Nike 2009 Annual Report Download - page 31

In fiscal 2008, we estimate that the combination of favorable translation of foreign currency-denominated
profits from international businesses and the foreign currency conversion losses included in other (income)
expense, net resulted in a year-over-year increase in consolidated income before income taxes of approximately
$122 million.
Income Taxes
Fiscal 2009 Fiscal 2008
FY09 vs.
FY08
% Change Fiscal 2007
FY08 vs.
FY07
% Change
Effective tax rate ................. 24.0% 24.8% (80) bps 32.2% (740) bps
Fiscal 2009 Compared to Fiscal 2008
Our effective tax rate for fiscal 2009 was 80 basis points lower than the effective tax rate for fiscal 2008 due
primarily to the tax benefit related to the impairment of goodwill, intangible and other assets of Umbro that had a
favorable impact of 250 basis points. Profits earned outside of the U.S., the impact of the resolution of foreign
audit items and the retroactive reinstatement of the research and development tax credit also favorably impacted
our fiscal 2009 effective tax rate. Reflected in the effective tax rate for fiscal 2008 was a one-time tax benefit of
$105.4 million, which had a favorable impact of 420 basis points on our effective tax rate. We estimate that our
effective tax rate for fiscal year 2010 will be approximately 25.5%.
Fiscal 2008 Compared to Fiscal 2007
Our effective tax rate for fiscal 2008 was 24.8%, 740 basis points lower than the prior year. Over the last
few years, 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 steps
necessary to realize these benefits, resulting in a one-time tax benefit of $105.4 million. Also reflected in the
year-over-year effective tax rate improvement was a reduction in our on-going effective tax rate resulting from
our profits earned outside the United States; our effective tax rates for these operations are generally lower than
the U.S. statutory rate.
Futures Orders
Worldwide futures and advance orders for footwear and apparel scheduled for delivery from June through
November 2009 declined 12% compared to orders reported for the comparable period of fiscal 2009. This futures
growth rate is calculated based upon our forecasts of the actual exchange rates under which our revenues will be
translated during this period, which approximate current spot rates. The net effect from changes in currency
exchange rates contributed approximately 7 percentage points to this reported futures decline versus the same
period in the prior year. Excluding this currency impact, lower apparel orders drove most of the decline in overall
futures and advance orders.
The reported futures and advance orders are not necessarily indicative of our expectation of revenue growth
during this period. This is because the mix of orders can shift between advance/futures and at-once orders and
that the fulfillment of certain orders may fall outside of the scheduled noted above. In addition, 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 close-out sales of NIKE footwear
and apparel, wholesale sales of equipment, Cole Haan, Converse, Hurley, Umbro, NIKE Golf and retail sales
across all brands.
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