Financial Statement Analysis The financial statements for Nike, Inc., are presented in Appendix C at the end of text. The following additional information in thousands is available: Accounts receivable at May 31, 2010 $ 3,138 Inventories at May 31, 2010 2,715 Total assets at May 31, 2010 14,998 Stockholders'equity at May 31, 2010 9,843 Instructions 1. Determine the following measures for the fiscal years ended May 31, 2013 (fiscal 2012), and May 31, 2012 (fiscal 2011), rounding to one decimal place. a. Working capital b. Current ratio C. Quick ratio d. Accounts receivable turnover e. Number of days' sales in receivables f. Inventory turnover g. Number of days' sales in inventory h. Ratio of liabilities to stockholders' equity i. Ratio of sales to assets j. Rate earned on total assets, assuming interest expense is $23 million for the year ending May 31, 2013, and $31 million for the year ending May 31, 2012 k. Rate earned on common stockholders' equity 1. Price-earnings ratio, assuming that the market price was $61.66 per share on May 31, 2013, and $53.10 per share on May 31, 2012 m. Percentage relationship of net income to sales What conclusions can be drawn from these analyses? 2. of cor will be financed to 2012 2013 $ 23,331 NIKE, Inc. Consolidated Statements of income VERTICAL ANALYSIS (ROUND ALL PERCENTAGES TO ONE DECIMAL PLACE) 25.313 14.279 13,183 10,148 2,607 4,458 11,034 2,745 7,065 Income from continuing operations 5,035 7,780 54 (15) 3,272 808 Cost of Sales Gross Profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest income) expense, net Other Income) expense, net Income before income taxes Income tax expense NET INCOME FROM CONTINUING OPERATIONS NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME 3,025 756 2,269 (46) 2,223 2,464 $ 2,485 2012 * CHANGE S CHANGE 2013 $ 23,331 13,183 HORIZONTAL ANALYSIS (ROUND ALL PERCENTAGES TO ONE DECIMAL PLACE) 10,148 2,607 4,458 7,065 Income from continuing operations Revenues Cost of Sales Gross Profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest (income) expense, net Other (income) expense, net Income before income taxes Income tax expense NET INCOME FROM CONTINUING OPERATIONS NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME 25,313 14,279 11,034 2,745 5,035 7,780 (3) (15) 3,272 808 2.464 21 54 3,025 756 2,269 (46) $ 2,223 $ 2,485 NIKE, Inc. Consolidated Statements Of Income a Year Ended May 31, 2012 2013 2011 S (In millions, except per share data) Income from continuing operations: Revenues Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest (income) expense, net (Notes 6, 7 and 8) Other (income) expense, net (Note 17) Income before income taxes Income tax expense (Note 9) 25,313 14.279 11,034 2,745 5,035 7,780 23,331 $ 13,183 10,148 2,607 4.458 7.065 4 54 20.117 10,915 9,202 2,344 4,017 6,361 (3) (25) 3,025 2.862 690 (15) 3,272 808 2,464 21 2,485 756 2,269 (46) 2,223 $ ATIONS (39) 2,133 $ $ NET INCOME FROM CONTINUING OPERATIONS NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME 2.75 2.69 S $ 2.47 $ 2.42 $ 2.28 2.24 Earnings per share from continuing operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) 0.02 $ 0.02 $ (0.05) $ (0.05) $ Earnings per share from discontinued operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) (0.04) (0.04) 0.81 $ 0.70 $ 0.60 Dividends declared per common share n ing notes to consolidated financial statements are an a consolidated financial statements are an integral part of this statement NIKE, Inc. Consolidated Statet ants of Comprehensive Income 2013 Year Ended May 31, 2012 2.485 $ 2,223 $ 2011 2,133 30 117 (In millions) Net Income Other comprehensive income (loss), net of tax Foreign currency translation and other Net gain (loss) on cash flow hedges Net gain (loss) on not invostment hedges Reclassification to net income of previously deferred (gains) losses related to hedge derivative Instruments Release of cumulative translation loss related to Umbro (Notes 14 and 15) Total other comprehensive income, net of tax TOTAL COMPREHENSIVE INCOME (295) 255 45 263 (242) (57) 49 (84) (105) 83 125 54 (120) 2,013 2,610 $ 2,277 $ (1) Net of tax expense) benefit of S(12) million, 50 million, and $(121) million, respectively (2) Net of tax expense) benefit of $(22) million (8) million, and 568 million, respectively (3) Net of tax benefit of 50 million, 50 milion, and $28 million, respectively Mer of tax benefit expense of 50 million $(14) milion, and $24 million, respectively. (5) Net of tax (benefit of $(47) million, 50 milion, and 50 milion, respectively The accompanying notes to consolidated financial statements are an integral part of this statement LULU voy 31, 2013 NIKE, Inc. Consolidated Balance Sheets May 31, 2013 2012 3,337 2,628 3,117 3.434 308 802 2.317 1.440 3,132 3.222 262 857 615 11,845 2.209 370 131 910 15,465 13,626 2.452 382 131 993 17,584 $ $ (In millions) ASSETS Current assets: Cash and equivalents Short-term investments (Note 6) Accounts receivable, net (Note 1) Inventories (Notes 1 and 2) Deferred income taxes (Note 9) Prepaid expenses and other current assets (Notes 6 and 17) Assets of discontinued operations (Note 15) Total current assets Property, plant and equipment, net (Note 3) Identifiable intangible assets, net (Note 4) Goodwill (Note 4) Deferred income taxes and other assets (Notes 6, 9 and 17) TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 8) Notes payable (Note 7) Accounts payable (Note 7) Accrued abilities (Notes 5, 6 and 17) income taxes payable (Note 9) Liabilities of discontinued operations (Note 15) Total current liabilities Long-term debt (Note 8) Deferred income taxes and other liabilities (Notes 6, 9 and 17) Commitments and contingencies (Note 16) Redeemable Preferred Stock (Note 10) Shareholders' equity: Common stock at stated value (Note 11): Class A convertible - 178 and 180 shares outstanding Class B-716 and 736 shares outstanding Capital in excess of stated value Accumulated other comprehensive income (Note 14) Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 57 121 1.646 1,986 98 18 3,926 1.210 1,292 49 108 1,549 1.941 65 170 3,882 228 974 5.184 274 5,695 11.156 4.641 149 5,588 10,381 15,465 S 17,584 $ The accompanying notes to consolidated financial statements are an inward NIKE, Inc. Consolidated Statements of Cash Flows Year Ended May 31. 2012 2011 2013 2.133 2,485 2 223 2,223 5 S S 335 373 438 (60) (76) 130 142 (197) (323) (805) (141) 470 1,899 (273) (551) (35) 151 1,812 (28) 41 3,027 (3,702) 1,501 (2.705) 2,585 1.244 (597) (7,616) 4,313 2.766 (432) 998 (636) 14 (In millions) Cash provided by operations: Net income Income charges (credits) not affecting cash: Depreciation Deferred income taxes Stock-based compensation (Nole 11) Amortization and other Net gain on divestitures Changes in certain working capital components and other assets and liabilities: Decrease increase) in accounts receivable (Increase) in inventories (Increase) in prepaid expenses and other current assets Increase in accounts payable, accrued liabilities and income taxes payable Cash provided by operations Cash (used) provided by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Additions to property, plant and equipment Disposals of property, plant and equipment Proceeds from divestitures Increase in other assets, net of other liabilities Settlement of net investment hedges Cash (used) provided by investing activities Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion Increase (decrease) in notes payable Proceeds from exercise of stock options and other stock issuances Excess tax benefits from share-based payment arrangements Repurchase of common stock Dividends - common and preferred Cash used by financing activities Effect of exchange rate changes Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of capitalized interest Income taxes Dividends declared and not paid 786 (28) (37) 22 (30) (23) (1,021) (1,067) 514 986 (49) 15 41 345 313 72 (1,674) (703) (1,040) 100 1,020 2.317 3,337 (203) (65) 468 115 (1.814) (619) (2,118) 67 (1,859) (555) (1,972) 57 (1.124) 3,079 1,955 362 1.955 2,317 $ $ 29 $ 20 $ 702 188 32 736 638 165 145 n ear Ended May 31, 2013 NIKE, Inc. Consolidated Statements of Shareholders' Equity Capital in Common Stock Excess of Class A Class B Stated Shares Amount Shares Amount Value 180 $ - 788 $ 3 $ 3,441 368 (48) Accumulated Other Comprehensive Retained Income Earnings $ 215 $ 6,095 Total $ 9,754 368 (14) (1,857) (1,871) (569) (569) 49 105 (120) 95 $ 105 (1) 2,133 2,133 (120) 5,801 $ 9,843 528 (1,793) (1,805) (639) (539) 180 $ - 756 $ 3 $ $ 3,944 528 (12) (In millions, except per share data) Balance at May 31, 2010 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.60 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other Comprehensive Income Balance at May 31, 2011 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock (50.70 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net Income Other comprehensive income Balance at May 31, 2012 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on Common stock ($0.81 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other comprehensive income Balance at May 31, 2013 57 (4) 2,223 130 (10) 2.223 54 180 S - 736 $ 3 $ $ 149 $ 5,588 4,641 322 $ 10,381 322 (2) (10) (1,647) (727) (1,657) (727) 65 174 (12) 2.485 2,485 125 178 $ - 716 S 3 $ 5,184 $ 125 274 $ 5,695 $11,156 The accompanying notes to consolidated financial statements are an integral part of this statement NIKE, Inc. Consolidated Statements Of Income Year Ended May 31, 2012 2013 2011 S 25,313 14.279 11.034 2,745 5,035 7.780 (In millions, except per share data) Income from continuing operations: Revenues Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest (income) expense, net (Notes 6, 7 and 8) Other (income) expense, net (Note 17) Income before income taxes Income tax expense (Note 9) NET INCOME FROM CONTINUING OPERATIONS DISCONTINUED OPERATIONS NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME 23,331 $ 13,183 10.148 2,607 4.458 7.065 4 54 20.117 10,915 9,202 2,344 4,017 6,361 (3) (25) 3,025 2.862 690 (15) 3,272 808 2,464 21 2,485 756 2,269 (46) 2,223 $ (39) $ $ 2,133 2.75 2.69 S $ 2.47 $ 2.42 $ 2.28 2.24 Earnings per share from continuing operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) 0.02 $ 0.02 $ Earnings per share from discontinued operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) (0.05) $ (0.05) $ (0.04) (0.04) 0.81 $ 0.70 $ 0.60 Dividends declared per common share a consolidated financial statements are an integral part of this statement ving notes to consolidated financial statements are a ULU Vidy 31, 2013 NIKE, Inc. Consolidated Balance Sheets May 31, 2013 2012 3,337 2,628 3,117 3.434 308 802 2.317 1,440 3,132 3.222 262 857 615 11,845 2.209 370 131 910 15,465 13,626 2,452 382 131 993 17,584 $ $ (In millions) ASSETS Current assets: Cash and equivalents Short-term investments (Note 6) Accounts receivable, net (Note 1) Inventories (Notes 1 and 2) Deferred income taxes (Note 9) Prepaid expenses and other current assets (Notes 6 and 17) Assets of discontinued operations (Note 15) Total current assets Property, plant and equipment, net (Note 3) Identifiable intangible assets, net (Note 4) Goodwill (Note 4) Deferred income taxes and other assets (Notes 6, 9 and 17) TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 8) Notes payable (Note 7) Accounts payable (Note 7) Accrued abilities (Notes 5, 6 and 17) income taxes payable (Note 9) Liabilities of discontinued operations (Note 15) Total current liabilities Long-term debt (Note 8) Deferred income taxes and other liabilities (Notes 6, 9 and 17) Commitments and contingencies (Note 16) Redeemable Preferred Stock (Note 10) Shareholders' equity: Common stock at stated value (Note 11): Class A convertible - 178 and 180 shares outstanding Class B-716 and 736 shares outstanding Capital in excess of stated value Accumulated other comprehensive income (Note 14) Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 57 121 1.646 1.986 98 18 3,926 1.210 1,292 49 108 1,549 1.941 65 170 3,882 228 974 5.184 274 5,695 11.156 17,584 $ 4.641 149 5,588 10,381 $ The accompanying notes to consolidated financial statements are an intreal 15,465 NIKE, Inc. Consolidated Statements of Cash Flows Year Ended May 31. 2012 2011 2013 2,133 2,485 2,223 S $ 335 438 373 (60) 130 (76) 105 (124) 142 (323) (273) (551) (35) (197) (28) (805) (141) 470 1,899 41 151 1,812 3,027 (3.702) 1.501 998 (636) (2.705) 2,585 1.244 (597) (7,616) 4,313 2,766 (432) 14 (In millions) Cash provided by operations: Net income Income charges (credits) not affecting cash: Depreciation Deferred income taxes Stock-based compensation (Nole 11) Amortization and other Net gain on divestitures Changes in certain working capital components and other assets and liabilities: Decrease (increase) in accounts receivable (Increase) in inventories (Increase) in prepaid expenses and other current assets Increase in accounts payable, accrued liabilities and income taxes payable Cash provided by operations Cash (used) provided by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Additions to property, plant and equipment Disposals of property, plant and equipment Proceeds from divestitures Increase in other assets, net of other liabilities Settlement of net investment hedges Cash (used) provided by investing activities Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion Increase (decrease) in notes payable Proceeds from exercise of stock options and other stock issuances Excess tax benefits from share-based payment arrangements Repurchase of common stock Dividends - common and preferred Cash used by financing activities Effect of exchange rate changes Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of capitalized interest Income taxes Dividends declared and not paid 786 (28) (37) 22 (30) (23) (1,021) (1,067) 514 986 (49) 15 41 313 345 72 (1.674) (703) (1,040) 100 1,020 2,317 3,337 (203) (65) 468 115 (1.814) (619) (2,118) 67 (1,859) (555) (1.972) 57 (1.124) 3,079 1,955 362 1,955 2,317 $ $ $ 20 $ 29 $ 702 638 32 736 145 188 165 NIKE, Inc. Consolidated Statements of Shareholders' Equity Capital in Common Stock Excess of Accumulated Other Class A Class B Seated Comprehensive Retained Shares Amount Shares Amount income Value Earnings Total 180 $ - 788 $ 3 $ 3.441 $ 215 5 6,095 $ 9,754 368 368 (48) (14) (1,857) (1.871) (569) 105 (5) 2,1332.139 (120) S 9,143 5,801 100 $ 3 $ 95 $ $ 756 18 3,944 528 (12) (1.793) (639) fin milions, except por share data) Balance at May 31, 2010 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.60 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Not income Other Comprehensive Income Balance at May 31, 2011 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.70 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net Income Other comprehensive income Balance at May 31, 2012 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on Common stock ($0.81 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other comprehensive income Balance at May 31, 2013 67 130 (0) (1.805) (639) 57 130 (10) 2.223 2.223 54 180$ 3 $ $ 149 $ 5,588 $ 10,381 736 $ 10 4.641 322 322 (10) (1.647) (727) (1.657) (727) 65 174 (12) 2.485 125 $11.156 2.485 178 $ - 716 $ 3 $ 5,184 $ 125 274 $ 5,695 The accompanying notes to consolidated Anancial statements are so g ourt of his slaman - Rear Ended May 31, 2013 NIKE, Inc. Consolidated Statements of Shareholders' Equity Capital in Common Stock Excess of Class A Class B Stated Shares Amount Shares AmountValue 180 $ - 788 $ 3 $ 3,441 Accumulated Other Comprehensive Retained Income Earnings $ 215 $ 6,095 Total $ 9,754 368 (48) 368 (14) (1.857) (1,871) (569) (569) 49 105 (6) (120) 180 $ 105 (1) 2,133 2,133 (120) 5,801 $ 9,843 528 (1,793) (1,805) (639) (639) - 756 $ 3 $ $ 95 $ 3.944 528 (12) (In millions, except per share data) Ocup per share data) Balance at May 31, 2010 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.60 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other Comprehensive Income Balance at May 31, 2011 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock (50.70 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net Income Other comprehensive income Balance at May 31, 2012 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on Common stock ($0.81 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other comprehensive income Balance at May 31, 2013 57 (4) 2,223 130 (10) 2.223 54 180 S - 736 $ 3 54 149 $ $ $ 5,588 4,641 322 $ 10,381 322 (2) (10) (1,647) (1,657) (727) (727) 65 174 (12) 2,485 2.485 125 5,695 $11,156 178 $ - 716 S 3 $ 5,184 $ 125 274 $ The accompanying notes to consolidated financial statements are an integral part of this statement