What was the impact of the adoption of FAS 142 on NIKE's financial results?

NIKE adopted FAS 142, 'Goodwill and Other Intangible Assets,' effective June 1, 2002. This led to a non-recurring $266.1 million charge in the first quarter of fiscal 2003, representing the cumulative effect of impairment on goodwill and certain intangible assets. This charge significantly reduced the year-to-date net income but did not impact the second-quarter results' operational performance.

How is NIKE's international business performing, and what is driving its growth?

NIKE's international business is performing exceptionally well, with revenues increasing 21% (19% in constant dollars) in the second quarter, now accounting for half of the company's total revenue. The EMEA region showed particularly strong growth, up 35% (25% in constant dollars), driven by demand across footwear, apparel, and equipment, especially in emerging European markets. Asia Pacific also demonstrated robust growth of 14% (12% in constant dollars).

What is the company's strategy regarding its U.S. distribution, particularly concerning Foot Locker?

NIKE is undergoing a strategic realignment of its U.S. distribution. The company expects U.S. sales to Foot Locker to remain below prior year levels at least through the first quarter of fiscal 2004. This is due to lower orders and limitations imposed by NIKE on Foot Locker's purchase of certain products. Foot Locker will no longer be a primary distributor for NIKE's high-end, innovative footwear in the U.S. after February 2003. NIKE is actively pursuing incremental sales with other retailers to offset this shift.

How did foreign currency exchange rates affect NIKE's reported revenues?

Foreign currency exchange rates had a mixed but generally positive impact on reported revenues. For the second quarter, reported revenue growth was 8%, while constant dollar growth was 6%. For the first six months, reported revenue growth was 7%, with constant dollar growth at 5%. Stronger currencies in Europe and Japan positively impacted reported results, while weaker Latin American currencies negatively affected reported revenue in the Americas region.

NKE 10-Q Quarterly Report Q2 FY2003 — Revenue, Net Income, EPS

Summary

NIKE, Inc. reported its second-quarter fiscal year 2003 results, showcasing a robust performance with a notable increase in net income and earnings per share. The company achieved an 8% revenue increase year-over-year, driven primarily by strong performance in its international regions, which collectively saw a 21% revenue jump. This growth was supported by a 1.9 percentage point increase in gross margin, reflecting successful cost-saving initiatives and a favorable product mix. Despite a significant $266.1 million cumulative charge in the first quarter related to the adoption of new accounting standards (FAS 142) for goodwill and intangible assets, the company demonstrated strong operational momentum. The effective tax rate also saw a slight reduction, further boosting net income. Management highlighted strategic shifts in U.S. distribution, particularly with Foot Locker, and ongoing investments in international expansion and new retail concepts, positioning NIKE for continued profitable growth.

Key Highlights

1Revenues increased by 8% to $2.51 billion for the second quarter of fiscal 2003 compared to the prior year, driven by international growth.
2International regions experienced a 21% revenue increase (19% in constant dollars), now representing 50% of total company revenues.
3Net income for the second quarter grew by 18% to $152.0 million, with diluted earnings per share rising 19% to $0.57.
4Gross margin percentage improved by 1.9 percentage points year-over-year, attributed to cost reductions and a favorable product mix.
5The company adopted FAS 142, resulting in a $266.1 million non-recurring impairment charge for goodwill and intangible assets in the first quarter, significantly impacting year-to-date net income.
6Selling and administrative expenses increased as a percentage of revenue, largely due to increased demand creation and investments in new retail stores and infrastructure.
7The company is strategically realigning its U.S. distribution, reducing reliance on Foot Locker for high-end products, and focusing on other retail partners.

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2002

Summary

Key Highlights

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