Nike 2006 Annual Report Download - page 6

Significant Customer
Foot Locker Inc., which operates a chain of retail stores specializing in athletic footwear and apparel,
accounted for approximately 10 percent of global net sales of NIKE, Inc. during fiscal 2006. No other customer
accounted for 10 percent or more of our net sales during fiscal 2006.
Orders
Worldwide futures and advance orders for NIKE brand athletic footwear and apparel, scheduled for delivery
from June through November 2006, were $6.6 billion compared to $6.3 billion for the same period last year. This
futures and advance order amount is calculated based upon our forecast of the actual exchange rates under which
our revenues will be translated during this period, which approximate current spot rates. Based upon historical
data, we expect that approximately 95 percent of these orders will be filled in that time period, although some
orders may be cancelled. Reported futures and advance orders are not necessarily indicative of our expectation of
revenues for this period. This is because the mix of orders can shift between advance/futures and at-once orders.
In addition, foreign currency exchange rate fluctuations as well as differing levels of order cancellations and
discounts can cause differences in the comparisons between futures and advance orders and actual revenues.
Moreover, a significant portion of our revenue is not derived from futures and advance orders, including at-once
and closeout sales of NIKE footwear and apparel, wholesale sales of equipment, U.S. licensed team apparel, Cole
Haan, Converse, Exeter Brands Group, Hurley, NIKE Bauer Hockey, NIKE Golf, and retail sales across all
brands.
Product Research and Development
We believe that our research and development efforts are a key factor in our past and future success.
Technical innovation in the design of footwear, apparel, and athletic equipment receive continued emphasis as
NIKE strives to produce products that help to reduce injury, enhance athletic performance and maximize
comfort.
In addition to NIKE’s own staff of specialists in the areas of biomechanics, exercise physiology,
engineering, industrial design and related fields, we also utilize research committees and advisory boards made
up of athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and other experts who consult
with us and review designs, materials and concepts for product improvement. Employee athletes and other
athletes wear-test and evaluate products during the design and development process.
Manufacturing
Virtually all of our footwear is produced outside of the United States. In fiscal 2006, contract suppliers in
China, Vietnam, Indonesia and Thailand manufactured 35 percent, 29 percent, 21 percent and 13 percent of total
NIKE brand footwear, respectively. We also have manufacturing agreements with independent factories in
Argentina, Brazil, India, Italy, and South Africa to manufacture footwear for sale primarily within those countries.
Our largest single footwear factory accounted for approximately 6 percent of total fiscal 2006 footwear production.
Almost all of NIKE brand apparel production for sale to the United States market, and all of our apparel
production for sale to the international market, was manufactured outside of the United States by independent
contract manufacturers located in 40 countries. Most of this apparel production occurred in Bangladesh, China,
Honduras, India, Indonesia, Malaysia, Mexico, Pakistan, Sri Lanka, Taiwan, Thailand, Turkey and Vietnam. Our
largest single apparel factory accounted for approximately 5 percent of total fiscal 2006 apparel production.
The principal materials used in our footwear products are natural and synthetic rubber, plastic compounds,
foam cushioning materials, nylon, leather, canvas and polyurethane films used to make Air-Sole cushioning
components. NIKE IHM, Inc. and NIKE (Suzhou) Sports Company, Ltd., wholly-owned subsidiaries of NIKE,
are our largest suppliers of the Air-Sole cushioning components used in footwear. The principal materials used in
our apparel products are natural and synthetic fabrics and threads, plastic and metal hardware, and specialized
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