Adidas 2002 Annual Report Download - page 72

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70 REPORTING MANAGEMENT DISCUSSION & ANALYSIS /// RESEARCH AND DEVELOPMENT
RECEIVABLES GROWTH COMPARES FAVORABLY TO SALES
DEVELOPMENT /// Receivables at adidas-Salomon increased
by 3% to € 1.3 billion in 2002 versus € 1.3 billion in the prior
year. On a currency-neutral basis, receivables increased by
14%. This rate is below the Group’s fourth quarter currency-
neutral sales growth and reflects strict discipline in the
Group’s trade terms management. The portion of adidas
receivables not-yet-due improved further by 3 percentage
points from 75% to 78%. The year-over-year receivables
comparison for brand adidas was flat, with reductions in
Europe and Asia compensated by increases in the highly
competitive North American region. As a result of lower
winter sports sales, year-end receivable balances at
Salomon were reduced. At TaylorMade-adidas Golf, strong
sales growth in the last few months of 2002 due to the R500
Series introduction resulted in a significant year-over-year
increase in receivables.
SALOMON AND TAYLORMADE-adidas GOLF RESEARCH
CLOSE TO MARKET /// For Salomon and TaylorMade-adidas
Golf the research and development of products is located
at each brand’s respective headquarters. Salomon’s
research and development as well as its marketing and
design activities are mainly concentrated at the Salomon
Design Center in Annecy, France. To remain close to its
consumers, Salomon has additional product-specific design
centers in Montebelluna, Italy, for ski and snowboard boots,
in Vancouver, Canada, for apparel (Arc’Teryx) and in Perth,
Australia, for new Salomon surfing products. Research
and development activities for TaylorMade-adidas Golf are
centered in Carlsbad/California, USA.
THREE REVOLUTIONARY TECHNOLOGIES DRIVE 2002
RESEARCH AND DEVELOPMENT EXPENSES /// In 2002,
adidas-Salomon launched three ground-breaking technolo-
gies: ClimaCool®footwear, a3® footwear and the R500 Series
golf drivers. ClimaCool®, available in both adidas footwear
and apparel, is a 360° ventilation and moisture management
system which keeps the body measurably cooler and drier.
a3® is an energy management system developed for adidas
footwear. The system cushions, guides and drives the foot
through each stride, providing optimized energy transfer.
The TaylorMade R500 Series drivers utilize an expanded COR
zone for greater ball velocity and accuracy. Each of these
technologies is patented and trademark-protected.
RESEARCH AND DEVELOPMENT EXPENDITURE VIRTUALLY
UNCHANGED IN 2002 /// In 2002, expenditures for research
and development decreased by less than 1% to € 85 million,
compared to € 86 million in 2001. In addition, market
research and analysis was incurred as part of the Group’s
operating expenses.
FINANCE AND INVESTMENT
TOTAL ASSETS INCREASE /// In 2002, total assets grew by
2% to € 4.3 billion versus € 4.2 billion in the prior year. This
increase reflects the January acquisition of the remaining
50% stake in adidas Italy, the July purchase of a 10% partici-
pation in the Bayern Munich football club, and the December
purchase of the golf brand Maxfli.
SUCCESSFUL WORKING CAPITAL MANAGEMENT /// As a
result of the focused working capital reduction initiatives
undertaken throughout 2002, inventories at adidas-Salomon
were reduced by 7% from € 1.3 billion in 2001 to € 1.2 billion
in 2002. On a currency-neutral basis, inventories increased
1%, which is significantly lower than year-end backlog growth.
Improvements were recorded at all brands within the Group.
The decrease in inventory levels at brand adidas was achieved
despite the double-digit growth in order books for the brand
at year-end. Following successful clearance efforts, particu-
larly in the inline skate and soft goods categories, Salomon
made strong progress in stock reduction, offsetting the
addition of Arc’Teryx inventory. Similarly, inventory reductions
at TaylorMade-adidas Golf were largely able to compensate
for the first-time inclusion of Maxfli stock.
INVENTORY STRUCTURE IMPROVES FURTHER /// At year-
end 2002, adidas current inventories, which represent prod-
ucts from the current season, comprised 76% of the brand’s
overall stock level. This was an improvement of 4 percentage
points versus the prior year and reflects the progress made in
global inventory management, including careful order plan-
ning and focused clearance programs. In addition, clearance
margins were improved, partly as a result of an increase in
adidas own-retail activities.