Nike 2006 Annual Report Download - page 65

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NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 13 — Comprehensive Income
Comprehensive income is as follows:
Year Ended May 31,
2006 2005 2004
(In millions)
Net income ...................................................... $1,392.0 $1,211.6 $ 945.6
Other comprehensive income:
Change in cumulative translation adjustment and other (net of tax benefit
(expense) of $19.7 in 2006, $3.9 in 2005, and ($4.7) in 2004) ......... 87.1 70.1 27.5
Changes due to cash flow hedging instruments (Note 16):
Net (loss) gain on hedge derivatives (net of tax benefit of $2.8 in 2006,
$28.7 in 2005 and $33.5 in 2004) ............................. (5.6) (54.0) (72.9)
Reclassification to net income of previously deferred (gains) and losses
related to hedge derivatives (net of tax expense (benefit) of $15.3 in
2006, ($72.8) in 2005 and ($97.8) in 2004) ..................... (33.2) 143.6 198.8
Other comprehensive income ........................................ 48.3 159.7 153.4
Total comprehensive income ........................................ $1,440.3 $1,371.3 $1,099.0
The components of accumulated other comprehensive income are as follows:
May 31,
2006 2005
(In millions)
Cumulative translation adjustment and other ......................................... $161.9 $74.8
Net deferred loss on hedge derivatives .............................................. (40.2) (1.4)
$121.7 $73.4
Note 14 — Commitments and Contingencies
The Company leases space for certain of its offices, warehouses and retail stores under leases expiring from
one to twenty-eight years after May 31, 2006. Rent expense was $252.0 million, $232.6 million and $206.7
million for the years ended May 31, 2006, 2005 and 2004, respectively. Amounts of minimum future annual
rental commitments under non-cancelable operating leases in each of the five years ending May 31, 2007 through
2011 are $229.0 million, $190.6 million, $158.8 million, $129.9 million, $116.9 million, respectively, and $599.3
million in later years.
As of May 31, 2006 and 2005, the Company had letters of credit outstanding totaling $347.6 million and
$555.0 million, respectively. These letters of credit were generally issued for the purchase of inventory.
In connection with various contracts and agreements, the Company provides routine indemnifications
relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items
that fall under the scope of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. Currently, the Company has several
such agreements in place. However, based on the Company’s historical experience and the estimated probability
of future loss, the Company has determined that the fair value of such indemnifications is not material to the
Company’s financial position or results of operations.
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