UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q FOR QUARTERLY REPORTS UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter Ended November 30, 2005 Commission file number - 1-10635 NIKE, Inc. (Exact name of registrant as specified in its charter) OREGON 93-0584541 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Bowerman Drive, Beaverton, Oregon 97005-6453 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (503) 671-6453 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No ___ ___ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No . ___ ___ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X . ___ ___ Common Stock shares outstanding as of November 30, 2005 were: _______________ Class A 65,676,484 Class B 193,591,439 _______________ 259,267,923 =============== PART 1 - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS NIKE, Inc. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> <S> <C> <C> November 30, May 31, 2005 2005 ________ ________ (in millions) ASSETS Current assets: Cash and equivalents $1,134.5 $1,388.1 Short-term investments 920.0 436.6 Accounts receivable, net 2,166.2 2,262.1 Inventories (Note 2) 1,892.7 1,811.1 Deferred income taxes 86.9 110.2 Prepaid expenses and other current assets 496.2 343.0 ________ ________ Total current assets 6,696.5 6,351.1 Property, plant and equipment 3,216.6 3,179.2 Less accumulated depreciation 1,630.8 1,573.4 ________ ________ Property, plant and equipment, net 1,585.8 1,605.8 Identifiable intangible assets, net (Note 3) 403.9 406.1 Goodwill (Note 3) 135.4 135.4 Deferred income taxes and other assets 322.5 295.2 ________ ________ Total assets $9,144.1 $8,793.6 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 254.5 $ 6.2 Notes payable 79.2 69.8 Accounts payable 797.1 843.9 Accrued liabilities (Note 4) 959.2 984.3 Income taxes payable 71.1 95.0 ________ ________ Total current liabilities 2,161.1 1,999.2 Long-term debt 408.3 687.3 Deferred income taxes and other liabilities 492.9 462.6 Commitments and contingencies (Note 10) -- -- Redeemable preferred stock 0.3 0.3 Shareholders' equity: Common stock at stated value: Class A convertible-65.7 and 71.9 shares outstanding 0.1 0.1 Class B-193.6 and 189.2 shares outstanding 2.7 2.7 Capital in excess of stated value 1,365.4 1,182.9 Unearned stock compensation (12.7) (11.4) Accumulated other comprehensive income (Note 5) 126.8 73.4 Retained earnings 4,599.2 4,396.5 ________ ________ Total shareholders' equity 6,081.5 5,644.2 ________ ________ Total liabilities and shareholders' equity $9,144.1 $8,793.6 ======== ======== </TABLE> The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, ____________________ __________________ 2005 2004 2005 2004 ____ ____ ____ ____ (in millions, except per share data) Revenues $3,474.7 $3,148.3 $7,336.7 $6,710.1 Cost of sales 1,963.3 1,760.2 4,077.2 3,736.2 _________ _________ _________ _________ Gross margin 1,511.4 1,388.1 3,259.5 2,973.9 Selling and administrative expense 1,054.7 973.2 2,159.1 2,046.8 Interest (income) expense, net (5.7) 3.7 (12.1) 8.5 Other (income) expense, net (1.4) 8.2 (11.3) 10.1 _________ _________ _________ _________ Income before income taxes 463.8 403.0 1,123.8 908.5 Income taxes 162.7 141.1 390.4 319.8 _________ _________ _________ _________ Net income $ 301.1 $ 261.9 $ 733.4 $ 588.7 ========= ========= ========= ========= Basic earnings per common share (Note 7) $ 1.16 $ 0.99 $ 2.82 $ 2.24 ========= ========= ========= ========= Diluted earnings per common share (Note 7) $ 1.14 $ 0.97 $ 2.77 $ 2.18 ========= ========= ========= ========= Dividends declared per common share $ 0.31 $ 0.25 $ 0.56 $ 0.45 ========= ========= ========= ========= </TABLE> The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> <S> <C> <C> Six Months Ended November 30, _____________________ 2005 2004 ____ ____ (in millions) Cash provided (used) by operations: Net income $ 733.4 $ 588.7 Income/charges not affecting cash: Depreciation 136.2 117.8 Deferred income taxes 5.2 22.2 Amortization and other 6.9 19.6 Income tax benefit from exercise of stock options 37.0 36.7 Changes in certain working capital components, net of the effect of acquisition of subsidiary: Decrease in accounts receivable 68.3 90.0 (Increase) decrease in inventories (99.3) 38.7 (Increase) decrease in prepaid expenses and other current assets (31.0) 31.9 Decrease in accounts payable, accrued liabilities and income taxes payable (118.5) (190.1) _________ ________ Cash provided by operations 738.2 755.5 _________ ________ Cash provided (used) by investing activities: Purchases of short-term investments (1,169.6) (701.2) Maturities of short-term investments 690.2 625.0 Additions to property, plant and equipment (164.7) (124.8) Disposals of property, plant and equipment 0.6 6.3 Increase in other assets (6.1) (12.1) Decrease in other liabilities (2.5) (2.9) Acquisition of subsidiary, net of cash acquired -- (47.2) _________ ________ Cash used by investing activities (652.1) (256.9) _________ ________ Cash provided (used) by financing activities: Reductions in long-term debt, including current portion (3.1) (5.9) Increase (decrease) in notes payable 18.1 (17.3) Proceeds from exercise of options and other stock issuances 145.8 174.0 Repurchase of common stock (382.6) (203.7) Dividends on common stock (130.4) (105.2) _________ ________ Cash used by financing activities (352.2) (158.1) _________ ________ Effect of exchange rate changes on cash 12.5 13.3 _________ ________ Net (decrease) increase in cash and equivalents (253.6) 353.8 Cash and equivalents, beginning of period 1,388.1 828.0 _________ ________ Cash and equivalents, end of period $1,134.5 $1,181.8 ========= ========= </TABLE> The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - Summary of Significant Accounting Policies: __________________________________________ Basis of presentation: The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period. The interim financial statement information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K. The results of operations for the six-month period ended November 30, 2005 are not necessarily indicative of results to be expected for the entire year. Certain prior year amounts have been reclassified to conform to fiscal year 2006 presentation. These changes had no impact on previously reported results of operations or shareholders' equity. NOTE 2 - Inventories: ___________ Inventory balances of $1,892.7 million and $1,811.1 million at November 30, 2005 and May 31, 2005, respectively, were substantially all finished goods. NOTE 3 - Identifiable Intangible Assets and Goodwill: ___________________________________________ The following table summarizes the Company's identifiable intangible assets and goodwill balances as of November 30, 2005 and May 31, 2005: <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> November 30, 2005 May 31, 2005 ______________________ ______________________ Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount ________ ____________ ________ ________ ____________ ________ (in millions) Amortized intangible assets: Patents $ 31.4 $ (12.1) $ 19.3 $ 29.2 $ (10.9) $ 18.3 Trademarks 55.5 (19.2) 36.3 54.8 (16.4) 38.4 Other 21.4 (14.6) 6.8 21.4 (13.5) 7.9 ________ ________ ________ ________ ________ ________ Total $ 108.3 $ (45.9) $ 62.4 $ 105.4 $ (40.8) $ 64.6 ======== ======== ======== ======== Unamortized intangible assets - Trademarks $ 341.5 $ 341.5 ________ ________ Identifiable intangible assets, net $ 403.9 $ 406.1 ======== ======== Goodwill $ 135.4 $ 135.4 ======== ======== </TABLE> Amortization expense, which is included in selling and administrative expense, was $2.4 million and $2.8 million for the three-month periods ended November 30, 2005 and 2004, respectively and $4.9 million and $4.4 million for the six-month periods ending November 30, 2005 and 2004, respectively. The estimated amortization expense for intangible assets subject to amortization for each of the succeeding years ended May 31, 2006 through May 31, 2010 are as follows: 2006: $9.7 million; 2007: $8.8 million; 2008: $8.3 million; 2009: $7.6 million; 2010: $6.8 million. NOTE 4 - Accrued Liabilities: ___________________ Accrued liabilities include the following: <TABLE> <CAPTION> <S> <C> <C> November 30, 2005 May 31, 2005 _______________ ____________ (in millions) Compensation and benefits, excluding taxes $301.6 $394.2 Endorser compensation 95.1 83.4 Taxes other than income taxes 90.8 96.8 Fair value of derivatives 84.0 61.8 Dividends payable 80.5 65.3 Advertising and marketing 79.6 57.4 Other1 227.6 225.4 _______ _______ $959.2 $984.3 ======= ======= 1 Other consists of various accrued expenses and no individual item accounted for more than $50 million of the balance at November 30, 2005 and May 31, 2005. </TABLE> NOTE 5 - Comprehensive Income: ____________________ Comprehensive income, net of taxes, is as follows: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, _____________________ __________________ 2005 2004 2005 2004 ____ ____ ____ ____ (in millions) Net income $301.1 $261.9 $733.4 $588.7 Other comprehensive income: Change in cumulative translation adjustment and other (26.0) 130.7 (43.3) 116.6 Changes due to cash flow hedging instruments: Net gain (loss) on hedge derivatives 55.4 (115.5) 97.4 (108.6) Reclassification to net income of previously deferred (gains) and losses related to hedge derivative instruments (8.4) 25.3 (0.7) 75.7 ________ _______ _______ _______ Other comprehensive income 21.0 40.5 53.4 83.7 _______ _______ _______ _______ Total comprehensive income $322.1 $302.4 $786.8 $672.4 ======= ======= ======= ======= </TABLE> NOTE 6 - Stock-Based Compensation: ________________________ The Company uses the intrinsic value method to account for stock-based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" as permitted by Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation" (FAS 123). Substantially all options granted by the Company have an exercise price equal to the market value at the date of grant, and accordingly, no compensation expense is recognized. The Company also has an Employee Stock Purchase Plan (ESPP) that qualifies as a non-compensatory employee stock purchase plan under Section 423 of the Internal Revenue Code, and accordingly, no compensation expense is recognized. If the Company had accounted for stock options and ESPP purchase rights issued to employees in accordance with FAS 123, the Company's pro forma net income and pro forma earnings per share would have been reported as follows: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, ____________________ __________________ 2005 2004 2005 2004 ____ ____ ____ ____ (in millions, except per share data) Net income as reported $301.1 $261.9 $733.4 $588.7 Add: Stock-based compensation expense included in reported net income, net of tax 0.0 0.3 0.1 0.3 Deduct: Total stock-based employee compensation expense under fair value based method for all awards, net of tax (19.6) (17.3) (38.5) (31.4) _______ _______ _______ _______ Pro forma net income $281.5 $244.9 $695.0 $557.6 ======= ======= ======= ======= Earnings per share: Basic - as reported $ 1.16 $ 0.99 $ 2.82 $2.24 Basic - pro forma 1.09 0.93 2.67 2.12 Diluted - as reported 1.14 0.97 2.77 2.18 Diluted - pro forma 1.07 0.91 2.64 2.09 </TABLE> The pro forma effects of applying FAS 123 may not be representative of the effects on reported net income and earnings per share for future periods as options vest over several years and additional awards are made each year. As disclosed in the Company's Annual Report on Form 10-K as of May 31, 2005, the Company is currently evaluating SFAS No. 123R "Share-Based Payment" (FAS 123R) and the Securities and Exchange Commission's Staff Accounting Bulletin No. 107 (SAB 107) to determine the fair value method to measure compensation expense, the appropriate assumptions to include in the fair value model and the transition method to use upon adoption. The impact of the adoption of FAS 123R is not known at this time due to these factors as well as the unknown level of stock-based payments granted in future years. The effect on the Company's results of operations of expensing stock options using the Black-Scholes model is presented in the table above. Under certain conditions, stock options granted by the Company are eligible for accelerated vesting upon the retirement of the employee. The FASB clarified in FAS 123R that the fair value of such stock options should be expensed based on an accelerated vesting schedule or immediately, rather than ratably over the vesting period stated in the grant. The Company's pro forma disclosure above currently reflects the expense of such options ratably over the stated vesting period, expensing all unvested shares upon actual retirement. The SEC clarified that companies should continue to follow the vesting method they have been using until adoption of FAS 123R, then apply the accelerated vesting schedule to all subsequent grants to those employees eligible for accelerated vesting upon retirement. Had the Company been accounting for such stock options using the accelerated vesting schedule for those employees eligible for accelerated vesting upon retirement, the Company would have recognized less stock-based compensation expense in the above pro forma of $0.02 and $0.01 per diluted share for the three months ended November 30, 2005 and November 30, 2004, respectively, and additional stock-based compensation expense in the above pro forma of $0.04 and $0.08 per diluted share for the six months ended November 30, 2005 and November 30, 2004, respectively. The Company grants the majority of stock options in a single grant in the first three months of each fiscal year. As such, accelerated vesting would result in increased expense recognition in the first three months of the fiscal year and a reduction of expense recorded in the remaining nine months of the fiscal year, as compared to the expense recorded by the Company under our current policy of expensing such options ratably over the stated vesting period. NOTE 7 - Earnings Per Common Share: _________________________ The following represents a reconciliation from basic earnings per share to diluted earnings per share. Options to purchase 5.6 million shares of common stock were outstanding at November 30, 2005 but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of common shares and, therefore, the effect would be antidilutive. There were no such antidilutive options outstanding at November 30, 2004. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, _____________________ ___________________ 2005 2004 2005 2004 ____ ____ ____ ____ (in millions, except per share data) Determination of shares: Average common shares outstanding 259.0 263.3 260.0 263.0 Assumed conversion of dilutive stock options and awards 4.7 7.8 5.0 7.5 _______ _______ _______ _______ Diluted average common shares outstanding 263.7 271.1 265.0 270.5 ======= ======= ======= ======= Basic earnings per common share $ 1.16 $ 0.99 $ 2.82 $ 2.24 ======= ======= ======= ======= Diluted earnings per common share $ 1.14 $ 0.97 $ 2.77 $ 2.18 ======= ======= ======= ======= </TABLE> NOTE 8 - Operating Segments: __________________ The Company's operating segments are evidence of the structure of the Company's internal organization. The major segments are defined by geographic regions for operations participating in NIKE brand sales activity excluding NIKE Golf and Bauer NIKE Hockey. Each NIKE brand geographic segment operates predominantly in one industry: the design, production, marketing and selling of sports and fitness footwear, apparel, and equipment. The "Other" category shown below represents activities of Cole Haan Holdings Incorporated, Bauer NIKE Hockey Inc., Hurley International LLC, NIKE Golf, Converse Inc., and Exeter Brands Group LLC (beginning August 11, 2004), which are considered immaterial for individual disclosure based on the aggregation criteria in SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information". Where applicable, "Corporate" represents items necessary to reconcile to the consolidated financial statements, which generally include corporate activity and corporate eliminations. Net revenues as shown below represent sales to external customers for each segment. Intercompany revenues have been eliminated and are immaterial for separate disclosure. The Company evaluates performance of individual operating segments based on pre-tax income. On a consolidated basis, this amount represents income before income taxes as shown in the Unaudited Condensed Consolidated Statements of Income. Reconciling items for pre-tax income represent corporate costs that are not allocated to the operating segments for management reporting including corporate activity, certain currency exchange rate gains and losses on transactions, and intercompany eliminations for specific income statement items in the Unaudited Condensed Consolidated Statements of Income. Accounts receivable, net, inventories, and property, plant and equipment, net for operating segments are regularly reviewed and therefore provided below. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, __________________ _________________ 2005 2004 2005 2004 _____ _____ _____ _____ Net Revenue U.S. $1,307.1 $1,132.0 $2,816.0 $2,533.7 EUROPE, MIDDLE EAST, AFRICA 977.4 961.1 2,194.9 2,119.0 ASIA PACIFIC 503.3 483.5 962.9 889.5 AMERICAS 252.1 189.3 465.8 351.0 OTHER 434.8 382.4 897.1 816.9 _________ _________ _________ _________ $3,474.7 $3,148.3 $7,336.7 $6,710.1 ========= ========= ========= ========= Pre-tax Income U.S. $ 265.7 $ 233.1 $ 610.9 $ 555.4 EUROPE, MIDDLE EAST, AFRICA 194.2 197.6 524.4 444.0 ASIA PACIFIC 115.2 112.0 206.6 175.4 AMERICAS 57.4 44.3 102.0 64.7 OTHER 23.0 20.8 63.0 61.0 CORPORATE (191.7) (204.8) (383.1) (392.0) _________ _________ _________ _________ $ 463.8 $ 403.0 $1,123.8 $ 908.5 ========= ========= ========= ========= Nov. 30, May 31, 2005 2005 _________ _________ (in millions) Accounts receivable, net U.S. $ 677.1 $ 627.0 EUROPE, MIDDLE EAST, AFRICA 630.3 723.6 ASIA PACIFIC 274.8 309.8 AMERICAS 223.1 168.7 OTHER 311.0 394.0 CORPORATE 49.9 39.0 _________ _________ $2,166.2 $2,262.1 ========= ========= Inventories U.S. $ 679.1 $ 639.9 EUROPE, MIDDLE EAST, AFRICA 480.5 496.5 ASIA PACIFIC 256.5 228.9 AMERICAS 124.3 96.8 OTHER 313.5 316.2 CORPORATE 38.8 32.8 _________ _________ $1,892.7 $1,811.1 ========= ========= Property, plant and equipment, net U.S. $ 218.1 $ 216.0 EUROPE, MIDDLE EAST, AFRICA 218.2 230.0 ASIA PACIFIC 341.1 380.4 AMERICAS 16.2 15.7 OTHER 94.8 93.4 CORPORATE 697.4 670.3 _________ _________ $1,585.8 $1,605.8 ========= ========= </TABLE> NOTE 9 - Related Party Transaction: _________________________ During the three-month period ended November 30, 2005, the Company made a $10.8 million contribution to the Nike Foundation which was recorded as selling and administrative expense. The Nike Foundation was established by the Company as a not-for-profit organization whose results are not consolidated by the Company. NOTE 10 - Commitments and Contingencies: ______________________________ At November 30, 2005, the Company had letters of credit outstanding totaling $437.6 million. These letters of credit were issued primarily for the purchase of inventory. There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company's latest Annual Report on Form 10-K. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview In the second quarter of fiscal 2006, our revenues grew 10% to $3.5 billion, net income grew 15% to $301.1 million and we delivered diluted earnings per share of $1.14, an 18% increase versus the second quarter of fiscal 2005. Strong demand for NIKE brand products in both the US and Americas regions drove the increase in revenues. The growth in diluted earnings per share was primarily driven by the higher revenues and by lower selling and administrative expense as a percentage of sales. Selling and administrative expense for the second quarter decreased as a percentage of sales by 50 basis points. For the quarter, our gross margin percentage decreased 60 basis points to 43.5%, driven largely by a reduction of in-line net pricing margins (net revenue for current product offerings minus product costs) for footwear and apparel, partially offset by positive effects from foreign currency hedge results. Diluted earnings per share in the second quarter increased at a greater rate than net income primarily due to our common share repurchases since the second quarter of fiscal 2005. During the second quarter of fiscal 2006, we increased our dividend per common share to $0.31, as compared to $0.25 in the second quarter of fiscal 2005. Results of Operations <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, ___________________ __________________ % % 2005 2004 change 2005 2004 change ______ ______ ________ ______ ______ ________ (in millions, except per share data) Revenues $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9% Cost of sales 1,963.3 1,760.2 12% 4,077.2 3,736.2 9% Gross margin 1,511.4 1,388.1 9% 3,259.5 2,973.9 10% Gross margin % 43.5% 44.1% 44.4% 44.3% Selling and administrative 1,054.7 973.2 8% 2,159.1 2,046.8 5% % of revenue 30.4% 30.9% 29.4% 30.5% Income before income taxes 463.8 403.0 15% 1,123.8 908.5 24% Net income 301.1 261.9 15% 733.4 588.7 25% Diluted earnings per share 1.14 0.97 18% 2.77 2.18 27% </TABLE> Consolidated Operating Results In the second quarter and first six months of fiscal 2006, consolidated revenues grew 10% and 9%, respectively, versus the comparable periods of fiscal 2005. One percentage point of the reported revenue growth for both the second quarter and first six months of fiscal 2006 was attributable to changes in currency exchange rates. The U.S. Region contributed 6 percentage points of the consolidated revenue growth for the second quarter and 4 percentage points for the first six months of fiscal 2006. Excluding the impact of changes in foreign currency, revenue growth in our international regions contributed 2 percentage points of the consolidated revenue growth for the second quarter and 3 percentage points of the consolidated revenue growth for the first six months, as all three of our international regions posted higher revenues. Sales in our Other businesses drove the balance of the improvements for the quarter and year-to- date period. In the second quarter of fiscal 2006, our consolidated gross margin percentage declined 60 basis points compared to the prior year's second quarter, from 44.1% to 43.5%. For the first six months of fiscal 2006, our consolidated gross margin percentage improved 10 basis points, from 44.3% to 44.4%. The primary factors contributing to these changes in gross margin percentage for the second quarter and year-to-date period were as follows: (1) A lower gross margin percentage in the U.S. Region reduced consolidated gross margin by approximately 70 and 40 basis points for the second quarter and first six months, respectively. The U.S. Region gross margin decline was due primarily to lower in-line pricing margins in footwear. Higher product costs (due in part to higher oil prices) and additional costs incurred to meet strong footwear unit demand drove the lower U.S. Region in-line footwear margins during the second quarter and first six months. (2) Our international regions reduced consolidated gross margin by approximately 20 basis points for the second quarter and increased consolidated gross margin by approximately 30 basis points for the year-to-date period. For the second quarter, lower gross margins in our Asia Pacific Region were partially offset by improvements in EMEA. For the year-to-date period, gross margin improvements from the EMEA and Americas regions were partially offset by lower gross margins in the Asia Pacific Region. These gross margin changes were primarily driven by improvements in year-over-year foreign currency hedge rates, partially offset by lower in-line pricing margins in our EMEA and Asia Pacific regions (as discussed below): (a) For the second quarter and year-to-date period, year-over-year currency hedge rate improvements, primarily the euro, contributed approximately 150 basis points and 170 basis points of consolidated gross margin improvement, respectively. (b) Lower in-line pricing margins on wholesale products in the EMEA and Asia Pacific regions, primarily related to footwear and apparel, decreased the consolidated gross margin by approximately 170 basis points and 130 basis points for the second quarter and year-to-date period, respectively. The lower in-line pricing margins for footwear and apparel were due to strategies to improve consumer value, higher product costs due in part to higher oil prices, higher discounts and a shift in the mix of products sold toward products with lower margins. (3) Improved gross margin percentages in our Other businesses increased consolidated gross margin by approximately 30 and 20 basis points for the quarter and year-to-date period, respectively. NIKE Golf drove the majority of the gross margin improvement for the quarter. NIKE Golf's improvement for the second quarter and year-to-date period was primarily driven by gross margin improvements in footwear and equipment. We currently expect gross margins for the full fiscal year 2006 to be comparable to fiscal 2005 levels. Hedge rates for the second half of fiscal 2006 are expected to be slightly better than the second half of fiscal 2005, but the year-over-year improvement will be substantially below the levels achieved in the first six months of 2006. Selling and administrative expense, comprised of demand creation (advertising and promotion) and operating overhead, grew 8% for the second quarter of fiscal 2006 and 5% year-to-date. As a percentage of sales, selling and administrative expense decreased 50 basis points and 110 basis points for the second quarter and first six months of fiscal 2006, respectively. We expect selling and administrative expenses for full fiscal 2006 to represent a lower percentage of sales than in fiscal 2005, given our continued focus on limiting operating overhead expense growth. Changes in currency exchange rates had a minimal impact on selling and administrative expense for quarter and year-to-date period. Demand creation expense increased 8% to $377.0 million in the second quarter and declined 2% to $798.6 million for the first six months of fiscal 2006. Changes in currency exchange rates increased the rate of growth in demand creation by 1 percentage point for both the second quarter and first six months of fiscal 2006. The increase in demand creation spending for the second quarter was primarily attributable to higher spending on sports marketing contracts and events, primarily in the US and at NIKE Golf (3 percentage points), incremental investment in retail marketing primarily in EMEA, Americas and at NIKE Golf (2 percentage points) and higher advertising spending primarily in EMEA and at Converse (1 percentage point). Excluding the impact of changes in currency exchange rates, the decrease in demand creation expense for the first six months of fiscal 2006 was the result of a change in the timing of demand creation spending versus fiscal 2005. Spending was particularly heavy in the first quarter of fiscal 2005 due to marketing programs centered on global sporting events that took place in the summer of 2004. In addition, certain advertising spending originally scheduled for the first half of fiscal 2006 was delayed to the second half of the year. The level of demand creation spending for the first six months of fiscal 2006 was not indicative of what we currently expect for the full year. Spending is expected to increase as a result of investment in advertising and marketing programs, most notably those relating to the 2006 World Cup. Operating overhead for the second quarter of fiscal 2006 grew 9% to $677.7 million and grew 11% to $1,360.5 million for the first six months of fiscal 2006. Changes in currency exchange rates contributed 1 percentage point of the increase for both the second quarter and the first six months. Excluding the effects of currency, operating overhead increases for the quarter and year-to-date period were mainly attributable to higher personnel costs due to increased headcount and higher wages and benefits (2 percentage points for the quarter and 4 percentage points for the year-to-date period); investments in infrastructure to support the growth of our Other businesses (2 percentage points for both the quarter and year-to-date period); continued investments in NIKE-owned retail stores (2 percentage points for the quarter and 1 percentage point for the year-to-date period); increased charitable contributions to the NIKE Foundation (2 percentage points for the quarter and 1 percentage point for the year-to-date period); and increased expenses associated with global and regional management meetings (1 percentage point for the quarter and year-to-date period). In the second quarter and first six months of fiscal 2006, foreign currency hedge gains were the most significant component of Other income, net, of $1.4 million and $11.3 million, respectively. These gains are reflected in the Corporate line in our segment presentation of pre-tax income in the Notes to Unaudited Condensed Consolidated Financial Statements (Note 8 - Operating Segments). In the second quarter and first six months of fiscal 2006, we estimate that the combination of net foreign currency gains in Other (income) expense, net, and the favorable translation of foreign currency denominated profits, most significantly in EMEA, resulted in a year-over-year increase in consolidated income before income taxes of $20 million and $37 million, respectively. In the second quarter of fiscal 2006, we adjusted our year-to-date effective tax rate to 34.7%, our estimate of our effective rate for full fiscal year 2006. The effective tax rate for the second quarter of fiscal 2006 of 35.1% was higher than the 34.9% rate reported for the full year of fiscal 2005 primarily due to higher taxes on foreign earnings. Worldwide futures and advance orders for our footwear and apparel scheduled for delivery from December 2005 through April 2006 were 2.5% higher than such orders reported for the comparable period of fiscal 2005. This increase was reduced by 4.5 percentage points due to changes in currency exchange rates versus the same period last year. Excluding this currency impact, higher average selling prices for footwear and apparel contributed approximately 1 percentage point of the growth in overall futures and advance orders. The remaining 6 percentage points of the increase were due to volume increases for both footwear and apparel. As always, the reported futures and advance orders growth is not necessarily indicative of our expectation of revenue growth during this period. This is because the mix of orders can shift between advance/futures and at-once orders. In addition, exchange rate fluctuations as well as differing levels of order cancellations and discounts can cause differences in the comparisons between futures and advance orders, and actual revenues. Moreover, a significant portion of our revenue is not derived from futures and advance orders, including at-once and closeout sales of NIKE footwear and apparel, wholesale sales of equipment, U.S. licensed team apparel, Bauer NIKE Hockey, Cole Haan, Converse, NIKE Golf, Hurley, Exeter Brands and retail sales across all brands. Operating Segments The breakdown of revenues follows: <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> Three Months Ended Six Months Ended November 30, November 30, ___________________ ____________________ % % 2005 2004 change 2005 2004 change ______ ______ _______ ______ ______ ______ (in millions) U.S. REGION FOOTWEAR $ 811.5 $ 680.0 19% $1,832.6 $1,601.4 14% APPAREL 433.8 384.7 13% 829.3 776.0 7% EQUIPMENT 61.8 67.3 -8% 154.1 156.3 -1% ________ ________ ________ ________ TOTAL U.S. 1,307.1 1,132.0 15% 2,816.0 2,533.7 11% EMEA REGION FOOTWEAR 533.2 531.8 0% 1,218.3 1,195.1 2% APPAREL 379.6 370.0 3% 814.8 779.7 5% EQUIPMENT 64.6 59.3 9% 161.8 144.2 12% ________ ________ ________ ________ TOTAL EMEA 977.4 961.1 2% 2,194.9 2,119.0 4% ASIA PACIFIC REGION FOOTWEAR 245.4 236.6 4% 482.8 455.2 6% APPAREL 214.6 207.8 3% 391.1 356.6 10% EQUIPMENT 43.3 39.1 11% 89.0 77.7 15% ________ ________ ________ ________ TOTAL ASIA PACIFIC 503.3 483.5 4% 962.9 889.5 8% AMERICAS REGION FOOTWEAR 178.1 129.8 37% 335.0 244.6 37% APPAREL 55.4 46.9 18% 96.1 82.4 17% EQUIPMENT 18.6 12.6 48% 34.7 24.0 45% ________ ________ ________ ________ TOTAL AMERICAS 252.1 189.3 33% 465.8 351.0 33% ________ ________ ________ ________ 3,039.9 2,765.9 10% 6,439.6 5,893.2 9% OTHER 434.8 382.4 14% 897.1 816.9 10% ________ ________ ________ ________ TOTAL REVENUES $3,474.7 $3,148.3 10% $7,336.7 $6,710.1 9% ======== ======== ======== ======== </TABLE> The discussion following includes disclosure of "pre-tax income" for our operating segments. We have reported pre-tax income for each of our operating segments in accordance with Statement of Financial Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and Related Information." As discussed in Note 8 - Operating Segments in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements, certain corporate costs are not included in pre-tax income of our operating segments. In the U.S. Region, increased unit sales in a majority of footwear categories drove the footwear revenue growth for the quarter and year-to- date period. Increased consumer demand for our Jordan brand was a significant driver of the footwear revenue growth. The increase in U.S. apparel sales for the second quarter and first six months of fiscal 2006 was driven by increases in NIKE and Jordan branded apparel. The NIKE and Jordan branded apparel increases were partially offset by sales declines as a result of the expiration of our license agreement with the NBA in November of fiscal 2005. For the second quarter of fiscal 2006, U.S. Region pre-tax income was $265.7 million, a 14% increase versus the second quarter of fiscal 2005. Pre-tax income for the first six months of fiscal 2006 increased 10% to $610.9 million. For the quarter and year-to-date period, higher revenues drove the increase, more than offsetting a lower gross margin percentage and higher selling and administrative expenses. Selling and administrative expenses increased at a slower rate than revenues for both the quarter and year-to-date period. For the quarter and year-to-date period of fiscal 2006, the lower gross margin percentage in the U.S. Region was primarily the result of lower in- line pricing margins for footwear due to higher product costs and additional costs incurred to meet strong footwear unit demand, as discussed above. Higher selling and administrative costs were due to increases in both demand creation and operating overhead. The increase in demand creation for both the quarter and year-to-date period was primarily driven by increased sports marketing costs, as discussed above. For the second quarter and year-to-date period, the increase in operating overhead was driven by increased investment in our retail businesses and higher personnel costs. The year-to-date period was also affected by increased spending on global and regional management meetings. For EMEA, changes in currency exchange rates had a minimal impact on revenue growth for the second quarter and first six months of fiscal 2006. Footwear revenues for the second quarter were comparable to fiscal 2005; for the year-to-date period footwear revenues were up slightly. These results reflected increased unit sales offset by declines in the average selling price per pair. Average selling price per pair declined for the quarter and year-to-date period due in part to strategies to improve consumer value, changes in the mix of in-line products sold and higher customer discounts. The increase in EMEA apparel revenue for the quarter and year-to-date period was driven by increased unit sales, partially offset by a slight reduction in average selling price and changes in the mix of product sold. In the second quarter, EMEA sales increases in emerging markets such as Russia, Turkey, South Africa and Central and Eastern Europe, drove the EMEA sales growth. Growth in these markets was partially offset by sales declines in the UK, Italy and France. For the year-to-date period, sales increases were driven by the emerging markets and the UK. EMEA pre-tax income for the second quarter of fiscal 2006 was $194.2 million, down 2% versus the prior year quarter. For the first six months of fiscal 2006, pre-tax income grew 18% to $524.4 million. For the second quarter, higher revenues and gross margin improvements were more than offset by increased selling and administrative costs. For the six-month period, higher revenues, gross margin improvements and lower selling and administrative costs all contributed to pre-tax income growth. The improved gross margins during the quarter and six-month period were primarily the result of improved year-over-year euro hedge rates and were partially offset by reduced in-line pricing margins primarily in footwear and apparel. The reduced in-line pricing margins for footwear and apparel were due to strategies to improve consumer value, higher product costs due in part to higher oil prices, higher discounts and a shift in the mix of products sold toward products with lower margins, as discussed above. Higher selling and administrative costs in the second quarter were driven by increases in both demand creation and operating overhead expenses. Demand creation spending increased in the second quarter primarily due to increased advertising spending, reflecting a shift in the timing of certain advertising campaigns from the first quarter to the second quarter of fiscal 2006. For the six- month period, demand creation expense was lower than the prior year, reflecting a shift in spending to the second half of fiscal 2006 due to the timing of global sporting events. Operating overhead increased in the second quarter and first six months of fiscal 2006 due to increases in personnel costs, spending for global and regional management meetings and investments in our retail businesses. In the Asia Pacific Region, 2 percentage points of the reported revenue growth for both the second quarter and first six months of fiscal 2006 were due to changes in currency exchange rates. Excluding the changes in currency exchange rates, higher sales in each Asia Pacific product business unit drove revenue growth in the second quarter and year-to-date period. Increased sales in China (driven by expansion of retail distribution and strong consumer demand) were the primary growth driver for both the second quarter and year- to-date period, partially offset by sales declines in Japan, Korea and Australia. These declines were the result of weak market conditions, investments in consumer value and higher customer discounts. Second quarter pre-tax income for the Asia Pacific Region increased 3% versus the second quarter of fiscal 2005 to $115.2 million; year-to-date pre-tax income increased 18% to $206.6 million. For the quarter and year-to- date period, higher revenues and lower selling and administrative costs were partially offset by reduced gross margins. The reduced gross margin percentage was primarily attributable to lower in-line pricing margins for footwear and apparel due to strategies to improve consumer value, higher product costs due in part to higher oil prices, higher discounts and a shift in the mix of products sold toward products with lower margins. The reduction in selling and administrative expenses for both the second quarter and first six months of fiscal 2006 was primarily due to lower demand creation expense associated with a shift in spending to the latter half of fiscal 2006. In the Americas Region, 13 percentage points of the revenue growth for both the second quarter and first six months of fiscal 2006 was due to changes in currency exchange rates. Even excluding the changes in currency exchange rates, sales in each product business unit grew in the second quarter and year-to-date period. The revenue growth for the second quarter was primarily driven by higher sales in South America. For the year-to-date period, higher sales in South America and Canada primarily drove the sales growth. In the second quarter of fiscal 2006, pre-tax income for the Americas Region increased 30% from the prior year quarter, to $57.4 million. For the first six months of fiscal 2006, pre-tax income increased 58% to $102.0 million. The increase in pre-tax income for the second quarter and year-to- date period was attributable to higher revenues and a benefit from changes in currency exchange rates, partially offset by higher selling and administrative costs. The year-to-date period also benefited from an improved gross margin percentage. Revenues and pre-tax income for our Other businesses in the second quarter and first six months of fiscal 2006 include results from Bauer NIKE Hockey Inc., Cole Haan Holdings Incorporated, Converse Inc., Hurley International LLC, NIKE Golf, and Exeter Brands Group LLC. For the second quarter and year-to-date period, the increase in Other business revenues was primarily driven by growth at Converse and NIKE Golf. Pre-tax income from the Other businesses improved 11% to $23.0 million in the second quarter of fiscal 2006 and improved 3% to $63.0 million in the year-to-date period versus the same period of last year. For the second quarter, improved profitability from Converse and NIKE Golf drove most of the increase, partially offset by a decrease at Bauer NIKE Hockey as a result of costs incurred in the second quarter in connection with the strategic shift to a unified brand and logo. Liquidity and Capital Resources Cash Flow Activity Cash provided by operations was $738.2 million for the first six months of fiscal 2006, compared to $755.5 million for the first six months of fiscal 2005. Net income provided $733.4 million of cash flow over the first six months of the current year, compared to $588.7 million in the first six months of last year, partially offset by a larger increase in working capital in fiscal 2006 than in fiscal 2005. In the first six months of fiscal 2006, our net investment in working capital increased $180.5 million as compared to an increase of only $29.5 million in the corresponding period of fiscal 2005. This increased investment in working capital was largely attributable to a larger increase in inventories reflecting our reported futures orders growth and changes in the timing of receipt of Spring product. In the current quarter, we purchased approximately 2.9 million shares of NIKE's Class B common stock for $239.8 million, bringing purchases for the first six months of fiscal 2006 to 4.7 million shares at a cost of $390.4 million. The share repurchases were part of a $1.5 billion, four- year share repurchase program that was approved by the Board of Directors in June 2004. Since the inception of this program, we have repurchased 11.6 million shares, at a total cost of $946.6 million. We expect to continue to fund this program from operating cash flow. The timing and the amount of shares purchased will be dictated by our capital needs and stock market conditions. Dividends declared per share of common stock for the second quarter of fiscal 2006 were $0.31, compared to $0.25 in the second quarter of fiscal 2005. Capital Resources No amounts are currently outstanding under our committed credit facility. The terms of our facility have not changed from those described in our Annual Report on Form 10-K for the fiscal year ended May 31, 2005. Our long-term senior unsecured debt ratings remain at A+ and A2 from Standard and Poor's Corporation and Moody's Investor Services, respectively. Liquidity is also provided by our commercial paper program, under which there was no amount outstanding at November 30, 2005 or May 31, 2005. We currently have short-term debt ratings of A1 and P1 from Standard and Poor's Corporation and Moody's Investor Services, respectively. We currently believe that cash generated by operations, together with access to external sources of funds as described above and in our Annual Report on Form 10-K for the fiscal year ended May 31, 2005, will be sufficient to meet our operating and capital needs in the foreseeable future. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, the reserve for uncollectible accounts receivable, inventory reserves, and contingent payments under endorsement contracts. These policies require that we make estimates in the preparation of our financial statements as of a given date. However, since our business cycle is relatively short, actual results related to these estimates are generally known within the six-month period following the financial statement date. Thus, these policies generally affect only the timing of reported amounts across two to three quarters. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the information previously reported under Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2005. Item 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company carries out a variety of on-going procedures, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of November 30, 2005. There has been no change in the Company's internal controls over financial reporting during the Company's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the Company's internal controls over financial reporting. Special Note Regarding Forward-Looking Statements and Analyst Reports Certain written and oral statements, other than purely historical information including estimates, projections, statements relating to NIKE's business plans, objectives and expected operating results, and the assumptions upon which those statements are based, made or incorporated by reference from time to time by NIKE or its representatives in this report, other reports, filings with the Securities and Exchange Commission, press releases, conferences, or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by NIKE with the S.E.C., including Forms 8-K, 10-Q, and 10-K, and include, among others, the following: international, national and local general economic and market conditions; the size and growth of the overall athletic footwear, apparel, and equipment markets; intense competition among designers, marketers, distributors and sellers of athletic footwear, apparel, and equipment for consumers and endorsers; demographic changes; changes in consumer preferences; popularity of particular designs, categories of products, and sports; seasonal and geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer preferences, consumer demand for NIKE products, and the various market factors described above; difficulties in implementing, operating, and maintaining NIKE's increasingly complex information systems and controls, including, without limitation, the systems related to demand and supply planning, and inventory control; fluctuations and difficulty in forecasting operating results, including, without limitation, the fact that advance "futures" orders may not be indicative of future revenues due to the changing mix of futures and at- once orders; the ability of NIKE to sustain, manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE's products; new product development and introduction; the ability to secure and protect trademarks, patents, and other intellectual property performance and reliability of products; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors; business disruptions; increased costs of freight and transportation to meet delivery deadlines; changes in business strategy or development plans; general risks associated with doing business outside the United States, including, without limitation, exchange rate fluctuations, import duties, tariffs, quotas and political and economic instability; changes in government regulations; liability and other claims asserted against NIKE; the ability to attract and retain qualified personnel; and other factors referenced or incorporated by reference in this report and other reports. The risks included here are not exhaustive. Other sections of this report may include additional factors which could adversely affect NIKE's business and financial performance. Moreover, NIKE operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on NIKE's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also be aware that while NIKE does, from time to time, communicate with securities analysts, it is against NIKE's policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that NIKE agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, NIKE has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of NIKE. Part II - Other Information Item 1. Legal Proceedings There have been no significant developments with respect to the information previously reported under Item 4 of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2005. Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities The following table presents a summary of share repurchases made by NIKE during the quarter ended November 30, 2005 under the four-year $1.5 billion share repurchase program authorized by our Board of Directors and announced in June 2004. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Total Number of Maximum Dollar Value Shares Purchased as of Shares that May Total Number Average Part of Publicly Yet Be Purchased Of Shares Price Paid Announced Plans Under the Plans Period Purchased Per Share or Programs or Programs ______ ____________ __________ ___________________ ____________________ (in millions) September 1 - 30, 2005 1,419,000 $ 79.47 1,419,000 $ 680.4 October 1 - 31, 2005 894,800 $ 82.59 894,800 $ 606.5 November 1 - 30, 2005 612,600 $ 86.61 612,600 $ 553.4 _________ _______ _________ Total 2,926,400 $ 81.92 2,926,400 ========= ======= ========= </TABLE> Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of shareholders was held on September 20, 2005. The shareholders (i) elected for the ensuing year all of management's nominees for the Board of Directors; (ii) approved the amendment to the Company's Articles of Incorporation; (iii) re-approved and amended the NIKE, Inc. Executive Performance Sharing Plan; (iv) approved an amendment to the NIKE, Inc. 1990 Stock Incentive Plan; and (v) ratified the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal 2006. The voting results are as follows: Proposal 1 - Election of Directors: Votes Cast Broker For Withheld Non-Votes ___ __________ _________ Directors Elected by holders of Class A Common Stock: John G. Connors 65,401,724 -0- -0- Ralph D. DeNunzio 65,401,724 -0- -0- Douglas G. Houser 65,401,724 -0- -0- Philip H. Knight 65,401,724 -0- -0- William D. Perez 65,401,724 -0- -0- Orin C. Smith 65,401,724 -0- -0- John R. Thompson, Jr. 65,401,724 -0- -0- Directors Elected by holders of Class B Common Stock: Jill K. Conway 170,388,955 5,542,169 -0- Alan B. Graf, Jr. 172,142,586 3,788,538 -0- Jeanne P. Jackson 169,622,940 6,308,184 -0- Broker For Against Abstain Non-Votes ___ _______ _______ _________ Proposal 2 - Amend the Articles of Incorporation to increase the number of authorized Shares: Class A and Class B Common Stock Voting Together 218,187,397 21,688,660 1,456,789 -0- Proposal 3 - Re-approve and amend Executive Performance Sharing Plan: Class A and Class B Common Stock Voting Together 234,976,040 4,720,526 1,636,280 -0- Proposal 4 - Amend the 1990 Stock Incentive Plan: Class A and Class B Common Stock Voting Together 132,436,064 90,824,711 1,537,476 16,534,596 Proposal 5 - Ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm: Class A and Class B Common Stock Voting Together 236,705,036 3,488,189 1,139,621 -0- Item 6. Exhibits (a) EXHIBITS: 3.1 Restated Articles of Incorporation, as amended. (incorporated by reference from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2005). 3.2 Third Restated Bylaws, as amended (incorporated by reference from Exhibit 3.2 to the Company's Current Report on Form 8-K filed November 18, 2004). 4.1 Restated Articles of Incorporation, as amended (see Exhibit 3.1). 4.2 Third Restated Bylaws, as amended (see Exhibit 3.2). 12.1 Computation of Ratio of Earnings to Fixed Charges. 31.1 Rule 13(a)-14(a) Certification of Chief Executive Officer. 31.2 Rule 13(a)-14(a) Certification of Chief Financial Officer. 32.1 Section 1350 Certificate of Chief Executive Officer. 32.2 Section 1350 Certificate of Chief Financial Officer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NIKE, Inc. an Oregon Corporation /s/ Donald W. Blair ________________________ Donald W. Blair Chief Financial Officer DATED: January 6, 2006