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This excerpt taken from the NKE 10-Q filed Oct 6, 2008. Other Expense,
net
Other
expense, net is comprised primarily of gains and losses associated with the
conversion of non-functional currency receivables and payables, the
re-measurement of foreign currency derivative instruments, disposals of fixed
assets, as well as other unusual or non-recurring transactions that are outside
the normal course of business. For both the first quarter of fiscal 2009 and
fiscal 2008, Other expense, net was primarily comprised of foreign currency
hedge losses.
Foreign
currency hedge gains and losses reported in Other expense, net are reflected in
the Corporate line in our segment presentation of pre-tax income in the Notes to Unaudited Condensed
Consolidated Financial Statements (Note 10 — Operating
Segments).
In the
first quarter of fiscal 2009, we estimate that the combination of foreign
currency hedge losses in Other expense, net and the favorable translation of
foreign currency-denominated profits from our international businesses resulted
in a year-over-year increase in consolidated income before income taxes of
approximately $71 million.
Income
Taxes
Our effective tax rate for the first
quarter of fiscal 2009 was 13.5 percentage points higher than the prior year
period, due primarily to a one-time tax benefit realized in the first quarter of
fiscal 2008. In the years prior to fiscal 2008, several of our
international entities generated losses for which we did not recognize the
corresponding tax benefits, as the realization of those benefits was uncertain.
In the first quarter of fiscal 2008, we took the steps necessary to realize
these benefits, resulting in a one-time tax benefit of $105.4
million. We estimate that our ongoing effective tax rate for the
remainder of fiscal year 2009 will be at or below 28.5%.
This excerpt taken from the NKE 10-K filed Jul 28, 2006. Other Expense, net
Fiscal 2006 Compared to Fiscal 2005 The significant reduction in Other expense, net for fiscal 2006 as compared to fiscal 2005 was primarily driven by foreign currency hedge gains in fiscal 2006 compared to foreign currency hedge losses in the prior year, partially offset by the Converse arbitration charge. The fiscal 2006 hedge gains primarily reflected that the euro had weakened since we entered into these hedge contracts and are reflected in the Corporate line in our segment presentation of pre-tax income in the accompanying Notes to Consolidated Financial Statements (Note 17 — Operating Segments and Related Information). In fiscal 2006, these net foreign currency hedge gains were partially offset by unfavorable U.S. dollar translation of foreign currency denominated profits, most significantly in the EMEA Region. We estimate that the combination of net foreign currency hedge gains in other expense, net, and the unfavorable U.S. dollar translation of foreign currency denominated profits resulted in an increase to consolidated income before income taxes of approximately $55 million for fiscal 2006 compared to the prior year. Fiscal 2005 Compared to Fiscal 2004 The most significant component of other expense, net, of $29.1 million for fiscal 2005 was foreign currency hedge losses. The hedge losses reflected that the euro had strengthened since we entered into these hedge contracts. In fiscal 2004, foreign currency hedge losses were also the most significant component of other expense, net, of $74.7 million. The year-over-year improvement in other expense, net, for fiscal 2005 was mainly due to lower foreign currency hedge losses and lower net losses on asset disposals compared to those recorded in fiscal 2004. In fiscal 2005, these net foreign currency losses in other expense, net, were more than offset by favorable U.S. dollar translation of foreign currency denominated profits, most significantly in the EMEA Region. We estimate that the combination of net foreign currency hedge losses in other expense, net, and the favorable U.S. dollar translation of foreign currency denominated profits resulted in an increase to consolidated income before income taxes of approximately $95 million for fiscal 2005 compared to the prior year.
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