On November 15, 2012, we announced a two-for-one split of both NIKE Class A and Class B Common shares. The stock split was in the form of a 100 percent stock dividend payable on December 24, 2012 to shareholders of record at the close of business December 10, 2012. Common stock began trading at the split-adjusted price on December 26, 2012. All share numbers and per share amounts presented reflect the stock split.

In the second quarter of fiscal 2013, our revenues from continuing operations increased 7% to $6.0 billion. Excluding the impact of currency exchange rates, revenues from continuing operations would have grown 10%. We delivered net income from continuing operations of $521 million and diluted earnings per share from continuing operations of $0.57, 9% and 12% above the second quarter of fiscal 2012, respectively.

Income before income taxes from continuing operations increased 13% compared to the second quarter of the prior year due to an increase in revenues, selling and administrative expense leverage, and an increase in other (income) expense, net, that more than offset the decline in gross margin. The decline in gross margin was primarily driven by higher product costs, unfavorable currency exchange rates, and an increase in third party royalties, which more than offset the positive impact of higher average product selling prices. The NIKE Brand, which represents over 90% of NIKE, Inc. revenues, delivered constant currency revenue growth in all geographies except China and across all product types and categories. Brand strength, innovative products and strong category retail presentation continue to fuel the demand for NIKE Brand products. Revenue from our Other Businesses also grew, reflecting growth in every business, led by Converse and NIKE Golf.

Our second quarter net income and diluted earnings per share from continuing operations were negatively impacted by a year-on-year increase in our effective tax rate of 270 basis points; however diluted earnings per share benefited from a decline in the weighted average number of diluted common shares outstanding, driven by our share repurchase program.

We continually evaluate our existing portfolio of businesses to ensure resources are invested in those businesses that are accretive to the NIKE Brand, and have the greatest potential to deliver profitable growth and high returns on capital. During the fourth quarter of fiscal 2012, we announced our intention to divest of Cole Haan and Umbro, allowing us to focus our resources on driving growth in the NIKE, Jordan, Converse and Hurley brands. On November 30, 2012, we completed the sale of Umbro to Iconix Brand Group for $225 million, recognizing an after tax loss on sale of $107 million. For the second quarter ended November 30, 2012 the results of Umbro's operations and financial position are presented as discontinued operations.

On November 16, 2012, we reached a definitive agreement to sell Cole Haan to Apax Partners for $570 million. For the quarter ended November 30, 2012, the Company has classified Cole Haan as held-for-sale and presented the results of Cole Haan's operations and financial position as discontinued operations. We expect to recognize a gain on the sale of Cole Haan when the transaction closes.

Results of Operations

                                                                                                          Six Months Ended
                                            Three Months Ended November 30,                                 November 30,
(Dollars in millions, except per
share data)                               2012             2011          % Change               2012              2011          % Change
Revenues                              $      5,955      $     5,546              7 %        $     12,429      $     11,439              9 %
Cost of sales                                3,425            3,170              8 %               7,071             6,445             10 %
Gross profit                                 2,530            2,376              6 %               5,358             4,994              7 %
Gross margin %                                42.5 %           42.8 %                               43.1 %            43.7 %
Demand creation expense                        613              616              0 %               1,484             1,280             16 %
Operating overhead expense                   1,223            1,115             10 %               2,411             2,181             11 %
Total selling and administrative
expense                                      1,836            1,731              6 %               3,895             3,461             13 %
% of Revenues                                 30.8 %           31.2 %                               31.3 %            30.3 %
Income before income taxes                     712              632             13 %               1,512             1,503              1 %
Net income from continuing
operations                                     521              480              9 %               1,106             1,141             -3 %
Net loss from discontinued
operations                                    (137 )            (11 )            -                  (155 )             (27 )            -
Net income                            $        384      $       469            -18 %        $        951      $      1,114            -15 %
Diluted earnings per share -
Continuing Operations                 $       0.57      $      0.51             12 %        $       1.20      $       1.21             -1 %
Diluted earnings per share -
Discontinued Operations               $      (0.15 )    $     (0.01 )            -          $      (0.16 )    $      (0.03 )            -

Consolidated Operating Results



Revenues



                                                   Three Months Ended November 30,                                               Six Months Ended November 30,
                                                                                         % Change                                                                     % Change
                                                                                        Excluding                                                                    Excluding
                                                                                         Currency                                                                     Currency
(Dollars in millions)                2012              2011            % Change         Changes(1)                2012              2011            % Change         Changes(1)
NIKE Brand Revenues by:
Footwear                          $     3,299       $     3,091                7 %               10 %          $     6,989       $     6,430                9 %               13 %
Apparel                                 1,801             1,680                7 %               10 %                3,562             3,282                9 %               12 %
Equipment                                 332               267               24 %               27 %                  718               610               18 %               22 %
Global Brand Divisions                     27                25                8 %               15 %                   54                57               -5 %                2 %
Total NIKE Brand                        5,459             5,063                8 %               11 %               11,323            10,379                9 %               13 %
Other Businesses                          518               488                6 %                6 %                1,153             1,073                7 %                8 %
Corporate(2)                              (22 )              (5 )              -                  -                    (47 )             (13 )              -                  -
TOTAL NIKE, INC. REVENUES FROM
CONTINUING OPERATIONS             $     5,955       $     5,546                7 %               10 %          $    12,429       $    11,439                9 %               13 %
Supplemental NIKE Brand
Revenues Details by:
Sales to Wholesale Customers      $     4,467       $     4,263                5 %                8 %          $     9,207       $     8,638                7 %               11 %
Sales Direct to Consumer                  965               775               25 %               27 %                2,062             1,684               22 %               25 %
Global Brand Divisions                     27                25                8 %               15 %                   54                57               -5 %                2 %
TOTAL NIKE BRAND REVENUES         $     5,459       $     5,063                8 %               11 %          $    11,323       $    10,379                9 %               13 %

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(2) Corporate revenues primarily consist of intercompany revenue eliminations and foreign currency revenue-related hedge gains and losses generated by entities within the NIKE Brand geographic operating segments and certain Other Businesses through our centrally managed foreign exchange risk management program.

Excluding the effects of changes in currency exchange rates, revenues for NIKE, Inc.'s continuing operations increased 10% for the second quarter and 13% for the first six months of fiscal 2013, driven by increases in both the NIKE Brand and our Other Businesses. On a currency neutral basis, revenues for the NIKE Brand increased 11% and 13% for the second quarter and year to date period, respectively, while revenues for our Other Businesses increased 6% and 8% for the same periods, respectively. For both the second quarter and first six months of fiscal 2013, every NIKE Brand geography except Greater China delivered higher revenues. North America contributed approximately 7 and 8 percentage points to the NIKE Brand revenue increase for the second quarter and first six months of fiscal 2013, respectively, while Emerging Markets contributed approximately 3 percentage points for both respective periods. China's results negatively impacted NIKE Brand revenue growth by approximately 2 percentage points for the second quarter and by less than 1 percentage point for the year to date period, respectively.

Excluding the effects of changes in currency exchange rates, NIKE Brand footwear and apparel revenues each increased 10% for the second quarter, while NIKE Brand equipment revenues increased 27%. For the first six months of fiscal 2013, NIKE Brand footwear and apparel revenues increased 13% and 12%, respectively, while NIKE Brand equipment revenues increased 22%. The increase in footwear revenue for both the second quarter and first six months of fiscal 2013 was attributable to growth across our Running, Basketball, and Sportswear categories, primarily reflective of increased demand for our performance products, most notably those utilizing NIKE Free and Lunar technologies. For the second quarter of fiscal 2013, unit sales increased approximately 6% and average selling price per pair increased approximately 4%. For the first half of fiscal 2013, unit sales increased approximately 8% and the average selling price per pair increased approximately 5%. The growth in average selling price per pair for the second quarter and year to date period primarily reflected the impact of product price increases.

The increase in NIKE Brand apparel revenue for both the second quarter and year to date period of fiscal 2013 was driven primarily by our Men's Training category, which includes our new NFL licensed business, while strong demand for Football (Soccer), Running, and Basketball products also contributed positively. For the second quarter of fiscal 2013, average selling price per unit increased approximately 11% and unit sales decreased approximately 1%. The decrease in unit sales for the second quarter was primarily driven by lower unit sales in Sportswear, largely offset by higher unit sales in Men's Training, Basketball, and Running. For the year to date period, average selling price increased approximately 9%, while units sold increased approximately 3%. The increase in average selling price per unit for the second quarter and year to date period was driven approximately equally by product price increases and a shift in mix to higher priced products such as our performance Running, Basketball and NFL licensed apparel.

While wholesale revenues remain the largest component of overall NIKE Brand revenues, we continue to expand Direct to Consumer revenues through a growing network of NIKE owned in-line and factory stores, as well as online sales through NIKE owned websites. For both the second quarter and first six months of fiscal 2013, Direct to Consumer revenues represented approximately 18% of our total NIKE Brand revenues, compared to 15% and 16% for the second quarter and first half of fiscal 2012, respectively. Excluding changes in currency exchange rates, Direct to Consumer revenues increased 27% and 25% for the second quarter and first six months of fiscal 2013, respectively, as comparable store sales increased 16% and 15% over the same respective periods. Comparable store sales include revenues from NIKE owned in-line and factory stores for which all three of the following requirements have been met: the store has been open at least one year, square footage has not changed by more than 15% within the past year, and the store has not been permanently repositioned within the past year.

Revenues for our Other Businesses consist of results from Converse, Hurley and NIKE Golf. Excluding the impact of currency changes, total revenues for these businesses increased by 6% and 8% in the second quarter and first half of fiscal 2013, respectively, reflecting growth across all businesses.

Futures Orders

Futures orders for NIKE Brand footwear and apparel scheduled for delivery from December 2012 through April 2013 were 6% higher than the orders reported for the comparable prior year period. The U.S. Dollar futures order amount is calculated based upon our internal forecast of the currency exchange rates under which our revenues will be translated during this period. Excluding the impact of currency changes, futures orders increased 7%, as unit orders contributed approximately 4 percentage points of the growth and average selling price per unit contributed approximately 3 percentage points.

By geography, futures orders growth was as follows:

                                           Reported Futures Orders           Futures Orders Excluding
                                                   Growth                      Currency Changes(1)
North America                                        14%                                14%
Western Europe                                       -1%                                 0%
Central & Eastern Europe                             10%                                11%
Greater China                                        -6%                                -7%
Japan                                                -3%                                 4%
Emerging Markets                                      7%                                11%
TOTAL NIKE BRAND FUTURES ORDERS                       6%                                 7%

(1) Growth rates have been restated using constant currency exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding changes in foreign currency exchange rates.

The reported futures orders growth is not necessarily indicative of our expectation of revenue growth during this period. This is due to year-over-year changes in shipment timing, the mix of orders which can shift between futures and at-once orders, and the fulfillment of certain orders may fall outside of the schedule noted above. In addition, currency exchange rate fluctuations as well as differing levels of order cancellations, discounts and returns can cause differences in the comparisons between futures orders and actual revenues. Moreover, a significant portion of our revenue is not derived from futures orders, including at-once and close-out sales of NIKE Brand footwear and apparel, sales of NIKE Brand equipment, sales from our Direct to Consumer operations, and sales from our Other Businesses.

Gross Margin



                                         Three Months Ended November 30,                        Six Months Ended November 30,
(Dollars in millions)                 2012             2011           % Change              2012             2011           % Change
Gross Profit                       $     2,530      $     2,376               6 %        $     5,358      $     4,994               7 %
Gross Margin %                            42.5 %           42.8 %      (30) bps                 43.1 %           43.7 %      (60) bps

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For the second quarter and first six months of fiscal 2013, our consolidated gross margin was 30 and 60 basis points lower than the respective prior year periods. For the second quarter, the decrease in margin was largely attributable to the following:

• Higher product costs, driven mainly by factory labor cost increases at our manufacturers, decreased our gross margin approximately 110 basis points;

• Unfavorable foreign currency exchange rates decreased our gross margin approximately 70 basis points;

• Higher third party royalties, primarily resulting from NFL licensed product sales in North America, decreased our gross margin approximately 50 basis points;

• Other less significant factors, primarily due to additional investments in digital products and capabilities and higher inventory obsolescence, contributed another approximate 60 basis point decline to our gross margin.

• These factors more than offset the favorable 260 basis point impact to gross margin due to higher net average selling price per unit, driven primarily by product price increases.

In addition, we have seen significant shifts in the mix of revenues from higher to lower margin segments of our business. While growth in these lower gross margin segments delivers incremental revenue and profits, it has a downward effect on our consolidated gross margin.

For the first six months of fiscal 2013, increases in selling prices contributed a benefit of 280 basis points to our gross margin, which were more than offset by higher product costs that negatively impacted gross margin by approximately 260 basis points, higher third party royalties negatively impacting gross margin by approximately 40 basis points, and unfavorable foreign currency exchange rates, reducing our year to date gross margin by approximately 40 basis points.

We expect that full year gross margin will be essentially flat compared to the prior year as currency headwinds and actions to clear inventory in China will offset gross margin expansion.

Selling and Administrative Expense



                                                   Three Months Ended                                    Six Months Ended
                                                      November 30,                                         November 30,
(Dollars in millions)                    2012             2011           % Change              2012             2011          % Change
Demand creation expense(1)            $       613      $       616               0 %        $     1,484      $     1,280             16 %
Operating overhead expense                  1,223            1,115              10 %              2,411            2,181             11 %
Selling and administrative expense    $     1,836      $     1,731               6 %        $     3,895      $     3,461             13 %

(1) Demand creation consists of advertising and promotion expenses, including costs of endorsement contracts.

Demand creation expense was flat in the second quarter and increased 16% during the first six months of fiscal 2013 compared to the same periods in the prior year. Excluding the effects of changes in currency exchange rates, demand creation for the second quarter of fiscal 2013 increased 3% primarily attributable to higher sports marketing expense, as we spent less on advertising and other marketing activities in the second quarter following our high level of brand event investments in the first quarter of fiscal 2013. For the six months ended November 30, 2012, demand creation expense was 21% higher than the prior year on a currency neutral basis, largely driven by higher spending around the Olympics and European Football Championships in the first quarter of fiscal 2013.

Operating overhead expense increased 10% and 11% during the second quarter and first six months of fiscal 2013, respectively. Changes in currency exchange rates decreased the growth in operating overhead expense by 2 percentage points for both periods. The increase for both the quarter and year to date periods was primarily attributable to higher wage related costs and performance-based compensation to support the growth of our overall business as well as increased investments in our expanding Direct to Consumer business.

For the full fiscal year, we anticipate selling and administrative expense to grow at a high-single to low-double-digit rate as we continue to make investments in our brands and growth initiatives while we anniversary demand creation investments made in the fourth quarter of fiscal 2012 for the Olympics and European Football Championships.

Other (Income) Expense, net

Other (income) expense, net comprises foreign currency conversion gains and losses from the re-measurement of monetary assets and liabilities denominated in non-functional currencies, the impact of certain foreign currency derivative instruments, as well as unusual or non-operating transactions that are outside the normal course of business.

For the second quarter of fiscal 2013, other (income) expense, net increased $27 million compared to the prior year. This change was primarily driven by a $39 million change from foreign currency net losses in the prior year to net gains in the current year. These impacts were partially offset by changes in other non-operating net gains and losses. For the first six months of fiscal 2013, other (income) expense, net increased $72 million compared to the prior year, primarily due to a $75 million change from foreign currency net losses in the prior year to net gains in the current year.

We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in other (income) expense, net had a favorable impact of approximately $10 million on our income before income taxes for the second quarter of fiscal 2013, and an unfavorable impact of $19 million for the first six months of fiscal 2013.

Income Taxes



                                         Three Months Ended November                            Six Months Ended
                                                     30,                                          November 30,
                                     2012            2011         % Change             2012            2011         % Change
Effective tax rate                      26.8 %          24.1 %      270 bps               26.9 %          24.1 %      280 bps

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Our effective tax rate on continuing operations for the second quarter and first six months of fiscal 2013 was 270 and 280 basis points higher than the effective tax rate on continuing operations for the respective prior year periods. The increase in our effective tax rate was primarily driven by changes in uncertain tax positions and an increase in the effective tax rate on foreign operations.

We anticipate the effective tax rate for the full fiscal year will be approximately 26.5%.

Discontinued Operations

On November 30, 2012, we completed the sale of certain assets of Umbro to Iconix Brand Group ("Iconix") for $225 million. The results of Umbro's operations and Umbro's financial position are presented as discontinued operations on the condensed consolidated statements of income and balance sheets, respectively. Previously, these amounts were reported in our segment presentation as "Businesses to be Divested." Upon meeting the held-for-sale criteria, we recorded a loss of $107 million, net of tax, on the sale of Umbro. The loss on sale was calculated as the net sales price less the Umbro assets of $248 million, including intangibles, goodwill, and fixed assets, other miscellaneous charges of $22 million, the release of the associated cumulative translation adjustment of $129 million, offset by a tax benefit on the loss of $67 million. Previously, we disclosed the potential for certain tax balances to be written off as a result of the sale of Umbro. However, upon determining the final transaction structure, we determined that those amounts remain realizable and therefore were not part of the loss on sale of Umbro.

Under the sale agreement, we will provide transition services to Iconix while certain markets are converted and transitioned to Iconix-designated licensees. These transition services are expected to be completed by May 31, 2013. We also expect to wind down the remaining operations of Umbro over the remainder of fiscal 2013 and incur approximately $30 million of additional exit and disposal costs related to this transaction. The continuing operating cash flows are not expected to be significant to the Umbro business and we will have no significant continuing involvement with Umbro beyond the transition period.

On November 16, 2012, we reached a definitive agreement to sell Cole Haan to Apax Partners for $570 million. The transaction is expected to be completed in the third fiscal quarter of 2013. At November 30, 2012, we classified the Cole Haan disposal group as held-for-sale and presented the results of Cole Haan's operations in the net loss from discontinued operations line item on the condensed consolidated statements of income. Previously, these amounts were reported in our segment presentation as "Businesses to be Divested." We are expecting a gain on the sale of Cole Haan that will be recognized when the transaction closes. The transition services associated with this transaction are immaterial.

Operating Segments

Reportable operating segments are based on our internal geographic organization. Each of the NIKE Brand geographies operate predominantly in one industry: the design, development, marketing and selling of athletic footwear, apparel, and equipment. Our reportable operating segments for the NIKE Brand are: North America, Western Europe, Central & Eastern Europe, Greater China, Japan, and Emerging Markets. Our NIKE Brand Direct to Consumer operations are managed within each geographic segment.

As part of our centrally managed foreign exchange risk management program, standard foreign currency exchange rates are assigned twice per year to each . . .