Annual Report 2011

NIKE, Inc.

missionOur goal is to carry on a legacy of innovative thinking, whether to develop products that help athletes of every level of ability reach their potential, or to create business opportunities that set Nike apart from the competition and provide value for our shareholders.

table ofcontents

Letter to the ShareholdersProduct ShowcaseBrand PortfolioSelect FinancialsBoard of DirectorsShareholder Information

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That’s the role of a leader. That’s how we serve the athlete, reward our shareholders, and continue to lead our industry. In the last 10 years we more than doubled our revenue. We increased our gross margin more than five percentage points and grew diluted EPS at a compounded rate of 15 percent. We nearly tripled our cash flow from operations, paid out over $3 billion in dividends and repurchased over $7 billion in

stock. In that same time our market cap more than tripled, driving a 17 percent average annual return.

At the beginning of fiscal 2011, we committed to amplifying our innovation agenda and driving growth at the category, brand and country level. The last 12 months also revealed many changes in our world. The global economy continues to recover but as we’ve seen, it’s a slow and volatile

recovery. Consumers, particularly youth, face nagging unemployment. Governments are wrestling with high levels of debt. And rising costs for raw materials, energy and labor are sparking inflation in world economies. We’re not immune to these factors and expect them to exert pressure on our gross margins in the first half of fiscaal 2012. But external forces do not control our destiny. We do. We are

NIKE, Inc. is about innovation

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letter to the shareholders

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well resourced and positioned to navigate the global economy, create competitive separation, and deliver profitable growth. The developing markets hold enormous opportunity for NIKE, Inc. Within the next 20 years, as much as 65 percent of the world’s population could be middle class – most of that in China, India and Brazil. We’re performing very well in these markets, and we’re ideally positioned to capitalize on

their potential. In our more mature developed markets, the economies are recovering at a slower pace. But the strength of our products and brands should enable us to continue to outgrow the market, as we’ve consistently done in North America. The key for NIKE, Inc. in any market is to drive innovation at every level – brand, product, retail, operations, events, and communications. That’s at the core of our growth strategy. In

May 2010, I stated a goal for NIKE, Inc. to deliver $27 billion of revenue in fiscal 2015. I’m excited to tell you that we’re ahead of schedule, so we’re revising that number. When I look at the strengths of our company and the opportunity we have going forward, I believe we can exceed that goal and reach $28-30 billion in revenue by fiscal year 2015. Today we have seven distinct, high-energy brands – each

with a powerful connection to its consumers. Those connections give us the insights we need to create amazing products and experiences. That’s the fundamental cycle that continually drives growth. And while each brand has enormous potential in its own right, the real power of NIKE, Inc. comes from making the overall value of our portfolio greater than the sum of the parts. We define our portfolio as the NIKE,

The number of companies that NIKE Inc. beat in Fortune

Magazine’s annual Most Innovative Companies ranking 298

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Inc. brands and everything that drives them: our products, retail partners and executions, supply chain, strong balance sheet and a very focused management team. We use the power of our portfolio to manage risk and attack our biggest growth opportunities. It’s the source of our financial capital. It gives us the scale necessary to drive down costs. It enables us to leverage our resources across multiple brands

and categories. And it all revolves around one thing: innovation. We innovate to serve the athlete. We innovate to grow the company. And we innovate to inspire the world. We deliver amazing products and experiences. This is easy in theory, but tougher in execution. When we launched NIKE Free technology, it changed the look, feel and role that footwear plays in the life of the athlete. Today, NIKE Free is one of

our most successful innovations. When we launched NIKE Lunar technology, we knew it would change the industry. But we didn’t know that it would be a $1.5 billion business at retail just three years later. Within our apparel business, we saw significant growth over the last year. For example, NIKE Pro is now the leading Women’s Base Layer brand in the U.S., and on the Men’s side we’ve taken significant

market share and are within 5 points of the lead as of May 2011. Our Running category is a great example of how we drive growth through the category offense. Last year alone we held 132 runs in 28 countries, increased membership in NIKE+ by 40 percent and launched the hottest digital product with the GPS Sport Watch. The result was a currency-neutral revenue increase of 30 percent in our Running and

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fitness category. We also saw some amazing sport moments and experiences this past year: World Cup, U.S. Open of Surfing, World Basketball Festival and Champions League to name just a few. Millions of athletes used NIKE digital apps to train, and billions of fans watched our athletes compete around the world.The appetite for sports is strong and growing, and NIKE is leading the way. We consistently create and commercialize innovative products and experiences that extend our leadership position. In fact, NIKE, Inc. holds more than twice the number of invention patents than our top five competitors combined, and I believe we’re just getting warmed up. The opportunities to deliver meaningful product

innovation have never been greater, and we’ve never been more excited and better prepared to take advantage of those opportunities. We see huge opportunity to drive growth by executing on our strategy to transform the marketplace. We’re on the ground around the world – identifying key markets, connecting with consumers and assessing retail opportunities. We use this knowledge to apply our resources where they make the most difference.

In fiscal 2011 we opened more than 100 category destinations, like the Field House with Dick’s Sporting Goods, House of Hoops with Foot Locker, and the Running Lab with Finish Line. We’re creating similar momentum with our direct-

to-consumer business. We opened nine NIKE Brand Experience and Category Experience stores in the U.S. and Europe. Converse opened stores in New York and Boston.

And NIKE, Inc. e-commerce was up 25 percent on a currency-neutral basis compared to last year. That’s a big increase, but it pales in comparison to the opportunity we have to expand e-commerce across all NIKE, Inc. brands.

I think one of the great lessons of the 21st century is the need for collaboration. Nobody can solve the big challenges or reach the big opportunities of the future alone – not governments, not companies, not activists. We all have to work together. This is especially true in sustainability. I believe that any

company doing business today has two simple options: embrace sustainability as a core part of your growth strategy, or eventually stop growing. We choose sustainability.

Last year we reclaimed 13 million plastic bottles from landfills in Japan and Taiwan and turned those bottles into our lightest high-performance football jerseys ever. We put those jerseys on nine national football teams at the World Cup, and that changed product creation in Football forever. We’re also working with partners to create new ways for young people everywhere to access sports. That makes our youth healthier and the future brighter for all of us. I was in Kenya and Ethiopia earlier this year and saw firsthand the impact

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of inter-generational poverty. I also saw the very real sense of hope and possibility in young girls who are breaking that cycle. It’s all part of NIKE’s commitment to help build a better world, while we build a better company, and I’m very proud of the progress we’re making.

As a CEO who came up through the product and design world, I know something about the nature of innovation. It’s incredibly valuable, and equally difficult.

That’s where this company distinguishes itself from all others: innovation. You can look back a year and see NIKE innovation at the World Cup in South Africa and the U.S. Open of Surfing in Huntington Beach, California. Look forward a year and you’ll see it in London at

the Olympics and the NFL in the U.S. You’ll see it in Brazil in 2014 at the World Cup and in 2016 at the next summer Olympics, and you’ll see it every day.

We’re just beginning to tap into some huge, game-changing innovation: digital integration between athletes and technology, one-of-a-kind customization, open source design, and a quantum leap in engineering and manufacturing that closes the loop and opens the door to smarter products and more robust performance. This is the kind of change we’re focused on, and we are relentless about innovating to reach our full potential.

Mark ParkerPresident and Chief Executive OfficerNIKE, Inc.

that’s where this company distinguishes itself from all others:

innovation

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880The approximate number of athletes and sports teams that are currently sponsored by NIKE, Inc.

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productshowcase

Nike Free Run

After learning that Stanford athletes had been training barefoot on the university’s golf course, three of Nike’s most innovative and creative employees set out to develop a shoe that felt natural and weightless, just like bare feet. In 2002, they examined a group of men and women with pressure-measuring insoles taped to their feet, using high-speed cameras to capture images of each foot in motion.

The team spent eight years studying the biomechanics of shoeless running. The results yielded a profound understanding of the foot’s natural landing angle, pressure and toe position, allowing Nike designers to build an unconventional and flexible running shoe.

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Nike+ Sensor Nike ProCombat Nike FuelBand Simply slip the sensor into the pocket beneath the sockliner of your left Nike+ ready shoe, connect the receiver to your iPod nano and start running. The sensor measures your pace, distance, time elapsed and calories burned. This information is transmitted wirelessly to the receiver and your Nike+ tracking device for real-time feedback while you train.

These compression shorts were designed to shield the body from big hits and hard falls while keeping the wearer comfortable.

Ergonomically designed floating foam gives lightweight impact protection on the hips and tailbone. Optional snap-in, foam-covered hard plates increase padding on the thighs for superior protection.

Nike+ FuelBand tracks activ-ity through a sport-tested ac-celeromete. it can track running, walking, dancing, basketball and dozens of everyday activities.

Users set Daily Goal and Nike+ FuelBand tracks progress, lighting up from red to green throughout the day. With the touch of a button the user can cycle through their time, steps taken and calories burned.

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It’s a simple idea: let your body perform as it wants to perform to develop significant performance benefits. This is the philosophy of Nike Free, shoes that offer the proven benefits of barefoot training, and your feet will thank you.

Allowed their freedom, the toes will flex and grip, setting off a natural chain that exercises muscles normally neglected in traditional footwear. By exercising these muscles, athletes can achieve small performance benefits, adding millimeters to a vertical leap or shaving milliseconds off a race time, while strengthening key stabilizer muscles that help prevent injuries.

The outsoles of Nike Free shoes feature siping (deep slices) and reverse flex grooves to encourage flexion and extension in both directions. With a lightweight seamless upper atop this flexible outsole, Nike Free shoes merge the natural, healthy motion of a bare foot with the protection of traditional footwear.

what isnike free?

contoured cushioning improves fit and comfort

upper combines with ultralight overlays to provide glove like

fit and precise support

asymmetrical lacing system helps to reduce pressure over the top ridge of

the foot for enhanced comfort

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flex grooves promote a natural, barefoot stride

waffle pistons in the outsole work in conjunction with the midsole by helping to absorb impact, then springing back to original shape for added responsiveness

Full inner-sleeve construction provides dynamic, sock-like fit that hug the foot

nike + ready to make tracking runs easy

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It started with a handshake between two visionary Oregonians - Bowerman and his University of Oregon runner Phil Knight. They and the people they hired evolved and grew the company that became Nike from a U.S.-based footwear distributor to a global marketer of athletic footwear, apparel and equipment that is unrivaled in the world.

brandportfolio

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Jordan Brand, a division of NIKE, Inc., is a premium crafted performance brand of athletic footwear, appareal and accessories inspired by the legacy and hands-on leadership of Michael Jordan. Since 1997, the Jordan Brand has grown into a complete collection of sport performance and lifestyle product. The Jordan Brand is also active in local communities through a new corporate responsibility program called “Wings for the Future”, which focuses on three unique community programs emphasizing education, sport, and creativity.

Nike Golf, a division of NIKE, Inc., designs and markets golf equipment, apparel, balls, footwear, bags, and assessories worldwide. With the most advanced R&D capabilities anywhere, Nike Golf delivers innovations that enable athletes to push the boundries of performance and reset what is possible in one of the world’s oldest games.

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Shaped by more than a century of innovation, craftsmanship and style, Cole Haan is a classic American apparel brand, devoted to making premium men’s and women’s footwear, assessories, and outerwear. A wholly-owned subsidiary of NIKE, Inc., Cole Haan can be found at retail locations worldwide, and online. The company is headquartered in New York City.

Hurley is a company based on inclusion, says chairman and founder Bob Hurley. This philosophy applied to the company’s launch is 1999, when Hurley decidied to start a brand that was a true microphone for youth. That sense of community remains a guiding principle of the company today, where innovative products like the Phantom Boardshort and game-changing events like the US Open of Surfing continues to redefine what is possible in our world. Hurley, a wholly-owned subsidiary of NIKE, Inc., is headquartered in Costa Mesa, California with international offices in Sydney and Barcelona.

$2.7Billions of dollars in revenue contributed by NIKE Inc. affiliate businesses in the 2011 fiscal year.

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Converse, Inc., based is N.Andover, Massachusetts, is a wholly-owned subsidiary of NIKE, Inc. Established in 1908, the Converse brand has built a reputation as “America’s Original Sports Company”. It has a rich brand heritage of legendary footwear, including Chuck Taylor All Star. Today, Converse offers a diverse porfolio of premium lifestyle men’s and women’s footwear and apparel adn can be found in more than 160 countries and over 50 company-owned retail locations in the U.S.

Umbro, a wholly-owned subsidiary of NIKE, Inc., based in Manchester, England is the original football sportswear brand. Born in England in 1924, the company leverages its rich heritage in its role as the most progressive, relevant, and connected brand in global football.

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200The approximate number of countries around the world that

sell NIKE Inc. products.

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select financials

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Revenues for NIKE, Inc. increased 18 percent to $5.7 billion, up 16 percent on a currency-neutral basis. Excluding the impacts of changes in foreign currency, NIKE Brand revenues rose 18 percent with growth in every geography except Japan and in all key categories except Action Sports. Revenues for Other Businesses increased 5 percent with minimal impact from changes in currency exchange rates, as growth at Converse more than offset lower revenues at NIKE Golf, Cole Haan, Hurley and Umbro.

revenue performance

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revenue distribution

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revenue increases

On December 21, 2010, Nike posted strong fiscal 2011 second-quarter earnings of 0.94 per share, reflecting a growth of 24% from the year-ago earnings of $0.76 per share. Healthy top-line growth coupled with higher gross margin and inventory management were the key highlights of the quarter.

Despite macroeconomic head-winds, Nike’s total revenue grew 10% to 4,842 million from $4,405 million in the prior-year quarter. The company continued to benefit from its strategy of consistently focus on innovative products that provide a competitive edge over its rivals.

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revenue results

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Last Price 109.90

52 Week High 112.97

52 Week Low 76.98

Volume 1.26 M

Average Daily Volume 2.34 M

Debt/Equity Ratio 0.04

Gross Margin 43.79%

Net Profit Margin 9.68%

Total Shares Outstanding 458.4 M

Market Capitalization 50.37 B

stock activity fundamental data

2011 2012 2013 2014

Average Estimate 1.37 1.43 4.94 5.80

High Estimate 1.45 1.72 5.02 6.20

Low Estimate 1.24 0.96 4.80 5.43

Year Ago EPS 1.24 1.36 4.39 4.94

Growth Rate +10.72% +5.48% +12.54% +17.40%

earnings estimates

financial data

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Qtr(5/12) EPS Estimate 1.37

FY(5/12) EPS Estimate 4.94

Current P/E 23.10

FY(5/13) EPS Estimate 5.80

Sales 23.4 B 6.9%

Income 2.3 B 8.9%

Dividend Rate 1.44 15.26%

Dividend Yield 1.30% 1.40%

financials

2011 growth

earnings estimates

Sales 23.42 B

Income 2.27 B

Net Profit Margin 9.68%

Return on Equity 22.58%

1st Qtr 6,081.0 5,175.0 4,799.0

2nd Qtr 5,731.0 4,842.0 4,405.6

3rd Qtr 5,846.0 5,079.0 4,733.0

4th Qtr N/A 5,766.0 5,077.0

Total 17,658.0 20,862.0 19,014.6

financial highlightsrevenue - quarterly results (in millions)

2011 2010 2009

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Phil Knight

Matt Parker

Charlie Denson

Chairman of the Board

Director/Founder at Nike, Inc.

Chief Executive Officer

Director

President at Nike, Inc.

President, Divisional at Nike, Inc.

executives

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board ofdirectorsAlan B. Graf Director at Nike, Inc.

Bernard F. Pliska Controller/Vice President at Nike, Inc.

David J. Ayre Vice President, Divisional at Nike, Inc.

Donald W. Blair CFO/Vice President at Nike, Inc.

Douglas G. Houser Director at Nike, Inc.

Elizabeth J. Comstock Director at Nike, Inc.

Eric D. Sprunk Vice President, Divisional at Nike, Inc.

Gary M. DeStefano President, Divisional at Nike, Inc.

Hans van Alebeek Vice President, Divisional at Nike, Inc.

Hilary K. Krane General Counsel/Vice President at Nike, Inc.

Jeanne P. Jackson President, Divisional at Nike, Inc.

Jill K. Conway Director at Nike, Inc.

John C. Lechleiter Director at Nike, Inc.

John F. Slusher President, Divisional at Nike, Inc.

John G. Connors Director at Nike, Inc.

John R. Thompson Director at Nike, Inc.

Johnathan A. Rodgers Director at Nike, Inc.

Orin C. Smith Director at Nike, Inc.

P. Eunan McLaughlin President, Divisional at Nike, Inc.

Phyllis M. Wise Director at Nike, Inc.

Ralph D. DeNunzio Director at Nike, Inc.

Roger S. Wyett President, Divisional at Nike, Inc

Timothy D. Cook Director at Nike, Inc.

Trevor Edwards Vice President, Divisional at Nike

The Nominating and Corporate Governance Committee of NIKE, Inc. considers and evaluates candidates for appointment or election to the Board of Directors. In evaluating potential candidates for suitability, the Committee considers many factors to identify individuals with the requisite intelligence, education, experience, and character to make significant contributions to the committee.

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shareholderinformation

NIKE, Inc. common stock is listed on the New York Stock Exchange under the tradingsymbol ‘NKE.’ Copies of the Company’s Form 10-K and Form 10-Q reports filed withthe Securities and Exchange Commission are available from the Company withoutcharge. To request a copy, please call 800-640-8007 or write to NIKE’s InvestorRelations Department at:NIKE World HeadquartersOne Bowerman DriveBeaverton, Oregon 97005-6453Quarterly dividends on NIKE common stock, when declared by the Board ofDirectors, are paid on or about July 5, October 5, January 5, and April 5. Financialinformation is also available at www.nikebiz.com/investors.

INDEPENDENT ACCOUNTANTSPricewaterhouseCoopers LLP1300 SW Fifth Avenue, Suite 3100Portland, Oregon 97201

REGISTRAR AND STOCK TRANSFER AGENTCommunications concerning shareholder address changes, stock transfers,changes of ownership, lost stock certificates, payment of dividends, dividend checkreplacements, duplicate mailings, or other account services should be directed tothe Company’s Registrar and Stock Transfer Agent at the following address:Computershare Trust CompanyN.A., P.O. Box 43078Providence, RI 02940-3078800-756-8200Hearing Impaired: 800-952-9245