Nike 2009 Annual Report Download - page 30

performance for fiscal 2009 was slightly better than we had originally expected, projected future cash flows had
fallen below the levels we expected at the time of acquisition. This erosion is a result of both the unprecedented
decline in global consumer markets, particularly in the United Kingdom, and our decision to adjust the level of
investment in the business.
We measured the fair value of Umbro by using an equal weighting of the fair value implied by a discounted
cash flow analysis and by comparisons with the market values of similar publicly traded companies. We believe
the blended use of both models compensates for the inherent risk associated with either model if used on a stand-
alone basis, and this combination is indicative of the factors a market participant would consider when
performing a similar valuation. The fair value of Umbro’s indefinite-lived trademark was estimated using the
relief from royalty method, which assumes that the trademark has value to the extent that Umbro is relieved of
the obligation to pay royalties for the benefits received from the trademark. Our assessments have resulted in the
recognition of impairment charges of $199.3 million and $181.3 million related to Umbro’s goodwill and
trademark, respectively, in fiscal 2009. In addition to the impairment analysis, we determined an equity
investment held by Umbro was impaired, and recognized a charge of $20.7 million related to the impairment of
this investment. These charges are included in our “Other” category for segment reporting purposes.
For additional information about our impairment charges, see Note 4 — Acquisition, Identifiable Intangible
Assets, Goodwill and Umbro Impairment in the accompanying notes to the consolidated financial statements.
Other (Income) Expense, net
Fiscal 2009 Compared to Fiscal 2008
For fiscal 2009, other (income) expense, net was a gain of $88.5 million compared to a loss of $7.9 million
in fiscal 2008. Other (income) expense, net is primarily comprised of foreign currency conversion gains and
losses from the remeasurement of monetary assets and liabilities in non-functional currencies and results of
foreign currency derivative instruments, as well as disposals of fixed assets and other unusual or non-recurring
transactions that are outside the normal course of business. For fiscal 2009, other (income) expense, net was
primarily comprised of $43.4 million of foreign currency conversion gains and the recognition of $24.0 million
of licensing income related to our fiscal 2008 sale of the NIKE Bauer Hockey business. For fiscal 2008, other
(income) expense, net was primarily comprised of a $32.0 million gain on the sale of NIKE Bauer Hockey and a
$28.6 million gain on the sale of the Starter brand business, as well as foreign currency conversion losses of
$76.6 million.
Foreign currency conversion gains and losses reported in other (income) expense, net, with the exception of
gains and losses generated by the EMEA Region and Other businesses, are reflected in the Corporate line in our
segment presentation of pre-tax income in the accompanying notes to the consolidated financial statements
(Note 19 — Operating Segments and Related Information).
For fiscal 2009, we estimate that the combination of foreign currency conversion gains in other (income)
expense, net and the modestly 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 $124 million.
Fiscal 2008 Compared to Fiscal 2007
For fiscal 2008, other (income) expense, net was a loss of $7.9 million compared to a gain of $0.9 million in
fiscal 2007. In fiscal 2008, other (income) expense, net included foreign currency conversion losses that were
partially offset by the $32.0 million gain on the sale of NIKE Bauer Hockey and the $28.6 million gain on the
sale of the Starter brand business. Other (income) expense, net in fiscal 2007 is primarily comprised of the $14.7
million gain on the sale-leaseback of our Oregon footwear distribution center and the $14.2 million benefit from
the settlement of the Converse arbitration, partially offset by foreign currency conversion losses.
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