growth through focused execution.

By executing this strategy, we aim to deliver the following long-term financial goals:

High single digit revenue growth;

Mid-teens earnings per share growth;

Increased return on invested capital and accelerated cash flows; and

Consistent results through effective management of our diversified portfolio of businesses.

In fiscal 2006, we met most of these financial goals. Our revenues grew 9% to $15 billion, net income grew 15% to $1.4 billion, and we delivered diluted earnings per share of $5.28, an 18% increase versus fiscal 2005. These reported results included a $51.9 million charge related to an unfavorable arbitration ruling involving our Converse subsidiary (see Note 5 — Accrued Liabilities in the accompanying Notes to Consolidated Financial Statements for more information on the Converse arbitration charge). Excluding this charge, our net income grew 17% and we delivered diluted earnings per share of $5.39, a 20% increase versus fiscal 2005. For fiscal 2006, our consolidated gross margin percentage decreased 50 basis points to 44.0% primarily due to lower in-line net pricing margins (net revenue for current product offerings minus product costs) partially offset by improvements in year-over-year currency hedge rates. The decline in the gross margin percentage and the Converse arbitration charge were more than offset by 80 basis points of selling and administrative expense leverage (due entirely to slowing the growth of operating overhead spending), and higher interest income resulting in a higher pre-tax income margin in fiscal 2006 than in fiscal 2005. In addition, we increased free cash flow from operations and continued to return larger amounts of cash to shareholders through higher dividends and increased share repurchases. Our return on invested capital declined slightly as compared to fiscal 2005. Although we may not meet all of the financial goals outlined above in any particular fiscal quarter or fiscal year, we continue to believe these are appropriate long-term goals.

We are providing net income and diluted earnings per share results excluding the Converse arbitration charge to enhance the visibility of the underlying earnings trend excluding this identifiable expense.

Results of Operations

Fiscal 2006 Compared to Fiscal 2005

In fiscal 2006, changes in currency exchange rates reduced the reported consolidated revenue growth by 1 percentage point. The U.S. Region contributed 4 percentage points of the consolidated revenue growth for fiscal 2006. Excluding the impact of changes in currency exchange rates, revenue growth in our international regions contributed 4 percentage points of the consolidated revenue growth for fiscal 2006, as all of our international regions posted higher revenues. Sales in our Other businesses drove the remainder of the consolidated revenue growth for fiscal 2006. Revenues for our Other businesses are comprised substantially of results from Cole Haan, Converse, Exeter Brands Group, Hurley, NIKE Bauer Hockey and NIKE Golf.

Fiscal 2005 Compared to Fiscal 2004

In fiscal 2005, 3 percentage points of the revenue growth were attributed to changes in currency