• Group Business Performance 
  • Economic and Sector Development 
  • Income Statement 
  • Balance Sheet and Cash Flow Statement 
  • Treasury 
  • Additional Disclosures 
• Business Performance by Segments 
• Risk and Opportunity Report 
• Subsequent Events 
• Outlook 

INCOME STATEMENT 

NO CHANGES IN ACCOUNTING POLICY
The Group’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). In line with IFRS, several new or amended standards and interpretations were applied for the first time in 2007.  see Note 1 Nevertheless, there were no changes in the Group’s consolidation and accounting principles. Therefore, changes in accounting policy and changes in management discretion in the application of accounting standards had no impact on Group business performance in the reporting period.

TWELVE MONTHS OF REEBOK RESULTS CONSOLIDATED
Several factors influenced the comparison of 2007 reported results for the Group and our segments with the prior year. Only eleven months of Reebok’s results were consolidated in 2006 due to the acquisition date (February 1, 2006). In 2007, twelve months of the segment’s results were consolidated. This had a positive impact on the comparison of Reebok segment sales to the prior year. The segment’s operating margin, however, was negatively affected, as the month of January is traditionally characterized by higher-than-average clearance activities. In addition, Reebok’s operating profit was negatively impacted by purchase price allocation charges, however to a significantly lesser extent compared to the prior year. In 2007, the negative effect on Reebok’s operating profit amounted to € 12 million (2006: € 89 million). Sales and operating margin at TaylorMade-adidas Golf were negatively affected by the divestiture of the Greg Norman Collection (GNC) wholesale business, which was completed on November 21, 2006.

SYNERGIES SUPPORT OPERATIONAL PERFORMANCE
The operational performance of the adidas and Reebok segments was positively impacted by the realization of revenue and cost synergies resulting from the integration of the Reebok business into the adidas Group.

Revenue synergies mainly occurred in the Reebok segment. Sales increased incrementally in several countries for which Reebok had purchased the distribution rights in order to better control brand management and gain market share. Revenues grew particularly strongly in Russia and China, where Reebok took full control of distribution effective January 1, 2007. Revenue synergies also had a small positive impact on sales development in the adidas segment. This was a result of higher revenues from the licensed business, in particular from our partnership with the NBA.

Cost synergies resulting from the combination of adidas and Reebok sourcing activities had a positive impact on the cost of sales of both segments, in particular for adidas due to the higher volume of products sourced compared to Reebok. Due to the timing of sourcing improvements, cost synergies were weighted towards the second half of the year. On a full year basis, the positive impact on the Group’s gross margin was largely offset by integration costs which negatively impacted the Group’s operating expenses. These costs were recorded in the HQ / Consolidation segment and to a lesser extent at adidas and Reebok. In line with our initial expectations, we realized revenue synergies of around € 100 million. Net cost synergies exceeded initial expectations and amounted to around € 20 million in the full year 2007.

ADIDAS GROUP CURRENCY-NEUTRAL SALES GROW 7 %
In 2007, Group revenues increased 7 % on a currency-neutral basis, mainly as a result of sales growth in the adidas segment. This development was in line with initial Management expectations of mid-single-digit growth. Currency movements negatively impacted Group sales in euro terms. Group revenues grew 2 % in euro terms to € 10.299 billion in 2007 from € 10.084 billion in 2006. On a like-for-like basis, including Reebok’s revenues for the full twelve-month periods of both years and excluding the effect from the divestiture of the GNC wholesale business, Group sales also increased 7 %.

 

NET SALES € in millions
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. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

 

NET SALES BY QUARTER1) € in millions
1)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.