Reebok 2007 Annual Report Download - page 60

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056
ANNUAL REPORT 2007 --- adidas Group GROUP MANAGEMENT REPORT – OUR GROUP -- Structure and Strategy - Internal Group Management System
FREE CASH FLOW AS INTERNAL GROUP MANAGEMENT
FOCUS The cornerstone of our Group’s Internal Management
System is our focus on free cash fl ow generation, which we
believe is the most important driver to sustain and increase
shareholder value. Free cash fl ow is comprised of operating
components (operating profi t, change in operating working
capital and capital expenditure) as well as non- operating
components such as fi nancial expenses and taxes. To maxi-
mize free cash fl ow generation across our multi-brand orga-
nization, brand management has direct responsibility for
improving operating profi t as well as optimizing operating
working capital and capital expenditure. Non- operating items
such as fi nancial expenses and taxes are managed centrally
by the Group Treasury and Tax departments. To keep Group and
brand management focused on ongoing per formance improve-
ment, a portion of the responsible managers’ total compensa-
tion is variable and linked to a combination of operating profi t,
operating working capital development, Group earnings before
tax, or relative / absolute stock price performance.
INTERNAL GROUP MANAGEMENT SYSTEM
The adidas Group’s central plannin
g
and
controll
i
n
g
system
i
s des
ig
ned to cont
i
nually
increase the value of our
G
rou
p
and brands
to maximize shareholder value. By improving
o
ur top- and bottom-line performance and
o
ptimizin
g
the use of capital employed, we aim
to maximize
f
ree cash
fl
ow
g
eneration. This is
o
ur principal goal
f
or increasing shareholder
v
alue. Management utilizes a variety o
f
d
ecision-making tools to assess our current
performance and to ali
g
n future strate
g
ic
a
nd
i
nvestment dec
i
s
i
ons to best ut
i
l
i
ze
commercial and organizational opportunities.
1)
Excludin
g
g
oodwill and fi nance leases.
FREE CASHFLOW COMPONENTS
Free Cash Flow
Operating Profi t
Non-Operating Components
Capital Expenditure 1)
Operating Working Capital