10-QPeriod: Q3 FY2009

NIKE, Inc. Quarterly Report for Q3 Ended Feb 28, 2009

Filed April 9, 2009For Securities:NKE

Summary

NIKE, Inc. reported its third quarter results for fiscal year 2009, ending February 28, 2009. The company experienced a 2% decline in revenue to $4.4 billion and a significant 47% decrease in net income to $243.8 million, resulting in diluted earnings per share of $0.50, down 46% year-over-year. This decline was heavily influenced by a substantial $401.3 million pre-tax non-cash impairment charge related to the Umbro brand's goodwill and intangible assets, which alone reduced diluted EPS by $0.49. Excluding these impairment charges, the company's net income would have increased by 4% and diluted EPS by 8%, indicating underlying operational resilience amidst a challenging macroeconomic environment. The company noted a 10% decrease in worldwide futures orders for the upcoming period, partly due to unfavorable currency exchange rates. NIKE is implementing a restructuring plan to streamline operations and reduce global workforce by up to 4%, anticipating charges of $175 million to $225 million.

Financial Highlights

24 data points
Beta

Revenue

$4.44B

43.9% Gross Margin

Net Income

$243.80M

5.5% Net Margin

EPS (Diluted)

$0.13

Cash & Equivalents

$1.89B

Free Cash Flow

-$86.30M

Financial Statements
Beta
Revenue$4.44B
Cost of Revenue$2.49B
Gross Profit$1.95B
SG&A Expenses$1.35B
Net Income$243.80M
EPS (Basic)$0.13
EPS (Diluted)$0.13

Key Highlights

  • 1Total revenue for the third quarter decreased by 2% to $4.4 billion compared to the prior year.
  • 2Net income saw a significant 47% decline to $243.8 million, with diluted EPS falling to $0.50.
  • 3A substantial $401.3 million pre-tax non-cash impairment charge related to the Umbro brand's goodwill and intangible assets significantly impacted profitability.
  • 4Excluding the Umbro impairment, net income would have increased by 4% and diluted EPS by 8%, highlighting operational strength.
  • 5Worldwide futures and advance orders for the upcoming period were down 10% compared to the prior year, influenced by currency headwinds.
  • 6NIKE is undertaking a restructuring initiative, expecting to reduce its global workforce by up to 4% and incur charges between $175 million and $225 million.

Frequently Asked Questions

The primary reason for the significant drop in net income was a $401.3 million pre-tax non-cash impairment charge recorded for the goodwill, intangible, and other assets of the Umbro brand. This charge significantly impacted the company's profitability for the quarter.

Excluding the impairment charges related to Umbro, NIKE's net income would have increased by 4% and diluted earnings per share by 8% compared to the prior year's third quarter. This suggests that the underlying business operations remained relatively strong despite the challenging economic environment.

Worldwide futures and advance orders for NIKE Brand footwear and apparel, scheduled for delivery from March through July 2009, were 10% lower than the comparable period in the prior year. This decline was influenced by unfavorable currency exchange rates (contributing approximately 8 percentage points to the decline) and decreased unit sales volume, particularly in apparel in the U.S. and EMEA regions, and footwear in the EMEA region.

NIKE announced a plan to restructure its organization to streamline management and eliminate redundancies. This plan includes reducing its global workforce by up to 4% and is expected to result in gross restructuring charges between $175 million and $225 million, primarily related to severance costs. The company expects to incur most of these charges in the fourth quarter of fiscal 2009 and the first quarter of fiscal 2010.