Adidas 2003 Annual Report Download - page 82

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OTHER NON-CURRENT LIABILITIES INCREASE /// Other non-
current liabilities nearly doubled to € 35 million in 2003 from
€ 19 million in 2002, primarily due to an increase in the
negative fair value of financial instruments used for hedging
activities within the Group and an obligation under a capital
lease contract.
FIXED ASSETS DECREASE /// Fixed assets (including financial
assets) decreased by 7% or € 79 million to € 1.128 billion
in 2003 from € 1.207 billion in 2002, with approximately
€40million due to currency effects. Disposals further
reduced fixed assets by € 20 million. One major transaction
was the sale of an office building at the Group’s headquarters
in Herzogen
aurach. The change in fixed assets due to addi-
tions of € 134 million was counterbalanced by depreciation
and
amortization including goodwill of € 155 million. Major
additions relate to the expansion of own-retail activities and
IT infrastructure.
OTHER NON-CURRENT ASSETS INFLUENCED BY PROMO-
TION CONTRACT EXTENSIONS /// Other non-current assets
increased by 81% to € 105 million in 2003 from € 58 million in
2002. The increase is mainly due to higher prepayments for
new or extended long-term promotion contracts in football.
EQUITY RATIO IMPROVES FURTHER, FINANCIAL LEVERAGE
AT LOWEST LEVEL SINCE SALOMON ACQUISITION /// The
Group’s equity base was further strengthened in 2003 despite
negative currency effects. Shareholders’ equity rose 25% to
€ 1.356 billion in 2003 from € 1.081 billion in 2002. The
majority of the net income was retained within the Group and
used to strengthen the equity base. In addition, the equity
component of the convertible bond strongly influenced the
rise in shareholders’ equity (see note 15). Negative effects,
however, came from the translation of foreign subsidiaries’
equity into euro at year-end due to the decline in the US
dollar and other foreign currencies versus the euro. As a
matter of corporate policy, adidas-Salomon hedges for the
translation of the local balance sheets only under certain
circumstances. In such cases, if certain criteria are met, we
may use changes in functional currencies of foreign sub-
sidiaries, changes in the currency denomination of their
monetary assets, or hedging with forward contracts or options
for this purpose. In addition, the hedging reserve resulting
from the fair valuation of financial instruments used for
product sourcing negatively impacted the year-end equity
balance (see note 23). The equity ratio rose by 7.0 percentage
points to 32.4% in 2003 from 25.4% in 2002. Financial leverage
improved 69 percentage points to 70% versus 139% in the
prior year. This marks the first time since the acquisition of
the Salomon group in 1997/98 that our equity exceeds bor-
rowings and reflects the healthy financial condition of adidas-
Salomon.
78 REPORTING GROUP MANAGEMENT REPORT /// FINANCE AND INVESTMENT
adidas SPORT PERFORMANCE ///
ROTEIROTM OFFICIAL MATCH BALL OF
THE UEFA EURO 2004™ EUROPEAN
FOOTBALL CHAMPIONSHIPS