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The 10-Q for the Quarter Ended August 31, 1996 filed by Nike Inc. in October, 1996. This is an example of a file accessed using the SEC's Edgar Database of Corporate Information. Much of the formating is lost, which makes reading table difficult, but formating problems are a small price to pay for the ease and speed of access! |
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ACCESSION NUMBER: 0000320187-96-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NYSE
SROS: PSE
FILER:
COMPANY DATA: COMPANY CONFORMED NAME: NIKE INC CENTRAL INDEX KEY: 0000320187 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 930584541 STATE OF INCORPORATION: OR
FISCAL YEAR END: 0531
FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10635
FILM NUMBER: 96643769
BUSINESS ADDRESS: STREET 1: ONE BOWERMAN DR CITY: BEAVERTON STATE: OR ZIP: 97005-6453 BUSINESS PHONE: 5036416453 </SEC-HEADER> <DOCUMENT> <TYPE>10-Q <SEQUENCE>1 <TEXT>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FOR QUARTERLY REPORTS UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended August 31, 1996 Commission file number - 1-10635
NIKE, Inc.
(Exact name of registrant as specified in its charter)
OREGON 93-0584541
(State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
One Bowerman Drive, Beaverton, Oregon 97005-6453
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 671-6453
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days
Yes X No . ___ ___
Common Stock shares outstanding as of August 31, 1996 were: _________________
Class A 50,990,185
Class B 93,019,323 ____________ 144,009,508 ===========
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements NIKE, Inc.
CONDENSED CONSOLIDATED BALANCE SHEET
Aug. 31, May 31, 1996 1996 ________ _______
(in thousands)
ASSETS
Current assets: Cash and equivalents $ 398,098 $ 262,117 Accounts receivable 1,627,046 1,346,125 Inventories (Note 3) 909,414 931,151 Deferred income taxes 88,852 93,120 Prepaid expenses 120,298 94,427
__________ _________
Total current assets 3,143,708 2,726,940
Property, plant and equipment 1,116,998 1,047,705 Less accumulated depreciation 425,420 404,246 __________ __________ 691,578 643,459
Identifiable intangible assets and goodwill 469,332 474,812 Deferred income taxes and other assets 121,210 106,417 __________ __________
$4,425,828 3,951,628 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,175 $ 7,301 Notes payable 539,210 445,064 Accounts payable 416,600 455,034 Accrued liabilities 525,738 480,407 Income taxes payable 141,287 79,253 __________ __________
Total current liabilities 1,627,010 1,467,059 Long-term debt 107,247 9,584 Deferred income taxes 1,764 1,883 Other liabilities 32,559 41,402 Commitments and contingencies (Note 4) -- -- Redeemable Preferred Stock 300 300 Shareholders' equity: Common Stock at stated value (Note 2): Class A convertible-50,990 and 51,120 shares outstanding 152 153 Class B-93,019 and 92,509 shares outstanding 2,704 2,702 Capital in excess of stated value 170,712 154,833 Foreign currency translation adjustment (7,190) (16,501) Retained earnings 2,490,570 2,290,213 ___________ __________
2,656,948 2,431,400 ___________ __________
$4,425,828 $3,951,628 ========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE> <CAPTION> Three Months Ended August 31, __________________
1996 1995* ____ ____
(in thousands, except per share data) <S> <C> <C> Revenues $2,281,926 $1,700,020 _________ _________
Costs and expenses: Cost of sales 1,362,119 1,013,379 Selling and administrative 529,537 369,043 Interest 12,666 11,251 Other expense (income) 8,641 10,249
________ ________
1,912,963 1,403,922 ________ ________
Income before income taxes 368,963 296,098
Income taxes 142,900 114,000 ________ ________
Net income $ 226,063 $ 182,098
========= =========
Net income per common share(Note 2) $ 1.53 $ 1.25 ========= ========= Dividends declared per common share $ .15 $ .125 ========= =========
Average number of common and common equivalent shares (Note 2) 148,184 145,852 ========= ========= </TABLE>
*For comparable purposes with 1996, results for the three months ended August 31, 1995 have been adjusted to reflect the elimination of the one month lag in reporting by certain of the Company's international operations. See further discussion under Note 5.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS <TABLE> <CAPTION> Three Months Ended August 31, _________________
1996 1995* ____ ____
(in thousands) <S> <C> <C> Cash provided (used) by operations: Net income $226,063 $182,098 Income charges (credits) not affecting cash: Depreciation 27,012 20,185 Deferred income taxes and purchased tax benefits 5,984 199 Other 13,306 7,048 Changes in other working capital components (250,952) (86,391) ________ _______
Cash provided by operations 21,413 123,139 ________ _______ Cash (used) provided by investing activities: Additions to property, plant and equipment (74,260) (55,986) Disposals of property, plant and equipment 7,525 1,779 (Increase) decrease in other assets (16,211) 1,631 (Decrease) in other liabilities (9,651) -- _______ _______
Cash used by investing activities (92,597) (52,576) _______ _______
Cash provided (used) by financing activities: Additions to long-term debt 98,808 644 Reductions in long-term debt including current portion (2,263) (26,183) Increase (decrease) in notes payable 78,983 (52,700) Proceeds from exercise of options 9,381 7,637 Repurchase of stock -- (18,756) Dividends - common and preferred (21,547) (17,893) _______ _______ Cash provided (used) by financing activities 163,362 (107,251) _______ _______
Effect of exchange rate changes on cash 799 (544) _______ _______
Effect of May 1996 cash flow activity for certain subsidiaries (Note 5) 43,004 -- _______ _______
Net increase (decrease) in cash and equivalents 135,981 (37,232) Cash and equivalents, May 31, 1996 and 1995 262,117 220,935
_______ _______
Cash and equivalents, August 31, 1996 and 1995 $398,098 $183,703 ======== ======== </TABLE>
* For comparable purposes with 1996, results for the three months ended August 31, 1995 have been adjusted to reflect the elimination of the one month lag in reporting by certain of the Company's international operations. See further discussion under Note 5.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of significant accounting policies: ___________________________________________
Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period(s). The interim financial information and notes thereto should be read in conjunction with the Company's latest annual report to shareholders. The results of operations for the three (3) months ended August 31, 1996 are not necessarily indicative of results to be expected for the entire year.
NOTE 2 - Net income per common share: ___________________________
Net income per common share is computed based on the weighted average number of common and common equivalent (stock option) shares outstanding for the period(s).
On October 30, 1995 the Company issued additional shares in connection with a two-for-one stock split effected in the form of a 100% stock dividend on outstanding Class A and Class B common stock. The per common share amounts in the Consolidated Financial Statements and accompanying notes have been adjusted to reflect this stock split.
In September of 1996, the Company's Board of Directors announced a two-for-one stock split in the form of a 100 percent stock dividend to be paid on October 23, 1996 to shareholders of record on October 11, 1996.
NOTE 3 - Inventories: ___________
Inventories by major classification are as follows:
Aug. 31, May 31, 1996 1996 ________ ________
(in thousands) Finished goods $864,081 $906,943 Work-in-process 40,419 20,002 Raw materials 4,914 4,206 ________ ________
$909,414 $931,151 ======== ========
NOTE 4 - Commitments and contingencies: _____________________________
There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company's most recent Form 10-K.
NOTE 5 - Change in year-end of certain subsidiaries: __________________________________________
Prior to fiscal year 1997, certain of the Company's international operations reported their results of operations on a one month lag which allowed more time to compile results. The Company has taken steps to improve its internal reporting procedures that has allowed for more timely reporting of these operations. Beginning in the first quarter of fiscal year 1997, the one month lag was eliminated. As a result, the May 1996 loss from operations for these entities of $4.1 million was recorded directly to retained earnings. The change affected the quarterly reporting periods for these operations and thus the income statement and cash flow statement have been presented to show comparable results for the quarter as if the change would have occurred in the prior year. The effect of the change is not material to the consolidated balance sheet and as a result the balance sheet as of May 31, 1996 has not been adjusted.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operating Results _________________
Net income increased 24% over the prior year's first quarter to $226.1 million, or $1.53 per share, from $182.1 million, or $1.25 per share. Revenues totaled $2.28 billion, up 34% from $1.70 billion in last year's first quarter, the first time that revenues exceeded $2 billion in one quarter. This period also marks the eighth straight quarter of double digit increases in total revenues. Gross margin percentage remained consistent with the prior year's first quarter. Selling and administrative expenses were 23.2% of revenue compared to 21.7% in the prior year.
Revenues for the quarter increased $581.9 million over the $1.7 billion reported in the same period of the prior year. U.S. revenues increased $380 million, or 39%. U.S. apparel increased 93% over last year's first quarter, the second consecutive quarter that U.S. apparel exceeded $200 million in revenues and the first time revenues exceeded $1 billion on a trailing twelve month basis. U.S. footwear increased $210.5 million, or 26.6%, over last year due to a 24% increase in pairs sold and a 3% increase in average selling price. These increases were primarily due to men's basketball, up 48%, and women's business, up 38%. Golf increased 124%. For the quarter, international revenue increased $202.8 million, or 35%, over last year. All regions showed double digit increases with Europe up 29%, Asia Pacific up 50% and the Americas region up 36%. The effect of exchange rates decreased the quarter's international revenues $55 million, or 10%, compared to the prior year. Other brands, which includes Cole Haan (R), Tetra Plastics, Sports Specialties and Bauer Inc., decreased slightly, $1.3 million, or 1%. The breakdown of revenues follows:
Three months ended Aug. 31,
1996 1995(1) % Change (in thousands)
U.S. Footwear $1,002,103 $ 791,568 27% U.S. Apparel 352,385 182,483 93% _________ _______ __
Total United States 1,354,488 974,051 39%
International Footwear 548,538 427,032 28% International Apparel 232,339 151,051 54% _______ _______ __
Total International 780,877 578,083 35%
Other Brands 146,561 147,886 (1)% _______ _______ ___
Total Revenues $2,281,926 $1,700,020 34% ========== ========== ===
(1) For comparable purposes with 1996, results for the three months ended August 31, 1995 have been adjusted to reflect the elimination of the one month lag in reporting by certain of the Company's international operations. See further discussion under Note 5.
Consolidated gross margin percentage remained relatively flat at 40.3% for the quarter compared to 40.4% for last year's first quarter, due to continued strong demand for NIKE products worldwide combined with sound inventory management. The Company continues to place strong emphasis on inventory management, minimizing foreign exchange risk and production sourcing in order to maximize gross profit. Gross profit percentages for the remainder of fiscal year 1997 are expected to be affected by strong demand for NIKE products offset by continued increased levels of air freight to meet the delivery dates on increasing customer orders. The gross profit percentage for the full year is expected to approximate last fiscal year's percentage.*
Selling and administrative expenses increased $160 million over the previous year's first quarter and increased as a percent of sales to 23.2%, compared to 21.7% in last year's first quarter. The majority of the increase in absolute dollars and percentage increases occurred in the U.S. and Europe due to planned marketing and advertising expenditures relating to the Olympics and the European soccer championships. It is expected that selling and administrative expenses as a percentage of revenues for the fiscal year will approximate last year's level.*
Interest expense increased slightly over the prior year due to increased short term borrowings for increased operations. The Company's Japanese subsidiary entered into a new long-term debt arrangement, as further discussed below.
The Company's effective tax rate for the first quarter was 38.7% compared to 38.5% in the prior year's first quarter. The slight increase was due to higher tax on foreign earnings. The Company anticipates the tax rate for fiscal 1997 will remain at approximately 38.7%.*
Worldwide future and advance orders for NIKE Brand athletic footwear and apparel scheduled for delivery from September 1996 through January 1997 were approximately $3.5 billion, 66% higher than such orders booked in the comparable period of the prior year.* These orders and the percentage growth in these orders are not necessarily indicative of the growth in revenues which the Company will experience for the subsequent periods. This is because the mix of advance futures and "at once" orders has shifted significantly toward furtures orders as the NIKE brand became more established in all areas, specifically in the U.S. apparel business and in international regions. The mix of advance orders to "at once" orders will continue to vary as the U.S. apparel business and international operations continue to account for a greater percentage of total revenues and place a greater emphasis on futures programs.* Finally, exchange rates can cause differences in the comparisons.
As further explained in Note 5, prior to fiscal year 1997, certain of the Company's international operations reported their results of operations on a one month lag which allowed more time to compile results. The Company has taken steps to improve its internal reporting procedures that has allowed for more timely reporting of these operations. Beginning in the first quarter of fiscal year 1997, the one month lag was eliminated. The May 1996 loss from operations for these entities of $4.1 million was recorded directly to retained earnings. The income statement and cash flow statement for the quarter ended August 31, 1995 have been presented as if these entities reported on a same month basis. There was no unusual activity in the month of May 1996 for the entities affected by the change to concurrent month reporting. The cash flow for the month was impacted mainly by changes in working capital components due to increased operations.
LIQUIDITY AND CAPITAL RESOURCES _______________________________
The Company's financial position remains strong at August 31, 1996. Since May 31, 1996, total assets grew $474 million to approximately $4.4 billion and shareholder's equity increased $226 million to nearly $2.7 billion. Working capital increased $257 million as a result of higher levels of cash and equivalents and accounts receivable offset by increased notes payable, accrued liabilities and income taxes payable. The Company's current ratio increased compared to May 31, 1996 from 1.86:1 to 1.93:1.
Since May 31, 1996, cash and equivalents increased $136 million (52%) and accounts receivable increased $281 million (21%) due to the high level of first quarter revenues compared to the same period in the prior year. Inventory levels decreased $22 million from May 31, the most significant change coming from U.S. footwear which decreased $47 million due to the large selling season.
Current liabilities increased $160 million from May 31, 1996, with the most significant increases occurring in notes payable ($94 million) and accrued liabilities ($45 million) due to higher a level of operations and income taxes payable ($62 million) due to timing of tax payments.
Additions to property, plant and equipment for the first quarter of fiscal 1997 were $74 million with the most significant components related to the continued consolidation of European footwear warehouses, the expansion of NIKE Town retail locations and the expansion of warehouses in the U.S.
Long-term debt increased $98 million from May 31, 1996. The increase was due almost entirely to the Company's Japanese subsidiary which borrowed 10.5 billion Japanese yen in a private placement with a maturity of June 26, 2011.
Dividends per share of common stock for the first quarter of fiscal 1997 was $.15 per share compared to $.125 per share for the first quarter of fiscal 1996.
In September of 1996, the Company's Board of Directors announced a two-for-one stock split in the form of a 100 percent stock dividend to be paid on October 23, 1996 to shareholders of record on October 11, 1996.
The Company's commercial paper program requires the support of committed and uncommitted lines of credit. There was $88 million outstanding under this program at August 31, 1996. The Company has $500 million available in committed unused lines of credit and, at August 31, 1996, no amounts were outstanding under this credit facility. NIKE's debt-to-equity ratio at August 31, 1996 was .7:1, compared to .6:1 at May 31, 1996.
Management believes that funds generated by operations, together with currently available resources and anticipated long-term debt arrangements, will continue to adequately finance anticipated fiscal 1997 expenditures.*
*The marked items are forward-looking statements that involve risks and uncertainties detailed from time to time in reports filed by NIKE with the S.E.C., including Forms 8-K, 10-Q, and 10-K.
Part II - Other Information
Item 1. Legal Proceedings:
There have been no material changes from the information previously reported under Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on September 16, 1996. The shareholders elected for the ensuing year all of management's nominees for the Board of Directors, ratified the appointment of Price Waterhouse LLP as independent accountants for fiscal 1997, and defeated the shareholder proposal regarding monitoring of Indonesian subcontractors. The voting results are as follows:
Election of Directors
Votes Cast For Withheld Broker Non-Votes Directors Elected by holders of Class A Common Stock:
Ralph D. DeNunzio 50,333,571 -0- -0- Richard K. Donahue 50,333,571 -0- -0- Douglas G. Houser 50,333,571 -0- -0- John E. Jaqua 50,333,571 -0- -0- Philip H. Knight 50,333,571 -0- -0- Kenichi Ohmae 50,333,571 -0- -0- Ralph A. Pfeiffer, Jr. 50,333,571 -0- -0- Charles W. Robinson 50,333,571 -0- -0- A. Michael Spence 50,333,571 -0- -0- John R. Thompson, Jr. 50,333,571 -0- -0-
Elected by holders of Class B Common Stock:
William J. Bowerman 78,556,851 789,884 -0- Thomas E. Clarke 78,572,406 774,329 -0- Jill K. Conway 78,774,975 571,760 -0- Delbert J. Hayes 78,593,917 752,818 -0-
Broker For Against Abstain Non-Votes Proposal 2 - Ratification of Appointment of Accountants:
Class A and Class B Common Stock Voting
Together 129,533,063 56,649 90,594 -0-
Proposal 3 - Shareholer Proposal regarding subcontractors:
Class A and Class B Common Stock Voting Together 3,642,906 111,258,271 5,849,783 8,929,346
Item 6. Exhibits and Reports on Form 8-K:
(a) EXHIBITS:
3.1 Restated Articles of Incorporation, as amended (incorporated by reference from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1995).
3.2 Third Restated Bylaws, as amended (incorporated by reference from Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1995).
4.1 Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2 Third Restated Bylaws, as amended (see Exhibit 3.2).
10.1 Credit Agreement dated as of September 15, 1995 among NIKE, Inc., Bank of America National Trust & Savings Association, individually and as Agent, and the other banks party thereto (incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1995).
10.2 Form of non-employee director Stock Option Agreement (incorporated by reference from Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1993).*
10.3 Form of Indemnity Agreement entered into between the Company and each of its officers and directors (incorporated by reference from the Company's definitive proxy statement filed in connection with its annual meeting of shareholders held on September 21, 1987).
10.4 NIKE, Inc. Restated Employee Incentive Compensation Plan (incorporated by reference from Registration Statement No. 33-29262 on Form S-8 filed by the Company on June 16, 1989).*
10.5 NIKE, Inc. 1990 Stock Incentive Plan (incorporated by reference from the Company's definitive proxy statement filed in connection with its annual meeting of shareholders held on September 17, 1990).*
10.6 Collateral Assignment Split-Dollar Agreement between NIKE, Inc. and Philip H. Knight dated March 10, 1994 (incorporated by reference from Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1994).*
10.7 NIKE, Inc. Executive Performance Sharing Plan (incorporated by reference from the Company's definitive proxy statement filed in connection with its annual meeting of shareholders held on September 18, 1995).*
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
(b) The following report on Form 8-K was filed by the Company during the first quarter of fiscal 1997:
July 9, 1996 ITEM 5. OTHER EVENTS. Press release announcing 4th quarter earnings
The following report on Form 8-K was filed by the Company after the first quarter of fiscal 1997, but before this Form 10-Q:
September 26, 1996 ITEM 5. OTHER EVENTS Press release announcing 1st quarter earnings, stock split and 1996 financial statements restated to reflect the stock split.
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 thereunto duly authorized.
NIKE, Inc. An Oregon Corporation
BY: s/Robert S. Falcone ________________________
Robert S. Falcone Vice President, Chief Financial Officer
DATED: October 15, 1996
</TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-27 <SEQUENCE>2 <DESCRIPTION>ART. 5 FDS FOR 1ST QUARTER 10-Q
<TEXT>
<TABLE> <S> <C>
<ARTICLE> 5 <LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUGUST 31, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. </LEGEND> <MULTIPLIER> 1,000
<S> <C> <PERIOD-TYPE> 3-MOS <FISCAL-YEAR-END> MAY-31-1997 <PERIOD-END> AUG-31-1996 <CASH> 398,098 <SECURITIES> 0 <RECEIVABLES> 1,627,046 <ALLOWANCES> 53,822 <INVENTORY> 909,414 <CURRENT-ASSETS> 3,143,708 <PP&E> 1,116,998 <DEPRECIATION> 425,420 <TOTAL-ASSETS> 4,425,828 <CURRENT-LIABILITIES> 1,627,010 <BONDS> 107,247 <COMMON> 2,856 <PREFERRED-MANDATORY> 0 <PREFERRED> 300 <OTHER-SE> 2,654,092 <TOTAL-LIABILITY-AND-EQUITY> 4,425,828 <SALES> 2,281,926 <TOTAL-REVENUES> 2,281,926 <CGS> 1,362,119 <TOTAL-COSTS> 1,362,119 <OTHER-EXPENSES> 534,480 <LOSS-PROVISION> 3,698 <INTEREST-EXPENSE> 12,666 <INCOME-PRETAX> 368,963 <INCOME-TAX> 142,900 <INCOME-CONTINUING> 226,063 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 226,063 <EPS-PRIMARY> 1.53 <EPS-DILUTED> 1.53
</TABLE> </TEXT> </DOCUMENT> </SEC-DOCUMENT> |
