OVERVIEW

NIKE designs, develops, markets and sells athletic footwear, apparel, equipment,
accessories and services worldwide. We are the largest seller of athletic
footwear and apparel in the world. We sell our products through NIKE-owned
retail stores and through digital platforms (which we refer to collectively as
our "NIKE Direct" operations), to retail accounts and to a mix of independent
distributors, licensees and sales representatives in virtually all countries
around the world. Our goal is to deliver value to our shareholders by building a
profitable global portfolio of branded footwear, apparel, equipment and
accessories businesses. Our strategy is to achieve long-term revenue growth by
creating innovative, "must-have" products, building deep personal consumer
connections with our brands and delivering compelling consumer experiences
through digital platforms and at retail. Through the Consumer Direct Offense, we
are focusing on our Triple Double strategy, with the objective of doubling the
impact of innovation, increasing our speed to market and growing our direct
connections with consumers.
For the second quarter of fiscal 2020, NIKE, Inc. Revenues increased 10% to
$10.3 billion compared to the second quarter of fiscal 2019. On a
currency-neutral basis, Revenues increased 13%. Net income was $1.1 billion and
diluted earnings per common share was $0.70 for the second quarter of fiscal
2020, compared to Net income of $847 million and diluted earnings per common
share of $0.52 for the second quarter of fiscal 2019.
Income before income taxes increased 25% compared to the second quarter of
fiscal 2019, driven by revenue growth, gross margin expansion and selling and
administrative expense leverage. The NIKE Brand, which represents over 90% of
NIKE, Inc. Revenues, delivered 10% revenue growth. On a currency-neutral basis,
NIKE Brand revenues grew 12%, driven by higher revenues across all geographies,
footwear and apparel, as well as growth in nearly all key categories, primarily
Sportswear and the Jordan Brand. Revenues for Converse increased 13% and 15% on
a reported and currency-neutral basis, respectively, mainly driven by
double-digit growth in Asia and Europe, as well as through digital globally.
Our effective tax rate was 10.7% for the second quarter of fiscal 2020 compared
to 15.0% for the second quarter of fiscal 2019, primarily due to a more
favorable impact from stock-based compensation.
Diluted earnings per common share reflects a 2% decline in the weighted average
diluted common shares outstanding, driven by our share repurchase program.
On October 29, 2019, we signed a definitive agreement to sell the assets and
liabilities of our wholly-owned subsidiary brand, Hurley. As of November 30,
2019, the related assets and liabilities were classified as held-for-sale on our
Unaudited Condensed Consolidated Balance Sheets. The transaction closed on
December 6, 2019, subsequent to the end of the second quarter of fiscal 2020.
The impacts of the divestiture are not material to the Company.
While foreign currency markets remain volatile, in part due to geopolitical
dynamics leading to a stronger U.S. Dollar, we continue to see opportunities to
drive future growth and profitability. We remain committed to effectively
managing our business to achieve our financial goals over the long-term by
executing against the operational strategies outlined above.
USE OF NON-GAAP FINANCIAL MEASURES
Throughout this Quarterly Report on Form 10-Q, we discuss non-GAAP financial
measures, including references to wholesale equivalent revenues,
currency-neutral revenues as well as Total NIKE Brand earnings before interest
and taxes (EBIT) and Total NIKE, Inc. EBIT, which should be considered in
addition to, and not in lieu of, the financial measures calculated and presented
in accordance with accounting principles generally accepted in the United States
of America ("U.S. GAAP"). References to wholesale equivalent revenues are
intended to provide context as to the total size of our NIKE Brand market
footprint if we had no NIKE Direct operations. NIKE Brand wholesale equivalent
revenues consist of (1) sales to external wholesale customers and (2) internal
sales from our wholesale operations to our NIKE Direct operations, which are
charged at prices comparable to those charged to external wholesale customers.
Currency-neutral revenues are calculated using actual exchange rates in use
during the comparative prior year period to enhance the visibility of the
underlying business trends excluding the impact of translation arising from
foreign currency exchange rate fluctuations. EBIT is calculated as Net Income
before Interest expense (income), net and Income tax expense in the Unaudited
Condensed Consolidated Statements of Income.
Management uses these non-GAAP financial measures when evaluating the Company's
performance, including when making financial and operating decisions.
Additionally, management believes these non-GAAP financial measures provide
investors with additional financial information that should be considered when
assessing our underlying business performance and trends. However, references to
wholesale equivalent revenues, currency-neutral revenues and EBIT should not be
considered in isolation or as a substitute for other financial measures
calculated and presented in accordance with U.S. GAAP and may not be comparable
to similarly titled non-GAAP measures used by other companies.

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RESULTS OF OPERATIONS
                                    THREE MONTHS ENDED NOVEMBER 30,          SIX MONTHS ENDED NOVEMBER 30,
(Dollars in millions, except
per share data)                      2019          2018     % CHANGE          2019         2018     % CHANGE
Revenues                        $    10,326    $    9,374         10  %   $   20,986    $  19,322          9 %
Cost of sales                         5,782         5,269         10  %       11,571       10,820          7 %
Gross profit                          4,544         4,105         11  %        9,415        8,502         11 %
Gross margin                           44.0 %        43.8 %                     44.9 %       44.0 %
Demand creation expense                 881           910         -3  %        1,899        1,874          1 %
Operating overhead expense            2,443         2,232          9  %        4,753        4,331         10 %
Total selling and                     3,324         3,142          6  %        6,652        6,205          7 %
administrative expense
% of revenues                          32.2 %        33.5 %                     31.7 %       32.1 %
Interest expense (income), net           12            14          -              27           25          -
Other (income) expense, net             (41 )         (48 )        -             (74 )          5          -
Income before income taxes            1,249           997         25  %        2,810        2,267         24 %
Income tax expense                      134           150        -11  %          328          328          0 %
Effective tax rate                     10.7 %        15.0 %                     11.7 %       14.5 %
NET INCOME                      $     1,115    $      847         32  %   $    2,482    $   1,939         28 %
Diluted earnings per common     $      0.70    $     0.52         35  %   $     1.56    $    1.19         31 %
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