SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 18, 1998
NIKE, INC.
(Exact name of registrant as specified in its charter)
Oregon 1-10635 93-0584541
(State of incorporation) (Commission File (IRS Employer
Number) Identification No.)
One Bowerman Drive, Beaverton, Oregon 97005-6453
(Address of principal executive offices) (Zip Code)
(503) 671-6453
(Registrant's telephone number, including area code)
Item 5. OTHER EVENTS
The Registrant issued the following press release on March 18, 1998:
NIKE REPORTS THIRD QUARTER 1998 EARNINGS;
FY 1998 RESTRUCTURING CHARGE TO BE BETWEEN $125 - $175 MILLION; WORLDWIDE
FUTURES ORDERS DECREASE 9 PERCENT
Highlights:
Revenues for the quarter decreased 8% to $2.22 billion; Earnings per
are $0.25 versus $0.80.
Restructuring charge of $125 - $175 million expected in FY98.
Global footwear revenues down 16 percent; global apparel up 11 percent.
Worldwide Futures Orders decreased 9 percent; down 7 percent in constant
dollars.
Beaverton, OR (March 18, 1998) -- NIKE, Inc. (NYSE:NKE) today reported
revenues and earnings for the Company's third quarter ended February 28,
1998. Third quarter net income totaled $73.1 million or $0.25 per
diluted share compared to $237.1 million, or $0.80 per diluted share.
Third quarter revenues were $2.22 billion, down 8 percent from $2.42
billion last year.
The Company also reported that fourth quarter fiscal 1998 earnings will
be reduced by an estimated restructuring charge of between $125 and $175
million. Included in the charge will be costs associated with the
anticipated reduction in the Company's global workforce of approximately
1,600 positions, or seven percent of the workforce. The charge is also
expected to include provisions for asset write-downs, lease abandonments
and other costs.*
These measures, combined with the Company's efforts to maintain an
efficient cost structure in the face of a difficult short-term market in
the U.S. and Asia Pacific, are expected to result in projected reduced
spending in excess of $100 million in fiscal 1999.*
In addition to the restructuring charge, the Company's gross margins for
the year will be negatively impacted by approximately $100 million
compared to Fiscal 1997, due to increased close-out sales and write-
downs of slow moving inventories.*
Philip H. Knight, Chairman and CEO, said, "The actions we announce
today, as difficult as they are to undertake as they impact our human
assets, will result in a leaner and more competitive NIKE as we move
into fiscal 1999. Our explosive growth in the three years prior to this
one caused us to dramatically increase our workforce from 9,500 to
almost 22,000 employees at the end of fiscal 1997.
"In spirit, NIKE remains a company that is about change. Going forward
into this challenging period, we must look to new initiatives, ambitious
thinking and new metrics for measuring our success to supplement our
core value of creating the best products for athletes. Our goal is to
continually invest in the future of NIKE, so that we are better poised
to leverage those investments when our business is back on the path of
growth.*
"Looking ahead into fiscal 1999, we foresee continued pressure on our
earnings resulting from our difficulties in the Asia Pacific market. Our
near-term prospects in Japan and Korea, combined with the negative effect
of the strong U.S. dollar, will continue to burden earnings through at
least the first half of fiscal 1999. Going forward, we believe that the
significant infrastructure reductions we have made in our regional
office in Hong Kong strategically position us closer to the individual
markets. We remain resolute in our belief that the Asia Pacific region
holds the greatest long-term opportunities for growth."*
Futures Orders
The Company reported worldwide futures orders for athletic footwear and
apparel, including orders for NIKE Japan, scheduled for delivery between
March and July 1998 total $4.0 billion, 9 percent lower than such orders
for the same period last year. Had the U.S. dollar remained constant
at year-ago levels, worldwide futures orders would have decreased 7
percent.*
Looking at futures orders by region, the USA region was down 13 percent,
Europe increased 15 percent, Asia Pacific was down 34 percent and the
Americas was up 9 percent. In constant dollars, futures orders for
Europe increased 16 percent, Asia Pacific decreased 26 percent and
Americas was up 12 percent.*
Regional Highlights
USA
U.S. athletic footwear revenues declined 18 percent to $800.4 million,
compared to $980.4 million in the same period last year. U.S. athletic
apparel revenues declined 5 percent in the quarter to $331.0 million.
Mr. Knight noted, "We continued to see a highly promotional retail
environment in the U.S. in the third quarter, resulting in gross margin
pressure on a higher percentage of our footwear. The encouraging news
is that our close-out inventory continues to sell through at a strong
pace and we anticipate our U.S. inventories to be in a more normalized
position by the end of fiscal 1998."*
Europe
European revenues in the quarter increased 4 percent to $568.0 million.
Had the dollar remained constant at year-ago levels, revenues would have
increased 11 percent. Italy, France and Spain all showed double digit
revenue growth in constant dollars. "The double digit increase in
futures orders is a good indication of our growing brand strength in
Europe, particularly in apparel," said Mr. Knight. "Looking out to
FY99, we anticipate continued pressure on pricing margins due to the
continued strength of the US dollar."*
Asia Pacific
Revenues in the Asia Pacific region declined 17 percent to $273.3
million. In constant dollars, regional revenues decreased 2 percent.
Revenues in Japan declined 10 percent, but were flat in constant
dollars. Korea saw the largest decline in the quarter, with revenues
down 52 percent and down 20 percent in constant dollars. Mr. Knight
noted, "We are actively engaged in moving excess inventory in this
region through existing channels, through the addition of NIKE factory
outlet stores, and by moving some of this product to other regions. We
believe we are adequately reserved for the impact this close-out
inventory will have on our gross margins but remain cautious on the
impact this inventory will have on our business going forward in FY99,
particularly in Japan and Korea."*
Americas
Revenues in the Americas region grew 27 percent to $133.1 million. Had
the dollar remained constant, revenues would have increased 32 percent.
Double digit revenue gains were recorded in every major country with
Canada up 28 percent in constant dollars.
Global Category Highlights
Despite a decrease in global footwear revenues of 16 percent, key growth
categories such as golf, soccer and Jordan brand footwear all showed
increases of over 80 percent. Global apparel revenues again showed
strength across most major categories, including our largest one,
training, which increased 19 percent. Other global apparel categories
showing strong growth were tennis, kids, soccer and golf.
Income Statement Review
In the third quarter, U.S. athletic footwear and apparel revenues totaled
$1.1 billion, a decrease of 15 percent. Non-U.S. athletic footwear and
apparel revenues decreased 1 percent to $974.3 million. Had the U.S.
dollar remained constant at year-ago levels, non-U.S. revenues would
have increased 9 percent in the quarter. Other revenues, which include
NIKE equipment, Bauer, Cole Haan(R), Tetra Plastics and Sports Specialties,
increased 6 percent to $118.3 million. Selling and administrative
expenses were 29.3 percent of third quarter revenues, compared to
23.8 percent last year.
Balance Sheet Review
Cash and short-term investments decreased to $150.3 in the third quarter.
The current ratio as of February 28, 1998, was 2.1 to 1. Total U.S.
footwear inventory units ended the quarter up 9 percent compared to
November 30, 1997, and up 7 percent from February 28, 1997.
Share Repurchase
During the third quarter, the Company purchased a total of 2.7 million
shares of NIKE's Class B Common Stock for $123.2 million, completing the
$450 million program approved in July 1993 and beginning the $1 billion
program approved in December 1997. In the quarter, 2.4 million shares
were purchased under the July 1993 program for $108.2 million. Total
shares purchased since July 1993 were 23.7 million. Under the new $1
billion, four-year program, the Company purchased a total of 355,000
shares for approximately $15.0 million.
NIKE, Inc., based in Beaverton, Oregon, is the world's leading designer
and marketer of authentic athletic footwear, apparel, equipment and
accessories for a wide variety of sports and fitness activities.
Wholly-owned NIKE subsidiaries include Bauer Inc., the world's leading
manufacturer of hockey equipment; Cole Haan, which markets a line of
high-quality men's and women's dress and casual shoes; and Sports
Specialties Corporation, which markets a full line of licensed headwear.
Total revenues for the trailing twelve months ending February 28, 1998,
were $9.6 billion.
* The marked paragraphs contain forward-looking statements that involve
risks and uncertainties that could cause actual results to differ
materially. These risks and uncertainties are detailed from time to
time in reports filed by NIKE with the S.E.C., including Forms 8-K,
10-Q, and 10-K. Some forward-looking statements in this release
concern changes in futures orders that are not necessarily indicative of
changes in total revenues for subsequent periods due to the mix of
futures and "at once" orders, which may vary significantly from quarter
to quarter.
NIKE's earnings releases and other financial information are available
on the Internet at NikeBiz.com.
NIKE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED FEBRUARY 28, 1998
(In thousands, except per share data)
INCOME QUARTER ENDING Y-T-D ENDING
STATEMENT 2/28/98 2/28/97 2/28/98 2/28/97
Revenues $2,223,995 $2,423,648 $7,245,366 $6,812,608
Costs & Expenses
Cost of Sales 1,428,849 1,435,427 4,503,836 4,075,174
SG&A 651,378 577,579 1,903,338 1,637,569
Interest Expense 13,167 15,793 47,222 38,687
Other 7,983 7,716 27,473 16,210
Total Costs 2,101,377 2,036,515 6,481,869 5,767,640
_________ _________ _________ _________
Pre-tax Income 122,618 387,133 763,497 1,044,968
Income Taxes 49,500 150,000 296,200 404,900
_________ ________ _________ _________
Net Income $73,118 $237,133 $467,297 $640,068
======== ======== ========= =========
Diluted EPS $0.25 $0.80 $1.58 $2.16
Basic EPS $0.25 $0.82 $1.61 $2.22
======== ======== ========= =========
Weighted Average Common Shares Outstanding:
Diluted 293,185 297,368 295,816 296,915
Basic 287,585 288,568 289,292 288,183
======== ======== ========= =======
Dividend $0.12 $0.10 $0.34 $0.28
======== ======== ========= =======
QUARTER ENDING Y-T-D ENDING
Divisional Revenues 2/28/98 2/28/97 2/28/98 2/28/97
=========================================================================
U.S. Athletic Footwear $800,410 $980,369 $2,644,077 $2,796,823
U.S. Athletic Apparel 330,958 348,702 1,174,459 1,067,474
________ _________ _________ _________
Total U.S. Athletic 1,131,368 1,329,071 3,818,536 3,864,297
International Footwear 595,433 689,064 1,910,215 1,754,831
International Apparel 378,857 293,821 1,091,303 788,181
_________ ________ _________ _________
Total International 974,290 982,885 3,001,518 2,543,012
Other Brands 118,337 111,692 425,312 405,299
_________ ________ _________ _________
Total $2,223,995 $2,423,648 $7,245,366 $6,812,608
QUARTER ENDING Y-T-D ENDING
Percentage Change 2/28/98 2/28/98
================================================================
U.S. Athletic Footwear -18% -5%
U.S. Athletic Apparel -5% 10%
___ ___
Total U.S. Athletic -15% -1%
International Footwear -14% 9%
International Apparel 29% 38%
___ ___
Total International -1% 18%
Other Brands 6% 5%
___ ___
Total -8% 6%
=============================================================
BALANCE SHEET 2/28/98 2/28/97
=============================================================
ASSETS
Cash & Investments $150,280 $300,801
Accounts Receivable 1,809,830 1,850,310
Inventory 1,566,099 1,089,143
Deferred Taxes 138,008 109,660
Prepaid Expenses 228,815 150,586
__________________________________
Current Assets 3,893,032 3,500,500
__________________________________
Fixed Assets 1,710,068 1,294,483
Depreciation 618,549 465,691
__________________________________
Net Fixed Assets 1,091,519 828,792
__________________________________
Identifiable Intangible
Assets and Goodwill 449,718 467,497
Other Assets 203,834 147,712
__________________________________
Total Assets $5,638,103 $4,944,501
==================================
LIAB AND EQUITY
Current Long-Term Debt $1,960 $2,641
Payable to Banks 629,665 527,393
Accounts Payable 471,575 511,802
Accrued Liabilities 674,179 506,859
Income Taxes Payable 59,369 55,146
_________________________________
Current Liabilities 1,836,748 1,603,841
Long-term Debt 385,311 289,375
Def Inc Taxes & Oth Liab 41,167 36,486
Preferred Stock 300 300
Common Equity 3,374,577 3,014,499
_________________________________
Total Liab. & Equity $5,638,103 $4,944,501
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NIKE, Inc.
(Registrant)
Date: March 24, 1998
By /s/ Robert E. Harold
Chief Financial Officer