Nike 2009 Annual Report Download - page 66

NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 4 — Acquisition, Identifiable Intangible Assets, Goodwill and Umbro Impairment
Acquisition
On March 3, 2008, the Company completed its acquisition of 100% of the outstanding shares of Umbro, a
leading United Kingdom-based global soccer brand, for a purchase price of 290.5 million British pounds sterling
in cash (approximately $576.4 million), inclusive of direct transaction costs. This acquisition is intended to
strengthen the Company’s market position in the United Kingdom and expand NIKE’s global leadership in
soccer, a key area of growth for the Company. This acquisition also provides positions in emerging soccer
markets such as China, Russia and Brazil. The results of Umbro’s operations have been included in the
Company’s consolidated financial statements since the date of acquisition as part of the Company’s “Other”
operating segment.
The acquisition of Umbro was accounted for as a purchase business combination in accordance with SFAS
No. 141 “Business Combinations.” The purchase price was allocated to tangible and identifiable intangible assets
acquired and liabilities assumed based on their respective estimated fair values on the date of acquisition, with
the remaining purchase price recorded as goodwill.
Based on our preliminary purchase price allocation at May 31, 2008, identifiable intangible assets and
goodwill relating to the purchase approximated $419.5 million and $319.2 million, respectively. Goodwill
recognized in this transaction is deductible for tax purposes. Identifiable intangible assets include $378.4 million
for trademarks that have an indefinite life, and $41.1 million for other intangible assets consisting of Umbro’s
sourcing network, established customer relationships, and the United Soccer League Franchise. These intangible
assets will be amortized on a straight line basis over estimated lives of 12 to 20 years.
During the quarter ended February 28, 2009, the Company finalized the purchase-price accounting for
Umbro and made revisions to preliminary estimates, including valuations of tangible and intangible assets and
certain contingencies, as further evaluations were completed and information was received from third parties
subsequent to the acquisition date. These revisions to preliminary estimates resulted in a $12.4 million decrease
in the value of identified intangible assets, primarily Umbro’s sourcing network, and an $11.2 million increase in
non-current liabilities, primarily related to liabilities assumed for certain contingencies and adjustments made to
deferred taxes related to the fair value of assets acquired. These changes in assets acquired and liabilities
assumed affect the amount of goodwill recorded.
The following table summarizes the allocation of the purchase price, including transaction costs of the
acquisition, to the assets acquired and liabilities assumed at the date of acquisition based on their estimated fair
values, including final purchase accounting adjustments (in millions):
May 31, 2008
Preliminary Adjustments
May 31, 2009
Final
Current assets ................................... $ 87.2 — $ 87.2
Non-current assets ................................ 90.2 — 90.2
Identified intangible assets ......................... 419.5 (12.4) 407.1
Goodwill ....................................... 319.2 23.6 342.8
Current liabilities ................................. (60.3) — (60.3)
Non-current liabilities ............................. (279.4) (11.2) (290.6)
Net assets acquired ........................... $576.4 $ — $ 576.4
The pro forma effect of the acquisition on the combined results of operations for fiscal 2008 was not
material.
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