Reebok 2009 Annual Report Download

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Annual Report 09
adidas GROUP
EVERY PRODUCT
TELLS A STORY

Table of contents

  • Page 1
    Annual Report 09 adidas GROUP EVERY PRODUCT TELLS A STORY

  • Page 2

  • Page 3
    ...Inventories Receivables and other current assets Working capital Net borrowings Shareholders' equity Capital expenditure Net cash from 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...

  • Page 4
    ... to market, such as: adidas: F50 football boot miCoach training system Reebok: ZigTechâ„¢ training shoe TaylorMade-adidas Golf: R9â„¢ SuperTri Driver Rockport: TruWALK footwear collection Reebok-CCM Hockey: 11K skates On a currency-neutral basis, sales to increase: at a low- to mid-single-digit rate...

  • Page 5
    ...inspirational events we have experienced. Of stories about the greatest talents performing in our products. Moments that our brands have shaped and our products have helped achieve. These stories fuel our passion, our spirit for innovation, our ambition to be better, in our products, in our business...

  • Page 6
    F50i TUNiT™ Lionel Messi is the best-known F50 player in the world. He knows he can rely fully on this boot. It is the first football boot with a single-layer upper, the SprintSkin. The incorporated lace cover ...

  • Page 7
    ...the decisive goal of the match: 2-0 for FC Barcelona against titleholders Manchester United. Overjoyed, he kisses his new F50i. The picture goes around the world. Messi is later in the year awarded European Player of the Year and FIFA World Player of the Year. EVERY PRODUCT TELLS A STORY adidas 3

  • Page 8
    ... the Griptoniteâ„¢ MAX all-weather palm treatment, providing a secure grip in all conditions. Santonio Holmes' touchdown proved the effectiveness of the Griptoniteâ„¢ MAX treatment. In ..., while the Keystone thumb with independent construction adds support and durability. 20 09 SANTONIO HOLMES...

  • Page 9
    ... manages to pull down the pass just inside the corner of the end zone. Touchdown. Holmes is the man of the match, the MVP. Afterwards, he autographs his winning gloves which are then auctioned, benefiting the Sickle Cell Disease Association of America, Inc. EVERY PRODUCT TELLS A STORY Reebok...

  • Page 10
    ... victory at the 2009 PGA Championship, where he played the TaylorMade r7® TP, the first iron to incorporate TaylorMade's Inverted Cone Technology (ICT). Originally developed for TaylorMade drivers, ICT increases the area of the clubface that delivers high ball speed, promoting greater forgiveness...

  • Page 11
    HAZELTINE/MINNESOTA, USA - AUGUST 16, 2009 Yong-Eun Yang hits a towering shot. 197 yards. A burst of emotion. Yang acts out his feelings. He now knows ...first golfer to overtake Tiger Woods in a major championship, in which Woods led until the final round. EVERY PRODUCT TELLS A STORY TaylorMade 7

  • Page 12
    ...HJ Blanka Vlasic is a dedicated adiZeroâ„¢ HJ wearer. This lightweight shoe, personalised in her individual colours, ensures higher energy transfer through the use of an aerodynamic lace cover. The lowcut design and the upper support on the medial side provide greater mobility and perfect protection...

  • Page 13
    ... captivates the stadium. Both are inspired to win. The tension is palpable. Friedrich gambles. But Vlasic takes gold - the only high jumper to clear 2.04m at the IAAF World Championships. An emotional moment for Blanka Vlasic and the huge crowd in the stadium. EVERY PRODUCT TELLS A STORY adidas 9

  • Page 14
    ...GROUP MANAGEMENT REPORT - OUR GROUP Corporate Mission Statement ...48 Group Brands ...49 Major Locations and Promotion Partnerships ...50 Group Strategy ...52 Global Sales Strategy ...54 Wholesale Strategy ...54 Retail Strategy ...56 Global Brands Strategy ...58 adidas Strategy ...60 Reebok Strategy...

  • Page 15
    03 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Internal Group Management System ...108 GROUP BUSINESS PERFORMANCE ...112 Economic and Sector Development ...112 Income Statement ...115 Balance Sheet and Cash Flow Statement ...122 Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 16
    Bislett Pole Vault Spikes The Reebok Bislett Pole Vault spikes with incorporated midfoot strap provide the ultimate support - and this came at just the right time for injured Steven Hooker at the IAAF World Championships in 2009. Additional features include a sharkskin outsole, which ensures ...

  • Page 17
    ... TO OUR SHAREHOLDERS Operational and Sporting Highlights 2009 ...14 Interview with the CEO ...18 Executive Board ...24 Supervisory Board ...26 Supervisory Board Report ...28 Declaration on Corporate Governance including the Corporate Governance Report ...33 Compensation Report ...38 Our Share ...42...

  • Page 18
    ... shoes featuring custom footbed technology to enhance support and provide personalised comfort Picture 07. 16.03. Numerous celebrities such as Mischa Barton and Jenny Garth experience Reebok's newly launched JUKARI Fit to Flyâ„¢ in Los Angeles. 18.03. Reebok-CCM Hockey presents its 2009 product line...

  • Page 19
    ...06. Reebok-CCM Hockey enters into multi-year partnership agreements with the top three 2009 NHL Draft picks John Tavares, Victor Hedman and Matt Duchene. 27.06. adidas sponsored swimmer Britta Steffen sets a new world record in the 100m freestyle finals of the German Championships. 29.06. Vogue.com...

  • Page 20
    ...whole event. 16.08. TaylorMade-adidas Golf Tour Staff professional Yong-Eun Yang wins the US PGA Championship Picture 02. 16.08. R&B superstar MC Fabolous and Reebok team up to debut the Reebok Classic Remix footwear collection, sold exclusively at select Foot Locker locations throughout the USA. 18...

  • Page 21
    ....com. The centrepiece of the new website is the section "Spirit of Sport" which contains stories about the brands, products and athletes of the adidas Group. 10.12. adidas and Disney announce a new product line for infants and children, combining adidas Kids top performance products with classic...

  • Page 22
    ... levels of cash from operations and significantly improved its financial position. During the year, the Group also completed a major reorganisation, setting a strong foundation for sustainable long-term growth. In the following interview, Herbert Hainer, adidas Group CEO, reï¬,ects on 2009 and...

  • Page 23
    ... increase operational efficiency have certainly helped us mitigate some of these effects. But at the same time, we had to get the balance right between cutting costs and maintaining investments in areas such as controlled space, promotion partnerships and product innovation to support future growth...

  • Page 24
    ...the adidas and Reebok retail operations around the globe. In the short term this will require additional investment in people and IT infrastructure as we strive to create greater retail competency in areas such as product merchandising, real estate management and store processes. At the same time we...

  • Page 25
    ...emerging markets such as India continued. However, the Japanese consumer environment is still weak, a trend we expect to impact our business in 2010. In Latin America, trading remains robust, with growth of 20% as our market share continues to advance. Finally, in North America, sales declined 7% in...

  • Page 26
    ... on major sports events as well as new product and campaign launches, we will invest in marketing and controlled space, securing share of voice and premium distribution. At the same time, we will remain disciplined in managing our operating cost base, and we expect operating margin to increase...

  • Page 27
    ... with our new global campaign which uses the motto "Ree", as Reebok strives to "ReeDefine" sport and style. And TaylorMade-adidas Golf will secure and drive market shares with campaigns like "TaylorMade versus TaylorMade" in metalwoods and "Project Burner" in irons to keep momentum going. With this...

  • Page 28
    ... latest was Director of Footwear Development. In 1993, Glenn Bennett joined adidas AG and began working as the Head of Worldwide Footwear Development. He was promoted to Senior Vice President of Footwear Operations a few months later. In 1997, Glenn Bennett was appointed to the Executive Board where...

  • Page 29
    ... 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 Marketing in 2000. Four years later, he was named President of adidas North America, while maintaining his position as Head of Global Marketing. In...

  • Page 30
    ... SE, Munich, Germany Member of the Board of Directors, Sanofi-Aventis S.A., Paris, France Member of the Board of Directors, HSBC France S.A., Paris, France SABINE BAUER 2) Deputy Chairwoman 1) Senior Manager Quality Analysis & Reporting, Global Operations, adidas AG 4) WILLI SCHWERDTLE Deputy...

  • Page 31
    ... 7, 2009. 2) Employee representative. 3) Since the end of the Annual General Meeting held on May 7, 2009. 4) Until December 31, 2009; thereafter as of January 1, 2010, Chairwoman of the Central Works Council, adidas AG. 5) Since July 1, 2009; formerly from January 12, 2009, General Manager, SB Asset...

  • Page 32
    ... to 2010, a year with major sports events and many promising new product initiatives. Igor Landau Chairman of the Supervisory Board Supervision and advice in dialogue with the Executive Board In 2009, we, as the Supervisory Board, carefully and regularly monitored the Group's management, in...

  • Page 33
    ... 2008 Performance Bonus. In addition, we set the key targets for payment of the 2009 Performance Bonus and resolved upon a new LTIP for the members of the Executive Board. Lastly, the Executive Board reported to us in detail on business development at the Reebok and Rockport brands. The main focus...

  • Page 34
    ... was the report on the current business development at Reebok and internal corporate restructuring measures in the context of the ongoing Reebok integration. At the meeting of the Supervisory Board on December 10, 2009, at which the Executive Board was not present, we approved the key individual...

  • Page 35
    ... met five times in 2009. The auditor and the Chief Financial Officer attended all meetings. The committee members focused on the adidas AG annual financial statements and the consolidated financial statements for 2008, the auditor's reports as well as the first half year report and quarterly...

  • Page 36
    ... the tremendous personal dedication, 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 Igor Landau Chairman March 2010 32 TO OUR SHAREHOLDERS Supervisory Board Report

  • Page 37
    ...management and company control. Good corporate governance supports a sustainable increase in value and enhances the confidence placed in our company by our shareholders, business partners, employees and the financial markets. It is thus essential for the Group's long-term success. We see corporate...

  • Page 38
    ... in particular for leading the entire Executive Board as well as for management of the business policy of the Group. In addition, he is in charge of various fields such as Global Sales (Wholesale and Retail) of the adidas and Reebok brands, Internal Audit and Social & Environmental Affairs as...

  • Page 39
    ...as well as the risk management system and is regularly informed on the work undertaken by Internal Audit. The Audit Committee's exact methods of working are regulated by the Rules of Procedure, which were resolved upon by the entire Supervisory Board in the year under review see www.adidas-Group.com...

  • Page 40
    ...the final consumer. Our Social & Environmental Affairs team deals with the rights of employees in the supply chain and coordinates product safety standards. Before our products reach the market, our Intellectual Property department researches the technologies, trademarks, logos and other designs to...

  • Page 41
    ... or exceeds â,¬ 5,000. In 2009, we received two Directors' Dealings' notifications relating to adidas shares (ISIN DE0005003404), which were published at www.adidas-Group.com/ directors_dealings. TO OUR SHAREHOLDERS Declaration on Corporate Governance including the Corporate Governance Report 37

  • Page 42
    ... Reduction of net debt (adjusted for non-operating effects) Sales growth with regard to the Reebok, Rockport and Reebok-CCM Hockey brands as well as Absolute and relative share price development, each measured over the three-year period from 2009 to 2011. The amount of the LTIP Bonus is calculated...

  • Page 43
    ... towards sustainable corporate development. The new compensation structure provides for an increase in the share of the LTIP Bonus in the total compensation and a decrease in the weighting of the Performance Bonus. For 2009, however, the Performance Bonus laid down in the prior year is applicable...

  • Page 44
    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 1) and can reach a maximum level of 40% of pensionable income. In the event of the retirement of an Executive Board ...

  • Page 45
    ... the Corporate Governance Report, p. 33. Supervisory Board members who have been members of the Supervisory Board only for a part of the financial year receive a pro-rated amount of compensation. The fixed annual payment for each member of the Supervisory Board amounts to â,¬ 40,000. Three times...

  • Page 46
    ... with equity market performance, the adidas AG share price declined at the beginning of the year, continuing the downward trend from 2008. While the announcement of cost-saving initiatives and better than expected 2008 annual results positively impacted our share price, weak retail sales data and...

  • Page 47
    ..., our share price performed better than the market through to year-end, as several analysts expressed their confidence in the Group's medium-term strategy. Accordingly, the adidas AG share closed 2009 at â,¬ 37.77, having gained 39% over the course of the year. Due to this development, our market...

  • Page 48
    ... world 3% Management 10% Germany 26% North America 06 31% Rest of Europe N° - adidas AG historically outperforms benchmark indices The adidas Group is committed to continuously enhancing shareholder value. The long-term development of our share price reï¬,ects investor confidence and the growth...

  • Page 49
    ... market community a regular update about the latest developments of the adidas Group and the adidas AG share. SHARE RATIOS AT A GLANCE 2009 08 2008 N° - Basic earnings per share â,¬ Diluted earnings per share â,¬ Operating cash ï¬,ow per share â,¬ Year-end price â,¬ Year-high â,¬ â,¬ Year-low...

  • Page 50
    TERREX Lite Softshell Jacket The Huber Brothers and adidas worked closely together in developing the highquality features of the adidas Outdoor product range. One example is the TERREX Lite Softshell Jacket which allows total freedom of movement due to FORMOTIONâ„¢ technology, while a unique hybrid ...

  • Page 51
    ...60 Reebok Strategy ...70 TaylorMade-adidas Golf Strategy ...76 Rockport Strategy ...82 Reebok-CCM Hockey Strategy ...84 Global Operations ...88 Research and Development ...92 Employees ...97 Sustainability ...102 02 GROUP MANAGEMENT REPORT - OUR GROUP NAMELESS TOWER, PAKISTAN - AUGUST 14, 2009 It...

  • Page 52
    ..., creative and financially rewarding for our employees and shareholders. WE ARE INNOVATION AND DESIGN LEADERS who seek to help athletes of all skill levels achieve peak performance with every product we bring to market. 48 GROUP MANAGEMENT REPORT - OUR GROUP Corporate Mission Statement

  • Page 53
    ... consumer. Reebok-CCM Hockey (2% of adidas Group sales) Reebok-CCM Hockey is one of the world's largest designers, manufacturers and marketers of hockey equipment and apparel with two of the world's most recognised hockey brand names: Reebok Hockey and CCM Hockey. GROUP MANAGEMENT REPORT...

  • Page 54
    Major Locations and Promotion Partnerships The adidas Group sells products in virtually every country around the world. As at December 31, 2009, the Group had 177 subsidiaries worldwide with our headquarters located in Herzogenaurach, Germany. Our Group has also assembled an unparalleled portfolio ...

  • Page 55
    ...Division Headquarters ICC World Twenty20 NFL Super Bowl O 11 adidas Group Asia D 12 adidas Group Latin America E IAAF Indoor World Championships A L Orange Africa Cup of Nations 2010 2010 FIFA World Cupâ„¢ GROUP MANAGEMENT REPORT - OUR GROUP Major Locations and Promotion Partnerships 51

  • Page 56
    ... for Global Brands. The new structure will allow us to better leverage the strengths of our management team and deliver best-in-class service to our consumers and customers. Due to the different business models of TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey, these operating segments...

  • Page 57
    ...managing working capital and optimising our capital structure remain key priorities for us. As always, we are committed to increasing returns to shareholders with aboveindustry-average share price performance and dividends. SHARED VALUES Performance Passion Integrity Diversity see Corporate Mission...

  • Page 58
    ... these two business models, the Group is in a better position to act on multiple customer and consumer needs, be more responsive to market developments and manage channel synergies by establishing best practices worldwide. WHOLESALE STRATEGIC PILLARS 01 N° - TO BECOME THE GLOBALLY LEADING SALES...

  • Page 59
    ..., IT systems, training concepts, and guidelines for store building and store operations. This ensures that the quality of the brand presentation and the service offered to the consumer are at all times high and comparable to our own retail stores. Harmonisation and standardisation of processes to...

  • Page 60
    ...follow a joint distribution roadmap aligning distribution policy between Wholesale and Retail. To this end, in 2009 we put a cross-functional team in place to analyse every country and every major city to avoid business cannibalisation. 56 GROUP MANAGEMENT REPORT - OUR GROUP Global Sales Strategy

  • Page 61
    ... primary focus for all retail teams, whether they are working in logistics, store operations, marketing or any other retail function. Therefore, in the short term, we will limit new store openings and close down stores not reaching their potential, as well as implement new store review processes to...

  • Page 62
    ... 2009, the Global Brands function was formed to guide and reinforce the go-to-market strategies for the adidas Sport Performance, adidas Sport Style and Reebok divisions with a particular focus on long-term brand development. To achieve this, Global Brands defines a clear target audience and value...

  • Page 63
    ... across all communication channels. Both adidas and Reebok regularly bring new global marketing concepts to life, which can be easily leveraged to create simple and powerful brand messages and support an array of product offerings. For example, adidas will use the "EVERY TEAM NEEDS ..." platform to...

  • Page 64
    ...mission is to be the leading sports brand in the world. One major lever to achieve this is the brand's broad and unique product portfolio spanning from apparel and footwear for professional athletes to premium fashion. It allows adidas to address multiple consumer needs, exploit market opportunities...

  • Page 65
    ... the adidas Sport Performance division offers products in almost every sports category, the key priorities are: Football Running Training Basketball Outdoor Every Team Needs a Shirt with a Story adidas sponsored national football teams unveiled their new federation home kits for the 2010 FIFA World...

  • Page 66
    ...the key marketing campaign for 2010, "Run Yourself Better". Training: creating new consumer experiences At adidas, Training is the biggest category for both men and women. Training supports the preparation needs of serious athletes across all sports disciplines and is the industry's largest apparel...

  • Page 67
    ... best-in-class product offering with revolutionary new consumer experiences that bring to life the adidas vision to be the leading personalised brand in the world. Throughout 2009, Training intensified its activity with athletes and the world's leading authorities on athlete performance, to bring...

  • Page 68
    ... fully integrated business models such as Never-outof-stock and other managed space initiatives see Global Sales Strategy, p. 54. Further focus will also be put on improving quality, increasing colour offerings and strengthening in-store marketing support for the range with well-known athletes such...

  • Page 69
    ...remains the key theme in its communication for the sport. In addition, Basketball is also exploiting the latest in digital media technologies, which is taking product messaging and consumer experience to new levels. For example during the adidas DoubleDouble Tour to China, a market where basketball...

  • Page 70
    ... marketing campaign featuring expedition images of the Huber Brothers showcasing the authenticity of the brand and its products, as well as cooperation activities with key retailers in the sporting goods and specialty outdoor channels. 66 GROUP MANAGEMENT REPORT - OUR GROUP adidas Strategy

  • Page 71
    ...consists of limited edition as well as mass distribution footwear, apparel and accessories. Classic adidas Originals track tops and sneaker styles are represented with characters and scenes from the epic saga in re-interpreted versions. P 04 GROUP MANAGEMENT REPORT - OUR GROUP adidas Strategy 67

  • Page 72
    ... focuses on young, style-adopting consumers that shop at volume distribution channels and at more accessible price points. It capitalises on existing trends and brings them to market more rapidly than traditional sporting goods timelines. 68 GROUP MANAGEMENT REPORT - OUR GROUP adidas Strategy

  • Page 73
    ... distributed through mono-branded stores in Asia and through key account partners in North America, most European countries and Japan. All these labels have allowed adidas to address all consumer and distribution options in the sportswear arena. Y-3, adidas SLVR and adidas Style Essentials all bear...

  • Page 74
    ... roots and heritage in fitness/training, consumer insights and positioning within the adidas Group, Reebok developed a clear roadmap for its key businesses going forward: Own Women's Fitness, Challenge in Men's Training/Sport and Revive Classics. Central to Reebok's brand heritage is the courage to...

  • Page 75
    ...stylish, new designs in its spring/summer 2010 collection, Reebok's EasyToneâ„¢ can be worn anywhere - be it at work, school, out shopping or walking. In 2010, EasyToneâ„¢ will be promoted through a global marketing campaign: "ReeTone". C 01 GROUP MANAGEMENT REPORT - OUR GROUP Reebok Strategy 71

  • Page 76
    ... across the bottom of the shoe for enhanced stability. The soft pods absorb a runner's energy, forcing key leg muscles to work a little harder while delivering a plush, smooth ride. RunToneâ„¢ helps runners get more out of their run. P 01 72 GROUP MANAGEMENT REPORT - OUR GROUP Reebok Strategy

  • Page 77
    ...marketing campaign "ReeZig" - featuring key athletes from Reebok's roster - with major launches planned to coincide with global event milestones such as the Super Bowl. ReeTrain: In 2010, Reebok will introduce a complete range of strength training products for men based on its muscle toning platform...

  • Page 78
    ... Manning developing his skills in a non-traditional way. C 03 The introduction of these products is supported by an integrated global marketing campaign, "ReeTrain". Key Reebok athletes such as Lewis Hamilton will again bear testimony to Reebok's training products. On the apparel side, Reebok...

  • Page 79
    ... footwear, apparel and accessories. In rebuilding the Classics business, a key tenet of the strategy is to control distribution by segmenting the product offering available for retailers, as well as keeping a tight rein on supply. In 2009, Reebok has continued to tightly manage its directional sport...

  • Page 80
    ...prime example of TaylorMadeadidas Golf's efforts to create unique promotional events is the "Wear in the World" golf adventure, which involves testing performance apparel in some of the world's most extreme weather conditions. 76 GROUP MANAGEMENT REPORT - OUR GROUP TaylorMade-adidas Golf Strategy

  • Page 81
    ... apparel among the top-selling golf products in these retail channels. Close working relationships with key accounts will continue in 2010, as will efforts to build additional brand presence at smaller retailers and on-course golf shops. In emerging markets throughout the world, the company employs...

  • Page 82
    ...-price categories. Market share expansion, particularly in golf, is driven mainly by the ability to deliver best-in-class lines of products at multiple price points. In 2009, an example of TaylorMade-adidas Golf's success in implementing this strategy is the TOUR360 Limited (high-price) footwear...

  • Page 83
    ... the first TaylorMade iron model to reach number one in sales in the United States, which in turn helped TaylorMade reach number one in iron market share in the United States for the first time in the brand's history, a position it has now held since August 2009. In 2010, TaylorMade will leverage...

  • Page 84
    ... help adidas Golf expand its line of womenspecific golf products. Also planned is the TOUR360 4.0 Sport, which offers a new approach to combining breathability with protection, and a new range of CLIMACOOL® tops and bottoms with softtouch COOLMAX® fabric. 80 GROUP MANAGEMENT REPORT - OUR GROUP...

  • Page 85
    ...2008, provides TaylorMade-adidas Golf with a unique opportunity to establish a golf lifestyle business. Founded in 1987, Ashworth's roots in golf and authenticity as a golf brand provide a key differentiator from other golf lifestyle brands. In 2009, Ashworth's efforts focused on creating a platform...

  • Page 86
    ...markets worldwide. Sales outside of the United States now account for close to half of Rockport's total business and doubledigit percentage growth is planned in the near term. Build a dual gender business In 2009, Rockport further strengthened its investments in its women's product and design teams...

  • Page 87
    ..., media outreach and advertising initiatives. C 01 In addition, Rockport plans to further leverage the Group's infrastructure (e.g. in emerging markets) as a core element in supporting its global growth strategy. Key strategic product initiatives and innovation The Rockport brand continues its...

  • Page 88
    ... NCAA and national teams. Reebok-CCM Hockey's strategy is to increase market share by leveraging its multi-brand approach to speak to different consumer groups, supported by its dedication to innovate for the leading athletes in the sport. Focus on high-end performance Reebok-CCM Hockey has a dual...

  • Page 89
    ... skate stands out in terms of comfort and adaptability and offers the maximum in personal customisation. The skate enhances heellock, ankle support and advanced forward ï¬,ex, resulting in a secure fit. P 01 ENHANCED HEEL-LOCK GROUP MANAGEMENT REPORT - OUR GROUP Reebok-CCM Hockey Strategy 85

  • Page 90
    ... its positioning as a high-performance company. Through a commitment to product innovation, Reebok-CCM Hockey's pricing strategy is to dominate the market in the premium price segments and to be a strong competitor within the mid-price segment of the market. Key strategic categories to drive growth...

  • Page 91
    ...NHLPA) for name and numbered apparel and headwear. NHL locker room performance apparel relates to the apparel that pro athletes wear under their jerseys during a game, or to work out and train in the gym. A key product initiative in this area is Reebok Speedwick apparel. Designed to feel like cotton...

  • Page 92
    ...for our customers at competitive costs. GLOBAL OPERATIONS IN GO-TO-MARKET PROCESS 01 Global Operations N° - Marketing Design Research & development Sourcing Supply chain management Design Sales subsidiaries Briefing Concept Product creation Manufacturing Distribution Sales Business...

  • Page 93
    ... growth of our brands and future demands from our retail channels. In addition, the planning phase for a new distribution centre in Russia was completed. However, execution of the project has been deferred until market conditions require that the project be re-started to support our business models...

  • Page 94
    ... can be found on our website www.adidas-Group.com/en/sustainability/ suppliers_and_workers. FOOTWEAR PRODUCTION BY REGION 1) 03 97% Asia N° - 1% Americas 2% Europe 1) Figures only include the adidas, Reebok and adidas Golf brands. The adidas Group also operates a limited amount of own...

  • Page 95
    ... APPAREL PRODUCTION 1) IN MILLION UNITS 06 225 252 284 239 N° - 2006 2007 2008 2009 1) Figures only include the adidas, Reebok and adidas Golf brands. HARDWARE PRODUCTION BY REGION 1) 07 98% Asia N° - 2% Europe 1) Figures only include the adidas and Reebok brands. GROUP MANAGEMENT REPORT...

  • Page 96
    ... new technologies as well as fresh design ideas, in order to best unite our brands' values with the unique needs of our consumers. The research and development process is driven by teams of employees with diverse professional backgrounds. In 2010, our R&D priorities will focus on the development...

  • Page 97
    ..., USA, is a vertically integrated organisation that covers all aspects of strategy, research, design, engineering and testing, while incorporating the Group's advanced proprietary athletic footwear technologies into casual and dress shoes. Reebok-CCM Hockey R&D located in Canada The R&D teams at...

  • Page 98
    ...property rights see Risk and Opportunity Report, p. 140. R&D expenses increase 6% In 2009, as in prior years, all R&D costs were expensed as incurred. adidas Group R&D expenses increased by 6% to â,¬ 86 million (2008: â,¬ 81 million) as a result of increases at brand adidas from initiatives relating...

  • Page 99
    ... had an important inï¬,uence on the brand's sales development, in particular in the Women's Fitness category. At brand Reebok, 64% of ordered footwear was launched in 2009 (2008: 66%). Only 14% of ordered footwear products were related to products introduced three or more years ago (2008: 14%). In...

  • Page 100
    ... consumer, in addition to further refinement of the truWALK architecture which will be launched in fall 2010. Reebok-CCM Hockey will concentrate on bringing new technologies in sticks and skates to market that improve performance and durability at reduced weight. 96 GROUP MANAGEMENT REPORT...

  • Page 101
    ... locations around the world where staff have the opportunity to openly share their views with senior management including the Executive Board and gain an overview of current and future business developments. THREE-PILLAR HUMAN RESOURCES STRATEGY We strive to have the right team in place by focusing...

  • Page 102
    ... abroad. At year-end 2009, we employed 39 participants in our global FTP (2008: 29). Succession Management: We have a Group-wide succession management system in place that helps us identify, manage and develop internal talents and successors for management and executive positions. The succession...

  • Page 103
    ...senior management and Executive Board members we offer Long-Term Incentive Programmes (LTIP). Other benefits include our 401-K pension plans in the USA and the adidas Group pension plan for our employees in Germany. In 2009, 1,896 employees (2008: 1,712) participated in the latter, which represents...

  • Page 104
    ... IN % 2009 05 2008 N° - 1) At year-end. 2) Includes Global Marketing, Global Operations, Global Corporate Services (e.g. Legal, Finance, HR). 3) Number of employees on a headcount basis. 4) Number of employees on a full-time equivalent basis. Due to the high share of part-time employees in our...

  • Page 105
    ...,982 in the previous year. This development is primarily related to new employees in the Retail segment, mainly on a part-time basis. On a full-time equivalent basis, our Group had 34,437 employees on December 31, 2009 (2008: 35,977). Due to the high share of employees working on a parttime basis in...

  • Page 106
    ... our business and demonstrates our commitment to being accountable. Comprehensive information on the Group's sustainability programme is provided in our 2009 Social and Environmental Online Report on our website www.adidas-Group. com/sustainability. Workplace Standards set rules in the supply chain...

  • Page 107
    ... licensees, agents and 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 2009, the SEA team conducted 216 training sessions and workshops (2008: 251). Monitoring...

  • Page 108
    ...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 109
    ... addition, at the end of 2008, we started the "Green Company" initiative to further expand our environmental initiatives throughout all of our operations. The initiative aims at providing the supporting framework, guidance and communication platform in order to help all Group entities improve their...

  • Page 110
    ... innovative Pump™ technology, they give the player customised fit. They additionally offer secureness due to the incorporated SkateLock™, which tightens the top three eyelets independently of the forefoot. To keep the foot dry, the skates contain a Dri-Lex™ liner and a Griptonite™ footbed...

  • Page 111
    03 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Internal Group Management System ...108 GROUP BUSINESS PERFORMANCE ...112 Economic and Sector Development ...112 Income Statement ...115 Balance Sheet and Cash Flow Statement ...122 Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 112
    ... operating working capital and capital expenditure. To keep senior management focused on long-term performance improvements, a portion of the responsible managers' total compensation is variable and linked to Group specific targets, as well as relevant KPIs related to the respective performance...

  • Page 113
    ... to optimise clearance 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...

  • Page 114
    ... stated in the 2008 Annual Report, published on March 4, 2009. The outlook was updated over the course of the year. 2) Excluding acquisitions and finance leases. M&A activities focus on long-term value creation potential We see the majority of our Group's future growth opportunities in our organic...

  • Page 115
    ... current sales and profitability development, Management analyses sell-through information from our own retail distribution as well as short-term replenishment orders from retailers. Taking into account yearto-date performance as well as opportunities and risks, the Group's full year financial...

  • Page 116
    ...2008. Diluted earnings per share decreased 60% to â,¬ 1.22 in 2009 versus â,¬ 3.07 in 2008. REGIONAL GDP DEVELOPMENT 1) IN % Global Europe USA Asia 2) 01 Latin America N° - Economic and Sector Development Global economy contracts Following a sharp slowdown in economic growth in 2008, the global...

  • Page 117
    ... America, full year GDP declined 3.6% (2008: growth of 3.2%). This development was mainly attributable to falling domestic and foreign demand as well as rising unemployment. However, as a result of increasing commodity prices and improving conditions in global financial markets, economic activity...

  • Page 118
    ..., especially in the first half of the year. Weak private consumption caused the overall industry to decrease at a high-single-digit rate with similar declines in footwear and apparel sales. 114 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Economic and Sector Development

  • Page 119
    ... long-term growth see Group Strategy, p. 52. As a consequence of the subsequent changes in internal reporting and in accordance with the new IFRS 8, the adidas Group has now divided its operating activities into six segments: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey...

  • Page 120
    ... Emerging Markets North America Greater China Other Asian Markets Latin America Total 1) 1) Including HQ/Consolidation. 3,262 1,122 2,360 967 1,647 1,006 10,381 3,527 1,179 2,520 1,077 1,585 893 10,799 116 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement

  • Page 121
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. GROSS PROFIT BY QUARTER â,¬ IN MILLIONS 18 1,288 1,164 1,263 1,105 1,307 1,194 1,136 1,511 N° - Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income...

  • Page 122
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. SALES WORKING BUDGET IN % OF NET SALES 21 2.7 2.3 N° - 2008 2009 MARKETING WORKING BUDGET IN % OF NET SALES 22 10.5 9.9 N° - 2008 2009 118 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement

  • Page 123
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. OPERATING PROFIT BY QUARTER â,¬ IN MILLIONS 27 282 208 473 N° - Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 58 72 336 42 107 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement 119

  • Page 124
    ... Reebok-CCM Hockey from February 1, 2006 onwards. INCOME BEFORE TAXES BY QUARTER â,¬ IN MILLIONS 30 250 N° - Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 9 28 169 306 16 54 431 120 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement

  • Page 125
    ...2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 5 9 116 302 169 32 N° - IN â,¬ 34 N° - 213 19 54 Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 0.04 0.06 0.56 0.79 1.03 0.09 0.27 1.44 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement...

  • Page 126
    ... SHEET STRUCTURE 1) IN % OF TOTAL ASSETS Assets 2009 35 2008 N° - Balance Sheet and Cash Flow Statement Changes in accounting policy The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS as adopted by the EU). In 2009...

  • Page 127
    .... RECEIVABLES â,¬ IN MILLIONS 39 965 1,415 1,459 1,624 1,429 N° - 2005 2006 1) 2007 2008 2009 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Balance Sheet and Cash Flow Statement 123

  • Page 128
    ...was recorded in HQ/Consolidation (2008: 52%) and was mainly related to investments into new office buildings and IT infrastructure see 43 and Global Operations, p. 88. 32% Own retail 124 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Balance Sheet and Cash Flow Statement

  • Page 129
    .... The authorisation to repurchase adidas AG shares is based on §§ 71 et seq. AktG and, as at the balance sheet date, on the authorisation granted by the Annual General Meeting on May 7, 2009. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Disclosures pursuant to § 315...

  • Page 130
    ...may be used to meet the company's obligations arising from the Management Share Option Plan 1999 (MSOP). They may be cancelled without a further resolution of the Annual General Meeting being required. 126 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Disclosures pursuant...

  • Page 131
    ...-in of any outstanding amounts. No compensation agreements exist between adidas AG and members of the Executive Board or employees relating to the event of a take-over bid. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Disclosures pursuant to § 315 Section 4 of the German...

  • Page 132
    ... IN MILLIONS 2009 46 2008 N° - < 1 year ...2,436 3,519 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 and...

  • Page 133
    ...828 Uncommitted ...1,410 1,585 Total 2,238 2,722 CURRENCY SPLIT OF GROSS BORROWINGS â,¬ IN MILLIONS 2009 48 2008 N° - 1,470 EUR ...1,076 1,004 USD ...591 JPY ...3 All others...97 Total 1,767 4 95 2,573 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Treasury 129

  • Page 134
    ...Positive effects from lower interest rates on short-term borrowings were offset by the higher share of longer-term borrowings in the Group's financing mix, which carry a higher average interest rate. Long-term fixed-rate financing amounted to 68% of the Group's total financing at the end of 2009...

  • Page 135
    ... 2009 55 2008 N° - 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 797 < 1 year ...198 1 to 3 years ...561 1,080 3 to 5 years ...822 > 5 years ...186 Total 1,767 234 2,573 462 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Treasury...

  • Page 136
    ...2009 (2008: â,¬ 999 million). Sales in Other Asian Markets increased 1% to â,¬ 1.041 billion in 2009 from â,¬ 1.029 billion in 2008, while revenues in Latin America improved 10% to â,¬ 865 million in 2009 (2008: â,¬ 790 million). 132 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE...

  • Page 137
    ... non-retail-related functions in 2009. On a full-time equivalent basis, the Wholesale segment employed 4,662 at year-end 2009. This represents a decrease of 9% versus the prior year-end level of 5,133. WHOLESALE NET SALES BY REGION 7% European Emerging Markets 12% Greater China 12% Latin America 14...

  • Page 138
    ... in this market. Sales in Other Asian Markets grew 11% on a currency-neutral basis primarily as a result of increases in Japan. In Latin America, currencyneutral Retail sales grew 51%, mainly driven by new store openings. 134 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY...

  • Page 139
    ... Markets N° - 5% Greater China 7% Latin America 15% Other Asian Markets 20% North America Concept store sales increase 4% on a currency-neutral basis Concept store revenues include sales from adidas Sport Performance, adidas Sport Style and Reebok concept stores. In 2009, concept store revenues...

  • Page 140
    ... Sport Performance sales increased 5%. Currency-neutral adidas Sport Style revenues grew 20% in the period. Currency-neutral Reebok sales were 7% higher compared to the prior year. Comparable store sales at the adidas brand declined at a high-singledigit rate, whereas Reebok sales decreased at a low...

  • Page 141
    ...(17%) (4.3pp) OTHER BUSINESSES NET SALES BY REGION 02 N° - 1% Latin America 2% European Emerging Markets 2% Greater China 17% Western Europe 25% Other Asian Markets 53% North America GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY SEGMENT Other Businesses Performance 137

  • Page 142
    ... gain related to the acquisition of Ashworth were the primary drivers of this increase. In euro terms, operating costs increased 9% to â,¬ 224 million in 2009 from â,¬ 206 million in 2008. 138 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY SEGMENT Other Businesses Performance

  • Page 143
    ... of sales. In absolute terms, segmental operating profit decreased 17% to â,¬ 281 million in 2009 versus â,¬ 337 million in the prior year. Number of employees decreases At year-end 2009, the Group employed 1,569 people in Other Businesses, representing a decrease of 7% versus 1,694 employees in...

  • Page 144
    ... or long-term strategies. Risks also include lost or poorly utilised opportunities. Opportunities are broadly defined as internal and external strategic and operational developments that have the potential to positively impact the Group if properly exploited. Risk and opportunity management system...

  • Page 145
    ... we collaborate with our manufacturing partners and retail customers to evaluate the impact of our growth and efficiency initiatives. Feedback is relayed in a timely manner to product, marketing and controlling functions. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report 141

  • Page 146
    ...-accounting-related IT systems is minimised by Group IT through central control and monitoring of virtually all IT systems, by means of centralised management of change processes and with support through regular data backups. 142 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity...

  • Page 147
    ... fresh new technologies and designs to market see Research and Development, p. 92. In addition, we also seek to enhance consumer demand for our brands and brand initiatives through extensive marketing, product and brand communication programmes. And we continue to focus on supply chain improvements...

  • Page 148
    ... shift production to other countries at an early stage if necessary see Global Operations, p. 88. At the end of 2008, nearly all apparel-specific safeguard measures against China expired based on the World Trade Organization (WTO) accession agreements. However, various governments sought protection...

  • Page 149
    ... clear and consistent messaging to our targeted consumer audience, in particular at point-of-sale. Market share gains at TaylorMade and continued growth in the adidas Sport Style division give us confidence that image risk for these brands remains low. Natural risks The adidas Group is exposed to...

  • Page 150
    ... other locations. As a result of the significant slowdown of global economic activity, raw material prices declined compared to the prior year. This development is forecasted to positively impact our sourcing costs in 2010. As we begin planning for 2011, renewed price increases cannot be ruled out...

  • Page 151
    ... Event and promotion partnerships play an important role in building brand image and generating sales of licensed products. The adidas Group faces the risk of either losing key partnerships or having to accept unfavourable terms due to intensified competition for attractive contracts. During 2009...

  • Page 152
    ... consumer preferences, we focus on streamlining research and development processes to speed up the time to market. Personnel risks Achieving the adidas Group's goal of becoming the global leader in the sporting goods industry is highly dependent on our employees and their talents. Loss of key...

  • Page 153
    ... adidas Group has continued to focus on additional IT control initiatives in 2009. These include the development of a five-year IT Strategic Plan aligned with and approved by senior business management, as well as the periodic review and approval of IT project budgets by a governance board. A new...

  • Page 154
    ..., all outstanding currency derivatives were re-evaluated using hypothetical foreign exchange rates to determine the effects on net income and equity. The analysis was performed on the same basis for both 2008 and 2009. 150 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report

  • Page 155
    ... at a year-end value instead of the more relevant sales-weighted average figure, which we utilise internally to better reï¬,ect both the seasonality of our business and intra-year currency ï¬,uctuations. The underlying forecasted cash ï¬,ow exposure (which the hedge instrument mainly relates to) is...

  • Page 156
    ... tenet of our Group's financial strategy is to continue to use surplus cash ï¬,ow from operations to reduce net borrowings see Treasury, p.128. In light of the low interest rate level in North America and Europe, and the easing of government fiscal action to stimulate economic growth, the risk of...

  • Page 157
    ... in the sporting goods industry with women accounting for more than a third of total spending on athletic footwear. Our Group still generates the majority of its revenues in men's and unisex categories. The adidas Group will continue to invest in developing women-specific product offerings in both...

  • Page 158
    ...strategy. Key concepts at adidas include mi Performance, mi Originals and mi Team. In 2009, Reebok launched the "Your Reebok" iPhone application, which enables consumers to design and order personalised footwear with their mobile phones. At TaylorMade-adidas Golf, the myTPball online platform offers...

  • Page 159
    ... to reduce costly non-value-added administration and data entry, allowing our development teams to focus on their core tasks. Furthermore, by implementing end-toend planning processes and improving our replenishment capabilities, we see opportunities to not only better serve our customers but also...

  • Page 160
    ...economy expected to return to modest growth in 2010 According to the World Bank, in 2010 growth of the global economy is projected to return to a growth rate of approximately 2.7%, mainly attributable to a strong upswing of industrial activity and improving financial market conditions. However, the...

  • Page 161
    ... at around 1.3% in 2010 versus the prior year. This mainly relates to modestly growing domestic and foreign demand for Japanese products as inventory clearance measures come to an end worldwide, as well as planned additional government stimulus measures. In Latin America, growth rates are likely to...

  • Page 162
    ...competitor that was terminated in the first half of 2009. Revenues at Rockport and Reebok-CCM Hockey are forecasted to increase as a result of improvements in the brands' product portfolio and better consumer reception. 158 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Subsequent Events and Outlook

  • Page 163
    ... impact on Group sales development. In North America, we expect to benefit from our strong market position in the emerging toning category. However, ongoing high price sensitivity among consumers as well as cautious retailer buying habits are projected to continue to weigh on Group sales growth in...

  • Page 164
    ... be employed on a part-time basis and located in emerging markets. The adidas Group will continue to spend around 1% of sales on research and development in 2010. Areas of particular focus include training, running, football, basketball and outdoor at adidas, and women's fitness and men's training...

  • Page 165
    ...Under this assumption, we project adidas Group sales and net income to improve in 2011 compared to 2010 levels. Key goals for long-term success In addition, the Group will continue to work towards reaching our priority goals to achieve long-term sustainable shareholder value creation. These include...

  • Page 166
    ...Tennis Performance Dress The adidas by Stella McCartney Tennis Performance Dress is styled for a full range of motion with a racerback top and low-cut...a comfortable feeling when competing on court. This dress reï¬,ects Wozniacki's trendiness and highlights the importance of style within tennis. 20 ...

  • Page 167
    ...of Changes in Equity ...168 Consolidated Statement of Cash Flows ...169 Notes ...170 Statement of Movements of Intangible and Tangible Assets ...211 Shareholdings ...212 NEW YORK, USA - SEPTEMBER 12, 2009 It is Caroline Wozniacki's first Grand Slam semifinal. The 19-year-old newcomer is fired up...

  • Page 168
    ..., the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with...

  • Page 169
    ... determination of audit procedures. The effectiveness of 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...

  • Page 170
    ... Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets 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 171
    ADIDAS AG CONSOLIDATED INCOME STATEMENT (IFRS) â,¬ IN MILLIONS Note Year ending Dec. 31, 2009 Year ending Dec. 31, 2008 02 Change N° - Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating ...

  • Page 172
    ... AG CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE â,¬ IN MILLIONS Note Year ending Dec. 31, 2009 03 Year ending Dec. 31, 2008 N° - Net income after taxes Net (loss)/gain on cash ï¬,ow hedges, net of tax Actuarial (losses)/gains of defined benefit plans and asset ceiling effect...

  • Page 173
    ... shareholders Exercised share options Repurchase of adidas AG shares Cash repayments of short-term borrowings Net cash used in financing activities Effect of exchange rates on cash Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash...

  • Page 174
    ... and markets leather footwear for men and women. Reebok-CCM Hockey designs, produces and markets hockey equipment such as sticks and skates as well as apparel under the brand names Reebok Hockey and CCM Hockey. The Other centrally managed brands segment primarily includes the business activities of...

  • Page 175
    ...accounting principles. A company is considered a subsidiary if adidas AG directly or indirectly governs the financial and operating policies of the respective enterprise. The number of consolidated subsidiaries evolved as follows for the years ending December 31, 2009 and 2008, respectively: NUMBER...

  • Page 176
    ...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 to calculate option prices. The fair market value of an option is inï¬,uenced not only by the remaining...

  • Page 177
    ... and fair value less cost to sell. Property, plant and equipment Property, plant and equipment are stated at cost (which comprises any costs directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by Management) less accumulated...

  • Page 178
    ... calculation uses cash ï¬,ow projections based on the financial planning covering a five-year period in total. The planning reï¬,ects an expected low- to mid-single-digit sales increase for the majority of the cash-generating units (or groups of units). We expect slightly higher sales growth in...

  • Page 179
    ... in the income statement over the term of the borrowing. The fair value of the liability component of the Group's convertible bond was determined using a market interest rate for a comparable straight bond at time of issuance. As at December 31, 2008, this amount was presented as part of short-term...

  • Page 180
    ... benefits Stock options were 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 (MSOP) of adidas AG see...

  • Page 181
    ...-sale. In 2009, impairment losses in the amount of â,¬ 2 million were recognised in other operating expenses. The previous adidas warehouse in the UK has been reclassified to property, plant and equipment due to a change in conditions. For the years ending December 31, 2009 and 2008, depreciation...

  • Page 182
    ... for the year ending December 31, 2009. Effective January 3, 2008, adidas Canada acquired 100% of the shares of Saxon Athletic Manufacturing, Inc. for a purchase price in the amount of CAD 4.6 million. Based in Brantford/ Ontario (Canada), Saxon Athletic is a design, development, marketing and...

  • Page 183
    ... purchase price of US $ 30 million. Based in Carlsbad/California (USA), Ashworth is a well-established golf lifestyle apparel brand. Cash and cash equivalents Inventories Other current assets Property, plant and equipment, net Trademarks and other intangible assets, net Deferred tax assets Accounts...

  • Page 184
    ... using the appropriate discount rate and adding a tax amortisation benefit. The "cost approach" was applied for apparel designs. These were valued as the cost to recreate the current design plus the opportunity cost measured as the cash ï¬,ow impact between having pre-existing designs versus...

  • Page 185
    ... 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. With respect to accounts receivable past due but not impaired, based on credit history and current credit ratings, there are...

  • Page 186
    ... of property, plant and equipment mainly relate to building projects in Herzogenaurach amounting to â,¬ 68 million. For details see Statement of Movements of Tangible and Intangible Assets Attachment I to these Notes. Prepaid expenses relate mainly to promotion agreements and service contracts...

  • Page 187
    ..., 2009 and 2008. Future changes in expected cash ï¬,ows and discount rates may lead to impairments of the accounted goodwill in the future. For details see Statement of Movements of Tangible and Intangible Assets Attachment I to these Notes. Reebok Rockport Reebok-CCM Hockey TaylorMade-adidas Golf...

  • Page 188
    ... expenses mainly include prepayments for long-term promotional contracts and service contracts see also Note 37 and Note 27. Borrowings and credit lines 17 Fair value adjustments from impairment losses amounted to â,¬ 5 million and â,¬ 0 million for the years ending December 31, 2009 and 2008...

  • Page 189
    ... weighted average interest rate on the Group's gross borrowings remained stable at 5.2% in 2009 (2008: 5.2%). As at December 31, 2009, the Group had cash credit lines and other long-term financing arrangements totalling â,¬ 5.9 billion (2008: â,¬ 6.5 billion); thereof unused credit lines accounted...

  • Page 190
    ... for promotion contracts. Provisions for employee benefits mainly consist of provisions for profit-sharing plans. With regard to provisions for early retirement, claims for reimbursement in an amount of â,¬ 3 million (December 31, 2008: â,¬ 2 million) are shown under other non-current assets...

  • Page 191
    ... to former employees and their survivors. The obligations arising from defined benefit plans are partly covered by plan assets. ACTUARIAL ASSUMPTIONS IN % Dec. 31, 2009 23 Dec. 31, 2008 N° - Information regarding forward contracts as well as currency options and interest rate derivatives is...

  • Page 192
    ... PLAN ASSETS â,¬ IN MILLIONS 2009 Of the total pension expenses, an amount of â,¬ 13 million (2008: â,¬ 12 million) relates to employees in Germany. The pension expense is recorded within the other operating expenses whereas the production-related part thereof is recognised within the cost of sales...

  • Page 193
    ... minorities is reported within financial expenses. HISTORICAL DEVELOPMENT â,¬ IN MILLIONS 23 Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 2005 N° - Shareholders' equity 131 - - 131 1 - 26 Present value of defined benefit obligation Fair value of plan assets Thereof: de...

  • Page 194
    ... served the purpose of fulfilling stock options in connection with the Management Share Option Plan (MSOP) 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 of its affiliated...

  • Page 195
    ... (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. The Euro Pacific Growth Fund, Los Angeles, USA, informed the company by letter on January 19, 2009, pursuant to...

  • Page 196
    ...% of the voting rights (1,580,086 shares) on this date. 0.39% of these voting rights (758,034 shares) are attributable to UBS AG in accordance with § 22 section 1 sentence 1 number 1 WpHG. The Euro Pacific Growth Fund, Los Angeles, USA, informed the company by letter on June 11, 2009, pursuant to...

  • Page 197
    ... 0.50 per share (total amount: â,¬ 97 million), approved by the 2009 Annual General Meeting. The Executive Board of adidas AG will propose to shareholders a dividend payment of â,¬ 0.35 per dividend-entitled share for the year 2009 to be made from retained earnings of â,¬ 285 million reported as at...

  • Page 198
    ... FAIR VALUES â,¬ IN MILLIONS N° - Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Other equity...

  • Page 199
    ... IAS 39 Financial assets at fair value through profit or loss thereof: designated as such upon initial recognition (Fair Value Option - FVO) thereof: Held for Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC...

  • Page 200
    ... cost Fair value Dec. 31, 2008 N° - Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Other...

  • Page 201
    ... IAS 39 Financial assets at fair value through profit or loss thereof: designated as such upon initial recognition (Fair Value Option - FVO) thereof: Held for Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC...

  • Page 202
    ... future cash ï¬,ows using current interest rates for debt of similar terms and remaining maturities, and adjusted by an adidas Group specific credit risk premium. Fair values of long-term financial assets classified as available-for-sale are based on quoted market prices in an active market or...

  • Page 203
    ...) was recorded in the income statement in 2009. The total net amount of US dollar purchases related to product sourcing versus other currencies was US $ 3.7 billion and US $ 3.6 billion in the years ending December 31, 2009 and 2008, respectively. The comparatively high amount of forward contracts...

  • Page 204
    ...will remain until the investment in the foreign entity is divested. In order to determine the fair values of its derivatives that are not publicly traded, the adidas Group uses generally accepted quantitative financial models based on market conditions prevailing at the balance sheet date. The fair...

  • Page 205
    ...the cost of sales as they are directly attributable to the production costs of goods sold. Cost by nature Expenses are presented by function in the income statement. Supplementary information on the expenses by nature is detailed below. 31 Cost of materials The total cost of materials relating to...

  • Page 206
    ...Fair value gains from available-for-sale investments Other Financial income 11 5 - - - 3 19 30 7 - - - 0 37 adidas AG and its German subsidiaries are subject to German corporate and trade taxes. For the years ending December 31, 2009 and 2008, respectively, the statutory corporate income tax rate...

  • Page 207
    ..., Inc. for the year ending December 31, 2008. 2) Relates to the disposal group Gekko Brands, LLC which was classified as Held-for-Sale for the year ending December 31, 2008 and sold in March 2009. 33 Year ending Dec. 31, 2008 N° - Gross Group deferred tax assets and liabilities before valuation...

  • Page 208
    ...athletic and sports lifestyle products. Due to the Group's reorganisation in 2009, the Group's internal management reporting has changed. In accordance with the definition of IFRS 8, six operating segments have been identified: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey...

  • Page 209
    REPORTABLE SEGMENTS â,¬ IN MILLIONS Wholesale 2009 2008 2009 Retail 2008 2009 Other Businesses 2008 2009 35 Total Segments 2008 N° - Net sales (non-Group) Segmental operating profit Segmental assets Segmental liabilities Capital expenditure Scheduled depreciation and amortisation Impairment 7,...

  • Page 210
    ... Markets Latin America HQ/Consolidation Total 3,262 1,122 2,360 967 1,647 1,006 17 10,381 3,527 1,179 2,520 1,077 1,585 893 18 10,799 1,505 437 666 474 521 225 0 3,828 1,563 469 813 485 546 222 0 4,098 Product Information NET SALES (NON-GROUP) â,¬ IN MILLIONS Year ending Dec. 31, 2009 35 Year...

  • Page 211
    ...ve years have remaining terms of up to 13 years from December 31, 2009. Information regarding commitments under lease and service contracts is also included in these Notes see Note 27. Litigation The Group is currently engaged in various lawsuits resulting from the normal course of business, mainly...

  • Page 212
    ...annual average rate 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...

  • Page 213
    ... 2009 Year ending Dec. 31, 2008 N° - Own retail Sales Logistics Marketing Central functions and administration Production Research and development Information technology Total 19,460 3,905 5,484 3,375 3,075 1,892 1,005 875 39,071 16,071 4,133 5,395 3,308 3,160 2,118 1,058 886 36,129 Accountant...

  • Page 214
    ...the business activities of the Reebok brand in China with the Chinese sporting goods retailer Pou Sheng International (Holdings) Limited. Both parties intend to enter into an agreement under which Pou Sheng will co-design, manufacture and become key distributor of Reebok branded footwear and apparel...

  • Page 215
    ... Internally generated software Total intangible assets Land and buildings/leasehold improvements Technical equipment and machinery ATTACHMENT Other equipment, furniture and fittings N° - I Goodwill Trademarks Construction in progress Total tangible assets Acquisition cost January 1, 2008...

  • Page 216
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 217
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 218
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 219
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 220
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 221
    ...Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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 Holdings Corporation 11) Sub-group Reebok International Limited...

  • Page 222
    TECHFITâ„¢ PowerWEBâ„¢ TECHFITâ„¢ PowerWEBâ„¢ is designed to focus muscle energy. Optimally applied pressure speeds up the process by which energy is created in muscles... most exhausting matches of the World Championship. Karabatic not only uses TECHFITâ„¢, he swears by it. 20 09 NIKOLA ...

  • Page 223
    05 ADDITIONAL INFORMATION Ten-Year Overview ...220 Glossary ...222 Index ...227 Publishing Details/Contact ...228 Financial Calendar 2010 ...229 ZAGREB, CROATIA - FEBRUARY 1, 2009 France reaches the final of the World Men's Handball Championship against host nation Croatia. adidas sponsored French...

  • Page 224
    ... Operating margin 2) 3) Interest coverage 2) Effective tax rate 2) Net income attributable to shareholders as a percentage of net sales 5) Sales by Brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Balance Sheet Data (â,¬ in millions) Total assets 4) Inventories...

  • Page 225
    ... Current asset intensity of investments Liquidity I 4) Liquidity II 4) Liquidity III 4) Working capital turnover 4) Return on equity 4) 5) Return on capital employed 4) 5) Data Per Share 6) Share price at year-end (in â,¬) Basic earnings 5) (in â,¬) Diluted earnings 5) (in â,¬) Price/earnings...

  • Page 226
    ...leases. Classics Reebok products designed in an authentic heritage style, targeting sports lifestyle consumers who seek trend-setting street wear with authentic origins. Clearance sales Revenues generated outside the course of normal business terms, arising from commercial decisions by management to...

  • Page 227
    Days of sales outstanding (DSO) Average time of receipt of outstanding payments from customers. Diluted earnings per share (Diluted EPS) Performance indicator used to gauge a company's earnings per share, assuming that all stock options and conversion rights related to a convertible bond are ...

  • Page 228
    ...: ((sum of cash + short-term financial assets + accounts receivable + inventories) / current liabilities) Ã- 100. Market capitalisation Total market value of all outstanding shares. Market capitalisation = number of outstanding shares Ã- current market price. Marketing working budget Promotion and...

  • Page 229
    ... Concept Stores (e.g. adidas Sport Performance, Originals and Sport Style) and concession corners as well as factory outlets and e-commerce for the adidas, Reebok and Rockport brands. Performance business In the sporting goods industry, business related to technical footwear and apparel, used...

  • Page 230
    ... the group of segments before Marketing Working Budget expenditures and operating overhead costs not directly attributable. Sell-through An indicator of how fast retailers are selling a particular product to the consumer. Shareholder value A management concept that focuses strategic and operational...

  • Page 231
    ... Income and Expense 168 Strategy - adidas Group 52 - Global Sales 54 - Global Brands 58 Subsequent Events 156 ff. Supervisory Board - Report 28 ff. - Committees 30 - Members 26 Supply Chain 52 ff., 88 ff., 140 ff. Sustainability 102 ff. T Targets - Inside Front Cover Taxes 120, 123, 142 Ten-Year...

  • Page 232
    ....com www.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...

  • Page 233
    Financial Calendar 2010 2009 Full Year Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast 20 09 March 3, 2010 First Quarter 2010 Results Press release, conference call and webcast May 4, 2010 Annual General Meeting Fürth (Bavaria), ...

  • Page 234
    adidas AG Adi-Dassler-Str. 1 91074 Herzogenaurach Germany ©2010 adidas AG. adidas, Reebok, TaylorMade, adidas Golf, Ashworth, Rockport and CCM are registered trademarks of the adidas Group.