Nike : Q121 Financial Schedules & Key Financial Metrics

NIKE, Inc.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	THREE MONTHS ENDED	%
(In millions, except per share data)		8/31/2020		8/31/2019	Change
Revenues	$	10,594	$	10,660	-1%
Cost of sales		5,853		5,789	1%
Gross profit		4,741		4,871	-3%
Gross margin		44.8 %		45.7 %
Demand creation expense		677		1,018	-33%
Operating overhead expense		2,298		2,310	-1%
Total selling and administrative expense		2,975		3,328	-11%
% of revenues		28.1 %		31.2 %
Interest expense (income), net		65		15	-
Other (income) expense, net		(14)		(33)	-
Income before income taxes		1,715		1,561	10%
Income tax expense		197		194	2%
Effective tax rate		11.5 %		12.4 %
NET INCOME	$	1,518	$	1,367	11%
Earnings per common share:
Basic	$	0.97	$	0.87	11%
Diluted	$	0.95	$	0.86	10%
Weighted average common shares outstanding:
Basic		1,561.8		1,562.4
Diluted		1,593.3		1,597.5
Dividends declared per common share	$	0.245	$	0.22

NIKE, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		August 31,		August 31,
(Dollars in millions)		2020		2019	% Change
ASSETS
Current assets:
Cash and equivalents	$	8,148	$	3,446	136%
Short-term investments		1,332		198	573%
Accounts receivable, net		3,813		4,656	-18%
Inventories		6,705		5,835	15%
Prepaid expenses and other current assets		1,939		2,093	-7%
Total current assets		21,937		16,228	35%
Property, plant and equipment, net		4,969		4,615	8%
Operating lease right-of-use assets, net		3,158		2,832	12%
Identifiable intangible assets, net		272		279	-3%
Goodwill		223		224	0%
Deferred income taxes and other assets		2,699		2,071	30%
TOTAL ASSETS	$	33,258	$	26,249	27%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	1	$	6	-83%
Notes payable		137		250	-45%
Accounts payable		1,983		2,716	-27%
Current portion of operating lease liabilities		459		427	7%
Accrued liabilities		5,742		4,455	29%
Income taxes payable		297		216	38%
Total current liabilities		8,619		8,070	7%
Long-term debt		9,408		3,463	172%
Operating lease liabilities		2,961		2,675	11%
Deferred income taxes and other liabilities		3,046		2,841	7%
Redeemable preferred stock		-		-	-
Shareholders' equity		9,224		9,200	0%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	33,258	$	26,249	27%

NIKE, Inc.

DIVISIONAL REVENUES

(Unaudited)

						% Change
	THREE MONTHS ENDED	%	Excluding
	Currency
(Dollars in millions)		8/31/2020		8/31/2019	Change
		Changes1
North America
Footwear	$	2,957	$	2,669	11%	11%
Apparel		1,125		1,431	-21%	-21%
Equipment		143		193	-26%	-26%
Total		4,225		4,293	-2%	-1%
Europe, Middle East & Africa
Footwear		1,802		1,758	3%	2%
Apparel		971		869	12%	11%
Equipment		137		146	-6%	-6%
Total		2,910		2,773	5%	5%
Greater China
Footwear		1,251		1,164	7%	10%
Apparel		478		465	3%	5%
Equipment		51		50	2%	3%
Total		1,780		1,679	6%	8%
Asia Pacific & Latin America
Footwear		758		930	-18%	-12%
Apparel		301		356	-15%	-10%
Equipment		40		59	-32%	-28%
Total		1,099		1,345	-18%	-12%
Global Brand Divisions2		4		6	-33%	-31%
TOTAL NIKE BRAND		10,018		10,096	-1%	0%
Converse		563		555	1%	2%
Corporate3		13		9	-	-
TOTAL NIKE, INC. REVENUES	$	10,594	$	10,660	-1%	0%
TOTAL NIKE BRAND
Footwear	$	6,768	$	6,521	4%	5%
Apparel		2,875		3,121	-8%	-7%
Equipment		371		448	-17%	-16%
Global Brand Divisions2		4		6	-33%	-31%
TOTAL NIKE BRAND REVENUES	$	10,018	$	10,096	-1%	0%

• The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure.

• Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.

• Corporate revenues consist primarily of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse but managed through the Company's central foreign exchange risk management program.

NIKE, Inc.

EARNINGS BEFORE INTEREST AND TAXES1

(Unaudited)

	THREE MONTHS ENDED	%
(Dollars in millions)		8/31/2020		8/31/2019	Change
North America	$	1,302	$	1,100	18%
Europe, Middle East & Africa		692		609	14%
Greater China		688		669	3%
Asia Pacific & Latin America		280		341	-18%
Global Brand Divisions2		(853)		(857)	0%
TOTAL NIKE BRAND1		2,109		1,862	13%
Converse		168		138	22%
Corporate3		(497)		(424)	-17%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1		1,780		1,576	13%
Interest expense (income), net		65		15	-
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,715	$	1,561	10%

• The Company evaluates the performance of individual operating segments based on earnings before interest and taxes (commonly referred to as "EBIT"), which represents net income before interest expense (income), net and income tax expense. Total NIKE Brand EBIT and Total NIKE, Inc. EBIT are considered non-GAAP financial measures and are being provided as management believes this additional information should be considered when assessing the Company's underlying business performance and trends. References to 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.

• Global Brand Divisions primarily represent demand creation, operating overhead and product creation and design expenses that are centrally managed for the NIKE Brand. Revenues for Global Brand Divisions are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.

• Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company's corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses. For the three months ended August 31, 2020, Corporate included non-recurring employee termination and related costs associated with the previously announced leadership and operating model changes.

NIKE, Inc.

RETURN ON INVESTED CAPITAL1

(Unaudited)

		FOR THE TRAILING FOUR
		QUARTERS ENDED
(Dollars in millions)		8/31/2020		5/31/2020
Numerator
Net income	$	2,690	$	2,539
Add: Interest expense (income), net		139		89
Add: Income tax expense		351		348
Earnings before interest and taxes		3,180		2,976
Income tax adjustment2		(362)		(352)
Earnings before interest and after taxes	$	2,818	$	2,624
	AVERAGE FOR THE TRAILING
		FIVE QUARTERS ENDED
		8/31/2020		5/31/2020
Denominator
Total debt3,4	$	9,276	$	8,022
Add: Shareholders' equity		8,975		8,938
Less: Cash and equivalents and Short-term investments		5,719		4,756
Total invested capital	$	12,532	$	12,204
RETURN ON INVESTED CAPITAL		22.5 %		21.5 %

• ROIC represents a performance measure that management believes is useful information in understanding the Company's ability to effectively manage invested capital. ROIC is considered a non-GAAP financial measure and 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.

• Equals Earnings before interest and taxes multiplied by the effective tax rate as of the respective quarter end.

• Total debt includes the following: 1) Current portion of long-term debt, 2) Notes Payable, 3) Current portion of operating lease liabilities, 4) Long-term debt and 5) Operating lease liabilities.

• The Company adopted Accounting Standards Codification No. 842, Leases, on June 1, 2019. For comparability, total debt for each quarter prior to adoption includes approximately $3.2 billion, which represents the current and long-term portion of the Company's operating lease liabilities as of June 1, 2019.