Adidas 2005 Annual Report Download - page 96

92 Group Management Report
Treasury
Centralized Treasury Function Optimizes Allocation of
Financial Resources
In accordance with our Group financing policy, more than 90%
of the worldwide credit lines are managed by our central trea-
sury function. Parts of the lines are passed on to subsidiaries
and backed up by parental guarantees. As a result of this
centralized liquidity management, the Group is well posi-
tioned to allocate resources effectively within the organiza-
tion. The Group’s outstanding financings are unsecured. We
maintain good relationships with various core banks, thereby
avoiding strong dependencies on a single institution. Bank-
ing partners of the Group’s treasury department as well as of
foreign Group subsidiaries are required to have a long-term
investment grade rating by Standard & Poor’s or an equiva-
lent rating by another leading rating agency (see Notes to the
Consolidated Balance Sheet/note 23). The Group’s treasury
committee, consisting of members of the Executive Board
and other senior executives, is required to approve all major
changes to our treasury policy.
Net Cash Position Positive for First Time Since IPO in 1995
At December 31, 2005, the Group had a net cash posi-
tion of € 551 million, reflecting an improvement of 183% or
€ 1.216 billion versus net borrowings of € 665 million at the
end of the prior year. The prior-year figure has been adjusted
due to revised IAS standards (see Notes to the Consolidated
Balance Sheet/note 15). This marks the first positive net cash
position for our Group since the IPO in 1995, helped by cash
inflow from operating activities as well as the proceeds from
the Salomon divestiture and the approximately 10% increase
of the adidas-Salomon AG share capital. The Group’s net
borrowings reduction represents the fifth consecutive year
of significant improvements and clearly exceeded Manage-
ment’s target that was announced at the beginning of 2005.
As a result of the Group’s strong net cash position, the avail-
able credit facilities for the Group were not utilized at the end
of 2005, while in 2004, on the basis of net borrowings, the
utilization of available credit facilities was 21%.
2001
2002
20031)
20041)
2005
Net Cash (Net Borrowings) € in millions
(1,679)
(1,498)
(1,018)
(665)
551
Q1 20042)
Q1 2005
Q2 20042)
Q2 2005
Q3 20042)
Q3 2005
Q4 20042)
Q4 2005
Net Cash (Net Borrowings) by Quarter1) € in millions
(1,116)
(700)
(1,039)
(613)
(984)
(657)
(665)
551
1) At end of period
2) Restated due to application of amendment to IAS 39
2001
2002
2003
2004
2005
Interest Rate Development1) in %
4.5
3.2
2.7
3.4
4.0
1) Weighted average interest rate of gross borrowings
Financing Structure of Gross Borrowings Continues
to Improve
In 2005, we continued to diversify the Group’s financing struc-
ture. Bank borrowings decreased 41% to € 102 million from
€ 172 million in the prior year and the total amount of our
private placements decreased 4% to € 567 million in 2005
(2004: € 592 million). The amount related to the convertible
bond increased 3% to € 366 million in 2005 from € 356 mil-
lion in the prior year, reflecting the accrued interest on the
debt component in accordance with IFRS requirements. As
a result, the total amount of gross borrowings decreased to
€ 1.035 billion at the end of 2005 from € 1.120 billion in the
prior year. This takes into consideration the adjustment of the
prior year figure due to revised IAS standards (see Notes to the
Consolidated Balance Sheet/note 15). In addition, € 1.525 bil-
lion were temporarily invested as bank deposits. The Group’s
short-term financial assets decreased by 76% or € 198 mil-
lion to € 61 million versus € 259 million in 2004 (see Notes to
the Consolidated Balance Sheet/note 6).
1) Restated due to application of amendment to IAS 39
lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllll
llllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllllll
llllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllll
lllllllllllllllllllllll
llllllllllllllllllllllllllllllllll
lllllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllllllllllllllllllllllllllllllll
llllllllllllllllllllllllllll