Adidas 2001 Annual Report Download - page 42

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37
MD&A
Solid Increase in Income Before Taxes
Income before taxes was € 376 million, up 9% versus
2000, reflecting operating gains despite the more
negative financial result. As a percentage of net sales,
income before taxes improved by 0.2 percentage points
to 6.2% , providing evidence of improving bottom-line
profitability.
Net Income Up 15% in Line with Expectations
Net income for the Group was € 208 million, up 15%
compared to the prior year’s level. Operating profit
gains were supported by a lower Group tax rate. Taxes
as a percentage of income before taxes and minority
interests declined 1.2 percentage points, largely due
to a more favorable regional profit mix and a reduc-
tion of the German and other European tax rates.
Furthermore, minority interests improved by 17% to
negative €21 million due to lower profits at the
Company’s joint ventures. Earnings per share were
reported at €4.60. This result is a 15% year-over-
year increase and is in line with the targets stated by
Management since the beginning of 2001.
Total Assets Increase
Total assets of the adidas-Salomon Group increased
by €165 million or 4% in 2001 to €4.2 billion.
Inventory Reductions in Line with Management Targets
Inventories at adidas-Salomon were reduced by 2%
to €1.3 billion, despite increasing order backlogs.
This improvement came as a result of the Group’s
working capital reduction initiatives, with improving
comparisons each quarter. Lower inventories at
brand adidas were responsible for the development,
with significant progress made in both North America
and Europe. Inventories at TaylorMade-adidas Golf
increased in line with sales expectations for the first
quarter 2002. Salomon inventories also increased
following the industry’s soft fourth quarter per-
formance.
Improving Inventory Structure
In addition to lower overall inventory levels, adidas-
Salomon continued to improve the inventory aging
structure. At year-end, adidas current inventories
comprised 72% of total inventory, an improvement
of 2.0 percentage points versus the prior year. This
development, in conjunction with the better clearance
margins derived from adidas own-retail activities,
resulted in an overall reduction in provisioning
requirements due to an improved overall structure
of Group inventories.
Income before Taxes
(euros in millions)
346
319
398
347
376
1997
1998
1999
2000
2001
Inventories Development versus the Prior Year
(in %)
29
22
1
(2)
Q1 2001
Q2 2001
Q3 2001
Q4 2001