“must have” products; deep personal connections with our brands; and compelling retail presentation.

We strive to convert revenue growth to shareholder value by driving operating excellence in several key areas:

Making our supply chain a competitive advantage, through operational discipline

Reducing product costs through a continued focus on lean manufacturing and product design that strives to eliminate waste

Improving selling and administrative expense productivity by focusing on investments that drive economic returns in the form of incremental revenue and gross margin, and leveraging existing infrastructure across our portfolio of brands to eliminate duplicative costs

Improving working capital efficiency

Deploying capital effectively to create value for our shareholders

By executing this strategy, we aim to deliver the following long-term financial goals:

High single-digit revenue growth;

Mid-teens earnings per share growth;

Increased return on invested capital and accelerated cash flows; and

Consistent results through effective management of our diversified portfolio of businesses.

In fiscal 2008 we met or exceeded these financial goals. Our revenues grew 14% to $18.6 billion, net income grew 26% to $1.9 billion, and we delivered diluted earnings per share of $3.74, a 28% increase versus fiscal 2007. These reported results included combined gains from the sale of our Starter Brand and NIKE Bauer Hockey businesses of $35.4 million, net of tax, in fiscal 2008 and the gain recognized on the sale-leaseback of the Oregon Footwear Distribution Center of $10.0 million, net of tax, in fiscal 2007, one-time tax benefits of $105.4 million and $25.5 million recognized in fiscal 2008 and 2007, respectively, operational losses of $13.3 million, net of tax, from Umbro, which we acquired in the fourth quarter of fiscal 2008, and a $9.6 million gain, net of tax, from the Converse arbitration ruling settlement in fiscal 2007. We estimate that the combination of favorable translation of foreign currency-denominated profits from international businesses and the foreign currency losses included in other (expense) income, net resulted in a year-over-year increase in consolidated income before income taxes of approximately 6%.

For the year, the increase in net income was higher than our rate of revenue growth due to a reduction in our effective tax rate and improved gross margins, partially offset by higher selling and administrative expenses as a percentage of revenue. Fiscal 2008 results were positively affected by a reduction in our effective tax rate of 7.4 percentage points as compared to fiscal 2007, primarily as a result of the $105.4 million one-time tax benefit received in the first quarter of fiscal 2008. Also reflected in the year-over-year effective tax rate improvement was a reduction in our ongoing effective tax rate resulting from our profits earned outside of the United States; our effective tax rates for these operations are generally lower than the U.S. statutory rate. Gross margins for the year grew 110 basis points versus the prior year as inventory management and strategic price increases were partially offset by higher