Good morning, everybody. Welcome. Thanks for being here today. We'll go ahead and get started. For those of you I haven't met yet, I'm Kelley Hall, Senior Director of Investor Relations for NIKE Inc. We have a pretty full agenda planned for you today. You have copies at your desk so you can see who you're going to hear from and the topics we're going to cover. And while we have a lot of information to share with you, we have 3 main goals for the day. The first is to highlight our FY '11 results and share progress against the FY '15 growth goals that we outlined last May. Second, to provide insight on how we'll leverage the power of our portfolio, fueled by our innovation agenda to capture the significant growth opportunities we see over the next 4 years. And third, to show you the strength of our management team. Their exceptional talent and leadership will drive the NIKE Inc. growth strategy. Of course, we intend to do this within the rules as expressed on the slide behind me. Halfway through the day, we'll take a break for lunch. Speakers will not join you over lunch, as we'll be at the midway point, but they will look forward to answering your questions at the Q&A following the presentations, as well as having a chance to chat with you at the reception that follows. So with that, I'll ask you to please silence your phones and we'll get started. Thank you and enjoy the day. [Video Presentation]

Okay, good morning, everybody. And thanks for being here. Welcome to the Nike world headquarters. You saw a bit of then and now in that video, and then you saw that also in the lobby when you walked in this morning. And that display that you saw is part of our annual maxims awards which happens this Thursday. And that's really a celebration of the amazing work that our team put out throughout the year. And what you saw are the finalists amongst hundreds of nominated projects from all over the world. And I think it's clear that we are prolific and that we are proud of the innovations we bring to athletes and consumers all over the world. And it's that same innovation that creates value for our shareholders and for all of you here today. And I think we've done a pretty good job at that. In the last 10 years, we more than doubled our revenue. We increased our gross margins more than 5 points and compounded earnings per share grew at 15%. We nearly tripled our cash flow from operations. We paid out over $3 billion in dividends, and we repurchased $7 billion of stock. And our market cap more than tripled, driving a 17% average annual return to shareholders. I think that's what makes Nike a growth company. Today, we have 7 distinct high-energy brands, each with a powerful connection to its consumers. And it's really those connections that give us the insights that we need to create the amazing products and experiences and then we do that over and over again and that's really the fundamental cycle that continually drives growth. And while each brand has an enormous potential in its own right, the real power of NIKE Inc. comes from making the overall…

Good morning, and indeed a very warm welcome. My name is Roger Wyett, and I'm the President of Nike Affiliates portfolio. The video you've just watched is of last year's U.S. Open in Huntington Beach where Nike, Hurley and Converse combined together to provide a wonderfully rich experience of surf, music and art. Over the course of a week, around 650,000 kids attended. It's a wonderful illustration of the power of our brands working alongside one another. There are 4 uniquely aspirational brands within the portfolio of the affiliates. Each brand expands our consumer reach while providing opportunity for growth and strategically each complements the Nike category offense. For example, think about Converse alongside Nike, Basketball and Jordan. Umbro alongside Nike Football or Hurley and Converse and Nike collectively driving our Action Sports strategy. Together, it's a wonderfully powerful formula for growth and consumer reach. Each of the affiliate brands is deeply connected to its own individual consumer through a sharp product offering and yet they all share the same common goal of putting the consumer first and knowing exactly what they want. So let's begin with the consumers and the importance of genuine long-term relationships. We know that kids live in a world that's ever changing. It's a social world. It's almost sensory overload. That it takes the need for clear communication and compelling product just to break through the clutter. We strongly believe that everyday consumer connectivity drives loyalty and increases purchase behavior. And I'll share through my presentation what that looks like for each of the individual brands. Consumer connectivity and loyalty are essential to driving growth. They all will give us confidence in the potential of the affiliate brands to be growth accelerators for NIKE Inc. Our fiscal year '11 results demonstrate this potential. The 4…

Good morning, everybody. Welcome to Nike. Hope you guys are off to a good start today. I'm Charlie Denson, I'm President of the NIKE Brand and we're going to now shift gears and talk a little bit about a larger part of our business, all right? So just over a year ago, we talked about the power of the NIKE Brand portfolio and the use of that portfolio that allows us to continue to grow under all -- every circumstance. As we talked about that and we continue to grow, what we focused on last year were 3 competitive advantages. And these competitive advantages are something we're going to revisit again today. Three are building strong consumer connections that amplify sports. The second, delivering the most innovative and compelling products around the world today. And the third, it's creating, growing and transforming the marketplace with premium consumer experiences. So here we are a little over a year later and we're not only here to confirm our progress, but we're also here to notify you that we're ahead of schedule. So on that note, for FY '11 that we just wrapped up, on a currency neutral basis, as you know by now, the NIKE Brand registered its highest growth rate in a decade. Revenue was up 10% on a currency neutral basis and our growth was very broad based. We grew in every single category and every single geography versus last year, with the exception of Japan who suffered through some obviously tragic and extraordinary events last spring. So a lot of the news has been around the growth in the U.S. which was again very impressive, but it's really been driven by the global portfolio. Our Q4 revenue, it was up 12%, and that does include a double-digit decline that…

. Good morning, everyone. Just a little prelude to some of the things that we do every year. So I know that -- my name is Trevor Edwards, and I'm the Vice President of Global Brand and Categories for NIKE, and it's great to be here to give you an update as we continue to evolve our category offense, our consumer-segmented growth strategy. So let me start where I always love to start, and that's really about the consumer. The consumer landscape continues to shift. Digital trends combined with mobility continue to reshape the world. And they continue to reshape the relationship that consumers have with their friends, with their families, with the products that they actually use, they're more connected, and also with the brands that they actually connect with. At NIKE, we stay relentlessly focused on the consumer. And for us, that consumer is an 18-year-old who lives a fast-paced, socially connected life, enabled by technology. They live an on-demand world with information and services at their fingertips. And they get what they want, how they want it, when they want it. They're squarely in charge. And what's even more interesting and actually fun is that in this world, it continues to shift, and the pace is actually moving at an ever-increasing pace. So how do we capture the imagination of the consumer today? Well, we do this by focusing our business on the consumer so that we can understand their needs, their aspirations and their desires. So we created the category offense, which is really about dedicated business units that are focused on the consumer from design to marketing, to product creation, to sales and to retail. And the intent there is to make sure we have a team that really understands everything about the consumer. It…

All right. Good morning, everyone. Last speaker before lunch, and it's going to be a really good one, I'm promising you. My name is Eric Sprunk, I'm the Vice President of Merchandising and Global Product. I'm going to spend the next several minutes or so before lunch talking about product, which is the most intimate connection we have with our consumer. Great products fuel the category offense and defines our brand with our consumers. And great product starts with innovation, the theme of my presentation today. Innovation has been at the core of NIKE since our beginning, and it is what continues to drive the growth in our Footwear business today. And I'll spend a couple of minutes with you talking about that. And then I'd like to update you on our Apparel business because one year ago, we spent quite a bit more time looking at Apparel. And I'm going to give you an update on that opportunity and talk about how innovation is driving our accelerated growth in Apparel. And we'll also talk about profitability and how innovation in that space drives results. And everybody in our industry talks about innovation, and many brands make innovation claims. And I believe at the end of our short time together, you'll agree that at NIKE, we live it and we deliver it. And lastly, in what is becoming a little bit of a tradition, we're going to show you a few glimpses of the future that I'm pretty sure will have you scratching your heads in bewilderment as you head to lunch. So let's start with Footwear. It is our nature to innovate as a company, and nowhere is this more evident and more important than it is in our Footwear business. We are blessed at NIKE to be able…

Good afternoon, everybody. How was lunch? Great, there you go. That's a good sound. All right, we'll start off. Good afternoon. My name is Gary DeStefano, I'm NIKE's President of Global Operations. When you joined us a couple of years ago, we talked to you that our job was not to manage the marketplace that exists, but to create the marketplace of the future. And what I'll talk to you about today is our continuing quest to create, grow and transform the marketplace. The other thing we'll discuss today is what Charlie and Eric and Trevor talked to you about earlier, our global competitive advantages. Certainly, the relentless flow of product innovation. The category offense, which as you saw in that 90-second brand video, that was brand activation in one country, one year, 90 seconds’ worth of highlight. Our ability to touch consumers all over the world in a relentless way as Mark said. And lastly, what Jeanne and I will talk about today is our ability and a capability to transform the marketplaces around the world. Last time you were here also, we started a new geographic focus. In fact, our segments are slightly different than most traditional players in the industry have. And I'll walk you through each of those geographic segments today and talk about the fact that we have accelerated growth in our new strategy, which was to focus on our largest opportunities in the world. The other thing we talked about last time was we believed we had a unique competitive advantage in our executional capability at the global level and at the local level. We said at that time that nobody has the ability globally like NIKE, the power of this brand. And nobody has the teams, as Charlie referenced earlier, on the ground…

Good afternoon. I'm Jeanne Jackson. I'm President of our Direct to Consumer business here at NIKE, and for just a little bit of a reminder, Direct to Consumer or DTC, are all of our retail stores and our Digital Commerce businesses across all of the brands around the entire globe. Throughout the day, you've heard some consistent themes, I hope. Consistent themes around everything we do starts with the athlete. And relentless – have you heard the word relentless yet today -- a relentless focus on our consumer. The importance of innovation, innovation in product, innovation in process, innovation in operations and how these all come together to help create greater capacity for our brands and for our businesses in every marketplace in which we operate throughout the world. So all of these themes that you've heard today have a sharp point and that sharp point is in our stores and on our site, where we get the chance to interact directly with the consumer. Our Direct to Consumer business represents the area where, in its purest form, our brands can lead by example. It's where we help shape our markets, and we are able to create environments to showcase the strength of our category offense, that Trevor talked about, the strength of our innovation, the strength of our brand stories. It's the place where we commercialize the new digital experiences that we're creating. It's the place where the brands come to life. It's the place where we realize that moment of truth, which is what we call it, with our consumers. That moment of truth is where we get the chance to interact with them one on one, without anybody in the middle to make the story fuzzy. So a year ago, we introduced you to the pillars of…

Well, good afternoon, everyone, and thank you very much for taking the time to come visit us. My objective at this point is to talk a little bit about what you've seen so far today and put in context and give you a clear picture of how we expect our business to perform over the next few years. I think you'll agree it's a pretty exciting picture. Over the last decade, we've focused on creating value for our shareholders by delivering strong results across 3 financial dimensions: growth, profitability and capital efficiency. That framework still guides our thinking today. And as we always do, let's start with growth. Growth is the engine that creates shareholder value. We're not just focused on any growth. As you know, we focus on quality growth. Without quality growth, there can't be long-term value. Quality growth is brand accretive. It's sustainable. It's profitable, and it's capital efficient. So today, we have shown you how we create that quality growth, by building deep, personal connections with consumers for each of our affiliate brands and for the NIKE brand through our category lens, by delivering a relentless flow of innovation and must-have products to consumers as they compete, train and express themselves through sport and by creating an integrated marketplace of compelling consumer experiences in store and online in NIKE-owned stores and with wholesale partners. We think that over the long term, we can deliver quality revenue growth at a high-single digit rate. If revenue growth is the engine for creating shareholder value, then profitability is the transmission. Our goal is to deliver mid-teens growth in earnings per share on average. We are always quick to point out that our financial model is not guidance for any specific year or quarter, and that's not just legal language.…

Hey, everybody. Hopefully, you enjoyed the day so far. So why not get us set up for Q&A. So while our speakers come out and take their place, just a couple of housekeeping items. I'm going to do my very best to work the room and get to as many people as possible in the allotted time, so I ask for your patience with that. And then the second is please wait until you have the microphone to ask your question, so that we can capture it for those listening on webcast. Okay? So we'll let our speakers get settled and get ready to go. All right, anybody want to start?

With the outlook that -- Robbie Ohmes from BofA Merrill Lynch. Don or for the whole group, with the outlook that Don just gave us, can you talk a little bit more about DTC growing faster than the rest of the business and how that could pressure the ability to leverage SG&A? Because I would imagine that puts upward pressure on SG&A as a percent of sales. So I understand you're going to leverage overhead but you keep the main accretion flat. And then DTC is supposed to grow significantly faster than wholesale. Can you sort of walk us through how you get back to leveraging SG&A?

Yes, what we've been doing is we have been offsetting the investments we're making in both DTC, as well as our innovation agenda by driving productivity in the rest of the cost structure. One thing to also bear in mind is DTC itself is becoming significantly more productive. As some of the things that Jeanne spoke to earlier have taken effect, we've had more velocity through those existing assets and that's helped give us leverage as well. Sam Poser - Sterne Agee & Leach Inc.: Sam Poser from Sterne Agee. I just wondered if you could -- you broke down the components of the gross margin on the last quarter. I wonder if you could give us how the merchandise margin versus airfreight broke down in Q4. And how you're thinking about that, especially the front half of the year?

I think the pattern we're going to see early on in the year, the first quarter is going to be very similar to the fourth quarter. There is without getting into the specific reconciliation of the numbers, about 2/3 of the lower gross margin number was really accounted for by the product margins, including the airfreight. There were some other elements we spoke to like logistics costs and the commissioning of the China Logistics Center and some other items. But basically, about 2/3 of the reduction was really product costs, including input and air freight. Did I not answer your question, Sam? Sam Poser - Sterne Agee & Leach Inc.: I just wanted, you did break out -- on the last quarter, you said it was 100 basis points of product margins, you said it was 50 basis points of airfreight and then you had 45 basis points going the other way. That got to the 105 in the third quarter. I wondered if you could give us that same kind of detail for the fourth quarter.

No. I think in just in aggregate terms, I'm not -- I don't think it makes sense to break all the numbers, there's a whole lot of other factors involved. So when you say we gave you that kind of a reconciliation, normally, we don't give it in that level of detail. But if you look at the 310 basis points for the fourth quarter, about 2/3 of that was input costs and airfreight, with some offset from some of the cost initiatives that Eric spoke to earlier. Sam Poser - Sterne Agee & Leach Inc.: [indiscernible] follow-up one more time.

Real quick.

Third time's the charm, okay. Sam Poser - Sterne Agee & Leach Inc.: Because of the efficient -- because of these new, the 33% increase in the factory base that should be up and running by the end of the year, we would assume -- and the inventory levels now, we would assume regardless of what it is that the airfreight components of the gross margin should be the part in the back half of the year when you add in the price increases and so on, that should go away because those product -- the other margin pressures will remain likely. Am I thinking about that correctly?

Yes, that's correct. So what I would first caution you on here is, you can't make a literal connection between inventory levels and airfreight because capacity is not completely fungible. As we've talked about several times today, our Running business, for example, is up 30% last year. A lot of that was new technology, Nike Free, Lunar, various products that are not necessarily equated to the same capacity that produces an Air Force One or even apparel. So I mean that inventory number includes a lot of different product types. So airfreight as Eric said earlier is going to improve over the course of the year. We do expect that to be more in the second half of the year, not really in the first or the second quarter.

Michael Binetti of UBS. I guess, when we think about the price increases that are coming up, obviously, everybody has tested their price increases and feels a little bit of confidence. But I don't know that we've seen the results or what to expect as the entire store starts to elevate prices with all the brands raising prices. So you've mentioned a few times today the price increases that you guys are putting through. Maybe you could tell us a little bit about what gets you confident that the consumer can absorb those other than just brand strength? But – maybe on products that aren't changing at all, they are just, just the sticker price is changing?

Yes, I think, first of all, I think the confidence we have in the product, so the innovation that's coming down the line and some of the new products that are in prospect today gives us great confidence that we will pull. I think the other thing that we're looking at, I mean, we're looking at a potential price increase across the product lines but as far as [indiscernible], we feel very confident from a consumer spending standpoint that they're going to be able to absorb that price increase. We're not pushing the envelope too far, too quickly. I think over time, we'll continue to review [indiscernible] as we always do and price value relationship is really the long-term approach that we use to evaluate where we're at. And like we said all day long, I think we're going to stay committed to the overall profitability of the brand. I think Don talked about it as well, I think as you start to move into the second half of the year, some of these things will start to even out.

We've seen a little bit of a -- some increases already in DTC that -- where the consumer hasn't flinched. And then I'll just add the brand, the strength of the brand, I think, I don't think there's anybody in the industry that has the brand strength and the level of product innovation to Charlie's point, that we have coming. And then as we ramp up to London, next summer, I think that excitement is going to continue to grow. So I'm very confident, not cavalier but confident.

Don, I was wondering if you could talk to us a little bit about the other income line as you start to realize the translation benefit in operating income, how should we be thinking about that directionally and is there any kind of magnitude that you can help us with?

We don't see there being major swings in that line. The conversation that we usually have on a quarterly basis is we tell you what the net impact is of translation of the P&Ls and other income and expense. At this point, we do expect there to be a fairly small headwind from FX in FY '12, that was embedded in all of the guidance that I gave you earlier. But we don't think that's going to be a huge set of numbers, if the exchange rates stay where they are.

[indiscernible] operating income [indiscernible] from FX?

No, it means, we expect that line is broadly going to be about at the level it was in the fourth quarter on a quarterly basis.

It's Omar from ISI Group. Two quick questions, the Brazil target of $1 billion over time, can you talk about the tariff situation there and whether you have in-country sourcing and how you view pricing and the development of that market given the high tariffs there? And also wondering if you could address why it seems like Nike might be seeing a little bit more margin pressure as a result of inflation versus some of the competition. Is it mix? Is it a different mix? Is it pricing strategies that you are taking? Maybe you can kind of theoretically talk about why that seems to be the case.

[indiscernible] We've seen some increases in tariff pressure in Brazil. One of the things we've done to offset that is primarily moved closer to the deliveries from China into Vietnam, which is currently not taxed at the same level. At the same time, we're increasing our local production capacity in-country and we're prepared to do that [indiscernible].

And I think with respect to the second part of the question, I'm going to let other companies talk about their margin equation. I mean, for us, what we expect to see is sequential improvement in margins over the course of the year. And that's really going to be fueled by all of the things that we do control that we talked about, things like lean manufacturing, the growth of DTC, tighter supply chain, less airfreight as was discussed earlier, as well as the price increases that are accelerating in the second half of the year.

Faye Landes, Customer Edge Research. First of all, just a little follow-up on the airfreighting thing and then I have another question. On that airfreight thing, you mentioned, Don, in your catalog of issues affecting inventory that airfreight was one of them. I just want to make sure I understand how that -- what you meant. And then the other question is, can you just comment on Western Europe, which was not mentioned at great length on the course of the day. But when you reported, we would see the profitability was down considerably, if you could elaborate on what's going on there?

Sure. The impact is just -- all of the costs to bringing the product and landed costs gets inventoried, so that was the element of the impact of airfreight on inventory. And with respect to Western Europe, we can have one of the other folks talk a little bit more about the business trends. From a profitability standpoint, Western Europe was the most significantly affected by foreign exchange in FY '12. And the major issue there was not that there was a major adverse move in the euro, it was that we had done a very effective job of hedging and that affected our FY '10 numbers. So FY '11, really, was more normalized. We had put some pretty long-dated euro hedges out, when the euro was above $1.50. So we had that benefit in FY '10. So that's really one of the major differences between Western Europe and the rest of the geographies.

So on a local currency basis, what was the profitability of western -- sorry, on a local currency basis, what would the profitability of Western Europe look like?

That question is almost impossible to peel apart because you're dealing with what would prices have been had you had different exchange rates and how each one of the currencies and the spending would have flowed through the P&L? And so we don't calculate it that way or disclose it that way.

Paul Swinand, Morningstar Equity Research. I was wondering if you could break down your growth aspirations in China a little more. Obviously, the middle-class growth looks very promising. What segments do you see the most growth out of? What product areas? What sports? And then just a follow-up to that, I thought I saw something on one of the slides, where part of it was NIKE retail. I just want to clarify that's not owned retail, it's partner retail? But first let's -- if you could just clarify or talk a little more color about the segments?

The segments in China, I mean again, we're very bullish on the growth. As you mentioned, the middle class, the projection of 600 million-person middle class by 2015. So we see that trend, we believe in that trend. GDP growth, although there's been some concern that it's slowing as we said in the presentation, it's still almost twice as rapid as the other markets of the world. So we still see bullish macro trends that we're convinced on. On the product front and the market share, we literally stratified the product offering, so we can take more share at the premium price points, RMB 800 and above, we believe there's a marketplace even lower than that. I think some of the commentary that's been made in the past, that we will go from just Tier 1, 2 and 3 cities and expand our reach there. So that is something that we’ve worked on. We're picking up market share in that segment. So we'll do both, we'll make a geographic expansion. We'll make a product expansion and we think we can capture share both ways.

I would just add one point here too. China is a little bit of a unique marketplace in the sense that all the monitoring [indiscernible] is a much better or more balanced mix between [indiscernible] as well. So [indiscernible] when you look at the mix between the 2. So we expect both of them to grow equally because of the off-ramp [ph] presentation [indiscernible].

I think your question was whether or not it was [indiscernible] was partner [indiscernible] about that. There is, however, an important role that [indiscernible] will play in China just as they do in every market, the factory store make [ph] there is critical, maybe even more critical than in some other market. [indiscernible] partner [indiscernible] 80% [ph] of the product [indiscernible] Some of it is digital [indiscernible] time right now [indiscernible] so although half isn't crystal clear today, it is crystal clear that there will be a [indiscernible] opportunity and the [indiscernible] a critical role in helping them partner being how we want to show up. So it will take a pinhole [ph] in China that [indiscernible].

Kate McShane, Citi Investment Research. I wonder if you could quantify at all how much of the sequential improvement in revenue that we saw this quarter versus the last quarter was because of a change in capacity rather than a change in demand, sequentially? And over the long term, what does more capacity mean? If it sounds like you're building out more capacity for some of the more popular items now like Nike Free and Lunar. Over time, how does capacity come into play for your business?

Well, what we said in the slides here was that, we're going to -- we think by the latter half of fiscal year '12, we'll have caught up with capacity and that capacity is really oriented towards those innovative products that you mentioned, Kate. And I think going forward, we feel like we're going to be better balanced between where our demand and our supply is. And so we're always on the lookout for good, solid, financially healthy partners in the supply chain and we'll continue to do that.

The other thing that I would just add is in looking at the overall demand [indiscernible] and giving ourselves enough flexibility to flex up and down as the future unfolds. So I think one of the things that takes that pressure off on [indiscernible], you make sure that you have flexibility in your supply chain to flex up and down [indiscernible].

Let me just add that the increasing capacity will really take root in this first half of fiscal '12. I mean, we've had some steady increases but the real ramp-up is happening in the next 6 months.

I have a question for, sorry, it's Maggie Gilliam from Gilliam & Co. I have a question for Jeanne, please. Jeanne, could you elaborate a little bit about how you expect to ramp-up the e-commerce on a global basis? I'm thinking specifically of Brazil, whether you’ll partner or how you’re going to do it.

E-commerce is, as we’ve talked about several times today, I think one of our biggest opportunity and the reality is that we need to make sure that we are relevant in each market and making sure that we're ramping in each market the way that market is evolving. And as many of you know, in different markets there are different phases in their evolution on e-commerce. They have an infrastructure, whether it's the ability to deliver a package by UPS. It's something we take for granted but that's [indiscernible] and you have to solve that. Whether it's a payment method, in some markets around the world have easy to get to payment method [indiscernible] today it’s cash on delivery, so it's something we usually [indiscernible]. Germany has a very robust, very easy to operate in e-commerce. So balancing market by market. And Brazil [indiscernible] us to make [indiscernible] incredible opportunity because the consumers there not only have a great affinity for our brand but they also have a great affinity for e-commerce. So while we're starting with a partner because it was a way for us to get there easily and efficiently, the long-term vision is for us to be there with all of our categories, in all of our sites, in all of our capabilities and have a really strong business. Does that answer your question?

Christopher Svezia from Susquehanna. I have 2 questions. I guess, first, just on gross margin. Down 100 basis points for the year, down 300 in the first quarter. As you go through the year, and you start to get better supply chain, maybe currency is not as much of a headwind, you get that pricing. Is there a point at which you can actually see growth in gross margin, I assume fourth quarter could be easy given the comparisons but is there an inflection point based on your guidance? And the other questions related to SG&A, just in terms of it's growing roughly in line with sales, give or take. And I'm just trying to -- curious about how you think about the leveragability of that SG&A and how we think about investments as you go into an investment year or fiscal year or 2012 with all those events relative to prior periods, whether Beijing, World Cup, same level or magnitude of spending or just kind of how you're thinking about that.

Okay. So at this point, I'm not going to give guidance on third, fourth quarter at this juncture but I think the math is correct. We do expect to see with the margin guidance we just gave for the full year and what we gave for the first quarter, we expect sequential improvement and we do think it will be positive by the end of the year. So yes, without giving individual pieces of the equation. With respect to SG&A, the guidance we gave said, yes, we do expect to gain some leverage. If you looked at what we said about the rate of growth, it's not going to be huge amounts of leverage in this particular year largely because of some of the factors that you just discussed. But we do expect to gain leverage and we do that when we are still investing in DTC, still investing in our innovation agenda. So we are always positioning our spending against the highest growth opportunities in the business and really driving productivity in the other parts of the business. Eric Tracy - FBR Capital Markets & Co.: Eric Tracy, FBR. Another disruptive or potentially disruptive force out there is the looming lockouts of NFL and NBA. Maybe if you could speak to prior lockouts, the negative impact you saw, given the uncertainty, how you think about planning the businesses, particularly on product launches as you enter into the NFL agreements? Certainly, you're dominant in basketball, how should we think about that?

Well, I'll take the NFL first. So obviously, we're hopeful that there aren't any lockouts. So but the reality is, with the NFL in a lockout now, it hasn't affected any of the scheduling yet. We're optimistic that it won't. But for us, in our relationship with the NFL, it doesn't go into effect until next year. So I'm not going to make any guarantees but hopefully, they're not locked out still when we get to next April and it shouldn't affect our launch as we move into that relationship. As for the NBA, I think and if you think back and compare it to previous situation, labor issues around the NBA, which you’d have to go back 5 or 6 years ago, we had a limited relationship with the NBA itself obviously, with the players much more direct tied to the business. And depending on what happens here, we will continue to utilize the players. I think there was a reference already about all the players that are going to China this summer. And I think everybody is very excited about that, including the players. As well as -- we have a very, very dominant footprint in college basketball. And with the absence of an NBA schedule, college basketball will become that much more important. And I think that's going to be -- it's a great position to be in from a basketball standpoint, if there is a labor issue that might affect the season.

This is Brian McGough of Hedgeye Risk Management. Is it okay if I ask 2? So I guess, first, I don't know if it's for Jeanne or Mark, Don, Charlie, but as I look at NIKE Retail, and I think, Don, I might be stealing your line here, but it's been a little bit like Big Foot in that we've heard a lot about it may be making money but we've never really seen it. And I know there's been a lot of capital that's been put into it over the past 2, 3 years. It looks like it's actually starting to work. And I'm wondering if we should look at it as a stand-alone business or if the costs that are being put into Retail are actually helping out the wholesale part of the business, is it fair to split them both apart. Or should they be looked at holistically from a margin standpoint?

I'm going to just touch on the general point that our DTC business is actually really -- my point, my position, our position is that DTC is really helping our overall business on the wholesale side. I mean, I've said many times before that the investment that we're making in DTC is actually going to make us a better wholesale partner and I really believe that's true. I think the combination of DTC with our category offense has actually made us a much stronger company over the past 2 to 3 years. Everything you have to do to be successful in Direct to Consumer is really in a sense a microcosm of what you need to do to be a better company. And I think that's really playing out as we -- as you can see, with some of the premium brand expressions that we have with some of our key retail partners and a lot of that is because we're actually a better retailer not just qualitatively, but quantitatively. So Jeanne, do you want to…

Well, the good news I can report is we are becoming more profitable. In the last fiscal year, our earnings, the EBIT growth, greatly outpaced the sales growth and we thought the sales growth was pretty good. So we're getting more productivity, we're getting more profitability. And things like the factory stores and digital are some of the most profitable things that we do. So as those things grow and as those things grow faster than the base, we're seeing increased profitability and increased leverage. The first cost margin is very strong. I've worked for vertical retailers in my life and these are pretty strong first cost margins to work with. So we've got some runway and we've got some capability. But that said, the big leverage is in, as we become better, helping those mono brand retailers around the world whether they're in Turkey or China or wherever they are, helping them apply the same principles, so they're more efficient because then they'll be more profitable and we'll be more profitable. So that's the big win is when we get all 3 of those working at the same time.

I'll just add one thing. I think from a -- I think when Mark kind of spoke about it, from a category perspective, one of the reasons we're able to see the success that we see is because we work very closely with our own DTC stores. And so we can actually test out these concepts, or we can focus our work against our DTC that allows us to leverage it through the wholesale trade. So whilst from one perspective, you can look at clearly the profitability of that part of the business, importantly as we look at it in terms of how we operationalize the category offense, we learn so much through actually operating through the DTC stores.

This is a great risk of over answering the question here. But I wanted to just be very clear about one thing, which is to Jeanne's point, the digital piece and the factory outlet stores are some of the most profitable things we do. And on the in-line side, which you have to bear in mind is some of these stores are really the pinnacle presentation. Those of you who have been in the Niketown stores are extraordinarily exciting category presentations. Those were not always designed to be more profitable, replicated types of formats. What we are now seeing in the new format that Jeanne spoke to is a completely different thought process around how we're doing retail. This is retail that is going to be both profitable and brand accretive and we're on track to do that.

And then just one other quick question. I think this is an Eric question, I'm not sure though. I actually thought that we'd see a little bit more about extreme sports just given that you guys have a great message out there right now. I think like a really big one, one of the biggest that you've had in a long time. Mark, I know this is one that's very near and dear to you. And I think most importantly, you've got the product actually to back it up. I stepped out for a couple of minutes, so maybe I missed it. But if in case I didn't, could someone spend a couple of minutes just really talking about?

Yes, absolutely. Yes, obviously, we had so many categories to kind of take you through. So obviously, we chose not to show Action Sport this time. But we continue to be very excited about our Action Sports business. It actually grew about 14%. So we felt very good about that. We're certainly seeing great growth within North America and it continues to grow. But also, we have a portfolio strategy, which we work with our affiliate business to kind of drive it. So we feel very confident about that business. We saw some slowing in Western Europe, but we've certainly working through that as we continue to roll out.

And I'd add to that too because obviously with the portfolios both Hurley and Converse, it's incredibly important. Hurley has had another good year. And as Jeanne mentioned this afternoon, the new Salvation store, which is opening up in Malibu on a second door is very exciting with the multi-brand category. So definitely something to look out for.

Yes, a couple of quick questions. Don, with respect to hedging, you mentioned implementing a trading company structure. What does that mean? And how does it change how we think about your hedges?

Well, it's not something that if you were building a model for next couple of quarters, you wouldn't necessarily see the impact of that. But the impact is that we are now funneling all of our transactions with factory groups and the various countries in which we do business through a hub, which lets us use the natural offsets of currency to reduce the level of currency exposure. So one of the things that is one of the macroeconomic factors that drives our business is foreign exchange. Sometimes, it's to the plus and sometimes not. What this does is it takes all of our sales in various currencies and our product purchases, which will increasingly be in multiple currencies and lets us net those together, so that we have less volatility from foreign exchange.

Okay. So does it reduce the cost of your hedging?

It does reduce the cost as well. But the main fact here, for example, with China, we are largely net 0 in China, the size of our purchasing and the size of our revenues are basically net 0. So our renminbi exposure is relatively small.

Okay, that's helpful. So no change to the philosophy, just change in the...

No change in the philosophy but a more efficient vehicle.

Great. The second question, you mentioned price increases with respect to fall and holiday, is that different from what you talked to us about, after the fiscal third quarter? Has there been any kind of retroactive price increases that have been put in place?

No, nothing of significance. I mean, when we can take price increases at retail, price sensitivity and playing that but nothing has changed of any material impact. Most of the price increases that we talked about last quarter will go into effect spring.

Don, you mentioned the shift in shipments in North America, I think, being part of the reason that sales are going to grow below futures in Q1. Can you quantify what that was, how much it helped Q4 and how much of a drag it is specifically on Q1?

No, I don't want to provide that level of detail at this point. But what I would tell you is if you look at the underlying trend lines of the business, for example, the futures order book, which gives you the order pattern and that's not muddied by the shipping pattern, you can see the strength of the business in North America. Taposh Bari - Jefferies & Company, Inc.: Taposh Bari with Jefferies. I wanted to ask you a question about Converse and Umbro as you take that business over in China. Can you just kind of talk about the, maybe financial and qualitative opportunities there? And maybe contrast that to what happened with NIKE when you took over that business a few years ago?

So on each of those, as you saw this morning, China offers both Umbro and Converse much upside in opportunity. We see definitely taking a lot of what is happening, out of the U.K., for example, in Umbro or out of the U.S. in the Converse case, and we see there's an awful lot of consumer connectivity and opportunity just as we built the model in other places.

You'll see more of an immediate upside opportunity on the Converse side and then Umbro will be a bit slower build. But both brands, obviously, have a long history and heritage and both we see a tremendous opportunity for growth in China.

Scott Emrin [ph], Westfield Capital [ph]. Just a few unrelated questions. Can you just speak to whether or not you anticipate any meaningful change in the mix between futures and At-Once business? Secondly, your China business is much more profitable today than most of your other geographies. If you can just speak to the sustainability of that? And then thirdly, if you could just talk about the cost environment for key sports marketing assets and maybe differentiate if it's meaningful between sports marketing assets in China versus here in the United States?

Okay. There's 3 questions. Some of which I can answer all of the above and then we can break them out. So the At-Once futures mix, we don't see it continuing to diversify much more than what we've talked about. I think as the business grows incrementally across the business model. We talked about always available. We talked about our retail footprint continuing to expand. But I don't see -- the futures will still be the best indicator for future possibilities, opportunities and how to measure the business. I don't see that changing anytime soon. Second question was China and...

Absolute level of profitability?

Oh yes, I think -- one of the interesting things about China, I think that it will continue to be as profitable. But actually, the third question relates to the China model a little bit, which is -- especially in sports marketing. China is able to actually leverage the global assets much, much better than probably any other business of scale or scope. So whether it's Kobe Bryant or LeBron James or whether it's Manchester United or Wayne Rooney or Cristiano Ronaldo, all of those costs actually sit out in the respective business units, where they're housed and China leverages them. So that being said, we're going to see China sports marketing assets start to accelerate as that business accelerates as the competition accelerates there in China. So I would expect that to have somewhat of an impact on the overall profitability. But still, very, very moderate.

Ini Anzardo [ph], Capital Group [ph]. Can you talk about how you're gaining access to distribution in sort of Tier 2, Tier 3 cities in China?

Yes, I think the expansion of the distribution has been a plain strategy. As you know, we went in and basically focused on the 3 major cities and I think that strategy was very successful for us. And I think over time, people are saying, "Hey, you need to be more aggressive." And we actually did quite a study and found out that we needed to be more aggressive in those other tiers of cities and that we're, in fact, losing share there. And there is, in fact, very little overlap between ourselves and some of the local brands. So that has been a strategy that we have access to those other marketplaces. So it's typical to what we're doing. We would look at the marketplaces, we would create the strategy for distribution in those marketplaces. And as we said today in the presentation, what we believe will be different over time in China what is today a monobrand marketplace, we believe NIKE Retail will be a catalyst for changing some of the secondary cities in the future. We've stayed in the major cities today. We believe over time, multi-brand will exist in those marketplaces. So today it's really about differentiating the monobrand partners that are there and working with those monobrand partners to make their doors more productive and more profitable in those cities. And basically, the distribution is there. We're going to leverage the distribution that's there and work to make it more profitable and more productive for our partners and ourselves.

You're going to see deeper penetration, obviously, not only in the Tier 2, 3 but 4, 5, 6 from NIKE. But as Gary touched on, I think the future is 1, 2 with the NIKE Brand. Umbro, Converse will be a multi-brand strategy against that market. So we see when we actually combine multiple brands, we're really at looking the portfolio against the opportunity in China, I think there's a huge growth potential.

I'm going to just add as Gary articulated, we talked this morning about collaboration and leverage, having the other brands, whether it's Converse or Umbro, coming in alongside and learning best practices and gaining efficiency. Whether it's on distribution or even whether we plug into, say, something such as basketball through Converse. So obviously, the adjacencies and the complementaries will definitely be top of mind.

It was a great learning, in the study, when we did the study is to look at the fact that we were very complementary and not overlapping with our affiliate brands. And that was kind of a key tipping point to our strategy to say, “Hey, we need to really accelerate that strategy.” Mitchel Kummetz - Robert W. Baird & Co. Incorporated: Mitch Kummetz, Robert Baird. Don, on the 2015 mid-teens earnings growth plan, a couple of questions. First, is there an operating margin target embedded in that plan? I know you talked about both operating margin expansion and the financial lever, I'm wondering if there's an operating margin target embedded in that. And then secondly, once we get past 2012, as you think about operating margin expansion into 2013, '14 and '15. It sounds like gross margins, they were down 70 bps last year, expect to be down 100-plus this year. As you get past 2012, does most of them -- operating margin expansion come from gross margin or SG&A? Is there any way you can kind of provide a little color on that?

Well, first of all, I think the math is inescapable. We do need to expand operating margins if we're going to grow revenues at the high-single digits and earnings in mid-teens. And as we said, there's those 3 drivers: gross margin, SG&A leverage and financial leverage. The element of the way we manage this business, at the end of the day, you can do fantastic planning but when you do business in well over 100 countries in so many currencies and it's as volatile as the world is, you essentially have to have a great team, you have to read the marketplace and then you have to adapt. And so our motto really is, a little bit more of a framework than it is a straitjacket. So we have mapped out the operational steps that it takes us to work towards those goals and we are very confident that we can deliver against that. But we're going to be managing this business on a year-in, year-out basis based upon the environment we find ourselves in. And I think if you look at our performance over the last 3 years or even over the last 10, we run a slightly different model every year. But we work in that framework of saying, this is where we want the top line to be, this is the bottom line, we want to improve capital productivity and we have to adapt as circumstances dictate.

Faye Landes again. First of all, 2 things. First of all, on the Europe thing. Can you just talk a little bit about the specific countries, the main countries in Western Europe? You talked about some of them but not all of them. You talked about Germany, a lot. Germany more and it's doing better. U.K. a little bit less and then didn't talk about Italy, if you address that. And then also just on apparel, based on your results and results of other companies selling athletic apparel, it certainly implies that the market for athletic or athletically-inspired apparel is growing quite significantly. Is that a correct perception? And can you just elaborate on that?

Yes. Sorry, Faye, we couldn't address all the countries. But again, we're trying to spin the world in 20 minutes there. So it really, as we said, we focused on the big 5 countries in Europe. The good news is that all of those countries are back to growth. So that's a significant departure from where we've been in Western Europe. So we're pleased with that. To your point, it's been a tough economic year. So in some of the countries, specifically the southern countries, Spain and Italy have been more difficult in terms of the macroenvironment. So that business is still doing well. What we like best is what we said earlier that the performance business is doing particularly well. To your point, the Apparel business is a great opportunity for the company and what Trevor talked about in the presentation, our ability to amplify sports, specifically Football when you look at the great Football assets we have in Europe. And you look at each of the countries, we talked specifically France and we didn't go into depth on the business. But when you pick up the French Federation, you look at all the assets we have whether it's Barcelona in Spain and they win the Champions League or it's Manchester United and they win the Premier League, we can literally now go anywhere in that portfolio and drive the business and drive apparel and drive footwear. So again, we think that should be a growth business for us.

[indiscernible] apparel is doing U.S. as well.

Yes, you know, first of all I agree with your observations on athletically-inspired apparel. We're seeing our futures strength in that area. If you look at our futures, up 15%. I mean, that's equally split between footwear and apparel. We think we have a unique position on the performance side of apparel. And that can help us drive, again, a more unique proposition on what we call the express or the Sportswear side of the business as well. We focused as Eric pointed out, I think in his presentation, a lot more on key items. We've gotten a lot more efficient in terms of focusing on those styles and getting more productivity per style. I think there's still more upside opportunity for NIKE as far as that's concerned. And then I think as you look across the portfolio, particularly with Converse and then Umbro as well and obviously, Hurley, there's some major upside on the apparel side. So we're bullish, we're very bullish on apparel and it's obviously, a really key part of our growth strategy.

One callout again is that too that I would make and I think each presenter called it out this morning is the correlation between one, performance and Sportswear is very significant. And two, having key items both driving growth, as well as defining the brand. And I think you see that when you walk next door and you see the power of strong items that the consumer can connect with and you keep coming back.

So we'll take one more question.

John Zolidis, Buckingham Research. Can you just comment a little bit about NIKE inventory in the U.S. Retail channel? With the inventory units up, I guess, 23%, do you think that there is not enough inventory in the channel? And then secondly, you outlined and you've got these great programs with your retail partners, the Track Club and the House of Hoops and the Field House, do you think that they have achieved a differentiated assortment of NIKE products? Or is there still too much overlap out there amongst your key retail partners in terms of the product they have from Nike?

I'll try and answer both of them. So the inventory levels, I think it's one of the strengths of our companies. I think no company in the industry has worked harder or probably had greater success in maintaining what we call a pull market in the industry. So our model is definitely pull, we try to create the demand as opposed to push the product and the inventory into the marketplace. So I think we're doing that. We work very closely with the retail partners in terms of monitoring their sell-through and they work very closely with us in terms of helping them with their inventory and the flow of that inventory. I think one thing we're better at than we've ever been as Trevor said and as we talked about with our own DTC experience is the flow of that inventory into the retail partners. So we're much better on the flow and I think that's working for everybody. We're not just loading a bunch of inventory in at the beginning of season. We're doing a much better job of flowing that inventory. In terms of differentiated assortment, it almost feels like a retailer question. So I would say every retailer in the industry would say, "Hey, we would like to be completely exclusive." And I think what we have done a much better job on as opposed to being just have exclusive product is to let to differentiate the consumer experience. And so I think all the retail partners who have worked with us on this strategy to how do I create a differentiated consumer experience versus let's just have an exclusive shoe. And I think that's made quite a difference in the change in their stores, change of their presentation and certainly, the consumer experience.

Yes, and I’ll just add to that one and just say that when we think about it, we think about it in terms of distinction. How do you actually allow the retailers to have better distinction in the marketplace. And I think that the category offense has actually allowed us to have distinct formats that we can flow products through and because we stay focused on that consumer every single day, every single season, we can pull a consistent story through those stores. Prior to that, it would have been a hit or miss. So I think that -- what it has allowed us to do is create -- increase the capacity of the marketplace but also increase the distinction between our retailers, which I think the consumer is then having a better experience. And so House of Hoops is a great example and we see that with our Foot Locker. Obviously, the Track Club that we do with FinishLine, another great example. So we're definitely seeing that as something that has really struck a nerve with our consumers and we’re delivering that all the way through our business model.

The last thing I would add is just what we've talked about all day long that opportunity to leverage both lifestyle versus performance and being able to complement each side of the closet, so to speak, of the consumer, really adds much more accessibility to broader capacity and growth for the NIKE brand and it's something that we're focused on.

So I want to thank you all again for being here today. And to those of you that participated via webcast. A couple things. I will look forward to chatting with you, the management team and I, next door, so we'll meet you there shortly. And housekeeping item, we have copies of the press release that went out across the wire following the prepared remarks today. So if you want to grab a copy on the way out the door, you're welcome to do that. Thank you, again.