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86 Group Management Report
Net Financial Expenses Decrease 11%
Net financial expenses decreased 11% to € 52 million in 2005
from € 59 million in the prior year. This mainly reflects a
strong increase of financial income which more than offset
the increase of the Group’s financial expenses (see Notes to
the Consolidated Income Statement/note 26).
Financial Income Up Strongly by 131%
Financial income increased strongly by 131% to € 42 million
in 2005 from € 18 million in the prior year. This mainly reflects
a strong increase of the Group’s cash position in the course
of 2005 as a result of the adidas-Salomon AG capital increase,
the proceeds related to the divestiture of the Salomon busi-
ness segment, both in the fourth quarter of 2005, as well as
the cash generation from the Group’s operating activities.
Financial Expenses Increase 22%
Financial expenses increased 22% to € 94 million in 2005
(2004: € 76 million), mainly as a result of one-time effects
including the cost for options related to the hedging of the
Reebok purchase price (payable in US dollars), a loss from
other financial assets as well as the new interpretation of IFRS
relating to minorities with put options. Unrealized losses from
short-term financial assets also had a negative impact on this
development. Positive effects from a slightly lower average
level of gross borrowings in 2005 were more than offset by an
increase of the weighted average interest rate. The latter was
partly a result of the fact that the Group’s convertible bond,
which in accordance with IFRS requirements carries a higher
interest rate in the income statement than actually paid, now
comprises a higher portion of the Group’s gross borrowings
than it did in the prior year.
Income Before Taxes Up 25%
As a result of operating improvements mentioned above and
lower net financial expenses, the Group’s income before taxes
increased 25% to € 655 million in 2005 from € 526 million in
2004. As a percentage of sales, IBT improved 0.9 percentage
points to 9.9% in 2005 from 9.0% in 2004. On a comparable
basis excluding the effects from IFRS changes, IBT and IBT as
a percentage of sales would have increased 17% and 0.3 per-
centage points respectively.
2001
2002
2003
20041)2)
20051)
Net Financial Expenses € in millions
102
87
49
59
52
1) Figures reflect continuing operations as a result of the divestiture of the Salomon
business segment.
2) The 2004 figure has been adjusted to reflect the application of IAS 32.
2001
2002
2003
20041)2)
20051)
Income Before Taxes € in millions
376
390
438
526
655
1) Figures reflect continuing operations as a result of the divestiture of the Salomon
business segment.
2) The 2004 figure has been adjusted to reflect the application of IAS 32.
Q1 20042)
Q1 2005
Q2 20042)
Q2 2005
Q3 20042)
Q3 2005
Q4 20042)
Q4 2005
Income Before Taxes by Quarter1) € in millions
149
194
103
142
265
309
10
11
1) Figures reflect continuing operations as a result of the divestiture of the Salomon
business segment.
2) 2004 quarterly figures have been adjusted to reflect the application of IAS 32.
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