Reebok 2006 Annual Report Download - page 78

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› Group Business PerformanceGroup Management Report ›
074 ANNUAL REPORT 2006 › adidas Group ›
Income Statement
First-Time Consolidation of Reebok Impacts 2006 Results
The business of Reebok International Ltd. (USA) and its sub-
sidiaries, 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 state-
ment (see Reebok Business Performance, p. 91). 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, p. 91).
As a consequence, no prior year figures for the Reebok seg-
ment are given at the Group level. However, to show Reebok’s
comparable development, prior year sales figures are pro-
vided 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 inclu-
sion 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, posi-
tively 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 mar-
gins 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 mar-
gin was negatively impacted by additional costs in connec-
tion with the closure of production facilities at manufactur-
ing 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, p. 156).
Net Sales by Quarter € in millions
Net Sales € in millions
2002
2003
20041)
20051)
20062)
6,523
6,267
5,860
6,636
10,084
1) Figures reflect continuing operations as a result of the divestiture of the Salomon
business segment.
2) Including Reebok business segment from February 1, 2006 onwards, excluding
Greg Norman wholesale business from December 1, 2006 onwards.
Q1 20051)
Q1 20062)
Q2 20051)
Q2 20063)
Q3 20051)
Q3 20063)
Q4 20051)
Q4 20064)
1,674
2,459
1,516
2,428
1,924
2,949
1,521
2,248
1) Figures reflect continuing operations as a result of the divestiture of the Salomon
business segment.
2) Including Reebok business segment from February 1, 2006 onwards.
3) Including Reebok business segment.
4) Including Reebok business segment, excluding Greg Norman wholesale business
from December 1, 2006 onwards.