Nike, Inc. Annual Shareholders Meeting

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Nike, Inc. Annual Shareholders Meeting NIKE, INC. ANNUAL SHAREHOLDERS MEETING SEPTEMBER 22, 2008 This presentation is provided by NIKE, Inc. only for reference purposes. Information included was current only as of the date it was presented, and may have subsequently changed materially. NIKE, Inc. does not update or delete outdated information contained in this presentation, and disclaims any obligation to do so. Presentation Transcript Phil Knight (Chairman, NIKE, Inc.): Will the meeting please come to order? I'm Phil Knight, Chairman, and it's my pleasure to welcome you to Nike's 28th annual shareholders meeting as a public company. First of all, I'll introduce to you your Board Of Directors. Starting back here, Mark Parker, your CEO for the last two and a half years; Tim Cook, who is the President and Chief Operating Officer of Apple; John Connors, who is former Chief Financial Officer of a little company called Microsoft and currently a venture capitalist in Seattle; Jeanne Jackson, formerly President of Banana Republic and Walmart.com, currently a consultant in Orange County; Ralph DeNunzio, former President of the New York Stock Exchange, former CEO of Kidder, Peabody; Doug Houser, principal in the important law firm of Bullivant, Houser, & Bailey and a Board member for over 40 years. In the front row, John Thompson, former basketball coach of Georgetown University, former Olympic basketball coach, currently a radio talk show host in Washington, D.C., and hot off the press from a prominent Internet site, he was named last week as the coolest brother of all time. Next to him is Orin Smith, former President and CEO of Starbucks. Next to him is Jill Conway, former president of Smith College, visiting professor at MIT, the author of many books, eight of them under her own name. Next to her we have Alan Graf, who is Chief Financial Officer of FedEx; next to him Johnathan Rodgers, who is President and CEO of TV1. In addition, we have our auditors here, Julie Schlendorf of Pricewaterhouse and John Maxwell also of Pricewaterhouse. And I had mentioned that Chris Hummel of Broadridge, which will serve as the Inspector of our election. The agenda for the meeting will be first to consider two matters to be voted on by the shareholders. After that, Mark Parker will report on the state of the business, and, finally, the officers will answer questions from the shareholders. You should have received a card in which you can write your questions. The question cards will be collected shortly, and at the end of the meeting we will answer as many questions as time permits. The results of the balloting will be announced shortly after the voting. John Coburn is the Secretary of Nike. John, was the notice of this meeting duly and properly given and is a quorum present? John Coburn (Secretary, NIKE, Inc.): Yes, Phil, the notices were mailed in accordance with the Bylaws on August 8, 2008. A quorum of both Class A and Class B common stock is present today. There are present in person or by proxy 96.8% of the total outstanding Class A shares entitled to vote at this meeting, and 88.4% of the total outstanding Class B shares entitled to vote at this meeting, which, in both cases, is more than the required majority needed for a quorum. Phil Knight: Thank you, John. Since a quorum is present, I declare this annual meeting of the shareholders of NIKE, Incorporated duly convened. We will dispense with the reading of the minutes of the last annual meeting and proceed to the matters to be voted on. There are two matters to be voted on at this annual meeting, each of which is described in your proxy statement -- number one, the election of Directors, and two, the ratification and appointment of PricewaterhouseCoopers as Nike's auditors for the current fiscal year. I would like to ask the Secretary to present management's recommendations to the shareholders at this time. John Coburn: Thank you. The first matter we will vote on is the election of Directors. Management's nominees for election by the Class A shares are John Connors, Timothy Cook, Ralph DeNunzio, Douglas Houser, Philip Knight, Mark Parker, Johnathan Rodgers, Orin Smith and John Thompson, Jr. Management's nominees for election by the Class B shares are Jill Conway, Alan Graf and Jeanne Jackson. I move that these nominees be elected to the Board Of Directors. Phil Knight: Is there a second? Unidentified Audience Member: Second. Phil Knight: The Company has not received notice of any other nominations as required by the Bylaws. Therefore, I declare the nominations closed. The second matter to be voted on is the shareholder ratification to the appointment of PricewaterhouseCoopers as the Company's independent registered public accounting firm for fiscal 2009. I move that the selection of PricewaterhouseCoopers be ratified. Is there a second? Unidentified Audience Member: Second. Phil Knight: Does anyone need a ballot? Any shareholder who wants a ballot should raise his or her hand and the ushers will provide a ballot. It is not necessary to ask for a ballot if you have already sent in your proxy. If you have previously sent in a proxy, please do not execute a separate ballot unless you mark your ballot to show that a proxy was previously submitted and that you desire to revoke your proxy. There are separate ballots for Class A and Class B shareholders. If any of you have questions written on your cards, please also pass them to the aisle and the ushers will collect them at this time. I now declare the polls closed. The Inspector Of Elections will now tally all votes on the measures and return the results to the secretary. I'll now turn the floor over to Chief Executive Officer, Mark Parker, who will review our performance for the fiscal year 2008. Mark Parker (President & CEO, NIKE, Inc.): Okay, thank you, Phil, and thank you, all, for coming to the meeting today. I want to talk about the past year. Fiscal 2008 was a very strong year for Nike. We continued to expand our leadership in revenue and market share here in the United States and around the world. We added $2.3 billion of incremental revenue to total $18.6 billion. And that's up 14% year-over-year growth in every region in every business. Gross margin improved more than a percentage point to a new record high of 45%. Earnings per share grew 28% and we increased dividends by 23%, bought back $1.2 billion in stock, and increased our return on invested capital by 250 basis points. So by all measures fiscal year '08 really illustrates the consistent performance of the Nike business. We have a very strong financial model. We have a strong NIKE, Inc. team. And we add more innovative products and excitement to the marketplace than anybody else in the industry. Two years ago we committed to growing to $23 billion in revenue by the end of fiscal year 2011, but only if it was a good kind of growth, growth that is profitable and sustainable. We feel very good about the progress we've made towards that goal. The power of the Nike brand will always be our strongest asset. It's our platform for innovation, it's how we build and leverage the power of sports, and it really represents the commitment to excellence we have in everything we do. More than anything, the Nike brand is how we reach and reward consumers. To do that effectively, we focus on six key categories -- running, soccer, basketball, men's training, women's training and sportswear. We saw revenues increase in five of these six categories. The exception was basketball, which maintained revenue levels while growing share over this past year. On a reported basis, both global footwear and global apparel were up 14%. We did this all while keeping inventory levels in check and spending in check. We continue to see more and more of our growth coming from key markets around the world, especially emerging markets. This year, for example, China surpassed $1 billion in revenue, and that was before the Olympics. We saw revenue pass $1 billion in our CEMEA regions of Central and Eastern Europe. Our Americas region also passed $1 billion in revenue for the first time, making fiscal year '08 a trifecta of billion dollar firsts for Nike in key emerging markets. The strength and performance of the Nike brand gives us the flexibility we need to pursue growth opportunities across our portfolio of businesses. Converse delivered its best year ever in fiscal year 2008 and continues to grow in the US and in the key emerging markets of China, Russia, and Brazil. Hurley and Cole Haan also had record years for revenue and pretax income. And NIKE golf increased revenue and pretax income as we widened our lead as the largest apparel business in the industry. But growth in our subsidiary brands is only half the story. The other half is change. Our portfolio brands is based on three things. One is pursuing the greatest growth opportunities, two is leveraging and expanding our Nike resources, and last it's serving consumers with premium products and experiences in and around sports. When we applied these three principals, we saw opportunities to take action in 2008. We sold the Starter and Bauer businesses and we acquired Umbro, one of the world's greatest football brands and a source of tremendous long-term growth potential for Nike. With Umbro, NIKE, Inc.
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