Nine Months 2006 Results

11/9/2006, 7:30 AM (Source: GlobeNewswire)
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Net income attributable to shareholders increases 22%
Currency-neutral sales up 52%

* Currency-neutral sales for the adidas Group excluding
Reebok grow 16%
* Group operating profit increases 23%
* Currency-neutral adidas backlogs up 3%
* Reebok backlogs decrease 14% on a currency-neutral basis
* 2006 net income to approach € 500 million
* 2007 net income growth to approach 15%

Third quarter adidas Group currency-neutral sales grow 56%
In the third quarter of 2006, Group sales increased 56% on a
currency-neutral basis, driven by the consolidation of the Reebok
business segment as well as the higher than expected growth at brand
adidas. Sales for the Group excluding Reebok increased 14% on a
currency-neutral basis, with double-digit sales increases coming from
all regions except North America, where sales increased by
single-digit rates. In euro terms, Group revenues grew 53% to
€ 2.949 billion in the third quarter of 2006 from € 1.924 billion in
2005. Sales for the adidas Group excluding Reebok grew 12% in euro
terms to € 2.154 billion from € 1.924 billion in the prior year.

Currency-neutral sales grow 52% in the first nine months of 2006
In the first nine months of 2006, Group sales increased 52% on a
currency-neutral basis, strongly supported by the first-time
consolidation of the Reebok business segment. Sales for the adidas
Group excluding Reebok increased 16% on a currency-neutral basis
driven by double-digit growth in all regions. In euro terms, Group
revenues grew 53% to € 7.836 billion in the first nine months of 2006
from € 5.115 billion in 2005. Sales for the adidas Group excluding
Reebok grew 16% in euro terms to € 5.954 billion in 2006 from
€ 5.115 billion in the prior year.

"After an outstanding first half of 2006, the adidas Group again
delivered strong performance in the third quarter," commented adidas
AG Chairman and CEO Herbert Hainer. "Sales growth accelerated and was
broader-based than at any other time of the year and we have
continued to make important progress with the Reebok integration."

Brand adidas and TaylorMade-adidas Golf grow strongly in the first
nine months of 2006
The adidas segment was the main driver for the Group's organic sales
growth in the first nine months of 2006. Currency-neutral adidas
revenues increased 15% during the first nine months of 2006,
positively impacted by the 2006 FIFA World Cup(TM). Increases in
nearly all Sport Performance categories as well as double-digit
growth in the Sport Heritage and Sport Style divisions also
contributed to this improvement. The Reebok segment added
€ 1.828 billion to adidas Group sales. At TaylorMade-adidas Golf,
currency-neutral revenues increased 23%. Excluding sales of the Greg
Norman Collection, which is expected to be divested to MacGregor Golf
Company by the end of this year, segment sales grew 14%, driven by
growth in nearly all major categories. Currency translation effects
only had a minor impact on sales in euro terms. adidas sales in euro
terms increased 15% to € 5.248 billion in the first nine months of
2006 from € 4.545 billion in 2005. TaylorMade-adidas Golf sales in
euro terms grew 25% to € 658 million in 2006 from € 528 million in
2005.


+---------------------------------------------------------------------+
| | Nine | Nine | Change | |
| | Months | Months | y-o-y | Change y-o-y |
| | 2006[1] | 2005[2] |in euro | currency-neutral |
| | | | terms | |
|-------------------+----------+----------+--------+------------------|
| | € in | € in | in % | in % |
| | millions | millions | | |
|-------------------+----------+----------+--------+------------------|
|adidas | 5,248 | 4,545 | 15 | 15 |
|-------------------+----------+----------+--------+------------------|
|Reebok[3] | 1,828 | 1,970 | (7) | (9) |
|-------------------+----------+----------+--------+------------------|
|TaylorMade-adidas | 658 | 528 | 25 | 23 |
|Golf | | | | |
|-------------------+----------+----------+--------+------------------|
|Total | 7,836 | 5,115 | 53 | 52 |
+---------------------------------------------------------------------+

Group sales by brand in 2006, "Total" includes HQ/Consolidation


Strong double-digit sales increases in all regions
Sales in Europe for the adidas Group in the first nine months grew
32% on a currency-neutral basis, reflecting the first-time
consolidation of the Reebok segment as well as increases at brand
adidas. This also represents an improvement of 32% in euro terms to
€ 3.339 billion in 2006 from € 2.537 billion in 2005. In North
America, Group sales during the first nine months increased 102% on a
currency-neutral basis, reflecting the first-time consolidation of
the Reebok segment as well as double-digit increases at both adidas
and TaylorMade-adidas Golf. In euro terms, sales increased 107% to
€ 2.492 billion in 2006 from € 1.203 billion in 2005. Sales for the
adidas Group in Asia increased 35% on a currency-neutral basis in
the first nine months of 2006, driven by strong double-digit
increases at adidas and TaylorMade-adidas Golf as well as the
first-time consolidation of the Reebok segment. In euro terms,
revenues in Asia also grew 35% to € 1.494 billion in 2006 from
€ 1.111 billion in 2005. In Latin America, currency-neutral sales
increased 54% in the first nine months of 2006. This development
mainly reflects strong increases at brand adidas as well as the
first-time consolidation of the Reebok segment. In euro terms, sales
grew 62% to € 375 million in 2006 from € 231 million in 2005. For the
adidas Group excluding Reebok, first nine months currency-neutral
sales grew 10% in Europe, 12% in North America, 21% in Asia and 32%
in Latin America.


+-------------------------------------------------------------------+
| | Nine | Nine | Change | |
| | Months | Months | y-o-y | |
| | 2006[4] | 2005[5] | in euro | Change y-o-y |
| | | | terms | currency-neutral |
|-----------+------------+------------+----------+------------------|
| | € in | € in | | |
| | millions | millions | in % | in % |
|-----------+------------+------------+----------+------------------|
| Europe | 3,339 | 2,537 | 32 | 32 |
|-----------+------------+------------+----------+------------------|
| North | | | | |
| America | 2,492 | 1,203 | 107 | 102 |
|-----------+------------+------------+----------+------------------|
| Asia | 1,494 | 1,111 | 35 | 35 |
|-----------+------------+------------+----------+------------------|
| Latin | | | | |
| America | 375 | 231 | 62 | 54 |
|-----------+------------+------------+----------+------------------|
| Total | 7,836 | 5,115 | 53 | 52 |
+-------------------------------------------------------------------+

Group sales by region in 2006, "Total" includes HQ/Consolidation

Group gross profit increases 42%
The gross margin of the adidas Group declined 3.6 percentage points
to 44.9% of sales in the first nine months of 2006 (2005: 48.5%),
mainly reflecting the first-time consolidation of Reebok. Reebok
carries a significantly lower gross margin than the Group average due
to its strong presence in North America where average gross margins
are lower than in other regions. In addition, Reebok's gross profit
in the first nine months includes negative impacts from purchase
price allocation in an amount of € 64 million. For the adidas Group
excluding Reebok, gross margin decreased 0.5 percentage points to
48.0% in the first nine months of 2006, mainly as a result of lower
margins arising from the cooperation agreement with Amer Sports
Corporation. Under this agreement, the adidas Group sources softgoods
for Salomon at a fixed buying commission. As a result of the Group's
strong top-line growth, gross profit for the adidas Group rose
strongly by 42% in the first nine months of 2006 to reach
€ 3.518 billion versus € 2.481 billion in the prior year. Excluding
Reebok, gross profit grew by 15% to € 2.860 billion in the first nine
months of 2006.

Operating profit improves 23%
The operating margin of the adidas Group declined 2.6 percentage
points to 10.6% of sales in the first nine months of 2006 (2005:
13.1%). This mainly reflects the first-time consolidation of Reebok,
which carries a significantly lower operating margin than the Group
average, and includes negative impacts from purchase price allocation
on cost of sales and operating expenses in a total amount of
€ 71 million. For the adidas Group excluding Reebok, the operating
margin decreased 0.5 percentage points to 12.6% in the first nine
months of 2006 from 13.1% in the prior year, reflecting the Group's
lower gross margin and higher marketing expenditures related to the
2006 FIFA World Cup(TM). As a result of strong sales growth, however,
operating profit for the adidas Group rose 23% in the first nine
months of 2006 to reach € 829 million versus € 672 million in 2005.
Excluding Reebok, operating profit for the adidas Group grew by 12%
to € 752 million in the first nine months of 2006 from € 672 million
in the prior year.

Income before taxes up 10%
Income before taxes for the adidas Group increased 10% to
€ 709 million in the first nine months of 2006 from € 645 million in
2005 as a result of the operating improvements in the adidas and
TaylorMade-adidas Golf segments which more than offset the
significant increase in net financial expenses. Net financial
expenses increased 335% to € 121 million in the first nine months of
2006 from € 28 million in the prior year. This mainly reflects the
financing of the Reebok acquisition.

Net income from continuing operations grows 12%
The Group's net income from continuing operations increased 12% to
€ 483 million in the first nine months of 2006 from € 431 million in
2005. The Group's strong sales increase was the main driver of this
improvement. In addition, net income was also positively impacted by
a lower tax rate, which declined 1.3 percentage points to 31.9% in
2006 (2005: 33.2%) mainly due to a more favorable earnings mix
throughout the Group.

Net income attributable to shareholders up 22%
The Group's net income attributable to shareholders increased 22% to
€ 469 million in 2006 from € 386 million in 2005. This improvement
reflects the outstanding performance of the adidas and
TaylorMade-adidas Golf segments. The non-recurrence of losses from
discontinued operations related to the Salomon business in 2005 also
had a positive impact on this strong development.

Basic earnings per share increase 10%
On June 6, 2006, adidas AG conducted a share split with each existing
adidas AG share being divided into four shares. 2005 earnings per
share figures have been restated accordingly. The Group's basic
earnings per share from continuing and discontinued operations
increased 10% to € 2.31 in the first nine months of 2006 versus
€ 2.10 in 2005 despite the capital increase conducted on November 3,
2005. Diluted earnings per share from continuing and discontinued
operations in the first nine months of 2006 increased 11% to € 2.18
from € 1.97 in the prior year. The dilutive effect mainly results
from approximately 16 million additional potential shares that could
be created in relation to the outstanding convertible bond, for which
conversion criteria were met for the first time at the end of the
fourth quarter of 2004.
Inventories and receivables increase due to Reebok consolidation
Group inventories increased 42% to € 1.498 billion in 2006 versus
€ 1.053 billion in 2005, largely as a result of the first-time
inclusion of € 395 million in inventories related to the Reebok
business. On a currency-neutral basis, this increase was 48%.
Inventories for the adidas Group excluding Reebok grew 5% (+9%
currency-neutral), reflecting progress made to reduce retail
inventories in the emerging markets. Group receivables grew 57% (+62%
currency-neutral) to € 1.914 billion at the end of the first nine
months of 2006 versus € 1.220 billion in the prior year, primarily
due to the first-time inclusion of receivables totaling € 612 million
related to the Reebok business. Receivables for the adidas Group
excluding Reebok increased 7% (+10% currency-neutral), which is lower
than the strong sales growth during the third quarter of 2006.

Net borrowings at € 2.728 billion
Net borrowings at September 30, 2006 were € 2.728 billion, up 315% or
€ 2.070 billion versus € 657 million in the prior year reflecting a
financial leverage of 94.6% versus 32.6% in 2005. This increase was
driven by the payment of around € 3.2 billion for the acquisition of
Reebok International Ltd. (USA), paid on January 31, 2006. In
addition, expenses of around € 170 million for the buyback of
Reebok's major properties in the USA and in Europe influenced this
development.

Low double-digit sales growth expected for adidas segment
Backlogs for the adidas brand at the end of the third quarter of 2006
increased 3% versus the prior year on a currency-neutral basis. In
euro terms, this represents a stable development. Footwear backlogs
grew 2% in currency-neutral terms (-2% in euros), led by improvements
in the Sport Performance tennis and training categories as well as in
Sport Heritage. Apparel backlogs grew 5% on a currency-neutral basis
(+2% in euros), driven by improvements in the Sport Performance
categories training and tennis. The transfer of the NBA and Liverpool
licensed business from Reebok to adidas had a positive impact of
approximately 1 percentage point on the development of brand adidas
backlogs. As a result of the strong first nine months performance,
the positive order book and strong growth expectations for at-once
and own-retail activities, the Group continues to expect low
double-digit currency-neutral sales growth for brand adidas in 2006.


+------------------------------------------------------------------------------------+
| | Footwear | Apparel | Total[6] |
|---------+------------------------+------------------------+------------------------|
|Change | | | | | | |
|y-o-y |in € | currency-neutral |in € | currency-neutral |in € | currency-neutral |
|in % | | | | | | |
|---------+-----+------------------+-----+------------------+-----+------------------|
|Europe | (7) | (5) | (7) | (5) | (8) | (6) |
|---------+-----+------------------+-----+------------------+-----+------------------|
|North | | | | | | |
|America | (1) | 4 | 4 | 9 | 2 | 6 |
|---------+-----+------------------+-----+------------------+-----+------------------|
|Asia | 10 | 16 | 14 | 20 | 12 | 18 |
|---------+-----+------------------+-----+------------------+-----+------------------|
|Total | (2) | 2 | 2 | 5 | 0 | 3 |
+------------------------------------------------------------------------------------+

adidas order backlogs by product category and region as at September
30, 2006

Mid-single-digit sales decline of Reebok business anticipated for
2006
Backlogs for the Reebok brand at the end of the third quarter of 2006
decreased 14% versus the prior year on a currency-neutral basis. In
euro terms, this represents a decrease of 16%. Footwear backlogs
declined 11% in currency-neutral terms (-14% in euros), mainly due to
decreases in Reebok's lifestyle product offering. Apparel backlogs
were down 19% on a currency-neutral basis (-21% in euros), primarily
as a result of declines in Reebok's licensed and branded apparel
business as well as the transfer of the NBA and Liverpool business
from Reebok to adidas. This transfer had a negative impact of
approximately 3 percentage points on Reebok's order backlog
development. Consequently, Reebok sales for eleven months of 2006,
with consolidation starting on February 1, 2006, are expected to
decline at mid-single-digit rates versus the prior year on a
like-for-like basis.


+---------------------------------------------------------------------------------------+
| | Footwear | Apparel | Total[7] |
|---------+-------------------------+-------------------------+-------------------------|
|Change | | | | | | |
|y-o-y | in € | currency-neutral | in € | currency-neutral | in € | currency-neutral |
|in % | | | | | | |
|---------+------+------------------+------+------------------+------+------------------|
|Europe | 3 | 4 | (19) | (18) | (6) | (5) |
|---------+------+------------------+------+------------------+------+------------------|
|North | | | | | | |
|America | (30) | (27) | (25) | (22) | (29) | (25) |
|---------+------+------------------+------+------------------+------+------------------|
|Total | (14) | (11) | (21) | (19) | (16) | (14) |
+---------------------------------------------------------------------------------------+

Reebok order backlogs by product category and region as at September
30, 2006

TaylorMade-adidas Golf to grow at double-digit rates
For TaylorMade-adidas Golf excluding the Greg Norman Collection, the
Group expects double-digit sales growth on a currency-neutral basis
in 2006. Although backlog information is not meaningful for this
segment, growth expectations are supported by trade show performance
and ongoing dialog with customers.

Double-digit sales and earnings growth expected in 2006
The adidas Group expects strong top- and bottom-line performance in
2006. Sales will reach € 10 billion for the first time in the Group's
history, supported by the first-time inclusion of Reebok and
currency-neutral sales growth for the adidas Group excluding Reebok
of around 12%. The gross margin for the Group is expected to be in a
range of between 44 and 46% in 2006 (between 47 and 48% excluding
Reebok). The Group's operating margin is forecasted to be around 9%
(between 10 and 10.5% excluding Reebok). Net income attributable to
shareholders for the adidas Group is expected to approach € 500
million (in a range between € 480 and € 490 million), including
accretion from the Reebok acquisition.

Net income growth to approach 15% in 2007
The Executive Board of adidas AG has decided to increase investment
in the Reebok segment in 2007. This includes investments in
advertising, new media, point-of-sale communication, product
development and initiatives to grow the brand in emerging markets.
Management believes this strategy will significantly strengthen
Reebok's medium- and long-term position in the marketplace. As a
result, Reebok's profit growth in 2007 will be lower than originally
expected. Therefore, 2007 net income growth for the Group is now
projected to approach 15% against the 2006 level. Originally, the
Group had expected to grow net income by 20%. Detailed guidance for
2007 will be provided with the announcement of the Group's 2006 Full
Year Results on March 7, 2007.

Herbert Hainer stated, "We have made significant progress in the
Reebok integration so that Reebok today is in much better shape than
it was at the time of the acquisition at the end of January. We
intend to increase our investment into the brand in 2007
to strengthen Reebok's position in all regions in the medium and long
term." Hainer continued, "For the adidas Group, 2007 will again be a
year of record sales and earnings."


***

Contacts:

Media
Relations
Investor Relations
Jan
Runau
Natalie M. Knight
Chief Corporate Communications Officer Vice
President, Investor Relations
Tel.: +49 (0) 9132
84-3830 Tel.: +49 (0)
9132 84-3584

Anne
Putz
Hendric Junker
Team Leader Corporate PR
Senior Investor Relations Manager
Tel.: +49 (0) 9132
84-2964 Tel.: +49 (0)
9132 84-4989

Kirsten
Keck
John-Paul O'Meara
Corporate PR
Manager Investor
Relations Manager
Tel.: +49 (0) 9132
84-6207 Tel.: +49 (0)
9132 84-2751

Please visit our corporate website: www.adidas-Group.com
[1] Including Reebok business segment from February 1, 2006 onwards.
[2] Figures reflect continuing operations as a result of the
divestiture of the Salomon business segment in 2005.
[3] Only includes eight months of the nine-month period in 2006. The
relevant figures for the eight-month period of 2005 were not
consolidated within the adidas Group in 2005 and are therefore not
included in the total. Reebok prior year results are based on US-GAAP
figures and not IFRS.
[4] Including Reebok business segment from February 1, 2006 onwards.
[5] Figures reflect continuing operations as a result of the
divestiture of the Salomon business segment in 2005.
[6] Including hardware backlogs.
[7] Including hardware backlogs.



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