Adidas 2000 Annual Report Download - page 36

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32
Total Assets Increase, Equity Ratio Improves
Total assets of the adidas-Salomon Group in 2000 increased by
c431 million or 12%. Inventories showed an over-proportional
increase of 24%. This growth was the result of two main
factors: higher back orders at Salomon and TaylorMade-
adidas Golf as well as our pull-forward efforts to ensure on-time
delivery of adidas products, mainly in Europe. Retail expansion
and increased
re-order business also played a role for brand
adidas. Important
to note, however, is that the structure of our
inventories improved in 2000. Aging was better, due partly to a
higher proportion of goods in transit. As a result, provisioning
against obsolete inventory also declined.
Year-end trade receivables in 2000 were up 10% compared to
the prior year. This improvement was well below the 17% year-
over-year increase for the fourth quarter. All brands contributed
to this positive development.
The equity base was further strengthened in 2000. Equity rose
20% to c815 million as the major share of net income was
retained within the Group and was thus used to strengthen the
equity base. The equity ratio rose by 1.3 percentage points to
20.3%. Financial leverage, the ratio of net borrowings to equity,
decreased 14.0 percentage points to 220%.
Investments Increase
Investments in property, plant and equipment within the Group
totaled
c125 million, up 23% versus the previous year. The
renovation and expansion of adidas America’s new headquarter
facilities cost c25 million in 2000. Other major capital expen-
diture projects included supply chain improvements, IT infra-
structure, own-retail expansion and further improvements to the
corporate headquarters in Herzogenaurach, Germany.
Financing Instruments Optimized
Net borrowings peaked in August, in line with usual annual
patterns, at above c1.9 billion, and declined steadily during
the last four months of the year. As a result, net borrowings
were c1.8 billion at year-end. Credit lines and other financing
arrangements, which were available for borrowings, amounted
to approximately c3.6 billion at the end of the year, of which
c1.6 billion were longer-term maturities. The Group’s strategy
is to gradually reduce its dependence on bank financing and
to extend maturities in its longer-term funding arrangements.
In January 2000, the Group introduced a second Commercial
Paper Program, in Germany, for an amount of c750 million.
The program performed successfully throughout the year and
grew from four initial dealing banks to the current six participat-
ing institutions. The maturity of the existing medium-term credit
line agreements was extended from 2003 to 2004. To strengthen
the longer-term component in our financing arrangements, the
Group negotiated additional longer-term financing in the form of
Private Placements for the amount of c91 million, with maturi-
ties of five and six years.
In its financing, the Group continued to concentrate on short-
term borrowings, taking advantage of the generally lower
short-term interest rates. As protection against the risk of rising
interest rates, adidas-Salomon utilizes longer-dated interest
rate caps. Primarily as a replacement for expiring caps, new
caps valued at approximately c600 million were arranged in
2000. More than 70% of the outstanding caps will expire
beyond 2002, with a concentration in 2006. 88% of the out-
standing caps protect borrowings in euros and US dollars.
The average protected interest rate of all outstanding caps is
6.5%. In 2001, borrowings are protected at 5.75%.
Equity Ratio
(in % of Total Assets)
0 10203040
2000
1999
1998
1997
1996
Capital Expenditure Development*
(euros in millions)
2000
1999
1998
1997
1996
0 20 40 60 80 100 120
* Comprises property, plant and equipment expenditures