What caused the reported net loss for the quarter?

The reported net loss of $48.9 million was primarily caused by a one-time charge of $266.1 million related to the adoption of Statement of Financial Accounting Standards No. 142 (FAS 142). This new accounting standard requires goodwill and certain intangible assets to be tested for impairment rather than amortized. The charge reflects the impairment of goodwill associated with the Bauer NIKE Hockey and Cole Haan reporting units, and impairment of Bauer trademarks.

How did the company's revenue performance vary by region?

Revenue growth was strong in international regions, with Europe, Middle East, and Africa (EMEA) up 15.5% and Asia Pacific up 23.8% (reported dollars). The Americas region saw a decline of 11.1% in reported dollars but grew 2.3% in constant dollars. The U.S. region showed modest growth of 1.5%, driven by apparel, while footwear and equipment were flat.

What is the impact of the FAS 142 adoption on future financial reporting?

With the adoption of FAS 142, goodwill and intangible assets with indefinite lives will no longer be amortized but will be tested annually for impairment. This means future reported earnings will not be reduced by amortization expense on these assets, but the company may incur impairment charges if the assets' fair value falls below their carrying value. The impairment charge for this quarter was a one-time cumulative effect; future impairment charges would be reflected within operating income.

What is the outlook for sales to Foot Locker?

NIKE anticipates significantly lower sales to Foot Locker for the second and third quarters of fiscal 2003 due to reduced orders and limitations on product purchases. The company is working with Foot Locker to develop a plan and is pursuing incremental sales with other retailers to offset the decline, though a full offset is not expected in the short term.

NKE 10-Q Quarterly Report Q1 FY2003 — Revenue, Net Income, EPS

Summary

NIKE, Inc. reported its fiscal first quarter results for the period ending August 31, 2002. The company saw a 7.0% increase in consolidated revenues, driven primarily by strong performance in its international regions, particularly Europe, Middle East, Africa, and Asia Pacific. Despite revenue growth, the company reported a net loss of $48.9 million for the quarter, largely due to a significant $266.1 million charge related to the adoption of FAS 142, which requires goodwill and certain intangible assets to be tested for impairment rather than amortized. This accounting change impacted reported earnings per share, resulting in a loss per share of $0.18. Excluding this one-time charge, income before accounting change was $217.2 million, a 6.4% increase year-over-year, reflecting improved gross margins and controlled interest expenses. Key financial shifts include a notable increase in accounts receivable and a decrease in cash and equivalents, while long-term debt saw an increase. The company highlighted strong gross margins, reaching 41.4%, attributed to cost-saving initiatives and a favorable product mix. However, selling and administrative expenses increased as a percentage of revenue, primarily due to higher demand creation spending for the World Cup and increased operating overhead. Investors should note the significant impact of the FAS 142 adoption on the bottom line, while the underlying operational performance, especially in international markets, shows positive momentum.

Key Highlights

1Consolidated revenues increased by 7.0% to $2,796.3 million, with international regions showing robust growth (13.6% reported, 8.1% constant dollar).
2Net loss of $48.9 million reported due to a $266.1 million cumulative effect charge from adopting FAS 142 (Goodwill and Other Intangible Assets).
3Income before accounting change increased by 6.4% to $217.2 million, indicating underlying operational improvement.
4Gross margin percentage improved significantly to 41.4% from 39.4% in the prior year period, driven by cost efficiencies and product mix.
5Accounts receivable increased by 12.2% to $2,028.0 million, while cash and equivalents decreased to $430.0 million.
6Selling and administrative expenses increased as a percentage of revenue to 28.6% from 26.6%, mainly due to increased marketing spend and operating overhead.

NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2002

Summary

Key Highlights

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