adidas-Salomon in the First Nine Months of 2003: Group earnings up
17%; Currency-neutral sales grow 7% HERZOGENAURACH, Germany, Nov. 5
/PRNewswire-FirstCall/ -- adidas-Salomon currency-neutral sales up
7% for the first nine months Currency-neutral sales for the Group
in the third quarter grew 6%. On a reported basis, however, at euro
1.9 billion, third quarter sales were slightly lower than the level
achieved in 2002. During the first nine months, sales increased 7%
on a currency-neutral basis. This represents a decline of 2% in
reported terms from euro 5.0 billion in 2002 to euro 4.9 billion in
2003. Herbert Hainer, Chairman and CEO of adidas-Salomon, stated:
"We've faced a number of economic, political and market challenges
in the first nine months of 2003, and overall have delivered
excellent sales and earnings performances. Regionally, Europe and
Asia have done particularly well, and we are quickly moving to
refocus our efforts in North America. adidas-Salomon is an
organization with flexibility, imagination and tenacity -- exactly
the types of skills that it takes to win in our industry today."
TaylorMade-adidas Golf the fastest growing segment in the first
nine months Revenues at TaylorMade-adidas Golf in the first nine
months increased 9% on a currency-neutral basis. This represents a
decline of 6% in reported terms, from euro 516 million in 2002 to
euro 487 million in 2003. Excluding the euro 21 million sales for
Slazenger Golf in the first nine months of 2002 from a licensing
arrangement that was not renewed in 2003, sales for
TaylorMade-adidas Golf increased 14% in currency-neutral terms (-2%
in euro terms), making TaylorMade-adidas Golf the Group's fastest
growing segment. The underlying sales increase is attributable to
growth in RAC irons as well as in adidas Golf footwear and apparel.
At brand adidas, sales increased 8% on a currency-neutral basis in
the first nine months. In reported terms, this represents a decline
of 1% from euro 4.1 billion in 2002 to euro 4.0 billion in 2003.
Drivers of this development were solid underlying growth in the
Sport Performance running and training categories as well as in the
Sport Heritage division. Salomon sales in the first nine months
were down 2% on a currency- neutral basis. This represents a
decline of 8% in reported terms from euro 424 million to euro 390
million. Solid growth in cycling components and soft goods was
offset by lower sales in the alpine, snowboard and inline skate
categories due to difficult retail conditions. 1st nine 1st nine
Change y-o-y Change y-o-y months 2002 months 2003 in euro currency-
euro in euro in terms neutral millions millions in % in % adidas
4,050 4,017 (1) 8 Salomon 424 390 (8) (2) TaylorMade-adidas Golf
516 487 (6) 9 Total 5,012 4,913 (2) 7 adidas-Salomon sales by brand
in the first nine months of 2003, "Total" includes HQ/Consolidation
Currency-neutral sales in Europe grow 8% Sales for adidas-Salomon
in Europe increased 8% on a currency-neutral basis in the first
nine months of 2003. In reported terms, this represents an increase
of 5% from euro 2.5 billion in 2002 to euro 2.7 billion in 2003.
The main drivers of this underlying increase were particularly
strong developments in Italy, France and the UK as well as in the
emerging markets. Group sales in Asia increased 10% on a
currency-neutral basis in the first nine months of 2003. In
reported terms, this represents a decrease of 3% to euro 817
million (2002: euro 841 million). Underlying growth was driven by
vigorous increases in China, Japan and South Korea. In North
America, sales for the Group in the first nine months of 2003 were
stable in currency-neutral terms compared to the prior year's
level. In reported terms, sales declined 16% to euro 1.2 billion
versus euro 1.5 billion in the prior year. This reflects a weakness
in demand for certain adidas product lines and the difficult market
conditions there. In Latin America, sales were up 37% in the first
nine months of 2003 on a currency-neutral basis, making it the
fastest growing region within the Group. This represents an
increase of 8% in reported terms to euro 130 million compared to
euro 120 million in 2002. Higher sales in Argentina and Brazil were
the main drivers of this improvement. 1st nine 1st nine Change
y-o-y Change y-o-y months 2002 months 2003 in euro currency- euro
in euro in terms neutral millions millions in % in % Europe 2,541
2,677 5 8 North America 1,483 1,249 (16) 0 Asia 841 817 (3) 10
Latin America 120 130 8 37 Total 5,012 4,913 (2) 7 adidas-Salomon
sales by region in the first nine months of 2003, "Total" includes
HQ/Consolidation adidas order backlog reflects mixed regional
development Order backlog for brand adidas declined 2% on a
currency-neutral basis (-8% in euro) at the end of the third
quarter of 2003. This development reflects tough comparisons with
the prior year and continued weakness in North America. Footwear
backlogs declined 10% in currency-neutral terms (-16% in euro)
driven by significantly lower orders in North America. Apparel
orders increased 6% in currency-neutral terms, highlighting the
brand's activities to grow sales in this product category. In
reported terms, orders were stable compared to the prior year's
levels. In Europe, orders increased 7% on a currency-neutral basis
(+4% in euro) supported by strong growth in apparel, where backlogs
were up 13% (+9% in euro). Footwear backlogs were up 1%
currency-neutral (-2% in euro). In Asia, currency-neutral backlogs
grew 11% (+2% in euro), with strong improvements coming from Japan
and China. Footwear backlogs declined 1% currency-neutral (-8% in
euro). On a currency-neutral basis, apparel orders increased 22%
(+13% in euro). In North America, order backlogs were down 23% on a
currency-neutral basis, which is in line with the guidance
adidas-Salomon provided for the market at the Investor Day on
September 30. This represents a decline of 35% in reported terms.
Currency- neutral footwear backlogs declined 29% (-40% in euro).
Currency-neutral apparel orders decreased 16% (-28% in euro).
Footwear Apparel Total Change y-o-y in % in euro currency- in euro
currency- in euro currency- neutral neutral neutral Europe (2) 1 9
13 4 7 North America (40) (29) (28) (16) (35) (23) Asia (8) (1) 13
22 2 11 Total (16) (10) 0 6 (8) (2) adidas order backlogs by
product category and region as at September 30, 2003 Gross margin
grows adidas-Salomon gross profit declined 1%, or euro 11 million,
in the first nine months of 2003 to reach euro 2.2 billion versus
euro 2.2 billion in 2002, reflecting the Group's decrease in
reported sales. The gross margin, however, improved 0.7 percentage
points to 44.1% (2002: 43.4%). Currency effects, which are also
captured in the headquarter function as a result of the Group's
centralized hedging strategy, positively impacted the Group's gross
margin by around 1.0 percentage points. Operating profit up 9%
Operating expenses, including selling, general and administrative
expenses (SG&A) and depreciation and amortization (excluding
goodwill), were reduced by 3% from euro 1.8 billion in the first
nine months of 2002 to euro 1.7 billion in 2003. As a percentage of
net sales this equates to 35.0%, which is 0.3 percentage points
lower than the 2002 level of 35.2%. This reduction is evidence of
the Group's focus on cost discipline. As a result, operating profit
for the Group increased 9% from euro 410 million in 2002 to euro
448 million in 2003. The operating margin increased 0.9 percentage
points from 8.2% in the first nine months of 2002 to 9.1% in 2003.
Earnings up 17% Financial expenses declined 36% from euro 69
million in the first nine months of 2002 to euro 44 million in
2003. The main factor contributing to this development was the
financial stabilization of emerging markets such as Argentina,
Turkey and Brazil. As a result of operating improvements and the
positive development of financial expenses, adidas-Salomon IBT in
the first nine months increased 18% from euro 341 million in 2002
to euro 401 million in 2003. As a percentage of net sales, income
before taxes improved by 1.4 percentage points from 6.8% in 2002 to
8.2% in 2003. Minority interests were up 15% to euro 13 million
(2002: euro 11 million), mainly due to higher profits in Turkey.
The Group tax rate increased 0.4 percentage points from 38.2% in
the first nine months of 2002 to 38.6% in 2003. Net income for the
Group increased 17% from euro 199 million in the first nine months
of 2002 to euro 234 million in 2003. EPS was euro 5.14 in 2003
versus euro 4.40 in 2002. Strong working capital management and
debt reduction continue Group inventories were reduced by 5% from
euro 1.2 billion at the end of September 2002 to euro 1.1 billion
in 2003. On a currency-neutral basis, inventories increased 1%,
which is below currency-neutral sales growth expectations for the
fourth quarter. Receivables decreased year-over-year by 2% to euro
1.5 billion in 2003 versus euro 1.5 billion in 2002. On a currency-
neutral basis, receivables increased by 4%, which is below the
Group's third quarter currency-neutral sales growth. These working
capital improvements, together with strong operating results, led
to a reduction of net borrowings at September 30, 2003 to euro 1.4
billion, down 23% or euro 420 million versus euro 1.8 billion in
the prior year. Strong results in Q3 In the third quarter of 2003,
Group net sales grew 6% on a currency- neutral basis. In reported
terms, however, revenues declined 1% or euro 16 million from euro
1.9 billion in 2002 to euro 1.9 billion in 2003. Group gross margin
increased 1.2 percentage points from 43.8% in 2002 to 45.0% in
2003. Operating expenses were down 2% from euro 576 million in the
third quarter of 2002 to euro 564 million in 2003. As a percentage
of sales, operating expenses were down 0.4 percentage points from
30.8% in 2002 to 30.5% in 2003. As a result, operating profit rose
11% to euro 270 million in the third quarter of 2003 (2002: euro
243 million). The operating margin was up 1.6 percentage points to
14.6% (2002: 13.0%). These developments in combination with a 29%
improvement in financial expenses to euro 17 million (2002: euro 23
million) led to an increase in the Group's income before taxes by
15% to euro 254 million (2002: euro 220 million). The tax rate for
the third quarter increased 0.7 percentage points to 37.9% (2002:
37.2%). As a result, net income increased 15% from euro 131 million
in 2002 to euro 150 million in 2003. adidas-Salomon EPS was euro
3.31 for the third quarter of 2003 versus euro 2.89 in 2002. Full
year sales and earnings targets confirmed As a result of the
Group's performance during the first nine months of 2003 and
business expectations for the remainder of the year, adidas-Salomon
confirms the sales and earnings guidance as provided with the 2002
full year results. Group revenues are expected to increase by at
least 5% on a currency- neutral basis. Group gross margin is likely
to exceed the target of 42 to 43% and operating margin is expected
to improve by approximately 50 basis points. As a result of these
developments, Group earnings for the full year are expected to grow
between 10 and 15%. Herbert Hainer stated: "We've delivered on our
promised performances so far in 2003 and are set to make our sales,
margin and earnings targets for the full year. Exciting new
technologies, which we will showcase at some of the world's biggest
sports events, will help us take the positive momentum into 2004."
Please visit our corporate website: http://www.adidas-salomon.com/
adidas-Salomon CONSOLIDATED INCOME STATEMENT (IFRS) 3rd QUARTER
2003 EURO IN MILLIONS 2003 2002 Change 2003/2002 NET SALES 1,853
1,868 (0.8)% COST OF SALES 1,018 1,050 (3.0)% GROSS PROFIT 835 819
1.9% (% OF NET SALES) 45.0% 43.8% 1.2 PP SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 540 552 (2.3)% (% OF NET SALES) 29.1% 29.6%
(0.4) PP DEPRECIATION AND AMORTIZATION (EXCL. GOODWILL) 25 23 5.8%
OPERATING PROFIT 270 243 11.2% (% OF NET SALES) 14.6% 13.0% 1.6 PP
GOODWILL AMORTIZATION 11 12 (3.2)% ROYALTY AND COMMISSION INCOME 11
12 (5.8)% FINANCIAL EXPENSES, NET 17 23 (29.0)% INCOME BEFORE TAXES
AND MINORITY INTERESTS 254 220 15.3% (% OF NET SALES) 13.7% 11.8%
1.9 PP INCOME TAXES 96 82 17.4% (% OF INCOME BEFORE TAXES AND
MINORITY INTERESTS) 37.9% 37.2% 0.7 PP MINORITY INTERESTS (7) (7)
4.4% NET INCOME 150 131 14.5% (% OF NET SALES) 8.1% 7.0% 1.1 PP
BASIC EARNINGS PER SHARE (IN EUROS) 3.31 2.89 14.3% DILUTED
EARNINGS PER SHARE (IN EUROS) 3.31 -- NET SALES EUROS IN MILLIONS
2003 2002 Change 2003/2002 adidas 1,475 1,496 (1.4)% Salomon 199
230 (13.6)% TaylorMade-adidas Golf 176 137 28.4% EUROPE 1,020 988
3.2% NORTH AMERICA 459 529 (13.3)% ASIA 308 302 1.9% LATIN AMERICA
52 43 22.6% ROUNDING DIFFERENCES MAY ARISE IN PERCENTAGES AND
TOTALS FOR FIGURES PRESENTED IN MILLIONS AS CALCULATION IS ALWAYS
BASED ON THE FIGURES STATED IN THOUSANDS. adidas-Salomon
CONSOLIDATED INCOME STATEMENT (IFRS) NINE MONTHS ENDED SEPTEMBER
30, 2003 EUROS IN MILLIONS 2003 2002 Change 2003/2002 NET SALES
4,913 5,012 (2.0)% COST OF SALES 2,747 2,835 (3.1)% GROSS PROFIT
2,166 2,177 (0.5)% (% OF NET SALES) 44.1% 43.4% 0.7 PP SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES 1,646 1,697 (3.0)% (% OF NET
SALES) 33.5% 33.9% (0.4) PP DEPRECIATION AND AMORTIZATION (EXCL.
GOODWILL) 72 70 4.1% OPERATING PROFIT 448 410 9.2% (% OF NET SALES)
9.1% 8.2% 0.9 PP GOODWILL AMORTIZATION 34 34 (0.9)% ROYALTY AND
COMMISSION INCOME 31 34 (8.0)% FINANCIAL EXPENSES, NET 44 69
(36.2)% INCOME BEFORE TAXES AND MINORITY INTERESTS 401 341 17.6% (%
OF NET SALES) 8.2% 6.8% 1.4 PP INCOME TAXES 155 130 18.8% (% OF
INCOME BEFORE TAXES AND MINORITY INTERESTS) 38.6% 38.2% 0.4 PP
MINORITY INTERESTS (13) (11) 14.6% NET INCOME 234 199 17.1% (% OF
NET SALES) 4.8% 4.0% 0.8 PP BASIC EARNINGS PER SHARE (IN EUROS)
5.14 4.40 16.8% DILUTED EARNINGS PER SHARE (IN EUROS) 5.14 -- --
NET SALES EUROS IN MILLIONS 2003 2002 Change 2003/2002 adidas 4,017
4,050 (0.8)% Salomon 390 424 (8.0)% TaylorMade-adidas Golf 487 516
(5.7)% EUROPE 2,677 2,541 5.4% NORTH AMERICA 1,249 1,483 (15.7)%
ASIA 817 841 (2.8)% LATIN AMERICA 130 120 8.3% ROUNDING DIFFERENCES
MAY ARISE IN PERCENTAGE AND TOTALS FOR FIGURES PRESENTED IN
MILLIONS AS CALCULATION IS ALWAYS BASED ON THE FIGURES STATED IN
THOUSANDS. adidas-Salomon CONSOLIDATED BALANCE SHEET (IFRS) EUROS
IN MILLIONS Sep. 30 Sep. 30 Change Dec. 31 2003 2002 2002 CASH AND
CASH EQUIVALENTS 74 95 (22.5)% 76 ACCOUNTS RECEIVABLE 1,455 1,491
(2.4)% 1,293 INVENTORIES 1,088 1,151 (5.5)% 1,190 OTHER CURRENT
ASSETS 292 283 3.0% 267 TOTAL CURRENT ASSETS 2,908 3,019 (3.7)%
2,826 PROPERTY, PLANT AND EQUIPMENT, NET 348 363 (4.3)% 366
GOODWILL, NET 604 633 (4.7)% 639 OTHER INTANGIBLE ASSETS, NET 107
79 35.4% 115 DEFERRED TAX ASSETS 203 167 21.4% 170 OTHER
NON-CURRENT ASSETS 188 179 4.7% 145 TOTAL NON-CURRENT ASSETS 1,449
1,422 1.9% 1,435 TOTAL ASSETS 4,357 4,441 (1.9)% 4,261 SHORT-TERM
BORROWINGS 0 35 (100.0)% 0 ACCOUNTS PAYABLE 456 477 (4.4)% 668
INCOME TAXES 193 129 49.1% 112 ACCRUED LIABILITIES AND PROVISIONS
512 405 26.6% 451 OTHER CURRENT LIABILITIES 184 192 (3.9)% 149
TOTAL CURRENT LIABILITIES 1,345 1,237 8.7% 1,381 LONG-TERM
BORROWINGS 1,497 1,903 (21.4)% 1,574 PENSIONS AND SIMILAR
OBLIGATIONS 108 96 11.5% 99 DEFERRED TAX LIABILITIES 61 55 11.7% 51
OTHER NON-CURRENT LIABILITIES 38 16 134.0% 19 TOTAL NON-CURRENT
LIABILITIES 1,703 2,070 (17.7)% 1,743 MINORITY INTERESTS 61 55
12.4% 56 SHAREHOLDERS' EQUITY 1,247 1,079 15.6% 1,081 TOTAL
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY 4,357
4,441 (1.9)% 4,261 ADDITIONAL BALANCE SHEET INFORMATION OPERATING
WORKING CAPITAL 2,087 2,164 (3.6)% 1,814 WORKING CAPITAL 1,563
1,782 (12.3)% 1,445 NET TOTAL BORROWINGS 1,423 1,843 (22.8)% 1,498
FINANCIAL LEVERAGE 114.1% 170.8% 138.5% ROUNDING DIFFERENCES MAY
ARISE IN PERCENTAGE AND TOTALS FOR FIGURES PRESENTED IN MILLIONS AS
CALCULATION IS ALWAYS BASED ON THE FIGURES STATED IN THOUSANDS.
DATASOURCE: adidas-Salomon CONTACT: Media Relations - Jan Runau,
Head of Corporate PR, +49-9132-84-3830, or Anne Putz, Corporate PR
Manager, +49-9132-84-2964, or Investor Relations - Natalie M.
Knight, Head of Investor Relations, +49-9132-84-3584, or Dr.
Charlotte Brigitte Loos, Investor Relations Manager,
+49-9132-84-3584, all of adidas-Salomon; or U.S. Media Relations -
Doug Donsky of Edelman Financial, +1-212-704-4473, for
adidas-Salomon Web site: http://www.adidas-salomon.com/
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