Nike Hits $15 Billion in Fiscal 2006; Q4 Earnings Slip

Nike, Inc.’s 2006 fiscal year, ended May 31, 2006 revenues grew 9% to $15.0 billion, compared to $13.7 billion last year. Net income increased 15% to $1.4 billion, compared to $1.2 billion last year, and diluted earnings per share increased 18% to $5.28 versus $4.48 last year. Fourth quarter, revenues increased 8% to $4.0 billion, compared to $3.7 billion for the same period last year. Fourth quarter net income declined 5% to $332.8 million, compared to $349.5 million in the prior year, and diluted earnings per share declined 2% to $1.27, versus $1.30 last year.

Changes in currency exchange rates reduced revenue growth by 1 percentage point for the full year, and 2 percentage points for the fourth quarter.

A previously disclosed one-time charge for the Converse arbitration ruling reduced fourth quarter diluted earnings per share by $0.12. Excluding the charge, fourth quarter net income increased 4 percent and diluted earnings per share increased 7 percent to $1.39. For the full year, excluding the charge, earnings per share were $5.39, up 20 percent compared to last year.

Mark Parker, Nike, Inc. President and Chief Executive Officer, said, “With deeper focus on discrete segments of our business, strong connections with consumers through global initiatives such as Joga Bonito, and compelling product innovations such as Air Max 360, we delivered very strong earnings growth and record revenues for the year. The Nike brand has never been stronger. We deepened our brand leadership in core categories such as basketball and soccer, and experienced strong growth in key markets such as the United States, Latin America, China and Russia. Our broader brand portfolio also performed well, with stellar performances for the year from Brand Jordan, Nike Golf and Converse.

“As we drive top-line results and extend our brand leadership,” Parker continued, “we also remain committed to creating value for shareholders. Our management focus on operating expense leverage is playing an increasingly important role in delivering our long-term financial goals and we continue to deliver strong cash returns to shareholders through increased share repurchases and a rising dividend payout ratio.”

Futures Orders

The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June 2006 through November 2006, totaling $6.6 billion, 5% higher than such orders reported for the same period last year. Changes in currency exchange rates had no significant impact on this growth.*

By region, futures orders for the U.S. increased 9 percent; Europe (which includes the Middle East and Africa) increased 1 percent; Asia Pacific grew 10 percent; and the Americas decreased 1 percent. Changes in currency exchange rates did not have a material effect on reported futures orders in Europe. In the Asia Pacific region changes in currency exchange rates increased reported futures orders by 1 percentage point; in the Americas region, changes in currency exchange rates decreased reported futures orders by 3 percentage points.*

Regional Highlights

U.S.

During the fourth quarter, U.S. revenues increased 10 percent to $1.5 billion versus $1.3 billion for the same period last year. Footwear revenues increased 10 percent to $993.7 million. Apparel revenues increased 18 percent to $395.7 million. Equipment revenues declined 12 percent to $74.3 million. U.S. pre-tax income improved 11 percent to $347.4 million.

For the full fiscal year, U.S. revenues were up 12 percent to $5.7 billion. Footwear revenues increased 14 percent to $3.8 billion, apparel revenues grew 9 percent to $1.6 billion and equipment revenues declined 5 percent to $298.7 million. U.S. pre-tax income rose 10 percent to $1.2 billion for the fiscal year.

Europe

Fourth quarter revenues for the European region grew 2 percent to $1.2 billion from $1.1 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by 8 percentage points. Footwear revenues were $672.2 million, down 3 percent from $689.6 million last year. Apparel revenues grew by 8 percent to $397.1 million and equipment revenues increased 13 percent to $82.3 million. Fourth quarter pre-tax income declined 10 percent to $227.6 million.

Full fiscal year European revenues grew 1 percent to $4.3 billion. Changes in currency exchange rates reduced revenue growth by 4 percentage points. Footwear revenues were down 2 percent to $2.5 billion, apparel revenues increased 4 percent to $1.6 billion and equipment revenues grew 10 percent to $313.3 million. European fiscal year pre-tax income increased 5 percent to $960.7 million.

Asia Pacific

Fourth quarter revenues for the Asia Pacific region grew 4 percent to $558.6 million compared to $535.0 million a year ago. Changes in currency exchange rates reduced revenue growth by 4 percentage points. Footwear revenues were up 3 percent to $277.2 million, apparel revenues increased 7 percent to $225.5 million and equipment revenues grew 2 percent to $55.9 million. Fourth quarter pre-tax income declined 30 percent to $86.3 million.

For the full fiscal year, Asia Pacific revenues increased 8 percent to $2.1 billion, compared to $1.9 billion last year. Changes in currency exchange rates reduced revenue growth by 1 percentage point. Footwear revenues were $1.0 billion, up 8 percent from $962.9 million last year. Apparel revenues increased 8 percent to $815.6 million and equipment revenues grew by 8 percent to $194.1 million. Pre-tax income increased 3 percent to $412.5 million for the fiscal year.

Americas

Fourth quarter revenues in the Americas region increased 17 percent to $236.0 million compared to $201.1 million last year. Changes in currency exchange rates contributed 8 percentage points to this growth rate. Footwear revenues were up 17 percent to $156.6 million, apparel revenues increased 15 percent to $61.3 million and equipment jumped 34 percent to $18.1 million. Pre-tax income was up 11 percent to $32.1 million for the quarter.

Full fiscal year revenues for the Americas region grew 30 percent to $904.9 million, 11 percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 33 percent to $635.3 million, apparel revenues grew 19 percent to $201.8 million, and equipment revenues rose 41 percent to $67.8 million. Pre-tax income increased 48 percent for the fiscal year to $172.6 million.

Other Businesses

For the fourth quarter, Other business revenues, which include Converse Inc., NIKE Golf, NIKE Bauer Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 13 percent to $595.5 million from $529.2 million last year. For the fiscal year Other business revenues increased 12 percent to $1.9 billion. Pre-tax income was down 33 percent to $45.0 million for the fourth quarter, which includes the previously disclosed one-time charge at Converse. For the fiscal year, Other business pre-tax income was relatively flat compared to the prior year at $151.6 million. Excluding the one-time charge of approximately $52 million at Converse, pre-tax income was up 44 percent for the quarter, and 34 percent for the year.

Income Statement Review

Fourth quarter gross margins were 43.8 percent compared to 45.2 percent last year. For the fiscal year, gross margins were 44.0 percent compared to 44.5 percent last year. Selling and administrative expenses were 30.8 percent of fourth quarter revenues, compared to 30.6 percent last year. For the fiscal year, selling and administrative expenses were 29.9 percent of fiscal year revenues versus 30.7 percent last year. The effective tax rate for the fourth quarter was 34.9 percent and 35.0 percent for the fiscal year.

Balance Sheet Review

At the end of the fiscal year, global inventories stood at $2.1 billion, an increase of 15 percent from May 31, 2005. Cash and short-term investments were $2.3 billion at the end of the fiscal year, compared to $1.8 billion last year.

                                  NIKE, Inc.
                      CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE PERIOD ENDED MAY 31, 2006
                     (In millions, except per share data)


                           QUARTER ENDING               YEAR ENDING
    INCOME STATEMENT   05/31/2006 05/31/2005 % Chg 05/31/2006 05/31/2005 % Chg
    Revenues            $4,005.4   $3,721.4     8%  $14,954.9  $13,739.7    9%
    Cost of sales        2,252.0    2,038.7    10%    8,367.9    7,624.3   10%
    Gross margin         1,753.4    1,682.7     4%    6,587.0    6,115.4    8%
                           43.8%      45.2%             44.0%      44.5%

    Selling and
     administrative
     expense             1,232.1    1,139.2     8%    4,477.8    4,221.7    6%
                           30.8%      30.6%             29.9%      30.7%

    Interest (income)
     expense, net          (16.3)      (3.6)    --      (36.8)       4.8    --
    Other expense, net      26.4        9.2     --        4.4       29.1    --

    Income before income
     taxes                 511.2      537.9    -5%    2,141.6    1,859.8   15%

    Income taxes           178.4      188.4    -5%      749.6      648.2   16%
                           34.9%      35.0%             35.0%      34.9%

    Net income            $332.8     $349.5    -5%   $1,392.0   $1,211.6   15%

    Diluted EPS            $1.27      $1.30    -2%      $5.28      $4.48   18%

    Basic EPS              $1.29      $1.34    -4%      $5.37      $4.61   16%

    Weighted Average
     Common Shares
     Outstanding:
    Diluted                261.4      268.5             263.8      270.3
    Basic                  257.2      261.1             259.0      262.6
    Dividends declared     $0.31      $0.25             $1.18      $0.95

NIKE, Inc.

    DIVISIONAL              QUARTER ENDING             YEAR ENDING
     REVENUES          05/31/2006 05/31/2005 % Chg 05/31/2006 05/31/2005 % Chg
    U.S. Region
      Footwear             $993.7    $907.2    10%  $3,832.2   $3,358.2    14%
      Apparel               395.7     335.9    18%   1,591.6    1,457.7     9%
      Equipment              74.3      84.3   -12%     298.7      313.4    -5%
        Total             1,463.7   1,327.4    10%   5,722.5    5,129.3    12%

    EMEA Region
      Footwear              672.2     689.6    -3%   2,454.3    2,500.0    -2%
      Apparel               397.1     366.1     8%   1,559.0    1,497.1     4%
      Equipment              82.3      73.0    13%     313.3      284.5    10%
        Total             1,151.6   1,128.7     2%   4,326.6    4,281.6     1%

    Asia Pacific Region
      Footwear              277.2     269.8     3%   1,044.1      962.9     8%
      Apparel               225.5     210.6     7%     815.6      755.5     8%
      Equipment              55.9      54.6     2%     194.1      178.9     8%
        Total               558.6     535.0     4%   2,053.8    1,897.3     8%

    Americas Region
      Footwear              156.6     134.4    17%     635.3      478.6    33%
      Apparel                61.3      53.2    15%     201.8      169.1    19%
      Equipment              18.1      13.5    34%      67.8       48.1    41%
        Total               236.0     201.1    17%     904.9      695.8    30%

                          3,409.9   3,192.2     7%  13,007.8   12,004.0     8%

    Other businesses        595.5     529.2    13%   1,947.1    1,735.7    12%

    Total NIKE, Inc.
     revenues            $4,005.4  $3,721.4     8% $14,954.9  $13,739.7     9%



    NIKE, Inc.
                           QUARTER ENDING       %        YEAR ENDING        %
    PRE-TAX INCOME(1),* 05/31/2006 05/31/2005  Chg  05/31/2006 05/31/2005  Chg

    U.S. Region           $347.4     $312.4    11%   $1,244.5   $1,127.9   10%
    EMEA Region            227.6      254.2   -10%      960.7      917.5    5%
    Asia Pacific Region     86.3      124.0   -30%      412.5      399.8    3%
    Americas Region         32.1       29.0    11%      172.6      116.5   48%
    Other businesses        45.0       67.4   -33%      151.6      151.4    --
    Corporate(2)          (227.2)    (249.1)    9%     (800.3)    (853.3)   6%

    Total pre-tax
     income(1)            $511.2     $537.9    -5%   $2,141.6   $1,859.8   15%