Nike

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NIKE

Presentation OutlinePresentation Outline

Snapshot Brief Overview Financial Statements Industry Comparison Current News Technical Analysis Trend Analysis Eval Summary of

Valuations

Analysts Recommendations

Risk Investment

Recommendations

SnapshotSector Consumer CyclicalIndustry FootwearMarket Cap. 21.738 billionTicker Symbol NKERecent Stock Price $84.1152wk High $92.4352wk Low $75.10Beta .83

Brief Overview NIKE’s principal business activity is the design, development and

worldwide marketing of high quality footwear, apparel, equipment, and accessory product

The largest seller of athletic footwear and athletic apparel in the world

Distributed in over 160 countries around the world Sell under the NIKE brand, wholly owned subsidiary Converse,

Cole Haan, g Series, Bragano, Hurley, NIKE Hockey, and Exeter brands

Main competitors have joined with the recent announced acquisition of Reebok by Adidas

Overview

Nike’s best year was last year. The US accounts for 46% of revenues. Market Cap doubled in 1 year, mostly due to

the growth in US footwear sales. Internet market share makes buying shoes

easy. No such thing as bad publicity.

Financial Statements Sales growth has consistently grown over the last four years

– 4.3% in 02’ 8.1% in 03’ 14.5% in 04’ 12.1% in 05’ Increase in Gross Margin from 39%-45%, however this is not

likely to continue to grow in future years Red Flags…

Industry ComparisonRatio NKE Industry Sector S&P500

P/E 17.09 17.33 17.38 19.63

Beta .64 2.31 1.12 1

Price to Sales 1.61 1.49 1.21 2.76

Current Ratio 1.92 4.07 2.91 1.71

ROA 15.25 14.55 7.45 7.62

ROI 19.98 19.07 9.95 11.46

ROE 24.04 22.71 14.3 18.96

Receivable Turnover 6.26 7.33 6.60 10.39

Inventory Turnover 4.44 4.49 8.53 13.02

Current News England just banned the use of a chemical that

is used in the production of leather shoes. The affects on NIKE have yet to be determined.

Adidas announce its acquisition of Reebok. These are the two biggest competitors, who when combined, will be roughly the size of NIKE.

Technical Analysis• Support level 76 dollars per share

• Resistance level approximately 92 dollars a share

In the last Year…

Last 5 years…• Support level at 39 dollars a share

Technical Analysis Continued…

• In line with its 200 day moving average

• Has tended to less volatility over the last 2-3 years

Trend Analysis

Inventory Trends

Leverage Analysis

Operating Cash Flow

Revenue BreakdownNIKE, Inc.DIVISIONAL REVENUES

Q1 05 Q2 05 Q3 05 Q4 05 YTD FY 05 Q1 06 YTD FY 06 1 Year Quarterly Growth

U.S. Region

Footwear 921.4 680.0 849.6 907.2 24.4% 1,021.1 26.4% 10.8% Apparel 391.3 384.7 345.8 335.9 10.6% 395.5 10.2% 1.1% Equipment 89.0 67.3 72.8 84.3 2.3% 92.3 2.4% 3.7% Total 1,401.7 1,132.0 1,268.2 1,327.4 37.3% 1,508.9 39.1% 7.6%

EMEA Region

Footwear 663.3 531.8 615.3 689.6 18.2% 685.1 17.7% 3.3% Apparel 409.7 370.0 351.3 366.1 10.9% 435.2 11.3% 6.2% Equipment 84.9 59.3 67.3 73.0 2.1% 97.2 2.5% 14.5% Total 1,157.9 961.1 1,033.9 1,128.7 31.2% 1,217.5 31.5% 5.1%

Asia Pacific Region

Footwear 218.6 236.6 237.9 269.8 7.0% 237.4 6.1% 8.6% Apparel 148.8 207.8 188.3 210.6 5.5% 176.5 4.6% 18.6% Equipment 38.6 39.1 46.6 54.6 1.3% 45.7 1.2% 18.4% Total 406.0 483.5 472.8 535.0 13.8% 459.6 11.9% 13.2%

Americas Region

Footwear 114.8 129.8 99.6 134.4 3.5% 156.9 4.1% 36.7% Apparel 35.5 46.9 33.5 53.2 1.2% 40.7 1.1% 14.6% Equipment 11.4 12.6 10.6 13.5 0.4% 16.1 0.4% 41.2% Total 161.7 189.3 143.7 201.1 5.1% 213.7 5.5% 32.2%

3,127.3 2,765.9 2,918.6 3,192.2 87.4% 3,399.7 88.0% 8.7%Other 434.5 382.4 389.6 529.2 12.6% 462.3 12.0% 6.4%

Total NIKE, Inc. revenues3,561.8 3,148.3 3,308.2 3,721.4 100.0% 3,862.0 100.0% 8.4%

EVal

Summary of Valuations

Analysts Recommendations

Analysts have a price target between 95-110 dollars depending on one or two year return

Consensus recommendation is OUTPERFORM Mean rating is a 1.84, down from a 2.06 two months

ago

NIKE Risk Risk Grade – 103 (Max 134) Over 3/4 of all stocks available are more risky than NIKE

Risk Cont’d

Portfolio with NIKE

Risk Grade of 60 vs. current risk grade of 62 An analysis of our current portfolio labels consumer

discretionary as the most underweight sector compared to the benchmark

Interesting Facts:– Nike NEVER made an offer to buy Under Armor– They had Nike Shocks well before they were sold

in store but decided to hold sale until Michael Jordon retired and his shoe line lost popularity

Investment Recommendations Positive: Company has strong potential if it can tap into the

foreign markets (China and International Soccer). A purchase of 65 shares would account for 4.65% of the portfolio and would have a market value 5,382 dollars.

Negative: – Right now too much stress is put on the strength and growth of the

US Footwear sector. – The abroad sector that is expected to grow contributes a low

percentage of overall revenue. However, this does leave room for rapid growth and expansion.

– The company has doubled its market cap. over the last five years and has seen a very wide trading range between 50 and 90 dollars.