Adidas 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Adidas annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 234

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221
  • 222
  • 223
  • 224
  • 225
  • 226
  • 227
  • 228
  • 229
  • 230
  • 231
  • 232
  • 233
  • 234

Annual Report 09
adidas GROUP
EVERY PRODUCT
TELLS A STORY

Table of contents

  • Page 1
    Annual Report 09 adidas GROUP EVERY PRODUCT TELLS A STORY

  • Page 2

  • Page 3
    ...Gross margin Operating expenses as a percentage of net sales Operating margin Effective tax rate Net income attributable to shareholders as a percentage of net sales Operating working capital as a percentage of net sales 1) Equity ratio Financial leverage Return on equity Balance Sheet and Cash Flow...

  • Page 4
    ... sales decline 9% Retail segment sales increase 7% Total adidas brand sales decline 5% Total Reebok brand sales decline 8% Sales of Other Businesses decline 4% TaylorMade-adidas Golf revenues decline 2% Gross margin: 45.4% Operating margin: 4.9% Operating working capital as a percentage of sales...

  • Page 5
    .... Of stories about the greatest talents performing in our products. Moments that our brands have shaped and our products have helped achieve. These stories fuel our passion, our spirit for innovation, our ambition to be better, in our products, in our business, in everything we do. Ensuring our...

  • Page 6
    ...F50 player in the world. He knows he can rely fully on this boot. It is the first football boot with a single-layer upper, the SprintSkin. The incorporated lace cover provides a perfect contact surface; the synthetic material is supple and water-repellent. The TUNiT™ technology enables players to...

  • Page 7
    ...the decisive goal of the match: 2-0 for FC Barcelona against titleholders Manchester United. Overjoyed, he kisses his new F50i. The picture goes around the world. Messi is later in the year awarded European Player of the Year and FIFA World Player of the Year. EVERY PRODUCT TELLS A STORY adidas 3

  • Page 8
    ... conditions. Santonio Holmes' touchdown proved the effectiveness of the Griptoniteâ„¢ MAX treatment. In addition, a single-layer mesh with Ultra-lite technology has been incorporated to increase air ï¬,ow and moisture wicking, while the Keystone thumb with independent construction adds support and...

  • Page 9
    ... manages to pull down the pass just inside the corner of the end zone. Touchdown. Holmes is the man of the match, the MVP. Afterwards, he autographs his winning gloves which are then auctioned, benefiting the Sickle Cell Disease Association of America, Inc. EVERY PRODUCT TELLS A STORY Reebok...

  • Page 10
    ... victory at the 2009 PGA Championship, where he played the TaylorMade r7® TP, the first iron to incorporate TaylorMade's Inverted Cone Technology (ICT). Originally developed for TaylorMade drivers, ICT increases the area of the clubface that delivers high ball speed, promoting greater forgiveness...

  • Page 11
    ... USA - AUGUST 16, 2009 Yong-Eun Yang hits a towering shot. 197 yards. A burst of emotion. Yang acts out his feelings. He now knows he can win. Indeed, it's this drive which clinches victory for Yang at the PGA Championship, making him the first golfer to overtake Tiger Woods in a major championship...

  • Page 12
    ...HJ Blanka Vlasic is a dedicated adiZeroâ„¢ HJ wearer. This lightweight shoe, personalised in her individual colours, ensures higher energy transfer through the use of an aerodynamic lace cover. The lowcut design and the upper support on the medial side provide greater mobility and perfect protection...

  • Page 13
    ... captivates the stadium. Both are inspired to win. The tension is palpable. Friedrich gambles. But Vlasic takes gold - the only high jumper to clear 2.04m at the IAAF World Championships. An emotional moment for Blanka Vlasic and the huge crowd in the stadium. EVERY PRODUCT TELLS A STORY adidas 9

  • Page 14
    ... GROUP MANAGEMENT REPORT - OUR GROUP Corporate Mission Statement ...48 Our Brands ...49 Major Locations and Promotion Partnerships ...50 Group Strategy ...52 Global Sales Strategy ...54 Wholesale Strategy ...54 Retail Strategy ...56 Global Brands Strategy ...58 adidas Strategy ...60 Reebok Strategy...

  • Page 15
    03 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Internal Group Management System ...108 GROUP BUSINESS PERFORMANCE ...112 Economic and Sector Development ...112 Income Statement ...115 Balance Sheet and Cash Flow Statement ...122 Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 16
    Bislett Pole Vault Spikes The Reebok Bislett Pole Vault spikes with incorporated midfoot strap provide the ultimate support - and this came at just the right time for injured Steven Hooker at the IAAF World Championships in 2009. Additional features include a sharkskin outsole, which ensures ...

  • Page 17
    ... Operational and Sporting Highlights 2009 ...14 Interview with the CEO ...18 Executive Board ...24 Supervisory Board ...26 Supervisory Board Report ...28 Declaration on Corporate Governance including the Corporate Governance Report ...33 Compensation Report ...38 Our Share ...42 BERLIN, GERMANY...

  • Page 18
    ... 05. JUKARI Fit to Flyâ„¢, a new workout for women MARCH 01.03. Reebok launches EasyToneâ„¢, an innovative technology that helps tone key leg and butt muscles Picture 06. 10.03. adidas Golf introduces FitRX and FitRX SPORT, two new shoes featuring custom footbed technology to enhance support and...

  • Page 19
    ... Ronson gather in Los Angeles to celebrate Reebok's EasyToneâ„¢. 25.06. Reebok-CCM Hockey enters into multi-year partnership agreements with the top three 2009 NHL Draft picks John Tavares, Victor Hedman and Matt Duchene. 27.06. adidas sponsored swimmer Britta Steffen sets a new world record in the...

  • Page 20
    ...tour ball designed to deliver a superior balance of performance in five key shot categories Picture 04. 02.09. adidas Group is awarded No. 2 in the DAX-30 category and No. 3 overall in the German Manager Magazin "Best Annual Reports 2009" ranking. 04.09. For the tenth consecutive time, adidas AG is...

  • Page 21
    ... new PowerSpine technology to provide better fit and greater control in movement and ball handling Picture 04. NOVEMBER 03.11. Top Five ranked tennis star Andy Murray, the winner of 13 ATP titles to date, signs a long-term contract with adidas. 05.11. Reebok athlete and New York Yankees starting...

  • Page 22
    ... operations and significantly improved its financial position. During the year, the Group also completed a major reorganisation, setting a strong foundation for sustainable long-term growth. In the following interview, Herbert Hainer, adidas Group CEO, reï¬,ects on 2009 and discusses the strategic...

  • Page 23
    ... increase operational efficiency have certainly helped us mitigate some of these effects. But at the same time, we had to get the balance right between cutting costs and maintaining investments in areas such as controlled space, promotion partnerships and product innovation to support future growth...

  • Page 24
    ...used the crisis to make the Group stronger for the future? HERBERT HAINER Our strategic vision for Retail is to become one of the most proficient retailers in the world by delivering healthy, sustainable growth with outstanding return on investment. Prior to 2002, our retail operations were mainly...

  • Page 25
    ... strong cash ï¬,ows from operations. That being said, we believe in managing our balance sheet actively and continue to look for ways to improve our capital structure while at the same time remaining ï¬,exible. For example, during the year, we took the opportunity of healthy demand for corporate...

  • Page 26
    ... on major sports events as well as new product and campaign launches, we will invest in marketing and controlled space, securing share of voice and premium distribution. At the same time, we will remain disciplined in managing our operating cost base, and we expect operating margin to increase to...

  • Page 27
    ...marketing a cost - but rather an investment. Each year we make this investment to secure the highest possible return on our key assets - our brands and our products. As such, all of our brands have an extensive partnership portfolio of high-profile endorsees and regularly bring new global marketing...

  • Page 28
    .... 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 29
    ... the Executive Board and became Head of Global Marketing in 2000. Four years later, he was named President of adidas North America, while maintaining his position as Head of Global Marketing. In 2006, he was named President of the adidas brand, and in 2009 he assumed responsibility for Global Brands...

  • Page 30
    ..., IG BCE, Headquarters Nuremberg, Nuremberg, Germany Member of the Supervisory Board, CeramTec AG, Plochingen, Germany ALEXANDER POPOV 3) Chairman, RFSO "Lokomotiv", Moscow, Russia HANS RUPRECHT 2) Sales Director Customer Service, Area Central, adidas AG HEIDI THALER-VEH 2) Member of the Central...

  • Page 31
    ...2010, Chairwoman of the Central Works Council, adidas AG. 5) Since July 1, 2009; formerly from January 12, 2009, General Manager, SB Asset Management GmbH, Kronberg, Germany and until January 12, 2009, Member of the Executive Board, Dresdner Bank AG, Frankfurt am Main, Germany. 6) Since July 1, 2009...

  • Page 32
    ... contact with the Executive Board, in particular with the CEO and the CFO, between the Supervisory Board meetings, discussing the new organisational structure, brand strategy and the impact of the global economic and financial crisis on the adidas Group, and reporting to the entire Supervisory...

  • Page 33
    ... LTIP for the members of the Executive Board. Lastly, the Executive Board reported to us in detail on business development at the Reebok and Rockport brands. The main focus of our May 6, 2009 meeting was the Executive Board's report on the cost-saving measures initiated by the Executive Board in the...

  • Page 34
    ... the CEO, Herbert Hainer, which had been prepared by the General Committee. Furthermore, we resolved upon several adjustments to the service contracts of the other Executive Board members related to the new VorstAG requirements. In mid-January 2010, we resolved upon changes to the adidas AG Articles...

  • Page 35
    ...by the Supervisory Board. Additional major topics of discussion at the committee meetings were the further development of risk management and the compliance programme, as well as the report on the internal control system and the Internal Audit report. The committee members were informed in detail on...

  • Page 36
    ... internal control and risk management system relating to the financial accounting process showed that the system is capable of performing its functions. The auditor was available for questions and the provision of additional information to the Audit Committee and the other Supervisory Board members...

  • Page 37
    ...of responsible and transparent management and company control. Good corporate governance supports a sustainable increase in value and enhances the confidence placed in our company by our shareholders, business partners, employees and the financial markets. It is thus essential for the Group's long...

  • Page 38
    ... areas. The CEO is responsible in particular for leading the entire Executive Board as well as for management of the business policy of the Group. In addition, he is in charge of various fields such as Global Sales (Wholesale and Retail) of the adidas and Reebok brands, Internal Audit and Social...

  • Page 39
    ... in detail in the Supervisory Board Report see p. 28. corporate_governance. The committee meets five times a year on a regular basis. It examines the adidas AG annual financial statements and the consolidated financial statements including the Management Reports. It also prepares the respective...

  • Page 40
    DIRECTORS' DEALINGS IN 2009 Frankfurt am Main, Date Type of transaction Number of shares Price in â,¬ 01 Position Total volume in â,¬ N° - Name August 5 December 1 Christian Tourres Christian Tourres Supervisory Board member Supervisory Board member Sale Sale 50,000 50,000 31.999875 38.30...

  • Page 41
    ... financial year 2009, the total number of shares held by the members of the Executive Board of adidas AG amounted to less than 1% of the shares issued by the company. At the same time, the members of the Supervisory Board owned 2.15% of the shares issued by the company. Accounting and annual audit...

  • Page 42
    ... weightings: Increase of consolidated net income Reduction of net debt (adjusted for non-operating effects) Sales growth with regard to the Reebok, Rockport and Reebok-CCM Hockey brands as well as Absolute and relative share price development, each measured over the three-year period from 2009 to...

  • Page 43
    ... prior year is applicable, which had a higher share in the total compensation than the LTIP Bonus. In absolute terms, the Performance Bonus decreased in 2009, despite the significant reduction of net debt, due to the decline in consolidated net income. Taking into account the compensation structure...

  • Page 44
    Starting from a base amount totalling 10% of the pensionable income, the pension entitlement increases by 2% for each full year of tenure as an Executive Board member of adidas AG 1) and can reach a maximum level of 40% of pensionable income. In the event of the retirement of an Executive Board ...

  • Page 45
    ...the Audit Committee) Klaus Weiß (Member of the General Committee, Member of the Audit Committee) Total 28,172 898,871 80,000 860,000 1) Since the end of the Annual General Meeting on May 7, 2009, member of the Supervisory Board for the first time. TO OUR SHAREHOLDERS Compensation Report 41

  • Page 46
    ... line with equity market performance, the adidas AG share price declined at the beginning of the year, continuing the downward trend from 2008. While the announcement of cost-saving initiatives and better than expected 2008 annual results positively impacted our share price, weak retail sales data...

  • Page 47
    ...published at the beginning of November. As a result, our share price performed better than the market through to year-end, as several analysts expressed their confidence in the Group's medium-term strategy. Accordingly, the adidas AG share closed 2009 at â,¬ 37.77, having gained 39% over the course...

  • Page 48
    ... 137 SHAREHOLDER STRUCTURE 1)

  • Page 49
    ... market community a regular update about the latest developments of the adidas Group and the adidas AG share. SHARE RATIOS AT A GLANCE 2009 08 2008 N° - Basic earnings per share â,¬ Diluted earnings per share â,¬ Operating cash ï¬,ow per share â,¬ Year-end price â,¬ Year-high â,¬ â,¬ Year...

  • Page 50
    ... Jacket The Huber Brothers and adidas worked closely together in developing the highquality features of the adidas Outdoor product range. One example is the TERREX Lite Softshell Jacket which allows total freedom of movement due to FORMOTIONâ„¢ technology, while a unique hybrid construction of...

  • Page 51
    ... GROUP MANAGEMENT REPORT - OUR GROUP Corporate Mission Statement ...48 Our Brands ...49 Major Locations and Promotion Partnerships ...50 Group Strategy ...52 Global Sales Strategy ...54 Wholesale Strategy ...54 Retail Strategy ...56 Global Brands Strategy ...58 adidas Strategy ...60 Reebok Strategy...

  • Page 52
    ... is socially and environmentally responsible, creative and financially rewarding for our employees and shareholders. WE ARE INNOVATION AND DESIGN LEADERS who seek to help athletes of all skill levels achieve peak performance with every product we bring to market. 48 GROUP MANAGEMENT REPORT - OUR...

  • Page 53
    ...Group sales) Inspired by its roots in sport and fitness, Reebok is a global brand that is committed to developing innovative products which will allow Reebok to own Women's Fitness, challenge in the Men's Sport category and revive its Classics heritage. Rockport (2% of adidas Group sales) Building...

  • Page 54
    ... partnerships around the world, including sports associations, events, teams and individual athletes. Our Group's most important locations and upcoming sporting events are highlighted on the world map. MAJOR LOCATIONS EUROPE adidas Group Headquarters, Herzogenaurach, Germany ...adidas International...

  • Page 55
    ...Division Headquarters ICC World Twenty20 NFL Super Bowl O 11 adidas Group Asia D 12 adidas Group Latin America E IAAF Indoor World Championships A L Orange Africa Cup of Nations 2010 2010 FIFA World Cupâ„¢ GROUP MANAGEMENT REPORT - OUR GROUP Major Locations and Promotion Partnerships 51

  • Page 56
    ...of regional headquarters, moving to more direct interaction between local markets and global functions. Separation of the responsibility between Global Brands and Global Sales management on the Board level. Herbert Hainer, adidas Group CEO, additionally assumed direct responsibility for Global Sales...

  • Page 57
    ... to increasing returns to shareholders with aboveindustry-average share price performance and dividends. SHARED VALUES Performance Passion Integrity Diversity see Corporate Mission Statement, p. 48. Leading through innovation Everyone in the adidas Group is responsible for driving innovation...

  • Page 58
    ... the Global Sales function, to promote and fully leverage the commercial activities of the adidas and Reebok brands. The function is organised into two distinctive channels - Wholesale and Retail. By catering more specifically to these two business models, the Group is in a better position to...

  • Page 59
    ... processes can help to further reduce cost through simplified IT systems and applications. Similarly, and already started in Europe, we are rolling out a trade terms policy that rewards customer performance either by higher efficiency (e.g. in logistics) or better sell-out support (e.g. by point...

  • Page 60
    ... growth with outstanding return on investment. Over the past five years, the adidas Group has evolved into a significant retailer, operating more that 2,200 stores for the adidas and Reebok brands worldwide. In light of the increase in importance of retail to the Group's performance, a new retail...

  • Page 61
    ...well as implement new store review processes to ensure that current retail assets maximise profitability and return on investment. E-commerce: building a successful channel At the beginning of 2010, a new leadership team was put in place to define and outline the further strategic direction of the...

  • Page 62
    ...day business activities, but also provide the platform and framework for long-term market share and profitability improvements. While adidas and Reebok each have unique identities, heritages, technologies, designs and reputations, the strategic principles and methods for driving future sales growth...

  • Page 63
    ... world of lifestyle and fashion continues to blur, adidas and Reebok have both successfully pursued design and co-branding strategies with complementary partners. For example, adidas has partnered with Stella McCartney and Porsche Design Sport, both designing high-end functional performance ranges...

  • Page 64
    ... be the leading sports brand in the world. One major lever to achieve this is the brand's broad and unique product portfolio spanning from apparel and footwear for professional athletes to premium fashion. It allows adidas to address multiple consumer needs, exploit market opportunities from various...

  • Page 65
    ... channels worldwide. C 01 Football: expanding market leadership Being the most popular sport worldwide, football is clearly one of adidas' key strategic priorities. For over 50 years, adidas has led all major developments in football boot and ball technologies. Building on its success around major...

  • Page 66
    ...market share opportunities. To achieve growth and market share increases in this category, in 2010 Running will put in place a three-year product and campaign plan revolving around how adidas can "Make Me Better". This means helping runners to be faster and stronger by creating innovative solutions...

  • Page 67
    ...activity with athletes and the world's leading authorities on athlete performance, to bring the benefits of innovation into its concepts and products. As a result, in 2010, Training will launch its first true 360° concept - adidas Core Performance. This is a total training range designed to help...

  • Page 68
    ...its performance essentials range through fully integrated business models such as Never-outof-stock and other managed space initiatives see Global Sales Strategy, p. 54. Further focus will also be put on improving quality, increasing colour offerings and strengthening in-store marketing support for...

  • Page 69
    ...its position as a performance brand. In 2009, adidas Basketball took further steps in these areas. For example, the brand strengthened its highly valued NBA partnership by becoming the official compression brand of the NBA. This exclusivity will serve to garner further global exposure for adidas in...

  • Page 70
    ...rst man to climb Mount Everest without the help of oxygen equipment. With this heritage and the growth in the outdoor sports sector, adidas has invested in building an authentic and performance-orientated outdoor market position, through such products collections as TERREX and SUPER TREKKING. Given...

  • Page 71
    adidas Sport Style: divisional overview The market for streetwear and lifestyle fashion represents a unique opportunity for sporting goods companies as it is more fragmented and larger in size than the market for products used in sports activity. In addition, profitability in the sports lifestyle ...

  • Page 72
    ...stand-alone retail locations in New York, Paris and Bangkok. adidas SLVR is also carried in all major adidas brand centres in Berlin, Beijing, Paris as well as in adidas online stores in the USA and Europe. In 2009, adidas SLVR was also introduced to wholesale partners in Japan. In 2010, adidas SLVR...

  • Page 73
    ... mainly used within our own stores as well as in stores of our wholesale partners. It will experience a big presence in Asia and will be supported globally through digital media. C 05 Porsche Design Sport Spray Light Top Engineered in cooperation with three-time Olympic gold medallist and two-time...

  • Page 74
    ... muscles to adapt and develop tone. Building on the huge success of EasyToneâ„¢ in 2009, Reebok will launch an integrated marketing campaign around the world in 2010 under the motto of "ReeTone". Reebok is also expanding its footwear offering into the running and training category, launching RunTone...

  • Page 75
    ...stylish, new designs in its spring/summer 2010 collection, Reebok's EasyToneâ„¢ can be worn anywhere - be it at work, school, out shopping or walking. In 2010, EasyToneâ„¢ will be promoted through a global marketing campaign: "ReeTone". C 01 GROUP MANAGEMENT REPORT - OUR GROUP Reebok Strategy 71

  • Page 76
    ... across the bottom of the shoe for enhanced stability. The soft pods absorb a runner's energy, forcing key leg muscles to work a little harder while delivering a plush, smooth ride. RunToneâ„¢ helps runners get more out of their run. P 01 72 GROUP MANAGEMENT REPORT - OUR GROUP Reebok Strategy

  • Page 77
    ...JumpToneâ„¢, helping to strengthen key leg muscles and thus allowing athletes to improve their vertical leap. ZigTechâ„¢ Building on its experience in toning, Reebok developed ZigTechâ„¢, a completely new running and training shoe concept. If EasyToneâ„¢ was designed to force muscles to work harder...

  • Page 78
    ... skin irritation is eliminated and, because of its proper fit, the performance of the underfoot technologies are optimised. U-Form will be available in select American football, basketball, baseball and running shoes starting in May 2010. 74 GROUP MANAGEMENT REPORT - OUR GROUP Reebok Strategy

  • Page 79
    ... business, a key tenet of the strategy is to control distribution by segmenting the product offering available for retailers, as well as keeping a tight rein on supply. In 2009, Reebok has continued to tightly manage its directional sport and generalist retail channels particularly in the United...

  • Page 80
    ... retail marketing into one fully integrated global marketing team. This team uses a variety of strong marketing tools to achieve its objectives. Product launches are supported by substantial PR and marketing campaigns, involving key assets and best-in-class customer support to drive new product sell...

  • Page 81
    ... products and communicate key messages as clearly as possible, allowing it to position its clubs, balls, footwear and apparel among the top-selling golf products in these retail channels. Close working relationships with key accounts will continue in 2010, as will efforts to build additional brand...

  • Page 82
    ...'s pricing policy mirrors the positioning of its three brands. TaylorMade's pricing strategy is to dominate the market at premium price points and compete aggressively in the high-volume mid-price segment. adidas Golf supports its market reputation as the innovation leader by selling its products...

  • Page 83
    ... in turn helped TaylorMade reach number one in iron market share in the United States for the first time in the brand's history, a position it has now held since August 2009. In 2010, TaylorMade will leverage this success with various product updates and geographic expansion. Wedges: Leveraging...

  • Page 84
    ... of exciting new launches such as a new premium offering called adiPUREâ„¢ (footwear and apparel) will continue adidas Golf's authentic union of design, technology and function. In addition, the brand will begin to leverage its partnership portfolio further. New signature lines planned with Natalie...

  • Page 85
    ...definition of product range architecture, cleaning up of distribution and revamping its partnership portfolio. In addition, all Ashworth operating and go-to-market functions were fully integrated with adidas Golf to take advantage of operational and fixed-cost synergies. In 2010, the brand will be...

  • Page 86
    ... USA and piloting stores in additional markets in 2010. Full-price own-retail stores are expected to comprise more than a fifth of total sales by 2014 and are planned to be the main driver of growth within the brand over that period. Build effective organisational processes 2009 saw increased focus...

  • Page 87
    ... technologies into its products. Following on the highly successful 2009 re-launch of its DresSport® 2 collection, which marries athletic innovation and contemporary style to make it one of the most comfortable, stylish and lightweight men's dress shoe collections on the market, in 2010 Rockport...

  • Page 88
    ... several NCAA and national teams. Reebok-CCM Hockey's strategy is to increase market share by leveraging its multi-brand approach to speak to different consumer groups, supported by its dedication to innovate for the leading athletes in the sport. Focus on high-end performance Reebok-CCM Hockey has...

  • Page 89
    ... provides its strategic retail partners with product education programmes, in-store merchandising programmes and on-the-ï¬,oor staff support. Reebok-CCM Hockey develops retail segmentation programmes that help create differentiated packages for its key accounts. Core distribution channels include...

  • Page 90
    ... its positioning as a high-performance company. Through a commitment to product innovation, Reebok-CCM Hockey's pricing strategy is to dominate the market in the premium price segments and to be a strong competitor within the mid-price segment of the market. Key strategic categories to drive growth...

  • Page 91
    ... or to work out and train in the gym. A key product initiative in this area is Reebok Speedwick apparel. Designed to feel like cotton, fabrics used in this apparel are breathable, utilising Play Dry® technology to manage moisture and antimicrobial yarns to permanently inhibit the growth of bacteria...

  • Page 92
    ... the adidas Group's top- and bottom-line growth by meeting consumer demand in both wholesale and retail channels with the right product - in terms of quality, size, colour, style and material - in the right place, at the right time. In order to realise its vision, the Global Operations function...

  • Page 93
    ..., bringing increased ï¬,exibility and responsiveness to our supply chain. We made significant enhancements to our SAP-based purchase order management system - Global Procurement System (GPS) - based on user feedback. We also started preparation work for its rollout to the Reebok brand in 2010. GPS...

  • Page 94
    ... 16% were located in Europe and 10% in the Americas. 32% of all suppliers were located in China see 02. Our Global Operations function manages product development, commercialisation and distribution, and also supervises sourcing for our Wholesale and Retail segments as well as for adidas Golf see 01...

  • Page 95
    ... UNITS 06 225 252 284 239 N° - 2006 2007 2008 2009 1) Figures only include the adidas, Reebok and adidas Golf brands. HARDWARE PRODUCTION BY REGION 1) 07 98% Asia N° - 2% Europe 1) Figures only include the adidas and Reebok brands. GROUP MANAGEMENT REPORT - OUR GROUP Global Operations...

  • Page 96
    ... the product creation process R&D within the adidas Group follows a decentralised approach. Fundamental and biomechanical research, however, is shared across the Group. In line with its distinctive positioning, each brand runs its own research, design and development activities. The teams generally...

  • Page 97
    ... to help improve the brand's club and ball fitting logic. MAJOR R&D LOCATIONS AND ACTIVITIES Main activities Location 01 Herzogenaurach, Germany Portland/ Oregon, USA Scheinfeld, Germany Shanghai, China Tokyo, Japan Canton/ Massachusetts, USA N° - adidas Global Development Center (ait) Global...

  • Page 98
    ... is the successful commercialisation of those technological innovations. Also in 2009, the majority of adidas Group sales were generated with products newly introduced in the course of the year. New products tend to have a higher gross margin compared to products which are in the market for more...

  • Page 99
    ... developed in cooperation with Cirque du Soleil. It uses a specially designed trapeze-shaped piece of equipment called JUKARI FlySetâ„¢ for an effective total body workout through cardio, strength, balance and core training. MAJOR 2009 PRODUCT LAUNCHES Product Brand 05 adidas adidas adidas adidas...

  • Page 100
    ... evolution to the market each year see Group Strategy, p. 52. In 2010, intelligent product technologies will be at the forefront of adidas R&D activities as we aim to position the brand as the technology leader in this rapidly growing category. Reebok will expand on the success of the toning...

  • Page 101
    ...the world where staff have the opportunity to openly share their views with senior management including the Executive Board and gain an overview of current and future business developments. THREE-PILLAR HUMAN RESOURCES STRATEGY We strive to have the right team in place by focusing our activities on...

  • Page 102
    ...-wide succession management system in place that helps us identify, manage and develop internal talents and successors for management and executive positions. The succession management process is supported by a system solution called "Horizon". This database hosts position and employee data related...

  • Page 103
    ... and Executive Board members we offer Long-Term Incentive Programmes (LTIP). Other benefits include our 401-K pension plans in the USA and the adidas Group pension plan for our employees in Germany. In 2009, 1,896 employees (2008: 1,712) participated in the latter, which represents an increase of...

  • Page 104
    ... 03 50% Retail N° - ADIDAS GROUP NUMBER OF EMPLOYEES 1) 06 26,376 31,344 38,982 39,596 N° - 4% Other Businesses 12% Wholesale 2005 2) 2006 3) 2007 2008 2009 15,935 34% Headquarter functions 1) 1) Includes Global Marketing, Global Operations, Global Corporate Services (e.g. Legal, Finance...

  • Page 105
    ..., representing 31% of the Group's total operating expenses (2008: 30%) and 13% of Group sales (2008: 12%). Emerging markets and own retail drive employee growth The number of employees working in the Wholesale segment decreased 8% to 4,881 at the end of 2009 (2008: 5,303), mainly due to the effects...

  • Page 106
    ... 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 with a new supplier when SEA approval has been granted. 102 GROUP MANAGEMENT...

  • Page 107
    ... for environmental management. By running a certified management system, our suppliers demonstrate commitment to continuously enhancing their performance. We help them build or improve human resources systems to maintain proper working conditions, including factory grievance systems to routinely...

  • Page 108
    ...throughout 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...

  • Page 109
    ...efficient use of resources in the design and selection of materials, we strive to minimise the environmental impact of our products without compromising function and quality. In this respect, our adidas Sport Performance division has initiated a programme called "Better Place", a horizontal concept...

  • Page 110
    ... 9K Pump™ skates are also known as "Sidney's Skates". Featuring the innovative Pump™ technology, they give the player customised fit. They additionally offer secureness due to the incorporated SkateLock™, which tightens the top three eyelets independently of the forefoot. To keep the foot dry...

  • Page 111
    03 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Internal Group Management System ...108 GROUP BUSINESS PERFORMANCE ...112 Economic and Sector Development ...112 Income Statement ...115 Balance Sheet and Cash Flow Statement ...122 Disclosures pursuant to § 315 Section 4 of the German Commercial Code ...

  • Page 112
    ... goal for increasing shareholder value at the adidas Group is maximising operating cash ï¬,ow. We strive to achieve this goal by continually improving our top- and bottom-line performance while at the same time optimising the use of invested capital. Our Group's planning and controlling system...

  • Page 113
    ...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 receivable, we strive...

  • Page 114
    ... 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. 110 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Internal Group Management...

  • Page 115
    ... result of lower gross margins and higher operating expenses as a percentage of sales. Due to our strong focus on operating working capital and cash management, we achieved all of our goals related to balance sheet improvements. Our expectations for the Group's business performance in 2010 are based...

  • Page 116
    ..., adidas Group revenues decreased 4% to â,¬ 10.381 billion from â,¬ 10.799 billion in 2008. The Group's gross margin declined 3.3 percentage points to 45.4% (2008: 48.7%), mainly impacted by higher input costs, currency devaluation effects as well as higher clearance sales and promotional activity...

  • Page 117
    ... result of increasing commodity prices and improving conditions in global financial markets, economic activity stabilised towards the end of the year in some of the region's economies. QUARTERLY UNEMPLOYMENT RATE BY REGION IN % OF TOTAL ACTIVE POPULATION Q4 2008 Q1 2009 Q2 2009 02 Q3 2009 Q4 2009...

  • Page 118
    ..., apparel sales were down at a mid-single-digit rate, as increasing demand for special functional apparel such as compression wear partly offset weakness in established categories such as basketball and lifestyle. Hardware sales, in particular high price point equipment products such as golf clubs...

  • Page 119
    ... structure to increase its responsiveness to consumer needs and to support sustainable long-term growth see Group Strategy, p. 52. As a consequence of the subsequent changes in internal reporting and in accordance with the new IFRS 8, the adidas Group has now divided its operating activities...

  • Page 120
    ... Emerging Markets North America Greater China Other Asian Markets Latin America Total 1) 1) Including HQ/Consolidation. 3,262 1,122 2,360 967 1,647 1,006 10,381 3,527 1,179 2,520 1,077 1,585 893 10,799 116 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement

  • Page 121
    ... double-digit increases in most of the region's major markets, also supported by the consolidation of new companies in the region see 11. Currency translation effects had a mixed impact on regional sales in euro terms. Group revenues in Western Europe decreased 8% to â,¬ 3.262 billion in 2009 from...

  • Page 122
    ... and Reebok-CCM Hockey from February 1, 2006 onwards. SALES WORKING BUDGET IN % OF NET SALES 21 2.7 2.3 N° - 2008 2009 MARKETING WORKING BUDGET IN % OF NET SALES 22 10.5 9.9 N° - 2008 2009 118 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement

  • Page 123
    ... functions. Almost half of overhead expenses are related to personnel costs. Operating overhead expenses as a percentage of sales increased 2.8 percentage points to 30.1% in 2009 from 27.3% in the prior year. This was primarily a result of the expansion of the Group's own-retail activities...

  • Page 124
    ... this development. The Group's tax rate increased 2.7 percentage points to 31.5% in 2009 (2008: 28.8%), mainly due to the write-down of deferred tax assets see Note 33, p. 202. 2005 1) 2006 2) 2007 2008 2009 Operating margin declines 5.0 percentage points The operating margin of the adidas Group...

  • Page 125
    ...Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 5 9 116 302 169 32 N° - IN â,¬ 34 N° - 213 19 54 Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 0.04 0.06 0.56 0.79 1.03 0.09 0.27 1.44 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Income Statement 121

  • Page 126
    ...120 million in 2008, mainly driven by an increase in prepaid promotion contracts see Note 16, p. 184. BALANCE SHEET STRUCTURE 1) IN % OF TOTAL LIABILITIES AND EQUITY Liabilities and equity 2009 36 2008 N° - Short-term borrowings ...2.2 Accounts payable ...13.1 Long-term borrowings ...17.7 Other...

  • Page 127
    .... RECEIVABLES â,¬ IN MILLIONS 39 965 1,415 1,459 1,624 1,429 N° - 2005 2006 1) 2007 2008 2009 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Balance Sheet and Cash Flow Statement 123

  • Page 128
    ...was recorded in HQ/Consolidation (2008: 52%) and was mainly related to investments into new office buildings and IT infrastructure see 43 and Global Operations, p. 88. 32% Own retail 124 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Balance Sheet and Cash Flow Statement

  • Page 129
    .... The authorisation to repurchase adidas AG shares is based on §§ 71 et seq. AktG and, as at the balance sheet date, on the authorisation granted by the Annual General Meeting on May 7, 2009. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Disclosures pursuant to § 315...

  • Page 130
    ... May 11, 2006. They may be used to meet the company's obligations arising from the Management Share Option Plan 1999 (MSOP). They may be cancelled without a further resolution of the Annual General Meeting being required. 126 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE...

  • Page 131
    ... by the Annual General Meeting on May 7, 2009 to conduct the share buyback pursuant to the resolved authorisation, also by using equity derivatives arranged with a financial institution in close conformity with market conditions. Subject to Supervisory Board approval, adidas AG may sell put options...

  • Page 132
    ...allocation of liquid financial resources, subsidiaries are required to transfer excess cash to the Group's headquarters. 462 1 to 3 years ...2,458 2,332 3 to 5 years ...822 > 5 years ...186 Total 5,902 234 6,547 128 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Treasury

  • Page 133
    ... in euros and US dollars. At the end of 2009, gross borrowings denominated in euros accounted for 61% of total gross borrowings (2008: 57%). The share of gross borrowings held in US dollars decreased to 33% (2008: 39%) see 48. SHORT-TERM CREDIT LINES â,¬ IN MILLIONS 2009 47 2008 N° - 1,137...

  • Page 134
    ... target of net debt to be below the prior year level communicated at the beginning of 2009. Lower working capital requirements and lower capital expenditure than originally planned positively inï¬,uenced this development. The strong reduction was also supported by the complete conversion of our...

  • Page 135
    ... 2009 55 2008 N° - 1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. 797 < 1 year ...198 1 to 3 years ...561 1,080 3 to 5 years ...822 > 5 years ...186 Total 1,767 234 2,573 462 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW GROUP BUSINESS PERFORMANCE Treasury...

  • Page 136
    ... sales grew 16%, supported by double-digit increases in all major markets and the effects resulting from consolidation of new companies in the region in the prior year. Currency translation effects had a mixed impact on regional sales in euro terms. Sales in Western Europe declined 10% in 2009...

  • Page 137
    ... and Men's Training, which were partly compensated by a double-digit sales increase in Women's Fitness. In euro terms, Reebok sales also decreased 10% to â,¬ 1.265 billion in 2009 from â,¬ 1.410 billion in 2008. Gross margin negatively impacted by higher input costs Wholesale gross margin decreased...

  • Page 138
    ... the own-retail activities of the adidas and Reebok brands. In 2009, currency-neutral Retail sales increased 7%. In euro terms, Retail sales grew 10% to â,¬ 1.906 billion (2008: â,¬ 1.738 billion). Currency-neutral comparable store sales declined 6% versus the prior year. Gross margin decreased...

  • Page 139
    ... store revenues include sales from adidas Sport Performance, adidas Sport Style and Reebok concept stores. In 2009, concept store revenues increased 4% on a currency-neutral basis. Sales increased at both adidas and Reebok. In euro terms, concept store sales increased 5% to â,¬ 833 million in 2009...

  • Page 140
    ... of the Group's store base. The vast majority of employees are employed on a part-time basis. On a full-time equivalent basis, the number of people employed in Retail increased 1% to 15,252 at the end of 2009 (2008: 15,168). 136 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY...

  • Page 141
    ...(17%) (4.3pp) OTHER BUSINESSES NET SALES BY REGION 02 N° - 1% Latin America 2% European Emerging Markets 2% Greater China 17% Western Europe 25% Other Asian Markets 53% North America GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY SEGMENT Other Businesses Performance 137

  • Page 142
    ... of a prior year book gain related to the acquisition of Ashworth were the primary drivers of this increase. In euro terms, operating costs increased 9% to â,¬ 224 million in 2009 from â,¬ 206 million in 2008. 138 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW BUSINESS PERFORMANCE BY SEGMENT Other...

  • Page 143
    ... all non-retail-related functions. On a full-time equivalent basis, the number of employees in Other Businesses decreased 11% and amounted to 1,502 at the end of 2009 (2008: 1,679). OTHER BUSINESSES GROSS MARGIN BY QUARTER IN % Q1 2008 Q1 2009 Q2 2008 Q2 2009 Q3 2008 Q3 2009 Q4 2008 Q4 2009 05 45...

  • Page 144
    ... or positively impact the Group's asset value, earnings, cash ï¬,ow strength, or intangible values such as brand image. We have summarised the most important of these risks and opportunities in this report in three main categories: External and Industry, Strategic and Operational, and Financial. We...

  • Page 145
    ... we collaborate with our manufacturing 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. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report 141

  • Page 146
    ...-accounting-related IT systems is minimised by Group IT through central control and monitoring of virtually all IT systems, by means of centralised management of change processes and with support through regular data backups. 142 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity...

  • Page 147
    ...In 2010, the adidas Group will continue to bring new product innovations to market, supported by extensive brand marketing campaigns see Global Brands Strategy, p. 58. Given the broad spectrum of our Group's product offering, retailer feedback and other early indicators see Internal Group Management...

  • Page 148
    ...2010 are expected to put further pressure on the sporting goods industry to consolidate. Moreover, with improving credit market conditions the merger and acquisition environment is expected to improve slightly. Many retailers and competitor positions have weakened due to declining sales and earnings...

  • Page 149
    ...refine our product offering to meet shifts in consumer demand and to contemporise our offering to respond to current trends. Central to all our brand image initiatives is ensuring clear and consistent messaging to our targeted consumer audience, in particular at point-of-sale. Market share gains at...

  • Page 150
    ... of price changes. As our ordering process and price negotiations usually take place around six months in advance of production, our sourcing function has visibility and reaction time to manage and plan for sharp increases in input costs. To reduce the financial impact on our product margins from...

  • Page 151
    ... Group or any of our operating segments accounted for more than 10% of Group sales in 2009. When necessary, we also restrict or limit the distribution of our products to protect brand image or product margins. By differentiating our product offer to customers, we limit the risk of increased price...

  • Page 152
    ... on streamlining research and development processes to speed up the time to market. Personnel risks Achieving the adidas Group's goal of becoming the global leader in the sporting goods industry is highly dependent on our employees and their talents. Loss of key personnel in strategic positions, to...

  • Page 153
    ...to focus on additional IT control initiatives in 2009. These include the development of a five-year IT Strategic Plan aligned with and approved by senior business management, as well as the periodic review and approval of IT project budgets by a governance board. A new team was formed within our IT...

  • Page 154
    ...resources available to meet maturing liabilities with regard to timing, volume and currency structure. In addition, the adidas Group faces the risk of having to accept unfavourable financing terms due to liquidity restraints. Our Group's Treasury department uses an efficient cash management system...

  • Page 155
    .... The more negative market values of the US dollar hedges would have decreased shareholders' equity by â,¬ 144 million. A 10% weaker euro at December 31, 2009 would have led to a â,¬ 1 million decrease in net income. Shareholders' equity would have increased by â,¬ 176 million see 05. The impacts of...

  • Page 156
    ... rate developments in the financial markets. As 2010 hedging has almost been completed, it is clear that conversion rates on major currencies will be slightly less favourable compared to those of 2009. Volume forecast variances, greater currency volatility and an increasing portion of our business...

  • Page 157
    ... of sport and lifestyle Emerging markets as long-term growth drivers Women's segment offering long-term potential Increasing consumer demand for functional apparel Growing popularity of "green" products Strategic and operational opportunities Strong market positions worldwide Multi-brand approach...

  • Page 158
    ... Strategic and Operational Opportunities Strong market positions worldwide The adidas Group is the market leader in numerous countries around the world. This strong competitive position offers us many advantages in terms of global brand visibility, market power and the ability to effectively expand...

  • Page 159
    ... the short term, due to ongoing macroeconomic challenges and their negative impact on private consumption and consumer spending, we believe that the adidas Group risk profile remains unchanged compared to the prior year. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report 155

  • Page 160
    ... to mid-single-digit rate on a currency-neutral basis due to growth in the Wholesale and Retail segments as well as in Other Businesses. Group gross margin is expected to increase to a level between 46% and 47%, primarily as a result of lower input costs and less clearance sales. Operating margin is...

  • Page 161
    ... major markets. Due to the strong dependence on demand for commodities, economic growth in many of the region's countries is likely to be positively impacted by the overall global economic improvement. Global sporting goods industry to expand only moderately In 2010, we expect the global sporting...

  • Page 162
    ... of increasing momentum in new product lines, such as adidas Style Essentials. Currency-neutral Reebok sales are expected to increase due to double-digit revenue growth in Women's Fitness as well as improvements in the Men's Training category. Retail sales to increase at a high-single-digit rate on...

  • Page 163
    ... affect Group gross margin. MAJOR 2010 PRODUCT LAUNCHES Product Brand 01 Launch Month N° - adiPURE™ football boot STAR WARS™ Originals line Supernova™ GLIDE running shoe miCoach training system adiSTAR® Salvation running shoe adidas by Stella McCartney performance cycling collection...

  • Page 164
    ... and timing of investments will be the rate at which we are able to successfully secure own-retail opportunities. All investments within the adidas Group in 2010 are expected to be fully financed through cash generated from operations. 160 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Subsequent...

  • Page 165
    ...of less than two times going forward. A strong balance sheet and a lower level of debt increase our ï¬,exibility to realise value-generating medium- and long-term opportunities in the best interests of our shareholders as they arise. GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Subsequent Events and...

  • Page 166
    ... by Stella McCartney Tennis Performance Dress The adidas by Stella McCartney Tennis Performance Dress is styled for a full range of motion with a racerback top and low-cut waist with loose pleats. The incorporated CLIMALITE® technology's light and breathable fabric pulls sweat away from the skin...

  • Page 167
    ... Income Statement ...167 Consolidated Statement of Comprehensive Income and Expense ...168 Consolidated Statement of Changes in Equity ...168 Consolidated Statement of Cash Flows ...169 Notes ...170 Statement of Movements of Intangible and Tangible Assets ...211 Shareholdings ...212 NEW YORK, USA...

  • Page 168
    ... with the expected development of the Group. Herzogenaurach, February 19, 2010 Herbert Hainer Chief Executive Officer Glenn Bennett Global Operations Robin J. Stalker Chief Financial Officer Erich Stamminger Global Brands 164 CONSOLIDATED FINANCIAL STATEMENTS Responsibility Statement

  • Page 169
    ...by adidas AG, Herzogenaurach, comprising the balance sheet, income statement, statement of comprehensive income and expense, statement of changes in equity, statement of cash ï¬,ows and the notes, together with the Group management report for the fiscal year from January 1 to December 31, 2009. The...

  • Page 170
    ... plant and equipment Goodwill Trademarks Other intangible assets Long-term financial assets Other non-current financial assets Deferred tax assets Other non-current assets Total non-current assets Total assets Short-term borrowings Accounts payable Other current financial liabilities Income taxes...

  • Page 171
    ADIDAS AG CONSOLIDATED INCOME STATEMENT (IFRS) â,¬ IN MILLIONS Note Year ending Dec. 31, 2009 Year ending Dec. 31, 2008 02 Change N° - Net sales Cost of sales Gross profit (% of net sales) Royalty and commission income Other operating income Other operating expenses (% of net sales) Operating ...

  • Page 172
    ... STATEMENT OF CHANGES IN EQUITY â,¬ IN MILLIONS Share capital Capital reserve Cumulative translation adjustments Hedging reserve Other reserves 1) Retained earnings Total shareholders' equity Minority interests 04 Note Total equity N° - Balance at December 31, 2007 Total comprehensive income...

  • Page 173
    ...) on sale of property, plant and equipment, net Other non-cash expense/(income) Operating profit before working capital changes Decrease/(increase) in receivables and other current assets Decrease/(increase) in inventories (Decrease)/increase in accounts payable and other current liabilities Cash...

  • Page 174
    Notes adidas AG, a listed German stock corporation and ultimate parent of the Group, and its subsidiaries 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-...

  • Page 175
    ... in the balance sheet at fair value. A debit difference between the acquisition cost and the proportionate fair value of assets and liabilities is shown as goodwill. A credit difference is recorded in the income statement. Goodwill arises due to the expectation of strategic advantages or relates to...

  • Page 176
    ... are recorded directly in income. Assets and liabilities of the Group's non-euro functional currency subsidiaries are translated into the reporting currency, the "euro", which is also the functional currency of adidas AG, at closing exchange rates at the balance sheet date. Revenues and expenses...

  • Page 177
    ... carrying amount and fair value less cost to sell. Property, plant and equipment Property, plant and equipment are stated at cost (which comprises any costs directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by Management...

  • Page 178
    ... growth rates do 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...

  • Page 179
    ... 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. Calculations are performed by qualified actuaries using the "projected unit credit method" in accordance with IAS...

  • Page 180
    ... equity. Equity compensation benefits Stock options were granted to members of the Executive Board of adidas AG as well as to the managing directors/senior vice presidents of its affiliated companies and to further senior executives of the Group in connection with the Management Share Option Plan...

  • Page 181
    ...Brands, LLC, was sold in the first quarter of 2009. ASSETS CLASSIFIED AS HELD-FOR-SALE â,¬ IN MILLIONS Dec. 31, 2009 Acquisition/Disposal of subsidiaries as well as assets and liabilities 04 Effective January 1, 2009, adidas International B.V. acquired the outstanding 25% of the shares of Reebok...

  • Page 182
    ... 16, 2009, adidas International, Inc. acquired assets of Bones in Motion, Inc. as part of an asset deal for a purchase price in the amount of USD 5 million. Based in Austin/Texas (USA), Bones in Motion, Inc. is engaged in developing, manufacturing and selling sports- and fitness-specific location...

  • Page 183
    ... (USA), Ashworth is a well-established golf lifestyle apparel brand. 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 liabilities Deferred tax liabilities Net...

  • Page 184
    ... value adjustments Recognised values on acquisition N° - 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 Accrued liabilities...

  • Page 185
    ... 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. With respect to accounts receivable past due but not impaired, based on credit history and current credit ratings, there are...

  • Page 186
    ... (shown in other operating expenses see also Note 30) were â,¬ 16 million and â,¬ 6 million for the years ending December 31, 2009 and 2008, respectively. These are related to assets within other equipment, furniture and fittings, mainly in the Group's own-retail activities, for which contrary...

  • Page 187
    ...December 31, 2009, trademarks, mainly related to the acquisition of Reebok International Ltd. (USA) in 2006 and Ashworth, Inc. in 2008, have indefinite useful lives. They were estimated to be indefinite due to the high degree of continuing brand recognition. The Group determines whether trademarks...

  • Page 188
    ...an active market, therefore existing contractual settlements were used in order to calculate the fair value as at December 31, 2009. Dividends are distributed by FC Bayern München AG instead of regular interest payments. Additionally, long-term financial assets include investments which are mainly...

  • Page 189
    ... 31, 2009 are denominated in euros (2009: 61%; 2008: 57%) and US dollars (2009: 33%; 2008: 39%). The weighted average interest rate on the Group's gross borrowings remained stable at 5.2% in 2009 (2008: 5.2%). As at December 31, 2009, the Group had cash credit lines and other long-term financing...

  • Page 190
    ... 19 19 Jan. 1, 2009 Currency translation differences Usage Reversals Changes in companies consolidated Additions Transfers Dec. 31, 2009 Thereof noncurrent N° - Marketing Employee benefits Returns, allowances, warranty Taxes, other than income taxes Other provisions Total provisions 54 42 114...

  • Page 191
    ... Pension increases Expected return on plan assets 5.0 3.3 2.0 5.4 5.9 4.3 2.0 5.0 The actuarial assumptions as at the balance sheet date are used to determine the defined benefit liability at that date and the pension expense for the upcoming financial year. CONSOLIDATED FINANCIAL STATEMENTS...

  • Page 192
    ... PLAN ASSETS â,¬ IN MILLIONS 2009 Of the total pension expenses, an amount of â,¬ 13 million (2008: â,¬ 12 million) relates to employees in Germany. The pension expense is recorded within the other operating expenses whereas the production-related part thereof is recognised within the cost of sales...

  • Page 193
    ... 2003 and guaranteed by adidas AG (formerly adidas-Salomon AG), and the issuance of 15,684,274 new shares on November 9, 2009 to an overall amount of â,¬ 209,216,186 divided into 209,216,186 shares. At the balance sheet date, the nominal capital of the company amounted to a total of â,¬ 209,216,186...

  • Page 194
    ...of the Annual General Meeting. Further amounts of contingent capital do not exist. Contingent Capital 1999/I The Contingent Capital 1999/I served 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...

  • Page 195
    ... to repurchase adidas AG shares granted by the Annual General Meeting on May 8, 2008, which had partly been used in 2008, but not in the year under review. At the same time, the shareholders granted the Executive Board an authorisation to repurchase adidas AG shares in an amount totalling up to...

  • Page 196
    .... BlackRock Investment Management (UK) Limited, London, United Kingdom, informed the company by letter on December 7, 2009 pursuant to § 21 section 1 as well as § 24 WpHG that: 1) On December 1, 2009, the voting interest of BlackRock Financial Management, Inc., New York, USA, in adidas AG exceeded...

  • Page 197
    ... 0.50 per share (total amount: â,¬ 97 million), approved by the 2009 Annual General Meeting. The Executive Board of adidas AG will propose to shareholders a dividend payment of â,¬ 0.35 per dividend-entitled share for the year 2009 to be made from retained earnings of â,¬ 285 million reported as at...

  • Page 198
    ... N° - Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Other equity investments Available-for-sale...

  • Page 199
    ... Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 28 Amortised cost Fair value Dec. 31, 2009 N° - Long-term borrowings Bank borrowings incl. commercial paper Private placements Convertible bond Eurobond Other non-current financial liabilities...

  • Page 200
    ...value Dec. 31, 2008 N° - Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge Derivatives not being part of a hedge Other financial assets Long-term financial assets Other equity investments...

  • Page 201
    ... Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 28 Amortised cost Fair value Dec. 31, 2008 N° - Long-term borrowings Bank borrowings incl. commercial paper Private placements Convertible bond Eurobond Other non-current financial liabilities...

  • Page 202
    ... 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 203
    ...Nature and Extent of Risks arising from Financial Instruments") can be found in Note 7 and the Group Management Report see Risk and Opportunity Report, p. 140. The notional amounts of all outstanding currency hedging instruments, which are mainly related to cash ï¬,ow hedges, are summarised in the...

  • Page 204
    ...will remain until the 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. The fair...

  • Page 205
    ...the cost of sales as they are directly attributable to the production costs of goods sold. Cost by nature Expenses are presented by function in the income statement. Supplementary information on the expenses by nature is detailed below. 31 Cost of materials The total cost of materials relating to...

  • Page 206
    ...income. For non-German companies, deferred taxes are calculated based on tax rates that have been enacted or substantively enacted by the closing date. FINANCIAL EXPENSES â,¬ IN MILLIONS Year ending Dec. 31, 2009 32 Year ending Dec. 31, 2008 N° - Deferred tax assets and liabilities Deferred tax...

  • Page 207
    ..., Inc. for the year ending December 31, 2008. 2) Relates to the disposal group Gekko Brands, LLC which was classified as Held-for-Sale for the year ending December 31, 2008 and sold in March 2009. 33 Year ending Dec. 31, 2008 N° - Gross Group deferred tax assets and liabilities before valuation...

  • Page 208
    .... Assets, liabilities, income and expenses relating to these corporate functions are presented together with other non-allocable items and intersegment eliminations in the reconciliations. Information about the Group's segments, in accordance with Management's internal reporting structure, is...

  • Page 209
    REPORTABLE SEGMENTS â,¬ IN MILLIONS Wholesale 2009 2008 2009 Retail 2008 2009 Other Businesses 2008 2009 35 Total Segments 2008 N° - Net sales (non-Group) Segmental operating profit Segmental assets Segmental liabilities Capital expenditure Scheduled depreciation and amortisation Impairment 7,...

  • Page 210
    ...485 546 222 0 4,098 Product Information NET SALES (NON-GROUP) â,¬ IN MILLIONS Year ending Dec. 31, 2009 35 Year ending Dec. 31, 2008 N° - With regard to Germany, Western Europe contains net sales amounting to â,¬ 587 million and â,¬ 601 million as well as non-current assets amounting to â,¬ 281...

  • Page 211
    ... Annual General Meeting on May 8, 2002, and on May 13, 2004, the Executive Board was authorised to issue non-transferable stock options for up to 1,373,350 no-par-value bearer shares to members of the Executive Board of adidas AG as well as to managing directors/senior vice presidents of its related...

  • Page 212
    ...the following performance objectives: (1) Absolute Performance: During the period between the issuance and exercise of the stock options, the stock market price for the adidas AG share - calculated upon the basis of the "total shareholder return approach" - has increased by an annual average rate of...

  • Page 213
    ...) is provided in the Compensation Report see Compensation Report, p 38. 39 Year ending Dec. 31, 2009 Year ending Dec. 31, 2008 N° - Own retail Sales Logistics Marketing Central functions and administration Production Research and development Information technology Total 19,460 3,905 5,484 3,375...

  • Page 214
    ... balance sheet date 41 Group-specific subsequent events Memorandum of Understanding signed with Pou Sheng International (Holdings) Limited In January 2010, adidas (China) Ltd. signed a Memorandum of Understanding for the business activities of the Reebok brand in China with the Chinese sporting...

  • Page 215
    ... assets Land and buildings/leasehold improvements Technical equipment and machinery ATTACHMENT Other equipment, furniture and fittings N° - I Goodwill Trademarks Construction in progress Total tangible assets Acquisition cost January 1, 2008 Currency effect Additions Increase in companies...

  • Page 216
    ... Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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...

  • Page 217
    ... Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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...

  • Page 218
    ... Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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...

  • Page 219
    ...125 adidas Style Retail Limited 14) 1) Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company with no active business 7) The number refers to the number of the company 8) Sub-group Onfield 9) Sub-group Reebok...

  • Page 220
    SHAREHOLDINGS OF ADIDAS AG, HERZOGENAURACH AT DECEMBER 31, 2009 Equity (currency units in thousands) ATTACHMENT N° - II Company and domicile Currency Share in capital held by 7) in % 126 127 128 129 130 R.C. Investments Ltd. Reebok Canada Inc. CCM Holdings (1983) Inc. Sport Maska Inc. SLM ...

  • Page 221
    ... Sub-group adidas UK 2) Sub-group Reebok International Ltd. 3) Sub-group India 4) Sub-group Mexico, adidas 5) Sub-group Taylor Made UK 6) Company 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...

  • Page 222
    ...â„¢ PowerWEBâ„¢ TECHFITâ„¢ PowerWEBâ„¢ is designed to focus muscle energy. Optimally applied pressure speeds up the process by which energy is created in muscles...the most exhausting matches of the World Championship. Karabatic not only uses TECHFITâ„¢, he swears by it. 20 09 NIKOLA ...

  • Page 223
    ...INFORMATION Ten-Year Overview ...220 Glossary ...222 Index ...227 Publishing Details/Contact ...228 Financial Calendar 2010 ...229 ZAGREB, CROATIA - FEBRUARY 1, 2009 France reaches the final of the World Men's Handball Championship against host nation Croatia. adidas sponsored French national team...

  • Page 224
    ... 5) Income Statement Ratios Gross margin 2) Operating margin 2) 3) Interest coverage 2) Effective tax rate 2) Net income attributable to shareholders as a percentage of net sales 5) Sales by Brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Balance Sheet Data...

  • Page 225
    ... 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 226
    ... 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...

  • Page 227
    ...and channels used to connect with consumers in order to best fulfil their needs. Green grass retailers Golf distribution channel. Small golf specialty shops typically located at a golf course. Gross Domestic Product (GDP) Market value of all finished goods and services produced within a country in...

  • Page 228
    ... + short-term financial assets + accounts receivable + inventories) / current liabilities) Ã- 100. Market capitalisation Total market value of all outstanding shares. Market capitalisation = number of outstanding shares Ã- current market price. Marketing working budget Promotion and communication...

  • Page 229
    ... brands. Performance business In the sporting goods industry, business related to technical footwear and apparel, used primarily in doing sports. PGA Tour Major US men's professional golf tour, featuring 49 golf tournaments. Price-earnings ratio (P/E) A company's share price divided by its current...

  • Page 230
    .... The cost of debt is calculated through the risk-free rate, credit spread and average tax rate see also Beta coefficient. Working capital A company's short-term disposable capital used to finance the day-to-day operations. Working capital = total current assets - total current liabilities see...

  • Page 231
    ... 44 Shareholders' Equity 44, 125, 122 ff. Shareholdings 44, 125, 212 Sourcing 88 ff. Statement of Comprehensive Income and Expense 168 Strategy - adidas Group 52 - Global Sales 54 - Global Brands 58 Subsequent Events 156 ff. Supervisory Board - Report 28 ff. - Committees 30 - Members 26 Supply Chain...

  • Page 232
    ... 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...

  • Page 233
    Financial Calendar 2010 2009 Full Year Results Analyst and press conferences in Herzogenaurach, Germany Press release, conference call and webcast 20 09 March 3, 2010 First Quarter 2010 Results Press release, conference call and webcast May 4, 2010 Annual General Meeting Fürth (Bavaria), ...

  • Page 234
    adidas AG Adi-Dassler-Str. 1 91074 Herzogenaurach Germany ©2010 adidas AG. adidas, Reebok, TaylorMade, adidas Golf, Ashworth, Rockport and CCM are registered trademarks of the adidas Group.