Good afternoon, everyone. Welcome to the Nike fiscal 2007 second quarter conference call. For those of you who need to reference today's press release, you'll find it at www.Nikebiz.com. Leading today's call will be Pamela Catlett, Vice President of Investor Relations. Before I turn it over to Ms. Catlett, let me remind you that the presenters of this call will make forward-looking statements based on current expectations and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed with the SEC including Forms 8-K, 10-K, and 10-Q. Some forward-looking statements concern futures orders that are not necessarily indicative of changes; and total revenues for subsequent periods due to the mix of futures and at-once orders, exchange rate fluctuations, order cancellations, and discounts which may vary significantly from quarter to quarter. In addition, it's important to remember a significant portion of Nike Incorporated's business including equipment, most of Nike Retail, Nike Golf, Converse, Cole Haan, Nike Bauer Hockey, Hurley, and Exeter Brands group are not included in these futures numbers. Finally, participants may discuss non-GAAP financial measures. A presentation of comparable GAAP measures and quantitative reconciliations can also be found at Nike's website. This call might also include a discussion of non-public financial and statistical information which is also publicly available on that site www.NikeBiz.com. Now I'd like to turn the call over to Pam Catlett, Vice President of Investor Relations. Pam Catlett: Thank you, and good afternoon, everyone. A Happy Holidays to all of you. Thank you for joining us today to discuss Nike's fiscal 2007 second quarter results. We issued our results about an hour ago. If you need to reference the results, as the operator indicated, you can find the press…

(Operator Instructions) We'll take our first question from Bob Drbul - Lehman Brothers. Bob Drbul - Lehman Brothers: The first question I have is on inventory. As you work the inventory down in line with revenues over the remainder of the year, do you expect any more margin pressure than what we've seen so far in terms of your plans for third and fourth quarter? What are the risks around the margin side of it in getting that inventory down and in line with your outlook? Don Blair: Well, we've assumed the inventory outcomes that I just described in our guidance around gross margin, so those gross margin expectations include the fact that we think our inventories are going to be growing at a much slower pace in the back half of the year. Really one of the keys to that is the expansion of our outlet network. We've been talking about this for the last couple of years but the outlet network gives us a lot of flexibility and the ability to liquidate closeout inventory much more profitably. So at this point, we feel that we've incorporated that in our forward gross margin guidance. Bob Drbul - Lehman Brothers: In terms of currency and in terms of how currency has impacted the business or is expected to impact the business, when you make the comment around the inventory, would that be real dollar reported number or would that be constant dollar in terms of the progress that you would expect to make? Don Blair: Well, we expect to make progress in constant currency. I can't predict where the real currency is going to be and I think this quarter was a great illustration of that. We're going to make progress in constant dollars and I believe based on where the currencies are likely to be, we'll see it on a real dollar basis as well, but I can't predict that with any real certainty. Bob Drbul - Lehman Brothers: Great. Thank you very much.

Your next question comes from Robbie Ohmes - Banc of America Securities. Robbie Ohmes - Banc of America: On the U.S. futures number, can you just tell us, roughly, the ASP versus unit component of that? I apologize if you said that already. Can you give us the weighting of the futures window when you look at that number? Is it pretty consistent over the next six months or is it weighted towards the first half or the back half? The follow-up question is just a little more commentary on the apparel strength and how sustainable you think that is and what will drive that? On the footwear side, what the key products are we should focus on as we look to spring '07? Thanks. Mark Parker: I may have to ask you to repeat some of those. First of all, the futures information, as we look forward on the futures we are seeing average selling prices ease. We have definitely seen quite a lot of average selling price expansion but the driver of futures going forward is primarily units and we've seen the average selling price ease. Front half, back half, third quarter is a little faster growth than the fourth. What was your second question? Robbie Ohmes - Banc of America: It was on the apparel business. It's been super strong. What's driving that and what could continue to drive that growth as we look into calendar '07? Mark Parker: Well, let me comment on that. The apparel growth, we've been actually been very pleased with where we are with apparel here in the last, actually, this year-to-date, particularly on the Performance side of the business which is up significantly. That's driven a lot by the increases on the Pro, Nike Pro business. We've had some healthy increases…

Your next question comes from Margaret Mager - Goldman Sachs. Margaret Mager - Goldman Sachs: Hi. Thanks and Happy Holidays to all of you. I have a couple questions. First of all, I missed the number on the demand creation increase in the quarter and if you could talk about where that is on a year-to-date basis and where you expect it to come out on a full year basis? Because I would expect that to be the bigger swing factor in the second half of the year in terms of boosting EPS growth rate. So if you could talk to that. I'm also curious about what are the big campaigns that you'll be running, Mark, you just walked us through a ton of product things that are happening, but where are the marketing dollars going to be placed against in any sort of meaningful way in the next two quarters? If I could, on the gross margin, could you talk about how the weak dollar impacts the gross margin versus the other expense down to the EPS level? I get that one a lot from investors. The other factors that have been influencing your gross margin recently, like rising raw material costs, where does that stand? Thanks. Don Blair: Okay, the demand creation for the quarter was up 27% and our expectation for the year is that we're going to be at or slightly above the rate of revenue growth for demand creation. For overall SG&A, if you take out the impact of the stock options, we think we're going to be at about the rate of revenue growth. We are going to be leveraging operating overhead as we continuously target and we're going to be doing some investing in demand creation; but the net of all of that…

We'll go next to John Shanley - Susquehanna Financial. John Shanley - Susquehanna Financial: Good afternoon, folks. Charlie, our research panel data shows that Air Force One sales year-to-date in the U.S. are down about 20%. Are you anticipating that you may be able to reverse this trend with the introduction of all of the new Air Force One and 25 shoes that you have coming out for this upcoming spring selling season? Charlie Denson: Well, I guess the short answer would be yes. Remember the Air Force One is really a controlled and allocated number on a monthly basis. So we really measure how much product we put out into the marketplace and we do it even right down to the door level. So some of that throttling down was in anticipation of this launch and the idea that we're building off of both the new version of the Air Force One which you'll see, you've seen a lot of permutations, I think you are going to see a lot more and I think you're going to see some price elasticity in that. And then I think with the new Air Force 25, it really starts to build a new franchise on top of the old one. John Shanley - Susquehanna Financial: Can you give us a sense in terms of how big the Air Force One shoe is in comparison to the rest of the Nike Brand, and maybe something in terms of what it contributes to your bottom line? Mark Parker: Well, I want to go back to a comment you made about the Air Force One sales being down. That's not what we're seeing. In fact, we've seen some good increase on Air Force One over the past six months or so. That being said, to…

Your next question comes from Virginia Genereux - Merrill Lynch. Virginia Genereux - Merrill Lynch: The factory store count is in your 10-K. Pam Catlett: Thank you, but I don't have everything memorized. Thanks for pointing it out, Virginia. Virginia Genereux - Merrill Lynch: I know, I didn't mean for you, I meant to ‘Shan the Man’. You do the domestic and international. I'm looking at it. Mark Parker: Thanks. Virginia Genereux - Merrill Lynch: Anyway, my two questions are -- and Happy Holidays to all you all. Pam Catlett: Happy Holidays. Virginia Genereux - Merrill Lynch: First, Don, is higher pricing helping to alleviate the margin pressure, given all the input cost increases? Why couldn't you raise prices a bit, considering the run we've had in oil and things? Don Blair: There is a piece of pricing in some of the offsets, Virginia, and that's really been the U.S. We really haven't seen any significant amount of pricing in other markets. We have talked about this before, but the way we do this is pretty surgical based on individual products and individual categories so this is not a business where you can take pricing across the board. It's really trying to make sure that you've got the right value proposition for each category and each consumer demographic in each geography. So there are places where we've had the opportunity to do that selectively and the U.S. has been the place where there's been some movement, but it really isn't 100% of the product line by any stretch of the imagination. Mark Parker: I'll add that we'll continue to look at those opportunities over this next three to six months and beyond, obviously. I should point out that our over $100 footwear sector for Nike is up over 20% over…

Your next question comes from Kate McShane - Citigroup. Kate McShane - Citigroup: What are driving the better futures in Europe? Is it any kind of improvement in the UK and/or France? If things aren't improving in the UK because of the continuing price war there, what is Nike's long-term strategy for that country? Charlie Denson: Kate, this is Charlie. Well, the futures numbers in Europe I would say we're not pleased or happy with them. We all feel that we have a lot more opportunity out of the Western European marketplace. They are being affected probably the most by France and the UK. I think one of the things that we've talked about with the UK is the challenging marketplace there. I would just say today that retrospectively, that marketplace was probably worse off than maybe we thought and that certainly, the overall consumer confidence traffic patterns at retail have hindered our ability to turn that thing around a little bit quicker. I think that being said, we're going to continue to do what we said we have been doing which is moving distribution and working on brand presentation into a place where we feel confident is a long-term position for us both on a business basis and a brand basis. I think the other thing is it's important to continue to remind everybody how important the UK marketplace is overall with respect to the European market. We're going to continue to invest in it. We think we can do a lot better job around product. That goes for both footwear and apparel and right now, nobody's winning in Europe. We're not getting beat from a brand standpoint. I think it's just a tough environment and we think we can turn it around but it's going to continue to…

Your next question comes from Jeffrey Edelman - UBS. Jeffrey Edelman - UBS: A follow-up question on Europe. Charlie, would you discuss a little bit what's happening in terms of mix, low profile versus performance and how that's influencing the average selling price and what kind of unit trend are we seeing? Charlie Denson: Yes, Jeff, the low profile silhouette is still the dominant silhouette in Europe. We introduced the Air Max product worldwide here in the last year and I think it did remarkably well in the U.S. It did very well in Asia, China, Japan, et cetera. In most of Europe, it did not do as well as we had hoped or expected and I think the reason was because the strength and the dominance of that low profile silhouette in the footwear business. So we see it continuing. That being said, I think Mark touched on it a little bit earlier. Our Metro business, our low profile business is up dramatically. Don Blair: Over 350%. Charlie Denson: So that's pretty dramatic, and we continue to do some things around that business that have been received very well this spring. I think we mentioned this concept that we're building around Zoom and the Performance execution of that opportunity will really be targeted. I think it's going to be a little bit more successful for fall. So it holds a pretty dominant position in that market. Mark Parker: Let me just add too, obviously, we were a bit late to that party, but fully committed to realizing not just the low-hanging fruit that we've picked up here over the last two years or so, but to really now bring innovation to that segment. What you'll see coming here in the late summer/fall with the Zoom will be a good…

We'll take our final question from Omar Saad - Credit Suisse. Omar Saad - Credit Suisse: Thanks. Mark, is there any chance I can get you to elaborate on the comment you made at the beginning about focusing on fewer high return opportunities? Mark Parker: Yes, actually one of my favorite topics, as people around here will tell you. We see that there's a smaller percentage of our business that often, almost always represents a higher percentage of return. So in other words, not all opportunities are created equal. So very simply, our focus is to really make sure that we're lining up against the biggest growth opportunities and we talked a lot about that relative to the category dimension of our business and we also look at it from the geography or the geographical segment or the dimension of our business. So as you look geographically, as you look categorically and at a different consumer segments and even down to price points you can see that there's some fairly significant upside opportunities where we're underpenetrated. So what we're really focused on is how do we, I often call this the optimization scheme, we're in a giant optimization scheme, unlimited opportunities in a sense, but limited resources, so how do we get the most out of those resources that we have to invest against the opportunities? So that's really what's driving a lot of the focus in the organization around categorical segmentation, the old what we used to call segment to grow; but really more effectively differentiating the marketplace so we can grow the market. So that we are focused on our core categories, Charlie has mentioned this before as have I. Certainly running basketball, soccer worldwide, the women 's business is significant. We see upside opportunities more on the…

Thank you, everyone. That does conclude today's conference.