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Annual Report 2008

Table of contents

  • Page 1
    Annual Report 2008

  • Page 2
    ...football, running, training, basketball and Originals. Inspired by its roots in sports and women's fitness, Reebok is a global brand that is committed to developing innovative products which will allow Reebok to own Women's Fitness, challenge Men's Sport and revive Classics. The Reebok segment also...

  • Page 3
    ... ratio Financial leverage Return on equity Balance sheet and cash ï¬,ow data (â,¬ in millions) Total assets Inventories Receivables and other current assets Working capital Net borrowings Shareholders' equity Capital expenditure Net cash provided by operating activities Per share of common stock...

  • Page 4
    ...â,¬ 10.8 billion; Group currency-neutral sales grow 9 % Major 2008 product launches: -- adidas F50 TUNIT â„¢ football boot, new technologies in adiSTAR® and adiZeroâ„¢ running shoe families, men's TECHFIT Power WEB, miCoach training system - Reebok Premier Verona KFS running shoe, Premier SmoothFit...

  • Page 5
    ... strive to be the global leader in the sporting goods industry. That's our goal. We know our strengths. We know where to attack. We have a dynamic team. We share values such as performance, passion, integrity and diversity. And we have lots of energy. Our next moves are planned. Our tactics are set...

  • Page 6
    .... Emerging markets > 35% of sales Core to our growth strategy is increasing our exposure to high-growth emerging markets. Our industry is truly global. Sport and a sporting lifestyle are part of everyday lives. With an unrivalled product portfolio and leadership in product innovation and design, we...

  • Page 7
    ...winning US basketball team at the Beijing Olympic Games. He has a clear goal for 2009: To win 16 games throughout the playoffs and lead his teammates to the ultimate victory - the NBA Championship. "The game plan to reach this goal is to play hard every day and play as a team." adidas Group Annual...

  • Page 8
    ... driver - 2008 was his year: He became the youngest ever Formula One World Champion. His performance is extreme and his goal very clear: To stay No. 1, defending his World Championship title in 2009 and beyond. His game plan to get there is drafted already: "Train in a disciplined way, concentrate...

  • Page 9
    ...% of sales Controlled space is becoming one of our most dynamic business models. Encompassing own-retail stores, e-commerce and retail space management such as shop-in-shops - expanding these initiatives is a key component of providing the highest level of customer service to our retail partners and...

  • Page 10
    ... World Golf Ranking. His swing made him famous. His precision is legendary. His goal for 2009? To win a Major, one of the four most prestigious annual tournaments in professional golf. And he will get there by following his game plan: "Hit the right shot at the right time, focus on my skills and use...

  • Page 11
    .... Taking the right opportunities. Reducing complexity. Uniting our team. Major Win a Operating margin > 11% Improving our operating margin is a cornerstone to increasing shareholder value. It is a significant opportunity for our Group and at the heart of our strategic planning. While following...

  • Page 12
    ...balance sheet can we build our business for the future and achieve our potential. We continually strive to improve the efficiency of our business cycle. We scope our investments in line with the priorities of our strategic plan. We seek diversity in our capital structure to achieve superior returns...

  • Page 13
    ...title, believes that making dreams come true is a mixture of desire, spirit and hard work. Her two biggest goals for the foreseeable future are to win another Grand Slam tournament and regain the World No. 1 ranking. "I try to focus on improving my game and fitness every day. This is my game plan."

  • Page 14
    ... and persistence. Like every athlete, we set ourselves ambitious goals and give our all to achieve them. We've made this experience our own. Strong brands, innovative products, timeless designs and ground-breaking technologies are the key to our success. And so is our strategy: 14 Kapitel Head II

  • Page 15
    ... Corporate Mission Statement Group Brands and Divisions Group Strategy adidas Strategy Reebok Strategy TaylorMade-adidas Golf Strategy Internal Group Management System Major Locations and Promotion Partnerships Corporate Functions Global Operations Sustainability Employees Research and Development...

  • Page 16
    ...performance. Positive momentum in the adidas and TaylorMade-adidas Golf segments propelled the Group to a 9% currency-neutral sales increase and 20% earnings per share growth. 2009, however, will be a challenging year. Nevertheless, the adidas Group is sticking to its "game plan". With strong market...

  • Page 17
    .... As a result, we today have a very close connection with the Chinese consumer. This I am sure will have a long-term positive effect on our brand image in the Chinese market, helping us sustain market leadership in one of the world's most exciting economies. adidas Group Annual Report 2008 013

  • Page 18
    ...-time high at 48.6%, while operating margin increased to a record 14.0%. adidas is all about performance and helping consumers to achieve their own personal "impossible" goals. We bring this to life every day by launching key product innovations such as the new generation of adiZeroâ„¢ running shoes...

  • Page 19
    ... than we originally expected. But the Reebok brand is moving in the right direction. After several years of hard work and refining our business in Europe and Latin America we are able to move forward with the implementation of joint operating structures for adidas and Reebok in these markets. This...

  • Page 20
    ... that do not contribute directly to our business success, while on the other hand investing in our future success. Own retail and controlled space roll-out remain top of the list. We will invest in new long-term promotion partnerships. We will continue to invest in infrastructure projects to create...

  • Page 21
    ... all the right things to keep our company on its long-term growth path. We have the resources and the energy to tackle the challenges that come. And don't forget the 2010 FIFA World Cupâ„¢ is just around the corner - an event that plays to the very strengths of our Group and which will already start...

  • Page 22
    018 To Our Shareholders Executive Board

  • Page 23
    .... Each Board member is responsible for at least one major function within the Group. Herbert Hainer was born in Dingolfing, Germany, in 1954. Following his business studies, Herbert Hainer spent eight years with Procter & Gamble in various sales and marketing positions. He joined adidas Germany in...

  • Page 24
    ... Report Dear Shareholders, 2008 was another very important year for the adidas Group. Major sports events such as the European Football Championship and the Olympic Games again drove the adidas brand to excellent levels of performance. TaylorMade-adidas Golf was again able to increase its revenues...

  • Page 25
    ... shares totalling up to 5% of the company's stock capital. The main topic on the agenda of the March 4, 2008 financial statements meeting was the review of the consolidated financial statements and the adidas AG annual financial statements as well as the respective Management Reports for the year...

  • Page 26
    ... report for the first nine months of the year presented by the Executive Board and the outlook for the remainder of 2008. We also reviewed an internal corporate restructuring measure in the context of the Reebok integration and discussed in depth the budget and investment plan for the adidas Group...

  • Page 27
    ... Committee again had no reason to meet in 2008. In August 2008, the Strategic Equity Investment Committee established ad hoc granted its approval to the acquisition of Textronics, Inc. with a view to the further development of the Group's product offering. adidas Group Annual Report 2008 023

  • Page 28
    ... financial position of adidas AG as well as shareholder and capital market expectations, we approved the proposal regarding the appropriation of retained earnings. Expression of thanks At the conclusion of our five-year term in office, which expires at the end of the Annual General Meeting on May...

  • Page 29
    ... Friderichs (Chairman), Igor Landau, Sabine Bauer, Roland Nosko 1) Employee representative. 2) As of December 9, 2008; formerly Member of the Supervisory Board. 3) Until January 12, 2009, thereafter General Manager SB Asset Management GmbH, Kronberg, Germany. adidas Group Annual Report 2008 025

  • Page 30
    ... for responsible, value-oriented performance and supervisory functions of the company. It is an important condition in order to maintain and strengthen the confidence placed in adidas AG by our shareholders, financial markets, business partners, employees as well as the public. Key parameters...

  • Page 31
    ... on Directors' Dealings, on changes in the percentage of voting rights as well as all corporate information subject to disclosure requirements. Through our Investor Relations activities, we are also in close contact with our shareholders see Our Share, p. 038 . adidas Group Annual Report 2008...

  • Page 32
    ...nancial statements and the adidas AG annual financial statements for 2008 by the Annual General Meeting after the Supervisory Board had confirmed the independence of the auditor. Directors' Dealings in 2008 Frankfurt am Main, Date Name Position Type of transaction Number of shares Price in...

  • Page 33
    ... shareholders and by those representing the employees. The members of our Supervisory Board do not meet for such preparation meetings as standard practice but only if required. More information on corporate governance All adidas AG corporate governance documents are available on our website at Group...

  • Page 34
    ... from a management share option plan does not exist since the members of our Executive Board exercised all option rights resulting from the Management Share Option Plan (MSOP) in the financial year 2007. A new share option plan was neither resolved upon by the Annual General Meeting in 2008...

  • Page 35
    ... tax rates in Germany and the USA. Executive Board total compensation in 2007 â,¬ in thousands Performancerelated compensation component Performance Bonus Compensation component with long-term incentive effect LTIP Bonus 2006 /2008 1) Non-performance-related compensation components Fixed annual...

  • Page 36
    ...all active Executive Board members into an external pension trust fund. For future pension entitlements of our Executive Board members, adidas AG has established pension reserves. In the Consolidated Balance Sheet drawn up in accordance with IFRS, plan assets which have arisen from the payments into...

  • Page 37
    ... these committees. Due to these changes, the total compensation of the Supervisory Board rose to â,¬ 860,000 in 2008 (2007: â,¬ 294,000). The compensation of the Supervisory Board members consists of a fixed annual payment amounting to â,¬ 40,000 for each member. Three times this amount is paid to...

  • Page 38
    ... a new apparel partnership via shop-in-shops throughout all Dick's stores in the USA. 25.03. Reebok launches its global marketing campaign "Your Move", which aims to evolve Reebok's positioning as the brand that celebrates individuality. 30.03. adidas has three of the top four No. 1 seeded teams in...

  • Page 39
    ... of its top metalwood. 22.04. adidas launches the football campaign "Dream Big", in which the world's biggest football stars meet the world's smallest football teams. 25.04. Reebok launches its new website www.reebok.com. 17.05. Reebok sponsors the 25th "Avon Running" women's run in Berlin...

  • Page 40
    ... Annual Report 2008" by "manager magazin". 04.09. The new homepage www.adidas.com highlights different campaigns and products and offers an individualisable appearance for every country. 08.09. adidas and the Russian Football Union (RFU) announce a long-term partnership under which adidas supplies...

  • Page 41
    ... up to number two in the Official World Golf Ranking. 12.11. adidas Running is internationally recognised by the world's leading running magazine Runner's World, winning two awards at their year-end summit in New York. 19.11. Picture 19 Reebok launches its first ever pop-up store "Reebok Flash" in...

  • Page 42
    ...highly volatile financial markets during the year. In tandem with the negative trends on international stock markets, the adidas AG share declined 47% in 2008. Given the strong 2008 operational performance and Management's confidence in the strength of the Group's financial position and long-term...

  • Page 43
    ... European supplier of extrafinancial analysis that measures companies' performance in the fields of sustainable development and social responsibility. Further, the adidas Group was included for the fourth consecutive time in the list of The Global 100 Most Sustainable Corporations in the World...

  • Page 44
    ...2,231,485 21 22 shares 50 adidas AG DAX-30 MSCI World Textiles, Apparel & Luxury Goods 1) Index: December 31, 2003 = 100. 1) Subject to Annual General Meeting approval. 2) Based on number of shares outstanding at year-end. 3) As reported by Deutsche Börse AG. 040 To Our Shareholders Our Share

  • Page 45
    ..., Management and the Investor Relations team spent more than 30 days on roadshows and presented at numerous national and international conferences. At the Annual General Meeting in May 2008, we conducted a private shareholder survey reï¬,ecting high satisfaction with our share as an investment as...

  • Page 46
    ... is currently Germany's most successful swimmer: Several world records and European Championship titles were hers already before she competed in the Olympic Games in Beijing - and won two gold medals. She has a clear objective for 2009 - to qualify for the World Championships. And her game plan to...

  • Page 47
    ... Corporate Mission Statement Group Brands and Divisions Group Strategy adidas Strategy Reebok Strategy TaylorMade-adidas Golf Strategy Internal Group Management System Major Locations and Promotion Partnerships Corporate Functions Global Operations Sustainability Employees Research and Development...

  • Page 48
    ...with the highest value. We are a global organisation that is socially and environmentally responsible, creative and financially rewarding for our employees and shareholders. 044 Group Management Report - Our Group Structure and Strategy - Corporate Mission Statement - Group Brands and Divisions

  • Page 49
    ... four key categories globally: football, running, training and basketball. Reebok (80% of Reebok sales) Inspired by its roots in sport and women's fitness, Reebok is a global brand that is committed to developing innovative products which will allow Reebok to own Women's Fitness, challenge the Men...

  • Page 50
    ... the development and further integration of our supply chain across all brands, turning it into a long-term competitive advantage see Global Operations, p. 064 . for our Group Leading position in markets worldwide As a global organisation, we target leading market positions in all regions where...

  • Page 51
    ...work closely with our partners (mono-branded stores, shopin-shops, joint ventures, co-branded stores) to ensure the appropriate product offering and presentation at the pointof-sale. Brand control helps us drive sales and profitability increases and expand our market position. We intend to generate...

  • Page 52
    ...segments differentiates the brand from competitors and ensures solid market growth, while staying true to the brand's values. Currently, the brand focuses on five global priorities: Football, Running, Training, Basketball and Originals. Preparing the adidas business for the future Like every world...

  • Page 53
    ... of new partners, in particular sports specialist or fashion specialist customers, as the product offering is expanding continuously. - Retail space management (e.g. shop-in-shops) is becoming the most dynamic business model for adidas and is a key part of the brand's controlled space expansion. In...

  • Page 54
    ...' key strategic priorities. For over 50 years, adidas has led all major developments in football boot technology and balls. Building on its success around major sporting events such as the FIFA World Cupâ„¢ and the European Football Championship, the brand strives to increase its leadership position...

  • Page 55
    ... as a legitimate sports lifestyle brand. What started as a niche business has developed into a significant contributor to the brand's top line with potential to represent up to 30% in the medium to long term. To best tap the potential of the sports lifestyle market, adidas created a dedicated Sport...

  • Page 56
    ... categories. Reebok strategy and focus areas YOUR MOVE Territory Having FUN staying in shape Women - Fitness - Running - Walking Men - Training - Running - Sports Classics - Women - Men Own Revive Challenge 052 Group Management Report - Our Group Structure and Strategy - Reebok Strategy

  • Page 57
    ... of the brand's business. That means meeting the needs of consumers, promotional partners, retailers and employees. With a "perfect fit" distribution strategy, Reebok intends to offer the right products to the right accounts at the right margins. Moreover, Reebok is committed to building a work...

  • Page 58
    ... 20 select retailers around the world, custom collaborations of The Pumpâ„¢ will be newly developed in 2009 and exclusively launched in select stores in limited quantities see Reebok Products and Campaigns, p. 138 . 054 Group Management Report - Our Group Structure and Strategy - Reebok Strategy

  • Page 59
    ... of a new Women's Fitness retail format. Increasing average selling prices To reinforce its position as a premium sports and lifestyle brand, Reebok's goal is to significantly improve and increase its product offering at high and mid-price points to drive growth in average selling prices. This...

  • Page 60
    ...branded offerings, increasing the number of Tour professionals using TaylorMade balls and further leveraging the successful NOODLE franchise, which focuses on soft-feeling, longdistance golf balls at a value price. 056 Group Management Report - Our Group Structure and Strategy - TaylorMade-adidas...

  • Page 61
    ... objectives. Product launches are followed by point-of-sale support, in-store communication and customer ï¬,ow management support (e.g. assistance in reducing waiting times for consumers) to drive product sell-through. Likewise, TaylorMade-adidas Golf's leadership and presence on the world's major...

  • Page 62
    ... The adidas Group's central planning and controlling system is designed to continually increase the value of our Group and brands to maximise shareholder value. By improving our top- and bottom-line performance and optimising the use of invested capital, we aim to maximise free cash ï¬,ow generation...

  • Page 63
    ... activities. As a result, stock turn development is the key performance indicator as it measures the number of times average inventory is sold during a year, highlighting the efficiency of capital locked up in products in relation to our Group's business. To minimise capital tied up in accounts...

  • Page 64
    ...financial returns of planned capital investments. The cost of equity is computed utilising the risk-free rate, market risk premium and beta. Cost of debt is calculated using the risk-free rate, credit spread and average tax rate. Structured performance measurement system Our Group has developed an...

  • Page 65
    ... % of sales) Group operating margin adidas segment operating margin Reebok segment operating margin TaylorMade-adidas Golf segment operating margin Net income growth (attributable to shareholders) Operating working capital (in % of net sales) Capital expenditure (â,¬ in million) 2) Net debt (â,¬ in...

  • Page 66
    ... map. Major locations Europe 01 adidas Group Headquarters Herzogenaurach, Germany Promotion partnerships A IHF Men's World Championship, Croatia January 16 - February 1, 2009 adidas Official Partner of International Handball Federation 02 Reebok Europe Amsterdam, Netherlands B NHL All-Star Game...

  • Page 67
    ...Arizona, USA 15 F Flora London Marathon, London, UK A IHF Men's World Championship, Croatia K MLB All-Star Game, St. Louis /Missouri, USA C NFL Super Bowl, Tampa / Florida, USA J FIFA Confederations Cup, South Africa H UEFA Champions League Final, Rome, Italy adidas Group Annual Report 2008...

  • Page 68
    ... partners, 74% were located in Asia, 13% were located in Europe and 13% in the Americas. 29% of all suppliers were located in China. Our Global Operations function manages product development, commercialisation and distribution, and also supervises sourcing of the adidas, Reebok and adidas Golf...

  • Page 69
    ...deliver on short leadtimes and continuous replenishment needs during large, global events such as these shows that we are moving closer to realising our vision. Hardware production by region 1) Europe 2% Asia 98% 1) Figures only include adidas and Reebok. adidas Group Annual Report 2008 065

  • Page 70
    ... used that information to consolidate volumes and negotiate more effectively which helped to offset cost increases. In addition, our Sourcing teams improved our allocation process to better align with suppliers' capabilities and take into account total supply chain costs (e.g. time to market, trade...

  • Page 71
    ... social and environmental performance. Careful supplier selection To improve working conditions throughout our supply chain, our Group SEA team works closely with the Global Operations function on supplier selection. The SEA team assesses all potential new suppliers and orders can only be placed...

  • Page 72
    ... our supply chain. Activities focus on helping suppliers establish sound environmental management systems to best reduce their negative environmental impacts. We develop guidelines and training programmes for our suppliers, using the environmental performance of our own production sites as examples...

  • Page 73
    ... reduce our energy use as a business. At the adidas Group we apply policies, procedures and practices to ensure that all corporate entities are operating to the highest standards. We have environmental management systems in place at our major sites, and our core suppliers are required to establish...

  • Page 74
    ... activities in emerging markets. Hence, the Reebok segment comprised 8,836 employees at year-end (2007: 6,751). At TaylorMade-adidas Golf, the number of employees increased by 33% to 1,852 (2007: 1,393) mainly due to the acquisition of Ashworth, Inc. The number of employees working in our Group...

  • Page 75
    ... plan appropriate training and development activities as necessary. We offer targeted training under our Fit for Today programme (e.g. basic skills training or business coaching) for both individual and team performance improvement. - Talent Management (Fit for Tomorrow): With specifically designed...

  • Page 76
    ... of the Group's profit target. In 2008, for example, we again paid a one-time gratification to employees in Germany (Champions Bonus) honouring their performance in the past year. - Additional compensation components: For senior management and Executive Board members we offer Long-Term Incentive...

  • Page 77
    ..., the Company Sports department in Germany offered about 130 courses and more than 30 events which were attended by more than 2,800 participants. 2008 key employee statistics adidas TaylorMadeReebok adidas Golf Group functions Total Total employees (in %) Male Female Management positions (in...

  • Page 78
    ...cantly decreased the number of physical samples by using virtual sampling technologies instead. This results in lower costs and a reduction of process time. adidas Innovation Team drives brand's R&D initiatives R&D activities at brand adidas focus on the development of innovative footwear, apparel...

  • Page 79
    ... technologies into casual and dress shoes. In all Reebok divisions, R&D includes a development /engineering team as well as a design and commercialisation team, a human performance laboratory and a prototype sampling group with the product marketing teams in each strategic business unit. Major...

  • Page 80
    ... . Successful product launches across all major adidas categories The strong sales development of brand adidas in 2008 was largely based on launching evolutions of existing technologies in all major categories. Products launched in 2008 accounted for 78% of brand sales (2007: 77%). Only 5% of total...

  • Page 81
    ... future positioning, i.e. Women's Fitness, Men's Sport and Classics. At brand Reebok, 66% of ordered footwear was launched in 2008 (2007: 61%). Only 14% of ordered footwear products were related to products introduced three or more years ago (2007: 10%). In 2008, Reebok brought to market SmoothFit...

  • Page 82
    ...times World Champion, two times Olympic Champion in the 10,000 metres, numerous world records in the 5,000 metres, the 10,000 metres and the marathon. In 2008, he again smashed his own world record at the Berlin Marathon. His new goal? To once run a marathon in under 2:03:00 hours. And his game plan...

  • Page 83
    ... Financial Year Group Business Performance Economic and Sector Development Income Statement Balance Sheet and Cash Flow Statement Treasury Disclosures pursuant to § 315 Section 4 of the German Commercial Code and Explanatory Report Business Performance by Segment adidas Business Performance Reebok...

  • Page 84
    ... of Internal Affairs and Communications. Quarterly development of Consumer Price Index 1) by region Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 USA Euro Zone Japan 1) Source: Bloomberg. 4.1 3.1 0.7 4.0 3.6 1.2 5.0 4.0 2.0 4.9 3.6 2.1 0.1 1.6 0.4 080 Group Management Report - Our Financial Year...

  • Page 85
    ... increases In Latin America, the sporting goods market developed in line with the overall economy and grew at a single-digit rate compared to the prior year. Both apparel and footwear sales increased in 2008 compared to the prior year, reï¬,ecting higher consumer spending in the region. adidas Group...

  • Page 86
    ... Reebok had purchased the distribution rights, such as Russia and China. Revenue synergies also had a small positive impact on sales development in the adidas segment due to increased revenues related to the NBA licence business, which was transferred from Reebok to the adidas brand in 2006. Cost...

  • Page 87
    ... sales by region 1) adidas and TaylorMade-adidas Golf drive top-line performance The adidas segment was the most significant contributor to Group sales growth in 2008. Currency-neutral adidas segment revenues increased 14% during the period, driven by doubledigit increases in all major performance...

  • Page 88
    ..., further own-retail expansion and a more favourable product mix. Currency movements also supported this development. Cost synergies resulting from the combination of adidas and Reebok sourcing activities also continued to have a positive impact. As a result, gross profit for the adidas Group rose...

  • Page 89
    ... increased 6% to â,¬ 4.378 billion in 2008 from â,¬ 4.115 billion in the prior year. Marketing working budget decreases as a percentage of sales Marketing working budget consists of items such as expenses for promotion partnerships, advertising, retail presentation and public relations. The Group...

  • Page 90
    ... Including Reebok business segment from February 1, 2006 onwards. Including Greg Norman apparel business from February 1, 2006 to November 30, 2006. Operating overhead expenses increase Group operating overheads include overhead costs related to marketing, sales, logistics, research and development...

  • Page 91
    ... assets with unlimited useful lives was incurred in 2008 and 2007. Operating margin improves 0.7 percentage points The operating margin of the adidas Group increased 0.7 percentage points to 9.9% in 2008 (2007: 9.2%). This development was in line with Management's initial expectation of an operating...

  • Page 92
    ...apparel business from February 1, 2006 to November 30, 2006. Income before taxes by quarter â,¬ in millions Q1 2007 Q1 2008 Q2 2007 Q2 2008 Q3 2007 Q3 2008 Q4 2007 Q4 2008 30 54 153 169 441 431 191 250 088 Group Management Report - Our Financial Year Group Business Performance - Income Statement

  • Page 93
    ... 16% The Group's net income attributable to shareholders increased 16% to â,¬ 642 million in 2008 from â,¬ 551 million in 2007. This development was in line with Management's initial expectation of net income growth of at least 15%. The Group's higher operating profit, a lower tax rate and lower...

  • Page 94
    ... in some markets. The new Reebok companies in Latin America as well as the consolidation of the Ashworth business acquired in November also contributed to this increase. Assets Cash and cash equivalents Accounts receivable 2.6 17.0 3.5 17.5 Short-term borrowings Accounts payable 8.4 12.8 2.2 10...

  • Page 95
    ... in the fair value of forward contracts also positively impacted this see Note 21, p. 176 . development Expenses related to off-balance sheet items Our most important off-balance sheet assets are operating leases, which are related to retail stores, offices, warehouses and equipment. The Group has...

  • Page 96
    ... own-retail activities. TaylorMade-adidas Golf capital expenditures accounted for 4% of total expenditures (2007: 4%). The remaining 32% of total capital expenditures was recorded in the HQ /Consolidation segment (2007: 24%) see and was mainly related to IT infrastructure measures Global Operations...

  • Page 97
    ... policy The major goal of our financing policy is to minimise the Group's financial expenses while ensuring sufficient liquidity reserves at all times to meet the Group's payment commitments. The operating activities of our Group segments and the resulting cash inï¬,ows represent the Group's main...

  • Page 98
    ... slightly to 5.2% in 2008 (2007: 5.3%). High interest rates, mainly in the Euro Zone, during the first half of the year were offset by decreased interest rates worldwide in the second half of 2008. Long-term fixed-rate financing amounted to around 60% of the Group's total financing at the end of...

  • Page 99
    ... 2) Including Reebok business segment from February 1, 2006 onwards. Financing structure â,¬ in millions 2008 2007 1) Restated due to application of amendment to IAS 39. 2) Including Reebok business segment from February 1, 2006 onwards. Total cash and short-term financial assets Bank borrowings...

  • Page 100
    ... the stock capital, subject to Supervisory Board approval, by issuing new shares against contributions in cash and /or in kind once or several times by no more than a maximum of â,¬ 12,000,000 (Authorised Capital 2008). 096 Group Management Report - Our Financial Year Group Business Performance...

  • Page 101
    ... to be issued by adidas AG or a direct or indirect subsidiary, in accordance with the authorisations granted by the Annual General Meetings held on May 8, 2003 and May 11, 2006. - They may be used to meet the company's obligations arising from the Management Share Option Plan 1999 (MSOP). - They may...

  • Page 102
    ... purchasing costs), taking into account the option premium received /paid. For selling and cancelling shares purchased using derivatives, the general rules resolved by the Annual General Meeting are applicable. As at December 31, 2008 adidas AG did not hold any treasury shares. Change of control...

  • Page 103
    adidas Business Performance In 2008, sales growth in the adidas segment exceeded Management's initial expectations. Profitability developed in line with expectations. Currency-neutral sales in the adidas segment increased 14%. In euro terms, segment sales grew 10% to â,¬ 7.821 billion in 2008 from ...

  • Page 104
    ...-retail activities made up 18% of adidas brand sales in 2008, up from 17% in the prior year. At December 31, 2008, the total number of adidas stores was 1,332, representing an increase of 329 (2007: 1,003 stores). The majority of new stores were opened in emerging markets with under-developed retail...

  • Page 105
    ... the prior year as a result of the segment's strong sales growth. In 2008, the adidas segment had higher operating overhead costs as a percentage of sales, mainly due to higher sales expenses in emerging markets related to sales growth. In euro terms, net other operating expenses and income grew 10...

  • Page 106
    ... China was partly offset by a decline in Japan. Currency-neutral sales in Latin America increased 192%, due to the first-time consolidation of Reebok's new companies in the second quarter of 2008. 102 Group Management Report - Our Financial Year Business Performance by Segment - Reebok Business...

  • Page 107
    ... in 2007. The increase was largely driven by new store openings in emerging markets, especially Russia. Reebok own-retail activities made up 18% of Reebok segment sales in 2008, up from 15% in the prior year. The share of own-retail activities as a percentage of brand sales at Rockport was signi...

  • Page 108
    ... Q1 2007 Q1 2008 Q2 2007 Q2 2008 Q3 2007 Q3 2008 Q4 2007 Q4 2008 (9) 25 21 6 (13) (1) (11) 84 Concession Corners 67 73 Total 647 524 104 Group Management Report - Our Financial Year Business Performance by Segment - Reebok Business Performance - TaylorMade-adidas Golf Business Performance

  • Page 109
    TaylorMade-adidas Golf Business Performance In 2008, sales growth in the TaylorMade-adidas Golf segment exceeded Management's initial expectations. Profitability developed in line with expectations. TaylorMade-adidas Golf revenues increased 7% on a currency-neutral basis. In euro terms, segment ...

  • Page 110
    ... revenues grow at double-digit rates in almost all regions TaylorMade-adidas Golf currency-neutral sales grew in all regions in 2008. Sales in Europe increased 17% on a currencyneutral basis, driven by double-digit growth in all major countries, in particular in the UK. In North America, sales...

  • Page 111
    ...to achieve short-term goals or long-term strategies. Risks also include lost or poorly utilised opportunities. Opportunities are broadly defined as internal and external strategic and operational developments that have the potential to positively impact the Group if properly exploited. Controlling...

  • Page 112
    ... partners and retail customers to evaluate the impact of our growth and efficiency initiatives. Feedback is relayed in a timely manner to product, marketing and controlling functions. - Risk and opportunity aggregation and reporting: Central risk management aggregates Group-wide risks and reports...

  • Page 113
    ... risks Strategic & operational risks Portfolio integration risks Risks from loss of brand image Own-retail risks Risks from rising input costs Supplier default risks Product quality risks Customer risks Risk from loss of key promotion partnerships Product design and development risks Personnel...

  • Page 114
    ... current financial impact is minor and we have adapted our sourcing activities accordingly. With regard to the medium-term risks of regulatory actions, we still continue to expect a carefully and interest-balanced global trade policy by the governments. One such example in the USA are potential new...

  • Page 115
    ...at point-of-sale. Strong brand momentum at adidas and TaylorMade-adidas Golf, as evidenced in improving market research results, gives us confidence that brand image risk in both these segments remains low. In 2008, we launched several Reebok product technologies and a new global brand campaign to...

  • Page 116
    ...the Group decided to limit the Reebok product offering to an important mall-based key account in North America. Due to the challenging economic situation and difficulties at some major sporting goods retailers in developed markets, we continue to view the risk of a strong reduction of business with...

  • Page 117
    ...engage in developing a motivating working environment. Our goal is to make the adidas Group the "Employer of Choice" within our industry. This is supplemented by offering attractive reward and incentive schemes as well as long-term see Employees, p. 070. career opportunities and planning Our overall...

  • Page 118
    ... contractual relationships include items such as other financial assets, short-term bank deposits and derivative financial instruments. The adidas Group Treasury department arranges currency and interest rate hedges, and invests cash, with major banks of a high credit standing throughout the world...

  • Page 119
    ... conditions at the balance sheet date. Based on our available credit lines and business model, we continue to regard the occurrence probability of financing and liquidity risks, which could also lead to increased interest costs, as low. Nevertheless, failure to maintain liquidity could have a high...

  • Page 120
    ...Interest rate risks Changes in market interest rates affect future interest payments for variable-interest liabilities. As a result, significant interest rate increases can have an adverse effect on the Group's profitability, liquidity and financial position. The acquisition of Reebok in 2006 led...

  • Page 121
    ... a few companies are able to supply high-end functional apparel. Our resources and our positioning as a sports performance leader enable us to constantly develop innovative products and capitalise on them. Women's segment offers long-term potential In our opinion, the women's sports market is one...

  • Page 122
    ...products to increase going forward. Strategic and Operational Opportunities Strong market positions worldwide The adidas Group has the highest market share in numerous countries around the world. This strong competitive position offers us many advantages in terms of global brand visibility, market...

  • Page 123
    ...to operate new shop formats. Examples of this are co-branded stores with partners such as the NBA (adidas) and NHL (Reebok). In July 2008, we opened the world's first adidas Brand Center in Beijing, taking the retail experience to a new level see adidas Strategy, p. 048 . We also launched new store...

  • Page 124
    ... trading conditions for retailers. This is likely to lead to a highly promotional environment in these markets. Emerging markets such as China are expected to be more resilient as opportunity for distribution expansion continues in these markets. 120 Group Management Report - Our Financial Year...

  • Page 125
    ... training, running, football and basketball at the adidas and Reebok brands, as well as golf hardware at TaylorMadeadidas Golf. The number of employees working in research and development throughout the Group will remain stable in 2009. In 2009, we expect the operating margin for the adidas Group...

  • Page 126
    ... offset this development see adidas Strategy, p. 048 . Europe Asia Total Footwear Apparel Total 2) 1) At year-end, change year-over-year. 2) Includes hardware backlogs. (7) (9) (9) 8 (1) 4 (1) 4 1 (2) (4) (4) 122 Group Management Report - Our Financial Year Subsequent Events and Outlook

  • Page 127
    ... upgrade and improve the brand's product offering. The consolidation of sales from Reebok's new companies in Latin America for the full twelve-month period is projected to support revenue development. TaylorMade-adidas Golf sales to increase at a low-single-digit rate We expect the consolidation...

  • Page 128
    ... and timing of investments will be the rate at which we are able to successfully secure controlled space opportunities. All investments within the adidas Group in 2009 are expected to be fully financed through cash generated in our operating businesses. Excess cash to be used to reduce net debt In...

  • Page 129
    ... used to achieve this goal and reduce exposure to financing risks. A strong balance sheet and a lower level of debt also increase our ï¬,exibility to realise value-generating medium- and long-term opportunities in the best interests of our shareholders as they arise. adidas Group Annual Report...

  • Page 130
    ... League winner in 2006, 2nd place FIFA Player of the Year 2007, gold medal at the Beijing Olympic Games. Impressive but never enough. His goal: To lead Argentina to the World Cup in South Africa - and win it for his home country. His game plan: "Believe in myself and the strength of my team."

  • Page 131
    Products and Campaigns adidas 128 Products and Campaigns Reebok 138 Products and Campaigns TaylorMade-adidas Golf 146 Products and Campaigns 4 Products and Campaigns

  • Page 132
    ... and unique designs are the key factors for our success. Our researchers, developers and designers push the limits of innovation. Have the right idea at the right time. Launch desirable products when consumers demand it. Introduce at least one major innovation every year. This is the strategy of our...

  • Page 133
    ... through adidas TECHFIT Power WEB, the blood vessels compress, increasing blood ï¬,ow which improves the supply of oxygen. * adidas TECHFIT Power WEB compared to conventional sportswear. Proven in research undertaken by the University of Calgary Human Performance Laboratory and adidas research. 129

  • Page 134
    ... can rely on our products. adidas football boots will support the brand in further expanding its football market leadership position in 2009. Engineered lightweight TUNIT ™ microfibre synthetic upper for perfect fit. 1 1 st The F50 TUNIT ™ is the world's first fully customisable football...

  • Page 135
    Supernova™ Sequence 2 adidas The all-new Supernova ™ Sequence 2 provides all the support your feet need, while offering a smooth and comfortable ride. Enjoy a perfect transition thanks to FORMOTION ™ heel units adapting to your individual footstrike: an experience that's one step ahead. 360°...

  • Page 136
    ... come together to present a new proposition to the market. The collection offers footwear and apparel referencing classic and contemporary looks and colours made for both classic scooter riders and all fans of casual and clean design. Both brands, Vespa and adidas, reference six decades of rich...

  • Page 137
    ... and constructions that work together to help maintain an athlete's body temperature at a desired 37 degrees. In 2009, adidas will communicate a complete men's training offer which will be supported by a campaign highlighting the key benefits of the CLIMACOOL ® offering. The central theme...

  • Page 138
    NBA Tested. Brotherhood Ready. adidas adidas Basketball kicked off the 2008 / 2009 NBA season with the next chapter in Brotherhood: "NBA Tested. Brotherhood Ready". This campaign brought together NBA...Internet, magazines and prominent retail destinations worldwide. 134 Products and Campaigns adidas

  • Page 139
    Outdoor Campaign 2009 adidas To strengthen adidas' positioning as the athletic brand in the outdoor market, adidas is launching a new range of products aimed specifically at outdoor athletes. The world recordbreaking speed-climbing Huber brothers, Alexander and Thomas, are the epitome of speed and ...

  • Page 140
    ...unveiled its largest global brand campaign ever for adidas Originals under the banner of "Celebrate Originality". The campaign is set against the backdrop of a house party hosting an eclectic mix of people from the worlds of music, fashion and sport. The campaign launched in the USA in November 2008...

  • Page 141
    ... SLVR Label Campaign adidas The adidas SLVR Label's key message is "Simply perfect". The campaign highlights the new label's connection to adidas as well as the values of all adidas SLVR Label products. adidas SLVR Label is clean, simple, inclusive and sophisticated. It brings creative solutions...

  • Page 142
    EasyTone™ Reebok EasyTone ™ is Reebok's new technology for women's fitness that allows women to "take the gym with them". EasyTone ™ helps tone key leg muscles with balance pods that are built under the heel and forefoot of the shoes. With every step, the balance pods are designed to create ...

  • Page 143
    ... of Reebok's top athletes such as Peyton and Eli Manning and Yao Ming. With a seamless interior, the SmoothFitâ„¢ technology of the SelectRide â„¢ eliminates irritation and maximises performance. 1 second to change The SelectRide â„¢ can be changed from a running shoe into a training shoe with...

  • Page 144
    ... shoes with exclusive retail collaboration partners starting late 2009. 20 years Reebok celebrates another milestone of its sports heritage in 2009: the 20th anniversary of the iconic Pump â„¢. 20 retailers Reebok has partnered with 20 selected retailers around the world to develop custom...

  • Page 145
    ... 8.0.8 O-Stick has more aerodynamic arches which provide less drag than ever before and increase the stick % speed and power. It also includes Griptone, the new Reebok proprietary grip enhancing control for better reaction speed. more aerodynamic The unique architecture in the lower part of the...

  • Page 146
    ...experience for women was created - fusing the intriguing world of Cirque du Soleil with Reebok's expertise in fitness. In February 2009, Reebok and Cirque du Soleil launched JUKARI Fit to Fly™ - offering women an entirely new way to work out. Integral to this experience is the new equipment - the...

  • Page 147
    Cirque du Soleil Collection Reebok Alongside JUKARI Fit to Flyâ„¢ is a fully integrated women's footwear and apparel range, the "Reebok Cirque du Soleil Collection". It combines the performance demands of the workout experience with the creativity and artistry of Cirque du Soleil. The collection has...

  • Page 148
    On The Move Reebok In 2009, Reebok will launch a new collection of women's apparel and footwear called "On The Move", inspired by Reebok's years of leadership in women's fitness. Created for the needs of a woman's busy lifestyle, the products are versatile and can be mixed and matched. The ...

  • Page 149
    ... 2009 advertising campaign underscores the brand's commitment to style and authenticity. Rockport empowers consumers to do more, be more, live more, with stylish shoes engineered to feel good. The global campaign will be executed across all markets through print, online and outdoor advertising. 145

  • Page 150
    R9 ™ Driver TaylorMade-adidas Golf The new R9 ™ driver unites two TaylorMade technologies to promote phenomenal distance and accuracy. Flight Control Technology (FCT) allows players to adjust the clubface angle, loft and lie each by 2 °, while Movable Weight Technology ™ (MWT ®) permits ...

  • Page 151
    ...-adidas Golf To promote the new Burner ® family of irons, the multi-platform campaign "The Set is Dead" will launch in 2009. Irons have for too long been engineered as a set - without heed to the shortcomings of this approach. TaylorMade realised that because long-irons, middle-irons and short...

  • Page 152
    ... year: He led the NHL with 11 winners and 22 power-play goals, plus he eclipsed the NHL record of 63 goals by a left-winger. Deservingly, he was named Most Valuable NHL Player. His goal: To win everything, every possible title. "To reach it, my game plan is to not just play, but to control the game...

  • Page 153
    ... Statements Responsibility Statement Independent Auditor's Report Consolidated Balance Sheet Consolidated Income Statement Consolidated Statement of Cash Flows Consolidated Statement of Recognised Income and Expense Notes Statement of Movements of Intangible and Tangible Assets and Financial Assets...

  • Page 154
    ...the expected development of the Group. Herzogenaurach, February 16, 2009 Herbert Hainer CEO and Chairman Glenn Bennett Global Operations Robin J. Stalker Finance Erich Stamminger President and CEO of the adidas Brand 150 Consolidated Financial Statements Responsibility Statement - Independent...

  • Page 155
    ...the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group Management Report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements...

  • Page 156
    ...assets Assets classified as held for sale Total current assets Property, plant and equipment Goodwill Trademarks Other intangible assets Long-term financial assets Deferred tax assets Other non-current assets Total non-current assets Total assets Short-term borrowings Accounts payable Income taxes...

  • Page 157
    ... Year ending Dec. 31, 2007 Change Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating profit (% of net sales) Financial income Financial expenses Income before taxes (% of net sales) Income...

  • Page 158
    ..., plant and equipment Acquisition of further investments in subsidiaries Acquisition of subsidiaries and other business units net of cash acquired Purchase of short-term financial assets Purchase of investments and other long-term assets Interest received Net cash used in investing activities 904...

  • Page 159
    ... long-term borrowings Dividend to shareholders of adidas AG Dividend to minority shareholders Exercised share options Repurchase of adidas AG shares Cash repayments of short-term borrowings Net cash used in financing activities Effect of exchange rates on cash Decrease in cash and cash equivalents...

  • Page 160
    ... /(loss) on cash ï¬,ow hedges, net of tax Actuarial gain of defined benefit plans, net of tax Currency translation Net income recognised directly in equity Net income after taxes Total income and expense recognised in the financial statements Attributable to shareholders of adidas AG Attributable...

  • Page 161
    ...design, develop, produce and market - increasingly through own-retail activities - a broad range of athletic and sports lifestyle products. The Group's Headquarters are located at Adi-Dassler-Str. 1, 91074 Herzogenaurach, Germany. The adidas Group has divided its operating activities by major brands...

  • Page 162
    ...in the income statement. No fair value adjustments are recognised at the first-time consolidation of acquired minority interests in companies accounted for using the "purchase method". A debit difference between the cost for such an additional investment and the carrying amount of the net assets at...

  • Page 163
    ... volatility of the underlying foreign currency base. The fair values of interest rate options on the reporting date are assessed by generally accepted models, such as the "Markov functional model". Cash and cash equivalents Cash and cash equivalents represent cash and short-term bank deposits with...

  • Page 164
    ... average debt /equity structure and financing costs including the Group's major competitors. The discount rate used is an after-tax rate and reï¬,ects the specific equity and country risk. The applied discount rate is 8.3% (2007: 7.5%). If expenditures for internally generated intangible assets...

  • Page 165
    ... not exceed the long-term average growth rate of the business in which each cash-generating unit operates. Discount rates are based on a weighted average cost of capital calculation considering a fiveyear average debt /equity structure and financing costs including the Group's major competitors of...

  • Page 166
    ... amount that employees have earned in return for their service during the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on high-quality corporate bonds...

  • Page 167
    ... assets, net Total 14 4 10 3 31 33 - 40 7 80 Liabilities classified as held-for-sale â,¬ in millions Dec. 31, 2008 Dec. 31, 2007 Accounts payable and other current liabilities Accrued liabilities and provisions Deferred tax liabilities Total 2 1 3 6 2 2 - 4 adidas Group Annual Report...

  • Page 168
    ... Athletic is a design, development, marketing and manufacturing company for team uniforms worn by professional and amateur teams throughout North America. The acquisition had the following effect on the Group's assets and liabilities: Effective April 1, 2008, adidas International B.V. acquired 99...

  • Page 169
    ...date â,¬ in millions Preacquisition carrying amounts Fair value adjustments Recognised values on acquisition Cash and cash equivalents Inventories Other current assets Property, plant and equipment, net Trademarks and other intangible assets, net Deferred tax assets Accounts payable Other current...

  • Page 170
    ... carrying amounts Fair value adjustments Recognised values on acquisition Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment, net Trademarks and other intangible assets, net Deferred tax assets Borrowings Accounts payable Income taxes...

  • Page 171
    ...". Changes in the fair value are recognised in the income statement as they occur. The majority of short-term financial assets are marketable securities relating to money market funds and structured deposits. 7 Accounts receivable Accounts receivable consist mainly of the currencies US dollar, euro...

  • Page 172
    ...expenses relate mainly to promotion agreements and service contracts as well as rents. Information in relation to forward contracts as well as currency options and interest rate derivatives is also included in these Notes see Note 23 . Inventories â,¬ in millions Dec. 31, 2008 Gross value Allowance...

  • Page 173
    ... and 2007. Future changes in expected cash ï¬,ows and discount rates may lead to impairments of the accounted trademarks in the future. For details see Statement of Movements of Tangible and Intangible Assets and Financial Assets (Attachment I to these Notes). adidas Group Annual Report 2008 169

  • Page 174
    ... an active market, therefore existing contractual settlements were used in order to reasonably estimate the fair value as at December 31, 2008. Dividends are distributed by FC Bayern München AG instead of regular interest payments. Additionally, long-term financial assets include investments which...

  • Page 175
    ... practice of shifting short-term private placements to long-term borrowings due to syndicated loan refinancing ceased in 2008. The prior year end amount has been reclassified in order to ensure comparability. The borrowings related to our outstanding convertible bond changed in value, reï¬,ecting...

  • Page 176
    ... translation differences Changes in companies consolidated Jan. 1, 2008 Usage Reversals Additions Transfers Dec. 31, 2008 Thereof non-current Marketing Employee benefits Returns, allowances, warranty Taxes, other than income taxes Other provisions Total provisions Goods and services not yet...

  • Page 177
    .... The liabilities arising from defined benefit plans are partly covered by plan assets. Actuarial assumptions in % Dec. 31, 2008 Dec. 31, 2007 Discount rate Salary increases Pension increases Expected return on plan assets 5.9 4.3 2.0 5.0 5.6 3.5 1.8 5.7 adidas Group Annual Report 2008 173

  • Page 178
    ... Year ending Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Current service cost Interest cost Expected return on plan assets Pension expenses 12 9 (4) 17 12 7 (4) 15 Present value of unfunded obligation Present value of funded obligation Present value of total obligations Fair value of plan assets...

  • Page 179
    ... (Germany), as the company is a limited partnership, and adidas Hellas A.E. (Greece), as this minority is held with a put option. The fair value of these minorities is shown within other liabilities. The result for these minorities is reported within financial expenses. adidas Group Annual Report...

  • Page 180
    ... Management Share Option Plan (MSOP). On December 15, 2008, 4,671,225 treasury shares were cancelled. These shares had been repurchased based on the authorisation to repurchase adidas AG shares granted to the Executive Board by the Annual General Meeting held on May 8, 2008. Hence, the stock capital...

  • Page 181
    ...of Association applicable as at the balance sheet date. Contingent Capital 1999/ I The Contingent Capital 1999/ I serves the purpose of fulfilling stock options in connection with the Management Share Option Plan (MSOP) to members of the Executive Board of adidas AG as well as to managing directors...

  • Page 182
    ... the stock capital at the date of the Annual General Meeting held on May 8, 2008. The overall purchase price amounted to â,¬ 179,437,942.89 (excluding incidental purchasing costs) whereas the average purchase price amounted to â,¬ 38.41. Between January 30 and October 22, 2008, adidas AG repurchased...

  • Page 183
    ... Annual General Meeting. The Executive Board of adidas AG will propose to shareholders a dividend payment of â,¬ 0.50 per dividend-entitled share for the year 2008 to be made from retained earnings of â,¬ 237 million reported as at December 31, 2008. The subsequent remaining amount will be carried...

  • Page 184
    ...Note Share capital Capital reserve Hedging reserve Other reserves 1) Retained earnings Minority interests Total equity Balance at December 31, 2006 Net income recognised directly in equity Net income Total recognised income and expense for the period Dividend payment Exercised share options...

  • Page 185
    ... into long-term contracts. Financial commitments under these contracts mature as follows: Financial commitments for service arrangements â,¬ in millions Dec. 31, 2008 Dec. 31, 2007 Within 1 year Between 1 and 5 years After 5 years Total 49 48 - 97 48 62 - 110 adidas Group Annual Report 2008...

  • Page 186
    ... cost Fair value Dec. 31, 2008 Assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Available-for-sale financial assets...

  • Page 187
    ... cost Fair value Dec. 31, 2007 Assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Available-for-sale financial assets...

  • Page 188
    ... future cash ï¬,ows using current interest rates for debt of similar terms and remaining maturities, and adjusted by an adidas Group specific credit risk premium. Fair values of long-term financial assets classified as available-for-sale are based on quoted market prices in an active market or...

  • Page 189
    ...investment in the foreign entity is divested. In order to determine the fair values of its derivatives that are not publicly traded, the adidas Group uses generally accepted quantitative financial models based on market conditions prevailing at the balance sheet date. Notional amounts of US dollar...

  • Page 190
    ...The goal of these hedges is to lower exposure to increasing short-term euro interest rates. The negative fair value of â,¬ 6 million (2007: negative â,¬ 1 million) was credited in hedging reserves. Notes to the Consolidated Income Statement 24 Other operating income Other operating income consists...

  • Page 191
    ... of promotion and communication spending such as promotion contracts, advertising, retail support, events and other communication activities. However, it does not include marketing overhead expenses. In 2008, marketing working budget accounted for approximately 33% (2007: 33%) of the total operating...

  • Page 192
    ... financial instruments at fair value through profit or loss Interest income from non-financial assets Net foreign exchange gains Fair value gains from available-for-sale investments Other Financial income 30 7 - - - 0 37 23 4 - 7 - 2 36 Financial expenses â,¬ in millions Year ending Dec. 31...

  • Page 193
    ...) 26 - - 11 25 (7) (135) 1) Relates to the acquisition of Ashworth, Inc. and Textronics, Inc. for the year ending December 31, 2008. 2) Relates to the disposal group Gekko Brands, LLC which is classified as held-for-sale for the year ending December 31, 2008. adidas Group Annual Report 2008 189

  • Page 194
    ...212 million for the year ending December 31, 2008. These amounts mainly relate to tax losses and unused foreign tax credits of the USA tax group. Remaining unrecognised deferred tax assets relate to companies operating in certain emerging markets, since the realisation of the related benefit is not...

  • Page 195
    ... less the tax effect. Notes - Additional Information 30 Segmental information The Group operates predominately in one industry segment - the design, wholesale and marketing of athletic and sports lifestyle products. The Group is currently managed by brands. Certain Group functions are centralised...

  • Page 196
    ...3 Secondary segmental information by region â,¬ in millions Europe 2008 2007 2008 North America 2007 2008 Asia 2007 2008 Latin America 2007 2008 HQ /Consolidation 2007 2008 adidas Group 2007 Net sales to third parties Assets Capital expenditure Capital expenditure from acquisitions of subsidiaries...

  • Page 197
    ... (USA), as part of an asset deal see Note 4 . 33 Equity compensation benefits Management Share Option Plan (MSOP) of adidas AG Under the Management Share Option Plan (MSOP) adopted by the shareholders of adidas AG on May 20, 1999, and amended by resolution of the Annual General Meeting on...

  • Page 198
    ... shareholder return approach" - has increased by an annual average rate of at least 8%. (2) Relative Performance: During the same period, the stock market price for the adidas AG share must have developed by an annual average of 1% more favourably than the stock market prices of a basket of global...

  • Page 199
    ... 1 no. 6a HGB (German commercial law) is provided in the Compensation Report see Compensation Report, p. 030. Own retail Sales Logistics Marketing Central functions and administration Production Research and development Information technology Total 16,071 4,133 5,395 3,308 3,160 2,118 1,058 886 36...

  • Page 200
    ... Currency effect Additions Impairment Write-ups Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2008 Net carrying amount December 31, 2006 December 31, 2007 December 31, 2008...

  • Page 201
    ...equipment and machinery Other equipment, furniture and fittings Construction in progress Total tangible assets Shares in affiliated companies Participations Other financial assets Total financial assets...2 - - - - - (10) 123 23 - - 4 27 27 106 103 96 adidas Group Annual Report 2008 197

  • Page 202
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 203
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 204
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 205
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 206
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 207
    ...India 4) Sub-group Mexico, adidas 5) Sub-group Mexico, Reebok 6) Companies with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok-CCM Hockey, Inc. 10) Sub-group Sports Holdings Corporation 11) Sub-group Reebok International Limited 12) Pro...

  • Page 208
    ... Group segmental information: ten-year overview â,¬ in millions 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Brands adidas Net sales Gross profit Gross margin Operating profit 1) Operating margin 1) Operating assets Reebok 2) Net sales Gross profit Gross margin Operating profit Operating...

  • Page 209
    adidas Group segmental information: ten-year overview â,¬ in millions 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Regions 4) 5) Europe Net sales North America Net sales Asia Net sales Latin America Net sales 4,665 4,369 4,162 3,166 3,068 3,365 3,200 3,066 2,860 2,723 2,520 2,929 ...

  • Page 210
    ... 2) Operating margin 2) 3) Interest coverage 2) Effective tax rate 2) Net income attributable to shareholders as a percentage of net sales 5) Balance Sheet Data (â,¬ in millions) Total assets 4) Inventories Receivables and other current assets Working capital 4) Net borrowings Shareholders' equity...

  • Page 211
    ...4) Working capital turnover 4) Return on equity 4) 5) Return on capital employed 4) 5) Data Per Share 6) Share price at year-end (in â,¬) Basic earnings 5) (in â,¬) Diluted earnings 5) (in â,¬) Price /earnings ratio at year-end Market capitalisation at year-end (â,¬ in millions) Operating cash ï¬,ow...

  • Page 212
    ... with retail partners and co-branded stores. Controlled space offers a high level of brand control and ensures optimal product offering and presentation according to brand requirements. Convertible bond Corporate bond that can be exchanged for a specific number of shares of a company's common stock...

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    ...Current asset intensity of investments = current assets / total assets. Days of sales outstanding (DSO) customers. Average time of receipt of outstanding payments from Demand-driven supply chain Management of up- and downstream relationships between suppliers and customers to deliver the best value...

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    ... and transparency in the accounting principles that are used by businesses and other organisations for financial reporting around the world. Investments see Capital expenditure Gross Domestic Product (GDP) Market value of all finished goods and services produced within a country in a given period...

  • Page 215
    ... to changes in its rotation rate. Used as a key measurement in the golf club business. Mono-branded stores adidas, Reebok or Rockport branded stores not operated or owned by the adidas Group but by franchise partners. This concept is used especially in the emerging markets, such as China, bene...

  • Page 216
    ... right to purchase (call option) or to sell (put option) a particular asset (e.g. shares or foreign exchange) at a predetermined price (strike price) on or before a specific date. Order backlogs see Backlogs Own-retail activities Sales directly generated through a store operated by a brand segment...

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    .... The cost of debt is calculated through the risk-free rate, credit spread and average tax rate see also Beta Factor and Market Risk Premium . Working capital A company's short-term disposable capital used to finance the day-to-day operations. Working capital = total current assets - total current...

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    ...075 M Major Locations and Promotion Partnerships 062 Management Share Option Plan (MSOP) 193 Market Capitalisation 038 ff. Marketing Working Budget 085 f., 187 Mission Statement 044 N Net Income Attributable to Shareholders 089, 206 Non-Balance Sheet Items 091 Notes 157 ff. O Operating Expenses 085...

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    Financial Calendar 2009 March 4, 2009 2008 Full Year Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast May 5, 2009 First Quarter 2009 Results Press release, conference call and webcast May 7, 2009 Annual General Meeting in Fürth/Bavaria, ...

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    ... adidas Group is a member of DAI (German Share Institute), DIRK (German Investor Relations Association) and NIRI (National Investor Relations Institute, USA). This report is also available in German. For further adidas Group publications, please see our corporate website. Concept and Design...