UNITED STATES
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 November 30, 2005
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 is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
___ ___
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 .
___ ___
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes No X .
___ ___
Common Stock shares outstanding as of November 30, 2005 were:
_______________
Class A 65,676,484
Class B 193,591,439
_______________
259,267,923
===============
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
NIKE, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, May 31,
2005 2005
________ ________
(in millions)
ASSETS
Current assets:
Cash and equivalents $1,134.5 $1,388.1
Short-term investments 920.0 436.6
Accounts receivable, net 2,166.2 2,262.1
Inventories (Note 2) 1,892.7 1,811.1
Deferred income taxes 86.9 110.2
Prepaid expenses and other current assets 496.2 343.0
________ ________
Total current assets 6,696.5 6,351.1
Property, plant and equipment 3,216.6 3,179.2
Less accumulated depreciation 1,630.8 1,573.4
________ ________
Property, plant and equipment, net 1,585.8 1,605.8
Identifiable intangible assets, net (Note 3) 403.9 406.1
Goodwill (Note 3) 135.4 135.4
Deferred income taxes and other assets 322.5 295.2
________ ________
Total assets $9,144.1 $8,793.6
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 254.5 $ 6.2
Notes payable 79.2 69.8
Accounts payable 797.1 843.9
Accrued liabilities (Note 4) 959.2 984.3
Income taxes payable 71.1 95.0
________ ________
Total current liabilities 2,161.1 1,999.2
Long-term debt 408.3 687.3
Deferred income taxes and other liabilities 492.9 462.6
Commitments and contingencies (Note 10) -- --
Redeemable preferred stock 0.3 0.3
Shareholders' equity:
Common stock at stated value:
Class A convertible-65.7 and
71.9 shares outstanding 0.1 0.1
Class B-193.6 and 189.2 shares
outstanding 2.7 2.7
Capital in excess of stated value 1,365.4 1,182.9
Unearned stock compensation (12.7) (11.4)
Accumulated other comprehensive income (Note 5) 126.8 73.4
Retained earnings 4,599.2 4,396.5
________ ________
Total shareholders' equity 6,081.5 5,644.2
________ ________
Total liabilities and shareholders' equity $9,144.1 $8,793.6
======== ========
The accompanying Notes to Unaudited Condensed Consolidated Financial
Statements are an integral part of this statement.
NIKE, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
November 30, November 30,
____________________ __________________
2005 2004 2005 2004
____ ____ ____ ____
(in millions, except per share data)
Revenues $3,474.7 $3,148.3 $7,336.7 $6,710.1
Cost of sales 1,963.3 1,760.2 4,077.2 3,736.2
_________ _________ _________ _________
Gross margin 1,511.4 1,388.1 3,259.5 2,973.9
Selling and administrative expense 1,054.7 973.2 2,159.1 2,046.8
Interest (income) expense, net (5.7) 3.7 (12.1) 8.5
Other (income) expense, net (1.4) 8.2 (11.3) 10.1
_________ _________ _________ _________
Income before income taxes 463.8 403.0 1,123.8 908.5
Income taxes 162.7 141.1 390.4 319.8
_________ _________ _________ _________
Net income $ 301.1 $ 261.9 $ 733.4 $ 588.7
========= ========= ========= =========
Basic earnings per common share (Note 7) $ 1.16 $ 0.99 $ 2.82 $ 2.24
========= ========= ========= =========
Diluted earnings per common share (Note 7) $ 1.14 $ 0.97 $ 2.77 $ 2.18
========= ========= ========= =========
Dividends declared per common share $ 0.31 $ 0.25 $ 0.56 $ 0.45
========= ========= ========= =========
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements
are an integral part of this statement.
NIKE, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
November 30,
_____________________
2005 2004
____ ____
(in millions)
Cash provided (used) by operations:
Net income $ 733.4 $ 588.7
Income/charges not affecting cash:
Depreciation 136.2 117.8
Deferred income taxes 5.2 22.2
Amortization and other 6.9 19.6
Income tax benefit from exercise of stock
options 37.0 36.7
Changes in certain working capital
components, net of the effect of
acquisition of subsidiary:
Decrease in accounts receivable 68.3 90.0
(Increase) decrease in inventories (99.3) 38.7
(Increase) decrease in prepaid expenses
and other current assets (31.0) 31.9
Decrease in accounts payable, accrued
liabilities and income taxes payable (118.5) (190.1)
_________ ________
Cash provided by operations 738.2 755.5
_________ ________
Cash provided (used) by investing activities:
Purchases of short-term investments (1,169.6) (701.2)
Maturities of short-term investments 690.2 625.0
Additions to property, plant and
equipment (164.7) (124.8)
Disposals of property, plant and
equipment 0.6 6.3
Increase in other assets (6.1) (12.1)
Decrease in other liabilities (2.5) (2.9)
Acquisition of subsidiary, net of cash
acquired -- (47.2)
_________ ________
Cash used by investing activities (652.1) (256.9)
_________ ________
Cash provided (used) by financing activities:
Reductions in long-term debt,
including current portion (3.1) (5.9)
Increase (decrease) in notes payable 18.1 (17.3)
Proceeds from exercise of options and
other stock issuances 145.8 174.0
Repurchase of common stock (382.6) (203.7)
Dividends on common stock (130.4) (105.2)
_________ ________
Cash used by financing activities (352.2) (158.1)
_________ ________
Effect of exchange rate changes on cash 12.5 13.3
_________ ________
Net (decrease) increase in cash and equivalents (253.6) 353.8
Cash and equivalents, beginning of period 1,388.1 828.0
_________ ________
Cash and equivalents, end of period $1,134.5 $1,181.8
========= =========
The accompanying Notes to Unaudited Condensed Consolidated Financial
Statements are an integral part of this statement.
NIKE, Inc.
NOTES TO UNAUDITED 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. The interim financial
statement information and notes thereto should be read in conjunction with the
Company's latest Annual Report on Form 10-K. The results of operations
for the six-month period ended November 30, 2005 are not necessarily
indicative of results to be expected for the entire year.
Certain prior year amounts have been reclassified to conform to fiscal
year 2006 presentation. These changes had no impact on previously reported
results of operations or shareholders' equity.
NOTE 2 - Inventories:
___________
Inventory balances of $1,892.7 million and $1,811.1 million at November
30, 2005 and May 31, 2005, respectively, were substantially all finished goods.
NOTE 3 - Identifiable Intangible Assets and Goodwill:
___________________________________________
The following table summarizes the Company's identifiable intangible
assets and goodwill balances as of November 30, 2005 and May 31, 2005:
November 30, 2005 May 31, 2005
______________________ ______________________
Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
________ ____________ ________ ________ ____________ ________
(in millions)
Amortized intangible assets:
Patents $ 31.4 $ (12.1) $ 19.3 $ 29.2 $ (10.9) $ 18.3
Trademarks 55.5 (19.2) 36.3 54.8 (16.4) 38.4
Other 21.4 (14.6) 6.8 21.4 (13.5) 7.9
________ ________ ________ ________ ________ ________
Total $ 108.3 $ (45.9) $ 62.4 $ 105.4 $ (40.8) $ 64.6
======== ======== ======== ========
Unamortized intangible assets - Trademarks $ 341.5 $ 341.5
________ ________
Identifiable intangible assets, net $ 403.9 $ 406.1
======== ========
Goodwill $ 135.4 $ 135.4
======== ========
Amortization expense, which is included in selling and administrative
expense, was $2.4 million and $2.8 million for the three-month periods ended
November 30, 2005 and 2004, respectively and $4.9 million and $4.4 million for
the six-month periods ending November 30, 2005 and 2004, respectively. The
estimated amortization expense for intangible assets subject to amortization
for each of the succeeding years ended May 31, 2006 through May 31, 2010 are
as follows: 2006: $9.7 million; 2007: $8.8 million; 2008: $8.3 million; 2009:
$7.6 million; 2010: $6.8 million.
NOTE 4 - Accrued Liabilities:
___________________
Accrued liabilities include the following:
November 30, 2005 May 31, 2005
_______________ ____________
(in millions)
Compensation and benefits, excluding taxes $301.6 $394.2
Endorser compensation 95.1 83.4
Taxes other than income taxes 90.8 96.8
Fair value of derivatives 84.0 61.8
Dividends payable 80.5 65.3
Advertising and marketing 79.6 57.4
Other1 227.6 225.4
_______ _______
$959.2 $984.3
======= =======
1 Other consists of various accrued expenses and no individual item accounted
for more than $50 million of the balance at November 30, 2005 and May 31, 2005.
NOTE 5 - Comprehensive Income:
____________________
Comprehensive income, net of taxes, is as follows:
Three Months Ended Six Months Ended
November 30, November 30,
_____________________ __________________
2005 2004 2005 2004
____ ____ ____ ____
(in millions)
Net income $301.1 $261.9 $733.4 $588.7
Other comprehensive income:
Change in cumulative translation
adjustment and other (26.0) 130.7 (43.3) 116.6
Changes due to cash flow hedging
instruments:
Net gain (loss) on hedge derivatives 55.4 (115.5) 97.4 (108.6)
Reclassification to net income of
previously deferred (gains) and losses
related to hedge derivative instruments (8.4) 25.3 (0.7) 75.7
________ _______ _______ _______
Other comprehensive income 21.0 40.5 53.4 83.7
_______ _______ _______ _______
Total comprehensive income $322.1 $302.4 $786.8 $672.4
======= ======= ======= =======
NOTE 6 - Stock-Based Compensation:
________________________
The Company uses the intrinsic value method to account for stock-based
compensation in accordance with Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees" as permitted by Statement of
Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation" (FAS 123). Substantially all options granted by the Company have
an exercise price equal to the market value at the date of grant, and
accordingly, no compensation expense is recognized. The Company also has an
Employee Stock Purchase Plan (ESPP) that qualifies as a non-compensatory
employee stock purchase plan under Section 423 of the Internal Revenue Code,
and accordingly, no compensation expense is recognized.
If the Company had accounted for stock options and ESPP purchase rights
issued to employees in accordance with FAS 123, the Company's pro forma net
income and pro forma earnings per share would have been reported as follows:
Three Months Ended Six Months Ended
November 30, November 30,
____________________ __________________
2005 2004 2005 2004
____ ____ ____ ____
(in millions, except per share data)
Net income as reported $301.1 $261.9 $733.4 $588.7
Add: Stock-based compensation expense included
in reported net income, net of tax 0.0 0.3 0.1 0.3
Deduct: Total stock-based employee compensation
expense under fair value based method for all
awards, net of tax (19.6) (17.3) (38.5) (31.4)
_______ _______ _______ _______
Pro forma net income $281.5 $244.9 $695.0 $557.6
======= ======= ======= =======
Earnings per share:
Basic - as reported $ 1.16 $ 0.99 $ 2.82 $2.24
Basic - pro forma 1.09 0.93 2.67 2.12
Diluted - as reported 1.14 0.97 2.77 2.18
Diluted - pro forma 1.07 0.91 2.64 2.09
The pro forma effects of applying FAS 123 may not be representative of
the effects on reported net income and earnings per share for future periods
as options vest over several years and additional awards are made each year.
As disclosed in the Company's Annual Report on Form 10-K as of May 31,
2005, the Company is currently evaluating SFAS No. 123R "Share-Based Payment"
(FAS 123R) and the Securities and Exchange Commission's Staff Accounting
Bulletin No. 107 (SAB 107) to determine the fair value method to measure
compensation expense, the appropriate assumptions to include in the fair value
model and the transition method to use upon adoption. The impact of the
adoption of FAS 123R is not known at this time due to these factors as well as
the unknown level of stock-based payments granted in future years. The effect
on the Company's results of operations of expensing stock options using the
Black-Scholes model is presented in the table above.
Under certain conditions, stock options granted by the Company are
eligible for accelerated vesting upon the retirement of the employee. The FASB
clarified in FAS 123R that the fair value of such stock options should be
expensed based on an accelerated vesting schedule or immediately, rather than
ratably over the vesting period stated in the grant. The Company's pro forma
disclosure above currently reflects the expense of such options ratably over
the stated vesting period, expensing all unvested shares upon actual
retirement. The SEC clarified that companies should continue to follow the
vesting method they have been using until adoption of FAS 123R, then apply the
accelerated vesting schedule to all subsequent grants to those employees
eligible for accelerated vesting upon retirement. Had the Company been
accounting for such stock options using the accelerated vesting schedule
for those employees eligible for accelerated vesting upon retirement, the
Company would have recognized less stock-based compensation expense in the
above pro forma of $0.02 and $0.01 per diluted share for the three months
ended November 30, 2005 and November 30, 2004, respectively, and additional
stock-based compensation expense in the above pro forma of $0.04 and $0.08 per
diluted share for the six months ended November 30, 2005 and November 30, 2004,
respectively. The Company grants the majority of stock options in a single
grant in the first three months of each fiscal year. As such, accelerated
vesting would result in increased expense recognition in the first three
months of the fiscal year and a reduction of expense recorded in the remaining
nine months of the fiscal year, as compared to the expense recorded by the
Company under our current policy of expensing such options ratably over the
stated vesting period.
NOTE 7 - Earnings Per Common Share:
_________________________
The following represents a reconciliation from basic earnings per share
to diluted earnings per share. Options to purchase 5.6 million shares of
common stock were outstanding at November 30, 2005 but were not included in
the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of common shares and,
therefore, the effect would be antidilutive. There were no such antidilutive
options outstanding at November 30, 2004.
Three Months Ended Six Months Ended
November 30, November 30,
_____________________ ___________________
2005 2004 2005 2004
____ ____ ____ ____
(in millions, except per share data)
Determination of shares:
Average common shares
outstanding 259.0 263.3 260.0 263.0
Assumed conversion of
dilutive stock options
and awards 4.7 7.8 5.0 7.5
_______ _______ _______ _______
Diluted average common
shares outstanding 263.7 271.1 265.0 270.5
======= ======= ======= =======
Basic earnings per common share $ 1.16 $ 0.99 $ 2.82 $ 2.24
======= ======= ======= =======
Diluted earnings per common share $ 1.14 $ 0.97 $ 2.77 $ 2.18
======= ======= ======= =======
NOTE 8 - Operating Segments:
__________________
The Company's operating segments are evidence of the structure of the
Company's internal organization. The major segments are defined by geographic
regions for operations participating in NIKE brand sales activity excluding
NIKE Golf and Bauer NIKE Hockey. Each NIKE brand geographic segment operates
predominantly in one industry: the design, production, marketing and selling
of sports and fitness footwear, apparel, and equipment. The "Other" category
shown below represents activities of Cole Haan Holdings Incorporated, Bauer
NIKE Hockey Inc., Hurley International LLC, NIKE Golf, Converse Inc., and
Exeter Brands Group LLC (beginning August 11, 2004), which are considered
immaterial for individual disclosure based on the aggregation criteria in SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information".
Where applicable, "Corporate" represents items necessary to reconcile to
the consolidated financial statements, which generally include corporate
activity and corporate eliminations.
Net revenues as shown below represent sales to external customers for
each segment. Intercompany revenues have been eliminated and are immaterial
for separate disclosure. The Company evaluates performance of individual
operating segments based on pre-tax income. On a consolidated basis, this
amount represents income before income taxes as shown in the Unaudited
Condensed Consolidated Statements of Income. Reconciling items for pre-tax
income represent corporate costs that are not allocated to the operating
segments for management reporting including corporate activity, certain
currency exchange rate gains and losses on transactions, and intercompany
eliminations for specific income statement items in the Unaudited Condensed
Consolidated Statements of Income.
Accounts receivable, net, inventories, and property, plant and equipment,
net for operating segments are regularly reviewed and therefore provided
below.
Three Months Ended Six Months Ended
November 30, November 30,
__________________ _________________
2005 2004 2005 2004
_____ _____ _____ _____
Net Revenue
U.S. $1,307.1 $1,132.0 $2,816.0 $2,533.7
EUROPE, MIDDLE EAST, AFRICA 977.4 961.1 2,194.9 2,119.0
ASIA PACIFIC 503.3 483.5 962.9 889.5
AMERICAS 252.1 189.3 465.8 351.0
OTHER 434.8 382.4 897.1 816.9
_________ _________ _________ _________
$3,474.7 $3,148.3 $7,336.7 $6,710.1
========= ========= ========= =========
Pre-tax Income
U.S. $ 265.7 $ 233.1 $ 610.9 $ 555.4
EUROPE, MIDDLE EAST, AFRICA 194.2 197.6 524.4 444.0
ASIA PACIFIC 115.2 112.0 206.6 175.4
AMERICAS 57.4 44.3 102.0 64.7
OTHER 23.0 20.8 63.0 61.0
CORPORATE (191.7) (204.8) (383.1) (392.0)
_________ _________ _________ _________
$ 463.8 $ 403.0 $1,123.8 $ 908.5
========= ========= ========= =========
Nov. 30, May 31,
2005 2005
_________ _________
(in millions)
Accounts receivable, net
U.S. $ 677.1 $ 627.0
EUROPE, MIDDLE EAST, AFRICA 630.3 723.6
ASIA PACIFIC 274.8 309.8
AMERICAS 223.1 168.7
OTHER 311.0 394.0
CORPORATE 49.9 39.0
_________ _________
$2,166.2 $2,262.1
========= =========
Inventories
U.S. $ 679.1 $ 639.9
EUROPE, MIDDLE EAST, AFRICA 480.5 496.5
ASIA PACIFIC 256.5 228.9
AMERICAS 124.3 96.8
OTHER 313.5 316.2
CORPORATE 38.8 32.8
_________ _________
$1,892.7 $1,811.1
========= =========
Property, plant and equipment, net
U.S. $ 218.1 $ 216.0
EUROPE, MIDDLE EAST, AFRICA 218.2 230.0
ASIA PACIFIC 341.1 380.4
AMERICAS 16.2 15.7
OTHER 94.8 93.4
CORPORATE 697.4 670.3
_________ _________
$1,585.8 $1,605.8
========= =========
NOTE 9 - Related Party Transaction:
_________________________
During the three-month period ended November 30, 2005, the Company
made a $10.8 million contribution to the Nike Foundation which was recorded as
selling and administrative expense. The Nike Foundation was established by
the Company as a not-for-profit organization whose results are not
consolidated by the Company.
NOTE 10 - Commitments and Contingencies:
______________________________
At November 30, 2005, the Company had letters of credit outstanding
totaling $437.6 million. These letters of credit were issued primarily for
the purchase of inventory.
There have been no other significant subsequent developments relating to
the commitments and contingencies reported on the Company's latest Annual
Report on Form 10-K.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
In the second quarter of fiscal 2006, our revenues grew 10% to $3.5
billion, net income grew 15% to $301.1 million and we delivered diluted
earnings per share of $1.14, an 18% increase versus the second quarter of
fiscal 2005. Strong demand for NIKE brand products in both the US and Americas
regions drove the increase in revenues. The growth in diluted earnings per
share was primarily driven by the higher revenues and by lower selling and
administrative expense as a percentage of sales. Selling and administrative
expense for the second quarter decreased as a percentage of sales by 50 basis
points. For the quarter, our gross margin percentage decreased 60 basis
points to 43.5%, driven largely by a reduction of in-line net pricing margins
(net revenue for current product offerings minus product costs) for footwear
and apparel, partially offset by positive effects from foreign currency hedge
results. Diluted earnings per share in the second quarter increased at a
greater rate than net income primarily due to our common share repurchases
since the second quarter of fiscal 2005. During the second quarter of fiscal
2006, we increased our dividend per common share to $0.31, as compared to
$0.25 in the second quarter of fiscal 2005.
Results of Operations
Three Months Ended Six Months Ended
November 30, November 30,
___________________ __________________
% %
2005 2004 change 2005 2004 change
______ ______ ________ ______ ______ ________
(in millions, except per share data)
Revenues $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9%
Cost of sales 1,963.3 1,760.2 12% 4,077.2 3,736.2 9%
Gross margin 1,511.4 1,388.1 9% 3,259.5 2,973.9 10%
Gross margin % 43.5% 44.1% 44.4% 44.3%
Selling and administrative 1,054.7 973.2 8% 2,159.1 2,046.8 5%
% of revenue 30.4% 30.9% 29.4% 30.5%
Income before income taxes 463.8 403.0 15% 1,123.8 908.5 24%
Net income 301.1 261.9 15% 733.4 588.7 25%
Diluted earnings per share 1.14 0.97 18% 2.77 2.18 27%
Consolidated Operating Results
In the second quarter and first six months of fiscal 2006, consolidated
revenues grew 10% and 9%, respectively, versus the comparable periods of fiscal
2005. One percentage point of the reported revenue growth for both the second
quarter and first six months of fiscal 2006 was attributable to changes in
currency exchange rates.
The U.S. Region contributed 6 percentage points of the consolidated
revenue growth for the second quarter and 4 percentage points for the first
six months of fiscal 2006. Excluding the impact of changes in foreign currency,
revenue growth in our international regions contributed 2 percentage points of
the consolidated revenue growth for the second quarter and 3 percentage points
of the consolidated revenue growth for the first six months, as all three of
our international regions posted higher revenues. Sales in our Other
businesses drove the balance of the improvements for the quarter and year-to-
date period.
In the second quarter of fiscal 2006, our consolidated gross margin
percentage declined 60 basis points compared to the prior year's second
quarter, from 44.1% to 43.5%. For the first six months of fiscal 2006, our
consolidated gross margin percentage improved 10 basis points, from 44.3% to
44.4%. The primary factors contributing to these changes in gross margin
percentage for the second quarter and year-to-date period were as follows:
(1) A lower gross margin percentage in the U.S. Region reduced
consolidated gross margin by approximately 70 and 40 basis points
for the second quarter and first six months, respectively. The U.S.
Region gross margin decline was due primarily to lower in-line
pricing margins in footwear. Higher product costs (due in part to
higher oil prices) and additional costs incurred to meet strong
footwear unit demand drove the lower U.S. Region in-line footwear
margins during the second quarter and first six months.
(2) Our international regions reduced consolidated gross margin by
approximately 20 basis points for the second quarter and increased
consolidated gross margin by approximately 30 basis points for the
year-to-date period. For the second quarter, lower gross margins in
our Asia Pacific Region were partially offset by improvements in
EMEA. For the year-to-date period, gross margin improvements from
the EMEA and Americas regions were partially offset by lower gross
margins in the Asia Pacific Region. These gross margin changes were
primarily driven by improvements in year-over-year foreign currency
hedge rates, partially offset by lower in-line pricing margins in our
EMEA and Asia Pacific regions (as discussed below):
(a) For the second quarter and year-to-date period, year-over-year
currency hedge rate improvements, primarily the euro,
contributed approximately 150 basis points and 170 basis
points of consolidated gross margin improvement, respectively.
(b) Lower in-line pricing margins on wholesale products in the
EMEA and Asia Pacific regions, primarily related to footwear
and apparel, decreased the consolidated gross margin by
approximately 170 basis points and 130 basis points for the
second quarter and year-to-date period, respectively. The
lower in-line pricing margins for footwear and apparel were
due to strategies to improve consumer value, higher product
costs due in part to higher oil prices, higher discounts and
a shift in the mix of products sold toward products with lower
margins.
(3) Improved gross margin percentages in our Other businesses increased
consolidated gross margin by approximately 30 and 20 basis points for
the quarter and year-to-date period, respectively. NIKE Golf
drove the majority of the gross margin improvement for the quarter.
NIKE Golf's improvement for the second quarter and year-to-date
period was primarily driven by gross margin improvements in footwear
and equipment.
We currently expect gross margins for the full fiscal year 2006 to be
comparable to fiscal 2005 levels. Hedge rates for the second half of fiscal
2006 are expected to be slightly better than the second half of fiscal 2005,
but the year-over-year improvement will be substantially below the levels
achieved in the first six months of 2006.
Selling and administrative expense, comprised of demand creation
(advertising and promotion) and operating overhead, grew 8% for the second
quarter of fiscal 2006 and 5% year-to-date. As a percentage of sales, selling
and administrative expense decreased 50 basis points and 110 basis points for
the second quarter and first six months of fiscal 2006, respectively. We expect
selling and administrative expenses for full fiscal 2006 to represent a lower
percentage of sales than in fiscal 2005, given our continued focus on limiting
operating overhead expense growth. Changes in currency exchange rates had a
minimal impact on selling and administrative expense for quarter and
year-to-date period.
Demand creation expense increased 8% to $377.0 million in the second
quarter and declined 2% to $798.6 million for the first six months of fiscal
2006. Changes in currency exchange rates increased the rate of growth in
demand creation by 1 percentage point for both the second quarter and first
six months of fiscal 2006. The increase in demand creation spending for the
second quarter was primarily attributable to higher spending on sports
marketing contracts and events, primarily in the US and at NIKE Golf (3
percentage points), incremental investment in retail marketing primarily in
EMEA, Americas and at NIKE Golf (2 percentage points) and higher
advertising spending primarily in EMEA and at Converse (1 percentage point).
Excluding the impact of changes in currency exchange rates, the decrease in
demand creation expense for the first six months of fiscal 2006 was the
result of a change in the timing of demand creation spending versus fiscal
2005. Spending was particularly heavy in the first quarter of fiscal 2005
due to marketing programs centered on global sporting events that took
place in the summer of 2004. In addition, certain advertising spending
originally scheduled for the first half of fiscal 2006 was delayed to the
second half of the year.
The level of demand creation spending for the first six months of fiscal
2006 was not indicative of what we currently expect for the full year.
Spending is expected to increase as a result of investment in advertising
and marketing programs, most notably those relating to the 2006 World Cup.
Operating overhead for the second quarter of fiscal 2006 grew 9% to
$677.7 million and grew 11% to $1,360.5 million for the first six months of
fiscal 2006. Changes in currency exchange rates contributed 1 percentage
point of the increase for both the second quarter and the first six months.
Excluding the effects of currency, operating overhead increases for the
quarter and year-to-date period were mainly attributable to higher personnel
costs due to increased headcount and higher wages and benefits (2 percentage
points for the quarter and 4 percentage points for the year-to-date
period); investments in infrastructure to support the growth of our Other
businesses (2 percentage points for both the quarter and year-to-date
period); continued investments in NIKE-owned retail stores (2 percentage
points for the quarter and 1 percentage point for the year-to-date period);
increased charitable contributions to the NIKE Foundation (2 percentage
points for the quarter and 1 percentage point for the year-to-date period);
and increased expenses associated with global and regional management
meetings (1 percentage point for the quarter and year-to-date period).
In the second quarter and first six months of fiscal 2006, foreign
currency hedge gains were the most significant component of Other income,
net, of $1.4 million and $11.3 million, respectively. These gains are
reflected in the Corporate line in our segment presentation of pre-tax
income in the Notes to Unaudited Condensed Consolidated Financial Statements
(Note 8 - Operating Segments). In the second quarter and first six months of
fiscal 2006, we estimate that the combination of net foreign currency gains
in Other (income) expense, net, and the favorable translation of foreign
currency denominated profits, most significantly in EMEA, resulted in a
year-over-year increase in consolidated income before income taxes of $20
million and $37 million, respectively.
In the second quarter of fiscal 2006, we adjusted our year-to-date
effective tax rate to 34.7%, our estimate of our effective rate for full
fiscal year 2006. The effective tax rate for the second quarter of fiscal
2006 of 35.1% was higher than the 34.9% rate reported for the full year of
fiscal 2005 primarily due to higher taxes on foreign earnings.
Worldwide futures and advance orders for our footwear and apparel
scheduled for delivery from December 2005 through April 2006 were 2.5%
higher than such orders reported for the comparable period of fiscal 2005.
This increase was reduced by 4.5 percentage points due to changes in
currency exchange rates versus the same period last year. Excluding this
currency impact, higher average selling prices for footwear and apparel
contributed approximately 1 percentage point of the growth in overall
futures and advance orders. The remaining 6 percentage points of the
increase were due to volume increases for both footwear and apparel. As
always, the reported futures and advance orders growth is not necessarily
indicative of our expectation of revenue growth during this period. This is
because the mix of orders can shift between advance/futures and at-once
orders. In addition, exchange rate fluctuations as well as differing levels
of order cancellations and discounts can cause differences in the
comparisons between futures and advance orders, and actual revenues.
Moreover, a significant portion of our revenue is not derived from futures
and advance orders, including at-once and closeout sales of NIKE footwear
and apparel, wholesale sales of equipment, U.S. licensed team apparel, Bauer
NIKE Hockey, Cole Haan, Converse, NIKE Golf, Hurley, Exeter Brands and
retail sales across all brands.
Operating Segments
The breakdown of revenues follows:
Three Months Ended Six Months Ended
November 30, November 30,
___________________ ____________________
% %
2005 2004 change 2005 2004 change
______ ______ _______ ______ ______ ______
(in millions)
U.S. REGION
FOOTWEAR $ 811.5 $ 680.0 19% $1,832.6 $1,601.4 14%
APPAREL 433.8 384.7 13% 829.3 776.0 7%
EQUIPMENT 61.8 67.3 -8% 154.1 156.3 -1%
________ ________ ________ ________
TOTAL U.S. 1,307.1 1,132.0 15% 2,816.0 2,533.7 11%
EMEA REGION
FOOTWEAR 533.2 531.8 0% 1,218.3 1,195.1 2%
APPAREL 379.6 370.0 3% 814.8 779.7 5%
EQUIPMENT 64.6 59.3 9% 161.8 144.2 12%
________ ________ ________ ________
TOTAL EMEA 977.4 961.1 2% 2,194.9 2,119.0 4%
ASIA PACIFIC REGION
FOOTWEAR 245.4 236.6 4% 482.8 455.2 6%
APPAREL 214.6 207.8 3% 391.1 356.6 10%
EQUIPMENT 43.3 39.1 11% 89.0 77.7 15%
________ ________ ________ ________
TOTAL ASIA PACIFIC 503.3 483.5 4% 962.9 889.5 8%
AMERICAS REGION
FOOTWEAR 178.1 129.8 37% 335.0 244.6 37%
APPAREL 55.4 46.9 18% 96.1 82.4 17%
EQUIPMENT 18.6 12.6 48% 34.7 24.0 45%
________ ________ ________ ________
TOTAL AMERICAS 252.1 189.3 33% 465.8 351.0 33%
________ ________ ________ ________
3,039.9 2,765.9 10% 6,439.6 5,893.2 9%
OTHER 434.8 382.4 14% 897.1 816.9 10%
________ ________ ________ ________
TOTAL REVENUES $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9%
======== ======== ======== ========
The discussion following includes disclosure of "pre-tax income" for
our operating segments. We have reported pre-tax income for each of our
operating segments in accordance with Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information." As discussed in Note 8 - Operating Segments in the
accompanying Notes to Unaudited Condensed Consolidated Financial Statements,
certain corporate costs are not included in pre-tax income of our operating
segments.
In the U.S. Region, increased unit sales in a majority of footwear
categories drove the footwear revenue growth for the quarter and year-to-
date period. Increased consumer demand for our Jordan brand was a
significant driver of the footwear revenue growth.
The increase in U.S. apparel sales for the second quarter and first six
months of fiscal 2006 was driven by increases in NIKE and Jordan branded
apparel. The NIKE and Jordan branded apparel increases were partially offset
by sales declines as a result of the expiration of our license agreement
with the NBA in November of fiscal 2005.
For the second quarter of fiscal 2006, U.S. Region pre-tax income was
$265.7 million, a 14% increase versus the second quarter of fiscal 2005.
Pre-tax income for the first six months of fiscal 2006 increased 10% to
$610.9 million. For the quarter and year-to-date period, higher revenues
drove the increase, more than offsetting a lower gross margin percentage and
higher selling and administrative expenses. Selling and administrative
expenses increased at a slower rate than revenues for both the quarter and
year-to-date period.
For the quarter and year-to-date period of fiscal 2006, the lower gross
margin percentage in the U.S. Region was primarily the result of lower in-
line pricing margins for footwear due to higher product costs and additional
costs incurred to meet strong footwear unit demand, as discussed above.
Higher selling and administrative costs were due to increases in both demand
creation and operating overhead. The increase in demand creation for both
the quarter and year-to-date period was primarily driven by increased sports
marketing costs, as discussed above. For the second quarter and
year-to-date period, the increase in operating overhead was driven by
increased investment in our retail businesses and higher personnel costs.
The year-to-date period was also affected by increased spending on global
and regional management meetings.
For EMEA, changes in currency exchange rates had a minimal impact on
revenue growth for the second quarter and first six months of fiscal 2006.
Footwear revenues for the second quarter were comparable to fiscal 2005; for
the year-to-date period footwear revenues were up slightly. These results
reflected increased unit sales offset by declines in the average selling
price per pair. Average selling price per pair declined for the quarter and
year-to-date period due in part to strategies to improve consumer value,
changes in the mix of in-line products sold and higher customer discounts.
The increase in EMEA apparel revenue for the quarter and year-to-date
period was driven by increased unit sales, partially offset by a slight
reduction in average selling price and changes in the mix of product sold.
In the second quarter, EMEA sales increases in emerging markets such as
Russia, Turkey, South Africa and Central and Eastern Europe, drove the EMEA
sales growth. Growth in these markets was partially offset by sales
declines in the UK, Italy and France. For the year-to-date period,
sales increases were driven by the emerging markets and the UK.
EMEA pre-tax income for the second quarter of fiscal 2006 was $194.2
million, down 2% versus the prior year quarter. For the first six months of
fiscal 2006, pre-tax income grew 18% to $524.4 million. For the second
quarter, higher revenues and gross margin improvements were more than offset
by increased selling and administrative costs. For the six-month period,
higher revenues, gross margin improvements and lower selling and
administrative costs all contributed to pre-tax income growth. The improved
gross margins during the quarter and six-month period were primarily the
result of improved year-over-year euro hedge rates and were partially offset
by reduced in-line pricing margins primarily in footwear and apparel. The
reduced in-line pricing margins for footwear and apparel were due to
strategies to improve consumer value, higher product costs due in part to
higher oil prices, higher discounts and a shift in the mix of products sold
toward products with lower margins, as discussed above. Higher selling and
administrative costs in the second quarter were driven by increases in both
demand creation and operating overhead expenses. Demand creation spending
increased in the second quarter primarily due to increased advertising
spending, reflecting a shift in the timing of certain advertising campaigns
from the first quarter to the second quarter of fiscal 2006. For the six-
month period, demand creation expense was lower than the prior year,
reflecting a shift in spending to the second half of fiscal 2006 due to the
timing of global sporting events. Operating overhead increased in the second
quarter and first six months of fiscal 2006 due to increases in personnel
costs, spending for global and regional management meetings and investments
in our retail businesses.
In the Asia Pacific Region, 2 percentage points of the reported revenue
growth for both the second quarter and first six months of fiscal 2006 were
due to changes in currency exchange rates. Excluding the changes in currency
exchange rates, higher sales in each Asia Pacific product business unit drove
revenue growth in the second quarter and year-to-date period. Increased sales
in China (driven by expansion of retail distribution and strong consumer
demand) were the primary growth driver for both the second quarter and year-
to-date period, partially offset by sales declines in Japan, Korea and
Australia. These declines were the result of weak market conditions,
investments in consumer value and higher customer discounts.
Second quarter pre-tax income for the Asia Pacific Region increased 3%
versus the second quarter of fiscal 2005 to $115.2 million; year-to-date
pre-tax income increased 18% to $206.6 million. For the quarter and year-to-
date period, higher revenues and lower selling and administrative costs were
partially offset by reduced gross margins. The reduced gross margin
percentage was primarily attributable to lower in-line pricing margins for
footwear and apparel due to strategies to improve consumer value, higher
product costs due in part to higher oil prices, higher discounts and a shift
in the mix of products sold toward products with lower margins. The
reduction in selling and administrative expenses for both the second quarter
and first six months of fiscal 2006 was primarily due to lower demand
creation expense associated with a shift in spending to the latter half of
fiscal 2006.
In the Americas Region, 13 percentage points of the revenue growth for
both the second quarter and first six months of fiscal 2006 was due to
changes in currency exchange rates. Even excluding the changes in currency
exchange rates, sales in each product business unit grew in the second
quarter and year-to-date period. The revenue growth for the second quarter
was primarily driven by higher sales in South America. For the year-to-date
period, higher sales in South America and Canada primarily drove the sales
growth.
In the second quarter of fiscal 2006, pre-tax income for the Americas
Region increased 30% from the prior year quarter, to $57.4 million. For the
first six months of fiscal 2006, pre-tax income increased 58% to $102.0
million. The increase in pre-tax income for the second quarter and year-to-
date period was attributable to higher revenues and a benefit from changes
in currency exchange rates, partially offset by higher selling and
administrative costs. The year-to-date period also benefited from an
improved gross margin percentage.
Revenues and pre-tax income for our Other businesses in the second
quarter and first six months of fiscal 2006 include results from Bauer NIKE
Hockey Inc., Cole Haan Holdings Incorporated, Converse Inc., Hurley
International LLC, NIKE Golf, and Exeter Brands Group LLC. For the second
quarter and year-to-date period, the increase in Other business revenues was
primarily driven by growth at Converse and NIKE Golf.
Pre-tax income from the Other businesses improved 11% to $23.0 million
in the second quarter of fiscal 2006 and improved 3% to $63.0 million in the
year-to-date period versus the same period of last year. For the second
quarter, improved profitability from Converse and NIKE Golf drove most of
the increase, partially offset by a decrease at Bauer NIKE Hockey as a
result of costs incurred in the second quarter in connection with the
strategic shift to a unified brand and logo.
Liquidity and Capital Resources
Cash Flow Activity
Cash provided by operations was $738.2 million for the first six months
of fiscal 2006, compared to $755.5 million for the first six months of
fiscal 2005. Net income provided $733.4 million of cash flow over the first
six months of the current year, compared to $588.7 million in the first six
months of last year, partially offset by a larger increase in working
capital in fiscal 2006 than in fiscal 2005. In the first six months of
fiscal 2006, our net investment in working capital increased $180.5 million
as compared to an increase of only $29.5 million in the corresponding period
of fiscal 2005. This increased investment in working capital was largely
attributable to a larger increase in inventories reflecting our reported
futures orders growth and changes in the timing of receipt of Spring
product.
In the current quarter, we purchased approximately 2.9 million shares
of NIKE's Class B common stock for $239.8 million, bringing purchases for
the first six months of fiscal 2006 to 4.7 million shares at a cost of
$390.4 million. The share repurchases were part of a $1.5 billion, four-
year share repurchase program that was approved by the Board of Directors in
June 2004. Since the inception of this program, we have repurchased 11.6
million shares, at a total cost of $946.6 million. We expect to continue to
fund this program from operating cash flow. The timing and the amount of
shares purchased will be dictated by our capital needs and stock market
conditions.
Dividends declared per share of common stock for the second quarter of
fiscal 2006 were $0.31, compared to $0.25 in the second quarter of fiscal
2005.
Capital Resources
No amounts are currently outstanding under our committed credit facility.
The terms of our facility have not changed from those described in our Annual
Report on Form 10-K for the fiscal year ended May 31, 2005.
Our long-term senior unsecured debt ratings remain at A+ and A2 from
Standard and Poor's Corporation and Moody's Investor Services, respectively.
Liquidity is also provided by our commercial paper program, under which
there was no amount outstanding at November 30, 2005 or May 31, 2005. We
currently have short-term debt ratings of A1 and P1 from Standard and Poor's
Corporation and Moody's Investor Services, respectively.
We currently believe that cash generated by operations, together with
access to external sources of funds as described above and in our Annual
Report on Form 10-K for the fiscal year ended May 31, 2005, will be
sufficient to meet our operating and capital needs in the foreseeable
future.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities.
We believe that the estimates, assumptions and judgments involved in
the accounting policies described in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of our
most recent Annual Report on Form 10-K have the greatest potential impact on
our financial statements, so we consider these to be our critical accounting
policies. Because of the uncertainty inherent in these matters, actual
results could differ from the estimates we use in applying the critical
accounting policies. Certain of these critical accounting policies affect
working capital account balances, including the policies for revenue
recognition, the reserve for uncollectible accounts receivable, inventory
reserves, and contingent payments under endorsement contracts. These
policies require that we make estimates in the preparation of our financial
statements as of a given date. However, since our business cycle is
relatively short, actual results related to these estimates are generally
known within the six-month period following the financial statement date.
Thus, these policies generally affect only the timing of reported amounts
across two to three quarters.
Within the context of these critical accounting policies, we are not
currently aware of any reasonably likely events or circumstances that would
result in materially different amounts being reported.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information previously
reported under Item 7A of the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 2005.
Item 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules
and forms and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures.
The Company carries out a variety of on-going procedures, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial
Officer, to evaluate the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that
the Company's disclosure controls and procedures were effective at the
reasonable assurance level as of November 30, 2005.
There has been no change in the Company's internal controls over
financial reporting during the Company's most recent fiscal quarter that has
materially affected, or is reasonable likely to materially affect, the
Company's internal controls over financial reporting.
Special Note Regarding Forward-Looking Statements
and Analyst Reports
Certain written and oral statements, other than purely historical
information including estimates, projections, statements relating to NIKE's
business plans, objectives and expected operating results, and the assumptions
upon which those statements are based, made or incorporated by reference from
time to time by NIKE or its representatives in this report, other reports,
filings with the Securities and Exchange Commission, press releases,
conferences, or otherwise, are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate, or imply
future results, performance, or achievements, and may contain the words
"believe," "anticipate," "expect," "estimate," "project," "will be," "will
continue," "will likely result," or words or phrases of similar meaning.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from the forward-looking statements. The
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, and include, among
others, the following: international, national and local general economic and
market conditions; the size and growth of the overall athletic footwear,
apparel, and equipment markets; intense competition among designers,
marketers, distributors and sellers of athletic footwear, apparel, and
equipment for consumers and endorsers; demographic changes; changes in
consumer preferences; popularity of particular designs, categories of
products, and sports; seasonal and geographic demand for NIKE products;
difficulties in anticipating or forecasting changes in consumer preferences,
consumer demand for NIKE products, and the various market factors described
above; difficulties in implementing, operating, and maintaining NIKE's
increasingly complex information systems and controls, including, without
limitation, the systems related to demand and supply planning, and inventory
control; fluctuations and difficulty in forecasting operating results,
including, without limitation, the fact that advance "futures" orders may not
be indicative of future revenues due to the changing mix of futures and at-
once orders; the ability of NIKE to sustain, manage or forecast its growth and
inventories; the size, timing and mix of purchases of NIKE's products; new
product development and introduction; the ability to secure and protect
trademarks, patents, and other intellectual property performance and
reliability of products; customer service; adverse publicity; the loss of
significant customers or suppliers; dependence on distributors; business
disruptions; increased costs of freight and transportation to meet delivery
deadlines; changes in business strategy or development plans; general risks
associated with doing business outside the United States, including, without
limitation, exchange rate fluctuations, import duties, tariffs, quotas and
political and economic instability; changes in government regulations;
liability and other claims asserted against NIKE; the ability to attract and
retain qualified personnel; and other factors referenced or incorporated by
reference in this report and other reports.
The risks included here are not exhaustive. Other sections of this report
may include additional factors which could adversely affect NIKE's business
and financial performance. Moreover, NIKE operates in a very competitive and
rapidly changing environment. New risk factors emerge from time to time and it
is not possible for management to predict all such risk factors, nor can it
assess the impact of all such risk factors on NIKE's business or the extent to
which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements.
Given these risks and uncertainties, investors should not place undue reliance
on forward-looking statements as a prediction of actual results.
Investors should also be aware that while NIKE does, from time to time,
communicate with securities analysts, it is against NIKE's policy to disclose
to them any material non-public information or other confidential commercial
information. Accordingly, shareholders should not assume that NIKE agrees with
any statement or report issued by any analyst irrespective of the content of
the statement or report. Furthermore, NIKE has a policy against issuing or
confirming financial forecasts or projections issued by others. Thus, to the
extent that reports issued by securities analysts contain any projections,
forecasts or opinions, such reports are not the responsibility of NIKE.
Part II - Other Information
Item 1.
Legal Proceedings
There have been no significant developments with respect to the
information previously reported under Item 4 of the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 2005.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
The following table presents a summary of share repurchases made by NIKE
during the quarter ended November 30, 2005 under the four-year $1.5 billion
share repurchase program authorized by our Board of Directors and announced in
June 2004.
Total Number of Maximum Dollar Value
Shares Purchased as of Shares that May
Total Number Average Part of Publicly Yet Be Purchased
Of Shares Price Paid Announced Plans Under the Plans
Period Purchased Per Share or Programs or Programs
______ ____________ __________ ___________________ ____________________
(in millions)
September 1 - 30, 2005 1,419,000 $ 79.47 1,419,000 $ 680.4
October 1 - 31, 2005 894,800 $ 82.59 894,800 $ 606.5
November 1 - 30, 2005 612,600 $ 86.61 612,600 $ 553.4
_________ _______ _________
Total 2,926,400 $ 81.92 2,926,400
========= ======= =========
Item 4.
Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on September 20,
2005. The shareholders (i) elected for the ensuing year all of management's
nominees for the Board of Directors; (ii) approved the amendment to the
Company's Articles of Incorporation; (iii) re-approved and amended the NIKE,
Inc. Executive Performance Sharing Plan; (iv) approved an amendment to the
NIKE, Inc. 1990 Stock Incentive Plan; and (v) ratified the appointment of
PricewaterhouseCoopers LLP as independent registered public accounting firm
for fiscal 2006.
The voting results are as follows:
Proposal 1 -
Election of Directors:
Votes Cast Broker
For Withheld Non-Votes
___ __________ _________
Directors Elected
by holders of
Class A Common Stock:
John G. Connors 65,401,724 -0- -0-
Ralph D. DeNunzio 65,401,724 -0- -0-
Douglas G. Houser 65,401,724 -0- -0-
Philip H. Knight 65,401,724 -0- -0-
William D. Perez 65,401,724 -0- -0-
Orin C. Smith 65,401,724 -0- -0-
John R. Thompson, Jr. 65,401,724 -0- -0-
Directors Elected
by holders of
Class B Common Stock:
Jill K. Conway 170,388,955 5,542,169 -0-
Alan B. Graf, Jr. 172,142,586 3,788,538 -0-
Jeanne P. Jackson 169,622,940 6,308,184 -0-
Broker
For Against Abstain Non-Votes
___ _______ _______ _________
Proposal 2 -
Amend the Articles of
Incorporation to increase
the number of authorized
Shares:
Class A and Class B
Common Stock Voting
Together 218,187,397 21,688,660 1,456,789 -0-
Proposal 3 -
Re-approve and amend
Executive Performance
Sharing Plan:
Class A and Class B
Common Stock Voting
Together 234,976,040 4,720,526 1,636,280 -0-
Proposal 4 -
Amend the 1990 Stock
Incentive Plan:
Class A and Class B
Common Stock Voting
Together 132,436,064 90,824,711 1,537,476 16,534,596
Proposal 5 -
Ratify the appointment
of PricewaterhouseCoopers LLP
as independent registered
public accounting firm:
Class A and Class B
Common Stock Voting
Together 236,705,036 3,488,189 1,139,621 -0-
Item 6. Exhibits
(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,
2005).
3.2 Third Restated Bylaws, as amended (incorporated by reference
from Exhibit 3.2 to the Company's Current Report on Form 8-K
filed November 18, 2004).
4.1 Restated Articles of Incorporation, as amended (see Exhibit
3.1).
4.2 Third Restated Bylaws, as amended (see Exhibit 3.2).
12.1 Computation of Ratio of Earnings to Fixed Charges.
31.1 Rule 13(a)-14(a) Certification of Chief Executive Officer.
31.2 Rule 13(a)-14(a) Certification of Chief Financial Officer.
32.1 Section 1350 Certificate of Chief Executive Officer.
32.2 Section 1350 Certificate of Chief Financial Officer.
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
/s/ Donald W. Blair
________________________
Donald W. Blair
Chief Financial Officer
DATED: January 6, 2006