**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

** **

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** **

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

## ** **

## **For the quarterly period ended June 30, 2005**

** **

**OR**

** **

**o****   TRANSITIONREPORT PURSUANT TO SECTION 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—EmployerIdentification No. 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 12months (or for such shorter period that the Registrant was required to filesuch reports) and (2) has been subject to such filing requirements for thepast 90 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

 

The total number ofshares of the Registrant’s Common Stock, par value $.01 per share, outstandingon August 4, 2005 was 59,733,130.

 

 

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**REEBOKINTERNATIONAL LTD.**

 

***INDEX***

 
| ***PART I.***  | ***FINANCIAL INFORMATION: ***                                                                    |   |
|---------------------|-------------------------------------------------------------------------------------------------------|--------|
|                |                                                                                                  |   |
| Item 1.             | Financial Statements (Unaudited)                                                                      |   |
|                |                                                                                                  |   |
|                | Condensed Consolidated  Balance Sheets - June 30, 2005 and 2004 and December 31, 2005       |   |
|                |                                                                                                  |   |
|                | Condensed Consolidated  Statements of Income - Three and Six Months Ended June 30, 2005 and 2004 |   |
|                |                                                                                                  |   |
|                | Condensed  Consolidated Statements of Cash Flows - Six Months Ended June 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

** **
| ** **                                                                                                                                                    | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                    | ** ** | **2005**          | ** ** | **2004**              | ** ** | **2004** | ** ** |
| ** **                                                                                                                                                    | ** ** | **(Unaudited)**   | ** ** | **(See Note 1)**      | ** ** |
| **Assets**                                                                                                                                                    |       |              |       |                  |       |   |   |
| Current Assets:                                                                                                                                               |       |              |       |                  |       |   |   |
| Cash and cash  equivalents                                                                                                                                    |       | $                 | 455,594    |                  | $          | 501,377 |   | $ | 565,233 |   |
| Accounts  receivable, net of allowance for doubtful accounts (June 2005, $77,082; June 2004,  $76,579; December 2004, $81,280)                 |       | 670,006           |       | 623,264               |       | 660,599 |   |
| Inventory                                                                                                                                                     |       | 541,049           |       | 539,392               |       | 458,435 |   |
| Deferred income  taxes                                                                                                                                        |       | 118,768           |       | 116,697               |       | 111,516 |   |
| Prepaid expenses  and other current assets                                                                                                                    |       | 107,136           |       | 64,640                |       | 61,730 |   |
| Total current  assets                                                                                                                                         |       | 1,892,553         |       | 1,845,370             |       | 1,857,513 |   |
|                                                                                                                                                          |       |              |       |                  |       |   |   |
| Property and  equipment, net                                                                                                                                  |       | 183,421           |       | 160,542               |       | 183,799 |   |
| Other  non-current assets:                                                                                                                                    |       |              |       |                  |       |   |   |
| Goodwill, net                                                                                                                                                 |       | 126,909           |       | 82,817                |       | 124,125 |   |
| Intangibles, net  of amortization                                                                                                                             |       | 195,592           |       | 199,881               |       | 196,138 |   |
| Deferred income  taxes                                                                                                                                        |       | 44,440            |       | 19,511                |       | 44,892 |   |
| Other                                                                                                                                                         |       | 30,932            |       | 29,736                |       | 34,161 |   |
| Total Assets                                                                                                                                                  |       | $                 | 2,473,847  |                  | $          | 2,337,857 |   | $ | 2,440,628 |   |
|                                                                                                                                                          |       |              |       |                  |       |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                |       |              |       |                  |       |   |   |
| Current  liabilities:                                                                                                                                         |       |              |       |                  |       |   |   |
| Notes payable to  banks                                                                                                                                       |       | $                 | 64,122     |                  | $          | 15,772 |   | $ | 63,179 |   |
| Current portion  of long-term debt                                                                                                                            |       | 100,295           |       | 152,907               |       | 100,627 |   |
| Accounts payable                                                                                                                                              |       | 170,591           |       | 183,257               |       | 183,853 |   |
| Accrued expenses  and other current liabilities                                                                                                               |       | 312,782           |       | 359,955               |       | 386,725 |   |
| Income taxes  payable                                                                                                                                         |       | 71,306            |       | 39,834                |       | 71,930 |   |
| Total current  liabilities                                                                                                                                    |       | 719,096           |       | 751,725               |       | 806,314 |   |
|                                                                                                                                                          |       |              |       |                  |       |   |   |
| Long-term debt,  net of current portion                                                                                                                       |       | 359,663           |       | 452,880               |       | 360,126 |   |
| Minority  interest                                                                                                                                            |       | 9,923             |       | 14,039                |       | 8,514 |   |
| Other long-term  liabilities                                                                                                                                  |       | 45,461            |       | 21,730                |       | 45,718 |   |
| Commitments and  contingencies                                                                                                                                |       |              |       |                  |       |   |   |
| Stockholders’  equity:                                                                                                                                   |       |              |       |                  |       |   |   |
| Common stock,  par value $.01; authorized 250,000 shares; issued shares:  June 2005, 102,336; June 2004,  101,924; December 2004, 101,827 |       | 1,023             |       | 1,019                 |       | 1,018 |   |
| Retained  earnings                                                                                                                                            |       | 2,073,007         |       | 1,874,318             |       | 1,985,324 |   |
| Less shares in  treasury at cost: June 2005, 42,619; June 2004, 42,619;  December 2004, 42,619                                                 |       | (780,510          | )          | (780,510              | )          | (780,510 | ) |
| Unearned  compensation                                                                                                                                        |       | (6,718            | )          | (2,054                | )          | (5,804 | ) |
| Accumulated  other comprehensive gain                                                                                                                         |       | 52,902            |       | 4,710                 |       | 19,928 |   |
| Total  Stockholders’ Equity                                                                                                                              |       | 1,339,704         |       | 1,097,483             |       | 1,219,956 |   |
| Total  Liabilities and Stockholders’ Equity                                                                                                              |       | $                 | 2,473,847  |                  | $          | 2,337,857 |   | $ | 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** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                        | ** ** | **June 30**       | ** ** | **June 30**     | ** ** |
| ** **                                        | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Net sales                                         |       | $                      | 876,235    |                 | $          | 813,565 |   | $ | 1,801,271 |   | $ | 1,645,425 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Costs and  expenses:                              |       |                   |       |                 |       |   |   |   |   |
| Cost of sales                                     |       | 520,657                |       | 495,788              |       | 1,072,733 |   | 993,530 |   |
| Selling, general  and administrative expenses     |       | 299,105                |       | 271,113              |       | 602,980 |   | 537,241 |   |
| Loss on early  extinguishment of debt             |       |                   |       | 10,228               |       |   |   | 10,228 |   |
| Interest  expense, net                            |       | 2,634                  |       | 1,643                |       | 5,310 |   | 5,187 |   |
| Other expense,  net                               |       | 1,495                  |       | 2,891                |       | 2,682 |   | 4,726 |   |
|                                              |       | 823,891                |       | 781,663              |       | 1,683,705 |   | 1,550,912 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Income before  income taxes and minority interest |       | 52,344                 |       | 31,902               |       | 117,566 |   | 94,513 |   |
| Income taxes                                      |       | 14,971                 |       | 9,730                |       | 34,590 |   | 28,826 |   |
| Income before  minority interest                  |       | 37,373                 |       | 22,172               |       | 82,976 |   | 65,687 |   |
| Minority  interest                                |       | 285                    |       | 420                  |       | 2,659 |   | 2,830 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Net income                                        |       | $                      | 37,088     |                 | $          | 21,752 |   | $ | 80,317 |   | $ | 62,857 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Basic earnings  per share:                        |       | $                      | .62        |                 | $          | .36 |   | $ | 1.35 |   | $ | 1.05 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Diluted earnings  per share:                      |       | $                      | .60        |                 | $          | .35 |   | $ | 1.29 |   | $ | .98 |   |
|                                              |       |                   |       |                 |       |   |   |   |   |
| Dividends per  common share:                      |       |                   |       |                 |       | $ | .15 |   | $ | .15 |   |

 

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)**

Amounts inthousands, except per share data

 
| ** **                                                                          | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                          | ** ** | **2005**                            | ** ** | **2004** | ** ** |
|                                                                                |       |                                |       |   |   |
| Cash flows from  operating activities:                                              |       |                                |       |   |   |
| Net income                                                                          |       | $                                   | 80,317     |   | $ | 62,857 |   |
| Adjustments to  reconcile net income to net cash used for operating activities:     |       |                                |       |   |   |
| Depreciation and  amortization                                                      |       | 23,022                              |       | 17,952 |   |
| Minority  interest                                                                  |       | 2,659                               |       | 2,830 |   |
| Loss on early  extinguishment of debt                                               |       |                                |       | 10,228 |   |
| Deferred income  taxes                                                              |       | (4,354                              | )          | (13,660 | ) |
| Changes in  operating assets and liabilities, excluding the effect of acquisitions: |       |                                |       |   |   |
| Accounts  receivable                                                                |       | (30,039                             | )          | (19,460 | ) |
| Inventory                                                                           |       | (93,020                             | )          | (120,558 | ) |
| Prepaid expenses  and other                                                         |       | (19,108                             | )          | (19,805 | ) |
| Accounts payable  and accrued expenses                                              |       | (34,665                             | )          | 4,406 |   |
| Income taxes  payable                                                               |       | 4,021                               |       | 27,123 |   |
| Total  adjustments                                                                  |       | (151,484                            | )          | (110,944 | ) |
| Net cash used  for operating activities:                                            |       | (71,167                             | )          | (48,087 | ) |
|                                                                                |       |                                |       |   |   |
| Cash flows used  for investing activities:                                          |       |                                |       |   |   |
| Payments to  acquire property and equipment                                         |       | (22,488                             | )          | (15,795 | ) |
| Acquisition of  The Hockey Company (net of cash received)                           |       |                                |       | (193,052 | ) |
| Net cash used  for investing activities                                             |       | (22,488                             | )          | (208,847 | ) |
|                                                                                |       |                                |       |   |   |
| Cash flows (used  for) provided by financing activities:                            |       |                                |       |   |   |
| Net borrowings  of notes payable to banks                                           |       | 5,811                               |       | 8,091 |   |
| Re-payments of  long-term debt                                                      |       | (112                                | )          | (255,638 | ) |
| Net proceeds  from issuance of convertible debentures                               |       |                                |       | 350,000 |   |
| Proceeds from  issuance of common stock to employees                                |       | 16,162                              |       | 18,777 |   |
| Dividends paid                                                                      |       | (8,952                              | )          | (8,972 | ) |
| Repurchase of  common stock                                                         |       | (5,655                              | )          | (40,321 | ) |
| Net cash (used  for) provided by financing activities                               |       | 7,254                               |       | 71,937 |   |
|                                                                                |       |                                |       |   |   |
| Effect of  exchange rate changes on cash and cash equivalents                       |       | (23,238                             | )          | (7,225 | ) |
| Net decrease in  cash and cash equivalents                                          |       | (109,639                            | )          | (192,222 | ) |
| Cash and cash  equivalents at beginning of period                                   |       | 565,233                             |       | 693,599 |   |
| Cash and cash  equivalents at end of period                                         |       | $                                   | 455,594    |   | $ | 501,377 |   |
| Supplemental  disclosures of cash flow information:                                 |       |                                |       |   |   |
| Interest paid                                                                       |       | $                                   | 14,425     |   | $ | 14,733 |   |
| Income taxes  paid                                                                  |       | $                                   | 33,690     |   | $ | 11,658 |   |

 

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

 

5

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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**

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United States (“GAAP”)for interim financial information and reflect all adjustments (consisting ofnormal recurring accruals) which are, in the opinion of management, necessaryfor a fair presentation of the results of operations for the interimperiods.  The interim financialinformation and notes thereto should be read in conjunction with the Company’slatest annual report on Form 10-K. The results of operations for the three months and six months ended June 30,2005 are not necessarily indicative of results to be expected for the entireyear.

 

The balance sheet at December 31,2004 has been derived from the audited financial statements at that date, butdoes not include all of the information and footnotes required by GAAP forcomplete financial statements.  Forfurther information, refer to the consolidated financial statements andfootnotes thereto included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2004.

 

**Reclassification**

 

Certain amounts in priorperiods have been reclassified to conform to the 2005 presentation.  These reclassifications had no impact onpreviously reported results of operations or stockholders’ equity.

 

**Accountingfor Stock-Based Compensation**

 

At June 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.

 

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

 
| ** **                                                                                                                                  | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                                                                                                  | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                                                                                                  | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                                                                                        |       |                   |       |                 |       |   |   |   |   |
| Net income                                                                                                                                  |       | $                      | 37,088     |                 | $          | 21,752 |   | $ | 80,317 |   | $ | 62,857 |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards net of related tax effect |       | 2,914                  |       | 3,171                |       | 5,368 |   | 3,139 |   |
| Pro forma net  income                                                                                                                       |       | $                      | 34,174     |                 | $          | 18,581 |   | $ | 74,949 |   | $ | 59,718 |   |

 

6

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| ** **                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                   | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                   | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
|                         |       |                   |       |                 |       |   |   |   |   |
| Basic earnings  per share:   |       |                   |       |                 |       |   |   |   |   |
| As reported                  |       | $                      | .62        |                 | $          | .36 |   | $ | 1.35 |   | $ | 1.05 |   |
| Pro forma                    |       | $                      | .58        |                 | $          | .32 |   | $ | 1.27 |   | $ | 1.01 |   |
| Diluted earnings  per share: |       |                   |       |                 |       |   |   |   |   |
| As reported                  |       | $                      | .60        |                 | $          | .35 |   | $ | 1.29 |   | $ | .98 |   |
| Pro forma                    |       | $                      | .55        |                 | $          | .30 |   | $ | 1.22 |   | $ | .95 |   |

 

Pro forma informationregarding net income and earnings per share is required by SFAS 123, whichrequires that the information be determined as if the Company had accounted forits employee stock options granted subsequent to December 31, 1994 underthe fair value method of that Statement. The fair value for these options was estimated at the date of grantusing a Black-Scholes option pricing model with the following weighted-averageassumptions as follows:

 
| ** **                                                                          | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                                          | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                                          | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
| Risk-free  interest rates                                                           |       | 3.7%                   |       | 2.8%                 |       | 3.7%-4.1% |   | 2.8%-3.3% |   |
| Dividend yields                                                                     |       | .69%                   |       | .74%-.76%            |       | .69% to .71% |   | .82%-.86% |   |
| Volatility  factors of the expected market price of the Company’s common stock |       | .22                    |       | .33                  |       | .21-.22 |   | .31-.33 |   |
| Weighted-average  expected life of the option                                       |       | 3.5 years              |       | 3.5 years            |       | 3.5 years |   | 3.5 years |   |

 

Net income, as reported, included $740 and $258 of restrictedstock-based compensation expense for the three months ended June 30, 2005and 2004, respectively, and $1,432 and $491 of restricted stock-basedcompensation expense for the six months ended June 30, 2005 and 2004,respectively.

 

**Recently IssuedAccounting Standards**

 

On December 16, 2004, the FinancialAccounting Standards Board (“FASB”) issued FASB Statement No. 123 (revised2004) “Share-Based Payment” (“SFAS 123R”), which is a revision of Statement No. 123,“Accounting for Stock-Based Compensation” (“SFAS 123”).  SFAS 123R supersedes APB Opinion No. 25,“Accounting for Stock Issued to Employees”, and amends FASB Statement No. 95,“Statement of Cash Flows”.  SFAS 123Rrequires all share-based payments to employees, including grants of employeestock options, to be recognized in the income statement based on their fairvalues.  Pro forma disclosure is nolonger an alternative.

 

Under SFAS 123R, the Company must determinethe appropriate fair value model to be used for valuing share-based payments,the amortization method for compensation cost and the transition method to beused at the date of adoption.  Thetransition alternatives include retrospective and prospective adoption methods.  Under the retrospective method, prior periodsmay be restated based on the amounts previously recognized under SFAS 123 forpurposes of pro forma disclosures either for all periods presented or as of thebeginning of the year of adoption.

 

The prospective method requires thatcompensation expense be recognized beginning with the effective date, based onthe requirements 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 thebeginning of the first fiscal year beginning after June 15, 2005.  The Company expects to adopt the standard on January 1,2006.  The Company is evaluating therequirements of SFAS 123R and has not determined its method of adoption,however, the Company does not believe that SFAS 123R will have a materialimpact on its financial position or results of operations.

 

7

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**2**

**SPECIAL CHARGES**

 

Details of the specialcharge activity during the six months ended June 30, 2005 are as follows:

 
| ** **                       | ** ** | ** ** | ** ** | **Employee**  | ** ** | ** **    | ** ** |
|----------------------------------|------------|------------|------------|---------------|------------|---------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Severance** | ** ** | **Marketing** | ** ** |
| ** **                       | ** ** | **Total**  | ** ** | **And Other** | ** ** | **Contracts** | ** ** |
|                             |       |       |       |          |       |          |       |
| Balance,  December 31, 2004 |       | $          | 7,064      |          | $          | 1,264         |       | $ | 5,800 |   |
| 2005 Utilization                 |       | (2,064     | )          | (1,264        | )          | (800          | )          |
| Balance,  June 30, 2005     |       | $          | 5,000      |          | $          | 0             |       | $ | 5,000 |   |

 

The remaining accrual iscomprised primarily of a contractual marketing obligation and will be utilizedover the next few years as this contractual obligation comes due.  The short-term portion of the accrual, or$1,600, is included in accrued expenses with the balance of $3,400 included inother long-term liabilities.

 

**3**

**EARNINGS PER SHARE**

 

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

 

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

 
| ** **                                                     | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                     | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                     | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                                     |       | $                      | 37,088     |                 | $          | 21,752 |   | $ | 80,317 |   | $ | 62,857 |   |
| **Numerator  for diluted earnings per share:**                 |       |                   |       |                 |       |   |   |   |   |
| Net income                                                     |       | $                      | 37,088     |                 | $          | 21,752 |   | $ | 80,317 |   | $ | 62,857 |   |
| Interest on 4.25%  convertible debentures, net of income taxes |       |                   |       | 959                  |       |   |   | 2,805 |   |
| Interest on  2.00% convertible debentures, net of income taxes |       | 184                    |       | 124                  |       | 370 |   | 124 |   |
| Net income                                                     |       | $                      | 37,272     |                 | $          | 22,835 |   | $ | 80,687 |   | $ | 65,786 |   |
| **Denominator  for basic earnings per share:**                 |       |                   |       |                 |       |   |   |   |   |
| Weighted average  shares                                       |       | 59,775                 |       | 59,652               |       | 59,409 |   | 59,666 |   |
| **Denominator  for diluted earnings per share:**               |       |                   |       |                 |       |   |   |   |   |
| Weighted average  shares                                       |       | 59,775                 |       | 59,652               |       | 59,409 |   | 59,666 |   |
| Effect of  dilutive securities:                                |       |                   |       |                 |       |   |   |   |   |
| Dilutive employee  stock options and warrants                  |       | 1,819                  |       | 1,959                |       | 1,894 |   | 2,107 |   |
| Assumed  conversion of 4.25% convertible Debentures            |       |                   |       | 3,349                |       |   |   | 4,916 |   |
| Assumed  conversion of 2.00% convertible Debentures            |       | 1,038                  |       | 696                  |       | 1,038 |   | 350 |   |
|                                                           |       | 62,632                 |       | 65,656               |       | 62,341 |   | 67,039 |   |
|                                                           |       |                   |       |                 |       |   |   |   |   |
| **Basic  earnings per share:**                                 |       | $                      | .62        |                 | $          | .36 |   | $ | 1.35 |   | $ | 1.05 |   |
| **Diluted  earnings per share:**                               |       | $                      | .60        |                 | $          | .35 |   | $ | 1.29 |   | $ | .98 |   |

 

8

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**4**

**COMPREHENSIVE INCOME**

 

The following table sets forth the computation of comprehensive income:

 
| ** **                                                        | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                                        | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                                        |       | $                      | 37,088     |                 | $          | 21,752 |   | $ | 80,317 |   | $ | 62,857 |   |
| Changes in  foreign currency translation adjustments              |       | (22,771                | )          | (1,965               | )          | (35,214 | ) | (4,398 | ) |
| Net change due  to hedging instruments in accordance with FAS 133 |       | 40,383                 |       | 21,656               |       | 68,188 |   | 31,323 |   |
| Comprehensive  income                                             |       | $                      | 54,700     |                 | $          | 41,443 |   | $ | 113,291 |   | $ | 89,782 |   |

 

**5**

**COMMITMENTS AND CONTINGENCIES**

 

The Company is involved in various legal proceedingsgenerally incidental to its business. While it is not feasible to predict or determine the outcome of theseproceedings, management does not believe that they should result in amaterially adverse effect on the Company’s financial position, results ofoperations or liquidity.

 

The Company has entered into financing agreements, realproperty and equipment leases which contain tax indemnity provisions.  The maximum potential amount of futurepayments is not determinable since any amounts potentially owed by the Companywould be due to future changes in tax rates or income tax regulations whichcannot be predicted.

 

**6**

**ACQUISITIONOF COMMON STOCK**

** **

Under various share repurchase programs, the Board ofDirectors has authorized the repurchase of the Company’s common stock in theopen market or privately negotiated transactions.  During the six months ended June 30,2005, the Company acquired 130,000 shares of treasury 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 June 30, 2005,the Company had approximately $150.0 million available for future repurchasesof its common stock under these Board authorized programs.

 

**7**

**SUBSEQUENTEVENTS**

** **

The Company has entered into an Agreement and Plan of Merger,dated as of August 2, 2005 (the “Merger Agreement”), with adidas-SalomonAG (“Adidas”) and Ruby Merger Corporation, a Massachusetts corporation which iswholly-owned by Adidas or one or more wholly-owned subsidiaries of Adidas (“MergerSub”).  Pursuant to the Merger Agreement,Merger Sub will merge with and into the Company (the “Merger”), with theCompany continuing as the surviving corporation.  Pursuant to the Merger Agreement, at theeffective time of the Merger, each outstanding share of common stock, par value$.01 per share, of the Company (the “Shares”), other than any Shares owned bythe Company or any direct or indirect wholly-owned subsidiary of the Company,or by any stockholders who are entitled to and who properly exercise appraisalrights under Massachusetts law, will be canceled and converted automaticallyinto 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

 

9

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converted into the right to receive $59.00 per restricted share,deferred share or share of common stock underlying such option less, in thecase of options, the exercise price thereof, without interest.

 

The Merger is conditioned, among other things, on theadoption of the Merger Agreement by the stockholders of the Company and thetermination or expiration of the waiting period under the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended, and certain other regulatoryapprovals.

 

The Merger Agreement contains certain termination rights andprovides that, upon the termination of the Merger Agreement under specifiedcircumstances, the Company may be required to pay Adidas a termination feeequal to $100.0 million.  In the eventthe Merger Agreement is terminated for failure to obtain required antitrust approvals,Adidas may be required to pay to the Company a termination fee equal to $75.0million.

 

On July 15, 2005, the Company completed the sale ofRalph Lauren Footwear Co., Inc. (“RLF”), a wholly owned subsidiary of theCompany and Polo Ralph Lauren Corporation’s footwear licensee, to Polo RalphLauren Corporation (“Polo”) for a gross purchase price of $108.9 million,subject to certain post-closing adjustments. It is expected that the sale will result in an after-tax gain to theCompany of approximately $45.0 million to $50.0 million, which will be recordedin the third quarter of 2005.  Upon theclosing of the transaction, the agreement under which RLF acted as Polo’sfootwear licensee was terminated.  TheCompany will continue to provide certain transition services to Polo for aperiod of up to eighteen months.  Thefees received for such services will approximate the expenses incurred.

 

On July 1, 2005, the Company entered into a newfive-year revolving credit agreement in the amount of $300.0 million (“TheAgreement”) with its bank group.  TheAgreement includes a letter of credit sub-facility in the amount of $200.0million as well as a revolving credit facility, which is available to financethe short-term working capital needs of the Company, if required.  As part of the Agreement, the Company isrequired to pay certain commitment fees on the unused portion of the revolvingcredit facility.  The Agreement containsvarious covenants including the requirement to maintain a minimum interestcoverage ratio and debt to adjusted earnings ratio. Under the terms of theAgreement, there are various options under which interest is calculated.  The Agreement replaces the Company’s credit agreementwhich was entered into in 2002.

 

Item 2.  Management’sDiscussion and Analysis of Results of Operations and Financial Condition.

 

**SPECIALNOTE CONCERNING FORWARD-LOOKING STATEMENTS**

 

This Quarterly Report on Form 10-Q containsforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995, including statements about the Company’s sales,revenues, earnings, spending, margins, cash flow, future orders, inventory,products, actions, plans, strategies, objectives, guidance with respect to theCompany’s future operating results and estimates of gains on the sale of RalphLauren Footwear Co., Inc. 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 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 subjectto the 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 affect the Company’sactual results and could cause such results to differ materially from thosecontained in forward-looking statements made by or on behalf of the Companyinclude, but are not limited to, the following: economic conditions in theCompany’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 and

 

10

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manufacturing; increases in raw material prices; the Company’sability to manage and forecast its growth and inventories; the loss of significantcustomers or suppliers; and the effect of currency fluctuations.  Inaddition, the European Union (“EU”) is conducting anti-dumping investigationsregarding the importation into the EU of footwear manufactured in China,Vietnam and India.  While the outcome ofthese investigations is uncertain, they could result in the imposition by theEU of additional import duties on certain Reebok and Rockport branded footwear,which could increase the cost of footwear imported into the EU by the Companyand other brands.  A number of companiesin the footwear industry, including the Company, are aggressively defendingagainst the imposition of such duties by the EU.  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 Company basesits estimates on historical experience and on various other assumptions thatare believed to be reasonable under the circumstances, the results of whichform the basis for making judgments about the carrying values of assets andliabilities 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 to occur thatwould materially affect the methodology, the assumptions described, oraccounting estimates used. There have been no material changes made to theaccounting estimate in the past three years. In the past, actual results have not been materially different from theCompany’s estimates.  Management hasdiscussed the development and selection of its accounting estimates, and theManagement’s Discussion and Analysis disclosure regarding these estimates, withthe Company’s audit committee.

 

The Company has identifiedthe following as critical accounting policies based on the significantjudgments and estimates used in determining the amounts reported in itsconsolidated financial statements:

 

**Sales Returns and Allowances**

 

The Company recordsreductions to revenue for estimated customer returns and allowances.  The Company bases its estimates on historicalrates of customer returns and allowances as well as the specific identificationof outstanding returns and allowances that have not yet been received by theCompany.  The actual amount of customerreturns or allowances, which is inherently uncertain, may differ from theCompany’s estimates.  If actual orexpected returns and allowances were significantly greater or lower than thereserves the Company had established, the Company would record an adjustment toreduce or increase net sales and net income in the period in which it made sucha determination.

 

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**Accounts Receivable**

 

The Company maintainsallowances for doubtful accounts for estimated losses resulting from theinability 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.  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 theCompany.  The settlement or resolution ofthese differences could result in future changes to these estimates.

 

**Inventory Valuation**

 

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

 

**Hedging Policies**

 

The Company uses foreigncurrency forward contracts, options contracts and interest rate swap agreementsto hedge its exposure to: (1) merchandise purchased in U.S. Dollars thatis forecasted to be sold to customers in other currencies; (2) significantassets and liabilities that are denominated in other currencies; and (3) interestrate movement.  If actual fluctuations inforeign exchange rates or interest rates are more or less favorable than thoseprojected by management, or if the actual amount of merchandise purchased inU.S. Dollars to be sold to customers in other currencies differs from theamounts projected, an adjustment may be required to reduce or increase cost ofgoods sold or other income and net income.

 

**Endorsement Contracts**

 

In general, endorsementpayments are expensed on a straight-line basis over the term of the contract.However, certain contract elements may be accounted for differently based uponthe facts and circumstances of each individual contract. Certain contractsprovide for contingent payments for meeting specific performance achievements.The Company records these contingent payments in selling, general andadministrative expenses when the specific performance achievement has been met.

 

Some of the contractsprovide for payments based upon endorsers maintaining a level of performance intheir sport over an extended period of time (*e.g.*,maintaining a top ranking in a sport for a year). These amounts are reported inselling and administrative expense when the Company determines that it isprobable that the specified level of performance will be maintained throughoutthe period. In these instances, to the extent that actual payments to theendorser differ from the Company’s estimate due to changes in the endorser’sathletic performance, increased or decreased selling and administrative expensemay be reported in a future period.

 

Some of the contractsprovide for royalty payments to endorsers based upon a predetermined percentageof sales of particular products.  TheCompany expenses these payments in cost of sales as the related sales aremade.  In certain contracts, the Companyoffers minimum guaranteed royalty payments. For contractual obligations forwhich the Company estimates that it will not meet the minimum guaranteed amountof royalty fees through sales of product, the Company records a portion of theamount in selling, general and administrative expenses and a portion in cost ofsales on a straight line basis over 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 generate sufficientfuture taxable income in these jurisdictions, an adjustment may**

** **

**12**

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** **

**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 ACCOUNTING STANDARDS—**TheCompany has described the impact anticipated from the adoption of certain newaccounting pronouncements effective in 2005 in Note 1 to the CondensedConsolidated Financial Statements for the quarter ended June 30, 2005.

 

**NON-GAAPMEASURES**—The Company provides certain constant dollarcomparisons, which eliminate the effect of foreign currency fluctuations onsuch comparisons, in this Quarterly Report on Form 10-Q.  Constant dollars are calculated bytranslating the prior period financial information at the current periodforeign exchange rates, thereby eliminating the effect of foreign currencyfluctuations.  Because of thesignificance of the Company’s international operations and because of thesignificant fluctuation that has occurred in foreign currency values ascompared to the U.S. Dollar, the Company believes that disclosing constantdollar comparisons in certain instances assists in the readers’ understandingof the Company’s consolidated financial statements.  However, such comparisons may not reflectfuture changes in currency.

 

In this Quarterly Report on Form 10-Q the Company provides certainnet sales and balance sheet comparisons that exclude the results of The HockeyCompany.  Because the Company acquiredThe Hockey Company effective June 30, 2004, The Hockey Company resultswere not included in the Reebok Brand for the six months ended June 30,2004.  The Company believes thatdisclosing comparisons excluding the results of The Hockey Company in certaininstances assists in the readers’ understanding of the Company’s consolidatedfinancial statements.

 

**OPERATINGRESULTS**

 

**SecondQuarter 2005 Compared to Second Quarter 2004**

 

Net sales for the quarterended June 30, 2005, were $876.2 million, an increase of $62.6 million, or7.7%, from the quarter ended June 30, 2004 net sales of $813.6million.  On a constant dollar basis,which eliminates the effect of currency exchange fluctuations, net sales forthe quarter ended June 30, 2005, increased $49.1 million, or 5.9%, ascompared to the second quarter of 2004.  The inclusion of The Hockey Company accountedfor most of the increase.  Worldwidesales of the Reebok Brand were $740.1 million in the second quarter of 2005, anincrease of $59.1 million, or 8.7%, from $681.0 million in the second quarterof 2004.

 

The following tableprovides a reconciliation of net sales for the three months ended June 30,2005 and 2004, excluding the sales of The Hockey Company (in millions):

 
| ** **          | ** ** | **2005**         | ** ** | **2004**                | ** ** |
|---------------------|------------|------------------|------------|-------------------------|------------|
| **Net Sales**       | ** ** | **As  Reported** | ** ** | **The Hockey  Company** | ** ** | **Without  The Hockey  Company** | ** ** | **As  Reported** | ** ** |
| Reebok Brand:       |       |             |       |                    |       |   |   |   |   |
| U.S. Footwear       |       | $                | 281.2      |                    | $          | 4.3 |   | $ | 276.9 |   | $ | 279.3 |   |
| U.S. Apparel        |       | 109.2            |       | 9.2                     |       | 100.0 |   | 89.6 |   |
| International       |       | 349.7            |       | 34.8                    |       | 314.9 |   | 312.1 |   |
| Total Reebok  Brand |       | $                | 740.1      |                    | $          | 48.3 |   | $ | 691.8 |   | $ | 681.0 |   |
|                |       |             |       |                    |       |   |   |   |   |
| Total Company       |       | $                | 876.2      |                    | $          | 48.3 |   | $ | 827.9 |   | $ | 813.6 |   |

 

U.S. footwear sales of the Reebok Brand increased 0.7% to $281.2million in the second quarter of 2005 from $279.3 million in the second quarterof 2004.  The inclusion of The HockeyCompany accounted for the increase. During the quarter, as a percentage of sales, the Company’s full price,fill-in business for U.S. footwear was flat and cancellations declined whencompared to the second quarter of 2004. Also during the second quarter of 2005, footwear and apparel sales inthe Company’s U.S. outlet stores declined as 

 

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compared with the prior year’s second quarter because the Company isrepositioning these stores for more profitable long-term growth.

 

The Company continues toinvest in its three key product and marketing platforms: Performance, Rbk andClassic.  During the quarter, Reeboksales of Performance footwear products increased by 23.6% on a worldwidebasis.  The Company saw a shift to moretechnical performance products, particularly in the U.S. market.  Sales were up in most of the Performancecategories including basketball, running, cleated, tennis and training.  The Company believes that footwear technologycontinues to play an important role in its performance positioning.  During the quarter the Company introduced itsnewest Pump technology, which it refers to as The Pump 2.0.  This new self-inflating Pump technology willbe featured across multiple product categories during the second half of theyear, including basketball and running, for both men and women.

 

The Company believes thatits Rbk product and marketing platform continues to evolve into a broaderinitiative across multiple categories for both men and women.  During the 2005 second quarter, U.S. footwearsales of Rbk products increased 6.6%. The Company plans to launch a new line of Rbk fashion Classic productspecifically designed for women in 2006. The Company also intends to market additional music products pertainingto new associations with selected music icons, thereby broadening the number ofcollections and marketing themes that the Company brings to retail.

 

During the three and sixmonth periods, worldwide sales of Reebok Classic footwear increased.  In the U.S., where the Company believes themarket has turned towards more technical performance products, sales of Classicfootwear declined 12.8%.  This declineoccurred primarily with one of the Company’s key retail partners.  This retail partner experienced some slowdownin the rate of sale of the Company’s Classic leather products as compared withits internal plans.

 

U.S. apparel sales of theReebok Brand increased by 21.9% to $109.2 million in the second quarter of 2005from $89.6 million in the second quarter of 2004.  The Hockey Company accounted for approximatelyone-half of the increase.  The Companygenerated a strong double-digit sales increase in its sports licensed apparelbusiness in the quarter.  The Company’ssports licensed products continue to perform well with strong sales increasesto athletic specialty retailers, sporting goods dealers, team shops and on theinternet.  The sales increase thisquarter was also due to the fact that in last year’s second quarter the Companywas implementing new systems and procedures in its Indianapolis licensed apparelfacility, which caused a temporary slowdown and some disruption in its abilityto ship during the second quarter of 2004. The new systems are performing well this year, and June 2005 wasthe highest shipping month ever for this facility as through-put per labor hourincreased and the costs decreased.  Salesduring the quarter in Reebok’s U.S. branded apparel business were about thesame as in the prior year’s second quarter.

 

International sales ofthe Reebok Brand (including footwear and apparel) were $349.7 million in thesecond quarter of 2005, an increase of 12.0% from sales of $312.1 million inthe second quarter of 2004.  The HockeyCompany sales included therein were $34.8 million.  International footwear sales increased 22.8%and international apparel sales decreased by 1.0%.  Changes in foreign currency exchange rateshave favorably impacted these comparisons. On a constant dollar basis, international sales of the Reebok Brandincreased $25.8 million, or 8.0%. International footwear sales increased 18.6% and international apparelsales decreased by 4.9%.  On a categorybasis, most of the footwear sales improvement came from the Classic, running,adventure and kids categories.

 

In the U.K., footwearsales increased by 38.2% during the second quarter of 2005 as compared with thesame period last year.  However, U.K.apparel sales declined by 25.4% in the quarter. Most of the apparel decline is attributable to Liverpool Football Clubshirt sponsorship questions (not related to Reebok) that were unresolved duringthe first half of 2005.  Because of theseissues, the Company was unable to take its Liverpool Football Club shirts tomarket.  These issues have been resolvedand the Company believes that its licensed apparel sales performance in the U.K.should improve in the second half of the year.  In constant dollars, sales increased in Germany, Poland, Spain,Switzerland and Turkey whereas sales declined in 

 

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France and Italy.  Over the past six months the Company hasinstalled new management teams in both France and Italy.  The Company is hopeful that with newleadership in these markets and with the investments it is making inadvertising and marketing in Europe, it will begin to see progress in Franceand Italy beginning in 2006.  In Europeduring the first six months of 2005, the Company increased its advertisingexpenditure by 75% over the comparable period last year.

 

The Company’s footwearbusiness in the Asia Pacific region also performed well in the quarter withsales increases in China, India, Japan, Korea and to its independentdistributors in the region.  In LatinAmerica, sales by the Company’s Mexican subsidiary increased by 34% in the secondquarter of 2005 and sales by the Company’s independent distributors in thisregion increased in most of the countries in which they operate.

 

Rockport’s sales for thesecond quarter of 2005 were $85.6 million, a decrease of 2.7% from sales of$88.0 million in the second quarter of 2004. The Company believes that the quality of Rockport’s sales has improvedas closeout sales declined in the quarter. Domestic sales for the Rockport Brand decreased 4.6% while internationalsales for the Rockport brand increased 1.0% as compared to the second quarter of2004.  Currency has favorably impactedthese comparisons.  On a constant dollarbasis, international sales of the Rockport Brand decreased 3.2%.  International revenues accounted forapproximately 34% of Rockport’s sales in the second quarter of 2005 as comparedto 33% in the second quarter of 2004.

 

Sales of the Company’sother brands, Ralph Lauren Footwear and The Greg Norman Collection, were $50.5million in the second quarter of 2005, an increase of 13.2% from sales of $44.6million in the second quarter of 2004.

 

The Company’s overallgross margin was 40.6% of sales during the second quarter of 2005, which is anincrease of 150 basis points when compared with the Company’s gross margin of39.1% in the second quarter of 2004. During the quarter, the Company’s gross margins improved both in theU.S. and internationally.  However, mostof the improvement came from the Company’s  international markets.

 

Selling, general andadministrative expenses for the second quarter of 2005 were $299.1 million, or34.1% of sales, an increase of $28.0 million when compared to $271.1 million,or 33.3% of sales, for the second quarter of 2004.  Approximately half of the increase inSG&A was due to the inclusion of The Hockey Company.  The Company’s new “I Am What I Am” campaignfor the Reebok Brand, which was launched in the first quarter of 2005, is theCompany’s largest global integrated marketing and advertising campaign innearly a decade.  During the quarter theCompany introduced several new celebrities to be featured in the campaignincluding sports, music and entertainment personalities.

 

During the first quarterof 2005, the Company began to integrate The Hockey Company’s business into theReebok Brand on both a product and geographic basis.  The Company had originally planned to moveonly The Hockey Company’s operations, including their warehouse anddistribution facilities, into newly constructed headquarters in Montreal in thefirst quarter of 2005.  This move wasdelayed until the second quarter of 2005 because the Company decided to alsomove the Company’s Canadian operations to these facilities.  The Company has also decided to integrate itsReebok operations and The Hockey Company operations in Scandinavia beginning inthe second half of 2005.  As a result of theseactions, the Company will incur certain one-time integration costs during thesecond half of 2005 which are currently estimated to be in the range of $9.0 ona pre-tax basis.  These costs relate tocarrying redundant workforces and facilities for a period of time and toseverance and other wind-down expenses. The Company believes that this newly created organization will positionReebok and The Hockey Company for future growth by driving a consistent brandimage with greater efficiencies in both Canada and Scandinavia.

 

For the quarter ended June 30,2005, other expenses, net, was income of $1.5 million.  Included in other expenses, net, is theamortization of finite-lived intangibles, certain currency gains and losses andother non-operating expenses.

 

Net interest expense was$2.6 million for the quarter ended June 30, 2005, an increase of $1.0million as compared to the second quarter of 2004.  Interest expense increased $1.6 during thesecond quarter of 2005 and interest income increased $0.6 million for thesecond quarter of 2005 as compared to the second quarter of 2004.

 

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The Company’s effectiveincome tax rate was 28.6% for the second quarter of 2005 as compared to 30.5%for the second quarter of 2004.  TheCompany expects that its full year 2005 effective income tax rate will beapproximately 29.5%, which also approximates the rate for the first half of2005.  The estimated 2005 tax rate isbased on current tax law and the current expected geographic mix of the Company’searnings.  Under current accountingrules, the tax rate could, and is expected to, fluctuate on a quarterly basisdepending on the jurisdictions in which profits are considered to be earned,changes in estimates of credits and deductions, the resolution of issuesarising from tax audits with various taxing authorities and the ability torealize deferred tax assets.

 

**First SixMonths of 2005 Compared to First Six Months of 2004**

 

Net sales for the sixmonths ended June 30, 2005, were $1.801 billion, an increase of $155.9million, or 9.5%, from the six months ended June 30, 2004 net sales of$1.645 billion.  The inclusion of TheHockey Company accounted for almost half of the increase.  On a constant dollar basis, which eliminatesthe effect of currency exchange fluctuations, net sales for the six monthsended June 30, 2005, increased $121.7 million, or 7.2%.  Worldwide sales of the Reebok Brand were$1.523 billion for the first six months of 2005, an increase of $145.5 million,or 10.6%, from $1.378 billion in the first six months of 2004.

 

The following tableprovides a reconciliation of net sales for the six months ended June 30,2005 and 2004, excluding the sales of The Hockey Company (in millions):

 
| ** **          | ** ** | **2005**         | ** ** | **2004**                | ** ** |
|---------------------|------------|------------------|------------|-------------------------|------------|
| **Net Sales**       | ** ** | **As  Reported** | ** ** | **The Hockey  Company** | ** ** | **Without  The Hockey  Company** | ** ** | **As  Reported** | ** ** |
| Reebok Brand:       |       |             |       |                    |       |   |   |   |   |
| U.S. Footwear       |       | $                | 553.9      |                    | $          | 6.9 |   | $ | 547.0 |   | $ | 540.0 |   |
| U.S. Apparel        |       | 222.8            |       | 15.1                    |       | 207.7 |   | 187.4 |   |
| International       |       | 746.6            |       | 50.5                    |       | 696.1 |   | 650.4 |   |
| Total Reebok  Brand |       | $                | 1,523.3    |                    | $          | 72.5 |   | $ | 1,450.8 |   | $ | 1,377.8 |   |
|                |       |             |       |                    |       |   |   |   |   |
| Total Company       |       | $                | 1,801.3    |                    | $          | 72.5 |   | $ | 1,728.8 |   | $ | 1,645.4 |   |

 

U.S. footwear sales ofthe Reebok Brand increased 2.6% to $553.9 million in the first six months of2005 from $540.0 million in the first six months of 2004.  During the first six months of 2005, theCompany’s full price, fill-in business for U.S. footwear decreased and returns,cancellations and off-price close-out business declined as a percentage ofsales when compared to the prior year’s first six months.  Also during the first six months of 2005,footwear and apparel sales in the Company’s U.S. outlet stores declined ascompared with the prior year’s comparable six month period.

 

U.S. apparel sales of theReebok Brand increased by 18.9% to $222.8 million in the first six months of2005 from $187.4 million in the first six months of 2004.  Excluding the sales of The Hockey Company in2005, sales of U.S. apparel increased by 10.8%. The Company generated double-digit sales increases in its sportslicensed apparel business and single digit sales increases in its U.S. brandedapparel business during the first six months of 2005 as compared to the firstsix months of 2004.  The Company’s sportslicensed products continued to perform well with strong sales increases toathletic specialty retailers, sporting goods dealers and team shops.

 

International sales ofthe Reebok Brand (including footwear and apparel) were $746.6 million in thefirst six months of 2005, an increase of 14.8% from sales of $650.4 million inthe first six months of 2004.  The HockeyCompany sales included therein were $50.5 million.  International footwear sales increased 22.5%and international apparel sales increased by 5.2%.  Changes in foreign currency exchange rateshave favorably impacted these comparisons. On a constant dollar basis, international sales of the Reebok Brandincreased $65.6 million, or 9.6%. International footwear sales increased 17.1% and international apparelsales increased by 0.3%.

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On a category basis, thesales improvement came from the adventure, Classics, training, kids, running,tennis and walking categories.

 

In the U.K., footwear salesincreased by 34.2% for the first six months of 2005 as compared with the sameperiod last year.  However, U.K. apparelsales declined by 17.0% during the first six months of 2005.  A majority of the apparel decline isattributable to Liverpool Football Club shirt sponsorship questions (notrelated to Reebok) that were unresolved during the first half of 2005.  Because of these issues, the Company wasunable to take its Liverpool Football Club shirts to market.  These issues have been resolved and theCompany believes that its licensed apparel sales performance in the U.K. shouldimprove in the second half of the year.

 

In constant dollars,sales increased in Germany, Poland, Russia, Portugal and Turkey whereas salesdeclined in France, Spain and in Italy. Over the past six months the Company has installed new management teamsin both France and Italy.  The Company ishopeful that with new leadership in these markets and with the investments itis making in advertising and marketing in Europe, it will begin to see progressin France and Italy beginning in 2006. In Europe during the first six months of 2005, the Company’s advertisingexpenditures have increased by 75% over the comparable period last year.

 

The Company’s footwearbusiness in the Asia Pacific region also performed well in the first six monthsof 2005 with sales increases in China, India, Japan, Korea and with itsindependent distributors in the region. In Latin America, sales by the Company’s Mexican subsidiary increased by42.2% during the first six months of 2005 and sales by the Company’sindependent distributors in this region increased in most of the countries inwhich they operate.

 

Rockport’s sales for thefirst six months of 2005 were $175.7 million, an increase of 0.4% from sales of$175.0 million in the first six months of 2004. Domestic sales for the Rockport Brand decreased 3.1%, whereasinternational sales increased 6.6% as compared to the first six months of2004.  Currency has favorably impactedthese comparisons.  On a constant dollarbasis, international sales of the Rockport Brand increased 1.9%.  International revenues accounted forapproximately 38% of Rockport’s sales in the first six months of 2005 ascompared to 36% in the first six months of 2004.

 

Sales of the Company’sother brands, Ralph Lauren Footwear and The Greg Norman Collection, were $102.3million in the first six months of 2005, an increase of 10.5% from sales of$92.6 million in the first six months of 2004.

 

The Company’s overallgross margin was 40.4% of sales during the first six months of 2005, which isan increase of 80 basis points when compared with the Company’s gross margin of39.6% in the first six months of 2004. During the first six months of 2005, the Company’s gross marginsimproved in both the U.S. and internationally. However, most of the improvement came from the Company’s internationalmarkets.

 

Selling, general andadministrative expenses for the first six months of 2005 were $603.0 million,or 33.5% of sales, an increase of $65.8 million when compared to $537.2million, or 32.6% of sales, for the first six months of 2004.  During the first six 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 AmWhat I Am” marketing campaign celebrates authenticity and individuality and theCompany believes that it is both relevant and inspiring for youngconsumers.  The coordinated launch inEurope covered thirteen countries including the United Kingdom, France, Spainand Italy.  As a result of theseinvestments in the first six months of 2005, the Company’s total Reebok brandadvertising expense increased, as compared with the first six months of 2004.

 

For the six months ended June 30,2005, other expenses, net, was income of $2.6 million.  Included in other expenses, net, is theamortization of finite-lived intangibles, certain currency gains and losses andother non-operating expenses.

 

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Net interest expense was$5.3 million for the six months ended June 30, 2005, approximately thesame as the first six months of 2004. Interest expense increased $2.1 during the first six months of 2005 andinterest income increased $2.0 million for the first six months of 2005 ascompared to the first six months of 2004.

 

The Company’s effectiveincome tax rate was 29.4% for the first six months of 2005 as compared to30.50% for the first six months of 2004. The Company expects that its full year 2005 effective income tax ratewill be approximately 29.5%, which also approximates the rate for the firsthalf of 2005.  The estimated 2005 taxrate is based on current tax law and the current expected geographic mix of theCompany’s earnings.  Under currentaccounting rules, the tax rate could, and is expected to, fluctuate on aquarterly basis depending on the jurisdictions in which profits are consideredto be earned, changes in estimates of credits and deductions, the resolution ofissues arising from tax audits with various taxing authorities and the abilityto realize deferred tax assets.

 

**ReebokBrand Backlog of Open Orders**

 

Worldwide backlog of opencustomer orders scheduled for delivery during the period July 1, 2005through December 31, 2005 for the Reebok Brand increased 0.6% as comparedto the same period last year.  Backlog inconstant dollars is calculated by translating the 2004 backlog at the 2005foreign exchange rates, thereby eliminating the effect of currency fluctuationson the comparisons.

 

Comparisons regardingorders scheduled for delivery for the period July 1, 2005 through December 31,2005 for the Reebok Brand are as follows:

 
| ** **           | ** ** | **As Reported**       | ** ** |
|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **Percentage Change** | ** ** |
| ** **           | ** ** | **2005/2004**         | ** ** |
| ** **           | ** ** | **Reported**          | ** ** | **Constant** | ** ** |
| ** **           | ** ** | **Dollars**           | ** ** | **Dollars** | ** ** |
| USA:                 |       |                  |       |   |   |
| Footwear             |       |                  | -0.7%      |   |   | -0.7% |   |
| Apparel              |       |                  | +1.0%      |   |   | +1.0% |   |
| Total Domestic       |       |                  | -0.1%      |   |   | -0.1% |   |
| International:       |       |                  |       |   |   |   |   |
| Footwear             |       |                  | -3.9%      |   |   | -4.2% |   |
| Apparel              |       |                  | +7.9%      |   |   | +7.6% |   |
| Total  International |       |                  | +1.7%      |   |   | +1.4% |   |
|                 |       |                  |       |   |   |   |   |
| Total Reebok  Brand: |       |                  |       |   |   |   |   |
| Footwear             |       |                  | -1.9%      |   |   | -2.0% |   |
| Apparel              |       |                  | +4.3%      |   |   | +4.2% |   |
| Total Reebok  Brand  |       |                  | +0.6%      |   |   | +0.5% |   |

 

The Company’s backlog position is not necessarily indicativeof future sales because a significant portion of the Company’s business,including sales by Company-owned retail stores, Rockport and The Greg NormanCollection are not included in the backlog. In addition, many markets are not included in open orders since salesare made by independent distributors. Finally, many orders may be cancelled, currency may fluctuate and theratio of future orders to “at once” shipments may vary from year to year.

 

**Liquidityand Sources of Capital**

 

At June 30, 2005,the Company’s working capital was $1.173 billion compared to $1.051 billion at December 31,2004 and $1.094 billion at June 30, 2004. The current ratio, a comparison of current assets to currentliabilities, at June 30, 2005 was 2.6 to 1 compared to 2.3 to 1 at December 31,2004 and 2.5 to 1 at June 30, 2004.

 

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Accounts receivable at June 30,2005 were $670.0 million compared to $623.3 million at June 30, 2004.Excluding the impact of currency, accounts receivable increased $39.8 million,or 6.3%.  Much of the Company’s salesgrowth is in regions where the days sales outstanding in receivables (“DSOs”)are longer than the Company’s average, and as a result, the Company’s DSOs haveincreased from the prior year’s first six months.  Worldwide inventories were $541.0 million at June 30,2005 compared to $539.4 million at June 30, 2004.  Excluding the impact of currency, inventorydeclined $2.8 million or 0.5%.

 

The following table setsforth a reconciliation between inventory and receivables as of June 30,2005, excluding the effect of currency:

 
| ** **              | ** ** | **June 30,** | ** ** |
|-------------------------|------------|-------------------|------------|
| **Accounts Receivable** | ** ** | **2005**          | ** ** | **2004** | ** ** | **Increase** | ** ** |
| Balance as  reported    |       | $                 | 670.0      |   | $ | 623.3 |   | 7.5 | % |
| Less:                   |       |              |       |   |   |   |   |
| Effect of  currency     |       | 6.9               |       |   |   |   |   |
|                    |       | $                 | 663.1      |   | $ | 623.3 |   | 6.3 | % |

 
| ** **           | ** ** | **June 30,** | ** ** |
|----------------------|------------|-------------------|------------|
| **Inventory**        | ** ** | **2005**          | ** ** | **2004** | ** ** | **Increase** | ** ** |
| Balance as  reported |       | $                 | 541.0      |   | $ | 539.4 |   | 0.3 | % |
| Less:                |       |              |       |   |   |   |   |
| Effect of  currency  |       | 4.4               |       |   |   |   |   |
|                 |       | $                 | 536.6      |   | $ | 539.4 |   | (0.5 | )% |

 

Prepaid expenses andother current assets were $107.1 million at June 30, 2005, as compared to$64.6 million at June 30, 2004.  Theincrease is primarily due to the increase in the value of the Company’s foreignexchange contracts of $28.9 million.  Theremaining increase is due to the increase in prepaid royalties.

 

Cash used for operations during the first six months of 2005was $71.2 million, as compared to cash used for operations of $48.1 millionduring the first six months of 2004. Capital expenditures for the six months ended June 30, 2005 were$22.5 million compared to $15.8 million for the first six months of 2004.  The capital expenditures are primarilyrelated to the Company’s European regionalization, the rollout of SAP, theintegration of The Hockey Company and Reebok Canada operations, and retail andother facility requirements internationally.

 

On July 1, 2005, the Company entered into a newfive-year revolving credit agreement in the amount of $300 million with itsbank group.  The new agreement providesthe Company with greater flexibility at reduced pricing over the next fiveyears.   Also during the quarter, theCompany repatriated $290 million of cash from foreign jurisdictions as part ofthe American Jobs Creation Act.  This isthe amount that the Company estimated at the end of 2004.

 

On July 15, 2005, the Company completed the sale ofRalph Lauren Footwear Co., Inc. (“RLF”), a wholly owned subsidiary of Reebokand Polo Ralph Lauren Corporation’s footwear licensee to Polo Ralph LaurenCorporation (“Polo”) for a gross purchase price of $108.9 million, subject tocertain post-closing adjustments.  It isexpected that the sale will result in an after-tax gain to Reebok ofapproximately $45.0 million to $50.0 million, which will be recorded in thethird quarter of 2005.

 

The Company believes thatcash generated from operations, together with the Company’s existing creditlines and other financial resources, will adequately finance the Company’s planned2005 cash requirements.  However, theCompany’s actual experience may differ from the expectations set forth in thepreceding sentence.  Factors that mightlead to a difference include, but are not limited to, the matters discussed inthe Company’s Annual Report on Form 10-K under the heading “Issues andUncertainties,” as well as future events that might have the effect of reducingthe Company’s available cash balances (such as unexpected operating losses orincreased capital or other expenditures, as well as increases in the Company’sinventory 

 

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or accounts receivable),or future events that might reduce or eliminate the availability of externalfinancial resources.

 

During the six months ended June 30, 2005, the Companyacquired 130,000 shares of treasury stock for $5.7 million.  The purchases were minimal due to the Company’snegotiations to sell RLF which precluded the Company from purchasing its shareson the open market for much of the second quarter of 2005.  At June 30, 2005, the Company hadapproximately $150.0 million available for future share purchases under theCompany’s current Board authorization.

 

In February 2005 the Company’s Board of Directorsdeclared a semi-annual cash dividend in the amount of $0.15 per share, or$9.0 million, which was paid on March 18, 2005 to shareholders ofrecord as of March 5, 2005.  On July 26,2005, the Board of Directors declared a cash dividend in the amount of $0.15per share which is payable on September 2, 2005 to all shareholders of recordas of August 19, 2005.

 

**Item3.  Quantitative and QualitativeDisclosures about Market Risk.**

 

Our market risks, and the ways we manage them, are summarizedin management’s discussion and analysis of financial condition and results ofoperations as of December 31, 2004, included in the Company’s Form 10-Kfor the year ended December 31, 2004. There have been no material changes in the first six months of 2005 tosuch risks or our management of such risks.

 

**Item 4.  Controls and Procedures.**

 

a)              The Company carriedout an evaluation, under the supervision and with the participation of theCompany’s management, including the Company’s Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures pursuant to Rule 13a-14 ofthe Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of theperiod 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 to ensure that information required tobe disclosed in this report has been properly recorded, processed, summarizedand reported within the required time periods.

 

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 financialreporting.

 

**PART II  - OTHER INFORMATION**

 

**Item 1:  Legal Proceedings.**

 

The Company is involved in various legal proceedingsgenerally incidental to its business. While it is not feasible to predict or determine the outcome of theseproceedings, management does not believe that they should result in amaterially adverse effect on the Company’s financial position, results ofoperations or liquidity.

 

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

 

(e)        Issuer Purchases ofEquity Securities

 

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| **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** | ** **  |
|--------------------------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|-------------|
| April 1,  2005 through  April 30, 2005 |       | 90,000                                |       | 43.20                             |       | 90,000                                                                                       |       | $                                                                                      | 61,861,319  |   |
| May 1, 2005  through  May 31, 2005     |       |                                  |       |                              |       |                                                                                         |       | $                                                                                      | 150,000,000 |   |
| June 1,  2005 through  June 30, 2005   |       |                                  |       |                              |       |                                                                                         |       | $                                                                                      | 150,000,000 |   |
| TOTALS                                           |       | 90,000                                |       | 43.20                             |       | 90,000                                                                                       |       | $                                                                                      | 150,000,000 |   |

 

Under various sharerepurchase programs, the Board of Directors has authorized the repurchase of theCompany’s common stock in the open market or privately negotiated transactions.  During the six months ended June 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 June 30, 2005,the Company had approximately $150.0 million available for future repurchasesof its common stock under these Board authorized programs.

 

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

 

None.

 

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

 

The Company held itsAnnual Meeting of Shareholders on May 3, 2005. At the Annual Meeting:

 

1.             Sevenmembers of the Board of Directors were elected by the Company’s shareholderswith no Abstentions or Unvoted shares.

 
| **Name of Director** | ** ** | **Votes For** | ** ** | **Votes Against** | ** ** |
|----------------------|------------|---------------|------------|-------------------|------------|
| Norman Axelrod       |       | 51,195,348    |       | 707,048           |       |
| Paul B. Fireman      |       | 51,184,200    |       | 718,196           |       |
| Paul R. Duncan       |       | 51,161,904    |       | 740,492           |       |
| Richard G.  Lesser   |       | 48,998,830    |       | 2,903,566         |       |
| Deval L. Patrick     |       | 51,197,615    |       | 704,781           |       |
| Dorothy E. Puhy      |       | 51,293,647    |       | 608,749           |       |
| Thomas M. Ryan       |       | 43,659,126    |       | 8,243,270         |       |

 

2.                                       Theappointment of Ernst & Young LLP as the Company’s independent auditorsfor 2005 was ratified by a vote of 48,637,524 For and 2,973,343 Against, with291,529 Abstentions and no Unvoted shares.

 

**Item 5: Other Information.**

 

None.

 

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**Item 6: Exhibits.**

 

10.1                           Creditand Guarantee Agreement dated as of July 1, 2005, among Reebok InternationalLtd., Reebok International Limited, Reebok Canada Inc., Sport Maska Inc., the lendersnamed therein, Credit Suisse, as General Administrative Agent,  Credit Suisse, Toronto Branch, as CanadianAdministrative Agent,  BNP Paribas, asSyndication Agent,  ABN AMRO Bank N.V., Bankof America, N.A. and Wachovia Bank, National Association, as Co-DocumentationAgents, and Credit Suisse and BNP Paribas, as Joint Bookrunners and Co-LeadArrangers.

 

31.1                           Certificationof Paul Fireman, Chairman and Chief Executive Officer, dated August 9,2005, and made pursuant to Rule 13a-14(a) and 15d-14(a) underthe Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.

 

31.2                           Certification of Kenneth Watchmaker, ExecutiveVice President and Chief Financial Officer, dated August 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 August 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.

 

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

 

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SIGNATURE

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
| Date: August 9, 2005 |   |
|----------------------|--------|
|                 |   |
|                 |   |
|                 |   | REEBOK  INTERNATIONAL LTD. |
|                 |   |   |
|                 | BY:    | /s/ KENNETH  WATCHMAKER |   |
|                 |   | Kenneth  Watchmaker |
|                 |   | Executive Vice  President and |
|                 |   | Chief Financial  Officer |

 

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