Nike, Inc COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Summary Analysis

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #2 Nike Background Information 1964: Founded as Blue Ribbon Sports 1972: Name changed to Nike 1979: Apparel line launched 1996: Equipment division formed 1999: Nike is the world’s largest supplier of athletic footwear and one of the largest suppliers of athletic apparel 2005: Adidas-Solomon AG buys Reebok; poses potential for strong competition

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #3 Management Discussion and Analysis Consolidated gross margin percentage improved 160 basis points Deliveries scheduled for June – November were 9.5% higher than for the same period one year previous Dashboard indicators –Revenues grew by 12% –Net income grew 28% –Diluted EPS grew by 28%

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #4 Common-Size Income Statements Vertical –Gross margin grew from 41% in 2003 to 44.5% in 2005 Horizontal (2005 as a percentage of 2003) –Material increase (128.4%) in revenues –Selling and administrative expenses increased 133.8% –Material increase in income taxes (169.3%) –Net income increased 255.6%

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #5 Three-Year Comparison Liquidity –Most markers show material improvement –Inventory should be addressed to determine if control can be improved –Address working capital in relation to sales Long-Term Debt-Paying Ability –All markers indicate a very good situation –Material improvement

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #6 Three-Year Comparison (cont’d) Profitability –All markers except total asset turnover indicate a very good profitability position –Total asset turnover is stable Investor Analysis –Strong EPS increase –Financial leverage is practically nonexistent From a risk perspective this is good Leverage is not contributing to profits

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #7 Comparison with Competitor Reebok Liquidity –Nike is stronger in receivables, current ratio, acid- test ratio, cash ratio, and operating cash flow to current maturities of long-term debt and current notes payable –Reebok is stronger in inventory –Sales to working capital is approximately the same for both Nike and Reebok

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #8 Comparison with Competitor Reebok (cont’d) Long-Term Debt Paying Ability –Nike has superior position for all markers Profitability –Reebok has a better sales to fixed assets position and a better total asset turnover; may be due to different fixed asset bases –Nike’s ratios for all other profitability markers are stronger Investor Analysis –Nike appears stronger than Reebok

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #9 Comparison with Industry Recall that comparison with industry data has inherent complications –Differing accounting methods –Time-sensitive data –Industry ratios are typically based on a broader coverage than is ideal

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #10 Comparison with Industry (cont’d) Liquidity –The lack of consistency in the major comparison points forces the consideration that the industry data for liquidity is not well-tuned Long-Term Debt-Paying Ability –Nike appears to be materially better than the industry Profitability –All ratios except for operating asset turnover show Nike to be better than the industry Investor Analysis –The ratios are favorable to Nike

Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved. Summary Analysis, Slide #11 Summary Liquidity: very good Debt position: very good Profitability: very good Creditors will be concerned with liquidity and debt position Investors should consider all positions, but focus on profitability