**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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### **FORM 10-Q**

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** **

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period endedSeptember 30, 2005**

 

**OR**

** **

**o****   TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

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## **Commission file number 1-9340**

 

**REEBOK INTERNATIONAL LTD.**

## Incorporated pursuant to the Laws of TheCommonwealth of Massachusetts

 

## **Internal Revenue Service-Employer IdentificationNo. 04-2678061**

**1895 J.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 by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the Registrant was required to file suchreports) 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-2under the Securities Exchange Act of 1934). Yes ý No o

 

Indicate by check markwhether the Registrant is a shell company (as defined in Rule 12b-2 underthe Securities Exchange Act of 1934). Yes o No ý

 

Thetotal number of shares of the Registrant’s Common Stock, par value $.01 pershare, outstanding on October 28, 2005 was 59,837,496.

 

 

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**REEBOK INTERNATIONAL LTD.**

 

***INDEX***

 
| ***PART I. FINANCIAL  INFORMATION:***                                                                   |   |
|--------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                         |   |
| Item 1. Financial Statements  (Unaudited)                                                                    |   |
|                                                                                                         |   |
| Condensed Consolidated  Balance Sheets - September 30, 2005 and 2004 and December 31, 2004         |   |
|                                                                                                         |   |
| Condensed Consolidated  Statements of Income - Three and Nine months Ended September 30, 2005  and 2004 |   |
|                                                                                                         |   |
| Condensed Consolidated  Statements of Cash Flows - Nine months Ended September 30, 2005 and 2004        |   |
|                                                                                                         |   |
| Notes to Condensed Consolidated Financial Statements                                                         |   |
|                                                                                                         |   |
| Item 2. Management’s Discussion  and Analysis of Financial Condition and Results of Operations          |   |
|                                                                                                         |   |
| Item 3. Quantitative and  Qualitative Disclosures About Market Risk                                          |   |
|                                                                                                         |   |
| Item 4.  Controls and Procedures                                                                        |   |
|                                                                                                         |   |
| ***Part II. OTHER INFORMATION:***                                                                       |   |
|                                                                                                         |   |
| Item 1. Legal Proceedings                                                                                    |   |
|                                                                                                         |   |
| Item 2. Unregistered Sales of  Equity Securities and Use of Proceeds                                         |   |
|                                                                                                         |   |
| 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 I - FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

**ReebokInternational Ltd.**

**Condensed Consolidated BalanceSheets**

Amounts in thousands, except per share data

 
| ** **                                                                                                                                                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                         | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2004** | ** ** |
| ** **                                                                                                                                                         | ** ** | **(Unaudited)**        | ** ** | ** **            | ** ** | **(See Note 1)** | ** ** |
| **Assets**                                                                                                                                                         |       |                   |       |                  |       |   |   |
| Current Assets:                                                                                                                                                    |       |                   |       |                  |       |   |   |
| Cash and cash  equivalents                                                                                                                                         |       | $                      | 481,545    |                  | $          | 269,563 |   | $ | 565,233 |   |
| Accounts  receivable, net of allowance for doubtful accounts (September 2005,  $77,401 September 2004, $77,570, December 2004, $81,280)             |       | 739,880                |       | 814,140               |       | 660,599 |   |
| Inventory                                                                                                                                                          |       | 506,627                |       | 505,009               |       | 458,435 |   |
| Deferred income  taxes                                                                                                                                             |       | 125,528                |       | 117,047               |       | 111,516 |   |
| Prepaid expenses  and other current assets                                                                                                                         |       | 102,184                |       | 73,289                |       | 61,730 |   |
| Total current  assets                                                                                                                                              |       | 1,955,764              |       | 1,779,048             |       | 1,857,513 |   |
|                                                                                                                                                               |       |                   |       |                  |       |   |   |
| Property and  equipment, net                                                                                                                                       |       | 189,675                |       | 166,919               |       | 183,799 |   |
| Other  non-current assets:                                                                                                                                         |       |                   |       |                  |       |   |   |
| Goodwill, net                                                                                                                                                      |       | 125,908                |       | 88,156                |       | 124,125 |   |
| Intangibles, net  of amortization                                                                                                                                  |       | 197,033                |       | 198,629               |       | 196,138 |   |
| Deferred income  taxes                                                                                                                                             |       | 44,033                 |       | 23,632                |       | 44,892 |   |
| Other                                                                                                                                                              |       | 30,439                 |       | 29,554                |       | 34,161 |   |
| Total Assets                                                                                                                                                       |       | $                      | 2,542,852  |                  | $          | 2,285,938 |   | $ | 2,440,628 |   |
|                                                                                                                                                               |       |                   |       |                  |       |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                     |       |                   |       |                  |       |   |   |
| Current  liabilities:                                                                                                                                              |       |                   |       |                  |       |   |   |
| Notes payable to  banks                                                                                                                                            |       | $                      | 59,044     |                  | $          | 39,560 |   | $ | 63,179 |   |
| Current portion  of long-term debt                                                                                                                                 |       |                   |       | 100,170               |       | 100,627 |   |
| Accounts payable                                                                                                                                                   |       | 174,704                |       | 173,563               |       | 183,853 |   |
| Accrued expenses  and other current liabilities                                                                                                                    |       | 329,475                |       | 369,110               |       | 386,725 |   |
| Income taxes  payable                                                                                                                                              |       | 114,111                |       | 63,261                |       | 71,930 |   |
| Total current  liabilities                                                                                                                                         |       | 677,334                |       | 745,664               |       | 806,314 |   |
|                                                                                                                                                               |       |                   |       |                  |       |   |   |
| Long-term debt,  net of current portion                                                                                                                            |       | 359,619                |       | 359,271               |       | 360,126 |   |
| Minority  interest                                                                                                                                                 |       | 7,695                  |       | 7,748                 |       | 8,514 |   |
| Other long-term  liabilities                                                                                                                                       |       | 39,184                 |       | 27,436                |       | 45,718 |   |
| Commitments and  contingencies                                                                                                                                     |       |                   |       |                  |       |   |   |
| Stockholders’  equity:                                                                                                                                        |       |                   |       |                  |       |   |   |
| Common stock,  par value $.01; authorized 250,000 shares; issued shares:  September 2005, 102,493; September 2004, 100,886;  December 2004, 101,827 |       | 1,025                  |       | 1,020                 |       | 1,018 |   |
| Retained  earnings                                                                                                                                                 |       | 2,187,837              |       | 1,912,089             |       | 1,985,324 |   |
| Less shares in  treasury at cost: September 2005, 42,619; September 2004, 42,619;  December 2004, 42,619                                            |       | (780,510               | )          | (780,510              | )          | (780,510 | ) |
| Unearned  compensation                                                                                                                                             |       | (5,904                 | )          | (2,049                | )          | (5,804 | ) |
| Accumulated  other comprehensive gain (loss)                                                                                                                       |       | 56,572                 |       | 15,269                |       | 19,928 |   |
| Total  Stockholders’ Equity                                                                                                                                   |       | 1,459,020              |       | 1,145,819             |       | 1,219,956 |   |
| Total  Liabilities and Stockholders’ Equity                                                                                                                   |       | $                      | 2,542,852  |                  | $          | 2,285,938 |   | $ | 2,440,628 |   |
|                                                                                                                                                                    |            |                        |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

The accompanying notesare an integral part of the unaudited condensed consolidated financialstatements.

 

3

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**Reebok International Ltd.**

**Condensed Consolidated Statementsof Income (Unaudited)**

**Amounts in thousands, except per share data**

 
| ** **                                       | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|--------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                       | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Net sales                                        |       | $                      | 1,041,209  |                   | $          | 1,164,733 |   | $ | 2,842,479 |   | $ | 2,810,158 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Costs and  expenses:                             |       |                   |       |                   |       |   |   |   |   |
| Cost of sales                                    |       | 590,280                |       | 694,110                |       | 1,663,012 |   | 1,687,639 |   |
| Selling, general  and administrative expenses    |       | 347,085                |       | 346,109                |       | 950,065 |   | 883,350 |   |
| Loss on early  extinguishment of debt            |       |                   |       |                   |       |   |   | 10,228 |   |
| Interest  expense, net                           |       | 1,353                  |       | 4,266                  |       | 6,664 |   | 9,453 |   |
| Other (income)  expense, net                     |       | (76,447                | )          | (489                   | )          | (73,765 | ) | 4,237 |   |
|                                             |       | 862,271                |       | 1,043,996              |       | 2,545,976 |   | 2,594,907 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Income before income taxes and minority interest |       | 178,938                |       | 120,737                |       | 296,503 |   | 215,251 |   |
| Income taxes                                     |       | 58,646                 |       | 36,824                 |       | 93,236 |   | 65,651 |   |
| Income before minority interest                  |       | 120,292                |       | 83,913                 |       | 203,267 |   | 149,600 |   |
| Minority interest                                |       | 2,636                  |       | 2,087                  |       | 5,295 |   | 4,917 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Net income                                       |       | $                      | 117,656    |                   | $          | 81,826 |   | $ | 197,972 |   | $ | 144,683 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Basic earnings per share:                        |       | $                      | 1.97       |                   | $          | 1.40 |   | $ | 3.33 |   | $ | 2.50 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Diluted earnings per share:                      |       | $                      | 1.87       |                   | $          | 1.34 |   | $ | 3.17 |   | $ | 2.32 |   |
|                                             |       |                   |       |                   |       |   |   |   |   |
| Dividends per common share:                      |       | $                      | .15        |                   | $          | .15 |   | $ | .30 |   | $ | .30 |   |
|                                                  |            |                        |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The accompanying notes are an integral part of the unaudited condensedconsolidated financial statements.

 

4

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**-Reebok International Ltd.**

**Condensed Consolidated Statementsof Cash Flows (Unaudited)**

Amountsin thousands, except per share data

 
| ** **                                                                          | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                          | ** ** | **2005**                                  | ** ** | **2004** | ** ** |
|                                                                                |       |                                      |       |   |   |
| Cash flows from operating activities:                                               |       |                                      |       |   |   |
| Net income                                                                          |       | $                                         | 197,972    |   | $ | 144,683 |   |
| Adjustments to reconcile net income to net cash used  for operating activities:     |       |                                      |       |   |   |
| Depreciation and  amortization                                                      |       | 33,935                                    |       | 28,085 |   |
| Gain on sale of  Ralph Lauren Footwear                                              |       | (80,307                                   | )          |   |   |
| Minority interest                                                                   |       | 5,295                                     |       | 4,917 |   |
| Loss on early  extinguishment of debt                                               |       |                                      |       | 10,228 |   |
| Dividends to  minority shareholders                                                 |       | (4,832                                    | )          | (4,852 | ) |
| Deferred income  taxes                                                              |       | (13,025                                   | )          | (10,417 | ) |
| Changes in operating assets and liabilities,  excluding the effect of acquisitions: |       |                                      |       |   |   |
| Accounts  receivable                                                                |       | (101,524                                  | )          | (204,345 | ) |
| Inventory                                                                           |       | (78,305                                   | )          | (82,411 | ) |
| Prepaid expenses  and other                                                         |       | (13,100                                   | )          | (19,262 | ) |
| Accounts payable  and accrued expenses                                              |       | (25,146                                   | )          | (579 | ) |
| Income taxes  payable                                                               |       | 51,721                                    |       | 42,793 |   |
| Total  adjustments                                                                  |       | (225,288                                  | )          | (235,843 | ) |
| Net cash used  for operating activities:                                            |       | (27,316                                   | )          | (91,160 | ) |
|                                                                                |       |                                      |       |   |   |
| Cash flows provided by (used for) investing  activities:                            |       |                                      |       |   |   |
| Payments to acquire property and equipment                                          |       | (37,526                                   | )          | (30,346 | ) |
| Proceeds from Sale of Ralph Lauren Footwear                                         |       | 108,072                                   |       |   |   |
| Acquisition of The Hockey Company (net of cash  received)                           |       |                                      |       | (347,066 | ) |
| Net cash  provided by (used for) investing activities                               |       | 70,546                                    |       | (377,412 | ) |
|                                                                                |       |                                      |       |   |   |
| Cash flows (used for) provided by financing  activities:                            |       |                                      |       |   |   |
| Net borrowings of notes payable to banks                                            |       | (5,669                                    | )          | 31,080 |   |
| Re-payments of long-term debt                                                       |       | (100,322                                  | )          | (256,037 | ) |
| Net proceeds from issuance of convertible debentures                                |       |                                      |       | 350,000 |   |
| Proceeds from issuance of common stock to employees                                 |       | 20,688                                    |       | 19,991 |   |
| Dividends paid                                                                      |       | (17,930                                   | )          | (17,781 | ) |
| Repurchase of common stock                                                          |       | (5,655                                    | )          | (77,338 | ) |
| Net cash (used  for) provided by financing activities                               |       | (108,888                                  | )          | 49,915 |   |
|                                                                                |       |                                      |       |   |   |
| Effect of exchange rate changes on cash and cash  equivalents                       |       | (18,030                                   | )          | (5,379 | ) |
| Net decrease in cash and cash equivalents                                           |       | (83,688                                   | )          | (424,036 | ) |
| Cash and cash equivalents at beginning of period                                    |       | 565,233                                   |       | 693,599 |   |
| Cash and cash equivalents at end of period                                          |       | $                                         | 481,545    |   | $ | 269,563 |   |
| Supplemental disclosures of cash flow information:                                  |       |                                      |       |   |   |
| Interest paid                                                                       |       | $                                         | 22,870     |   | $ | 20,102 |   |
| Income taxes paid                                                                   |       | $                                         | 56,769     |   | $ | 33,752 |   |
|                                                                                     |            |                                           |            |  |  |  |  |  |

 

The accompanying notes are an integral part of theunaudited condensed consolidated financial statements.

 

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**Reebok International Ltd.**

Notes to CondensedConsolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share data)

 

**1**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Basis ofPresentation**

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States (“GAAP”) for interim financial information and reflect alladjustments (consisting of normal recurring accruals) which are, in the opinionof management, necessary for a fair presentation of the results of operationsfor the 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 andnine months ended September 30, 2005 are not necessarily indicative ofresults to be expected for the entire year.

 

Thebalance sheet at December 31, 2004 has been derived from the auditedfinancial statements at that date, but does not include all of the informationand footnotes required by GAAP for complete financial statements.  For further information, refer to theconsolidated financial statements and footnotes thereto included in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2004.

 

**Reclassification**

 

Certainamounts in prior periods have been reclassified to conform to the 2005presentation.  These reclassificationshad no impact on previously reported results of operations or stockholders’equity.

 

**Accountingfor Stock-Based Compensation**

 

At September 30,2005, the Company had stock-based employee compensation plans.  The Company accounts for those plans underthe recognition and measurement principles of Accounting Principles BoardOpinion No. 25, “Accounting for Stock Issued to Employees,” and relatedInterpretations.  The Company’s policy isto grant stock options with an exercise price equal to the market value at thedate of the grant, and accordingly no compensation expense is recognized.  The Company provides pro forma disclosures ofthe compensation expense determined under the fair value provisions ofFinancial Accounting Standards Board Statement No. 123, “Accounting forStock-Based Compensation.”  The Companyexpects to adopt FASB Statement No. 123 (revised 2004) “Share-BasedPayment” (“SFAS 123R”) on January 1, 2006. The standard requires all share-based payments to employees, includinggrants of employee stock options, to be recognized in the income statementbased on their fair values.  See RecentlyIssued Accounting Standards below.

 

Forpurposes of pro forma disclosures, the estimated fair value of the options isamortized to expense over the options’ vesting period.  The Company’s pro forma information follows(in thousands, except for earnings per share information):

 
| ** **                                                                                                                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                                                  | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                                                                  | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                                                                                        |       |                   |       |                   |       |   |   |   |   |
| Net income                                                                                                                                  |       | $                      | 117,656    |                   | $          | 81,826 |   | $ | 197,972 |   | $ | 144,683 |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards net of related tax effect |       | 2,137                  |       | 5,673                  |       | 7,505 |   | 8,813 |   |
| Pro forma net  income                                                                                                                       |       | $                      | 115,519    |                   | $          | 76,153 |   | $ | 190,467 |   | $ | 135,870 |   |
|                                                                                                                                             |            |                        |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |

 

6

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| ** **                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|-----------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                  | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                  | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic earnings per share:   |       |                   |       |                   |       |   |   |   |   |
| As reported                 |       | $                      | 1.97       |                   | $          | 1.40 |   | $ | 3.33 |   | $ | 2.50 |   |
| Pro forma                   |       | $                      | 1.95       |                   | $          | 1.32 |   | $ | 3.22 |   | $ | 2.37 |   |
| Diluted earnings per share: |       |                   |       |                   |       |   |   |   |   |
| As reported                 |       | $                      | 1.87       |                   | $          | 1.34 |   | $ | 3.17 |   | $ | 2.32 |   |
| Pro forma                   |       | $                      | 1.85       |                   | $          | 1.26 |   | $ | 3.07 |   | $ | 2.20 |   |

 

Proforma information regarding net income and earnings per share is required bySFAS 123, which requires that the information be determined as if the Companyhad accounted 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 wasestimated at the date of grant using a Black-Scholes option pricing model withthe following weighted-average assumptions as follows:

 
| ** **                                                                          | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**   | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------|------------|-------------------------|------------|
| ** **                                                                          | ** ** | **September 30,** | ** ** | **September  30,** | ** ** |
| ** **                                                                          | ** ** | **2005**               | ** ** | **2004**                | ** ** | **2005** | ** ** | **2004** | ** ** |
| Risk-free  interest rates                                                           |       | 4.2                    |       | 3.1%                    |       | 3.7%-4.2% |   | 2.8%-3.3% |   |
| Dividend yields                                                                     |       | N/A (1)                |       | .9%                     |       | .66%-.74% |   | .8%-.9% |   |
| Volatility  factors of the expected market price of the Company’s common stock |       | .25                    |       | .30                     |       | .2-.25 |   | .30-.33 |   |
| Weighted-average  expected life of the option                                       |       | 3.5 years              |       | 3.5 years               |       | 3.5 years |   | 3.5 years |   |

 

(1) There were no options granted during the threemonths ended September 20, 2005.

 

Net income, as reported, included $985 and $344 of restrictedstock-based compensation expense for the three months ended September 30,2005 and 2004, respectively, and $2,417 and $835 of restricted stock-basedcompensation expense for the nine months ended September 30, 2005 and2004, respectively.

 

**RecentlyIssued Accounting Standards**

 

On December 16, 2004, the Financial Accounting StandardsBoard (“FASB”) issued FASB Statement No. 123 (revised 2004) “Share-BasedPayment” (“SFAS 123R”), which is a revision of Statement No. 123, “Accountingfor Stock-Based Compensation” (“SFAS 123”). SFAS 123R supersedes APB Opinion No. 25, “Accounting for StockIssued to Employees”, and amends FASB Statement No. 95, “Statement of CashFlows”.  SFAS 123R requires allshare-based payments to employees, including grants of employee stock options,to be recognized in the income statement based on their fair values.  Pro forma disclosure is no longer analternative.

 

Under SFAS 123R, the Company must determine the appropriatefair value model to be used for valuing share-based payments, the amortizationmethod for compensation cost and the transition method to be used at the dateof adoption.  The transition alternativesinclude the modified retrospective and the modified prospective adoptionmethods.  Under the modifiedretrospective method, prior periods may be restated based on the amountspreviously recognized under SFAS 123 for purposes of pro forma disclosureseither for all periods presented or as of the beginning of the year ofadoption.

 

The modified prospective method requires that compensationexpense be recognized beginning with the effective date, based on therequirements of SFAS 123R, for all share-based payments granted after theeffective date, and based on the requirements of SFAS 123, for all awardsgranted to employees prior to the effective date of SFAS 123R that remainunvested on the effective date.

 

The provisions of this statement are effective as of the beginningof the first fiscal year beginning after June 15, 2005.  The Company expects to adopt the standard on January 1,2006.  The Company is evaluating the

 

7

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requirements of SFAS 123R and has not determined its methodof adoption, however, the Company does not believe that SFAS 123R will have amaterial impact on its financial position or results of operations.

 

**2**

**SPECIAL CHARGES**

 

Detailsof the special charge activity during the nine months ended September 30,2005 are as follows:

 
| ** **                       | ** ** | ** ** | ** ** | **Employee**  | ** ** | ** **    | ** ** |
|----------------------------------|------------|------------|------------|---------------|------------|---------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Severance** | ** ** | **Marketing** | ** ** |
| ** **                       | ** ** | **Total**  | ** ** | **And Other** | ** ** | **Contracts** | ** ** |
|                             |       |       |       |          |       |          |       |
| Balance, December 31, 2004  |       | $          | 7,064      |          | $          | 1,264         |       | $ | 5,800 |   |
| 2005 Utilization                 |       | (2,464     | )          | (1,264        | )          | (1,200        | )          |
| Balance, September 30, 2005 |       | $          | 4,600      |          | $          | 0             |       | $ | 4,600 |   |

 

Theremaining accrual is comprised primarily of a contractual marketing obligationand will be utilized over the next few years as this contractual obligationcomes due.  The short-term portion of theaccrual, or $1,600, is included in accrued expenses with the balance of $3,000included in other long-term liabilities.

 

**3**

**EARNINGS PER SHARE**

 

Basicearnings per share excludes dilution and is computed by dividing net earningsavailable to common stockholders by the weighted average number of commonshares outstanding for the period. Diluted earnings per share reflects the potential dilution that couldoccur if options to acquire common stock were exercised and assumes theconversion of the convertible debentures into common stock when dilutive.

 

Thefollowing table sets forth the computation of basic and diluted earnings pershare (amounts in thousands, except per share data):

 
| ** **                                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                     | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                     | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                                     |       | $                      | 117,656    |                   | $          | 81,826 |   | $ | 197,972 |   | $ | 144,683 |   |
| **Numerator  for diluted earnings per share:**                 |       |                   |       |                   |       |   |   |   |   |
| Net income                                                     |       | $                      | 117,656    |                   | $          | 81,826 |   | $ | 197,972 |   | $ | 144,683 |   |
| Interest on  4.25% convertible debentures, net of income taxes |       |                   |       |                   |       |   |   | 2,805 |   |
| Interest on  2.00% convertible debentures, net of income taxes |       | 186                    |       | 186                    |       | 556 |   | 310 |   |
| Net income                                                     |       | $                      | 117,842    |                   | $          | 82,012 |   | $ | 198,528 |   | $ | 147,798 |   |
| **Denominator  for basic earnings per share:**                 |       |                   |       |                   |       |   |   |   |   |
| Weighted average  shares                                       |       | 59,675                 |       | 58,472                 |       | 59,498 |   | 57,873 |   |
| **Denominator  for diluted earnings per share:**               |       |                   |       |                   |       |   |   |   |   |
| Weighted average  shares                                       |       | 59,675                 |       | 58,472                 |       | 59,498 |   | 57,873 |   |
| Effect of  dilutive securities:                                |       |                   |       |                   |       |   |   |   |   |
| Dilutive  employee stock options and warrants                  |       | 2,353                  |       | 1,641                  |       | 2,047 |   | 1,951 |   |
| Assumed conversion  of 4.25% convertible Debentures            |       |                   |       |                   |       |   |   | 3,277 |   |
| Assumed  conversion of 2.00% convertible Debentures            |       | 1,038                  |       | 1,038                  |       | 1,038 |   | 582 |   |
|                                                           |       | 63,066                 |       | 61,151                 |       | 62,583 |   | 63,683 |   |
|                                                           |       |                   |       |                   |       |   |   |   |   |
| **Basic  earnings per share:**                                 |       | $                      | 1.97       |                   | $          | 1.40 |   | $ | 3.33 |   | $ | 2.50 |   |
| **Diluted  earnings per share:**                               |       | $                      | 1.87       |                   | $          | 1.34 |   | $ | 3.17 |   | $ | 2.32 |   |
|                                                                |            |                        |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**4**

**COMPREHENSIVE INCOME**

 

Thefollowing table sets forth the computation of comprehensive income:

 
| ** **                                                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|-------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                        | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                        | ** ** | **2005**               | ** ** | **2004**               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                                        |       | $                      | 117,656    |                   | $          | 81,826 |   | $ | 197,972 |   | $ | 144,683 |   |
| Changes in  foreign currency translation adjustments              |       | 2,369                  |       | 10,159                 |       | (32,845 | ) | 5,753 |   |
| Net change due  to hedging instruments in accordance with FAS 133 |       | 1,301                  |       | 401                    |       | 69,489 |   | 31,724 |   |
| Comprehensive  income                                             |       | $                      | 121,326    |                   | $          | 92,386 |   | $ | 234,616 |   | $ | 182,160 |   |
|                                                                   |            |                        |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |

 

**5**

**COMMITMENTSAND CONTINGENCIES**

** **

On August 12,2005, a purported class action complaint, Bryan Jennings v. ReebokInternational Ltd., et al. (C.A. No. 05-4355 BLS) was filed by ashareholder of the Company against the Company and its directors challengingthe transactions contemplated by the Agreement and Plan of Merger, dated as of August 2,2005 (the “Merger Agreement”), between adidas-Salomon AG (“adidas”), RubyMerger Corporation (“Merger Sub”) and the Company.  Pursuant to the Merger Agreement, Merger Subwill merge with and into the Company (the “Merger”), with the Companycontinuing as the surviving corporation. The lawsuit is pending in Suffolk County Superior Court in TheCommonwealth of Massachusetts.

 

Thecomplaint alleges that the Company’s directors breached their fiduciary dutiesin connection with the Merger, and claims, among other things, that the MergerConsideration (as defined in the Merger Agreement) to be paid to the Company’sshareholders in the Merger is unfair and grossly inadequate and that thedefendants failed to sufficiently ascertain the true value of the Companythrough open bidding or a market check mechanism. The complaint seeks, amongother things, injunctive relief to enjoin the completion of the Merger, rescindthe Merger Agreement and direct the defendants to sell or auction the Companyfor the highest possible price, and damages, including reasonable attorneys’and experts’ fees.

 

Thelawsuit is in its preliminary stages. The Company believes that the lawsuit is without merit and intends todefend vigorously against it.

 

The Company is involved in various otherlegal proceedings generally incidental to its business.  While it is not possible 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.

 

The Company has entered into financingagreements, real property and equipment leases which contain tax indemnityprovisions.  The maximum potential amountof future payments is not determinable since any amounts potentially owed bythe Company would be due to future changes in tax rates or income taxregulations which cannot be predicted.

 

**6**

**ACQUISITIONOF COMMON STOCK**

** **

Under various share repurchase programs,the Board of Directors has authorized the repurchase of Reebok common stock inthe open market or privately negotiated transactions.  During the nine months ended September 30,2005, the Company acquired 130,000 shares of its common stock for approximately$5.7 million.  In May 2005 the Boardapproved the continuation of the Company’s repurchase program and authorizedthe repurchase of an additional $88.0 million of the Company’s commonstock.  As of September 30, 2005,the Company had approximately $150.0 million available for future repurchasesof its

 

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common stock under these Board authorizedprograms.  Under the terms of the MergerAgreement, however, the Company is prohibited from repurchasing its commonstock.

 

**7**

**BUSINESSDIVESTITURES**

** **

On July 15, 2005 the Company completedthe sale of Ralph Lauren Footwear Co. Inc., a wholly owned subsidiary of theCompany and Polo Ralph Lauren Corporation’s footwear licensee, to Polo RalphLauren Corporation for proceeds of $108.0 million, subject to certain closingadjustments.  The sale resulted in anpre-tax gain to the Company of approximately $80.3 million, or $48.8 millionafter-tax, which is included in other income in the third quarter of 2005.  Upon the closing of the transaction, theagreement under which Ralph Lauren Footwear acted as Polo’s footwear licenseewas terminated.  The Company continues toprovide transition services to Polo Ralph Lauren Corporation for a period of upto eighteen months after the closing date. The fees received for such services will approximate the expensesincurred.

 

**8**

**AGREEMENTAND PLAN OF MERGER**

** **

The Company entered into an Agreement andPlan of Merger, dated as of August 2, 2005 (the “Merger Agreement”), withadidas-Salomon AG (“adidas”) and Ruby Merger Corporation, a Massachusettscorporation which is wholly-owned by adidas or one or more wholly-ownedsubsidiaries of adidas (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and intothe Company (the “Merger”), with the Company continuing as the survivingcorporation.  Pursuant to the Merger Agreement,at the effective time of the Merger, each outstanding share of common stock,par value $.01 per share, of the Company (the “Shares”), other than any Sharesowned by the Company or any direct or indirect wholly-owned subsidiary of theCompany, or by any stockholders who are entitled to and who properly exerciseappraisal rights under Massachusetts law, will be canceled and convertedautomatically into the right to receive $59.00 in cash, without interest.  All outstanding options to purchase shares ofcommon stock, restricted shares and deferred shares of common stock of theCompany will be canceled and converted into the right to receive $59.00 perrestricted share, deferred share or share of common stock underlying suchoption less, in the case of options, the exercise price thereof, withoutinterest.

 

The Merger is conditioned, among otherthings, on the approval of the Merger Agreement by the stockholders of theCompany and the termination or expiration of the waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”) andcertain other regulatory approvals.  On October 3,2005, the HSR waiting period expired.

 

The Merger Agreement contains certaintermination rights and provides that, upon the termination of the MergerAgreement under specified circumstances, the Company may be required to payadidas a termination fee equal to $100.0 million.  In the event the Merger Agreement isterminated for failure to obtain required antitrust approvals, adidas may berequired to pay to the Company a termination fee equal to $75.0 million.  The Company has incurred $2.5 million ofmerger costs which are included in other (income) expenses, net for the threeand nine months ended September 30, 2005.

 

**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.**

 

**SPECIALNOTE CONCERNING FORWARD-LOOKING STATEMENTS**

 

This Quarterly Report on Form 10-Qcontains 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,” “willresult,” “could,” “may,” “might,” or any variations of such words or otherwords with similar meanings.  Any suchstatements are subject to risks and

 

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uncertainties that could cause the Company’sactual results to differ materially from the results discussed in suchforward-looking statements.  Prospectiveinformation is based on management’s then current expectations orforecasts.  Such information is subject tothe risk that such expectations or forecasts, or the assumptions underlyingsuch expectations or forecasts, may change. The Company assumes no obligation to update any such forward-lookingstatements to reflect actual results, changes in assumptions or changes inother factors affecting such forward-looking statements.

 

Risks and uncertainties that could affectthe Company’s actual results and could cause such results to differ materiallyfrom those contained in forward-looking statements made by or on behalf of theCompany include, but are not limited to, the following: economic conditions inthe Company’s major markets; competition; shifts in consumer preferences; theability to maintain advantageous licenses with the Company’s licensors; risksassociated with the Company’s international sales, distribution andmanufacturing; increases in raw material prices; the Company’s ability tomanage and forecast its growth and inventories; the loss of significantcustomers or suppliers; and the effect of currency fluctuations.  In addition, the European Union (EU) isconducting anti-dumping investigations regarding the importation into the EU offootwear manufactured in China, Vietnam and India.  While the outcome of these investigations isuncertain, they could result in the imposition by the EU of additional importduties on certain Reebok and Rockport branded footwear, which could increasethe cost of footwear imported into the EU by the Company and other brands.  A number of companies in the footwearindustry, including the Company, are aggressively defending against theimposition of such duties by the EU.  On August 2,2005, the Company entered into the Merger Agreement with adidas.  There is no assurance that the proposedMerger will be consummated.  If the proposedMerger is not completed, the value of the Company’s common stock may declineand the Company’s business may be adversely affected.

 

This list of risk factors is notexhaustive.  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 31,2004, which has been filed with the Securities and Exchange Commission.  The Company operates in a highly competitiveand 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 a significant portion of the Company’s business, includingsales by Company-owned retail stores, Rockport and The Greg Norman Collectionare not included in the backlog.  Inaddition, many markets are not included in open orders since sales are made byindependent distributors.  Finally, manyorders may be cancelled, currency may fluctuate and the ratio of future ordersto “at once” shipments may vary from year to year.

 

**CRITICALACCOUNTING POLICIES**—The Company’s significant accountingpolicies are described in Note 1 to the consolidated financial statementsincluded in Item 8 in the Company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2004. The Company’s discussion and analysis of its financial condition andresults of operations are based upon the Company’s condensed consolidatedfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States.  The preparation of these financial statementsrequires the Company to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent assets and liabilities.  Onan on-going basis the Company evaluates its estimates, including those relatedto sales returns and allowances, the realizability of outstanding accountsreceivable, the carrying value of inventories, hedging policies and theprovision for income taxes.  The Companybases its estimates on historical experience and on various other assumptionsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources.  However, results may differ from theseestimates under different assumptions or conditions.  The Company is not aware of any trends,demands, commitments, events or uncertainties that are reasonably likely tooccur that would materially affect the methodology, the assumptions described,or accounting estimates used.  There havebeen no material changes made to these accounting estimates in the past threeyears.  In the past, actual results havenot been materially different from the Company’s estimates.  Management has

 

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discussedthe development and selection of its accounting estimates, and the Management’sDiscussion and Analysis disclosure regarding these estimates, with the Company’saudit committee.

 

TheCompany has identified the following as critical accounting policies based onthe significant judgments and estimates used in determining the amountsreported in its consolidated financial statements:

 

**Sales Returns and Allowances**

The Companyrecords reductions to revenue for estimated customer returns andallowances.  The Company bases itsestimates on historical rates of customer returns and allowances as well as thespecific identification of outstanding returns and allowances that have not yetbeen received by the Company.  The actualamount of customer returns or allowances, which is inherently uncertain, maydiffer from the Company’s estimates.  Ifactual or expected returns and allowances were significantly greater or lowerthan the reserves the Company had established, the Company would record anadjustment to reduce or increase net sales and net income in the period inwhich it made such a determination.

 

**Accounts Receivable**

TheCompany maintains allowances for doubtful accounts for estimated lossesresulting from the inability of its customers to make required payments.  The Company estimates potential losses basedon the Company’s historical rate of credit losses, its knowledge of thefinancial condition of certain customers and an assessment of the overallconditions at retail.  If the Companydetermined that increases or decreases to the allowance for doubtful accountswas appropriate, the Company would record an adjustment to increase or reduceselling, general and administrative expenses and net income in the period inwhich the Company made such a determination. Historically, losses have been within the Company’s expectations.  If the financial condition of the Company’scustomers was to change, adjustments may be required to these estimates.  Furthermore, the Company provides forestimated losses resulting from differences between the gross carrying value ofits receivables and the amounts that customers estimate are owed to the Company.  The settlement or resolution of thesedifferences could result in future changes to these estimates.

 

**Inventory Valuation**

TheCompany values its inventory at the lower of cost (first-in, first-out method)or market.  Market value is estimatedbased upon assumptions made about future demand and retail marketconditions.  If the Company determinesthat the estimated market value of its inventory is less than the carryingvalue of such inventory, the Company provides a reserve for such difference asa charge to cost of sales.  If actualmarket conditions are more or less favorable than those projected by theCompany, further adjustments may be required that would decrease or increasethe Company’s cost of sales which would increase or decrease net income in theperiod in which they were recorded.

 

**Hedging Policies**

TheCompany uses foreign currency forward contracts, options contracts and interestrate swap agreements to hedge its exposure to: (1) merchandise purchasedin U.S. Dollars that is forecasted to be sold to customers in other currencies;(2) significant assets and liabilities that are denominated in othercurrencies; 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, anadjustment may be required to reduce or increase cost of goods sold or otherincome and net income.

 

**Endorsement Contracts**

Ingeneral, endorsement payments are expensed on a straight-line basis over theterm of the contract. However, certain contract elements may be accounted fordifferently based upon the facts and circumstances of each individual contract.Certain contracts provide for contingent payments for meeting specificperformance achievements. The Company records these contingent payments inselling, general and administrative expenses when the specific performanceachievement has been met.

 

Someof the contracts provide for payments based upon endorsers maintaining a levelof performance in their sport over an extended period of time (*e.g.*, maintaining a top ranking in a sport for a year).These amounts are reported in selling, general and administrative expenses whenthe Company determines that it is probable that the specified level ofperformance will be maintained throughout the period. In these

 

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instances,to the extent that actual payments to the endorser differ from the Company’sestimate due to changes in the endorser’s athletic performance, increased ordecreased selling, general and administrative expenses may be reported in afuture period.

 

Someof the contracts provide for royalty payments to endorsers based upon apredetermined percentage of sales of particular products.  The Company expenses these payments in costof sales as the related sales are made. In certain contracts, the Company offers minimum guaranteed royaltypayments. For contractual obligations for which the Company estimates that itwill not meet the minimum guaranteed amount of royalty fees through sales ofproduct, the Company records a portion of the amount in selling, general andadministrative expenses and a portion in cost of sales on a straight line basisover the guarantee period.

 

**Income Taxes**

**Thecarrying value of the Company’s net deferred tax assets assumes that theCompany will be able to generate sufficient future taxable income in certaintax jurisdictions to realize the value of these assets.  If the Company is unable to generatesufficient future taxable income in these jurisdictions, an adjustment may berequired to the net carrying value of the deferred tax assets resulting inadditional income tax expense in the Company’s consolidated statement of incomethereby reducing net income.  Managementevaluates the realizability of the deferred tax assets and assesses the needfor any valuation adjustment quarterly.**

** **

**RECENTLY ISSUED ACCOUNTINGSTANDARDS—**The Company has described the impact anticipatedfrom the adoption of certain new accounting pronouncements effective in 2004 inNote 1 to the Condensed Consolidated Financial Statements for the quarter endedSeptember 30, 2005.

 

**NON-GAAP MEASURES**—TheCompany provides certain constant dollar comparisons, which eliminate theeffect of foreign currency fluctuations on such comparisons, in this QuarterlyReport on Form 10-Q.  Constantdollars are calculated by translating the prior period financial information atthe current period foreign exchange rates, thereby eliminating the effect offoreign currency fluctuations.  Becauseof the significance of the Company’s international operations, the Companybelieves that disclosing constant dollar comparisons in certain instancesassists in the readers’ understanding of the Company’s consolidated financialstatements.  However, such comparisonsmay not reflect future changes in currency.

 

In this Quarterly Report on Form 10-Q the Companyprovides certain net sales comparisons that exclude the results of its RalphLauren Footwear (“RLF”) business because the Company sold RLF on July 15,2005.  The Company believes thatdisclosing comparisons excluding the results of RLF in certain instancesassists in the readers’ understanding of the Company’s consolidated financialstatements and of comparisons between comparable periods.

 

**OPERATINGRESULTS**

 

**ThirdQuarter 2005 Compared to Third Quarter 2004**

 

Netincome for the third quarter ended September 30, 2005 was $117.7 million,or $1.87 per diluted share, an earnings per share increase of 39.6% whencompared to net income of $81.8 million, or $1.34 per diluted share, for thethird quarter of 2004.  The third quarter2005 results were favorably impacted by an after-tax gain of $48.8 million fromthe sale of RLF and negatively impacted by $2.5 million for costs pertaining tocertain legal and other expenses associated with the proposed merger withadidas.  In addition, the Company’s operatingresults were negatively affected by the integration of The Hockey Company intothe Reebok Brand and from the Company’s plans to reposition its business withFootlocker, Inc., as well as Footlocker’s efforts to reduce its inventorylevels over the balance of 2005. Additional information with regard to The Hockey Company integration andthe Company’s business with Footlocker is contained later herein.

 

Netsales for the quarter ended September 30, 2005, were $1.041 billion, adecrease of $123.5 million, or 10.6%, from the quarter ended September 30,2004 net sales of $1.165 billion.  The2004 third quarter includes sales of RLF, which the Company sold on July 15,2005.  Excluding the sales of RLF, salesdeclined 8.1% in the quarter.  Currencyfluctuations did not have a material impact on sales comparisons in

 

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thequarter.  Worldwide sales of the ReebokBrand were $912.1 million in the third quarter of 2005, a decrease of $91.2million, or 9%, from $1,003.3 million in the third quarter of 2004.

 

Thefollowing table provides a reconciliation of net sales for the three monthsended September 30, 2005 and 2004, excluding the sales of RLF (inmillions):

 
| **Net Sales**              | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| Total Company              |       | $        | 1,041.2    |     | $          | 1,164.7 |   |
| Sales of RLF               |       | 6.5      |       | 38.7     |       |
| Total Company  without RLF |       | $        | 1,034.7    |     | $          | 1,126.0 |   |
|                            |            |          |            |          |            |  |  |  |

 

U.S.footwear sales of the Reebok Brand decreased 20.3% to $241.0 million in thethird quarter of 2005 from $302.4 million in the third quarter of 2004.  The Company believes that the announcement onAugust 3, 2005 of its proposed merger with adidas has created in the shortterm some retailer uncertainty with respect to the Company and that thisimpacted its sales and order intake in the quarter, particularly with certainmall based retailers in the U.S.  Inaddition, as it noted last quarter, the Company is in the process ofrepositioning its business with one of its major customers, Footlocker, Inc.  The Company believes that by shifting some ofits Classic business at Footlocker into new Performance categories that it willstimulate consumer demand.  While in theshort term the Company’s Footlocker business is negatively impacting itsoperating results, the Company believes that its strategy to reposition itsbusiness with Footlocker will help to improve its operating margins in the future.  Footlocker has also announced plans to reduceits inventory levels over the balance of 2005 and the Company has been workingwith Footlocker to help them achieve this. The Company’s sales to Footlocker declined approximately $46.0 millionon a global basis in the 2005 third quarter as compared with the comparablequarter last year.  Most of the salesdecline occurred in the U.S.  The Companyalso believes that the U.S. market has become promotional in response toeconomic factors such as rising energy costs and Hurricanes Katrina andRita.  The Company expects this trend tocontinue for the balance of the year.

 

Duringthe back-to-school period in the U.S., sales of Classic product derivativesslowed down at retail as the Company continued to see a shift in the U.S.market towards Performance products.  TheCompany’s new The Pump technology product introduction is still in its earlystages.  For the remainder of this yearand for 2006 and beyond the Company plans to introduce several new evolutionsof its self-inflating, self-regulating The Pump technology.  The Answer IX, which is the tenth shoe in theIverson collection and was introduced at retail in early November, is the firstIverson shoe to feature The Pump customization technology.  The Company believes it’s The Pump productswill become sales and earnings contributors as the Company evolves The Pumptechnology and markets its benefits to sports performance enthusiasts.

 

Duringthe third quarter of 2005, the Company decided to consolidate its Reebok Brandproduct and marketing groups under one leader. The Company believes that the new organizational structure will give itgreater focus on product and marketing concepts for its targeted consumergroups.  The new product teams are fullyintegrated from design and development through to marketing and they supportthe Company’s product initiatives under the Rbk, Performance, Lifestyle and Kid’splatforms.

 

Withrespect to the Company’s Classic products, while sales of Classic derivativeproducts did slow down in the U.S. during the quarter, this was not the case inEurope where sales of Classic Fusion and Classic Original products continued tobe strong.  The Company believes that itsClassic products have been a strength of the Reebok Brand for many years andthat this will continue into the future. The Company plans to launch a new line of Rbk Classic products later in2006 and will be accelerating the rollout of its Classic Fusion products intoseveral key markets, including the U.S.

 

U.S.apparel sales of the Reebok Brand were $204.8 million in the third quarter of2005, as compared to $204.1 million in the third quarter of 2004.  Sales of Reebok sports licensed apparel,which includes apparel sold under the Company’s license agreements with the NFL,NBA and NHL, increased in the third quarter of 2005 compared to the thirdquarter of 2004.  The Company’s fan-basedlicensed apparel continues to perform well in team shops where sales of NFL andNBA products increased by approximately 30.0% in the quarter. The increase insales of the Company’s licensed apparel business was offset by a decline insales of U.S. branded apparel.

 

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Duringthe first quarter of 2005, the Company began the integration of The HockeyCompany business into the Reebok Brand on both a product and geographicbasis.  As part of this integration, theCompany is consolidating multiple warehouses in Canada into its newdistribution facility in Quebec.  Thestartup problems the Company encountered at this new facility during the firstquarter of 2005 have not been fully resolved and this has caused somedifficulty in shipping the demand for The Hockey Company’s products.  At the end of the third quarter of 2005,there were approximately $15.0 million of open orders that the Company wasunable to fulfill until October 2005 or beyond due to capacity constraintsduring the start-up period.  The Companyis incurring duplicate costs related to redundant facilities and excess payrollcosts in connection with the start-up and wind down of the facilities.  The Company expects to have these issuesresolved during 2006.

 

Internationalsales of the Reebok Brand (including footwear and apparel) were $466.3 millionin the third quarter of 2005, a decrease of 6.1% from sales of $496.8 millionin the third quarter of 2004. International footwear sales decreased 8.9% and international apparelsales decreased by 3.1%.

 

Salesin Europe declined 7.2% as compared to the third quarter of 2004.  The sales decline was primarily in the U.K.,France and Italy.  While the French andItalian markets have been particularly difficult for the Company recently, theCompany believes the benefit of recent management changes will begin topositively impact future performance. The retail environment in Europe has been challenging andpromotional.  Average selling pricescontinue to decline across Europe, and very few retailers are reportingpositive trading results.  The emergingmarkets of Eastern Europe continue to show sales growth, reporting double-digitsales increases this quarter.  TheCompany believes this growth is closely related to its retail presence throughits own and third party operated retail stores. Although sales declined during the quarter in Asia Pacific, the Companybelieves it is starting to see results of the last eighteen months of itsinvestment in this region.  The Companyplans to open its first 10,000 square foot Reebok store in the region in November 2005and plans to open its Tokyo flagship store in February 2006.  In Latin America, sales by the Company’sMexican subsidiary increased by 33% during the third quarter of 2005 ascompared to the third quarter of 2004 and sales by the Company’s independentdistributors in this region increased 27%.

 

Rockport’ssales for the third quarter of 2005 were $102.6 million, a decrease of 3.2%from sales of $106.0 million in the third quarter of 2004.  While sales of the Rockport brand declined inthe quarter, the Company believes that the quality of Rockport’s sales hasimproved as closeout sales declined in the quarter.  Sales to better department stores increased11% in the quarter and overall operating performance improved in thequarter.  Domestic sales for the RockportBrand decreased 5.7% while international sales for the Rockport brand werecomparable to the third quarter of 2004. International revenues accounted for approximately 44% of Rockport’ssales in the third quarter of 2005 as compared to 42% in the third quarter of2004.

 

Salesof the Company’s other brands, Ralph Lauren Footwear and The Greg NormanCollection, were $26.5 million in the third quarter of 2005, a decrease of52.2% from sales of $55.4 million in the third quarter of 2004.  The Company sold RLF on July 15, 2005.

 

TheCompany’s overall gross margin was 43.3% of sales during the third quarter of2005, which is an increase of 290 basis points when compared with the Company’sgross margin of 40.4% in the third quarter of 2004.  During the quarter, most of the improvementcame from the Company’s international markets.

 

Selling,general and administrative expenses for the third quarter of 2005 were $347.1million, or 33.3% of sales, an increase of $1.0 million when compared to $346.1million, or 29.7% of sales, for the third quarter of 2004.  As a result of lower sales in the quarter, theCompany’s SG&A percentage was higher than anticipated.  Most of the sales shortfall occurred in September andthe Company was not able to adjust its spending plans in time to offset theshortfall.  The Company plans to bringits operating expenses down as a percentage of sales in order to achieveimproved operating margins in the future.

 

Forthe quarter ended September 30, 2005, other (income) expenses, net was netincome of $76.4 million.  Other incomeincludes the gain on the sale of RLF of $80.8 million ($48.8 millionafter-tax), as well as $2.5 million of legal expenses and other costs relatedto the proposed merger with adidas.  Alsoincluded in other

 

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expenses,net, is the amortization of finite-lived intangibles, certain currency gainsand losses and other non-operating expenses.

 

Netinterest expense was $1.4 million for the quarter ended September 30,2005, a decrease of $2.9 million as compared to the third quarter of 2004.  Interest expense increased $2.1 millionduring the third quarter of 2005 and interest income increased $5.0 million forthe third quarter of 2005 as compared to the third quarter of 2004.

 

TheCompany’s effective income tax rate was 32.8% for the third quarter of2005.  The tax rate for the third quarterof 2005 reflects a tax on the gain on sale of RLF of approximately 39.2%.  Excluding the effect of this gain, theCompany’s tax rate for the quarter was 27.5% as compared to 30.5% for the thirdquarter of 2004.  Under currentaccounting rules, the tax rate could, and likely will, continue to fluctuate ona quarterly basis depending on the jurisdictions in which profits areconsidered to be earned, changes in estimates of credits and deductions, theresolution of issues arising from tax audits with various taxing authoritiesand the ability to realize deferred tax assets.

 

**FirstNine Months of 2005 Compared to First Nine Months of  2004**

 

Netincome for the nine months ended September 30, 2005 was $198.0 million, or$3.17 per diluted share, an earnings per share increase of 36.6% when comparedto net income of $144.7 million, or $2.32 per diluted share, for the first ninemonths of 2004.  The results for thefirst nine months of 2005 were favorably impacted by an after-tax gain of $48.8million from the sale of RLF and negatively impacted by $2.5 million for costspertaining to certain legal and other expenses associated with the proposedmerger with adidas.  In addition, theCompany’s operating results were negatively affected by the integration of TheHockey Company into the Reebok Brand and from the Company’s plans to repositionits business with Footlocker, Inc., as well as Footlocker’s efforts toreduce its inventory levels over the balance of 2005.  Additional information with regard to TheHockey Company integration and the Company’s business with Footlocker iscontained later herein.

 

Netsales for the nine months ended September 30, 2005 were $2.843 billion, anincrease of $32.3 million, or 1%, from net sales for the nine months ended September 30,2004 of $2.810 billion.  The first ninemonths of 2005 includes sales of RLF, which the Company sold on July 15,2005.  Excluding the sales of RLF, salesincreased 2.2% during the nine month period. On a constant dollar basis, which eliminates the effect of currencyexchange fluctuations, net sales for the nine months ended September 30, 2005decreased $12.2 million, or 0.4%. Worldwide sales of the Reebok Brand were $2.435 billion for the firstnine months of 2005, an increase of $54.3 million, or 2.2%, from $2.381 billionin the first nine months of 2004.

 

Thefollowing table provides a reconciliation of net sales for the three monthsended September 30, 2005 and 2004, excluding the sales of RLF (inmillions):

 
| **Net Sales**              | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| Total Company              |       | $        | 2,842.5    |     | $          | 2,810.2 |   |
| Sales of RLF               |       | 65.0     |       | 93.7     |       |
| Total Company  without RLF |       | $        | 2,777.5    |     | $          | 2,716.5 |   |

 

U.S.footwear sales of the Reebok Brand decreased 5.6% to $794.9 million in the firstnine months of 2005 from $842.3 million in the first nine months of 2004.  The Company believes that the announcement ofits proposed merger with adidas on August 3, 2005 has created in the shortterm some retailer uncertainty with respect to the Company and that thisimpacted its sales and order intake in the third quarter, particularly withcertain mall based retailers in the U.S. In addition, the Company is in the process of repositioning its businesswith one of its major customers, Footlocker, Inc.  The Company believes that by shifting some ofits Classic business at Footlocker into new Performance categories that it willstimulate consumer demand.  While in theshort term the Company’s Footlocker business is negatively impacting itsoperating results, the Company believes that its strategy to reposition itsbusiness with Footlocker will help to improve its operating margins in thefuture.  For the nine month period, salesof Classic footwear product in the U.S., including Footlocker, was down 15% withthe decline being partially offset by an 8% increase in sales of Performancefootwear products.

 

U.S.apparel sales of the Reebok Brand increased 9.2% to $427.6 million in the firstnine months of 2005 from $391.6 million in the first nine months of 2004.  The Company generated double-digit salesincreases in its sports licensed apparel business, which were partially offsetby a decline in sales of U.S. branded apparel.

 

Duringthe first quarter of 2005, the Company began the integration of The Hockey Companybusiness into the Reebok Brand on both a product and geographic basis.  As part of this integration, the Company isconsolidating multiple warehouses in Canada into its new distribution facilityin Quebec.  The startup problems theCompany encountered at this new facility during the first quarter of 2005 havenot been fully resolved and this has caused some difficulty in shipping thedemand for The Hockey Company’s products. At the end of the third quarter of 2005, there were approximately $15.0million of open orders that the Company was unable to fulfill until October2005 or beyond due to capacity constraints during the start-up period.  The Company is incurring duplicate costsrelated to redundant facilities and excess payroll costs in connection with thestart-up and wind down of the facilities. The Company expects to have these issues resolved during 2006.

 

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Internationalsales of the Reebok Brand (including footwear and apparel) were $1.213 billionin the first nine months of 2005, an increase of 5.7% from sales of $1.147million in the first nine months of 2004. International footwear salesincreased 8.9% and international apparel sales increased by 1.9%.  Changes in foreign currency exchange rateshave favorably impacted these comparisons. On a constant dollar basis, international sales of the Reebok Brandincreased $25.9 million, or 2.2%. International footwear sales increased 5.5% and international apparelsales decreased by 1.7%.

 

Salesin Europe decreased about 1.0% as compared to the first nine months of 2004.  Sales declined in the U.K., France andItaly.  Partially offsetting the salesdecline in these countries were sales increases in Germany, Poland andRussia.  The emerging markets of EasternEurope continue to show sales growth, reporting double-digit sales increasesduring the first nine months of 2005. The Company believes this growth is closely related to its retailpresence through its own and third party operated retail stores.  While the French and Italian markets havebeen particularly difficult for the Company recently, the Company believes thebenefit of recent management changes will begin to positively impact futureperformance.  The retail environment inEurope has been challenging and promotional. Average selling prices continue to decline across Europe, and very fewretailers are reporting positive trading results. Despite the difficult marketconditions in the U.K., the Company’s U.K. footwear business has experienced an8.0% increase in sales for the nine-month period.

 

InAsia Pacific, the Company is starting to see the results of the last eighteenmonths of its investment in this region, with double-digit sales increases inthe growing markets of China and India. In Latin America, sales by the Company’s Mexican subsidiary increased by40% during the first nine months of 2005 and sales by the Company’s independentdistributors increased by 36%, with all of the Company’s distributors in theregion reporting double-digit sales increases for the nine month period endedSeptember 30, 2005.

 

Rockport’ssales for the first nine months of 2005 were $278.3 million, a decrease of 1%from sales of $280.9 million in the first nine months of 2004.  Domestic sales for the Rockport Branddecreased 4.0%, whereas international sales increased 4.0% as compared to thefirst nine months of 2004.  Currency haspositively impacted these comparisons. On a constant dollar basis, international sales of the Rockport Branddecreased 2.2%.  International revenuesaccounted for approximately 40% of Rockport’s sales in the first nine months of2005 as compared to 38% in the first nine months of 2004.

 

Salesof the Company’s other brands, RLF and The Greg Norman Collection, were $128.8million in the first nine months of 2005, a decrease of 13.1% from salesof  $148.2 million in the first ninemonths of 2004.  The Company sold RLF on July 15,2005.

 

TheCompany’s overall gross margin was 41.5% of sales during the first nine monthsof 2005, which is an increase of 160 basis points when compared with theCompany’s gross margin of 39.9% in the first nine months of 2004. During thenine month period, most of the improvement came from the Company’sinternational markets.

 

Selling,general and administrative expenses for the first nine months of 2005 were$950.1 million, or 33.4% of sales, an increase of $66.7 million when comparedto $883.4 million, or 31.4% of sales for the first nine months of 2004.  Approximately half of the increase inSG&A was due to the inclusion of The Hockey Company, which was acquiredeffective July 1, 2004, for the entire 2005 nine month period.  During the first nine months of 2005, theCompany launched its largest global integrated marketing and advertisingcampaign in nearly a decade and significantly increased its overall advertisingspend for the Reebok Brand.  The  “I Am What I Am” marketing campaigncelebrates authenticity and individuality and the Company believes that it isboth relevant and inspiring for young consumers.  As a result of these investments in the firstnine months of 2005, the Company’s total Reebok brand advertising expenseincreased by approximately 20% as compared with the first nine months of2004.  Also, as a result of lower salesin the third quarter of 2005, the Company’s SG&A percentage was higher thananticipated in that quarter.  Most of thesales shortfall occurred in September 2005 and the Company was not able toadjust its spending plans in time to offset the shortfall.  The Company plans to bring its operatingexpenses down as a percentage of sales in order to achieve improved operatingmargins in the future.

 

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Forthe nine months ended September 30, 2005, other (income) expenses, net,was income of $73.8 million.  Other(income) expense, net includes the gain on the sale of RLF of $80.8 million($48.8 million after-tax), as well as $2.5 million of legal expenses and othercosts related to the proposed merger with adidas.  Also included in other (income) expenses,net, is the amortization of finite-lived intangibles, certain currency gainsand losses and other non-operating expenses.

 

Netinterest expense was $6.7 million for the nine month period ended September 30,2005, a decrease of $2.8 million as compared to the first nine months of2004.  Interest expense increased $4.2during the first nine months of 2005 and interest income increased $7.0 millionfor the first nine months of 2005 as compared to the first nine months of 2004.

 

TheCompany’s effective income tax rate was 31.4% for the first nine months of2005.  The tax rate for the first ninemonths of 2005 reflects a tax on the gain on sale of RLF of approximately39.2%.  Excluding the effect of thisgain, the Company’s tax rate for the nine-month period was 28.5% as compared to30.5% for the first nine months of 2004. Under current accounting rules, the tax rate could, and likely will,continue to fluctuate on a quarterly basis depending on the jurisdictions inwhich profits are considered to be earned, changes in estimates of credits anddeductions, the resolution of issues arising from tax audits with varioustaxing authorities and the ability to realize deferred tax assets.

 

**ReebokBrand Backlog of Open Orders**

 

Worldwidebacklog of open customer orders scheduled for delivery during the period October 1,2005 through March 31, 2006 for the Reebok Brand decreased 8.3% ascompared to the same period last year. Backlog in constant dollars is calculated by translating the 2004backlog at the 2005 foreign exchange rates, thereby eliminating the effect ofcurrency fluctuations on the comparisons.

 

Comparisonsregarding orders scheduled for delivery for the period October 1, 2005through March 31, 2006 versus the comparable period in 2004-2005 for theReebok Brand are as follows:

 
| ** **           | ** ** | **As Reported**       | ** ** |
|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **Percentage Change** | ** ** |
| ** **           | ** ** | **2005/2004**         | ** ** |
| ** **           | ** ** | **Reported**          | ** ** | **Constant** | ** ** |
| ** **           | ** ** | **Dollars**           | ** ** | **Dollars** | ** ** |
| USA:                 |       |                  |       |   |   |
| Footwear             |       | -18.4                 | %          | -18.4 | % |
| Apparel              |       | -11.4                 | %          | -11.4 | % |
| Total Domestic       |       | -16.7                 | %          | -16.7 | % |
| International:       |       |                  |       |   |   |
| Footwear             |       | +1.1                  | %          | +2.2 | % |
| Apparel              |       | +7.3                  | %          | +8.4 | % |
| Total  International |       | +3.9                  | %          | +5.0 | % |
|                 |       |                  |       |   |   |
| Total Reebok Brand:  |       |                  |       |   |   |
| Footwear             |       | -11.8                 | %          | -11.5 | % |
| Apparel              |       | -1.0                  | %          | -.5 | % |
| Total Reebok  Brand  |       | -8.2                  | %          | -7.8 | % |

 

The Company’s backlog position is notnecessarily indicative of future sales because a significant portion of theCompany’s business, including sales by Company-owned retail stores, Rockportand The Greg Norman Collection, are not included in the backlog.  In addition, many markets are not included inopen orders since sales are made by independent distributors.  Finally, many orders may be cancelled,currency may fluctuate and the ratio of future orders to “at once” shipmentsmay vary from year to year.

 

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**Liquidityand Sources of Capital**

 

At September 30,2005, the Company’s working capital was $1.283 billion compared to $1.051billion at December 31, 2004 and $1.033 billion at September 30,2004.  The current ratio, a comparison ofcurrent assets to current liabilities, at September 30, 2005 was 2.9 to 1compared to 2.3 to 1 at December 31, 2004 and 2.4 to 1 at September 30,2004.

 

Worldwideinventories were $506.6 million at September 30, 2005 compared to $505.0million at September 30, 2004. Accounts receivable at September 30, 2005 were $739.9 millioncompared to $814.1 million at September 30, 2004.  During the quarter, the Company repaid fromavailable cash its $100.0 million principal amount of 6.75% debentures whichbecame due on September 15, 2005.  AtSeptember 30, 2005 the Company had $481.5 million of cash as compared with$269.6 million of cash at September 30, 2004.

 

Prepaidexpenses and other current assets were $102.2 million at September 30,2005, as compared to $73.3 million at September 30, 2004.  The increase is primarily due to the increasein the value of the Company’s foreign exchange contracts of $28.7 million.

 

Cash used for operations during the firstnine months of 2005 was $225.3 million, as compared to cash used for operationsof $235.8 million during the first nine months of 2004.  Capital expenditures for the nine monthsended September 30, 2005 were $37.5 million compared to $30.3 million forthe first nine months of 2004.  Thecapital expenditures are primarily related to the integration of The HockeyCompany and Reebok Canada operations, European regionalization, and retail andother facility requirements internationally.

 

On July 1, 2005, the Company enteredinto a new five-year revolving credit agreement in the amount of $300.0 million(“the Credit Agreement”) with its bank group. The Credit Agreement includes a letter of credit sub-facility in theamount of $200.0 million as well as a revolving credit facility, which isavailable to finance the short-term working capital needs of the Company, ifrequired.  As part of the CreditAgreement, the Company is required to pay certain commitment fees on the unusedportion of the revolving credit facility. The Credit Agreement contains various covenants including therequirement to maintain a minimum interest coverage ratio and debt to adjustedearnings ratio. Under the terms of the Credit Agreement there are variousoptions under which interest is calculated.

 

TheCompany believes that cash generated from operations, together with the Company’sexisting credit lines and other financial resources, will adequately financethe Company’s planned 2005 cash requirements. However, the Company’s actual experience may differ from theexpectations set forth in the preceding sentence.  Factors that might lead to a differenceinclude, but are not limited to, the matters discussed in the Company’s AnnualReport on Form 10-K under the heading “Issues and Uncertainties,” as wellas future events that might have the effect of reducing the Company’s availablecash balances (such as unexpected operating losses or increased capital orother expenditures, as well as increases in the Company’s inventory or accountsreceivable), or future events that might reduce or eliminate the availabilityof external financial resources.

 

During the nine months ended September 30,2005 the Company acquired 130,000 shares of its common stock for $5.7million.  At September 30, 2005 theCompany had approximately $150.0 million available for future share purchasesunder the Company’s current Board authorization.  Under the terms of the Merger Agreement,however, the Company is prohibited from repurchasing its common stock.

 

On July 26, 2005 the Company’s Boardof Directors declared a semi-annual cash dividend in the amount of $0.15 pershare, or an aggregate of $9.0 million, which was paid on September 2,2005 to shareholders of record as of August 19, 2005.  In February 2005 the Company’s Board ofDirectors declared a semi-annual cash dividend in the amount of $0.15 pershare, or an aggregate of $8.9 million, which was paid on March 18, 2005to shareholders of record as of March 5, 2005.

 

**Item 3.  Quantitative and Qualitative Disclosuresabout Market Risk.**

 

Our market risks, and the ways we managethem, are summarized in management’s discussion and analysis of financialcondition and results of operations as of December 31, 2004, included inthe Company’s Form 10-K

 

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for the year ended December 31,2004.  There have been no materialchanges in the first nine months of 2005 to such risks or our management ofsuch risks.

 

**Item 4.  Controls and Procedures.**

 

a)     The Companycarried out an evaluation, under the supervision and with the participation ofthe Company’s management, including the Company’s Chief Executive Officer andChief Financial Officer, of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures pursuant to Rule 13a-15of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end ofthe period covered by this report.  Basedupon that evaluation, the Company’s management, including the Chief ExecutiveOfficer and Chief Financial Officer, concluded that the Company’s disclosurecontrols and procedures were effective.

 

b)    There has been nochange in the Company’s internal control over financial reporting that occurredduring the last fiscal quarter that has materially affected, or is reasonablylikely to materially affect, the Company’s internal control over financial reporting.

 

**PART II  - OTHER INFORMATION**

 

**Item 1:  Legal Proceedings.**

 

On August 12,2005, a purported class action complaint, Bryan Jennings v. ReebokInternational Ltd., et al. (C.A. No. 05-4355 BLS) was filed by ashareholder of the Company against the Company and its directors challengingthe transactions contemplated by the Agreement and Plan of Merger, dated as of August 2,2005 (the “Merger Agreement”), between adidas-Salomon AG (“adidas”), RubyMerger Corporation (“Merger Sub”) and the Company.  Pursuant to the Merger Agreement, Merger Subwill merge with and into the Company (the “Merger”), with the Companycontinuing as the surviving corporation. The lawsuit is pending in Suffolk County Superior Court in TheCommonwealth of Massachusetts.

 

Thecomplaint alleges that the Company’s directors breached their fiduciary dutiesin connection with the Merger, and claims, among other things, that the MergerConsideration (as defined in the Merger Agreement) to be paid to the Company’sshareholders in the Merger is unfair and grossly inadequate and that thedefendants failed to sufficiently ascertain the true value of the Companythrough open bidding or a market check mechanism. The complaint seeks, amongother things, injunctive relief to enjoin the completion of the Merger, rescindthe Merger Agreement and direct the defendants to sell or auction the Companyfor the highest possible price, and damages, including reasonable attorneys’and experts’ fees.

 

Thelawsuit is in its preliminary stages. The Company believes that the lawsuit is without merit and intends todefend vigorously against it.

 

TheCompany is involved in various other legal proceedings generally incidental toits business.  While it is not possibleto predict or determine the outcome of these proceedings, management does notbelieve that they should result in a materially adverse effect on the Company’sfinancial position, results of operations or liquidity.

 

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**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds.**

 

(e)          IssuerPurchases of Equity Securities

 
| **Period**                                       | ** ** | **Total Number of  Shares Purchased** | ** ** | **Average Price Paid  Per Share** | ** ** | **Total Number of Shares  Purchased as Part of  Publicly Announced  Plans or Programs** | ** ** | **Maximum Dollar Value  that May Yet Be  Purchased Under the  Plans or Programs** |
|--------------------------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|
| July 1, 2005 through July 31, 2005     |       |                                  |       |                              |       |                                                                                         |       | $                                                                                      | 149,861,319 |
| August 1, 2005 through August 31, 2005      |       |                                  |       |                              |       |                                                                                         |       | $                                                                                      | 149,861,319 |
| September 1, 2005 through September 30 2005 |       |                                  |       |                              |       |                                                                                         |       | $                                                                                      | 149,861,319 |
| TOTALS                                           |       | 0                                     |       | N/A                               |       | 0                                                                                            |       | $                                                                                      | 149,861,319 |

 

Under various share repurchase programs,the Board of Directors has authorized the repurchase of Reebok common stock inthe open market or privately negotiated transactions.  During the nine months ended September 30,2005, the Company acquired 130,000 shares of its common stock for approximately$5.7 million.  In May 2005, theBoard approved the continuation of the Company’s repurchase program andauthorized the repurchase of an additional $88.0 million of the Company’scommon stock.  As of September 30,2005, the Company had approximately $150.0 million available for futurerepurchases of its common stock under these Board authorized programs.  Under the terms of the Merger Agreement,however, the Company is prohibited from repurchasing its common stock.

 

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

 

None.

 

**Item 4:  Submission of Matters to a Vote of SecurityHolders.**

 

None.

 

**Item 5:  Other Information.**

 

None.

 

**Item 6:  Exhibits.**

 

31.1                           Certification of Paul Fireman, Chairmanand Chief Executive Officer, dated November 9, 2005, and made pursuant to Rule 13a-14(a) and15d-14(a) under the Exchange Act, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

 

31.2                           Certification of Kenneth Watchmaker, ExecutiveVice President and Chief Financial Officer, dated November 9, 2005,and made pursuant to Rule 13a-14(a) and 15d-14(a) under theExchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

 

32.1                         Certification of Paul Fireman, Chairman and ChiefExecutive Officer, dated as of November 9, 2005, and made pursuant to Section 1350, Chapter63 of Title 18, United States Code, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002.

 

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32.2                         Certification of Kenneth Watchmaker, ExecutiveVice President and Chief Financial Officer, dated as of November 9, 2005,and made pursuant to Section 1350, Chapter 63 of Title 18, United StatesCode, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURE

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

Date:  November 9,2005

 

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

 

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