Adidas 1997 Annual Report Download - page 46

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The Board of Directors will recommend to the annual general meeting that the unappropriated
earnings of adidas-Salomon AG at December 31, 1997 should be appropriated as follows
(in thousands):
Dividend of DM 1.65 per ordinary share DM 74,826
Allocation to revenue reserves DM 379,641
Unappropriated earnings of adidas-Salomon AG as of December 31, 1997 DM 454,467
12. Leasing arrangements The Company leases space for its offices, warehouses and equipment under leases expiring from
one to eight years. Rent expense aggregated DM 80 million, DM 61 million and DM 49 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Amounts of future minimum
lease payments under significant non-cancellable operating leases for the succeeding five years
1998 through 2002 are approximately DM 65 million, DM 42 million, DM 26 million, DM 15 million
and DM 12 million, respectively. Amounts of future minimum lease payments after 2002 are
approximately DM 21 million.
Additionally, the Company conducts a portion of its operations from leased facilities in France.
The lease, which is for fifteen years expiring in 2004, is classified as a capital lease. The value of
facilities under this capital lease, net of accumulated depreciation, of approximately DM 4 million
and DM 5 million at December 31, 1997 and 1996, respectively, is included in land, land rights,
and buildings. The future minimum lease payments under this capital lease, which are payable
through the year 2004, amounted to approximately DM 2 million at December 31, 1997.
13. Employee The Company sponsors and/or contributes to various pension plans, primarily in Germany. The
benefit plans Company’s plans cover substantially all German employees. The liabilities related to these plans
of approximately DM 60 million and DM 38 million at December 31, 1997 and 1996, respectively,
are included in other long-term liabilities. The aggregate amounts vested in Germany under
these plans were DM 33 million and DM 20 million at December 31, 1997 and 1996, respectively.
Additionally, the Company borrowed approximately DM 17 million at December 31, 1997 and
1996, respectively, from its pension trust fund in Germany. This amount is also included in other
long-term liabilities. As of January 1, 1997, this amount bears interest at the average Deutsche
Bundesbank public bond rate of 5.25% (1996: 5.46%) as fixed at the beginning of the year.
The Company’s plans include both defined contribution plans and defined benefit plans as
described below.
The Company sponsors and contributes to a defined benefit plan in Germany. The employee
benefits of this plan are based on years of service. Pension costs are generally funded currently,
subject to German regulatory funding limitations. The pension accruals of adidas-Salomon AG
were calculated actuarially using the projected unit credit method in accordance with International
Accounting Standards. Measurement of the projected benefit obligation was based on a discount
rate of 7% in 1997 and 1996, respectively, and an expected compensation growth rate between
2.2% and 3%. Additionally, the Company sponsors and contributes to a defined benefit plan in
Germany for certain employees. The Company’s contributions to the plan are determined annually
and are allocated to an employee based on years of service and the employee’s compensation.