What was the primary driver of the revenue growth for NIKE in this period?

Revenue growth was driven by strong demand for NIKE brand products across all geographic regions and product categories. Foreign currency exchange rates also had a positive impact, increasing revenues by 3 percentage points in the third quarter and 2 percentage points for the first nine months. Unit sales volume increases in footwear and apparel were key contributors.

How did the adoption of FAS 123R impact NIKE's financial results?

The adoption of SFAS No. 123R, 'Share-Based Payment,' on June 1, 2006, required NIKE to recognize expense for stock-based compensation. For the third quarter, this resulted in an after-tax charge of $17.8 million ($0.04 per diluted share), and for the first nine months, $78.1 million ($0.15 per diluted share). Management provided adjusted figures excluding this charge to highlight underlying business trends.

What contributed to the decrease in the effective tax rate?

The effective tax rate decreased due to a European tax agreement finalized in the second quarter of fiscal 2007 and the retroactive reinstatement of the U.S. research and development tax credit in December 2006. This resulted in a retroactive benefit recorded during the nine months ended February 28, 2007.

How is NIKE managing its capital and returning value to shareholders?

NIKE is actively managing its capital through strong operating cash flow and access to credit facilities. The company continued its share repurchase program, completing the previous $1.5 billion program and initiating a new $3 billion program, repurchasing $694.0 million worth of shares in the first nine months of fiscal 2007. Additionally, dividends per share increased to $0.185 for the third quarter, up from $0.155 in the prior year's comparable quarter.

NKE 10-Q Filed Apr 4, 2007

Summary

NIKE, Inc. reported strong performance for the third quarter and first nine months of fiscal year 2007, with revenues growing 9% year-over-year to $3.9 billion for the quarter and $11.9 billion year-to-date. Net income for the quarter increased 8% to $350.8 million, resulting in a 10% rise in diluted earnings per share to $0.68. The company benefited from a lower effective tax rate due to a European tax agreement and the reinstatement of the U.S. research and development tax credit. While gross margins showed a slight improvement year-over-year for the quarter, they were slightly down for the nine-month period due to various factors including lower footwear net pricing margins and increased closeout mix in certain regions. Significant investments in growth drivers such as emerging markets, non-Nike brands, and owned retail contributed to a 14% increase in selling and administrative expenses for the quarter. The adoption of SFAS No. 123R for stock-based compensation also added expense, though management provided figures excluding this impact to highlight underlying business trends. The company continued its robust share repurchase program and increased dividends, reflecting a positive outlook on its financial health and commitment to shareholder returns.

Key Highlights

1Revenue growth of 9% for both the third quarter and year-to-date periods, reaching $3.9 billion and $11.9 billion respectively.
2Net income increased by 8% to $350.8 million for the third quarter, with diluted EPS up 10% to $0.68.
3Effective tax rate reduced due to a European tax agreement and U.S. R&D tax credit reinstatement, positively impacting profitability.
4Selling and administrative expenses increased by 14% for the quarter, driven by investments in growth areas and stock-based compensation under new accounting standards (FAS 123R).
5Gross margin for the quarter improved by 60 basis points to 44.2%, but was down 20 basis points year-to-date.
6Worldwide futures and advance orders increased by 9%, signaling continued demand, with unit sales volume being a key driver.
7NIKE continued its capital return strategy with significant share repurchases under a new $3 billion program and increased dividend payments.

NIKE, Inc. Quarterly Report for Q3 Ended Apr 4, 2007

Summary

Key Highlights

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