Adidas 2003 Annual Report Download - page 100

FINANCING NEEDS /// The Group’s level of debt has been
considerably reduced in 2003. However, we believe it is always
prudent to ensure sufficient refinancing possibilities on an
ongoing basis. During the past years, adidas-Salomon has
diversified into different sources of financing to reduce our
dependency on traditional bank financing. In addition to the
existing ABS, commercial paper programs and private place-
ments, the Group launched a € 400 million convertible bond
with a maturity up to 2018 (see note 15). With respect to credit
line relationships with banks, adidas-Salomon concentrates
on centrally managed global banking relationships. Due to the
Group’s operations around the globe, operating cash is also
spread over different locations. Wherever possible and eco-
nomically feasible, cash is concentrated centrally. The author-
ization of banking partners is regularly reviewed. Short- and
longer-term investments of surplus liquidity are arranged at
the headquarter level, considering counterparty and product
limits. In order to minimize the risk of a major rise in interest
rates, the vast majority of the Group’s floating rate borrowings
are protected with interest rate caps. Furthermore, during
2003 adidas-Salomon has made use of the historically low
longer-term interest rates to shift part of its borrowings from
floating to fixed-rate financing arrangements.
SOCIAL AND ENVIRONMENTAL FACTORS /// We have contin-
uing responsibilities to our workers and the environment.
Malpractice in these areas can have a significant impact on
the reputation and operational efficiency of our Group and its
suppliers. Our Social and Environmental Affairs (SEA) team
monitors the factories of adidas-Salomon suppliers to ensure
compliance with social, environmental, health and safety
standards, creating and implementing action plans to ensure
improvements where necessary. These internal audits are
verified by the Fair Labor Association (FLA). At adidas-
Salomon, we believe that the most sustainable way to enforce
compliance with our Standards of Engagement is by providing
constant training, communication and consultation for our
suppliers’ management and their workers. For this reason,
the SEA team has increased its focus on training our business
partners in developing systems for self-governance, in addi-
tion to monitoring them (see Sustainability).
LEGAL MATTERS /// As a global corporation, adidas-Salomon
operates under a wide variety of legal and regulatory frame-
works. Finding solutions for various legal matters in numer-
ous countries entails risk for the Group, especially in the
formulation of contracts, the resolution of legal issues and
the taking of legal action. To manage these tasks, internal and
external specialists are assigned to these matters. Based on
all outstanding litigation, we believe that the ultimate liabili-
ties resulting from any claims not already covered by accurals
and provisions will not materially affect the consolidated
financial position of the Group.
INTELLECTUAL PROPERTY PROTECTION AND PIRACY ///
adidas-Salomon is exposed to risk from product counterfeit-
ing and imitation, which can cause the loss of sales and
damage to our reputation. The Group is also exposed to the
risk of claims and litigation from third parties for infringe-
ment of their rights. We therefore take a number of measures
to manage these risks, including legal protection (usually
through registration) for our important trademarks, designs
and innovations. We also utilize brand protection programs in
our key markets to detect and take action against product
counterfeiting and imitation and carefully research new
products and product names to identify and avoid potentially
conflicting rights of third parties.
PRODUCT LIABILITY /// As a supplier of consumer products,
adidas-Salomon can face legal action if and when defective
products are sold. Apart from the financial consequences of
product liability cases, for which we have adequate insurance
cover, these cases may damage market perception of our
products, resulting in image impairment. Through intensive
quality control we seek to minimize these risks.
96 REPORTING GROUP MANAGEMENT REPORT /// RISK MANAGEMENT