On June 26, footwear and sporting goods designer extraordinaire Nike (NYSE:NKE) released full-year 2007 earnings for the period ended May 31.

  • How could a company named for the Greek goddess of victory fail to meet its targets? Nike delivered its customary, solid report once again.
  • An effective tax rate of 32.2% -- down from 35% last year -- helped counteract rising SG&A expenses.
  • A generous share buyback program then boosted earnings per share beyond the revenue growth rate. That's important to the executive team -- their stock-based bonus awards are tied to EPS and far more lucrative than the EBIT-based cash bonus. (Read the latest proxy filing for details.)
  • Management is happy about the tighter inventory control, as evidenced by the much slower growth in inventory levels than in net sales.

(Figures in millions, except per-share data)

Income Statement Highlights

FY 2007

FY 2006

Change

Sales

$16,326

$14,955

9.2%

Net Profit

$1,492

$1,392

7.1%

EPS

$2.93

$2.64

11.0%

Diluted Shares

509.9

527.6

(3.4%)

Get back to basics with the income statement.

Margin Checkup

FY 2007

FY 2006

Change*

Gross Margin

43.9%

44.1%

(0.2)

Operating Margin

13.1%

14.1%

(1.0)

Net Margin

9.1%

9.3%

(0.2)
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

FY 2007

FY 2006

Change

Cash + ST Invest.

$2,847

$2,303

23.6%

Accounts Rec.

$2,495

$2,383

4.7%

Inventory

$2,122

$2,077

2.2%

Liabilities

FY 2007

FY 2006

Change

Accounts Payable

$1,040

$952

9.3%

Long-Term Debt*

$440

$666

(33.9%)
*Including current portion of $30.5 million in 2007 and $255.3 million in 2006.

The balance sheet reflects the company's health.

Cash Flow Highlights

FY 2007

FY 2006

Change

Free Cash Flow

$1,600*

$1,334

19.9%
*Figure taken from the earnings call. No cash flow statement this time, and no data on depreciation or capital expenditures, either.

Free cash flow is a Fool's best friend.

Cash Conversion Checkup

FY 2007

FY 2006

Change

Days in Inventory

83.6

84.8

(1.2)

Days in Receivables

54.5

56.7

(2.2)

Days Payables Outstanding

39.7

37.7

2.0

Cash Conversion Cycle

98.5

103.8

(5.4)

Read up on cash conversion metrics and their importance for retail operations.

Run for the hills:

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned, and all his sneakers are Reeboks. Fool rules are here.