2000 net sales are highest in Group history

Herzogenaurach, 08/03/2001 - Sales in the fourth quarter of 2000 increased 17% over the 1999 level. Gross margin declined 1.0 percentage points, largely as a result of the weak euro. This development, however, was offset by strong progress on the containment of operational expenses. As a result, earnings per share reached € 0.10, which is the highest fourth quarter net income level ever for the adidas-Salomon Group.

Group sales in 2000 reach record level

For the year 2000, adidas-Salomon consolidated net sales increased by 9% to a record level of € 5.8 billion. This improvement was driven by footwear and hardware sales, which grew 13% and 23% respectively. Hardware sales (which includes skis, golf clubs and sports equipment) passed € 1 billion for the first time.

Sales performance was positive at all brands in 2000. Sales for brand adidas were up 6% to € 4.7 billion, led by footwear sales increases of 12% to € 2.4 billion. TaylorMade-adidas Golf sales increased by 35% to € 441 million in 2000, delivering the highest percentage improvement within the Group. Salomon also had an impressive year with 2000 sales increasing 19% to € 648 million. Mavic sales increased 25% to € 55 million.

Gross margin above target range

The gross margin for the year 2000 was maintained at an industry-leading 43.3%, despite the negative effects of the strong US dollar, partly due to improved performance at Salomon and TaylorMade-adidas Golf. This was above the 41% to 43% target range established by Management as an ongoing target for the Group.

Income in line with expectations

Operating expenses increased by 12% to € 2.1 billion in 2000. As a percentage of net sales, this represents an increase of 0.9 percentage points to 35.8%. The major drivers of this increase included marketing and promotion costs associated with the Summer Olympics in Sydney and the EURO 2000™ soccer championships as well as spending for the Growth and Efficiency Program. As a result, the operating profit declined 9% year-over-year to € 437 million. Income before taxes was € 347 million in 2000, down 13% over the previous year. The tax rate rose by 1.9 percentage points to 40.3%. Minority interests increased by 44.5% to € 25 million due to better performance by our joint ventures. These factors led to a 20% lower net income for the year of € 182 million and earnings per share of € 4.01, in line with expectations communicated by Management since January last year.

Dividend level maintained

The adidas-Salomon Executive Board will propose paying a dividend of € 0.92 per share to the Annual General Meeting of Shareholders on May 10, the same amount as in the previous year. This decision to maintain a stable dividend level, despite the EPS decline in 2000, underlines Management’s confidence in its ability to achieve its 2001 targets. Management views 2000 as a year of consolidation and restructuring and has increased the payout percentage to reward long-term shareholders.

adidas order backlogs up slightly

At December 31, 2000 adidas order backlogs were up 1% over the same period last year. Footwear backlogs increased while apparel backlogs were virtually flat. Order backlogs increased soundly in Asia and Europe, while North America backlogs declined.

Outlook

For 2001, the adidas brand’s new divisional structure will be in place to start delivering positive results for the Group. adidas America will remain a challenge but nevertheless will deliver qualitative sales improvements in the second half of 2001. Top-line growth is expected in all other regions. Double-digit growth from Salomon is projected as a result of the continued innovative strength and the increasing profile of their products. The integration of Mavic with Salomon, which began in 2000, will continue in 2001, with further synergies between the two brands. At Taylor Made-adidas Golf, increased marketing and sales support will target ambitious golfers, and solid growth in all the major golf markets is expected to continue.

In addition to these positive top-line developments, gross margins are expected to remain within a range of 41% to 43%, operating expenses will decline as a percentage of sales, and as a result net income is projected to increase by 15%.

CEO Herbert Hainer stated, “2000 was a pivotal year for adidas-Salomon. Our efforts to re-shape and re-focus the company will lead to substantial top- and bottom-line improvements in 2001.”