Nike, Inc. received a less that hoped for ruling in an arbitration case arising from a contract dispute between the company’s Converse subsidiary and Alon International, S.A., a former licensee for Converse in Brazil, Argentina, Paraguay, and Uruguay.
The arbitrator awarded Alon $52.5 million in damages, plus legal fees, less some amounts previously paid to Alon. This potential liability had not been accrued by Nike, and will likely result in a charge to earnings for the company’s fiscal 2006 fourth quarter ending May 31, 2006. The actual amount of the fourth quarter charge will be decided by the arbitrator’s final determination of attorney’s fees, as well as Nike’s assessment of the likely outcome of any further proceedings.
