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Beaverton, OR; NIKE, Inc. (NYSE:NKE) today reported revenues and earnings for the Company’s second quarter ended November 30, 2003. Second quarter revenues increased 13 percent to $2.8 billion, versus $2.5 billion for the same period last year. Second quarter net income totaled $179.1 million, or $0.66 per diluted share, compared to $152.0 million, or $0.57 per diluted share, in the prior year.
“It was a great quarter,” Philip H. Knight, Chairman and Chief Executive Officer said. “These positive results span most of Nike’s portfolio of businesses and categories. They reflect our management’s ability to lead in innovative product, communication, and operational performance.”*
Knight added, “We are optimistic the momentum we are seeing in the business, coupled with the improving health of the footwear and apparel industry, is setting the stage for continued profitable growth through the remainder of fiscal 2004.”*
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from December 2003 through April 2004, totaling $4.4 billion, 9.7 percent higher than such orders reported for the same period last year. Approximately four points of this growth were due to changes in currency exchange rates.
By region, futures orders for the USA were up one percent; Europe increased 16 percent; Asia Pacific grew 18 percent; and the Americas increased 11 percent. In Europe, eight points of the increase were due to changes in currency exchange rates. Currency exchange rate movements contributed approximately four points and seven points, respectively, to futures growth in the Asia Pacific and Americas regions.
Knight continued, “The 9.7 percent increase in our worldwide futures orders is the result of Nike’s strong brand and product momentum around the globe. We are particularly pleased by the continued improvement in our USA region, which posted the first futures increase in six quarters. This rebound in the USA complements continued strong performance in our international regions, which delivered 16 percent futures orders growth for the period.”*
During the second quarter, U.S. revenues increased five percent to $1.09 billion versus $1.03 billion for the second quarter of 2003. U.S. athletic footwear revenues increased five percent to $624.0 million. Apparel revenues increased eight percent to $398.3 million. Equipment revenues fell six percent to $63.3 million.
Revenues for the European region (which includes the Middle East and Africa) grew nine percent to $848.9 million, up from $781.2 million for the same period last year. Fifteen points of this growth were the result of changes in currency exchange rates. Footwear revenues increased eight percent to $472.5 million, apparel revenues increased ten percent to $324.9 million and equipment revenues increased four percent to $51.5 million.
Revenues in the Asia Pacific region grew 18 percent to $412.7 million compared to $350.4 million a year ago. Five points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 21 percent to $205.6 million; apparel revenues increased 15 percent to $174.5 million and equipment grew 11 percent to $32.6 million.
Revenues in the Americas region increased 17 percent to $156.1 million, an improvement from $133.5 million in the second quarter of 2003. This growth rate reflected an eight percent increase due to changes in currency exchange rates. Footwear revenues were up 25 percent to $103.7 million, apparel revenues increased three percent to $41.9 million and equipment improved five percent to $10.5 million.
Other revenues, which include Nike Golf, Converse, Inc., Bauer Nike Hockey Inc., Cole HaanÒ, and Hurley International LLC, grew 54 percent to $333.8 million from $217.0 million last year. This is the first quarter in which Converse results are reflected in the “Other Revenues” category, as Nike completed the acquisition of the company on September 4, 2003.
Income Statement Review
Gross margins were 42.3 percent compared to 40.2 percent last year. Selling and administrative expenses were 31.8 percent of second quarter revenues, compared to 30.3 percent last year. The effective tax rate for the second quarter was 34.8 percent.
Balance Sheet Review
At quarter end, global inventories stood at $1.6 billion, an increase of 15 percent from November 30, 2002. Cash and short-term investments were $968.9 million at the end of the quarter, compared to $555.8 million last year.
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