01—Abstract
Summary
Summary of the 10-K filed August 14, 2002. Cited figures are marked; the original filing is the authoritative source.
NIKE, Inc. reported robust financial performance for the fiscal year ended May 31, 2002, with revenues reaching $9.89 billiona, a 4.3% increase year-over-year.
Net income also saw a significant rise of 13.3% to $668.3 millionb (before an accounting change adjustment), demonstrating the company's ability to grow its top and bottom lines in a competitive market. This growth was driven by strong international performance, particularly in the EMEA and Asia Pacific regions, and increased sales in apparel and equipment within the U.S., offsetting a slight decline in U.S. footwear revenue. The company maintained healthy gross margins of 39.3% and managed its selling and administrative expenses effectively, although strategic investments in supply chain initiatives and marketing continued to impact this category.
NIKE continues to leverage its strong brand by investing in product innovation and marketing, including a significant push around the World Cup 2002. The company also strategically acquired Hurley International LLC to expand its presence in the action sports market.
Despite some headwinds, such as a reduction in orders from a major customer, Foot Locker, Inc., NIKE remains confident in its long-term growth prospects, supported by a solid cash flow from operations and established credit facilities. The company also announced its intention to adopt new accounting standards, including FAS 142, which is expected to result in a significant impairment charge related to goodwill for its Bauer NIKE Hockey and Cole Haan subsidiaries.
02—Key points
Key Highlights
- Revenues increased by 4.3% to $9.89 billion, showcasing continued top-line growth.
- Net income (before accounting change) grew by 13.3% to $668.3 million, indicating improved profitability.
- International revenues demonstrated strong growth, increasing by 6.6% in reported dollars and highlighting the global appeal of the NIKE brand.
- Gross margin improved slightly to 39.3% from 39.0% in the prior year, reflecting effective cost management and pricing strategies.
- Strategic investments in supply chain initiatives and marketing, including World Cup 2002 campaigns, are highlighted as key drivers for future growth.
- Acquisition of Hurley International LLC in April 2002 signals expansion into the action sports apparel market.
- The company anticipates a significant transitional impairment loss of approximately $270 million related to goodwill for Bauer NIKE Hockey and Cole Haan subsidiaries upon adoption of SFAS No. 142.
03—Questions
Frequently Asked Questions
What was NIKE's revenue performance in fiscal year 2002?
NIKE's total revenues for the fiscal year ended May 31, 2002, were $9.89 billion, representing a 4.3% increase compared to $9.49 billion in fiscal year 2001. This growth was driven by increased NIKE brand sales across all geographic regions.
How did NIKE's profitability fare in fiscal year 2002?
Income before the cumulative effect of an accounting change increased by 13.3% to $668.3 million in fiscal year 2002, compared to $589.7 million in fiscal year 2001. Diluted earnings per share before this adjustment also increased by 13.9% to $2.46.
What was the geographic breakdown of NIKE's revenue growth?
International revenues continued to grow, accounting for 45.6% of total company revenues in fiscal year 2002, up from 44.6% in the prior year. Reported revenues from international regions increased by 6.6%. Specific regions like Asia Pacific (9.2% growth) and EMEA (5.7% growth) showed strong performance, while the Americas region also saw a 5.4% increase.
Are there any significant upcoming accounting changes that investors should be aware of?
Yes, NIKE plans to adopt SFAS No. 142, 'Goodwill and Other Intangible Assets,' effective June 1, 2002. This adoption is expected to result in a transitional impairment loss of approximately $270 million, primarily related to the goodwill of its Bauer NIKE Hockey and Cole Haan subsidiaries. This charge will be recognized as a cumulative effect of a change in accounting principle in the first quarter of fiscal year 2003.
What impact is the reduced business with Foot Locker expected to have?
Foot Locker, Inc., a major customer, has indicated a strategy shift towards more moderately-priced offerings, leading to significantly reduced futures orders for NIKE's U.S. business for the upcoming holiday season. While NIKE expects Foot Locker to remain an important partner, this reduction is expected to impact U.S. footwear orders in the second half of fiscal 2003 and is being actively managed by seeking incremental sales elsewhere and focusing on retailers serving the premium performance footwear market.
04—Continue