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Nike Inc (PDF) by xiuliliaofz

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									                                          Ticker:     ‐   
                                         NYSE: NKE




Nike Inc.
Investment Analysis Report 
 


Analysts: William Brand, JP Tramontana




                                         March 12, 2009
 
                  Nike Analysis Report

    TABLE OF CONTENTS:

    Investment Thesis ............................................................................................................... 3 
    The Company, Industry, & Competitors............................................................................. 3 
    Historical Financial Analysis ............................................................................................ 16 
    Risk Factors ...................................................................................................................... 23 
    Cost of Capital, Capital Structure Analysis & Distributions ............................................ 25 
    Financial Statement Forecasts........................................................................................... 28 
    Cash Flow Valuation......................................................................................................... 28 
    Summary & Conclusions .................................................................................................. 30 
    Appendix ........................................................................................................................... 31 




                                                                                 
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              Nike Analysis Report


    Investment Thesis 
    Our analyst team feels that Nike Inc. is a buy because of the large amount of positive
    aspects of the company which are both qualitative and quantitative. Nike is the leader in
    many different retail environments and we feel that their solid earning power as well as
    their diverse and loyal customer base and efficient operations should all contribute to
    make the company profitable for years to come. Nike is an extremely unique company
    with many competitive advantages and is an industry leader. Nike is undervalued even
    given conservative assumptions with a robust financial position and strong growth
    opportunities.

    Main Drivers of Value:
        • Extremely strong brand equity within the retail industry
        • Efficient “futures” inventory strategy
        • Well positioned balance sheet with less than 10% Debt/Cap (-2B net debt) and
           large cash reserves
        • Large international growth prospects while maintaining dominant U.S. market
           share
    These are the main drivers of value for the company that our analyst team expects will
    produce stellar financial and operational results for the company both in the near and long
    term.

    Main Risk Factors:
      • Continued macroeconomic downturn resulting in extensively lower consumer
          spending associated with a worldwide GDP contraction
      • Market saturation and potential lack of room for growth

    These are the two most important risk factors for the company however there are more
    business risks that affect the company which are detailed further in the Risk Factors
    section.

    The Company, Industry, & Competitors 
    The Company’s Description 
    “Nike, Inc. designs, develops, and markets footwear, apparel, equipment, and accessory
    products worldwide. The company offers various categories of shoes, including running,
    training, basketball, soccer, sport-inspired urban shoes, and children’s shoes. Nike, Inc.
    also markets its products under the brand names of Converse, Chuck Taylor, All Star,
    One Star, John Varvatos, Jack Purcell, Cole Haan, Bragano, and Hurley. The company
    sells its products to retail accounts, through stores, independent distributors, and licensees,
    as well as through its Website, nikestore.com. As of May 31, 2008, it operated 296 retail
    stores in the United States and 260 retail stores internationally. The company was
    founded in 1964 and is headquartered in Beaverton, Oregon.”
    Source: CapitalIQ1




                                                          
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             Nike Analysis Report




    Source: Nike Inc. 10-K Report 20081
    Nike manufactures many different products in many different lines of business that target
    a diverse group of customers. Mainly Nike is well known for their athletic shoes but over
    the years the company has expanded into having a product for every aspect of virtually
    every sport. As well, the company is well positioned because of its exposure to licensing
    agreements with major sports teams at the collegiate and professional level as well as
    high school and private league programs for younger competitors.

    Products & Competition 
    Major Products 
    Nike’s main product is athletic shoes however they as well as well sell products used for
    leisure purposes. The company focuses on high quality construction in all of their
    products in order to ensure customer satisfaction as well as to maintain the company’s
    well known and respected name. Their top sellers are running, training, basketball,
    soccer, sport-inspired urban shoes, and children’s shoes. From the 10K, “We also market
    shoes designed for aquatic activities, baseball, bicycling, 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 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 have agreements for licensees to produce and sell NIKE brand
    swimwear, team sports apparel, training equipment, children’s clothing, electronic
    devices, eyewear, golf accessories, and belts.” The company owns Cole Haan, Converse
    Inc. Hurley International and Umbro Ltd. who also produce athletic and leisure footwear
    and accessories.



                                                        
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             Nike Analysis Report




                              Source: Nike Inc. 10-K Report 20081

    Geographic Product Sales




                                        Source: CapitalIQ1

    United States Market
    The company’s US market share is well known as it is one of the most recognizable
    brands. From the 10K, “In fiscal 2008, sales in the United States including U.S. sales of
    Cole Haan, Converse, Exeter Brands Group (which we sold in December, 2007), Hurley,
    Umbro, NIKE Bauer Hockey (which we sold in April, 2008) and NIKE Golf accounted
    for approximately 43 percent of total revenues, compared to 47 percent in fiscal 2007 and
    47 percent in fiscal 2006. We estimate that we sell to more than 25,000 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 year 2008, our three largest
    customers accounted for approximately 24 percent of NIKE brand sales in the United
    States.” The company as well uses their innovative “futures” ordering program through
    which retailers order in advance (5-6 mo.) for delivery at a specified date and price.”In
    fiscal year 2008, 86 percent of our U.S. wholesale footwear shipments (excluding Cole
    Haan, Converse, Exeter Brands Group, Hurley, NIKE Golf, Umbro, and NIKE Bauer
    Hockey) were made under the futures program, compared to 94 percent in fiscal 2007
    and 90 percent in fiscal 2006. In fiscal 2008, 62 percent of our U.S. wholesale apparel
    shipments (excluding Cole Haan, Converse, Exeter Brands Group, Hurley, NIKE Golf,
    Umbro, and NIKE Bauer Hockey) were made under the futures program, compared to 65
    percent in fiscal 2007 and 2006.”
    Source: Nike Inc. 10-K Report 20081



                                                         
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             Nike Analysis Report

    International Markets
    Nike is an international company that earns revenue all over the world. Nike’s
    international business represents strong growth prospects which should continue to be
    very profitable in the future. From the 10K, “In fiscal 2008, non-U.S. sales (including
    non-U.S. sales of Cole Haan, Converse, Exeter Brands Group, Hurley, NIKE Bauer
    Hockey, Umbro, and NIKE Golf) accounted for 57 percent of total revenues, compared to
    53 percent in fiscal 2007 and 53 percent in fiscal 2006. 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 27,000
    retail accounts outside the United States, excluding sales by independent distributors and
    licensees. We operate 11 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 9 percent of total non-U.S. sales.”




    Source: Nike Inc. 10-K Report 20081

    Geographic Sales Summation
    Nike’s revenue stream is globally distributed giving them solid exposure to both
    developed and developing markets. Their level of exposure to the international market
    gives the company a favorable position for the future as well as supporting current
    earnings. Specifically, we believe that their position in the developing markets as well as
    their position in China sets the company apart from their competitors. China’s market is
    very lucrative because of both the size and the country’s recent progression in the sport of
    basketball. Nike is one of the leading producers of high-end basketball shoes and should
    greatly benefit from their exposure to China. As well, less developed markets like India,
    Brazil and Africa should also generate a large amount of future profits for the company.
    This is due to the fact that as the markets mature in the future, the amount of
    discretionary funds per person will also increase. When the level of discretionary income
    increases consumers will be more apt to purchase higher-end athletic shoes; the shoes
    will most likely be produced by Nike because of their large well-known brand name.
    (Note: the forecasted revenue growth broken down by region and then by product is
    found in the appendix)
                                   




                                                         
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             Nike Analysis Report

    Sector Data 

    Nike is in the Consumer Discretionary Sector and is classified in the Consumer Durables
    and Apparel subsector. Consumer Discretionary sector data is located below and the
    subsector will be developed later in this section.

    US Consumer Discretionary by Market Capitalization




    The consumer discretionary sector is by definition products that are purchased at the
    discretion of the consumer; they are not considered to be necessities. As well, it
    encompasses those industries that tend to be the most sensitive to economic cycles. Its
    manufacturing segment includes automotive, household durable goods, textiles & apparel
    and leisure equipment. The services segment includes hotels, restaurants and other
    leisure facilities, media production and services, and consumer retailing and services.

    Consumer Discretionary Sector (international companies included)




                                      Source: CapitalIQ3




                                                       
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             Nike Analysis Report

    Subsector Data (Consumer Durables and Apparel) 




    There are five sub-industries within the scope of consumer discretionary: Automobiles
    and Components, Consumer Durables and Apparel, Consumer Services, Media and
    Retailing

    Competition
    The main competitors of Nike Inc. that will be used in this report are UnderArmor Inc., K
    Swiss Inc., Skechers USA Inc. and Adidas AG. Nike’s amounts of products are very
    diverse and accordingly a diverse range of companies that have comparable aspects to
    Nike have been chosen. Adidas AG is arguably Nike’s closest competitor however
    company information is difficult to obtain because the company’s equity is not traded on
    a US exchange. UnderArmour is mainly in the athletic apparel industry however
    Skechers and KSwiss are mainly in the footwear industry. All of these industries are very
    competitive with different companies constantly competing for market share both in the
    US and on the international level. From the 10K , “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



                                                        
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             Nike Analysis Report

    use our products, and we actively sponsor sporting events and clinics. We believe that we
    are competitive in all of these areas.”

    Market Share




    Source: Wikinvest
    Nike is well positioned in the global footwear market and has a solid market share in the
    global athletic apparel market. As can be seen in the right graph, there is not a dominant
    company in the athletic apparel market but Nike has a good market share which should
    continue to grow over the years either through organic or acquisitions.

    Porter’s Five
    Buyer Power (Low)
          Buyers in this industry are extremely fragmented.
          High degree of brand equity has historically made buyers less price sensitive.
           Nike owns a lot of retail stores; this lessens the power of third party retailers.
    Supplier Power – (Low)
          Firms typically contract manufacturers over seas. There are tons of manufacturers
          competing for contracts.
              – Allows firms to exhibit significant influence over suppliers.
          Single suppliers don’t provide a substantial amount of product to these companies
          (save UA).
          Raw materials are readily available.
    Threat of Entry – (Low)
          High degree of brand equity and loyal customers make it hard for new firms to
          gain market share.
              – Highly competitive industry
          Difficult for firms to obtain capital to buy fixed assets needed and establish
          distribution network.
              – Advertising/Marketing new products also very expensive.
    Threat of Substitutes – (None)
          No pure substitutes for athletic footwear and apparel.



                                                        
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           Very little threat of technological innovation producing substitutes.
    Rivalry – (High)
           Several dominate firms in the industry competing intensely for market share.
           Swings in consumer preferences increase competition to stay on top of trends.
           Very low consumer switching costs.

    SWOT Analysis
    Strengths
          NKE has an incredibly strong global brand. This is critical especially in a
          weakening global economy
              – With a strong revenue stream, NKE is able to contract the most popular
                 athletes for endorsements
              – Helps keep the margins fat
          Nike has no factories so it does not tie up cash in manufacturing labor and plants
          Futures ordering system allows NKE to actively manage inventory
          Geographically diversified, which has helped NKE maintain strong revenues
          Able to leverage high global market share to its advantage
          Very strong financial position
    Weaknesses
          To grow in the USA in the future, NKE will need to continue to gain market
          share/grow inorganically.
          Very large amount of NKE revenue comes from USA footwear market (~23%)
          which is highly competitive and saturated. NKE will be vulnerable if it looses
          market share.
              – Opportunities
          Nike has exposure to emerging markets and thus fantastic growth opportunities.
          Well positioned to take advantage of consumer shift to healthier lifestyles.
          As the retail industry continues to falter, NKE continues to expand and gain
          market share.
              – NKE will be well positioned in the future
    Threats
          The footwear and greater retail industry has become increasingly competitive.
          Nike must maintain its brand equity and continue to anticipate fashion trends.
          Inventory buildup
              – Inventories up 9% YOY in Q2.
          Increased pressure on margins due to Nike-owned retail expansion.
          Forex Translation
          Continued Economic Downturn
              – Delayed Purchases
              – Trading down
    Opportunities
          Nike has exposure to emerging markets and thus fantastic growth opportunities.
          Well positioned to take advantage of consumer shift to healthier lifestyles.
          As the retail industry continues to falter, NKE continues to expand and gain
          market share.
              – NKE will be well positioned in the future



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                Nike Analysis Report

    Analysis: As a whole, the athletic apparel and footwear market seems very attractive.
    Both suppliers and customers have relatively little power over the firms which compete
    in this space; there is virtually no threat of substitutes and it would be excessively
    difficult for firms to enter this industry. The one drawback is that there is intense rivalry
    present. Several large firms compete intensely for market share, which is limited. This is
    especially true in the United States market, which is growing at a slower rate than other
    international markets. We believe Nike is uniquely suited for this competition, and has
    performed well in spite of the crowded space due to several core competencies.

    Core Competencies
    Branding:

    Nike has been extremely successful in creating a worldwide brand. This has been
    accomplished via product design as well as high profile celebrity endorsements such as
    LeBron James and Tiger Woods. Nike currently has over $3.5 billion slated for
    endorsement contracts between 2009 and 2013, and that fails to account for future
    advertising and sport sponsorships.

    This branding has given Nike significant pricing control as it has created an insatiable
    consumer demand for the company’s famous “swoosh”. This is displayed in the
    financial condition ratios section where it can be seen that Nike’s ROE, ROA and net
    income margins are well above the other comparable companies in the industry.

    Supply Chain Management:

    In addition to branding, Nike has one of the world’s best supply chains. Nike does not
    own have any factories, allowing them to avoid tying up cash in manufacturing facilities.
    There are a multitude of suppliers which compete for contracts with Nike; as a result
    there is very little supplier risk for the firm.

    Nike also has a phenomenally managed inventory system. Nike employs a system called
    the “futures” ordering system, in which third party retailers place and pay for orders 6
    months in advance. This helps Nike more actively anticipate future sales and adjust
    inventory levels accordingly. In FY 2008, 86% of US footwear and 62% of US apparel
    were ordered through this system.

    Finally, Nike has developed multiple ways to effectively reach its end consumer. The
    company operates 13 distribution facilities, 11 of which are outside of the US. This
    allows for quick shipping to customers anywhere in the world. Nike operates over 500
    stores worldwide, in addition to selling through third-party retailers and operating several
    websites for direct selling. Nike also operates a customizable “NikeID” website to allow
    customers to design Nike products to their personal tastes.

    Insider-Institutional Ownership
    Nike Inc.



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             Nike Analysis Report




                                         Source: CapitalIQ3
    Nike is largely owned by institutions, which is a positive signal for the company because
    it shows that institutional managers believe the security is a solid investment. As was
    discussed in lecture, the institutional managers have most of the purchasing power in the
    market and this is a good sign for the company

    Recent Insider Trading




                                        Source: CapitalIQ3
    Insider activity has largely been selling in the recent past, this is because of both profit
    taking when Nike’s stock was close to its high as well as the recent turmoil in the
    financial markets. The most recent insider buy is a positive signal for the stock showing
    that the company’s insiders feel the security is currently undervalued.

    Nike vs. Comparables




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    Adidas




                                        Source: CapitalIQ3
    Adidas common stock is not traded on an exchange in the US which makes the
    company’s information harder to find. The company’s stock is mostly owned by the
    public and is partially owned by institutions. There is no insider ownership which can be
    viewed as a negative signal for the security.

    UnderArmour




                                       Source: CapitalIQ3
    UnderArmour Inc. is a much smaller company than Nike and historically has focused on
    the athletic apparel business but has recently started to market products in other areas
    such as footwear. The company is mostly owned by institutions and the recent insider
    activity has been mostly buying which is a positive signal.

    Skechers USA




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              Nike Analysis Report




                                       Source: CapitalIQ3
    Skechers is mostly owned by institutions and has a fairly substantial level of insider
    ownership. Insider activity has been negligible in the recent past.

    K Swiss




                                       Source: CapitalIQ3
    KSwiss stock is almost completely owned by institutions and the rest of the company’s
    equity is owned by insiders. Insider activity in the recent past has not been material.




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             Nike Analysis Report

    The Future of the Company 
    Analyst Earnings & Sales Estimates




    Analyst forecasts for revenue in the current year and for the next year are slightly higher
    than one year ago levels of revenue and are on the conservative side due to the turbulent
    market environment. EPS estimates for the current quarter are 81 cents per share which
    is the same estimate as the prior year. In the prior year the company exceeded these
    estimates by 14 percent. Current year forecasted EPS is flat with a forecasted
    improvement in the following year. Below analysts give growth forecasts for Nike, their
    industry, their sector and the market overall. It is important to mention that these are just
    forecasts. We disagree with the forecasts for Nike for this year because we feel with their
    level of exposure they will surpass analyst expectations as they have done in the past.




                                      Source: YahooFinance
    Positive or Negative Earnings Surprises




                                        Source: YahooFinance
    Nike Inc. is predicted to remain a long term profitable company and is expected to
    continue to set the bar in the several industries. Historically, the company is able to meet
    its targets and beat analyst expectations. Analysts believe this high level of performance
    is going to continue in the future.




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             Nike Analysis Report

    Expert Opinions (Forecasts)




                                    Source: Bloomberg Terminal2
    Analysts currently have given Nike a buy rating overall with a target price of $61.44. We
    feel that this target price is on the conservative side because of both the qualitative and
    quantitative attributes of Nike. Our target price will be discussed later in this report.
    Historical Financial Analysis
    Stock Price Performance (5 YR HISTORY) 

    Nike vs. Comparable Companies




                                        Source: CapitalIQ3
    This chart depicts Nike’s stock price performance measured against the performance of
    its peer group discussed earlier. The peer group consists of UnderArmor Inc., K Swiss
    Inc., Skechers USA Inc. and Adidas AG. Nike’s stock price has outperformed their peers
    over the past five years (aggregate) however the entire group’s prices have decreased
    recently because of the current financial crisis.




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             Nike Analysis Report

    Nike vs. Portfolio of Comparables




                                        Source: CapitalIQ3
    This chart shows Nike’s stock performance measured against the consumer discretionary
    sector as a whole. Nike’s stock has largely outperformed the consumer discretionary
    sector over the past five years showing its dominance in the sector.




                               Source: Nike Inc. 10-K Report 20081
    This chart shows Nike’s equity performance measured against the S&P 500 Index, the DJ
    US Footwear Index, and the S&P Apparel, Accessories and Luxury Goods Index. Nike
    has outperformed each of these indexes since May 2003. (Note: This chart’s performance
    measure is not as recent as the other charts and is from May 2008)




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            Nike Analysis Report

    Nike vs. Market




                                       Source: CapitalIQ3
    This graph denotes Nike’s stock performance compared to the S&P 500 Index and shows
    that Nike has largely outperformed the market over the past five years.




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Growth Performance 

Nike
    Ratios
                                          LTM
    For the Fiscal Period Ending    12 months     12 months     12 months     12 months     12 months     12 months
                                   Nov-30-2008   May-31-2008   May-31-2007   May-31-2006   May-31-2005   May-31-2004
    Growth Over Prior Year
     Total Revenue                      13.6%         14.1%          9.2%          8.8%         12.1%         14.5%
     Gross Profit                       17.3%         17.1%          8.7%          7.7%         16.4%         19.8%
     EBITDA                              9.8%         13.9%          0.4%         11.1%         15.9%         24.9%
     EBITA                               9.4%         14.1%          1.1%         11.4%         18.3%         28.4%
     EBIT                                9.5%         14.2%          1.1%         11.4%         22.2%         26.1%
     Earnings from Cont. Ops.            8.0%         26.3%          7.1%         14.9%         28.1%         27.8%
     Net Income                          8.0%         26.3%          7.1%         14.9%         28.1%         99.5%
     Normalized Net Income               6.7%         12.5%          1.4%         15.2%         28.3%         29.1%
     Diluted EPS before Extra           10.6%         27.7%         10.9%         17.7%         27.8%         26.8%

     Accounts Receivable                 4.6%         12.0%          4.7%          5.3%           6.7%          1.7%
     Inventory                           8.8%         14.9%          2.2%         14.7%           9.8%          8.9%
     Net PP&E                            6.3%         12.7%          1.2%          3.2%         (0.4%)        (0.6%)
     Total Assets                       10.3%         16.4%          8.3%         12.2%         11.2%         15.9%

     Tangible Book Value                  2.0%          2.3%        12.8%         12.7%         19.2%         12.4%
     Common Equity                        8.3%        11.4%         11.8%         11.4%         18.0%         19.8%
     Cash from Ops.                    (29.0%)          3.1%        12.6%          6.2%           3.4%        64.7%
     Capital Expenditures                31.1%        43.3%         (6.1%)        29.8%         19.7%         15.5%
     Levered Free Cash Flow            (39.3%)        (1.2%)          8.8%        14.0%         (3.3%)        63.1%
     Unlevered Free Cash Flow          (39.3%)        (1.2%)          8.8%        13.7%         (4.5%)        61.0%
     Dividend per Share                  19.7%        23.2%         20.3%         24.2%         28.4%         37.0%

                                   Source: CapitalIQ3
Nike’s growth performance YoY is shown for the past five fiscal years as well as the
trailing twelve months from 10/30/2008. Nike has shown healthy top line growth while
maintaining solid margins and an efficient operating environment. Gross profit as well as
EBITDA, EBIT and normalized NI have shown good growth demonstrating the earning
power of the company as well as its ability to control costs while expanding its market
share globally.




                                    Source: CapitalIQ3
This figure denotes the same results as above however the absolute values and margins
are shown instead of just YoY growth.




                                                                
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    Nike vs. Comparables
              NKE       Nike Inc.              2004      2005      2006      2007      2008
              Total Revenue                  $12,253.1 $13,739.7 $14,954.9 $16,325.9 $18,627.0
                         Annual Growth                    12.1%      8.8%       9.2%    14.1%
              EBITDA                           1,863.2   2,160.2   2,401.0   2,411.4   2,746.5
                         Annual Growth                    15.9%     11.1%       0.4%    13.9%
                         Margin                 15.2%     15.7%     16.1%     14.8%     14.7%
                                               996       997       998       999       1000
              UA        Under Armour, Inc.     2004      2005      2006      2007      2008
              Total Revenue                     $205.2    $281.1    $430.7    $606.6    $725.2
                         Annual Growth                    37.0%     53.2%     40.8%     19.6%
              EBITDA                              28.6       42.4     66.7     100.9       98.3
                         Annual Growth                    48.3%     57.6%     51.2%     (2.6%)
                         Margin                 13.9%     15.1%     15.5%     16.6%     13.6%
                                               996       997       998       999       1000
              KSW S     K-Swiss Inc.           2004      2005      2006      2007      2008
              Total Revenue                     $429.2    $484.1    $508.6    $501.1    $410.4
                         Annual Growth                    12.8%      5.1%     (1.5%)  (18.1%)
              EBITDA                              88.9     102.9     108.8     101.4       34.7
                         Annual Growth                    15.7%      5.7%     (6.8%)  (65.8%)
                         Margin                 20.7%     21.3%     21.4%     20.2%       8.4%
                                               996       997       998       999       1000
              DB:ADS    Adidas AG              2004      2005      2006      2007      2008
              Total Revenue                   $7,931.2  $7,416.3  $8,398.4 $12,762.1 $13,034.2
                         Annual Growth                    (6.5%)    13.2%     52.0%       2.1%
              EBITDA                             813.2     889.8   1,056.8   1,388.3   1,446.6
                         Annual Growth                      9.4%    18.8%     31.4%       4.2%
                         Margin                 10.3%     12.0%     12.6%     10.9%     11.1%
                                               996       997       998       999       1000
              SKX       Skechers USA Inc.      2004      2005      2006      2007      2008
              Total Revenue                     $920.3  $1,006.5  $1,205.4  $1,394.2  $1,440.7
                         Annual Growth                      9.4%    19.8%     15.7%       3.3%
              EBITDA                              70.3       99.8    129.2     130.6       75.2
                         Annual Growth                    42.0%     29.5%       1.0%  (42.4%)
                         Margin                  7.6%       9.9%    10.7%       9.4%      5.2%
                                     Source: CapitalIQ3
    The companies that Nike is measured against for the purposes of this report (UnderArmor
    Inc., K Swiss Inc., Skechers USA Inc. and Adidas AG) have for the most part achieved
    fairly good operating results. UnderArmour’s top line growth is by far the highest
    because of the company’s size and the fact that they are a relatively new company.
    KSwiss, Adidas and Skechers have all had decreasing revenues in the most recent years
    however Nike has maintained fairly consistent growth further proving their relative
    strength in their industry.

    Financial Performance 

    Management outlines the companies past financial successes as well as their future goals
    in the 10K as follows, “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.” These goals are aimed at generating solid and consistent future
    revenues in the high single digits with mid-teens EPS growth through efficient



                                                               
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    operations. The company is also aiming to maintain consistent results throughout their
    diverse portfolio of companies. Nike’s management commentary is below.
    “ In fiscal 2008 we met or exceeded these financial goals. Our revenues grew 14% to
    $18.6 billion, net income grew 26% to $1.9 billion, and we delivered diluted earnings per
    share of $3.74, a 28% increase versus fiscal 2007. We estimate that the combination of
    favorable translation of foreign currency-denominated profits from international
    businesses and the foreign currency losses included in other (expense) income, net
    resulted in a year-over-year increase in consolidated income before income taxes of
    approximately 6%. For the year, the increase in net income was higher than our rate of
    revenue growth due to a reduction in our effective tax rate and improved gross margins,
    partially offset by higher selling and administrative expenses as a percentage of revenue.
    Fiscal 2008 results were positively affected by a reduction in our effective tax rate of 7.4
    percentage points as compared to fiscal 2007, primarily as a result of the $105.4 million
    one-time tax benefit received in the first quarter of fiscal 2008. Also reflected in the year-
    over-year effective tax rate improvement was a reduction in our ongoing effective tax
    rate resulting from our profits earned outside of the United States; our effective tax rates
    for these operations are generally lower than the U.S. statutory rate. Gross margins for
    the year grew 110 basis points versus the prior year as inventory management and
    strategic price increases were partially offset by higher product costs and increased close-
    out sales. The increase in selling and administrative expenses was attributable to higher
    investments in growth drivers such as athlete and sport team endorsers of our products,
    spending around major sporting events, key product initiatives, investments in company
    owned retail and non-NIKE brand businesses as well as normal wage increases. 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
    addition, we increased cash flow from operations and continued to return larger amounts
    of cash to shareholders through higher dividends and increased cash paid for share
    repurchases. Our return on invested capital increased as compared to fiscal 2007.
    Although we may not meet all of the financial goals outlined above in any particular
    fiscal quarter or fiscal year, we continue to believe these are appropriate long-term
    goals.”
    Source: Nike Inc. 10-K Report 20081

    F2Q09 Results
        •   Record revenue of $4bn, up 6% YOY.
               o Global footwear up 7%
               o Global apparel up 6%
        •   Futures orders up 6% in USA
        •   Revenue in Europe up 4%
               o Futures orders slightly down
        •   Emerging markets revenue up 21%
        •   Revenue in Asia up 17%
               o Continued strong growth out of China, where revenues and futures were
                   up 27% and 25% respectively.
        •   Americas revenue up 23%, futures up 26%
        •   USA revenue down 1%, Some margin pressure to increasing input costs.


                                                          
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    Financial Ratios
    Nike
        Ratios
                                                         LTM
        For the Fiscal Period Ending               12 months     12 months     12 months     12 months     12 months     12 months
                                                  Nov-30-2008   May-31-2008   May-31-2007   May-31-2006   May-31-2005   May-31-2004
        Profitability
         Return on Assets %                            13.0%         13.2%         13.0%         14.1%         14.2%         13.2%
         Return on Capital %                           18.4%         19.0%         18.3%         19.7%         19.7%         18.6%
         Return on Equity %                            23.8%         25.4%         22.4%         23.3%         23.2%         21.6%

        Margin Analysis
         Gross Margin %                                45.7%         45.0%         43.9%         44.0%         44.5%         42.9%
         SG&A Margin %                                 33.0%         32.0%         30.8%         29.9%         30.7%         30.2%
         EBITDA Margin %                               14.4%         14.7%         14.8%         16.1%         15.7%         15.2%
         EBITA Margin %                                12.8%         13.1%         13.1%         14.2%         13.9%         13.1%
         EBIT Margin %                                 12.7%         13.1%         13.1%         14.1%         13.8%         12.6%
         Earnings from Cont. Ops Margin %               9.4%         10.1%          9.1%          9.3%          8.8%          7.7%
         Net Income Margin %                            9.4%         10.1%          9.1%          9.3%          8.8%          7.7%
         Net Income Avail. for Common Margin %          9.4%         10.1%          9.1%          9.3%          8.8%          7.7%
         Normalized Net Income Margin %                 7.9%          8.2%          8.3%          9.0%          8.5%          7.4%
         Levered Free Cash Flow Margin %                4.7%          6.6%          7.7%          7.7%          7.3%          8.5%
         Unlevered Free Cash Flow Margin %              4.7%          6.6%          7.7%          7.7%          7.4%          8.6%

        Asset Turnover
         Total Asset Turnover                            1.6x          1.6x          1.6x          1.6x          1.6x          1.7x
         Fixed Asset Turnover                           10.7x         10.4x          9.8x          9.2x          8.5x          7.6x
         Accounts Receivable Turnover                    7.3x          7.0x          6.7x          6.4x          6.3x          5.8x
         Inventory Turnover                              4.6x          4.5x          4.4x          4.3x          4.4x          4.4x

                                      Source: CapitalIQ3
    Nike, due to their solid earnings over the past five years, have generated very solid
    returns as measured by ROQ, ROC and ROE. GM percentages have been well
    maintained as well as SG&A costs margin. Due to solid cost management and higher
    than average earnings, NI and FCF have maintained solid margins as well. TAT has
    remained relatively constant and AR and INV turnover have maintained consistent results.

    Nike vs. Comparables
                                                     Normalized               1 Yr
                                              Price Trailing PE Forward PE EPS Growth           PEG Price/Sales Price/Book
        NKE         Nike Inc.                $ 39.94      12.75      11.34   5.76%                0.86    1.05         2.38
        UA          Under Armour, Inc.       $ 12.33      14.90      16.90   5.84%                0.87    0.83         1.84
        KSWS        K-Swiss Inc.             $ 6.99       38.22        -     0.00%               46.64    0.59         0.59
        DB:ADS      Adidas AG                $ 29.05       9.07       7.34 -4.59%                  -      0.45         1.38
        SKX         Skechers USA Inc.        $ 5.71        6.72       4.81 -73.53%                 -      0.18         0.39
                                       Source: CapitalIQ3
    Nike’s financial ratios as compared to their main competitors (previously mentioned
    companies) show how financially stable the company is. Their normalized P/E ratio is
    around the middle of their peer group while their projected EPS growth is at the high end
    of the relative spectrum. Their PEG is less than one which is a positive signal for the
    company and their P/S and P/B are on the higher end of the group. The trailing P/E ratio
    is actually lower when the amount of cash that the company has on their books is factored
    in.



                                                                               
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                      Nike Analysis Report

    Financial Condition Ratios
    Nike vs. Comparables

                                                      ROA                 ROE                     ROC                 Current            Quick
        NKE            Nike Inc.                       12.97                23.78                    18.41                2.89             1.77
        UA             Under Armour, Inc.              10.95                12.50                    14.32                2.98             1.38
        KSWS           K-Swiss Inc.                     0.41                 8.56                     0.47                8.38             6.79
        DB:ADS         Adidas AG                        6.90                19.03                    10.59                1.99             0.96
        SKX            Skechers USA Inc.                4.25                 8.55                     5.43                3.20             1.58

                                                                                                                     Dividend
                                                   Asset TO         Inventory TO             Receivables TO           Yield              Payout
        NKE            Nike Inc.                        1.63                 4.59                       7.34          2.5%                24%
        UA             Under Armour, Inc.               1.65                 2.13                       8.30          0.0%                 0%
        KSWS           K-Swiss Inc.                     0.79                 3.16                       7.61          2.8%                20%
        DB:ADS         Adidas AG                        1.17                 3.20                       5.36          2.2%                16%
        SKX            Skechers USA Inc.                1.69                 3.63                       8.41          0.0%                 0%
                                         Source: CapitalIQ3
    Nike’s ROE, ROA and ROC are all higher than their peers and their current and quick
    ratios are close the groups average.

    Trading Multiples
        Multiples Detail
        For Quarter Ending           Mar-05-2009   Dec-31-2008   Sep-30-2008   Jun-30-2008     Mar-31-2008   Dec-31-2007   Sep-28-2007   Jun-29-2007
        TEV/LTM Total Revenue              0.89x         1.16x         1.59x         1.46x           1.76x         1.71x         1.62x         1.66x
        TEV/NTM Total Revenues             0.90x         1.15x         1.48x         1.35x           1.58x         1.55x         1.48x             -
        TEV/LTM EBITDA                     6.15x         8.08x        11.00x         9.84x          11.34x        11.54x        10.89x        11.39x
        TEV/NTM EBITDA                     5.77x         7.56x         9.95x         9.07x          10.94x        10.45x        10.28x             -
        TEV/LTM EBIT                       6.96x         9.13x        12.41x        11.18x          12.95x        12.94x        12.24x        12.74x
        P/LTM EPS                         10.69x        13.66x        18.37x        15.95x          18.82x        19.03x        17.72x        19.93x
        P/NTM EPS                         10.35x        13.04x        15.76x        15.21x          18.07x        17.68x        16.95x             -
        P/LTM Normalized EPS              12.75x        16.28x        21.57x        19.69x          22.19x        22.41x        21.08x        21.62x
        P/BV                               2.38x         3.04x         4.06x         3.74x           4.41x         4.27x         3.98x         4.18x
        P/Tangible BV                      2.73x         3.48x         4.73x         4.42x           4.73x         4.60x         4.30x         4.53x
        TEV/LTM Unlevered FCF             18.92x             -             -             -               -             -             -             -
        Market Cap/LTM Levered FCF        21.02x             -             -             -               -             -             -             -


    Risk Factors 
             •     Continued macroeconomic downturn resulting in extensively lower consumer
                   spending associated with a worldwide GDP contraction
             •     Market saturation and potential lack of room for growth Intense competition and
                   ability to anticipate consumer preferences and develop new products as well as
                   the potential lack of high quality endorsers
             •     Seasonal nature of business and “Futures” orders accuracy and inventory levels
             •     Financial health of our retailers, Credit Risk and Currency exchange rate
                   fluctuations


                                                                                     
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              Nike Analysis Report

        •   Intellectual property rights being protected
        •   Inherent operational risks of international business and overseas sourcing,
            manufacturing, and financing as well as Global distribution facilities and their
            impact on international revenue generation
        •   Rely significantly on information technology in our supply chain as well as the
            company’s reliance on technical innovation and high quality products in order to
            compete
        •   Phil Knight owns a large share of stock, the sale of which could depress market
            prices of company’s equity

    Nike has many risk factors that should be mentioned while conducting a thorough
    company analysis. The two most material risk factors are mentioned in the Investment
    Thesis section and are as well displayed in the preceding list. The continued
    macroeconomic downturn is a risk that affects every business in the world because of the
    downturn’s affect on the consumer however we feel that Nike is shielded from the better
    part of this risk because of their efficient management, brand equity and loyal customer
    base. We as well feel that the economic downturn cannot continue indefinitely and that
    Nike will be able to “weather the storm” and continue to lead their industry. The other
    main risk factor of potential market saturation and lack of room for growth is extremely
    material and should be discussed. We feel that Nike’s growth prospects, due to their
    large market share in the US as well as their high level of exposure internationally should
    mitigate this risk. Below are details regarding the company’s exact figures which should
    ensure their continued revenue growth and overall success.

            Dominate presence in many emerging economies.
                – Emerging economies rev. up 21% YOY Q2.
                      • Argentina, Russia, China, Brazil, Mexico
            Strong growth from established economies.
                – Canada up 10% YOY
                – Japan up 7% YOY
            Market share gain in the US
                – 3% gain in share Q2 YOY

    These strong results position Nike to continue to grow. The other risk factors that affect
    the company are mentioned after the two most important that are discussed above. These
    are broad risks that affect most businesses and assert that Nike’s overall company
    strength, financial position and brand equity should mitigate and control these risks.




                                                         
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                       Nike Analysis Report


    Cost of Capital, Capital Structure Analysis & Distributions 
    Analysis of Firm’s Capital Structure 
        Capital Structure Data
        For the Fiscal Period Ending
                                          12 months May-31-2008               12 months May-31-2007        12 months May-31-2006

        Units                                  Millions      % of Total           Millions   % of Total      Millions     % of Total

        Total Debt                                625.1          7.4%                541.2      7.2%            709.4       10.1%
        Total Common Equity                     7,825.3         92.6%              7,025.4     92.8%          6,285.2       89.9%
        Total Preferred Equity                      0.3          0.0%                  0.3      0.0%              0.3        0.0%
         Total Capital                          8,450.7        100.0%              7,566.9    100.0%          6,994.9      100.0%

                                        Source: CapitalIQ3
    Nike does not use a large amount of debt financing in their capital structure which is
    extremely positive and material in the current market conditions. Nike is well positioned
    to remain extremely financially healthy and stable even through the current global
    economic contraction.

        Ratios
                                                  LTM
        For the Fiscal Period Ending        12 months      12 months       12 months       12 months       12 months     12 months
                                           Nov-30-2008    May-31-2008     May-31-2007     May-31-2006     May-31-2005   May-31-2004
        Short Term Liquidity
         Current Ratio                            2.9x            2.7x             3.1x          2.8x            3.2x          2.7x
         Quick Ratio                              1.8x            1.7x             2.1x          1.8x            2.0x          1.6x
         Cash from Ops. to Curr. Liab.            0.5x            0.6x             0.7x          0.6x            0.8x          0.7x
         Avg. Days Sales Out.                     49.9            52.0             54.5          56.7            58.2          62.8
         Avg. Days Inventory Out.                 79.7            81.5             83.6          84.8            82.9          82.7
         Avg. Days Payable Out.                   36.7            40.4             39.5          36.5            36.5          34.7
         Avg. Cash Conversion Cycle               92.8            93.1             98.6         105.0           104.6         110.8

        Long Term Solvency
         Total Debt/Equity                        9.8%           8.0%             7.7%          11.3%          13.5%          17.5%
         Total Debt/Capital                       8.9%           7.4%             7.2%          10.1%          11.9%          14.9%
         LT Debt/Equity                           5.5%           5.6%             5.8%           6.5%          12.2%          14.3%
         LT Debt/Capital                          5.0%           5.2%             5.4%           5.9%          10.7%          12.1%
         Total Liabilities/Total Assets          35.8%          37.1%            34.3%          36.3%          35.8%          39.5%

         EBIT / Interest Exp.                       NA             NA               NA             NA            NM            62.0x
         EBITDA / Interest Exp.                     NA             NA               NA             NA            NM            74.5x
         (EBITDA-CAPEX) / Interest Exp.             NA             NA               NA             NA            NM            65.9x
         Total Debt/EBITDA                         0.3x           0.2x             0.2x           0.3x           0.4x           0.4x
         Net Debt/EBITDA                            NM            NM                NM             NM             NM             NM
         Total Debt/(EBITDA-CAPEX)                 0.3x           0.3x             0.3x           0.3x           0.4x           0.5x
         Net Debt/(EBITDA-CAPEX)                   NM             NM                NM             NM             NM             NM

         Altman Z Score                           6.37            6.73              NA             NA             NA            7.46

                                         Source: CapitalIQ3
    Nike is a very solvent company with low levels of debt and liabilities as compared to
    equity, capital and assets. As was previously mentioned, Nike’s capital structure is very
    healthy and further contributes to their financial stability and future financial outlook.




                                                                           
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                           Nike Analysis Report

    Analysis of the Competitors Capital Structure 
                                                                              Total LT Debt                      Total
                                                                             incl. Cap Leases                    Equity                         D/E             LT D/E
          NKE                  Nike Inc.                                               441.10                     7,825.60                      10%               5%
          UA                   Under Armour, Inc.                                       13.16                       331.10                      14%               4%
          KSWS                 K-Swiss Inc.                                               -                         384.23                       2%               0%
          DB:ADS               Adidas AG                                             2,719.74                     3,825.86                      88%              88%
          SKX                  Skechers USA Inc.                                        16.19                       668.69                       3%               2%
                                          Source: CapitalIQ3
    Nike’s competitors are now heavily debt finance with the exception of Adidas who is
    very heavily levered. In the current market we feel that this is a large negative signal for
    Adidas. Nike is similarly positioned from a capital structure position than their
    competitors however the company currently has enough cash on their balance sheet to
    cover all of their debt both short term and long term.

    Debt Schedule 
        Description                      Type         Principal Due (USD)    Coupon Rate   Maturity                  Seniority       Secured      Convertible   Repayment Currency
        1.5% Japanese Yen Loan           Term Loans                   47.4        1.500%        Feb-14-2012                 Senior        Yes             No           JPY
        2.0% Japanese Yen Loan           Term Loans                   24.4        2.000%      8-20-2001 - 2020              Senior         No             No           JPY

        2.6% Japanese Yen Loan           Term Loans                   54.5        2.600%      8-20-2001 - 2020              Senior         No             No           JPY

        4.3% Japanese Yen Note, Payable Bonds and                     99.6       4.300%         Jun-26-2011                 Senior         No             No           JPY
        June 26, 2011                   Notes
        4.7% Corporate Bond, Payable     Bonds and                    50.0       4.700%          Oct-01-2013                Senior         No             No           USD
        October 1, 2013                  Notes

        5.15% Corporate Bonds, Payable   Bonds and                   104.5       5.150%          Oct-15-2015                Senior         No             No           USD
        October 15, 2015                 Notes

        5.375% Corporate Bond, Payable   Bonds and                    25.5       5.375%          Jul-08-2009                Senior         No             No           USD
        July 8, 2009                     Notes

        5.4% Corporate Bond, Payable     Bonds and                    15.4       5.400%         Aug-07-2012                 Senior         No             No           USD
        August 7, 2012                   Notes

        5.66% Corporate Bond, Payable    Bonds and                    26.1       5.660%          Jul-23-2012                Senior         No             No           USD
        July 23, 2012                    Notes


                                           Source: CapitalIQ3
    Nike does not utilize a large amount of debt in their capital structure. The debt that the
    company does possess is more than covered by the company’s cash on hand. We feel
    that this is a very positive signal for the company because of the current credit markets.

    Beta 




                                       Source: Bloomberg
    The beta for Nike as calculated with a regression analysis is 1.023. We found Nike’s beta
    ranging from .76 to 1.023 and decided to take the conservative approach and are thus
    using the highest beta found of 1.023.




                                                                                                                  
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                     Nike Analysis Report

    Cost of Capital 
                                       WACC

                                       CAPM
                                       Risk Free Rate      10 yr T bill       2.90%
                                       Market Risk Premium                   6.630%
                                       Beta                                    1.023
                                       CAPM                                   9.68%

                                       Cost of Debt
                                       Rating                                     A+
                                       Spread                                   2.0%
                                       Adjusted Cost of Debt                    6.5%
                                       Synthetic Cost of Debt                   4.9%
                                       Tax Rate                                 0.34

                                       Capital Structure Details

                                       Debt/Cap                                8.91%
                                       Equity/Cap                                91%

                                       WACC                                    9.20%
    The weighted average cost of capital that is calculated and used in order to discount
    future cash flows to their present value is shown above. The CAPM was used with a
    10yr Treasury Bill rate of four percent, a 6.63 percent calculated market risk premium
    and a 1.023 beta (see beta section). The market risk premium was calculated using
    Damadoran’s method of discounting the dividend growth of the S&P 500. This
    calculation yielded a value of 9.68 percent and is used as Nike’s cost of equity capital.
    Nike’s cost of debt, because of their A+ rating, is 6.5 percent which is combined with the
    aforementioned cost of equity (based on capital structure percentages) to yield a WACC
    of 9.2 percent for Nike.

    Distributions (Dividends & Share Repurchases) 
    Historical Dividends (Absolute values) 




    Source: Nike Inc. 10-K Report 20081
    Historical Growth Rates YOY 
        Ratios
                                                LTM
        For the Fiscal Period Ending      12 months       12 months     12 months     12 months     12 months     12 months
                                         Nov-30-2008     May-31-2008   May-31-2007   May-31-2006   May-31-2005   May-31-2004
         Dividend per Share                   19.7%           23.2%         20.3%         24.2%         28.4%         37.0%
                                                                                                                                
    Source: CapitalIQ3

    Personal Forecast of Future Behavior 
    We believe that Nike will continue to maintain a consist level of dividends regardless of
    the current economic environment. The company’s payout ratio has historically ranged



                                                                        
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                  Nike Analysis Report

    from 20-30 percent and we expect that this level will be consistent. The historical payout
    ratios are below.

                                           2003              2004               2005               2006               2007    2008
        Dividends per Share                 0.27              0.37               0.48               0.59               0.71    0.88
        Payout Ratio %                      0.29              0.19               0.20               0.21               0.23    0.22

    We decided to keep the payout ratio at a constant of 24 percent for the purposes of
    modeling the future growth and overall company health of Nike. The results are detailed
    below.
                                                                                              Projections
                                                                2009E                 2010E        2011E              2012E   2013E
        Dividends per Share                                      1.00                  0.74          0.86              1.02    1.18
        Payout Ratio %                                           0.24                  0.24          0.24              0.24    0.24


    Financial Statement Forecasts 
    Presentation of Pro Forma Financial Statements 
    Historical Financial Statements 
    (Note): See “Historical Financials” in Appendix for full historical financial statements.

    Presentation of Projections 
    (Note): See “Projected Financials & Valuation” in Appendix for full projected financial
    statements.

    Cash Flow Valuation 
                          DCF Analysis - Millions
                                                                        Projections
                          Year                      2009E      2010E        2011E        2012E      2013E

                          Revenue                18,691.0 19,339.2 20,546.0 21,255.9 21,681.0
                          Operating Expenses     16,448.0 17,018.5 17,875.0 18,067.5 17,995.2
                          % of REVENUE                88%      88%      87%      85%      83%

                          EBIT                   2,242.92    2,320.71    2,670.98      3,188.38   3,685.77
                          Taxes                    762.59      789.04      908.13      1,084.05   1,253.16
                          Net of Tax             1,480.32    1,531.67    1,762.85      2,104.33   2,432.61
                          Dep/Amort                352.33      382.64      414.83        448.14     482.11

                          Change NWC                399.74    138.54        71.68       264.51      (42.40)

                          CAPEX                     372.09    384.96       408.92       423.01     431.45

                          FCF                    1,060.83 1,390.80 1,697.08 1,864.95 2,525.66
                          Discount years                 1        2        3        4        5

                          FCFF PV                   971.45   1166.32      1303.26      1311.50    1626.50

                          Future Obligations                                                                  Thereafter

                          Operating Leases           312.4      264.4        228.9        192.1      163.9        692.3
                          Endorsement Contract       700.4      599.3        518.3        480.3      407.2         1122
                          Product Purchase Obl        2272        1.9            0            0          0            0
                          Other                      250.7       76.4         62.2         55.1       50.7          1.2
                          Total                     3535.5        942        809.4        727.5      621.8       1815.5




                                                                                  
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              Nike Analysis Report

    Nike’s projected future cash flows are discounted to their present values using the
    calculated WACC. It is also important to look at the future obligations of the company
    and their present value as well. Nike’s future obligations concerning operating leases as
    well as their endorsement contracts with athletes are combined with all other future
    obligations and are then discounted back to their present value. This was done in order to
    show the company’s level of future commitments in order to better inform the reader
    about what can be expected in Nike’s future.



        16%
                                  Revenue Growth
        14%

        12%
                                                                             Growth Profile
        10%

        8%

        6%

        4%

        2%

        0%
               2004   2005   2006     2007   2008   2009E 2010E 2011E 2012E 2013E


    Nike’s base case revenue projections based on our analysis are shown graphically as
    compared to their past revenue growth in order to visually display the conservative
    growth prospects that are used in order to value the company.

                         WACC                                       9.20%
                         Terminal Growth Rate                        3.0%
                         Terminal Value                         41,955.63
                         PV of TV                               27,018.94

                         EV                                     33,397.97
                         Total Debt                                441.00

                         FCFE                                   32,956.97
                         Shares Outstanding                          495.6

                         Implied Share Price                $       66.50
                         Current Share Price                $       43.43
                         Implied ROI                               53.12%
    This figure displays the summation of all of the future cash flows as well as the horizon
    or terminal cash flow. These cash flows are all displayed at their present values
    according to the WACC. The level of debt is subtracted out in order to arrive at the total
    value of the firm which is then divided by numbers of shares outstanding in order to
    arrive at the intrinsic or implied value per share. This value is then compared to the


                                                         
                                             Page 29 
                                                         
 
                Nike Analysis Report

    current price per share in order to ascertain the level of return to be expected, with the
    assumed projections, from Nike’s stock.


    Cash Flow Valuation (Scenario analysis­Worst Case) 
                                                                   WACC                           9.20%
                                   Growth Profile
                                                                   Terminal Growth Rate            3.0%
        20%
                                                                   Terminal Value             28,328.04
        15%                                                        PV of TV                   18,242.94
        10%
         5%                                                        EV                         23,930.03
                                                                   Total Debt                    441.00
         0%
        -5%    2004 2005 2006 2007 20082009E2010E2011E2012E2013E FCFE                         23,489.03
        -10%                                                       Shares Outstanding              495.6
        -15%
                         Growth Profile                            Implied Share Price    $       47.40
        -20%
                                                                   Current Share Price    $       43.43
        -25%                                                       Implied ROI                    9.13%

    The worst case scenario that our analyst team felt could be legitimately applied to Nike’s
    growth forecast is displayed on the left and the results of the DCF model are displayed on
    the right. Over the next 3 years the growth rates that were applied (overall top line) are
    -20%, -10%, and -5% with growth rising to 0% in the fourth year and continuing to 3%
    into perpetuity. These growth rates are extremely conservative and were used to show
    what the implied value per share would be assuming these very low rates. Our analyst
    team does not think that it is even feasible that Nike will come anywhere close to these
    projected growth levels however we included this to show a worst-case scenario. As well,
    even assuming the worst case scenario the stock is still undervalued with an intrinsic
    price of 47.40 USD.

    Summary & Conclusions 
    Our analyst team feels that Nike is an extremely strong and well positioned company that
    is being unfairly undervalued because of the weakening global economy. We have
    analyzed nearly every facet of Nike’s business and feel that the company is very well
    managed with efficient operating procedures as well as having one of the most
    recognizable brands on the planet and a loyal and ever-growing customer base. Nike’s
    stock is a buy according to our analysis and should yield the purchaser outstanding yields
    both through dividends and equity appreciation.

    (Note: Please see Investment Thesis for specific growth drivers and associated risks)
                                      




                                                           
                                               Page 30 
                                                           
                                                                                                                                                                                                                                                  




 
 
                                                                                                                                                                                                              Appendix 



           Income Statement
                                                      LTM
           For the Fiscal Period Ending        12 months       12 months       12 months       12 months       12 months       12 months
                                              Nov-30-2008     May-31-2008     May-31-2007     May-31-2006     May-31-2005     May-31-2004
           Revenue                               19,654.7        18,627.0        16,325.9        14,954.9        13,739.7        12,253.1
           Other Revenue                                  -               -               -               -               -               -
                                                                                                                                                                                    Historical Financials  




             Total Revenue                       19,654.7        18,627.0        16,325.9        14,954.9        13,739.7        12,253.1
                                                                                                                                                                                                                          Nike Analysis Report




           Cost Of Goods Sold                    10,663.3        10,239.6          9,165.4         8,367.9         7,624.3         7,001.4
             Gross Profit                          8,991.4         8,387.4         7,160.5         6,587.0         6,115.4         5,251.7
                                                                                                                                              Source: Nike Inc. 10-K Report 20081




           Selling General & Admin Exp.            6,492.7         5,953.7         5,028.7         4,477.8         4,221.7         3,702.0
           R & D Exp.                                     -               -               -               -               -               -
           Depreciation & Amort.                          -               -               -               -               -               -
           Other Operating Expense/(Income)               -               -               -               -               -               -
             Other Operating Exp., Total           6,492.7         5,953.7         5,028.7         4,477.8         4,221.7         3,702.0




Page 31 
             Operating Income                      2,498.7         2,433.7         2,131.8         2,109.2         1,893.7         1,549.7




 
 
           Interest Expense                               -               -               -               -           (4.8)          (25.0)
           Interest and Invest. Income                 44.5            77.1            67.2           36.8                -               -
             Net Interest Exp.                         44.5            77.1            67.2           36.8            (4.8)          (25.0)
           Other Non-Operating Inc. (Exp.)           (52.0)          (68.5)          (28.0)           (4.4)          (29.1)          (74.7)
             EBT Excl. Unusual Items               2,491.2         2,442.3         2,171.0         2,141.6         1,859.8         1,450.0
           Impairment of Goodwill                         -               -               -               -               -               -
           Gain (Loss) On Sale Of Assets               60.6            60.6            14.7               -               -               -
           Other Unusual Items                            -               -            14.2               -               -               -
             EBT Incl. Unusual Items               2,551.8         2,502.9         2,199.9         2,141.6         1,859.8         1,450.0
           Income Tax Expense                        696.0           619.5           708.4           749.6           648.2           504.4
             Earnings from Cont. Ops.              1,855.8         1,883.4         1,491.5         1,392.0         1,211.6           945.6
           Earnings of Discontinued Ops.                  -               -               -               -               -               -
           Extraord. Item & Account. Change               -               -               -               -               -               -
             Net Income                            1,855.8         1,883.4         1,491.5         1,392.0         1,211.6           945.6
           Pref. Dividends and Other Adj.                 -               -               -               -               -               -

            NI to Common Incl Extra Items          1,855.8         1,883.4         1,491.5         1,392.0         1,211.6           945.6
                                                                                                                                                                  




 
 
                                                                                                                                          Nike Analysis Report




           Balance Sheet
           Balance Sheet as of:                                                             Reclassified                      Restated
                                               Nov-30-2008    May-31-2008    May-31-2007    May-31-2006     May-31-2005    May-31-2004
           Currency                                   USD            USD            USD            USD             USD            USD
           ASSETS
           Cash And Equivalents                     1,721.5        2,133.9        1,856.7           954.2        1,388.1          828.0




Page 32 
           Short Term Investments                   1,008.0          642.2          990.3         1,348.8          436.6          400.8




 
 
            Total Cash & ST Investments             2,729.5        2,776.1        2,847.0         2,303.0        1,824.7        1,228.8
           Accounts Receivable                      2,737.2        2,795.3        2,494.7         2,382.9        2,262.1        2,120.2
            Total Receivables                       2,737.2        2,795.3        2,494.7         2,382.9        2,262.1        2,120.2
           Inventory                                2,419.1        2,438.4        2,121.9         2,076.7        1,811.1        1,650.2
           Prepaid Exp.                               947.9          266.7          253.0           177.1          343.0          364.4
           Deferred Tax Assets, Curr.                  89.7          227.2          219.7           203.3          110.2          165.0
           Other Current Assets                           -          335.6          140.2           203.0              -              -
            Total Current Assets                    8,923.4        8,839.3        8,076.5         7,346.0        6,351.1        5,528.6
           Gross Property, Plant & Equipment        4,109.4        4,103.0        3,619.1         3,408.3        3,179.2        3,183.4
           Accumulated Depreciation               (2,208.5)      (2,211.9)      (1,940.8)       (1,750.6)      (1,573.4)      (1,571.6)
            Net Property, Plant & Equipment         1,900.9        1,891.1        1,678.3         1,657.7        1,605.8        1,611.8
           Goodwill                                   376.8          448.8          130.8           130.8          135.4          135.4
           Other Intangibles                          650.2          743.1          409.9           405.5          406.1          366.3
           Deferred Tax Assets, LT                    783.4          520.4          392.8           300.4          295.2          266.6
           Other Long-Term Assets                         -              -              -            29.2              -              -
           Total Assets                           12,634.7       12,442.7       10,688.3          9,869.6        8,793.6        7,908.7
                                                                                                                                                         




 
 
                                                                                                                                 Nike Analysis Report




           Balance Sheet
           Balance Sheet as of:                                                      Reclassified                    Restated
                                           Nov-30-2008   May-31-2008   May-31-2007   May-31-2006    May-31-2005   May-31-2004
           Currency                               USD           USD           USD           USD            USD           USD
           LIABILITIES




Page 33 
           Accounts Payable                    1,124.1       1,287.6       1,040.3          952.2         775.0         780.4




 
 
           Accrued Exp.                          941.2       1,475.7       1,120.0        1,033.4         926.1         785.4
           Short-term Borrowings                 316.0         177.7         100.8           43.4          69.8         146.0
           Curr. Port. of LT Debt                 32.4           6.3          30.5          255.3           6.2            6.6
           Curr. Income Taxes Payable            117.4          88.0         109.0           85.5          95.0         118.2
           Other Current Liabilities             558.5         286.2         183.4          242.6         127.1         193.9
            Total Current Liabilities          3,089.6       3,321.5       2,584.0        2,612.4       1,999.2       2,030.5
           Long-Term Debt                        445.5         441.1         409.9          410.7         687.3         682.4
           Def. Tax Liability, Non-Curr.         983.1         854.5         668.7          561.0         462.6         413.8
           Other Non-Current Liabilities             -             -             -              -             -              -
           Total Liabilities                   4,518.2       4,617.1       3,662.6        3,584.1       3,149.1       3,126.7
           Pref. Stock, Redeemable                 0.3           0.3           0.3            0.3           0.3            0.3
            Total Pref. Equity                     0.3           0.3           0.3            0.3           0.3            0.3
           Common Stock                            2.8           2.8           2.8            2.8           2.8            2.8
           Additional Paid In Capital          2,751.9       2,497.8       1,960.0        1,447.3       1,182.9         887.8
           Retained Earnings                   5,108.7       5,073.3       4,885.2        4,713.4       4,396.5       3,982.9
           Treasury Stock                            -             -             -              -             -              -
           Comprehensive Inc. and Other          252.8         251.4         177.4          121.7          62.0         (91.8)
            Total Common Equity                8,116.2       7,825.3       7,025.4        6,285.2       5,644.2       4,781.7
           Total Equity                        8,116.5       7,825.6       7,025.7        6,285.5       5,644.5       4,782.0

           Total Liabilities And Equity       12,634.7      12,442.7      10,688.3        9,869.6       8,793.6       7,908.7
 
                              Nike Analysis Report

        Cash Flow
                                                             LTM                                                                               Restated
        For the Fiscal Period Ending                  12 months          12 months           12 months       12 months       12 months       12 months
                                                     Nov-30-2008        May-31-2008         May-31-2007     May-31-2006     May-31-2005     May-31-2004
        Net Income                                        1,855.8            1,883.4             1,491.5         1,392.0         1,211.6           945.6
        Depreciation & Amort.                               321.6              303.6               269.7           282.0           257.2           255.2
        Amort. of Goodwill and Intangibles                     8.7                9.2                 9.9             9.8             9.3            58.3
        Depreciation & Amort., Total                        330.3              312.8               279.6           291.8           266.5           313.5
        (Gain) Loss From Sale Of Assets                     (60.6)             (60.6)                   -               -               -               -
        Stock-Based Compensation                            154.0              141.0               147.7             11.8             4.9               -
        Tax Benefit from Stock Options                           -                  -                   -            54.2            63.1            47.2
        Other Operating Activities                        (222.6)            (291.9)                 24.7          (38.7)            37.6            19.0
        Change in Acc. Receivable                         (277.4)            (118.3)               (39.6)          (85.1)          (93.5)            97.1
        Change In Inventories                             (347.9)            (249.8)               (49.5)        (200.3)         (103.3)           (55.9)
        Change in Acc. Payable                                98.4             330.9                 85.1          279.4           112.4           255.6
        Change in Other Net Operating Assets                  94.7             (11.2)             (60.8)           (37.2)            71.4        (103.6)
          Cash from Ops.                                  1,624.7            1,936.3             1,878.7         1,667.9         1,570.7         1,518.5
        Capital Expenditure                               (472.2)            (449.2)             (313.5)         (333.7)         (257.1)         (214.8)
        Sale of Property, Plant, and Equipment                15.5                1.9                28.3             1.6             7.2            11.6
        Cash Acquisitions                                 (571.1)            (571.1)                    -               -          (47.2)        (289.1)
        Divestitures                                        246.0              246.0                    -               -               -               -
        Invest. in Marketable & Equity Securt.            (384.2)              380.4               382.4         (909.9)           (35.3)        (400.8)
        Net (Inc.) Dec. in Loans Originated/Sold                 -                  -                   -               -               -               -
        Other Investing Activities                          147.7              (21.8)               (4.3)          (34.6)          (28.0)          (57.5)
          Cash from Investing                           (1,018.3)            (413.8)                 92.9      (1,276.6)         (360.4)         (950.6)
        Short Term Debt Issued                                   -                  -                   -               -               -               -
        Long-Term Debt Issued                                    -               63.7                94.4               -               -          153.8
        Total Debt Issued                                   210.1                63.7                94.4               -               -          153.8
        Short Term Debt Repaid                                   -                  -                   -               -               -               -
        Long-Term Debt Repaid                                    -            (35.2)             (255.7)           (24.2)         (90.9)         (206.9)
        Total Debt Repaid                                   (10.6)             (35.2)            (255.7)           (24.2)          (90.9)        (206.9)
        Issuance of Common Stock                            271.3              343.3               322.9           225.3           226.8           253.6
        Repurchase of Common Stock                      (1,290.4)          (1,248.0)             (985.2)         (761.1)         (556.2)         (419.8)
        Common Dividends Paid                              (39.5)                   -                   -               -               -               -
        Common and/or Pref. Dividends Paid                (412.9)            (412.9)             (343.7)         (290.9)         (236.7)         (179.2)
        Total Dividends Paid                              (452.4)            (412.9)             (343.7)         (290.9)         (236.7)         (179.2)
        Special Dividend Paid                                    -                  -                   -               -               -               -
        Other Financing Activities                            55.2               63.0                55.8               -               -               -
          Cash from Financing                           (1,216.8)          (1,226.1)           (1,111.5)         (850.9)         (657.0)         (398.5)
        Foreign Exchange Rate Adj.                        (138.6)              (19.2)                42.4            25.7             6.8            24.6
          Net Change in Cash                              (749.0)              277.2               902.5         (433.9)           560.1           194.0




                                                                                         
                                                                     Page 34 
                                                                                         
 
                   Nike Analysis Report

    Projected Financials & Valuation 
                                                                            Projections
                                               2009E            2010E            2011E          2012E           2013E

        Revenue                             18,690.96     19,339.24          20,545.98       21,255.86       21,680.98
        Other Revenue                               -             -                  -               -               -
         Total Revenue                      18,690.96     19,339.24          20,545.98       21,255.86       21,680.98

        Cost Of Goods Sold                  10,653.85     11,023.36          11,711.21       11,903.28       11,924.54
        % of REVENUE                              57%             57%              57%             56%             55%
         Gross Profit                        8,037.11      8,315.87            8,834.77       9,352.58        9,756.44

        Selling General & Admin Exp.         5,441.87      5,612.53           5,748.96        5,716.06        5,588.57
        % of REVENUE                              31%             31%              30%             29%             28%
        R & D Exp.                                  -                -               -               -               -
        Depreciation & Amort.                  352.33           382.64          414.83          448.14          482.11
        % of PPE                                   8%              8%               8%              8%              8%
        Other Operating Expense/(Income)            -                   -                -               -               -

         Other Operating Exp., Total         5,794.20      5,995.16            6,163.80       6,164.20        6,070.67
         Operating Income                    2,242.92      2,320.71            2,670.98       3,188.38        3,685.77

        Interest Expense                       18.31            16.94            16.94          12.66            9.64
        Interest and Invest. Income            36.80            36.80            36.80          36.80           36.80
         Net Interest Exp.                      18.49            19.86            19.86          24.14           27.16

        Currency Exchange Gains (Loss)              -             -                   -              -               -
        Other Non-Operating Inc. (Exp.)             -             -                   -              -               -
         EBT Excl. Unusual Items             2,261.41      2,340.57            2,690.84       3,212.52        3,712.93

        Impairment of Goodwill                      -             -                   -              -               -
        Gain (Loss) On Sale Of Assets               -             -                   -              -               -
        Other Unusual Items                         -             -                   -              -               -
         EBT Incl. Unusual Items             2,261.41      2,340.57            2,690.84       3,212.52        3,712.93

        Income Tax Expense                    775.06        802.20              922.24        1,101.04        1,272.55
        % of EBT                                  34%             34%              34%             34%             34%
         Earnings from Cont. Ops.            1,486.34      1,538.37            1,768.59       2,111.48        2,440.38

        Earnings of Discontinued Ops.               -             -                   -              -               -
        Extraord. Item & Account. Change            -             -                   -              -               -
         Net Income                          1,486.34      1,538.37            1,768.59       2,111.48        2,440.38

        Pref. Dividends and Other Adj.              -                -                -                  -               -

         NI to Common Incl Extra Items       1,486.34      1,538.37            1,768.59       2,111.48        2,440.38
         NI to Common Excl. Extra Items      1,486.34      1,538.37            1,768.59       2,111.48        2,440.38

        Per Share Items
        Basic EPS                                3.00             3.10            3.57            4.26            4.92
        Basic EPS Excl. Extra Items              3.00             3.10            3.57            4.26            4.92
        Weighted Avg. Basic Shares Out.        495.60           495.60          495.60          495.60          495.60

        Diluted EPS                             2.95             3.05            3.51            4.19            4.84
        Diluted EPS Excl. Extra Items           2.95             3.05            3.51            4.19            4.84
        Weighted Avg. Diluted Shares Out.      504.10           504.10          504.10          504.10          504.10


        Dividends per Share                      1.00            0.74             0.86            1.02            1.18
        Payout Ratio %                           0.24            0.24             0.24            0.24            0.24        


                                                             
                                               Page 35 
                                                             
 
                    Nike Analysis Report

        Balance Sheet (In Millions)
                                                                 Projections
        ASSETS                                 2009E        2010E        2011E         2012E        2013E
        Cash And Equivalents                 2,133.90     2,133.90    2,133.90       2,133.90     2,133.90
        Short Term Investments                812.33       812.33      812.33         812.33       812.33
        % of CASH                                 38%            38%         38%          38%          38%
        Marketable Securities                 802.50     2,132.08      3,651.05      5,474.81    7,871.60
         Total Cash & ST Investments         3,748.72     5,078.30      6,597.28      8,421.04   10,817.82

        Accounts Receivable                  2,990.55      3,094.3      3,287.36     3,400.94     3,468.96
        % of REVENUE                              16%            16%         16%          16%          16%
         Total Receivables                   2,990.55     3,094.28      3,287.36     3,400.94     3,468.96

        Inventory                            2,513.32     2,600.49      2,762.75     2,858.21     2,915.37
        % of REVENUE                              13%            13%         13%          13%          13%
        Prepaid Exp.                           398.65       412.48        438.22       445.41       446.20
        % of COGS                                  4%            4%           4%           4%           4%
        Deferred Tax Assets, Curr.            224.29       232.07        267.10       318.84       368.58
        % of EBIT                                 10%            10%         10%          10%          10%
        Other Current Assets                      -              -           -            -            -
         Total Current Assets                9,875.54    11,417.62     13,352.70    15,444.43    18,016.93

        Gross Property, Plant & Equipment    4,475.09     4,860.05      5,268.97     5,691.99     6,123.44
        Accumulated Depreciation            (2,564.23)   (2,946.87)    (3,361.70)   (3,809.84)   (4,291.94)
         Net Property, Plant & Equipment      1,910.86     1,913.18      1,907.27     1,882.15     1,831.50

        Goodwill                              448.80       448.80        448.80       448.80       448.80
        Other Intangibles                     743.10       743.10        743.10       743.10       743.10
        Deferred Tax Assets, LT                334.13       334.13        334.13       334.13       334.13
        Other Long-Term Assets                       -            -             -            -            -
        Total Assets                        13,312.43    14,856.84     16,786.01    18,852.61    21,374.46

        LIABILITIES
        Accounts Payable                     1,151.84     1,191.80      1,266.16     1,309.91     1,336.11
        % of REVENUE                               6%            6%           6%           6%           6%
        Accrued Exp.                         1,300.02     1,345.11      1,429.04     1,452.48     1,455.08
        % of COGS                                 12%            12%         12%          12%          12%
        Short-term Borrowings                  102.18       102.18        102.18       102.18       102.18
        Other ST Debt                                -            -             -            -            -
        Curr. Port. of LT Debt                  31.30         6.30        153.40        46.30       197.50
        Curr. Income Taxes Payable            146.22       151.34        173.99       207.72       240.08
        % of Income Tax                           19%            19%         19%          19%          19%
        Other Current Liabilities              253.81       262.61        279.00       288.64       294.41
        % of REVENUE                               1%            1%           1%           1%           1%
         Total Current Liabilities           2,985.38     3,059.34      3,403.78     3,407.23     3,625.35

        Long-Term Debt                        416.10       409.80        256.40        210.10        12.60
        Def. Tax Liability, Non-Curr.       1,094.61     1,402.19      1,796.20      2,300.92     2,947.46
        YOY Growth %                              28%            28%         28%          28%          28%
        Other Non-Current Liabilities               -            -             -            -            -
        Total Liabilities                    4,496.09     4,871.33      5,456.37     5,918.25     6,585.41

        Pref. Stock, Redeemable                 0.30         0.30          0.30          0.30         0.30
         Total Pref. Equity                      0.30         0.30          0.30          0.30         0.30

        Common Stock                            2.80         2.80          2.80          2.80         2.80
        Additional Paid In Capital          2,497.80     2,497.80      2,497.80      2,497.80     2,497.80
        Retained Earnings                   6,064.04     7,233.21      8,577.34     10,182.06    12,036.75
        Treasury Stock                               -            -             -            -            -
        Comprehensive Inc. and Other          251.40       251.40        251.40       251.40       251.40
         Total Common Equity                 8,816.04     9,985.21     11,329.34    12,934.06    14,788.75

        Total Equity                         8,816.34     9,985.51     11,329.64    12,934.36    14,789.05

        Total Liabilities And Equity        13,312.43    14,856.84     16,786.01    18,852.61    21,374.46




                                                              
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        Cash Flow Statement - In millions

                                                                                Projections
                                                     2009E           2010E           2011E      2012E       2013E
        Net Income                                   1,486.34        1,538.37       1,768.59    2,111.48    2,440.38
        Depreciation & Amort.                         352.33          382.64         414.83      448.14      482.11
        Amort. of Goodwill and Intangibles             12.15           13.19          14.30       15.45       16.62
        % of Depreciation                                3%              3%             3%          3%          3%
        Depreciation & Amort., Total                  364.48          395.83         429.14      463.59      498.73


        (Gain) Loss From Sale Of Assets                     -               -              -           -           -
        Stock-Based Compensation                      141.00          141.00         141.00      141.00      141.00
        Tax Benefit from Stock Options                      -               -              -           -           -
        Other Operating Activities                          -               -              -           -           -
        Change in Acc. Receivable                     195.25          103.72         193.08      113.58       68.02
        Change In Inventories                         (74.92)         (87.17)       (162.27)     (95.46)     (57.16)
        Change in Acc. Payable                       (135.76)          39.95          74.37       43.75       26.20
        Change in Other Net Operating Assets                -               -              -           -           -
         Cash from Ops.                              1,976.40        2,131.71       2,443.91    2,777.94    3,117.16


        Capital Expenditure                          (372.09)        (384.96)       (408.92)    (423.01)    (431.45)
        % or REVENUE                                      2%              2%             2%          2%          2%
        Sale of Property, Plant, and Equipment              -               -              -           -           -
        Cash Acquisitions                                   -               -              -           -           -
        Divestitures                                        -               -              -           -           -
        Invest. in Marketable & Equity Securt.        380.40          380.40         380.40      380.40      380.40
        Net (Inc.) Dec. in Loans Originated/Sold            -               -              -           -           -
        Other Investing Activities                    (31.78)         (31.78)        (31.78)     (31.78)     (31.78)
         Cash from Investing                          (23.45)         (36.32)        (60.28)     (74.38)     (82.82)


        Short Term Debt Issued                              -               -              -           -           -
        Long-Term Debt Issued                               -               -              -           -           -
        Total Debt Issued                                   -               -              -           -           -
        Short Term Debt Repaid                              -               -              -           -           -
        Long-Term Debt Repaid                         (31.30)          (6.30)       (153.40)     (46.30)    (197.50)
        Total Debt Repaid                             (31.30)          (6.30)       (153.40)     (46.30)    (197.50)


        Issuance of Common Stock                      236.02          236.02         236.02      236.02      236.02
        Repurchase of Common Stock                   (500.00)        (400.00)              -           -           -


        Common Dividends Paid
        Common and/or Pref. Dividends Paid          (495.60)        (369.21)      (424.46)     (506.75)    (585.69)
        Total Dividends Paid                         (495.60)        (369.21)       (424.46)    (506.75)    (585.69)


        Special Dividend Paid                               -               -              -           -           -
        Other Financing Activities                          -               -              -           -           -
         Cash from Financing                         (790.88)        (375.51)       (577.86)    (553.05)    (783.19)


        Foreign Exchange Rate Adj.                          -               -              -           -           -
         Net Change in Cash                           802.50         2,132.08       3,651.05    5,474.81    7,871.60




                                                                 
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                          Nike Analysis Report




        Revenue Breakdown - In millions
                                                                                                                                         Projections
                                                2003       2004       2005       2006       2007           2008     2009E      2010E         2011E       2012E     2013E

        United States of America
        Footwear                              3019.5     3070.4     3358.2     3832.2     4067.2         4326.8     4110.5     4110.5       4316.0      4445.5     4534.4
        YOY Growth %                                         2%         9%        14%         6%             6%         -5%        0%            5%         3%         2%
        Apparel                                 1351     1433.5     1457.7     1591.6     1716.1         1745.1     1657.8     1657.8       1707.6      1758.8     1794.0
        YOY Growth %                                         6%         2%         9%         8%             2%         -5%        0%            3%         3%         2%
        Equiptment                             287.9      277.9      313.4      298.7      323.8          306.1      281.6      270.3         270.3      278.5      284.0
        YOY Growth %                                         -3%       13%         -5%        8%             -5%       -8%         -4%           0%         3%         2%
        Total Revenue USA                     4,658.4    4,781.8    5,129.3    5,722.5    6,107.1        6,378.0    6,049.9    6,038.7      6,293.9     6,482.7    6,612.4
        YOY Growth %                                         3%         7%        12%         7%             4%         -5%        0%            4%         3%         2%


        Europe, Middle East, Africa (EMEA)
        Footwear                                1896     2232.2       2500     2454.3       2608         3112.6     3174.9     3333.6       3566.9      3674.0     3747.4
        YOY Growth %                                        18%        12%         -2%        6%            19%         2%         5%            7%         3%         2%
        Apparel                               1133.1     1333.8     1497.1       1559     1757.2         2083.5     2125.2     2231.4       2387.6      2459.3     2508.4
        YOY Growth %                                        18%        12%         4%        13%            19%         2%         5%            7%         3%         2%
        Equiptment                             212.6      261.7      284.5      313.3      358.1          424.3      424.3      454.0         485.8      500.4      510.4
        YOY Growth %                                        23%         9%        10%        14%            18%         0%         7%            7%         3%         2%
        Total Revenue EMEA                    3,241.7    3,827.7    4,281.6    4,326.6    4,723.3        5,620.4    5,724.3    6,019.0      6,440.4     6,633.6    6,766.2
        YOY Growth %                                        18%        12%         1%         9%            19%         2%         5%            7%         3%         2%


        Asia/Pacific
        Footwear                               732.4      855.3      962.9     1044.1     1159.2         1499.5     1559.5     1637.5       1752.1      1804.6     1840.7
        YOY Growth %                                        17%        13%         8%        11%            29%         4%         5%            7%         3%         2%
        Apparel                                499.3      612.3      755.5      815.6      909.3         1,140.0    1185.6     1244.9       1332.0      1372.0     1399.4
        YOY Growth %                                        23%        23%         8%        11%            25%         4%         5%            7%         3%         2%
        Equiptment                             127.1      143.2      178.9      194.1      214.9          242.2      242.2      247.0         256.9      264.6      269.9
        YOY Growth %                                        13%        25%         8%        11%            13%         0%         2%            4%         3%         2%
        Total Revenue Asia                    1,358.8    1,610.8    1,897.3    2,053.8    2,283.4        2,881.7    2,987.3    3,129.4      3,341.0     3,441.3    3,510.1
        YOY Growth %                                        19%        18%         8%        11%            26%         4%         5%            7%         3%         2%


        Americas
        Footwear                               337.3      408.2      478.6      635.3      679.6          792.7      832.3      874.0         935.1      963.2      982.4
        YOY Growth %                                        21%        17%        33%         7%            17%         5%         5%            7%         3%         2%
        Apparel                                148.1      159.5      169.1      201.8      193.9          265.4      278.7      292.6         313.1      322.5      328.9
        YOY Growth %                                         8%         6%        19%         -4%           37%         5%         5%            7%         3%         2%
        Equiptment                              41.6       36.8       48.1       67.8         79             96       96.0       99.8         105.8      109.0      111.2
        YOY Growth %                                        -12%       31%        41%        17%            22%         0%         4%            6%         3%         2%
        Total Revenue Americas                 527.0      604.5      695.8      904.9      952.5         1,154.1    1,207.0    1,266.4      1,354.0     1,394.7    1,422.6
        YOY Growth %                                        15%        15%        30%         5%            21%         5%         5%            7%         3%         2%


        Other
                                               991.1     1,428.3    1,735.7    1,947.1    2,259.6        2,592.8    2722.4     2885.8       3116.6      3303.6     3369.7
        YOY Growth %                                        44%        22%        12%        16%            15%         5%         6%            8%         6%         2%




         Total Revenues                      10,777.0   12,253.1   13,739.7   14,954.9   16,325.9       18,627.0   18,691.0   19,339.2     20,546.0    21,255.9   21,681.0
        YOY Growth %                                        14%        12%         9%         9%            14%         4%         5%            6%         3%         2%




                                                                                                     
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                    Nike Analysis Report




    Bibliography: All Sources and Citations 

    Direct (In-Text) Citations:
    1[
         Charts, in text citations and miscellaneous information] via Nike Inc. 10K
    2[Charts, historical cost of capital information, analyst forecasts, and other financial information], via Bloomberg Terminal, accessed
    [March 2009].
    3[Charts, market share data, historical figures, stock price performance, and other financial data], CapitalIQ, Inc., a division of
    Standard & Poor’s.

    4[Chart] http://www.wikinvest.com/stock/Nike_(NKE)




                                                                                    
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