Adidas 2002 Annual Report Download - page 71

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69
DOUBLE-DIGIT NET INCOME GROWTH FOR SECOND YEAR
IN A ROW /// Net income for the Group increased 10% from
€ 208 million in 2001 to € 229 million in 2002. This result was
at the top end of the Group’s targeted earnings range. Solid
sales and gross margin improvements as well as a better
financial result were more than able to compensate for
additional expenses related to the strategic initiatives men-
tioned above. Lower minorities and a more favorable tax rate
also contributed to the net income gain. Minorities declined by
35% from € 21 million in 2001 to € 14 million in 2002 as a
result of the Group’s acquisition of the remaining shares of
adidas Italy. The tax rate improved by 1.1 percentage points
from 39.0% to 37.9%, mainly due to a more balanced earnings
mix and reduced tax rates in several foreign jurisdictions.
€ 5.04 EARNINGS PER SHARE /// In 2002, basic earnings per
share were € 5.04 versus € 4.60 in 2001. This is a 10% year-
over-year increase and at the top end of the 5 to 10% target
range communicated by Management since the beginning
of 2002. The Group’s total number of shares outstanding
increased by 73,300 shares in 2002 to 45,422,500, as a result
of the first exercise period of Tranche II of the Management
Stock Option Plan (MSOP) of adidas-Salomon AG. Diluted
earnings per share were also € 5.04 in 2002. In 2001 diluted
earnings per share did not exist (see note 26).
NO MATERIAL TRANSACTIONS SINCE THE END OF THE
FISCAL YEAR /// From the end of 2002 to the time at which
the audit of the Group’s results was completed, no material
transactions at the Group or brand level had occurred.
ROYALTY AND COMMISSION INCOME € in millions
1998 45
1999 35
2000 43
2001 42
2002 46
INCOME BEFORE TAXES € in millions
1998 319
1999 398
2000 347
2001 376
2002 390
EARNINGS PER SHARE €
1998 4.52
1999 5.02
2000 4.01
2001 4.60
2002 5.04
RESEARCH AND DEVELOPMENT
adidas-Salomon COMMITMENT TO RESEARCH AND DEVEL-
OPMENT /// adidas-Salomon believes that innovation and
design leadership are critical to the sustained success of the
Group. As a result, we invest considerable resources into
continuously developing technological innovations and con-
temporizing our design philosophy to best unite the needs of
our consumers and our brand values. The design and devel-
opment process is driven by in-house teams of designers,
product developers and experts for biomechanics, materials
technology, product and process engineering and similar
disciplines. adidas-Salomon currently employs 886 people
in research and development activities. This represents a
reduction of 1% from the prior year’s level of 899.
adidas RESEARCH SPLIT BETWEEN TWO LOCATIONS /// For
brand adidas, the majority of our research and development
activities are located in Herzogenaurach, Germany, and
Portland/Oregon, USA. Product design and product develop-
ment for the Sport Heritage products and the Sport Perfor-
mance categories running, football, tennis and training takes
place at the development center in Herzogenaurach, while
design and development activities for the Sport Performance
category basketball are assigned to Portland. This allows the
brand to best utilize the skills and resources of the headquar-
ters team and those of our team in the largest market. Sport
Style products are designed and developed in Herzogenaurach
and Tokyo.