Kelley Hall - Vice President of Treasury and Investor Relations Mark G. Parker - Chief Executive Officer, President, Executive Director and Member of Executive Committee Charles D. Denson - Former President of Nike Brand Donald W. Blair - Chief Financial Officer and Executive Vice President

Kate McShane - Citigroup Inc, Research Division Robert S. Drbul - Barclays Capital, Research Division Robert F. Ohmes - BofA Merrill Lynch, Research Division Sam Poser - Sterne Agee & Leach Inc., Research Division Michelle Tan - Goldman Sachs Group Inc., Research Division Michael Binetti - UBS Investment Bank, Research Division Omar Saad - ISI Group Inc., Research Division Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Good afternoon, everyone. Welcome to NIKE's Fiscal 2012 Second Quarter Conference Call. For those who need to reference today's press release, you'll find it at http://investors.nikeinc.com. Leading today's call is Kelley Hall, Vice President, Treasury, and Investor Relations. Before I turn the call over to Ms. Hall, let me remind you that participants on 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 future orders that are not necessarily indicative of changes in total revenues for subsequent periods due to 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 is important to remember a significant portion of NIKE, Inc.'s business, including equipment, NIKE Golf, Cole Haan, Converse, Hurley, and Umbro, are not included in these futures numbers. Finally, participants may discuss non-GAAP financial measures, including references to total wholesale equivalent sales for NIKE, Inc. businesses that have license sales. Wholesale equivalent sales include both reported revenue and estimations of sales by licensees based on the royalties paid. References to total wholesale equivalent sales are only intended to provide context as to the overall current market footprint of the brands owned by NIKE, Inc., and should not be relied upon as a financial measure of actual results. Participants may also make references to other nonpublic financial and statistical information as non-GAAP financial measures. Discussion of non-public financial and statistical information, and presentations of comparable GAAP measures, and quantitative reconciliation can be found at NIKE's website, http://investors.nikeinc.com. Now, I would like to turn the call over to Kelley Hall, Vice President, Treasury, and Investor Relations.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE's second quarter 2012 result. As the operator indicated, participants on today's call may discuss non-GAAP financial measures. You will find the appropriate reconciliations in our press release, which was issued about an hour ago, and at our new Web address, investors.nikeinc.com. Joining us on today's call will be NIKE, Inc. President and CEO, Mark Parker; followed by Charlie Denson, President of the NIKE Brand; and finally, you will hear from our Chief Financial Officer, Don Blair, who will give you an in-depth review of our financial results. Following their prepared remarks, we will take your questions. [Operator Instructions] Thanks for your help with this. I'll now turn the call over to NIKE, Inc. President and CEO, Mark Parker. Mark G. Parker: Thanks, Kelley, and happy holidays, everybody. We're closing the calendar year with a very strong second quarter performance. And looking at our results, you can see that NIKE, Inc. portfolio is a powerful engine for growth. NIKE, Inc. revenue for the quarter reached $5.7 billion, up 18%, earnings per share grew 6% to $1, and global NIKE Brand futures grew 13%. Overall, a remarkable performance in what continues to be a very volatile global economy that has yet to deliver a uniform recovery. And looking ahead, economic and political uncertainty are unlikely to abate in any meaningful way in the short-term, so risk and challenges do remain. But that said, we're well-positioned and resourced to manage risk and continue to drive growth going forward. There are 2 things I want to touch on today that connect our results from Q2 with where we're headed in the back half of the year and beyond. And the first is confidence. We create and commercialize innovation with the speed and quality unmatched by anyone in the industry. And we do that because we're deeply connected to athletes. They inspire us, they challenge us, and they help us create the products and experiences that come to life in stores, online and in the most important markets all around the world. Athletes will always be our most important partners. And our brands will always be our strongest assets. People seek out brands they can trust and products that are relevant, especially in a more challenging economy. We have 7 distinct and high-energy brands delivering on that promise across categories, geographies, price points and channels. Our brands are a source of authentic, emotional connections, and they offer the power and flexibly needed to create and convert growth to value for our shareholders. It's a truly innovative product experiences in brands run by the strongest management team in the industry, that's a big part of why I see more opportunity now than ever before. The second thing I want to touch on is focus. Recently, we held a meeting of our top 250 NIKE leaders from around the world. We came together to see and talk about what the future holds for the company. And that meeting focused on how we're really drilling down to identify and resource the most compelling growth opportunities for NIKE, Inc. What we call edit-to-amplify. By being better editors, we're able to be laser focused on what we're doing, who we're partnering with and where we are investing to reach our full potential as a company and as a leader in this industry. I will provide all the details, but I will tell you that we've opened the door to truly game changing innovation. And some of the most powerful potential for innovation lies in the digital technology space. We're using digital to change everything about the product creation process, from the time it leaves the mind of the designer to when it gets into the hands of our consumer. Truly breakthrough innovation that will allow us to accelerate how we create and commercialize new products. Social networking and digital communication is helping us unify and expand the family of sport. We've never been closer to our consumers as they continue to extend their reach and connect even more with each other, with their sports heroes and their favorite teams. And digital technology is a powerful enabler of the huge opportunities we have in our Direct to Consumer business and in working with our wholesale partners. Now with an amazing leadership meeting that not only showcased the game changing innovations to come but dramatically exhibited the continued benefits of key decisions and very focused investments we've made over the last 5 years, like going to the category offense and elevating Apparel, investing in DTC and our wholesale partners, and making the big commitments it takes to revolutionize our products, our manufacturing and our supply chain, creating even greater growth potential. Confidence and focus are incredibly powerful, and you're going to see them come to life on the fields, the courts and tracks, where global sporting events unfold over the next 12 months. The BCS games, the NBA finals, the Euro Champs, the Summer Olympics in London, the NFL, these are the moments that inspire us, that motivate us and allow us to share the world stage with the greatest athletes alive. They will be at their best, and I can assure you, so will we. Going forward, we'll continue to use the unique power of our portfolio to drive growth and manage risk, to be opportunistic and disciplined, to connect with people locally and globally. In short, to bring inspiration and innovation to every athlete in the world. I'm excited about our opportunities in the back half of the fiscal year and beyond. We're confident, we're focused, and we're hungry, and of course, you can expect us to act accordingly. So thanks, everyone, and now here's Charlie. Charles D. Denson: Thanks, Mark. Happy holidays, everybody. It was a very good Q2 for the NIKE Brand. I think it illustrates the 3 crucial elements of our growth strategy. You've heard me talk about them a lot. That's innovative products, brand strength, and premium distribution. And all 3 come to life through our category offense. That's how we continue to transform the marketplace, and that's how we deliver the kind of numbers we're seeing today. Let's take a look at our NIKE Brand results on a constant currency basis. Global revenue was up to date 18%, and global futures were up 13%. Every geography, except Japan, grew its top line, and 6 of our 7 key categories increased revenue. Our brand DTC revenue increased nearly 20%, propelled by positive comp store growth in both factory and Inline locations, as well as higher online sales. As we said many times, NIKE is a growth company, and we see a lot of opportunity to grow by focusing on these 3 key areas I've mentioned: Product, brand, and distribution. For product, let's turn to Basketball. We've been pretty busy here. We released the LeBron 9, the first Basketball shoe to combine Flywire and Hyperfuse technologies. Kevin Durant got his fourth signature shoe, which features a new Adaptive Fit system and is featured in our Basketball Never Stops campaign. In the Jordan Brand, we launched 3 game changing shoes with 3 of the game's most explosive players: Dwayne Wade, Carmelo Anthony, and the newest L.A. Clipper, Chris Paul. And the dancer tomorrow, we're releasing the Kobe VII System Supreme. It allows players to switch out inserts to match their styles of play. That's the kind of innovation that proves Basketball never does stop. It also increased our Basketball revenue double digits for the quarter. We're all happy to see the NBA start up again with 5 great games on Christmas Day. But that's just the beginning. Along with that, we're looking forward to March Madness, the NBA Finals, and then onto the Olympics in London. We're at the front of another great run of momentum in Basketball around the world. That's great for fans, it's great for the game, and of course, it's great for NIKE. For brand strength, let's turn to Running. It's been a great quarter. In fact, it's been a great year. My favorite running story of the quarter has to be the event we did in Seoul, South Korea, a city with incredible energy and a growing influence in youth culture. We sponsored a 10K there as part of our WE RUN campaign that takes place in 16 cities throughout our Emerging Markets geography. It sold out with more than 30,000 people, in just 2 hours. And we continue to have similar turnouts around the world. 10,000 runners in Singapore, 12,000 in Kuala Lumpur, 15,000 in Buenos Aires, and 23,000 in Guadalajara in Mexico City. And then there was the Chicago Marathon, 45,000 runners, store events, product expos, training runs, and it all came together online through Nike+. It was our most digital Marathon ever. We haven't seen this much energy around Running since the first boom happened back in the '70s. We were in the middle of that one, and we're in the middle of this one as well. Our results prove it, with Running up strong double digits again in Q2. And the third part of our brand growth strategy focuses on transforming the marketplace. We continue to work with our wholesale partners to elevate the experience our consumers have with our brand and our products. That brand Jordan launch I mentioned was a big day at the Foot Locker House of Hoops in Miami. And if you want to learn about our new Hyperwarm Apparel technology, a great place to go is our Dick's Field House concept, tremendous opportunity ahead with our wholesale partners. On the DTC side, there are 2 great examples I want to talk about. First, the new brand experience store we opened right here in Portland. It replaces the very first Nike town we opened back in 1991. That first Nike town was a quantum leap forward for our entire industry. It expanded access to our brands and unlocked incredible growth in Nike Apparel. In our current generation of stores, we're doing it again. This time, unlocking the power of the category offense to expand capacity in the marketplace. We get better with each new opening. That brings me to my second example, our newest NIKE Brand experience store in Asia. It's located in Wuhan, China, which also happens to be the hometown of Li Na. She's the defending French Open champion and a national hero, who is on hand for the opening of the store. The store is an important and impressive example of how we're expanding and differentiating the NIKE Brand throughout the entire China marketplace. Through our DTC business, we continued to showcase how we serve the athlete in every aspect of their lives, how they compete, train, and express themselves. We call this amplified sport, and it's a powerful 24/7 relationship that we're leveraging in our brand experience stores, our category stores and with our key wholesale partners. We saw that in our results for the Thanksgiving weekend here in North America both our Inline and factory stores delivered double-digit comp store gains, and we had our biggest day ever online. We're seeing tremendous traction in our efforts to transform the marketplace, and we feel we're just getting warmed up as we look at all of our global opportunities. This relentless focus on innovating across product brand and distribution is the core of our growth in developed and developing markets. North America continues to outperform, with revenues up 21%. We haven't even launched the NFL product yet. 21% growth is a big number in any market. And given the size of our existing footprint, some may wonder how we're able to do this. It validates that our category strategies are delivering results. North America is where the category offense was deployed first, where its most fully developed and where it has the biggest short-term payoff. It's where we have the most develop retail marketplace with our own stores, with our wholesale partners, and online. It's where we have the longest and deepest relationships with consumers. It's a model that we leverage all over the world. If you want to see the benefits of transforming the marketplace to drive growth around the world, take a closer look at North America. Let's look at China, which continues to post very strong numbers. Revenue in China grew 28% for the quarter. Footwear is up 27% and Apparel was even higher up 34% on the quarter. In part, benefiting from changes in shipment timing compared to last year. When I look at our China business, I see a couple of things at work. First, we continue to build brand loyalty with the young consumers. And second, we're leveraging the category offense to bring the most relevant products and services to the marketplace. The consumers are responding. Going forward, the big growth opportunity in China is based on our ability to connect directly with young consumers there, and we're continuing to work hard at it. The passion for sport is building in China, and NIKE is at the center of it. We're also working to leverage in Western Europe, which remains a very challenging economic environment. But we believe that our commitment to innovation and premium brand position will inspire consumers and set us up for the long-term growth. We're using what we know about the significant benefits of transforming a marketplace through the category offense to continue to elevate the NIKE Brand positioning in Western Europe. And we expect to reap those benefits over time, as the category offense takes hold throughout that geography. And as Mark said, it is going to be an amazing year in sports, especially in Europe, where 2 of the most important events of the year will play out: the Summer Olympics, and the European Championships. I think we're going to see an amazing appetite for performance and a tremendous energy around the culture of sports. That's good for the NIKE Brand, both on the ground in Europe and around the world. We're truly excited about what's in store for our brand and our business globally. Demand continues to build, as evidenced by our futures numbers. At the same time, we continue to see pressure on gross margins from input cost inflation, which impacts our overall profitability. As you know, we took more meaningful price increases in our spring and summer lines, which are reflected in the futures orders that we are reporting today. The combination of our deep pipeline of innovative products, strong demand, and the power of the NIKE Brand, continue to give us confidence in our ability to take pricing actions in the future. While the consumer will ultimately decide, we believe our pricing strategy creates the right price value equation for our products at all price points in every market. And as we talked about on the last call, the higher input cost that are putting pressure on our gross margins are also showing up in our inventory growth in a significant way for this quarter. In addition, we did see growth in unit inventories, but absolute unit levels have plateau-ed. We remain laser focused on managing inventory to keep the marketplace clean and support profitable growth. Don will walk you through the detail on inventory growth in a minute. But overall, I feel good about our inventories and where they're heading. So looking forward, I'm confident in what we're bringing to the consumers. And with a full sports calendar and some very exciting product launches, including a few surprises coming your way this spring and summer, I like where we are, and better yet, I like where we're headed. So thanks, everybody, have a happy holiday. And here's Don. Donald W. Blair: Thanks, Charlie, and happy holidays everyone. Last quarter, I outlined 3 key themes that drove our financial results and our outlook: Strong top line momentum, fueled by our category offense and the quality of our innovation agenda, the power of our portfolio that allows us to manage risk and outperform in a volatile macro environment, and our focus on delivering both near-term performance and long-term shareholder value. Those themes were again reflected in our second quarter results. As Charlie and Mark spoke to earlier, the category offense and our innovation capabilities enable us to deliver highly differentiated product, deep brand connections and compelling retail experiences to consumers around the world. Those capabilities are driving incredible top line momentum and will also enable us to continue to deliver a strong price value equation to consumers even as higher prices hit the market. The second theme is the power of our portfolio to drive growth and manage risk. In Q2, revenue growth accelerated in our largest businesses, the NIKE Brand and Converse, and that was across multiple categories and in both developed and developing markets. The breadth and diversification of the Nike portfolio, combined with our strong balance sheet, uniquely positions us to effectively manage through the ongoing economic uncertainty that's become the new normal. While no company can completely eliminate risk, our ability to leverage our portfolio of brands, geographies, categories and operational capabilities, gives us confidence that we can continue to deliver on our goals. The third theme is our ongoing commitment to delivering long-term shareholder value and near-term results. As our Q2 results show, we continue to see significant pressure on gross margins from input cost increases. We're also facing increasingly significant FX headwinds. We will manage the levers of our profit equation to mitigate risk and deliver near-term profitability. That said, we'll also invest in our business to deliver sustainable growth and long-term value for our shareholders. So with that context, let me now turn to our Q2 results. Reported revenue for Nike Inc. increased 18%, up 16% on a currency neutral basis. The revenue increase was driven by robust growth for the NIKE Brand and Converse. NIKE Brand constant currency revenue grew 18%, driven by higher revenues in nearly every geography and category. Currency neutral revenues for our other businesses grew 5%, driven by double-digit growth at Converse. NIKE Brand futures orders for December through April 2012 grew 13% on both a reported and currency neutral basis. Futures increased at a double-digit rate for all categories, except sportswear and Action Sports, which grew at a mid single-digit rate. Unit orders increased 7%, while average price per unit added 6 points of growth, due mostly to price increases that take effect for the spring and summer seasons. On the strength of our Q2 results and our forward orders, we're raising our full-year revenue expectations to mid-teens growth. Second quarter diluted EPS grew 6% to $1, as strong revenue growth, SG&A leverage, and the benefits of a lower share count were partially offset by a decline in gross margin. Gross margin for Q2 was down 260 basis points versus last year, driven primarily by higher product costs. This downside was partially offset by strong growth in our Direct to Consumer business, moderate price increases for our fall and holiday seasons, and the benefits of our ongoing product cost reduction initiatives. As we've discussed on prior calls, there's a 6 to 9 month time lag between changes in input cost and higher cost of goods sold reported on our P&L. As a result, the holiday 2011 and spring 2012 seasons reflect the peak materials costs we saw earlier this calendar year. As we move into the summer and fall 2012 seasons, we expect our cost of goods sold to reflect the lower materials costs we've seen more recently. In addition, while there are some higher prices in effect for fall and holiday, the planned pricing actions we've taken for the spring and summer 2012 seasons are more significant. We continue to expect the rate of gross margin decline to narrow over the balance of this fiscal year. But given our Q2 results and current exchange rates, we now believe we'll see at least 160 basis points of gross margin erosion for the full fiscal year. As we anticipated, inventory levels plateau-ed in Q2, while the rate of inventory growth improved sequentially from last quarter. The dollar value of NIKE, Inc. inventories increased 35% versus last year, driven by 39% growth for the NIKE Brand. About 20 percentage points of the increase for Nike brand inventories was driven by higher unit inventories, a significant deceleration versus the 34% growth we reported in Q1. Now, as then, the unit increase versus last year's relatively low levels was driven by strong demand and ongoing improvement in factory deliveries. The remaining 19 percentage points of inventory growth for Nike Inc., NIKE Brand, excuse me, were the result of higher cost per unit primarily due to input cost inflation. Overall, we're comfortable with current inventory levels and trends. That said, we'll continue to manage our inventories carefully to support market demand and manage risk. We continue to expect inventory balances to remain stable over the remaining quarters of the fiscal year, with the rate of inventory growth declining sequentially, and coming more into line with revenue growth by Q4. Although working capital levels have risen from unusually low levels last year, our trailing 12 months return on invested capital increased to 22.6%, up 1.4 points versus the prior year. And in Q2, we generated $360 million of free cash flow from operations. As our inventory balances stabilize, we expect to generate more normal levels of free cash flow from operations in the second half of the fiscal year. So now let's take a look at our performance by segment. North America again delivered tremendous top line performance in Q2, driven by strong growth across nearly every dimension of the business. Constant currency revenues rose 21%, fueled by double-digit growth in every category except Action Sports, which declined mid-single-digits. Forward revenues grew 20%, while Apparel grew 23%, continuing to benefit from our focus on transforming the marketplace along category lines. Our Direct to Consumer business grew 17%, as improved store productivity drove a 14% increase in comp store sales and online sales grew 16%. On a reported basis, revenues for North America grew 21%, and EBIT grew 17%, as robust revenue growth and SG&A leverage were partially offset by lower gross margins. In Western Europe, Q2 revenue increased 2% on a currency neutral basis, as growth in Running, football, Women's Training and Basketball were partially offset by lower sportswear revenues. On a territory basis, double-digit growth in our AGS Territory; Austria, Germany, and Switzerland, was partially offset by declines in nearly every other territory. On a reported basis, revenues for Western Europe grew 7%, but EBIT declined 35%, due mostly to lower gross margins. Unfavorable FX rates and higher product cost more than offset upsides from direct to consumer and higher prices to drive the gross margin decline. In Central and Eastern Europe, Q2 revenue grew 19% on a currency neutral basis, driven by higher revenues across all categories, led by double-digit growth in Running, Football, and Men's and Women's Training. On a territory basis, double-digit growth in Russia and Turkey more than offset lower revenues in Southern and Central European markets, such as Greece and Poland. On a reported basis, revenues for CEE grew 17%, but EBIT was down 31%, driven primarily by lower gross margins, which were adversely impacted by both higher product costs and higher discounts. In China, growth accelerated in Q2, as currency neutral revenues grew 28%, reflecting growth across all categories and territories. Footwear continues to perform very well, as revenues advanced 27% for the quarter. Apparel revenues grew 34% in Q2, due in part to a shift in timing from Q2 to Q3 last year. Excluding these changes, China Apparel would've grown about 20% in Q2. While we've made progress with Apparel in China, we believe significant opportunities remain to position this business for profitable growth going forward. Reported revenues for China grew 35% and EBIT increased 26%, as higher revenues and SG&A leverage were partially offset by lower gross margins. Gross margins were lower in Q2 as a result of higher input costs and discounts to clear a slow-moving Apparel inventories, more than offsetting the benefit of higher prices. Japan continued to deliver mixed results, as currency neutral revenues fell 7% in Q2, reflecting holiday futures orders taken in the weeks immediately following the natural disaster in March. While revenues declined for most key categories, Running was a bright spot, delivering double-digit growth for the quarter. Reported revenues for Japan increased 3%, but EBIT declined 3%, as higher revenue and improved gross margins were offset by SG&A deleverage. Our Emerging Markets geography continues to drive strong growth, as Q2 revenues grew 26% on both the reported and currency neutral basis. Every category and territory posted higher revenues, with Brazil, Argentina, Mexico and Korea driving the largest share of the growth. EBIT for the Emerging Markets increased 27%, driven by revenue growth and SG&A leverage, which more than offset lower gross margins. Second quarter revenue for our other businesses increased 5% on both a reported and currency neutral basis, as revenue declines in 4 of these businesses, were offset by a more than 20% increase in revenues at Converse. EBIT for the other businesses decreased 3%, driven by lower gross margins and SG&A deleverage. With the first half of the fiscal year in the books and spring 2012 futures in hand, the outlook for the fiscal year has changed somewhat. We now believe revenue growth for the year will be higher than we had previously expected, reflecting our Q2 results and a broad based momentum in our businesses. At the same time, gross margin for the year will likely be lower than we previously expected, driven by Q2 results and the ongoing impact of weaker international currencies. In addition, these currency variances will reduce the reported U.S. dollar revenues, expenses and profits from our international businesses. Note that our estimate of these translation effects has been included in the guidance we're giving you today. Specifically, we now expect mid-teens revenue growth for the full year, reflecting second half revenue growth slightly above the rate of futures growth we reported today. For gross margin, we expect the cost headwinds that drove our results in the first half of the fiscal year will continue to have an impact over the remaining quarters, and we expect FX pressures to intensify. We do anticipate the planned price increases for the spring and summer 2012 seasons will provide greater benefit to gross margin in the second half. partially offsetting cost and FX pressures. As a result, we now expect full year gross margin will be down at least 160 basis points, with Q3 down about 150 basis points and Q4 down about 50 basis points. Over time, we believe the combination of higher prices and easing materials costs will bring our gross margins back to year-over-year growth. We continue to expect SG&A leverage for the year, with growth in the low- to mid-teens, reflecting mid-teens growth for both Q3 and Q4. Although we expect the demand creation investment to be weighted to Q4 in support of the Euro Champs and the London Olympics, this will be balanced by operating overhead growth weighted to Q3. We continue to expect the effective tax rate for the full year to be about 24.5%, reflecting the benefit of a lower tax rate on our international operations. However, we expect the rate for Q3 will be about a point higher due to the forecast of timing of income by operating unit for the balance of the year. As we look back on the first half of the fiscal year, we feel great about the strength of our business and our ability to deliver exceptional results despite ongoing global economic volatility. Looking ahead, we recognize the need to continue to effectively manage risk while investing in the future to drive growth. We're confident we have the brand strength, innovation pipeline and operational discipline to manage all of the levers required to deliver sustainable, profitable growth for our shareholders. Now, we're ready to take your questions.

Our first question comes from the line of Kate McShane with Citi Investment Research. Kate McShane - Citigroup Inc, Research Division: Don, I was wondering with regards to the guidance that you gave for gross margin pressure for the rest of the year. Can you further break out how much is coming from FX pressure? Donald W. Blair: Well, I don't want to try to give you a reconciliation, Kate. But what I would say is there's really about 4 components that I would call out. One is certainly FX is going to be more challenging, and that's a big factor. A second element is that in the second quarter, we expected to see an improvement in discounts. It actually was about flat versus last year. So we're expecting that were going to see that trend continue. And we're also seeing a very significant strength in our North America business and a little bit weaker results out of our international businesses. And that actually has a bit of a mixed shift to the downside on gross margins. So those are really the key factors driving the balance of the year. Kate McShane - Citigroup Inc, Research Division: And then my second question is on Converse. I think the Converse China license comes back into the fold in January, I believe. I was wondering if you're able to give us any further detail on what some of your plans are for the brand over the next 12 months? Mark G. Parker: Well, we have a great opportunity in China with Converse. Certainly positioned from a brand standpoint in a very different way than the NIKE Brand is. So we're looking at both footwear growth there, of course, and we've seen some good steady healthy growth in footwear in Converse in China, and we're also looking to build a stronger base in apparel as well. So we expect that the brand connection with the consumer in China is going to continue to get stronger and stronger for Converse. And then we've seen upgrades happening on a steady, consistent basis in our retail presentation. So the outlook for Converse in China is actually quite bullish. And we feel good about, again, the relative positioning of Converse versus NIKE. So it's a real complementary situation between those 2 brands. Donald W. Blair: Yes, the other thing I point out, Kate, is we did take over the U.K. market for Converse on January 1 of this year, 2011, and we've seen a really significant acceleration in the business results in the U.K. So we feel very confident in this model of taking these markets direct, and our ability to grow the business on the top line and the bottom line.

Our next question comes from the line of Bob Drbul with Barclays Capital. Robert S. Drbul - Barclays Capital, Research Division: A couple of questions, really. On the first one, on the China business, the Apparel definitely snapped back. Can you just maybe give us a little bit of commentary around how you feel about the marketplace, the inventory levels in the marketplace, market share position? And within China, I think you caught out a shipment timing. Was that a year-over-year timing shipment, or is that Q2 '12 impacting Q3 '12? Donald W. Blair: I'll have to answer the second part and say year-over-year timing. It's not a change in timing this year, it's a change in timing last year that's affecting the percentage comparisons. Charles D. Denson: Bob, this is Charlie. I think when we look at the China business right now, we're still obviously very bullish on China and we feel great about the brand where it's at, both from a positioning standpoint, how it competes with the global competitors, as well as the local competition. I think as you look at, we look at a lot of different things when we're thinking about the future there. One is sports participation, two is brand strength, and then three is making sure we have the right product at the right time, and being locally relevant. And I would say there right now, all 3 of those things we feel pretty good about. I think that when you look at the opportunities over the next 12 to 18 months, China still represents a great growth story for us and a great piece of our growth strategy. The one area where I would say that we have to continue to get better is on the Apparel side. We had a great quarter in Apparel. There's certainly a great appetite for Nike Apparel in the China marketplace. But as you know, China represents a much more balanced weighting between footwear and Apparel. And so we're taking advantage of the opportunity. There's still more work to be done. Robert S. Drbul - Barclays Capital, Research Division: Great. And then my follow-up question would be, on the futures orders, were there any trends that -- any variance with the first half of the period versus the second half of the period that are worth noting, Don? Donald W. Blair: Yes, the futures orders are a little more back-end weighted than they are in the front end. But anticipating your question, we did not see a significant slowdown in unit sales growth over the course of the window. So this is relatively higher percent growth in revenue projection for the back half of the window because of the price increases, but we didn't see a significant change in the unit velocity over the window.

Our next question comes from the line of Robbie Ohmes with Bank of America Merrill Lynch. Robert F. Ohmes - BofA Merrill Lynch, Research Division: Two quick questions. One, could you talk a little more about Western Europe and sort of what it feels like to you guys as you head into 2012. Some other people that operate there have indicated little bits of issues with their backlogs. Clearly, you guys haven't seen anything like that yet. And maybe help us think through that versus the 2 big things going on next year, the Olympics, and Euro Cup, and maybe help us think about that. And then after you guys elaborate on that for us, the second question, would just be on the DTC momentum you guys saw, could you comment on how that momentum breaks out full-line stores versus outlets, particularly in the U.S. but the global on that would be great also. Charles D. Denson: Robbie, this is Charlie. Western Europe, I think, I mean, certainly one of the more challenging geographies for us right now when you look at the numbers. The uncertainty that really reigned supreme across the entire continent is challenging, I think, for everybody. And we're no different in that regard. One of the things I feel really good about is our ability to manage through this time of uncertainty and instability. We continue to keep a pretty sharp focus on inventories. The pressure that we're getting from FX, obviously, is significant. Really bore a large part of the impact on their gross margin performance for the quarter. And so where that goes in the future remains to be seen. But from a consumer standpoint and a brand positioning standpoint, we feel very good about where we're at, the brand is healthy. The thing I'm most pleased with right now in Europe is our performance product is performing extremely well, where we have an opportunity to get more market share is really more on the sportswear side, both footwear and Apparel. So we're still very, very bullish on Europe long term, but the level of uncertainty short-term is proving to be somewhat challenging. But as I look across the landscape, I don't think that we're out of any rates by any means and a good position for the long haul. Donald W. Blair: And Robbie, as far as DTC is concerned let’s just focus on North America for the moment. We actually had stronger growth out of the inline stores. Both of them were up on the comp basis, but slightly stronger growth out of the Inline stores. And as we said earlier on the call, strong growth out of digital as well.

Our next question comes from the line of Sam Poser with Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: Just could you walk through the inventory in a little more detail regarding the cost increases? And the commentary, was that completely on the NIKE Brand? Charles D. Denson: Yes. So breaking this down, NIKE, Inc. was up 35%. That was 39% up on the NIKE Brand side. That's the overwhelming majority of both the inventory and it obviously drove the growth. So that 39% growth on the NIKE Brand side, 20 points of the growth was increase in units. And that compared to 34% increase in units in Q1. So we're definitely seeing the rate of growth of units come down, and we're actually in absolute quantities it's plateau-ing as we expected it would. So that's the majority of the growth about 20 points. The remaining 19 points of growth is largely due to increased cost per unit. And as you know, that's pretty much the input cost increase as we've seen, labor and materials. Sam Poser - Sterne Agee & Leach Inc., Research Division: And would you say also that those costs have peaked as well here? Or do we expect those costs to continue to increase until we get to the end of the year, or is it pretty much peaked out right now with these inventories that you have? Charles D. Denson: No, I think -- I don't think it's going up, but we don't expect it to start coming down really more towards the very end of this year and really more into the fall season. It's when we look at the key materials, what we're seeing today is the prices as they were in the spring of 2011, and that was really the peak. So we're really not going to start to see this come down until we get in more towards the very tail end of summer and fall of 2012. Donald W. Blair: Yes. And I would just add that we're seeing some stabilization in material. The labor cost continued to accelerate. So they're starting to offset each other a little bit. Sam Poser - Sterne Agee & Leach Inc., Research Division: And then just lastly, Western Europe, the futures numbers there, are you seeing much more acceleration in the back half relative to other, given the events? Charles D. Denson: I don't think you're really seeing the impact of the events yet. This is early for us to start to see that. We've got the European Championship should come at the very tail end of the fiscal year, and then the Olympics are largely going to be in fiscal '13. So you really don't have those in those futures windows yet.

Our next question comes from the line of Michelle Tan with Goldman Sachs. Michelle Tan - Goldman Sachs Group Inc., Research Division: I was just curious on the gross margin again. It sounded like the piece where things came in worse then you thought was primarily on the discounting and the improvement that you had expected to see but didn't come through in the quarter. Is that true of kind of the balance of the year and where you're seeing greater pressure than you expected? Donald W. Blair: You are correct that, that is a key driver for the quarter, that we expected discounts to get a little better, they didn't. And for the balance of the year, we do expect a continuation of that. But in addition, as I've said earlier, we also are seeing more FX pressure in the back half than we expected 90 days ago. And also, much greater strength in North America and somewhat weaker results in Western Europe primarily. So it's really those 3 factors that are driving the balance of the year change in outlook. Michelle Tan - Goldman Sachs Group Inc., Research Division: And I guess when you look at the improvement in discounts that you expected to see that you're no longer counting on through the next several quarters is that something where you would expect to still see that over time, so that's an opportunity that you see in 2013? Or I guess what's driving the change in kind of the improvement in discounts? Is it specific to a region? Is it specific to kind of the inventory levels that you have today? What's the root cause? Donald W. Blair: Yes, it's a combination of -- first of all, we are always in continuous improvement mode and we're continuing to make sure that our discount structures are focused on driving growth. And then the second element, as you point out, we are moving through some inventory in a couple of pockets. And I think Charlie mentioned, and I also mentioned, around the Chinese Apparel situation. So one of the things that I think we have a long-standing track record on is that we really want to keep our inventories lean, we want to keep a full market in place. And when we think we need to move the inventory, we will. Michelle Tan - Goldman Sachs Group Inc., Research Division: That's helpful. And then, finally, just any color you can give us on the NFL license? When we should start to see it show up in the order trends? And then any kind of color on plans for the business? What should we look to see in the market? Donald W. Blair: Within that over first part of April, right so you'll see some initial part of going to the marketplace in April. It's not the high season, to say the least, where we're at. So you really won't see a big material impact until we get into the fall season. But that being said, I am very excited about that launch. And I think if you talked to any of our retail partners who have seen the product already, they would echo those sentiments. Charles D. Denson: I'm going to add because I'm equally excited that this is going to be, I think, a new chapter for the NFL and NIKE. The level of performance and innovation here are exciting everybody here around the company. So -- and the retailers that we've shown the product to already. So it's very exciting.

Our next question comes from the line of Michael Binetti with UBS. Michael Binetti - UBS Investment Bank, Research Division: Just a quick couple of modeling questions for you. I'm sorry if I missed it, did you do give a third quarter revenue guide for us? Donald W. Blair: The guidance for both the third and the fourth quarters is the same, which is slightly above the futures growth that we reported today. Michael Binetti - UBS Investment Bank, Research Division: And then I just want to make sure we're setting the bar appropriately for folks listening here. As far as the price increases that are coming up, are those completely reflected in the futures orders at this point? Or in other words, is there another incremental bump up to come next quarter, just so we have expectations correctly for how that one affects futures windows going forward? Donald W. Blair: So the futures numbers, we just reported today, as we've said, there was about a 7 percentage point increase in units and about a 6 percentage point increase in value per unit. This futures window includes December and January, which will have some holiday, therefore, in the window. So when you get to the next futures window, it's going to be spring and summer and therefore, you'll be reflective of the full impact of the price increases for spring and summer. So I would expect to see just the mix of months involved here. We've got some of holiday and some of spring here, where the next one is going to be spring and summer, so it should be a little higher. Michael Binetti - UBS Investment Bank, Research Division: And then just, I guess, on the comment, I know you're getting beat to death on gross margins here, so I apologize. On the comment about discounting being a little more sticky than you thought previously, and I know you give a little detail there, but we've got higher discounts that I guess are surprising you guys a little bit heading into price increases. And I'm just kind of -- I'd like to be able to get a little bit more of what makes you confident heading into price increases that the discounting won't surprise you on the upside a little bit going forward. Is there anything you can kind of tell us, like if you are more confident that the price increases won't need to be discounted at a heavier level? Just considering that was one of the comments today. Donald W. Blair: Well, I think, first of all, there's -- I draw a distinction between the 2 separate pieces. The question around the pricing really has to do with the consumer response. And as we've said before, we think we're in the best possible position to be taking price increases at this particular point, given the strength of the brand and the innovation pipeline. So we think we're in terrific shape. We do manage and measure with our wholesale partners sell through very carefully. So we're going to be watching this. But we feel we're in the best possible position. With respect to what drives the level of discounts on a shorter-term basis, that's really more in the supply chain around things like delivery timing and overall inventory levels. And as we said earlier on the call, we're seeing great improvement in on-time performance coming out of our factories. Our airfreight is down. So as we start to see our supply chain smooth out, I think we're going to also see those discount levels can be managed down.

Our next question comes from the line of Omar Saad with ISI Group. Omar Saad - ISI Group Inc., Research Division: Wanted to -- I apologize, but I wanted to follow-up with other question on gross margin. It looks like this was your first sub-43 kind of gross margin quarter in 6 or 7 years. On the one hand we're seeing these kind of ongoing gross margin pressure in your business like a little bit more than you expected. But in the other hand, I hear you guys talk and we see it in the marketplace, the innovation that's in place, the impacts of your category offense, the Running, the Basketball innovations and product line you've been talking about early in the call. Help me kind of balance out those 2 dynamics and fill up that disconnect. It sounds to me like the innovation has never been stronger, and the product line has never been stronger. But we're seeing kind of more gross margin pressure than we ever imagined for such a great brand. Is it a strategic decision on your part? Is it something going on in the marketplace competitively? Any color would be helpful. Donald W. Blair: Well, I think the first thing I would do is just talk a little bit about the philosophy on this. And that is that, first of all, we're managing a long-term growth trajectory here. And our objective is to manage a good price value equation for the consumer over time and drive the overall growth of our business. And I first would also point to the fact that you can't completely disconnect the revenue and the gross margin lines, and we're seeing fantastic growth in our business, and over time, that's making us a lot more profitable, a lot more valuable. I also think that as we're coming into spring and summer and really as we go into successive seasons, I think were thinking differently about pricing than where we have been in the past. We have more inflation in the macro economy than there has been before. We have terrific brand strength, great innovation. I think we can monetize some of that through higher prices. So we do expect that we're going to see over time improving gross margins, but I also want to make sure we're always thinking about the overall profitability equation including the top line. And that's been absolutely fantastic. Omar Saad - ISI Group Inc., Research Division: And then can you give us a quick update on the supply chain? I know you guys have been working on the supply chains, some innovations going on there, opening up some more capacity and how you think that will affect the situation? Charles D. Denson: Well, I'll take part of it, I think we can probably all chime in here from different directions. I think one of the things that we feel really good about is some of the things that Don just alluded to is really catching up on capacity. We've had an unbelievable last 12 to 18 months, and we were really short of capacity on some of our most important technologies. And we feel like we've negated that going forward, and that we're in a position now to really maximize and optimize some of the technologies that are in the marketplace. With that being said. I think you heard Mark allude to, and I'll let him talk more about it, but we have some real innovation coming down the pipeline that we're incredibly excited about. And I think that's one of the things that gives is such great confidence about the future, is some of the new innovation that we have in the pipeline that you will start to see maybe as soon as the Olympics. Mark G. Parker: Yes. We'll chime in, This is Mark. I speak a lot of about a lot about innovation, and much of that is around product. But as I mentioned earlier, there's a lot of innovation focused around our supply chain, specifically in working with our factories to upgrade, I think, their ability to innovate with us. And that's beyond what we've talked about in the past come in terms of lean manufacturing. And then looking at whole new ways to manufacture products. And these are the things that will really take shape and have a much more profound impact, I think, between the top line and the bottom line in the months and years to come. Some of these dramatic breakthroughs that I referenced in my remarks earlier are happening on the manufacturing side as well. And you'll see NIKE take a much more active position in trying to drive innovation from design, all the way through the manufacturing process. I think that's absolutely critical for us to be a competitive company moving into the future and really again apply innovation as best we can within that part of our business. So I can't be very specific at this point, but I can tell you that we're incredibly excited about, as I said, some of the real game changing innovation that's coming. And I spoke earlier about innovation as it relates to the event that are coming up. You're going to see some very dramatic innovation from Nike in the months ahead. And as Charlie mentioned, a few surprises. Much of this is going to be coming around the summer Olympics, or leading up to the Summer Olympics, where I think NIKE does its best work. We really rally behind these big global sporting events. So some of the innovations you're going to be seeing actually quite shortly, and then really leading up through the next six-month is going to be I think some of the most dramatic innovation that you've ever seen from Nike. So very, very excited about all of that.

Our final question will come from the line of Jim Duffy with stifled Nicholas. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: So you've mentioned strength and performance Apparel in Europe. you're also seeing this in the U.S. I'm curious what the dynamic is with performance in other areas of the world? What stage of adoption are you with performance Apparel offering some of the other regions? Charles D. Denson: Jim, this is Charlie. Well, no, it's not just the U.S. or Europe. It's really a worldwide -- I wouldn't call it a phenomenon. I think we're just servicing the needs of the athlete, and I think it's paying off for us. Not only with regards to the revenue line, but I think also the brand strength line. And it's an area where we felt we had one of the bigger opportunities to not only but improve, but to really push the envelope. We've made some pretty significant investments into the advanced R&D areas around our Apparel business, and we're very excited about the future of the Apparel business being led by some of the performance innovation that we talked about. With that said, I think then it opens up the Aperture or the capacity of the marketplace and our ability to do some of the sportswear business with -- using some of that innovation in more of a expressive, casual way, and it gives us a great combination of both performance and sportswear together, which is what we talked about all the time. We talk about this amplified sport approach. So it's not just North America, and it's not just Europe, but it certainly is leading there. But even places like China and the emerging markets, it's a very important part of the portfolio. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: And then a question with respect to China, have you been pleased thus far with the performance of the new China DC? There's with the timing of shipment dynamics. Have there been any hiccups there? And are you starting to see some of the cost benefits that you expected to see from opening that? Charles D. Denson: Well, I think overall performance, we're very pleased. We're -- in many different dimensions. It's the greenest building, I think, in China right now. It's one of the most impressive distribution facilities to date that have been built there. We've had great cooperation from, whether it's the Chinese government or our teams on the ground. There have been some short-term, as you would expect, getting the thing up and running. But it gives us huge competitive advantages as we continue to expand in the marketplace, from managing our timing of deliveries, launching of products, coordination of Footwear and Apparel. It's a great competitive advantage for us. So we're excited about it and the role of that it will play in the future. Donald W. Blair: Jim, let me just be clear, too. The shipment timing question we were talking about for China Apparel relates to last year's timing of deliveries of outerwear. It really had nothing to do with either deliveries this year or deliveries out of our distribution center in China. So no issue on the financials showing up from issues that the China logistic center is doing great.

Thanks, everybody. We'll talk to you after the New Year.

Ladies and gentlemen, this does conclude today's conference. Thank you all for participating, and you may now disconnect.