contracts and events primarily in the U.S., EMEA and Asia Pacific regions, higher advertising spending primarily in the EMEA Region, and increased spending on retail marketing programs in the U.S., EMEA and Asia Pacific regions. The addition of Converse and formation of Exeter Brands Group also contributed to the demand creation increase for the year.

Changes in currency exchange rates contributed 3 percentage points of the increase to operating overhead expense in fiscal 2005. Excluding the effects of foreign currency, operating overhead increases for fiscal 2005 were mainly attributable to higher personnel costs (both increased headcount and higher compensation), investments in emerging markets (such as China, India and our Central Europe, Middle East and Africa unit) and our Other businesses, increased costs due to sales and leadership events and higher spending associated with new NIKE-owned retail stores.

Other Expense, Net

	

Fiscal 2006 Compared to Fiscal 2005

The significant reduction in Other expense, net for fiscal 2006 as compared to fiscal 2005 was primarily driven by foreign currency hedge gains in fiscal 2006 compared to foreign currency hedge losses in the prior year, partially offset by the Converse arbitration charge. The fiscal 2006 hedge gains primarily reflected that the euro had weakened since we entered into these hedge contracts and are reflected in the Corporate line in our segment presentation of pre-tax income in the accompanying Notes to Consolidated Financial Statements (Note 17 — Operating Segments and Related Information).

In fiscal 2006, these net foreign currency hedge gains were partially offset by unfavorable U.S. dollar translation of foreign currency denominated profits, most significantly in the EMEA Region. We estimate that the combination of net foreign currency hedge gains in other expense, net, and the unfavorable U.S. dollar translation of foreign currency denominated profits resulted in an increase to consolidated income before income taxes of approximately $55 million for fiscal 2006 compared to the prior year.

Fiscal 2005 Compared to Fiscal 2004

The most significant component of other expense, net, of $29.1 million for fiscal 2005 was foreign currency hedge losses. The hedge losses reflected that the euro had strengthened since we entered into these hedge contracts. In fiscal 2004, foreign currency hedge losses were also the most significant component of other expense, net, of $74.7 million. The year-over-year improvement in other expense, net, for fiscal 2005 was mainly due to lower foreign currency hedge losses and lower net losses on asset disposals compared to those recorded in fiscal 2004.

In fiscal 2005, these net foreign currency losses in other expense, net, were more than offset by favorable U.S. dollar translation of foreign currency denominated profits, most significantly in the EMEA Region. We estimate that the combination of net foreign currency hedge losses in other expense, net, and the favorable U.S. dollar translation of foreign currency denominated profits resulted in an increase to consolidated income before income taxes of approximately $95 million for fiscal 2005