Income Statement
First-Time Consolidation of Reebok Impacts 2006 Results
The business
of Reebok International Ltd. (USA) and its subsidiaries, which was
acquired to broaden the adidas Group’s product offering and to increase
the Group’s long-term growth opportunities, is consolidated within the
adidas Group as of February 1, 2006. The adidas Group’s 2006 reported
financial results were significantly impacted by this consolidation.
Most visible is the strong increase in Group sales. The Group’s gross
and operating margins, however, were negatively impacted by Reebok’s
lower than Group average margins as well as accounting effects from
purchase price allocation such as the impact of fair values charged to
expense in the income statement (see Reebok Business Performance). In addition, the Group’s IBT was negatively impacted by the
financing of the Reebok acquisition, which led to a significant
increase of the Group’s financial expenses in 2006. The performance of
this business is shown in the Reebok segment. Reebok’s results are not
comparable with 2005 reported results for several reasons (see Reebok
Business Performance). As a consequence, no prior year figures
for the Reebok segment are given at the Group level. However, to show
Reebok’s comparable development, prior year sales figures are provided
in the Reebok section of this report.
Exceptional Factors Impact 2006 Operational Performance
In 2006, several other exceptional factors influenced the reported
operating results for the Group and the segments. Over the course of
the year, brand adidas was positively influenced by strong sales
related to the 2006 FIFA World Cup™, which took place in our home
market Germany and for which adidas was Official Sponsor, Supplier and
Licensee. TaylorMade-adidas Golf was positively impacted by the
inclusion of the Greg Norman apparel business until the end of
November, when the business was divested. Sales recorded in the
HQ/Consolidation segment increased strongly, positively impacted by €
86 million of sales related to the Group’s cooperation agreement with
Amer Sports Corporation, under which the adidas Group sources softgoods
for Salomon at a fixed buying commission for a limited period in an
effort to support the transfer of Salomon’s business activities to Amer
Sports Corporation. However, this agreement includes margins
significantly below the Group’s average and therefore negatively
impacted the Group’s gross and operating margin development in 2006. In
addition, Reebok’s operating margin was negatively impacted by
additional costs in connection with the closure of production
facilities at manufacturing partners in Indonesia in the fourth quarter
of 2006. The Group’s minority interests were impacted by the purchase
of the remaining 9% of shares from the joint venture partner of the
adidas subsidiary in India as well as by the purchase of the remaining
49% of shares from the joint venture partner of the adidas subsidiary
in Korea, effective February 1, 2006 and September 1, 2006,
respectively (see Note 5).
Net Sales € in millions
Net Sales by Quarter € in millions
