Reebok 2006 Annual Report Download - page 180

Consolidated Financial Statements ›
176 ANNUAL REPORT 2006 › adidas Group ›
29 » Earnings Per Share
Basic earnings per share are calculated by dividing the net income attributable to shareholders
by the weighted average number of shares outstanding during the year. Due to the share split,
conducted in June 2006, all numbers of shares have been restated by multiplying them by
four.
Dilutive potential shares have arisen under the Management Share Option Plan (MSOP)
of adidas AG, which was implemented in 1999 (see Note 33). As the required performance
criteria for the exercise of the stock options of all tranches of the share option plan have been
fulfilled, dilutive potential shares impact the diluted earnings per share calculation.
It is also necessary to include dilutive potential shares arising from the convertible bond
issuance in October 2003 in the calculation of diluted earnings per share as at December 31,
2006 and 2005, respectively, as the required conversion criteria were fulfilled at the balance
sheet date (see Note 16). The convertible bond is assumed to have been converted into ordinary
shares and the net income is adjusted to eliminate the interest expense less the tax effect.
For the calculation of earnings per share from continuing and discontinued operations, the
weighted average number of shares as presented above has been used.
Notes – Additional Information
30 » Segmental Information
The Group operates predominately in one industry segment, the design, wholesale and mar-
keting of athletic and sports lifestyle products. The Group is currently managed by brands.
Certain functions of the Group are centralized and an allocation of these functions to
specific segments is not considered to be meaningful. This includes mainly central treasury,
worldwide sourcing as well as other headquarter departments. Assets, liabilities, income and
expenses relating to these corporate functions are presented in the HQ/Consolidation column
together with non-allocable items and intersegment eliminations.
In comparison to the financial year 2005 there is a new separate segment for the acquired
Reebok business which includes the brands Reebok, Rbk Hockey, CCM and Rockport. The
Greg Norman license, which was acquired with the Reebok business and subsequently sold
in November 2006, was allocated to the TaylorMade-adidas Golf segment. Both the NBA and
Liverpool licensed businesses were transferred to brand adidas in 2006.
Information about the Group’s segments in accordance with the management approach
is presented on the following page.
There are no intersegment sales between the brands. Net sales to third parties are shown
in the geographic market in which the revenues are realized. The global sourcing function is
included in the HQ/Consolidation column. Transactions between the segments are based on
the dealing-at-arm’s-length principle.
Segment assets include all operating assets and comprise mainly accounts receivable,
inventory as well as property, plant and equipment and intangible assets. Segment liabilities
comprise operating liabilities and consist principally of trade and other payables and accrued
liabilities and provisions. Non-allocable items include financial assets, assets and liabilities
relating to income taxes and borrowings, which are included in the HQ/Consolidation column.
Capital expenditure, amortization and depreciation relate to segment assets; the acquisi-
tion of goodwill and the inception of finance leases do not affect capital expenditure.
Earnings Per Share
Year ending Dec. 31
2006 2005
Net income attributable to shareholders (€ in millions) 483 383
Weighted average number of shares 203,386,104 186,947,832
Basic earnings per share (€) 2.37 2.05
Net income attributable to shareholders (€ in millions) 483 383
Interest expense on convertible bond (net of taxes) (€ in millions) 12 11
Net income used to determine diluted earnings
per share (€ in millions) 495 394
Weighted average number of shares 203,386,104 186,947,832
Weighted share options 328,308 895,315
Weighted assumed conversion convertible bond 15,685,110 15,686,275
Weighted average number of shares for diluted earnings per share 219,399,522 203,529,422
Diluted earnings per share (€) 2.25 1.93