Table	of	Contents

# SECURITIES	AND	EXCHANGE	COMMISSION

(Mark	One)

# 	 ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

¨ 	 TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# NIKE,	Inc.

(Exact	name	of	Registrant	as	specified	in	its	charter)

Oregon

(State	or	other	jurisdiction of	incorporation)

One	Bowerman	Drive Beaverton,	Oregon	97005-6453

(Address	of	principal	executive	offices)	(Zip	Code)

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Class	B	Common	Stock

(Title	of	Each	Class)

(IRS	Employer Identification	No.)

(Registrant's	Telephone	Number,	Including	Area	Code)

New	York	Stock	Exchange

(Name	of	Each	Exchange	on	Which	Registered)

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.				Yes	þ								No	¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.				Yes	¨								No	þ

Indicate	by	check	mark	whether	the	Registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during the	preceding	12	months	(or	for	such	shorter	period	that	the	Registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past 90	days.				Yes	þ								No	¨

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Website,	if	any,	every	Interactive	Data	File	required	to	be submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	(§229.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was required	to	submit	and	post	such	files).				Yes	¨								No	¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§229.405	of	this	chapter)	is	not	contained	herein,	and	will	not	be contained,	to	the	best	of	Registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment to	this	Form	10-K.				þ

Indicate	by	check	mark	whether	the	Registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See

definitions	of	"large	accelerated	filer,"	"accelerated	filer"	"non-accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer				þ

Non-accelerated	filer				¨

Accelerated	filer				¨

Smaller	Reporting	Company				¨

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).				Yes	¨								No	þ

As	of	November	30,	2008,	the	aggregate	market	value	of	the	Registrant's	Class	A	Common	Stock	held	by	nonaffiliates	of	the	Registrant	was	$221,932,688	and the	aggregate	market	value	of	the	Registrant's	Class	B	Common	Stock	held	by	nonaffiliates	of	the	Registrant	was	$20,688,140,567.

As	of	July	24,	2009,	the	number	of	shares	of	the	Registrant's	Class	A	Common	Stock	outstanding	was	95,299,318	and	the	number	of	shares	of	the	Registrant's Class	B	Common	Stock	outstanding	was	390,631,331.

# DOCUMENTS	INCORPORATED	BY	REFERENCE:

Parts	of	Registrant's	Proxy	Statement	for	the	annual	meeting	of	shareholders	to	be	held	on	September	21,	2009	are	incorporated	by	reference	into	Part	III	of	this

Report.

# ANNUAL	REPORT	ON	FORM	10-K

# PART	III

# PART	I

# Item	1. 	 Business

# General

NIKE,	Inc.	was	incorporated	in	1968	under	the	laws	of	the	state	of	Oregon.	As	used	in	this	report,	the	terms	"we",	"us",	"NIKE"	and	the	"Company"	refer	to NIKE,	Inc.	and	its	predecessors,	subsidiaries	and	affiliates,	unless	the	context	indicates	otherwise.	Our	Internet	address	is	www.nike.com.	On	our	NIKE	Corporate	web site,	located	at	www.nikebiz.com,	we	post	the	following	filings	as	soon	as	reasonably	practicable	after	they	are	electronically	filed	with	or	furnished	to	the	Securities	and Exchange	Commission:	our	annual	report	on	Form	10-K,	our	quarterly	reports	on	Form	10-Q,	our	current	reports	on	Form	8-K	and	any	amendments	to	those	reports filed	or	furnished	pursuant	to	Section	13(a)	or	15(d)	of	the	Securities	and	Exchange	Act	of	1934,	as	amended.	All	such	filings	on	our	NIKE	Corporate	web	site	are available	free	of	charge.	Also	available	on	the	NIKE	Corporate	web	site	are	the	charters	of	the	committees	of	our	board	of	directors,	as	well	as	our	corporate	governance guidelines	and	code	of	ethics;	copies	of	any	of	these	documents	will	be	provided	in	print	to	any	shareholder	who	submits	a	request	in	writing	to	NIKE	Investor Relations,	One	Bowerman	Drive,	Beaverton,	Oregon	97005-6453.

Our	principal	business	activity	is	the	design,	development	and	worldwide	marketing	of	high	quality	footwear,	apparel,	equipment,	and	accessory	products.	NIKE is	the	largest	seller	of	athletic	footwear	and	athletic	apparel	in	the	world.	We	sell	our	products	to	retail	accounts,	through	NIKE-owned	retail	including	stores	and	internet sales,	and	through	a	mix	of	independent	distributors	and	licensees,	in	over	170	countries	around	the	world.	Virtually	all	of	our	products	are	manufactured	by	independent contractors.	Virtually	all	footwear	and	apparel	products	are	produced	outside	the	United	States,	while	equipment	products	are	produced	both	in	the	United	States	and abroad.

# Products

NIKE's	athletic	footwear	products	are	designed	primarily	for	specific	athletic	use,	although	a	large	percentage	of	the	products	are	worn	for	casual	or	leisure purposes.	We	place	considerable	emphasis	on	high	quality	construction	and	innovation	in	products	designed	for	men,	women	and	children.	Running,	training,	basketball, soccer,	sport-inspired	casual	shoes,	and	kids'	shoes	are	currently	our	top-selling	footwear	categories	and	we	expect	them	to	continue	to	lead	in	product	sales	in	the	near future.	We	also	market	footwear	designed	for	aquatic	activities,	baseball,	cheerleading,	football,	golf,	lacrosse,	outdoor	activities,	skateboarding,	tennis,	volleyball, walking,	wrestling,	and	other	athletic	and	recreational	uses.

We	sell	sports	apparel	and	accessories	covering	most	of	the	above	categories,	sports-inspired	lifestyle	apparel,	as	well	as	athletic	bags	and	accessory	items.	NIKE apparel	and	accessories	are	designed	to	complement	our	athletic	footwear	products,	feature	the	same	trademarks	and	are	sold	through	the	same	marketing	and distribution	channels.	We	often	market	footwear,	apparel	and	accessories	in	"collections"	of	similar	design	or	for	specific	purposes.	We	also	market	apparel	with	licensed college	and	professional	team	and	league	logos.

We	sell	a	line	of	performance	equipment	under	the	NIKE	brand	name,	including	bags,	socks,	sport	balls,	eyewear,	timepieces,	electronic	devices,	bats,	gloves, protective	equipment,	golf	clubs,	and	other	equipment	designed	for	sports	activities.	We	also	sell	small	amounts	of	various	plastic	products	to	other	manufacturers through	our	wholly-owned	subsidiary,	NIKE	IHM,	Inc.

In	addition	to	the	products	we	sell	directly	to	customers,	we	have	entered	into	license	agreements	that	permit	unaffiliated	parties	to	manufacture	and	sell	various apparel,	equipment	and	accessory	items,	such	as	swimwear,	children's	apparel,	training	equipment,	eyewear,	electronic	devices	and	golf	accessories.

Our	wholly-owned	subsidiary,	Cole	Haan	("Cole	Haan"),	headquartered	in	Yarmouth,	Maine,	designs	and	distributes	dress	and	casual	footwear,	apparel	and accessories	for	men	and	women	under	the	brand	names	Cole	Haan ®	and	Bragano ®.

Our	wholly-owned	subsidiary,	Converse	Inc.	("Converse"),	headquartered	in	North	Andover,	Massachusetts,	designs,	distributes,	and	licenses	athletic	and	casual footwear,	apparel	and	accessories	under	the	Converse ®,	Chuck	Taylor ®,	All	Star ®,	One	Star ®	,	and	Jack	Purcell ®	trademarks.

Our	wholly-owned	subsidiary,	Hurley	International	LLC	("Hurley"),	headquartered	in	Costa	Mesa,	California,	designs	and	distributes	a	line	of	action	sports apparel	for	surfing,	skateboarding,	and	snowboarding,	youth	lifestyle	apparel,	and	accessories	under	the	Hurley ®	trademark.

Our	wholly-owned	subsidiary,	Umbro	Ltd.	("Umbro"),	headquartered	in	Manchester,	England,	designs,	distributes	and	licenses	athletic	and	casual	footwear, apparel	and	equipment,	primarily	for	the	sport	of	soccer,	under	the	Umbro ®	trademarks.

# Sales	and	Marketing

Financial	information	about	geographic	and	segment	operations	appears	in	Note	19	of	the	accompanying	consolidated	financial	statements	on	page	85.

We	experience	moderate	fluctuations	in	aggregate	sales	volume	during	the	year.	Historically,	revenues	in	the	first	and	fourth	fiscal	quarters	have	slightly	exceeded those	in	the	second	and	third	quarters.	However,	the	mix	of	product	sales	may	vary	considerably	as	a	result	of	changes	in	seasonal	and	geographic	demand	for	particular types	of	footwear,	apparel	and	equipment.

Because	NIKE	is	a	consumer	products	company,	the	relative	popularity	of	various	sports	and	fitness	activities	and	changing	design	trends	affect	the	demand	for our	products.	We	must	therefore	respond	to	trends	and	shifts	in	consumer	preferences	by	adjusting	the	mix	of	existing	product	offerings,	developing	new	products,	styles and	categories,	and	influencing	sports	and	fitness	preferences	through	aggressive	marketing.	Failure	to	respond	in	a	timely	and	adequate	manner	could	have	a	material adverse	effect	on	our	sales	and	profitability.	This	is	a	continuing	risk.

We	report	our	NIKE	brand	operations	based	on	our	internal	geographic	organization.	Each	NIKE	brand	geography	operates	predominantly	in	one	industry:	the design,	production,	marketing	and	selling	of	sports	and	fitness	footwear,	apparel,	and	equipment.	The	geographic	organization	consists	of	the	following	four regions:	U.S.,	Europe,	Middle	East	and	Africa	(collectively,	"EMEA"),	Asia	Pacific,	and	Americas.	As	previously	announced,	in	the	fourth	quarter	of	fiscal	2009,	we initiated	a	reorganization	of	the	NIKE	brand	into	a	new	model	consisting	of	six	geographies.	As	a	result	of	the	reorganization,	beginning	in	the	first	quarter	of	fiscal 2010,	our	new	organizational	structure	will	consist	of	the	following	geographies:	North	America,	Western	Europe,	Central/Eastern	Europe,	Greater	China,	Japan,	and Emerging	Markets.

# United	States	Market

In	fiscal	2009,	sales	in	the	United	States	including	U.S.	sales	of	our	Other	businesses	accounted	for	approximately	42%	of	total	revenues,	compared	to	43%	in fiscal	2008	and	47%	in	fiscal	2007.	For	fiscal	2009,	our	Other	businesses	were	primarily	comprised	of	Cole	Haan,	Converse,	Hurley,	NIKE	Golf	and	Umbro	(which	was acquired	on	March	3,	2008).	For	fiscal	2008	and	2007,	our	Other	businesses	were	primarily	comprised	of	Cole	Haan,	Converse,	Exeter	(whose	primary	business	was	the Starter	brand	business	which	was	sold	on	December	17,	2007),	Hurley,	NIKE	Bauer	Hockey	(which	was	sold	on	April	17,	2008),	NIKE	Golf	and	Umbro.	We	estimate that	we	sell	to	more	than	23,000	retail	accounts	in	the	United	States.	The	NIKE	brand	domestic	retail	account	base	includes	a	mix	of	footwear	stores,	sporting	goods stores,	athletic	specialty	stores,	department	stores,	skate,	tennis	and	golf	shops,	and	other	retail	accounts.	During	fiscal	2009,	our	three	largest	customers	accounted	for approximately	25%	of	sales	in	the	United	States.

We	make	substantial	use	of	our	"futures"	ordering	program,	which	allows	retailers	to	order	five	to	six	months	in	advance	of	delivery	with	the	commitment	that their	orders	will	be	delivered	within	a	set	time

period	at	a	fixed	price.	In	fiscal	2009,	89%	of	our	U.S.	wholesale	footwear	shipments	(excluding	our	Other	businesses)	were	made	under	the	futures	program,	compared to	90%	in	fiscal	2008	and	fiscal	2007.	In	fiscal	2009,	60%	of	our	U.S.	wholesale	apparel	shipments	(excluding	our	Other	businesses)	were	made	under	the	futures program,	compared	to	62%	in	fiscal	2008	and	65%	in	fiscal	2007.

We	utilize	20	NIKE	sales	offices	to	solicit	sales	in	the	United	States.	We	also	utilize	5	independent	sales	representatives	to	sell	specialty	products	for	golf,	and	3 for	skateboarding	and	outdoor	products.	In	addition,	we	sell	NIKE	brand	products	through	our	internet	website,	www.nikestore.com,	and	we	operate	the	following	retail outlets	in	the	United	States:

| U.S.	Retail	Stores | Number |
| :--- | :--- |
| NIKE\tfactory\tstores\t(which\tcarry\tprimarily\toverstock\tand\tclose-out\tmerchandise) | 140 |
| NIKE\tstores\t(including\tone\tNIKE\tWomen\tstore) | 16 |
| NIKETOWNs\t(designed\tto\tshowcase\tNIKE\tproducts) | 11 |
| NIKE\temployee-only\tstores | 3 |
| Cole\tHaan\tstores\t(including\tfactory\tstores) | 111 |
| Converse\tfactory\tstores | 43 |
| Hurley\tstores\t(including\tfactory\tand\temployee\tstores) | 14 |
| Total | 338 |

NIKE's	three	United	States	distribution	centers	for	footwear	are	located	in	Memphis,	Tennessee.	Apparel	and	equipment	products	are	shipped	from	our	Memphis, Tennessee,	and	Foothill	Ranch,	California	distribution	centers.	Cole	Haan	products	are	distributed	primarily	from	Greenland,	New	Hampshire,	Converse	products	are shipped	primarily	from	Ontario,	California,	and	Hurley	products	are	distributed	from	Irvine,	California.

# International	Markets

In	fiscal	2009,	non-U.S.	sales	(including	non-U.S.	sales	of	our	Other	businesses)	accounted	for	58%	of	total	revenues,	compared	to	57%	in	fiscal	2008	and	53%	in fiscal	2007.	We	sell	our	products	to	retail	accounts,	through	NIKE-owned	retail	stores,	and	through	a	mix	of	independent	distributors	and	licensees	around	the	world. We	estimate	that	we	sell	to	more	than	28,000	retail	accounts	outside	the	United	States,	excluding	sales	by	independent	distributors	and	licensees.	We	operate	14 distribution	centers	outside	of	the	United	States.	In	many	countries	and	regions,	including	Canada,	Asia,	some	Latin	American	countries,	and	Europe,	we	have	a	futures ordering	program	for	retailers	similar	to	the	United	States	futures	program	described	above.	NIKE's	three	largest	customers	outside	of	the	U.S.	accounted	for approximately	11%	of	total	non-U.S.	sales.

We	operate	the	following	retail	outlets	outside	the	United	States:

| Non-U.S.	Retail	Stores | Number |
| :--- | :--- |
| NIKE\tfactory\tstores | 184 |
| NIKE\tstores | 61 |
| NIKETOWNs | 4 |
| NIKE\temployee-only\tstores | 12 |
| Cole\tHaan\tstores | 74 |
| Hurley\tstores | 1 |
| Total | 336 |

International	branch	offices	and	subsidiaries	of	NIKE	are	located	in	Argentina,	Australia,	Austria,	Belgium,	Bermuda,	Brazil,	Canada,	Chile,	Croatia,	Cyprus,	the Czech	Republic,	Denmark,	Finland,	France,	Germany,	Greece,	Hong	Kong,	Hungary,	Indonesia,	India,	Ireland,	Israel,	Italy,	Japan,	Korea,	Lebanon,	Macau,	Malaysia,

Mexico,	New	Zealand,	the	Netherlands,	Norway,	the	People's	Republic	of	China,	the	Philippines,	Poland,	Portugal,	Russia,	Singapore,	Slovakia,	Slovenia,	South	Africa, Spain,	Sri	Lanka,	Sweden,	Switzerland,	Taiwan,	Thailand,	Turkey,	the	United	Arab	Emirates,	the	United	Kingdom,	Uruguay	and	Vietnam.

# Significant	Customer

No	customer	accounted	for	10%	or	more	of	our	net	sales	during	fiscal	2009.

# Orders

Worldwide	futures	and	advance	orders	for	NIKE	brand	athletic	footwear	and	apparel,	scheduled	for	delivery	from	June	through	November	2009,	were	$7.8	billion compared	to	$8.8	billion	for	the	same	period	last	year.	This	futures	and	advance	order	amount	is	calculated	based	upon	our	forecast	of	the	actual	exchange	rates	under which	our	revenues	will	be	translated	during	this	period,	which	approximate	current	spot	rates.	Reported	futures	and	advance	orders	are	not	necessarily	indicative	of	our expectation	of	revenues	for	this	period.	This	is	because	the	mix	of	orders	can	shift	between	advance/futures	and	at-once	orders	and	the	fulfillment	of	certain	of	these advance/futures	orders	may	fall	outside	of	the	scheduled	time	period	noted	above.	In	addition,	foreign	currency	exchange	rate	fluctuations	as	well	as	differing	levels	of order	cancellations	and	discounts	can	cause	differences	in	the	comparisons	between	futures	and	advance	orders	and	actual	revenues.	Moreover,	a	significant	portion	of our	revenue	is	not	derived	from	futures	and	advance	orders,	including	at-once	and	close-out	sales	of	NIKE	footwear	and	apparel,	wholesale	sales	of	equipment,	Cole Haan,	Converse,	Hurley,	Umbro,	NIKE	Golf,	and	retail	sales	across	all	brands.

# Product	Research	and	Development

We	believe	our	research	and	development	efforts	are	a	key	factor	in	our	past	and	future	success.	Technical	innovation	in	the	design	of	footwear,	apparel,	and athletic	equipment	receive	continued	emphasis	as	NIKE	strives	to	produce	products	that	help	to	reduce	injury,	enhance	athletic	performance	and	maximize	comfort.

In	addition	to	NIKE's	own	staff	of	specialists	in	the	areas	of	biomechanics,	chemistry,	exercise	physiology,	engineering,	industrial	design	and	related	fields,	we also	utilize	research	committees	and	advisory	boards	made	up	of	athletes,	coaches,	trainers,	equipment	managers,	orthopedists,	podiatrists	and	other	experts	who	consult with	us	and	review	designs,	materials	and	concepts	for	product	improvement.	Employee	athletes,	athletes	engaged	under	sports	marketing	contracts	and	other	athletes wear-test	and	evaluate	products	during	the	design	and	development	process.

# Manufacturing

Virtually	all	of	our	footwear	is	produced	outside	of	the	United	States.	In	fiscal	2009,	contract	suppliers	in	China,	Vietnam,	Indonesia	and	Thailand	manufactured 36%,	36%,	22%	and	6%	of	total	NIKE	brand	footwear,	respectively.	We	also	have	manufacturing	agreements	with	independent	factories	in	Argentina,	Brazil,	India,	and Mexico	to	manufacture	footwear	for	sale	primarily	within	those	countries.	Our	largest	single	footwear	factory	accounted	for	approximately	5%	of	total	fiscal	2009 footwear	production.

Almost	all	of	NIKE	brand	apparel	is	manufactured	outside	of	the	United	States	by	independent	contract	manufacturers	located	in	34	countries.	Most	of	this apparel	production	occurred	in	China,	Thailand,	Indonesia,	Malaysia,	Vietnam,	Turkey,	Sri	Lanka,	Cambodia,	Taiwan,	El	Salvador,	Mexico,	India	and	Israel.	Our largest	single	apparel	factory	accounted	for	approximately	5%	of	total	fiscal	2009	apparel	production.

The	principal	materials	used	in	our	footwear	products	are	natural	and	synthetic	rubber,	plastic	compounds,	foam	cushioning	materials,	nylon,	leather,	canvas	and polyurethane	films	used	to	make	Air-Sole	cushioning	components.	During	fiscal	2009,	NIKE	IHM,	Inc.	and	NIKE	(Suzhou)	Sports	Company,	Ltd.,	both

wholly-owned	subsidiaries	of	NIKE,	and	independent	contractors	in	China	and	Taiwan,	were	our	largest	suppliers	of	the	Air-Sole	cushioning	components	used	in footwear.	The	principal	materials	used	in	our	apparel	products	are	natural	and	synthetic	fabrics	and	threads,	plastic	and	metal	hardware,	and	specialized	performance fabrics	designed	to	repel	rain,	retain	heat,	or	efficiently	transport	body	moisture.	NIKE's	contractors	and	suppliers	buy	raw	materials	in	bulk.	Most	raw	materials	are available	in	the	countries	where	manufacturing	takes	place.	We	have	thus	far	experienced	little	difficulty	in	satisfying	our	raw	material	requirements.

Since	1972,	Sojitz	Corporation	of	America	("Sojitz	America"),	a	large	Japanese	trading	company,	has	performed	significant	import-export	financing	services	for us.	During	fiscal	2009,	Sojitz	America	provided	financing	and	purchasing	services	for	NIKE	brand	products	sold	in	Argentina,	Uruguay,	Canada,	Chile,	Brazil,	India, Indonesia,	the	Philippines,	Malaysia,	South	Africa,	China,	Korea,	and	Thailand,	excluding	products	produced	and	sold	in	the	same	country.	Approximately	16%	of NIKE	brand	sales	occurred	in	those	countries.	Any	failure	of	Sojitz	America	to	provide	these	services	or	any	failure	of	Sojitz	America's	banks	could	disrupt	our	ability to	acquire	products	from	our	suppliers	and	to	deliver	products	to	our	customers	outside	of	the	United	States,	EMEA	and	Japan.	Such	a	disruption	could	result	in cancelled	orders	that	would	adversely	affect	sales	and	profitability.	However,	we	believe	that	any	such	disruption	would	be	short-term	in	duration	due	to	the	ready availability	of	alternative	sources	of	financing	at	competitive	rates.	Our	current	agreements	with	Sojitz	America	expire	in	2011.

# International	Operations	and	Trade

Our	international	operations	and	sources	of	supply	are	subject	to	the	usual	risks	of	doing	business	abroad,	such	as	possible	revaluation	of	currencies,	export	and import	duties,	anti-dumping	measures,	quotas,	safeguard	measures,	trade	restrictions,	restrictions	on	the	transfer	of	funds	and,	in	certain	parts	of	the	world,	political instability	and	terrorism.	We	have	not,	to	date,	been	materially	affected	by	any	such	risk,	but	cannot	predict	the	likelihood	of	such	developments	occurring.

The	global	economic	crisis	has	resulted	in	a	significant	slow	down	in	international	trade	and	a	sharp	rise	in	protectionist	actions	around	the	world.	These	trends	are affecting	many	global	manufacturing	and	service	sectors,	and	the	footwear	and	apparel	industries,	as	a	whole,	are	not	immune.	Companies	in	our	industry	are	facing trade	protectionist	challenges	in	many	different	regions,	and	in	nearly	all	cases	we	are	working	together	to	address	trade	issues	to	reduce	the	impact	to	the	industry,	while observing	applicable	competition	laws.	Notwithstanding	our	efforts,	such	actions,	if	implemented,	could	result	in	increases	in	the	cost	of	our	products,	which	could adversely	affect	our	sales	or	profitability	and	the	imported	footwear	and	apparel	industry	as	a	whole.	Accordingly,	we	are	actively	monitoring	the	developments described	below.

# Footwear	Imports	into	the	European	Union

In	2005,	at	the	request	of	the	European	domestic	footwear	industry,	the	European	Commission	("EC")	initiated	investigations	into	leather	footwear	imported	from China	and	Vietnam.	Together	with	other	companies	in	our	industry,	we	took	the	position	that	Special	Technology	Athletic	Footwear	(STAF)	(i)	should	not	be	within	the scope	of	the	investigation,	and	(ii)	does	not	meet	the	legal	requirements	of	injury	and	price	in	an	anti-dumping	investigation.	Our	arguments	were	successful	and	the	EU agreed	in	October	2006	on	definitive	duties	of	16.5%	for	China	and	10%	for	Vietnam	for	non-STAF	leather	footwear,	but	excluded	STAF	from	the	final	measures.	Prior to	the	scheduled	expiration	in	October	2008	of	the	measures	imposed	on	the	non-STAF	footwear,	the	domestic	industry	requested	and	the	EC	agreed	to	review	a	petition to	extend	these	restrictions	on	non-STAF	leather	footwear.	We	are	working	in	broad	coalition	with	other	companies	in	our	industry	to	challenge	this	request	for extension,	and	we	expect	a	decision	by	the	end	of	calendar	year	2009	or	early	2010.

# Footwear	Imports	into	Brazil	and	Argentina

At	the	request	of	certain	domestic	footwear	industries,	both	Brazil	and	Argentina	have	initiated	independent	anti-dumping	investigations	against	footwear	made	in China.	We	are	working	in	broad	coalition	with	other	companies	in	our	industry	to	challenge	these	cases	on	the	basis	that	the	athletic	footwear	being	imported	from

China	(i)	should	not	be	within	the	scope	of	the	investigation,	and	(ii)	does	not	meet	the	legal	requirements	of	injury	and	price	in	an	anti-dumping	investigation.	We anticipate	final	decisions	in	both	cases	will	be	made	in	late	2009.

# Footwear	Imports	into	Turkey

In	2006,	Turkey	introduced	a	safeguard	measure	on	all	imported	footwear	into	Turkey	with	the	goal	of	protecting	its	local	shoe	manufacturing	industry	until August	2009.	In	June	2009,	Turkish	shoe-manufacturers	submitted,	and	the	Turkish	Government	agreed	to	review,	a	request	for	extension	of	the	safeguard	measures claiming	that	the	rehabilitation	process	of	the	local	Turkish	industry	was	interrupted	due	to	the	continuing	increase	of	footwear	imports.	We	are	working	in	broad coalition	with	other	companies	in	our	industry	to	oppose	the	continuation	of	these	safeguard	measures.	We	anticipate	a	final	decision	in	this	review	will	be	made	in	early fall	2009.

# Trade	Relations	with	China

China	represents	an	important	sourcing	and	marketing	country	for	us.	Many	governments	around	the	world	are	concerned	about	China's	growing	and	fast-paced economy,	compliance	with	World	Trade	Organization	rules,	currency	valuation,	and	high	trade	surpluses.	As	a	result,	a	wide	range	of	legislative	proposals	have	been introduced	to	address	these	concerns.	While	some	of	these	concerns	may	be	justified,	we	are	working	with	broad	coalitions	of	global	businesses	and	trade	associations representing	a	wide	variety	of	sectors	(e.g.,	services,	manufacturing,	and	agriculture)	to	help	ensure	any	legislation	enacted	and	implemented	(i)	addresses	legitimate	and core	concerns,	(ii)	is	consistent	with	international	trade	rules,	and	(iii)	reflects	and	considers	China's	domestic	economy	and	the	important	role	it	has	in	the	global economic	community.	We	believe	other	companies	in	our	industry	as	well	as	most	other	multi-national	companies	are	in	a	similar	position	regarding	these	trade measures.

In	the	event	any	of	these	trade	protection	measures	were	implemented,	we	believe	that	we	have	the	ability	to	develop,	over	a	period	of	time,	adequate	alternative sources	of	supply	for	the	products	obtained	from	our	present	suppliers.	If	events	prevented	us	from	acquiring	products	from	our	suppliers	in	a	particular	country,	our operations	could	be	temporarily	disrupted	and	we	could	experience	an	adverse	financial	impact.	However,	we	believe	that	we	could	abate	any	such	disruption,	and	that much	of	the	adverse	impact	on	supply	would,	therefore,	be	of	a	short-term	nature.	We	believe	our	principal	competitors	are	subject	to	similar	risks.

# Competition

The	athletic	footwear,	apparel	and	equipment	industry	is	keenly	competitive	in	the	United	States	and	on	a	worldwide	basis.	We	compete	internationally	with	a significant	number	of	athletic	and	leisure	shoe	companies,	athletic	and	leisure	apparel	companies,	sports	equipment	companies,	and	large	companies	having	diversified lines	of	athletic	and	leisure	shoes,	apparel	and	equipment,	including	Adidas,	Puma,	and	others.	The	intense	competition	and	the	rapid	changes	in	technology	and consumer	preferences	in	the	markets	for	athletic	and	leisure	footwear	and	apparel,	and	athletic	equipment,	constitute	significant	risk	factors	in	our	operations.

NIKE	is	the	largest	seller	of	athletic	footwear	and	athletic	apparel	in	the	world.	Performance	and	reliability	of	shoes,	apparel,	and	equipment,	new	product development,	price,	product	identity	through	marketing	and	promotion,	and	customer	support	and	service	are	important	aspects	of	competition	in	the	athletic	footwear, apparel	and	equipment	industry.	To	help	market	our	products,	we	contract	with	prominent	and	influential	athletes,	coaches,	teams,	colleges	and	sports	leagues	to	endorse our	brands	and	use	our	products,	and	we	actively	sponsor	sporting	events	and	clinics.	We	believe	that	we	are	competitive	in	all	of	these	areas.

# Trademarks	and	Patents

We	utilize	trademarks	on	nearly	all	of	our	products	and	believe	that	having	distinctive	marks	that	are	readily	identifiable	is	an	important	factor	in	creating	a market	for	our	goods,	in	identifying	the	Company,	and	in	distinguishing	our	goods	from	the	goods	of	others.	We	consider	our	NIKE ®	and	Swoosh	Design ®	trademarks	to be	among	our	most	valuable	assets	and	we	have	registered	these	trademarks	in	over	150	countries.	In	addition,	we	own	many	other	trademarks	that	we	utilize	in marketing	our	products.	We	continue	to	vigorously	protect	our	trademarks	against	infringement.

NIKE	has	an	exclusive,	worldwide	license	to	make	and	sell	footwear	using	patented	"Air"	technology.	The	process	utilizes	pressurized	gas	encapsulated	in polyurethane.	Some	of	the	early	NIKE	AIR^®

patents	will	not	expire	for	several	years.	We	also	have	hundreds	of	U.S.	and	foreign	utility	patents,	and	thousands	of	U.S.	and	foreign	design	patents	covering components	and	features	used	in	various	athletic	and	leisure	shoes,	apparel,	and	equipment.	These	patents	expire	at	various	times,	and	patents	issued	for	applications filed	this	year	will	have	a	remaining	duration	of	from	now	to	2023	for	design	patents,	and	from	now	to	2029	for	utility	patents.	We	believe	that	our	success	depends primarily	upon	skills	in	design,	research	and	development,	production	and	marketing	rather	than	upon	our	patent	position.	However,	we	have	followed	a	policy	of	filing applications	for	United	States	and	foreign	patents	on	inventions,	designs	and	improvements	that	we	deem	valuable.

# Employees

We	had	approximately	34,300	employees	at	May	31,	2009.	Management	considers	its	relationship	with	employees	to	be	excellent.	None	of	our	employees	is represented	by	a	union,	except	for	certain	employees	in	the	Americas	Region,	where	local	law	requires	those	employees	to	be	represented	by	a	trade	union.	Also,	in some	countries	outside	of	the	United	States,	local	laws	require	representation	for	employees	by	works	councils	(such	as	in	the	European	Union,	in	which	they	are entitled	to	information	and	consultation	on	certain	Company	decisions)	or	other	representation	by	an	organization	similar	to	a	union,	although	collective	bargaining agreements	are	not	involved.	There	has	never	been	a	material	interruption	of	operations	due	to	labor	disagreements.

# Executive	Officers	of	the	Registrant

The	executive	officers	of	NIKE	as	of	July	24,	2009	are	as	follows:

Philip	H.	Knight,	Chairman	of	the	Board	—	Mr.	Knight,	71,	a	director	since	1968,	is	a	co-founder	of	NIKE	and,	except	for	the	period	from	June	1983	through September	1984,	served	as	its	President	from	1968	to	1990,	and	from	June	2000	to	December	2004.	Prior	to	1968,	Mr.	Knight	was	a	certified	public	accountant	with Price	Waterhouse	and	Coopers	&	Lybrand	and	was	an	Assistant	Professor	of	Business	Administration	at	Portland	State	University.

Mark	G.	Parker,	Chief	Executive	Officer	and	President	—	Mr.	Parker,	53,	was	appointed	CEO	and	President	in	January	2006.	He	has	been	employed	by	NIKE since	1979	with	primary	responsibilities	in	product	research,	design	and	development,	marketing,	and	brand	management.	Mr.	Parker	was	appointed	divisional Vice	President	in	charge	of	development	in	1987,	corporate	Vice	President	in	1989,	General	Manager	in	1993,	Vice	President	of	Global	Footwear	in	1998,	and	President of	the	NIKE	Brand	in	2001.

David	J.	Ayre,	Vice	President,	Global	Human	Resources	—	Mr.	Ayre,	49,	joined	NIKE	as	Vice	President,	Global	Human	Resources	in	July	2007.	Prior	to	joining NIKE,	he	held	a	number	of	senior	human	resource	positions	with	PepsiCo,	Inc.	since	1990,	most	recently	as	head	of	Talent	and	Performance	Rewards.

Donald	W.	Blair,	Vice	President	and	Chief	Financial	Officer	—	Mr.	Blair,	51,	joined	NIKE	in	November	1999.	Prior	to	joining	NIKE,	he	held	a	number	of financial	management	positions	with	PepsiCo,	Inc.,	including	Vice	President,	Finance	of	Pepsi-Cola	Asia,	Vice	President,	Planning	of	PepsiCo's	Pizza	Hut	Division,	and

Senior	Vice	President,	Finance	of	The	Pepsi	Bottling	Group,	Inc.	Prior	to	joining	PepsiCo,	Mr.	Blair	was	a	certified	public	accountant	with	Deloitte,	Haskins,	and	Sells.

Charles	D.	Denson,	President	of	the	NIKE	Brand	—	Mr.	Denson,	53,	has	been	employed	by	NIKE	since	1979.	Mr.	Denson	held	several	management	positions within	the	Company,	including	his	appointments	as	Director	of	USA	Apparel	Sales	in	1994,	divisional	Vice	President,	U.S.	Sales	in	1994,	divisional	Vice	President European	Sales	in	1997,	divisional	Vice	President	and	General	Manager,	NIKE	Europe	in	1998,	Vice	President	and	General	Manager	of	NIKE	USA	in	2000,	and President	of	the	NIKE	Brand	in	2001.

Gary	M.	DeStefano,	President,	Global	Operations	—	Mr.	DeStefano,	52,	has	been	employed	by	NIKE	since	1982,	with	primary	responsibilities	in	sales	and regional	administration.	Mr.	DeStefano	was	appointed	Director	of	Domestic	Sales	in	1990,	divisional	Vice	President	in	charge	of	domestic	sales	in	1992,	Vice	President of	Global	Sales	in	1996,	Vice	President	and	General	Manager	of	Asia	Pacific	in	1997,	President	of	USA	Operations	in	2001,	President	of	Global	Operations	in	2006.

Trevor	Edwards,	Vice	President,	Global	Brand	and	Category	Management	—	Mr.	Edwards,	46,	joined	NIKE	in	1992.	He	was	appointed	Marketing	Manager, Strategic	Accounts,	Foot	Locker	in	1993,	Director	of	Marketing,	the	Americas	in	1995,	Director	of	Marketing,	Europe	in	1997,	Vice	President,	Marketing	for	Europe, Middle	East	and	Africa	in	1999,	and	Vice	President,	U.S.	Brand	Marketing	in	2000.	Mr.	Edwards	was	appointed	corporate	Vice	President,	Global	Brand	Management	in 2002	and	Vice	President,	Global	Brand	and	Category	Management	in	2006.	Prior	to	NIKE,	Mr.	Edwards	was	with	the	Colgate-Palmolive	Company.

Jeanne	P.	Jackson,	President,	Direct	to	Consumer	—	Ms.	Jackson,	57,	served	as	a	member	of	the	NIKE,	Inc.	Board	of	Directors	from	2001	through	March	2009, when	she	resigned	from	our	Board	and	was	appointed	President,	Direct	to	Consumer.	She	is	founder	and	CEO	of	MSP	Capital,	a	private	investment	company. Ms.	Jackson	was	CEO	of	Walmart.com	from	March	2000	to	January	2002.	She	was	with	Gap,	Inc.,	as	President	and	CEO	of	Banana	Republic	from	1995-2000,	also serving	as	CEO	of	Gap,	Inc.	Direct	from	1998-2000.	Since	1978,	she	has	held	various	retail	management	positions	with	Victoria's	Secret,	The	Walt	Disney	Company, Saks	Fifth	Avenue,	and	Federated	Department	Stores.	Ms.	Jackson	is	the	President	of	the	United	States	Ski	and	Snowboard	Foundation	Board	of	Trustees,	and	serves	on the	Board	of	Advisors	of	the	University	of	California,	Irvine.	She	is	also	a	director	of	McDonald's	Corporation,	Nordstrom,	Inc.,	and	Harrah's	Entertainment,	Inc.

P.	Eunan	McLaughlin,	President,	Affiliates	—	Mr.	McLaughlin,	51,	joined	NIKE	as	Director	of	Sales,	NIKE	Europe	in	1999,	and	was	appointed	Vice	President Commercial	Sales	and	Retail	in	2000,	Vice	President,	Asia	Pacific	in	2001,	Vice	President,	Europe,	Middle	East	&	Africa	in	May	2004,	and	President	of	Affiliates	in April	2009.	Prior	to	joining	NIKE,	he	was	Partner	and	Vice	President	of	Consumer	&	Retail	Practices	Division,	Korn/Ferry	International	from	1996	to	1999.	From	1983 to	1996,	Mr.	McLaughlin	held	various	positions	with	Mars,	Inc.	in	finance,	sales,	marketing	and	general	management.

Bernard	F.	Pliska,	Vice	President,	Corporate	Controller	—	Mr.	Pliska,	47,	joined	NIKE	as	Corporate	Controller	in	1995.	He	was	appointed	Vice	President, Corporate	Controller	in	2003.	Prior	to	NIKE,	Mr.	Pliska	was	with	Price	Waterhouse	from	1984	to	1995.	Mr.	Pliska	is	a	certified	public	accountant.

John	F.	Slusher,	Vice	President,	Global	Sports	Marketing	—	Mr.	Slusher,	40,	has	been	employed	by	NIKE	since	1998	with	primary	responsibilities	in	global sports	marketing.	Mr.	Slusher	was	appointed	Director	of	Sports	Marketing	for	the	Asia	Pacific	and	Americas	Regions	in	2006,	divisional	Vice	President,	Asia	Pacific	& Americas	Sports	Marketing	in	September	2007	and	Vice	President,	Global	Sports	Marketing	in	November	2007.	Prior	to	joining	NIKE,	Mr.	Slusher	was	an	attorney	at the	law	firm	of	O'Melveny	&	Myers	from	1995	to	1998.

Eric	D.	Sprunk,	Vice	President,	Merchandising	and	Product	—	Mr.	Sprunk,	45,	joined	NIKE	in	1993.	He	was	appointed	Finance	Director	and	General	Manager	of the	Americas	in	1994,	Finance	Director,	NIKE	Europe	in	1995,	Regional	General	Manager,	NIKE	Europe	Footwear	in	1998,	and	Vice	President	&	General	Manager	of

the	Americas	in	2000.	Mr.	Sprunk	was	appointed	corporate	Vice	President,	Global	Footwear	in	2001	and	Vice	President,	Merchandising	and	Product	in	2009.	Prior	to joining	NIKE,	Mr.	Sprunk	was	a	certified	public	accountant	with	Price	Waterhouse	from	1987	to	1993.

Hans	van	Alebeek,	Vice	President,	Global	Operations	and	Technology	—	Mr.	van	Alebeek,	43,	joined	NIKE	as	Director	of	Operations	of	Europe	in	1999,	and was	appointed	Vice	President,	Operations	&	Administration	in	EMEA	in	2001,	Vice	President,	Global	Operations	in	2003,	Vice	President,	Global	Operations	& Technology	in	2004,	and	Corporate	Vice	President	in	November	2005.	Prior	to	joining	NIKE,	Mr.	van	Alebeek	worked	for	McKinsey	&	Company	as	a	management consultant,	and	at	N.V.	Indivers	in	business	development.

# Item	1A. 	 Risk	Factors

# Special	Note	Regarding	Forward-Looking	Statements	and	Analyst	Reports

Certain	written	and	oral	statements,	other	than	purely	historical	information,	including	estimates,	projections,	statements	relating	to	NIKE's	business	plans, objectives	and	expected	operating	results,	and	the	assumptions	upon	which	those	statements	are	based,	made	or	incorporated	by	reference	from	time	to	time	by	NIKE	or its	representatives	in	this	report,	other	reports,	filings	with	the	Securities	and	Exchange	Commission,	press	releases,	conferences,	or	otherwise,	are	"forward-looking statements"	within	the	meaning	of	the	Private	Securities	Litigation	Reform	Act	of	1995	and	Section	21E	of	the	Securities	Exchange	Act	of	1934,	as	amended.	Forward- looking	statements	include,	without	limitation,	any	statement	that	may	predict,	forecast,	indicate,	or	imply	future	results,	performance,	or	achievements,	and	may contain	the	words	"believe,"	"anticipate,"	"expect,"	"estimate,"	"project,"	"will	be,"	"will	continue,"	"will	likely	result,"	or	words	or	phrases	of	similar	meaning. Forward-looking	statements	involve	risks	and	uncertainties	which	may	cause	actual	results	to	differ	materially	from	the	forward-looking	statements.	The	risks	and uncertainties	are	detailed	from	time	to	time	in	reports	filed	by	NIKE	with	the	Securities	and	Exchange	Commission,	including	Forms	8-K,	10-Q,	and	10-K,	and	include, among	others,	the	following:	international,	national	and	local	general	economic	and	market	conditions;	the	size	and	growth	of	the	overall	athletic	footwear,	apparel,	and equipment	markets;	intense	competition	among	designers,	marketers,	distributors	and	sellers	of	athletic	footwear,	apparel,	and	equipment	for	consumers	and	endorsers; demographic	changes;	changes	in	consumer	preferences;	popularity	of	particular	designs,	categories	of	products,	and	sports;	seasonal	and	geographic	demand	for	NIKE products;	difficulties	in	anticipating	or	forecasting	changes	in	consumer	preferences,	consumer	demand	for	NIKE	products,	and	the	various	market	factors	described above;	difficulties	in	implementing,	operating,	and	maintaining	NIKE's	increasingly	complex	information	systems	and	controls,	including,	without	limitation,	the systems	related	to	demand	and	supply	planning,	and	inventory	control;	interruptions	in	data	and	communications	systems;	fluctuations	and	difficulty	in	forecasting operating	results,	including,	without	limitation,	the	fact	that	advance	"futures"	orders	may	not	be	indicative	of	future	revenues	due	to	changes	in	shipment	timing,	and the	changing	mix	of	futures	and	at-once	orders	and	order	cancellations;	the	ability	of	NIKE	to	sustain,	manage	or	forecast	its	growth	and	inventories;	the	size,	timing	and mix	of	purchases	of	NIKE's	products;	increases	in	the	cost	of	materials	and	energy	used	to	manufacture	products,	new	product	development	and	introduction;	the	ability to	secure	and	protect	trademarks,	patents,	and	other	intellectual	property;	performance	and	reliability	of	products;	customer	service;	adverse	publicity;	the	loss	of significant	customers	or	suppliers;	dependence	on	distributors;	business	disruptions;	increased	costs	of	freight	and	transportation	to	meet	delivery	deadlines;	increases	in borrowing	costs	due	to	any	decline	in	our	debt	ratings;	changes	in	business	strategy	or	development	plans;	general	risks	associated	with	doing	business	outside	the United	States,	including,	without	limitation,	exchange	rate	fluctuations,	import	duties,	tariffs,	quotas,	political	and	economic	instability,	and	terrorism;	changes	in government	regulations;	liability	and	other	claims	asserted	against	NIKE;	the	ability	to	attract	and	retain	qualified	personnel;	and	other	factors	referenced	or	incorporated by	reference	in	this	report	and	other	reports.

The	risks	included	here	are	not	exhaustive.	Other	sections	of	this	report	may	include	additional	factors	which	could	adversely	affect	NIKE's	business	and financial	performance.	Moreover,	NIKE	operates	in	a	very	competitive	and	rapidly	changing	environment.	New	risk	factors	emerge	from	time	to	time	and	it	is	not possible

for	management	to	predict	all	such	risk	factors,	nor	can	it	assess	the	impact	of	all	such	risk	factors	on	NIKE's	business	or	the	extent	to	which	any	factor,	or	combination of	factors,	may	cause	actual	results	to	differ	materially	from	those	contained	in	any	forward-looking	statements.	Given	these	risks	and	uncertainties,	investors	should	not place	undue	reliance	on	forward-looking	statements	as	a	prediction	of	actual	results.

Investors	should	also	be	aware	that	while	NIKE	does,	from	time	to	time,	communicate	with	securities	analysts,	it	is	against	NIKE's	policy	to	disclose	to	them	any material	non-public	information	or	other	confidential	commercial	information.	Accordingly,	shareholders	should	not	assume	that	NIKE	agrees	with	any	statement	or report	issued	by	any	analyst	irrespective	of	the	content	of	the	statement	or	report.	Furthermore,	NIKE	has	a	policy	against	issuing	or	confirming	financial	forecasts	or projections	issued	by	others.	Thus,	to	the	extent	that	reports	issued	by	securities	analysts	contain	any	projections,	forecasts	or	opinions,	such	reports	are	not	the responsibility	of	NIKE.

# Our	products	face	intense	competition.

NIKE	is	a	consumer	products	company	and	the	relative	popularity	of	various	sports	and	fitness	activities	and	changing	design	trends	affect	the	demand	for	our products.	The	athletic	footwear,	apparel	and	equipment	industry	is	keenly	competitive	in	the	United	States	and	on	a	worldwide	basis.	We	compete	internationally	with	a significant	number	of	athletic	and	leisure	shoe	companies,	athletic	and	leisure	apparel	companies,	sports	equipment	companies,	and	large	companies	having	diversified lines	of	athletic	and	leisure	shoes,	apparel	and	equipment.	We	also	compete	with	other	companies	for	the	production	capacity	of	independent	manufacturers	that	produce our	products	and	for	import	quota	capacity.

Our	competitors'	product	offerings,	technologies,	marketing	expenditures	(including	expenditures	for	advertising	and	endorsements),	pricing,	costs	of	production, and	customer	service	are	areas	of	intense	competition.	This,	in	addition	to	rapid	changes	in	technology	and	consumer	preferences	in	the	markets	for	athletic	and	leisure footwear	and	apparel,	and	athletic	equipment,	constitute	significant	risk	factors	in	our	operations.	If	we	do	not	adequately	and	timely	anticipate	and	respond	to	our competitors,	our	costs	may	increase	or	the	consumer	demand	for	our	products	may	decline	significantly.

# If	we	are	unable	to	anticipate	consumer	preferences	and	develop	new	products,	we	may	not	be	able	to	maintain	or	increase	our	net	revenues	and	profits.

Our	success	depends	on	our	ability	to	identify,	originate	and	define	product	trends	as	well	as	to	anticipate,	gauge	and	react	to	changing	consumer	demands	in	a timely	manner.	All	of	our	products	are	subject	to	changing	consumer	preferences	that	cannot	be	predicted	with	certainty.	Our	new	products	may	not	receive	consumer acceptance	as	consumer	preferences	could	shift	rapidly	to	different	types	of	performance	or	other	sports	apparel	or	away	from	these	types	of	products	altogether,	and	our future	success	depends	in	part	on	our	ability	to	anticipate	and	respond	to	these	changes.	If	we	fail	to	anticipate	accurately	and	respond	to	trends	and	shifts	in	consumer preferences	by	adjusting	the	mix	of	existing	product	offerings,	developing	new	products,	designs,	styles	and	categories,	and	influencing	sports	and	fitness	preferences through	aggressive	marketing,	we	could	experience	lower	sales,	excess	inventories	and	lower	profit	margins,	any	of	which	could	have	an	adverse	effect	on	our	results	of operations	and	financial	condition.

# We	rely	on	technical	innovation	and	high	quality	products	to	compete	in	the	market	for	our	products.

Although	design	and	aesthetics	of	our	products	appear	to	be	the	most	important	factor	for	consumer	acceptance	of	our	products,	technical	innovation	and	quality control	in	the	design	of	footwear,	apparel,	and	athletic	equipment	is	also	essential	to	the	commercial	success	of	our	products.	Research	and	development	plays	a	key	role in	technical	innovation.	We	rely	upon	specialists	in	the	fields	of	biomechanics,	exercise	physiology,	engineering,	industrial	design	and	related	fields,	as	well	as	research committees	and	advisory	boards	made	up	of	athletes,	coaches,	trainers,	equipment	managers,	orthopedists,	podiatrists	and	other	experts	to	develop	and	test

cutting	edge	performance	products.	While	we	strive	to	produce	products	that	help	to	reduce	injury,	enhance	athletic	performance	and	maximize	comfort,	if	we	fail	to introduce	technical	innovation	in	our	products	the	consumer	demand	for	our	products	could	decline,	and	if	we	experience	problems	with	the	quality	of	our	products,	we may	incur	substantial	expense	to	remedy	the	problems.

# Failure	to	continue	to	obtain	high	quality	endorsers	of	our	products	could	harm	our	business.

We	establish	relationships	with	professional	athletes,	sports	teams	and	leagues	to	evaluate,	promote,	and	establish	product	authenticity	with	consumers.	If	certain endorsers	were	to	stop	using	our	products	contrary	to	their	endorsement	agreements,	our	business	could	be	adversely	affected.	In	addition,	actions	taken	by	athletes, teams	or	leagues	associated	with	our	products	that	harm	the	reputations	of	those	athletes,	teams	or	leagues	could	also	harm	our	brand	image	with	consumers	and,	as	a result,	could	have	an	adverse	effect	on	our	sales	and	financial	condition.	In	addition,	poor	performance	by	our	endorsers,	a	failure	to	continue	to	correctly	identify promising	athletes	to	use	and	endorse	our	products,	or	a	failure	to	enter	into	cost	effective	endorsement	arrangements	with	prominent	athletes	and	sports	organizations could	adversely	affect	our	brand	and	result	in	decreased	sales	of	our	products.

# Failure	of	our	contractors	to	comply	with	our	code	of	conduct,	local	laws,	and	other	standards	could	harm	our	business.

We	contract	with	hundreds	of	contractors	outside	of	the	United	States	to	manufacture	our	products,	and	we	impose	on	those	contractors	a	code	of	conduct	and other	environmental,	health,	and	safety	standards	for	the	benefit	of	workers.	However,	from	time	to	time	contractors	may	not	comply	with	such	standards	or	applicable local	law.	Significant	or	continuing	noncompliance	with	such	standards	and	laws	by	one	or	more	contractors	could	harm	our	reputation	and,	as	a	result,	could	have	an adverse	effect	on	our	sales	and	financial	condition.

# Global	capital	and	credit	market	conditions,	and	resulting	declines	in	consumer	confidence	and	spending,	could	have	a	material	adverse	effect	on	our	business, operating	results,	and	financial	condition.

Volatility	and	disruption	in	the	global	capital	and	credit	markets	in	2008	and	2009	have	led	to	a	tightening	of	business	credit	and	liquidity,	a	contraction	of consumer	credit,	business	failures,	higher	unemployment,	and	declines	in	consumer	confidence	and	spending	in	the	United	States	and	internationally.	If	global	economic and	financial	market	conditions	deteriorate	or	remain	weak	for	an	extended	period	of	time,	the	following	factors	could	have	a	material	adverse	effect	on	our	business, operating	results,	and	financial	condition:

•Slower	consumer	spending	may	result	in	reduced	demand	for	our	products,	reduced	orders	from	retailers	for	our	products,	order	cancellations,	lower revenues,	increased	inventories,	and	lower	gross	margins.

•	 We	may	be	unable	to	find	suitable	investments	that	are	safe,	liquid,	and	provide	a	reasonable	return.	This	could	result	in	lower	interest	income	or	longer investment	horizons.	Disruptions	to	capital	markets	or	the	banking	system	may	also	impair	the	value	of	investments	or	bank	deposits	we	currently	consider safe	or	liquid.

•	 We	may	be	unable	to	access	financing	in	the	credit	and	capital	markets	at	reasonable	rates	in	the	event	we	find	it	desirable	to	do	so.

•The	failure	of	financial	institution	counterparties	to	honor	their	obligations	to	us	under	credit	and	derivative	instruments	could	jeopardize	our	ability	to	rely on	and	benefit	from	those	instruments.	Our	ability	to	replace	those	instruments	on	the	same	or	similar	terms	may	be	limited	under	poor	market	conditions.

•	 We	conduct	transactions	in	various	currencies,	which	increases	our	exposure	to	fluctuations	in	foreign	currency	exchange	rates	relative	to	the	U.S.

dollar.	Continued	volatility	in	the	markets	and	exchange	rates	for	foreign	currencies	and	contracts	in	foreign	currencies	could	have	a	significant	impact	on our	reported	financial	results	and	condition.

•	 Continued	volatility	in	the	markets	and	prices	for	commodities	and	raw	materials	we	use	in	our	products	and	in	our	supply	chain	(such	as	petroleum)	could have	a	material	adverse	effect	on	our	costs,	gross	margins,	and	profitability.

•If	retailers	of	our	products	experience	declining	revenues,	or	retailers	experience	difficulty	obtaining	financing	in	the	capital	and	credit	markets	to	purchase our	products,	this	could	result	in	reduced	orders	for	our	products,	order	cancellations,	inability	of	retailers	to	timely	meet	their	payment	obligations	to	us, extended	payment	terms,	higher	accounts	receivable,	reduced	cash	flows,	greater	expense	associated	with	collection	efforts,	and	increased	bad	debt	expense.

•If	retailers	of	our	products	experience	severe	financial	difficulty,	some	may	become	insolvent	and	cease	business	operations,	which	could	reduce	the availability	of	our	products	to	consumers.

•If	contract	manufacturers	of	our	products	or	other	participants	in	our	supply	chain	experience	difficulty	obtaining	financing	in	the	capital	and	credit	markets to	purchase	raw	materials	or	to	finance	general	working	capital	needs,	it	may	result	in	delays	or	non-delivery	of	shipments	of	our	products.

# Our	business	is	affected	by	seasonality,	which	could	result	in	fluctuations	in	our	operating	results	and	stock	price.

We	experience	moderate	fluctuations	in	aggregate	sales	volume	during	the	year.	Historically,	revenues	in	the	first	and	fourth	fiscal	quarters	have	slightly	exceeded those	in	the	second	and	third	fiscal	quarters.	However,	the	mix	of	product	sales	may	vary	considerably	from	time	to	time	as	a	result	of	changes	in	seasonal	and geographic	demand	for	particular	types	of	footwear,	apparel	and	equipment.	In	addition,	our	customers	may	cancel	orders,	change	delivery	schedules	or	change	the	mix of	products	ordered	with	minimal	notice.	As	a	result,	we	may	not	be	able	to	accurately	predict	our	quarterly	sales.	Accordingly,	our	results	of	operations	are	likely	to fluctuate	significantly	from	period	to	period.	This	seasonality,	along	with	other	factors	that	are	beyond	our	control,	including	general	economic	conditions,	changes	in consumer	preferences,	weather	conditions,	availability	of	import	quotas	and	currency	exchange	rate	fluctuations,	could	adversely	affect	our	business	and	cause	our results	of	operations	to	fluctuate.	Our	operating	margins	are	also	sensitive	to	a	number	of	factors	that	are	beyond	our	control,	including	shifts	in	product	sales	mix, geographic	sales	trends,	and	currency	exchange	rate	fluctuations,	all	of	which	we	expect	to	continue.	Results	of	operations	in	any	period	should	not	be	considered indicative	of	the	results	to	be	expected	for	any	future	period.

# "Futures"	orders	may	not	be	an	accurate	indication	of	our	future	revenues.

We	make	substantial	use	of	our	"futures"	ordering	program,	which	allows	retailers	to	order	five	to	six	months	in	advance	of	delivery	with	the	commitment	that their	orders	will	be	delivered	within	a	set	period	at	a	fixed	price.	Our	futures	ordering	program	allows	us	to	minimize	the	amount	of	products	we	hold	in	inventory, purchasing	costs,	the	time	necessary	to	fill	customer	orders,	and	the	risk	of	non-delivery.	We	report	changes	in	futures	orders	in	our	periodic	financial	reports.	Although we	believe	futures	orders	are	an	important	indicator	of	our	future	revenues,	reported	futures	orders	are	not	necessarily	indicative	of	our	expectation	of	changes	in revenues	for	any	future	period.	This	is	because	the	mix	of	orders	can	shift	between	advance/futures	and	at-once	orders.	In	addition,	foreign	currency	exchange	rate fluctuations,	order	cancellations,	returns,	and	discounts	can	cause	differences	in	the	comparisons	between	futures	orders	and	actual	revenues.	Moreover,	a	significant portion	of	our	revenue	is	not	derived	from	futures	orders,	including	at-once	close-out	sales	of	NIKE	footwear	and	apparel,	wholesale	sales	of	equipment,	Cole	Haan, Converse,	Hurley,	NIKE	Golf	and	Umbro,	and	retail	sales	across	all	brands.

# Our	"futures"	ordering	program	does	not	prevent	excess	inventories	or	inventory	shortages,	which	could	result	in	decreased	operating	margins	and	harm	to	our business.

We	purchase	products	from	manufacturers	outside	of	our	futures	ordering	program	and	in	advance	of	customer	orders,	which	we	hold	in	inventory	and	resell	to customers.	There	is	a	risk	we	may	be	unable	to	sell

excess	products	ordered	from	manufacturers.	Inventory	levels	in	excess	of	customer	demand	may	result	in	inventory	write-downs,	and	the	sale	of	excess	inventory	at discounted	prices	could	significantly	impair	our	brand	image	and	have	an	adverse	effect	on	our	operating	results	and	financial	condition.	Conversely,	if	we underestimate	consumer	demand	for	our	products	or	if	our	manufacturers	fail	to	supply	products	we	require	at	the	time	we	need	them,	we	may	experience	inventory shortages.	Inventory	shortages	might	delay	shipments	to	customers,	negatively	impact	retailer	and	distributor	relationships,	and	diminish	brand	loyalty.

The	difficulty	in	forecasting	demand	also	makes	it	difficult	to	estimate	our	future	results	of	operations	and	financial	condition	from	period	to	period.	A	failure	to accurately	predict	the	level	of	demand	for	our	products	could	adversely	affect	our	net	revenues	and	net	income,	and	we	are	unlikely	to	forecast	such	effects	with	any certainty	in	advance.

# We	may	be	adversely	affected	by	the	financial	health	of	our	retailers.

We	extend	credit	to	our	customers	based	on	an	assessment	of	a	customer's	financial	condition,	generally	without	requiring	collateral.	To	assist	in	the	scheduling of	production	and	the	shipping	of	seasonal	products,	we	offer	customers	the	ability	to	place	orders	five	to	six	months	ahead	of	delivery	under	our	"futures"	ordering program.	These	advance	orders	may	be	cancelled,	and	the	risk	of	cancellation	may	increase	when	dealing	with	financially	ailing	retailers	or	retailers	struggling	with economic	uncertainty.	In	the	past,	some	customers	have	experienced	financial	difficulties,	which	have	had	an	adverse	effect	on	our	business.	As	a	result,	retailers	may be	more	cautious	than	usual	with	orders	as	a	result	of	weakness	in	the	retail	economy.	A	slowing	economy	in	our	key	markets	could	have	an	adverse	effect	on	the financial	health	of	our	customers,	which	in	turn	could	have	an	adverse	effect	on	our	results	of	operations	and	financial	condition.	In	addition,	product	sales	are	dependent in	part	on	high	quality	merchandising	and	an	appealing	store	environment	to	attract	consumers,	which	requires	continuing	investments	by	retailers.	Retailers	who experience	financial	difficulties	may	fail	to	make	such	investments	or	delay	them,	resulting	in	lower	sales	and	orders	for	our	products.

# Consolidation	of	retailers	or	concentration	of	retail	market	share	among	a	few	retailers	may	increase	and	concentrate	our	credit	risk,	and	impair	our	ability	to	sell our	products.

The	athletic	footwear,	apparel,	and	equipment	retail	markets	in	some	countries	are	dominated	by	a	few	large	athletic	footwear,	apparel,	and	equipment	retailers with	many	stores.	These	retailers	have	in	the	past	increased	their	market	share	and	may	continue	to	do	so	in	the	future	by	expanding	through	acquisitions	and construction	of	additional	stores.	These	situations	concentrate	our	credit	risk	with	a	relatively	small	number	of	retailers,	and,	if	any	of	these	retailers	were	to	experience	a shortage	of	liquidity,	it	would	increase	the	risk	that	their	outstanding	payables	to	us	may	not	be	paid.	In	addition,	increasing	market	share	concentration	among	one	or	a few	retailers	in	a	particular	country	or	region	increases	the	risk	that	if	any	one	of	them	substantially	reduces	their	purchases	of	our	products,	we	may	be	unable	to	find	a sufficient	number	of	other	retail	outlets	for	our	products	to	sustain	the	same	level	of	sales	and	revenues.

# Failure	to	adequately	protect	our	intellectual	property	rights	could	adversely	affect	our	business.

We	utilize	trademarks	on	nearly	all	of	our	products	and	believe	that	having	distinctive	marks	that	are	readily	identifiable	is	an	important	factor	in	creating	a market	for	our	goods,	in	identifying	us,	and	in	distinguishing	our	goods	from	the	goods	of	others.	We	consider	our	NIKE ®	and	Swoosh	Design ®	trademarks	to	be	among our	most	valuable	assets	and	we	have	registered	these	trademarks	in	over	150	countries.	In	addition,	we	own	many	other	trademarks	that	we	utilize	in	marketing	our products.	We	believe	that	our	trademarks,	patents,	and	other	intellectual	property	rights	are	important	to	our	brand,	our	success	and	our	competitive	position.	We periodically	discover	products	that	are	counterfeit	reproductions	of	our	products	or	that	otherwise	infringe	on	our	intellectual	property	rights.	If	we	are	unsuccessful	in challenging	a	party's	products	on	the	basis	of	trademark	or	design	or	utility	patent	infringement,	continued	sales	of	these	products	could	adversely	affect	our	sales	and our	brand	and	result	in	the	shift	of	consumer	preference	away	from	our	products.	The	actions	we	take	to	establish	and	protect

trademarks,	patents,	and	other	intellectual	property	rights	may	not	be	adequate	to	prevent	imitation	of	our	products	by	others	or	to	prevent	others	from	seeking	to	block sales	of	our	products	as	violations	of	proprietary	rights.

In	addition,	the	laws	of	certain	foreign	countries	may	not	protect	intellectual	property	rights	to	the	same	extent	as	the	laws	of	the	United	States.	We	may	face significant	expenses	and	liability	in	connection	with	the	protection	of	our	intellectual	property	rights	outside	the	United	States,	and	if	we	are	unable	to	successfully protect	our	rights	or	resolve	intellectual	property	conflicts	with	others,	our	business	or	financial	condition	may	be	adversely	affected.

# We	are	subject	to	periodic	litigation	and	other	regulatory	proceedings,	which	could	result	in	unexpected	expense	of	time	and	resources.

From	time	to	time	we	are	called	upon	to	defend	ourselves	against	lawsuits	and	regulatory	actions	relating	to	our	business.	Due	to	the	inherent	uncertainties	of litigation	and	regulatory	proceedings,	we	cannot	accurately	predict	the	ultimate	outcome	of	any	such	proceedings.	An	unfavorable	outcome	could	have	an	adverse impact	on	our	business,	financial	condition	and	results	of	operations.	In	addition,	any	significant	litigation	in	the	future,	regardless	of	its	merits,	could	divert management's	attention	from	our	operations	and	result	in	substantial	legal	fees.

# Our	international	operations	involve	inherent	risks	which	could	result	in	harm	to	our	business.

Virtually	all	of	our	athletic	footwear	and	apparel	is	manufactured	outside	of	the	United	States,	and	the	majority	of	our	products	are	sold	outside	of	the	United States.	Accordingly,	we	are	subject	to	the	risks	generally	associated	with	global	trade	and	doing	business	abroad,	which	include	foreign	laws	and	regulations,	varying consumer	preferences	across	geographic	regions,	political	unrest,	disruptions	or	delays	in	cross-border	shipments	and	changes	in	economic	conditions	in	countries	in which	we	manufacture	or	sell	products.	In	addition,	disease	outbreaks,	terrorist	acts	and	military	conflict	have	increased	the	risks	of	doing	business	abroad.	These	factors, among	others,	could	affect	our	ability	to	manufacture	products	or	procure	materials,	our	ability	to	import	products,	our	ability	to	sell	products	in	international	markets, and	our	cost	of	doing	business.	If	any	of	these	or	other	factors	make	the	conduct	of	business	in	a	particular	country	undesirable	or	impractical,	our	business	could	be adversely	affected.	In	addition,	many	of	our	imported	products	are	subject	to	duties,	tariffs	or	quotas	that	affect	the	cost	and	quantity	of	various	types	of	goods	imported into	the	United	States	and	other	countries.	Any	country	in	which	our	products	are	produced	or	sold	may	eliminate,	adjust	or	impose	new	quotas,	duties,	tariffs,	safeguard measures,	anti-dumping	duties,	cargo	restrictions	to	prevent	terrorism,	restrictions	on	the	transfer	of	currency,	or	other	charges	or	restrictions,	any	of	which	could	have an	adverse	effect	on	our	results	of	operations	and	financial	condition.

# Changes	in	tax	laws	and	unanticipated	tax	liabilities	could	adversely	affect	our	effective	income	tax	rate	and	profitability.

We	are	subject	to	income	taxes	in	the	United	States	and	numerous	foreign	jurisdictions.	Our	effective	income	tax	rate	in	the	future	could	be	adversely	affected	by a	number	of	factors,	including:	changes	in	the	mix	of	earnings	in	countries	with	differing	statutory	tax	rates,	changes	in	the	valuation	of	deferred	tax	assets	and	liabilities, changes	in	tax	laws,	the	outcome	of	income	tax	audits	in	various	jurisdictions	around	the	world,	and	any	repatriation	of	non-US	earnings	for	which	we	have	not previously	provided	for	U.S.	taxes.	We	regularly	assess	all	of	these	matters	to	determine	the	adequacy	of	our	tax	provision,	which	is	subject	to	significant	discretion. Recently,	the	Obama	administration	proposed	legislation	that	would	change	how	U.S.	multinational	corporations	are	taxed	on	their	foreign	income.	If	such	legislation	is enacted,	it	may	have	a	material	adverse	impact	to	our	tax	rate	and	in	turn,	our	profitability.

# Currency	exchange	rate	fluctuations	could	result	in	higher	costs	and	decreased	margins.

A	majority	of	our	products	are	sold	outside	of	the	United	States.	As	a	result,	we	conduct	transactions	in	various	currencies,	which	increases	our	exposure	to fluctuations	in	foreign	currency	exchange	rates	relative	to	the	U.S.	dollar.	Our	international	revenues	and	expenses	generally	are	derived	from	sales	and	operations	in foreign	currencies,	and	these	revenues	and	expenses	could	be	affected	by	currency	fluctuations,	including	amounts	recorded	in	foreign	currencies	and	translated	into U.S.	dollars	for	consolidated	financial	reporting.	Currency	exchange	rate	fluctuations	could	also	disrupt	the	business	of	the	independent	manufacturers	that	produce	our products	by	making	their	purchases	of	raw	materials	more	expensive	and	more	difficult	to	finance.	Foreign	currency	fluctuations	could	have	an	adverse	effect	on	our results	of	operations	and	financial	condition.

Our	hedging	activities	(see	Note	18,	Risk	Management	and	Derivatives	on	the	accompanying	note	to	the	consolidated	financial	statement),	which	are	designed	to minimize	and	delay,	but	not	to	completely	eliminate,	the	effects	of	foreign	currency	fluctuations	may	not	sufficiently	mitigate	the	impact	of	foreign	currencies	on	our financial	results.	Factors	that	could	affect	the	effectiveness	of	our	hedging	activities	include	accuracy	of	sales	forecasts,	volatility	of	currency	markets,	and	the availability	of	hedging	instruments.	Since	the	hedging	activities	are	designed	to	minimize	volatility,	they	not	only	reduce	the	negative	impact	of	a	stronger	U.S.	dollar, but	they	also	reduce	the	positive	impact	of	a	weaker	U.S.	dollar.	Our	future	financial	results	could	be	significantly	affected	by	the	value	of	the	U.S.	dollar	in	relation	to the	foreign	currencies	in	which	we	conduct	business.	The	degree	to	which	our	financial	results	are	affected	for	any	given	time	period	will	depend	in	part	upon	our hedging	activities.

# Our	products	are	subject	to	risks	associated	with	overseas	sourcing,	manufacturing,	and	financing.

The	principal	materials	used	in	our	apparel	products	—	natural	and	synthetic	fabrics	and	threads,	plastic	and	metal	hardware,	and	specialized	performance	fabrics designed	to	repel	rain,	retain	heat,	or	efficiently	transport	body	moisture	—	are	available	in	countries	where	our	manufacturing	takes	place.	The	principal	materials	used in	our	footwear	products	—	natural	and	synthetic	rubber,	plastic	compounds,	foam	cushioning	materials,	nylon,	leather,	canvas	and	polyurethane	films	—	are	also	locally available	to	manufacturers.	NIKE	contractors	and	suppliers	buy	raw	materials	in	bulk.

There	could	be	a	significant	disruption	in	the	supply	of	fabrics	or	raw	materials	from	current	sources	or,	in	the	event	of	a	disruption,	we	might	not	be	able	to	locate alternative	suppliers	of	materials	of	comparable	quality	at	an	acceptable	price,	or	at	all.	In	addition,	we	cannot	be	certain	that	our	unaffiliated	manufacturers	will	be	able to	fill	our	orders	in	a	timely	manner.	If	we	experience	significant	increases	in	demand,	or	need	to	replace	an	existing	manufacturer,	there	can	be	no	assurance	that additional	supplies	of	fabrics	or	raw	materials	or	additional	manufacturing	capacity	will	be	available	when	required	on	terms	that	are	acceptable	to	us,	or	at	all,	or	that any	supplier	or	manufacturer	would	allocate	sufficient	capacity	to	us	in	order	to	meet	our	requirements.	In	addition,	even	if	we	are	able	to	expand	existing	or	find	new manufacturing	or	sources	of	materials,	we	may	encounter	delays	in	production	and	added	costs	as	a	result	of	the	time	it	takes	to	train	suppliers	and	manufacturers	in	our methods,	products,	quality	control	standards,	and	labor,	health	and	safety	standards.	Any	delays,	interruption	or	increased	costs	in	the	supply	of	materials	or	manufacture of	our	products	could	have	an	adverse	effect	on	our	ability	to	meet	retail	customer	and	consumer	demand	for	our	products	and	result	in	lower	revenues	and	net	income both	in	the	short	and	long	term.

Because	independent	manufacturers	manufacture	a	majority	of	our	products	outside	of	our	principal	sales	markets,	our	products	must	be	transported	by	third parties	over	large	geographic	distances.	Delays	in	the	shipment	or	delivery	of	our	products	due	to	the	availability	of	transportation,	work	stoppages,	port	strikes, infrastructure	congestion,	or	other	factors,	and	costs	and	delays	associated	with	consolidating	or	transitioning	between	manufacturers,	could	adversely	impact	our financial	performance.	In	addition,	manufacturing	delays	or	unexpected	demand	for	our	products	may	require	us	to	use	faster,	but	more	expensive,	transportation methods	such	as	aircraft,	which	could	adversely	affect	our	profit	margins.	The	cost	of	fuel	is	a	significant	component	in	manufacturing	and	transportation	costs,	so increases	in	the	price	of	petroleum	products	can	adversely	affect	our	profit	margins.

In	addition,	Sojitz	America	performs	significant	import-export	financing	services	for	most	of	the	NIKE	brand	products	sold	outside	of	the	United	States,	Europe,

Middle	East,	Africa	and	Japan,	excluding	products	produced	and	sold	in	the	same	country.	Any	failure	of	Sojitz	America	to	provide	these	services	or	any	failure	of Sojitz	America's	banks	could	disrupt	our	ability	to	acquire	products	from	our	suppliers	and	to	deliver	products	to	our	customers	outside	of	the	United	States,	Europe, Middle	East,	Africa,	and	Japan.	Such	a	disruption	could	result	in	cancelled	orders	that	would	adversely	affect	sales	and	profitability.

# Our	success	depends	on	our	global	distribution	facilities.

We	distribute	our	products	to	customers	directly	from	the	factory	and	through	distribution	centers	located	throughout	the	world.	Our	ability	to	meet	customer expectations,	manage	inventory,	complete	sales	and	achieve	objectives	for	operating	efficiencies	depends	on	the	proper	operation	of	our	distribution	facilities,	the development	or	expansion	of	additional	distribution	capabilities,	and	the	timely	performance	of	services	by	third	parties	(including	those	involved	in	shipping	product	to and	from	our	distribution	facilities).	Our	distribution	facilities	could	be	interrupted	by	information	technology	problems	and	disasters	such	as	earthquakes	or	fires.	Any significant	failure	in	our	distribution	facilities	could	result	in	an	adverse	affect	on	our	business.	We	maintain	business	interruption	insurance,	but	it	may	not	adequately protect	us	from	adverse	effects	that	could	be	caused	by	significant	disruptions	in	our	distribution	facilities.

# We	rely	significantly	on	information	technology	in	our	supply	chain,	and	any	failure,	inadequacy,	interruption	or	security	failure	of	that	technology	could	harm	our ability	to	effectively	operate	our	business.

We	are	heavily	dependent	on	information	technology	systems	across	our	supply	chain,	including	product	design,	production,	forecasting,	ordering, manufacturing,	transportation,	sales,	and	distribution.	Our	ability	to	effectively	manage	and	maintain	our	inventory	and	to	ship	products	to	customers	on	a	timely	basis depends	significantly	on	the	reliability	of	these	supply	chain	systems.	Over	the	last	several	years,	as	part	of	the	ongoing	initiative	to	upgrade	our	worldwide	supply	chain, we	have	implemented	new	systems	in	all	of	our	geographical	regions	in	which	we	operate.	Over	the	next	few	years,	we	will	work	to	continue	to	enhance	the	systems	and related	processes	in	our	global	operations.	The	failure	of	these	systems	to	operate	effectively,	problems	with	transitioning	to	upgraded	or	replacement	systems,	or	a breach	in	security	of	these	systems	could	cause	delays	in	product	fulfillment	and	reduced	efficiency	of	our	operations,	and	could	require	significant	capital	investments	to remediate	the	problem,	and	may	have	an	adverse	effect	on	our	results	of	operations	and	financial	condition.

# Our	financial	results	may	be	adversely	affected	if	substantial	investments	in	businesses	and	operations	fail	to	produce	expected	returns.

From	time	to	time,	we	may	invest	in	business	infrastructure,	acquisitions	of	new	businesses,	and	expansion	of	existing	businesses,	such	as	our	retail	operations, which	require	substantial	cash	investments	and	management	attention.	We	believe	cost	effective	investments	are	essential	to	business	growth	and	profitability.	However, significant	investments	are	subject	to	typical	risks	and	uncertainties	inherent	in	acquiring	or	expanding	a	business.	The	failure	of	any	significant	investment	to	provide the	returns	or	profitability	we	expect	could	have	a	material	adverse	effect	on	our	financial	results	and	divert	management	attention	from	more	profitable	business operations.

# We	depend	on	key	personnel,	the	loss	of	whom	would	harm	our	business.

Our	future	success	will	depend	in	part	on	the	continued	service	of	key	executive	officers	and	personnel.	The	loss	of	the	services	of	any	key	individual	could	harm us.	Our	future	success	also	depends	on	our	ability	to	identify,	attract	and	retain	additional	qualified	personnel.	Competition	for	employees	in	our	industry	is	intense	and we	may	not	be	successful	in	attracting	and	retaining	such	personnel.

# The	sale	of	a	large	number	of	shares	held	by	our	Chairman	could	depress	the	market	price	of	our	common	stock.

Philip	H.	Knight,	Co-founder	and	Chairman	of	our	Board	of	Directors,	beneficially	owns	over	96%	of	our	Class	A	Common	Stock.	If	all	of	his	Class	A	Common Stock	were	converted	into	Class	B	Common	Stock,	Mr.	Knight	would	own	over	19%	of	our	Class	B	Common	Stock.	These	shares	are	available	for	resale,	subject	to	the requirements	of	the	U.S.	securities	laws.	The	sale	or	prospect	of	the	sale	of	a	substantial	number	of	these	shares	could	have	an	adverse	effect	on	the	market	price	of	our common	stock.

# Anti-takeover	provisions	may	impair	an	acquisition	of	the	Company	or	reduce	the	price	of	our	common	stock.

There	are	provisions	of	our	articles	of	incorporation	and	Oregon	law	that	are	intended	to	protect	shareholder	interests	by	providing	the	Board	of	Directors	a	means to	attempt	to	deny	coercive	takeover	attempts	or	to	negotiate	with	a	potential	acquirer	in	order	to	obtain	more	favorable	terms.	Such	provisions	include	a	control	share acquisition	statute,	a	freezeout	statute,	two	classes	of	stock	that	vote	separately	on	certain	issues,	and	the	fact	holders	of	Class	A	Common	Stock	shares	elect	three- fourths	of	the	Board	of	Directors	rounded	down	to	the	next	whole	number.	However,	such	provisions	could	discourage,	delay	or	prevent	an	unsolicited	merger, acquisition	or	other	change	in	control	of	our	company	that	some	shareholders	might	believe	to	be	in	their	best	interests	or	in	which	shareholders	might	receive	a premium	for	their	common	stock	over	the	prevailing	market	price.	These	provisions	could	also	discourage	proxy	contests	for	control	of	the	Company.

# We	may	fail	to	meet	analyst	expectations,	which	could	cause	the	price	of	our	stock	to	decline.

Our	common	stock	is	traded	publicly,	and	at	any	given	time	various	securities	analysts	follow	our	financial	results	and	issue	reports	on	us.	These	reports	include information	about	our	historical	financial	results	as	well	as	the	analysts'	estimates	of	our	future	performance.	The	analysts'	estimates	are	based	upon	their	own	opinions and	are	often	different	from	our	estimates	or	expectations.	If	our	operating	results	are	below	the	estimates	or	expectations	of	public	market	analysts	and	investors,	our stock	price	could	decline.	In	the	past,	securities	class	action	litigation	has	been	brought	against	NIKE	and	other	companies	following	a	decline	in	the	market	price	of	their securities.	If	our	stock	price	is	volatile,	we	may	become	involved	in	this	type	of	litigation	in	the	future.	Any	litigation	could	result	in	substantial	costs	and	a	diversion	of management's	attention	and	resources	that	are	needed	to	successfully	run	our	business.

# Item	1B. 	 Unresolved	Staff	Comments

Not	applicable.

# Item	2. Properties

The	following	is	a	summary	of	principal	properties	owned	or	leased	by	NIKE.

The	NIKE	World	Campus,	owned	by	NIKE	and	located	in	Beaverton,	Oregon,	USA,	is	a	176	acre	facility	of	18	buildings	which	functions	as	our	world headquarters	and	is	occupied	by	almost	5,700	employees	engaged	in	management,	research,	design,	development,	marketing,	finance,	and	other	administrative	functions from	nearly	all	of	our	divisions.	We	also	lease	various	office	facilities	in	the	surrounding	metropolitan	area.	We	lease	a	similar,	but	smaller,	administrative	facility	in Hilversum,	the	Netherlands,	which	serves	as	the	headquarters	for	the	EMEA	Region.

There	are	three	significant	distribution	and	customer	service	facilities	for	NIKE	brand	products	in	the	United	States.	All	three	of	them	are	located	in	Memphis, Tennessee,	one	of	which	is	leased.	Cole	Haan	also	operates	a	distribution	facility	in	Greenland,	New	Hampshire,	which	we	lease.	Smaller	leased	distribution	facilities for	other	brands	and	non-NIKE	brand	businesses	are	located	in	various	parts	of	the	United	States.	We

also	own	or	lease	distribution	and	customer	service	facilities	in	many	parts	of	the	world,	the	most	significant	of	which	are	the	distribution	facilities	located	in Tomisatomachi,	Japan,	and	in	Laakdal,	Belgium,	both	of	which	we	own.

We	manufacture	Air-Sole	cushioning	materials	and	components	at	NIKE	IHM,	Inc.	manufacturing	facilities	located	in	Beaverton,	Oregon	and	St.	Charles, Missouri,	which	we	own.	We	also	manufacture	and	sell	small	amounts	of	various	plastic	products	to	other	manufacturers	through	NIKE	IHM,	Inc.

Aside	from	the	principal	properties	described	above,	we	lease	three	production	offices	outside	the	United	States,	over	100	sales	offices	and	showrooms worldwide,	and	approximately	60	administrative	offices	worldwide.	We	lease	more	than	600	retail	stores	worldwide,	which	consist	primarily	of	factory	outlet	stores.	See "United	States	Market"	and	"International	Markets"	starting	on	page	2	of	this	Report.	Our	leases	expire	at	various	dates	through	the	year	2034.

# Item	3. Legal	Proceedings

There	are	no	material	pending	legal	proceedings,	other	than	ordinary	routine	litigation	incidental	to	our	business,	to	which	we	are	a	party	or	of	which	any	of	our property	is	the	subject.

# Item	4. Submission	of	Matters	to	a	Vote	of	Security	Holders

No	matter	was	submitted	during	the	fourth	quarter	of	the	2009	fiscal	year	to	a	vote	of	security	holders,	through	the	solicitation	of	proxies	or	otherwise.

# PART	II

# Item	5. 	 Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

NIKE's	Class	B	Common	Stock	is	listed	on	the	New	York	Stock	Exchange	and	trades	under	the	symbol	NKE.	At	July	24,	2009,	there	were	20,672	holders	of record	of	our	Class	B	Common	Stock	and	16	holders	of	record	of	our	Class	A	Common	Stock.	These	figures	do	not	include	beneficial	owners	who	hold	shares	in nominee	name.	The	Class	A	Common	Stock	is	not	publicly	traded	but	each	share	is	convertible	upon	request	of	the	holder	into	one	share	of	Class	B	Common	Stock. The	following	tables	set	forth,	for	each	of	the	quarterly	periods	indicated,	the	high	and	low	sales	prices	for	the	Class	B	Common	Stock	as	reported	on	the	New	York Stock	Exchange	Composite	Tape	and	dividends	declared	on	the	Class	A	and	Class	B	Common	Stock.

| Fiscal	2009	(June	1,	2008	—	May	31,	2009) | High | Low | Dividends<br>Declared |
| :--- | :--- | :--- | :--- |
| First\tQuarter | $70.28 | $54.64 | $0.23 |
| Second\tQuarter | \t 68.00 | \t 42.68 | 0.25 |
| Third\tQuarter | \t 57.33 | \t 40.08 | 0.25 |
| Fourth\tQuarter | \t 57.14 | \t 38.24 | 0.25 |

| Fiscal	2008	(June	1,	2007	—	May	31,	2008) | High | Low | Declared |
| :--- | :--- | :--- | :--- |
| First\tQuarter | $60.35 | $51.87 | $0.185 |
| Second\tQuarter | \t 66.57 | \t 54.15 | 0.23 |
| Third\tQuarter | \t 67.93 | \t 51.50 | 0.23 |
| Fourth\tQuarter | \t 70.60 | \t 56.70 | 0.23 |

No	share	repurchases	were	made	by	NIKE	during	the	fourth	quarter	ended	May	31,	2009	under	the	four-year	$3.0	billion	share	repurchase	program	authorized	by our	Board	of	Directors	and	announced	in	June	2006.	As	of	May	31,	2009,	the	maximum	dollar	value	of	shares	available	for	repurchase	under	this	program	is	$300.2 million.	In	September	2008,	our	Board	of	Directors	approved	a	new	$5	billion	share	repurchase	program.	This	new	program	will	commence	upon	completion	of	our current	$3	billion	share	repurchase	program.

# Performance	Graph

The	following	graph	demonstrates	a	five-year	comparison	of	cumulative	total	returns	for	NIKE's	Class	B	Common	Stock,	the	Standard	&	Poor's	500	Stock Index,	the	Standard	&	Poor's	Apparel,	Accessories	&	Luxury	Goods	Index,	and	the	Dow	Jones	U.S.	Footwear	Index.	The	graph	assumes	an	investment	of	$100	on May	31,	2004	in	each	of	our	Class	B	Common	Stock,	and	the	stocks	comprising	the	Standard	&	Poor's	500	Stock	Index,	the	Standard	&	Poor's	Apparel,	Accessories	&

Luxury	Goods	Index,	and	the	Dow	Jones	U.S.	Footwear	Index.	Each	of	the	indices	assumes	that	all	dividends	were	reinvested.

# COMPARISON	OF	5-YEAR	CUMULATIVE	TOTAL	RETURN	AMONG	NIKE,	INC.,	S&P	500

# INDEX,	S&P	APPAREL,	ACCESSORIES	&	LUXURY	GOODS	INDEX,

# AND	THE	DOW	JONES	U.S.	FOOTWEAR	INDEX

The	Dow	Jones	U.S.	Footwear	Index	consists	of	NIKE,	Deckers	Outdoor	Corp.,	Timberland	Co.,	Wolverine	World	Wide,	Inc.,	and	Crocs,	Inc.	Because	NIKE	is part	of	the	Dow	Jones	U.S.	Footwear	Index,	the	price	and	returns	of	NIKE	stock	have	a	substantial	effect	on	this	index.	The	Standard	&	Poor's	Apparel,	Accessories	&

Luxury	Goods	Index	consists	of	VF	Corp.,	Coach,	Inc.,	and	Polo	Ralph	Lauren	Corporation.	The	Dow	Jones	U.S.	Footwear	Index	and	the	Standard	&	Poor's	Apparel, Accessories,	and	Luxury	Goods	Index	include	companies	in	two	major	lines	of	business	in	which	the	Company	competes.	The	indices	do	not	encompass	all	of	the Company's	competitors,	nor	all	product	categories	and	lines	of	business	in	which	the	Company	is	engaged.

The	stock	performance	shown	on	the	performance	graph	above	is	not	necessarily	indicative	of	future	performance.	The	Company	will	not	make	nor	endorse	any predictions	as	to	future	stock	performance.

The	performance	graph	above	is	being	furnished	solely	to	accompany	this	Report	pursuant	to	Item	201(e)	of	Regulation	S-K,	and	is	not	being	filed	for	purposes	of Section	18	of	the	Securities	Exchange	Act	of	1934,	as	amended,	and	is	not	to	be	incorporated	by	reference	into	any	filing	of	the	Company,	whether	made	before	or	after the	date	hereof,	regardless	of	any	general	incorporation	language	in	such	filing.

# Item	6. Selected	Financial	Data

|  | 2009 | 2008 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tmillions,\texcept\tper\tshare\tdata\tand\tfinancial\tratios) | (In\tmillions,\texcept\tper\tshare\tdata\tand\tfinancial\tratios) | (1) |  |
| Year\tEnded\tMay\t31, |  |  |  |  |  |
| Revenues | $19,176.1 | $18,627.0 | $16,325.9 | $14,954.9 | $13,739.7 |
| Gross\tmargin | 8,604.4 | 8,387.4 | 7,160.5 | 6,587.0 | 6,115.4 |
| Gross\tmargin\t% | 44.9% | 45.0% | 43.9% | 44.0% | 44.5% |
| Restructuring\tcharges | 195.0 | — | — | — | — |
| Goodwill\timpairment | 199.3 | — | — | — | — |
| Intangible\tand\tother\tasset\timpairment | 202.0 | — | — | — | — |
| Net\tincome | 1,486.7 | 1,883.4 | 1,491.5 | 1,392.0 | 1,211.6 |
| Basic\tearnings\tper\tcommon\tshare | 3.07 | 3.80 | 2.96 | 2.69 | 2.31 |
| Diluted\tearnings\tper\tcommon\tshare | 3.03 | 3.74 | 2.93 | 2.64 | 2.24 |
| Weighted\taverage\tcommon\tshares\toutstanding | 484.9 | 495.6 | 503.8 | 518.0 | 525.2 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 490.7 | 504.1 | 509.9 | 527.6 | 540.6 |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | 0.98 | 0.875 | 0.71 | 0.59 | 0.475 |
| Cash\tflow\tfrom\toperations | 1,736.1 | 1,936.3 | 1,878.7 | 1,667.9 | 1,570.7 |
| Price\trange\tof\tcommon\tstock |  |  |  |  |  |
| High | 70.28 | 70.60 | 57.12 | 45.77 | 46.22 |
| Low | 38.24 | 51.50 | 37.76 | 38.27 | 34.31 |
| At\tMay\t31, |  |  |  |  |  |
| Cash\tand\tequivalents | $2,291.1 | $2,133.9 | $1,856.7 | $954.2 | $1,388.1 |
| Short-term\tinvestments | 1,164.0 | 642.2 | 990.3 | 1,348.8 | 436.6 |
| Inventories | 2,357.0 | 2,438.4 | 2,121.9 | 2,076.7 | 1,811.1 |
| Working\tcapital | 6,457.0 | 5,517.8 | 5,492.5 | 4,733.6 | 4,339.7 |
| Total\tassets | \t 13,249.6 | \t 12,442.7 | \t 10,688.3 | 9,869.6 | 8,793.6 |
| Long-term\tdebt | 437.2 | 441.1 | 409.9 | 410.7 | 687.3 |
| Redeemable\tPreferred\tStock | 0.3 | 0.3 | 0.3 | 0.3 | 0.3 |
| Shareholders'\tequity | 8,693.1 | 7,825.3 | 7,025.4 | 6,285.2 | 5,644.2 |
| Year-end\tstock\tprice | 57.05 | 68.37 | 56.75 | 40.16 | 41.10 |
| Market\tcapitalization | \t 27,697.8 | \t 33,576.5 | \t 28,472.3 | \t 20,564.5 | \t 21,462.3 |
| Financial\tRatios: |  |  |  |  |  |
| Return\ton\tequity | 18.0% | 25.4% | 22.4% | 23.3% | 23.2% |
| Return\ton\tassets | 11.6% | 16.3% | 14.5% | 14.9% | 14.5% |
| Inventory\tturns | 4.4 | 4.5 | 4.4 | 4.3 | 4.4 |
| Current\tratio\tat\tMay\t31 | 3.0 | 2.7 | 3.1 | 2.8 | 3.2 |
| Price/Earnings\tratio\tat\tMay\t31 | 18.8 | 18.3 | 19.4 | 15.2 | 18.3 |

	 All	share	and	per	share	information	has	been	restated	to	reflect	a	two-for-one	stock	split	affected	in	the	form	of	a	100%	common	stock	dividend	distributed	on April	2,	2007.

# Selected	Quarterly	Financial	Data

|  | 1st	Quarter | 1st	Quarter | 2nd	Quarter | 2nd	Quarter | 3rd	Quarter | 3rd	Quarter | 4th	Quarter | 4th	Quarter |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
|  |  |  |  | (Unaudited) |  |  |  |  |
|  |  |  | (In\tmillions,\texcept\tper\tshare\tdata) | (In\tmillions,\texcept\tper\tshare\tdata) | (In\tmillions,\texcept\tper\tshare\tdata) |  |  |  |
| Revenues | $5,432.2 | $4,655.1 | $4,590.1 | $4,339.5 | $4,440.8 | $4,544.4 | $4,713.0 | $5,088.0 |
| Gross\tmargin | \t 2,562.1 | \t 2,087.0 | \t 2,050.0 | \t 1,921.1 | \t 1,948.5 | \t 2,047.9 | \t 2,043.8 | \t 2,331.4 |
| Gross\tmargin\t% | 47.2% | 44.8% | 44.7% | 44.3% | 43.9% | 45.1% | 43.4% | 45.8% |
| Restructuring\tcharges | — | — | — | — | — | — | 195.0 | — |
| Goodwill\timpairment | — | — | — | — | 199.3 | — | — | — |
| Intangible\tand\tother\tasset\timpairment | — | — | — | — | 202.0 | — | — | — |
| Net\tincome | 510.5 | 569.7 | 391.0 | 359.4 | 243.8 | 463.8 | 341.4 | 490.5 |
| Basic\tearnings\tper\tcommon\tshare | 1.05 | 1.14 | 0.81 | 0.72 | 0.50 | 0.94 | 0.70 | 1.00 |
| Diluted\tearnings\tper\tcommon\tshare | 1.03 | 1.12 | 0.80 | 0.71 | 0.50 | 0.92 | 0.70 | 0.98 |
| Weighted\taverage\tcommon\tshares\toutstanding | 487.2 | 499.4 | 483.7 | 497.6 | 484.0 | 493.9 | 484.8 | 491.4 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 494.9 | 507.3 | 489.8 | 506.2 | 488.1 | 502.5 | 489.4 | 500.1 |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | 0.23 | 0.185 | 0.25 | 0.23 | 0.25 | 0.23 | 0.25 | 0.23 |
| Price\trange\tof\tcommon\tstock |  |  |  |  |  |  |  |  |
| High | 70.28 | 60.35 | 68.00 | 66.57 | 57.33 | 67.93 | 57.14 | 70.60 |
| Low | 54.64 | 51.87 | 42.68 | 54.15 | 40.08 | 51.50 | 38.24 | 56.70 |

# Item	7. 	 Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

# Overview

NIKE	designs,	develops	and	markets	high	quality	footwear,	apparel,	equipment	and	accessory	products	worldwide.	We	are	the	largest	seller	of	athletic	footwear and	apparel	in	the	world	and	sell	our	products	primarily	through	a	combination	of	retail	accounts,	NIKE-owned	retail,	including	stores	and	e-commerce,	independent distributors,	franchisees	and	licensees	worldwide.	Our	goal	is	to	deliver	value	to	our	shareholders	by	building	a	profitable	global	portfolio	of	branded	footwear,	apparel, equipment	and	accessories	businesses.	Our	strategy	is	to	achieve	long-term	revenue	growth	by	creating	innovative,	"must	have"	products;	building	deep	personal consumer	connections	with	our	brands;	and	delivering	compelling	retail	presentation	and	experiences.

We	strive	to	convert	revenue	growth	to	shareholder	value	by	driving	operating	excellence	in	several	key	areas:

•	 Making	our	supply	chain	a	competitive	advantage,	through	operational	discipline

•	 Reducing	product	costs	through	a	continued	focus	on	lean	manufacturing	and	product	design	that	strives	to	eliminate	waste

•Improving	selling	and	administrative	expense	productivity	by	focusing	on	investments	that	drive	economic	returns	in	the	form	of	incremental	revenue	and gross	margin,	and	leveraging	existing	infrastructure	across	our	portfolio	of	brands	to	eliminate	duplicative	costs

•Improving	working	capital	efficiency

•	 Deploying	capital	effectively	to	create	value	for	our	shareholders

Through	execution	of	this	strategy,	our	long-term	financial	goal	is	to	achieve:

•	 High	single-digit	revenue	growth

•	 Mid-teens	earnings	per	share	growth

•Increased	return	on	invested	capital	and	accelerated	cash	flows,	and

•	 Consistent	results	through	effective	management	of	our	diversified	portfolio	of	businesses

Since	the	adoption	of	this	long-term	strategy	in	2001,	on	an	annual	compounded	basis,	NIKE,	Inc.'s	revenues	and	earnings	per	share	have	grown	9%	and	14%, respectively.	During	the	same	period,	our	return	on	invested	capital	increased	from	14%	to	18%.	In	fiscal	2009,	deteriorating	macroeconomic	conditions	caused significant	volatility	in	global	financial	markets	and	put	significant	pressure	on	discretionary	consumer	spending	worldwide.	NIKE's	fiscal	2009	revenues	grew	3%	to $19.2	billion,	net	income	decreased	21%	to	$1.5	billion,	and	we	delivered	diluted	earnings	per	share	of	$3.03,	a	19%	decrease	versus	fiscal	2008.	Our	fiscal	2009 reported	results	also	contain	significant	non-comparable	transactions,	including	after-tax	charges	of	$144.5	million	for	our	restructuring	activities,	which	were	completed in	the	fourth	quarter	of	fiscal	2009,	and	$240.7	million	for	the	impairment	of	goodwill,	intangible	and	other	assets	of	Umbro,	which	was	recorded	in	the	third	quarter	of fiscal	2009.	Our	fiscal	2008	reported	results	include	combined	gains	from	the	sale	of	our	Starter	Brand	and	NIKE	Bauer	Hockey	businesses	of	$35.4	million,	net	of	tax, and	a	one-time	tax	benefit	of	$105.4	million.	Excluding	these	non-comparable	items,	net	income	would	have	increased	7%	to	$1.9	billion	and	diluted	earnings	per	share would	have	increased	10%	to	$3.81	compared	to	fiscal	2008	(see	Reconciliation	of	Net	Income	and	Diluted	Earnings	Per	Share	Excluding	Non-Comparable	items below).	The	increase	in	our	net	income	excluding	non-comparable	items	was	higher	than	our	rate	of	revenue	growth	in	fiscal	2009	due	primarily	to	an	increase	in	other (income)	expense,	net,	which	included	foreign	currency	conversion	gains	of	$43.4	million	compared	to	foreign	currency	conversion	losses	of	$76.6	million	in	fiscal 2008,	and	the	recognition	of	licensing	income	of	$24.0	million	related	to	our	fiscal	2008	sale	of	the	NIKE	Bauer	Hockey	business.	Excluding	non-comparable	items,	our earnings	per	share	for	the	year	grew	at	a	higher	rate	than	net	income	given	lower	outstanding	shares	due	to	repurchases	made	under	our	share	repurchase	program	in	the first	half	of	fiscal	2009.	Our	cash	flows	from	operations	and	return	on	invested	capital	both	declined	as	compared	to	fiscal	2008.

During	fiscal	2009,	we	took	steps	we	believe	prudent	and	necessary	to	identify	and	manage	potential	exposures	and	to	position	ourselves	for	sustainable, profitable	long-term	growth.	In	the	fourth	quarter	of	fiscal	2009,	we	executed	a	plan	of	restructuring	the	organization	to	streamline	our	management	structure,	enhance consumer	focus,	drive	innovation	more	quickly	to	market,	and	establish	a	more	scalable	cost	structure.	As	a	result	of	these	actions,	we	reduced	our	global	workforce	by approximately	5%	and	incurred	pre-tax	restructuring	charges	of	$195	million,	primarily	consisting	of	cash	charges	related	to	severance	costs.	As	part	of	this restructuring	plan,	we	also	initiated	a	reorganization	of	the	NIKE	brand	business	into	a	new	operating	model	consisting	of	six	geographies.	As	a	result	of	the reorganization,	beginning	in	the	first	quarter	of	fiscal	2010,	our	new	organizational	structure	will	consist	of	the	following	geographies:	North	America,	Western	Europe, Central/Eastern	Europe,	Greater	China,	Japan,	and	Emerging	Markets.

Other	steps	taken	in	fiscal	2009	included	reductions	in	planned	selling	and	administrative	expenses,	including	the	implementation	of	a	hiring	freeze,	reductions	in planned	spending	for	travel,	meetings	and	demand	creation,	as	well	as	tighter	inventory	purchasing	and	working	capital	management.	We	also	placed	increased	focus	on monitoring	the	financial	health	of	suppliers	and	customers	and	continued	to	take	proactive	measures	to	consolidate	production	with	our	strongest,	most	efficient	and innovative	manufacturing	contractors	to	ensure	we	maintain	a	healthy	production	base	for	the	present	and	the	future.	These	capacity	consolidation	actions	could	result	in additional	costs	associated	with	production	and	logistics	as	well	as	supply	chain	disruptions	in	the	first	half	of	fiscal	year	2010	as	we	transition	production	between manufacturing	contractors;	however,	we	do	not	believe	these	potential	additional	costs	will	have	a	material	impact	on	our	operating	results.

We	continue	to	believe	that	the	Company	is	well	positioned	from	a	business	and	financial	perspective,	but	we	are	not	immune	to	the	current	challenging	global economic	conditions.	These	conditions	could	continue	to	affect	our	business	in	a	number	of	direct	and	indirect	ways,	including	lower	revenue	from	slowing consumer/customer	demand	for	our	products,	reduced	profit	margins	and/or	increased	costs,	changes	in	interest	and	currency	exchange	rates,	lack	of	credit	availability and	business	disruptions	due	to	difficulties	experiences	by	suppliers	and	customers.	Our	future	performance	is	subject	to	the	inherent	uncertainty	presented	by	the evolving	macroeconomic	conditions	and	our	continued	actions	to	respond	to	these	conditions.

# Results	of	Operations

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  | (In\tmillions,\texcept\tper\tshare\tdata) | (In\tmillions,\texcept\tper\tshare\tdata) |  |  |
| Revenues | $19,176.1 | $18,627.0 | 3% | $16,325.9 | 14% |
| Cost\tof\tsales | \t 10,571.7 | \t 10,239.6 | 3% | 9,165.4 | 12% |
| Gross\tmargin | 8,604.4 | 8,387.4 | 3% | 7,160.5 | 17% |
| Gross\tmargin\t% | 44.9% | 45.0% |  | 43.9% |  |
| Selling\tand\tadministrative\texpense | 6,149.6 | 5,953.7 | 3% | 5,028.7 | 18% |
| %\tof\tRevenues | 32.1% | 32.0% |  | 30.8% |  |
| Restructuring\tcharges | 195.0 | — | — | — | — |
| Goodwill\timpairment | 199.3 | — | — | — | — |
| Intangible\tand\tother\tasset\timpairment | 202.0 | — | — | — | — |
| Income\tbefore\tincome\ttaxes | 1,956.5 | 2,502.9 | -22% | 2,199.9 | 14% |
| Net\tincome | 1,486.7 | 1,883.4 | -21% | 1,491.5 | 26% |
| Diluted\tearnings\tper\tshare | 3.03 | 3.74 | -19% | 2.93 | 28% |

# Reconciliation	of	Net	Income	and	Diluted	Earnings	Per	Share	Excluding	Non-Comparable	Items^(1)

|  | Fiscal	2009 | Fiscal	2008 | Change |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions,\texcept\tper\tshare\tdata) |  |
| Net\tincome,\tas\treported | $1,486.7 | $1,883.4 | -21% |
| Add: |  |  |  |
| Restructuring\tcharges,\tnet\tof\ttax^(2) | 144.5 | — |  |
| Umbro\timpairment\tof\tgoodwill,\tintangible\tand\tother\tassets,\tnet\tof\ttax^(3) | 240.7 | — |  |
| Gain\trecognized\ton\tsale\tof\tNIKE\tBauer\tHockey,\tnet\tof\ttax | — | (17.7) |  |
| Gain\trecognized\ton\tsale\tof\tStarter\tBusiness,\tnet\tof\ttax | — | (17.7) |  |
| One-time\ttax\tbenefits^(4) | — | (105.4) |  |
| Net\tincome,\texcluding\tnon-comparable\titems | $1,871.9 | $1,742.6 | 7% |
| Diluted\tearnings\tper\tshare,\tas\treported | $3.03 | $3.74 | -19% |
| Add: |  |  |  |
| Restructuring\tcharges,\tnet\tof\ttax^(2) | 0.29 | — |  |
| Umbro\timpairment\tof\tgoodwill,\tintangible\tand\tother\tassets,\tnet\tof\ttax^(3) | 0.49 | — |  |
| Gain\trecognized\ton\tsale\tof\tNIKE\tBauer\tHockey, |  |  |  |
| net\tof\ttax | — | (0.04) |  |
| Gain\trecognized\ton\tsale\tof\tStarter\tBusiness,\tnet\tof\ttax | — | (0.04) |  |
| One-time\ttax\tbenefits^(4) | — | (0.21) |  |
| Diluted\tearnings\tper\tshare,\texcluding\tnon-comparable\titems | $3.81 | $3.45 | 10% |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding |  |  |  |
|  | 490.7 | 504.1 |  |

This	schedule	is	intended	to	satisfy	the	quantitative	reconciliation	for	non-GAAP	financial	measures	in	accordance	with	Regulation	G	and	Item	10(e)	of Regulation	S-K	of	the	Securities	and	Exchange	Commission.	In	addition,	this	schedule	is	provided	to	enhance	the	visibility	of	the	underlying	business	trends excluding	these	non-comparable	items	for	the	years	ended	May	31,	2009	and	2008. (1)

In	the	fourth	quarter	of	fiscal	2009,	we	took	necessary	steps	to	streamline	our	management	structure,	enhance	consumer	focus,	drive	innovation	more	quickly	to market,	and	establish	a	more	scalable,	long-term	cost	structure.	As	a	result,	we	incurred	a	$195	million	pre-tax	restructuring	charge	primarily	consisting	of severance	costs	related	to	the	workforce	reduction. (2)

	 We	recorded	a	non-cash	impairment	charge	during	the	third	quarter	of	fiscal	2009	to	reduce	the	carrying	value	of	Umbro's	goodwill,	indefinite-lived	trademark and	other	assets.	The	impairment	charge	is	a	result	of	both	the	deteriorating	global	consumer	markets,	particularly	in	Umbro's	primary	market,	the	United Kingdom,	and	management's	decision	to	adjust	planned	investment	in	the	brand.	In	addition,	the	deterioration	of	the	financial	markets	has	reduced	both	the present	value	of	future	cash	flows	and	the	market	value	of	comparable	businesses. (3)

The	tax	benefit	realized	during	fiscal	2008	relates	to	steps	taken	to	realize	losses	generated	by	several	international	entities	for	which	we	had	not	previously recognized	the	offsetting	tax	benefit	because	the	realization	of	those	benefits	had	been	uncertain.	The	necessary	steps	to	realize	those	tax	benefits	were	taken during	fiscal	2008	resulting	in	a	one-time	reduction	of	the	effective	tax	rate. (4)

# Consolidated	Operating	Results

# Revenues

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues | $19,176.1 | $18,627.0 | 3% | $16,325.9 | 14% |

During	fiscal	2009,	changes	in	foreign	currency	exchange	rates	decreased	revenues	by	1	percentage	point.	The	U.S.	Region	contributed	nearly	1	percentage	point of	the	consolidated	revenue	growth	for	fiscal	2009.	Excluding	the	effects	of	changes	in	currency	exchange	rates,	our	international	regions	contributed	over	3	percentage points	of	the	consolidated	revenue	growth	for	fiscal	2009,	as	all	of	our	international	regions	posted	higher	revenues	on	a	currency	neutral	basis.	By	product	group,	our worldwide	NIKE	brand	footwear	business	reported	revenue	growth	of	6%	and	contributed	$575	million	of	incremental	revenue	for	fiscal	2009.	Worldwide	NIKE branded	apparel	revenues	were	in	line	with	the	prior	year,	while	equipment	revenues	declined	2%	or	$20	million.

Our	Other	businesses,	comprised	primarily	of	results	from	Cole	Haan,	Converse	Inc.,	Hurley	International	LLC,	NIKE	Golf,	and	Umbro	in	fiscal	2009, constituted	the	remaining	revenue.	In	fiscal	2008,	our	Other	businesses	also	included	Exeter	Brands	Group	(whose	primary	business	was	the	Starter	brand	business which	was	sold	on	December	17,	2007)	and	NIKE	Bauer	Hockey	(which	was	sold	on	April	17,	2008).	Umbro	was	acquired	on	March	3,	2008.	Revenues	for	these businesses	declined	1%	or	$17	million.

During	fiscal	2008,	changes	in	foreign	currency	exchange	rates	contributed	5	percentage	points	of	consolidated	revenue	growth.	Strong	demand	for	NIKE	brand products	continued	to	drive	revenue	growth,	as	all	four	of	our	geographic	regions	and,	on	a	consolidated	basis,	all	three	of	our	product	business	units	delivered	revenue growth.	The	U.S.	Region	contributed	nearly	2	percentage	points	of	the	consolidated	revenue	growth	for	fiscal	2008.	Excluding	the	effects	of	changes	in	currency exchange	rates,	our	international	regions	contributed	nearly	7	percentage	points	of	the	consolidated	revenue	growth	for	fiscal	2008,	as	all	of	our	international	regions posted	higher	revenues.	Our	Other	businesses	contributed	the	remaining	consolidated	constant-currency	revenue	growth,	as	Cole	Haan,	Converse,	Hurley	and	NIKE	Golf posted	higher	year-over-year	revenues.

By	product	group,	worldwide	NIKE	brand	footwear	revenue	grew	14%	and	contributed	more	than	$1.2	billion	of	incremental	revenue	for	fiscal	2008.	Worldwide NIKE	branded	apparel	and	equipment	businesses	reported	revenue	growth	of	14%	and	6%	for	the	year,	respectively,	and	combined	added	approximately	$750	million	of incremental	revenue	in	fiscal	2008.	Our	Other	businesses	reported	revenue	growth	of	17%	and	combined	added	more	than	$360	million	of	incremental	revenue.

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Gross\tMargin | $8,604.4 | $8,387.4 | 3% | $7,160.5 | 17% |
| Gross\tMargin\t% | 44.9% | 45.0% | (10\tbps) | 43.9% | 110\tbps |

During	fiscal	2009,	the	primary	factors	contributing	to	the	10	basis	point	decline	in	consolidated	gross	margin	percentage	versus	the	prior	year	were	lower	gross pricing	margins	and	increased	discounts	which,	when	combined,	decreased	consolidated	gross	margins	by	approximately	60	basis	points.	This	decrease	was	partially offset	by	improved	hedge	rates	relative	to	the	prior	year,	primarily	in	the	Europe,	Middle	East	and	Africa	("EMEA")	Region.	Gross	pricing	margins	were	lower, primarily	driven	by	higher	product	input	costs,	most	notably	for	footwear	products.	Higher	levels	of	discounts	were	provided	across	all	businesses	in	fiscal	2009	to manage	inventory	levels.

We	anticipate	our	gross	margins	in	fiscal	2010	will	be	negatively	impacted	by	hedge	rates	that	are	unfavorable	in	comparison	to	the	prior	year.

During	fiscal	2008,	the	primary	factors	contributing	to	the	110	basis	point	increase	in	the	consolidated	gross	margin	percentage	versus	the	prior	year	included: higher	footwear	in-line	gross	pricing	margins,	most	notably	in	the	U.S.	Region,	primarily	due	to	strategic	price	increases;	improved	currency	hedge	rates	relative	to	the prior	year,	primarily	in	the	EMEA	Region;	and	higher	footwear	close-out	net	pricing	margins,	most	notably	in	the	EMEA	Region,	primarily	due	to	better	inventory management.	The	factors	driving	an	increased	gross	margin	percentage	were	partially	offset	by	lower	apparel	in-line	gross	pricing	margins	primarily	driven	by	higher product	costs,	most	notably	in	the	U.S.	and	EMEA	regions,	and	increased	apparel	close-out	sales,	primarily	in	the	U.S.	Region.

# Selling	and	Administrative	Expense

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Operating\toverhead\texpense | $3,798.2 | $3,645.4 | 4% | $3,116.3 | 17% |
| Demand\tcreation\texpense^(1) | 2,351.4 | 2,308.3 | 2% | 1,912.4 | 21% |
| Selling\tand\tadministrative\texpense | $6,149.6 | $5,953.7 | 3% | $5,028.7 | 18% |
| %\tof\tRevenues | 32.1% | 32.0% | 10\tbps | 30.8% | 120\tbps |

	 Demand	creation	consists	of	advertising	and	promotion	expenses,	including	costs	of	endorsement	contracts.

Changes	in	foreign	currency	exchange	rates	decreased	selling	and	administrative	expense	by	2	percentage	points	in	fiscal	2009.	Excluding	changes	in	exchange rates,	operating	overhead	increased	6%	during	fiscal	2009.	The	increase	in	operating	overhead	in	fiscal	2009	was	primarily	attributable	to	investments	in	growth	drivers such	as	NIKE-owned	retail	in	the	U.S.,	EMEA	and	Asia	Pacific	regions,	infrastructure	for	emerging	markets	in	the	EMEA	and	Asia	Pacific	regions	and	non-NIKE	brand businesses,	which	more	than	offset	the	steps	taken	to	reduce	operating	overhead	spending	including	implementation	of	a	hiring	freeze	and	reductions	in	spending	for travel	and	meetings.

On	a	constant-currency	basis,	demand	creation	expense	increased	3%	during	fiscal	2009.	Demand	creation	spending	decreased	in	the	second	half	of	fiscal	2009	as a	result	of	actions	taken	to	reduce	spending	across	nearly	all	demand	creation	related	activities,	most	notably	traditional	media	and	print	advertising.	The	increase	in demand	creation	the	first	half	of	fiscal	2009	was	primarily	attributable	to	strategic	investments	in	demand	creation,	including	first	quarter	spending	around	the	Beijing Summer	Olympics	and	the	European	Football	Championships,	and	increased	investments	in	athlete	and	team	endorsements	across	all	regions.

In	fiscal	2010,	we	intend	to	reduce	selling	and	administrative	spending	while	shifting	resources	to	fund	initiatives	that	are	critical	to	the	achievement	of	our	long- term	growth	goals.	We	expect	our	selling	and	administrative	expenses	to	decline	in	the	first	half	of	fiscal	2010	compared	to	the	same	period	in	the	prior	year,	reflecting both	lower	operating	overhead	and	demand	creation	spending,	with	the	latter	driven	partially	by	the	comparison	to	the	significant	prior	year	demand	creation	investment around	the	Beijing	Summer	Olympics	and	European	Football	Championships.	Future	selling	and	administrative	expense	may	vary	from	our	current	expectations	due	to changes	in	the	rapidly	evolving	macroeconomic	environment	and	our	reaction	to	those	changes.

In	fiscal	2008,	selling	and	administrative	expenses	increased	as	a	percentage	of	revenues	by	120	basis	points,	driven	primarily	by	strategic	investments	in	both demand	creation	and	operating	overhead.	Changes	in	currency	exchange	rates	increased	selling	and	administrative	expense	growth	by	4	percentage	points.

On	a	constant-currency	basis,	demand	creation	expense	increased	15%	versus	the	prior	year.	The	year-over-year	increase	was	primarily	attributable	to	investments in	athlete	and	sport	team	endorsers	of	our	products,	spending	around	major	sporting	events	including	the	European	Football	Championships	and	the	Beijing	Summer Olympics,	key	product	initiatives	such	as	Men's	Training	in	the	U.S.	and	retail	presentation.

Excluding	the	effects	of	changes	in	exchange	rates,	operating	overhead	increased	14%	versus	the	prior	year.	The	increase	in	operating	overhead	was	attributable	to investments	in	growth	drivers	such	as	NIKE-owned	retail,	non-NIKE	brand	businesses,	emerging	markets	and	normal	wage	inflation	and	performance-based compensation.

# Restructuring	Charges

During	the	fourth	quarter	of	fiscal	2009,	we	executed	a	plan	to	restructure	the	organization	to	streamline	our	management	structure,	enhance	consumer	focus, drive	innovation	more	quickly	to	market	and	establish	a	more	scalable	cost	structure.	As	a	result	of	these	actions,	we	reduced	our	global	workforce	by	approximately	5% and	incurred	pre-tax	restructuring	charges	of	$195	million,	primarily	consisting	of	cash	charges	related	to	severance	costs.	These	charges	are	included	in	our	"Corporate" category	for	segment	reporting	purposes.

# Goodwill,	Intangible	and	Other	Asset	Impairment

In	the	third	quarter	of	fiscal	2009,	we	recognized	a	$401.3	million	pre-tax	non-cash	impairment	charge	to	reduce	the	carrying	value	of	Umbro's	goodwill, intangible	and	other	assets.	Although	Umbro's	financial

performance	for	fiscal	2009	was	slightly	better	than	we	had	originally	expected,	projected	future	cash	flows	had	fallen	below	the	levels	we	expected	at	the	time	of acquisition.	This	erosion	is	a	result	of	both	the	unprecedented	decline	in	global	consumer	markets,	particularly	in	the	United	Kingdom,	and	our	decision	to	adjust	the level	of	investment	in	the	business.

We	measured	the	fair	value	of	Umbro	by	using	an	equal	weighting	of	the	fair	value	implied	by	a	discounted	cash	flow	analysis	and	by	comparisons	with	the market	values	of	similar	publicly	traded	companies.	We	believe	the	blended	use	of	both	models	compensates	for	the	inherent	risk	associated	with	either	model	if	used	on a	stand-alone	basis,	and	this	combination	is	indicative	of	the	factors	a	market	participant	would	consider	when	performing	a	similar	valuation.	The	fair	value	of	Umbro's indefinite-lived	trademark	was	estimated	using	the	relief	from	royalty	method,	which	assumes	that	the	trademark	has	value	to	the	extent	that	Umbro	is	relieved	of	the obligation	to	pay	royalties	for	the	benefits	received	from	the	trademark.	Our	assessments	have	resulted	in	the	recognition	of	impairment	charges	of	$199.3	million	and $181.3	million	related	to	Umbro's	goodwill	and	trademark,	respectively,	in	fiscal	2009.	In	addition	to	the	impairment	analysis,	we	determined	an	equity	investment	held by	Umbro	was	impaired,	and	recognized	a	charge	of	$20.7	million	related	to	the	impairment	of	this	investment.	These	charges	are	included	in	our	"Other"	category	for segment	reporting	purposes.

For	additional	information	about	our	impairment	charges,	see	Note	4	—	Acquisition,	Identifiable	Intangible	Assets,	Goodwill	and	Umbro	Impairment	in	the accompanying	notes	to	the	consolidated	financial	statements.

# Other	(Income)	Expense,	net

For	fiscal	2009,	other	(income)	expense,	net	was	a	gain	of	$88.5	million	compared	to	a	loss	of	$7.9	million	in	fiscal	2008.	Other	(income)	expense,	net	is primarily	comprised	of	foreign	currency	conversion	gains	and	losses	from	the	remeasurement	of	monetary	assets	and	liabilities	in	non-functional	currencies	and	results of	foreign	currency	derivative	instruments,	as	well	as	disposals	of	fixed	assets	and	other	unusual	or	non-recurring	transactions	that	are	outside	the	normal	course	of business.	For	fiscal	2009,	other	(income)	expense,	net	was	primarily	comprised	of	$43.4	million	of	foreign	currency	conversion	gains	and	the	recognition	of	$24.0 million	of	licensing	income	related	to	our	fiscal	2008	sale	of	the	NIKE	Bauer	Hockey	business.	For	fiscal	2008,	other	(income)	expense,	net	was	primarily	comprised	of a	$32.0	million	gain	on	the	sale	of	NIKE	Bauer	Hockey	and	a	$28.6	million	gain	on	the	sale	of	the	Starter	brand	business,	as	well	as	foreign	currency	conversion	losses of	$76.6	million.

Foreign	currency	conversion	gains	and	losses	reported	in	other	(income)	expense,	net,	with	the	exception	of	gains	and	losses	generated	by	the	EMEA	Region	and Other	businesses,	are	reflected	in	the	Corporate	line	in	our	segment	presentation	of	pre-tax	income	in	the	accompanying	notes	to	the	consolidated	financial	statements (Note	19	—	Operating	Segments	and	Related	Information).

For	fiscal	2009,	we	estimate	that	the	combination	of	foreign	currency	conversion	gains	in	other	(income)	expense,	net	and	the	modestly	favorable	translation	of foreign	currency-denominated	profits	from	our	international	businesses	resulted	in	a	year-over-year	increase	in	consolidated	income	before	income	taxes	of approximately	$124	million.

For	fiscal	2008,	other	(income)	expense,	net	was	a	loss	of	$7.9	million	compared	to	a	gain	of	$0.9	million	in	fiscal	2007.	In	fiscal	2008,	other	(income)	expense, net	included	foreign	currency	conversion	losses	that	were	partially	offset	by	the	$32.0	million	gain	on	the	sale	of	NIKE	Bauer	Hockey	and	the	$28.6	million	gain	on	the sale	of	the	Starter	brand	business.	Other	(income)	expense,	net	in	fiscal	2007	is	primarily	comprised	of	the	$14.7	million	gain	on	the	sale-leaseback	of	our	Oregon footwear	distribution	center	and	the	$14.2	million	benefit	from	the	settlement	of	the	Converse	arbitration,	partially	offset	by	foreign	currency	conversion	losses.

In	fiscal	2008,	we	estimate	that	the	combination	of	favorable	translation	of	foreign	currency-denominated	profits	from	international	businesses	and	the	foreign currency	conversion	losses	included	in	other	(income)	expense,	net	resulted	in	a	year-over-year	increase	in	consolidated	income	before	income	taxes	of	approximately $122	million.

# Income	Taxes

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
| Effective\ttax\trate | 24.0% | 24.8% | (80)\tbps | 32.2% | (740)\tbps |

Our	effective	tax	rate	for	fiscal	2009	was	80	basis	points	lower	than	the	effective	tax	rate	for	fiscal	2008	due	primarily	to	the	tax	benefit	related	to	the	impairment of	goodwill,	intangible	and	other	assets	of	Umbro	that	had	a	favorable	impact	of	250	basis	points.	Profits	earned	outside	of	the	U.S.,	the	impact	of	the	resolution	of foreign	audit	items	and	the	retroactive	reinstatement	of	the	research	and	development	tax	credit	also	favorably	impacted	our	fiscal	2009	effective	tax	rate.	Reflected	in the	effective	tax	rate	for	fiscal	2008	was	a	one-time	tax	benefit	of	$105.4	million,	which	had	a	favorable	impact	of	420	basis	points	on	our	effective	tax	rate.	We	estimate that	our	effective	tax	rate	for	fiscal	year	2010	will	be	approximately	25.5%.

Our	effective	tax	rate	for	fiscal	2008	was	24.8%,	740	basis	points	lower	than	the	prior	year.	Over	the	last	few	years,	several	of	our	international	entities	generated losses	for	which	we	did	not	recognize	the	corresponding	tax	benefits,	as	the	realization	of	those	benefits	was	uncertain.	In	the	first	quarter	of	fiscal	2008,	we	took	steps necessary	to	realize	these	benefits,	resulting	in	a	one-time	tax	benefit	of	$105.4	million.	Also	reflected	in	the	year-over-year	effective	tax	rate	improvement	was	a reduction	in	our	on-going	effective	tax	rate	resulting	from	our	profits	earned	outside	the	United	States;	our	effective	tax	rates	for	these	operations	are	generally	lower than	the	U.S.	statutory	rate.

# Futures	Orders

Worldwide	futures	and	advance	orders	for	footwear	and	apparel	scheduled	for	delivery	from	June	through	November	2009	declined	12%	compared	to	orders reported	for	the	comparable	period	of	fiscal	2009.	This	futures	growth	rate	is	calculated	based	upon	our	forecasts	of	the	actual	exchange	rates	under	which	our	revenues will	be	translated	during	this	period,	which	approximate	current	spot	rates.	The	net	effect	from	changes	in	currency	exchange	rates	contributed	approximately	7 percentage	points	to	this	reported	futures	decline	versus	the	same	period	in	the	prior	year.	Excluding	this	currency	impact,	lower	apparel	orders	drove	most	of	the	decline in	overall	futures	and	advance	orders.

The	reported	futures	and	advance	orders	are	not	necessarily	indicative	of	our	expectation	of	revenue	growth	during	this	period.	This	is	because	the	mix	of	orders can	shift	between	advance/futures	and	at-once	orders	and	that	the	fulfillment	of	certain	orders	may	fall	outside	of	the	scheduled	noted	above.	In	addition,	exchange	rate fluctuations	as	well	as	differing	levels	of	order	cancellations	and	discounts	can	cause	differences	in	the	comparisons	between	futures	and	advance	orders,	and	actual revenues.	Moreover,	a	significant	portion	of	our	revenue	is	not	derived	from	futures	and	advance	orders,	including	at-once	and	close-out	sales	of	NIKE	footwear	and apparel,	wholesale	sales	of	equipment,	Cole	Haan,	Converse,	Hurley,	Umbro,	NIKE	Golf	and	retail	sales	across	all	brands.

# Operating	Segments

The	breakdown	of	revenues	follows:

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008^(1) | %\tChange | Fiscal\t2007^(1) | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| U.S.\tRegion | $6,542.9 | $6,414.5 | 2% | $6,131.7 | 5% |
| EMEA\tRegion | 5,512.2 | 5,629.2 | -2% | 4,764.1 | 18% |
| Asia\tPacific\tRegion | 3,322.0 | 2,887.6 | 15% | 2,295.7 | 26% |
| Americas\tRegion | 1,284.7 | 1,164.7 | 10% | 966.7 | 20% |
| Total\tNIKE\tBrand\tRevenues | \t 16,661.8 | 16,096.0 | 4% | 14,158.2 | 14% |
| Other | 2,514.3 | 2,531.0 | -1% | 2,167.7 | 17% |
| Total\tNIKE,\tInc.\tRevenues | $19,176.1 | $ 18,627.0 | 3% | $ 16,325.9 | 14% |

The	breakdown	of	income	before	income	taxes	("pre-tax	income")	follows:

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008^(1) | %\tChange | Fiscal\t2007^(1) | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| U.S.\tRegion | $1,337.9 | $1,402.0 | -5% | $1,386.1 | 1% |
| EMEA\tRegion | 1,316.9 | 1,281.9 | 3% | 1,050.1 | 22% |
| Asia\tPacific\tRegion | 853.4 | 694.2 | 23% | 515.4 | 35% |
| Americas\tRegion | 274.1 | 242.3 | 13% | 199.3 | 22% |
| Other | (196.7) | 364.9 | -154% | 299.7 | 22% |
| Corporate\tExpense | (1,629.1) | (1,482.4) | -10% | (1,250.7) | -19% |
| Total\tPre-tax\tIncome | $1,956.5 | $2,502.9 | -22% | $2,199.9 | 14% |

	 Certain	prior	year	amounts	have	been	reclassified	to	conform	to	fiscal	year	2009	presentation.	These	changes	had	no	impact	on	previously	reported	results	of operations	or	shareholders'	equity.

The	following	discussion	includes	disclosure	of	pre-tax	income	for	our	operating	segments.	We	have	reported	pre-tax	income	for	each	of	our	operating	segments in	accordance	with	Statement	of	Financial	Accounting	Standard	("SFAS")	No.	131,	"Disclosures	about	Segments	of	an	Enterprise	and	Related	Information."	As discussed	in	Note	19	—	Operating	Segments	and	Related	Information	in	the	accompanying	notes	to	the	consolidated	financial	statements,	certain	corporate	costs	are	not included	in	pre-tax	income	of	our	operating	segments.

# U.S.	Region

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues |  |  |  |  |  |
| Footwear | $4,550.8 | $4,326.8 | 5% | $4,067.2 | 6% |
| Apparel | 1,664.4 | 1,745.1 | -5% | 1,716.1 | 2% |
| Equipment | 327.7 | 342.6 | -4% | 348.4 | -2% |
| Total\tRevenues | $6,542.9 | $6,414.5 | 2% | $6,131.7 | 5% |
| Pre-tax\tIncome | $1,337.9 | $1,402.0 | -5% | $1,386.1 | 1% |

During	fiscal	2009,	the	increase	in	U.S.	footwear	revenue	was	the	result	of	low-single	digit	growth	in	both	unit	sales	and	average	selling	price	per	pair.	The	growth in	unit	sales	was	primarily	driven	by	higher	demand	for	our	Jordan	brand,	action	sports	and	kids'	products.	The	increase	in	average	selling	price	per	pair	was	attributable to	selective	price	increases,	primarily	during	the	first	half	of	fiscal	2009,	and	increased	sales	mix	of	higher	priced	Jordan	brand	products,	partially	offset	by	increased sales	mix	of	kids'	products	which	are	lower	priced.

The	year-over-year	decrease	in	U.S.	apparel	revenues	during	fiscal	2009	reflected	a	mid-single	digit	decrease	in	unit	sales,	primarily	driven	by	a	reduction	in products	sold	to	value	channel	retailers	and	generally	softer	demand	in	the	overall	apparel	market.	Average	selling	prices	increased	slightly	as	a	result	of	the	reduction	in products	sold	to	value	retailers,	mostly	offset	by	an	increased	mix	of	close-out	sales	and	higher	levels	of	discounts	provided	retailers	to	manage	inventory	levels.

Pre-tax	income	for	the	U.S.	Region	declined	in	fiscal	2009	as	a	result	of	higher	operating	overhead	expenses	and	lower	gross	margins.	The	increase	in	operating overhead	was	attributable	to	investments	in	NIKE-owned	retail.	Gross	margins	decreased	as	a	result	of	higher	warehousing	costs,	higher	retail	inventory	markdowns	and increased	customer	discounts	provided	to	manage	inventory	levels.

During	fiscal	2008,	the	increase	in	U.S.	footwear	revenue	was	the	result	of	low-single	digit	growth	in	unit	sales	and	a	slight	increase	in	the	average	selling	price per	pair.	The	growth	in	unit	sales	and	average	selling	price	per	pair	was	driven	by	higher	demand	for	our	NIKE	brand	sportswear	products	and	Jordan	brand	products, partially	offset	by	a	decrease	in	demand	for	our	NIKE	brand	basketball	products.	The	increase	in	average	selling	price	per	pair	was	also	attributable	to	strategic	price increases	and	an	increased	sales	mix	of	higher	priced	NIKE	brand	sportswear	and	Jordan	brand	products.

The	year-over-year	increase	in	U.S.	apparel	revenues	during	fiscal	2008	reflected	an	increase	in	unit	sales,	mostly	offset	by	lower	average	selling	prices.	The increase	in	unit	sales	was	primarily	driven	by	higher	close-out	sales	and	increased	demand	for	NIKE	brand	sports	performance	products,	partially	offset	by	lower	unit sales	of	sportswear	and	Jordan	brand	products.	Average	selling	prices	decreased	primarily	as	a	result	of	a	higher	mix	of	close-out	sales.

The	year-over-year	decrease	in	U.S.	equipment	revenues	during	fiscal	2008	was	primarily	the	result	of	lower	unit	sales	of	accessory	products	and	fewer	close-out sales.

Pre-tax	income	for	the	U.S.	Region	grew	at	a	slower	rate	than	revenue	in	fiscal	2008	as	a	result	of	higher	demand	creation	and	operating	overhead	expenses, partially	offset	by	higher	gross	margins,	driven	by	footwear.	The	increase	in	demand	creation	was	driven	by	higher	sports	marketing	expenses	and	investments	in	the retail	presentation	of	our	key	wholesale	customers.	The	increase	in	operating	overhead	was	attributable	to	investments	in	NIKE-owned	retail	and	normal	wage	inflation.

# EMEA	Region

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues |  |  |  |  |  |
| Footwear | $3,136.7 | $3,112.6 | 1% | $2,608.0 | 19% |
| Apparel | 1,970.2 | 2,083.5 | -5% | 1,757.2 | 19% |
| Equipment | 405.3 | 433.1 | -6% | 398.9 | 9% |
| Total\tRevenues | $5,512.2 | $5,629.2 | -2% | $4,764.1 | 18% |
| Pre-tax\tIncome | $1,316.9 | $1,281.9 | 3% | $1,050.1 | 22% |

For	the	EMEA	Region,	changes	in	currency	exchange	rates	negatively	impacted	revenue	growth	by	approximately	2	percentage	points	in	fiscal	2009.	Excluding changes	in	currency	exchange	rates,	a	number	of	markets	within	the	region	experienced	lower	revenues,	reflecting	a	more	difficult	retail	environment	in	these	markets. The	U.K.	remained	flat	for	fiscal	2009	while	the	emerging	markets	in	the	region	grew	14%,	driven	by	stronger	results	in	Russia	during	the	first	half	of	fiscal	2009.	These results	were	offset	by	lower	revenues	in	Southern	European	markets,	including	Spain,	Italy	and	France.

Excluding	changes	in	exchange	rates,	footwear	revenues	increased	4	percentage	points	during	fiscal	2009.	The	increase	in	footwear	revenue	was	attributable	to mid	single-digit	growth	in	unit	sales,	partially	offset	by	a	low	single-digit	decrease	in	the	average	selling	price	per	pair.	The	growth	in	unit	sales	was	driven	primarily	by higher	demand	for	NIKE	brand	sportswear	and	kids'	products.	The	decrease	in	average	selling	price	per	pair	was	mainly	attributable	to	higher	customer	discounts	and	a shift	in	product	mix	to	lower	priced	product	models,	most	notably	higher	volume	of	kids'	products.

On	a	currency	neutral	basis,	EMEA	apparel	revenue	decreased	4	percentage	points	during	fiscal	2009,	primarily	driven	by	lower	average	selling	prices	resulting from	a	higher	mix	of	close-out	sales	and	higher	levels	of	discounts	provided	retailers	to	manage	inventory	levels,	which	more	than	offset	a	mid	single-digit	increase	in unit	sales.

The	year-over-year	increase	in	pre-tax	income	for	the	EMEA	Region	during	fiscal	2009	was	primarily	driven	by	a	higher	gross	margin	percentage,	partially	offset by	slightly	higher	selling	and	administrative	expenses	as	a	percentage	of	revenues.	The	gross	margin	improvement	in	fiscal	2009	was	primarily	attributable	to	improved year-over-year	currency	hedge	rates	which	more	than	offset	higher	warehousing	costs	and	discounts	on	in-line	products.	The	increase	in	selling	and	administrative expenses	was	mainly	driven	by	retail	expansion	across	the	region.

For	the	EMEA	Region,	changes	in	currency	exchange	rates	contributed	11	percentage	points	of	the	revenue	growth	during	fiscal	2008.	Nearly	all	markets	within the	region	increased	revenues	during	the	year.	The	emerging	markets	in	the	region	grew	nearly	25%,	driven	by	strong	results	in	Russia,	Turkey	and	South	Africa. Increases	in	Northern	Europe	and	the	U.K.	also	contributed	significantly	to	the	revenue	growth.

Excluding	changes	in	exchange	rates,	footwear	revenues	increased	8	percentage	points	during	fiscal	2008	compared	to	the	prior	year.	The	increase	in	footwear revenue	was	attributable	to	double-digit	growth	in	unit	sales,	partially	offset	by	a	low	single-digit	decrease	in	the	average	selling	price	per	pair.	The	growth	in	unit	sales was	driven	primarily	by	higher	demand	for	our	NIKE	brand	soccer	and	sportswear	products.	The	decrease	in

average	selling	price	per	pair	resulted	from	a	shift	in	product	mix	from	higher	priced	to	lower	priced	product	models,	most	notably	within	our	NIKE	brand	sportswear product	lines.

On	a	currency	neutral	basis,	EMEA	apparel	revenue	increased	8	percentage	points	during	fiscal	2008	compared	to	the	prior	year,	primarily	as	a	result	of	increased unit	sales	and	a	slight	increase	in	average	selling	prices.	The	increase	in	unit	sales	was	driven	primarily	by	increased	demand	for	sports	performance	products,	most notably	soccer.

The	increase	in	pre-tax	income	for	the	EMEA	Region	during	fiscal	2008	compared	to	the	prior	year	was	primarily	driven	by	the	increase	in	revenues,	favorable foreign	currency	translation	and	a	higher	gross	margin	percentage,	partially	offset	by	higher	selling	and	administrative	expenses	as	a	percentage	of	revenues.	The	gross margin	improvement	in	fiscal	2008	was	primarily	attributable	to	improved	year-over-year	hedge	rates	and	improved	margins	on	close-out	product.	The	increase	in	selling and	administrative	expenses	was	driven	by	an	increase	in	demand	creation	spending,	primarily	attributable	to	spending	around	the	European	Football	Championships.	As a	result	of	retail	expansion	and	overall	business	growth	across	the	region,	operating	overhead	expenses	increased	for	the	year,	but	at	a	slower	rate	than	revenue	growth.

# Asia	Pacific	Region

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues |  |  |  |  |  |
| Footwear | $1,727.1 | $1,499.5 | 15% | $1,159.2 | 29% |
| Apparel | 1,322.3 | 1,140.0 | 16% | 909.3 | 25% |
| Equipment | 272.6 | 248.1 | 10% | 227.2 | 9% |
| Total\tRevenues | $3,322.0 | $2,887.6 | 15% | $2,295.7 | 26% |
| Pre-tax\tIncome | $853.4 | $694.2 | 23% | $515.4 | 35% |

In	the	Asia	Pacific	Region,	changes	in	currency	exchange	rates	contributed	3	percentage	points	of	revenue	growth	for	fiscal	2009.	Excluding	changes	in	currency exchange	rates,	all	countries	across	the	region	delivered	revenue	growth.	China	continues	to	be	the	primary	driver	of	growth	within	the	region	as	fiscal	2009	revenues increased	22%	on	a	currency-neutral	basis,	driven	by	expansion	in	both	the	number	of	stores	selling	NIKE	products	and	sales	through	existing	stores.	China's	rate	of revenue	growth	slowed	to	6%	in	the	fourth	quarter	of	fiscal	2009	as	we	lapped	very	strong	growth	in	the	fourth	quarter	of	fiscal	2008.	On	a	currency	neutral	basis, revenues	in	Japan	were	up	1%	compared	to	fiscal	2008.

Footwear	and	apparel	revenue	growth	for	fiscal	2009	were	driven	primarily	by	an	increase	in	unit	sales,	most	notably	in	China.	The	growth	in	unit	sales	was slightly	offset	by	a	low-single	digit	reduction	in	average	selling	prices	in	fiscal	2009	resulting	primarily	from	increased	discounts	on	in-line	products	provided	retailers	to manage	inventory	levels.

The	increase	in	pre-tax	income	for	the	Asia	Pacific	Region	for	fiscal	2009	was	driven	by	higher	revenues	and	improved	gross	margins,	which	more	than	offset higher	selling	and	administrative	expenses.	Gross	margins	improved	versus	the	prior	year,	primarily	driven	by	improved	year-over-year	standard	foreign	currency	rates and	reduced	warehousing	costs,	which	more	than	offset	increased	product	discounts.	Selling	and	administrative	expenses	increased,	but	represented	a	lower	percentage of	revenues	in	fiscal	2009	versus	fiscal	2008.	The	increase	in	selling	and	administrative	expenses	during	fiscal	2009	was	primarily	due	to	retail	and	infrastructure expansion,	primarily	in	China,	and	spending	around	brand	events.

In	the	Asia	Pacific	Region,	changes	in	currency	exchange	rates	contributed	6	percentage	points	of	revenue	growth	for	fiscal	2008.	Nearly	all	countries	across	the region	delivered	revenue	growth	on	a	currency	neutral	basis.	China	continues	to	be	the	primary	driver	of	growth	within	the	region	as	fiscal	2008	revenues	increased	50% on	a	currency-neutral	basis,	driven	by	the	expansion	in	both	the	number	of	stores	selling	NIKE	products	and	sales	through	existing	stores.	Constant-currency	revenues	in Japan	increased	2%	during	fiscal	2008.

Footwear	revenue	growth	for	fiscal	2008	reflected	increased	unit	sales,	most	notably	in	China,	partially	offset	by	lower	average	selling	prices	driven	primarily	by a	shift	in	mix	from	higher	priced	to	lower	priced	models.	The	year-over-year	increase	in	apparel	revenue	was	driven	by	increased	demand	in	China.

The	increase	in	pre-tax	income	for	the	Asia	Pacific	Region	for	fiscal	2008	was	driven	by	higher	revenues,	improved	gross	margins	and	favorable	foreign	currency translation,	which	more	than	offset	slightly	higher	selling	and	administrative	expenses	as	a	percentage	of	revenue.	The	gross	margin	improvement	versus	the	prior	year was	primarily	driven	by	reduced	warehousing	costs,	improved	year-over-year	standard	currency	rates	and	improved	margins	on	close-out	product.	The	increase	in	selling and	administrative	expenses	during	fiscal	2008	was	primarily	attributable	to	spending	around	the	Beijing	Summer	Olympics.	Overall	business	growth	across	the	region combined	with	retail	expansion,	primarily	in	China,	also	contributed	to	an	increase	in	operating	overhead	expenses,	which	grew	slightly	slower	than	revenues.

# Americas	Region

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues |  |  |  |  |  |
| Footwear | $892.1 | $792.7 | 13% | $679.6 | 17% |
| Apparel | 287.8 | 265.4 | 8% | 193.9 | 37% |
| Equipment | 104.8 | 106.6 | -2% | 93.2 | 14% |
| Total\tRevenues | $1,284.7 | $1,164.7 | 10% | $966.7 | 20% |
| Pre-tax\tIncome | $274.1 | $242.3 | 13% | $199.3 | 22% |

In	the	Americas	Region,	changes	in	currency	exchange	rates	negatively	impacted	revenue	growth	by	approximately	9	percentage	points	in	fiscal	2009.	Excluding changes	in	foreign	currency	exchange	rates,	the	Americas	Region	reported	growth	in	all	markets,	led	by	Brazil,	Argentina	and	Mexico.

The	increase	in	pre-tax	income	for	fiscal	2009	was	primarily	attributable	to	higher	revenues	and	selling	and	administrative	expense	leverage,	which	more	than offset	lower	gross	margins.	Selling	and	administrative	expenses	were	higher	than	fiscal	2008,	but	represented	a	lower	percentage	of	revenues	for	fiscal	2009.	The increase	in	selling	and	administrative	expense	was	due	to	increases	in	both	demand	creation	and	operating	overhead	expenses	mainly	driven	by	spending	around	retail marketing	programs,	brand	events	and	normal	wage	inflation.	The	slight	decrease	in	gross	margin	percentage	in	fiscal	2009	was	mainly	due	to	a	higher	sales	mix	of lower	margin	footwear	products	and	higher	import	costs,	which	more	than	offset	improved	year-on-year	standard	foreign	currency	rates.

In	the	Americas	Region,	changes	in	currency	exchange	rates	contributed	7	percentage	points	of	revenue	growth	for	fiscal	2008.	Excluding	changes	in	foreign currency	exchange	rates,	the	Americas	Region	reported	growth	in	all	markets,	led	by	Argentina,	Mexico	and	Brazil.

The	increase	in	pre-tax	income	for	fiscal	2008	versus	the	prior	year	was	primarily	attributable	to	higher	revenues,	improved	gross	margins	and	operating	overhead leverage,	combined	with	favorable	foreign	currency	translation.	These	factors	were	partially	offset	by	higher	demand	creation	spending	as	a	percentage	of	revenue.	The gross	margin	improvement	was	driven	primarily	by	higher	in-line	net	pricing	margins	resulting	from	a	better	mix	of	products	sold	and	fewer	discounts	offered	in	fiscal 2008	compared	to	fiscal	2007.	The	increase	in	demand	creation	spending	during	fiscal	2008	was	primarily	attributable	to	investments	in	sports	marketing,	most	notably	in soccer,	brand	events	and	investments	in	our	retail	presentation.

# Other	Businesses

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Revenues |  |  |  |  |  |
| Converse | $915.3 | $729.0 | 26% | $563.8 | 29% |
| NIKE\tGolf | 648.3 | 725.2 | -11% | 646.3 | 12% |
| Cole\tHaan | 471.6 | 496.2 | -5% | 468.6 | 6% |
| Hurley | 202.9 | 171.1 | 19% | 150.6 | 14% |
| Umbro | 174.0 | 53.9 | 223% | — | — |
| Bauer | — | 201.9 | -100% | 166.1 | 22% |
| Exeter | — | 35.1 | -100% | 67.7 | -48% |
| Other | 102.2 | 118.6 | -14% | 104.6 | 13% |
| Revenues | $2,514.3 | $2,531.0 | -1% | $2,167.7 | 17% |
| Pre-tax\tIncome | $(196.7) | $364.9 | -154% | $299.7 | 22% |

For	fiscal	2009,	our	Other	businesses	were	primarily	comprised	of	Cole	Haan,	Converse,	Hurley,	NIKE	Golf	and	Umbro.	For	fiscal	2008,	our	Other	businesses were	primarily	comprised	of	Cole	Haan,	Converse,	Exeter	(whose	primary	business	was	the	Starter	brand	business	which	was	sold	on	December	17,	2007),	Hurley, NIKE	Bauer	Hockey	(which	was	sold	on	April	17,	2008),	NIKE	Golf	and	Umbro	(which	was	acquired	on	March	3,	2008).

The	slight	decrease	in	Other	businesses	revenues	for	fiscal	2009	was	primarily	attributable	to	the	loss	of	revenue	from	NIKE	Bauer	Hockey	and	the	Starter	brand business.	Excluding	the	loss	of	revenue	from	NIKE	Bauer	Hockey	and	the	Starter	brand	business	and	the	addition	of	Umbro,	Other	businesses	revenues	for	fiscal	2009 would	have	increased	5%,	driven	by	the	strong	performance	from	Converse	and	Hurley,	offset	by	sales	decreases	at	NIKE	Golf	and	Cole	Haan,	due	to	reductions	in consumer	discretionary	spending	in	their	respective	markets.

Pre-tax	income	for	Other	businesses	declined	for	fiscal	2009	primarily	as	a	result	of	a	$401.3	million	pre-tax	non-cash	impairment	charge	to	reduce	the	carrying value	of	Umbro's	goodwill,	intangible	and	other	assets.	Excluding	the	impairment	charge,	the	loss	of	income	from	NIKE	Bauer	Hockey	and	the	Starter	brand	business along	with	the	dilutive	impact	of	Umbro,	pre-tax	income	for	Other	businesses	would	have	decreased	by	28%,	driven	by	declines	in	operating	results	at	NIKE	Golf	and Cole	Haan.

The	increase	in	Other	business	revenues	was	driven	by	higher	revenues	across	most	businesses,	most	notably	Converse	and	NIKE	Golf.	The	increase	in	Converse and	NIKE	Golf	is	mainly	driven	by	strong	consumer	demand	both	in	the	United	States	and	international	markets.	The	growth	at	Cole	Haan	is	mainly	driven	by	the	strong results	at	Company-owned	retail	stores.

During	fiscal	2008,	growth	at	Converse	and	NIKE	Golf,	combined	with	margin	improvements	across	most	businesses	drove	the	year-over-year	increase	in	pre-tax income.	Fiscal	2007	pre-tax	income	included	a	$14.2	million	benefit	relating	to	the	settlement	of	an	arbitration	ruling	involving	Converse	and	a	former	South	American licensee.	Fiscal	2008	pre-tax	income	for	our	Other	businesses	would	have	increased	approximately	18%	versus	fiscal	2007	excluding	this	favorable	settlement.

On	March	3,	2008,	we	completed	the	acquisition	of	100%	of	the	outstanding	shares	of	Umbro,	a	United	Kingdom-based	global	soccer	brand,	for	a	purchase	price of	£290.5	million	in	cash	(approximately	$576.4	million),	inclusive	of	direct	transaction	costs.	This	acquisition	was	intended	to	strengthen	our	market	position	in	the United	Kingdom	and	expand	NIKE's	global	leadership	in	soccer,	a	key	area	of	growth	for	the	Company.	This	acquisition	also	provides	positions	in	emerging	soccer markets	such	as	China,	Russia	and	Brazil.	The	results	of	Umbro's	operations	have	been	included	in	the	Company's	consolidated	financial	statements	and	in	the	"Other" operating	segment	since	the	date	of	acquisition.	Umbro,	which	was	listed	on	the	London	Stock	Exchange	prior	to	our	acquisition,	reported	in	their	2006	annual	report that	revenues	for	calendar	year	2006	were	approximately	$276	million	(£149.5	million),	and	estimated	that	the	combination	of	Umbro's	calendar	year	2006	wholesale revenue	and	estimated	sales	revenue	earned	by	Umbro's	licensees	from	the	sale	of	Umbro	products	totaled	approximately	$755	million	(£409.4	million).

Following	a	strategic	review	of	the	Company's	existing	business	portfolio,	we	concluded	that	the	Starter	and	NIKE	Bauer	Hockey	businesses	did	not	align	with our	long-term	growth	priorities.	On	December	17,	2007	we	completed	the	sale	of	the	Starter	brand	business	for	$60	million	in	cash.	On	April	17,	2008,	we	completed	the sale	of	the	NIKE	Bauer	Hockey	business	for	net	proceeds	of	$189.2	million	after	working	capital	adjustments.	These	transactions	resulted	in	gains	of	approximately $28.6	million	and	$32.0	million,	respectively,	which	are	reflected	in	the	Corporate	line	in	our	segment	presentation	of	pre-tax	income	in	the	accompanying	notes	to	the consolidated	financial	statements	(Note	19	—	Operating	Segments	and	Related	Information).

# Corporate	Expense

|  |  |  | FY09	vs. |  | FY08	vs. |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | FY08 |  | FY07 |
|  | Fiscal\t2009 | Fiscal\t2008 | %\tChange | Fiscal\t2007 | %\tChange |
|  |  |  | (In\tmillions) |  |  |
| Corporate\tExpense | $(1,629.1) | $(1,482.4) | -10% | $(1,250.7) | -19% |

Corporate	expense	consists	of	unallocated	general	and	administrative	expenses,	which	includes	expenses	associated	with	centrally	managed	departments, depreciation	and	amortization	related	to	the	Company's	corporate	headquarters,	unallocated	insurance	and	benefit	programs,	foreign	currency	gains	and	losses,	including hedge	gains	and	losses,	corporate	eliminations	and	other	items.

The	increase	in	corporate	expense	in	fiscal	2009	was	primarily	attributable	to	pre-tax	restructuring	charges	of	$195	million,	consisting	primarily	of	cash	charges related	to	severance	costs.

Foreign	currency	gains	and	losses	include	conversion	gains	and	losses	generated	by	our	centrally	managed	foreign	currency	hedging	program	and	other conversion	gains	and	losses.	Foreign	currency	gains	and	losses	also	include	gains	and	losses	resulting	from	the	difference	between	actual	foreign	currency	rates	and standard	rates	assigned	to	our	regions.	With	the	exception	of	foreign	currency	gains	and	losses	generated	by	the	EMEA	Region	and	Other	businesses,	which	are	reported within	their	respective	operating	results,	substantially	all	of	the	Company's	remaining	conversion	gains	and	losses	as	well	as	standard	to	actual	foreign	currency	gains and	losses	reside	at	Corporate.	In	fiscal	2009,	foreign	currency	conversion	gains	(losses)	reported	in	Corporate	expense	totaled	$45.9	million	compared	to	($76.3) million	in	fiscal	2008,	which	was	primarily	driven	by	a	net	gain	from	currency	hedges	in	fiscal	2009	versus	a	net	hedge	loss	in	fiscal	2008.

The	increase	in	corporate	expense	from	fiscal	2007	to	fiscal	2008	was	primarily	driven	by	increased	employee	compensation	expense	due	to	the	increase	in centralized	corporate	functions,	higher	performance-based	compensation	as	well	as	increased	investments	in	demand	creation,	including	other	spending	around	the Beijing	Summer	Olympics.

In	fiscal	2008,	foreign	currency	conversion	loss	reported	in	Corporate	expense	totaled	$76.3	million	compared	to	$31.7	million	in	fiscal	2007,	which	was primarily	driven	by	a	larger	net	loss	from	currency	hedges	in	fiscal	2008	versus	2007.

# Foreign	Currency	Exposures	and	Hedging	Practices

As	a	global	company	with	significant	operations	outside	the	U.S.,	in	the	normal	course	of	business	we	are	exposed	to	risk	arising	from	changes	in	currency exchange	rates.	Foreign	currency	fluctuations	affect	the	recording	of	transactions,	such	as	sales,	purchases	and	intercompany	transactions	denominated	in	non-functional currencies	and	the	translation	of	foreign	currency	denominated	results	of	operations,	financial	position	and	cash	flows	into	U.S.	dollars	for	consolidated	reporting.	Our primary	foreign	currency	exposures	are	related	to	U.S.	dollar	transactions	at	wholly-owned	foreign	subsidiaries,	as	well	as	transactions	and	translation	of	results denominated	in	the	Euro,	British	pound,	Chinese	renminbi	and	Japanese	yen.

Our	foreign	exchange	risk	management	program	is	intended	to	minimize	both	the	positive	and	negative	effects	of	currency	fluctuations	on	our	reported consolidated	results	of	operations,	financial	position	and	cash	flows.	This	also	has	the	effect	of	delaying	the	impact	of	current	market	rates	on	our	consolidated	financial statements,	dependent	upon	hedge	horizons.	We	manage	global	foreign	exchange	risk	centrally	on	a	portfolio	basis,	to	manage	those	risks	that	are	material	to	NIKE,	Inc. on	a	consolidated	basis.	We	manage	these	exposures	by	taking	advantage	of	natural	offsets	and	currency	correlations	that	exist	within	the	portfolio,	and	by	hedging remaining	material	exposures,	where	practical,	using	derivative	instruments	such	as	forward	contracts	and	options.	The	Company's	hedging	policies	are	designed	to partially	or	entirely	offset	changes	in	the	underlying	exposures	being	hedged.	We	account	for	derivative	financial	instruments	in	accordance	with	SFAS	No.	133, "Accounting	for	Derivative	Instruments	and	Hedging	Activities,"	as	issued	and	amended	("FAS	133").	We	do	not	hold	or	issue	derivative	financial	instruments	for speculative	trading	purposes.

# Transactional	exposures

We	transact	business	in	various	currencies	and	have	significant	revenues	and	costs	denominated	in	currencies	other	than	the	functional	currency	of	the	relevant subsidiary,	which	subjects	us	to	foreign	currency	risk.	Our	most	significant	transactional	foreign	currency	exposures	are:

1. Inventory	Purchases	—	Most	of	our	inventory	purchases	around	the	world	are	denominated	in	U.S.	dollars.	This	generates	foreign	currency	exposures	for all	subsidiaries	with	a	functional	currency	other

than	the	U.S.	dollar.	A	weaker	U.S.	dollar	reduces	the	inventory	cost	in	the	purchasing	subsidiary's	functional	currency	whereas	a	stronger	U.S.	dollar increases	the	inventory	cost.

2. 	 Non-Functional	Currency	Revenues	—	A	portion	of	our	EMEA	Region	revenues	are	earned	in	currencies	other	than	the	Euro	(e.g.	British	pound),	but	are recognized	at	a	subsidiary	that	uses	the	Euro	as	its	functional	currency,	generating	foreign	currency	exposures.

3. 	 Other	Revenues	and	Costs	—	Non-functional	currency	revenues	and	costs,	such	as	endorsement	contracts,	intercompany	royalties	and	other	payments, generate	foreign	currency	risk	to	a	lesser	extent.

4. 	 Non-functional	currency	asset	and	liabilities	—	Our	global	subsidiaries	have	various	assets	and	liabilities,	primarily	receivables	and	payables,	that	are denominated	in	currencies	other	than	their	functional	currency.	These	balance	sheet	items	are	subject	to	remeasurement	under	SFAS	No.	52,	"Foreign Currency	Translation,"	("FAS	52"),	which	may	create	fluctuations	in	other	(income)	expense	within	our	consolidated	results	of	operations.

# Managing	transactional	exposures

Transactional	exposures	are	managed	on	a	portfolio	basis	within	our	foreign	currency	risk	management	program.	We	use	currency	forward	contracts	and	options with	maturities	up	to	23	months	to	hedge	the	effect	of	exchange	rate	fluctuations	on	probable	forecasted	future	cash	flows,	including	non-functional	currency	revenues and	expenses.	These	are	accounted	for	as	cash	flow	hedges	in	accordance	with	FAS	133.	The	fair	value	of	these	instruments	at	May	31,	2009	and	2008	was	$248.0 million	and	$95.3	million	in	assets	and	$12.2	million	and	$149.8	million	in	liabilities,	respectively.	The	effective	portion	of	the	changes	in	fair	value	of	these	instruments is	reported	in	other	comprehensive	income	("OCI"),	a	component	of	shareholders'	equity,	and	reclassified	into	earnings	in	the	same	financial	statement	line	item	and	in the	same	period	or	periods	during	which	the	related	hedged	transactions	affect	earnings.	The	ineffective	portion,	which	was	not	material	for	any	year	presented,	is immediately	recognized	in	earnings	as	a	component	of	other	(income)	expense,	net.

Certain	currency	forward	contracts	used	to	manage	foreign	exchange	exposure	of	non-functional	currency	assets	and	liabilities	subject	to	remeasurement	are	not designated	as	hedges	under	FAS	133.	In	these	cases,	the	change	in	value	of	the	instruments	is	intended	to	offset	the	foreign	currency	impact	of	the	remeasurement	of	the related	asset	or	liability.	The	fair	value	of	these	instruments	at	May	31,	2009	and	2008,	was	$13.2	million	and	$34.2	million	in	assets	and	$34.3	million	and	$7.3	million in	liabilities,	respectively.	The	change	in	value	of	these	instruments	is	immediately	recognized	in	earnings.	The	impact	of	such	instruments	is	included	in	other	(income) expense,	net	and	aims	to	offset	foreign	currency	remeasurement	gains	and	losses	of	the	exposures	being	hedged.

Refer	to	Note	18	—	Risk	Management	and	Derivatives	in	the	accompanying	notes	to	the	consolidated	financial	statements	for	additional	quantitative	detail.

# Translational	exposures

Substantially	all	of	our	foreign	subsidiaries	operate	in	functional	currencies	other	than	the	U.S.	dollar.	Fluctuations	in	currency	exchange	rates	create	volatility	in our	reported	results	as	we	are	required	to	translate	the	balance	sheets	and	operational	results	of	these	foreign	currency	denominated	subsidiaries	into	U.S.	dollars	for consolidated	reporting.	The	translation	of	foreign	subsidiaries	non-U.S.	dollar	balance	sheets	into	U.S.	dollars	for	consolidated	reporting	results	in	a	cumulative translation	adjustment	to	OCI	within	shareholders'	equity.	In	preparing	our	consolidated	statements	of	income,	foreign	exchange	rate	fluctuations	impact	our	operating results	as	the	revenues	and	expenses	of	our	foreign	operations	are	translated	into	U.S.	dollars.	In	translation,	a	weaker	U.S.	dollar	in	relation	to	foreign	functional currencies	benefits	our	consolidated	earnings	whereas	a	stronger	U.S.	dollar	reduces	our	consolidated	earnings.	The	impact	of	foreign	exchange	rate	fluctuations	on	the translation	of	our	consolidated	revenues	and	pre-tax	income	was	a	net	translation	benefit	(detriment)	of	($199.4)	million	and	$4.0	million,	respectively,	for	the	twelve months	ended	May	31,	2009.

# Managing	translational	exposures

To	minimize	the	impact	of	translating	foreign	currency	denominated	revenues	and	expenses	into	U.S.	dollars	for	consolidated	reporting,	certain	foreign subsidiaries	use	excess	cash	to	purchase	U.S.	dollar	denominated	available-for-sale	investments.	The	variable	future	cash	flows	associated	with	the	purchase	and subsequent	sale	of	these	U.S.	dollar	denominated	securities	at	non-U.S.	dollar	functional	currency	subsidiaries	creates	a	foreign	currency	exposure	that	qualifies	for hedge	accounting	under	FAS	133.	We	utilize	forward	contracts	and	options	to	partially,	or	entirely,	hedge	the	variability	of	the	forecasted	future	purchases	and	sales	of these	U.S.	dollar	investments.	This	has	the	effect	of	partially	offsetting	the	year-over-year	foreign	currency	translation	impact	on	net	earnings	in	the	period	the investments	are	sold.	Hedges	of	available-for-sale	investments	are	accounted	for	as	cash	flow	hedges.	The	fair	value	of	instruments	used	in	this	manner	at	May	31,	2009 and	2008	was	$103.6	million	and	$7.8	million	in	assets	and	$0	and	$14.4	million	in	liabilities,	respectively.	The	effective	portion	of	the	changes	in	fair	value	of	these instruments	is	reported	in	OCI	and	reclassified	into	earnings	in	other	(income)	expense,	net	in	the	period	during	which	the	hedged	available-for-sale	investment	is	sold and	affects	earnings.	Any	ineffective	portion,	which	was	not	material	for	any	year	presented,	is	immediately	recognized	in	earnings	as	a	component	of	other	(income) expense,	net.

# Net	investments	in	foreign	subsidiaries

We	are	also	exposed	to	the	impact	of	foreign	exchange	fluctuations	on	our	investments	in	wholly-owned	foreign	subsidiaries	denominated	in	a	currency	other than	the	U.S.	dollar,	which	could	adversely	impact	the	U.S.	dollar	value	of	these	investments	and	therefore	the	value	of	future	repatriated	earnings.	During	fiscal	2008, we	began	to	hedge	certain	net	investment	positions	in	Euro-functional	currency	foreign	subsidiaries	to	mitigate	the	effects	of	foreign	exchange	fluctuations	on	net investments,	with	the	effect	of	preserving	the	value	of	future	repatriated	earnings.	In	accordance	with	FAS	133,	the	effective	portion	of	the	change	in	fair	value	of	the forward	contracts	designated	as	net	investment	hedges	is	recorded	in	the	cumulative	translation	adjustment	component	of	accumulated	other	comprehensive	income. Any	ineffective	portion,	which	was	not	material	for	any	year	presented,	is	immediately	recognized	in	earnings	as	a	component	of	other	(income)	expense,	net.	To minimize	credit	risk,	we	have	structured	these	net	investment	hedges	to	be	generally	less	than	six	months	in	duration.	Upon	maturity,	the	hedges	are	settled	based	on	the current	fair	value	of	the	forward	contracts	with	the	realized	gain	or	loss	remaining	in	OCI;	concurrent	with	settlement,	we	enter	into	new	forward	contracts	at	the	current market	rate.	The	impact	of	net	investment	hedges	reflected	in	OCI	was	a	pre-tax	gain	(loss)	of	$161.4	million	and	($68.6)	million	in	2009	and	2008,	respectively.	Cash flows	from	net	investment	hedge	settlements	totaled	$191.3	million	and	($76.0)	million	in	2009	and	2008,	respectively.

# Liquidity	and	Capital	Resources

# 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.

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.

# Off-Balance	Sheet	Arrangements

In	connection	with	various	contracts	and	agreements,	we	provide	routine	indemnifications	relating	to	the	enforceability	of	intellectual	property	rights,	coverage	for legal	issues	that	arise	and	other	items	that	fall	under	the	scope	of	Financial	Accounting	Standards	Board	("FASB")	Interpretation	No.	45,	"Guarantor's	Accounting	and Disclosure	Requirements	for	Guarantees,	Including	Indirect	Guarantees	of	Indebtedness	of	Others."	Currently,	we	have	several	such	agreements	in	place.	However, based	on	our	historical	experience	and	the	estimated	probability	of	future	loss,	we	have	determined	that	the	fair	value	of	such	indemnifications	is	not	material	to	our financial	position	or	results	of	operations.

# Contractual	Obligations

Our	significant	long-term	contractual	obligations	as	of	May	31,	2009,	and	significant	endorsement	contracts	entered	into	through	the	date	of	this	report	are	as follows:

| Description	of	Commitment | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | (In\tmillions) |  |  |  |
| Operating\tLeases | $330.2 | $281.3 | $233.6 | $195.6 | $168.6 | $588.5 | $1,797.8 |
| Long-term\tDebt | 32.0 | 6.9 | 167.1 | 46.9 | 56.9 | 144.6 | $454.4 |
| Endorsement\tContracts^(1) | 711.7 | 654.6 | 601.0 | 509.7 | 431.0 | 1,293.9 | $4,201.9 |
| Product\tPurchase\tObligations^(2) | 1,985.7 | — | — | — | — | — | $1,985.7 |
| Other^(3) | 247.1 | 106.3 | 67.8 | 78.0 | 3.0 | 2.0 | $504.2 |
| Total | $3,306.7 | $1,049.1 | $1,069.5 | $830.2 | $659.5 | $2,029.0 | $8,944.0 |

The	amounts	listed	for	endorsement	contracts	represent	approximate	amounts	of	base	compensation	and	minimum	guaranteed	royalty	fees	we	are	obligated	to	pay athlete	and	sport	team	endorsers	of	our	products.	Actual	payments	under	some	contracts	may	be	higher	than	the	amounts	listed	as	these	contracts	provide	for bonuses	to	be	paid	to	the	endorsers	based	upon	athletic	achievements	and/or	royalties	on	product	sales	in	future	periods.	Actual	payments	under	some	contracts may	also	be	lower	as	these	contracts	include	provisions	for	reduced	payments	if	athletic	performance	declines	in	future	periods.

In	addition	to	the	cash	payments,	we	are	obligated	to	furnish	our	endorsers	with	NIKE	product	for	their	use.	It	is	not	possible	to	determine	how	much	we	will spend	on	this	product	on	an	annual	basis	as	the	contracts	generally	do	not	stipulate	a	specific	amount	of	cash	to	be	spent	on	the	product.	The	amount	of

product	provided	to	the	endorsers	will	depend	on	many	factors	including	general	playing	conditions,	the	number	of	sporting	events	in	which	they	participate,	and our	own	decisions	regarding	product	and	marketing	initiatives.	In	addition,	the	costs	to	design,	develop,	source,	and	purchase	the	products	furnished	to	the endorsers	are	incurred	over	a	period	of	time	and	are	not	necessarily	tracked	separately	from	similar	costs	incurred	for	products	sold	to	customers.

	 We	generally	order	product	at	least	four	to	five	months	in	advance	of	sale	based	primarily	on	advanced	futures	orders	received	from	customers.	The	amounts listed	for	product	purchase	obligations	represent	agreements	(including	open	purchase	orders)	to	purchase	products	in	the	ordinary	course	of	business,	that	are enforceable	and	legally	binding	and	that	specify	all	significant	terms.	In	some	cases,	prices	are	subject	to	change	throughout	the	production	process.	The	reported amounts	exclude	product	purchase	liabilities	included	in	accounts	payable	on	the	consolidated	balance	sheet	as	of	May	31,	2009.

	 Other	amounts	primarily	include	service	and	marketing	commitments	made	in	the	ordinary	course	of	business.	The	amounts	represent	the	minimum	payments required	by	legally	binding	contracts	and	agreements	that	specify	all	significant	terms,	including	open	purchase	orders	for	non-product	purchases.	The	reported amounts	exclude	those	liabilities	included	in	accounts	payable	or	accrued	liabilities	on	the	consolidated	balance	sheet	as	of	May	31,	2009.

The	total	liability	for	uncertain	tax	positions	was	$273.9	million,	excluding	related	interest	and	penalties,	at	May	31,	2009.	We	are	not	able	to	reasonably	estimate when	or	if	cash	payments	of	the	long-term	liability	for	uncertain	tax	positions	will	occur.

We	also	have	the	following	outstanding	short-term	debt	obligations	as	of	May	31,	2009.	Please	refer	to	the	accompanying	notes	to	the	consolidated	financial statements	(Note	7	—	Short-Term	Borrowings	and	Credit	Lines)	for	further	description	and	interest	rates	related	to	the	short-term	debt	obligations	listed	below.

As	of	May	31,	2009,	letters	of	credit	of	$154.8	million	were	outstanding,	generally	for	the	purchase	of	inventory.

# Capital	Resources

In	December	2008,	we	filed	a	shelf	registration	statement	with	the	Securities	and	Exchange	Commission	under	which	$760	million	in	debt	securities	may	be issued.	As	of	May	31,	2009,	no	debt	securities	had	been	issued	under	this	shelf	registration.	We	may	issue	debt	securities	under	the	shelf	registration	in	fiscal	2010 depending	on	general	corporate	needs.

As	of	May	31,	2009,	we	had	no	amounts	outstanding	under	our	multi-year,	$1	billion	revolving	credit	facility	in	place	with	a	group	of	banks.	The	facility	matures in	December	2012.	Based	on	our	current	long-term	senior	unsecured	debt	ratings	of	A+	and	A1	from	Standard	and	Poor's	Corporation	and	Moody's	Investor	Services, respectively,	the	interest	rate	charged	on	any	outstanding	borrowings	would	be	the	prevailing	London	Interbank	Offer	Rate	("LIBOR")	plus	0.15%.	The	facility	fee	is 0.05%	of	the	total	commitment.

If	our	long-term	debt	rating	were	to	decline,	the	facility	fee	and	interest	rate	under	our	committed	credit	facility	would	increase.	Conversely,	if	our	long-term	debt rating	were	to	improve,	the	facility	fee	and	interest	rate	would	decrease.	Changes	in	our	long-term	debt	rating	would	not	trigger	acceleration	of	maturity	of	any	then outstanding	borrowings	or	any	future	borrowings	under	the	committed	credit	facility.	Under	this	committed	credit	facility,	we	have	agreed	to	various	covenants.	These covenants	include	limits	on	our	disposal	of	fixed	assets	and	the	amount	of	debt	secured	by	liens	we	may	incur	as	well	as	a	minimum	capitalization	ratio.	In	the

event	we	were	to	have	any	borrowings	outstanding	under	this	facility,	failed	to	meet	any	covenant,	and	were	unable	to	obtain	a	waiver	from	a	majority	of	the	banks,	any borrowings	would	become	immediately	due	and	payable.	As	of	May	31,	2009,	we	were	in	full	compliance	with	each	of	these	covenants	and	believe	it	is	unlikely	we	will fail	to	meet	any	of	these	covenants	in	the	foreseeable	future.

Liquidity	is	also	provided	by	our	$1	billion	commercial	paper	program.	As	of	May	31,	2009,	$100	million	was	outstanding	under	this	program	at	a	weighted average	interest	rate	of	0.40%.	This	borrowing	was	repaid	subsequent	to	May	31,	2009.	We	may	issue	commercial	paper	from	time	to	time	during	fiscal	2010	depending on	general	corporate	needs.	We	currently	have	short-term	debt	ratings	of	A1	and	P1	from	Standard	and	Poor's	Corporation	and	Moody's	Investor	Services,	respectively.

Despite	recent	uncertainties	in	the	financial	markets,	to	date	we	have	not	experienced	difficulty	accessing	the	credit	markets	or	incurred	higher	interest	costs. Continuing	volatility	in	the	capital	markets,	however,	may	increase	costs	associated	with	issuing	commercial	paper	or	other	debt	instruments	or	affect	our	ability	to access	those	markets.	Notwithstanding	these	adverse	market	conditions,	we	believe	that	current	cash	and	short-term	investment	balances	and	cash	generated	by operations,	together	with	access	to	external	sources	of	funds	as	described	above,	will	be	sufficient	to	meet	our	operating	and	capital	needs	in	the	foreseeable	future.

# Recently	Adopted	Accounting	Standards

On	December	1,	2008,	we	adopted	SFAS	No.	161,	"Disclosures	about	Derivative	Instruments	and	Hedging	Activities	—	an	amendment	of	FASB	Statement No.	133"	("FAS	161"),	which	provides	revised	guidance	for	enhanced	disclosures	about	how	and	why	an	entity	uses	derivative	instruments,	how	derivative	instruments and	the	related	hedged	items	are	accounted	for	under	FAS	133,	and	how	derivative	instruments	and	the	related	hedged	items	affect	an	entity's	financial	position, financial	performance	and	cash	flows.	The	adoption	of	FAS	161	did	not	have	an	impact	on	our	consolidated	financial	position	or	results	of	operations.	For	additional information,	see	Note	18	—	Risk	Management	and	Derivatives	in	the	accompanying	notes	to	the	consolidated	financial	statements.

On	June	1,	2008,	we	adopted	SFAS	No.	157,	"Fair	Value	Measurements"	("FAS	157")	for	financial	assets	and	liabilities,	which	clarifies	the	meaning	of	fair value,	establishes	a	framework	for	measuring	fair	value	and	expands	disclosures	about	fair	value	measurements.	Fair	value	is	defined	under	FAS	157	as	the	exchange price	that	would	be	received	for	an	asset	or	paid	to	transfer	a	liability	in	the	principal	or	most	advantageous	market	for	the	assets	or	liability	in	an	orderly	transaction between	market	participants	on	the	measurement	date.	Subsequent	changes	in	fair	value	of	these	financial	assets	and	liabilities	are	recognized	in	earnings	or	other comprehensive	income	when	they	occur.	The	effective	date	of	the	provisions	of	FAS	157	for	non-financial	assets	and	liabilities,	except	for	items	recognized	at	fair	value on	a	recurring	basis,	was	deferred	by	FASB	Staff	Position	FAS	157-2	("FSP	FAS	157-2")	and	is	effective	for	the	fiscal	year	beginning	June	1,	2009.	The	adoption	of FAS	157	for	financial	assets	and	liabilities	did	not	have	an	impact	on	our	consolidated	financial	position	or	results	of	operations.	The	adoption	of	FAS	157	for	non- financial	assets	and	liabilities	is	not	expected	to	have	a	significant	impact	on	our	consolidated	financial	position	or	results	of	operations.	See	Note	6	—	Fair	Value Measurements	in	the	accompanying	notes	to	the	consolidated	financial	statements	for	further	discussion.

Also	effective	June	1,	2008,	we	adopted	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities"	("FAS	159"),	which	allows	an entity	the	irrevocable	option	to	elect	fair	value	for	the	initial	and	subsequent	measurement	for	certain	financial	assets	and	liabilities	on	a	contract-by-contract	basis.	As	of May	31,	2009,	we	have	not	elected	the	fair	value	option	for	any	additional	financial	assets	and	liabilities	beyond	those	already	prescribed	by	accounting	principles generally	accepted	in	the	United	States.

In	October	2008,	the	FASB	issued	Staff	Position	No.	FAS	157-3,	"Determining	the	Fair	Value	of	a	Financial	Asset	in	a	Market	That	Is	Not	Active"	("FSP	FAS 157-3").	FSP	FAS	157-3	clarifies	the	application	of	FAS	157	in	a	market	that	is	not	active	and	defines	additional	key	criteria	in	determining	the	fair	value	of	a

financial	asset	when	the	market	for	that	financial	asset	is	not	active.	FSP	FAS	157-3	applies	to	financial	assets	within	the	scope	of	accounting	pronouncements	that require	or	permit	fair	value	measurements	in	accordance	with	FAS	157.	FSP	FAS	157-3	was	effective	upon	issuance	and	the	application	of	FSP	FAS	157-3	did	not	have a	material	impact	on	our	consolidated	financial	statements.

# Recently	Issued	Accounting	Standards

In	May	2009,	the	FASB	issued	SFAS	No.	165,	"Subsequent	Events"	("FAS	165"),	which	establishes	general	standards	of	accounting	and	disclosure	for	events that	occur	after	the	balance	sheet	date	but	before	financial	statements	are	issued.	The	provisions	of	FAS	165	are	effective	for	the	quarter	ending	August	31,	2009.	We	do not	expect	the	adoption	will	have	a	material	impact	on	our	consolidated	financial	position	or	results	of	operations.

In	April	2009,	the	FASB	issued	Staff	Position	No.	FAS	107-1	and	APB	28-1,	"Interim	Disclosures	about	Fair	Value	of	Financial	Instruments"	("FSP	FAS	107-1 and	APB	28-1"),	which	amends	SFAS	No.	107,	"Disclosures	about	Fair	Value	of	Financial	Instruments",	and	APB	Opinion	No.	28,	"Interim	Financial	Reporting,"	to require	disclosures	about	fair	value	of	financial	instruments	in	interim	and	annual	reporting	periods.	The	provisions	of	FSP	FAS	107-1	and	APB	28-1	are	effective	for the	quarter	ending	August	31,	2009.	We	do	not	expect	the	adoption	will	have	an	impact	on	our	consolidated	financial	position	or	results	of	operations.

In	December	2007,	the	FASB	issued	SFAS	No.	141	(revised	2007),	"Business	Combinations"	("FAS	141(R)")	and	SFAS	No.	160,	"Noncontrolling	Interests	in Consolidated	Financial	Statements"	("FAS	160").	These	standards	aim	to	improve,	simplify,	and	converge	international	standards	of	accounting	for	business combinations	and	the	reporting	of	noncontrolling	interests	in	consolidated	financial	statements.	The	provisions	of	FAS	141(R)	are	effective	for	business	combinations for	which	the	acquisition	date	is	on	or	after	June	1,	2009.	Generally,	the	effects	of	FAS	141(R)	will	depend	on	future	acquisitions.	The	provisions	of	FAS	No.	160	are effective	for	the	Company	beginning	June	1,	2009.	We	do	not	expect	that	the	adoption	of	FAS	160	will	have	a	material	impact	on	the	Company's	consolidated	financial position	or	results	of	operations.

In	April	2008,	the	FASB	issued	Staff	Position	No.	FAS	142-3,	"Determination	of	the	Useful	Life	of	Intangible	Assets"	("FSP	FAS	142-3").	FSP	FAS	142-3 amends	the	factors	that	should	be	considered	in	developing	renewal	or	extension	assumptions	used	to	determine	the	useful	life	of	a	recognized	intangible	asset	under SFAS	No.	142,	"Goodwill	and	Other	Intangible	Assets."	The	intent	of	the	position	is	to	improve	the	consistency	between	the	useful	life	of	a	recognized	intangible	asset under	SFAS	No.	142	and	the	period	of	expected	cash	flows	used	to	measure	the	fair	value	of	the	asset	under	FAS	141(R),	and	other	U.S.	generally	accepted	accounting principles.	The	provisions	of	FSP	FAS	142-3	are	effective	for	the	fiscal	year	beginning	June	1,	2009.	We	do	not	expect	the	adoption	of	FSP	FAS	142-3	will	have	a material	impact	on	our	consolidated	financial	position	or	results	of	operations.

# Critical	Accounting	Policies

Our	previous	discussion	and	analysis	of	our	financial	condition	and	results	of	operations	are	based	upon	our	consolidated	financial	statements,	which	have	been prepared	in	accordance	with	accounting	principles	generally	accepted	in	the	United	States	of	America.	The	preparation	of	these	financial	statements	requires	us	to	make estimates	and	judgments	that	affect	the	reported	amounts	of	assets,	liabilities,	revenues	and	expenses,	and	related	disclosure	of	contingent	assets	and	liabilities.

We	believe	that	the	estimates,	assumptions	and	judgments	involved	in	the	accounting	policies	described	below	have	the	greatest	potential	impact	on	our	financial statements,	so	we	consider	these	to	be	our	critical	accounting	policies.	Because	of	the	uncertainty	inherent	in	these	matters,	actual	results	could	differ	from	the	estimates we	use	in	applying	the	critical	accounting	policies.	Certain	of	these	critical	accounting	policies	affect

working	capital	account	balances,	including	the	policies	for	revenue	recognition,	the	allowance	for	uncollectible	accounts	receivable,	inventory	reserves,	and	contingent payments	under	endorsement	contracts.	These	policies	require	that	we	make	estimates	in	the	preparation	of	our	financial	statements	as	of	a	given	date.	However,	since our	business	cycle	is	relatively	short,	actual	results	related	to	these	estimates	are	generally	known	within	the	six-month	period	following	the	financial	statement	date. Thus,	these	policies	generally	affect	only	the	timing	of	reported	amounts	across	two	to	three	fiscal	quarters.

Within	the	context	of	these	critical	accounting	policies,	we	are	not	currently	aware	of	any	reasonably	likely	events	or	circumstances	that	would	result	in	materially different	amounts	being	reported.

# Revenue	Recognition

We	record	wholesale	revenues	when	title	passes	and	the	risks	and	rewards	of	ownership	have	passed	to	the	customer,	based	on	the	terms	of	sale.	Title	passes generally	upon	shipment	or	upon	receipt	by	the	customer	depending	on	the	country	of	the	sale	and	the	agreement	with	the	customer.	Retail	store	revenues	are	recorded	at the	time	of	sale.

In	some	instances,	we	ship	product	directly	from	our	supplier	to	the	customer	and	recognize	revenue	when	the	product	is	delivered	to	and	accepted	by	the customer.	Our	revenues	may	fluctuate	in	cases	when	our	customers	delay	accepting	shipment	of	product	for	periods	up	to	several	weeks.

In	certain	countries	outside	of	the	U.S.,	precise	information	regarding	the	date	of	receipt	by	the	customer	is	not	readily	available.	In	these	cases,	we	estimate	the date	of	receipt	by	the	customer	based	upon	historical	delivery	times	by	geographic	location.	On	the	basis	of	our	tests	of	actual	transactions,	we	have	no	indication	that these	estimates	have	been	materially	inaccurate	historically.

As	part	of	our	revenue	recognition	policy,	we	record	estimated	sales	returns	and	miscellaneous	claims	from	customers	as	reductions	to	revenues	at	the	time revenues	are	recorded.	We	base	our	estimates	on	historical	rates	of	product	returns	and	claims,	and	specific	identification	of	outstanding	claims	and	outstanding	returns not	yet	received	from	customers.	Actual	returns	and	claims	in	any	future	period	are	inherently	uncertain	and	thus	may	differ	from	our	estimates.	If	actual	or	expected future	returns	and	claims	were	significantly	greater	or	lower	than	the	reserves	we	had	established,	we	would	record	a	reduction	or	increase	to	net	revenues	in	the	period	in which	we	made	such	determination.

# Allowance	for	Uncollectible	Accounts	Receivable

We	make	ongoing	estimates	relating	to	the	ability	to	collect	our	accounts	receivable	and	maintain	an	allowance	for	estimated	losses	resulting	from	the	inability	of our	customers	to	make	required	payments.	In	determining	the	amount	of	the	allowance,	we	consider	our	historical	level	of	credit	losses	and	make	judgments	about	the creditworthiness	of	significant	customers	based	on	ongoing	credit	evaluations.	Since	we	cannot	predict	future	changes	in	the	financial	stability	of	our	customers,	actual future	losses	from	uncollectible	accounts	may	differ	from	our	estimates.	If	the	financial	condition	of	our	customers	were	to	deteriorate,	resulting	in	their	inability	to make	payments,	a	larger	allowance	might	be	required.	In	the	event	we	determine	that	a	smaller	or	larger	allowance	is	appropriate,	we	would	record	a	credit	or	a	charge to	selling	and	administrative	expense	in	the	period	in	which	such	a	determination	is	made.

# Inventory	Reserves

We	also	make	ongoing	estimates	relating	to	the	net	realizable	value	of	inventories,	based	upon	our	assumptions	about	future	demand	and	market	conditions.	If	we estimate	that	the	net	realizable	value	of	our	inventory	is	less	than	the	cost	of	the	inventory	recorded	on	our	books,	we	record	a	reserve	equal	to	the	difference	between	the cost	of	the	inventory	and	the	estimated	net	realizable	value.	This	reserve	is	recorded	as	a	charge	to

cost	of	sales.	If	changes	in	market	conditions	result	in	reductions	in	the	estimated	net	realizable	value	of	our	inventory	below	our	previous	estimate,	we	would	increase our	reserve	in	the	period	in	which	we	made	such	a	determination	and	record	a	charge	to	cost	of	sales.

# Contingent	Payments	under	Endorsement	Contracts

A	significant	portion	of	our	demand	creation	expense	relates	to	payments	under	endorsement	contracts.	In	general,	endorsement	payments	are	expensed	uniformly over	the	term	of	the	contract.	However,	certain	contract	elements	may	be	accounted	for	differently,	based	upon	the	facts	and	circumstances	of	each	individual	contract.

Some	of	the	contracts	provide	for	contingent	payments	to	endorsers	based	upon	specific	achievements	in	their	sports	(e.g.,	winning	a	championship).	We	record selling	and	administrative	expense	for	these	amounts	when	the	endorser	achieves	the	specific	goal.

Some	of	the	contracts	provide	for	payments	based	upon	endorsers	maintaining	a	level	of	performance	in	their	sport	over	an	extended	period	of	time	(e.g., maintaining	a	top	ranking	in	a	sport	for	a	year).	These	amounts	are	reported	in	selling	and	administrative	expense	when	we	determine	that	it	is	probable	that	the	specified level	of	performance	will	be	maintained	throughout	the	period.	In	these	instances,	to	the	extent	that	actual	payments	to	the	endorser	differ	from	our	estimate	due	to changes	in	the	endorser's	athletic	performance,	increased	or	decreased	selling	and	administrative	expense	may	be	reported	in	a	future	period.

Some	of	the	contracts	provide	for	royalty	payments	to	endorsers	based	upon	a	predetermined	percentage	of	sales	of	particular	products.	We	expense	these payments	in	cost	of	sales	as	the	related	sales	occur.	In	certain	contracts,	we	offer	minimum	guaranteed	royalty	payments.	For	contractual	obligations	for	which	we estimate	that	we	will	not	meet	the	minimum	guaranteed	amount	of	royalty	fees	through	sales	of	product,	we	record	the	amount	of	the	guaranteed	payment	in	excess	of that	earned	through	sales	of	product	in	selling	and	administrative	expense	uniformly	over	the	remaining	guarantee	period.

# Property,	Plant	and	Equipment	and	Definite-Lived	Assets

Property,	plant	and	equipment,	including	buildings,	equipment,	and	computer	hardware	and	software	are	recorded	at	cost	(including,	in	some	cases,	the	cost	of internal	labor)	and	are	depreciated	over	the	estimated	useful	life.	Changes	in	circumstances	(such	as	technological	advances	or	changes	to	our	business	operations)	can result	in	differences	between	the	actual	and	estimated	useful	lives.	In	those	cases	where	we	determine	that	the	useful	life	of	a	long-lived	asset	should	be	shortened,	we increase	depreciation	expense	over	the	remaining	useful	life	to	depreciate	the	asset's	net	book	value	to	its	salvage	value.

We	review	the	carrying	value	of	long-lived	assets	or	asset	groups	to	be	used	in	operations	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying amount	of	the	assets	might	not	be	recoverable.	Factors	that	would	necessitate	an	impairment	assessment	include	a	significant	adverse	change	in	the	extent	or	manner	in which	an	asset	is	used,	a	significant	adverse	change	in	legal	factors	or	the	business	climate	that	could	affect	the	value	of	the	asset,	or	a	significant	decline	in	the observable	market	value	of	an	asset,	among	others.	If	such	facts	indicate	a	potential	impairment,	we	would	assess	the	recoverability	of	an	asset	group	by	determining	if the	carrying	value	of	the	asset	group	exceeds	the	sum	of	the	projected	undiscounted	cash	flows	expected	to	result	from	the	use	and	eventual	disposition	of	the	assets	over the	remaining	economic	life	of	the	primary	asset	in	the	asset	group.	If	the	recoverability	test	indicates	that	the	carrying	value	of	the	asset	group	is	not	recoverable,	we	will estimate	the	fair	value	of	the	asset	group	using	appropriate	valuation	methodologies	which	would	typically	include	an	estimate	of	discounted	cash	flows.	Any impairment	would	be	measured	as	the	difference	between	the	asset	groups	carrying	amount	and	its	estimated	fair	value.

# Goodwill	and	Indefinite-Lived	Intangible	Assets

In	accordance	with	SFAS	No.	142	"Goodwill	and	Other	Intangible	Assets"	("FAS	142"),	we	perform	annual	impairment	tests	on	goodwill	and	intangible	assets with	indefinite	lives	in	the	fourth	quarter	of	each	fiscal	year,	or	when	events	occur	or	circumstances	change	that	would,	more	likely	than	not,	reduce	the	fair	value	of	a reporting	unit	or	an	intangible	asset	with	an	indefinite	life	below	its	carrying	value.	Events	or	changes	in	circumstances	that	may	trigger	interim	impairment	reviews include	significant	changes	in	business	climate,	operating	results,	planned	investments	in	the	reporting	unit,	or	an	expectation	that	the	carrying	amount	may	not	be recoverable,	among	other	factors.	The	impairment	test	requires	us	to	estimate	the	fair	value	of	our	reporting	units.	If	the	carrying	value	of	a	reporting	unit	exceeds	its	fair value,	the	goodwill	of	that	reporting	unit	is	potentially	impaired	and	we	proceed	to	step	two	of	the	impairment	analysis.	In	step	two	of	the	analysis,	we	measure	and record	an	impairment	loss	equal	to	the	excess	of	the	carrying	value	of	the	reporting	unit's	goodwill	over	its	implied	fair	value	should	such	a	circumstance	arise.

We	generally	base	our	measurement	of	the	fair	value	of	a	reporting	unit	on	a	blended	analysis	of	the	present	value	of	future	discounted	cash	flows	and	the	market valuation	approach.	The	discounted	cash	flows	model	indicates	the	fair	value	of	the	reporting	unit	based	on	the	present	value	of	the	cash	flows	that	we	expect	the reporting	unit	to	generate	in	the	future.	Our	significant	estimates	in	the	discounted	cash	flows	model	include:	our	weighted	average	cost	of	capital;	long-term	rate	of growth	and	profitability	of	the	reporting	unit's	business;	and	working	capital	effects.	The	market	valuation	approach	indicates	the	fair	value	of	the	business	based	on	a comparison	of	the	reporting	unit	to	comparable	publicly	traded	firms	in	similar	lines	of	business.	Significant	estimates	in	the	market	valuation	approach	model	include identifying	similar	companies	with	comparable	business	factors	such	as	size,	growth,	profitability,	risk	and	return	on	investment	and	assessing	comparable	revenue	and operating	income	multiples	in	estimating	the	fair	value	of	the	reporting	unit.

We	believe	the	weighted	use	of	discounted	cash	flows	and	the	market	valuation	approach	is	the	best	method	for	determining	the	fair	value	of	our	reporting	units because	these	are	the	most	common	valuation	methodologies	used	within	our	industry;	and	the	blended	use	of	both	models	compensates	for	the	inherent	risks	associated with	either	model	if	used	on	a	stand-alone	basis.

Indefinite-lived	intangible	assets	primarily	consist	of	acquired	trade	names	and	trademarks.	In	measuring	the	fair	value	for	these	intangible	assets,	we	utilize	the relief-from-royalty	method.	This	method	assumes	that	trade	names	and	trademarks	have	value	to	the	extent	that	their	owner	is	relieved	of	the	obligation	to	pay	royalties for	the	benefits	received	from	them.	This	method	requires	us	to	estimate	the	future	revenue	for	the	related	brands,	the	appropriate	royalty	rate	and	the	weighted	average cost	of	capital.

# Hedge	Accounting	for	Derivatives

We	use	forward	exchange	contracts	and	option	contracts	to	hedge	certain	anticipated	foreign	currency	exchange	transactions,	as	well	as	any	resulting	receivable or	payable	balance.	When	specific	criteria	required	by	SFAS	No.	133,	"Accounting	for	Derivative	and	Hedging	Activities,"	as	amended	and	interpreted	("FAS	133"), have	been	met,	changes	in	fair	values	of	hedge	contracts	relating	to	anticipated	transactions	are	recorded	in	other	comprehensive	income	rather	than	net	income	until	the underlying	hedged	transaction	affects	net	income.	In	most	cases,	this	results	in	gains	and	losses	on	hedge	derivatives	being	released	from	other	comprehensive	income into	net	income	some	time	after	the	maturity	of	the	derivative.	One	of	the	criteria	for	this	accounting	treatment	is	that	the	forward	exchange	contract	amount	should	not be	in	excess	of	specifically	identified	anticipated	transactions.	By	their	very	nature,	our	estimates	of	anticipated	transactions	may	fluctuate	over	time	and	may	ultimately vary	from	actual	transactions.	When	anticipated	transaction	estimates	or	actual	transaction	amounts	decrease	below	hedged	levels,	or	when	the	timing	of	transactions changes	beyond	the	threshold	allowed	by	FAS	133,	we	are	required	to	reclassify	at	least	a	portion	of	the	cumulative	changes	in	fair	values	of	the	related	hedge	contracts from	other	comprehensive	income	to	other	(income)	expense,	net	during	the	quarter	in	which	such	changes

occur.	Once	an	anticipated	transaction	estimate	or	actual	transaction	amount	decreases	below	hedged	levels,	we	make	adjustments	to	the	related	hedge	contract	in	order to	reduce	the	amount	of	the	hedge	contract	to	that	of	the	revised	anticipated	transaction.

We	use	forward	contracts	to	hedge	our	investment	in	the	net	assets	of	certain	international	subsidiaries	to	offset	foreign	currency	translation	and	economic exposures	related	to	our	net	investment	in	those	subsidiaries.	When	appropriately	designated	as	a	hedge	in	accordance	with	FAS	133,	the	change	in	fair	value	of	the forward	contracts	hedging	our	net	investments	is	reported	in	the	cumulative	translation	adjustment	component	of	accumulated	other	comprehensive	income	within stockholders'	equity	to	offset	the	foreign	currency	translation	adjustments	on	those	investments.

As	the	value	of	our	underlying	net	investments	in	wholly-owned	international	subsidiaries	is	known	at	the	time	a	hedge	is	placed,	the	designated	hedge	is	matched to	the	portion	of	our	net	investment	at	risk.	Accordingly,	the	variability	involved	in	net	investment	hedges	is	substantially	less	than	that	of	other	types	of	hedge transactions	and	we	do	not	expect	any	material	ineffectiveness.	In	accordance	with	FAS	133,	we	consider,	on	a	quarterly	basis,	the	need	to	redesignate	existing	hedge relationships	based	on	changes	in	the	underlying	net	investment.	Should	the	level	of	our	net	investment	decrease	below	hedged	levels,	any	resulting	ineffectiveness would	be	reported	directly	to	earnings	in	the	period	incurred.

# Stock-based	Compensation

As	of	the	first	quarter	of	fiscal	2007,	we	account	for	stock-based	compensation	in	accordance	with	SFAS	No.	123R	"Share-Based	Payment"	("FAS	123R").	Under the	provisions	of	FAS	123R,	the	fair	value	of	stock-based	compensation	is	estimated	on	the	date	of	grant	using	the	Black-Scholes	option	pricing	model.	The	Black- Scholes	option	pricing	model	requires	the	input	of	highly	subjective	assumptions	including	volatility.	Expected	volatility	is	estimated	based	on	implied	volatility	in market	traded	options	on	our	common	stock	with	a	term	greater	than	one	year,	along	with	other	factors.	Our	decision	to	use	implied	volatility	was	based	on	the availability	of	actively	traded	options	on	our	common	stock	and	our	assessment	that	implied	volatility	is	more	representative	of	future	stock	price	trends	than	historical volatility.	If	factors	change	and	we	use	different	assumptions	for	estimating	stock-based	compensation	expense	in	future	periods,	stock-based	compensation	expense	may differ	materially	in	the	future	from	that	recorded	in	the	current	period.

# Taxes

We	record	valuation	allowances	against	our	deferred	tax	assets,	when	necessary,	in	accordance	with	SFAS	No.	109,	"Accounting	for	Income	Taxes"	("FAS 109").	Realization	of	deferred	tax	assets	(such	as	net	operating	loss	carry-forwards)	is	dependent	on	future	taxable	earnings	and	is	therefore	uncertain.	At	least	quarterly, we	assess	the	likelihood	that	our	deferred	tax	asset	balance	will	be	recovered	from	future	taxable	income.	To	the	extent	we	believe	that	recovery	is	not	likely,	we establish	a	valuation	allowance	against	our	deferred	tax	asset,	which	increases	our	income	tax	expense	in	the	period	when	such	determination	is	made.

In	addition,	we	have	not	recorded	U.S.	income	tax	expense	for	foreign	earnings	that	we	have	determined	to	be	indefinitely	reinvested	offshore,	thus	reducing	our overall	income	tax	expense.	The	amount	of	earnings	designated	as	indefinitely	reinvested	offshore	is	based	upon	the	actual	deployment	of	such	earnings	in	our	offshore assets	and	our	expectations	of	the	future	cash	needs	of	our	U.S.	and	foreign	entities.	Income	tax	considerations	are	also	a	factor	in	determining	the	amount	of	foreign earnings	to	be	indefinitely	reinvested	offshore.

We	carefully	review	all	factors	that	drive	the	ultimate	disposition	of	foreign	earnings	determined	to	be	reinvested	offshore,	and	apply	stringent	standards	to overcoming	the	presumption	of	repatriation.	Despite	this	approach,	because	the	determination	involves	our	future	plans	and	expectations	of	future	events,	the	possibility exists	that	amounts	declared	as	indefinitely	reinvested	offshore	may	ultimately	be	repatriated.	For	instance,	the

actual	cash	needs	of	our	U.S.	entities	may	exceed	our	current	expectations,	or	the	actual	cash	needs	of	our	foreign	entities	may	be	less	than	our	current	expectations. This	would	result	in	additional	income	tax	expense	in	the	year	we	determined	that	amounts	were	no	longer	indefinitely	reinvested	offshore.	Conversely,	our	approach may	also	result	in	a	determination	that	accumulated	foreign	earnings	(for	which	U.S.	income	taxes	have	been	provided)	will	be	indefinitely	reinvested	offshore.	In	this case,	our	income	tax	expense	would	be	reduced	in	the	year	of	such	determination.

On	an	interim	basis,	we	estimate	what	our	effective	tax	rate	will	be	for	the	full	fiscal	year.	The	estimated	annual	effective	tax	rate	is	then	applied	to	the	year-to- date	pre-tax	income	excluding	infrequently	occurring	or	unusual	items,	to	determine	the	year-to-date	tax	expense.	The	income	tax	effects	of	infrequent	or	unusual	items are	recognized	in	the	interim	period	in	which	they	occur.	As	the	fiscal	year	progresses,	we	continually	refine	our	estimate	based	upon	actual	events	and	earnings	by jurisdiction	during	the	year.	This	continual	estimation	process	periodically	results	in	a	change	to	our	expected	effective	tax	rate	for	the	fiscal	year.	When	this	occurs,	we adjust	the	income	tax	provision	during	the	quarter	in	which	the	change	in	estimate	occurs	so	that	the	year-to-date	provision	equals	the	expected	annual	rate.

We	account	for	uncertain	tax	positions	in	accordance	with	FASB	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes"	("FIN	48").	On	a	quarterly basis,	we	reevaluate	the	probability	that	a	tax	position	will	be	effectively	sustained	and	the	appropriateness	of	the	amount	recognized	for	uncertain	tax	positions	based	on factors	including	changes	in	facts	or	circumstances,	changes	in	tax	law,	settled	audit	issues	and	new	audit	activity.	Changes	in	our	assessment	may	result	in	the recognition	of	a	tax	benefit	or	an	additional	charge	to	the	tax	provision	in	the	period	our	assessment	changes.	We	recognize	interest	and	penalties	related	to	income	tax matters	in	income	tax	expense.

# Other	Contingencies

In	the	ordinary	course	of	business,	we	are	involved	in	legal	proceedings	regarding	contractual	and	employment	relationships,	product	liability	claims,	trademark rights,	and	a	variety	of	other	matters.	We	record	contingent	liabilities	resulting	from	claims	against	us,	including	related	legal	costs,	when	a	loss	is	assessed	to	be probable	and	the	amount	of	the	loss	is	reasonably	estimable.	Assessing	probability	of	loss	and	estimating	probable	losses	requires	analysis	of	multiple	factors,	including in	some	cases	judgments	about	the	potential	actions	of	third	party	claimants	and	courts.	Recorded	contingent	liabilities	are	based	on	the	best	information	available	and actual	losses	in	any	future	period	are	inherently	uncertain.	If	future	adjustments	to	estimated	probable	future	losses	or	actual	losses	exceed	our	recorded	liability	for	such claims,	we	would	record	additional	charges	as	other	(income)	expense,	net	during	the	period	in	which	the	actual	loss	or	change	in	estimate	occurred.	In	addition	to contingent	liabilities	recorded	for	probable	losses,	we	disclose	contingent	liabilities	when	there	is	a	reasonable	possibility	that	the	ultimate	loss	will	materially	exceed	the recorded	liability.	Currently,	we	do	not	believe	that	any	of	our	pending	legal	proceedings	or	claims	will	have	a	material	impact	on	our	financial	position	or	results	of operations.

# Item	7A. 	 Quantitative	and	Qualitative	Disclosures	about	Market	Risk

In	the	normal	course	of	business	and	consistent	with	established	policies	and	procedures,	we	employ	a	variety	of	financial	instruments	to	manage	exposure	to fluctuations	in	the	value	of	foreign	currencies	and	interest	rates.	It	is	our	policy	to	utilize	these	financial	instruments	only	where	necessary	to	finance	our	business	and manage	such	exposures;	we	do	not	enter	into	these	transactions	for	speculative	purposes.

We	are	exposed	to	foreign	currency	fluctuation	as	a	result	of	our	international	sales,	product	sourcing	and	funding	activities.	Our	foreign	exchange	risk management	program	is	intended	to	minimize	both	the	positive	or	negative	effects	of	currency	fluctuations	on	our	consolidated	results	of	operations,	financial	position and	cash	flows.	This	also	has	the	effect	of	delaying	the	impact	of	current	market	rates	on	our	consolidated	financial	statements	dependent	upon	hedge	horizons.	We	use forward	exchange	contracts	and	options	to	hedge	certain

anticipated	but	not	yet	firmly	committed	transactions	as	well	as	certain	firm	commitments	and	the	related	receivables	and	payables,	including	third	party	and intercompany	transactions.	We	also	use	forward	contracts	to	hedge	our	investment	in	the	net	assets	of	certain	international	subsidiaries	to	offset	foreign	currency translation	and	economic	exposures	related	to	our	net	investment	in	those	subsidiaries.

When	we	begin	hedging	exposures,	the	type	and	duration	of	each	hedge	depends	on	the	nature	of	the	exposure	and	market	conditions.	Generally,	all	anticipated and	firmly	committed	transactions	that	are	hedged	are	to	be	recognized	within	twelve	to	eighteen	months,	although	at	May	31,	2009	we	had	forward	contracts	hedging anticipated	transactions	that	will	be	recognized	in	as	many	as	23	months.	The	majority	of	the	contracts	expiring	in	more	than	twelve	months	relate	to	the	anticipated purchase	of	inventory	by	one	of	our	European	subsidiaries.	When	intercompany	loans	are	hedged,	it	is	typically	for	their	expected	duration.	Hedged	transactions	are principally	denominated	in	Euro,	Japanese	yen	and	British	pound.	See	Section	"Foreign	Currency	Exposures	and	Hedging	Practices"	under	Item	7	for	additional	detail.

Our	earnings	are	also	exposed	to	movements	in	short	and	long-term	market	interest	rates.	Our	objective	in	managing	this	interest	rate	exposure	is	to	limit	the impact	of	interest	rate	changes	on	earnings	and	cash	flows	and	to	reduce	overall	borrowing	costs.	To	achieve	these	objectives,	we	maintain	a	mix	of	commercial	paper, bank	loans	and	fixed	rate	debt	of	varying	maturities	and	have	entered	into	receive-fixed,	pay-variable	interest	rate	swaps.

# Market	Risk	Measurement

We	monitor	foreign	exchange	risk,	interest	rate	risk	and	related	derivatives	using	a	variety	of	techniques	including	a	review	of	market	value,	sensitivity	analysis, and	Value-at-Risk	("VaR").	Our	market-sensitive	derivative	and	other	financial	instruments	are	foreign	currency	forward	contracts,	foreign	currency	option	contracts, interest	rate	swaps,	intercompany	loans	denominated	in	non-functional	currencies,	fixed	interest	rate	U.S.	dollar	denominated	debt,	and	fixed	interest	rate	Japanese	yen denominated	debt.

We	use	VaR	to	monitor	the	foreign	exchange	risk	of	our	foreign	currency	forward	and	foreign	currency	option	derivative	instruments	only.	The	VaR	determines the	maximum	potential	one-day	loss	in	the	fair	value	of	these	foreign	exchange	rate-sensitive	financial	instruments.	The	VaR	model	estimates	assume	normal	market conditions	and	a	95%	confidence	level.	There	are	various	modeling	techniques	that	can	be	used	in	the	VaR	computation.	Our	computations	are	based	on interrelationships	between	currencies	and	interest	rates	(a	"variance/co-variance"	technique).	These	interrelationships	are	a	function	of	foreign	exchange	currency	market changes	and	interest	rate	changes	over	the	preceding	one	year	period.	The	value	of	foreign	currency	options	does	not	change	on	a	one-to-one	basis	with	changes	in	the underlying	currency	rate.	We	adjusted	the	potential	loss	in	option	value	for	the	estimated	sensitivity	(the	"delta"	and	"gamma")	to	changes	in	the	underlying	currency rate.	This	calculation	reflects	the	impact	of	foreign	currency	rate	fluctuations	on	the	derivative	instruments	only,	and	does	not	include	the	impact	of	such	rate fluctuations	on	non-functional	currency	transactions	(such	as	anticipated	transactions,	firm	commitments,	cash	balances,	and	accounts	and	loans	receivable	and	payable), including	those	which	are	hedged	by	these	instruments.

The	VaR	model	is	a	risk	analysis	tool	and	does	not	purport	to	represent	actual	losses	in	fair	value	that	we	will	incur,	nor	does	it	consider	the	potential	effect	of favorable	changes	in	market	rates.	It	also	does	not	represent	the	full	extent	of	the	possible	loss	that	may	occur.	Actual	future	gains	and	losses	will	differ	from	those estimated	because	of	changes	or	differences	in	market	rates	and	interrelationships,	hedging	instruments	and	hedge	percentages,	timing	and	other	factors.

The	estimated	maximum	one-day	loss	in	fair	value	on	our	foreign	currency	sensitive	derivative	financial	instruments,	derived	using	the	VaR	model,	was	$67.8 million	and	$34.9	million	at	May	31,	2009	and	May	31,	2008,	respectively.	The	VaR	increased,	despite	a	reduction	in	the	total	notional	value	of	our	foreign	currency derivative	instruments,	as	a	result	of	increased	foreign	currency	volatilities	at	May	31,	2009	as	compared	to

May	31,	2008.	Such	a	hypothetical	loss	in	fair	value	of	our	derivatives	would	be	offset	by	increases	in	the	value	of	the	underlying	transactions	being	hedged.	The	average monthly	change	in	the	fair	values	of	foreign	currency	forward	and	foreign	currency	option	derivative	instruments	was	$207.4	million	and	$32.3	million	during	fiscal 2009	and	fiscal	2008,	respectively.

The	instruments	not	included	in	the	VaR	are	intercompany	loans	denominated	in	non-functional	currencies,	fixed	interest	rate	Japanese	yen	denominated	debt, fixed	interest	rate	U.S.	dollar	denominated	debt	and	interest	rate	swaps.	Intercompany	loans	and	related	interest	amounts	are	eliminated	in	consolidation.	Furthermore, our	non-functional	currency	intercompany	loans	are	substantially	hedged	against	foreign	exchange	risk	through	the	use	of	forward	contracts,	which	are	included	in	the VaR	calculation	above.	We,	therefore,	consider	the	interest	rate	and	foreign	currency	market	risks	associated	with	our	non-functional	currency	intercompany	loans	to	be immaterial	to	our	consolidated	financial	position,	results	from	operations	and	cash	flows.

Details	of	third	party	debt	and	interest	rate	swaps	are	provided	in	the	table	below.	The	table	presents	principal	cash	flows	and	related	weighted	average	interest rates	by	expected	maturity	dates.	Weighted	average	interest	rates	for	the	fixed	rate	swapped	to	floating	rate	debt	reflect	the	effective	interest	rates	as	of	May	31,	2009.

|  | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | Fair	Value |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | (In\tmillions,\texcept\tinterest\trates) | (In\tmillions,\texcept\tinterest\trates) |  |  |  |
| Foreign\tExchange\tRisk |  |  |  |  |  |  |  |  |
| Japanese\tYen\tFunctional\tCurrency |  |  |  |  |  |  |  |  |
| Long\tTerm\tJapanese\tyen\tdebt\t—\tFixed\trate |  |  |  |  |  |  |  |  |
| Principal\tpayments | $6.9 | $ 6.9 | $167.1 | $6.9 | $ 6.9 | $44.7 | $239.4 | $235.9 |
| Average\tinterest\trate | 2.4% | 2.4% | 3.4% | 2.4% | 2.4% | 2.4% | 2.5% |  |
| Interest\tRate\tRisk |  |  |  |  |  |  |  |  |
| Japanese\tYen\tFunctional\tCurrency |  |  |  |  |  |  |  |  |
| Long-term\tJapanese\tyen\tdebt\t—\tFixed\trate |  |  |  |  |  |  |  |  |
| Principal\tpayments | $6.9 | $ 6.9 | $167.1 | $6.9 | $ 6.9 | $44.7 | $239.4 | $235.9 |
| Average\tinterest\trate | 2.4% | 2.4% | 3.4% | 2.4% | 2.4% | 2.4% | 2.5% |  |
| U.S.\tDollar\tFunctional\tCurrency |  |  |  |  |  |  |  |  |
| Principal\tpayments | $25.0 | $ — | $— | $40.0 | $ — | $100.0 | $165.0 | $169.0 |
| Average\tinterest\trate | 3.1% | — | — | 3.1% | — | 1.6% | 2.2% |  |
| Long-term\tU.S.\tdollar\tdebt\t—\tFixed\trate |  |  |  |  |  |  |  |  |
| Principal\tpayments | $— | $ — | $— | $— | $ — | $50.0 | $50.0 | $51.5 |
| Average\tinterest\trate | — | — | — | — | — | 4.7% | 4.7% |  |

The	fixed	interest	rate	Japanese	yen	denominated	debts	were	issued	by	and	are	accounted	for	by	one	of	our	Japanese	subsidiaries.	Accordingly,	the	monthly	re- measurement	of	these	instruments	due	to	changes	in	foreign	exchange	rates	is	recognized	in	accumulated	other	comprehensive	income	upon	the	consolidation	of	this subsidiary.

In	fiscal	2003,	we	entered	into	a	receive-floating,	pay-fixed	interest	rate	swap	related	to	a	Japanese	yen	denominated	intercompany	loan	with	one	of	our	Japanese subsidiaries.	This	interest	rate	swap	was	not	designated	as	a	hedge	instrument	under	FAS	133.	Accordingly,	changes	in	the	fair	value	of	the	swap	were	recorded	to consolidated	net	income	each	period.	The	change	in	fair	value	of	the	swap	was	not	material	for	the	years	ended	May	31,	2009,	2008	and	2007.	Both	the	intercompany loan	and	the	related	interest	rate	swap	matured	during	fiscal	2009.

# Item	8. 	 Financial	Statements	and	Supplemental	Data

Management	of	NIKE,	Inc.	is	responsible	for	the	information	and	representations	contained	in	this	report.	The	financial	statements	have	been	prepared	in conformity	with	the	generally	accepted	accounting	principles	we	considered	appropriate	in	the	circumstances	and	include	some	amounts	based	on	our	best	estimates	and judgments.	Other	financial	information	in	this	report	is	consistent	with	these	financial	statements.

Our	accounting	systems	include	controls	designed	to	reasonably	assure	assets	are	safeguarded	from	unauthorized	use	or	disposition	and	provide	for	the preparation	of	financial	statements	in	conformity	with	generally	accepted	accounting	principles.	These	systems	are	supplemented	by	the	selection	and	training	of qualified	financial	personnel	and	an	organizational	structure	providing	for	appropriate	segregation	of	duties.

An	Internal	Audit	department	reviews	the	results	of	its	work	with	the	Audit	Committee	of	the	Board	of	Directors,	presently	consisting	of	three	outside	directors. The	Audit	Committee	is	responsible	for	the	appointment	of	the	independent	registered	public	accounting	firm	and	reviews	with	the	independent	registered	public accounting	firm,	management	and	the	internal	audit	staff,	the	scope	and	the	results	of	the	annual	examination,	the	effectiveness	of	the	accounting	control	system	and other	matters	relating	to	the	financial	affairs	of	NIKE	as	they	deem	appropriate.	The	independent	registered	public	accounting	firm	and	the	internal	auditors	have	full access	to	the	Committee,	with	and	without	the	presence	of	management,	to	discuss	any	appropriate	matters.

# Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting

Management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting,	as	such	term	is	defined	in	Rule	13a-15(f)	and	Rule 15d-15(f)	of	the	Securities	Exchange	Act	of	1934,	as	amended.	Internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding the	reliability	of	financial	reporting	and	the	preparation	of	the	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles	in the	United	States	of	America.	Internal	control	over	financial	reporting	includes	those	policies	and	procedures	that:	(i)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	assets	of	the	company;	(ii)	provide	reasonable	assurance	that	transactions	are	recorded as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the company	are	being	made	only	in	accordance	with	authorizations	of	our	management	and	directors;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or	timely detection	of	unauthorized	acquisition,	use	or	disposition	of	assets	of	the	company	that	could	have	a	material	effect	on	the	financial	statements.

While	"reasonable	assurance"	is	a	high	level	of	assurance,	it	does	not	mean	absolute	assurance.	Because	of	its	inherent	limitations,	internal	control	over	financial reporting	may	not	prevent	or	detect	every	misstatement	and	instance	of	fraud.	Controls	are	susceptible	to	manipulation,	especially	in	instances	of	fraud	caused	by	the collusion	of	two	or	more	people,	including	our	senior	management.	Also,	projections	of	any	evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

Under	the	supervision	and	with	the	participation	of	our	Chief	Executive	Officer	and	Chief	Financial	Officer,	our	management	conducted	an	evaluation	of	the effectiveness	of	our	internal	control	over	financial	reporting	based	upon	the	framework	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	Based	on	the	results	of	our	evaluation,	our	management	concluded	that	our	internal	control	over financial	reporting	was	effective	as	of	May	31,	2009.

PricewaterhouseCoopers	LLP,	an	independent	registered	public	accounting	firm,	has	audited	(1)	the	consolidated	financial	statements	and	(2)	the	effectiveness	of our	internal	control	over	financial	reporting	as	of	May	31,	2009,	as	stated	in	their	report	herein.

Mark	G.	Parker

Chief	Executive	Officer	and	President

Donald	W.	Blair

Chief	Financial	Officer

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# To	the	Board	of	Directors	and

# Shareholders	of	NIKE,	Inc.:

In	our	opinion,	the	consolidated	financial	statements	listed	in	the	index	appearing	under	Item	15(a)(1)	present	fairly,	in	all	material	respects,	the	financial	position of	NIKE,	Inc.	and	its	subsidiaries	at	May	31,	2009	and	2008,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended May	31,	2009	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America.	In	addition,	in	our	opinion,	the	financial	statement	schedule listed	in	the	appendix	appearing	under	Item	15(a)(2)	presents	fairly,	in	all	material	respects,	the	information	set	forth	therein	when	read	in	conjunction	with	the	related consolidated	financial	statements.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	May	31, 2009,	based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission (COSO).	The	Company's	management	is	responsible	for	these	financial	statements	and	financial	statement	schedule,	for	maintaining	effective	internal	control	over financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in	Management's	Annual	Report	on	Internal	Control Over	Financial	Reporting	appearing	under	Item	8.	Our	responsibility	is	to	express	opinions	on	these	financial	statements,	on	the	financial	statement	schedule,	and	on	the Company's	internal	control	over	financial	reporting	based	on	our	integrated	audits.	We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and	perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial statements	are	free	of	material	misstatement	and	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audits	of	the financial	statements	included	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements,	assessing	the	accounting	principles used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal	control	over	financial	reporting included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	and	testing	and	evaluating	the	design and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as	we	considered	necessary	in	the circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

# /s/				PRICEWATERHOUSECOOPERS	LLP

Portland,	Oregon

# CONSOLIDATED	STATEMENTS	OF	INCOME

| Revenues | $19,176.1 | $18,627.0 | $16,325.9 |
| :--- | :--- | :--- | :--- |
| Cost\tof\tsales | \t 10,571.7 | 10,239.6 | 9,165.4 |
| Gross\tmargin | 8,604.4 | 8,387.4 | 7,160.5 |
| Selling\tand\tadministrative\texpense | 6,149.6 | 5,953.7 | 5,028.7 |
| Restructuring\tcharges\t(Note\t16) | 195.0 | — | — |
| Goodwill\timpairment\t(Note\t4) | 199.3 | — | — |
| Intangible\tand\tother\tasset\timpairment\t(Note\t4) | 202.0 | — | — |
| Interest\tincome,\tnet\t(Notes\t1,\t7\tand\t8) | (9.5) | (77.1) | (67.2) |
| Other\t(income)\texpense,\tnet\t(Notes\t17\tand\t18) | (88.5) | 7.9 | (0.9) |
| Income\tbefore\tincome\ttaxes | 1,956.5 | 2,502.9 | 2,199.9 |
| Income\ttaxes\t(Note\t9) | 469.8 | 619.5 | 708.4 |
| Net\tincome | 1,486.7 | 1,883.4 | 1,491.5 |
| Basic\tearnings\tper\tcommon\tshare\t(Note\t12) | $3.07 | $3.80 | $2.96 |
| Diluted\tearnings\tper\tcommon\tshare\t(Note\t12) | $3.03 | $3.74 | $2.93 |
| Dividends\tdeclared\tper\tcommon\tshare | $0.98 | $0.875 | $0.71 |

The	accompanying	notes	to	consolidated	financial	statements	are	an	integral	part	of	this	statement.

# CONSOLIDATED	BALANCE	SHEETS

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tequivalents | $2,291.1 | $2,133.9 |
| Short-term\tinvestments | 1,164.0 | 642.2 |
| Accounts\treceivable,\tnet\t(Note\t1) | 2,883.9 | 2,795.3 |
| Inventories\t(Notes\t1\tand\t2) | 2,357.0 | 2,438.4 |
| Deferred\tincome\ttaxes\t(Note\t9) | 272.4 | 227.2 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 765.6 | 602.3 |
| Total\tcurrent\tassets | 9,734.0 | 8,839.3 |
| Property,\tplant\tand\tequipment,\tnet\t(Note\t3) | 1,957.7 | 1,891.1 |
| Identifiable\tintangible\tassets,\tnet\t(Note\t4) | 467.4 | 743.1 |
| Goodwill\t(Note\t4) | 193.5 | 448.8 |
| Deferred\tincome\ttaxes\tand\tother\tassets\t(Notes\t9\tand\t18) | 897.0 | 520.4 |
| Total\tassets | $13,249.6 | $12,442.7 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Current\tportion\tof\tlong-term\tdebt\t(Note\t8) | $32.0 | $6.3 |
| Notes\tpayable\t(Note\t7) | 342.9 | 177.7 |
| Accounts\tpayable\t(Note\t7) | 1,031.9 | 1,287.6 |
| Accrued\tliabilities\t(Notes\t5\tand\t18) | 1,783.9 | 1,761.9 |
| Income\ttaxes\tpayable\t(Note\t9) | 86.3 | 88.0 |
| Total\tcurrent\tliabilities | 3,277.0 | 3,321.5 |
| Long-term\tdebt\t(Note\t8) | 437.2 | 441.1 |
| Deferred\tincome\ttaxes\tand\tother\tliabilities\t(Note\t9) | 842.0 | 854.5 |
| Commitments\tand\tcontingencies\t(Notes\t15\tand\t18) | — | — |
| Redeemable\tPreferred\tStock\t(Note\t10) | 0.3 | 0.3 |
| Shareholders'\tequity: |  |  |
| Common\tstock\tat\tstated\tvalue\t(Note\t11): |  |  |
| Class\tA\tconvertible\t—\t95.3\tand\t96.8\tshares\toutstanding | 0.1 | 0.1 |
| Class\tB\t—\t390.2\tand\t394.3\tshares\toutstanding | 2.7 | 2.7 |
| Capital\tin\texcess\tof\tstated\tvalue | 2,871.4 | 2,497.8 |
| Accumulated\tother\tcomprehensive\tincome\t(Note\t14) | 367.5 | 251.4 |
| Retained\tearnings | 5,451.4 | 5,073.3 |
| Total\tshareholders'\tequity | 8,693.1 | 7,825.3 |
| Total\tliabilities\tand\tshareholders'\tequity | $13,249.6 | $12,442.7 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Cash\tprovided\tby\toperations: |  |  |  |
| Net\tincome | $1,486.7 | $1,883.4 | $1,491.5 |
| Income\tcharges\t(credits)\tnot\taffecting\tcash: |  |  |  |
| Depreciation | 335.0 | 303.6 | 269.7 |
| Deferred\tincome\ttaxes | (294.1) | (300.6) | 34.1 |
| Stock-based\tcompensation\t(Note\t11) | 170.6 | 141.0 | 147.7 |
| Impairment\tof\tgoodwill,\tintangibles\tand\tother\tassets\t(Note\t4) | 401.3 | — | — |
| Gain\ton\tdivestitures\t(Note\t17) | — | (60.6) | — |
| Amortization\tand\tother | 48.3 | 17.9 | 0.5 |
| Changes\tin\tcertain\tworking\tcapital\tcomponents\tand\tother\tassets\tand\tliabilities\texcluding\tthe\timpact\tof\tacquisition\tand |  |  |  |
| divestitures: |  |  |  |
| Increase\tin\taccounts\treceivable | (238.0) | (118.3) | (39.6) |
| Decrease\t(increase)\tin\tinventories | 32.2 | (249.8) | (49.5) |
| Decrease\t(increase)\tin\tprepaid\texpenses\tand\tother\tcurrent\tassets | 14.1 | (11.2) | (60.8) |
| (Decrease)\tincrease\tin\taccounts\tpayable,\taccrued\tliabilities\tand\tincome\ttaxes\tpayable | (220.0) | 330.9 | 85.1 |
| Cash\tprovided\tby\toperations | 1,736.1 | 1,936.3 | 1,878.7 |
| Cash\t(used)\tprovided\tby\tinvesting\tactivities: |  |  |  |
| Purchases\tof\tshort-term\tinvestments | (2,908.7) | (1,865.6) | (2,133.8) |
| Maturities\tof\tshort-term\tinvestments | 2,390.0 | 2,246.0 | 2,516.2 |
| Additions\tto\tproperty,\tplant\tand\tequipment | (455.7) | (449.2) | (313.5) |
| Disposals\tof\tproperty,\tplant\tand\tequipment | 32.0 | 1.9 | 28.3 |
| Increase\tin\tother\tassets,\tnet\tof\tother\tliabilities | (47.0) | (21.8) | (4.3) |
| Settlement\tof\tnet\tinvestment\thedges | 191.3 | (76.0) | — |
| Acquisition\tof\tsubsidiary,\tnet\tof\tcash\tacquired\t(Note\t4) | — | (571.1) | — |
| Proceeds\tfrom\tdivestitures\t(Note\t17) | — | 246.0 | — |
| Cash\t(used)\tprovided\tby\tinvesting\tactivities | (798.1) | (489.8) | 92.9 |
| Cash\tused\tby\tfinancing\tactivities: |  |  |  |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt | — | — | 41.8 |
| Reductions\tin\tlong-term\tdebt,\tincluding\tcurrent\tportion | (6.8) | (35.2) | (255.7) |
| Increase\tin\tnotes\tpayable | 177.1 | 63.7 | 52.6 |
| Proceeds\tfrom\texercise\tof\tstock\toptions\tand\tother\tstock\tissuances | 186.6 | 343.3 | 322.9 |
| Excess\ttax\tbenefits\tfrom\tshare-based\tpayment\tarrangements | 25.1 | 63.0 | 55.8 |
| Repurchase\tof\tcommon\tstock | (649.2) | (1,248.0) | (985.2) |
| Dividends\t—\tcommon\tand\tpreferred | (466.7) | (412.9) | (343.7) |
| Cash\tused\tby\tfinancing\tactivities | (733.9) | (1,226.1) | (1,111.5) |
| Effect\tof\texchange\trate\tchanges | (46.9) | 56.8 | 42.4 |
| Net\tincrease\tin\tcash\tand\tequivalents | 157.2 | 277.2 | 902.5 |
| Cash\tand\tequivalents,\tbeginning\tof\tyear | 2,133.9 | 1,856.7 | 954.2 |
| Cash\tand\tequivalents,\tend\tof\tyear | $2,291.1 | $2,133.9 | $1,856.7 |
| Supplemental\tdisclosure\tof\tcash\tflow\tinformation: |  |  |  |
| Cash\tpaid\tduring\tthe\tyear\tfor: |  |  |  |
| Interest,\tnet\tof\tcapitalized\tinterest | $46.7 | $44.1 | $60.0 |
| Income\ttaxes | 765.2 | 717.5 | 601.1 |
| Dividends\tdeclared\tand\tnot\tpaid | 121.4 | 112.9 | 92.9 |

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  | Common	Stock | Common	Stock | Common	Stock | Common	Stock | Capital	in | Accumulated |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Class\tA | Class\tA | Class\tB | Class\tB | Excess\tof | Other |  |  |
|  |  |  |  |  | Stated | Comprehensive | Retained |  |
|  | Shares | Amount | Shares | Amount | Value | Income | Earnings | Total |
|  |  |  |  | (In\tmillions,\texcept\tper\tshare\tdata) | (In\tmillions,\texcept\tper\tshare\tdata) | (In\tmillions,\texcept\tper\tshare\tdata) |  |  |
| Balance\tat\tMay\t31,\t2006 | 127.8 | $0.1 | 384.2 | $2.7 | $1,447.3 | $121.7 | $4,713.4 | $ 6,285.2 |
| Stock\toptions\texercised |  |  | 10.7 |  | 349.7 |  |  | 349.7 |
| Conversion\tto\tClass\tB\tCommon\tStock | (10.2) |  | 10.2 |  |  |  |  | — |
| Repurchase\tof\tClass\tB\tCommon\tStock |  |  | (22.1) |  | (13.2) |  | (962.0) | (975.2) |
| Dividends\ton\tCommon\tstock\t($0.71\tper\tshare) |  |  |  |  |  |  | (357.2) | (357.2) |
| Issuance\tof\tshares\tto\temployees |  |  | 1.2 |  | 30.1 |  |  | 30.1 |
| Stock-based\tcompensation\t(Note\t11): |  |  |  |  | 147.7 |  |  | 147.7 |
| Forfeiture\tof\tshares\tfrom\temployees |  |  | (0.1) |  | (1.6) |  | (0.5) | (2.1) |
| Comprehensive\tincome\t(Note\t14): |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  |  |  |  | 1,491.5 | 1,491.5 |
| Other\tcomprehensive\tincome: |  |  |  |  |  |  |  | — |
|  |  |  |  |  |  | 84.6 |  | 84.6 |
|  |  |  |  |  |  | (38.1) |  | (38.1) |
| Reclassification\tto\tnet\tincome\tof\tpreviously\tdeferred\tlosses\trelated\tto\thedge\tderivatives\t(net |  |  |  |  |  |  |  |  |
| of\ttax\tbenefit\tof\t$3.6) |  |  |  |  |  | 21.4 |  | 21.4 |
| Comprehensive\tincome |  |  |  |  |  | 67.9 | 1,491.5 | 1,559.4 |
|  |  |  |  |  |  | (12.2) |  | (12.2) |
| Balance\tat\tMay\t31,\t2007 | 117.6 | $0.1 | 384.1 | $2.7 | $1,960.0 | $177.4 | $4,885.2 | $ 7,025.4 |
| Stock\toptions\texercised |  |  | 9.1 |  | 372.2 |  |  | 372.2 |
| Conversion\tto\tClass\tB\tCommon\tStock | (20.8) |  | 20.8 |  |  |  |  | — |
| Repurchase\tof\tClass\tB\tCommon\tStock |  |  | (20.6) |  | (12.3) |  | (1,235.7) | (1,248.0) |
| Dividends\ton\tCommon\tstock\t($0.875\tper\tshare) |  |  |  |  |  |  | (432.8) | (432.8) |
| Issuance\tof\tshares\tto\temployees |  |  | 1.0 |  | 39.2 |  |  | 39.2 |
| Stock-based\tcompensation\t(Note\t11): |  |  |  |  | 141.0 |  |  | 141.0 |
| Forfeiture\tof\tshares\tfrom\temployees |  |  | (0.1) |  | (2.3) |  | (1.1) | (3.4) |
| Comprehensive\tincome\t(Note\t14): |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  |  |  |  | 1,883.4 | 1,883.4 |
| Other\tcomprehensive\tincome: |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | 211.9 |  | 211.9 |
| Realized\tforeign\tcurrency\ttranslation\tgain\tdue\tto\tdivestiture |  |  |  |  |  |  |  |  |
| (Note\t17): |  |  |  |  |  | (46.3) |  | (46.3) |
|  |  |  |  |  |  | (175.8) |  | (175.8) |
|  |  |  |  |  |  | (43.5) |  | (43.5) |
| Reclassification\tto\tnet\tincome\tof\tpreviously\tdeferred\tlosses\trelated\tto\thedge\tderivatives\t(net |  |  |  |  |  |  |  |  |
| of\ttax\tbenefit\tof\t$49.6) |  |  |  |  |  | 127.7 |  | 127.7 |
| Comprehensive\tincome |  |  |  |  |  | 74.0 | 1,883.4 | 1,957.4 |
| Adoption\tof\tFIN\t48\t(Note\t9) |  |  |  |  |  |  | (15.6) | (15.6) |
|  |  |  |  |  |  |  | (10.1) | (10.1) |
| Balance\tat\tMay\t31,\t2008 | 96.8 | $0.1 | 394.3 | $2.7 | $2,497.8 | $251.4 | $5,073.3 | $ 7,825.3 |
| Stock\toptions\texercised |  |  | 4.0 |  | 167.2 |  |  | 167.2 |
| Conversion\tto\tClass\tB\tCommon\tStock | (1.5) |  | 1.5 |  |  |  |  | — |
| Repurchase\tof\tClass\tB\tCommon\tStock |  |  | (10.6) |  | (6.3) |  | (632.7) | (639.0) |
| Dividends\ton\tCommon\tstock\t($0.98\tper\tshare) |  |  |  |  |  |  | (475.2) | (475.2) |
| Issuance\tof\tshares\tto\temployees |  |  | 1.1 |  | 45.4 |  |  | 45.4 |
| Stock-based\tcompensation\t(Note\t11): |  |  |  |  | 170.6 |  |  | 170.6 |
| Forfeiture\tof\tshares\tfrom\temployees |  |  | (0.1) |  | (3.3) |  | (0.7) | (4.0) |
| Comprehensive\tincome\t(Note\t14): |  |  |  |  |  |  |  |  |
| Net\tincome |  |  |  |  |  |  | 1,486.7 | 1,486.7 |
| Other\tcomprehensive\tincome: |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | (335.3) |  | (335.3) |
|  |  |  |  |  |  | 453.6 |  | 453.6 |
|  |  |  |  |  |  | 106.0 |  | 106.0 |
| Reclassification\tto\tnet\tincome\tof\tpreviously\tdeferred\tnet\tgains\trelated\tto\thedge\tderivatives |  |  |  |  |  |  |  |  |
| (net\tof\ttax\texpense\tof\t$39.6) |  |  |  |  |  | (108.2) |  | (108.2) |
| Comprehensive\tincome |  |  |  |  |  | 116.1 | 1,486.7 | 1,602.8 |
| Balance\tat\tMay\t31,\t2009 | 95.3 | $0.1 | 390.2 | $2.7 | $2,871.4 | $367.5 | $5,451.4 | $ 8,693.1 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# Note	1	—	Summary	of	Significant	Accounting	Policies

# Description	of	Business

NIKE,	Inc.	is	a	worldwide	leader	in	the	design,	marketing	and	distribution	of	athletic	and	sports-inspired	footwear,	apparel,	equipment	and	accessories.	Wholly- owned	Nike	subsidiaries	include	Cole	Haan,	which	designs,	markets	and	distributes	dress	and	casual	shoes,	handbags,	accessories	and	coats;	Converse	Inc.,	which designs,	markets	and	distributes	athletic	and	causal	footwear,	apparel	and	accessories;	Hurley	International	LLC,	which	designs,	markets	and	distributes	action	sports	and youth	lifestyle	footwear,	apparel	and	accessories;	and	Umbro	Ltd.,	which	designs,	distributes	and	licenses	athletic	and	casual	footwear,	apparel	and	equipment,	primarily for	the	sport	of	soccer.

# Basis	of	Consolidation

The	consolidated	financial	statements	include	the	accounts	of	NIKE,	Inc.	and	its	subsidiaries	(the	"Company").	All	significant	intercompany	transactions	and balances	have	been	eliminated.

# Recognition	of	Revenues

Wholesale	revenues	are	recognized	when	the	risks	and	rewards	of	ownership	have	passed	to	the	customer,	based	on	the	terms	of	sale.	This	occurs	upon	shipment or	upon	receipt	by	the	customer	depending	on	the	country	of	the	sale	and	the	agreement	with	the	customer.	Retail	store	revenues	are	recorded	at	the	time	of	sale. Provisions	for	sales	discounts,	returns	and	miscellaneous	claims	from	customers	are	made	at	the	time	of	sale.

# Shipping	and	Handling	Costs

Shipping	and	handling	costs	are	expensed	as	incurred	and	included	in	cost	of	sales.

# Advertising	and	Promotion

Advertising	production	costs	are	expensed	the	first	time	the	advertisement	is	run.	Media	(TV	and	print)	placement	costs	are	expensed	in	the	month	the	advertising appears.

A	significant	amount	of	the	Company's	promotional	expenses	result	from	payments	under	endorsement	contracts.	Accounting	for	endorsement	payments	is	based upon	specific	contract	provisions.	Generally,	endorsement	payments	are	expensed	on	a	straight-line	basis	over	the	term	of	the	contract	after	giving	recognition	to periodic	performance	compliance	provisions	of	the	contracts.	Prepayments	made	under	contracts	are	included	in	prepaid	expenses	or	other	assets	depending	on	the	period to	which	the	prepayment	applies.

Through	cooperative	advertising	programs,	the	Company	reimburses	retail	customers	for	certain	costs	of	advertising	the	Company's	products.	The	Company records	these	costs	in	selling	and	administrative	expense	at	the	point	in	time	when	it	is	obligated	to	its	customers	for	the	costs,	which	is	when	the	related	revenues	are recognized.	This	obligation	may	arise	prior	to	the	related	advertisement	being	run.

Total	advertising	and	promotion	expenses	were	$2,351.3	million,	$2,308.3	million,	and	$1,912.4	million	for	the	years	ended	May	31,	2009,	2008	and	2007, respectively.	Prepaid	advertising	and	promotion	expenses	recorded	in	prepaid	expenses	and	other	assets	totaled	$280.0	million	and	$266.7	million	at	May	31,	2009	and 2008,	respectively.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	—	(Continued)

# Cash	and	Equivalents

Cash	and	equivalents	represent	cash	and	short-term,	highly	liquid	investments	with	maturities	of	three	months	or	less	at	date	of	purchase.	The	carrying	amounts reflected	in	the	consolidated	balance	sheet	for	cash	and	equivalents	approximate	fair	value.

# Short-term	Investments

Short-term	investments	consist	of	highly	liquid	investments,	primarily	commercial	paper,	U.S.	Treasury,	U.S.	agency,	and	corporate	debt	securities,	with maturities	over	three	months	from	the	date	of	purchase.	Debt	securities	which	the	Company	has	the	ability	and	positive	intent	to	hold	to	maturity	are	carried	at	amortized cost,	which	approximates	fair	value.	At	May	31,	2009,	the	Company	did	not	hold	any	short-term	investments	that	were	classified	as	held-to-maturity.	Short-term investments	of	$124.9	million	as	of	May	31,	2008	were	classified	as	held-to-maturity	and	were	primarily	comprised	of	U.S.	Treasury	and	U.S.	agency	securities.

Available-for-sale	debt	securities	are	recorded	at	fair	value	with	net	unrealized	gains	and	losses	reported,	net	of	tax,	in	other	comprehensive	income,	unless unrealized	losses	are	determined	to	be	other	than	temporary.	The	Company	considers	all	available-for-sale	securities,	including	those	with	maturity	dates	beyond	12 months,	as	available	to	support	current	operational	liquidity	needs	and	therefore	classifies	these	securities	as	short-term	investments	within	current	assets	on	the consolidated	balance	sheet.	As	of	May	31,	2009,	the	Company	held	$1,005.0	million	of	available-for-sale	securities	with	maturity	dates	within	one	year	and	$159.0 million	with	maturity	dates	over	one	year	and	less	than	five	years.

Investments	classified	as	available-for-sale	consist	of	the	following	at	fair	value:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Available-for-sale\tinvestments: |  |  |
| U.S.\ttreasury\tand\tagencies | $772.8 | $194.1 |
| Corporate\tcommercial\tpaper\tand\tbonds | 391.2 | 323.2 |
| Total\tavailable-for-sale\tinvestments | $1,164.0 | $517.3 |

Included	in	interest	income,	net	for	the	years	ended	May	31,	2009,	2008,	and	2007,	was	interest	income	of	$49.7	million,	$115.8	million	and	$116.9	million, respectively,	related	to	short-term	investments	and	cash	and	equivalents.

Accounts	receivable	consists	principally	of	amounts	receivable	from	customers.	We	make	ongoing	estimates	relating	to	the	collectibility	of	our	accounts receivable	and	maintain	an	allowance	for	estimated	losses	resulting	from	the	inability	of	our	customers	to	make	required	payments.	In	determining	the	amount	of	the allowance,	we	consider	our	historical	level	of	credit	losses	and	make	judgments	about	the	creditworthiness	of	significant	customers	based	on	ongoing	credit	evaluations. Accounts	receivable	with	anticipated	collection	dates	greater	than	twelve	months	from	the	balance	sheet	date	and	related	allowances	are	considered	non-current	and recorded	in	other	assets.	The	allowance	for	uncollectible	accounts	receivable	was	$110.8	million	and	$78.4	million	at	May	31,	2009	and	2008,	respectively,	of	which $36.9	million	and	$36.7	million	was	recorded	in	other	assets.

# Inventory	Valuation

Inventories	related	to	our	wholesale	operations	are	stated	at	lower	of	cost	or	market	and	valued	on	a	first-in,	first-out	("FIFO")	or	moving	average	cost basis.	Inventories	related	to	our	retail	operations	are	stated	at	the	lower	of	average	cost	or	market	using	the	retail	inventory	method.	Under	the	retail	inventory	method, the	valuation	of	inventories	at	cost	is	calculated	by	applying	a	cost-to-retail	ratio	to	the	retail	value	inventories.	Permanent	and	point	of	sale	markdowns,	when	recorded, reduce	both	the	retail	and	cost	components	of	inventory	on	hand	so	as	to	maintain	the	already	established	cost-to-retail	relationship.

# Property,	Plant	and	Equipment	and	Depreciation

Property,	plant	and	equipment	are	recorded	at	cost.	Depreciation	for	financial	reporting	purposes	is	determined	on	a	straight-line	basis	for	buildings	and	leasehold improvements	over	2	to	40	years	and	for	machinery	and	equipment	over	2	to	15	years.	Computer	software	(including,	in	some	cases,	the	cost	of	internal	labor)	is depreciated	on	a	straight-line	basis	over	3	to	10	years.

# Impairment	of	Long-Lived	Assets

The	Company	reviews	the	carrying	value	of	long-lived	assets	or	asset	groups	to	be	used	in	operations	whenever	events	or	changes	in	circumstances	indicate	that the	carrying	amount	of	the	assets	might	not	be	recoverable.	Factors	that	would	necessitate	an	impairment	assessment	include	a	significant	adverse	change	in	the	extent or	manner	in	which	an	asset	is	used,	a	significant	adverse	change	in	legal	factors	or	the	business	climate	that	could	affect	the	value	of	the	asset,	or	a	significant	decline	in the	observable	market	value	of	an	asset,	among	others.	If	such	facts	indicate	a	potential	impairment,	the	Company	would	assess	the	recoverability	of	an	asset	group	by determining	if	the	carrying	value	of	the	asset	group	exceeds	the	sum	of	the	projected	undiscounted	cash	flows	expected	to	result	from	the	use	and	eventual	disposition	of the	assets	over	the	remaining	economic	life	of	the	primary	asset	in	the	asset	group.	If	the	recoverability	test	indicates	that	the	carrying	value	of	the	asset	group	is	not recoverable,	the	Company	will	estimate	the	fair	value	of	the	asset	group	using	appropriate	valuation	methodologies	which	would	typically	include	an	estimate	of discounted	cash	flows.	Any	impairment	would	be	measured	as	the	difference	between	the	asset	groups	carrying	amount	and	its	estimated	fair	value.

# Identifiable	Intangible	Assets	and	Goodwill

In	accordance	with	SFAS	No.	142	"Goodwill	and	Other	Intangible	Assets"	("FAS	142"),	the	Company	performs	annual	impairment	tests	on	goodwill	and intangible	assets	with	indefinite	lives	in	the	fourth	quarter	of	each	fiscal	year,	or	when	events	occur	or	circumstances	change	that	would,	more	likely	than	not,	reduce	the fair	value	of	a	reporting	unit	or	an	intangible	asset	with	an	indefinite	life	below	its	carrying	value.	Events	or	changes	in	circumstances	that	may	trigger	interim impairment	reviews	include	significant	changes	in	business	climate,	operating	results,	planned	investments	in	the	reporting	unit,	or	an	expectation	that	the	carrying amount	may	not	be	recoverable,	among	other	factors.	The	impairment	test	requires	the	Company	to	estimate	the	fair	value	of	its	reporting	units.	If	the	carrying	value	of	a reporting	unit	exceeds	its	fair	value,	the	goodwill	of	that	reporting	unit	is	potentially	impaired	and	the	Company	proceeds	to	step	two	of	the	impairment	analysis.	In	step two	of	the	analysis,	the	Company	measures	and	records	an	impairment	loss	equal	to	the	excess	of	the	carrying	value	of	the	reporting	unit's	goodwill	over	its	implied	fair value	should	such	a	circumstance	arise.

The	Company	generally	bases	its	measurement	of	fair	value	of	a	reporting	unit	on	a	blended	analysis	of	the	present	value	of	future	discounted	cash	flows	and	the market	valuation	approach.	The	discounted	cash	flows	model	indicates	the	fair	value	of	the	reporting	unit	based	on	the	present	value	of	the	cash	flows	that	the	Company expects	the	reporting	unit	to	generate	in	the	future.	The	Company's	significant	estimates	in	the	discounted	cash	flows	model	include:	its	weighted	average	cost	of	capital; long-term	rate	of	growth	and	profitability	of	the

reporting	unit's	business;	and	working	capital	effects.	The	market	valuation	approach	indicates	the	fair	value	of	the	business	based	on	a	comparison	of	the	reporting	unit to	comparable	publicly	traded	companies	in	similar	lines	of	business.	Significant	estimates	in	the	market	valuation	approach	model	include	identifying	similar companies	with	comparable	business	factors	such	as	size,	growth,	profitability,	risk	and	return	on	investment	and	assessing	comparable	revenue	and	operating	income multiples	in	estimating	the	fair	value	of	the	reporting	unit.

The	Company	believes	the	weighted	use	of	discounted	cash	flows	and	the	market	valuation	approach	is	the	best	method	for	determining	the	fair	value	of	its reporting	units	because	these	are	the	most	common	valuation	methodologies	used	within	its	industry;	and	the	blended	use	of	both	models	compensates	for	the	inherent risks	associated	with	either	model	if	used	on	a	stand-alone	basis.

Indefinite-lived	intangible	assets	primarily	consist	of	acquired	trade	names	and	trademarks.	In	measuring	the	fair	value	for	these	intangible	assets,	the	Company utilizes	the	relief-from-royalty	method.	This	method	assumes	that	trade	names	and	trademarks	have	value	to	the	extent	that	their	owner	is	relieved	of	the	obligation	to pay	royalties	for	the	benefits	received	from	them.	This	method	requires	the	Company	to	estimate	the	future	revenue	for	the	related	brands,	the	appropriate	royalty	rate and	the	weighted	average	cost	of	capital.

# Foreign	Currency	Translation	and	Foreign	Currency	Transactions

Adjustments	resulting	from	translating	foreign	functional	currency	financial	statements	into	U.S.	dollars	are	included	in	the	foreign	currency	translation adjustment,	a	component	of	accumulated	other	comprehensive	income	in	shareholders'	equity.

The	Company's	global	subsidiaries	have	various	assets	and	liabilities,	primarily	receivables	and	payables,	that	are	denominated	in	currencies	other	than	their functional	currency.	These	balance	sheet	items	are	subject	to	remeasurement	under	SFAS	No.	52,	"Foreign	Currency	Translation,"	("FAS	52"),	the	impact	of	which	is recorded	in	other	(income)	expense,	net,	within	our	consolidated	statements	of	income.

# Accounting	for	Derivatives	and	Hedging	Activities

The	Company	uses	derivative	financial	instruments	to	limit	exposure	to	changes	in	foreign	currency	exchange	rates	and	interest	rates.	The	Company	accounts	for derivatives	pursuant	to	SFAS	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging	Activities,"	as	amended	and	interpreted	("FAS	133").	FAS	133	establishes accounting	and	reporting	standards	for	derivative	instruments	and	requires	all	derivatives	be	recorded	at	fair	value	on	the	balance	sheet.	Changes	in	the	fair	value	of derivative	financial	instruments	are	either	recognized	in	other	comprehensive	income	(a	component	of	shareholders'	equity),	debt	or	net	income	depending	on	the underlying	exposure	being	hedged	and	the	extent	to	which	the	derivative	is	effective.

See	Note	18	—	Risk	Management	and	Derivatives	for	more	information	on	the	Company's	risk	management	program	and	derivatives.

On	June	1,	2006,	the	Company	adopted	SFAS	No.	123R	"Share-Based	Payment"	("FAS	123R"),	which	requires	the	Company	to	record	expense	for	stock-based compensation	to	employees	using	a	fair	value	method.	Under	FAS	123R,	the	Company	estimates	the	fair	value	of	options	granted	under	the	NIKE,	Inc.	1990	Stock Incentive	Plan	(the	"1990	Plan")	and	employees'	purchase	rights	under	the	Employee	Stock	Purchase	Plans	("ESPPs")	using	the	Black-Scholes	option	pricing	model. The	Company	recognizes	this	fair	value,	net	of	estimated	forfeitures,	as	selling	and	administrative	expense	in	the	consolidated	statements	of	income	over	the	vesting period	using	the	straight-line	method.

The	Company	adopted	the	modified	prospective	transition	method	prescribed	by	FAS	123R,	which	does	not	require	the	restatement	of	financial	results	for previous	periods.	In	accordance	with	this	transition	method,	the	Company's	consolidated	statements	of	income	for	the	years	ended	May	31,	2009,	2008	and	2007 includes	(i)	amortization	of	outstanding	stock-based	compensation	granted	prior	to,	but	not	vested,	as	of	June	1,	2006,	based	on	the	fair	value	estimated	in	accordance with	the	original	provisions	of	SFAS	No.	123,	"Accounting	for	Stock-Based	Compensation"	("FAS	123")	and	(ii)	amortization	of	all	stock-based	awards	granted subsequent	to	June	1,	2006,	based	on	the	fair	value	estimated	in	accordance	with	the	provisions	of	FAS	123R.

To	calculate	the	excess	tax	benefits	available	for	use	in	offsetting	future	tax	shortfalls	as	of	the	date	of	implementation,	the	Company	is	following	the	alternative transition	method	discussed	in	FASB	Staff	Position	No.	123R-3,	"Transition	Election	Relating	to	Accounting	for	the	Tax	Effects	of	Share-Based	Payment	Awards."

See	Note	11	—	Common	Stock	and	Stock-Based	Compensation	for	more	information	on	the	Company's	stock	programs.

The	Company	accounts	for	income	taxes	using	the	asset	and	liability	method.	This	approach	requires	the	recognition	of	deferred	tax	assets	and	liabilities	for	the expected	future	tax	consequences	of	temporary	differences	between	the	carrying	amounts	and	the	tax	basis	of	assets	and	liabilities.	United	States	income	taxes	are provided	currently	on	financial	statement	earnings	of	non-U.S.	subsidiaries	that	are	expected	to	be	repatriated.	The	Company	determines	annually	the	amount	of undistributed	non-U.S.	earnings	to	invest	indefinitely	in	its	non-U.S.	operations.	The	Company	recognizes	interest	and	penalties	related	to	income	tax	matters	in	income tax	expense.	See	Note	9	—	Income	Taxes	for	further	discussion.

# Earnings	Per	Share

Basic	earnings	per	common	share	is	calculated	by	dividing	net	income	by	the	weighted	average	number	of	common	shares	outstanding	during	the	year.	Diluted earnings	per	common	share	is	calculated	by	adjusting	weighted	average	outstanding	shares,	assuming	conversion	of	all	potentially	dilutive	stock	options	and	awards. See	Note	12	—	Earnings	Per	Share	for	further	discussion.

# Management	Estimates

The	preparation	of	financial	statements	in	conformity	with	generally	accepted	accounting	principles	requires	management	to	make	estimates,	including	estimates relating	to	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	financial	statements	and the	reported	amounts	of	revenues	and	expenses	during	the	reporting	period.	Actual	results	could	differ	from	these	estimates.

# Reclassifications

Certain	prior	year	amounts	have	been	reclassified	to	conform	to	fiscal	year	2009	presentation,	including	a	reclassification	to	investing	activities	for	the	settlement of	net	investment	hedges	in	the	consolidated	statement	of	cash	flows.	These	reclassifications	had	no	impact	on	previously	reported	results	of	operations	or	shareholders' equity	and	do	not	affect	previously	reported	cash	flows	from	operations,	financing	activities	or	net	change	in	cash	and	equivalents.

On	December	1,	2008,	the	Company	adopted	Statement	of	SFAS	No.	161,	"Disclosures	about	Derivative	Instruments	and	Hedging	Activities	—	an	amendment of	FASB	Statement	No.133"	("FAS	161"),	which	provides	revised	guidance	for	enhanced	disclosures	about	how	and	why	an	entity	uses	derivative	instruments,	how derivative	instruments	and	the	related	hedged	items	are	accounted	for	under	FAS	133,	and	how	derivative	instruments	and	the	related	hedged	items	affect	an	entity's financial	position,	financial	performance	and	cash	flows.	The	adoption	of	FAS	161	did	not	have	an	impact	on	the	Company's	consolidated	financial	position	or	results	of operations.	For	additional	information,	see	Note	18	—	Risk	Management	and	Derivatives.

On	June	1,	2008,	the	Company	adopted	SFAS	No.	157,	"Fair	Value	Measurements"	("FAS	157")	for	financial	assets	and	liabilities,	which	clarifies	the	meaning of	fair	value,	establishes	a	framework	for	measuring	fair	value	and	expands	disclosures	about	fair	value	measurements.	Fair	value	is	defined	under	FAS	157	as	the exchange	price	that	would	be	received	for	an	asset	or	paid	to	transfer	a	liability	in	the	principal	or	most	advantageous	market	for	the	assets	or	liabilities	in	an	orderly transaction	between	market	participants	on	the	measurement	date.	Subsequent	changes	in	fair	value	of	these	financial	assets	and	liabilities	are	recognized	in	earnings	or other	comprehensive	income	when	they	occur.	The	effective	date	of	the	provisions	of	FAS	157	for	non-financial	assets	and	liabilities,	except	for	items	recognized	at	fair value	on	a	recurring	basis,	was	deferred	by	Financial	Accounting	Standards	Board	("FASB")	Staff	Position	FAS	157-2	("FSP	FAS	157-2")	and	are	effective	for	the fiscal	year	beginning	June	1,	2009.	The	adoption	of	FAS	157	for	financial	assets	and	liabilities	did	not	have	an	impact	on	the	Company's	consolidated	financial	position or	results	of	operations.	The	adoption	of	FAS	157	for	non-financial	assets	and	liabilities	is	not	expected	to	have	an	impact	on	the	Company's	consolidated	financial position	or	results	of	operations.	For	additional	information	on	the	fair	value	of	financial	assets	and	liabilities,	see	Note	6	—	Fair	Value	Measurements.

Also	effective	June	1,	2008,	the	Company	adopted	SFAS	No.	159,	"The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities"	("FAS	159"),	which allows	an	entity	the	irrevocable	option	to	elect	fair	value	for	the	initial	and	subsequent	measurement	for	certain	financial	assets	and	liabilities	on	a	contract-by-contract basis.	As	of	May	31,	2009,	the	Company	has	not	elected	the	fair	value	option	for	any	additional	financial	assets	and	liabilities	beyond	those	already	prescribed	by accounting	principles	generally	accepted	in	the	United	States.

In	October	2008,	the	FASB	issued	Staff	Position	No.	FAS	157-3,	"Determining	the	Fair	Value	of	a	Financial	Asset	in	a	Market	That	Is	Not	Active"	("FSP	FAS 157-3").	FSP	FAS	157-3	clarifies	the	application	of	FAS	157	in	a	market	that	is	not	active	and	defines	additional	key	criteria	in	determining	the	fair	value	of	a	financial asset	when	the	market	for	that	financial	asset	is	not	active.	FSP	FAS	157-3	applies	to	financial	assets	within	the	scope	of	accounting	pronouncements	that	require	or permit	fair	value	measurements	in	accordance	with	FAS	157.	FSP	FAS	157-3	was	effective	upon	issuance	and	the	application	of	FSP	FAS	157-3	did	not	have	a	material impact	on	the	Company's	consolidated	financial	statements.

In	May	2009,	the	FASB	issued	SFAS	No.	165,	"Subsequent	Events"	("FAS	165"),	which	establishes	general	standards	of	accounting	and	disclosure	for	events that	occur	after	the	balance	sheet	date	but	before	financial	statements	are	issued.	The	provisions	of	FAS	165	are	effective	for	the	quarter	ending	August	31,	2009.	The Company	does	not	expect	the	adoption	will	have	a	material	impact	on	its	consolidated	financial	position	or	results	of	operations.

In	April	2009,	the	FASB	issued	Staff	Position	No.	FAS	107-1	and	APB	28-1,	"Interim	Disclosures	about	Fair	Value	of	Financial	Instruments"	("FSP	FAS	107-1 and	APB	28-1"),	which	amends	SFAS	No.	107,	"Disclosures	about	Fair	Value	of	Financial	Instruments",	and	APB	Opinion	No.	28,	"Interim	Financial

Reporting",	to	require	disclosures	about	fair	value	of	financial	instruments	in	interim	and	annual	reporting	periods.	The	provisions	of	FSP	FAS	107-1	and	APB	28-1	are effective	for	the	quarter	ending	August	31,	2009.	The	Company	does	not	expect	the	adoption	will	have	an	impact	on	its	consolidated	financial	position	or	results	of operations.

In	December	2007,	the	FASB	issued	SFAS	No.	141	(revised	2007),	"Business	Combinations"	("FAS	141(R)")	and	SFAS	No.	160,	"Noncontrolling	Interests	in Consolidated	Financial	Statements"	("FAS	160").	These	standards	aim	to	improve,	simplify,	and	converge	international	standards	of	accounting	for	business combinations	and	the	reporting	of	noncontrolling	interests	in	consolidated	financial	statements.	FAS	141(R)	is	effective	for	business	combinations	for	which	the acquisition	date	is	on	or	after	June	1,	2009.	Generally,	the	effects	of	FAS	141(R)	will	depend	on	future	acquisitions.	FAS	160	is	effective	for	the	Company	beginning June	1,	2009.	The	Company	does	not	expect	the	adoption	of	FAS	160	will	have	a	material	impact	on	its	consolidated	financial	position	or	results	of	operations.

In	April	2008,	the	FASB	issued	Staff	Position	No.	FAS	142-3,	"Determination	of	the	Useful	Life	of	Intangible	Assets"	("FSP	FAS	142-3").	FSP	FAS	142-3 amends	the	factors	that	should	be	considered	in	developing	renewal	or	extension	assumptions	used	to	determine	the	useful	life	of	a	recognized	intangible	asset	under FAS	142.	The	intent	of	the	position	is	to	improve	the	consistency	between	the	useful	life	of	a	recognized	intangible	asset	under	FAS	142	and	the	period	of	expected	cash flows	used	to	measure	the	fair	value	of	the	asset	under	FAS	141(R),	and	other	U.S.	generally	accepted	accounting	principles.	The	provisions	of	FSP	FAS	142-3	are effective	for	the	fiscal	year	beginning	June	1,	2009.	The	Company	does	not	expect	the	adoption	of	FSP	FAS	142-3	will	have	a	material	impact	on	its	consolidated financial	position	or	results	of	operations.

# Note	2	—	Inventories

# Note	3	—	Property,	Plant	and	Equipment

Property,	plant	and	equipment	includes	the	following:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Land | $221.6 | $209.4 |
| Buildings | 974.0 | 934.6 |
| Machinery\tand\tequipment | 2,094.3 | 2,005.0 |
| Leasehold\timprovements | 802.0 | 757.3 |
| Construction\tin\tprocess | 163.8 | 196.7 |
|  | 4,255.7 | 4,103.0 |
| Less\taccumulated\tdepreciation | 2,298.0 | 2,211.9 |
|  | $1,957.7 | $1,891.1 |

# Note	4	—	Acquisition,	Identifiable	Intangible	Assets,	Goodwill	and	Umbro	Impairment

# Acquisition

On	March	3,	2008,	the	Company	completed	its	acquisition	of	100%	of	the	outstanding	shares	of	Umbro,	a	leading	United	Kingdom-based	global	soccer	brand, for	a	purchase	price	of	290.5	million	British	pounds	sterling	in	cash	(approximately	$576.4	million),	inclusive	of	direct	transaction	costs.	This	acquisition	is	intended	to strengthen	the	Company's	market	position	in	the	United	Kingdom	and	expand	NIKE's	global	leadership	in	soccer,	a	key	area	of	growth	for	the	Company.	This acquisition	also	provides	positions	in	emerging	soccer	markets	such	as	China,	Russia	and	Brazil.	The	results	of	Umbro's	operations	have	been	included	in	the	Company's consolidated	financial	statements	since	the	date	of	acquisition	as	part	of	the	Company's	"Other"	operating	segment.

The	acquisition	of	Umbro	was	accounted	for	as	a	purchase	business	combination	in	accordance	with	SFAS	No.	141	"Business	Combinations."	The	purchase	price was	allocated	to	tangible	and	identifiable	intangible	assets	acquired	and	liabilities	assumed	based	on	their	respective	estimated	fair	values	on	the	date	of	acquisition,	with the	remaining	purchase	price	recorded	as	goodwill.

Based	on	our	preliminary	purchase	price	allocation	at	May	31,	2008,	identifiable	intangible	assets	and	goodwill	relating	to	the	purchase	approximated	$419.5 million	and	$319.2	million,	respectively.	Goodwill	recognized	in	this	transaction	is	deductible	for	tax	purposes.	Identifiable	intangible	assets	include	$378.4	million	for trademarks	that	have	an	indefinite	life,	and	$41.1	million	for	other	intangible	assets	consisting	of	Umbro's	sourcing	network,	established	customer	relationships,	and	the United	Soccer	League	Franchise.	These	intangible	assets	will	be	amortized	on	a	straight	line	basis	over	estimated	lives	of	12	to	20	years.

During	the	quarter	ended	February	28,	2009,	the	Company	finalized	the	purchase-price	accounting	for	Umbro	and	made	revisions	to	preliminary	estimates, including	valuations	of	tangible	and	intangible	assets	and	certain	contingencies,	as	further	evaluations	were	completed	and	information	was	received	from	third	parties subsequent	to	the	acquisition	date.	These	revisions	to	preliminary	estimates	resulted	in	a	$12.4	million	decrease	in	the	value	of	identified	intangible	assets,	primarily Umbro's	sourcing	network,	and	an	$11.2	million	increase	in	non-current	liabilities,	primarily	related	to	liabilities	assumed	for	certain	contingencies	and	adjustments made	to	deferred	taxes	related	to	the	fair	value	of	assets	acquired.	These	changes	in	assets	acquired	and	liabilities	assumed	affect	the	amount	of	goodwill	recorded.

The	following	table	summarizes	the	allocation	of	the	purchase	price,	including	transaction	costs	of	the	acquisition,	to	the	assets	acquired	and	liabilities	assumed	at the	date	of	acquisition	based	on	their	estimated	fair	values,	including	final	purchase	accounting	adjustments	(in	millions):

|  | May	31,	2008 |  | May	31,	2009 |
| :--- | :--- | :--- | :--- |
|  | Preliminary | Adjustments | Final |
| Current\tassets | $87.2 | — | $87.2 |
| Non-current\tassets | 90.2 | — | 90.2 |
| Identified\tintangible\tassets | 419.5 | (12.4) | 407.1 |
| Goodwill | 319.2 | 23.6 | 342.8 |
| Current\tliabilities | (60.3) | — | (60.3) |
| Non-current\tliabilities | (279.4) | (11.2) | (290.6) |
| Net\tassets\tacquired | $576.4 | $— | $576.4 |

The	pro	forma	effect	of	the	acquisition	on	the	combined	results	of	operations	for	fiscal	2008	was	not	material.

# Umbro	Impairment

In	accordance	with	FAS	142	"Goodwill	and	Other	Intangible	Assets,"	the	Company	performs	annual	impairment	tests	on	goodwill	and	intangible	assets	with indefinite	lives	in	the	fourth	quarter	of	each	fiscal	year,	or	when	events	occur	or	circumstances	change	that	would,	more	likely	than	not,	reduce	the	fair	value	of	a reporting	unit	or	intangible	assets	with	an	indefinite	life	below	its	carrying	value.	As	a	result	of	a	significant	decline	in	global	consumer	demand	and	continued weakness	in	the	macroeconomic	environment,	as	well	as	decisions	by	Company	management	to	adjust	planned	investment	in	the	Umbro	brand,	the	Company	concluded that	sufficient	indicators	of	impairment	existed	to	require	the	performance	of	an	interim	assessment	of	Umbro's	goodwill	and	indefinite	lived	intangible	assets	as	of February	1,	2009.	Accordingly,	the	Company	performed	the	first	step	of	the	goodwill	impairment	assessment	for	Umbro	by	comparing	the	estimated	fair	value	of	Umbro to	its	carrying	amount,	and	determined	there	was	a	potential	impairment	of	goodwill	as	the	carrying	amount	exceeded	the	estimated	fair	value.	Therefore,	the	Company performed	the	second	step	of	the	assessment	which	compared	the	implied	fair	value	of	Umbro's	goodwill	to	the	book	value	of	goodwill.	The	implied	fair	value	of goodwill	is	determined	by	allocating	the	estimated	fair	value	of	Umbro	to	all	of	its	assets	and	liabilities,	including	both	recognized	and	unrecognized	intangibles,	in	the same	manner	as	goodwill	was	determined	in	the	original	business	combination.

The	Company	measured	the	fair	value	of	Umbro	by	using	an	equal	weighting	of	the	fair	value	implied	by	a	discounted	cash	flow	analysis	and	by	comparisons	with the	market	values	of	similar	publicly	traded	companies.	The	Company	believes	the	blended	use	of	both	models	compensates	for	the	inherent	risk	associated	with	either model	if	used	on	a	stand-alone	basis,	and	this	combination	is	indicative	of	the	factors	a	market	participant	would	consider	when	performing	a	similar	valuation.	The	fair value	of	Umbro's	indefinite-lived	trademark	was	estimated	using	the	relief	from	royalty	method,	which	assumes	that	the	trademark	has	value	to	the	extent	that	Umbro	is relieved	of	the	obligation	to	pay	royalties	for	the	benefits	received	from	the	trademark.	The	assessments	of	the	Company	resulted	in	the	recognition	of	impairment charges	of	$199.3	million	and	$181.3	million	related	to	Umbro's	goodwill	and	trademark,	respectively,	during	the	third	quarter	ended	February	28,	2009.	A	deferred	tax benefit	of	$54.5	million	was	recognized	as	a	result	of	the	trademark	impairment	charge.	In	addition	to	the	above	impairment	analysis,	the	Company	determined	an	equity investment	held	by	Umbro	was	impaired,	and	recognized	a	charge	of	$20.7	million	related	to	the	impairment	of	this	investment.	These	charges	are	included	in	the Company's	"Other"	category	for	segment	reporting	purposes.

The	discounted	cash	flow	analysis	calculated	the	fair	value	of	Umbro	using	management's	business	plans	and	projections	as	the	basis	for	expected	cash	flows	for the	next	twelve	years	and	a	3%	residual	growth	rate	thereafter.	The	Company	used	a	weighted	average	discount	rate	of	14%	in	its	analysis,	which	was	derived	primarily from	published	sources	as	well	as	our	adjustment	for	increased	market	risk	given	current	market	conditions.	Other	significant	estimates	used	in	the	discounted	cash	flow analysis	include	the	rates	of	projected	growth	and	profitability	of	Umbro's	business	and	working	capital	effects.	The	market	valuation	approach	indicates	the	fair	value of	Umbro	based	on	a	comparison	of	Umbro	to	publicly	traded	companies	in	similar	lines	of	business.	Significant	estimates	in	the	market	valuation	approach	include identifying	similar	companies	with	comparable	business	factors	such	as	size,	growth,	profitability,	mix	of	revenue	generated	from	licensed	and	direct	distribution	and risk	of	return	on	investment.

Holding	all	other	assumptions	constant	at	the	test	date,	a	100	basis	point	increase	in	the	discount	rate	would	reduce	the	adjusted	carrying	value	of	Umbro's	net assets	by	12%.

# Identified	Intangible	Assets	and	Goodwill

All	goodwill	balances	are	included	in	the	Company's	"Other"	category	for	segment	reporting	purposes.	The	following	table	summarizes	the	Company's	goodwill balance	as	of	May	31,	2009	and	2008	(in	millions):

	 Other	consists	of	foreign	currency	translation	adjustments	on	Umbro	goodwill. (1)

The	following	table	summarizes	the	Company's	identifiable	intangible	asset	balances	as	of	May	31,	2009	and	2008.

|  | May	31,	2009 | May	31,	2009 |  | May	31,	2008 | May	31,	2008 | May	31,	2008 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross |  | Net | Gross |  | Net |
|  | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying |
|  | Amount | Amortization | Amount | Amount | Amortization | Amount |
|  |  |  | (In\tmillions) |  |  |  |
| Amortized\tintangible\tassets: |  |  |  |  |  |  |
| Patents | $56.6 | $(17.2) | $39.4 | $47.5 | $(14.4) | $33.1 |
| Trademarks | 37.5 | (10.9) | 26.6 | 13.2 | (7.8) | 5.4 |
| Other | 40.0 | (19.6) | 20.4 | 65.2 | (19.7) | 45.5 |
| Total | $ 134.1 | $(47.7) | $86.4 | $ 125.9 | $(41.9) | $84.0 |
| Unamortized\tintangible\tassets\t—\tTrademarks |  |  | $ 381.0 |  |  | $ 659.1 |
| Identifiable\tintangible\tassets,\tnet |  |  | $ 467.4 |  |  | $ 743.1 |

The	effect	of	foreign	exchange	fluctuations	for	the	year	ended	May	31,	2009	reduced	unamortized	intangible	assets	by	approximately	$98.2	million,	resulting from	the	strengthening	of	the	U.S.	dollar	in	relation	to	the	British	pound	sterling.

During	the	year	ended	May	31,	2008,	the	gross	carrying	amount	of	unamortized	and	amortized	trademarks	were	reduced	by	$59.6	million	and	$37.5	million, respectively,	as	a	result	of	the	Company's	divestitures	of	the	Starter	brand	business	and	NIKE	Bauer	Hockey	during	the	year	ended	May	31,	2008.	See Note	17	—	Divestitures	for	more	information	the	Company's	divestitures.

# Note	5	—	Accrued	Liabilities

Accrued	liabilities	include	the	following:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Compensation\tand\tbenefits,\texcluding\ttaxes | $491.9 | $538.0 |
| Endorser\tcompensation | 237.1 | 203.5 |
| Taxes\tother\tthan\tincome\ttaxes | 161.9 | 147.6 |
| Restructuring\tcharges^(1) | 149.6 | — |
| Dividends\tpayable | 121.4 | 112.9 |
| Advertising\tand\tmarketing | 97.6 | 121.4 |
| Fair\tvalue\tof\tderivatives | 68.9 | 173.3 |
| Import\tand\tlogistics\tcosts | 59.4 | 78.8 |
| Other^(2) | 396.1 | 386.4 |
|  | $1,783.9 | $1,761.9 |

	 Accrued	restructuring	charges	primarily	consist	of	severance	costs	relating	to	the	Company's	restructuring	activities	that	took	place	during	the	fourth	quarter	of fiscal	2009.	See	Note	16	—	Restructuring	Charges	for	more	information.

	 Other	consists	of	various	accrued	expenses	and	no	individual	item	accounted	for	more	than	5%	of	the	balance	at	May	31,	2009	or	2008.

# Note	6	—	Fair	Value	Measurements

Effective	June	1,	2008,	the	Company	adopted	FAS	157,	"Fair	Value	Measurements"	for	financial	assets	and	liabilities.	FAS	157	establishes	a	hierarchy	that prioritizes	fair	value	measurements	based	on	the	types	of	inputs	used	for	the	various	valuation	techniques	(market	approach,	income	approach,	and	cost	approach).	FAS 157	is	applied	under	existing	accounting	pronouncements	that	require	or	permit	fair	value	measurements	and,	accordingly,	does	not	require	any	new	fair	value measurements.

# The	levels	of	hierarchy	are	described	below:

•Level	1:	Observable	inputs	such	as	quoted	prices	in	active	markets	for	identical	assets	or	liabilities.

•Level	2:	Inputs	other	than	quoted	prices	that	are	observable	for	the	asset	or	liability,	either	directly	or	indirectly;	these	include	quoted	prices	for	similar assets	or	liabilities	in	active	markets	and	quoted	prices	for	identical	or	similar	assets	or	liabilities	in	markets	that	are	not	active.

•Level	3:	Unobservable	inputs	in	which	there	is	little	or	no	market	data	available,	which	require	the	reporting	entity	to	develop	its	own	assumptions.

The	Company's	assessment	of	the	significance	of	a	particular	input	to	the	fair	value	measurement	in	its	entirety	requires	judgment	and	considers	factors	specific	to the	asset	or	liability.	Financial	assets	and	liabilities	are	classified	in	their	entirety	based	on	the	most	stringent	level	of	input	that	is	significant	to	the	fair	value measurement.

The	following	table	presents	information	about	the	Company's	financial	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	as	of	May	31,	2009	and indicates	the	fair	value	hierarchy	of	the	valuation	techniques	utilized	by	the	Company	to	determine	such	fair	value.

|  | Level	1 | Fair	Value	Measurements	Using<br>		Level	2 | Level	3 | Assets	/Liabilities	at<br>Fair	Value | Balance	Sheet	Classification |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |  |  |
| Assets |  |  |  |  |  |
| Derivatives | $— | $378.7 | $\t— | $378.7 | Other\tcurrent\tassets\tand\tother |
|  |  |  |  |  | long-term\tassets |
| Available-for-sale\tsecurities | 240.0 | 1,314.8 | — | 1,554.8 | Cash\tequivalents |
| Available-for-sale\tsecurities | 467.9 | 696.1 | — | 1,164.0 | Short-term\tinvestments |
| Total\tassets | $707.9 | $2,389.6 | $— | $\t3,097.5 |  |
| Liabilities |  |  |  |  |  |
| Derivatives | $— | $68.9 | $— | $68.9 | Accrued\tliabilities\tand\tother |
|  |  |  |  |  | long-term\tliabilities |
| Total\tLiabilities | $— | $68.9 | $— | $68.9 |  |

Derivative	financial	instruments	include	foreign	currency	forwards,	option	contracts	and	interest	rate	swaps.	The	fair	value	of	these	derivatives	contracts	is determined	using	observable	market	inputs	such	as	the	forward	pricing	curve,	currency	volatilities,	currency	correlations,	and	interest	rates,	and	considers nonperformance	risk	of	the	Company	and	that	of	its	counterparties.	Adjustments	relating	to	these	risks	were	not	material	for	the	year	ended	May	31,	2009.

Available-for-sale	securities	are	primarily	comprised	of	investments	in	U.S.	Treasury	and	agency	securities,	corporate	commercial	paper	and	bonds.	These securities	are	valued	using	market	prices	on	both	active	markets	(level	1)	and	less	active	markets	(level	2).	Level	1	instrument	valuations	are	obtained	from	real-time quotes	for	transactions	in	active	exchange	markets	involving	identical	assets.	Level	2	instrument	valuations	are	obtained	from	readily-available	pricing	sources	for comparable	instruments.

The	Company	had	no	material	Level	3	measurements	as	of	May	31,	2009.

In	accordance	with	the	requirements	of	SFAS	No.	107,	"Disclosures	about	Fair	Value	of	Financial	Instruments",	the	Company	annually	discloses	the	fair	value	of its	debt,	which	is	recorded	on	the	consolidated	balance	sheets	at	adjusted	cost.	Refer	to	Note	8	—	Long-Term	Debt	for	additional	detail.

# Note	7	—	Short-Term	Borrowings	and	Credit	Lines

Notes	payable	to	banks	and	interest-bearing	accounts	payable	to	Sojitz	Corporation	of	America	("Sojitz	America")	as	of	May	31,	2009	and	2008,	are	summarized below:

|  | 2009 |  | 2008 | 2008 |
| :--- | :--- | :--- | :--- | :--- |
|  | Borrowings | Interest\nRate | Borrowings | Interest\nRate |
|  |  | (In\tmillions) |  |  |
| Notes\tpayable: |  |  |  |  |
| Commercial\tPaper | $100.0 | 0.40% | $— | — |
| U.S.\toperations | 31.2 | 1.81%^(1) | 18.6 | 0.00%^(1) |
| Non-U.S.\toperations | 211.7 | 4.15%^(1) | 159.1 | 6.80%^(1) |
|  | $342.9 |  | $177.7 |  |
| Sojitz\tAmerica | $78.5 | 1.57% | $65.9 | 3.51% |

	 Weighted	average	interest	rate	includes	non-interest	bearing	overdrafts.

The	carrying	amounts	reflected	in	the	consolidated	balance	sheet	for	notes	payable	approximate	fair	value.

The	Company	purchases	through	Sojitz	America	certain	athletic	footwear,	apparel	and	equipment	it	acquires	from	non-U.S.	suppliers.	These	purchases	are	for	the Company's	operations	outside	of	the	United	States,	the	Europe,	Middle	East,	and	Africa	Region	and	Japan.	Accounts	payable	to	Sojitz	America	are	generally	due	up	to 60	days	after	shipment	of	goods	from	the	foreign	port.	The	interest	rate	on	such	accounts	payable	is	the	60-day	London	Interbank	Offered	Rate	("LIBOR")	as	of	the beginning	of	the	month	of	the	invoice	date,	plus	0.75%.

As	of	May	31,	2009,	the	Company	had	$100.0	million	outstanding	under	its	commercial	paper	program	at	a	weighted	average	interest	rate	of	0.40%.	No borrowings	were	outstanding	at	May	31,	2008.

In	December	2006,	the	Company	entered	into	a	$1	billion	revolving	credit	facility	with	a	group	of	banks.	The	facility	matures	in	December	2012.	Based	on	the Company's	current	long-term	senior	unsecured	debt	ratings	of	A+	and	A1	from	Standard	and	Poor's	Corporation	and	Moody's	Investor	Services,	respectively,	the interest	rate	charged	on	any	outstanding	borrowings	would	be	the	prevailing	LIBOR	plus	0.15%.	The	facility	fee	is	0.05%	of	the	total	commitment.	Under	this agreement,	the	Company	must	maintain,	among	other	things,	certain	minimum	specified	financial	ratios	with	which	the	Company	was	in	compliance	at	May	31,	2009. No	amounts	were	outstanding	under	this	facility	as	of	May	31,	2009	or	2008.

# Note	8	—	Long-Term	Debt

Long-term	debt,	net	of	unamortized	premiums	and	discounts	and	swap	fair	value	adjustments,	is	comprised	of	the	following:

| 5.375%	Corporate	Bond,	payable	July	8,	2009 | $25.1 | $25.5 |
| :--- | :--- | :--- |
| 5.66%\tCorporate\tBond,\tpayable\tJuly\t23,\t2012 | 27.4 | 26.1 |
| 5.4%\tCorporate\tBond,\tpayable\tAugust\t7,\t2012 | 16.2 | 15.4 |
| 4.7%\tCorporate\tBond,\tpayable\tOctober\t1,\t2013 | 50.0 | 50.0 |
| 5.15%\tCorporate\tBonds,\tpayable\tOctober\t15,\t2015 | 111.1 | 104.5 |
| 4.3%\tJapanese\tyen\tnote,\tpayable\tJune\t26,\t2011 | 108.5 | 99.6 |
| 1.5%\tJapanese\tyen\tnote,\tpayable\tFebruary\t14,\t2012 | 51.7 | 47.4 |
|  | 54.7 | 54.5 |
|  | 24.5 | 24.4 |
| Total | 469.2 | 447.4 |
| Less\tcurrent\tmaturities | 32.0 | 6.3 |
|  | $437.2 | $441.1 |

The	fair	value	of	long-term	debt	is	estimated	based	upon	quoted	prices	for	similar	instruments.	The	fair	value	of	the	Company's	long-term	debt,	including	the current	portion,	was	approximately	$456.4	million	at	May	31,	2009	and	$450.8	million	at	May	31,	2008.

In	fiscal	years	2003	and	2004,	the	Company	issued	a	total	of	$240	million	in	medium-term	notes	of	which	$215	million,	at	face	value,	were	outstanding	at May	31,	2009	and	2008.	The	outstanding	notes	have	coupon	rates	that	range	from	4.70%	to	5.66%	and	maturity	dates	ranging	from	July	2009	to	October	2015.	For	each of	these	notes,	except	the	$50	million	note	maturing	in	October	2013,	the	Company	has	entered	into	interest	rate	swap	agreements	whereby	the	Company	receives	fixed interest	payments	at	the	same	rate	as	the	notes	and	pays	variable	interest	payments	based	on	the	three-month	or	six-month	LIBOR	plus	a	spread.	Each	swap	has	the	same notional	amount	and	maturity	date	as	the	corresponding	note.	At	May	31,	2009,	the	interest	rates	payable	on	these	swap	agreements	ranged	from	approximately	1.5%	to 3.2%.

In	June	1996,	one	of	the	Company's	Japanese	subsidiaries,	NIKE	Logistics	YK,	borrowed	¥10.5	billion	(approximately	$108.5	million	as	of	May	31,	2009)	in	a private	placement	with	a	maturity	of	June	26,	2011.	Interest	is	paid	semi-annually.	The	agreement	provides	for	early	retirement	of	the	borrowing.

In	July	1999,	NIKE	Logistics	YK	assumed	a	total	of	¥13.0	billion	in	loans	as	part	of	its	agreement	to	purchase	a	distribution	center	in	Japan,	which	serves	as collateral	for	the	loans.	These	loans	mature	in	equal	quarterly	installments	during	the	period	August	20,	2001	through	November	20,	2020.	Interest	is	also	paid	quarterly. As	of	May	31,	2009,	¥7.7	billion	(approximately	$79.2	million)	in	loans	remain	outstanding.

In	February	2007,	NIKE	Logistics	YK	entered	into	a	¥5.0	billion	(approximately	$51.7	million	as	of	May	31,	2009)	term	loan	that	replaced	certain	intercompany borrowings	and	matures	on	February	14,	2012.	The	interest	rate	on	the	loan	is	approximately	1.5%	and	interest	is	paid	semi-annually.

# Note	9	—	Income	Taxes

Income	before	income	taxes	is	as	follows:

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Income\tbefore\tincome\ttaxes: |  |  |  |
| United\tStates | $845.7 | $713.0 | $805.1 |
| Foreign | 1,110.8 | 1,789.9 | 1,394.8 |
|  | $1,956.5 | $2,502.9 | $2,199.9 |

The	provision	for	income	taxes	is	as	follows:

|  |  | Year	Ended	May	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2009 | 2008 | 2007 |
|  |  | (In\tmillions) |  |
| Current: |  |  |  |
| United\tStates |  |  |  |
| Federal | $410.1 | $469.9 | $352.6 |
| State | 46.1 | 58.4 | 59.6 |
| Foreign | 307.7 | 391.8 | \t 261.9 |
|  | 763.9 | 920.1 | \t 674.1 |
| Deferred: |  |  |  |
| United\tStates |  |  |  |
| Federal | (251.4) | (273.0) | 38.7 |
| State | (7.9) | (5.0) | (4.8) |
| Foreign | (34.8) | (22.6) | 0.4 |
|  | (294.1) | (300.6) | 34.3 |
|  | $469.8 | $619.5 | $708.4 |

Deferred	tax	assets	and	(liabilities)	are	comprised	of	the	following:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Deferred\ttax\tassets: |  |  |
| Allowance\tfor\tdoubtful\taccounts | $17.9 | $13.1 |
| Inventories | 52.8 | 49.2 |
| Sales\treturn\treserves | 52.8 | 49.2 |
| Deferred\tcompensation | 160.9 | 158.4 |
| Stock-based\tcompensation | 93.7 | 55.2 |
| Reserves\tand\taccrued\tliabilities | 66.7 | 57.0 |
| Property,\tplant,\tand\tequipment | — | 7.9 |
| Foreign\tloss\tcarry-forwards | 31.9 | 40.1 |
| Foreign\ttax\tcredit\tcarry-forwards | 32.7 | 91.9 |
| Hedges | 1.1 | 42.9 |
| Undistributed\tearnings\tof\tforeign\tsubsidiaries | 272.9 | — |
| Other | 46.2 | 40.5 |
| Total\tdeferred\ttax\tassets | 829.6 | 605.4 |
| Valuation\tallowance | (26.0) | (40.7) |
| Total\tdeferred\ttax\tassets\tafter\tvaluation\tallowance | 803.6 | 564.7 |
| Deferred\ttax\tliabilities: |  |  |
| Undistributed\tearnings\tof\tforeign\tsubsidiaries | — | (113.2) |
| Property,\tplant\tand\tequipment | (92.2) | (67.4) |
| Intangibles | (100.7) | (214.2) |
| Hedges | (86.6) | (1.3) |
| Other | (4.2) | (0.7) |
| Total\tdeferred\ttax\tliability | (283.7) | (396.8) |
| Net\tdeferred\ttax\tasset | $519.9 | $167.9 |

At	the	end	of	fiscal	2009,	the	Company	reported	a	net	deferred	tax	asset	of	$272.9	million	associated	with	its	investment	in	certain	non-U.S.	subsidiaries.	Prior	to fiscal	2009,	the	Company	reported	a	net	deferred	tax	liability	for	book	to	tax	differences	in	its	investment	in	non-U.S.	subsidiaries.	The	change	to	a	deferred	tax	asset position	at	the	end	of	fiscal	2009	is	due	primarily	to	the	impact	of	the	impairment	of	Umbro's	goodwill,	intangible	and	other	assets	as	described	in	Note	4	— Acquisition,	Identifiable	Intangible	Assets,	Goodwill	and	Umbro	Impairment.

A	reconciliation	from	the	U.S.	statutory	federal	income	tax	rate	to	the	effective	income	tax	rate	follows:

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Federal\tincome\ttax\trate | 35.0% | 35.0% | 35.0% |
| State\ttaxes,\tnet\tof\tfederal\tbenefit | 1.2% | 1.4% | 1.6% |
| Foreign\tearnings | -14.9% | -12.9% | -4.1% |
| Other,\tnet | 2.7% | 1.3% | -0.3% |
| Effective\tincome\ttax\trate | 24.0% | 24.8% | 32.2% |

The	effective	tax	rate	for	the	year	ended	May	31,	2009	of	24.0%	decreased	from	the	fiscal	2008	effective	tax	rate	of	24.8%.	The	effective	tax	rate	for	the	year ended	May	31,	2009	was	favorably	impacted	by	a	benefit	associated	with	the	impairment	of	goodwill,	intangible,	and	other	assets	of	Umbro	(see	Note	4	—	Acquisition, Identifiable	Intangible	Assets,	Goodwill	and	Umbro	Impairment),	the	impact	of	the	resolution	of	audit	items	and	the	retroactive	reinstatement	of	the	research	and development	tax	credit.	The	Tax	Extenders	and	Alternative	Minimum	Tax	Relief	Act	of	2008,	which	was	signed	into	law	during	the	second	quarter	of	fiscal	2009, reinstated	the	U.S.	federal	research	and	development	tax	credit	retroactive	to	January	1,	2008.	The	effective	tax	rate	for	the	year	ended	May	31,	2008	of	24.8%	decreased from	the	fiscal	2007	effective	tax	rate	of	32.2%.	Over	the	few	years	preceding	fiscal	2008,	a	number	of	international	entities	generated	losses	for	which	the	Company	did not	recognize	offsetting	tax	benefits	because	the	realization	of	those	benefits	was	uncertain.	The	necessary	steps	to	realize	these	benefits	were	taken	in	the	first	quarter	of fiscal	2008,	resulting	in	a	one-time	reduction	of	the	effective	tax	rate	for	the	year	ended	May	31,	2008.	Also	reflected	in	the	effective	tax	rate	for	the	years	ended May	31,	2009	and	May	31,	2008	is	a	reduction	in	our	on-going	effective	tax	rate	resulting	from	our	operations	outside	of	the	United	States,	as	our	tax	rates	on	those operations	are	generally	lower	than	the	U.S.	statutory	rate.

The	Company	adopted	FASB	Interpretation	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes"	("FIN	48")	effective	June	1,	2007.	Upon	adoption,	the Company	recognized	an	additional	long-term	liability	of	$89.4	million	for	unrecognized	tax	benefits,	$15.6	million	of	which	was	recorded	as	a	reduction	to	the Company's	beginning	retained	earnings,	and	the	remaining	$73.8	million	was	recorded	as	a	reduction	to	the	Company's	noncurrent	deferred	tax	liability.	In	addition,	the Company	reclassified	$12.2	million	of	unrecognized	tax	benefits	from	income	taxes	payable	to	other	long	term	liabilities	in	conjunction	with	the	adoption	of	FIN	48.

At	the	adoption	date	of	June	1,	2007,	the	Company	had	$122.5	million	of	gross	unrecognized	tax	benefits,	excluding	related	interest	and	penalties,	$30.7	million of	which	would	affect	the	Company's	effective	tax	rate	if	recognized	in	future	periods.	Including	related	interest	and	penalties	and	net	of	federal	benefit	of	interest	and unrecognized	state	tax	benefits,	at	June	1,	2007,	the	Company	had	$135.0	million	of	total	unrecognized	tax	benefits,	$52.0	million	of	which	would	affect	the	Company's effective	tax	rate	if	recognized	in	future	periods.	As	of	May	31,	2009,	the	total	gross	unrecognized	tax	benefits,	excluding	related	interest	and	penalties,	were	$273.9 million,	$110.6	million	of	which	would	affect	the	Company's	effective	tax	rate	if	recognized	in	future	periods.	Total	gross	unrecognized	tax	benefits,	excluding	interest and	penalties,	as	of	May	31,	2008	was	$251.1	million,	$60.6	million	of	which	would	affect	the	Company's	effective	tax	rate	if	recognized	in	future	periods.	The Company	does	not	anticipate	total	unrecognized	tax	benefits	will	change	significantly	within	the	next	12	months.

The	following	is	a	reconciliation	of	the	changes	in	the	gross	balance	of	unrecognized	tax	benefits:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Unrecognized\ttax\tbenefits,\tas\tof\tthe\tbeginning\tof\tthe\tperiod | $251.1 | $122.5 |
| Gross\tincreases\trelated\tto\tprior\tperiod\ttax\tpositions | 53.2 | 71.6 |
| Gross\tdecreases\trelated\tto\tprior\tperiod\ttax\tpositions | (61.7) | (23.1) |
| Gross\tincreases\trelated\tto\tcurrent\tperiod\ttax\tpositions | 71.5 | 87.7 |
| Settlements | (29.3) | (13.4) |
| Lapse\tof\tstatute\tof\tlimitations | (4.1) | (0.7) |
| Changes\tdue\tto\tcurrency\ttranslation | (6.8) | 6.5 |
| Unrecognized\ttax\tbenefits,\tas\tof\tthe\tend\tof\tthe\tperiod | $273.9 | $251.1 |

The	Company	recognizes	interest	and	penalties	related	to	income	tax	matters	in	income	tax	expense.	Upon	adoption	of	FIN	48	at	June	1,	2007,	the	Company	had $32.0	million	(excluding	federal	benefit)	accrued	for	interest	and	penalties	related	to	uncertain	tax	positions.	The	liability	for	payment	of	interest	and	penalties	increased $2.2	million	and	$41.2	million	during	the	years	ended	May	31,	2009	and	2008,	respectively.	As	of	May	31,	2009	and	2008,	accrued	interest	and	penalties	related	to uncertain	tax	positions	was	$75.4	million	and	$73.2	million,	respectively	(excluding	federal	benefit).

The	Company	is	subject	to	taxation	primarily	in	the	United	States,	China	and	the	Netherlands	as	well	as	various	state	and	other	foreign	jurisdictions.	The Company	has	concluded	substantially	all	U.S.	federal	income	tax	matters	through	fiscal	year	2006.	The	Company	is	currently	subject	to	examination	by	the	Internal Revenue	Service	for	the	2007,	2008	and	2009	tax	years.	The	Company's	major	foreign	jurisdictions,	China	and	the	Netherlands,	have	concluded	substantially	all	income tax	matters	through	calendar	year	1998	and	fiscal	year	2002,	respectively.

The	Company	has	indefinitely	reinvested	approximately	$2.6	billion	of	the	cumulative	undistributed	earnings	of	certain	foreign	subsidiaries.	Such	earnings	would be	subject	to	U.S.	taxation	if	repatriated	to	the	U.S.	Determination	of	the	amount	of	unrecognized	deferred	tax	liability	associated	with	the	permanently	reinvested cumulative	undistributed	earnings	is	not	practicable.

Deferred	tax	assets	at	May	31,	2009	and	2008,	respectively,	were	reduced	by	a	valuation	allowance	relating	to	tax	benefits	of	certain	foreign	subsidiaries	with operating	losses	where	it	is	more	likely	than	not	that	the	deferred	tax	assets	will	not	be	realized.	The	net	change	in	the	valuation	allowance	was	a	decrease	of	$14.7 million	during	fiscal	2009	and	a	decrease	of	$1.6	million	during	fiscal	2008.

The	Company	does	not	anticipate	any	foreign	tax	credit	carry-forwards	will	expire.	A	benefit	was	recognized	for	foreign	loss	carry-forwards	of	$13.1	million	at May	31,	2009.	Such	losses	will	expire	as	follows:

During	the	years	ended	May	31,	2009,	2008,	and	2007,	income	tax	benefits	attributable	to	employee	stock-based	compensation	transactions	of	$25.4	million, $68.9	million,	and	$56.6	million,	respectively,	were	allocated	to	shareholders'	equity.

# Note	10	—	Redeemable	Preferred	Stock

Sojitz	America	is	the	sole	owner	of	the	Company's	authorized	Redeemable	Preferred	Stock,	$1	par	value,	which	is	redeemable	at	the	option	of	Sojitz	America	or the	Company	at	par	value	aggregating	$0.3	million.	A	cumulative	dividend	of	$0.10	per	share	is	payable	annually	on	May	31	and	no	dividends	may	be	declared	or	paid on	the	common	stock	of	the	Company	unless	dividends	on	the	Redeemable	Preferred	Stock	have	been	declared	and	paid	in	full.	There	have	been	no	changes	in	the Redeemable	Preferred	Stock	in	the	three	years	ended	May	31,	2009,	2008	and	2007.	As	the	holder	of	the	Redeemable	Preferred	Stock,	Sojitz	America	does	not	have general	voting	rights	but	does	have	the	right	to	vote	as	a	separate	class	on	the	sale	of	all	or	substantially	all	of	the	assets	of	the	Company	and	its	subsidiaries,	on	merger, consolidation,	liquidation	or	dissolution	of	the	Company	or	on	the	sale	or	assignment	of	the	NIKE	trademark	for	athletic	footwear	sold	in	the	United	States.

# Note	11	—	Common	Stock	and	Stock-Based	Compensation

The	authorized	number	of	shares	of	Class	A	Common	Stock,	no	par	value,	and	Class	B	Common	Stock,	no	par	value,	are	175	million	and	750	million, respectively.	Each	share	of	Class	A	Common	Stock	is	convertible	into	one	share	of	Class	B	Common	Stock.	Voting	rights	of	Class	B	Common	Stock	are	limited	in certain	circumstances	with	respect	to	the	election	of	directors.

In	1990,	the	Board	of	Directors	adopted,	and	the	shareholders	approved,	the	NIKE,	Inc.	1990	Stock	Incentive	Plan	(the	"1990	Plan").	The	1990	Plan	provides	for the	issuance	of	up	to	132	million	previously	unissued	shares	of	Class	B	Common	Stock	in	connection	with	stock	options	and	other	awards	granted	under	the	plan.	The 1990	Plan	authorizes	the	grant	of	non-statutory	stock	options,	incentive	stock	options,	stock	appreciation	rights,	stock	bonuses	and	the	issuance	and	sale	of	restricted stock.	The	exercise	price	for	non-statutory	stock	options,	stock	appreciation	rights	and	the	grant	price	of	restricted	stock	may	not	be	less	than	75%	of	the	fair	market value	of	the	underlying	shares	on	the	date	of	grant.	The	exercise	price	for	incentive	stock	options	may	not	be	less	than	the	fair	market	value	of	the	underlying	shares	on the	date	of	grant.	A	committee	of	the	Board	of	Directors	administers	the	1990	Plan.	The	committee	has	the	authority	to	determine	the	employees	to	whom	awards	will	be made,	the	amount	of	the	awards,	and	the	other	terms	and	conditions	of	the	awards.	The	committee	has	granted	substantially	all	stock	options	at	100%	of	the	market	price on	the	date	of	grant.	Substantially	all	stock	option	grants	outstanding	under	the	1990	plan	were	granted	in	the	first	quarter	of	each	fiscal	year,	vest	ratably	over	four	years, and	expire	10	years	from	the	date	of	grant.

The	following	table	summarizes	the	Company's	total	stock-based	compensation	expense	recognized	in	selling	and	administrative	expense:

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Stock\toptions^(1) | $ 128.8 | $127.0 | $134.9 |
| ESPPs | 14.4 | 7.2 | 7.0 |
| Restricted\tstock | 7.9 | 6.8 | 5.8 |
| Subtotal | 151.1 | 141.0 | 147.7 |
| Stock\toptions\tand\trestricted\tstock\texpense\t—\trestructuring^(2) | 19.5 | — | — |
| Total\tstock-based\tcompensation\texpense | $ 170.6 | $141.0 | $147.7 |

In	accordance	with	FAS	123R,	stock-based	compensation	expense	reported	during	the	years	ended	May	31,	2009,	2008	and	2007	includes	$56.3	million,	$40.7 million	and	$36.3	million,	respectively,	of	accelerated	stock-based	compensation	expense	recorded	for	employees	eligible	for	stock	option	vesting	upon retirement.

In	connection	with	the	restructuring	activities	that	took	place	during	the	fourth	quarter	of	fiscal	2009,	the	Company	recognized	stock-based	compensation	expense relating	to	the	modification	of	stock	option	agreements,	allowing	for	an	extended	post-termination	exercise	period,	and	accelerated	vesting	of	restricted	stock	as part	of	severance	packages.	See	Note	16	—	Restructuring	Charges	for	further	details.

As	of	May	31,	2009,	the	Company	had	$82.3	million	of	unrecognized	compensation	costs	from	stock	options,	net	of	estimated	forfeitures,	to	be	recognized	as selling	and	administrative	expense	over	a	weighted	average	period	of	2.0	years.

The	weighted	average	fair	value	per	share	of	the	options	granted	during	the	years	ended	May	31,	2009,	2008	and	2007,	as	computed	using	the	Black-Scholes pricing	model,	was	$17.13,	$13.87	and	$8.80,	respectively.	The	weighted	average	assumptions	used	to	estimate	these	fair	values	are	as	follows:

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | 1.5% | 1.4% | 1.6% |
| Expected\tvolatility | 32.5% | 20.0% | 19.0% |
| Weighted\taverage\texpected\tlife\t(in\tyears) | 5.0 | 5.0 | 5.0 |
| Risk-free\tinterest\trate | 3.4% | 4.8% | 5.0% |

The	Company	estimates	the	expected	volatility	based	on	the	implied	volatility	in	market	traded	options	on	the	Company's	common	stock	with	a	term	greater	than one	year,	along	with	other	factors.	The	weighted	average	expected	life	of	options	is	based	on	an	analysis	of	historical	and	expected	future	exercise	patterns.	The	interest rate	is	based	on	the	U.S.	Treasury	(constant	maturity)	risk-free	rate	in	effect	at	the	date	of	grant	for	periods	corresponding	with	the	expected	term	of	the	options.

The	following	summarizes	the	stock	option	transactions	under	the	plan	discussed	above:

|  | Shares | Price |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Options\toutstanding\tMay\t31,\t2006 | 40.4 | $32.31 |
| Exercised | (10.7) | 27.55 |
| Forfeited | (1.6) | 37.17 |
| Granted | 11.6 | 39.54 |
| Options\toutstanding\tMay\t31,\t2007 | 39.7 | $35.50 |
| Exercised | (9.1) | 33.45 |
| Forfeited | (0.9) | 44.44 |
| Granted | 6.9 | 58.50 |
| Options\toutstanding\tMay\t31,\t2008 | 36.6 | $40.14 |
| Exercised | (4.0) | 35.70 |
| Forfeited | (1.3) | 51.19 |
| Granted | 7.5 | 58.17 |
| Options\toutstanding\tMay\t31,\t2009 | 38.8 | $43.69 |
| Options\texercisable\tat\tMay\t31, |  |  |
| 2007 | 15.3 | $29.52 |
| 2008 | 16.2 | 32.35 |
| 2009 | 21.4 | 36.91 |

The	weighted	average	contractual	life	remaining	for	options	outstanding	and	options	exercisable	at	May	31,	2009	was	6.3	years	and	5.0	years,	respectively.	The aggregate	intrinsic	value	for	options	outstanding	and	exercisable	at	May	31,	2009	was	$535.6	million	and	$433.5	million,	respectively.	The	aggregate	intrinsic	value	was the	amount	by	which	the	market	value	of	the	underlying	stock	exceeded	the	exercise	price	of	the	options.	The	total	intrinsic	value	of	the	options	exercised	during	the years	ended	May	31,	2009,	2008	and	2007	was	$108.4	million,	$259.4	million	and	$204.9	million,	respectively.

In	addition	to	the	1990	Plan,	the	Company	gives	employees	the	right	to	purchase	shares	at	a	discount	to	the	market	price	under	employee	stock	purchase	plans ("ESPPs").	Employees	are	eligible	to	participate	through	payroll	deductions	up	to	10%	of	their	compensation.	At	the	end	of	each	six-month	offering	period,	shares	are purchased	by	the	participants	at	85%	of	the	lower	of	the	fair	market	value	at	the	beginning	or	the	ending	of	the	offering	period.	Employees	purchased	1.0	million	shares, 0.8	million	shares,	and	0.8	million	shares	during	the	years	ended	May	31,	2009,	2008	and	2007,	respectively.

From	time	to	time,	the	Company	grants	restricted	stock	and	unrestricted	stock	to	key	employees	under	the	1990	Plan.	The	number	of	shares	granted	to	employees during	the	years	ended	May	31,	2009,	2008	and	2007	were	75,000,	110,000	and	345,000	with	weighted	average	values	per	share	of	$56.97,	$59.50	and	$39.38, respectively.	Recipients	of	restricted	shares	are	entitled	to	cash	dividends	and	to	vote	their	respective	shares	throughout	the	period	of	restriction.	The	value	of	all	of	the granted	shares	was	established	by	the	market	price	on	the	date	of	grant.	During	the	years	ended	May	31,	2009,	2008	and	2007,	the	fair	value	of	restricted	shares	vested was	$9.9	million,	$9.0	million	and	$5.5	million,	respectively,	determined	as	of	the	date	of	vesting.

During	the	year	ended	May	31,	2007,	the	Company	also	granted	shares	of	stock	under	the	Long-Term	Incentive	Plan	("LTIP"),	adopted	by	the	Board	of	Directors and	approved	by	shareholders	in	September	1997.	During	the	year	ended	May	31,	2007,	LTIP	participants	agreed	to	amend	their	grant	agreements	to	eliminate	the ability	to	receive	payments	in	shares	of	stock;	shares	of	stock	are	no	longer	awarded.	Prior	to	the	amendment,	the	LTIP	provided	for	the	issuance	of	cash	or	up	to 2.0	million	shares	of	Class	B	Common	Stock	to	certain	executives	based	on	performance	targets	established	over	three-year	time	periods.	Once	performance	targets	are achieved,	cash	or	shares	of	stock	are	issued.	The	shares	are	immediately	vested	upon	grant.	The	value	of	the	shares	is	established	by	the	market	price	on	the	date	of issuance.	Under	the	LTIP,	3,000	shares	with	a	price	of	$38.84	were	issued	during	the	year	ended	May	31,	2007	for	the	plan	year	ended	May	31,	2006.	Compensation expense	recognized	relating	to	shares	issued	during	the	year	ended	May	31,	2007	was	not	material.	The	Company	recognized	$17.6	million,	$35.9	million	and $30.0	million	of	selling	and	administrative	expense	related	to	the	cash	awards	during	the	years	ended	May	31,	2009,	2008	and	2007,	respectively.

# Note	12	—	Earnings	Per	Share

The	following	represents	a	reconciliation	from	basic	earnings	per	common	share	to	diluted	earnings	per	common	share.	Options	to	purchase	an	additional 13.2	million,	6.6	million	and	9.5	million	shares	of	common	stock	were	outstanding	at	May	31,	2009,	2008	and	2007,	respectively,	but	were	not	included	in	the computation	of	diluted	earnings	per	share	because	the	options	were	antidilutive.

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions,\texcept\tper\tshare\tdata) |  |
| Determination\tof\tshares: |  |  |  |
| Weighted\taverage\tcommon\tshares\toutstanding | 484.9 | 495.6 | 503.8 |
| Assumed\tconversion\tof\tdilutive\tstock\toptions\tand\tawards | 5.8 | 8.5 | 6.1 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 490.7 | 504.1 | 509.9 |
| Basic\tearnings\tper\tcommon\tshare | $3.07 | $3.80 | $2.96 |
| Diluted\tearnings\tper\tcommon\tshare | $3.03 | $3.74 | $2.93 |

# Note	13	—	Benefit	Plans

The	Company	has	a	profit	sharing	plan	available	to	most	U.S.-based	employees.	The	terms	of	the	plan	call	for	annual	contributions	by	the	Company	as determined	by	the	Board	of	Directors.	A	subsidiary	of	the	Company	also	has	a	profit	sharing	plan	available	to	its	U.S.-based	employees.	The	terms	of	the	plan	call	for annual	contributions	as	determined	by	the	subsidiary's	executive	management.	Contributions	of	$27.6	million,	$37.3	million,	and	$31.8	million	were	made	to	the	plans and	are	included	in	selling	and	administrative	expense	for	the	years	ended	May	31,	2009,	2008	and	2007,	respectively.	The	Company	has	various	401(k)	employee savings	plans	available	to	U.S.-based	employees.	The	Company	matches	a	portion	of	employee	contributions	with	common	stock	or	cash.	Company	contributions	to	the savings	plans	were	$37.6	million,	$33.9	million,	and	$24.9	million	for	the	years	ended	May	31,	2009,	2008	and	2007,	respectively,	and	are	included	in	selling	and administrative	expense.

The	Company	has	pension	plans	in	various	countries	worldwide.	The	pension	plans	are	only	available	to	local	employees	and	are	generally	government mandated.	The	liability	related	to	the	unfunded	pension	liabilities	of	the	plans	was	$82.8	million	and	$90.6	million	at	May	31,	2009	and	2008,	respectively.	Upon adoption	of	SFAS	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans"	("FAS	158")	on	May	31,	2007,	the	Company recorded	a	liability	of	$17.6	million	related	to	the	unfunded	pension	liabilities	of	the	plans.

# Note	14	—	Accumulated	Other	Comprehensive	Income

The	components	of	accumulated	other	comprehensive	income,	net	of	tax,	are	as	follows:

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Cumulative\ttranslation\tadjustment\tand\tother | $64.6 | $399.9 |
| Net\tdeferred\tgain\t(loss)\ton\tnet\tinvestment\thedge\tderivatives | 62.5 | (43.5) |
| Net\tdeferred\tgain\t(loss)\ton\tcash\tflow\thedge\tderivatives | \t 240.4 | (105.0) |
|  | $367.5 | $251.4 |

# Note	15	—	Commitments	and	Contingencies

The	Company	leases	space	for	certain	of	its	offices,	warehouses	and	retail	stores	under	leases	expiring	from	one	to	twenty-five	years	after	May	31,	2009.	Rent expense	was	$397.0	million,	$344.2	million	and	$285.2	million	for	the	years	ended	May	31,	2009,	2008	and	2007,	respectively.	Amounts	of	minimum	future	annual rental	commitments	under	non-cancelable	operating	leases	in	each	of	the	five	years	ending	May	31,	2010	through	2014	are	$330.2	million,	$281.3	million,	$233.6 million,	$195.6	million,	$168.6	million,	respectively,	and	$588.5	million	in	later	years.

As	of	May	31,	2009	and	2008,	the	Company	had	letters	of	credit	outstanding	totaling	$154.8	million	and	$193.4	million,	respectively.	These	letters	of	credit	were generally	issued	for	the	purchase	of	inventory.

In	connection	with	various	contracts	and	agreements,	the	Company	provides	routine	indemnifications	relating	to	the	enforceability	of	intellectual	property	rights, coverage	for	legal	issues	that	arise	and	other	items	that	fall	under	the	scope	of	FASB	Interpretation	No.	45,	"Guarantor's	Accounting	and	Disclosure	Requirements	for Guarantees,	Including	Indirect	Guarantees	of	Indebtedness	of	Others."	Currently,	the	Company	has	several

such	agreements	in	place.	However,	based	on	the	Company's	historical	experience	and	the	estimated	probability	of	future	loss,	the	Company	has	determined	that	the	fair value	of	such	indemnifications	is	not	material	to	the	Company's	financial	position	or	results	of	operations.

In	the	ordinary	course	of	its	business,	the	Company	is	involved	in	various	legal	proceedings	involving	contractual	and	employment	relationships,	product	liability claims,	trademark	rights,	and	a	variety	of	other	matters.	The	Company	does	not	believe	there	are	any	pending	legal	proceedings	that	will	have	a	material	impact	on	the Company's	financial	position	or	results	of	operations.

# Note	16	—	Restructuring	Charges

During	the	fourth	quarter	of	fiscal	2009,	the	Company	took	necessary	steps	to	streamline	its	management	structure,	enhance	consumer	focus,	drive	innovation more	quickly	to	market	and	establish	a	more	scalable,	long-term	cost	structure.	As	a	result,	the	Company	reduced	its	global	workforce	by	approximately	5%	and incurred	pre-tax	restructuring	charges	of	$195	million,	primarily	consisting	of	severance	costs	related	to	the	workforce	reduction.	As	nearly	all	of	the	restructuring activities	were	completed	in	the	fourth	quarter	of	fiscal	2009,	the	Company	does	not	expect	to	recognize	additional	costs	in	future	periods	relating	to	these	actions.	The restructuring	charge	is	reflected	in	the	corporate	expense	line	in	the	segment	presentation	of	pre-tax	income	in	Note	19	—	Operating	Segments	and	Related	Information.

The	activity	in	the	restructuring	accrual	for	the	year	ended	May	31,	2009	is	as	follows	(in	millions):

The	accrual	balance	as	of	May	31,	2009	will	be	relieved	throughout	fiscal	year	2010	and	early	2011,	as	severance	payments	are	completed.	The	restructuring accrual	is	included	in	Accrued	liabilities	in	the	Consolidated	Balance	Sheet.

As	part	of	its	restructuring	activities,	the	Company	reorganized	its	NIKE	brand	operations	geographic	structure.	In	fiscal	2009,	2008	and	2007,	NIKE	brand operations	were	organized	into	the	following	four	geographic	regions:	U.S.,	Europe,	Middle	East	and	Africa	(collectively,	"EMEA"),	Asia	Pacific,	and	Americas.	In	the fourth	quarter	of	2009,	the	Company	initiated	a	reorganization	of	the	NIKE	Brand	business	into	a	new	operating	model.	As	a	result	of	this	reorganization,	beginning	in the	first	quarter	of	fiscal	2010,	the	NIKE	brand	operations	will	consist	of	the	following	six	geographies:	North	America,	Western	Europe,	Central/Eastern	Europe, Greater	China,	Japan,	and	Emerging	Markets.

# Note	17	—	Divestitures

On	December	17,	2007,	the	Company	completed	the	sale	of	the	Starter	brand	business	to	Iconix	Brand	Group,	Inc.	for	$60.0	million	in	cash.	This	transaction resulted	in	a	gain	of	$28.6	million	during	the	year	ended	May	31,	2008.

On	April	17,	2008,	the	Company	completed	the	sale	of	NIKE	Bauer	Hockey	for	$189.2	million	in	cash	to	a	group	of	private	investors	("the	Buyer").	The	sale resulted	in	a	net	gain	of	$32.0	million	recorded	in	the	fourth	quarter	of	the	year	ended	May	31,	2008.	This	gain	included	the	recognition	of	a	$46.3	million	cumulative foreign	currency	translation	adjustment	previously	included	in	accumulated	other	comprehensive	income.	As	part	of	the	terms	of	the	sale	agreement,	the	Company granted	the	Buyer	a	royalty	free	limited	license	for	the	use	of	certain	NIKE	trademarks	for	a	transitional	period	of	approximately	two	years.	The	Company	deferred $41.0	million	of	the	sale	proceeds	related	to	this	license	agreement,	to	be	recognized	over	the	license	period.

The	gains	resulting	from	these	divestitures	are	reflected	in	other	(income)	expense,	net	and	in	the	corporate	expense	line	in	the	segment	presentation	of	pre-tax income	in	Note	19	—	Operating	Segments	and	Related	Information.

# Note	18	—	Risk	Management	and	Derivatives

The	Company	is	exposed	to	global	market	risks,	including	the	effect	of	changes	in	foreign	currency	exchange	rates	and	interest	rates,	and	uses	derivatives	to manage	financial	exposures	that	occur	in	the	normal	course	of	business.	The	Company	does	not	hold	or	issue	derivatives	for	trading	purposes.

The	Company	formally	documents	all	relationships	between	hedging	instruments	and	hedged	items,	as	well	as	its	risk	management	objective	and	strategy	for undertaking	hedge	transactions.	This	process	includes	linking	all	derivatives	to	either	specific	firm	commitments,	forecasted	transactions	or	net	investments.	The Company	also	enters	into	foreign	exchange	forwards	to	mitigate	the	change	in	fair	value	of	specific	assets	and	liabilities	on	the	balance	sheet;	these	are	not	designated	as hedging	instruments	under	FAS	133.	Accordingly,	changes	in	the	fair	value	of	hedges	of	recorded	balance	sheet	positions	are	recognized	immediately	in	other	(income) expense,	net,	on	the	income	statement	together	with	the	transaction	gain	or	loss	from	the	hedged	balance	sheet	position.

Substantially	all	derivatives	outstanding	as	of	May	31,	2009	are	designated	as	either	cash	flow,	fair	value	or	net	investment	hedges.	All	derivatives	are	recognized on	the	balance	sheet	at	their	fair	value	and	classified	based	on	the	instrument's	maturity	date.	The	total	notional	amount	of	outstanding	derivatives	as	of	May	31,	2009 was	$7.1	billion,	which	is	primarily	comprised	of	cash	flow	hedges	denominated	in	Euro,	Japanese	yen	and	British	pound.

The	following	table	presents	the	fair	values	of	derivative	instruments	included	within	the	consolidated	balance	sheet	as	of	May	31,	2009:

|  | Asset	Derivatives | Liability	Derivatives | Liability	Derivatives | Liability	Derivatives |
| :--- | :--- | :--- | :--- | :--- |
|  | Balance\tSheet\tLocation | Fair\tValue | Balance\tSheet\tLocation | Fair\tValue |
|  |  | (In\tmillions) | (In\tmillions) |  |
| Derivatives\tdesignated\tas\thedging\tinstruments\tunder\tFAS\t133:\nForeign\texchange\tforwards\tand\toptions | Prepaid\texpenses\tand | $270.4 | Accrued\tliabilities | $— |
|  | other\tcurrent\tassets |  |  |  |
| Interest\trate\tswap\tcontracts | Prepaid\texpenses\tand | 0.1 | Accrued\tliabilities | — |
|  | other\tcurrent\tassets |  |  |  |
| Foreign\texchange\tforwards\tand\toptions | Deferred\tincome | 81.3 | Deferred\tincome\ttaxes | 34.6 |
|  | taxes\tand\tother | and\tother\tliabilities | and\tother\tliabilities |  |
|  | assets |  |  |  |
| Interest\trate\tswap\tcontracts | Deferred\tincome | 13.7 | Deferred\tincome\ttaxes | — |
|  | taxes\tand\tother | and\tother\tliabilities | and\tother\tliabilities |  |
|  | assets |  |  |  |
| Total\tderivatives\tdesignated\tas\thedging\tinstruments\tunder\tFAS\t133 |  | 365.5 |  | 34.6 |
| Derivatives\tnot\tdesignated\tas\thedging\tinstruments\tunder\tFAS\t133:\nForeign\texchange\tforwards\tand\toptions | Prepaid\texpenses\tand | $12.8 | Accrued\tliabilities | $34.3 |
|  | other\tcurrent\tassets |  |  |  |
| Foreign\texchange\tforwards\tand\toptions | Deferred\tincome | 0.4 | Deferred\tincome\ttaxes | — |
|  | taxes\tand\tother | and\tother\tliabilities | and\tother\tliabilities |  |
|  | assets |  |  |  |
| Total\tderivatives\tnot\tdesignated\tas\thedging\tinstruments\tunder\tFAS\t133 |  | 13.2 |  | 34.3 |
| Total\tderivatives |  | $378.7 |  | $68.9 |

The	following	tables	present	the	amounts	affecting	the	consolidated	statement	of	income	for	year	ended	May	31,	2009:

For	the	year	ended	May	31,	2009,	the	Company	recorded	in	other	(income)	expense,	net	an	immaterial	amount	of	ineffectiveness	from	cash	flow	hedges. (1)

Substantially	all	interest	rate	swap	agreements	meet	the	shortcut	method	requirements	under	FAS	133;	accordingly,	changes	in	the	fair	values	of	the	interest	rate swap	agreements	are	exactly	offset	by	changes	in	the	fair	value	of	the	underlying	long-term	debt.	Refer	to	section	"Fair	Value	Hedges"	for	additional	detail. (1)

Refer	to	Note	5	—	Accrued	Liabilities	for	derivative	instruments	recorded	in	accrued	liabilities,	Note	6	—	Fair	Value	Measurements	for	a	description	of	how	the above	financial	instruments	are	valued	in	accordance	with	FAS	157,	Note	14	—	Accumulated	Other	Comprehensive	Income	and	the	Consolidated	Statement	of Shareholders'	Equity	for	additional	information	on	changes	in	other	comprehensive	income	for	the	year	ended	May	31,	2009.

# Cash	Flow	Hedges

The	purpose	of	the	Company's	foreign	currency	hedging	activities	is	to	protect	the	Company	from	the	risk	that	the	eventual	cash	flows	resulting	from	transactions in	foreign	currencies,	including	revenues,	product	costs,	selling	and	administrative	expenses,	investments	in	U.S.	dollar-denominated	available-for-sale	debt	securities and	payments	related	to	intercompany	transactions,	will	be	adversely	affected	by	changes	in	exchange	rates.	It	is	the	Company's	policy	to	utilize	derivatives	to	reduce foreign	exchange	risks	where	internal	netting	strategies	cannot	be	effectively	employed.	Hedged	transactions	are	denominated	primarily	in	Euro,	Japanese	yen	and British	pound.	The	Company	hedges	up	to	100%	of	anticipated	exposures	typically	twelve	to	eighteen	months	in	advance,	but	has	hedged	as	much	as	34	months	in advance.

All	changes	in	fair	values	of	outstanding	cash	flow	hedge	derivatives,	except	the	ineffective	portion,	are	recorded	in	other	comprehensive	income,	until	net income	is	affected	by	the	variability	of	cash	flows	of	the	hedged	transaction.	In	most	cases,	amounts	recorded	in	other	comprehensive	income	will	be	released	to	net income	some	time	after	the	maturity	of	the	related	derivative.	The	consolidated	statement	of	income	classification	of	effective	hedge	results	is	the	same	as	that	of	the underlying	exposure.	Results	of	hedges	of	revenue	and	product	costs	are	recorded	in	revenue	and	cost	of	sales,	respectively,	when	the	underlying	hedged	transaction affects	net	income.	Results	of	hedges	of	selling	and	administrative	expense	are	recorded	together	with	those	costs	when	the	related	expense	is	recorded.	Results	of hedges	of	anticipated	purchases	and	sales	of	U.S.	dollar-denominated	available-for-sale	securities	are	recorded	in	other	(income)	expense,	net	when	the	securities	are sold.	Results	of	hedges	of	anticipated	intercompany	transactions	are	recorded	in	other	(income)	expense,	net	when	the	transaction	occurs.

Premiums	paid	on	options	are	initially	recorded	as	deferred	charges.	The	Company	assesses	the	effectiveness	of	options	based	on	the	total	cash	flows	method	and records	total	changes	in	the	options'	fair	value	to	other	comprehensive	income	to	the	degree	they	are	effective.

As	of	May	31,	2009,	$132.0	million	of	deferred	net	gains	(net	of	tax)	on	both	outstanding	and	matured	derivatives	accumulated	in	other	comprehensive	income are	expected	to	be	reclassified	to	net	income	during	the	next	twelve	months	as	a	result	of	underlying	hedged	transactions	also	being	recorded	in	net	income.	Actual amounts	ultimately	reclassified	to	net	income	are	dependent	on	the	exchange	rates	in	effect	when	derivative	contracts	that	are	currently	outstanding	mature.	As	of May	31,	2009,	the	maximum	term	over	which	the	Company	is	hedging	exposures	to	the	variability	of	cash	flows	for	its	forecasted	and	recorded	transactions	is	23 months.

The	Company	formally	assesses	both	at	a	hedge's	inception	and	on	an	ongoing	basis,	whether	the	derivatives	that	are	used	in	the	hedging	transaction	have	been highly	effective	in	offsetting	changes	in	the	cash	flows	of	hedged	items	and	whether	those	derivatives	may	be	expected	to	remain	highly	effective	in	future	periods. Effectiveness	for	cash	flow	hedges	is	assessed	based	on	forward	rates.	When	it	is	determined	that	a	derivative	is	not,	or	has	ceased	to	be,	highly	effective	as	a	hedge,	the Company	discontinues	hedge	accounting	prospectively.

The	Company	discontinues	hedge	accounting	prospectively	when	(i)	it	determines	the	derivative	is	no	longer	highly	effective	in	offsetting	changes	in	the	cash flows	of	a	hedged	item	(including	hedged	items	such	as	firm	commitments	or	forecasted	transactions);	(ii)	the	derivative	expires	or	is	sold,	terminated,	or	exercised; (iii)	it	is	no	longer	probable	that	the	forecasted	transaction	will	occur;	or	(iv)	management	determines	that	designating	the	derivative	as	a	hedging	instrument	is	no	longer appropriate.

When	the	Company	discontinues	hedge	accounting	because	it	is	no	longer	probable	that	the	forecasted	transaction	will	occur	in	the	originally	expected	period,	the gain	or	loss	on	the	derivative	remains	in	accumulated	other	comprehensive	income	and	is	reclassified	to	net	income	when	the	forecasted	transaction	affects	net	income. However,	if	it	is	probable	that	a	forecasted	transaction	will	not	occur	by	the	end	of	the	originally	specified	time	period	or	within	an	additional	two-month	period	of	time thereafter,	the	gains	and	losses	that	were	accumulated	in	other	comprehensive	income	will	be	recognized	immediately	in	net	income.	In	all	situations	in	which	hedge accounting	is	discontinued	and	the	derivative	remains	outstanding,	the	Company	will	carry	the	derivative	at	its	fair	value	on	the	balance	sheet,	recognizing	future changes	in	the	fair	value	in	other	(income)	expense,	net.	For	the	years	ended	May	31,	2009,	2008	and	2007,	the	Company	recorded	in	other	(income)	expense	an immaterial	amount	of	ineffectiveness	from	cash	flow	hedges.

# Fair	Value	Hedges

The	Company	is	also	exposed	to	the	risk	of	changes	in	the	fair	value	of	certain	fixed-rate	debt	attributable	to	changes	in	interest	rates.	Derivatives	currently	used by	the	Company	to	hedge	this	risk	are	receive-fixed,	pay-variable	interest	rate	swaps.	As	of	May	31,	2009,	all	interest	rate	swap	agreements	are	designated	as	fair	value hedges	of	the	related	long-term	debt	and	meet	the	shortcut	method	requirements	under	FAS	133.	Accordingly,	changes	in	the	fair	values	of	the	interest	rate	swap agreements	are	exactly	offset	by	changes	in	the	fair	value	of	the	underlying	long-term	debt.	No	ineffectiveness	has	been	recorded	to	net	income	related	to	interest	rate swaps	designated	as	fair	value	hedges	for	the	years	ended	May	31,	2009,	2008	and	2007.

In	fiscal	2003,	the	Company	entered	into	a	receive-floating,	pay-fixed	interest	rate	swap	agreement	related	to	a	Japanese	yen	denominated	intercompany	loan	with one	of	the	Company's	Japanese	subsidiaries.	This	interest	rate	swap	was	not	designated	as	a	hedge	under	FAS	133.	Accordingly,	changes	in	the	fair	value	of	the	swap were	recorded	to	net	income	each	period	through	maturity	as	a	component	of	interest	(income)	expense,	net.	Both	the	intercompany	loan	and	the	related	interest	rate swap	matured	during	fiscal	2009.

# Net	Investment	Hedges

The	Company	also	hedges	the	risk	of	variability	in	foreign-currency-denominated	net	investments	in	wholly-owned	international	subsidiaries.	All	changes	in	fair value	of	the	derivatives	designated	as	net	investment	hedges,	except	ineffective	portions,	are	reported	in	the	cumulative	translation	adjustment	component	of	other comprehensive	income	along	with	the	foreign	currency	translation	adjustments	on	those	investments.	The	Company	assesses	hedge	effectiveness	based	on	changes	in forward	rates.	The	Company	recorded	no	ineffectiveness	from	its	net	investment	hedges	for	the	years	ended	May	31,	2009	and	2008.

# Credit	Risk

The	Company	is	exposed	to	credit-related	losses	in	the	event	of	non-performance	by	counterparties	to	hedging	instruments.	This	credit	risk	is	limited	to	the unrealized	gains	in	such	instruments	should	any	of	these	counterparties	fail	to	perform	as	contracted.	The	counterparties	to	all	derivative	transactions	are	major	financial institutions	with	investment	grade	credit	ratings.	However,	this	does	not	eliminate	the	Company's	exposure	to	credit	risk	with	these	institutions.	To	manage	this	risk,	the Company	has	established	strict	counterparty	credit	guidelines	that	are	continually	monitored	and	reported	to	senior	management	according	to	prescribed	guidelines.	The Company	utilizes	a	portfolio	of	financial	institutions	either	headquartered	or	operating	in	the	same	countries	the	Company	conducts	its	business.	As	a	result	of	the	above considerations,	the	Company	considers	the	risk	of	counterparty	default	to	be	immaterial.

Certain	of	the	Company's	derivative	instruments	contain	credit	risk	related	contingent	features.	As	of	May	31,	2009,	the	Company	was	in	compliance	with	all such	credit	risk	related	contingent	features.	The	aggregate	fair	value	of	derivative	instruments	with	credit	risk	related	contingent	features	that	are	in	a	net	liability position	at	May	31,	2009	was	$15.2	million.	The	Company	was	not	required	to	post	any	collateral	as	a	result	of	these	contingent	features.

# Note	19	—	Operating	Segments	and	Related	Information

Operating	Segments.				The	Company's	operating	segments	are	evidence	of	the	structure	of	the	Company's	internal	organization.	The	major	segments	are	defined by	geographic	regions	for	operations	participating	in	NIKE	brand	sales	activity	excluding	NIKE	Golf	and	NIKE	Bauer	Hockey.	Each	NIKE	brand	geographic	segment operates	predominantly	in	one	industry:	the	design,	production,	marketing	and	selling	of	sports	and	fitness	footwear,	apparel,	and	equipment.	The	"Other"	category shown	below	represents	activities	of	Cole	Haan,	Converse,	Exeter	Brands	Group	(whose	primary	business	was	the	Starter	brand	business	which	was	sold	on December	17,	2007),	Hurley,	NIKE	Bauer	Hockey	(through	April	16,	2008),	NIKE	Golf,	and	Umbro	(beginning	March	3,	2008)	which	are	considered	immaterial	for individual	disclosure	based	on	the	aggregation	criteria	in	SFAS	No.	131	"Disclosures	about	Segments	of	an	Enterprise	and	Related	Information."

Net	revenues	as	shown	below	represent	sales	to	external	customers	for	each	segment.	Intercompany	revenues	have	been	eliminated	and	are	immaterial	for	separate disclosure.	The	Company	evaluates	performance	of	individual	operating	segments	based	on	pre-tax	income.	On	a	consolidated	basis,	this	amount	represents	income before	income	taxes	as	shown	in	the	Consolidated	Statements	of	Income.	Reconciling	items	for	pre-tax	income	represent	corporate	expense	items	that	are	not	allocated	to the	operating	segments	for	management	reporting.	Corporate	expense	consists	of	unallocated	general	and	administrative	expenses,	which	includes	expenses	associated with	centrally	managed	departments,	depreciation	and	amortization	related	to	the	Company's	corporate	headquarters,	unallocated	insurance	and	benefit	programs, foreign	currency	gains	and	losses,	including	hedge	gains	and	losses,	corporate	eliminations	and	other	items.

Additions	to	long-lived	assets	as	presented	in	the	following	table	represent	capital	expenditures.

Accounts	receivable,	inventories	and	property,	plant	and	equipment	for	operating	segments	are	regularly	reviewed	by	management	and	are	therefore	provided below.

Certain	prior	year	amounts	have	been	reclassed	to	conform	to	fiscal	2009	presentation.

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Net\tRevenue |  |  |  |
| United\tStates | $6,542.9 | $6,414.5 | $6,131.7 |
| Europe,\tMiddle\tEast\tand\tAfrica | 5,512.2 | 5,629.2 | 4,764.1 |
| Asia\tPacific | 3,322.0 | 2,887.6 | 2,295.7 |
| Americas | 1,284.7 | 1,164.7 | 966.7 |
| Other | 2,514.3 | 2,531.0 | 2,167.7 |
|  | $19,176.1 | $18,627.0 | $16,325.9 |
| Pre-tax\tIncome |  |  |  |
| United\tStates | $1,337.9 | $1,402.0 | $1,386.1 |
| Europe,\tMiddle\tEast\tand\tAfrica | 1,316.9 | 1,281.9 | 1,050.1 |
| Asia\tPacific | 853.4 | 694.2 | 515.4 |
| Americas | 274.1 | 242.3 | 199.3 |
| Other^(1) | (196.7) | 364.9 | 299.7 |
| Corporate\tExpense^(2) | (1,629.1) | (1,482.4) | (1,250.7) |
|  | $1,956.5 | $2,502.9 | $2,199.9 |
| Additions\tto\tLong-lived\tAssets |  |  |  |
| United\tStates | $95.2 | $138.4 | $67.3 |
| Europe,\tMiddle\tEast\tand\tAfrica | 77.7 | 69.0 | 94.9 |
| Asia\tPacific | 74.8 | 42.4 | 20.7 |
| Americas | 8.7 | 8.6 | 5.3 |
| Other | 89.6 | 61.5 | 36.0 |
| Corporate | 109.7 | 129.3 | 89.3 |
|  | $455.7 | $449.2 | $313.5 |
| Depreciation |  |  |  |
| United\tStates | $61.4 | $49.2 | $45.4 |
| Europe,\tMiddle\tEast\tand\tAfrica | 55.4 | 64.8 | 47.4 |
| Asia\tPacific | 43.6 | 31.1 | 25.2 |
| Americas | 6.5 | 6.7 | 6.1 |
| Other | 37.5 | 28.1 | 28.2 |
| Corporate | 130.6 | 123.7 | 117.4 |
|  | $335.0 | $303.6 | $269.7 |

(1) 	 During	the	year	ended	May	31,	2009,	the	Other	category	included	a	pre-tax	charge	of	$401.3	million	for	the	impairment	of	goodwill,	intangible	and	other	assets of	Umbro,	which	was	recorded	in	the	third	quarter	of	fiscal	2009.	See	Note	4	—	Acquisition,	Identifiable	Intangible	Assets,	Goodwill	and	Umbro	Impairment	for more	information.

(2) 	 During	the	year	ended	May	31,	2009,	Corporate	expense	included	pre-tax	charges	of	$195.0	million	for	the	Company's	restructuring	activities,	which	were completed	in	the	fourth	quarter	of	fiscal	2009.	See	Note	16	—	Restructuring	Charges	for	more	information.

|  | 2009 | 2008 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Accounts\tReceivable,\tnet |  |  |
| United\tStates | $837.2 | $823.9 |
| Europe,\tMiddle\tEast\tand\tAfrica | 877.1 | 843.0 |
| Asia\tPacific | 394.6 | 406.1 |
| Americas | 263.6 | 246.0 |
| Other | 439.8 | 424.0 |
| Corporate | 71.6 | 52.3 |
|  | $2,883.9 | $2,795.3 |
| Inventories |  |  |
| United\tStates | $831.8 | $834.0 |
| Europe,\tMiddle\tEast\tand\tAfrica | 619.7 | 705.7 |
| Asia\tPacific | 295.8 | 280.9 |
| Americas | 205.5 | 181.1 |
| Other | 371.8 | 396.6 |
| Corporate | 32.4 | 40.1 |
|  | $2,357.0 | $2,438.4 |
| Property,\tPlant\tand\tEquipment,\tnet |  |  |
| United\tStates | $345.2 | $318.4 |
| Europe,\tMiddle\tEast\tand\tAfrica | 341.5 | 370.5 |
| Asia\tPacific | 434.0 | 375.6 |
| Americas | 18.8 | 20.4 |
| Other | 163.7 | 126.9 |
| Corporate | 654.5 | 679.3 |
|  | $1,957.7 | $1,891.1 |

Revenues	by	Major	Product	Lines.				Revenues	to	external	customers	for	NIKE	brand	products	are	attributable	to	sales	of	footwear,	apparel	and	equipment.	Other revenues	to	external	customers	primarily	include	external	sales	by	Cole	Haan,	Converse,	Exeter	(whose	primary	business	was	the	Starter	brand	business	which	was	sold December	17,	2007),	Hurley,	NIKE	Bauer	Hockey	(through	April	16,	2008),	NIKE	Golf,	and	Umbro	(beginning	March	3,	2008).

|  | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Footwear | $10,306.7 | $9,731.6 | $8,514.0 |
| Apparel | 5,244.7 | 5,234.0 | 4,576.5 |
| Equipment | 1,110.4 | 1,130.4 | 1,067.7 |
| Other | 2,514.3 | 2,531.0 | 2,167.7 |
|  | $19,176.1 | $18,627.0 | $16,325.9 |

Revenues	and	Long-Lived	Assets	by	Geographic	Area.				Geographical	area	information	is	similar	to	what	was	shown	previously	under	operating	segments	with the	exception	of	the	Other	activity,	which	has	been	allocated	to	the	geographical	areas	based	on	the	location	where	the	sales	originated.	Revenues	derived	in	the

United	States	were	$8,019.8	million,	$7,938.5	million,	and	$7,593.7	million,	for	the	years	ended	May	31,	2009,	2008,	and	2007,	respectively.	The	Company's	largest concentrations	of	long-lived	assets	primarily	consist	of	the	Company's	world	headquarters	and	distribution	facilities	in	the	United	States	and	distribution	facilities	in Japan	and	Belgium.	Long-lived	assets	attributable	to	operations	in	the	United	States,	which	are	comprised	of	net	property,	plant	&	equipment,	were	$1,142.6	million, $1,109.9	million,	and	$991.3	million	at	May	31,	2009,	2008,	and	2007,	respectively.	Long-lived	assets	attributable	to	operations	in	Japan	were	$322.3	million,	$303.8 million,	and	$260.6	million	at	May	31,	2009,	2008,	and	2007,	respectively.	Long-lived	assets	attributable	to	operations	in	Belgium	were	$191.0	million,	$219.1	million and	$198.3	million	at	May	31,	2009,	2008,	and	2007,	respectively.

Major	Customers.				Revenues	derived	from	Foot	Locker,	Inc.	represented	9%	of	the	Company's	consolidated	revenues	for	the	years	ended	May	31,	2009	and 2008,	and	10%	for	the	year	ended	May	31,	2007.	Sales	to	this	customer	are	included	in	all	segments	of	the	Company.

# Item	9.				Changes	In	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

There	has	been	no	change	of	accountants	nor	any	disagreements	with	accountants	on	any	matter	of	accounting	principles	or	practices	or	financial	statement disclosure	required	to	be	reported	under	this	Item.

# Item	9A.				Controls	and	Procedures

We	maintain	disclosure	controls	and	procedures	that	are	designed	to	ensure	that	information	required	to	be	disclosed	in	our	Exchange	Act	reports	is	recorded, processed,	summarized	and	reported	within	the	time	periods	specified	in	the	Securities	and	Exchange	Commission's	rules	and	forms	and	that	such	information	is accumulated	and	communicated	to	our	management,	including	our	Chief	Executive	Officer	and	Chief	Financial	Officer,	as	appropriate,	to	allow	for	timely	decisions regarding	required	disclosure.	In	designing	and	evaluating	the	disclosure	controls	and	procedures,	management	recognizes	that	any	controls	and	procedures,	no	matter how	well	designed	and	operated,	can	provide	only	reasonable	assurance	of	achieving	the	desired	control	objectives,	and	management	is	required	to	apply	its	judgment	in evaluating	the	cost-benefit	relationship	of	possible	controls	and	procedures.

We	carry	out	a	variety	of	on-going	procedures,	under	the	supervision	and	with	the	participation	of	our	management,	including	our	Chief	Executive	Officer	and Chief	Financial	Officer,	to	evaluate	the	effectiveness	of	the	design	and	operation	of	our	disclosure	controls	and	procedures.	Based	on	the	foregoing,	our	Chief	Executive Officer	and	Chief	Financial	Officer	concluded	that	our	disclosure	controls	and	procedures	were	effective	at	the	reasonable	assurance	level	as	of	May	31,	2009.

"Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting"	is	included	in	Item	8	on	page	51	of	this	Report.

There	has	been	no	change	in	our	internal	control	over	financial	reporting	during	our	most	recent	fiscal	quarter	that	has	materially	affected,	or	is	reasonable	likely to	materially	affect,	our	internal	control	over	financial	reporting.

# Item	9B.				Other	Information

No	disclosure	is	required	under	this	Item.

# Item	10.				Directors,	Executive	Officers	and	Corporate	Governance

The	information	required	by	Item	401	of	Regulation	S-K	regarding	directors	is	included	under	"Election	of	Directors"	in	the	definitive	Proxy	Statement	for	our 2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.	The	information	required	by	Item	401	of	Regulation	S-K	regarding	executive	officers	is included	under	"Executive	Officers	of	the	Registrant"	in	Item	1	of	this	Report.	The	information	required	by	Item	405	of	Regulation	S-K	is	included	under	"Section	16(a) Beneficial	Ownership	Reporting	Compliance"	in	the	definitive	Proxy	Statement	for	our	2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference. The	information	required	by	Item	406	of	Regulation	S-K	is	included	under	"Code	of	Business	Conduct	and	Ethics"	in	the	definitive	Proxy	Statement	for	our	2009 Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.	The	information	required	by	Items	407(d)(4)	and	(d)(5)	of	Regulation	S-K	regarding	the	Audit Committee	of	the	Board	of	Directors	is	included	under	"Board	of	Directors	and	Committees"	in	the	definitive	Proxy	Statement	for	our	2009	Annual	Meeting	of Shareholders	and	is	incorporated	herein	by	reference.

# Item	11.				Executive	Compensation

The	information	required	by	Items	402,	407(e)(4)	and	407(e)(5)	of	Regulation	S-K	regarding	executive	compensation	is	included	under	"Director	Compensation for	Fiscal	2009,"	"Executive	Compensation,"	"Compensation	Discussion	and	Analysis,"	"Compensation	Committee	Interlocks	and	Insider	Participation"	and "Compensation	Committee	Report"	in	the	definitive	Proxy	Statement	for	our	2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.

# Item	12.				Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

The	information	required	by	Item	201(d)	of	Regulation	S-K	is	included	under	"Equity	Compensation	Plans"	in	the	definitive	Proxy	Statement	for	our	2009 Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.	The	information	required	by	Item	403	of	Regulation	S-K	is	included	under	"Stock	Holdings	of Certain	Owners	and	Management"	in	the	definitive	Proxy	Statement	for	our	2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.

# Item	13.				Certain	Relationships	and	Related	Transactions,	and	Director	Independence

The	information	required	by	Items	404	and	407(a)	of	Regulation	S-K	is	included	under	"Transactions	with	Related	Persons"	and	"Board	of	Directors	and Committees"	in	the	definitive	Proxy	Statement	for	our	2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.

# Item	14.				Principal	Accountant	Fees	and	Services

The	information	required	by	Item	9(e)	of	Schedule	14A	is	included	under	"Ratification	Of	Independent	Registered	Public	Accounting	Firm"	in	the	definitive Proxy	Statement	for	our	2009	Annual	Meeting	of	Shareholders	and	is	incorporated	herein	by	reference.

# PART	IV

# Item	15.				Exhibits	and	Financial	Statement	Schedules

All	other	schedules	are	omitted	because	they	are	not	applicable	or	the	required	information	is	shown	in	the	financial	statements	or	notes	thereto.

		4.4 Form	of	Officers'	Certificate	relating	to	the	Company's	Fixed	Rate	Medium-Term	Notes	and	the	Company's	Floating	Rate	Medium-Term	Notes,	form	of Fixed	Rate	Note	and	form	of	Floating	Rate	Note	(incorporated	by	reference	to	Exhibits	4.2,	4.3	and	4.4	of	the	Company's	Current	Report	on	Form	8-K filed	May	29,	2002).

*	 Management	contract	or	compensatory	plan	or	arrangement.

The	exhibits	filed	herewith	do	not	include	certain	instruments	with	respect	to	long-term	debt	of	NIKE	and	its	subsidiaries,	inasmuch	as	the	total	amount	of	debt authorized	under	any	such	instrument	does	not	exceed	10	percent	of	the	total	assets	of	NIKE	and	its	subsidiaries	on	a	consolidated	basis.	NIKE	agrees,	pursuant	to Item	601(b)(4)(iii)	of	Regulation	S-K,	that	it	will	furnish	a	copy	of	any	such	instrument	to	the	SEC	upon	request.

Upon	written	request	to	Investor	Relations,	NIKE,	Inc.,	One	Bowerman	Drive,	Beaverton,	Oregon	97005-6453,	NIKE	will	furnish	shareholders	with	a	copy	of any	Exhibit	upon	payment	of	$.10	per	page,	which	represents	our	reasonable	expenses	in	furnishing	Exhibits.

# SCHEDULE	II

# VALUATION	AND	QUALIFYING	ACCOUNTS

|  | Balance	at<br>Beginning<br>of	Period | Charged	to<br>Costs	and<br>Expenses | Charged	to<br>Other<br>Accounts | Write-Offs<br>Net	of<br>Recoveries | Balance	at<br>End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | (In\tmillions) |  |  |
| Allowance\tfor\tdoubtful\taccounts\t(current\tand\tnon-current)^(1) |  |  |  |  |  |
| For\tthe\tyear\tended\tMay\t31,\t2007 | $67.6 | $18.5 | $1.8 | $(16.2) | $71.7 |
| For\tthe\tyear\tended\tMay\t31,\t2008 | 71.7 | 25.7 | 4.0 | (23.0) | 78.4 |
| For\tthe\tyear\tended\tMay\t31,\t2009 | 78.4 | 62.4 | (11.7) | (18.3) | 110.8 |

The	non-current	portion	of	the	allowance	for	doubtful	accounts	is	classified	in	deferred	income	taxes	and	other	assets	on	the	consolidated	balance	sheet.

# CONSENT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by the	undersigned,	thereunto	duly	authorized.

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	as	amended,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the registrant	and	in	the	capacities	and	on	the	dates	indicated.



Question: what percent of the total amount outstanding is due to notes payable due at mutually agreed-upon dates within one year of issuance or on demand?
Answer: 81%