overhead, primarily due to higher personnel costs to support growth in China.

Fiscal 2005 Compared to Fiscal 2004

In the Asia Pacific Region, 4 percentage points of reported revenue growth for fiscal 2005 were due to changes in currency exchange rates. Excluding changes in currency exchange rates, sales in each Asia Pacific product business unit grew versus fiscal 2004 with the growth primarily due to unit volume; average price per unit increased slightly. Excluding currency changes, significant revenue increases in China (driven by expansion of retail distribution and strong consumer demand) and increases in every other country in the region except Australia and New Zealand were the key growth drivers for fiscal 2005.

The increase in pre-tax income for the Asia Pacific Region in fiscal 2005 was driven by higher revenues, partially offset by a lower gross margin percentage and increased selling and administrative costs as a percentage of revenues. The reduced gross margin percentage was primarily attributable to less profitable closeout sales and lower in-line net pricing margins due to strategies to improve the consumer value in Japan, partially offset by better year-over-year currency hedge rates. The increase in selling and administrative expenses was due to increases in both demand creation (driven by higher spending on sports marketing endorsements and events and increased spending on retail marketing programs) and operating overhead (driven by increased spending on personnel costs to support the growth of our business and higher costs related to sales and leadership events).

Americas Region



Fiscal 2006 Compared to Fiscal 2005

In the Americas Region, 11 percentage points of the revenue growth for fiscal 2006 were due to changes in currency exchange rates. Even excluding the changes in currency exchange rates, sales in each Americas product business unit grew in fiscal 2006. The revenue growth was driven by increased sales in every country in the region, with significant sales increases in Brazil, Argentina and Mexico.

The increase in fiscal 2006 pre-tax income for the Americas Region was attributable to higher revenues, an improved gross margin percentage, lower selling and administrative expenses as a percentage of revenues and favorable currency translation. Selling and administrative expenses were higher than fiscal 2005, but represented a lower percentage of revenues for fiscal 2006. The increased selling and administrative expenses were due to increases in both demand creation (due to increased sports marketing endorsement contracts, and increased advertising spending and retail marketing programs primarily related to the World Cup campaign) and operating overhead (driven by increased personnel costs as a result of continued expansion of the business across the region).

Fiscal 2005 Compared to Fiscal 2004

In the Americas Region, 1 percentage point of the revenue growth for fiscal 2005 was due to changes in currency exchange rates. Excluding the effects of changes in foreign currency, sales in each Americas product business unit grew in fiscal 2005. The revenue growth was driven primarily by higher sales in Central and