Adidas 2001 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2001 Adidas annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 117

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

36 MD&A
Research and Development Focus on New Products
Research and development costs, which are included
in operating expenses, were €86 million in 2001.
New technical footwear and apparel innovations at
adidas, product category expansion at Salomon and
golf product development at TaylorMade-adidas Golf
were the primary focus of these expenditures.
Substantial Marketing Working Budget Savings
The marketing working budget, which is comprised
of Group advertising and promotional expenses,
accounted for 12.0% of net sales in 2001 versus 13.7%
in the prior year. This reduction comes as a result of
non-renewal and renegotiation of contracts with ath-
letes and teams that were deemed less critical to the
adidas brand. 2000 figures were high, as they included
one-time costs associated with the Summer Olympics
and the EURO 2000™ football championship. SG&A
improvements were utilized to finance further expansion
of adidas own-retail business and investments in the
Group sales and logistics infrastructure to sustain long-
term growth momentum.
Amortization of Goodwill at Prior-Year Level
At €40 million, the amortization of goodwill
remained unchanged in comparison to 2000. The
largest component was € 29 million related to
the acquisition of the Salomon group in 1997.
Royalty and Commission Income Virtually Unchanged
Royalty and commission income decreased by 2%
to €42 million. Higher income in Europe was offset
by a decrease in North America.
Financial Result Impacted by Currency Effects
The financial result in 2001 deteriorated by 8% to
negative €102 million. The impact of lower average
interest rates was more than offset by the higher
average borrowing level throughout the year and
extraordinary currency effects, in particular those
associated with the financial crisis in Turkey.
Extraordinary Income Neutral to Results
Extraordinary income of €2 million was the result
of exercised stock options which were granted in the
Special Reward and Incentive Plan (SRIP). As in pre-
vious years, these options are neutral to net income
as the resulting expenses of the same amount are
included in the SG&A expenses.
Royalty and Commission Income
(euros in millions)
44
45
35
43
42
1997
1998
1999
2000
2001
Marketing Working Budget
(in % of net sales)
12.8
12.9
13.5
13.7
12.0
1997
1998
1999
2000
2001