Nike (NKE)

Cash Flow Activity

Cash provided by operations was $1.7 billion for fiscal 2009 compared to $1.9 billion for fiscal 2008. This decrease was mainly due to an increase in cash used for our working capital as a result of lower accounts payable and a higher accounts receivable balance. The decrease in accounts payable was primarily due to lower purchases of inventory as well as a reduction in overall spending. The higher accounts receivable balance is a result of a longer collection cycle, reflecting a more challenging retail environment experienced by our customers in the EMEA and U.S. regions.

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Cash used by investing activities was $0.8 billion during fiscal 2009 compared to $0.5 billion in fiscal 2008. The year-over-year increase was primarily due to a net increase in short-term investments purchased in fiscal 2009. The increase in net purchases of short-term investments in fiscal 2009 was partially offset by proceeds from settlement of net investment hedges of $191.3 million. During the second half of fiscal 2008, we began to use net investment hedges to mitigate the risk of variability in foreign-currency-denominated net investments in certain wholly-owned international subsidiaries.

Cash used in financing activities was $0.7 billion during fiscal 2009, compared to $1.2 billion in fiscal 2008. The decrease in fiscal 2009 was primarily due to a decrease in share repurchases to preserve liquidity given the current financial market conditions.

In fiscal 2009, we purchased approximately 10.6 million shares of NIKE’s Class B Common Stock for $639.0 million. As of the end of fiscal 2009, we have repurchased 49.2 million shares for $2.7 billion under the $3 billion program approved by our Board of Directors in June 2006. In September 2008, our Board of Directors approved a new $5 billion share repurchase program. The new program will commence upon completion of our current $3 billion share repurchase program. We expect to fund share repurchases from operating cash flow, excess cash, and/or debt. The timing and the amount of shares purchased will be dictated by our capital needs and stock market conditions.

Cash Flow Activity

Cash provided by operations was $662.4 million for the first nine months of fiscal 2009, compared to $1,303.8 million for the first nine months of fiscal 2008. Our primary source of operating cash flow for the first nine months of fiscal 2009 was net income of $1,145.3 million offset by investments in working capital. Our investments in working capital increased during the first nine months of fiscal 2009 as compared to the same period in the prior year primarily due to lower accounts payable and accrued liabilities as a result of reduced inventory purchases and selling and administrative expenses. The increase in cash used for working capital is also attributable to higher accounts receivable as a result of a longer collection cycle.

Cash used by investing activities was $201.7 and $27.4 million for the first nine months of fiscal 2009 and fiscal 2008, respectively. The year-over-year change was primarily due to a net purchase of short-term investments of $65.5 million (purchases net of sales and maturities) in the first nine months of fiscal 2009, compared to net sales and maturities of $326.2 million in short-term investments during the first nine months of fiscal 2008, partially offset by an increase from the proceeds of net investment hedge settlements. During the second half of fiscal 2008, we began to use net investment hedges to mitigate the risk of variability in foreign-currency-denominated net investments held by wholly-owned foreign operations. The first settlement of net investment hedges occurred in the fourth quarter of fiscal 2008.

Cash used in financing activities was $657.1 million for the first nine months of fiscal 2009, compared to $906.6 million used in the first nine months of fiscal 2008. The decrease in the first nine months of fiscal 2009 was primarily due to a decrease in share repurchases in order to preserve liquidity given the current financial market conditions.

In the first nine months of fiscal 2009, we purchased 10.6 million shares of NIKE’s Class B common stock for $639.0 million. As of February 28, 2009, we have now repurchased 49.2 million shares for $2.7 billion under the $3 billion program approved by our Board of Directors in June 2006. In September 2008, our Board of Directors approved a new $5 billion share repurchase program. The new program will commence upon completion of our current $3 billion share repurchase program. We expect to fund share repurchases from operating cash flow, excess cash, and/or debt. The timing and the amount of shares purchased will be dictated by our capital needs and stock market conditions.

Dividends declared per share of common stock for the third quarter of fiscal 2009 were $0.25, compared to $0.23 in the third quarter of fiscal 2008.

Fiscal 2008 Cash Flow Activity

Cash provided by operations was approximately $1.9 billion in both fiscal 2008 and fiscal 2007. Our primary source of operating cash flow in fiscal 2008 was net income of $1.9 billion. Adjustments for non-cash depreciation and stock-based compensation were offset by increases in deferred income taxes as well as investments in working capital and other assets and liabilities to support growth in the business. The increase in working capital during fiscal 2008 was primarily attributable to an increase in inventories and accounts receivable, partially offset by increases in accounts payable and accrued liabilities. The increase in accounts receivable is attributable to higher sales in the last quarter of 2008. The increase in inventories reflects year-over-year growth in reported futures and higher inventories to support the expansion of NIKE-owned retail stores, slightly offset by better inventory management. The increase in accounts payable and accrued liabilities was primarily due to the timing of payments and inventory receipts compared to the prior year.

Cash used by investing activities was $0.4 billion during fiscal 2008, compared to $0.1 billion provided by investing activities during fiscal 2007. The year-over-year increase in cash used by investing activities was primarily due to our acquisition of Umbro for approximately $0.6 billion offset by proceeds from the divestitures of our NIKE Bauer Hockey and Starter brand businesses of $0.2 billion.

Cash used in financing activities was $1.2 billion during fiscal 2008, compared to $1.1 billion used in fiscal 2007. The increase versus fiscal 2007 was primarily due to an increase in share repurchases and dividends paid, discussed below, partially offset by a decrease in payments of long term debt as we made a $250 million repayment of corporate bonds in fiscal 2007.

In fiscal 2008, we purchased approximately 20.6 million shares of NIKE’s Class B Common Stock for $1.2 billion. As of the end of fiscal 2008, we have repurchased 38.6 million shares for $2.1 billion under the $3 billion program approved by our Board of Directors in June 2006. We expect to fund share repurchases from operating cash flow, excess cash and/or debt. The timing and the ultimate amount of shares purchased under the programs will be dictated by our capital needs and stock market conditions.

Dividends declared per share of common stock for fiscal 2008 were $0.875, compared to $0.71 in fiscal 2007. We have paid a dividend every quarter since February 1984. Our current dividend policy is to provide an annual dividend equal to 20% to 30% of the trailing twelve-months’ earnings per share, paid out on a quarterly basis. We review our dividend policy from time to time, and based upon current projected earnings and cash flow requirements, we anticipate continuing to pay a quarterly dividend in the foreseeable future.

Fiscal 2008 Cash Flow Activity

Fiscal 2007 Cash Flow Activity

Cash provided by operations was $1.9 billion in fiscal 2007, compared to $1.7 billion in fiscal 2006. Our primary source of operating cash flow was net income of $1.5 billion, and non-cash depreciation and stock-based compensation, offset by investments in working capital and other assets and liabilities to support growth in the business. The increase in working capital during fiscal 2007 was primarily attributable to an increase in prepaid expenses and other current assets and inventories, partially offset by increases in accounts payable and accrued liabilities. The increase in prepaid expenses and other current assets was primarily due to the timing of payments, while the increase in inventories reflects year-over-year growth in reported futures and higher inventories to support the expansion of NIKE-owned retail stores, slightly offset by better inventory management. The increase in accounts payable and accrued liabilities was primarily due to the timing of payments and inventory receipts compared to the prior year.

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Cash provided by investing activities was $0.1 billion during fiscal 2007, compared to $1.3 billion used in investing activities during fiscal 2006. The year-over-year change was due to a net decrease of $382.4 million in short-term investments during fiscal 2007, compared to a net increase of $909.9 million in short-term investments during fiscal 2006. The decrease in short-term investments was the result of a strategic shift to highly liquid instruments with maturities of three months or less.

Cash used in financing activities was $1.1 billion during fiscal 2007, compared to $0.9 billion used in fiscal 2006. The increase versus fiscal 2006 was primarily due to the $250 million repayment of corporate bonds, combined with an increase in share repurchases, discussed below, partially offset by an increase in notes payable, proceeds from the issuance of long-term debt and exercise of stock options.

In fiscal 2007, we purchased approximately 22.1 million shares of NIKE’s Class B Common Stock for $975.3 million. In the first quarter of fiscal 2007, 4.0 million of the shares repurchased completed the previous four-year, $1.5 billion share repurchase program approved by the Board of Directors in June 2004. As of the end of fiscal 2007, we have repurchased 18.1 million shares for $812.7 million under the new $3 billion program approved by our Board of Directors in June 2006. We expect to fund share repurchases from operating cash flow, excess cash, and/or debt. The timing and the ultimate amount of shares purchased under the programs will be dictated by our capital needs and stock market conditions.

Dividends declared per share of common stock for fiscal 2007 were $0.71, compared to $0.59 in fiscal 2006. We have paid a dividend every quarter since February 1984. Our current dividend policy is to provide an annual dividend equal to 20% to 30% of the trailing twelve-months’ earnings per share, paid out on a quarterly basis. We review our dividend policy from time to time, and based upon current projected earnings and cash flow requirements, we anticipate continuing to pay a quarterly dividend in the foreseeable future.

Fiscal 2006 Cash Flow Activity

Cash provided by operations was $1.7 billion in fiscal 2006, compared to $1.6 billion in fiscal 2005. Our primary source of operating cash flow was net income of $1.4 billion. For fiscal 2006, our net investment in working capital increased $43.2 million as compared to an increase of $13.0 million in fiscal 2005. This increased investment in working capital was largely attributable to a larger increase in inventories and prepaid expenses and other current assets, partially offset by increases in accounts payable and accrued liabilities. The increase in inventories reflects higher in-transit inventories (due primarily to growth in reported futures and other orders, and earlier product ordering compared to last year) and higher inventories to support the expansion of NIKE-owned retail stores. Prepaid expenses and other current assets increased in fiscal 2006 compared to a decrease in the prior year, primarily due to the timing of payments, including earlier payments of income taxes in certain foreign locations. The increase in accounts payable and accrued liabilities is primarily due to the timing of payments and inventory receipts compared to the prior year.

Cash used by investing activities during fiscal 2006 was $1.3 billion, compared to $360.4 million invested during fiscal 2005. The increase over the prior year was primarily due to a higher net increase in short-term investments (purchases net of maturities), which increased from $35.3 million in fiscal 2005 to $909.9 million in fiscal 2006, and increased net additions to property, plant and equipment. The additions to property, plant and equipment primarily reflect capital expenditures on computer equipment and software (to support both normal business operations and our supply chain systems upgrade), and continued investment in NIKE-owned retail stores.

In fiscal 2006, we purchased approximately 9.5 million shares of NIKE’s Class B Common Stock for $781.2 million. The share repurchases were part of a four-year, $1.5 billion share repurchase program that was approved by the Board of Directors in June 2004. Since the inception of this program, we have repurchased 16.4 million shares, at a total cost of $1.3 billion. In June 2006, the Board of Directors approved a new four-year, $3.0 billion share repurchase program, to commence upon completion of the $1.5 billion share repurchase program. We expect to fund share repurchases from operating cash flow, excess cash, and/or debt. The timing and the ultimate amount of shares purchased under the programs will be dictated by our capital needs and stock market conditions.

Dividends declared per share of common stock for fiscal 2006 were $1.18, compared to $0.95 in fiscal 2005. We have paid a dividend every quarter since February 1984. Our current dividend policy is to provide an annual dividend equal to 20% to 30% of the trailing twelve-months’ earnings per share, paid out on a quarterly basis. We review our dividend policy from time to time, and based upon current projected earnings and cash flow requirements, we anticipate continuing to pay a quarterly dividend in the foreseeable future.