Reebok 2008 Annual Report Download

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Annual Report 2008

Table of contents

  • Page 1
    Annual Report 2008

  • Page 2
    ... in sports and women's fitness, Reebok is a global brand that is committed to developing innovative products which will allow Reebok to own Women's Fitness, challenge Men's Sport and revive Classics. The Reebok segment also comprises the brands Reebok-CCM Hockey and Rockport. TaylorMade-adidas Golf...

  • Page 3
    ... other current assets Working capital Net borrowings Shareholders' equity Capital expenditure Net cash provided by operating activities Per share of common stock (â,¬) Basic earnings Diluted earnings Operating cash ï¬,ow Dividend Share price at year-end Other (at year-end) Number of employees Number...

  • Page 4
    ...neutral sales growth Results 2008 Net sales reach â,¬ 10.8 billion; Group currency-neutral sales grow 9 % Major 2008 product launches: -- adidas F50 TUNIT â„¢ football boot, new technologies in adiSTAR® and adiZeroâ„¢ running shoe families, men's TECHFIT Power WEB, miCoach training system - Reebok...

  • Page 5
    ...global leader in the sporting goods industry. That's our goal. We know our strengths. We know where to attack. We have a dynamic team. We share values such as performance, passion, integrity and diversity. And we have lots of energy. Our next moves are planned. Our tactics are set. We're ready to go...

  • Page 6
    Growth adidas Group A signal of brand strength. New perspectives without moving too far from the core. Sport has no boundaries. Emerging markets > 35% of sales Core to our growth strategy is increasing our exposure to high-growth emerging markets. Our industry is truly global. Sport and a sporting ...

  • Page 7
    ... US basketball team at the Beijing Olympic Games. He has a clear goal for 2009: To win 16 games throughout the playoffs and lead his teammates to the ultimate victory - the NBA Championship. "The game plan to reach this goal is to play hard every day and play as a team." adidas Group Annual Report...

  • Page 8
    ... Formula One driver - 2008 was his year: He became the youngest ever Formula One World Champion. His performance is extreme and his goal very clear: To stay No. 1, defending his World Championship title in 2009 and beyond. His game plan to get there is drafted already: "Train in a disciplined way...

  • Page 9
    ... adidas Group The first moment of truth. Brand statement. Right product. Right store. Right time. Closest to the consumer. > 35 Stay No. % Controlled space > 35% of sales Controlled space is becoming one of our most dynamic business models. Encompassing own-retail stores, e-commerce and retail...

  • Page 10
    ... World Golf Ranking. His swing made him famous. His precision is legendary. His goal for 2009? To win a Major, one of the four most prestigious annual tournaments in professional golf. And he will get there by following his game plan: "Hit the right shot at the right time, focus on my skills and use...

  • Page 11
    ...fitability adidas Group The ultimate measure of corporate performance. Separating quality from quantity. Taking the right opportunities. Reducing complexity. Uniting our team. Major Win a Operating margin > 11% Improving our operating margin is a cornerstone to increasing shareholder value. It...

  • Page 12
    Financial strength adidas Group The resources for realising our vision. Efficient and diverse. Withstanding the elements. Currency to execute. Regain No. 1 Financial leverage < 50% Only through a strong balance sheet can we build our business for the future and achieve our potential. We ...

  • Page 13
    ... 21-year-old, winner of the 2008 Roland Garros title, believes that making dreams come true is a mixture of desire, spirit and hard work. Her two biggest goals for the foreseeable future are to win another Grand Slam tournament and regain the World No. 1 ranking. "I try to focus on improving my game...

  • Page 14
    ... and persistence. Like every athlete, we set ourselves ambitious goals and give our all to achieve them. We've made this experience our own. Strong brands, innovative products, timeless designs and ground-breaking technologies are the key to our success. And so is our strategy: 14 Kapitel Head II

  • Page 15
    ... Corporate Mission Statement Group Brands and Divisions Group Strategy adidas Strategy Reebok Strategy TaylorMade-adidas Golf Strategy Internal Group Management System Major Locations and Promotion Partnerships Corporate Functions Global Operations Sustainability Employees Research and Development...

  • Page 16
    ...performance. Positive momentum in the adidas and TaylorMade-adidas Golf segments propelled the Group to a 9% currency-neutral sales increase and 20% earnings per share growth. 2009, however, will be a challenging year. Nevertheless, the adidas Group is sticking to its "game plan". With strong market...

  • Page 17
    ... event. As a result, we today have a very close connection with the Chinese consumer. This I am sure will have a long-term positive effect on our brand image in the Chinese market, helping us sustain market leadership in one of the world's most exciting economies. adidas Group Annual Report 2008...

  • Page 18
    ...other key performance categories running, training and basketball scored double-digit rate sales increases in 2008. And our Sport Style division also finished the year up 10% currency-neutral, as our products continue to generate a buzz in the sports-inspired lifestyle market. adidas has made good...

  • Page 19
    ... Reebok products have taken longer than we originally expected. But the Reebok brand is moving in the right direction. After several years of hard work and refining our business in Europe and Latin America we are able to move forward with the implementation of joint operating structures for adidas...

  • Page 20
    ... the number one played driver on the European Tour in a few short weeks. With the acquisition of Ashworth, we have supplemented our existing high-tech performance-infused adidas Golf apparel with an authentic golf lifestyle brand. That makes us the undisputed market leader in golf apparel globally...

  • Page 21
    ... cannot control the macro environment or currencies, we are in control of our business. And that is why we will continue to execute our "game plan" to build a long-term growth company for the benefit of all our stakeholders. Herbert, thank you for this interview. adidas Group Annual Report 2008...

  • Page 22
    018 To Our Shareholders Executive Board

  • Page 23
    ...career at GfK, a German consumer research institute. In 1983, Erich Stamminger joined adidas Germany. He served in numerous marketing positions before becoming Managing Director for Germany and later Europe and Asia/Pacific. In 1997, he was appointed to the Executive Board and became Head of Global...

  • Page 24
    ... the global economic and financial crisis. The adidas Group delivered very good results in this difficult environment, confirming the successful implementation of the Group's strategic plan. Dr. Hans Friderichs Chairman of the Supervisory Board 020 To Our Shareholders Supervisory Board Report

  • Page 25
    ... the Reebok segment and the current status of the share buyback programme that we had approved in January. We also kept ourselves informed on key aspects of personnel development and training as well as the adidas Group's performance-oriented compensation concept. adidas Group Annual Report 2008 021

  • Page 26
    The main focus of our May 7, 2008 meeting was the first quarter 2008 financial results as presented by the Executive Board. We also discussed the business development of the Reebok segment as well as the initiatives planned to improve market penetration. Additionally, we dealt in detail with the ...

  • Page 27
    ... of new structures for Executive Board employment contracts. The Audit Committee met five times in 2008. The auditor and the Chief Financial Officer were always in attendance. Committee members examined in detail the consolidated financial statements and the adidas AG annual financial statements...

  • Page 28
    ..., the performance and the ongoing commitment of the Executive Board, the managements of Group companies, the Works Council and all adidas Group employees. For the Supervisory Board Dr. Hans Friderichs Chairman March 2009 024 To Our Shareholders Supervisory Board Report - Supervisory Board

  • Page 29
    ... Sabine Bauer 1) Senior Manager Quality Analysis & Reporting, Global Operations, adidas AG Dr. iur. Manfred Gentz Chairman of the Administrative Board, Zurich Financial Services S. A., Zurich, Switzerland Chairman2) of the Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany Member of...

  • Page 30
    ...the company. It is an important condition in order to maintain and strengthen the confidence placed in adidas AG by our shareholders, financial markets, business partners, employees as well as the public. Key parameters of our corporate governance activities in 2008 were the further development of...

  • Page 31
    ... on Directors' Dealings, on changes in the percentage of voting rights as well as all corporate information subject to disclosure requirements. Through our Investor Relations activities, we are also in close contact with our shareholders see Our Share, p. 038 . adidas Group Annual Report 2008 027

  • Page 32
    ...a further recommendation of the German Corporate Governance Code. At the end of the financial year 2008, the entire number of shares held by the members of the Executive Board of adidas AG amounted to less then 1% of the shares issued by the company. At the same time, the members of the Supervisory...

  • Page 33
    ... Board do not meet for such preparation meetings as standard practice but only if required. More information on corporate governance All adidas AG corporate governance documents are available on our website at Group.com /corporate_governance. www. adidas- adidas Group Annual Report 2008...

  • Page 34
    ... rights resulting from the Management Share Option Plan (MSOP) in the financial year 2007. A new share option plan was neither resolved upon by the Annual General Meeting in 2008 nor is such a resolution planned for the Annual General Meeting in May 2009. Executive Board compensation The structure...

  • Page 35
    ... currently equals the fixed annual salary. Starting from a base amount totalling 10% of the pensionable income, the pension entitlement increases by 2% for each full year of tenure as an Executive Board member of adidas AG 2) and can reach a maximum level of 40% of pensionable income. In the event...

  • Page 36
    ... the adidas Group's directors' and officers' group liability insurance covers the personal liability of the Executive Board members but does not provide for a deductible see Corporate Governance Report, p. 026 . Pension payments to former Executive Board members In the financial year 2008, pension...

  • Page 37
    ... members' compensation in â,¬ Compensation redefined as of 2008 Effective as of the financial year 2008, there has been a change in structure of the Supervisory Board compensation. The compensation is now linked to the size of the Group and to the more intense supervisory tasks. Furthermore, the...

  • Page 38
    ... individual training plans. 18.03. Reebok and Dick's Sporting Goods announce a new apparel partnership via shop-in-shops throughout all Dick's stores in the USA. 25.03. Reebok launches its global marketing campaign "Your Move", which aims to evolve Reebok's positioning as the brand that celebrates...

  • Page 39
    ...'s biggest football stars meet the world's smallest football teams. 25.04. Reebok launches its new website www.reebok.com. 17.05. Reebok sponsors the 25th "Avon Running" women's run in Berlin with over 13,000 participants. 20.05. Picture 07 Reebok's running shoe "Premier SmoothFit â„¢ Cushion" is...

  • Page 40
    ... the National Hockey League (NHL) for the 2008 NHL Premiere Series in Europe and unveils its 2009 global hockey product line. 03.09. The adidas Group annual report "United by Sport" is awarded "Best Annual Report 2008" by "manager magazin". 04.09. The new homepage www.adidas.com highlights different...

  • Page 41
    ... their year-end summit in New York. 19.11. Picture 19 Reebok launches its first ever pop-up store "Reebok Flash" in New York. Around 3,000 feet of gallery space create an incredible retail installation featuring selected Reebok products. 24.11. adidas and the International Association of Athletics...

  • Page 42
    ...share declined 47% in 2008. Given the strong 2008 operational performance and Management's confidence in the strength of the Group's financial position and long-term strategy, we intend to propose an unchanged dividend per share at our 2009 Annual General Meeting. adidas AG share price development...

  • Page 43
    ... annual list of The Global 100 Most Sustainable Corporations in the World is unveiled each year at the World Economic Forum in Davos. adidas AG historically outperforms benchmark indices The adidas Group is committed to continuously enhancing shareholder value. The long-term development of our share...

  • Page 44
    ... earnings per share Operating cash ï¬,ow per share Year-end price Year-high Year-low Dividend per share Dividend payout Dividend payout ratio Dividend yield Shareholders' equity per share Price-earnings ratio at year-end Average trading volume per trading day DAX-30 ranking 3) at year-end by market...

  • Page 45
    ...the "manager magazin" competition "The Best Annual Reports". Extensive financial information available online We offer extensive information around our share as well as the Group's strategy and financial results on our corporate website at www.adidas-Group.com / investors. Our event calendar lists...

  • Page 46
    ... is currently Germany's most successful swimmer: Several world records and European Championship titles were hers already before she competed in the Olympic Games in Beijing - and won two gold medals. She has a clear objective for 2009 - to qualify for the World Championships. And her game plan to...

  • Page 47
    ... Corporate Mission Statement Group Brands and Divisions Group Strategy adidas Strategy Reebok Strategy TaylorMade-adidas Golf Strategy Internal Group Management System Major Locations and Promotion Partnerships Corporate Functions Global Operations Sustainability Employees Research and Development...

  • Page 48
    Corporate Mission Statement The adidas Group strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle. We are dedicated to consistently delivering outstanding financial results. We are committed to continuously ...

  • Page 49
    ... world's most recognised hockey brand names: Reebok Hockey and CCM Hockey. adidas Golf (30% of TaylorMade-adidas Golf sales) adidas Golf targets active, serious, athletic-minded golfers who understand that the right technologies can dramatically improve the performance of golf footwear and apparel...

  • Page 50
    ...potential. As a Group, we are number two in terms of sales, but we believe we are currently under-represented in the North American sporting goods market. Therefore, we target market share expansion via a strong, consumer-driven product offering, a diversified distribution strategy, and visible and...

  • Page 51
    ... or other brands Creating shareholder value Sustainable revenue and operating profit growth are critical to our success. Creating value for our shareholders through significant free cash ï¬,ow generation drives our overall decision-making process see Internal Group Management System, p. 058 . For...

  • Page 52
    ... the adidas business going forward. It will guide all efforts in product design and development, (digital) marketing and distribution and it is adidas' goal to be the most personal sports brand by 2015. Partnership network strengthened The utilisation of promotion partners such as federations, teams...

  • Page 53
    ... brand activation plans. In this, adidas is working very closely with its main retail partners to fully align consumer propositions and to develop unique selling propositions in line with the partner's target audience. In 2008, an example of this was the collaboration with the Intersport Group...

  • Page 54
    ...North American market, therefore represents another key component of the adidas brand strategy. adidas intends to strengthen its position in the category by emphasising the brand's unique positioning - with a clear focus not only on individual but also on team performance. In 2008, adidas Basketball...

  • Page 55
    ...legitimate sports lifestyle brand. What started as a niche business has developed into a significant contributor to the brand's top line with potential to represent up to 30% in the medium to long term. To best tap the potential of the sports lifestyle market, adidas created a dedicated Sport Style...

  • Page 56
    .... In 2008, the Reebok brand has further refined its strategy considering the brand's heritage and values, consumer insights and positioning within the adidas Group portfolio. Inspired by its roots in sport and women's fitness, Reebok developed a clear roadmap for its key businesses going forward...

  • Page 57
    ... strategy, Reebok intends to offer the right products to the right accounts at the right margins. Moreover, Reebok is committed to building a work environment that matches the need of its employees and to hiring people who fit the brand's values. Own women's fitness Reebok is on a mission to make...

  • Page 58
    ... 20 select retailers around the world, custom collaborations of The Pumpâ„¢ will be newly developed in 2009 and exclusively launched in select stores in limited quantities see Reebok Products and Campaigns, p. 138 . 054 Group Management Report - Our Group Structure and Strategy - Reebok Strategy

  • Page 59
    .... By the end of 2009, Reebok plans to have over 150 of these in place in the European market. Reebok is also leveraging the digital space to control distribution and build direct consumer relationships. In 2008, Reebok launched a new global website and e-commerce channels in North America and five...

  • Page 60
    ...branded offerings, increasing the number of Tour professionals using TaylorMade balls and further leveraging the successful NOODLE franchise, which focuses on soft-feeling, longdistance golf balls at a value price. 056 Group Management Report - Our Group Structure and Strategy - TaylorMade-adidas...

  • Page 61
    ... and sporting goods retailers) in the distribution mix allows TaylorMade-adidas Golf to position its clubs, balls, footwear and apparel among the top-selling golf products in these retail channels. TaylorMade-adidas Golf will continue to work closely with its strategic accounts in 2009 and plans to...

  • Page 62
    Internal Group Management System The adidas Group's central planning and controlling system is designed to continually increase the value of our Group and brands to maximise shareholder value. By improving our top- and bottom-line performance and optimising the use of invested capital, we aim to ...

  • Page 63
    ... activities. As a result, stock turn development is the key performance indicator as it measures the number of times average inventory is sold during a year, highlighting the efficiency of capital locked up in products in relation to our Group's business. To minimise capital tied up in accounts...

  • Page 64
    ...To assess current sales and profitability development, Management analyses sell-through information from our controlled space distribution as well as shortterm replenishment orders from retailers. Taking into account year-to-date performance as well as opportunities and risks, the Group's full year...

  • Page 65
    ... Reebok, sales increases in the emerging markets, particularly in Asia and in Eastern Europe, were more than offset by lower than anticipated revenues in North America and the UK. Our expectations for Group business performance in 2009 reï¬,ect the deterioration of the global economy towards the end...

  • Page 66
    ... 20, 2009 adidas Official Apparel and Footwear Outfitter 07 Reebok International Headquarters Canton/Massachusetts, USA F Flora London Marathon, London, UK April 26, 2009 adidas Official Sponsor 08 The Rockport Company Headquarters Canton/Massachusetts, USA 09 Reebok-CCM Hockey Headquarters...

  • Page 67
    ..., USA 15 F Flora London Marathon, London, UK A IHF Men's World Championship, Croatia K MLB All-Star Game, St. Louis /Missouri, USA C NFL Super Bowl, Tampa / Florida, USA J FIFA Confederations Cup, South Africa H UEFA Champions League Final, Rome, Italy adidas Group Annual Report 2008 063

  • Page 68
    ... our supply chain, to ensure consistently high product quality and to further improve our delivery performance. In 2008, Global Operations focused on five key initiatives to optimise processes in our supply chain, each of which will be further built upon in 2009. Suppliers by region 1) Americas...

  • Page 69
    ... vision of Global Operations is to be closest to every consumer. This means meeting consumer demand in various distribution channels with the right product (in terms of quality, size, colour, style and material) in the right store at the right time. In 2008, we had further evidence of the success of...

  • Page 70
    ...our supply chain. One example is our new Global Procurement System (GPS), a SAP-based system for purchase order management which harmonises and simplifies the ordering process and enables us to better react to market changes. GPS is the largest SAP implementation ever undertaken by the adidas Group...

  • Page 71
    ... adidas Group business entities in order to build personnel capacities throughout our company. In this way, acceptable working conditions become a routine part of business activities. In 2008, the SEA team conducted 251 training sessions and workshops (2007: 267). adidas Group Annual Report 2008...

  • Page 72
    ...throughout our supply chain. Activities focus on helping suppliers establish sound environmental management systems to best reduce their negative environmental impacts. We develop guidelines and training programmes for our suppliers, using the environmental performance of our own production sites as...

  • Page 73
    ... source of emissions, we have taken steps to measure and reduce our energy use as a business. At the adidas Group we apply policies, procedures and practices to ensure that all corporate entities are operating to the highest standards. We have environmental management systems in place at our major...

  • Page 74
    ... in Latin America (2007: 4%). As a global company with less than 10% of our employees located in Germany, we actively encourage global mobility and offer our employees the opportunity to go on international assignments. To support relocating professionals and their families in new living and working...

  • Page 75
    ... all-employee meetings at our major locations around the world where our staff have the opportunity to openly share their views with senior management and gain an overview of current and future business developments. The last one in 2008 took place at the adidas Group Headquarters in Herzogenaurach...

  • Page 76
    ... to purchase discounted products in our own stores. Own retail 47 41 Sales Logistics Marketing Central functions & administration Production Research & development IT 11 14 14 15 9 9 5 3 2 9 9 6 3 3 Total 38,982 31,344 072 Group Management Report - Our Group Corporate Functions - Employees

  • Page 77
    ...to continuously refine our branding as an employer of choice. For example, in 2008 we started a "key university strategy roll-out" where members of the Executive Board and other senior executives of the Group shared their business insights at 13 top universities worldwide and engaged in discussions...

  • Page 78
    ... samples by using virtual sampling technologies instead. This results in lower costs and a reduction of process time. adidas Innovation Team drives brand's R&D initiatives R&D activities at brand adidas focus on the development of innovative footwear, apparel and hardware technologies. To solidify...

  • Page 79
    ...brand Reebok, the Reebok Advanced Concepts (RAC) and Reebok Equipment teams located in Canton /Massachusetts, USA, create footwear, apparel and equipment with the primary focus on developing products that provide maximum comfort and fit for the consumer. - The R&D team at Reebok-CCM Hockey, located...

  • Page 80
    ... represents 3% of total Group employees, unchanged compared to the prior year (2007: 3%). R & D expenses â,¬ in millions 2004 1) 2005 1) 59 63 98 84 81 2006 2) 2007 2008 1) Figures reï¬,ect continuing operations as a result of the divestiture of the Salomon business segment. 2) Including Reebok...

  • Page 81
    ...(KFS) technology. This technology makes use of a series of engineered stretch panels positioned in key areas of the shoe which accommodate changes in the size and shape of an athlete's foot as it moves. At Reebok-CCM Hockey, products launched in 2008 accounted for 31% of sales in North America (2007...

  • Page 82
    ... in the 10,000 metres, numerous world records in the 5,000 metres, the 10,000 metres and the marathon. In 2008, he again smashed his own world record at the Berlin Marathon. His new goal? To once run a marathon in under 2:03:00 hours. And his game plan: "Have a clear goal, pursue it and challenge my...

  • Page 83
    ... Financial Year Group Business Performance Economic and Sector Development Income Statement Balance Sheet and Cash Flow Statement Treasury Disclosures pursuant to § 315 Section 4 of the German Commercial Code and Explanatory Report Business Performance by Segment adidas Business Performance Reebok...

  • Page 84
    .... Quarterly development of Consumer Price Index 1) by region Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 USA Euro Zone Japan 1) Source: Bloomberg. 4.1 3.1 0.7 4.0 3.6 1.2 5.0 4.0 2.0 4.9 3.6 2.1 0.1 1.6 0.4 080 Group Management Report - Our Financial Year Group Business Performance - Economic...

  • Page 85
    ... In Latin America, the sporting goods market developed in line with the overall economy and grew at a single-digit rate compared to the prior year. Both apparel and footwear sales increased in 2008 compared to the prior year, reï¬,ecting higher consumer spending in the region. adidas Group outpaces...

  • Page 86
    ... impacted as the new companies took over the business of the former distribution partner in the region. Synergies support operational performance The operational performance of the adidas and Reebok segments was positively impacted by the realisation of revenue and cost synergies resulting from...

  • Page 87
    ... region's major markets, supported by the new Reebok companies in Brazil /Paraguay and Argentina. 2008 net sales growth (currency-neutral) 1) by segment and region in % North America Latin America Europe Asia Total adidas Reebok TaylorMadeadidas Golf Total 1) Versus the prior year. 13 (3) 17...

  • Page 88
    ...own-retail expansion and a more favourable product mix. Currency movements also supported this development. Cost synergies resulting from the combination of adidas and Reebok sourcing activities also continued to have a positive impact. As a result, gross profit for the adidas Group rose 8% in 2008...

  • Page 89
    ...: 13.4%). Higher expenses related to the major sporting events in 2008 were offset by the adidas Group's strong revenue growth. In absolute terms, marketing working budget increased 4% to â,¬ 1.429 billion in 2008 from â,¬ 1.378 billion in the prior year. Gross profit by quarter â,¬ in millions Q1...

  • Page 90
    ...of the divestiture of the Salomon business segment. 2) Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006. 086 Group Management Report - Our Financial Year Group Business Performance - Income Statement

  • Page 91
    ...282 1) Figures reï¬,ect continuing operations as a result of the divestiture of the Salomon business segment. 2) Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006. adidas Group Annual Report 2008 087

  • Page 92
    ...apparel business from February 1, 2006 to November 30, 2006. Income before taxes by quarter â,¬ in millions Q1 2007 Q1 2008 Q2 2007 Q2 2008 Q3 2007 Q3 2008 Q4 2007 Q4 2008 30 54 153 169 441 431 191 250 088 Group Management Report - Our Financial Year Group Business Performance - Income Statement

  • Page 93
    ... grows 16% The Group's net income attributable to shareholders increased 16% to â,¬ 642 million in 2008 from â,¬ 551 million in 2007. This development was in line with Management's initial expectation of net income growth of at least 15%. The Group's higher operating profit, a lower tax rate...

  • Page 94
    ... of product shipments received from suppliers towards the end of the year in anticipation of future price increases as well as potential regulatory changes in Latin America. Hesitant customer order patterns also impacted this development see Risk and Opportunity Report, p. 107. In addition, the new...

  • Page 95
    ... payable were up 37%. This development was mainly a result of a higher volume of production and product shipments towards the end of the year in anticipation of future price increases as well as potential regulatory changes in Latin America see Risk and Opportunity Report, p. 107. The new Reebok...

  • Page 96
    ... Net cash used in financing activities Cash and cash equivalents at the end of 2008 1) 37% (106) 295 244 1) Includes a positive exchange rate effect of â,¬ 2 million. 092 Group Management Report - Our Financial Year Group Business Performance - Balance Sheet and Cash Flow Statement - Treasury

  • Page 97
    ... are Group companies authorised to work with banks with a lower rating see Risk and Opportunity Report, p. 107. To optimise the Group's cash position and ensure optimal allocation of liquid financial resources, subsidiaries are required to transfer excess cash to the Group's headquarters. Long-term...

  • Page 98
    ... 5.2% in 2008 (2007: 5.3%). High interest rates, mainly in the Euro Zone, during the first half of the year were offset by decreased interest rates worldwide in the second half of 2008. Long-term fixed-rate financing amounted to around 60% of the Group's total financing at the end of 2008 (2007...

  • Page 99
    ... of the credit facilities available to the Group at the end of 2008 was 33% versus 28% in the prior year. Currency management further optimised Due to the Group's global activity, currency management is a key focus of the Group's Treasury department. Hedging US dollars is the central pillar of our...

  • Page 100
    ... to Supervisory Board approval, by issuing new shares against contributions in cash and /or in kind once or several times by no more than a maximum of â,¬ 12,000,000 (Authorised Capital 2008). 096 Group Management Report - Our Financial Year Group Business Performance - Disclosures pursuant...

  • Page 101
    ... or through an offer made to all shareholders for cash or through sale at a price not significantly below the stock market price of shares with the same features. - They may be used, subject to Supervisory Board approval, for the purpose of acquiring companies, parts of companies or participations...

  • Page 102
    ...to ask the Annual General Meeting 2009 to issue a new authorisation to repurchase adidas AG shares. The change-of-control clause contained in the convertible bond follows common practice for the protection of bondholders. 098 Group Management Report - Our Financial Year Group Business Performance...

  • Page 103
    adidas Business Performance In 2008, sales growth in the adidas segment exceeded Management's initial expectations. Profitability developed in line with expectations. Currency-neutral sales in the adidas segment increased 14%. In euro terms, segment sales grew 10% to â,¬ 7.821 billion in 2008 from ...

  • Page 104
    ... eyewear. Asia 27% 2008 adidas own-retail sales by channel Factory Outlets 47% Internet Concession Corners 1% 2% Originals Concept Stores 6% Sport Performance Concept Stores 44% 100 Group Management Report - Our Financial Year Business Performance by Segment - adidas Business Performance

  • Page 105
    ... the prior year as a result of the segment's strong sales growth. In 2008, the adidas segment had higher operating overhead costs as a percentage of sales, mainly due to higher sales expenses in emerging markets related to sales growth. In euro terms, net other operating expenses and income grew 10...

  • Page 106
    ...growth in India and China was partly offset by a decline in Japan. Currency-neutral sales in Latin America increased 192%, due to the first-time consolidation of Reebok's new companies in the second quarter of 2008. 102 Group Management Report - Our Financial Year Business Performance by Segment...

  • Page 107
    ... market environment in the USA, in particular in the department store and mall-based retail channels. In euro terms, Rockport revenues decreased 17% to â,¬ 243 million in 2008 (2007: â,¬ 291 million). Latin America 11% North America 45% Asia 12% Europe 32% adidas Group Annual Report 2008...

  • Page 108
    ... Q1 2007 Q1 2008 Q2 2007 Q2 2008 Q3 2007 Q3 2008 Q4 2007 Q4 2008 (9) 25 21 6 (13) (1) (11) 84 Concession Corners 67 73 Total 647 524 104 Group Management Report - Our Financial Year Business Performance by Segment - Reebok Business Performance - TaylorMade-adidas Golf Business Performance

  • Page 109
    ...-adidas Golf Business Performance In 2008, sales growth in the TaylorMade-adidas Golf segment exceeded Management's initial expectations. Profitability developed in line with expectations. TaylorMade-adidas Golf revenues increased 7% on a currency-neutral basis. In euro terms, segment sales...

  • Page 110
    ...-adidas Golf operating profit by quarter â,¬ in millions Q1 2007 Q1 2008 Q2 2007 Q2 2008 Q3 2007 Q3 2008 Q4 2007 Q4 2008 11 24 24 15 19 (1) 23 27 106 Group Management Report - Our Financial Year Business Performance by Segment - TaylorMade-adidas Golf Business Performance - Risk and Opportunity...

  • Page 111
    ... by employing our Global Internal Audit department to independently assess and appraise operational and internal controls throughout the Group. adidas Group risk and opportunity management system Supervisory and Executive Boards Central risk management Brand and headquarter functions Reporting...

  • Page 112
    ..., each business unit actively monitors brand, distribution channel and price point developments in our core sport, leisure lifestyle and sport fusion markets. A key element of the identification process is primary qualitative and quantitative research such as trend scouting, consumer surveys and...

  • Page 113
    ... we continue to focus on supply chain improvements to speed up creation-to-shelf timelines see Global Operations, p. 064 . In 2009, the adidas Group will continue to refine the Reebok brand's communication programme in alignment with see Reebok Strategy, p. 052 . the brand's positioning Given the...

  • Page 114
    ... the Group's distribution strategy. The economic slowdown in 2008 and negative outlook for 2009 may put further pressure on the sporting goods industry to consolidate. Several retailers and competitors released declining sales and earnings and reported financial difficulties during the year...

  • Page 115
    ...clear and consistent messaging to our targeted consumer audience, in particular at point-of-sale. Strong brand momentum at adidas and TaylorMade-adidas Golf, as evidenced in improving market research results, gives us confidence that brand image risk in both these segments remains low. In 2008, we...

  • Page 116
    ... our retail segmentation strategy. By segmenting product offer to our customers, we limit the risk of increased competition which can result in higher sales discounts. For example, in the course of 2008, the Group decided to limit the Reebok product offering to an important mall-based key account in...

  • Page 117
    ... of the legal systems where they conduct Group business. During 2008, all of our employees were trained on a Code of Conduct e-learning tool as part of our Global Compliance Programme. All new employees are also trained on this tool see Corporate Governance Report, p. 026 . Participation is...

  • Page 118
    ... of 2008, no customer at either adidas, Reebok or TaylorMade-adidas Golf accounted for more than 10% of accounts receivable. However, compared to the prior year, the deterioration of the economic environment and a reduction in consumer confidence is expected to increase the risk of poor performance...

  • Page 119
    ... to timing, volume and currency structure. In addition, the adidas Group faces the risk of having to accept unfavourable financing terms due to liquidity restraints. Our Group's Treasury department uses an efficient cash management system to manage liquidity risk. At December 31, 2008, Group cash...

  • Page 120
    ..., we are expecting interest rates in 2009 to be stable or down from 2008. Therefore, we continue to project the likelihood of significant Group interest rate increases, which could have a low financial effect, as low. 116 Group Management Report - Our Financial Year Risk and Opportunity Report

  • Page 121
    ..., the women's sports market is one of the most attractive segments in the sporting goods industry with women accounting for more than a third of total spending on athletic footwear. The adidas Group has developed its Women's categories over the past years. Product offerings in both performance and...

  • Page 122
    ... at TaylorMade-adidas Golf, the acquisition of Ashworth provides a new platform to expand the segment's golf apparel business into the lifestyle market see TaylorMade-adidas Golf Strategy, p. 056 . Emerging markets as long-term growth drivers Emerging economies in Asia, Europe and Latin America have...

  • Page 123
    ... 2008, we opened the world's first adidas Brand Center in Beijing, taking the retail experience to a new level see adidas Strategy, p. 048 . We also launched new store formats for adidas Originals called Atelier and Studio. Rockport is also planning to launch a new store format in 2009 see Reebok...

  • Page 124
    ...2009, we expect the global sporting goods industry to decline. In mature markets such as the USA and Western Europe, the decline is expected to be more pronounced due to low levels of consumer confidence and difficult trading conditions for retailers. This is likely to lead to a highly promotional...

  • Page 125
    ... markets. The adidas Group will continue to spend around 1% of sales on research and development in 2009. Areas of particular focus include training, running, football and basketball at the adidas and Reebok brands, as well as golf hardware at TaylorMadeadidas Golf. The number of employees working...

  • Page 126
    ... conditions in many major markets. Incremental sales from the further segmentation of the brand's product range to effectively address specific consumer groups are forecasted to partly offset this development see adidas Strategy, p. 048 . Europe Asia Total Footwear Apparel Total 2) 1) At year...

  • Page 127
    ... Reebok Strategy, p. 052 . In the Classics category, we will continue to visibly upgrade and improve the brand's product offering. The consolidation of sales from Reebok's new companies in Latin America for the full twelve-month period is projected to support revenue development. TaylorMade-adidas...

  • Page 128
    ...-term financial leverage target of below 50% (2008: 64.6%). adidas Group 2009 outlook Currency-neutral sales growth Gross margin Operating margin Earnings per share low- to mid-single-digit decline decline decline decline 124 Group Management Report - Our Financial Year Subsequent Events...

  • Page 129
    ... TaylorMade-adidas Golf segment is projected to benefit from leading market positions in key categories, supported by continuously bringing new product innovations to the consumer as well as leveraging the benefit we anticipate gaining from the Ashworth acquisition. Key goals for long-term success...

  • Page 130
    ...Champions League winner in 2006, 2nd place FIFA Player of the Year 2007, gold medal at the Beijing Olympic Games. Impressive but never enough. His goal: To lead Argentina to the World Cup in South Africa - and win it for his home country. His game plan: "Believe in myself and the strength of my team...

  • Page 131
    Products and Campaigns adidas 128 Products and Campaigns Reebok 138 Products and Campaigns TaylorMade-adidas Golf 146 Products and Campaigns 4 Products and Campaigns

  • Page 132
    ... and unique designs are the key factors for our success. Our researchers, developers and designers push the limits of innovation. Have the right idea at the right time. Launch desirable products when consumers demand it. Introduce at least one major innovation every year. This is the strategy of our...

  • Page 133
    ... exploding out of the blocks, attacking the board or powering through the defence. adidas TECHFIT Power WEB compression garments support and stabilise core muscle groups, helping athletes achieve dynamic and agile movements. +1.1 % - speed* adidas TECHFIT Power WEB converts the energy of an...

  • Page 134
    ... can rely on our products. adidas football boots will support the brand in further expanding its football market leadership position in 2009. Engineered lightweight TUNIT ™ microfibre synthetic upper for perfect fit. 1 1 st The F50 TUNIT ™ is the world's first fully customisable football...

  • Page 135
    Supernova™ Sequence 2 adidas The all-new Supernova ™ Sequence 2 provides all the support your feet need, while offering a smooth and comfortable ride. Enjoy a perfect transition thanks to FORMOTION ™ heel units adapting to your individual footstrike: an experience that's one step ahead. 360°...

  • Page 136
    ... come together to present a new proposition to the market. The collection offers footwear and apparel referencing classic and contemporary looks and colours made for both classic scooter riders and all fans of casual and clean design. Both brands, Vespa and adidas, reference six decades of rich...

  • Page 137
    ... and constructions that work together to help maintain an athlete's body temperature at a desired 37 degrees. In 2009, adidas will communicate a complete men's training offer which will be supported by a campaign highlighting the key benefits of the CLIMACOOL ® offering. The central theme...

  • Page 138
    ... adidas Basketball kicked off the 2008 / 2009 NBA season with the next chapter in Brotherhood: "NBA Tested. Brotherhood Ready". This campaign brought together NBA All-Stars Gilbert Arenas, Dwight Howard, Tracy McGrady, Tim Duncan and Kevin Garnett to introduce the two styles of player that make...

  • Page 139
    Outdoor Campaign 2009 adidas To strengthen adidas' positioning as the athletic brand in the outdoor market, adidas is launching a new range of products aimed specifically at outdoor athletes. The world recordbreaking speed-climbing Huber brothers, Alexander and Thomas, are the epitome of speed and ...

  • Page 140
    ... its largest global brand campaign ever for adidas Originals under the banner of "Celebrate Originality". The campaign is set against the backdrop of a house party hosting an eclectic mix of people from the worlds of music, fashion and sport. The campaign launched in the USA in November 2008 and in...

  • Page 141
    .... adidas SLVR Label is clean, simple, inclusive and sophisticated. It brings creative solutions to reduce complexity. The adidas SLVR Label will be promoted through advertising in select fashion and lifestyle magazines, on websites as well as through outdoor executions in specific local markets...

  • Page 142
    ... EasyTone â„¢ activates the gluteus maximus more than a traditional walking shoe. 11 % more activity for key muscles in the calves and hamstrings The EasyTone â„¢ activates key leg muscles and tones them with every step, acting as your personal gym-on-the-go. 138 Products and Campaigns Reebok

  • Page 143
    ... of Reebok's top athletes such as Peyton and Eli Manning and Yao Ming. With a seamless interior, the SmoothFitâ„¢ technology of the SelectRide â„¢ eliminates irritation and maximises performance. 1 second to change The SelectRide â„¢ can be changed from a running shoe into a training shoe with...

  • Page 144
    ... shoes with exclusive retail collaboration partners starting late 2009. 20 years Reebok celebrates another milestone of its sports heritage in 2009: the 20th anniversary of the iconic Pump â„¢. 20 retailers Reebok has partnered with 20 selected retailers around the world to develop custom...

  • Page 145
    ... Griptone, the new Reebok proprietary grip enhancing control for better reaction speed. more aerodynamic The unique architecture in the lower part of the shaft makes the Reebok 8.0.8 O-Stick 22% more aerodynamic than a regular stick. 120 68 players A total of 68 NHL players wear the U+â„¢ Pro...

  • Page 146
    ...physical elements, JUKARI Fit to Flyâ„¢ incorporates the joy of movement, the fun that comes with training together and the artistic ï¬,air of Cirque du Soleil. Communication of the new workout experience started with a global marketing campaign in February 2009. 142 Products and Campaigns Reebok

  • Page 147
    ...to Flyâ„¢ is a fully integrated women's footwear and apparel range, the "Reebok Cirque du Soleil Collection". It combines the performance demands of the workout experience with the creativity and artistry of Cirque du Soleil. The collection has a style expression that is forward-looking, exploratory...

  • Page 148
    ... In 2009, Reebok will launch a new collection of women's apparel and footwear called "On The Move", inspired by Reebok's years of leadership in women's fitness. Created for the needs of a woman's busy lifestyle, the products are versatile and can be mixed and matched. The collection was designed...

  • Page 149
    ... Rockport's spring 2009 advertising campaign underscores the brand's commitment to style and authenticity. Rockport empowers consumers to do more, be more, live more, with stylish shoes engineered to feel good. The global campaign will be executed across all markets through print, online and outdoor...

  • Page 150
    ... the loft, lie and face angle. 24 146 driver configurations The adjustable head and the movable weights enable players to optimise their own driver. 3 Products and Campaigns TaylorMade-adidas Golf movable weights Movable Weight Technology â„¢ lets players change the head's centre of gravity.

  • Page 151
    ...-adidas Golf To promote the new Burner ® family of irons, the multi-platform campaign "The Set is Dead" will launch in 2009. Irons have for too long been engineered as a set - without heed to the shortcomings of this approach. TaylorMade realised that because long-irons, middle-irons and short...

  • Page 152
    ... year: He led the NHL with 11 winners and 22 power-play goals, plus he eclipsed the NHL record of 63 goals by a left-winger. Deservingly, he was named Most Valuable NHL Player. His goal: To win everything, every possible title. "To reach it, my game plan is to not just play, but to control the game...

  • Page 153
    ...of Cash Flows Consolidated Statement of Recognised Income and Expense Notes Statement of Movements of Intangible and Tangible Assets and Financial Assets Shareholdings 150 151 152 153 154 156 157 196 198 Segmental Information 204 Ten-Year Overview 206 Glossary 208 Index 214 Financial Calendar 2009...

  • Page 154
    ...opportunities and risks associated with the expected development of the Group. Herzogenaurach, February 16, 2009 Herbert Hainer CEO and Chairman Glenn Bennett Global Operations Robin J. Stalker Finance Erich Stamminger President and CEO of the adidas Brand 150 Consolidated Financial Statements...

  • Page 155
    ...the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group Management Report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements...

  • Page 156
    ..., 2008 Dec. 31, 2007 Change in % Cash and cash equivalents Short-term financial assets Accounts receivable Inventories Income tax receivables Other current assets Assets classified as held for sale Total current assets Property, plant and equipment Goodwill Trademarks Other intangible assets Long...

  • Page 157
    ... income statement (IFRS) â,¬ in millions Note Year ending Dec. 31, 2008 Year ending Dec. 31, 2007 Change Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating profit (% of net sales) Financial...

  • Page 158
    ... of further investments in subsidiaries Acquisition of subsidiaries and other business units net of cash acquired Purchase of short-term financial assets Purchase of investments and other long-term assets Interest received Net cash used in investing activities 904 10, 12, 13, 25 27 27 24...

  • Page 159
    ... Dec. 31, 2008 Year ending Dec. 31, 2007 Financing activities: Proceeds from /Repayments of long-term borrowings Dividend to shareholders of adidas AG Dividend to minority shareholders Exercised share options Repurchase of adidas AG shares Cash repayments of short-term borrowings Net cash used in...

  • Page 160
    ... â,¬ in millions Note Year ending Dec. 31, 2008 Year ending Dec. 31, 2007 Net gain /(loss) on cash ï¬,ow hedges, net of tax Actuarial gain of defined benefit plans, net of tax Currency translation Net income recognised directly in equity Net income after taxes Total income and expense recognised...

  • Page 161
    ... German stock corporation, and its subsidiaries design, develop, produce and market - increasingly through own-retail activities - 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...

  • Page 162
    ... item within shareholders' equity without affecting income. A summary of exchange rates to the euro for major currencies in which the Group operates is as follows: Number of consolidated companies 2008 2007 Exchange rates â,¬ 1 equals Average rate for the year ending Dec. 31 2008 2007 2008 Spot...

  • Page 163
    ... testing, such as the "dollar offset method" or the "hypothetical derivative method". The fair values of forward contracts and currency options are determined on the basis of market conditions on the reporting dates. The fair value of a currency option is determined using generally accepted models...

  • Page 164
    ... using steady growth rates of 1.7% (2007: 2.5%). The growth rates do not exceed the long-term average growth rate of the business to which the trademarks are allocated. The discount rate is based on a weighted average cost of capital calculation considering a fiveyear average debt /equity structure...

  • Page 165
    ...-adidas Golf. Cash ï¬,ows beyond this period are extrapolated using steady growth rates of 1.7% (2007: 2.0% to 2.5%). These growth rates do not exceed the long-term average growth rate of the business in which each cash-generating unit operates. Discount rates are based on a weighted average cost...

  • Page 166
    ... in return for their service during the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on high-quality corporate bonds. Calculations are performed by...

  • Page 167
    ...group held-for-sale. The selling process commenced in December 2008, and contract finalisation is expected in 2009. At December 31, 2008, this disposal group contains assets of â,¬ 10 million less liabilities of â,¬ 6 million. In connection with the planned divesture of the Maxï¬,i golf ball brand...

  • Page 168
    ...Saxon Athletic is a design, development, marketing and manufacturing company for team uniforms worn by professional and amateur teams throughout North America. The acquisition had the following effect on the Group's assets and liabilities: Effective April 1, 2008, adidas International B.V. acquired...

  • Page 169
    ... the cash-generating unit adidas and is managed in the local functional currency. If this acquisition had occurred on January 1, 2008, total Group net sales would have been â,¬ 10.8 billion and net income would have been â,¬ 640 million for the year ending December 31, 2008. The acquired subsidiary...

  • Page 170
    ...Inc. acquired 100% of the shares of Ashworth, Inc., including all direct and indirect holdings for a purchase price of US $ 30 million. Based in Carlsbad /California (USA), Ashworth is a well-established golf lifestyle apparel brand. The acquisition had the following effect on the Group's assets and...

  • Page 171
    ... profit or loss". Changes in the fair value are recognised in the income statement as they occur. The majority of short-term financial assets are marketable securities relating to money market funds and structured deposits. 7 Accounts receivable Accounts receivable consist mainly of the currencies...

  • Page 172
    ...expenses relate mainly to promotion agreements and service contracts as well as rents. Information in relation to forward contracts as well as currency options and interest rate derivatives is also included in these Notes see Note 23 . Inventories â,¬ in millions Dec. 31, 2008 Gross value Allowance...

  • Page 173
    ..., 2008 and 2007. Future changes in expected cash ï¬,ows and discount rates may lead to impairments of the accounted trademarks in the future. For details see Statement of Movements of Tangible and Intangible Assets and Financial Assets (Attachment I to these Notes). adidas Group Annual Report 2008...

  • Page 174
    ... market price in an active market, therefore existing contractual settlements were used in order to reasonably estimate the fair value as at December 31, 2008. Dividends are distributed by FC Bayern München AG instead of regular interest payments. Additionally, long-term financial assets include...

  • Page 175
    ... in which the Group conducts its business. The largest portions of effective gross borrowings (before liquidity swaps for cash management purposes) as at December 31, 2008 are denominated in euros (2008: 57%; 2007: 51%) and US dollars (2008: 39%; 2007: 45%). Month-end weighted average interest rates...

  • Page 176
    ... translation differences Changes in companies consolidated Jan. 1, 2008 Usage Reversals Additions Transfers Dec. 31, 2008 Thereof non-current Marketing Employee benefits Returns, allowances, warranty Taxes, other than income taxes Other provisions Total provisions Goods and services not yet...

  • Page 177
    .... The liabilities arising from defined benefit plans are partly covered by plan assets. Actuarial assumptions in % Dec. 31, 2008 Dec. 31, 2007 Discount rate Salary increases Pension increases Expected return on plan assets 5.9 4.3 2.0 5.0 5.6 3.5 1.8 5.7 adidas Group Annual Report 2008 173

  • Page 178
    ... Year ending Dec. 31, 2008 Year ending Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Current service cost Interest cost Expected return on plan assets Pension expenses 12 9 (4) 17 12 7 (4) 15 Present value of unfunded obligation Present value of funded obligation Present value of total obligations...

  • Page 179
    ... were partly acquired in connection with the acquisition of the Reebok business and partly through purchases in 2008. Historical development â,¬ in millions Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004 Present value of defined benefit obligation Fair value of plan assets...

  • Page 180
    ..., 2011 - by issuing new shares against contributions in cash or in kind once or several times by no more than a maximum of â,¬ 12,000,000 and, subject to Supervisory Board approval, to exclude shareholders' subscription rights (Authorised Capital 2008); 176 Consolidated Financial Statements Notes

  • Page 181
    ... in cash once or several times by no more than a maximum of â,¬ 20,000,000 and, subject to Supervisory Board approval, to exclude shareholders' subscription rights for fractional amounts and when issuing the new shares at a value not essentially below the stock market price of shares with...

  • Page 182
    ...Section 4 of the German Commercial Code and Explanatory Report (Handelsgesetzbuch - HGB), p. 096 . Between January 30, 2008 and May 2, 2008, adidas AG repurchased 5,511,023 shares with an overall value of â,¬ 229,948,950.18 (excluding incidental purchasing costs) in accordance with the authorisation...

  • Page 183
    ... voting rights (9,695,127 shares) on this date. All of these voting rights are attributable to the Capital Research and Management Company, in accordance with § 22 section 1 sentence 1 number 6 WpHG. Euro Pacific Growth Fund, Los Angeles, USA informed the Company by letter on January 19, 2009 in...

  • Page 184
    ... statement of changes in equity â,¬ in millions Cumulative translation adjustments Total shareholders' equity Note Share capital Capital reserve Hedging reserve Other reserves 1) Retained earnings Minority interests Total equity Balance at December 31, 2006 Net income recognised directly...

  • Page 185
    ... into long-term contracts. Financial commitments under these contracts mature as follows: Financial commitments for service arrangements â,¬ in millions Dec. 31, 2008 Dec. 31, 2007 Within 1 year Between 1 and 5 years After 5 years Total 49 48 - 97 48 62 - 110 adidas Group Annual Report 2008...

  • Page 186
    ... in net income Measurement according to IAS 17 Amortised cost Fair value Dec. 31, 2008 Assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term...

  • Page 187
    ... in net income Measurement according to IAS 17 Amortised cost Fair value Dec. 31, 2007 Assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term...

  • Page 188
    ...values of long-term financial assets classified as available-for-sale are based on quoted market prices in an active market or are calculated as present values of expected future cash ï¬,ows. The fair values of forward contracts and currency options are determined on the basis of market conditions...

  • Page 189
    ... publicly traded, the adidas Group uses generally accepted quantitative financial models based on market conditions prevailing at the balance sheet date. Notional amounts of US dollar hedging instruments â,¬ in millions Dec. 31, 2008 Dec. 31, 2007 Forward contracts Currency options Total 1,732...

  • Page 190
    ... income â,¬ in millions Year ending Dec. 31, 2008 Year ending Dec. 31, 2007 Income from accounts receivable previously written off Income from release of accruals and provisions Gains from disposal of fixed assets Income from the recognition of negative goodwill see Note 4 Other revenues Total...

  • Page 191
    ... such as promotion contracts, advertising, retail support, events and other communication activities. However, it does not include marketing overhead expenses. In 2008, marketing working budget accounted for approximately 33% (2007: 33%) of the total operating expenses. Total depreciation and...

  • Page 192
    ...from interest derivatives not being part of a hedging relationship. Unrealised gains /losses from fair value measurement of such financial assets are shown in other financial income or expenses. Year ending Dec. 31, 2008 Year ending Dec. 31, 2007 Financial income â,¬ in millions Interest expense...

  • Page 193
    ...) 26 - - 11 25 (7) (135) 1) Relates to the acquisition of Ashworth, Inc. and Textronics, Inc. for the year ending December 31, 2008. 2) Relates to the disposal group Gekko Brands, LLC which is classified as held-for-sale for the year ending December 31, 2008. adidas Group Annual Report 2008 189

  • Page 194
    ... million to â,¬ 212 million for the year ending December 31, 2008. These amounts mainly relate to tax losses and unused foreign tax credits of the USA tax group. Remaining unrecognised deferred tax assets relate to companies operating in certain emerging markets, since the realisation of the related...

  • Page 195
    ...Reebok-CCM Hockey and Rockport. The TaylorMade-adidas Golf segment includes the brands TaylorMade, adidas Golf and Ashworth. Earnings per share Information about the Group's segments in accordance with the management approach is presented on the following page. Year ending Dec. 31, 2008 Year ending...

  • Page 196
    Primary segmental information by brand â,¬ in millions adidas 2008 2007 2008 Reebok 2007 TaylorMade-adidas Golf 2008 2007 2008 HQ /Consolidation 2007 2008 adidas Group 2007 Net sales to third parties Gross profit in % of net sales Operating profit in % of net sales Assets Liabilities Capital ...

  • Page 197
    ...to issue non-transferable stock options for up to 1,373,350 no-par-value bearer shares to members of the Executive Board of adidas AG as well as to managing directors /senior vice presidents of its related companies and to other executives of adidas AG and its related companies until August 27, 2004...

  • Page 198
    ...of at least 8%. (2) Relative Performance: During the same period, the stock market price for the adidas AG share must have developed by an annual average of 1% more favourably than the stock market prices of a basket of global competitors of the adidas Group and in absolute terms may not have fallen...

  • Page 199
    34 Other information Employees The average numbers of employees are as follows: Executive Board In 2008, the overall compensation of the members of the Executive Board (all short-term benefits) totalled â,¬ 8.4 million (2007: â,¬ 10.6 million). Post-employment benefits (costs for accrued pension ...

  • Page 200
    ...Goodwill Trademarks Total intangible assets Land and buildings Acquisition cost January 1, 2007 Currency effect Additions Increase in companies consolidated Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2007/January 1, 2008 Currency effect...

  • Page 201
    ... Construction in progress Total tangible assets Shares in affiliated companies Participations Other financial assets Total financial assets 118 (10) 21... 4 27 27 106 103 96 129 (2) 6 - - - - (3) 130 1 2 - - - - - (10) 123 23 - - 4 27 27 106 103 96 adidas Group Annual Report 2008 197

  • Page 202
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 203
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 204
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 205
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 206
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 207
    ...Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports...

  • Page 208
    ... Group segmental information: ten-year overview â,¬ in millions 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Brands adidas Net sales Gross profit Gross margin Operating profit 1) Operating margin 1) Operating assets Reebok 2) Net sales Gross profit Gross margin Operating profit Operating...

  • Page 209
    ... 2004 and 2005 reï¬,ect continuing operations as a result of the divestiture of the Salomon business segment. 5) Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006. adidas Group Annual Report 2008 205

  • Page 210
    ... IAS 19. 5) Includes income from continuing and discontinued operations. 6) Figures adjusted for 1: 4 share split conducted on June 6, 2006. 7) Subject to Annual General Meeting approval. 8) Based on number of shares outstanding at year-end. 206 Consolidated Financial Statements Ten-year overview

  • Page 211
    ... 39 and amendment to IAS 19. 5) Includes income from continuing and discontinued operations. 6) Figures adjusted for 1: 4 share split conducted on June 6, 2006. 7) Subject to Annual General Meeting approval. 8) Based on number of shares outstanding at year-end. adidas Group Annual Report 2008 207

  • Page 212
    ... to aid in the design process. Capital expenditure Total cash expenditure used for the purchase of tangible and intangible assets, excluding acquisitions and finance leases. Classics Reebok products designed in an authentic heritage style, targeting sports lifestyle consumers who seek trendsetting...

  • Page 213
    ...Current asset intensity of investments = current assets / total assets. Days of sales outstanding (DSO) customers. Average time of receipt of outstanding payments from Demand-driven supply chain Management of up- and downstream relationships between suppliers and customers to deliver the best value...

  • Page 214
    ... such a corporation's Supervisory Board must be composed of an equal number of employees and shareholder representatives. Go to market All instruments, tools and channels used to connect with consumers in order to best fulfil their needs. Goodwill Intangible asset that quantifies the price that...

  • Page 215
    ...promotion and communications. Operating profit Profit from operating activities after cost of sales and operating expenses. Operating profit = gross profit + royalty and commission income + other operating income - marketing working budget - operating overheads. adidas Group Annual Report 2008...

  • Page 216
    ... assets and taxes. Operating working capital = accounts receivable + inventories - accounts payable. see also Working capital Promotional expenditure Expenses related to promotion partnerships. Proxy solicitation Process of actively contacting shareholders, either through the company directly...

  • Page 217
    ... All parties that have a direct or indirect interest in a company's performance and results. For the adidas Group, this includes credit providers, shareholders, consumers, retailers, distributors, licensees, supply chain business partners, employees, international sports bodies, non-governmental...

  • Page 218
    ...045 Business Performance - adidas Group 080 ff. - Brand Segments 099 ff. C Campaigns 128 ff. Capital Expenditure 092, 124 Cash 090 ff. Cash Flow Statement 092 ff. Consolidated Financial Statements 152 ff. Compensation - Report 030 ff. - Executive Board 030 ff. - Supervisory Board 033 - Employees 070...

  • Page 219
    Financial Calendar 2009 March 4, 2009 2008 Full Year Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast May 5, 2009 First Quarter 2009 Results Press release, conference call and webcast May 7, 2009 Annual General Meeting in Fürth/Bavaria, ...

  • Page 220
    ....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...