Reebok 2006 Annual Report Download

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ANNUAL REPORT 2006
SETTING THE PACE
»»»

Table of contents

  • Page 1
    ANNUAL REPORT 2006 »»» SETTING THE PACE

  • Page 2
    ...) Equity ratio Financial leverage 229 260 314 383 483 Balance Sheet and Cash Flow Data (â,¬ in millions) Total assets Inventories Receivables and other current assets Working capital Net cash (net borrowings) Shareholders' equity Capital expenditure Net cash provided by operating activities 4) Per...

  • Page 3
    ...in sport and life. The Reebok segment comprises three brand units: Reebok, Reebok-CCM Hockey and Rockport. » TaylorMade-adidas Golf offers a full range of golf hardware, footwear, apparel and accessories. It is market leader in the metalwoods category. TaylorMade-adidas Golf markets products under...

  • Page 4
    ... revolutions to market » » Group sales reach â,¬ 10.1 billion; currency-neutral growth of 53% (14% excluding Reebok) Major 2006 product launches: › adidas: +F50 TUNIT football boot, adidas_1 basketball shoe, Adilibria women's apparel collection, integrated training system by adidas and Polar...

  • Page 5
    ... WHAT YOU WANT. YOU HAVE A VISION. YOU GO YOUR OWN WAY. YOU STICK TO IT. YOU TRUST YOUR STRENGTHS. YOUR STRATEGY. AND YOUR PERFORMANCE. YOU SET NEW STANDARDS. BECAUSE YOU KNOW YOU CAN. As an athlete. As a company. As the adidas Group. We have written sports history. And we keep on writing it. With...

  • Page 6
    » SPORT HAS BEEN A GREAT LEARNING PLACE. IF YOU WANT TO ACHIEVE ...YOU CAN. Haile Gebrselassie. A living legend. A hero for a whole generation of runners. With irresistible finishing power. Four times World Champion and two times Olympic Champion in the 10,000 meters. Still pushing towards new ...

  • Page 7
    » » » HAILE GEBRSELASSIE MID- AND LONG-DISTANCE RUNNER FASTEST MARATHON TIMES IN THE WORLD IN 2005 AND 2006

  • Page 8
    » » PEYTON MANNING QUARTERBACK, AMERICAN FOOTBALL 2007 SUPER BOWL CHAMPION AND MOST VALUABLE PLAYER

  • Page 9
    ... Peyton Manning. The best quarterback on the field today. Tough training. Constant improvement. Never stands still. Always seizing new opportunities. Reading the field. And then throwing the decisive pass for a touchdown. I'VE NEVER TAKEN FOR GRANTED WHAT WE'VE HAD, NOT FOR A SINGLE GAME, NOT ONE...

  • Page 10
    » I ALWAYS THINK UNDER PAR. YOU HAVE TO BELIEVE IN YOURSELF. Sergio Garcia. Youngest player ever to compete in the Ryder Cup. Passion drives his shots. Precision his putts. Concentration is what powers his game. Confidence is a key to his success.

  • Page 11
    » » » SERGIO GARCIA GOLFER MEMBER OF EUROPE'S WINNING RYDER CUP TEAM 2006

  • Page 12
    » KEVIN GARNETT POWER FORWARD, BASKETBALL 10-TIME NBA ALL-STAR »

  • Page 13
    ... Garnett. Born with a ball. Extremely agile. Aggressive in defense. With an amazing affinity for the hoop. One of the most outstanding all-round players the game has ever seen. Giving all he's got. And more. I FEEL LIKE IF YOU'RE GOING TO COMMIT YOURSELF, COMMIT YOURSELF WHOLEHEARTEDLY - 1000%.

  • Page 14
    » Allyson Felix. Olympic Silver. Then World Champion. And just getting started. Driven by WHEN PEOPLE STEP UP AND RUN COMPETITIVE TIMES IT BRINGS THE WHOLE LEVEL UP. ATHLETES JUST BRING GREATNESS OUT OF EACH OTHER. competition. Getting better every day. And not about to stop.

  • Page 15
    ... Board Report Supervisory Board Corporate Governance Report Compensation Report Our Share Operational and Sporting Highlights 2006 GROUP MANAGEMENT REPORT Structure and Strategy › adidas Group › Brand Segments › Corporate Functions Group Business Performance › adidas Group › Development...

  • Page 16
    012 ANNUAL REPORT 2006 › adidas Group › Interview with the CEO

  • Page 17
    ...scored with consumers, breaking sales records for footballs, boots and national team replica products. There were more players in the tournament wearing adidas footwear than any other brand. And our brand communication made a step change, with spectacular onsite advertising. Independent research con...

  • Page 18
    ... a small number of topnotch brands, we can mean more to more consumers. And in the long term, this is what market leadership is all about. Within our Group, adidas is recognized as the altruistic, premium performance brand with a strong emphasis on team sports. Reebok will be positioned within our...

  • Page 19
    ...brands. Growing our business profitably is our guiding principle in this market. At adidas, although our backlog development is negative in footwear, we are seeing positive sell-through at the retail level, particularly in running, which leaves us confident we will grow sales again in 2007. Reebok...

  • Page 20
    016 ANNUAL REPORT 2006 › adidas Group › What about TaylorMade-adidas Golf? What are the opportunities and challenges for this business segment in 2007? Our innovative strengths in this segment have allowed us to grow and increase market share in an otherwise challenging space. 2007 will be an...

  • Page 21
    ...175 million in cost synergies by 2009. The Group is moving in the right direction and I am confident we can deliver on our medium-term guidance. But this is just the start, as far as I am concerned. With all our brands at the top of their game, we will be a formidable force in shaping the future of...

  • Page 22
    ..., USA, in 1963. With a degree in computer science, he began his professional career with Reebok International Ltd. in 1983, where he worked for ten years in various operations and product functions of which the latest was Director of Footwear Development. In 1993, Glenn Bennett joined adidas AG...

  • Page 23
    ...Managing Director for Germany and later Europe and Asia/Pacific. In 1997, he was appointed to the Executive Board. In 2000, he was appointed Head of Global Marketing. In 2004, he was named President and CEO of adidas North America, while maintaining his position as Head of Global Marketing. In 2006...

  • Page 24
    ... 2006 Annual General Meeting, in particular the share split in a ratio of 1: 4 and the change of the company name from adidas-Salomon AG to adidas AG. Further, the Executive Board reported to us on the current status of the Reebok integration as well as on various capital increase measures planned...

  • Page 25
    ... of the opening balance sheet of Reebok and the change-over of the individual balance sheets, previously prepared in accordance with US-GAAP, to International Financial Reporting Standards (IFRS) as well as the required adjustments in this context. Furthermore, the members reviewed in detail the...

  • Page 26
    ...short-term challenges relating to the Reebok brand, we are confident that the Group is well positioned for continuing success. We appreciate the tremendous personal dedication, the performance and the ongoing commitment of the Executive Board, the Management Boards of the Group companies, the Works...

  • Page 27
    ... Corporation Act) 2) Employee representative Other Committees of the Supervisory Board "Greg Norman" Committee Henri Filho (Chairman) Dr. Hans Friderichs Roland Nosko Hans Ruprecht Henri Filho Chairman French, born in 1931 Management Consultant › Deputy Chairman of the Supervisory Board, Groupe...

  • Page 28
    024 ANNUAL REPORT 2006 › adidas Group › Sabine Bauer 2) German, born in 1963 Team Leader Quality Service Systems, Global Operations, adidas AG Dr. iur. Manfred Gentz German, born in 1942 Chairman of the Administrative Board, Zurich Financial Services S.A., Zurich, Switzerland › Member of ...

  • Page 29
    ..., born in 1954 Sales Director Customer Service, Area Central, adidas AG Willi Schwerdtle German, born in 1953 General Manager, Procter & Gamble Holding GmbH, Schwalbach/Taunus, Germany Heidi Thaler-Veh 2) German, born in 1962 Member of the Central Works Council, adidas AG Christian Tourres French...

  • Page 30
    026 ANNUAL REPORT 2006 › adidas Group › Corporate Governance Report We are committed to the principles of good corporate governance and continually strive to strengthen and sustain the trust that investors, business partners, employees and the public have placed in us. Accordingly, our ...

  • Page 31
    ... analysts, employees and the public in a prompt and comprehensive manner. An important communication medium for this purpose is our website www.adidas-Group.com. With our financial reports, analyst and press conferences, ad hoc and press releases as well as Annual General Meeting information, all...

  • Page 32
    028 ANNUAL REPORT 2006 › adidas Group › Information on Directors' Dealings and Share Ownership According to § 15a of the German Securities Trading Act (Wertpapierhandelsgesetz - WpHG), Executive and Supervisory Board members, other key executives as well as persons in close relationship with ...

  • Page 33
    ... to initiate a new stock option plan in the future, we will comply with this recommendation. » Supervisory Board members are not subject to an age limit as we believe that this would unnecessarily narrow the rights of our shareholders and employees to elect their representatives to the Supervisory...

  • Page 34
    ... not made in the Notes and Management Report. Executive Board Total Compensation â,¬ in thousands 2006 Non-performance-related component Performance-related components (Performance Bonus + LTIP Bonus) Share-based component (MSOP) Total 2,976 5,837 603 9,416 2005 2,998 5,780 2,652 11,430 Executive...

  • Page 35
    ... of the Long-Term Incentive Plan. Both bonus systems are designed to provide a direct incentive for our Executive Board members to achieve defined targets and to support sustainable value-oriented management. › The amount of the Performance Bonus is linked to the fixed annual salary and depends...

  • Page 36
    032 ANNUAL REPORT 2006 › adidas Group › Number of Stock Options Outstanding Reduced In 2006, a total of 9,100 options were exercised within the scope of the Management Share Option Plan (MSOP) by the current members of our Executive Board in the period ending December 31, 2006. Compensation ...

  • Page 37
    ...Report › 033 Service Costs Key Parameter for Pension Provisions Expenses for the current Executive Board members' pension scheme include basic service and interest costs. Variable interest costs and income associated with plan assets are subject to strong ï¬,uctuations. As a result, service cost...

  • Page 38
    ... ANNUAL REPORT 2006 › adidas Group › Our Share 2006 was a difficult year for the adidas AG share, in which it was unable to continue the excellent performance it delivered in 2005 and previous years. Concerns surrounding Reebok's short-term business outlook and the state of the North American...

  • Page 39
    ... start in January, when our share reached its year-high of â,¬ 44.00, the share price declined in February and early March as a result of concerns regarding Reebok's shortterm business outlook. Analyst reports commenting positively on the future of the combined Group after our annual Investor Day...

  • Page 40
    ... policy, under which the adidas Group intends to pay out between 15 and 25% of consolidated net income. Five-Year Share Price Development 1) 200 150 100 50 Share Ratios at a Glance 2006 Basic earnings per share Diluted earnings per share Operating cash ï¬,ow per share Year-end price Year-high...

  • Page 41
    ... the annual Investor Relations rankings conducted by German business magazine Capital. Extensive Financial Information Available Online At www.adidas-Group.com/investors, we offer extensive information around our share as well as the Group's strategy and financial results. Our event calendar lists...

  • Page 42
    ...The adidas Group takes over distribution rights for the Reebok brand in Russia and China. Distributor buyouts in the Czech Republic and Slovakia are announced in subsequent months. June On June 6, the company's name change to adidas AG and share split in a ratio of 1: 4 are implemented on the stock...

  • Page 43
    ... marathon events during the year. October The world's largest adidas Sport Performance store opens in Paris attended by top adidas athletes such as Zinédine Zidane, Justine HeninHardenne and Djibril Cissé. The store features 1,750 m2 sales ï¬,oor space on two levels. Other major openings in 2006...

  • Page 44
    » THINK FASTER AND BE CREATIVE. Sidney Crosby. The Next One. The greatest talent in the NHL since Gretzky and Lemieux. He attracts the puck like a magnet. Unstoppable.

  • Page 45
    ... and Divisions » Group Strategy » Major Locations and Promotion Partnerships » Internal Group Management System › Brand Segments » adidas » Reebok » TaylorMade-adidas Golf › Corporate Functions » Global Operations » Sustainability » Employees » Research & Development Group Business...

  • Page 46
    042 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy Structure and Strategy One of the key strengths of our Group lies in the diversity and breadth provided by our portfolio of brands. Our brands share a common commitment to performance, ...

  • Page 47
    ... lifestyle and street wear. adidas Golf (24% of TaylorMade-adidas Golf sales) Reebok-CCM Hockey (8% of Reebok sales) Reebok-CCM Hockey is the world's largest designer, manufacturer and marketer of hockey equipment and related apparel under the world's most recognized hockey brand names: Rbk Hockey...

  • Page 48
    044 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy Group Strategy Our goal as a Group is to lead the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. We are a consumer-driven company and everything we do ...

  • Page 49
    ... to widen our design and innovation reach and imbue our products with the excitement consumers demand. Financial Performance Drives Shareholder Value Sustainable revenue and operating profit growth are critical to our success (see Internal Group Management System, p. 48). At all our brands we will...

  • Page 50
    046 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy Major Locations and Promotion Partnerships As a true global player, the adidas Group sells products in virtually every country around the world. And the acquisition of Reebok significantly ...

  • Page 51
    ... adidas Official Partner of International Handball Federation FIFA Women's World Cup China 2007 adidas Official FIFA Partner (football) Japan Golf Tour TaylorMade number one driver French Open 2007 adidas Official Partner of Roland Garros Beijing 2008 Olympic Games UEFA EURO 2008™ 7 adidas...

  • Page 52
    ... is designed to continually increase the value of our Group and brands to maximize shareholder value. By improving our top- and bottom-line performance and optimizing the use of our capital employed, we aim to maximize free cash ï¬,ow generation, which is our principal financial goal. Management...

  • Page 53
    ..., we strive to optimize payment terms with our suppliers to best manage our accounts payable. Capital Expenditure Targeted to Maximize Future Returns Improving the effectiveness of the Group's capital expenditure is another lever to maximize the Group's free cash ï¬,ow. Planning and control are of...

  • Page 54
    ... the Group's bottom-line development and therefore the Group's free cash ï¬,ow. Financial expenses are managed centrally by our Group Treasury department (see Treasury, p. 85). The Group's current and future cash outï¬,ow for taxes is optimized globally by our Group Taxes department. Cost of Capital...

  • Page 55
    ... Business Performance, p. 72). For 2007 and beyond, we again strive to optimize our Group's free cash ï¬,ow development. We believe the current trading environment supports our expectations given positive growth projections for our industry and the global economy. Further, we believe our targets...

  • Page 56
    ...will continue to generate at least 70% of adidas brand revenues in the medium and long term. Although the adidas Sport Performance division offers product in almost every sports category, our key priorities are the running, football, basketball and training apparel categories. In all these areas, we...

  • Page 57
    ... basketball category, which will help us achieve our long-term ambition of becoming the leading basketball brand worldwide. Training Apparel: Technology and Sport Fusion Drive Growth Training apparel is another important category for the adidas brand across our men's, women's and kids' businesses...

  • Page 58
    .../accessories to retail partners. Additionally, we run adidas own-retail stores, where we sell our products directly to consumers. Our own-retail business accounts for close to 15% of adidas brand revenues. Wholesale: Building a Broad Platform At the core of our wholesale strategy is the idea...

  • Page 59
    ... by supporting athletes and consumers to realize their unique dreams and goals. To best address distinct consumer groups and to balance our business, we have segmented Reebok into three brand units: Reebok, Reebok-CCM Hockey and Rockport. "I AM WHAT I AM" Articulates Brand Positioning "I AM WHAT...

  • Page 60
    ... our partnerships to drive sales growth in sports licensing but also supplement our licensed apparel and footwear offering with performance gear for the respective sport. In hockey, for example, we support our licensed apparel range with Rbk or CCM branded equipment, fully capitalizing on the market...

  • Page 61
    ... lifestyle brand, we intend to significantly improve and increase our product offering at high- and mid-price points to drive growth in average selling prices. Although this approach may slow our top-line development in the short term, we believe it enables us to build a platform for future sales...

  • Page 62
    058 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy TaylorMade-adidas Golf TaylorMade-adidas Golf, which changed the game of golf by bringing the metalwood to the masses 27 years ago, today is market leader in the metalwoods category. Yet our ...

  • Page 63
    ...the value segment, we distribute our products through all golf-related retail formats. Pricing Strategy Reï¬,ects Brand Positioning Our pricing policy mirrors the positioning of our brands in the golf market. To underline the premium positioning of the TaylorMade brand, our pricing strategy includes...

  • Page 64
    060 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy Global Operations The adidas Group's Global Operations function coordinates the development, commercialization, manufacturing and distribution of our products and leads the Group's efforts in ...

  • Page 65
    ...-CCM Hockey was also produced in Asia. In addition, both brands sourced a small portion of hardware products in the Americas and Europe. At TaylorMade, the majority of golf club components were manufactured in China and assembled by TaylorMade in the USA, China and Japan. Reebok Integration Drives...

  • Page 66
    ...as basic apparel lines. Both business models have been implemented at brand adidas in Europe, the USA and Asia. We expect to generate 20% of brand adidas revenues via the Brand and Evergreen products in 2007 and these new business models show an overproportionate sales growth potential going forward...

  • Page 67
    ... value, helping us to be a sustainable company. Open Dialog and Interaction with Stakeholders We actively and systematically engage with our numerous stakeholders, involving them in key social and environmental decisions that shape day-to-day operations. In this way, we can balance interests, build...

  • Page 68
    ... Operations, Marketing, Product Development and Human Resources. It is directly involved in developing and updating corporate policies and operating procedures related to social accountability, product safety and compliance with environmental laws and regulations. Our team members are represented...

  • Page 69
    ... Employee Growth At December 31, 2006, the Group employed 26,376 people, which represents an increase of 66% versus the previous year's level of 15,935. This strong growth is mainly related to the acquisition of Reebok. In addition, new employees were primarily added in adidas own-retail activities...

  • Page 70
    .... Employees by Function in % 2006 1) 2005 2) Own retail 29 Sales 21 32 Logistics Marketing Central functions & administration Production Research & development IT Total 16 16 10 10 7 4 3 26,376 18 13 11 3 4 3 15,935 1) Including Reebok business. 2) Figures reï¬,ect continuing operations as...

  • Page 71
    ... cross-brand "Business Management Program", hiring 10 top talents and training and developing them to take over management positions in the future. adidas Group Personnel Development Performance Culture Leadership Excellence Employee Development Based On Three Success Drivers Just like athletes...

  • Page 72
    ... development and leadership competence related to work-life balance. Additionally, we offer our employees a wide range of sports activities at our major sites. Significant Progress in Reebok Integration Bringing together colleagues from Reebok and the adidas Group, managing the change process...

  • Page 73
    ... Global R&D Activities Research and development within the adidas Group is organized in a decentralized structure, i.e. each brand separately runs its own research, design and development activities, with major locations in several countries. Our brand teams collaborate closely, sharing fundamental...

  • Page 74
    ... ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Structure and Strategy Divisional R&D Structure at Reebok Within the Reebok segment, the Reebok, Reebok-CCM Hockey and Rockport divisions run separate R&D teams due to the different product offering of each. At brand Reebok...

  • Page 75
    ... of sales increased slightly to 1.0% from 0.9% in 2005. Other related expenses for product development and market research, for example, were incurred as part of the Group's other operating overheads. Active Trademark and Patent Protection Policy To capitalize on the Group's R&D achievements...

  • Page 76
    ...the Reebok business as well as strong development of the adidas and TaylorMade-adidas Golf segments. Sales for the adidas Group excluding Reebok grew 14% on a currency-neutral basis. In euro terms, adidas Group revenues grew 52% to â,¬ 10.084 billion in 2006 from â,¬ 6.636 billion in 2005. Sales for...

  • Page 77
    ... apparel sales increased at low-single-digit rates, largely driven by the increased football offering. From a country perspective, strong growth in Spain and Italy was offset by promotional market conditions particularly in the UK, which led to declines in volume and price points. Average selling...

  • Page 78
    ... Report › › Group Business Performance Income Statement First-Time Consolidation of Reebok Impacts 2006 Results The business of Reebok International Ltd. (USA) and its subsidiaries, which was acquired to broaden the adidas Group's product offering and to increase the Group's long-term growth...

  • Page 79
    ... 499 million in 2006 from â,¬ 319 million in 2005. Currency-neutral sales in Latin America for the adidas Group excluding Reebok increased 31% in 2006. This represents the highest regional growth within the Group as a result of continued strong development of the adidas brand. In euro terms, sales...

  • Page 80
    ... in football. In addition, solid growth in the adidas Sport Heritage division and in adidas Golf drove this positive development. In euro terms, apparel sales for the adidas Group excluding Reebok grew 19% to â,¬ 3.322 billion in 2006 from â,¬ 2.798 billion in 2005. Hardware sales increased...

  • Page 81
    ... this development. In euro terms, royalty and commission income for the adidas Group excluding Reebok grew 18% to â,¬ 56 million in 2006 from â,¬ 47 million in 2005. 1) 2) 1) Figures reï¬,ect continuing operations as a result of the divestiture of the Salomon business segment. 2) Including Reebok...

  • Page 82
    ... 2006 FIFA World Cupâ„¢. In absolute terms, operating expenses for the adidas Group excluding Reebok increased by 13% to â,¬ 2.872 billion in 2006 from â,¬ 2.537 billion in 2005. Operating Expenses â,¬ in millions 2006 1) 2005 2) Marketing working budget 1,301 Marketing overhead 3) Sales force...

  • Page 83
    ... of Sales Our Group's marketing working budget is well balanced between the major marketing components, which are communication (including advertising, retail presentation and public relations) and promotion partnerships. Marketing working budget as a percentage of sales declined 1.3 percentage...

  • Page 84
    080 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Group Business Performance Reebok Acquisition Drives Net Financial Expenses Increase Net financial expenses increased 203% to â,¬ 158 million in 2006 from â,¬ 52 million in the prior year. This reï¬,ects the financing ...

  • Page 85
    ... in 2006 from â,¬ 383 million in the prior year. This improvement reï¬,ects the outstanding performance of the adidas and TaylorMade-adidas Golf segments as well as the non-recurrence of losses from discontinued operations related to the Salomon business in 2005. Basic and Diluted Earnings Per Share...

  • Page 86
    ...segment including Reebok's major properties in the USA and Europe, the Group's balance sheet structure changed significantly (see Consolidated Balance Sheet, p. 144). Balance Sheet Structure 1) in % of total assets Assets Cash and cash equivalents Accounts receivable 2006 2) 3.7 16.9 2005 Balance...

  • Page 87
    ...than sales growth during the fourth quarter of 2006. Other Current Assets Down 23% Other current assets decreased 23% to â,¬ 413 million at the end of 2006 from â,¬ 537 million in 2005. Other current assets for the adidas Group excluding Reebok were down 40%, mainly due to lower positive fair values...

  • Page 88
    ... adidas. Strong Cash Flow Development In 2006, cash inï¬,ow from operating activities was â,¬ 762 million and was primarily used to finance working capital needs in accordance with the seasonality of the business. The Group used â,¬ 2.988 billion of net cash for investing activities mainly related...

  • Page 89
    ... Balance Sheet and Cash Flow Statement » Treasury 085 Treasury Treasury System and Responsibilities Our Group's treasury policy governs all treasury-related issues, including banking policy and approval of bank relationships, global financing arrangements and liquidity/asset management, currency...

  • Page 90
    ... of employee stock options and Reebok's convertible bond. In addition, expenditure of around â,¬ 170 million for the buyback of Reebok's major properties in the USA and in Europe inï¬,uenced this development (see Note 5, p. 156). The net debt position at year-end was significantly better than...

  • Page 91
    .... This reï¬,ects the increased size of our business mainly as a result of the first-time inclusion of Reebok in 2006. In relation to our sales, however, the net US dollar deficit against the euro was reduced. As outlined in our Group's treasury policy, we have established a rolling 12 to 18 months...

  • Page 92
    ...-received product offering, the Sport Style division delivered strong sales growth in 2006. Revenues increased 37% both on a currency-neutral basis and in euro terms to â,¬ 26 million in 2006 (2005: â,¬ 19 million), again representing less than 1% of brand adidas sales. adidas Net Sales by Quarter...

  • Page 93
    ...markets, in particular continued strong double-digit sales growth in Brazil, Argentina and Chile, contributed to this positive development. In euro terms, sales improved 37% to â,¬ 425 million in 2006 from â,¬ 310 million in 2005. adidas Net Sales by Region Latin America 7% North America 20% Europe...

  • Page 94
    090 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Group Business Performance Gross Margin Improves to 46.2% The adidas gross margin increased by 0.9 percentage points to 46.2% in 2006 from 45.3% in 2005. This represents the segment's highest gross margin since the IPO. ...

  • Page 95
    ... in North America, Europe and Latin America which could not be offset by double-digit revenue growth in Asia. In euro terms, revenues also declined 9% to â,¬ 2.473 billion in 2006 from â,¬ 2.718 billion in 2005. On a like-for-like basis, currencyneutral sales decreased 6%, in line with Management...

  • Page 96
    ... Liverpool licensed businesses to brand adidas also negatively impacted sales. In euro terms, sales decreased 13% to â,¬ 1.979 billion (2005: â,¬ 2.264 billion). Reebok-CCM Hockey Currency-Neutral Sales Up 11% Sales of Reebok-CCM Hockey, which account for 8% of revenues within the segment, increased...

  • Page 97
    .... This represents an increase of 11% in euro terms to â,¬ 229 million in 2006 from â,¬ 206 million in 2005. The strong sales growth was mainly a result of solid double-digit sales increases in India and Korea. Currency-Neutral Sales Decline 5% in Latin America Reebok segment sales in Latin America...

  • Page 98
    .... Growth was driven by strong sales increases in North America and Asia and the inclusion of the Greg Norman apparel business. In euro terms, this represents an improvement of 21% to â,¬ 856 million in 2006 from â,¬ 709 million in 2005. TaylorMade-adidas Golf gross margin declined 0.1 percentage...

  • Page 99
    ... strong growth in Korea and Japan. Asian revenues in euro terms increased 15% to â,¬ 254 million in 2006 versus â,¬ 221 million in the prior year. Sales for the TaylorMade-adidas Golf segment excluding the GNC apparel business increased 18% on a currency-neutral basis. This development represents an...

  • Page 100
    ...ecting that different business segments and regions carry heterogeneous risk profiles. Our risk management process is composed of the following steps: » Risk identification: The adidas Group constantly monitors both the macroeconomic environment and developments in the sporting goods industry as...

  • Page 101
    ... risks Financial Risks Currency risks Interest rate risks Investment risks Financing and liquidity risks Strategic Risks Portfolio risks Risks from loss of key promotion partnerships Brand image risks Research and development risks Product quality risks Own-retail risks Personnel risks Operational...

  • Page 102
    ... the UK. Following three years of declining average selling prices, the adidas brand initiated a new trade distribution policy effective January 1, 2007. This strategy offers our top product range only to retailers who satisfy trade policy requirements. We accept the high risk of a short-term sales...

  • Page 103
    .... Financial Risks Currency Risks Most of the Group's currency risks result from the fact that a significant portion of our sourcing is done directly with suppliers in Asia (see Global Operations, p. 60). This means the products are invoiced mainly in US dollars, whereas our sales to customers are...

  • Page 104
    ... our Group as our product portfolio is weighted towards performance-oriented styles. We mitigate this risk by following a multi-brand strategy with brands that address distinct performance-oriented consumer segments as well as product offerings targeting lifestyle-oriented consumers. Nonetheless...

  • Page 105
    ... customer at brands adidas, Reebok and TaylorMade accounted for more than 10% of brand sales in 2006. Further, following the Reebok acquisition, we are actively reducing the brand's dependence on key accounts by strengthening our business in the sporting goods and athletic specialty retail channels...

  • Page 106
    ... markets, categories, consumer target groups and product styles show potential for future growth. We actively monitor brand, distribution channel and price point developments. Our primary focus is on sport, but increasingly we also look at adjacent market segments such as leisure lifestyle and sport...

  • Page 107
    ...growing women's segment Increasing focus on kids Building market share in high-growth sports categories Running category to grow further Technology to drive growth of customized products Strategic Opportunities Multi-brand approach provides competitive advantage Greater connection to the consumer at...

  • Page 108
    ... between our brands and sports at an early age. Kids represent an important current and future target group for many sports categories. As a result, we will continue to focus on and invest in this critical segment of the business. Building Market Share in High-Growth Sports Categories Expanding...

  • Page 109
    ... positioning and expertise outside of North America, Reebok's assets, including the exclusive license contracts with the NFL, NHL and MLB, will be leveraged beyond Reebok's core US and UK markets to drive incremental sales for the Group. We also have significant opportunities to reduce and optimize...

  • Page 110
    ... the Group's Legal Structure The Hockey Company was renamed Reebok-CCM Hockey, Inc., in January 2007. We believe this new name better reï¬,ects the company's focus on two key separate and distinct brands: Rbk Hockey and CCM Hockey. Subsequent Management Changes In January 2007, the adidas Group made...

  • Page 111
    ... our business, we do not provide order information for TaylorMade-adidas Golf. However, trade show performance and ongoing dialog with customers supports continued positive development of the segment. Currency-Neutral Development of Reebok Order Backlogs by Product Category and Region 1) in % North...

  • Page 112
    ... and promotional. For the North American sporting goods market, we project low-single-digit growth in 2007. The mixed development of product categories in the second half of 2006, particularly the sales declines in basketball and classics, compounded by varied performance among retail channels...

  • Page 113
    ... functional line of performance apparel to date, the adidas TechFitâ„¢ Powerweb. For Europe and North America, own-retail and at-once business, which are not included in order backlogs, will be positive topline growth drivers. However, our new distribution policy in the UK announced in 2006 to...

  • Page 114
    ...of the GNC wholesale business at the end of November and the transfer of the remaining GNC-related retail operations to Reebok effective January 1, 2007, reported sales for TaylorMade-adidas Golf may decline in 2007 compared to the prior year. Growth will mainly be driven by new products such as the...

  • Page 115
    ... around 1% of sales on research and development. Areas of particular focus include running, football and basketball at the adidas and Reebok brands, as well as golf hardware at TaylorMade-adidas Golf. The number of employees working in research and development throughout the Group will increase in...

  • Page 116
    ... our operating business. Free Cash Flow to Drive Reductions in Net Borrowings We intend to further reduce our net borrowings in 2007 to below â,¬ 2 billion through continued strong free cash ï¬,ow generation and tight working capital management. At the beginning of 2006, our net borrowings position...

  • Page 117
    ... and 2009, respectively, as a result of our continuing top-line growth and improved profitability projected at all brands. Group Medium-Term Financial Targets to 2009 Annual currency-neutral sales growth Gross margin Operating margin Annual net income growth high-single-digit 46 to 48% approx. 11...

  • Page 118
    114 ANNUAL REPORT 2006 › adidas Group › Group Management Report › › Reporting Pursuant to § 315 Section 2 No. 4 and Section 4 HGB Reporting Pursuant to § 315 Section 2 No. 4 and Section 4 HGB adidas AG as the parent company of the adidas Group utilizes an organized market as defined ...

  • Page 119
    ... Annual General Meeting dated May 20, 1999, the Executive Board implemented a Management Share Option Plan (MSOP) for members of the Executive Board of adidas AG, as well as managing directors/senior vice presidents of its related companies and other executives of adidas AG and its related companies...

  • Page 120
    » FOR ME, HEPTATHLON IS FUN. AND HAVING FUN IS WHAT I NEED TO BE SUCCESSFUL. Carolina Klüft. The heptathlon queen. Relaxed but fully focused. Enjoying every discipline. Every challenge. Every crowd. Even pressure puts a smile on her face. Performance powered by fun.

  • Page 121
    ... ATHLETICS CHAMPIONSHIPS 2006 117 CAMPAIGNS AND PRODUCTS 119 119 122 124 126 128 130 130 132 134 136 137 138 138 adidas › Impossible Is Nothing › Running › Football › Basketball › Originals Reebok › Running › American Football › Women's › Hockey › Rockport TaylorMade-adidas...

  • Page 122
    118 ANNUAL REPORT 2006 › adidas Group › » Campaigns and Products › CAMPAIGNS AND PRODUCTS Our brands are the heart and soul of the adidas Group. And brand campaigns and communication are our most direct way of connecting with consumers around the globe. The following pages highlight some...

  • Page 123
    ... › » Impossible Is Nothing 119 » The adidas brand's largest campaign in 2007 is "Impossible Is Nothing" and this year communication focuses on the mind of the athlete with more than 20 international sports personalities using their own hand-drawn illustrations and paintings to tell their...

  • Page 124
    120 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › GILBERT ARENAS GUARD, BASKETBALL « When no-one else believes in you - believe in yourself Hi, I'm Gilbert Arenas and this is my story: When I entered the NBA, the first 40 games of my career I sat on the bench. They said I ...

  • Page 125
    ... where you end up. I am Yelena Isinbayeva and this is my story: I dreamed to be the Olympic champion in gymnastics, but that's very difficult because I was so tall. My coach asked me to try pole vault. I said: "Are you crazy?". Now I have 20 world records. Where you start isn't necessarily...

  • Page 126
    122 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › » "Impossible Is Nothing" will also be used in 2007 to let consumers tell us about their own "impossibles" with stories that can touch the heart or make us laugh. These personal anecdotes will then be featured alongside ...

  • Page 127
    adidas › » Running 123

  • Page 128
    124 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › adidas FOOTBALL « "Impossible Is Nothing" is also a core element of adidas football brand communication in 2007. Here the story focuses on a battle between two fictitious clubs: "Predator F.C." and "F50 Club de Fútbol", ...

  • Page 129
    adidas › » Football 125

  • Page 130
    126 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products ›

  • Page 131
    ... to provide a broad message to different consumer groups. One of the best examples of this fresh creative approach is the "It Takes 5ive" global basketball campaign. It is based on the brand's core belief that the sport is bigger than the individual, and that athletes working together can do great...

  • Page 132
    128 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products ›

  • Page 133
    ... 129 adidas ORIGINALS « Brand communication for sports lifestyle products needs to have a different look and feel to connect with consumers. And in 2007, adidas Originals is all about "Free Thinking". Each element of the campaign combines items from a real and an imaginary world, creating...

  • Page 134
    130 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › Reebok RUNNING « In 2007, Reebok kicks off the global "Run Easy" campaign. This is the brand's most important advertising campaign of the year. The message is simple: Reebok wants to inspire consumers to fulfill their ...

  • Page 135
    Reebok › » Running 131

  • Page 136
    132 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products ›

  • Page 137
    ... in American performance sports. Reebok has the largest sports licensing division in the USA and is a leading innovator in performance products, fan apparel and accessories. As the official outfitter of the NFL, Reebok is in the position to exclusively develop and market licensed products. Reebok...

  • Page 138
    134 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › » In 2007, two campaigns will remind consumers of Reebok's unique strength in the women's segment. Scarlett "Hearts" Rbk Scarlett "Hearts" Rbk is a signature collection developed in collaboration with Hollywood actress ...

  • Page 139
    Reebok › » Women's 135

  • Page 140
    136 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products › Reebok HOCKEY « Reebok's signature campaign "I AM WHAT I AM" is central to the brand's hockey advertising this year. Print and television ads feature some of hockey's most eclectic personalities such as Pavel Datsyuk and ...

  • Page 141
    Reebok › » Hockey » Rockport 137 » Building on Rockport's storied heritage and commitment to innovation and design, the 2007 advertising highlights a new evolutionary footwear collection of men's dress, casual and outdoor looks that feature advanced technology engineered for athletic ...

  • Page 142
    138 ANNUAL REPORT 2006 › adidas Group › Campaigns and Products ›

  • Page 143
    ... expected to drive expansion in the metalwoods category. adidas Golf's new POWERBAND performance footwear is promoted through the "Equipment for Your Body" marketing campaign. This shoe employs three proprietary technologies to deliver greater stability, balance and leverage, helping athletes of all...

  • Page 144
    » » I WANT TO BE REMEMBERED AS A PLAYER WHO WAS THE BEST IN HIS POSITION BUT REMAINED HUMBLE. Richie McCaw. Captain of the renowned All Blacks. His tackles - feared. His work rate - inspiring. His commitment - intense. At the top of his game. But always down to earth.

  • Page 145
    ..., RUGBY 2006 IRB WORLD PLAYER OF THE YEAR 141 CONSOLIDATED FINANCIAL STATEMENTS 142 143 144 145 146 148 149 157 173 176 182 184 190 192 194 200 Executive Board Statement Independent Auditor's Report Consolidated Balance Sheet Consolidated Income Statement Consolidated Statement of Cash Flows...

  • Page 146
    ... 2006 › adidas Group › Consolidated Financial Statements › Executive Board Statement The Executive Board of adidas AG is responsible for the compilation, completeness and accuracy of the Group's annual consolidated financial statements, the Group Management Report and the other information...

  • Page 147
    ...until May 29, 2006: adidas-Salomon AG), Herzogenaurach - comprising the balance sheet, the income statement, statement of recognized income and expense, cash ï¬,ow statement and the notes to the consolidated financial statements - together with the Group Management Report for the business year from...

  • Page 148
    ... ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › Consolidated Balance Sheet â,¬ in millions (Note) Cash and cash equivalents Short-term financial assets Accounts receivable Inventories Income tax receivables Other current assets Assets classified as held for sale...

  • Page 149
    ... Balance Sheet › Consolidated Income Statement › 145 Consolidated Income Statement â,¬ in millions (Note) Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income and expenses (% of net sales) Operating profit (% of net sales) Financial...

  • Page 150
    146 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › Consolidated Statement of Cash Flows â,¬ in millions (Note) Operating activities: Income before taxes Adjustments for: Depreciation and amortization Unrealized foreign exchange losses/(gains), net Interest income ...

  • Page 151
    ... Statement of Cash Flows â,¬ in millions (Note) Financing activities: Increase in long-term borrowings Proceeds from issue of share capital Dividend of adidas AG Dividends to minority shareholders Exercised share options Capital contributions by minority shareholders Decrease in short-term...

  • Page 152
    148 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › Consolidated Statement of Recognized Income and Expense â,¬ in millions (Note) Net (loss)/gain on cash ï¬,ow hedges, net of tax Net gain/(loss) on hedge of net investments in foreign subsidiaries, net of tax ...

  • Page 153
    ... German stock corporation, and its subsidiaries design, develop, produce and market a broad range of athletic and sports lifestyle products. The Group's headquarters are located at Adi-Dassler-Str. 1, 91074 Herzogenaurach, Germany. The adidas Group has divided its operating activities by major brand...

  • Page 154
    ... from changes in exchange rates are included in a separate item within shareholders' equity without affecting income. In the individual financial statements of Group companies, monetary items denominated in non-euro currencies are generally measured at closing exchange rates at the balance sheet...

  • Page 155
    ... contracts and currency options are determined on the basis of the market conditions on the reporting dates. The fair value of a currency option is determined using generally accepted models to calculate option prices. The fair market value of an option is inï¬,uenced not only by the remaining term...

  • Page 156
    ... units. The Group's cash-generating units are identified according to brand of operations (in the prior year according to brands and regions) in line with the internal management approach. The adidas Group has thus defined the three segments adidas, Reebok and TaylorMade-adidas Golf as the...

  • Page 157
    ... in millions TaylorMadeadidas Golf 286 - - (2) 284 Total goodwill 436 1,165 3 (88) 1,516 adidas December 31, 2005 Additions - Reebok acquisition Additions - other Currency effects December 31, 2006 150 699 3 (57) 795 Reebok - 466 - (29) 437 Financial Assets All purchases and sales of investments...

  • Page 158
    .... Equity Compensation Benefits Stock options have been granted to members of the Executive Board of adidas AG as well as to the managing directors/senior vice presidents of its affiliated companies and to further senior executives of the Group in connection with the Management Share Option Plan...

  • Page 159
    ... quarter of 2006. The Salomon business segment included the related subsidiaries and brands Salomon, Mavic, Bonfire, Arc'Teryx and Cliché. Analysis of the Result of Discontinued Operations â,¬ in millions 2005 Net sales Expenses Income from discontinued operations before taxes Income taxes Income...

  • Page 160
    ... on the Group's assets and liabilities: Reebok's Net Assets at the Acquisition Date â,¬ in millions Pre-aquisition carrying amounts Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment, net Trademarks and other intangible assets, net Long-term...

  • Page 161
    ... well as short-term bank deposits. 7 » Short-Term Financial Assets Short-term financial assets are classified at "fair value through profit or loss". They comprise investment funds as well as marketable equity securities. Changes in the fair value are recognized in the income statement as they...

  • Page 162
    ...position "Sundry" includes the remaining payment of â,¬ 65 million related to the Salomon divestiture. Gross value Finished goods and merchandise on hand Goods in transit Raw materials Work in progress Inventories, net Net value Gross value Net value 11 » Property, Plant and Equipment Property...

  • Page 163
    ... future. For details see Statement of Movements of Tangible and Intangible Assets and Financial Assets (Attachment I to these Notes). Intangible asset amortization expenses (continuing operations) were â,¬ 69 million and â,¬ 34 million for the years ending December 31, 2006 and 2005, respectively...

  • Page 164
    ... Financial Assets Long-term financial assets include a 10% investment in FC Bayern München AG of â,¬ 77 million which was made in July 2002. This investment is classified as available for sale and recorded at fair value. This equity security does not have a quoted market price in an active market...

  • Page 165
    ... 31, 2006 are denominated in euros (51%; 2005: 76%) and US dollars (44%; 2005: 16%). Month-end weighted average interest rates on borrowings in all currencies ranged from 4.2% to 5.3% in 2006 and from 3.7% to 4.2% in 2005. As at December 31, 2006, the Group had cash credit lines and other long-term...

  • Page 166
    162 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › 17 » Accrued Liabilities and Provisions Accrued liabilities and provisions consist of the following: Accrued Liabilities and Provisions â,¬ in millions Currency translation differences Changes in companies Release ...

  • Page 167
    ...and economic conditions in each respective country. Pensions and Similar Obligations â,¬ in millions Dec. 31 2006 Defined benefit plans Thereof: adidas AG Similar obligations Pensions and similar obligations 126 109 8 134 Dec. 31 2005 131 123 17 148 Information regarding forward contracts as well...

  • Page 168
    ... for 2006 was â,¬ 2 million (2005: â,¬ 14 million) The cumulative recognized actuarial losses amount to â,¬ 30 million (2005: â,¬ 31 million) (see also Note 22). Pension Expenses â,¬ in millions Year ending Dec. 31 2006 2005 Current service cost Interest cost Expected return on plan assets Pension...

  • Page 169
    ... Balance Sheet 165 Historical Development â,¬ in millions Dec. 31 2006 Defined benefit obligation Plan assets Deficit in plan Experience adjustments 170 44 126 4 Dec. 31 2005 131 - 131 1 Dec. 31 2004 118 - 118 - Dec. 31 2003 100 - 100 - Dec. 31 2002 93 - 93 - 20 » Other Non-Current...

  • Page 170
    ... The Contingent Capital 1999/I serves the purpose of granting stock options in connection with the Management Share Option Plan to members of the Executive Board of adidas AG as well as to managing directors/senior vice presidents of its affiliated companies and to other executives of adidas AG and...

  • Page 171
    ...companies. » Subject to Supervisory Board approval, as consideration for the acquisition, also through Group companies, of industrial property rights such as patents, brands, names and logos of athletes, sports clubs and other third parties or for the acquisition of licenses relating to such rights...

  • Page 172
    ... direct or indirect subsidiary of the Company. » To meet the Company's obligations arising from the Management Share Option Plan 1999 (MSOP). Furthermore, the Supervisory Board is authorized to assign or promise reacquired treasury shares to Executive Board members as compensation by way of a stock...

  • Page 173
    ...Sheet 169 Consolidated Statement of Changes in Equity â,¬ in millions Cumulative translation adjustment (133) 75 Total shareholders' equity 1,544 159 383 542 (60) 20 639 0 (1) 2,684 (281) 483 202 (66) 0 6 0 0 2 2,828 (Note) Balance at December 31, 2004 Net income recognized directly in equity Net...

  • Page 174
    170 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › 23 » Leasing and Service Arrangements Operating Leases The Group leases offices, retail stores, warehouses and equipment under leases with expiration dates of between one and sixteen years. Rent expenses are ...

  • Page 175
    ... It is Group policy to have a high share of hedging instruments, such as currency options or option combinations, which provide protection and, at the same time, retain the potential to benefit from future favorable exchange rate developments in the financial markets. In 2006, the Group contracted...

  • Page 176
    ... models based on market conditions prevailing at the balance sheet date. Management of Interest Rate Risk The Group switched concentration from short-term financing to long-term financing, due to increasing interest rates in 2005 and 2006. Therefore the Group is better protected against future...

  • Page 177
    ...marketing working budget consists of promotion and communication spending such as promotion contracts, advertising, retail support, events and other communication activities, however it does not include marketing overhead expenses. In 2006, marketing working budget of continuing operations accounted...

  • Page 178
    ... tax income of â,¬ 2 million relating to discontinued operations for the year ending December 31, 2005. 2) Relates to the acquisition of Reebok International Ltd. (USA) and its subsidiaries for the year ending December 31, 2006 (see Note 5) and to the divestiture of the Salomon business segment for...

  • Page 179
    ...finitely. These amounts were mainly part of the opening balance of Reebok International Ltd. (USA) as at January 31, 2006. Remaining valuation allowances relate to deferred tax assets of companies operating in certain emerging markets, since the realization of the related benefit is not considered...

  • Page 180
    ... 1.93 Notes - Additional Information 30 » Segmental Information The Group operates predominately in one industry segment, the design, wholesale and marketing of athletic and sports lifestyle products. The Group is currently managed by brands. Certain functions of the Group are centralized and an...

  • Page 181
    ...Asia 2005 1) 1,523 617 37 Latin America 2005 1) 319 176 5 adidas Group 2005 6,996 5,750 211 2006 Net sales to third parties Assets Capital expenditure 4,162 1,808 84 2006 2,020 719 74 2006 499 217 7 HQ/Consolidation 2006 2005 1) Net sales to third parties Assets Capital expenditure 1) Figures re...

  • Page 182
    178 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › 31 » Additional Cash Flow Information As at September 30, 2005, the Salomon business segment was divested (see also Note 3). Generally, the fair value of the net assets approximated the book value of the net assets...

  • Page 183
    ... Performance: During the same period, the stock market price for the adidas AG share must have developed by an annual average of 1% more favorably than the stock market prices of a basket of competitors of the adidas Group globally and in absolute terms may not have fallen. The stock options...

  • Page 184
    180 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › 34 » Other Information Employees The average numbers of employees are as follows: Employees Year ending Dec. 31 2006 2005 Own retail Sales Logistics Marketing Central functions & administration Production Research ...

  • Page 185
    ... § 161 of the Stock Corporation Act (AktG). The text of the Declaration of Compliance is available on the Group's corporate website. 36 » Events after the Balance Sheet Date Group-Specific Subsequent Events In January 2007, the adidas Group acquired additional or all shares of minority interests...

  • Page 186
    182 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › Statement of Movements of Intangible and Tangible Assets and Financial Assets â,¬ in millions (Attachment I) Goodwill ACQUISITION COST December 31, 2004 Netting goodwill amortization Currency effect Additions ...

  • Page 187
    Statement of Movements of Intangible and Tangible Assets and Financial Assets › 183 Other equipment, furniture and fittings Construction in progress Total tangible assets Shares in affiliated companies Participations Other financial assets Total financial assets 356 - 22 81 - (7) 21 (...

  • Page 188
    184 ANNUAL REPORT 2006 › adidas Group › Consolidated Financial Statements › Shareholdings of adidas AG, Herzogenaurach as of December 31, 2006 (Attachment II) Company and Domicile 1 2 3 4 5 6 GEV Grundstücksgesellschaft Herzogenaurach mbH & Co. KG GEV Grundstücks-...

  • Page 189
    ...7) 12) Reebok International Limited 12) Reebok Spain SA American Sports & Leisure (cz) s.r.o. Reebok (Poland) SA RBK Holdings Limited 12) Reebok International Finance BV Reebok Sports Limited J.W. Foster & Sons Athletic Shoes Ltd. 7) 12) Rockport Company Limited 7) 12) Reebok Eastern Trading Limited...

  • Page 190
    ... adidas America Inc. 88 adidas Promotional Retail Operations Inc. 89 adidas Sales Inc. 90 adidas Village Corporation 91 adidas Interactive Inc. 92 adidas International, Inc. 93 adidas Team Inc. 94 Taylor Made Golf Co. Inc. 95 adidas Canada Ltd. 96 Reebok International Ltd. 2) 97 The Rockport Company...

  • Page 191
    ... of adidas AG, Herzogenaurach as of December 31, 2006 (Attachment II) Company and Domicile 100 101 102 103 104 Reebok Worldwide Trading Co. LLC The Hockey Company Corp. 10) Sports Holdings Corp. 11) WAP Holdings Inc. 11) Maska US Inc. Canton, Massachusetts (USA) Delaware (USA) Delaware (USA...

  • Page 192
    ... Ltd. adidas Services Limited Reebok Technical Services Private Limited Reebok Korea Ltd. Reebok Japan Inc. RIL Shanghai Ltd. Reebok India Company Smedley (H.K.) Ltd. 10) 7) Reebok Trading (Far East) Ltd. RIL Securities Ltd. Reebok (China) Services Limited Zhuhai Reebok Sporting Products Design...

  • Page 193
    ...-group India 5) Sub-group Mexico, adidas 6) Sub-group Mexico, Reebok 7) Companies with no active business 8) The number refers to the number of the company. 9) Sub-group Onfield 10) Sub-group The Hockey Company Corporation 11) Sub-group Sports Holding Corporation 12) Sub-group Reebok International...

  • Page 194
    190 ANNUAL REPORT 2006 › adidas Group › Segmental Information › adidas Group Segmental Information: Ten-Year Overview â,¬ in millions 2006 BRANDS adidas Net sales Gross profit Gross margin Operating profit 1) Operating margin 1) Operating assets Reebok 2) Net sales Gross profit Gross ...

  • Page 195
    191 adidas Group Segmental Information: Ten-Year Overview â,¬ in millions 2006 Discontinued Operations 4) Net sales Gross profit Gross margin Operating profit Operating margin Operating assets REGIONS 5) 6) Europe Net sales North America Net sales Asia Net sales Latin America Net sales 2005 ...

  • Page 196
    ...Operating margin 3) 4) Interest coverage 3) Effective tax rate 3) Net income attributable to shareholders as a percentage of net sales 6) Balance Sheet Data (â,¬ in millions) Total assets 5) Inventories Receivables and other current assets Working capital 5) Net total borrowings Shareholders' equity...

  • Page 197
    ... 5) Working capital turnover 5) Return on equity 5) 6) Return on capital employed 5) 6) Data Per Share 7) Share price at year-end (in â,¬) Basic earnings 6) (in â,¬) Diluted earnings 6) (in â,¬) Price/earnings ratio at year-end Market capitalization at year-end (â,¬ in millions) Operating cash ï¬,ow...

  • Page 198
    ... the Group's brands adidas and TaylorMade-adidas Golf which are the segments that were not divested in October 2005. See also Net Income from Continuing and Discontinued Operations. Convertible Bond A corporate bond that can be exchanged for a specific number of shares of a company's common stock...

  • Page 199
    ...). Directional Accounts High-profile boutiques and metropolitan accounts that target trendsetting sports lifestyle consumers. Discontinued Operations Operations that have been or will be divested by the company and therefore will not contribute to future economic development. For the adidas Group...

  • Page 200
    196 ANNUAL REPORT 2006 › adidas Group › Glossary › Forward Contract Agreement to exchange amounts of one currency for another currency at an agreed fixed rate at a future date. Free Cash Flow Cash that is generated by a company's operating activities after the deduction of capital ...

  • Page 201
    ...-free rate. Marketing Working Budget Promotion and communication spending including sponsorship contracts with teams and individual athletes, as well as advertising, retail support, events and other communication activities, but excluding marketing overhead expenses. Metalwoods Golf clubs (drivers...

  • Page 202
    ... Market (OTC Market) When a traded stock is not listed on a stock exchange. In such cases, brokers negotiate directly with one another over computer networks and by phone. Own-Retail Activities Sales directly generated through a store operated by a brand segment within the adidas Group. Own retail...

  • Page 203
    ... order to commercialize, produce and deliver final products to customers. Sport Fusion Footwear and apparel products mixing performance-oriented features and casual styles. Stakeholders All parties that have a direct or indirect interest in a company's performance and results. For the adidas Group...

  • Page 204
    ..., 177 Investor Relations 037 L Leases 170 Liquidity 085 ff. Locations 046 f. M Management Share Option Plan (MSOP) 030 ff., 114 ff., 154, 178 Market Capitalization 034 f. Marketing Working Budget 079, 173 Mission Statement 042 N Net Income Attributable to Shareholders 081, 111 ff. Non-Balance Sheet...

  • Page 205
    ....adidas-Group.com /investors adidas Group is a member of DAI (German Share Institute), DIRK (German Investor Relations Association) and NIRI (National Investor Relations Institute, USA). This report is also available in German. For further adidas Group publications, please see our corporate website...

  • Page 206
    FINANCIAL CALENDAR 2007 March 7 2006 Full Year Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast First Quarter 2007 Results Press release, conference call and webcast Annual General Meeting in Fürth (Bavaria), Germany Webcast Dividend ...