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.

2007 NET SALES BY SEGMENT1)
1)	HQ / Consolidation accounts for less than 1 % of sales.

2007 NET SALES BY REGION1)
1)	Excluding HQ / Consolidation.

NET SALES BY REGION
€ 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.
3) Including HQ / Consolidation.

Currency-neutral sales in the Reebok segment were stable as a result of the consolidation of twelve months of Reebok’s revenues in 2007 versus only eleven months in the prior year. On a like-for-like basis, Reebok segment sales declined by 5 % in 2007. This like-for-like comparison of Reebok segment revenues reflects sales for the full twelve-month periods of both years. It also includes GNC retail sales which were transferred from the TaylorMade-adidas Golf segment to the Reebok segment, effective January 1, 2007. However, it excludes sales related to the NBA and Liverpool licensed businesses. These were transferred to brand adidas in the first half of 2006.

At TaylorMade-adidas Golf, currency-neutral revenues increased 1 %, negatively impacted by the divestiture of the GNC wholesale business. On a like-for-like basis, TaylorMade-adidas Golf sales increased 9 %.

In the HQ / Consolidation segment, we record revenues not attributable to the adidas, Reebok or TaylorMade-adidas Golf segments. In 2007, the HQ / Consolidation segment primarily comprised sales of Salomon products as part of our cooperation agreement with Amer Sports Corporation. The agreement was entered into to support the transfer of Salomon’s business activities to Amer Sports Corporation. Compared to the prior year, sales decreased by 60 % on a currency-neutral basis. This development was mainly due to the expiration of the Salomon footwear sourcing cooperation agreement.

Currency translation effects negatively impacted sales in all segments in euro terms. adidas sales increased 7 % to € 7.113 billion in 2007 from € 6.626 billion in 2006. Sales at Reebok decreased 6 % to € 2.333 billion versus € 2.473 billion in the prior year. TaylorMade-adidas Golf sales declined 6 % to € 804 million in 2007 from € 856 million in 2006. HQ / Consolidation sales decreased 62 % to € 48 million from € 129 million in the prior year.

2007 Net Sales Growth (Currency -Neutral) ¹⁾
by segment and region in % 

1) Versus the prior year.
2) Reebok 2006 results only included eleven months of the twelve-month period.
3) TaylorMade-adidas Golf results included Greg Norman apparel business
    from February 1, 2006 to November 30, 2006.

2007 Net Sales Growth (in €) ¹⁾
by segment and region in % 

1) Versus the prior year.
2) Reebok 2006 results only included eleven months of the twelve-month period.
3) TaylorMade-adidas Golf results included Greg Norman apparel business
    from February 1, 2006 to November 30, 2006.

SALES INCREASE IN NEARLY ALL REGIONS
adidas Group sales grew in all regions except North America in 2007. Group sales in Europe grew 7 % on a currency-neutral basis as a result of strong growth in the region’s emerging markets. In North America, Group sales declined 2 % on a currency-neutral basis due to lower Reebok sales in the USA. Sales for the adidas Group in Asia increased 18 % on a currency-neutral basis, driven by growth in China. In Latin America, sales grew 38 % on a currency-neutral basis, with increases coming from all of the region’s major markets.

Currency translation effects negatively impacted sales in euro terms in all regions. In euro terms, sales in Europe increased 5 % to € 4.369 billion in 2007 from € 4.162 billion in 2006. Sales in North America decreased 9 % to € 2.929 billion in 2007 from € 3.234 billion in the prior year. Revenues in Asia grew 12 % to € 2.254 billion in 2007 from € 2.020 billion in 2006. Sales in Latin America grew 32 % to € 657 million in 2007 from € 499 million in the prior year.

GROUP APPAREL SALES GROW STRONGLY
From a product category perspective, Group sales growth in the year was largely driven by the apparel category. Currency-neutral footwear sales grew solidly and increased 5 % during the period. Strong increases in the adidas and TaylorMade-adidas Golf segments were partly offset by declines in the Reebok segment. Apparel sales grew 11 % on a currency-neutral basis. Increases in the adidas and Reebok segments were partly offset by a decrease at TaylorMade-adidas Golf. In this segment, increases in adidas Golf apparel sales were more than offset by negative impacts from the divestiture of the GNC wholesale business. Currency-neutral hardware sales were stable compared to the prior year. Increases at TaylorMade-adidas Golf were offset by declines in the adidas and Reebok segments.

Currency translation effects negatively impacted sales in all product categories in euro terms. As a result, footwear sales in euros were virtually unchanged at € 4.751 billion in 2007 (2006: € 4.733 billion). Apparel sales in euro terms grew 6 % to € 4.365 billion in 2007 from € 4.105 billion in the prior year. Hardware sales in euros decreased 5 % to € 1.182 billion in 2007 from € 1.246 billion in 2006.

2007 NET SALES BY PRODUCT CATEGORY

NET SALES BY PRODUCT CATEGORY
€ 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.

COST OF SALES DECLINES 3 %
Cost of sales is defined as the amount we pay to third parties for expenses associated with producing and delivering our products. Own-production expenses at adidas and Reebok as well as assembling expenses at TaylorMade-adidas Golf are also included in the Group’s cost of sales. However, these expenses represent only a very small portion of total cost of sales. In 2007, cost of sales was € 5.417 billion, representing a decrease of 3 % from € 5.589 billion in 2006, despite higher sourcing volumes compared to the prior year. This improvement is the result of cost synergies from the combination of adidas and Reebok sourcing activities. The optimization of sourcing processes and efficiency gains within our supply chain more than offset increasing labor and raw material costs.

GROSS MARGIN in %
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.

GROSS PROFIT € 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.

GROSS MARGIN INCREASES BY 2.8 PERCENTAGE POINTS
The gross margin of the adidas Group increased by 2.8 percentage points to 47.4 % in 2007 (2006: 44.6 %). This development exceeded Management’s initial expectation of a gross margin between 45 and 47 %. The non-recurrence of negative impacts from purchase price allocation in the Reebok segment, which in 2006 amounted to € 76 million, positively impacted gross margin development. Cost synergies resulting from the combination of adidas and Reebok sourcing activities as well as underlying improvements in all segments also contributed to this development. As a result, gross profit for the adidas Group rose 9 % in 2007 to reach € 4.882 billion versus € 4.495 billion in the prior year.

ROYALTY AND COMMISSION INCOME GROWS STRONGLY
Royalty and commission income for the adidas Group increased 20 % on a currency-neutral basis. Increased adidas and TaylorMade-adidas Golf sales through external licensees and higher average royalty rates at all brands were the main drivers of this increase. The consolidation of the month of January in the Reebok segment in 2007 also positively impacted this development. In euro terms, royalty and commission income increased by 14 % to € 102 million in 2007 from € 90 million in the prior year.

GROSS PROFIT 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

OPERATING EXPENSES € 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.

OPERATING EXPENSES in % of net sales
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.

HIGHER EXPENSES AT REEBOK DRIVE OPERATING EXPENSE INCREASE
Operating expenses include marketing working budget and operating overhead costs as well as depreciation and amortization. Operating expenses as a percentage of sales increased by 2.5 percentage points to 39.2 % in 2007 from 36.7 % in 2006. This increase primarily reflects one-time costs related to the integration of Reebok into the adidas Group as well as higher expenses in the Reebok segment for advertising, product development and initiatives to grow the brand in emerging markets. In absolute terms, operating expenses for the adidas Group increased by 9 % to € 4.035 billion in 2007 from € 3.704 billion in the prior year.

MARKETING WORKING BUDGET INCREASES AS A PERCENTAGE OF SALES
Almost half of our Group’s marketing working budget is variable to increase the flexibility of our Group. The variable portion primarily includes expenses for advertising, retail presentation and public relations, whereas the fixed portion consists mainly of expenses for promotion partnerships. Marketing working budget as a percentage of sales increased 0.5 percentage points to 13.4 % in 2007 (2006: 12.9 %). adidas marketing working budget as a percentage of sales remained stable. Reebok’s marketing working budget as a percentage of sales increased to support the revitalization of the brand. However, Reebok’s marketing working budget continues to be below the Group average. Marketing expenditure as a percentage of sales at TaylorMade-adidas Golf grew compared to the prior year as a result of the divestiture of the GNC wholesale business, which had lower marketing expenditures as a percentage of sales.

OPERATING EXPENSES BY FUNCTION € 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.

MARKETING WORKING BUDGET in % of net sales
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.

OPERATING OVERHEADS INCREASE AS A PERCENTAGE OF SALES
Group operating overheads include overhead costs related to marketing, sales, logistics, research and development as well as central finance and administration functions. Operating overhead expenses as a percentage of sales increased 2.2 percentage points to 26.0 % in 2007 from 23.8 % in the prior year. This was primarily a result of higher own-retail expenditures, which increased in line with the expansion of the Group’s own-retail activities. Central finance and administration expenses also grew overproportionately due to integration expenses in the Group’s Headquarter functions. However, research and development expenditure decreased as a result of the combination of certain adidas and Reebok research capabilities.  see Research and Development

EBITDA UP 8 %
The Group’s earnings before interest, taxes, depreciation and amortization of tangible and intangible assets (EBITDA) increased 8 % to € 1.165 billion in 2007 ( 2006: € 1.078 billion). Depreciation and amortization expense for tangible and intangible assets with limited useful lives grew 1 % to € 211 million in 2007 (2006: € 209 million). In accordance with International Financial Reporting Standards, intangible assets with unlimited useful lives (goodwill and trademarks) are tested annually and additionally when there are indications of potential impairment. No impairment of intangible assets was incurred in 2007 and 2006.

OPERATING MARGIN REACHES 9.2 %
The operating margin of the adidas Group increased 0.5 percentage points to 9.2 % in 2007 (2006: 8.7 %). This development was in line with initial Management expectations of an operating margin around 9 %. The operating margin increase is a result of the Group’s gross margin improvement, which more than offset higher operating expenses as a percentage of sales. As a result, Group operating profit increased 8 % in 2007 to reach € 949 million versus € 881 million in 2006.

EBITDA € in millions
1)	Adjusted to reflect the application of IAS 32.
2)	Figures reflect continuing operations as a result of the divestiture of the Salomon business segment.
3)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

OPERATING MARGIN in %
1)	Excluding royalty and commission income as well as goodwill amortization.
2)	Figures reflect continuing operations as a result of the divestiture of the Salomon business segment.
3)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

OPERATING PROFIT € in millions
1)	Excluding royalty and commission income as well as goodwill amortization.
2)	Figures reflect continuing operations as a result of the divestiture of the Salomon business segment.
3)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

OPERATING PROFIT 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.

NET FINANCIAL EXPENSES € in millions
1)	Adjusted to reflect the application of IAS 32.
2)	Figures reflect continuing operations as a result of the divestiture of the Salomon business segment.
3)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

STRONG DECREASE OF NET FINANCIAL EXPENSES
Net financial expenses decreased 15 % to € 134 million in 2007 from € 158 million in the prior year as a result of lower financial expenses following the strong reduction of net borrowings.  see Treasury

FINANCIAL INCOME DECLINES BY 9 %
Financial income decreased by 9 % to € 36 million in 2007 (2006: € 39 million). In the prior year, financial income was higher due to a significant cash position after the capital increase and the proceeds related to the divestiture of the Salomon business segment at the beginning of 2006. Both transactions were completed in the fourth quarter of 2005.

FINANCIAL EXPENSES DECREASE BY 14 %
Financial expenses decreased 14 % to € 170 million in 2007 (2006: € 197 million), mainly as a result of significantly lower gross borrowings versus the prior year.

INCOME BEFORE TAXES INCREASES BY 13 %
As a result of the Group’s operating margin increase and lower net financial expenses, income before taxes (IBT) as a percentage of sales increased by 0.7 percentage points to 7.9 % in 2007 from 7.2 % in 2006. IBT for the adidas Group increased 13 % to € 815 million in 2007 from € 723 million in 2006.

INCOME BEFORE TAXES € in millions
1)	Adjusted to reflect the application of IAS 32.
2)	Figures reflect continuing operations as a result of the divestiture of the Salomon business segment.
3)	Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006.

INCOME BEFORE TAXES 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

NET INCOME ATTRIBUTABLE TO SHAREHOLDERS GROWS 14 %
The Group’s net income attributable to shareholders increased 14 % to € 551 million in 2007 from € 483 million in 2006. This development was in line with initial Management expectations that targeted an increase at a rate approaching 15 %. The Group’s higher operating profit, lower net financial expenses and lower minority interests each contributed to this development. The Group’s tax rate increased by 0.4 percentage points to 31.8 % in 2007 (2006: 31.4 %). The non-recurrence of a one-time tax benefit, which had a positive impact in the prior year, was partly compensated for by favorable tax rate changes in several countries.  see Note 27

MINORITY INTERESTS DECLINE BY 71 %
The Group’s minority interests decreased 71 % to € 4 million in 2007 from € 13 million in 2006. The strong decline in minority interests compared to the prior year was primarily due to the buyout of the adidas joint venture partner in Korea. Effective September 1, 2006, the Group purchased the remaining 49 % of shares.

Net Income Attributable to Shareholders € 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.

Net Income Attributable to Shareholders 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.

BASIC AND DILUTED EARNINGS PER SHARE BOTH INCREASE 14 %
In line with the increase of the Group’s net income attributable to shareholders, basic earnings per share increased 14 % to € 2.71 in 2007 versus € 2.37 in 2006. The Group’s total number of shares outstanding increased by 92,100 shares to 203,628,960 at the end of 2007 from 203,536,860 at the end of 2006 as a result of shares from stock options exercised as part of Tranches II, III, IV and V of the Management Share Option Plan (MSOP) of adidas AG. Consequently, the weighted average number of shares used in the calculation of basic earnings per share was 203,594,975 (2006 average: 203,386,104). Diluted earnings per share in 2007 also increased 14 % to € 2.57 from € 2.25 in the prior year. The weighted average number of shares used in the calculation of diluted earnings per share was 219,467,177 (2006 average: 219,399,522). The number of diluted shares outstanding at year-end 2007 was 219,485,875 (2006: 219,485,875). The dilutive effect largely results from approximately sixteen million additional potential shares that could be created in relation to our outstanding convertible bond, for which conversion criteria were first met at the end of the fourth quarter of 2004.