Reebok 2007 Annual Report Download - page 94

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ANNUAL REPORT 2007 --- adidas Group GROUP MANAGEMENT REPORT - OUR FINANCIAL YEAR -- Group Business Performance - Balance Sheet and Cash Flow Statement - Treasury
CAPITAL EXPENDITURES FOCUS ON OWN-RETAIL ACTIVITIES
Capital expenditure is the total cash expenditure for the pur-
chase of tangible and intangible assets and the construction
of tangible assets. Group capital expenditures increased 4 % to
€ 289 million in 2007 (2006: € 277 million). The adidas seg-
ment accounted for 52 % of Group capital expenditures (2006:
49 %). Expenditures in the Reebok segment accounted for
20 % of total expenditures (2006: 26 %). The majority of adidas
and Reebok expenditures focused on the expansion of own-
retail activities. TaylorMade-adidas Golf capital expenditures
accounted for 4 % of total expenditures (2006: 5 %). The
remaining 24 % of total capital expenditures was recorded
in the HQ / Consolidation segment (2006: 20 %) and was mainly
related to integration initiatives such as the construction of
the shared warehouse facility in the UK and the Group-wide
harmonization of IT systems.
EQUITY BASE FURTHER STRENGTHENED The Group’s equity
base was further strengthened compared to the prior year.
Shareholders’ equity rose 7 % to € 3.023 billion at the end of
2007 versus € 2.828 billion in 2006. The net income generated
during the period more than offset negative currency trans-
lation effects.
EXPENSES RELATED TO OFF-BALANCE SHEET ITEMS Our
most important off-balance sheet assets are operating leases,
which are related to retail stores, offi ces, warehouses and
equipment. The Group has entered into various operating
leases as opposed to property acquisitions to reduce exposure
to property value fl uctuations. Rent expenses increased 21 %
to € 337 million in 2007 from € 278 million in the prior year,
mainly due to the continued expansion of adidas own-retail
activities.
CASH FLOW DEVELOPMENT REFLECTS OPERATIONAL
STRENGTH In 2007, cash infl ow from operating activities was
€ 780 million. It was primarily used to fi nance working capital
needs in accordance with the seasonality of our business.
Cash outfl ow for investing activities was € 285 million and was
mainly related to spending for property, plant and equipment
such as investment in the furnishing and fi tting of adidas
and Reebok own-retail stores. In addition, investments also
related to the Reebok integration. Major integration projects
included the construction of the shared adidas and Reebok
ware housing and distribution center in the UK. Cash outfl ow
for fi nancing activities totaled € 510 million and was related
to the payment of dividends as well as the reduction of long-
term borrowings. Operating activities provided less cash than
used in investing and fi nancing activities. As a result of this
development and a negative exchange rate effect of € 1 mil-
lion, cash and cash equivalents decreased by € 16 million to
€ 295 million at the end of 2007 (2006: € 311 million).
SHAREHOLDERS’ EQUITY
€
in milli
o
n
s
2003 1)
2004 1)
2005
2006 2)
200
7
1
) Restated due to a
pp
lication of amendment to IAS 19.
2
) Includin
g
Reebok business se
g
ment from February 1, 2006 onwards.
1,544
2,684
2,828
3
,
02
3
1,285
2007 CAPITAL EXPENDITURE BY SEGMENT
Reebok
2
0 %
5
2
%
adidas
TaylorMade-
adidas Golf 4
%
Cash
C
ash
and cash Net cash Net cash Net cash an
d
cas
h
equivalents provided by used in used in equivalents
at the end operating investing fi nancing
a
t th
e
e
n
d
of 2006 activities activities activities
o
f
2007
1
)
1)
Includes a negative exchange rate effect of € 1 million
.
CHANGE IN CASH AND CASH EQUIVALENTS
€ in millions
311
780 (285)
(510)
295
HQ /
Consolidation
2
4 %