Adidas 1999 Annual Report Download - page 36

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32
Management Discussion and Analysis
Despite record earnings, 1999 proved to be a year of ex-
tremely unstable development for the adidas-Salomon share.
In common with all sporting goods industry stocks, adidas-
Salomon lacked the favors of the financial markets. In the
course of the year it lost a fifth of its value. Even the
announcement of a proposed dividend payment increase to
DM 1.80 per share did nothing to change this.
Sporting goods industry stocks weak
Few competitors in the footwear and apparel industries
were able to achieve share price increases in 1999. The
S&P Footwear Index, which reports a composite of the
Group’s footwear competitors in the United States, for ex-
ample declined by more than 20% in the course of the
year. Industry factors which hampered the share price
performance were all related to North America. They
included a strengthening US Dollar and disappointing
prospects for the North American market resulting from
shifts in demand and the declining retail environment
there.
Volatile adidas-Salomon
share price development
The adidas-Salomon share had a tough 1999 that was
characterized by a series of ups and downs based on
good current financial results and a market perception
that the outlook for the sporting goods industry may be
poor.
Investors ultimately adopted
a generally negative
view of the share.
The adidas-Salomon share closed the year at Euro 75.
This represents a decline of Euro 16 or 18% compared
to the end of 1998. Share price development at the
beginning of 2000 continued this downward trend.
Market capitalization at the end of the year stood at
Euro 3.4 billion (previous year: Euro 4.2 billion).
Stock options program approved
In 1999, the Annual Shareholders’ Meeting approved the
introduction of a Stock Option Program for upper and
middle management. More than 400 employees at senior
and middle management level are entitled to participate
in the program that has been built on the understanding
of linking management decisions more closely to share-
holder value. The program includes demanding exercise
criteria so that management will only be able to profit
from the options if the stock price has increased by
more than the long-term average of the stock market.
For details see Note 29.
The adidas-Salomon Share
Jan. 1999 Dec. 1999
(Indexed, January 8 = 100)
150
140
130
120
110
100
90
80
70
nadidas-Salomon
nS&P SC Footwear
SHARE PRICE VS. INDUSTRY INDEX
1999 1998
Year end price 74.55 93.30
High 103.00 168.30
Low 68.35 77.20
Dividend* 0.92 0.84
Net income** 5.02 4.52
Cash flow*** 7.24 2.64
Number of shares
outstanding (m) 45.35 45.35
*** 1999: Dividend proposal
***1998: before special effect
*** Net cash provided from operating activities
(in B, except for number of shares)
KEY PER SHARE DATA