NIKE INC - 10-K Annual Report

Back to GetFilings.com

1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------
FORM 10-K
------------------------

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MAY 31, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NO. 1-10635

NIKE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

OREGON 93-0584541
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)

ONE BOWERMAN DRIVE
BEAVERTON, OREGON 97005-6453
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(503) 671-6453
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
Class B Common Stock New York Stock Exchange
Pacific Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

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 [ ]

As of July 25, 2001, the aggregate market value of the Registrant's Class A
Common Stock held by nonaffiliates of the Registrant was $150,509,504 and the
aggregate market value of the Registrant's Class B Common Stock held by
nonaffiliates of the Registrant was $7,801,584,944.

As of July 25, 2001, the number of shares of the Registrant's Class A
Common Stock outstanding was 99,126,334 and the number of shares of the
Registrant's Class B Common Stock outstanding was 170,114,060.

DOCUMENTS INCORPORATED BY REFERENCE:

Parts of Registrant's Proxy Statement dated August 10, 2001 for the annual
meeting of shareholders to be held on September 17, 2001 are incorporated by
reference into Part III of this Report.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2

NIKE, INC.
ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

i
3

PART I

ITEM 1. BUSINESS

GENERAL

NIKE, Inc. was incorporated in 1968 under the laws of the state of Oregon.
As used in this report, the terms "we", "us", "NIKE" and the "Company" refer to
NIKE, Inc. and its predecessors, subsidiaries and affiliates, unless the context
indicates otherwise.

Our principal business activity involves the design, development and
worldwide marketing of high quality footwear, apparel, equipment, and accessory
products. NIKE is the largest seller of athletic footwear and athletic apparel
in the world. We sell our products to approximately 17,000 retail accounts in
the United States and through a mix of independent distributors, licensees and
subsidiaries in approximately 140 countries around the world. Virtually all of
our products are manufactured by independent contractors. Virtually all footwear
products are produced outside the United States, while apparel products are
produced both in the United States and abroad.

PRODUCTS

NIKE's athletic footwear products are designed primarily for specific
athletic use, although a large percentage of the products are worn for casual or
leisure purposes. We place considerable emphasis on high quality construction
and innovative design. Running, basketball, children's, cross-training and
women's shoes are currently our top-selling product categories and we expect
them to continue to lead in product sales in the near future. However, we also
market shoes designed for outdoor activities, tennis, golf, soccer, baseball,
football, bicycling, volleyball, wrestling, cheerleading, aquatic activities,
hiking, and other athletic and recreational uses.

We sell active sports apparel covering most of the above categories,
athletically 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 often market footwear, apparel and
accessories in "collections" of similar design or for specific purposes. 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 sport balls, timepieces, eyewear, skates, bats, gloves, and other
equipment designed for sports activities. We also have agreements for licensees
to produce and sell NIKE brand swimwear, women's sports bras, cycling apparel,
children's clothing, posters, school supplies, and electronic media devices.

We also sell a line of dress and casual footwear and accessories for men,
women and children under the brand name Cole Haan(R) through our wholly-owned
subsidiary, Cole Haan Holdings Incorporated, headquartered in Maine. We also
sell small amounts of various plastic products to other manufacturers through
our wholly-owned subsidiary, NIKE IHM, Inc.

Our wholly-owned subsidiary, Bauer NIKE Hockey Inc., headquartered in
Greenland, New Hampshire, manufactures and distributes ice skates, skate blades,
in-line roller skates, protective gear, hockey sticks, and hockey jerseys and
accessories under the Bauer(R) and NIKE(R) brand names. Bauer also offers a full
selection of products for street, roller and field hockey.

1
4

SALES AND MARKETING

The table below shows certain information regarding NIKE's United States
and international (non-U.S.) revenues for the last three fiscal years.

Financial information about geographic and segment operations appears in
Note 16 of the consolidated financial statements on page 41.

We experience moderate fluctuations in aggregate sales volume during the
year. However, the mix of product sales may vary considerably from time to time
as a result of changes in seasonal and geographic demand for particular types of
footwear, apparel, and equipment.

Because NIKE is a consumer products company, the relative popularity of
various sports and fitness activities and changing design trends affect the
demand for our products. We must therefore respond to trends and shifts in
consumer preferences by adjusting the mix of existing product offerings,
developing new products, styles and categories, and influencing sports and
fitness preferences through aggressive marketing. This is a continuing risk.
Failure to timely and adequately respond could have a material adverse affect on
our sales and profitability.

UNITED STATES MARKET

During fiscal 2001, sales in the United States accounted for approximately
54 percent of total revenues, compared to 56 percent in fiscal 2000 and 57
percent in fiscal 1999. We sell to approximately 17,000 retail accounts in the
United States. The NIKE brand domestic retail account base includes a mix of
department stores, footwear stores, sporting goods stores, skating, tennis and
golf shops, and other retail accounts. During fiscal year 2001, our three
largest customers accounted for approximately 29 percent of NIKE brand sales in
the United States, and 27 percent of total sales in the United States.

2
5

We make substantial use of our "futures" ordering program, which allows
retailers to order five to six months in advance of delivery with the guarantee
that 90 percent of their orders will be delivered within a set time period at a
fixed price. In fiscal year 2001, 86 percent of our U.S. footwear shipments
(excluding Cole Haan and Bauer) were made under the futures program, compared to
90 percent in fiscal 2000 and 91 percent in fiscal 1999. In fiscal 2001, 78
percent of our U.S. apparel shipments were made under the futures program,
compared to 82 percent in fiscal 2000, and 80 percent in 1999.

We utilize 16 NIKE sales offices to solicit sales in the United States. We
also utilize 30 independent sales representatives to sell specialty products for
golf, cycling, water sports and outdoor activities. In addition, we operate the
following retail outlets in the United States:

NIKE's domestic distribution centers for footwear are located in Beaverton,
Oregon, Wilsonville, Oregon, Memphis, Tennessee, and Greenland, New Hampshire.
Apparel products are shipped from the Memphis distribution center. Cole Haan
footwear and Bauer NIKE Hockey products are distributed primarily from
Greenland, New Hampshire, and licensed team apparel is shipped from Foothill
Ranch, California.

INTERNATIONAL MARKETS

We currently market our products in approximately 140 countries outside of
the United States through independent distributors, licensees, subsidiaries and
branch offices. Non-U.S. sales accounted for 46 percent of total revenues in
fiscal 2001, compared to 44 percent in fiscal 2000 and 43 percent in fiscal
1999. We operate 19 distribution centers in Europe, Asia, Australia, Latin
America, and Canada, and also distribute through independent distributors and
licensees. We estimate that our products are sold through more than 30,000
retail accounts outside the United States. In many countries and regions,
including Japan, Canada, Asia, Latin America, 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 10 percent of non-U.S. sales.

We operate 111 retail outlets outside the United States, which are
comprised of NIKETOWNs, factory stores, employee stores, and Cole Haan stores.

International branch offices and subsidiaries of NIKE are located in
Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Croatia, Czech
Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, Indonesia,
India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, The
Netherlands, Norway, Peoples Republic of China, The Philippines, Poland,
Portugal, Singapore, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, the United Kingdom, and Vietnam.

SIGNIFICANT CUSTOMERS

Venator Group Inc., which operates a chain of retail stores specializing in
athletic footwear and apparel, accounted for approximately 12 percent of global
net sales of NIKE brand products during fiscal 2001. No other customer accounted
for 10 percent or more of our net sales during fiscal 2001.

ORDERS

As of May 31, 2001, our worldwide futures orders for NIKE brand athletic
footwear and apparel totaled $4.3 billion, compared to $4.2 billion as of May
31, 2000. These orders are scheduled for delivery from June

3
6

through November of 2001. Based upon historical data, we expect that
approximately 95 percent of these orders will be filled in that time period,
although the orders may be cancelable.

PRODUCT RESEARCH AND DEVELOPMENT

We believe that our research and development efforts are a key factor in
our past and future success. Technical innovation in the design of footwear,
apparel, and athletic equipment receive continued emphasis as NIKE strives to
produce products that reduce or eliminate injury, aid athletic performance and
maximize comfort.

In addition to NIKE's own staff of specialists in the areas of
biomechanics, exercise physiology, engineering, industrial design and related
fields, we also utilize research committees and advisory boards made up of
athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and
other experts who consult with us and review designs, materials and concepts for
product improvement. Employee athletes wear-test and evaluate products during
the design and development process.

MANUFACTURING

In fiscal 2001, approximately five percent of total NIKE brand apparel
production for sale to the United States market was manufactured in the United
States by independent contract manufacturers, most of which are located in the
southern states. The remainder was manufactured by independent contractors
located in 28 countries. Most of this apparel production occurred in Bangladesh,
China, Hong Kong, India, Indonesia, Malaysia, Mexico, Pakistan, The Philippines,
Sri Lanka, Taiwan, and Thailand. Substantially all of our apparel production for
sale to the international market was manufactured outside the U.S. Our largest
single apparel supplier accounted for approximately eight percent of total
fiscal 2001 apparel production.

Virtually all of our footwear is produced outside of the United States. In
fiscal 2001, contract suppliers in the following countries manufactured the
following percentages of total NIKE brand footwear:

We also have manufacturing agreements with independent factories in Argentina,
Brazil, Mexico, South Africa, and Zimbabwe, to manufacture footwear for sale
within those countries. Our largest single footwear supplier accounted for
approximately 6 percent of total fiscal 2001 footwear production.

The principal materials used in our footwear products are natural and
synthetic rubber, plastic compounds, foam cushioning materials, nylon, leather,
canvas, and polyurethane films used to make AIR-SOLE cushioning components. NIKE
IHM, Inc., a wholly-owned subsidiary of NIKE, is our sole supplier of the
AIR-SOLE cushioning components used in footwear. The principal materials used in
our apparel products are natural and synthetic fabrics and threads, plastic and
metal hardware, and specialized performance fabrics designed to repel rain,
retain heat, or efficiently transport body moisture. NIKE and its contractors
and suppliers buy raw materials in bulk. Most raw materials are available in the
countries where manufacturing takes place. We have thus far experienced little
difficulty in satisfying our raw material requirements.

Our international operations are subject to the usual risks of doing
business abroad, such as possible revaluation of currencies, export duties,
quotas, restrictions on the transfer of funds and, in certain parts of the
world, political instability. See "Trade Legislation" below. We have not, to
date, been materially affected by any such risk, but cannot predict the
likelihood of such developments occurring. We believe that we have the ability
to develop, over a period of time, adequate alternative sources of supply for
the products obtained from

4
7

our present suppliers outside of the United States. If events prevented us from
acquiring products from our suppliers in a particular country, our footwear
operations could be temporarily disrupted and we could experience an adverse
financial impact. However, we believe that we could eliminate any such
disruption within a period of no more than 12 months, and that any adverse
impact would, therefore, be of a short-term nature. We believe that our
principal competitors are subject to similar risks.

All of our products manufactured overseas and imported into the United
States and other countries are subject to duties collected by customs
authorities. Customs information submitted by us is routinely subject to review
by customs authorities. We are unable to predict whether additional customs
duties, quotas or other restrictions may be imposed on the importation of our
products in the future. The enactment of any such duties, quotas or restrictions
could result in increases in the cost of our products generally and might
adversely affect the sales or profitability of NIKE and the imported footwear
and apparel industry as a whole.

Since 1972, Nissho Iwai American Corporation ("NIAC"), a subsidiary of
Nissho Iwai Corporation, a large Japanese trading company, has performed
significant import-export financing services for us. Currently, NIAC provides
such financing services with respect to more than 80 percent of the NIKE
products sold outside of the United States, Europe and Japan. Any failure of
NIAC to provide these services could disrupt our ability to acquire products
from our suppliers and to deliver products to our customers outside of the
United States, Europe and Japan. If prolonged, such a disruption could result in
cancelled orders that would adversely affect sales and profitability. We believe
that any such disruption would be short term in duration due to the ready
availability of alternative sources of financing at competitive rates. Our
current agreements with NIAC expire on May 31, 2003.

TRADE LEGISLATION

Our non-U.S. operations are subject to the usual risks of doing business
abroad, such as the imposition of import quotas or anti-dumping duties. In 1994,
the European Union ("EU") Commission imposed quotas on certain types of footwear
manufactured in China. These quotas replaced national quotas that had previously
been in effect in several Member States. Footwear designed for use in sporting
activities, meeting certain technical criteria and having a CIF (cost, insurance
and freight) price above 9 euros ("Special Technology Athletic Footwear" or
"STAF"), is excluded from the quotas. As a result of the STAF exclusion, and the
amount of quota made available to us, the quotas have not, to date, had a
material effect on our business.

In 1995, the EU Commission, at the request of European footwear
manufacturers, initiated two anti-dumping investigations covering footwear
imported from the People's Republic of China, Indonesia and Thailand. As a
result, in October 1997 the Commission imposed definitive anti-dumping duties on
certain textile upper footwear imported from China and Indonesia. In February
1998, the Commission imposed definitive anti-dumping duties on certain synthetic
and leather upper footwear originating in China, Indonesia and Thailand. In the
case of textile upper footwear, the anti-dumping duties do not cover sports
footwear. In the case of synthetic and leather upper footwear, the anti-dumping
duties do not cover footwear meeting the STAF technical criteria and with a CIF
price above 5.7 euros. As a result, the anti-dumping duties for synthetic and
leather upper footwear apply only to low cost footwear. In our case, these
duties primarily affect children's shoes and low cost sandals. While the
exclusions are subject to some interpretation by customs authorities, we believe
that most of our footwear sourced in the target countries for sale in the EU
fits within the exclusions. We have also shifted the production of these types
of footwear to other countries. Accordingly, the anti-dumping duties have not
had a material effect on our business.

While we have no reason to believe that the sports footwear exclusions from
the quotas (which will remain in place through 2004) and anti-dumping duties
will be eliminated, the EU Commission in June 2000 issued an amendment to the
explanatory notes to the EU's customs nomenclature ("CN"). The amendment, which
is not legally binding, interprets some of the technical criteria for the STAF
exclusion and the footwear types that can be classified as for use in sporting
activity. The amendment could restrict the scope of the STAF exclusion from the
quotas and also the sports footwear exclusions from the two EU anti-dumping
measures. In addition, the Commission has altered its administration of the
quota system in a manner that

5
8

would preclude national customs authorities from opting to grant the exclusion
to certain other footwear types, notably sandals.

We cannot assess the full impact of the amendment to the CN explanatory
notes until the national customs administrations clarify their national
application of its non-binding provisions. In the meantime, we are assessing the
legal issues relating to both the Commission's action in issuing the amendment
and its related administrative action concerning other footwear originating in
China. We will closely monitor further developments and will seek, by individual
action and through relevant trade associations, to prevent interpretations and
administrative measures that would subject a greater portion of our products to
the quotas and anti-dumping duties.

If the EU trade measures become substantially more restrictive as a result
of the recent Commission measures, we would recommend that our European
subsidiaries consider, in addition to possible legal remedies, shifting the
production of such footwear to other countries in order to maintain competitive
pricing. We believe that we are prepared to deal effectively with any such
change of circumstances and that any adverse impact would be of a temporary
nature. We continue to closely monitor international restrictions and maintain
our multi-country sourcing strategy and contingency plans. We believe that our
major competitors stand in much the same position regarding these trade
measures.

The People's Republic of China ("China") is a material source of footwear
production for NIKE. As part of China's bid to join the World Trade Organization
("WTO"), and after the United States and China reached a comprehensive trade
agreement, former President Clinton submitted legislation to Congress which
would grant permanent non-discriminatory "normal trade relations" ("NTR",
formerly "most favored nation") trading status to China. In 2000, Congress
approved the legislation, but because China had not finished its accession
negotiations with the WTO, in June 2001 President Bush extended NTR to China on
an annual basis. That decision was recently supported by Congress. Once China
completes the terms of accession to the WTO, Congress has provided the President
with the authority to grant China permanent NTR. Bringing China into the WTO and
providing permanent NTR to China will eventually reduce barriers to producing
products in, exporting products from, and marketing and selling products within
China.

We are also currently sourcing footwear and apparel products from factories
in Vietnam. From 1995 to 1998, former President Clinton took several steps to
normalize economic and diplomatic relations between the United States and
Vietnam. The President's actions were steps toward restoration of full trade
relations which includes the United States granting non-discriminatory NTR
trading status to Vietnam which would result in lower tariffs between the two
countries. In July 2000, the United States and Vietnam signed a comprehensive
bilateral trade agreement, which would, among other things, provide reciprocal
NTR between the two countries. In June 2001, that agreement was submitted to
Congress for consideration. If approved by the U.S. Congress and the Vietnamese
National Assembly, the United States will grant an annual extension of NTR to
Vietnam. This grant must be renewed annually by the President and reviewed by
the Congress. We currently believe that Congress will consider the trade
agreement by the end of this calendar year. If Congress approves the trade
agreement, the grant of NTR trading status for Vietnam could expand our
production and marketing opportunities in Vietnam and allow for Vietnamese
sourced product to enter the United States at NTR tariff rates.

COMPETITION

The athletic footwear, apparel and equipment industry is keenly competitive
in the United States and on a worldwide basis. We compete internationally with
an increasing number of athletic and leisure shoe companies, athletic and
leisure apparel companies, sports equipment companies, and large companies
having diversified lines of athletic and leisure shoes, apparel and equipment,
including Reebok, Adidas and others. 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

6
9

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

TRADEMARKS AND PATENTS

We utilize trademarks on nearly all of our products and believe that having
distinctive marks that are readily identifiable is an important factor in
creating a market for our goods, in identifying the Company, and in
distinguishing our goods from the goods of others. We consider our NIKE(R) and
Swoosh Design(R) trademarks to be among our most valuable assets and we have
registered these trademarks in over 100 countries. In addition, we own many
other trademarks which we utilize in marketing our products. We continue to
vigorously protect our trademarks against infringement.

NIKE has an exclusive, worldwide license to make and sell footwear using
patented "Air" technology. The process utilizes pressurized gas encapsulated in
polyurethane. Some of the early NIKE AIR(R) patents have expired, which may
enable competitors to use certain types of like technology. Subsequent NIKE AIR
patents will not expire for several years. We also have a number of patents
covering components and features used in various athletic and leisure shoes. We
believe that our success depends primarily upon skills in design, research and
development, production and marketing rather than upon our patent position.
However, we have followed a policy of filing applications for United States and
foreign patents on inventions, designs and improvements that we deem valuable.

EMPLOYEES

We had approximately 22,700 employees at May 31, 2001. Management considers
its relationship with employees to be excellent. With the exception of Bauer
NIKE Hockey Inc., our employees are not represented by a union. Of Bauer NIKE
Hockey's North American employees, approximately 65 percent, or fewer than 450,
are covered by three union collective bargaining agreements with three separate
bargaining units, and of Bauer NIKE Hockey's approximately 170 employees in
Italy, approximately 30 percent, or fewer than 50, are covered by three
collective bargaining agreements. The collective bargaining agreements expire on
various dates from 2001 through 2003. There has never been a material
interruption of operations due to labor disagreements.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of NIKE as of July 25, 2001 are as follows:

Philip H. Knight, Chief Executive Officer, Chairman of the Board, and
President -- Mr. Knight, 63, a director since 1968, is a co-founder of NIKE and,
except for the period from June 1983 through September 1984, served as its
President from 1968 to 1990, and from June 2000 to present. Prior to 1968, Mr.
Knight was a certified public accountant with Price Waterhouse and Coopers &
Lybrand and was an Assistant Professor of Business Administration at Portland
State University.

Donald W. Blair, Vice President and Chief Financial Officer -- Mr. Blair,
43, joined NIKE in November 1999. Prior to joining NIKE, he held a number of
financial management positions with Pepsico, Inc., including Vice President,
Finance of Pepsi-Cola Asia, Vice President, Planning of PepsiCo's Pizza Hut
Division, and Senior Vice President, Finance of The Pepsi Bottling Group, Inc.
Prior to joining Pepsico, Mr. Blair was a certified public accountant with
Deloitte, Haskins, and Sells.

Thomas E. Clarke, President of New Ventures -- Dr. Clarke, 50, a director
since 1994, joined the Company in 1980. He was appointed divisional Vice
President in charge of marketing in 1987, elected corporate Vice President in
1989, appointed General Manager in 1990, and served as President and Chief
Operating Officer from 1994 to 1999. Dr. Clarke previously held various
positions with the Company, primarily in research, design, development and
marketing. Dr. Clarke holds a doctorate degree in biomechanics.

7
10

Charles D. Denson, President of the NIKE Brand -- Mr. Denson, 45, has been
employed by NIKE since February 1979. Mr. Denson held several positions within
the Company, including his appointments as Director of USA Apparel Sales in
1994, divisional Vice President, US Sales in 1994, divisional Vice President
European Sales in 1997, divisional Vice President and General Manager, NIKE
Europe in 1998, Vice President and General Manager of NIKE USA in June 2000, and
President of the NIKE Brand in March 2001.

Gary M. DeStefano, President of USA Operations -- Mr. DeStefano, 44, has
been employed by NIKE since 1982, with primary responsibilities in sales and
regional administration. Mr. DeStefano was appointed Director of Domestic Sales
in 1990, divisional Vice President in charge of domestic sales in 1992, Vice
President of Global Sales in 1996, Vice President and General Manager of Asia
Pacific in March 1997, and President of USA Operations in March 2001.

Mindy F. Grossman, Vice President of Global Apparel -- Ms. Grossman, 43,
joined NIKE in October 2000. Prior to joining NIKE, she was President and Chief
Executive Officer of Polo Jeans Company/Ralph Lauren, a division of Jones
Apparel Group, from 1995 to 2000. Prior to that, Ms. Grossman was Vice President
of New Business Development at Polo Ralph Lauren Corp. from 1994 to 1995,
President of The Warnaco Group Inc. Chaps Ralph Lauren division, and Senior Vice
President of The Warnaco Group Inc. Menswear division from 1991 to 1994.

P. Eunan McLaughlin, Vice President, Asia Pacific -- Mr. McLaughlin, 43,
joined NIKE as Vice President Sales, NIKE Europe in February 1999, was appointed
Vice President Commercial Sales and Retail in February 2000. and became Vice
President, Asia Pacific in June 2001. Prior to joining NIKE, he was Partner and
Vice President of Consumer & Retail Practices Division, Korn/Ferry International
from 1996 to 1999. From 1985 to 1996 Mr. McLaughlin held the following positions
with Mars, Inc.: Finance Director, Sales Director, and Managing Director of
Germany Drink Division; Operations Director of Pedigree Pet Foods; and European
Sales & Marketing Director. Mr. McLaughlin also worked for Reynolds McCarron
(formerly Ernst & Young) in Ireland.

Mark G. Parker, President of the NIKE Brand -- Mr. Parker, 44, has been
employed by NIKE since 1979 with primary responsibilities in product research,
design and development. Mr. Parker was appointed divisional Vice President in
charge of development in 1987, corporate Vice President in 1989, General Manager
in 1993, Vice President of Global Footwear in 1998, and President of the NIKE
Brand in March 2001.

Eric D. Sprunk, Vice President, Global Footwear -- Mr. Sprunk, 37, joined
the Company in 1993. He was appointed Finance Director and General Manager of
the Americas in 1994, Finance Director, NIKE Europe in 1995, Regional General
Manager, NIKE Europe Footwear in 1998, and Vice President & General Manager of
the Americas in 2000. Mr. Sprunk was appointed Vice President, Global Footwear
in June 2001.

Lindsay D. Stewart, Vice President and Chief of Staff, and Assistant
Secretary -- Mr. Stewart, 54, joined NIKE as Assistant Corporate Counsel in
1981. Mr. Stewart became Corporate Counsel in 1983. He was appointed Vice
President and General Counsel in 1991, and Chief of Staff in March 2001. Prior
to joining NIKE, Mr. Stewart was in private practice and an attorney for
Georgia-Pacific Corporation.

Frits D. van Paasschen, Vice President and General Manager, NIKE
Europe -- Mr. van Paasschen, 40, has been employed by NIKE since 1997. He served
as Vice President, Strategic Planning, and was appointed Vice President and
General Manager, The Americas and Africa in 1998, and corporate Vice President
and General Manager, NIKE Europe in 2000. Mr. van Paasschen was formerly Vice
President, Finance & Planning, Disney Consumer Products, The Walt Disney
Company.

8
11

ITEM 2. PROPERTIES

Following is a summary of principal properties owned or leased by NIKE. Our
leases expire at various dates through the year 2017.

U.S. ADMINISTRATIVE OFFICES: DISTRIBUTION FACILITIES:
Beaverton, Oregon (9 locations) -- 8 leased Greenland, New Hampshire -- leased
Wilsonville, Oregon Wilsonville, Oregon
Memphis, Tennessee (2 locations) -- 1 leased Forest Park, Georgia
Yarmouth, Maine Memphis, Tennessee (2 locations) -- 1 leased
Charlotte, North Carolina -- leased Foothill Ranch, California -- leased
Canada (2 locations) -- leased
INTERNATIONAL ADMINISTRATIVE OFFICES: Europe (3 locations) -- 2 leased
Canada (4 locations) -- leased Asia Pacific (12 locations) -- 10 leased
Europe (18 locations) -- leased Latin America (2 locations) -- leased
Asia Pacific (16 locations) -- leased
Latin America (5 locations) -- leased INTERNATIONAL PRODUCTION OFFICES:
Africa (2 locations) -- leased Europe (2 locations) -- leased
Latin America (2 locations) -- leased
SALES OFFICES AND SHOWROOMS: Asia Pacific (27 locations) -- leased
United States (23 locations) -- leased
Canada (4 locations) -- leased MANUFACTURING FACILITIES:
Europe (26 locations) -- leased United States (3 locations) -- 1 leased
Asia Pacific (17 locations) -- leased Canada (3 locations) -- 2 leased
Latin America (7 locations) -- leased Europe (2 locations) -- leased
Africa (2 locations) -- leased Asia Pacific (1 location) -- owned
RETAIL OUTLETS:
United States (157 locations) -- 154 leased
Canada (7 locations) -- leased
Europe (34 locations) -- leased
Asia Pacific (57 locations) -- leased
Latin America (13 locations) -- leased

ITEM 3. LEGAL PROCEEDINGS

Except as described below, there are no material pending legal proceedings,
other than ordinary routine litigation incidental to our business, to which we
are a party or of which any of our property is the subject.

The Company and certain of its officers and directors were named as
defendants in four substantially identical securities class actions filed in the
U.S. District Court for the District of Oregon on March 9, 14, 20, and April 4,
2001. On July 23, 2001, the cases were consolidated as In re NIKE, Inc.
Securities Litigation, CV-01-332-K. The consolidated amended complaint seeks
unspecified damages on behalf of a purported class consisting of purchasers of
the Company's stock during the period December 20, 2000 through February 26,
2001. Plaintiffs allege that the defendants made false and misleading statements
about the Company's actual and expected business and financial performance in
violation of federal securities laws. Plaintiffs further allege that certain
individual defendants sold Company stock while in possession of material
non-public information. While the litigation is in a very preliminary stage,
based on the available information we do not currently anticipate that the
action will have a material financial impact. We believe the claims are without
merit, and we intend to vigorously defend them.

A related shareholder derivative lawsuit, Metivier v. Denunzio, et al.,
0104-04339, was filed in the Multnomah County Circuit Court of the State of
Oregon on April 26, 2001. The derivative suit was brought by certain Company
shareholders, allegedly on behalf of the Company, against certain directors and
officers of the Company. The derivative plaintiffs allege that these officers
and directors breached their fiduciary duties to the Company by making or
causing to be made alleged misstatements about the Company's actual and expected
financial performance while certain officers and directors sold Company stock
and by allowing the Company to be sued in the shareholder class action. The
derivative plaintiffs seek compensatory and other

9
12

damages, and disgorgement of compensation received. On July 25, 2001, the Court
entered a stipulation and order abating the action until further notice.

In accordance with the Company's Articles of Incorporation and Bylaws, and
in accordance with indemnity agreements between the Company and the directors
and officers named in the legal actions, the Company has agreed to indemnify
these individuals and assume their defense in the actions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the 2001 fiscal year
to a vote of security holders, through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

NIKE's Class B Common Stock is listed on the New York Stock Exchange and
the Pacific Stock Exchange and trades under the symbol NKE. At July 25, 2001,
there were approximately 19,500 holders of record of our Class B Common Stock
and 27 holders of record of our Class A Common Stock. These figures do not
include beneficial owners who hold shares in nominee name. The Class A Common
Stock is not publicly traded but each share is convertible upon request of the
holder into one share of Class B Common Stock.

We refer to the table entitled "Selected Quarterly Financial Data" in Item
6, which lists, for the periods indicated, the range of high and low closing
sales prices on the New York Stock Exchange. That table also describes the
amount and frequency of all cash dividends declared on our common stock for the
2001 and 2000 fiscal years.

10
13

ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL HISTORY
(IN MILLIONS, EXCEPT PER SHARE DATA, FINANCIAL RATIOS AND NUMBER OF
SHAREHOLDERS)

11
14

All per common share data has been adjusted to reflect the 2-for-1 stock
splits paid October 23, 1996, October 30, 1995 and October 5, 1990. The
Company's Class B Common Stock is listed on the New York and Pacific Exchanges
and trades under the symbol NKE. At May 31, 2001, there were approximately
141,000 shareholders of Class A and Class B common stock.

FINANCIAL HIGHLIGHTS
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA AND FINANCIAL RATIOS)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

HIGHLIGHTS

- Fiscal year 2001 revenues increased 5.5% to $9.5 billion, compared to
$9.0 billion in fiscal year 2000.

- Net income increased in fiscal year 2001 to $589.7 million from $579.1
million in the prior year.

- Fiscal year 2001 diluted earnings per share increased by 4.3%, from $2.07
to $2.16.

- Gross margins declined as a percentage of revenues to 39.0% from 39.9% in
fiscal year 2000.

- Selling and administrative expenses also declined as a percentage of
revenues to 28.3% from 29.0% in fiscal year 2000.

12
15

RESULTS OF OPERATIONS

FISCAL 2001 COMPARED TO FISCAL 2000

Net income increased 1.8% over fiscal 2000, from $579.1 million to $589.7
million. Although consolidated revenues increased 5.5% over fiscal 2000, income
before income taxes was essentially flat as pretax profit margins decreased due
to a lower gross margin percentage, higher interest expense, and increased other
operating expenses, partially offset by lower selling and administrative
expenses as a percent of revenue. Despite flat income before income taxes, net
income increased due to a lower effective tax rate. Diluted earnings per share
increased 4.3%, from $2.07 to $2.16. The percentage increase in earnings per
share was higher than that of net income primarily due to share repurchases in
fiscal years 2000 and 2001.

NIKE brand revenues in the United States region increased 1.8% as compared
to fiscal 2000, while NIKE brand revenues in our international regions increased
9.8%. Had the U.S. dollar remained constant with the prior year, these
international revenues would have increased 18.6%, and consolidated revenues
would have advanced 9.3%. In the United States region, our largest market
segment, the 1.8% increase in revenues reflected a 9.2% increase in apparel
sales and a 54.4% increase in equipment sales, offset by a 4.2% decrease in
footwear sales. The increases in apparel and equipment reflected stronger demand
for in-line products. The increase in the equipment product line reflected
increases in a variety of sports equipment categories, including golf, football,
and baseball products as well as socks, bags and eyewear. The decrease in
footwear reflected lower demand, particularly in the mid-range price segment,
and supply chain disruptions resulting from the implementation of a new global
demand and supply planning system. The supply chain disruptions resulted in
product excesses as well as product shortages and late deliveries in the second
half of the fiscal year.

In fiscal 2001, NIKE brand revenues from our international regions
continued to grow, both as a percentage of total company revenues and in total
dollars as compared to fiscal 2000. These revenues represented 44.6% of total
company revenues as compared to 42.9% in fiscal 2000. Revenues from our
international regions were $4.2 billion as compared to $3.9 billion in fiscal
2000. Revenues in our Europe, Middle East, and Africa (EMEA) region increased
for the seventh consecutive year. Fiscal 2001 revenues in EMEA increased over
fiscal 2000 by 7.4% to $2,584.8 million, a 19.3% increase in constant dollars.
In our Asia Pacific region, revenues grew 16.2%, a 20.8% increase in constant
dollars. The Americas region grew revenues 9.1%, an 11.4% increase in constant
dollars.

In fiscal 2001, revenue from other brands increased 7.2% to $435.9 million.

Worldwide futures and advance orders for NIKE brand athletic footwear and
apparel scheduled for delivery from June through November 2001 were 3% higher
than such orders booked in the comparable period of fiscal 2000. The percentage
growth in these orders is not necessarily indicative of our expectation of
revenue growth in subsequent periods. 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 can cause
differences in the comparisons between future orders and actual revenues.
Finally, a significant portion of our revenues are not derived from futures
orders, including those from our equipment product line, U.S. licensed team
apparel product line, retail operations, and other brands, including Bauer NIKE
Hockey and Cole Haan.

13
16

The breakdown of revenues follows:

Our gross margin percentage declined 90 basis points, from 39.9% in fiscal
2000 to 39.0% in fiscal 2001. Factors contributing to the lower gross margin
percentage were as follows:

(1) The effect of the change in foreign exchange rates, most notably
the weakening of the euro against the U.S. dollar relative to fiscal 2000.

(2) A higher mix of close-out sales as well as lower margins achieved
on close-outs, primarily in footwear and licensed team apparel in the
United States. In footwear, the higher mix of close-outs and lower
close-out margins were due in part to the supply chain disruptions
discussed above. Higher close-outs and lower margins in U.S. licensed team
apparel resulted primarily from the liquidation of National Football League
("NFL") team apparel, due to the termination of our NFL license agreement
this year.

(3) Product recalls of certain footwear models in the United States,
which resulted in product returns and write-offs.

We expect the weakness of the euro to place additional negative pressure on
our gross margins throughout fiscal 2002. In addition, we will continue to
liquidate excess inventories caused by the supply chain problems, affecting
gross margins through the first half of fiscal 2002.

Selling and administrative expenses decreased as a percentage of revenues
from 29.0% to 28.3%. This decrease reflected cost containment measures, both in
marketing and operational areas. While implementing these measures to control
selling and administrative expense growth, we also continued to invest in
operational initiatives designed to create future revenues and profits. These
initiatives included the expansion of NIKE-owned retail outlets, the development
of e-commerce applications, and systems and processes supporting our worldwide
supply chain. Our level of investment in these areas was comparable to our level
of investment in fiscal 2000. The worldwide supply chain initiative is intended
to improve revenue (by increasing our ability to respond to market conditions),
margins (by lowering close-outs and distribution costs) and cash flow (by

14
17

reducing inventories). The ultimate level of benefit to revenues, margins, and
cash flows, if any, will not be known until the new systems and processes have
been implemented worldwide over the next few years.

Interest expense increased 30.4%, from $45.0 million to $58.7 million, due
to higher average debt levels in fiscal 2001 versus fiscal 2000. During fiscal
2000, we increased debt to fund capital expenditures and higher working capital
requirements and to repurchase common stock. Although our debt balance decreased
during fiscal 2001, the average debt balance for fiscal 2001 remained above the
prior year.

Other income/expense was a net expense of $34.2 million versus a net
expense of $23.2 million in fiscal 2000. Significant amounts included in other
income/expense were interest income, profit sharing expense, goodwill
amortization, certain foreign currency conversion gains and losses, and asset
disposal gains and losses.

Our fiscal 2001 effective tax rate was 36.0% as compared to 37.0% in fiscal
2000. Factors contributing to this decrease included lower taxes on a portion of
foreign earnings that have been permanently invested outside of the U.S. and
additional research tax credits.

FISCAL 2000 COMPARED TO FISCAL 1999

Net income increased 28.3% in fiscal 2000 over fiscal 1999, from $451.4
million to $579.1 million. Excluding the impact of restructuring charge activity
in fiscal 1999, net income advanced $100.4 million, or 21.0%. Income before
income taxes increased due to increased revenues and an improved gross margin,
partially offset by higher selling and administrative expenses. The increased
selling and administrative expenses in large part reflected significant
investments in new supply chain systems, e-commerce initiatives, and new retail
stores, discussed further below. The increase in net income primarily reflected
the improved income before income taxes, but also reflected a lower effective
tax rate. Diluted earnings per share increased 31.8%, more rapidly than net
income, as a result of share repurchases during fiscal 2000. Excluding the
impact of restructuring charges, diluted earnings per share increased 24.7%.

Total NIKE revenues increased by 2.5% in fiscal 2000. NIKE brand revenues
in the United States region were flat as compared to fiscal 1999 while NIKE
brand revenues in our international regions increased 6.9%. Had the U.S. dollar
remained constant with the prior year, these international revenues would have
increased 11.9%, and consolidated revenues would have advanced 4.5%. Revenue
growth in the United States was slowed by a contraction of athletic sportswear
retail space.

In fiscal 2000, NIKE brand revenues from our international regions
represented 42.9% of total company revenues and grew significantly during the
year. Fiscal 2000 revenues in EMEA increased over fiscal 1999 by 4.9% to
$2,407.0 million, 15.5% in constant dollars. In our Asia Pacific region,
revenues grew 13.1%, a 4.7% increase in constant dollars. The Americas region
grew revenues 5.3%, 7.2% in constant dollars.

In fiscal 2000, our gross margin percentage improved 250 basis points, from
37.4% to 39.9%. The key factors in the improvement of margins were as follows:

(1) Increased margins on in-line products, particularly in apparel and
equipment.

(2) Reduced levels of lower margin close-out sales, reflecting lower
inventories of close-out, out-of-season product.

(3) Higher margins on close-out sales, driven by the expansion of our
network of outlet stores.

Selling and administrative expenses increased 7.4% in fiscal 2000 to
$2,606.4 million. Much of the increase was driven by investments designed to
create future revenues and profits, including opening new NIKE-owned retail
outlets, development of e-commerce capability, initiatives to streamline our
supply chain, and the conversion of certain international markets from
independent distributorships to direct NIKE ownership. Higher bad debt expense
due to the bankruptcy filing of one of our U.S. customers, also increased
selling and administrative expenses in fiscal 2000 versus fiscal 1999.

Interest expense increased by 2.0% during fiscal 2000 to $45.0 million.
This increase reflected incremental interest costs due to significantly higher
average debt balances than in fiscal 1999. (Much of this increase was offset by
the effect of lower interest rates outside of the U.S. and the effect of our
restructured operating agreement with NIAC, which reduced the interest rate on
product purchases financed by NIAC.)

15
18

Other income/expense was a net expense of $23.2 million in fiscal 2000 as
compared to a net expense of $21.5 million in fiscal 1999. Significant amounts
included in other income/expense were interest income, profit sharing expense,
goodwill amortization, certain foreign exchange conversion gains and losses, and
asset disposal gains and losses. In fiscal 1999, other income/expense also
included a $15.0 million credit related to the change in accounting for
substantially all inventories in the U.S. from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. The change was not sufficiently
material to require presentation of the cumulative effect or to restate
comparable income statements as dictated by Accounting Principles Board Opinion
No. 20.

Our effective tax rate was 37.0% in fiscal 2000, significantly lower than
the prior year rate of 39.5% in fiscal 1999. This decrease was primarily due to
reduced state taxes and the utilization of tax loss carryforwards in certain
recently profitable foreign operations, where our effective rate is lower than
in the U.S.

FISCAL 1999 RESTRUCTURING CHARGE

During fiscal 1999, the Company incurred a $60.1 million restructuring
charge as a result of certain actions taken to better align our cost structure
with expected revenue growth rates. As a result of the restructuring actions, we
were able to remove approximately $36 million from our cost structure.

The charge (shown below in tabular format) was primarily for costs of
severing employees, including severance packages, lease abandonments and the
write down of assets no longer in use. Two major areas that were affected by the
reduction in force include our information technology functions, primarily in
the U.S., as we shifted to an outsource agreement for certain areas of our
operations, and European customer service and accounting, where we have been
consolidating functions from individual countries to our European headquarters.
Outside of these two areas, employees were terminated from various other areas
around the Company, including our Asia Pacific region. The original number of
employees to be terminated was 1,291. As of May 31, 2001, 71 employees have
found positions elsewhere in the Company and 1,200 have left the Company,
leaving 20 still to be terminated.

The second major component of the 1999 charge was a write-off of certain
equipment, hardware and software development costs at one of our U.S.
distribution centers due to a change in strategy around how we flow product for
a specific type of business.

Due to the change in the number of employees that will be terminated, $0.1
million and $1.4 million of the reserve was reversed during fiscal 2001 and
fiscal 2000, respectively. The remaining accrual balance as of May 31, 2001 of
$1.5 million will be relieved as leases expire and severance payments are
completed.

Detail of the restructuring charge is as follows:

16
19

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European
Union established permanent, fixed conversion rates between their existing
currencies and the European Union's new common currency, the euro. In January
2001, an additional country, Greece, also established a fixed conversion rate to
the euro. During the transition period ending December 31, 2001, public and
private parties may pay for goods and services using either the euro or the
participating country's legacy currency. Beginning January 1, 2002, euro
denominated bills and coins will be issued, and the legacy currencies will be
completely withdrawn from circulation on June 30, 2002.

We have had a dedicated project team working on the euro transition
strategy since January 1998. We have made modifications to information
technology systems supporting marketing, order management, purchasing,
invoicing, payroll, and cash management functions, in order to make them euro
compliant. All major systems have been converted and are euro compliant, well
ahead of the end of the transitional period.

We believe the introduction of the euro may create a move towards a greater
level of wholesale price harmonization, although differing country costs and
value added tax rates will continue to result in price differences at the retail
level. Over the past three years, we have been actively working to assess and,
where necessary, adjust pricing practices to operate effectively in this new
environment.

The costs of adapting our systems and practices to the implementation of
the euro were generally related to the modification of existing systems and
totaled approximately $8 million. These costs were expensed as incurred,
primarily in fiscal 2000. We believe that the conversion to the euro will not
have a material impact on our financial condition or results of operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

Effective June 1, 2001, we will adopt Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities" (FAS 133).

As required upon adoption of FAS 133, a one-time transition adjustment will
be recorded as of June 1, 2001 on both our consolidated statement of income and
consolidated balance sheet. We estimate that the transition adjustment on the
consolidated statement of income to be a charge of approximately $5.1 million,
net of tax effect. This amount relates to an investment that will be adjusted to
fair value in accordance with FAS 133. The transition adjustment on the
consolidated balance sheet represents the initial recognition of the fair values
of hedge derivatives outstanding on the adoption date and realized gains and
losses on effective hedges for which the underlying exposure has not yet
affected earnings. The transition adjustment on the consolidated balance sheet
is estimated to be an increase in current assets of $118.5 million, an increase
in noncurrent assets of $87.0 million, an increase in current liabilities of
$151.6 million, and an increase in other comprehensive income of approximately
$59.0 million, net of tax effects.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142
(FAS 142), "Goodwill and Other Intangible Assets." Our adoption date is expected
to be June 1, 2002. As required by FAS 142, we will perform an impairment test
on goodwill and other intangible assets as of the adoption date. Thereafter, we
will perform impairment tests annually and whenever events or circumstances
occur indicating that goodwill or other intangible assets might be impaired.
Amortization of goodwill and certain other intangible assets, including those
recorded in past business combinations, will cease. We have not yet determined
what the impact of FAS 142 will be on our results of operations and financial
position.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations was $656.5 million in fiscal 2001, compared to
$699.6 million in fiscal 2000. Our primary source of operating cash flow was net
income earned during the year of $589.7 million. The company also generated cash
flow by utilizing tax loss carryforwards, which resulted in a decrease in
deferred income tax assets during the year, and from income tax benefits from
stock option exercises. These cash

17
20

inflows were partially offset by a slight increase in operating working capital,
which reflected a higher level of operating activity in the current fiscal year.

Cash used by investing activities during fiscal 2001 was $342.3 million,
compared to $440.0 million invested during fiscal 2000. The total for fiscal
2001 related primarily to capital expenditures for computer equipment and
software, driven by our supply chain initiative; investments in new retail
outlets; the expansion of our world headquarters; and the development of new
distribution facilities in Japan. During fiscal 2002, we will continue to incur
expenditures related to the supply chain initiative and retail expansion,
although we currently expect total capital expenditures to be less than the
total for fiscal 2001.

Cash used by financing activities in fiscal year 2001 was $349.9 million,
up from $252.1 million in the prior year. This amount included uses of cash for
dividends to shareholders, a net reduction of short-term debt, payment of a
maturing note payable, and share repurchases. These uses of cash were partially
offset by proceeds from the exercise of employee stock options.

The share repurchases were part of a $1.0 billion share repurchase program
that began in fiscal 2001, after completion of a four-year, $1.0 billion program
in fiscal 2000. To date, under the new program we have purchased a total of 4.0
million shares of NIKE's Class B common stock for $157.0 million. We expect to
fund the current program largely from operating cash flow. The timing and the
amount of shares purchased will be dictated by our capital needs and stock
market conditions.

We have filed a shelf registration with the Securities and Exchange
Commission (SEC) under which $500.0 million in debt securities are available to
be issued. Our long-term debt rating is A2 and A by Moody's Investor Service and
Standard and Poor's Corporation, respectively.

Liquidity is also provided by our commercial paper program, under which
there was $710.0 million and $691.9 million outstanding at May 31, 2001 and May
31, 2000, respectively. Our issuances of commercial paper are required to be
supported by committed lines of credit and/or cash. During fiscal 2001, we
entered into a new $1.25 billion committed credit facility with a group of
banks: $750 million has a maturity of 364 days from the facility date and $500
million has a maturity of five years from the facility date. To date, we have
not borrowed under this facility. Each year, the $750 million, 364 day facility
can be extended 364 days, and the $500 million, five year facility can be
extended one year. Our ratings for the issuance of commercial paper are P1 and
A1 by Moody's Investor Service and Standard and Poor's Corporation,
respectively. We also maintain significant uncommitted short and long-term lines
of credit with banks. At May 31, 2001 and 2000, we had letters of credit
outstanding totaling $851.8 million and $678.2 million, respectively. These
letters of credit were issued for the purchase of inventory.

Management currently believes that cash generated by operations, together
with access to external sources of funds, will be sufficient to meet our
operating and capital needs.

Dividends per share of common stock for fiscal 2001 were $0.48, the same as
in fiscal 2000. We have paid a dividend for every quarter since February 1984.
Consistent with our practice in prior years, we will review our dividend policy
at the meeting of our Board of Directors in November; however, based upon
current projected earnings and cash flow requirements, we anticipate continuing
to pay a quarterly dividend.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business and consistent with established policies
and procedures, we employ a variety of financial instruments to manage exposure
to fluctuations in the value of foreign currencies and interest rates. It is our
policy to utilize these financial instruments only where necessary to finance
our business and manage such exposures; we do not enter into these transactions
for speculative purposes.

We are exposed to foreign currency fluctuation as a result of our
international sales, production and funding activities. Our foreign currency
risk management objective is to protect cash flows from the adverse impact of
exchange rate movements. We use forward exchange contracts and purchased options
to hedge certain firm commitments and the related receivables and payables,
including third party or intercompany transactions, and use purchased currency
options to hedge certain anticipated but not yet firmly committed

18
21

transactions. When we begin hedging exposures depends on the nature of the
exposure and market conditions. Generally, all firmly committed and anticipated
transactions that are hedged are to be recognized within twelve months. In
addition, we use cross-currency swaps to hedge foreign currency denominated
payments under intercompany loan agreements. Hedged transactions are principally
denominated in European currencies, Japanese yen, Australian dollars, Canadian
dollars, and Korean won.

Our financial performance is also exposed to movements in short and
long-term market interest rates. Our objective in managing this interest rate
exposure is to limit the impact of interest rate changes on earnings and cash
flows, and to reduce overall borrowing costs. To achieve these objectives, we
maintain a mix of medium and long-term fixed rate debt, commercial paper, bank
loans and trade financing from NIAC.

MARKET RISK MEASUREMENT

We monitor foreign exchange risk, interest rate risk and related
derivatives using a variety of techniques including a review of market value,
sensitivity analysis, and Value-at-Risk (VaR). Our market-sensitive derivative
and other financial instruments, as defined by the SEC, are foreign currency
forward contracts, foreign currency option contracts, cross-currency swaps,
intercompany loans denominated in foreign currencies, fixed interest rate U.S.
dollar denominated debt and fixed interest rate Japanese yen denominated debt.

We use VaR to monitor the foreign exchange risk of our foreign currency
forward and foreign currency option derivative instruments only. The VaR
determines the maximum potential one-day loss in the fair value of these foreign
exchange rate-sensitive financial instruments. The VaR model estimates assume
normal market conditions and a 95% confidence level. There are various modeling
techniques that can be used in the VaR computation. Our computations are based
on interrelationships between currencies and interest rates (a
"variance/co-variance" technique). We determined these interrelationships by
observing foreign exchange currency market changes and interest rate changes
over the preceding one year. The value of foreign currency options does not
change on a one-to-one basis with changes in the underlying currency rate. We
adjusted the potential loss in option value for the estimated sensitivity (the
"delta" and "gamma") to changes in the underlying currency rate. We have
excluded anticipated transactions, firm commitments, cash balances and accounts
receivable and payable denominated in foreign currencies from the VaR
calculation, which certain of these instruments are intended to hedge.

The VaR model is a risk analysis tool and does not purport to represent
actual losses in fair value that we will incur, nor does it consider the
potential effect of favorable changes in market rates. It also does not
represent the full extent of the possible loss that may occur. Actual future
gains and losses will differ from those estimated because of changes or
differences in market rates and interrelationships, hedging instruments and
hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on NIKE's foreign currency
sensitive financial instruments, derived using the VaR model, was $18.9 million
and $9.5 million at May 31, 2001 and May 31, 2000, respectively. Such a
hypothetical loss in fair value of our derivatives would be offset by increases
in the value of the underlying transactions being hedged.

Details of all other market-sensitive derivative and other financial
instruments, including their fair values, are included in the table below. These
instruments include intercompany loans denominated in foreign currencies, fixed
interest rate Japanese yen denominated debt, fixed interest rate U.S. dollar
denominated debt, and cross-currency swaps. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. We have excluded the cross-currency swaps from the
foreign exchange risk category because these instruments eliminate all foreign
currency exposure in the cash flows of a Dutch guilder denominated inter-company
loan. We have included these cross-currency swaps in the interest rate risk
category but excluded the related intercompany loan from this category because
the intercompany interest eliminates in consolidation. For the cross-currency
swaps the table presents both the Dutch guilder swap payable and U.S. dollar
swap receivable and the respective pay and receive interest rates. All
information is presented in U.S. dollar equivalents, in millions, except
interest rates.

19
22

EXPECTED MATURITY DATE
YEAR ENDED MAY 31,

Intercompany loans and related interest amounts eliminate in consolidation.
Intercompany loans are generally hedged against foreign exchange risk through
the use of forward contracts and swaps with third parties.

20
23

The fixed interest rate Japanese yen denominated debts were issued by and
are accounted for by two of NIKE's Japanese subsidiaries. Accordingly, the
monthly remeasurement of these instruments due to changes in foreign exchange
rates is recognized in accumulated other comprehensive income upon the
consolidation of these subsidiaries.

There was not a significant change in debt or cross-currency swap market
risks during fiscal 2001. The U.S. dollar fair values of intercompany loans
denominated in foreign currencies was $692.8 million at May 31, 2000, which is
the same as the carrying values of the loans prior to their elimination. The
U.S. dollar fair value of the fixed rate Japanese yen denominated debt that was
outstanding at May 31, 2000 was $220.4 million versus a carrying value of $219.8
million at that date. The U.S. dollar fair values of the fixed rate U.S. dollar
denominated debt, the Dutch guilder swap payable and the U.S. dollar swap
receivable as of May 31, 2000 were $288.4 million, $226.6 million and $288.8
million, respectively, versus carrying values of $299.6 million, $227.6 million
and $300 million, respectively, at that date.

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, 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

21
24

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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Management of NIKE, Inc. is responsible for the information and
representations contained in this report. The financial statements have been
prepared in conformity with the generally accepted accounting principles we
considered appropriate in the circumstances and include some amounts based on
our best estimates and judgments. Other financial information in this report is
consistent with these financial statements.

Our accounting systems include controls designed to reasonably assure that
assets are safeguarded from unauthorized use or disposition and which provide
for the preparation of financial statements in conformity with generally
accepted accounting principles. These systems are supplemented by the selection
and training of qualified financial personnel and an organizational structure
providing for appropriate segregation of duties.

An Internal Audit department reviews the results of its work with the Audit
Committee of the Board of Directors, presently consisting of three outside
directors. The Audit Committee is responsible for recommending to the Board of
Directors the appointment of the independent accountants and reviews with the
independent accountants, management and the internal audit staff, the scope and
the results of the annual examination, the effectiveness of the accounting
control system and other matters relating to the financial affairs of NIKE as
they deem appropriate. The independent accountants and the internal auditors
have full access to the Committee, with and without the presence of management,
to discuss any appropriate matters.

22
25

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of NIKE, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(A)(1) on page 45 present fairly, in all material
respects, the financial position of NIKE, Inc. and its subsidiaries at May 31,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended May 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(A)(2) on page 45 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Portland, Oregon
June 27, 2001

23
26

NIKE, INC.

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes to consolidated financial statements are an integral part
of this statement.

24
27

NIKE, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

The accompanying notes to consolidated financial statements are an integral part
of this statement.

25
28

NIKE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes to consolidated financial statements are an integral part
of this statement.

26
29

NIKE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

The accompanying notes to consolidated financial statements are an integral part
of this statement.
27
30

NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of consolidation:

The consolidated financial statements include the accounts of NIKE, Inc.
and its subsidiaries (the Company). All significant intercompany transactions
and balances have been eliminated.

Recognition of revenues:

Wholesale revenues are recognized when title passes and the risks and
rewards of ownership have passed to the customer based on the terms of sale.
Title passes generally upon shipment or upon receipt by the customer depending
on the country of the sale and the agreement with the customer. Retail store
revenues are recorded at the time of sale. Provisions for sales discounts and
returns are made at the time of sale.

Advertising and promotion:

Advertising production costs are expensed the first time the advertisement
is run. Media (TV and print) placement costs are expensed in the month the
advertising appears. The majority of the Company's promotional expenses result
from payments under endorsement contracts. Accounting for endorsement payments
is based upon specific contract provisions. Generally, endorsement payments are
expensed uniformly over the term of the contract after giving recognition to
periodic performance compliance provisions of the contracts. Prepayments made
under contracts are included in prepaid expenses or other assets depending on
the length of the contract. Total advertising and promotion expenses were
$1,000.5 million, $978.2 million and $978.6 million for the years ended May 31,
2001, 2000 and 1999, respectively. Included in prepaid expenses and other assets
was $122.3 million and $158.7 million at May 31, 2001 and 2000, respectively,
relating to prepaid advertising and promotion expenses.

Cash and equivalents:

Cash and equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.

Inventory valuation:

Inventories are stated at the lower of cost or market. Inventories are
valued on a first-in, first-out (FIFO) basis. During the year ended May 31,
1999, the Company changed its method of determining cost for substantially all
of its U.S. inventories from last-in, first-out (LIFO) to FIFO. See Note 11.

Property, plant and equipment and depreciation:

Property, plant and equipment are recorded at cost. Depreciation for
financial reporting purposes is determined on a straight-line basis for
buildings and leasehold improvements over 2 to 40 years and principally on a
declining balance basis for machinery and equipment over 2 to 15 years. Computer
software is depreciated on a straight-line basis over 3 to 10 years.

Identifiable intangible assets and goodwill:

At May 31, 2001 and 2000, the Company had patents, trademarks and other
identifiable intangible assets recorded at a cost of $218.6 million and $215.2
million, respectively. The Company's excess of purchase cost over the fair value
of net assets of businesses acquired (goodwill) was $322.5 million and $323.5
million at May 31, 2001 and 2000, respectively.

Identifiable intangible assets and goodwill are being amortized over their
estimated useful lives on a straight-line basis over five to forty years.
Accumulated amortization was $143.8 million and $127.8 million at

28
31
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

May 31, 2001 and 2000, respectively. Amortization expense, which is included in
other income/expense, was $15.6 million, $18.5 million and $19.4 million for the
years ended May 31, 2001, 2000 and 1999, respectively.

Impairment of long-lived assets:

When events or circumstances indicate the carrying value of a long-lived
asset may be impaired, the Company uses an estimate of the future undiscounted
cash flows to be derived from the remaining useful life of the asset to assess
whether or not the asset is recoverable. If the future undiscounted cash flows
to be derived over the life of the asset do not exceed the asset's net book
value, the Company then considers estimated fair market value versus carrying
value in determining any potential impairment.

Foreign currency translation and foreign currency transactions:

Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in the foreign currency
translation adjustment, a component of accumulated other comprehensive income in
shareholders' equity. Gains and losses resulting from transactions that are made
in a currency different from the functional currency of the applicable Company
entity are recognized in earnings as they occur or, for hedging contracts, when
the underlying hedged transaction affects earnings. Foreign currency transaction
gains and losses were a $129.6 million gain, a $36.1 million gain, and a $32.3
million loss for the years ended May 31, 2001, 2000, and 1999, respectively.

Derivatives:

The Company enters into foreign currency contracts in order to reduce the
impact of certain foreign currency fluctuations. Firmly committed transactions
and the related receivables and payables may be hedged with forward exchange
contracts or purchased options. Anticipated, but not yet firmly committed,
transactions may be hedged through the use of purchased options. Premiums paid
on purchased options and any realized gains are included in prepaid expenses or
accrued liabilities and are recognized in earnings when the transaction being
hedged is recognized. Gains and losses arising from foreign currency forward and
option contracts and cross-currency swap transactions are recognized in income
or expense as offsets of gains and losses resulting from the underlying hedged
transactions. Hedge effectiveness is determined by evaluating whether gains and
losses on hedges will offset gains and losses on the underlying exposures. This
evaluation is performed at inception of the hedge and periodically over the life
of the hedge. Occasionally, hedges may cease to be effective and are thus
terminated prior to recognition of the underlying transaction. Gains and losses
on these hedges are deferred until the point in time ineffectiveness is
determined and will be included in the basis of the underlying transaction.
Hedges will also be terminated if the underlying transaction is no longer
expected to occur. When this occurs, all related deferred gains and losses are
recognized in earnings immediately. Cash flows from hedging activities are
classified in the same category as the cash flows from the related foreign
exchange transaction activity. See Note 15 for further discussion.

Income taxes:

United States income taxes are provided currently on financial statement
earnings of non-U.S. subsidiaries expected to be repatriated. The Company
determines annually the amount of undistributed non-U.S. earnings to invest
indefinitely in its non-U.S. operations. The Company accounts for income taxes
using the asset and liability method. This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of other
assets and liabilities. See Note 6 for further discussion.

29
32
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings per share:

Basic earnings per common share is calculated by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per common share is calculated by adjusting weighted average
outstanding shares, assuming conversion of all potentially dilutive stock
options and awards. See Note 9 for further discussion.

Management estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates, including
estimates relating to assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.

Reclassifications:

Certain prior year amounts have been reclassified to conform to fiscal year
2001 presentation. These changes had no impact on previously reported results of
operations or shareholders' equity.

Recently issued accounting standards:

Effective June 1, 2001, the Company will adopt Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" (FAS 133).

As required upon adoption of FAS 133, a one-time transition adjustment will
be recorded as of June 1, 2001 on both the consolidated statement of income and
consolidated balance sheet. The Company estimates the transition adjustment on
the consolidated statement of income to be a charge of approximately $5.1
million, net of tax effect. This amount relates to an investment that will be
adjusted to fair value in accordance with FAS 133. The transition adjustment on
the consolidated balance sheet represents the initial recognition of the fair
values of hedge derivatives outstanding on the adoption date and realized gains
and losses on effective hedges for which the underlying exposure has not yet
affected earnings. The transition adjustment on the consolidated balance sheet
is estimated to be an increase in current assets of $118.5 million, an increase
in noncurrent assets of $87.0 million, an increase in current liabilities of
$151.6 million, and an increase in other comprehensive income of approximately
$59.0 million, net of tax effects.

The Company expects to adopt SFAS No. 142, "Goodwill and Other Intangible
Assets" on June 1, 2002 (FAS 142). As required by FAS 142, the Company will
perform an impairment test on goodwill and other intangible assets as of the
adoption date. Thereafter, the Company will perform impairment tests annually
and whenever events or circumstances occur indicating that goodwill or other
intangible assets might be impaired. Amortization of goodwill and certain other
intangible assets, including those recorded in past business combinations, will
cease. The Company has not yet determined what the impact of FAS 142 will be on
the Company's results of operations and financial position.

30
33
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- INVENTORIES:

Inventories by major classification are as follows:

NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment includes the following:

Capitalized interest expense incurred was $8.4 million, $4.8 million and
$6.9 million for the years ended May 31, 2001, 2000 and 1999, respectively.

NOTE 4 -- SHORT-TERM BORROWINGS AND CREDIT LINES:

Commercial paper outstanding, notes payable to banks and interest-bearing
accounts payable to Nissho Iwai American Corporation (NIAC) are summarized
below:

The Company has outstanding loans at interest rates at various spreads
above the banks' cost of funds for financing non-U.S. operations. Certain of
these loans are secured by accounts receivable and inventory.

31
34
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

U.S. operations were funded principally with commercial paper. At May 31, 2001
there was $710.0 million outstanding and at May 31, 2000 there was $691.9
million outstanding under these arrangements, net of discounting.

The Company purchases through NIAC certain athletic footwear and apparel it
acquires from non-U.S. suppliers. These purchases are for the Company's
operations outside of the U.S. and Europe. Accounts payable to NIAC are
generally due up to 60 days after shipment of goods from the foreign port. The
interest on such accounts payable accrues at the 60 day London Interbank Offered
Rate (LIBOR) as of the beginning of the month of the invoice date, plus 0.75%.

At May 31, 2001, the Company had no outstanding borrowings under its $1.25
billion committed credit facility with a group of 20 banks. This credit facility
has a 364-day revolver (due 364 days from the borrowing date) for $750.0 million
and a five-year revolver (due five years from the borrowing date) for $500.0
million. Each year, the $750 million, 364-day facility can be extended 364 days,
and the $500 million, five-year facility can be extended one year. Based on the
Company's current senior unsecured debt ratings, the interest rate charged on
any outstanding borrowings on the $750.0 million revolver would be the
prevailing LIBOR rate plus 0.24%, and the interest rate charged on any
outstanding borrowings on the $500.0 million revolver would be the prevailing
LIBOR rate plus 0.22%. The facility fees for the $750.0 million and the $500.0
million revolvers are 0.06% and 0.08%, respectively, of the total commitment.
Under these agreements, the Company must maintain, among other things, certain
minimum specified financial ratios with which the Company was in compliance at
May 31, 2001.

NOTE 5 -- LONG-TERM DEBT:

Long-term debt includes the following:

In December 1996, the Company filed a $500.0 million shelf registration
with the Securities and Exchange Commission (SEC) and issued $200 million
seven-year notes, maturing December 1, 2003. In June 1997, the Company issued an
additional $100 million in medium-term notes under this program with maturities
of June 16, 2000 and June 17, 2002. The note that matured on June 16, 2000 was
repaid. Interest on the remaining note outstanding is paid semi-annually. The
proceeds from all three issues were subsequently exchanged for Dutch guilders
and loaned to a European subsidiary. The Company entered into swap transactions
to hedge the foreign currency exposure related to the repayment of these
intercompany loans. (See Note 15.) In February 1999, the Company filed a shelf
registration with the SEC for the sale of up to $500 million in debt securities,
of which $200 million had been previously registered but not issued under the
December 1996 registration.

32
35
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1996, one of the Company's Japanese subsidiaries borrowed 10,500
million Japanese yen in a private placement with a maturity of June 26, 2011.
Interest is paid semi-annually. The agreement provides for early retirement
after year ten.

In July 1999, another of the Company's Japanese subsidiaries assumed 13,000
million in Japanese yen loans as part of its agreement to purchase a
distribution center in Japan, which serves as collateral for the loans. These
loans mature in equal quarterly installments during the period August 20, 2001
through November 20, 2020. Interest is also paid quarterly.

Amounts of long-term debt maturities in each of the years ending May 31,
2002 through 2006 are $5.4 million, $55.5 million, $205.2 million, $5.5 million
and $5.6 million, respectively.

NOTE 6 -- INCOME TAXES:

Income before income taxes and the provision for income taxes are as
follows:

The Company has indefinitely reinvested approximately $81.0 million of the
cumulative undistributed earnings of certain foreign subsidiaries, of which
$25.0 million was earned in the year ended May 31, 2001. Such earnings would be
subject to U.S. taxation if repatriated to the U.S. The amount of unrecognized
deferred tax liability associated with the undistributed earnings was
approximately $19.9 million.

A benefit was recognized for foreign loss carryforwards of $118.6 million
at May 31, 2001, of which $4.0 million, $6.0 million, $31.6 million, $8.3
million and $8.1 million expire in the years ended May 31, 2004, 2005, 2006,
2007, and 2008, respectively. Foreign loss carryforwards of $60.6 million do not
expire.

As of May 31, 2001 the Company had utilized all foreign tax credits.

33
36
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax liabilities (assets) are comprised of the following:

A reconciliation from the U.S. statutory federal income tax rate to the
effective income tax rate follows:

NOTE 7 -- REDEEMABLE PREFERRED STOCK:

NIAC is the sole owner of the Company's authorized Redeemable Preferred
Stock, $1 par value, which is redeemable at the option of NIAC or the Company at
par value aggregating $0.3 million. A cumulative dividend of $0.10 per share is
payable annually on May 31 and no dividends may be declared or paid on the
common stock of the Company unless dividends on the Redeemable Preferred Stock
have been declared and paid in full. There have been no changes in the
Redeemable Preferred Stock in the three years ended May 31, 2001. As the holder
of the Redeemable Preferred Stock, NIAC does not have general voting rights but
does have the right to vote as a separate class on the sale of all or
substantially all of the assets of the Company and its subsidiaries, on merger,
consolidation, liquidation or dissolution of the Company or on the sale or
assignment of the NIKE trademark for athletic footwear sold in the United
States.

NOTE 8 -- COMMON STOCK:

The authorized number of shares of Class A Common Stock no par value and
Class B Common Stock no par value are 110 million and 350 million, respectively.
Each share of Class A Common Stock is convertible into one share of Class B
Common Stock. Voting rights of Class B Common Stock are limited in certain
circumstances with respect to the election of directors.

In 1990, the Board of Directors adopted, and the shareholders approved, the
NIKE, Inc. 1990 Stock Incentive Plan (the "1990 Plan"). The 1990 Plan provides
for the issuance of up to 37.5 million shares of

34
37
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Class B Common Stock in connection with stock options and other awards granted
under such plan. The 1990 Plan authorizes the grant of incentive stock options,
non-statutory stock options, stock appreciation rights, stock bonuses and the
sale of restricted stock. The exercise price for incentive stock options may not
be less than the fair market value of the underlying shares on the date of
grant. The exercise price for non-statutory stock options, stock appreciation
rights and the purchase price of restricted stock may not be less than 75% of
the fair market value of the underlying shares on the date of grant. No
consideration will be paid for stock bonuses awarded under the 1990 Plan. A
committee of the Board of Directors administers the 1990 Plan. The committee has
the authority to determine the employees to whom awards will be made, the amount
of the awards, and the other terms and conditions of the awards. As of May 31,
2001, the committee has granted substantially all non-statutory stock options at
100% of fair market value on the date of grant under the 1990 Plan.

During the year ended May 31, 2001, the Company granted 25,000 shares of
restricted stock at a market value of $39.875 per share under the 1990 plan. A
portion of the grant was immediately vested, a portion will vest in one year and
a final portion in two years. The shares are subject to forfeiture if employment
terminates prior to vesting. During the year ended May 31, 2000, the Company
granted 427,000 shares of restricted stock at a market value of $27.69 per
share. The restrictions lapse and recipients of the restricted shares become
vested in the shares over a three-year period from the date of grant. The shares
are subject to partial forfeiture if employment terminates within the three-year
period. Recipients of restricted shares are entitled to cash dividends and to
vote their respective shares. The value of all of the restricted shares was
established by the market price on the date of grant. Unearned compensation was
charged for the market value of the restricted shares. The unearned compensation
is shown as a reduction of shareholders' equity and is being amortized ratably
over the vesting period. During the years ended May 31, 2001 and 2000,
respectively, the Company recognized $4.3 million and $1.0 million in selling
and administrative expense related to the grants, net of forfeitures.

During the years ended May 31, 2001 and 2000, the Company also granted
shares of restricted stock under the Long-Term Incentive Plan ("LTIP"), adopted
by the Board of Directors and approved by shareholders in September 1997. Under
the LTIP, awards are made to certain executives based on performance targets
established over varying time periods. Once performance targets are achieved,
the shares of stock are issued and remain restricted for an additional three
years, subject to forfeiture if the executive's employment terminates within
that period. Plan participants are entitled to cash dividends and to vote their
respective shares. The value of the restricted shares is established by the
market price on the date of grant. Unearned compensation is charged for the
market value of the restricted shares. The unearned compensation is shown as a
reduction of shareholders' equity and is being amortized ratably over the
service and vesting periods. Under the LTIP, a total of 115,000 restricted
shares with an average market value of $47.56 were issued during the year ended
May 31, 2001, and a total of 33,000 restricted shares with an average market
value of $51.06 were issued during the year ended May 31, 2000. The Company
recognized $2.3 million and $2.0 million of selling and administrative expense
in the years May 31, 2001 and 2000, respectively, net of forfeitures.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (FAS 123) defines a fair value method of accounting
for employee stock compensation and encourages, but does not require, all
entities to adopt that method of accounting. Entities electing not to adopt the
fair value method of accounting must make pro forma disclosures of net income
and earnings per share, as if the fair value based method of accounting defined
in this statement had been applied.

The Company has elected not to adopt the fair value method; however, as
required by FAS 123, the Company has computed for pro forma disclosure purposes,
the fair value of options granted during the years ended May 31, 2001, 2000 and
1999 using the Black-Scholes option pricing model. The weighted average
assumptions used for stock option grants for each of these years were a dividend
yield of 1%; expected

35
38
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

volatility of the market price of the Company's common stock of 39%, 37%, and
34% for the years ended May 31, 2001, 2000, and 1999, respectively; a
weighted-average expected life of the options of approximately five years; and
interest rates of 5.4% for the year ended May 31, 2001, 5.8%, 6.2% and 6.6% for
the year ended May 31, 2000 and 5.5% and 4.9% for the year ended May 31, 1999.
These interest rates are reflective of option grant dates throughout the year.

Options were assumed to be exercised over the 5 year expected life for
purposes of this valuation. Adjustments for forfeitures are made as they occur.
For the years ended May 31, 2001, 2000 and 1999, the total value of the options
granted, for which no previous expense has been recognized, was computed as
approximately $5.0 million, $129.8 million and $61.6 million, respectively,
which would be amortized on a straight line basis over the vesting period of the
options. The weighted average fair value per share of the options granted in the
years ended May 31, 2001, 2000 and 1999 are $17.27, $15.81 and $17.33,
respectively.

If the Company had accounted for these stock options issued to employees in
accordance with FAS 123, the Company's pro forma net income and pro forma
earnings per share (EPS) would have been reported as follows:

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 years since
options vest over several years and additional awards are made each year.

The following summarizes the stock option transactions under plans
discussed above (adjusted for all applicable stock splits):

36
39
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the exercise prices, the number of options
outstanding and exercisable and the remaining contractual lives of the Company's
stock options at May 31, 2001:

NOTE 9 -- EARNINGS PER SHARE:

The following represents a reconciliation from basic earnings per share to
diluted earnings per share. Options to purchase 8.3 million and 9.7 million
shares of common stock were outstanding at May 31, 2001 and May 31, 2000,
respectively, 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 the common shares and, therefore, the effect would be antidilutive. No
such antidilutive options were outstanding at May 31, 1999.

NOTE 10 -- BENEFIT PLANS:

The Company has a profit sharing plan available to substantially all
U.S.-based employees. The terms of the plan call for annual contributions by the
Company as determined by the Board of Directors. Contributions of $13.1 million,
$15.7 million and $12.8 million to the plan are included in other income/expense
in the consolidated financial statements for the years ended May 31, 2001, 2000
and 1999, respectively. The Company has a voluntary 401(k) employee savings
plan. The Company matches a portion of employee contributions with common stock.
Plan changes during the year ended May 31, 2001 included a larger Company match
percentage and a change to immediate vesting of the Company match, compared to a
previous vesting schedule over 5 years. Company contributions to the savings
plan were $12.7 million, $6.7 million and $7.4 million for the years ended May
31, 2001, 2000 and 1999, respectively, and are included in selling and
administrative expenses.

NOTE 11 -- OTHER INCOME/EXPENSE, NET:

Included in other income/expense for the years ended May 31, 2001, 2000,
and 1999, was interest income of $13.9 million, $13.6 million and $13.0 million,
respectively. In addition, included in other income/expense in the year ended
May 31, 1999 was income of $15.0 million related to the change in accounting for
inventories in the U.S. from the LIFO to the FIFO method. The change was not
considered significant to

37
40
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

show the cumulative effect or to restate comparable income statements as
dictated by Accounting Principles Board Opinion No. 20.

NOTE 12 -- COMMITMENTS AND CONTINGENCIES:

The Company leases space for certain of its offices, warehouses and retail
stores under leases expiring from one to sixteen years after May 31, 2001. Rent
expense aggregated $152.0 million, $145.5 million and $129.5 million for the
years ended May 31, 2001, 2000 and 1999, respectively. Amounts of minimum future
annual rental commitments under non-cancelable operating leases in each of the
five years ending May 31, 2002 through 2006 are $108.9 million, $101.3 million,
$88.0 million, $78.4 million, $70.1 million, respectively, and $298.8 million in
later years.

As of May 31, 2001 and 2000, the Company had letters of credit outstanding
totaling $851.8 million and $678.2 million, respectively. These letters of
credit were issued for the purchase of inventory.

In the ordinary course of its business, the Company has pending various
cases involving contractual matters, employee-related matters, distribution
questions, product liability claims, trademark infringement and other matters.
The Company does not believe there are any pending legal proceedings that will
have a material impact on the Company's financial position or results of
operations.

NOTE 13 -- RESTRUCTURING CHARGES:

During the year ended May 31, 1999, a $60.1 million charge was taken to
better align the Company's cost structure with expected revenue growth rates.
The charge (shown below in tabular format) was primarily for costs of severing
employees, including severance packages, lease abandonments and the write down
of assets no longer in use. Employees were terminated in Europe, Asia Pacific,
and in the United States, and included employees affected by the Company's shift
to outsourcing certain of its information technology functions. The original
number of employees to be terminated was 1,291. As of May 31, 2001, 71 employees
have found positions elsewhere in the Company and 1,200 have left the Company,
leaving 20 still to be terminated. Due to the change in the number of employees
that will be terminated, $0.1 million and $1.4 million of the reserve was
reversed during the years ended May 31, 2001 and 2000, respectively.

Also included in the charge was a $20.2 million write-off of certain assets
related to the change in strategies around the Company's warehouse distribution
facilities in the United States.

The remaining accrual balance as of May 31, 2001 of $1.5 million will be
relieved as leases expire and severance payments are completed.

38
41
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Detail of the restructuring charge is as follows:

During the year ended May 31, 2000, a $1.1 million reserve established as
part of a restructuring charge in the year ended May 31, 1998 was reversed due
to changes in outstanding lease commitments.

NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts reflected in the consolidated balance sheet for cash
and equivalents and notes payable approximate fair value due to the short
maturities. The fair value of long-term debt is estimated using discounted cash
flow analyses, based on the Company's incremental borrowing rates for similar
types of borrowing arrangements. The fair value of the Company's long-term debt,
including current portion, is approximately $437.8 million, compared to a
carrying value of $441.3 million at May 31, 2001 and $509.9 million, compared to
a carrying value of $520.4 million at May 31, 2000. See Note 15 for fair value
of derivatives.

NOTE 15 -- FINANCIAL RISK MANAGEMENT AND DERIVATIVES:

The purpose of the Company's foreign currency hedging activities is to
protect the Company from the risk that the eventual cash flows resulting from
the sale and purchase of products in foreign currencies will be adversely
affected by changes in exchange rates. In addition, the Company seeks to manage
the impact of foreign currency fluctuations related to the repayment of
intercompany transactions, including intercompany borrowings. The Company does
not hold or issue financial instruments for trading purposes. It is the
Company's policy to utilize derivative financial instruments to reduce foreign
exchange risks where internal netting strategies cannot be effectively employed.
Fluctuations in the value of hedging instruments are offset by fluctuations in
the value of the underlying exposures being hedged.

The Company uses forward exchange contracts and purchased options to hedge
certain firm purchases and sales commitments and the related payables and
receivables, including other third party or intercompany foreign currency
transactions, and uses purchased currency options to hedge certain anticipated
but not yet firmly committed transactions. Cross-currency swaps are used to
hedge foreign currency denominated payments related to intercompany loan
agreements. Hedged transactions are denominated primarily in European
currencies, Japanese yen, Australian dollars, Canadian dollars, and Korean won.
Premiums paid on purchased options and any realized gains are included in
prepaid expenses or accrued liabilities and recognized in earnings when the
underlying transaction is recognized. Deferred option premium cost, net of
realized gains, was $6.1 million of net cost at May 31, 2001. Deferred option
premium cost, net of realized gains, was

39
42
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$3.8 million of net benefit at May 31, 2000. Results related to hedges of firmly
committed transactions and the related receivables and payables are deferred and
are recognized in earnings or as adjustments of carrying amounts when the
offsetting results are recognized on the underlying transaction. Net realized
and unrealized gains on forward contracts deferred at May 31, 2001 and 2000 were
$15.8 million and $42.8 million, respectively.

The estimated fair values of derivatives used to hedge the Company's risks
will fluctuate over time. The fair value of the forward exchange contracts and
cross-currency swaps are estimated by obtaining quoted market prices. The fair
value of option contracts is estimated using option pricing models widely used
in the financial markets. These fair value amounts should not be viewed in
isolation, but rather in relation to the fair values of the underlying hedged
transactions and the overall reduction in the Company's exposure to adverse
fluctuations in foreign exchange rates. The notional amounts of derivatives
summarized below do not necessarily represent amounts exchanged by the parties
and, therefore, are not a direct measure of the exposure to the Company through
its use of derivatives. The amounts exchanged are calculated on the basis of the
notional amounts and the other terms of the derivatives, which relate to
interest rates, exchange rates or other financial indices.

The following table presents the aggregate notional principal amounts,
carrying values and fair values of the Company's derivative financial
instruments outstanding at May 31, 2001 and 2000.

Carrying values primarily represent amounts recognized for unrealized gains
and losses on contracts which do not meet the criteria for deferral accounting
and unamortized premiums paid on option contracts.

The net fair value of outstanding forward contracts of $51.7 million as of
May 31, 2001 was comprised of unrealized fair value losses of $22.9 million and
unrealized fair value gains of $74.6 million. The net fair value of outstanding
forward contracts of $62.1 million as of May 31, 2000 was comprised of
unrealized fair value losses of $16.4 million and unrealized fair value gains of
$78.5 million.

The normal term of foreign exchange forward and option contracts entered
into is one year or less. The currency swaps have maturity dates consistent with
the maturity dates of the related intercompany loan which matures partially
during the year ending May 31, 2003 and during the year ending May 31, 2004. All
realized results deferred at May 31, 2001 will be recorded in earnings within
one year.

The Company is exposed to credit-related losses in the event of
non-performance by counterparties to hedging instruments. The counterparties to
derivative transactions are major financial institutions with high investment
grade credit ratings and, additionally, counterparties to derivatives three
years or greater are AA+ or better rated. However, this does not eliminate the
Company's exposure to credit risk with these institutions. This credit risk is
generally limited to the unrealized gains in such contracts should any of these
counterparties fail to perform as contracted. To manage this risk, the Company
has established strict counterparty credit guidelines which are continually
monitored and reported to senior management according to prescribed guidelines.
The Company utilizes a portfolio of financial institutions either headquartered
or operating in the

40
43
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

same countries the Company conducts its business. As a result of the above
considerations, the Company considers the risk of counterparty default to be
minimal.

In addition to hedging instruments, the Company is subject to
concentrations of credit risk associated with cash and equivalents and accounts
receivable. The Company places cash and equivalents with financial institutions
with investment grade credit ratings and, by policy, limits the amount of credit
exposure to any one financial institution. The Company considers its
concentration risk related to accounts receivable to be mitigated by the
Company's credit policy, the significance of outstanding balances owed by each
individual customer at any point in time and the geographic dispersion of these
customers.

NOTE 16 -- OPERATING SEGMENTS AND RELATED INFORMATION:

Operating Segments. For subsidiaries participating in NIKE brand sales
activity, the Company's major operating segments are defined by geographic
regions. Other brands as shown below represent activity for our subsidiaries
Cole Haan Holdings, Inc., Bauer NIKE Hockey Inc., and NIKE IHM, Inc., and are
considered immaterial for individual disclosure. In prior years, the Company's
operations in Africa were included in the Americas region, but effective June 1,
2000, these operations are included in the EMEA (Europe, Middle East, and
Africa) region. Africa information and certain other prior year segment
information has been reclassified to conform with current year presentation.
Where applicable, "Corporate" represents items necessary to reconcile to the
consolidated financial statements; these items generally include corporate
activity and corporate eliminations. The segments are evidence of the structure
of the Company's internal organization. Each NIKE brand geographic segment
operates predominantly in one industry: the design, production, marketing and
selling of sports and fitness footwear, apparel, and equipment.

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 centrally manages interest expense. Operating
segment interest is primarily the result of intercompany lending, which is
eliminated for consolidated purposes. The Company evaluates performance of
individual operating segments based on Contribution Profit before Corporate
Allocations and Income Taxes (referred to as management pre-tax income). On a
consolidated basis, this amount represents Income Before Taxes as shown in the
Consolidated Statements of Income. Reconciling items for management pre-tax
income represent corporate costs that are not allocated to the operating
segments for management reporting and intercompany eliminations for specific
income statement items.

Additions to long-lived assets predominantly represent capital
expenditures, which are shown below by operating segment. Other additions to
long-lived assets represent additions to identifiable intangibles and goodwill,
which are immaterial for disclosure. Amortization of identifiable intangible
assets and goodwill is considered a corporate expense and is not attributable to
any specific operating segment. See Note 1 for further discussion on
identifiable intangible assets and goodwill.

41
44
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accounts receivable, inventory and property, plant and equipment for
operating segments are regularly reviewed by management and are therefore
provided below.

42
45
NIKE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Revenues by Major Product Lines. Revenues to external customers for NIKE
brand products are attributable to sales of footwear, apparel, and equipment.
Revenues to external customers for Other brands include external sales by Cole
Haan Holdings, Inc. and Bauer NIKE Hockey Inc..

Revenues and Long-Lived Assets by Geographic Area. Geographical area
information is similar to that shown previously under operating segments with
the exception that Other brand activity is derived predominantly from activity
in the U.S. and Americas. Revenues derived in the U.S. were $5,144.2 million
$5,017.4 million, $5,042.6 million, during the years ended May 31, 2001, 2000,
and 1999, respectively. Long-lived assets, which are comprised of net property,
plant & equipment and net identifiable intangible assets and goodwill,
attributable to operations in the U.S. were $1,201.5 million $1,222.5 million,
and $1,112.3 million at May 31, 2001, 2000, and 1999, respectively.

Major Customers. During the years ended May 31, 2001, 2000 and 1999,
revenues derived from one customer represented 11.8%, 12.4% and 10.3%,
respectively of the Company's consolidated revenues. Sales to this customer are
included in all segments of the Company.

43
46

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no change of accountants nor any disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosure required to be reported under this Item.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 401 of Regulation S-K regarding directors
is included under "Election of Directors" in the definitive Proxy Statement for
our 2001 Annual Meeting of Shareholders and is incorporated herein by reference.
The information required by Item 401 of Regulation S-K regarding executive
officers is included under "Executive Officers of the Registrant" in Item 1 of
this Report. The information required by Item 405 of Regulation S-K is included
under "Section 16(a) Beneficial Ownership Reporting Compliance" in the
definitive Proxy Statement for our 2001 Annual Meeting of Shareholders and is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is included under "Director
Compensation and Retirement Plan," "Executive Compensation" (but excluding the
Performance Graph), "Personnel Committee Interlocks and Insider Participation"
and "Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" in the definitive Proxy Statement for our 2001 Annual Meeting of
Shareholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is included under "Stock Holdings of
Certain Owners and Management" in the definitive Proxy Statement for our 2001
Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is included under "Certain
Transactions and Business Relationships" and "Indebtedness of Management" in the
definitive Proxy Statement for our 2001 Annual Meeting of Shareholders and is
incorporated herein by reference.

44
47

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(A) The following documents are filed as part of this report:

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

3. 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,
1995).
3.2 Third Restated Bylaws, as amended (incorporated by reference
from Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended August 31, 1995).
4.1 Restated Articles of Incorporation, as amended (see Exhibit
3.1).
4.2 Third Restated Bylaws, as amended (see Exhibit 3.2).
4.3 Indenture between the Company and The First National Bank of
Chicago, as Trustee (incorporated by reference from Exhibit
4.01 to Amendment No. 1 to Registration Statement No.
333-15953 filed by the Company on November 26, 1996).
10.1 Credit Agreement dated as of November 17, 2000 among NIKE,
Inc., Bank of America, N.A., individually and as Agent, and
the other banks party thereto (incorporated by reference
from Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 2000).
10.2 Form of non-employee director Stock Option Agreement
(incorporated by reference from Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 2000).*
10.3 Form of Indemnity Agreement entered into between the Company
and each of its officers and directors (incorporated by
reference from the Company's definitive proxy statement
filed in connection with its annual meeting of shareholders
held on September 21, 1987).
10.4 NIKE, Inc. 1990 Stock Incentive Plan (incorporated by
reference from the Company's definitive proxy statement
filed in connection with its annual meeting of shareholders
held on September 18, 2000).*
10.5 NIKE, Inc. Executive Performance Sharing Plan (incorporated
by reference from the Company's definitive proxy statement
filed in connection with its annual meeting of shareholders
held on September 18, 2000).*
10.6 NIKE, Inc. Long-Term Incentive Plan (incorporated by
reference from the Company's definitive proxy statement
filed in connection with its annual meeting of shareholders
held on September 22, 1997).*

45
48

10.7 Collateral Assignment Split-Dollar Agreement between NIKE,
Inc. and Philip H. Knight dated March 10, 1994 (incorporated
by reference from Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
1994).*
12.1 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP, independent
accountants (set forth on page F-2 of this Annual Report on
Form 10-K).

- ---------------
* Management contract or compensatory plan or arrangement.

Upon written request to Investor Relations, NIKE, Inc., One Bowerman Drive,
Beaverton, Oregon 97005-6453, NIKE will furnish shareholders with a copy of any
Exhibit upon payment of $.10 per page, which represents our reasonable expenses
in furnishing Exhibits.

(B) The following reports on Form 8-K were filed by NIKE during the last quarter
of fiscal 2001:

46
49

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)

F-1
50

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the documents listed
below of our report dated June 27, 2001 relating to the financial statements and
financial statement schedule of NIKE, Inc., which appears in this Form 10-K:

1. Registration Statement on Form S-8 (No. 2-81419) of NIKE, Inc.;

2. Registration Statement on Form S-3 (No. 33-43205) of NIKE, Inc.;

3. Registration Statement on Form S-3 (No. 33-48977) of NIKE, Inc.;

4. Registration Statement on Form S-3 (No. 33-41842) of NIKE, Inc.;

5. Registration Statement on Form S-8 (No. 33-63995) of NIKE, Inc.;

6. Registration Statement on Form S-3 (No. 333-15953) of NIKE, Inc.;

7. Registration Statement on Form S-8 (No. 333-63581) of NIKE, Inc.;

8. Registration Statement on Form S-8 (No. 333-63583) of NIKE, Inc.; and

9. Registration Statement on Form S-3 (No. 333-71975) of NIKE, Inc.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Portland, Oregon
August 9, 2001

F-2
51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: August 9, 2001 NIKE, INC.

By: /s/ PHILIP H. KNIGHT
------------------------------------
Philip H. Knight
Chairman of the Board, Chief
Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

S-1