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adidas Group Annual Report
2011
TOGETHER
WE WIN

Table of contents

  • Page 1
    TOGETHER WE WIN adidas Group Annual Report 2 0 11

  • Page 2
    ... 2012 Currency-neutral sales development: adidas Group increase at a mid- to high-single-digit rate Wholesale segment increase at a mid-single-digit rate Retail segment increase at a low-double-digit rate Other Businesses increase at a mid-single-digit rate TaylorMade-adidas Golf increase at a low...

  • Page 3
    ... of net sales Average operating working capital as a percentage of net sales Equity ratio Net borrowings / EBITDA Financial leverage Return on equity Balance Sheet and Cash Flow Data (â,¬ in millions) Total assets Inventories Receivables and other current assets Working capital Net cash/(net...

  • Page 4
    ... consumers. adidas Sport Style's positioning statement is "Style your Life". adidas Golf develops high-performance golf footwear and apparel for active, serious, athletic-minded golfers seeking products to elevate their game... Ashworth Ashworth is an authentic golf apparel brand with powerful...

  • Page 5
    ... it takes teamwork. Together we inspire and encourage each other to go further and achieve more. Our Group, our employees, our innovations, our brands, connecting and resonating with people all over the world. On the pitch and on the street. Together we are a team. Living the moments and sharing our...

  • Page 6
    ...OUR GROUP GROUP MANAGEMENT REPORT Group Strategy Global Sales Strategy Wholesale Strategy Retail Strategy eCommerce Strategy Global Brands Strategy adidas Strategy Reebok Strategy Other Businesses Strategy TaylorMade-adidas Golf Strategy Rockport Strategy Reebok-CCM Hockey Strategy Global Operations...

  • Page 7
    ...03 03.1 03.2 FINANCIAL REVIEW GROUP MANAGEMENT REPORT Internal Group Management System Group Business Performance Economic and Sector Development Income Statement Statement of Financial Position and Statement of Cash Flows Treasury Financial Statements and Management Report of adidas AG Disclosures...

  • Page 8
    ... and dedication of the communities, the coaches, the families, the fans and the volunteers. 4 Together we win. 20 11 Some of the 70,000 volunteers, 6,000 staff and 4,500 technical officials who make London 2012 possible. adidas Group 2011 Annual Report T O G E T H E R W E W IN

  • Page 9
    SALLY PEARSON 2011 IAAF World Champion in the 100m hurdles and 2011 IAAF Athlete of the Year. W E IN YOHAN BLAKE 2011 IAAF World 100m Champion. T O G E T H E R W 5 20 11 JESSICA ENNIS 2010 IAAF World Indoor Pentathlon Champion. adidas Group 2011 Annual Report

  • Page 10
    Believing in their side. The fans that supported the Spanish football team to become European and World Champions. T H E R 6 20 11 adidas Group 2011 Annual Report T O G E W E W IN

  • Page 11
    ... of the beautiful game all over the world. T O G E T H E R W E W IN 7 20 11 Together we win. IKER CASILLAS FERNANDO LLORENTE DAVID VILLA XABI ALONSO XAVI HERNÁNDEZ DAVID SILVA of Spain's national football team, current European and World Champions. adidas Group 2011 Annual Report

  • Page 12
    ... we live, who we are and what we want. Seeing what's out there and who's wearing it. Musicians, athletes, actors, icons - their story, their look, their way - inspiring us - our story, our look, our way! 8 Together we win. 20 11 Inspired by life, inspiring each other. adidas Group 2011 Annual...

  • Page 13
    T O G E T H E R W E W IN 9 20 11 SNOOP DOGG Rapper, singer, record producer and actor. adidas Group 2011 Annual Report

  • Page 14
    ANNIE THORISDOTTIR Winner of the 2011 Reebok CrossFit Games, "Fittest Woman on Earth". 10 20 11 RICH FRONING JR. Winner of the 2011 Reebok CrossFit Games, "Fittest Man on Earth". T O G E T H E R W E W IN 2011 Reebok CrossFit Games, California, USA. adidas Group 2011 Annual Report

  • Page 15
    ...a community, inspiring each other and pushing harder. This camaraderie gives joy and encouragement, making fitness fun and something everyone can do. T O G E T H E R W E W IN 11 20 11 Together we win. Reebok and CrossFit - making fitness fun for everyone. adidas Group 2011 Annual Report

  • Page 16
    ..., striving for better, more distance and more accuracy. Every shot, every round, part of a story, of advice, of sharing ideas, of laughs, of disappointments, of good days and of bad days. Together learning more, getting better and going further. Together we win. adidas Group 2011 Annual Report...

  • Page 17
    T O G E T H E R W E W IN 13 20 11 DUSTIN JOHNSON 2011 Barclays PGA Tour Tournament winner. adidas Group 2011 Annual Report

  • Page 18
    14 20 11 RYAN NUGENT-HOPKINS 2010 Western Hockey League Best Rookie and 2011 Canadian Hockey League Top Draft Prospect. adidas Group 2011 Annual Report T O G E T H E R W E W IN

  • Page 19
    ...Its players and teams famous for their heart and commitment to its hard hits, energy and fast pace. But it's also famous for its unrivalled fans and dedicated followers, proud of their team, their sport. Keeping it all for the action out on the ice. Together we win. adidas Group 2011 Annual Report

  • Page 20
    ... the latest fashion - a hectic world of high heels, sharp suits and espressos. ...get on with looking fabulous and stay committed to style and great design, while enjoying exceptional comfort, lightness and walkability. Together we win. Walkability - the way we walk. adidas Group 2011 Annual Report

  • Page 21
    T O G E T H E R W E W IN 17 20 11 Style made comfortable - no compromise. adidas Group 2011 Annual Report

  • Page 22
    Better Cotton Sustainable cotton production initiative. E T H 18 20 11 Engaging with suppliers and producers, in a collaborative way. adidas Group 2011 Annual Report T O G E R W E W IN

  • Page 23
    ... We are all connected. We understand that, by sincere efforts and social engagement, we can make a difference. Improving the lives of everyone and reducing our impact on the environment. Learning every day to be better, smarter and more sustainable. Together we win. adidas Group 2011 Annual Report

  • Page 24
    TOGETHER WE WIN 2 0 11

  • Page 25
    2 0 11

  • Page 26
    ...01.2 01.3 01.4 01.5 01.6 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Interview with the CEO Executive Board Supervisory Board Supervisory Board Report Corporate Governance Report including the Declaration on Corporate Governance Compensation Report Our Share 24 28 34 38 40 45 50 54...

  • Page 27
    adidas Sport Performance 2 0 11 / 2 0 12 the fastest boot just got a brain © 2011 adidas AG. adidas, the 3-Bars logo and the 3-Stripes mark are registered trademarks of the adidas Group. prove you're fast Compete on the pitch and measure your speed. Then share your stats online and compare with...

  • Page 28
    ...AP R 07. TaylorMade-adidas Golf starts 2011 off with two new partnerships: Camilo 14. adidas launches the adizero Crazy Light, the lightest basketball shoe Villegas and Jim Furyk (2010 PGA Tour Player of the Year). ever, at an exclusive media event in New York City with streetball legend Bobbito...

  • Page 29
    01.1 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Q1 03 04 25 20 11 01 07 02 06 05 08 12 10 09 11 Q2 adidas Group 2011 Annual Report

  • Page 30
    ...adizero Prime track shoe PICTURE 04 . 31. In the manager magazin ranking "Best Annual Reports 2011", the adidas campaign, presented at the 25th Annual Footwear News Achievement Awards. This keeps the award in the Group, following on from Reebok's success in 2010. DE C 02. adidas and UEFA present...

  • Page 31
    01.1 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Q3 05 27 02 20 11 04 01 03 06 07 08 10 11 09 12 Q4 adidas Group 2011 Annual Report

  • Page 32
    ...11 HERBERT HAINER Chief Executive Officer In 2011, the adidas Group commenced its five-year strategic business plan Route 2015. With currency-neutral sales growth of 13%, earnings per share increasing 18% and a net cash position of â,¬ 90 million at year-end, the Group has set off at a fast pace...

  • Page 33
    ...adidas brand sales in North America have increased 41% over the past two years, the biggest jump we have achieved as a management team, with the 21% currency-neutral growth in 2011 being our best ever. All of our key categories - be it Originals, running, basketball or training - posted solid growth...

  • Page 34
    ... sales decline in 2012, the core of the Reebok brand is expected to remain stable in this year of brand consolidation. As we begin building our fitness empire and continue our work in invigorating Reebok Classics, 2012 will give us the platform to build a robust and sustainable business as we go...

  • Page 35
    ... commercial targets mainly focused on increasing our exposure in the UK. As official partner to the London Organising Committee (LOCOG), only our branding will be visible at all the events and key Olympic sites. And, for the first time, we are selling the official products as worn by the athletes...

  • Page 36
    ... you other specific sustainability targets for the Group? ? And how does your growing expertise in own retail play into making adidas NEO a success? 32 20 11 ! As part of our Environmental Strategy, which is an integral part of our overall Route 2015 strategic business plan, we have numerous...

  • Page 37
    ... year for the adidas Group. Through our unmatched innovation, our cutting-edge product pipeline as well as our marketing and point-of-sale execution strength, we are in a great position to sustain momentum as we execute our Route 2015 plan. We expect sales to increase at a mid- to high-single digit...

  • Page 38
    ...T Global Operations Herbert Hainer was born in Dingolfing, Germany, in 1954. Following his business studies, Herbert Hainer spent eight years with Procter & Gamble in various sales and marketing positions. He joined adidas Germany in 1987 and has held numerous management positions within the Group...

  • Page 39
    ... was named President of adidas North America, while maintaining his position as Head of Global Marketing. In 2006, he was named President of the adidas brand, and in 2010 he assumed responsibility for Global Brands. Erich Stamminger is married and lives in Nuremberg. adidas Group 2011 Annual Report

  • Page 40
    TO OUR SHAREHOLDERS 01.3 Executive Board Thank you all! The Executive Board would like to thank all employees worldwide for their team spirit and their dedication in the past year. Together we win. 36 20 11 adidas Group 2011 Annual Report

  • Page 41
    TO OUR SHAREHOLDERS 01.3 Executive Board 37 20 11 adidas Group 2011 Annual Report

  • Page 42
    TO OUR SHAREHOLDERS 01.4 Supervisory Board 01.4 Supervisory Board Supervisory Board Members 38 20 11 01 02 03 04 05 06 07 08 09 10 11...Veh Dr. Stefan Jentzsch, Hans Ruprecht Nomination Committee: Igor Landau (Chairman), Willi Schwerdtle, Christian Tourres adidas Group 2011 Annual Report

  • Page 43
    ... HANS RUPRECHT 1) Sales Director Customer Service Central, adidas AG HEIDI THALER-VEH 1) Member of the Central Works Council, adidas AG CHRISTIAN TOURRES Former Member of the Executive Board of adidas AG 10 11 12 Other Committees Committee for Real Estate Projects: Herbert Kauffmann (Chairman...

  • Page 44
    ... extremely successful year 2011. Thanks to strong brands as well as innovative products and marketing campaigns, the Group was able to grow in all regions and to considerably improve its results. The sales and earnings guidance, which the Executive Board had raised several times during the year, was...

  • Page 45
    ... centre will support the growth targets set out by the Executive Board as part of the Group's strategic business plan Route 2015. At our Supervisory Board meeting held on November 2, 2011, we intensively discussed the possibility of acquiring Five Ten, a leading brand in outdoor action sports and...

  • Page 46
    ..., which is vital for a successful, globally operating company, is to be maintained to the current extent. At the Supervisory Board elections taking place in 2014, we intend to increase the number of female Supervisory Board members from currently two to three women. Following in-depth consultation...

  • Page 47
    ... members focused on the examination of the annual financial statements and the consolidated financial statements for 2010 as well as the Management Reports, an in-depth discussion of the audit reports with the auditor and the detailed examination of the first half year report and quarterly...

  • Page 48
    ...annual financial statements of adidas AG were thus approved. 44 20 11 Expression of thanks The Supervisory Board wishes to thank the Executive Board, the management of the Group companies, the Works Council and all adidas Group employees for their tremendous personal dedication, their performance...

  • Page 49
    ...Board strives for at least three female members on the Supervisory Board, at least one of them on the side of the shareholder representatives 1) The Corporate Governance Report including the Declaration on Corporate Governance is part of the Group Management Report. adidas Group 2011 Annual Report

  • Page 50
    ... and the annual consolidated financial statements of the adidas Group for its approval, taking into consideration the auditor's reports. Certain business transactions and measures of the Executive Board are subject to Supervisory Board approval. In order to increase the efficiency of its work, the...

  • Page 51
    ... IGOR L AND A U Chairman of the Supervisory Board HERBERT HAINER Chief Executive Officer : The above Declaration of Compliance dated February 13, 2012 has been published on our website, where it can be downloaded at WWW.ADIDAS-GROUP.COM/CORPORATE_GOVERNANCE . adidas Group 2011 Annual Report

  • Page 52
    ... towards present and future generations are essential. Our Social & Environmental Affairs department, with its worldwide team members, has for many years been dealing with the rights of employees in the supply chain and coordinating product safety standards. adidas Group 2011 Annual Report

  • Page 53
    ... the shares issued by the company. At the same time, members of the Supervisory Board owned 1.92% of the shares issued by the company. A detailed overview of Directors' Dealings in 2011 is published on our website at : WWW.ADIDAS-GROUP.COM/DIRECTORS_DEALINGS . Accounting and annual audit adidas AG...

  • Page 54
    ... (adjusted for non-operating effects) - Increase of sales growth with regard to the Reebok, Rockport and Reebok-CCM Hockey brands - Absolute and relative share price development When calculating the LTIP Bonus payable following the three-year period, the weighted degrees of target achievement of the...

  • Page 55
    ... a management share option plan does not exist and is not planned. For the 2011 financial year, the total compensation paid to our Executive Board amounted to â,¬ 14.791 million (2010: â,¬ 11.494 million) TABLES 01 AND 02 . Starting in 2012, the Executive Board will be provided with a new Long-Term...

  • Page 56
    ... will increase on the anniversary of the initial pension payment by at least 1% of the amount of the prior year pension and additionally by any income from the pension trust fund allocable to the respective Executive Board member. In the event that an Executive Board member leaves the company prior...

  • Page 57
    ... of one and a half times the fixed annual compensation for all cases of damage within one financial year in accordance with the recommendations of the German Corporate Governance Code. 03 Compensation of the Supervisory Board (in â,¬) 2011 2010 Members of the Supervisory Board as at December 31...

  • Page 58
    ... sales trends emerging with athletic footwear and apparel retailers. The adidas Group 2010 results publication as well as the increased revenue outlook for 2011 benefited the share price at the beginning of March. The positive trend, however, was reversed towards the end of the quarter following...

  • Page 59
    ...11 44.25 40 30-day moving average 43.22 â- High and low share prices 1) Based on daily Xetra closing prices. 04 adidas AG market capitalisation at year-end (â,¬ in millions) 10,515 10,229 7,902 5,252 10,438 2011 2010 2009 2008 2007 adidas Group 2011 Annual Report 43.95 Source: Bloomberg...

  • Page 60
    ... the growth potential of our Group. Over the last ten years, our share has gained 138%. This represents a clear outperformance of the DAX-30, which increased 14% during the period. 05 Five-year share price development 1) | Dec. 31, 2006 Dec. 31, 2011 | 180 56 20 140 adidas AG share member of...

  • Page 61
    ..., the Annual General Meeting and Investor Days, we also offer podcasts of our quarterly conference calls. Furthermore, in order to give a regular update about the latest developments of the adidas Group and the adidas AG share, we also offer our shareholders and the financial market community the...

  • Page 62
    ...OUR GROUP GROUP MANAGEMENT REPORT Group Strategy Global Sales Strategy Wholesale Strategy Retail Strategy eCommerce Strategy Global Brands Strategy adidas Strategy Reebok Strategy Other Businesses Strategy TaylorMade-adidas Golf Strategy Rockport Strategy Reebok-CCM Hockey Strategy Global Operations...

  • Page 63
    ... T O G W E W IN Reebok launches the campaign "The Sport Of Fitness Has Arrived". Partnering with CrossFit, this multi-touchpoint campaign celebrates the passion and camaraderie that can be found in fitness, to make it fun and something everyone can do. Together we win. 02 OUR GROUP

  • Page 64
    ... end, we strive to provide our customers with superior service to secure prime shelf space for our brands, while continuing our commitment to building a strategic competency in own retail and e-commerce SEE GLOBAL SALES STRATEGY, P. 62 . Creating a ï¬,exible supply chain Speed and agility are key...

  • Page 65
    ... this Annual Report. 01 adidas Group strategic pillars Markets/Channels Focus investment on the highest-potential markets and our distinct channel approach. One Team Develop a team that is grounded in our rich heritage and is committed to the positive values found in sport - performance, passion...

  • Page 66
    ... America, Japan and the UK as key growth markets SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . Of these markets, the three attack markets North America, Greater China and Russia/CIS are targeted to contribute over 50% of the sales increase we anticipate as part of Route 2015. adidas Group 2011 Annual...

  • Page 67
    02.2 GROUP MANAGEMENT REPORT - OUR GROUP Global Sales Strategy Wholesale Strategy Wholesale Strategy The main strategic objective of the Wholesale channel is to deliver profitable market share growth by becoming the leading sales organisation in the sporting goods industry in terms of ...

  • Page 68
    02.2 GROUP MANAGEMENT REPORT - OUR GROUP Global Sales Strategy Wholesale Strategy Retail Strategy 02.2 PEAK people development programme to build the best sales team When reaching for gold in business, just like in sports, the quality of the team is critical to score as high as possible. ...

  • Page 69
    ... concept stores to increase the number of distribution points for our lifestyle offering. Another area of focus in 2012 will be the further expansion of the store base of the adidas NEO label, the vertical business model for the Group SEE GLOBAL BRANDS STRATEGY, P. 68 . Furthermore, we will test new...

  • Page 70
    ... assets is the primary focus of all Retail teams, particularly in light of the pivotal role Retail has in achieving the adidas Group's Route 2015 targets. As such, we have introduced a set of operational KPIs benchmarked to best-in-class retailers in order to measure existing business performance...

  • Page 71
    ... eCommerce as the third sales channel. In doing so, we hired external expertise, added young and talented digital/online addicts, and strengthened our leadership both on a global and a market level. Moreover, in North America we rolled out a new eCommerce platform built in-house that will...

  • Page 72
    ... growth by building desirable brands in customers' and consumers' perception. Global Brands played a central role in the creation of Route 2015, the adidas Group's five-year strategic business plan that was unveiled in 2010. The adidas and Reebok brands are expected to deliver 90% of the targeted...

  • Page 73
    ... through strategic partnerships 69 20 11 01 Brand architecture - portfolio strategy Pure Performer Athletic Stylite Athletic Classic Brand Driven Sport Inspired Style Adopter Style Setter Competitive Sports Active Sports Casual Sports Sports Fashion adidas Group 2011 Annual Report

  • Page 74
    ... products in the performance arena, but also to facilitate the extension of the adidas and Reebok brands in the sports-inspired lifestyle market. Both adidas and Reebok follow a partnership strategy geared to best reï¬,ect their respective positioning in the market. adidas Group 2011 Annual Report

  • Page 75
    ... through strategic partnerships adidas and Reebok have both successfully pursued design and co-branding strategies with complementary partners. For example, adidas has partnered with Yohji Yamamoto, Stella McCartney and Porsche Design, designing sports-inspired fashion, high-end functional ranges...

  • Page 76
    ...to 29-year-olds, a clear focus of the brand is on strengthening its resonance with the high school athlete and 14- to 19-year-olds. adidas Sport Performance offers products in most sports categories. The key focus categories are: - Football - Basketball - Running - Training - Outdoor adidas, as "the...

  • Page 77
    ... and apparel technologies. Building on its success around major sporting events, the brand strives to increase its strong market position by continuously creating the industry's top products and fully leveraging its outstanding portfolio of sports marketing partners. adidas Group 2011 Annual Report

  • Page 78
    ... adizero Crazy Light shoe, adidas has positioned itself as the basketball brand that makes the lightest and fastest products in the game PICTURE 05 . Running: building credibility with core runners, young urban runners and next-generation athletes Running continues to be high on the adidas agenda...

  • Page 79
    ... on improving quality, increasing colour offerings and strengthening in-store marketing. For example, a new and commercially relevant Performance Essentials collection will be launched and executed through a fully integrated never-out-of-stock business model SEE GLOBAL SALES STRATEGY, P. 62 . 20 11...

  • Page 80
    ... GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy adidas Strategy 02.3 09 adidas Sport Performance Terrex Active Shell Jacket adidas Originals - celebrating originality The market for streetwear and lifestyle sports fashion represents a unique opportunity for sporting goods companies...

  • Page 81
    ...coming years will see the opening of additional Y-3 stores in other inï¬,uential cities in the USA, Asia and Europe, and Y-3 will expand its business by further developing the global e-commerce site : WWW.Y-3STORE.COM . adidas SLVR: smart design adidas Sport Style: style your life What once started...

  • Page 82
    ... new business model has been built to accommodate shorter lead times and quicker processes in brand and product marketing, design as well as in retail operations. In 2012, we will start to pilot our own retail solution in Germany, where we plan to open 10 stores. In these test stores, new technology...

  • Page 83
    ... taking the pinnacle inï¬,uences into broader product lines. 79 20 11 17 Reebok strategy and focus areas Fitness Made Fun Women Girls Training Running Walking Men Boys Training Running Walking 18 Reebok CrossFit Long Sleeve 1/4 Zip Classics Own Invigorate Challenge adidas Group 2011 Annual...

  • Page 84
    ... is designed to conserve and return energy PICTURE 20 . In 2012, ZigTech will continue to expand its footwear and apparel offerings based on its iconic geometric shape. 80 20 11 19 Reebok CrossFit "The Sport Of Fitness Has Arrived" Campaign 20 Reebok ZigTech adidas Group 2011 Annual Report

  • Page 85
    02.3 GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy Reebok Strategy - RealFlex: RealFlex was launched in a number of markets in 2011, to outstanding reception. This running and training shoe answers the lightweight, natural movement needs of the consumer, delivering multi-directional ...

  • Page 86
    ... complementing adidas Golf's athletic position. Combining adidas Golf and Ashworth, TaylorMade-adidas Golf is a global leader in golf apparel and ranks number two in footwear sales. Key markets Focus areas Key strategic pillars - Maintain TaylorMade's status as the No. 1 driver brand on the world...

  • Page 87
    ..., social media and marketing campaigns, involving key assets and best-in-class point-ofsale support to drive sell-through of new products. 02 TaylorMade Sergio García at the "White Out" event in New York Pricing strategically determined to increase market share Expanding market share in golf is...

  • Page 88
    ... strong presence in the USA, where it forged an all-time high of a 45% share in March 2011. The brand's primary focus going forward is to remain the innovation leader and expand its metalwood business outside the USA. 20 11 - Wedges: Leveraging TaylorMade's success in metalwoods and irons...

  • Page 89
    ...design and help the brand gain a larger share of a category which offers significant growth opportunities. adidas Golf: setting new standards in high-performance footwear and apparel adidas Golf develops high-performance golf footwear and apparel for athletes seeking products to elevate their game...

  • Page 90
    ... globally in 2011, setting new industry benchmarks in style and comfort, particularly with the Janae Boat Pump PICTURE 08 . About Rockport Brand mission Brand attitude Key markets Focus areas Key strategic pillars Net sales in 2011 08 Rockport Janae Boat Pump Leather footwear market offers...

  • Page 91
    ...-price own-retail stores are planned to be the main growth driver within the brand over the next years. The target is that a fifth of total sales should originate from full-price own retail by 2014. In 2011, Rockport opened more than 80 points of sale in Russia, China, South Korea and other markets...

  • Page 92
    ...U+ stick and U+ Crazy Light protective, the lightest high-performance protective in the world PICTURE 13 . Key strategic pillars Net sales in 2011 Focus on high-end performance Reebok-CCM Hockey has a dual brand portfolio consisting of Reebok Hockey and CCM. Reebok Hockey is a global hockey brand...

  • Page 93
    ... with its highperformance positioning in the sport. 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. adidas Group 2011 Annual Report

  • Page 94
    ... apparel to 60 days - Establish a regional source base Supporting the Group's growth projects Support the company's Route 2015 priorities - Build fast-fashion creation, sourcing and supply chain management capabilities - Further roll-out of processes and systems - Offer short lead time production...

  • Page 95
    ... level, Global Operations is also a key contributor to the company's Integrated Business Planning (IBP) project SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 114 . IBP forms part of the Group's Driving Route 2015 programme and aims at establishing a coherent end-to-end demand and supply planning process...

  • Page 96
    ...'s growth projects Global Operations supports the Group's key growth projects outlined in the Route 2015 strategic business plan, such as the adidas NEO label, market and channel programmes as well as brand programmes such as customisation SEE GLOBAL BRANDS STRATEGY, P. 68 SEE GLOBAL SALES STRATEGY...

  • Page 97
    ..., we promote adherence to social and environmental standards throughout our supply chain SEE SUSTAINABILITY, P. 107 . Our Global Operations function manages product development, commercialisation and distribution, and also supervises sourcing for adidas and Reebok as well as for adidas Golf DIAGRAM...

  • Page 98
    GROUP MANAGEMENT REPORT - OUR GROUP 02.5 Global Operations 02.5 Rockport purchased approximately 9 million pairs of footwear in 2011, which represents an increase of 6% versus the prior year. Products were primarily sourced from factories in China (66%), Vietnam (23%), India (8%) and Indonesia ...

  • Page 99
    ... Group. In line with their strategic and long-term visions and distinctive positioning, each brand runs its own research, design and development activities. These teams generally have either a category or a technology focus. R&D is closely integrated with the sourcing, design and product marketing...

  • Page 100
    ... locations 96 20 11 adidas The adidas innovation team is divided into groups that focus on performance footwear, apparel and hardware innovation, within which there are individual product focus categories. These reï¬,ect adidas' business needs with an emphasis on our five key Sport Performance...

  • Page 101
    ... costly and time-consuming product changes in the latter stages of the development process. 03 R&D expenses (in % of net sales) 0.9 0.8 0.8 0.8 0.8 2011 2010 2009 2008 2007 04 R&D expenses (in % of other operating expenses) 2.1 2.0 2.0 1.9 2.1 2011 2010 2009 2008 2007 adidas Group 2011 Annual...

  • Page 102
    ...of innovative products SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . Successful product launches across all major adidas categories In 2011, adidas sales were again driven by the latest product offerings, with products launched during the course of the year accounting for 74% of brand sales (2010: 75...

  • Page 103
    ... market share in March a month after their launch, and they went on to maintain this early success all year long. Following the success in Reebok-CCM Hockey innovates in sticks and skates At Reebok-CCM Hockey, products launched in 2011 accounted for 55% of sales in North America. Only 15% of sales...

  • Page 104
    ... golf magazine) Best Golf Shoe Award / Golf Magazin (German golf magazine) Running Running Running Running Outdoor Outdoor Outdoor Eyewear Basketball Running Golf Golf adidas adidas adidas Reebok adidas adidas adidas adidas adidas Reebok TaylorMade adidas Golf adidas Group 2011 Annual Report

  • Page 105
    ...and Planning tool (PEP) is the cornerstone of performance management at the adidas Group. Based on business targets as well as job tasks and competencies, each employee is evaluated and receives feedback at least once a year. Building on defined development goals, we offer and support our employees...

  • Page 106
    ...of these assignments takes place abroad. At year-end 2011, we employed 47 participants in our global FTP (2010: 36). Our development programmes are complemented by apprenticeship and internship programmes. The adidas Group apprenticeship offers young people who want to join our Group directly out of...

  • Page 107
    ... strategy. At the end of 2011, we employed 330 interns in Germany (2010: 331). Succession management: The adidas Group succession management approach aims to ensure business continuity. We achieve this through a globally consistent succession plan which covers successors for director level positions...

  • Page 108
    ... department. Increasing proportion of women in management positions: The adidas Group has set specific goals which are in line with our corporate culture as well as our employee structure. We plan to increase the proportion of women in management to between 32% and 35% by 2015 (currently: 27...

  • Page 109
    .... 04 adidas Group number of employees 1) 46,824 42,541 39,596 38,982 31,344 2011 2010 2009 2008 2007 1) At year-end. 105 20 11 05 Employees by function 1) 1 2 3 4 5 6 7 8 53% 12% 11% 8% 8% 4% 2% 2% Own retail Logistics Sales Marketing Central administration Production Research & development IT...

  • Page 110
    ... 1) At year-end. 2) Number of employees on a headcount basis. 3) Number of employees on a full-time equivalent basis. Due to the high share of part-time employees in our Retail segment, this figure is lower than the number of employees counted on a headcount basis. adidas Group 2011 Annual Report

  • Page 111
    ... and train our suppliers in improving their social and environmental performance. Careful supplier selection To improve working conditions throughout our supply chain, the Group function Global Operations works closely with our SEA team on supplier selection. The SEA team assesses all potential new...

  • Page 112
    ...and adidas Group business entities. In this way, the consideration of acceptable working conditions becomes a routine part of business activities. In 2011, the SEA team conducted 170 training sessions and workshops (2010: 193) DIAGRAM 01 . 01 Number of trainings 170 193 216 251 267 2011 2010 2009...

  • Page 113
    ...concept. The adidas brand consolidates its sustainable product research and development within this sustainable product creation programme. The first adidas "Better Place" products were introduced globally in 2009 in response to increasing consumer demand for sustainable sports apparel and footwear...

  • Page 114
    ... Key Performance Indicator (KPI) rating for factories' compliance performance - have a management plan in place that details the factory's compliance programme and future targets - are publicly disclosed on the adidas Group website quarters of the Volunteer clothing and accessories at sustainability...

  • Page 115
    GROUP MANAGEMENT REPORT - OUR GROUP Sustainability 02.8 Control and monitoring of restricted substances We have specified clear standards that follow the strictest local regulations and best practice standards for consumer care and safety. This policy is mandatory for all business partners and is ...

  • Page 116
    03 03.1 03.2 FINANCIAL REVIEW GROUP MANAGEMENT REPORT Internal Group Management System Group Business Performance Economic and Sector Development Income Statement Statement of Financial Position and Statement of Cash Flows Treasury Financial Statements and Management Report of adidas AG Disclosures...

  • Page 117
    ... She wears the JANAE HEEL Style Made Comfortable with Style Made Comfortable with The culmination of years of development, Rockport will introduce truWalk Zero in spring 2012. A market-leading innovation to claim ownership of lightness in the brown shoe industry. Featuring advanced lightweight...

  • Page 118
    ...fit as well as optimising operating working capital and capital expenditure. To keep senior management focused on long-term performance improvements we have adopted a modified economic value added (EVA) model. The asset base of a market or operating unit within the Group is subject to a percentage...

  • Page 119
    ...markets, business models and channels. The strategic implications and decisions taken in this respect are a key element of our strategic planning efforts, ensuring clarity and focus of the organisation to maximise the Group's operating margin. Capital expenditure targeted to maximise future returns...

  • Page 120
    ...a quarterly basis. To assess current sales and profitability development, Management analyses sell-through information from our own-retail activities as well as short-term replenishment orders from retailers. Taking into account year-to-date performance as well as opportunities and risks, the Group...

  • Page 121
    ... process led by Group Finance Integrated KPIs + Financials Feedback results Operations Review Sales Review All channels All markets Marketing Review 03 adidas Group targets versus actual key metrics 2010 Actual 2011 Initial outlook 1) 2011 Actual 2012 Targets Sales (year-over-year...

  • Page 122
    ... REPORT - FINANCIAL REVIEW Group Business Performance Economic and Sector Development 03.2 Group Business Performance In 2011, the adidas Group delivered a strong financial performance. Currency-neutral Group sales increased 13% as a result of double-digit growth in the Wholesale and Retail...

  • Page 123
    ... Affairs and Communications. 4) Source: China National Bureau of Statistics. 5) Source: Russia Federal Service of State Statistics. 03 Quarterly development of Consumer Price Index 1) (by region) Positive growth in the global sporting goods industry In 2011, the global sporting goods industry...

  • Page 124
    ... spending levels led to sales declines in the sporting goods market. 1) Spot rates at quarter-end. 06 Oil price development 1) (in US $ per barrel) | Jan. 1, 2010 Dec. 31, 2011 | 120 100 80 60 1) West Texas Intermediate Cushing crude oil. Source: Bloomberg. adidas Group 2011 Annual Report

  • Page 125
    ... REPORT - FINANCIAL REVIEW Group Business Performance Income Statement Income Statement adidas Group currency-neutral sales grow 13% In 2011, Group revenues grew 13% on a currency-neutral basis, as a result of double-digit sales increases in Wholesale, Retail and Other Businesses. This development...

  • Page 126
    ... MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Income Statement 03.2 Group sales up in all product categories In 2011, Group sales grew in all product categories on a currencyneutral basis. Currency-neutral footwear sales increased 18% in 2011. This development was due to growth...

  • Page 127
    ... a positive low-double-digit million euro impact on the Group's financial results in 2010 SEE NOTE 29, P. 208 . store openings to support the Group's retail expansion. In addition, higher expenditure at the point of sale as well as new product launches at Reebok contributed to this development. By...

  • Page 128
    ... This represents an increase of 10% versus the prior year level of 42,541. New hirings related to the expansion of the Group's own-retail store base were the main driver of this development. On a full-time equivalent basis, the number of employees increased 12% to 40,637 at the end of 2011 (2010: 36...

  • Page 129
    ...GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Income Statement Operating margin improves 0.1 percentage points Group operating profit increased 13% to â,¬ 1.011 billion in 2011 versus â,¬ 894 million in 2010 DIAGRAM 23 . As a result, the operating margin of the adidas Group...

  • Page 130
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Statement of Financial Position and Statement of Cash Flows 03.2 Statement of Financial Position and Statement of Cash Flows Accounting policy unchanged The Group's consolidated financial statements are prepared in ...

  • Page 131
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Statement of Financial Position and Statement of Cash Flows Other current financial assets up 55% Other current financial assets grew 55% to â,¬ 304 million at the end of December 2011 from â,¬ 197 million in 2010 SEE ...

  • Page 132
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Statement of Financial Position and Statement of Cash Flows 03.2 Other current provisions up 8% Other current provisions were up 8% to â,¬ 507 million at the end of 2011 versus â,¬ 470 million at the end of 2010. This ...

  • Page 133
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Statement of Financial Position and Statement of Cash Flows Treasury Net cash position of â,¬ 90 million Net cash at December 31, 2011 amounted to â,¬ 90 million, compared to net borrowings of â,¬ 221 million at the end of...

  • Page 134
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.2 Group Business Performance Treasury 03.2 Centralised treasury function In accordance with our Group's Treasury Policy, all worldwide credit lines are directly or indirectly managed by the Group Treasury department. Portions of those lines are ...

  • Page 135
    ... to 77% of the Group's total gross borrowings at the end of 2011 (2010: 76%). Variable-rate financing amounted to 23% of total gross borrowings at the end of the year (2010: 24%). 2011 2010 2009 2008 2007 1) Weighted average interest rate of gross borrowings. adidas Group 2011 Annual Report

  • Page 136
    ... within the Group's medium-term guideline of less than two times. Efficient management of our capital structure continues to be a top management priority SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . 51 Financing structure 1) (â,¬ in millions) 2011 2010 Cash and short-term financial assets Bank...

  • Page 137
    ... Performance Financial Statements and Management Report of adidas AG Financial Statements and Management Report of adidas AG adidas AG is the parent company of the adidas Group. It includes operating business functions, primarily for the German market, corporate headquarter functions such as Global...

  • Page 138
    ...million, mainly due to the new "Laces" office building, as well as an increase of â,¬ 27 million in receivables and other current assets. Financial result increases 25% Net interest expense of adidas AG declined 9% to â,¬ 63 million in 2011 (2010: â,¬ 69 million). This positive development derives...

  • Page 139
    ... powers of control. Voting right control if employees have a share in the capital Like all other shareholders, employees who hold adidas AG shares exercise their control rights directly in accordance with statutory provisions and the Articles of Association. adidas Group 2011 Annual Report

  • Page 140
    ... (Authorised Capital 2011). - Until July 12, 2015, the Executive Board is authorised to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in cash once or several times by no more than â,¬ 20,000,000 altogether (Authorised Capital 2010...

  • Page 141
    ... cash (limited to 10% of the nominal capital taking into account certain offsets) at a price not significantly below the stock market price of shares with the same features. - They may be offered and assigned as consideration for the direct or indirect acquisition of companies, parts of companies...

  • Page 142
    ... Wholesale Business Performance Wholesale full year results In 2011, sales in the Wholesale segment grew 11% on a currency-neutral basis, driven by double-digit growth at adidas Sport Performance and adidas Sport Style. Currency-neutral Reebok revenues increased at a low-single-digit rate. Currency...

  • Page 143
    ...fit by quarter (â,¬ in millions) Q4 2011 Q4 2010 523 525 813 813 586 607 802 626 Wholesale development by brand In 2011, adidas Sport Performance wholesale revenues grew 10% on a currency-neutral basis. Growth was mainly a result of doubledigit sales increases in the training, running, outdoor...

  • Page 144
    03.3 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Business Performance by Segment Retail Business Performance 03.3 Retail Business Performance Retail full year results In 2011, currency-neutral Retail sales increased 20%. Concept store, factory outlet and other retail format currency-neutral sales ...

  • Page 145
    ...Group Retail segment operated 2,401 stores. This represents a net increase of 131 or 6% versus the prior year-end level of 2,270. Of the total number of stores, 1,804 were adidas and 597 Reebok branded (December 31, 2010: 1,712 adidas stores, 558 Reebok stores). During 2011, the Group opened 323 new...

  • Page 146
    ... increased 35% on a currency-neutral basis. Sales from adidas and Reebok e-commerce platforms were up 64% on a currency-neutral basis compared to 2010. Currency-neutral comparable sales from other retail formats grew 25%. In 2011, the Group opened 50 new stores in other retail formats and closed...

  • Page 147
    ... China Latin America Other Businesses development by segment In 2011, TaylorMade-adidas Golf revenues grew 16% on a currencyneutral basis. Growth at TaylorMade was primarily driven by strong double-digit revenue increases in both metalwoods and putters. Sales for adidas Golf also increased, mainly...

  • Page 148
    03.3 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Business Performance by Segment Other Businesses Performance 03.3 Other Centrally Managed Brands revenues grew 13% on a currencyneutral basis, primarily driven by growth at Y-3 and adidas SLVR as well as the first-time consolidation of Five Ten in ...

  • Page 149
    ... can positively impact the Group's business objectives or financial goals. We have summarised the most important of these risks and opportunities in this Risk and Opportunity Report in three main categories: Strategic and Operational, Compliance-related and Financial. The adidas AG Executive Board...

  • Page 150
    ... as well as feedback from our business partners and controlled space network. These efforts are supported by global market research and competitor analysis. Through this process, we seek to identify the markets, categories, consumer target groups and product styles which show most potential for...

  • Page 151
    ... internal control and risk management system serves to identify and assess as well as to limit and control risks identified in the consolidated accounting process which might result in our consolidated financial statements not being in conformity with regulations. adidas Group 2011 Annual Report

  • Page 152
    ... to product counterfeiting and imitation Product quality risks Risks related to non-compliance Financial risks Credit risks Financing and liquidity risks Currency risks Interest rate risks Strategic and operational risks Macroeconomic risks Growth in the sporting goods industry is highly dependent...

  • Page 153
    ... SEE RESEARCH AND DEVELOPMENT, P. 95 . We also seek to enhance consumer demand for our brands through extensive marketing, product and brand communication programmes SEE GLOBAL BRANDS STRATEGY, P. 68 . And we focus on supply chain improvements to shorten production lead times SEE GLOBAL OPERATIONS...

  • Page 154
    ... our supply chain in light of increasing input costs SEE GLOBAL OPERATIONS, P. 90 . In the medium term, we also have the ability to adapt our sourcing structure to take advantage of more competitive pricing in other locations. As a result of the high degree of volatility on global commodity markets...

  • Page 155
    ... of key business functions globally SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 114 . In addition, our Global Operations function offers sophisticated and tailored replenishment models in order to shorten order-to-delivery times, ensuring availability of products while avoiding excess inventories SEE...

  • Page 156
    03.4 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report Strategic and operational risks 03.4 Risks related to key event or promotion partnerships Event and promotion partnerships play an important role in building brand image and product authenticity with our consumers, and ...

  • Page 157
    ...all major projects. The IT organisation's strategic direction and five-year plan is aligned with the adidas Group's overall Route 2015 strategic business plan. New quality reviews for major projects have been implemented to ensure that the progress, quality and costs of those projects are regularly...

  • Page 158
    ... risk by employing dedicated teams that monitor the quality of our products on all levels of the supply chain through rigorous testing prior to production, close cooperation with suppliers throughout the manufacturing process, random testing after retail delivery, open communication about defective...

  • Page 159
    ... times. In the light of our available credit lines, financing structure and business model, we assess the likelihood of occurrence of financing and liquidity risks as unlikely, and therefore expect only a minor potential financial impact on the Group. 155 20 11 adidas Group 2011 Annual Report

  • Page 160
    ... this analysis. âˆ' Operational issues, such as potential discounts to key accounts, which have high transparency regarding the impacts of currency on our sourcing activities (due to their own private label sourcing efforts), are also excluded from this presentation. adidas Group 2011 Annual Report

  • Page 161
    ... be slightly less favourable compared to those of 2011. Volume forecast variances, greater currency volatility and an increasing portion of our business in emerging markets will expose the adidas Group to additional currency risks in 2012. As a consequence, our assessment of currency risks remains...

  • Page 162
    ... Emerging markets as long-term growth drivers Women's segment offers long-term potential Increasing consumer demand for functional apparel Growing popularity of "green" products Social media offering new ways to engage consumers Leveraging strong market positions worldwide Multi-brand approach...

  • Page 163
    ... strategic business plan. After the successful introduction in emerging markets, mainly Greater China and Russia, in 2012, we will open 10 adidas NEO label pilot stores in Germany in order to test this fastfashion model in a mature market SEE ADIDAS STRATEGY, P. 72 . adidas Group 2011 Annual Report

  • Page 164
    ..., very few companies are able to supply high-end functional apparel. Our resources and our positioning as a sports performance leader enable us to constantly develop innovative products and capitalise on them commercially SEE GLOBAL BRANDS STRATEGY, P. 68 . Social media offering new ways to engage...

  • Page 165
    ...Route 2015 targets, we are working on various efficiency projects to minimise costs and drive operational performance. For example, we continuously search for ways to increase efficiency in our supply chain and make it truly demand-driven. Furthermore, by implementing end-to-end planning processes...

  • Page 166
    ...unchanged versus prior year Management aggregates all risks reported by different business units and functions. Taking into account the occurrence likelihood and the potential financial impact of the risks explained within this report as well as the current business outlook, adidas Group Management...

  • Page 167
    ...products as well as positive effects from major sporting events, we project top- and bottom-line improvements in our Group's financial results in 2012. We forecast adidas Group sales to increase at a mid- to high-single-digit rate on a currencyneutral basis due to growth in the Wholesale and Retail...

  • Page 168
    ...2012 Olympic Games and Team GB, the adidas brand will be the most visible brand during the event. This event not only provides an excellent platform to increase the brand's presence in the important UK market, but also to present its performance credentials globally. adidas Group 2011 Annual Report

  • Page 169
    ...store base and comparable store sales are expected to contribute at a similar rate to the revenue growth. The Group expects a net increase of its store base by around 100 to 150 adidas and Reebok stores in 2012. We plan to open around 250 new stores, depending on the adidas Group 2011 Annual Report

  • Page 170
    ...central costs. We expect the number of employees within the adidas Group to increase versus the prior year level. Additional hires will be mainly related to own-retail expansion. The majority of new hires will be employed on a part-time basis and will be located in emerging markets. The adidas Group...

  • Page 171
    ... year level (2011: 20.8%). This is mainly due to working capital increases to support the growth of our business. Management to propose dividend of â,¬ 1.00 In light of the strong cash ï¬,ow generation in 2011 and resulting net cash position at year-end, Management will recommend paying a dividend...

  • Page 172
    ...targeted to grow annual earnings at a compound annual growth rate of 15% and to reach an operating margin of 11% sustainably by 2015 at the latest. For 2013, in line with our mid-term guidance, we project adidas Group sales and net income to increase compared to 2012. In order to reach our strategic...

  • Page 173
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.5 Subsequent Events and Outlook 02 Product Major 2012 product launches Brand adizero Rose 2.5 basketball shoe adizero adios 2 running shoe adipure Trainer training shoe adipure Adapt running shoe Climacool Seduction running shoe Climacool Freshride ...

  • Page 174
    ... 04.8 CONSOLIDATED FINANCIAL STATEMENTS Responsibility Statement Auditor's Report Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes Notes to...

  • Page 175
    ... Day's style. ©2011 Taylor Made Golf Company, Inc. adidas, the 3-Bars logo, and the 3-Stripes mark are registered trademarks of the adidas Group. E T H E R W E W IN adidas Golf, known for its technology-infused, game-enhancing apparel and footwear, launches an entirely new apparel line...

  • Page 176
    ... principal opportunities and risks associated with the expected development of the Group. Herzogenaurach, February 15, 2012 H E R B E R T H A IN E R CEO GLENN BENNET T Global Operations R O B IN J. S TA L K E R Finance E R I C H S TA M M IN G E R Global Brands adidas Group 2011 Annual Report

  • Page 177
    ... by adidas AG, Herzogenaurach, comprising the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash ï¬,ows and the notes, together with the management report of the Company and the Group for the business year from...

  • Page 178
    ...174 20 11 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-term financial...

  • Page 179
    ... of Financial Position .. adidas AG Consolidated Statement of Financial Position (IFRS) (â,¬ in millions) Note Dec. 31, 2011 Dec. 31, 2010 Change in % LIABILITIES AND EQUITY Short-term borrowings Accounts payable Other current financial liabilities Income taxes Other current provisions Current...

  • Page 180
    CONSOLIDATED FIN A NCI A L S TATEMENTS 04.4 Consolidated Income Statement 04.4 Consolidated Income Statement .. adidas AG Consolidated Income Statement (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Change Net sales Cost of sales 35 13,344 7,000 6,344 47.5% ...

  • Page 181
    ... Comprehensive Income .. adidas AG Consolidated Statement of Comprehensive Income (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Net income after taxes Net gain on cash ï¬,ow hedges, net of tax Actuarial loss of defined benefit plans (IAS 19), net of tax Asset...

  • Page 182
    ... at December 31, 2011 1) Reserves for actuarial gains/losses and share option plans. Rounding differences may arise in percentages and totals. The accompanying notes are an integral part of these consolidated financial statements. 20 11 25 26 209 722 25 26 209 722 adidas Group 2011 Annual Report

  • Page 183
    04.6 CONSOLIDATED FIN A NCI A L S TATEMENTS Consolidated Statement of Changes in Equity Cumulative translation adjustments Hedging reserves Other reserves 1)... 4,623 877 (169) 0 4 5,331 20 11 (121) 94 (10) 123 (28) (10) 3,844 671 (167) 0 (27) 113 (38) 4,348 adidas Group 2011 Annual Report

  • Page 184
    ... expense Losses on sale of property, plant and equipment, net Other non-cash income Operating profit before working capital changes Increase in receivables and other assets Increase in inventories Increase in accounts payable and other liabilities Cash generated from operations before interest and...

  • Page 185
    ...The Retail segment comprises all business activities relating to the sale of adidas and Reebok products directly to end consumers through own retail and own e-commerce platforms. adidas and Reebok branded products include footwear, apparel and hardware, such as bags and balls. TaylorMade-adidas Golf...

  • Page 186
    ... as follows for the years ending December 31, 2011 and 2010, respectively: Number of consolidated subsidiaries 2011 2010 11 Assets Cash and cash equivalents Short-term financial assets Accounts receivable Inventories Assets classified as held for sale Property, plant and equipment Goodwill...

  • Page 187
    ...' equity without affecting the income statement. A summary of exchange rates to the euro for major currencies in which the Group operates is as follows: Exchange rates (â,¬ 1 equals) Average rates for the year ending Dec. 31, 2011 2010 2011 Spot rates at Dec. 31, 2010 USD GBP JPY CNY RUB...

  • Page 188
    ....8 Notes 04.8 Inventories Merchandise and finished goods are valued at the lower of cost or net realisable value, which is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Costs are determined...

  • Page 189
    ... testing. As a result of the redefinition of cash-generating units, the number of cash-generating units increased to 30 from 19, including the other operating segments TaylorMade-adidas Golf, Rockport and Reebok-CCM Hockey. The cash-generating units (or groups of units) represent the lowest level...

  • Page 190
    ... 38 "Intangible Assets". The Group spent â,¬ 115 million and â,¬ 102 million on product research and development for the years ending December 31, 2011 and 2010, respectively. Financial assets All purchases and sales of financial assets are recognised on the trade date. Costs of purchases include...

  • Page 191
    ... the acquisition, construction or production of a qualifying asset. This interest is capitalised as part of the cost of the qualifying asset. Income taxes Current income taxes are computed in accordance with the applicable taxation rules established in the countries in which the Group operates. The...

  • Page 192
    ...sports sector focusing on categories such as climbing and mountain biking. Through the acquisition of Five Ten, the adidas Group intends to improve its position in the outdoor category, which provides significant growth opportunities as articulated in the Group's strategic business plan "Route 2015...

  • Page 193
    ... to the Consolidated Statement of Financial Position 04 Accounts receivable past due but not impaired (â,¬ in millions) past due 1 - 30 days past due 31 - 60 days past due 61 - 90 days past due 91 - 180 days past due > 180 days Cash and cash equivalents Dec. 31, 2011 Dec. 31, 2010 158 118 70...

  • Page 194
    ... benefits. In 2011, reversals of impairment losses were recorded in an amount of â,¬ 1 million (2010: â,¬ 7 million). For details see Attachment I to the consolidated financial statements SEE STATEMENT OF MOVEMENTS OF INTANGIBLE AND TANGIBLE ASSETS, P. 216 . adidas Group 2011 Annual Report

  • Page 195
    ...use of the acquired brand names. The Group tests at least on an annual basis whether trademarks with indefinite useful lives are impaired. This requires an estimation of the fair value less costs to sell of the trademarks. As part of this estimation, the Group is required to make an estimate of the...

  • Page 196
    ... (â,¬ in millions) Dec. 31, 2011 Dec. 31, 2010 Prepaid expenses Sundry Other non-current assets 105 2 107 98 2 100 Prepaid expenses mainly include prepayments for long-term promotional contracts and service contracts SEE NOTES 37 AND 27 . 17 Borrowings and credit lines Investment in FC Bayern...

  • Page 197
    ... maturities were classified as long-term borrowings as they represented permanent funding volumes that were covered by the committed mid-term syndicated loan, which ends in 2012. For further details on future cash outï¬,ows SEE RISK AND OPPORTUNITY REPORT, P. 145 . adidas Group 2011 Annual Report

  • Page 198
    ...claims with regard to the return of faulty products sold by the Group. The amount of the provision follows the historical development of returns, allowances and warranty as well as current agreements. Provisions for taxes other than income taxes mainly relate to value added tax, real estate tax and...

  • Page 199
    ..., rebates and sales commissions. Accrued liabilities for payroll and commissions mainly consist of accruals for outstanding salary payments, such as bonuses and overtime, as well as outstanding vacation. Other accrued liabilities partly include accruals for interest. adidas Group 2011 Annual Report

  • Page 200
    ... to the Consolidated Statement of Financial Position 04.8 21 Other current liabilities 23 Pensions and similar obligations Other current liabilities consist of the following: Other current liabilities (â,¬ in millions) Dec. 31, 2011 Dec. 31, 2010 The Group has recognised post-employment bene...

  • Page 201
    ...million (2010: â,¬ 13 million) relates to employees of adidas AG. The pension expense is recorded within the other operating expenses whereas the production-related part thereof is recognised within the cost of sales. Present value of the defined benefit obligation (â,¬ in millions) 2011 2010 The...

  • Page 202
    ...Consolidated Statement of Financial Position 04.8 The expected payments for 2012 amount to â,¬ 9 million. Thereof, â,¬ 6 million relate to benefits paid directly by the Group companies and â,¬ 3 million to employer contributions paid into the plan assets. In 2011, the actual return on plan assets...

  • Page 203
    ... shares (Contingent Capital 2010). The contingent capital increase will be implemented only to the extent that holders or creditors of option or conversion rights or the persons obligated to exercise option or conversion duties on bonds issued by the company or a adidas Group 2011 Annual Report

  • Page 204
    ... disclosure dated March 9, 2011. 7) See the company's disclosure dated January 7, 2009. Capital management The Group's policy is to maintain a strong capital base so as to uphold investor, creditor and market confidence and to sustain future development of the business. The Group seeks to maintain...

  • Page 205
    ... Less: estimated amount representing interest Present value of minimum lease payments Thereof falling due: Within 1 year Between 1 and 5 years After 5 years 3 4 - 2 3 0 3 4 - 7 0 7 2 3 0 5 0 5 27 Leasing and service arrangements Operating leases The Group leases primarily retail stores as well as...

  • Page 206
    ... IAS 39 Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2011 Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of...

  • Page 207
    ... Held for Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) 566 âˆ' 566 1,872 18 3,504 12 adidas Group 2011 Annual Report

  • Page 208
    ... Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2010 204 20 11 Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part...

  • Page 209
    ... Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) 336 - 336 1,824 14 3,723 28 205 20 11 adidas Group 2011 Annual Report

  • Page 210
    .... Net gains/(losses) on financial instruments recognised in the consolidated income statement (â,¬ in millions) Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Financial assets or financial liabilities at fair value through profit or loss Thereof: designated as such upon initial recognition...

  • Page 211
    ... cash ï¬,ow hedges for forecasted sales is reported in the income statement when the forecasted sales transactions are recorded. The vast majority of these transactions are forecasted to occur in 2012. As at December 31, 2011, inventories were adjusted by negative â,¬ 5 million (2010: positive...

  • Page 212
    .... In 2011, marketing working budget accounted for approximately 25% (2010: 26%) of the total other operating expenses. Expenses for central administration include the functions IT, Finance, Legal, Human Resources, Facilities & Services as well as General Management. adidas Group 2011 Annual Report

  • Page 213
    ... cost of sales as they are directly assigned to the production costs. Other operating expenses (â,¬ in millions) Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 32 Financial income/financial expenses Financial result consists of the following: Financial income (â,¬ in millions) Year ending...

  • Page 214
    .... 57 32 (9) (21) 76 - Tax expenses are split as follows: Income tax expenses (â,¬ in millions) Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 (21) 0 4 63 (12) 11 3 57 Current tax expenses Deferred tax (income) Income tax expenses 289 (32) 257 314 (76) 238 adidas Group 2011 Annual Report

  • Page 215
    ... costs directly attributable to the segment or the group of segments (primarily sales and logistics costs) before marketing working budget expenditures and operating overhead costs not directly attributable. Segmental assets include accounts receivable and inventories. Only these items are reported...

  • Page 216
    ... financial statements, taking into account items which are not directly attributable to a segment or a group of segments. Net sales (non-Group) (â,¬ in millions) Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Operating profit of centralised functions which do not represent a segment, such...

  • Page 217
    ... due to increased income taxes paid and higher operating working capital requirements. Net cash outï¬,ow from investing activities in 2011 was mainly related to spending for property, plant and equipment such as investments in the furnishing and fitting of stores in the Retail segment, in new of...

  • Page 218
    ... terms of up to 19 years from December 31, 2011. Information regarding commitments under lease and service contracts is also included in these Notes SEE NOTE 27 . Own retail Sales Logistics Marketing Central administration Production Research and development Information technology Total 24,429...

  • Page 219
    ...on the Group's corporate website. 215 20 11 Remuneration of the Supervisory Board and the Executive Board of adidas AG Supervisory Board Pursuant to the Articles of Association, the Supervisory Board members' fixed annual payment amounted to â,¬ 0.9 million (2010: â,¬ 0.9 million). Members of the...

  • Page 220
    ... of impairment losses Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2011 Net carrying amount December 31, 2009 December 31, 2010 December 31, 2011 Rounding differences may...

  • Page 221
    ... TATEMENTS Statement of Movements of Intangible and Tangible Assets ATTACHMENT I Internally generated software Total intangible assets Land and buildings Technical equipment... 1,107 2 4 4 2,980 3,128 3,242 257 338 466 101 93 93 297 284 319 69 140 85 724 855 963 adidas Group 2011 Annual Report

  • Page 222
    ...business. 6) The number refers to the number of the company. 7) Sub-group Onfield. 8) Sub-group Reebok-CCM Hockey, Inc. 9) Sub-group Reebok International Limited. 10) Profit and loss transfer agreement. 11) Sub-group Taylor Made Golf Co., Inc. 12) Sub-group adidas Brazil. adidas Group 2011 Annual...

  • Page 223
    ...business. 6) The number refers to the number of the company. 7) Sub-group Onfield. 8) Sub-group Reebok-CCM Hockey, Inc. 9) Sub-group Reebok International Limited. 10) Profit and loss transfer agreement. 11) Sub-group Taylor Made Golf Co., Inc. 12) Sub-group adidas Brazil. adidas Group 2011 Annual...

  • Page 224
    ...business. 6) The number refers to the number of the company. 7) Sub-group Onfield. 8) Sub-group Reebok-CCM Hockey, Inc. 9) Sub-group Reebok International Limited. 10) Profit and loss transfer agreement. 11) Sub-group Taylor Made Golf Co., Inc. 12) Sub-group adidas Brazil. adidas Group 2011 Annual...

  • Page 225
    ...business. 6) The number refers to the number of the company. 7) Sub-group Onfield. 8) Sub-group Reebok-CCM Hockey, Inc. 9) Sub-group Reebok International Limited. 10) Profit and loss transfer agreement. 11) Sub-group Taylor Made Golf Co., Inc. 12) Sub-group adidas Brazil. adidas Group 2011 Annual...

  • Page 226
    05 05.1 05.2 05.3 05.4 05.5 05.6 ADDITIONAL INFORMATION Ten-Year Overview Glossary Index Declaration of Support Publishing Details & Contact Financial Calendar 224 228 234 235 236 237 T O G E T H E R W E W IN

  • Page 227
    Yohji Yamamoto Y- 3 2 0 11 / 2 0 12 The latest Y-3 campaign is by artist Collier Schorr and takes its cue from the experimental city of Brasília. Portraits are collaged with architectural images that define the city and are a meditation on the bond between human beings and their environment. ...

  • Page 228
    ...Brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Net Sales by Product Category (â,¬ in millions) Footwear 2) Apparel 2) Hardware 2) Balance Sheet Data (â,¬ in millions) Total assets 4) Inventories Receivables and other current assets Working capital 4) Net cash...

  • Page 229
    A DDITION A L INFORM ATION 05.1 Ten-Year Overview 2008 2007 2006 1) 2005 2004 2003 2002 10,799 5,256 89 103 4,378 1,280 1,070 (166) 904 ... 2,684 4,434 1,155 1,425 1,336 (665) 1,544 4,188 1,164 1,335 1,433 (1,018) 1,285 4,261 1,190 1,560 1,445 (1,498) 1,081 adidas Group 2011 Annual Report

  • Page 230
    ... 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 ratio at year-end Market capitalisation at year-end (â,¬ in millions) Net cash generated...

  • Page 231
    A DDITION A L INFORM ATION 05.1 Ten-Year Overview 2008 2007 2006 1) 2005 2004 2003 2002 1.7 24.5% 64.6% 35.5% 73.6% 127.7% 89.1% 48.2% 51.8% 10.5% 55.1% 109.8% 8.4 18.9% 19.8% ... 1,283 31,344 1,186 26,376 1,087 15,935 706 14,254 637 15,686 709 14,716 758 adidas Group 2011 Annual Report

  • Page 232
    ... stores. Controlled space offers a high level of brand control and ensures optimal product offering and presentation according to brand requirements. 228 11 20 aim is to reduce the use and impact of harmful substances in the apparel and footwear supply chains : WWW.AFIRM-GROUP.ORG . Capital...

  • Page 233
    ...'s business. Emerging markets Developing countries showing potential for growth in both economic strength and private wealth in the future. For the adidas Group, emerging markets are the developing countries of Asia, Eastern Europe, Latin America and Africa. Fair value Amount at which assets are...

  • Page 234
    ...Grassroots events involve the advertising and promotion of products and/or services on a local and/ or personal level. A message is shared with a small group of inï¬,uencers within a target group. If successful, these then spread the marketing message, e.g. by sharing it on social media platforms or...

  • Page 235
    ... to the products or services sold, such as costs for distribution, marketing overhead costs, logistics, research and development, as well as general and administrative costs, but not including costs for promotion, advertising and communication. 231 A company's short-term disposable capital which is...

  • Page 236
    ...a company's sales or revenues. Segment Also called Business Segment. Units within a company that have profit and loss responsibility. The adidas Group is currently divided into six business segments: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed...

  • Page 237
    ... tax rate. Working capital A company's short-term disposable capital used to finance the day-to-day operations. Working capital = total current assets - total current liabilities SEE ALSO OPERATING WORKING CAPITAL . World Business Council for Sustainable Development (WBCSD) The WBCSD is a global...

  • Page 238
    ... Income 123, 133 S Segmental Reporting 121, 138 ff., 211 ff. Share Price Performance 55 ff. Shareholder Structure 56 Shareholders' Equity 128, 198 ff. Shareholdings 56 f., 135, 182, 199 ff., 218 ff. Sourcing 90 ff., 110, 150 Statement of Cash Flows 126 ff., 180, 213 Statement of Financial Position...

  • Page 239
    ... adidas Team, Inc., Portland, Oregon, USA adidas Technical Services Pvt. Ltd., New Delhi, India adidas Trgovina d.o.o., Ljubljana, Slovenia adidas Vietnam Company Limited, Ho Chi Minh City, Vietnam adisport Corporation, San Juan, Puerto Rico ASPA do Brasil Ltda., São Paulo, Brazil Concept Sport...

  • Page 240
    ... 32 84 - 31 27 Email: [email protected] www.adidas-Group.com/investors adidas Group is a member of DIRK (German Investor Relations Association). This report is also available in German. For further adidas Group publications, please see our corporate website. To improve readability...

  • Page 241
    Financial Calendar 2 012 March 7, 2012 Full Year 2011 Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast Publication of 2011 Annual Report May 3, 2012 First Quarter 2012 Results Press release, conference call and webcast Publication of First...

  • Page 242
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