SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FOR QUARTERLY REPORTS UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended November 30, 1996 Commission file number - 1-10635
NIKE, Inc.
(Exact name of registrant as specified in its charter)
OREGON 93-0584541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bowerman Drive, Beaverton, Oregon 97005-6453
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 671-6453
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days
Yes X No .
___ ___
Common Stock shares outstanding as of November 30, 1996 were:
_________________
Class A 101,731,470
Class B 186,633,670
_________________
288,365,140
==========
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
NIKE, Inc.
CONDENSED CONSOLIDATED BALANCE SHEET
Nov. 30, May 31,
1996 1996
________ _______
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 267,534 $ 262,117
Accounts receivable 1,572,426 1,346,125
Inventories (Note 3) 981,080 931,151
Deferred income taxes 104,820 93,120
Prepaid expenses 145,096 94,427
__________ _________
Total current assets 3,070,956 2,726,940
__________ _________
Property, plant and equipment 1,200,747 1,047,705
Less accumulated depreciation 442,990 404,246
__________ __________
757,757 643,459
Identifiable intangible assets and goodwill 471,394 474,812
Other assets 121,048 106,417
__________ __________
$4,421,155 $3,951,628
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,214 $ 7,301
Notes payable 432,517 445,064
Accounts payable 465,686 455,034
Accrued liabilities 521,351 480,407
Income taxes payable 42,774 79,253
__________ __________
Total current liabilities 1,465,542 1,467,059
Long-term debt 98,970 9,584
Non-current deferred income taxes 1,802 1,883
Other long-term liabilities 34,832 41,402
Commitments and contingencies (Note 4) - -
Redeemable Preferred Stock 300 300
Shareholders' equity:
Common Stock at stated value (Note 2):
Class A convertible-101,731 and
102,240 shares outstanding 152 153
Class B-186,634 and 185,018 shares
outstanding 2,704 2,702
Capital in excess of stated value 179,973 154,833
Foreign currency translation
adjustment (1,716) (16,501)
Retained earnings 2,638,596 2,290,213
___________ __________
2,819,709 2,431,400
___________ __________
$4,421,155 $3,951,628
========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of this statement.
NIKE, Inc.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
__________________ __________________
1996 1995* 1996 1995*
____ ____ ____ ____
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $2,107,034 $1,356,758 $4,388,960 $3,056,778
_________ _________ _________ _________
Costs and expenses:
Cost of sales 1,277,628 828,129 2,639,747 1,841,508
Selling and administrative 530,453 353,715 1,059,990 722,758
Interest 10,228 8,527 22,894 19,778
Other expense (income) (147) 7,375 8,494 17,624
________ ________ _________ _________
1,818,162 1,197,746 3,731,125 2,601,668
________ ________ _________ _________
Income before income taxes 288,872 159,012 657,835 455,110
Income taxes 112,000 61,200 254,900 175,200
________ ________ _________ _________
Net income $ 176,872 $ 97,812 $ 402,935 $ 279,910
========= ========= ========== ==========
Net income per common share(Note 2) $ 0.60 $ 0.34 $ 1.36 $ .96
========= ========= ========== ==========
Dividends declared per common share $ 0.10 $ 0.08 $ 0.18 $ 0.14
========= ========= ========== ==========
Average number of common and
common equivalent shares (Note 2) 297,022 293,988 296,693 292,840
========= ========= ========== ==========
</TABLE>
*For comparable purposes with 1996, results for the three and six months
ended November 30, 1995 have been adjusted to reflect the elimination of
the one month lag in reporting by certain of the Company's international
operations. See further discussion under Note 5.
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of this statement.
NIKE, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
November 30,
_________________
1996 1995
____ ____
(in thousands)
<S> <C> <C>
Cash provided (used) by operations:
Net income $402,935 $279,910
Income charges (credits) not
affecting cash:
Depreciation 58,199 41,629
Deferred income taxes and
purchased tax benefits (5,910) (10,513)
Other 23,642 10,185
Changes in other working capital
components (353,850) (228,501)
________ _______
Cash provided by operations 125,016 92,710
________ _______
Cash (used) provided by investing activities:
Additions to property, plant and
equipment (187,579) (96,111)
Disposals of property, plant and
equipment 19,353 3,533
Increase in other assets (25,476) (2,770)
Decrease in other liabilities (9,652) --
_______ _______
Cash used by investing activities (203,354) (95,348)
_______ _______
Cash provided (used) by financing activities:
Additions to long-term debt 99,789 1,012
Reductions in long-term debt
including current portion (10,023) (27,103)
(Decrease) increase in notes payable (27,710) 58,670
Proceeds from exercise of options 13,242 12,709
Repurchase of stock -- (18,756)
Dividends paid - common and preferred (43,153) (35,800)
_______ _______
Cash provided (used) by financing
activities 32,145 (9,268)
_______ _______
Effect of exchange rate changes on cash 8,606 (9,169)
_______ _______
Effect of May 1996 cash flow activity for certain
subsidiaries (Note 5) 43,004 --
_______ _______
Net (decrease) increase in cash and equivalents 5,417 (21,075)
Cash and equivalents, May 31, 1996 and 1995 262,117 220,935
_______ _______
Cash and equivalents, November 30, 1996
and 1995 $267,534 $199,860
======== ========
</TABLE>
*For comparable purposes with 1996, results for the six months ended November
30, 1995 have been adjusted to reflect the elimination of the one month lag in
reporting by certain of the Company's international operations. See further
discussion under Note 5.
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of this statement.
NIKE, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of significant accounting policies:
___________________________________________
Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals) which
are, in the opinion of management, necessary for a fair presentation of
the results of operations for the interim period(s). The interim financial
information and notes thereto should be read in conjunction with the
Company's latest annual report to shareholders. The results of operations
for the three (3) and six (6) months ended November 30, 1996 are not
necessarily indicative of results to be expected for the entire year.
NOTE 2 - Net income per common share:
___________________________
Net income per common share is computed based on the weighted average
number of common and common equivalent (stock option) shares outstanding
for the period(s).
On October 23, 1996 the Company issued additional shares in connection
with a two-for-one stock split effected in the form of a 100% stock dividend
on outstanding Class A and Class B common stock. The per common share amounts
in the Consolidated Financial Statements and accompanying notes have been
adjusted to reflect this stock split.
NOTE 3 - Inventories:
___________
Inventories by major classification are as follows:
Nov. 30, May 31,
1996 1996
________ ________
(in thousands)
Finished goods $902,547 $874,700
Work-in-process 44,737 28,940
Raw materials 33,796 27,511
________ ________
$981,080 $931,151
======== ========
NOTE 4 - Commitments and contingencies:
_____________________________
There have been no other significant subsequent developments
relating to the commitments and contingencies reported on the
Company's most recent Form 10-K.
NOTE 5 - Change in year-end of certain subsidiaries:
__________________________________________
Prior to fiscal year 1997, certain of the Company's international
operations reported their results of operations on a one month lag
which allowed more time to compile results. The Company has taken steps
to improve its internal reporting procedures that has allowed for
more timely reporting of these operations. Beginning in the first
quarter of fiscal year 1997, the one month lag was eliminated. As a
result, the May 1996 loss from operations for these entities of
$4.1 million was recorded directly to retained earnings in the first
quarter of the current year. The change affected the previously reported
quarterly periods for these operations and thus, the income satement and
cash flow statement have been presented to show comparable results for the
quarter and year as if the change had occurred in the prior year. The effect
of the change is not material to the consolidated balance sheet and as a
result the balance sheet as of May 31, 1996 has not been adjusted.
NOTE 6 - Subsequent Event:
______________
In December of 1996, the Company issued $200 million seven-year notes
maturing December 1, 2003, with a stated rate of 6.375%.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Operating Results
_________________
Net income increased 81% over the prior year's second quarter,
rising to $176.9 million, or $0.60 per share, from $97.8 million, or
$0.34 per share last year. Year-to-date net income increased 44% to
$402.9 million, $3 million more than the Company's net income for the
entire 1995 fiscal year. Revenues were $2.1 billion, up 55% for the
quarter and 44% year-to-date. This quarter is the ninth straight
quarter of double digit increases in total revenues. Gross margin
percentage increased slightly for both the quarter and year-to-
date, while selling and administrative expenses decreased as a
percentage of revenues for the quarter, but increased as a percentage
of revenues on a year-to-date basis.
Revenues for the quarter increased $750.3 million over
the $1.4 billion reported in the same period of the prior year.
U.S. revenues increased $459.9 million, or 63%, for the second quarter,
and $840.3 million, or 49%, on a year-to-date basis. U.S. apparel
increased 93% over last year's second quarter and has increased more
than 85% in each of the last six quarters. U.S. footwear increased
$277.8 million, or 52%, over last year's second quarter due to a 48%
increase in pairs sold and a 4% increase in average selling price.
Increases can be seen in almost all categories, the most significant
being men's basketball up 38%, men's running up 90%, men's cross-
training up 57%, and women's fitness up 79%. For the quarter
international revenues increased $292.2 million, or 60%, with strong
growth in both footwear and apparel. Year-to-date, international
revenues increased $495.0 million, or 46%. All regions showed double
digit increases for the quarter with Europe up 42%, comprised of a 37%
increase in footwear and a 53% increase in apparel; Asia Pacific was up
96%, with a 111% growth rate in footwear and a 73% increase in apparel;
and the Americas region was up 45%, increasing 25% in footwear and 135%
in apparel. Japan, now the largest country outside the U.S. in
revenues, increased 171% in the quarter and 111% for the year. The
impact of exchange rates on the quarter's revenue was a decrease of $38
million, or 8%. For the year, rates have decreased revenues by $93
million, or 9%. Other brands, which includes Cole Haan (R), Tetra
Plastics, Sports Specialties and Bauer Inc., decreased slightly, $1.8
million, (1%), for the quarter and $3.1 million, (1%), year-to-date.
The breakdown of revenues follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
1996 1995(1) % Change 1996 1995(1) % Change
____ ____ ___ ____ ____ ___
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Footwear $ 816,283 $ 538,497 52% $1,818,386 $1,330,065 37%
U.S. Apparel 377,870 195,795 93 730,255 378,278 93
__________ __________ __________ _________
Total United States 1,194,153 734,292 63 2,548,641 1,708,343 49
__________ __________ __________ _________
International Footwear 517,229 330,162 57 1,065,767 757,194 41
International Apparel 262,021 156,896 67 494,360 307,947 61
__________ __________ __________ _________
Total International 779,250 487,058 60 1,560,127 1,065,141 46
__________ __________ __________ _________
Other Brands 133,631 135,408 (1) 280,192 283,294 (1)
__________ __________ _________ _________
Total Revenues $2,107,034 $1,356,758 55% $4,388,960 $3,056,778 44%
========== ========== === ========= ========= ===
</TABLE>
(1) For comparable purposes with 1996, results for the three and six months
ended November 30, 1995 have been adjusted to reflect the elimination of
the one month lag in reporting by certain of the Company's international
operations. See further discussion under Note 5.
Consolidated gross margin percentage was 39.4% for the quarter
compared to 39.0% for last year's second quarter. Year-to-date margins
are at 39.9% compared to 39.8% for last year. The increase in gross
margin percentage is primarily attributed to footwear price increases
taking effect in this quarter as well as changes to product and customer
mix during the period. The Company continues to place strong emphasis
on inventory management, minimizing foreign exchange risk and production
sourcing in order to maximize gross profit. Gross profit percentages
for the remainder of fiscal year 1997 are expected to be affected by
both strong demand for NIKE products and increased pricing levels,
offset by increased levels of air freight to meet the delivery dates or
increasing customer orders. At this time, Management expects the
percentage for the full year to be up only slightly from last fiscal
year's percentage.*
Selling and administrative expenses increased $177 million over the
previous year's second quarter and $337 million year-to-date. As a
percentage of revenues, expenses have decreased to 25.2% for the
quarter, down from 26.1% for the same period last year. On a
year-to-date basis, expenses have increased to 24.2%, up from 23.6%.
For the quarter, the revenue growth outstripped the expenses,
resulting in a lower percentage, however, increased spending on
advertising and marketing, as well as increased infrastructure costs,
make up the majority of both the dollar and percentage increases. At
this time, Management expects selling and administrative expenses as a
percentage of revenues for the year will approximate the prior year.*
Interest expense increased for both the quarter and year-to-date
over the prior year due to increased short-term borrowings for growing
operations, mostly in Europe and Asia Pacific. Other expense decreased
$7.5 million for the quarter and $9.1 million year-to-date primarily due
to decreased conversion loss on foreign transactions, gains on the
disposal of fixed assets, and income earned from a promotional event in
Japan.
The Company's effective tax rate for the year-to-date was 38.75%
compared to 38.5% in the prior year. The slight increase is due
primarily to higher state income taxes on U.S. earnings. At this time,
Management anticipates the tax rate for fiscal 1997 will remain at
approximately 38.75%.*
Worldwide orders for NIKE Brand athletic footwear and apparel
scheduled for delivery from December 1996 through April 1997 were
approximately $4.1 billion, 54% higher than such orders booked in the
comparable period of the prior year. These orders and the percentage
growth in these orders are not necessarily indicative of the growth in
revenues which the Company will experience for the subsequent periods.
This is because the mix of advance futures and "at once" orders has
shifted significantly toward futures orders as the NIKE brand becomes
more established in all areas, specifically in the U.S. apparel business
and in international regions. The mix of advance orders to "at once"
orders will continue to vary as the U.S. apparel business and
international operations continue to account for a greater percentage of
total revenues and as each places a greater emphasis on futures
programs.* Finally, exchange rates can cause differences in the
comparisons.*
As further explained in Note 5, prior to fiscal year 1997, certain
of the Company's international operations reported their results of
operations on a one month lag in order to allow more time for compiling
results. The Company has taken steps to improve its internal reporting
procedures which have allowed for more timely reporting of these
operations. Beginning in the first quarter of fiscal year 1997, the one
month lag was eliminated. As a result, the May 1996 operational results
for these entities of a $4.1 million loss was recorded to retained
earnings in the first quarter of the current year. The change affected
the previously reported quarterly periods for these operations, and
thus, the income statement and cash flow statement have been adjusted in
order to show comparable results for the previous periods as if the
change had occurred in the prior year. Throughout this discussion,
comparisons to last year are also stated as they would have appeared had
these entities reported on a same month basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remains strong at November 30, 1996.
Since May 31, 1996, total assets grew $470 million to approximately $4.4
billion and shareholder's equity increased $388 million to $2.8 billion.
Working capital increased $346 million, and the Company's current ratio
increased to 2.10:1 at November 30, 1996 from 1.86:1 at May 31, 1996.
Cash provided by operations included year-to-date net income of $403
million plus the year-to-date non-cash depreciation charge of $58 million.
Cash used by changes in other working capital components totaled $354 million
due, in large part, to increases in accounts receivable and inventory. Since
May 31, 1996, accounts receivable increased $226 million (17%) due to the high
level of revenues compared to the same period in the prior year. Inventory
levels increased $50 million from May 31, as total international inventory
increased $52 million in order to support revenue volume. Inventory turns
increased to 5.56 at November 30, 1996 from 5.01 at May 31, 1996.
Cash used in investing activities totaled $203 million for the first six
months of fiscal 1997. Additions to property, plant and equipment totaled
$188 million with the most significant components related to the continued
consolidation of European footwear warehouses, the overall expansion of U.S.
operations and the continued expansion of NIKE Town retail locations in
the U.S.
Cash provided from financing activities included an increase from
May 31, 1996 of $100 million in long-term debt due, primarily, to the
Company's Japanese subsidiary borrowing 10.5 billion yen in the first
quarter. Cash was used to decrease notes payable by $28 million and to
pay dividends totaling $43 million.
During the quarter, the Company announced a 33% increase in the
quarterly cash dividend to $.10 per share from the previous $.075 per share.
The Company's commercial paper program requires the support of committed
and uncommitted lines of credit. There was $6 million outstanding under
this program at November 30, 1996. The Company has $500 million available in
committed unused lines of credit and, at November 30, 1996, no amounts were
outstanding under this credit facility. NIKE's debt-to-equity ratio at
November 30, 1996 remained constant from May 31 at .6:1.
In December of 1996, the Company issued $200 million of seven-year notes,
maturing December 1, 2003 (see Note 6). The proceeds from the sale of the
notes, received December 13, 1996, will be used for general corporate purposes
including, without limitation, refinancing, in part, short-term debt.
Management believes that funds generated by operations, together with
currently available resources and long-term debt arrangements,will
continue to adequately finance anticipated fiscal 1997 expenditures.*
*The marked items are forward-looking statements that involve risks and
uncertainties detailed from time to time in reports filed by NIKE with the
S.E.C., including Forms 8-K, 10-Q, and 10-K.
Part II - Other Information
Item 1. Legal Proceedings:
There have been no material changes from the information previously
reported under Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1996.
Item 6. Exhibits and Reports on Form 8-K:
(a) EXHIBITS:
3.1 Restated Articles of Incorporation, as amended (incorporated by
reference from Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the first quarter ended August 31, 1995).
3.2 Third Restated Bylaws, as amended (incorporated by referencec from
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
first quarter ended August 31, 1995).
4.1 Restated Articles of Incorporation, as amended (see Exhibit 3.1).
4.2 Third Restated Bylaws, as amended (see Exhibit 3.2).
10.1 Credit Agreement dated as of September 15, 1995 among NIKE, Inc.,
Bank of America National Trust & Savings Association,
individually and as Agent, and the other banks party thereto (in-
corporated by reference from Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter rended August 31, 1995).
10.2 Form of non-employee director Stock Option Agreement (incorporated
by reference from Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1993).*
10.3 Form of Indemnity Agreement entered into between the Company and
each of its officers and directors (incorporated by reference from
the Company's definitive proxy statement filed in connection with
its annual meeting of shareholders held on September 21, 1987).
10.4 NIKE, Inc. Restated Employee Incentive Compensation Plan
(incorporated by reference from Registration Statement No. 33-29262
on Form S-8 filed by the Company on June 16, 1989).*
10.5 NIKE, Inc. 1990 Stock Incentive Plan (incorporated by reference
from the Company's definitive proxy statement filed in connection
with its annual meeting of shareholders held on September 17, 1990).*
10.6 Collateral Assignment Split-Dollar Agreement between NIKE, Inc.
and Philip H. Knight dated March 10, 1994 (incorporated by
reference from Exhibit 10.7 to the Company's Annual Report on
Form 10-K for he fiscal year ended May 31, 1994).*
10.7 NIKE, Inc. Executive performance Sharing Plan (incorporated by
reference from the Company's definitive proxy statement
filed in connection with its annual meeting of shareholders
held on September 18, 1995).*
10.8 NIKE, Inc. Supplemental Executive Savings Plan *
12.1 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
(b) The following reports on Form 8-K were filed by the Company during
the first quarter of fiscal 1997:
Form 8-K
September 16, 1996 ITEM 5 OTHER EVENTS Press release announcing
the first quarter earnings,
and a restatement of con-
solidated financial state-
ments and accompanying
notes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NIKE, Inc.
An Oregon Corporation
BY: /s/ Robert S. Falcone
________________________
Robert S. Falcone
Vice President,
Chief Financial Officer
DATED: January 14, 1997
Exhibit
NIKE, INC.
SUPPLEMENTAL EXECUTIVE SAVINGS PLAN
1995 RESTATEMENT
June 1, 1995
NIKE, Inc.
an Oregon corporation
One Bowerman Drive
Beaverton, OR 97005-6453 "Company"
The Company adopted a Supplemental Executive Savings Plan effective
February 1, 1994 to provide an opportunity for executive employees
to set aside additional amounts for retirement on a tax deferred basis
and to provide a limited make-up of profit sharing contributions lost
as a result of the $150,000 limit on compensation counted under the
Company's 401(k) Savings and Profit Sharing Plan for Employees of NIKE,
Inc. (the "Profit Sharing Plan"). The make-up contribution is being
expanded effective June 1, 1995 through adoption of a separate NIKE,
Inc. Supplemental Executive Profit Sharing Plan. In order to continue
the provisions for elective tax deferred savings, the Company adopts
this 1995 Restatement of the Supplemental Executive Savings Plan (the
"Plan").
1. Employers; Administration; Plan Year.
1.1 The Plan shall apply to the Company and to other members of
the Controlled Group designated by the Company. The "Controlled Group"
is the controlled group of corporations, as defined in Internal Revenue
Code Section 1563(a), of which the Company is a member. The term
"Employer" refers to the Company and such a designated member of the
Controlled Group.
1.2 The Plan shall be administered by the Retirement Committee
established under the Profit Sharing Plan (the "Committee"). The
Committee shall interpret the Plan, determine eligibility and the amount
of benefits, maintain records, and generally be responsible for seeing
that the purposes of the Plan are accomplished. The Committee may
delegate all or part of its administrative duties to others.
1.3 "Plan Year" means the 12-month period starting each June 1
and ending on the following May 31.
2. Eligibility; Deferral Election.
2.1 An executive employee of an Employer shall be eligible to
defer compensation under the Plan for a Plan Year if the employee's
annual salary rate from the Employer as of the June 1 at the start of
such Plan Year equals or exceeds $150,000 or such higher amount as is
fixed with cost-of-living adjustments under Internal Revenue Code
Section 401(a)(17).
2.2 An employee eligible under 2.1 may elect to defer
compensation for each Plan Year by completing a "Deferral Election"
in a form prescribed by the Committee, signing it and returning it to
the Committee. The Deferral Election shall designate a dollar amount
or percentage to be deferred out of the employee's annual salary and
annual Performance Sharing Plan bonus, which dollar amount or percentage
may be different as between salary and bonus. A deferral of bonus shall
be controlled by the Deferral Election for the Plan Year in which the
bonus is paid. To be effective for any Plan Year, the Deferral Election
must be returned before June 1 of the Plan Year, except as provided in
2.3. A Deferral Election shall apply to a single Plan Year and shall be
irrevocable after the start of that Plan Year, except as follows. A
Participant may elect at any time to reduce the amount or percentage to
be deferred from salary earned in the remainder of the Plan
Year to zero. Such an election shall be effective for the remainder of
the Plan Year and shall be irrevocable. A new Deferral Election must be
returned to continue deferrals for subsequent Plan Years.
2.3 An executive employee who comes into a position with an
annual salary rate at or above the level described in 2.1 during a Plan
Year, whether by hire from outside the Company or promotion to a higher
salary level, shall be eligible to defer the Participant's salary for
the remainder of the Plan Year. To be effective, a Deferral Election by
such a Participant must be returned within 30 days of the date the
Participant becomes eligible. The provisions of 2.2 on irrevocability
and reduction to zero shall apply to elections under this 2.3. This 2.3
shall be effective January 1, 1997. The 30-day election period for all
executive employees who moved into an eligible position since June 1,
1996 shall expire January 30, 1997.
2.4 The Employer shall reduce the Participant's salary or bonus
by the amounts deferred under 2.2 or 2.3 and shall credit such amounts
to the Participant's Account under 3.1. Amounts due for FICA taxes on
the elected amounts shall be withheld from the Participant's remaining
salary and bonus.
2.5 "Participant" means an executive employee who is eligible
for and elects deferral of compensation under 2.2 or 2.3.
3. Accounts.
3.1 Each Participant who defers compensation under 2.2 or 2.3
shall have an "Account" in this Plan. All deferred compensation amounts
elected by a Participant shall be credited to the Participant's Account
as of the date they would have been paid to the Participant if not
deferred.
3.2 Each Account shall be credited with Interest monthly until
the entire Account has been paid out. "Interest" means an amount
calculated at a rate equal to 120 percent of the federal mid-term rate
in effect on the last business day of the month, as published from time
to time by the Internal Revenue Service.
3.3 A Participant's Account shall be fully vested at all times.
4. Trust.
The Company shall establish a trust (the "Trust") with a financial
institution as trustee for payment of benefits under the Plan. The
Trust shall be a grantor trust for tax purposes. The Trust shall
provide that any assets contributed to the trustee shall be used
exclusively for payment of benefits under this Plan except in the event
the Company becomes insolvent, in which case the Trust assets shall be
held for payment of the Company's obligations to its general creditors.
5. Payment of Benefits to the Participant.
5.1 The "Payment Amount" shall be the vested balance in the
Participant's Account, including deferred compensation and Interest.
5.2 The Payment Amount shall be payable to a Participant under
the Plan upon termination of all employment of the Participant with the
Controlled Group. A Participant who is receiving benefits from Employer
on account of disability shall not be treated as having a termination
of employment until such benefits cease and the Participant does not
return to work.
5.3 A Participant's termination under 5.2 shall constitute a
retirement for purposes of this Plan if at the time of termination the
Participant has attained age 55 and has been continuously employed for
five or more years within the Controlled Group.
5.4 The form of payment shall be as follows. If the
Participant's termination of employment under 5.2 is not a retirement as
described in 5.3, the Payment Amount shall be based on Interest accrued
to the end of the month of employment termination and payment shall be
made in a lump sum as soon as practicable after such month end. If the
termination is a retirement, the Payment Amount shall be paid in one of
the following ways as determined under 5.5:
(a) In a lump sum on the January 1 following the date of
employment termination.
(b) In ten substantially equal annual installments
beginning on the January 1 following the date of employment termination.
5.5 The Participant shall select the form of payment under 5.4
on a form provided by the Committee for that purpose. A Participant's
selection shall be irrevocable for amounts credited to the Participant's
Account while the selection is in effect and for any Interest
attributable to such amounts. A Participant may change the form of
payment by written notice to the Committee. Such a change shall be
effective on the first day of the Plan Year beginning after the
Committee receives notice of the change. A change of payment form shall
apply only to amounts credited to the Participant's Account after the
change becomes effective and Interest attributable thereto.
If the Payment Amount as of the January 1 following the date of
employment termination is less than $100,000, payment shall be made as
provided in 5.4(a) regardless of the form selected by the Participant.
If no form of payment is selected by a Participant, payment shall be
made in the form described in 5.4(b).
5.6 If all or a portion of any payment of benefits under this
Section 5 to a Participant would not be deductible for federal income
tax purposes by the Company because of a limitation on the total amount
of the Participant's deductible compensation from the Company, including
any other such compensation already paid to the Participant earlier in
the same fiscal year of the Company, the following shall apply:
(a) Payment of the nondeductible amount shall be deferred
until the first day of the following fiscal year of the Company.
(b) If the amount deferred under (a) would exceed the
limitation on the total amount of the Participant's deductible
compensation from the Company for the following fiscal year, the excess
shall be deferred to the first day of succeeding fiscal years until all
of the Payment Amount falls underneath the limitation on total
deductible compensation, subject to (c).
(c) In no event shall any payment be deferred under this
5.6 more than three years from the date scheduled for payment under 5.4.
(d) Interest shall continue to be credited under 3.3
during the period of deferral under this 5.6.
5.7 The Company may withhold from any payments any deductions
required by law.
6. Death Benefits.
6.1 A Participant's Payment Amount shall be payable under 6.2
through 6.4 on the Participant's death regardless of the provisions of
Section 5.
6.2 On death, the Payment Amount shall be paid to the
Participant's Beneficiary as follows:
(a) If the Beneficiary is the surviving spouse or
permanent partner of the Participant, the amount for which the
Participant had selected installments under 5.4(b) shall be paid to the
Beneficiary by installments in accordance with the selection, beginning
within 30 days after the Participant's death.
(b) Any amount not described in (a) shall be paid to the
Beneficiary in a lump sum within 30 days after the Participant's death.
(c) If the Payment Amount as of the date of death is
less than $100,000, payment shall be made as provided in (b)
regardless of whether the Beneficiary is the surviving spouse or
permanent partner.
6.3 "Beneficiary" means the death beneficiary designated by the
Participant under the Profit Sharing Plan unless the Participant submits
to the Committee a different designation for this Plan on a form
provided for the purpose, which shall then control. If the Participant
has no surviving Beneficiary designated under either plan, the
Beneficiary shall be the following, in order of priority:
(a) The Participant's surviving spouse.
(b) The Participant's surviving children in equal shares.
(c) The beneficiaries designated by the Participant under
the Company's LifeTrek program.
(d) The Participant's estate.
6.4 If a surviving spouse or permanent partner Beneficiary is
receiving installments and dies when a balance remains, the balance
shall be paid in a lump sum to the spouse's or permanent partner's
estate.
6.5 A designation of a spouse beneficiary by a Participant who
is subsequently divorced from that spouse shall be automatically revoked
by the divorce unless the Participant renews the designation after the
divorce.
7. Change of Control.
7.1 Notwithstanding the provisions of Sections 5 and 6, the
Payment Amount shall be paid to each Participant, or to the Beneficiary
of each deceased Participant, in a lump sum within 30 days after the
date of a Change of Control.
7.2 A "Change of Control" means any of the following:
(a) The purchase or other acquisition by any person,
entity or group of persons, within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934 (Act), or any comparable
successor provisions, or beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Act) of 30 percent or more of either
the outstanding shares of common stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote
generally.
(b) The approval by the stockholders of the Company of a
reorganization, merger, or consolidation with respect to which persons
who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities.
(c) A liquidation or dissolution of the Company.
(d) A sale of all or substantially all of the Company's
assets.
8. Withdrawals.
8.1 A Participant or a surviving spouse or permanent partner
Beneficiary may withdraw vested amounts from the Accounts before those
amounts would otherwise have been paid because of Financial Hardship, as
determined by the Committee. The withdrawal shall be limited to the
amount reasonably necessary to meet the Financial Hardship.
8.2 "Financial Hardship" means a Participant's or a surviving
spouse or permanent partner Beneficiary's immediate and substantial
financial need that cannot be met from other reasonably available
resources and is caused by one or more of the following:
(a) Medical expenses for the Participant or Beneficiary, a
member of the Participant's or Beneficiary's immediate family or
household, or other dependent.
(b) Loss of or damage to a Participant's or Beneficiary's
possessions or property due to casualty.
(c) Other extraordinary and unforeseeable circumstances
arising from events beyond the Participant's or Beneficiary's control.
8.3 The Committee shall establish guidelines and procedures for
implementing withdrawals. An application shall be written, be signed by
the Participant or the surviving spouse or permanent partner Beneficiary
and include a statement of facts causing the Financial Hardship and any
other facts required by the Committee.
8.4 The withdrawal date shall be fixed by the Committee. The
Committee may require a minimum advance notice and may limit the amount,
time and frequency of withdrawals.
9. Amendment; Termination.
9.1 The Company may amend this Plan effective the first day of
any month by notice to the Participants, except the rate of Interest
credited under 3.2 may not be reduced without the consent of a
Participant as to the balance in the Participant's Account as of the
date of the reduction.
9.2 At any time the Company may terminate the Plan and pay out
all Accounts to the Participants or Beneficiaries entitled to the
Payment Amounts and thereby discharge all the benefit obligations of the
Plan. Upon such termination any assets remaining in the trust provided
for in Section 4 shall be returned to the Company.
9.3 If the Internal Revenue Service issues a final ruling that
any amounts deferred under this Plan will be subject to current income
tax, all amounts to which the ruling is applicable shall be paid to the
Participants within 30 days.
10. Claims Procedure.
10.1 Any person claiming a benefit or requesting an
interpretation, ruling or information under the Plan shall present the
request in writing to the Committee, which shall respond in writing as
soon as practicable.
10.2 If the claim or request is denied, the written notice of
denial shall state:
(a) The reasons for denial, with specific reference to the
Plan provisions on which the denial is based.
(b) A description of any additional materials or
information required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
10.3 The initial notice of denial shall normally be given within
90 days of receipt of the claim. If special circumstances require an
extension of time, the claimant shall be so notified and the time limit
shall be 180 days.
10.4 Any person whose claim or request is denied or who has not
received a response within 30 days may request review by notice in
writing to the Committee. The original decision shall be reviewed by
the Committee, which may, but shall not be required to, grant the
claimant a hearing. On review, whether or not there is a hearing, the
claimant may have representation, examine pertinent documents and submit
issues and comments in writing.
10.5 The decision on review shall ordinarily be made within 60
days. If an extension of time is required for a hearing or other
special circumstances, the claimant shall be so notified and the time
limit shall be 120 days. The decision shall be in writing and shall
state the reasons and the relevant plan provisions. All decisions on
review shall be final and bind all parties concerned.
11. General Provisions.
11.1 If suit or action is instituted to enforce any rights under
this Plan, the prevailing party may recover from the other party
reasonable attorneys' fees at trial and on any appeal.
11.2 Any notice under this Plan shall be in writing and shall be
effective when actually delivered or, if mailed, when deposited as first
class mail postage prepaid. Mail shall be directed to the Company at
the address stated in this Plan, to the Participant's last known home
address shown in the Company's records, or to such other address as a
party may specify by notice to the other parties. Notices to an
Employer or the Committee shall be sent to the Company's address.
11.3 The rights of a Participant under this Plan are personal.
Except for the limited provisions of Section 6, no interest of a
Participant or one claiming through a Participant may be directly or
indirectly assigned, transferred or encumbered and no such interest
shall be subject to seizure by legal process or in any other way
subjected to the claims of any creditor.
11.4 Following termination of employment, a Participant shall
not be an employee of an Employer or an affiliate for any purpose, and
payments under Sections 5 and 6 shall not constitute salary or wages.
A Participant shall receive such payments as retirement benefits, not as
compensation for performance of any substantial services.
11.5 Amounts payable under this Plan shall be an obligation of
the Company and the Trust provided by Section 4. If an Employer merges,
consolidates, or otherwise reorganizes or if its business or assets are
acquired by another company, this Plan shall continue with respect to
those eligible individuals who continue in the employ of the successor
company. The transition of Employers shall not be considered a
termination of employment for purposes of this Plan. In such an event,
however a successor corporation may terminate this Plan as to its
Participants on the effective date of the succession by notice to
Participants within 30 days after the succession.
11.6 The Committee may decide that because of the mental or
physical condition of a person entitled to payments, or because of other
relevant factors, it is in the person's best interest to make payments
to others for the benefit of the person entitled to payment. In that
event, the Committee may in its discretion direct that payments be made
as follows:
(a) To a parent or spouse or a child of legal age;
(b) To a legal guardian; or
(c) To one furnishing maintenance, support, or
hospitalization.
12. Effective Date
This Restatement shall be effective June 1, 1995, except as follows.
The changes in 2.1 on eligibility to defer compensation shall be
effective June 1, 1996 for eligibility in the Plan Year beginning on
that date. The change in 2.2 to base deferral of bonuses on the
election for the Plan Year in which the bonus is paid shall first apply
to the bonus paid in the Plan Year beginning on June 1, 1996.
Adopted: November 15, 1995
NIKE, INC.
By: MARCIA A. STILWELL
Executed: December 17, 1996
NIKE, Inc. Exhibit 12.1
Computation of Ratio of Earnings to Fixed Charges
Six Months Ended
November 30,
________________
1995* 1996
____ ____
(dollars in thousands)
Net income $279,910 $402,935
Income taxes 175,200 254,900
________ ________
Income before income taxes 455,110 657,835
________ ________
Add fixed charges
Interest expense (A) 19,778 24,289
Interest component of leases (B) 8,384 11,866
_________ ________
Total fixed charges 28,162 36,155
_________ ________
Earnings before income taxes and
fixed charges (C) $483,272 $692,595
======== ========
Ratio of earnings to total fixed charges 17.16 19.16
======== ========
*For comparable purposes with 1996, results for the six months ended
November 30, 1995 have been adjusted to reflect the elimination of
the one month lag in reporting by certain of the Company's international
operations. See further discussion under Note 5.
(A) Interest expense includes interest both expensed and capitalized.
(B) Interest component of leases includes one-third of rental expense,
which approximates the interest component of operating leases.
(C) Earnings before income taxes and fixed charges is exclusive
of capitalized interest.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE NOVEMBER 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 267,534
<SECURITIES> 0
<RECEIVABLES> 1,572,426
<ALLOWANCES> 50,071
<INVENTORY> 981,080
<CURRENT-ASSETS> 3,070,956
<PP&E> 1,200,747
<DEPRECIATION> 442,990
<TOTAL-ASSETS> 4,421,155
<CURRENT-LIABILITIES> 1,465,542
<BONDS> 98,970
<COMMON> 2,856
0
300
<OTHER-SE> 2,816,853
<TOTAL-LIABILITY-AND-EQUITY> 4,421,155
<SALES> 4,388,960
<TOTAL-REVENUES> 4,388,960
<CGS> 2,639,747
<TOTAL-COSTS> 2,639,747
<OTHER-EXPENSES> 1,056,607
<LOSS-PROVISION> 11,877
<INTEREST-EXPENSE> 22,894
<INCOME-PRETAX> 657,835
<INCOME-TAX> 254,900
<INCOME-CONTINUING> 402,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,935
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
