CASE 11-6 VALUE-NIKE, INC. Selected data from Nike's financial statements for the period 2007-2011 follow: Item 6 Selected Financial Data (In Part) Financial History 2011 2010 2009 2008 2007 (In millions, except per share data and financial ratios) $20,862 $19,014 $19,176 $18,627 $16,326 Year Ended May 31, Revenues Gross margin Gross margin % Restructuring charges Goodwill impairment Intangible and other asset impairment Net income Basic earnings per common share Diluted earnings per common share Weighted average common shares 9,058 8,800 8,604 8,387 7,161 45.0% 43.9% 44.9% 195 199 202 2,133 1,9071,4871,883 1,492 3.07 3.03 45.6% 46.3% 2.96 4.48 4.39 3.93 3.86 3.80 3.742.93 475.5 485.5484.9 495.6 503.8 485.7 493.9490.7504.1 509.9 1,812 3,164 1,736 1,936 1,879 outstanding Diluted weighted average common shares 1 outstanding Cash dividends declared per common share Cash flow from operations Price range of common stock 1.20 1.060.98 0.875 0.71 High Low 92.30 78.55 70.28 70.60 57.12 67.21 50.1638.24 51.50 37.76 (continued) Source: Nike, Inc. 2010 10-K CHAPTER I1 Expandled Anailyas 2011 2010 2009 (In millions, except per share data CASe 11-6 CONTIND) and financial tati 9ss $ 3,079 2,291 S 2,134 715 2,041 2,357 2,438 6,457 5,518 0.3 441 0.3 9,754 8,693 7,825 2.15 2,041 2,37 642 1 7,339 7,595 1,164 At May 31, 2,067 2,583 Cash and equivalents Short-term investments 14,998 14,419 13,20 18 2 437 Working capital 276 Total assets Long-term debe 72.38 57.05 68.37 02 68.37 5675 Redeemable Preferred Stock Shareholders' equity 39,523 35,032 27,698 33,577 5 Year-end stock price Market capitalization Financial Ratios: Retura on equiry Retarn on assets lnventory turns Current ratio at May 3 20.7% 21.8% 14.5% 18.0% 11.6% 25.4% 16.3% 13.8% 3.3 18.8 2.7 2.9 19.2 18.818.3 Price/Earnings ratio at May 31 Note: There are many approches to valuing a company. The analysts would likely review a com approaches Required a. Liquidity 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion the liquidity position (refer back to Exhibit 3, Summary Analysis). 2. Review the current ratio in this case (2007-2011). Comment. 3. Review cash provided by operations (2007-2011). Comment. b. Long-term debt-paying ability 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion of the debt position (refer back to Exhibit 3, Summary Analysis). 2. Review the debe ratio for 2009-2011. Comment. c. Profitability 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion of the profitability (refer back to Exhibit 3, Summary Analysis). 2. Review the trend in revenues (2007-2011). Comment. 3. Review the trend in gross profit margin (2007-2011). Comment. d. Investor Analysis 1. Review the absolute amount and trend in the price/earnings for 2007-2011. Considering liquidity, debt, and profitability, is there a reasonable probability that the pricelearnings may increase 2. Comment on the trend in market capitalization (2007-2011) (share price x number of outstanding shares). 3. Review cash dividends declared per common share (2007-2011). Is there a likely chance that dividends will be increased during the year ending May 31, 20122 4. Give your opinion of the stock price of Nike, Inc. on May 31, 2013. In practlc things would be considered that are not presented in this case. Base your opinion the summary analysis (2009-2011) and the financial history (2007-2011) many er 1. This case has used a fundamental financial statement approach to valuing Nike your opinion, would an analyst likely use this type of approach for valung Comment. CASE 11-6 VALUE-NIKE, INC. Selected data from Nike's financial statements for the period 2007-2011 follow: Item 6 Selected Financial Data (In Part) Financial History 2011 2010 2009 2008 2007 (In millions, except per share data and financial ratios) $20,862 $19,014 $19,176 $18,627 $16,326 Year Ended May 31, Revenues Gross margin Gross margin % Restructuring charges Goodwill impairment Intangible and other asset impairment Net income Basic earnings per common share Diluted earnings per common share Weighted average common shares 9,058 8,800 8,604 8,387 7,161 45.0% 43.9% 44.9% 195 199 202 2,133 1,9071,4871,883 1,492 3.07 3.03 45.6% 46.3% 2.96 4.48 4.39 3.93 3.86 3.80 3.742.93 475.5 485.5484.9 495.6 503.8 485.7 493.9490.7504.1 509.9 1,812 3,164 1,736 1,936 1,879 outstanding Diluted weighted average common shares 1 outstanding Cash dividends declared per common share Cash flow from operations Price range of common stock 1.20 1.060.98 0.875 0.71 High Low 92.30 78.55 70.28 70.60 57.12 67.21 50.1638.24 51.50 37.76 (continued) Source: Nike, Inc. 2010 10-K CHAPTER I1 Expandled Anailyas 2011 2010 2009 (In millions, except per share data CASe 11-6 CONTIND) and financial tati 9ss $ 3,079 2,291 S 2,134 715 2,041 2,357 2,438 6,457 5,518 0.3 441 0.3 9,754 8,693 7,825 2.15 2,041 2,37 642 1 7,339 7,595 1,164 At May 31, 2,067 2,583 Cash and equivalents Short-term investments 14,998 14,419 13,20 18 2 437 Working capital 276 Total assets Long-term debe 72.38 57.05 68.37 02 68.37 5675 Redeemable Preferred Stock Shareholders' equity 39,523 35,032 27,698 33,577 5 Year-end stock price Market capitalization Financial Ratios: Retura on equiry Retarn on assets lnventory turns Current ratio at May 3 20.7% 21.8% 14.5% 18.0% 11.6% 25.4% 16.3% 13.8% 3.3 18.8 2.7 2.9 19.2 18.818.3 Price/Earnings ratio at May 31 Note: There are many approches to valuing a company. The analysts would likely review a com approaches Required a. Liquidity 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion the liquidity position (refer back to Exhibit 3, Summary Analysis). 2. Review the current ratio in this case (2007-2011). Comment. 3. Review cash provided by operations (2007-2011). Comment. b. Long-term debt-paying ability 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion of the debt position (refer back to Exhibit 3, Summary Analysis). 2. Review the debe ratio for 2009-2011. Comment. c. Profitability 1. Review the summary analysis for Nike, Inc. from 2009-2011. Give your opinion of the profitability (refer back to Exhibit 3, Summary Analysis). 2. Review the trend in revenues (2007-2011). Comment. 3. Review the trend in gross profit margin (2007-2011). Comment. d. Investor Analysis 1. Review the absolute amount and trend in the price/earnings for 2007-2011. Considering liquidity, debt, and profitability, is there a reasonable probability that the pricelearnings may increase 2. Comment on the trend in market capitalization (2007-2011) (share price x number of outstanding shares). 3. Review cash dividends declared per common share (2007-2011). Is there a likely chance that dividends will be increased during the year ending May 31, 20122 4. Give your opinion of the stock price of Nike, Inc. on May 31, 2013. In practlc things would be considered that are not presented in this case. Base your opinion the summary analysis (2009-2011) and the financial history (2007-2011) many er 1. This case has used a fundamental financial statement approach to valuing Nike your opinion, would an analyst likely use this type of approach for valung Comment