Adidas 2003 Annual Report Download - page 139

Goodwill amortization expense was € 45 million for the years ending December 31, 2003 and
2002; thereof approximately € 30 million for the years ending December 31, 2003 and 2002 relate to
the acquisition of the Salomon group.
12 /// OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following:
OTHER INTANGIBLE ASSETS € in thousands
Dec. 31 Dec. 31
2003 2002
Software, patents, trademarks and concessions, gross 228,816 223,658
Less: accumulated amortization 125,133 108,281
103,683 115,377
Advance payments, net 114 118
Other intangible assets, net 103,797 115,495
Intangible asset amortization expense was € 28 million and € 30 million for the years ending
December 31, 2003 and 2002 respectively.
13 /// LONG-TERM FINANCIAL ASSETS
Long-term financial assets include a 10% participation in FC Bayern München AG of € 77 million
which was concluded in July 2002. This participation is recorded at cost including transaction costs,
as this equity security does not have a quoted market price in an active market and other methods
of reasonably estimating fair value as at December 31, 2003 and 2002 were inappropriate or un-
workable. Additionally, financial assets comprise shares in unconsolidated affiliated companies of
€3 million at December 31, 2003 and 2002.
Long-term financial assets further include investments which are mainly related to a deferred
compensation plan (see note 18). These are mainly invested in insurance products and are mea-
sured at fair value.
14 /// OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
OTHER NON-CURRENT ASSETS € in thousands
Dec. 31 Dec. 31
2003 2002
Prepaid expenses 86,554 45,113
Interest rate options 8,924 2,250
Currency options 819 1,217
Security deposits 6,463 6,030
Sundry 1,809 3,051
Other non-current assets 104,569 57,661
Prepaid expenses mainly include prepayments for long-term promotional contracts and service
contracts (see also notes 22 and 31).
15 /// BORROWINGS AND CREDIT LINES
Despite the decline of borrowings in 2003, it has been the policy of the Group to continue a high
level of financing agreements, with further improvement in the structure and maturity profile of
these arrangements. The Group has continued its diversification among different sources of financ-
ing and succeeded in increasing its funding through private placements to € 684 million (2002:
€560 million), with maturities of up to 12 years. A € 400 million convertible bond with final matu-
rity in 2018 and an interest rate of 2.5% was issued. On the other hand, the Group temporarily
suspended its commercial paper programs and prematurely repaid private placements with re-
maining short maturities in the total amount of € 31 million. The global on-balance-sheet asset-
backed security (ABS) program, under which € 109 million were outstanding at the end of 2003
(2002: € 147 million), was not extended further and now has a remaining life of four years.
Gross borrowings declined in 2003 by € 349 million (2002: € 192 million). As all borrowings
with short-term maturities which are backed by longer-term arrangements are reported as long-
term borrowings, the Group does not report short-term borrowings. The reported amount of
longer-term borrowings therefore includes bank borrowings, commercial paper, financing under
the ABS program, private placements as well as the convertible bond.
With settlement on October 8, 2003 adidas-Salomon issued a € 400 million convertible bond
through its wholly owned Dutch subsidiary, adidas-Salomon International Finance B.V., guaranteed
by adidas-Salomon AG. The bond was issued in tranches of € 50,000 each with a maturity up to
15 years. The bond is, at the option of the respective holder, subject to certain conditions, convert-
ible from and including November 18, 2003 up to and including September 20, 2018 into ordinary
no-par-value bearer shares of adidas-Salomon AG at the conversion price of € 102.00 which was
fixed upon issue. The coupon of the bond is 2.5% and is payable annually in arrears on October 8
of each year, commencing on October 8, 2004. The bond is convertible into approximately four
million no-par-value shares.
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