Athletic footwear and apparel designer Nike Inc. reported a 5 percent drop in fourth-quarter earnings on Tuesday, as charges related to the Converse arbitration ruling and tighter margins offset an 8 percent increase in revenue.

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Net income declined to $332.8 million, or $1.27 per share, from $349.5 million, or $1.30 per share, last year. Excluding a 12-cent charge for the Converse arbitration ruling, earnings would have been $1.39 per share.

Revenue increased 8 percent to $4.01 billion from $3.72 billion for the same period last year. Changes in currency exchange rates reduced revenue growth by 1 percentage point for the full year, and 2 percentage points for the fourth quarter.

On average, analysts were looking for slightly higher operating profit of $1.40 per share, but sales came in above Wall Street expectations of $3.98 billion.

Fourth-quarter gross margins slid to 43.8 percent compared with 45.2 percent last year, and selling and administrative expenses edged up to 30.8 percent of revenue from 30.6 percent last year.

Mark Parker, Nike president and CEO, said, "We deepened our brand leadership in core categories such as basketball and soccer, and experienced strong growth in key markets such as the United States, Latin America, China and Russia. Our broader brand portfolio also performed well, with stellar performances for the year from Brand Jordan, Nike Golf and Converse."

Nike reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June 2006 through November 2006, totaling $6.6 billion, 5 percent higher than reported last year.

During the fourth quarter, U.S. revenue increased 10 percent to $1.5 billion from $1.3 billion for the same period last year. Footwear revenue grew 10 percent to $993.7 million, and apparel revenue increased 18 percent to $395.7 million. Equipment sales declined 12 percent to $74.3 million.

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