NIke, Inc. Annual Report

NIKE, INC. A M O N U M E N TA L Y E A R I N R E V I E W

OUR MISSION: TO BRING INSPIRATION AND INNOVATION TO EVERY ATHELETE IN THE WORLD.

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TABLE OF CONTENTS: MISSION STATEMENT 1 FOUNDED ON A HANDSHAKE 5-6 LETTER FROM THE PRESIDENT 7-8 LETTER TO OUR SHAREHOLDERS 11-12 FINANCIALS OF THE FISCAL YEAR 13-14 WHAT WE DO 15-16 NIKE, INC | 4

FOUNDED ON A HANDSHAKE Before there was the Swoosh, before there was Nike, there were two visionary men who pioneered a revolution in athletic footwear that redefined the industry.

Bill Bowerman was a nationally respected track and field coach at the University of Oregon, who was constantly seeking ways to give his athletes a competitive advantage.

He experimented with different track surfaces, re-hydration drinks and – most importantly – innovations in running shoes.

But the established footwear manufacturers of the 1950s ignored the ideas he tried to offer them, so Bowerman began cobbling shoes for his runners.

Phil Knight was a talented middle-distance runner from Portland, who enrolled at Oregon in the fall of 1955 and competed

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for Bowerman’s track program. Upon graduating from Oregon, Knight earned his MBA in finance from Stanford University, where he wrote a paper that proposed quality running shoes could be manufactured in Japan that would compete with more established German brands. But his letters to manufacturers in Japan and Asia went unanswered, so Knight took a chance.

He made a cold-call on the Onitsuka Co. in Kobe, Japan, and persuaded the manufacturer of Tiger shoes to make Knight a distributor of Tiger running shoes in the United States. When the first set of sample shoes arrived, Knight sent several pairs to Bowerman, hoping to make a sale. Instead, Bowerman stunned Knight by offering to become his partner, and to provide his footwear design ideas to Tiger.

A LETTER FROM THE PRESIDENT As President of the Nike Brand, Charlie Denson is responsible for leading the strategy of the world’s most distinctive, authentic and connected brand in sports, including oversight of the company’s major, global categories: Action Sports, Basketball, Football (Soccer), Men’s Training, Running, Sportswear, and Women’s Training, as well as the Jordan Brand and Nike Golf.

After more than three decades, Denson has developed a deep expertise of the athletic consumer products industry and been instrumental in growing Nike to become one of the world’s biggest brands.

Starting as an assistant manager at Nike’s first retail store in Portland, Oregon in 1979, he learned the business from the ground up and understands the importance of creating and maintaining a strong connection with consumers.

In his career, Denson ran the company’s U.S. and European operations and pioneered Nike’s expansion into China, India and Brazil.

He’s been a constant innovator in developing sales and distribution strategies and driving global growth as Nike expanded into more than 160 countries. Nike Brand revenues surpassed $21 billion in FY12, a growth of 16%.

CHARLIE DENSON President, NIKE Brand

THANK YOU FOR MAKING THIS COMPANY POSSIBLE.

DON BLAIR VICE PRESIDENT, CFO

JOHN SLUSHER VP GLOBAL SPORTS MARKETING

TREVOR EDWARDS VP, GLOBAL MANAGEMENT

DAVID AYRE VP, GLOBAL HR

GARY DESTEFANO PRESIDENT, GLOBAL OPS

ROGER WYETT PRESIDENT, NIKE AFFLIATES

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TO OUR SHAREHOLDERS: NIKE was awarded its first patent in 1974 for the Waffle outsole. It was the inspired invention of Bill Bowerman, legendary track coach and co-founder of NIKE. In fiscal year 2012, NIKE landed the top spot on The Patent Board’s Consumer Products scorecard. We earned it for our strong technical skills, the depth of our science and research, and the quantity of our innovation.

That’s a tribute to the drive, ingenuity and teamwork of NIKE people across the organization. I’m very proud of that. While earning top honors for the strength of our innovation is an outstanding achievement, we still have room to improve and elevate our performance.

That’s how it’s been for my 33 years with this company – a relentless drive to innovate, inspire and grow. That’s how it was in fiscal 2012 and how it will continue to be going forward.

WE ARE ON THE OFFENSE. ALWAYS. This is one of our guiding principles. It drives us to create and deliver amazing products to the marketplace – shoes, apparel, equipment, services, and experiences. That generates topline growth, and fiscal 2012 was a very strong year.

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Global revenue for NIKE, Inc. grew 16 percent to $24.1 billion, our fastest growth in 15 years.

Global revenue for the NIKE Brand was up 16 percent, with increases in every geography and category.

Our NIKE Brand Direct-to-Consumer (DTC) business – that’s the stores and websites we own and operate – increased 23 percent overall. Online sales alone grew 26 percent.

And Converse had another great year, increasing revenue by 17 percent – terrific momentum in that business.

There’s no doubt about the power of our brands and the strong consumer demand for our products.

That said, we didn’t deliver as much of that growth to the bottom line as we would have liked, due largely to significantly higher costs for the materials and labor that go into our products. We raised prices over the course of the year and did a good job leveraging SG&A expense, which grew below the rate of revenue. As a result, our diluted Earnings per Share for the year grew 8 percent to $4.73. Those are solid results given the variables in our economy. But we’re not satisfied with “solid.” We remain confident that our earnings will grow faster than our revenue over the long-term. *

FIVE YEAR NIKE,INC. STOCK PERFORMANCE vs. S&P 500* Fiscal Years 2008 - 2012

*Performance of the S&P 500 and NIKE stock is calculated by comparing the total returns of each assuming the reinvestment of dividends over the time period of 5/31/2007 to 5/31/2012.

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NIKE, INC REVENUE PERFORMANCE Fiscal Years 2008 - 2012 FIVE YEAR CAGR 8%

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NIKE, INC RETURN ON INVESTED CAPITAL Fiscal Years 2008 - 2012

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WHAT WE DO

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YEAR IN ADVERTISING

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T HANK YOU FOR A MONUME NTAL YE AR.