**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

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**ý****QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

 

**Forthe quarterly period ended March 31, 2003**

 

**OR**

 

**o****TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

 

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**Commissionfile number 1-9340**

 

**REEBOK INTERNATIONAL LTD.**

Incorporatedpursuant to the Laws of The Commonwealth of Massachusetts

 

Internal RevenueService— Employer Identification No. **04-2678061**

**1895J.W. Foster Boulevard, Canton, Massachusetts, 02021**

**(781)401-5000**

 

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Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to filesuch reports) and (2) has been subject to such filing requirements for the past90 days. Yes ýNo o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 underthe Securities Exchange Act of 1934). Yes ý No o

 

The total number ofshares of the Registrant’s Common Stock, par value $.01 per share, outstandingon May 2, 2003 was 59,254,588.

 

 

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**REEBOKINTERNATIONAL LTD.**

 

***INDEX***

 
| ***PART I.                       FINANCIAL INFORMATION:***                            |                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                |
| Item 1.                                                                                                                                                                                             | Financial Statements  (Unaudited)                                                                    |   |
|                                                                                                                                                                                                |                                                                                                 |   |
|                                                                                                                                                                                                | Condensed Consolidated  Balance Sheets -  March 31, 2003 and 2002, and December 31, 2002   |   |
|                                                                                                                                                                                                |                                                                                                 |   |
|                                                                                                                                                                                                | Condensed  Consolidated Statements of Income -  Three Months Ended March 31, 2003  and 2002     |   |
|                                                                                                                                                                                                |                                                                                                 |   |
|                                                                                                                                                                                                | Condensed  Consolidated Statements of Cash Flows -  Three Months Ended March 31, 2003  and 2002 |   |
|                                                                                                                                                                                                |                                                                                                 |   |
|                                                                                                                                                                                                | Notes  to Condensed Consolidated Financial Statements                                                |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item  2.                                                                                                                                                                                            | Management’s  Discussion and Analysis of Results  of Operations and Financial  Condition   |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item  3.                                                                                                                                                                                            | Quantitative  and Qualitative Disclosures About  Market Risk                                    |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item 4.                                                                                                                                                                                             | Controls and  Procedures                                                                             |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| ***Part II.                            OTHER INFORMATION:*** |                                                                                                 |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item 1.                                                                                                                                                                                             | Legal Proceedings                                                                                    |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item  2.                                                                                                                                                                                            | Changes  in Securities                                                                               |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item 3.                                                                                                                                                                                             | Defaults Upon  Senior Securities                                                                     |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item  4.                                                                                                                                                                                            | Submission  of Matters to a Vote of Security-Holders                                                 |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item 5.                                                                                                                                                                                             | Other Information                                                                                    |   |
|                                                                                                                                                                                                |                                                                                                 |   |
| Item 6.                                                                                                                                                                                             | Exhibits                                                                                             |   |

 

2

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**PART II  -  FINANCIAL INFORMATION**

**Item 1.  Financial Statements.**

 

**ReebokInternational Ltd.**

**Condensed Consolidated Balance Sheets**

 
|                                                                                                                                                |   | **March 31,**   |      | **December  31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|-----------|-------------------|--------|
| **Amounts in thousands, except per share data**                                                                                                     |   | **2003**        |      | **2002**          |   | **2002** |   |
|                                                                                                                                                |   | **(Unaudited)** |      | **(See Note  1)** |   |
| **Assets**                                                                                                                                          |   |            |      |              |   |   |   |
| Current  assets:                                                                                                                                    |   |            |      |              |   |   |   |
| Cash  and cash equivalents                                                                                                                          |   | $               | 460,314   |              | $      | 359,981 |   | $ | 642,367 |   |
| Accounts  receivable, net of allowance for doubtful accounts (March 2003, $60,706 March  2002, $55,671; December 2002, $60,906)                     |   | 536,879         |      | 488,522           |   | 421,750 |   |
| Inventory                                                                                                                                           |   | 417,477         |      | 349,571           |   | 399,664 |   |
| Deferred  income taxes                                                                                                                              |   | 118,191         |      | 104,334           |   | 117,649 |   |
| Prepaid  expenses and other current assets                                                                                                          |   | 43,440          |      | 41,611            |   | 32,137 |   |
| Total  current assets                                                                                                                               |   | 1,576,301       |      | 1,344,019         |   | 1,613,567 |   |
|                                                                                                                                                |   |            |      |              |   |   |   |
| Property  and equipment, net                                                                                                                        |   | 134,754         |      | 132,483           |   | 134,767 |   |
| Other  non-current assets:                                                                                                                          |   |            |      |              |   |   |   |
| Goodwill,  net                                                                                                                                      |   | 23,431          |      | 23,163            |   | 23,431 |   |
| Intangibles,  net of amortization                                                                                                                   |   | 43,697          |      | 45,063            |   | 43,821 |   |
| Deferred  income taxes                                                                                                                              |   | 18,222          |      | 13,575            |   | 19,391 |   |
| Other                                                                                                                                               |   | 23,765          |      | 21,395            |   | 25,795 |   |
| Total  Assets                                                                                                                                       |   | $               | 1,820,170 |              | $      | 1,579,698 |   | $ | 1,860,772 |   |
|                                                                                                                                                |   |            |      |              |   |   |   |
| **Liabilities and Stockholders’ Equity**                                                                                                       |   |            |      |              |   |   |   |
| Current  liabilities:                                                                                                                               |   |            |      |              |   |   |   |
| Notes  payable to banks                                                                                                                             |   | $               | 18,019    |              | $      | 14,638 |   | $ | 18,971 |   |
| Current  portion of long-term debt                                                                                                                  |   | 131             |      | 98                |   | 125 |   |
| Accounts  payable                                                                                                                                   |   | 148,193         |      | 117,285           |   | 166,148 |   |
| Accrued  expenses                                                                                                                                   |   | 310,270         |      | 271,840           |   | 350,019 |   |
| Income  taxes payable                                                                                                                               |   | 32,310          |      | 42,821            |   | 44,657 |   |
| Total  current liabilities                                                                                                                          |   | 508,923         |      | 446,682           |   | 579,920 |   |
|                                                                                                                                                |   |            |      |              |   |   |   |
| Long-term  debt, net of current portion                                                                                                             |   | 353,204         |      | 350,016           |   | 353,329 |   |
| Minority  interest and other long-term liabilities                                                                                                  |   | 42,919          |      | 22,790            |   | 42,953 |   |
| Commitments  and contingencies                                                                                                                      |   |            |      |              |   |   |   |
| Stockholders’  equity:                                                                                                                         |   |            |      |              |   |   |   |
| Common  stock, par value $.01; authorized 250,000 shares; issued shares:  March 2003, 99,771; March 2002, 98,464;  December 2002,  99,235 |   | 998             |      | 985               |   | 992 |   |
|                                                                                                                                                |   |            |      |              |   |   |   |
| Retained  earnings                                                                                                                                  |   | 1,653,640       |      | 1,492,178         |   | 1,602,453 |   |
| Less  shares in treasury at cost:  March  2003, 40,072 March 2002, 39,011; December 2002, 39,011                                               |   | (692,699        | )         | (660,422          | )      | (660,422 | ) |
| Unearned  compensation                                                                                                                              |   | (1,498          | )         | (2,494            | )      | (1,730 | ) |
| Accumulated  other comprehensive loss                                                                                                               |   | (45,317         | )         | (70,037           | )      | (56,723 | ) |
| Total  Stockholders’ Equity                                                                                                                    |   | 915,124         |      | 760,210           |   | 884,570 |   |
|                                                                                                                                                |   |            |      |              |   |   |   |
| Total  Liabilities and Stockholders’ Equity                                                                                                    |   | $               | 1,820,170 |              | $      | 1,579,698 |   | $ | 1,860,772 |   |

 

The accompanying notesare an integral part of the condensed consolidated financial statements.

 

3

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**ReebokInternational Ltd.**

**Condensed Consolidated Statements ofIncome (Unaudited)**

 
|                                                                                                    |   | **Three  Months Ended  March 31,** |    |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
| **Amounts in thousands, except per share data**                                                         |   | **2003**                           |    | **2002** |   |
|                                                                                                    |   |                               |    |   |   |
| Net  sales                                                                                              |   | $                                  | 798,280 |   | $ | 735,986 |   |
|                                                                                                    |   |                               |    |   |   |
| Costs  and expenses:                                                                                    |   |                               |    |   |   |
|                                                                                                    |   |                               |    |   |   |
| Cost  of sales                                                                                          |   | 499,789                            |    | 461,849 |   |
| Selling,  general and administrative expenses                                                           |   | 230,868                            |    | 213,638 |   |
| Interest  expense, net                                                                                  |   | 4,584                              |    | 3,365 |   |
| Other  expense, net                                                                                     |   | 1,678                              |    | 1,243 |   |
|                                                                                                    |   | 736,919                            |    | 680,095 |   |
|                                                                                                    |   |                               |    |   |   |
| Income  before income taxes, minority interest and cumulative effect of change in  accounting principle |   | 61,361                             |    | 55,891 |   |
| Income  taxes                                                                                           |   | 18,654                             |    | 17,326 |   |
|                                                                                                    |   |                               |    |   |   |
| Income  before minority interest and cumulative effect of change in accounting  principle               |   | 42,707                             |    | 38,565 |   |
| Minority  interest                                                                                      |   | 1,872                              |    | 1,493 |   |
|                                                                                                    |   |                               |    |   |   |
| Income  before cumulative effect of change in accounting principle                                      |   | 40,835                             |    | 37,072 |   |
| Cumulative  effect of change in accounting principle (net of taxes), Note 1                             |   |                               |    | 5,070 |   |
|                                                                                                    |   |                               |    |   |   |
| Net  income                                                                                             |   | $                                  | 40,835  |   | $ | 32,002 |   |
|                                                                                                    |   |                               |    |   |   |
| Basic  earnings per share:                                                                              |   |                               |    |   |   |
|                                                                                                    |   |                               |    |   |   |
| Before  cumulative effect of change in accounting principle                                             |   | $                                  | .68     |   | $ | .63 |   |
| Cumulative  effect of change in accounting principle                                                    |   |                               |    | (.09 | ) |
|                                                                                                    |   | $                                  | .68     |   | $ | .54 |   |
| Diluted  earnings per share:                                                                            |   |                               |    |   |   |
|                                                                                                    |   |                               |    |   |   |
| Before  cumulative effect of change in accounting principle                                             |   | $                                  | .63     |   | $ | .58 |   |
| Cumulative  effect of change in accounting principle                                                    |   |                               |    | (.07 | ) |
|                                                                                                    |   | $                                  | .63     |   | $ | .51 |   |

 

The accompanying notesare an integral part of the condensed consolidated financial statements.

 

4

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**ReebokInternational Ltd.**

**Condensed Consolidated Statements ofCash Flows (Unaudited)**

 
|                                                                            |   | **Three  Months Ended  March 31,** |    |
|---------------------------------------------------------------------------------|--------|------------------------------------|---------|
| **Amounts in thousands**                                                        |   | **2003**                           |    | **2002** |   |
|                                                                            |   |                               |    |   |   |
| Cash  flows from operating activities:                                          |   |                               |    |   |   |
| Net  income                                                                     |   | $                                  | 40,835  |   | $ | 32,002 |   |
| Adjustments  to reconcile net income to net cash used for operating activities: |   |                               |    |   |   |
| Depreciation  and amortization                                                  |   | 8,119                              |    | 8,131 |   |
| Minority  interest                                                              |   | 1,872                              |    | 1,493 |   |
| Deferred  income taxes                                                          |   | 627                                |    | 2,464 |   |
| Cumulative  effect of change in accounting principle                            |   |                               |    | 5,070 |   |
| Changes  in operating assets and liabilities:                                   |   |                               |    |   |   |
| Accounts  receivable                                                            |   | (112,547                           | )       | (105,320 | ) |
| Inventory                                                                       |   | (16,886                            | )       | 11,166 |   |
| Prepaid  expenses and other                                                     |   | (8,033                             | )       | (10,701 | ) |
| Accounts  payable and accrued expenses                                          |   | (48,078                            | )       | (2,068 | ) |
| Dividends  to minority shareholders                                             |   | (1,625                             | )       | (2,543 | ) |
| Income  taxes payable                                                           |   | (15,541                            | )       | 7,530 |   |
| Total  adjustments                                                              |   | (192,092                           | )       | (84,778 | ) |
| Net  cash used for operating activities:                                        |   | (151,257                           | )       | (52,776 | ) |
|                                                                            |   |                               |    |   |   |
| Cash  flows used for investing activities:                                      |   |                               |    |   |   |
| Payments  to acquire property and equipment                                     |   | (7,540                             | )       | (6,174 | ) |
|                                                                            |   |                               |    |   |   |
| Net  cash used for investing activities                                         |   | (7,540                             | )       | (6,174 | ) |
|                                                                            |   |                               |    |   |   |
| Cash  flows (used for) provided by financing activities:                        |   |                               |    |   |   |
| Net  borrowings of notes payable to banks                                       |   | (925                               | )       | 2,880 |   |
| Re-payments  of long-term debt                                                  |   | (170                               | )       | (1,169 | ) |
| Proceeds  from issuance of common stock to employees                            |   | 13,070                             |    | 4,875 |   |
| Repurchase  of common stock                                                     |   | (32,277                            | )       |   |   |
| Net  cash (used for) provided by financing activities                           |   | (20,302                            | )       | 6,586 |   |
|                                                                            |   |                               |    |   |   |
| Effect  of exchange rate changes on cash and cash equivalents                   |   | (2,954                             | )       | (936 | ) |
|                                                                            |   |                               |    |   |   |
| Net  decrease in cash and cash equivalents                                      |   | (182,053                           | )       | (53,300 | ) |
| Cash  and cash equivalents at beginning of period                               |   | 642,367                            |    | 413,281 |   |
| Cash  and cash equivalents at end of period                                     |   | $                                  | 460,314 |   | $ | 359,981 |   |
|                                                                            |   |                               |    |   |   |
| Supplemental  disclosures of cash flow information:                             |   |                               |    |   |   |
| Interest  paid                                                                  |   | $                                  | 10,965  |   | $ | 9,793 |   |
| Income  taxes paid                                                              |   | 19,838                             |    | 7,668 |   |

 

The accompanying notesare an integral part of the condensed consolidated financial statements.

 

5

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**ReebokInternational Ltd.**

Notes to CondensedConsolidated Financial Statements (Unaudited)

(Dollar amounts inthousands, except per share data)

 

**1**

**SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

**Basis ofPresentation**

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United States(“GAAP”) for interim financial information and reflect all adjustments(consisting of normal recurring accruals, and the cumulative effect of a changein accounting principle as of January 1, 2002) which are, in the opinion ofmanagement, necessary for a fair presentation of the results of operations forthe interim periods.  The interimfinancial information and notes thereto should be read in conjunction with theCompany’s latest annual report on Form 10-K. The results of operations for the three months ended March 31, 2003 arenot necessarily indicative of results to be expected for the entire year.

 

The balance sheet atDecember 31, 2002 has been derived from the audited financial statements atthat date, but does not include all of the information and footnotes requiredby GAAP for complete financial statements. For further information, refer to the consolidated financial statementsand footnotes thereto included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2002.

 

**RecentlyIssued Accounting Standards**

 

On December 31, 2002, theFASB issued Statement of Financial Accounting Standards No. 148, “Accountingfor Stock-Based Compensation – Transition and Disclosure” (“SFAS 148”), whichamends the disclosure provisions of Financial Accounting Standards No. 123,“Accounting for Stock-Based Compensation” (“SFAS 123”) and APB opinion No. 28,“Interim Financial Reporting” (“APB 28”). SFAS 148 requires expanded disclosures within the Company’s Summary ofSignificant Accounting Policies and within the Company’s condensed consolidatedinterim financial information filed on Form 10-Q.  SFAS 148’s annual disclosure requirements became effective forthe fiscal year ended December 31, 2002. SFAS 148’s amendment of the disclosure requirements of APB 28 iseffective for financial reports containing condensed consolidated financialstatements for interim periods beginning after December 15, 2002.  (See note 6.)

 

In January 2003 the FASBissued Interpretation No. 46, “Consolidation of Variable Interest Entities, anInterpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of Accounting Research Bulletin No. 51,“Consolidated Financial Statements,” to certain entities in which equityinvestors do not have the characteristics of a controlling financial interestor do not have sufficient equity at risk for the entity to finance itsactivities without additional subordinated financial support from otherparties.

 

6

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The consolidation requirements of FIN 46 apply immediately to variableinterest entities created after January 31, 2003 and to existing variableinterest entities in the interim period beginning after June 15, 2003.  The Company does not expect that theadoption of the Statement will have a significant impact on its financialposition or results of operations.

 

**Reclassification**

 

Certain amounts in priorperiods have been reclassified to conform to the 2003 presentation.  These reclassifications had no impact onpreviously reported results of operations or stockholders’ equity.

 

**2**

**SPECIALCHARGES**

 

Details of the specialcharge activity during the three months ended March 31, 2003 are as follows:

 
|                        |   | **Total** |   | **Employee  Severance  and Other** |   | **Marketing  Contracts** |   |
|-----------------------------|--------|-----------|--------|------------------------------------|--------|--------------------------|--------|
| Balance,  December 31, 2002 |   | $         | 12,863 |                               | $      | 3,863                    |   | $ | 9,000 |   |
| 2003  Utilization           |   | (400      | )      | (0                                 | )      | (400                     | )      |
| Balance,  March 31, 2003    |   | $         | 12,463 |                               | $      | 3,863                    |   | $ | 8,600 |   |

 

The remaining accrual,which reflects a portion of the total costs to be incurred related to theCompany’s European reorganization, is comprised primarily of severance, leasetermination costs and contractual marketing obligations and will be utilizedover the next few years as planned consolidations occur and contractualobligations come due.

 

The short-term portion ofthe accrual, or $5,063, is included in accrued expenses with the balance of$7,400 included in other long-term liabilities.

 

**3**

**EARNINGSPER SHARE**

 

Basic earnings per shareexcludes dilution and is computed by dividing net earnings available to commonstockholders by the weighted average number of common shares outstanding forthe period.  Diluted earnings per sharereflects the potential dilution that could occur if options to acquire commonstock were exercised and assumes the conversion of the convertible debenturesinto common stock when dilutive.

 

7

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The following table setsforth the computation of basic and diluted earnings per share (amounts inthousands, except per share data):

 
|                                                               |   | **Three  Months Ended  March 31** |   |
|--------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                               |   | **2003**                          |   | **2002** |   |
| **Numerator for basic earnings per share:**                        |   |                              |   |   |   |
| Income  before cumulative effect of change in accounting principle |   | $                                 | 40,835 |   | $ | 37,072 |   |
| Cumulative  effect of change in accounting principle               |   |                              |   | (5,070 | ) |
| Net  income                                                        |   | $                                 | 40,835 |   | $ | 32,002 |   |
|                                                               |   |                              |   |   |   |
| **Numerator for diluted earnings per share:**                      |   |                              |   |   |   |
| Income  before cumulative effect of change in accounting principle |   | $                                 | 40,835 |   | 37,072 |   |
| Interest  on 4.25% convertible debentures, net of income taxes     |   | 1,849                             |   | 1,833 |   |
|                                                               |   | 42,684                            |   | 38,905 |   |
| Cumulative  effect of change in accounting principle               |   |                              |   | (5,070 | ) |
| Net  income                                                        |   | $                                 | 42,684 |   | $ | 33,835 |   |
|                                                               |   |                              |   |   |   |
| **Denominator for basic earnings per share:**                      |   |                              |   |   |   |
| Weighted  average shares                                           |   | 59,880                            |   | 58,979 |   |
|                                                               |   |                              |   |   |   |
| **Denominator for diluted earnings per share:**                    |   |                              |   |   |   |
| Weighted  average shares                                           |   | 59,880                            |   | 58,979 |   |
| Effect  of dilutive securities:                                    |   |                              |   |   |   |
| Dilutive  employee stock options and warrants                      |   | 1,705                             |   | 2,044 |   |
| Assumed  conversion of 4.25% convertible debentures                |   | 6,483                             |   | 6,483 |   |
|                                                               |   | 68,068                            |   | 67,506 |   |
| **Basic earnings per share:**                                      |   |                              |   |   |   |
| Before  cumulative effect of change in accounting principle        |   | $                                 | .68    |   | $ | .63 |   |
| Cumulative  effect of change in accounting principle               |   |                              |   | (.09 | ) |
|                                                               |   | $                                 | .68    |   | $ | .54 |   |
| **Diluted earnings per share:**                                    |   |                              |   |   |   |
| Before  cumulative effect of change in accounting principle        |   | $                                 | .63    |   | $ | .58 |   |
| Cumulative  effect of change in accounting principle               |   |                              |   | (.07 | ) |
|                                                               |   | $                                 | .63    |   | $ | .51 |   |

 

**4**

**COMPREHENSIVEINCOME**

 

The following table setsforth the computation of comprehensive income:

 
|                                                              |   | **Three  Months Ended  March 31,** |   |
|-------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                              |   | **2003**                           |   | **2002** |   |
| Net  income                                                       |   | $                                  | 40,835 |   | $ | 32,002 |   |
| Changes  in foreign currency translation adjustments              |   | 2,516                              |   | (3,181 | ) |
| Net  change due to hedging instruments in accordance with FAS 133 |   | 8,890                              |   | 4,377 |   |
| Comprehensive  income                                             |   | $                                  | 52,241 |   | $ | 33,198 |   |

 

8

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**5**

**COMMITMENTSAND CONTINGENCIES**

 

The Company is involvedin various legal proceedings generally incidental to its business.  While it is not feasible to predict ordetermine the outcome of these proceedings, management does not believe thatthey should result in a materially adverse effect on the Company’s financialposition, results of operations or liquidity.

 

**6**

**STOCK-BASEDCOMPENSATION**

 

At March 31, 2003 theCompany had stock-based employee compensation plans.  The Company accounts for those plans under the recognition andmeasurement principles of Accounting Principles Board Opinion No. 25, “Accountingfor Stock Issued to Employees,” and related Interpretations.  No stock-based employee compensation cost isreflected in net income, as all options granted under those plans had anexercise price equal to the market value of the underlying common stock on thedate of grant.

 

Pro forma informationregarding net income and earnings per share is required by SFAS 123 and 148,which requires that the information be determined as if the Company hasaccounted for its employee stock options granted subsequent to December 31,1994 under the fair value method of that Statement.  The fair value for these options was estimated at the date ofgrant using a Black-Scholes option pricing model with the followingweighted-average assumptions for the three months ended March 31, 2003 andMarch 31, 2002: risk-free interest rates ranging from 1.5% to 7.7%; dividendyields of 0.0%; volatility factors of the expected market price of theCompany’s common stock of .52 in 2003 and .56 in 2002; and a weighted-averageexpected life of the options of 3.5 years.

 

For purposes of pro formadisclosures, the estimated fair value of the options is amortized to expenseover the options’ vesting period.  TheCompany’s pro forma information follows (in thousands, except for earnings pershare information):

 
|                                                                                                                                         |   | **Three  Months Ended  March 31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                         |   | **2003**                           |   | **2002** |   |
| Net  income before cumulative effect of accounting change                                                                                    |   | $                                  | 40,835 |   | $ | 37,072 |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effect |   | 2,317                              |   | 1,697 |   |
| Pro  forma net income before cumulative effect of accounting change                                                                          |   | $                                  | 38,518 |   | $ | 35,375 |   |
|                                                                                                                                         |   |                               |   |   |   |
| Basic  earnings per share before cumulative effect of accounting change:                                                                     |   |                               |   |   |   |
| As  reported                                                                                                                                 |   | $                                  | .68    |   | $ | .63 |   |
| Pro  forma                                                                                                                                   |   | $                                  | .66    |   | $ | .62 |   |
| Diluted  earnings per share before cumulative effect of accounting change:                                                                   |   |                               |   |   |   |
| As  reported                                                                                                                                 |   | $                                  | .63    |   | $ | .58 |   |
| Pro  forma                                                                                                                                   |   | $                                  | .61    |   | $ | .56 |   |

 

9

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|                                                                                                                                         |   | **2003** |   | **2002** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| Net  income as reported                                                                                                                      |   | $        | 40,835 |     | $      | 32,002 |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effect |   | 2,317    |   | 1,697    |   |
| Pro  forma net income                                                                                                                        |   | $        | 38,518 |     | $      | 30,305 |   |
|                                                                                                                                         |   |     |   |     |   |
| Basic  earnings per share:                                                                                                                   |   |     |   |     |   |
| As  reported                                                                                                                                 |   | $        | .68    |     | $      | .54 |   |
| Pro  forma                                                                                                                                   |   | $        | .66    |     | $      | .53 |   |
| Diluted  earnings per share:                                                                                                                 |   |     |   |     |   |
| As  reported                                                                                                                                 |   | $        | .63    |     | $      | .51 |   |
| Pro  forma                                                                                                                                   |   | $        | .61    |     | $      | .49 |   |

 

Net income, as reported,included $242 and $232 of stock based compensation expense for the three monthsended March 31, 2003 and 2002, respectively.

 

**9**

**ACQUISITION OF COMMON STOCK**

 

Under various sharerepurchase programs, the Board of Directors has authorized the repurchase ofReebok common stock in the open market or privately negotiatedtransactions.  During the three months endedMarch 31, 2003, the Company acquired 1,061 shares of treasury stock forapproximately $32,277.  As of March 31,2003, the Company had approximately $87,271 available for future repurchases ofits common stock under these Board authorized programs.

 

**Item 2.  Management’s Discussion and Analysis of Results of Operations andFinancial Condition.**

 

SPECIAL NOTE CONCERNINGFORWARD-LOOKING STATEMENTS

 

This Quarterly Report onForm 10-Q contains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995, including statements about theCompany’s sales, revenues, earnings, spending, margins, cash flow, futureorders, inventory, products, actions, plans, strategies, objectives andguidance with respect to the Company’s future operating results.  Forward-looking statements include, withoutlimitation, any statement that may predict, forecast, indicate or imply futureresults, performance or achievements, and may contain the words “believe,”“anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,”“will continue,” “will result,” “could,” “may,” “might,” or any variations ofsuch words or other words with similar meanings.  Any such statements are subject to risks and uncertainties thatcould cause the Company’s actual results to differ materially from the resultsdiscussed in such forward-looking statements. Prospective information is based on management’s then currentexpectations or forecasts.  Suchinformation is subject to the risk that such expectations or forecasts, or theassumptions underlying such expectations or forecasts, may change.  The Company assumes no obligation to updateany such forward-looking statements to reflect

 

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actual results, changes in assumptions or changes in other factorsaffecting such forward-looking statements.

 

Risks and uncertaintiesthat could affect the Company’s actual results and could cause such results todiffer materially from those contained in forward-looking statements made by oron behalf of the Company include, but are not limited to, the following:economic conditions in our major markets; the threat of terrorism and war andrelated political instability and economic uncertainty; competition; shifts inconsumer preferences; the ability to accurately forecast consumer demand, salesand market conditions; the ability to sustain current pricing levels for theCompany’s products; the potential that the backlog report may not be indicativeof future sales; the continued popularity of the sports leagues and otherbrands we license and the ability to maintain advantageous licenses; the effectof the Company’s investment in advertising, marketing, athlete endorsements,and athletic sponsorships; risks associated with the Company’s internationalsales and manufacturing operations, including without limitation importregulations, political instability or general economic factors in theinternational regions where the Company conducts its business; the size andgrowth of the athletic footwear, apparel and equipment markets; interruption orunavailability of sources of supply, including without limitation disruptioncaused by labor slowdowns or work stoppages; the potential for disruption tothe Company’s business as a result of severe acute respiratory syndrome (SARS);increased costs of freight, transportation and storage to meet deliverydeadlines; increases in leather and other raw material prices; reliance onindependent manufacturers; popularity of particular designs, categories ofproducts, and sports; seasonal and geographic demand for the Company’sproducts; demographic changes; the Company’s ability to manage and forecast itsgrowth and inventories; the ability to make timely payments on indebtedness;the ability to protect the Company’s intellectual property rights; new productdevelopment and introduction; customer service; adverse publicity; the loss ofsignificant customers or suppliers; the ability to realize the full value ofthe Company’s deferred tax assets; the ability to achieve the intended benefitsfrom the restructuring of the Company’s global operations, including operatingand logistical efficiencies in the areas of distribution and informationsystems; the effect a strong United States dollar may have on the Company’sresults of operations from its international business; changes in governmentregulations; liability and other claims that may be asserted against theCompany; the Company’s ability to attract and retain qualified personnel; andother factors mentioned or incorporated by reference in this report or otherreports.  This list of risk factors isnot exhaustive.  Other risks anduncertainties are discussed elsewhere in this report and in further detailunder the caption entitled “Issues and Uncertainties” included in the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2002, whichhas been filed with the Securities and Exchange Commission.  In addition, the Company operates in a highlycompetitive and rapidly changing environment. Therefore, new risk factors can arise, and it is not possible formanagement to predict all such risk factors, nor to assess the impact of allsuch risk factors on the Company’s business or the extent to which anyindividual risk factor, or combination of factors, may cause results to differmaterially from those contained in any forward-looking statement.  With respect to any statements concerningfuture orders, the Company’s backlog position is not necessarily indicative offuture sales because the ratio of future orders to “at once” shipments as wellas sales by Company-owned retail outlet stores may vary from year to year.  In addition, currencies may fluctuate, manycustomer orders are cancelable and

 

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many markets are notincluded in open orders since sales are made by independent distributors.  Accordingly, investors should not placeundue reliance on forward-looking statements as a prediction of actual results.

 

CRITICAL ACCOUNTINGPOLICIES

 

The Company’s significantaccounting policies are described in Note 1 to the consolidated financialstatements included in Item 8 in the Company’s Annual Report on Form 10-K forthe fiscal year ended December 31, 2002. The Company’s discussion and analysis of its financial condition andresults of operations are based upon the Company’s consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of these financial statements requires the Company tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities.  On an on-going basis,the Company evaluates its estimates, including those related to sales returnsand allowances, the realizability of outstanding accounts receivable, thecarrying value of inventories, hedging policies, and the provision for incometaxes.  The Company bases its estimateson historical experience and on various other assumptions that are believed tobe reasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. In the past, actual results have not been materially different from theCompany’s estimates.  However, resultsmay differ from these estimates under different assumptions or conditions.

 

The Company hasidentified the following as critical accounting policies, based on the  significant judgments and estimates used indetermining the amounts reported in its condensed consolidated financialstatements:

 

**SalesReturns and Allowances**

The Company recordsreductions to revenue for estimated customer returns and allowances.  The Company bases its estimates onhistorical rates of customer returns and allowances as well as the specificidentification of outstanding returns and allowances that have not yet beenreceived by the Company.  The actual amountof customer returns or allowances, which is inherently uncertain, may differfrom the Company’s estimates.  If actualor expected returns and allowances were significantly greater or lower than thereserves the Company had established, the Company would record a reduction orincrease to net sales in the period in which it made such a determination.

 

**AccountsReceivable**

The Company maintainsallowances for doubtful accounts for estimated losses resulting from theinability of its customers to make required payments.  The Company estimates potential losses based on the Company’shistorical rate of credit losses, its knowledge of the financial condition ofcertain customers and an assessment of the overall conditions at retail.  Historically, losses have been within theCompany’s expectations.  If thefinancial condition of the Company’s customers was to change, adjustments maybe required to these estimates. Furthermore, the Company provides for estimated losses resulting fromdifferences which arise from the gross carrying value of its receivables andthe amounts that customers estimate are owed to the Company.  The settlement or resolution of these

 

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differences could resultin future changes to these estimates. If the Company determined that increases or decreases to the allowancefor doubtful accounts was appropriate, the Company would record a charge orcredit to selling, general and administrative expense in the period in whichthe Company made such a determination.

 

**InventoryValuation**

The Company values itsinventory at the lower of cost (first-in, first-out method) or market.  Market value is estimated based uponassumptions made about future demand and retail market conditions.  If the Company determines that the estimatedmarket value of its inventory is less than the carrying value of suchinventory, the Company provides a reserve for such difference as a charge tocost of sales.  If actual marketconditions are more or less favorable than those projected by the Company,further adjustments may be required that would decrease or increase theCompany’s cost of sales and net income in the period in which they wererecorded.

 

**HedgingPolicies**

The Company uses foreigncurrency forward contracts, options contracts and interest rate swap agreementsto hedge its exposure to:  (1)merchandise purchased in U.S. dollars that is forecasted to be sold tocustomers in other currencies; (2) significant assets and liabilities that aredenominated in other currencies; and (3) interest rate movement.  If actual fluctuations in foreign exchangerates or interest rates are more or less favorable than those projected bymanagement, or if the actual amount of merchandise purchased in U.S. dollars tobe sold to customers in other currencies differs from the amounts projected,future operating results may be impacted by adjustments to these estimates.

 

**IncomeTaxes**

The carrying value of theCompany’s net deferred tax assets assumes that the Company will be able togenerate sufficient future taxable income in certain tax jurisdictions torealize the value of these assets.  Ifthe Company is unable to generate sufficient future taxable income in thesejurisdictions an adjustment may be required in the net carrying value of thedeferred tax assets resulting in additional income tax expense in the Company’sconsolidated statement of income. Management evaluates the realizability of the deferred tax assets andassesses the need for any valuation adjustment quarterly.

 

**RecentlyIssued Accounting Standards**

The Company has describedthe impact from the adoption of certain new accounting pronouncements effectivein 2002 in note 1 to the condensed consolidated financial statements.

 

13

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**OPERATINGRESULTS**

 

**FirstQuarter 2003 Compared to First Quarter 2002**

 

Net sales for the quarterended March 31, 2003, were $798.3 million, an 8.5% increase from 2002’s firstquarter net sales of $736.0 million.  Ona constant dollar basis, which eliminates the effect of currency exchangefluctuations, net sales for the quarter ended March 31, 2003, increased $18.5million or 2.4%.  Worldwide sales of theReebok Brand were $667.6 million in the first quarter of 2003, an increase of9.2% from $611.5 million in the first quarter of 2002.  On a constant dollar basis, worldwide salesof the Reebok Brand increased $14.7 million or 2.3%.

 

U.S. footwear sales ofthe Reebok Brand increased 3.9% to $256.7 million in the first quarter of 2003from $247.0 million in the first quarter of 2002.  Despite the difficult U.S. retail climate, sales of U.S. footwearto the athletic specialty and sporting goods channels of distribution increasedby 21.0% during the quarter, while sales to the volume channel of distribution,which consists primarily of moderate department stores and volume shoe stores,declined 8.2%.  During the first quarterof 2003, U.S. footwear sales in the basketball category increased by 20%,driven by strong sales of Iverson and Above the Rim products.  The Company believes that its Rbk productsand related marketing are reaching its target consumer in an effectiveway.  The Company is expanding its Rbkproduct offerings to include additional product categories and points ofdistribution in which these products are sold. The Company is beginning to execute its previously announced strategy tofocus additional efforts on its performance products that leverage its on-fieldauthenticity and provide athletes with authentic technologies that enhancetheir performance.  During 2003, theCompany plans to introduce two new versions of its DMX technology into itsperformance products.  DMX Shearstrip isscheduled to debut in the Company’s Premier Series running products during thethird quarter of 2003 and DMX Reflex is scheduled to debut in both running andbasketball during the second half of 2003. During the first quarter the Company launched its new Premier Seriesrunning shoes.  Based on the initiallaunch, the Company believes that these products are selling through well atkey specialty running shops.  Inaddition, sales of men’s training products increased over 100% in the firstquarter of 2003 supported by the Company’s recent relationships with the NBAand NFL.  In addition, sales of Classicproducts increased 24% in the quarter, reflecting the strong current trend forretro styled products.

 

U.S. apparel sales of theReebok Brand increased in the first quarter of 2003 by 24.3% to $89.5 millionfrom $72.0 million in the first quarter of 2002.  Although sales of Reebok branded apparel increased slightly, theincrease in apparel sales came primarily from the Company’s sports licensedapparel business.  The Company’s sportslicensed apparel business continues to perform well and the Company believesthese products are experiencing strong sell throughs at major specialty andsporting goods accounts.

 

International sales ofthe Reebok Brand (including footwear and apparel) were $321.4 million in thefirst quarter of 2003, an increase of 9.9% from sales of $292.5 million in thefirst quarter of 2002.  Currency hasfavorably impacted these comparisons. On a constant dollar basis, international sales of the Reebok Branddecreased $12.5 million or

 

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3.7%.  In Europe, several recentmergers of European retailers have resulted in such retailers’ consolidatinginventories and merchandising strategies, thereby reducing the amount offulfillment of inventories during the consolidation period.  This impacted the Company’s first quartersales in 2003.  For the quarter, inconstant dollars, international sales increased in basketball by 85%, and inmen’s training by 29%.  These increaseswere offset by decreases in the kids’ and women’s fitness categories.  In constant dollars, sales increased in manyEuropean countries including Belgium, Greece, Holland, Poland, Russia,Scandinavia and Spain.  The largestinternational sales increase in the quarter was generated by certain large PanEuropean accounts where the Company believes it is making progress inpresenting the Reebok Brand in a consistent manner across Europe.  In the 2003 first quarter, sales declined inGermany and Italy where, as the Company previously noted, it has elected toexit certain retail channels of distribution. In the U.K., sales declined due in part to a change in many retailers’buying patterns and to the consolidation of certain retailers.  Generally weak economic conditions in theU.K. also contributed to the sales decline. The Company’s near term outlook for the U.K., however, is positive.  Backlog of open customer orders in the U.K.is positive for the next six months and the Company is planning on salesincreases in this region for the balance of the year.

 

Rockport’s first quarter2003 sales were $89.5 million, an increase of 2.4% from sales of $87.4 millionin the first quarter of 2002.  Domesticsales for the Rockport Brand, in the first quarter of 2003, increased 3.7%despite the difficult conditions at retail for its two most prominent channelsof distribution, department stores and independent shoe stores. In the quarter,sales of Rockport’s women’s product increased, which the Company believes is aresult of Rockport’s strategy to focus renewed attention on its women’s productline.  The Company believes Rockport’swomen’s product line represents a long-term growth prospect for the Rockportbrand.  In addition, sales of Rockport’smen’s product increased in the quarter, which the Company believes isattributable to Rockport’s product segmentation strategy that enables Rockportto reach a broader base of consumers in multiple channels of distribution.  International revenues accounted forapproximately 31% of Rockport’s sales in both the first quarter of 2003 and thefirst quarter of 2002.

 

Sales of the Company’sother brands, Ralph Lauren Footwear and The Greg Norman Collection, were $41.2million in the first quarter of 2003, an increase of 11.1% from sales of $37.1million in the first quarter of 2002.

 

During the first quarterof 2003, the Company’s overall gross margin was 37.4% of sales, which is animprovement of 20 basis points when compared with the Company’s gross margin of37.2% in the first quarter of 2002.

 

15

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Selling, general and administrative expenses for the first quarter of2003 were $230.9 million, or 28.9% of sales, an increase of $17.3 million whencompared with last year’s first quarter selling, general and administrativeexpenses of $213.6 million, or 29.0% of sales. During the first quarter of 2003, the Company increased its advertisingexpenditures by approximately 25.0% as compared to the first quarter of2002.  The Company expects to increaseits advertising expenditures throughout 2003 in an effort to generate increasedconsumer demand for its products.

 

Included in otherexpense, net, are the amortization of finite-lived intangibles, certaincurrency losses and other non-operating expenses.  Net interest expense was $4.6 million for the first quarter of2003 as compared to $3.4 million for the first quarter of 2002.  The increase was primarily due to the lowerrates of return the Company is realizing on invested cash and increased bankborrowings in certain foreign locations.

 

The Company’s effectiveincome tax rate was 30.4% in the first quarter of 2003 as compared to 31.0% forthe first quarter of 2002.  This 60basis point reduction was due to the geographic mix of the Company’searnings.  Based on current estimates,the Company expects that the full year 2003 effective income tax rate willapproximate 30.4%.  However, the taxrate could fluctuate depending on the level and geographic mix of the Company’searnings, and if there are changes in the effective statutory rates.

 

**ReebokBrand Backlog of Open Orders**

 

Worldwide backlog of opencustomer orders scheduled for delivery during the period April 1, 2003 throughSeptember 30, 2003 for the Reebok Brand increased 15.5% as compared to the sameperiod last year, including the open orders for the Company’s sports licensedapparel business.  On a constant dollarbasis, the comparable backlog of open orders increased 9.2%.

 

On a category basis, U.S.footwear backlog for performance products reflected increases in running andmen’s training.  In addition, theClassic and children’s categories reflect backlog increases at March 31,2003.  However, the walking category inthe U.S. is reporting declines in both backlog and first quarter sales as theCompany found it necessary to introduce a newer version of DMX technology inorder to effectively compete in the middle market.  This new technology is called DMX-Max, and will not be availableuntil the fourth quarter of 2003.

 

16

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Comparisons regarding orders scheduled for delivery for the period April1, 2003 through September 30, 2003 are as follows for the Reebok Brand:

 
|                 |   | **Percentage  Change  2003/2002** |   |
|----------------------|--------|-----------------------------------|--------|
|                 |   | **Reported  Dollars**             |   | **Constant  Dollars** |   |
| U.S.A.:              |   |                              |   |   |   |
| Footwear             |   | +                                 | 7.4    | % | + | 7.4 | % |
| Apparel              |   | +                                 | 21.0   | % | + | 21.0 | % |
| Total  Domestic      |   | +                                 | 11.3   | % | + | 11.3 | % |
|                 |   |                              |   |   |   |
| International:       |   |                              |   |   |   |
| Footwear             |   | +                                 | 21.7   | % | + | 6.4 | % |
| Apparel              |   | +                                 | 22.6   | % | + | 6.2 | % |
| Total  International |   | +                                 | 22.1   | % | + | 6.3 | % |
|                 |   |                              |   |   |   |
| Total  Reebok Brand: |   |                              |   |   |   |
| Footwear             |   | +                                 | 12.0   | % | + | 7.0 | % |
| Apparel              |   | +                                 | 21.8   | % | + | 13.0 | % |
| Total  Reebok Brand  |   | +                                 | 15.5   | % | + | 9.2 | % |

 

These backlog comparisonsare not necessarily indicative of future sales trends. Many customer orders arecancelable with little or no penalty, currencies may fluctuate, sales byCompany-owned retail outlet stores are not included in the backlog and can varyfrom year-to-year, many markets in Latin America and Asia Pacific are notincluded in the backlog because sales are made by independent distributors, andthe ratio of orders booked early to at-once shipments can vary from period toperiod.

 

**Liquidityand Sources of Capital**

 

At March 31, 2003, theCompany’s working capital was $1.067 billion as compared with $1.034 atDecember 31, 2002, and $897.3 million at March 31, 2002.  The current ratio at March 31, 2003 was 3.1to 1, as compared to 2.8 to 1 at December 31, 2002, and 3.0 to 1 at March 31,2002.

 

Accounts receivable atMarch 31, 2003 increased by $48.4 million from March 31,2002, an increase of9.9% as a result of increased sales in the first quarter of 2003 as compared to2002; however, days sales outstanding in accounts receivable decreased by 5days over the same period in 2002. Inventory at March 31, 2003 increased by $67.9 million, or 19.4%, fromMarch 31, 2002.  Substantially all ofthe increase is attributable to the Company’s sports licensing business and theeffects of currency.  The increasedinventory on hand for the sports licensing business is intended to supportfuture planned growth of that business. Cash used for operations during the first three months of 2003 was$151.3 million, as compared to cash used for operations of $52.8 million duringthe first three months of 2002.  Capitalexpenditures for the three months ended March 31, 2003 were $7.5 million ascompared to $6.2 million during the first quarter of 2002.  Capital expenditures for 2003 are expectedto be in the range of $65.0 to $75.0 million in order to support the Company’sEuropean regionalization, the accelerated rollout of SAP, the enhancement ofits sports licensing production capability, and retail outlet expansion

 

17

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internationally.  Also, duringthe three months ended March 31, 2003, the Company acquired 1.06 million sharesof treasury stock for approximately $32.3 million.  The acquisition of the shares was in accordance with theCompany’s previously announced intention to utilize share buybacks to partiallyoffset the dilutive effect of outstanding stock options.

 

The Company believes thatcash generated from operations, together with the Company’s existing credit linesand other financial resources, will adequately finance the Company’s planned2003 cash requirements.  However, theCompany’s actual experience may differ from the expectations set forth in thepreceding sentence.  Factors that mightlead to a difference include, but are not limited to, the matters discussed inthe Company’s Annual Report on Form 10-K under the heading “Issues andUncertainties,” as well as future events that might have the effect of reducingthe Company’s available cash balances (such as unexpected operating losses orincreased capital or other expenditures, as well as increases in the Company’sinventory or accounts receivable), or future events that might reduce oreliminate the availability of external financial resources.

 

**Item 3.  Quantitative and Qualitative Disclosures about Market Risk.**

 

Our market risks, and theways we manage them, are summarized in management’s discussion and analysis offinancial condition and results of operations as of December 31, 2002, includedin the Company’s Form 10-K for the year ended December 31, 2002.  There have been no material changes in thefirst three months of 2003 to such risks or our management of such risks.

 

**Item 4.  Controls and Procedures**

 

a)                 Within the 90-dayperiod prior to the date of this report, the Company carried out an evaluation,under the supervision and with the participation of the Company’s management,including the Company’s Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of the design and operation of the Company’s disclosurecontrols and procedures pursuant to Rule 13a-14 and 15d-14 of the SecuritiesExchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Company’s management, including theChief Executive Officer and Chief Financial Officer, concluded that theCompany’s disclosure controls and procedures are effective in timely alertingthem to material information relating to the Company (including itsconsolidated subsidiaries) required to be included in the Company’s ExchangeAct filings.

 

b)                There have been nosignificant changes in the Company’s internal controls or in other factorswhich could significantly affect internal controls subsequent to the date theCompany carried out its evaluation.

 

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**PART II **-**  OTHER INFORMATION**

 

**Item 1:  Legal Proceedings..**

 

None.

 

**Item 2:  Changes in Securities and Use of Proceeds..**

 

None.

 

**Item 3:  Defaults upon Senior Securities..**

 

None.

 

**Item 4:  Submission of Matters to a Vote of Security Holders..**

 

None.

 

**Item 5:  Other Information..**

 

None.

 

**Item 6:  Exhibits and Reports on Form 8-K****.**

 
| Exhibits |
|----------|
|     |   |   |
| 99.1     |   | Certification of Paul  Fireman, Chairman and Chief Executive Officer, dated as of May 13, 2003, and  made pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|     |   |   |
| 99.2     |   | Certification of  Kenneth Watchmaker, Executive Vice President and Chief Financial Officer,  dated as of May 13, 2003, and made pursuant to Section 1350, Chapter 63 of  Title 18, United States Code, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

Current Reports on Form8-K

 

None.

 

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SIGNATURE

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Date:  May 13, 2003

 

 
|   |   | REEBOK INTERNATIONAL  LTD.    |
|--------|--------|-------------------------------|
|   |   |                          |
|   | BY:    | /s/  KENNETH WATCHMAKER  |   |
|   |   | Kenneth Watchmaker            |
|   |   | Executive Vice  President and |
|   |   | Chief Financial Officer       |

 

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CERTIFICATIONS

 

I, Paul Fireman, certifythat:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of Reebok International Ltd.;

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant’s internal controls; and

 

6.                                       Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  May 13, 2003 |                                  |
|--------------------------|---------------------------------------|
|                     |                                  |
|                     | /s/  PAUL FIREMAN                |   |
|                     | Paul Fireman                          |
|                     | Chairman and Chief  Executive Officer |

 

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I, Kenneth Watchmaker,certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of Reebok International Ltd.

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                       Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalent function):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                                       Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date:  May 13, 2003 |                                                   |
|--------------------------|--------------------------------------------------------|
|                     |                                                   |
|                     | /s/ KENNETH WATCHMAKER                                 |   |
|                     | Kenneth Watchmaker                                     |
|                     | Executive Vice  President and  Chief Financial Officer |

 

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