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adidas Group Annual Report
2011
TOGETHER
WE WIN

Table of contents

  • Page 1
    TOGETHER WE WIN adidas Group Annual Report 2 0 11

  • Page 2
    ... Group sales of Outlook 2012 Currency-neutral sales development: adidas Group increase at a mid- to high-single-digit rate Wholesale segment increase at a mid-single-digit rate Retail segment increase at a low-double-digit rate Other Businesses increase at a mid-single-digit rate TaylorMade-adidas...

  • Page 3
    ... Effective tax rate Net income attributable to shareholders as a percentage of net sales Average operating working capital as a percentage of net sales Equity ratio Net borrowings / EBITDA Financial leverage Return on equity Balance Sheet and Cash Flow Data (â,¬ in millions) Total assets Inventories...

  • Page 4
    ... adidas Sport Performance is on five key categories: football, basketball, running, training and outdoor... TaylorMade leads the golf industry in metalwood sales and is the No. 1 driver brand on the world's major professional golf tours. The brand is recognised globally for its capacity to develop...

  • Page 5
    TOGETHER WE WIN adidas Group Annual Report 2 0 11 It takes passion, discipline and dedication to succeed, but above all it takes teamwork. Together we inspire and encourage each other to go further and achieve more. Our Group, our employees, our innovations, our brands, connecting and resonating ...

  • Page 6
    ... GROUP MANAGEMENT REPORT Group Strategy Global Sales Strategy Wholesale Strategy Retail Strategy eCommerce Strategy Global Brands Strategy adidas Strategy Reebok Strategy Other Businesses Strategy TaylorMade-adidas Golf Strategy Rockport Strategy Reebok-CCM Hockey Strategy Global Operations Research...

  • Page 7
    ...03 03.1 03.2 FINANCIAL REVIEW GROUP MANAGEMENT REPORT Internal Group Management System Group Business Performance Economic and Sector Development Income Statement Statement of Financial Position and Statement of Cash Flows Treasury Financial Statements and Management Report of adidas AG Disclosures...

  • Page 8
    ... and dedication of the communities, the coaches, the families, the fans and the volunteers. 4 Together we win. 20 11 Some of the 70,000 volunteers, 6,000 staff and 4,500 technical officials who make London 2012 possible. adidas Group 2011 Annual Report T O G E T H E R W E W IN

  • Page 9
    SALLY PEARSON 2011 IAAF World Champion in the 100m hurdles and 2011 IAAF Athlete of the Year. W E IN YOHAN BLAKE 2011 IAAF World 100m Champion. T O G E T H E R W 5 20 11 JESSICA ENNIS 2010 IAAF World Indoor Pentathlon Champion. adidas Group 2011 Annual Report

  • Page 10
    Believing in their side. The fans that supported the Spanish football team to become European and World Champions. T H E R 6 20 11 adidas Group 2011 Annual Report T O G E W E W IN

  • Page 11
    ... of the beautiful game all over the world. T O G E T H E R W E W IN 7 20 11 Together we win. IKER CASILLAS FERNANDO LLORENTE DAVID VILLA XABI ALONSO XAVI HERNÁNDEZ DAVID SILVA of Spain's national football team, current European and World Champions. adidas Group 2011 Annual Report

  • Page 12
    Together we have style: Style Your Life Style and fashion is all about the things that inspire us. Always fun, fresh and connected. ... story, our look, our way! 8 Together we win. 20 11 Inspired by life, inspiring each other. adidas Group 2011 Annual Report T O G E T H E R W E W IN

  • Page 13
    T O G E T H E R W E W IN 9 20 11 SNOOP DOGG Rapper, singer, record producer and actor. adidas Group 2011 Annual Report

  • Page 14
    ANNIE THORISDOTTIR Winner of the 2011 Reebok CrossFit Games, "Fittest Woman on Earth". 10 20 11 RICH FRONING JR. Winner of the 2011 Reebok CrossFit Games, "Fittest Man on Earth". T O G E T H E R W E W IN 2011 Reebok CrossFit Games, California, USA. adidas Group 2011 Annual Report

  • Page 15
    ...a community, inspiring each other and pushing harder. This camaraderie gives joy and encouragement, making fitness fun and something everyone can do. T O G E T H E R W E W IN 11 20 11 Together we win. Reebok and CrossFit - making fitness fun for everyone. adidas Group 2011 Annual Report

  • Page 16
    ..., striving for better, more distance and more accuracy. Every shot, every round, part of a story, of advice, of sharing ideas, of laughs, of disappointments, of good days and of bad days. Together learning more, getting better and going further. Together we win. adidas Group 2011 Annual Report...

  • Page 17
    T O G E T H E R W E W IN 13 20 11 DUSTIN JOHNSON 2011 Barclays PGA Tour Tournament winner. adidas Group 2011 Annual Report

  • Page 18
    14 20 11 RYAN NUGENT-HOPKINS 2010 Western Hockey League Best Rookie and 2011 Canadian Hockey League Top Draft Prospect. adidas Group 2011 Annual Report T O G E T H E R W E W IN

  • Page 19
    ...Its players and teams famous for their heart and commitment to its hard hits, energy and fast pace. But it's also famous for its unrivalled fans and dedicated followers, proud of their team, their sport. Keeping it all for the action out on the ice. Together we win. adidas Group 2011 Annual Report

  • Page 20
    ... a compromise. Using the latest advances in materials and technologies, you can get on with looking fabulous and stay committed to style and great design, while enjoying exceptional comfort, lightness and walkability. Together we win. Walkability - the way we walk. adidas Group 2011 Annual Report

  • Page 21
    T O G E T H E R W E W IN 17 20 11 Style made comfortable - no compromise. adidas Group 2011 Annual Report

  • Page 22
    Better Cotton Sustainable cotton production initiative. E T H 18 20 11 Engaging with suppliers and producers, in a collaborative way. adidas Group 2011 Annual Report T O G E R W E W IN

  • Page 23
    ... We are all connected. We understand that, by sincere efforts and social engagement, we can make a difference. Improving the lives of everyone and reducing our impact on the environment. Learning every day to be better, smarter and more sustainable. Together we win. adidas Group 2011 Annual Report

  • Page 24
    TOGETHER WE WIN 2 0 11

  • Page 25
    2 0 11

  • Page 26
    ...01.2 01.3 01.4 01.5 01.6 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Interview with the CEO Executive Board Supervisory Board Supervisory Board Report Corporate Governance Report including the Declaration on Corporate Governance Compensation Report Our Share 24 28 34 38 40 45 50 54...

  • Page 27
    adidas Sport Performance 2 0 11 / 2 0 12 the fastest boot just got a brain © 2011 adidas AG. adidas, the 3-Bars logo and the 3-Stripes mark are registered trademarks of the adidas Group. prove you're fast Compete on the pitch and measure your speed. Then share your stats online and compare with...

  • Page 28
    ... Furyk (2010 PGA Tour Player of the Year). ever, at an exclusive media event in New York City with streetball legend Bobbito García. 14. RealFlex, a first-of-its-kind running and training shoe from Reebok, 24 20 11 10. For the second consecutive time, Lionel Messi is crowned FIFA World Player...

  • Page 29
    01.1 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Q1 03 04 25 20 11 01 07 02 06 05 08 12 10 09 11 Q2 adidas Group 2011 Annual Report

  • Page 30
    ... Marketing, Design, 01. adidas sponsored Sam Sutton defends his title as Extreme Kayak World 26 20 11 Product Development and Global Operations departments move into Laces - a new, state-of-the-art building at the World of Sports, the adidas Group's headquarters in Herzogenaurach, Germany. Laces...

  • Page 31
    01.1 TO OUR SHAREHOLDERS Operational and Sporting Highlights 2011 Q3 05 27 02 20 11 04 01 03 06 07 08 10 11 09 12 Q4 adidas Group 2011 Annual Report

  • Page 32
    ... its strategic goals. As a result of this strong performance, Management is proposing a dividend to shareholders of â,¬ 1.00, an increase of 25%. Supported by major international sporting events and an exciting product pipeline, 2012 is shaping up to be another record year for the adidas Group. In...

  • Page 33
    ... communication to attract the next-generation consumer. And the numbers are coming through powerfully. adidas brand sales in North America have increased 41% over the past two years, the biggest jump we have achieved as a management team, with the 21% currency-neutral growth in 2011 being our best...

  • Page 34
    ... their commercial success. While the end of the NFL licence and the transfer of our US-related NHL business to the Reebok-CCM Hockey segment will see Reebok sales decline in 2012, the core of the Reebok brand is expected to remain stable in this year of brand consolidation. As we begin building our...

  • Page 35
    ...Innovation Team has carried out extensive research and testing to develop the adipure running range. This is a collection of three shoes with a variety of heel gradients that mimic the natural movement of the foot, by helping the body gradually adapt to the demands of mid- to forefoot running. Using...

  • Page 36
    ... with this sub-brand? Now that the adidas Group has achieved a net cash position, does this change your policies towards capital management and dividends or other shareholder return opportunities? After looking closely at the market, it was clear that there is a younger consumer out there looking...

  • Page 37
    ...that 2012 will be another record year for the adidas Group. Through our unmatched innovation, our cutting-edge product pipeline as well as our marketing and point-of-sale execution strength, we are in a great position to sustain momentum as we execute our Route 2015 plan. We expect sales to increase...

  • Page 38
    ... with Reebok International Ltd. in 1983, where he worked for ten years in various operations and product functions of which the latest was Director of Footwear Development. In 1993, Glenn Bennett joined adidas AG and began working as the Head of Worldwide Footwear Development. He was promoted to...

  • Page 39
    ... 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 2010 he assumed responsibility for Global Brands. Erich Stamminger is married and lives in Nuremberg. adidas Group 2011 Annual Report

  • Page 40
    TO OUR SHAREHOLDERS 01.3 Executive Board Thank you all! The Executive Board would like to thank all employees worldwide for their team spirit and their dedication in the past year. Together we win. 36 20 11 adidas Group 2011 Annual Report

  • Page 41
    TO OUR SHAREHOLDERS 01.3 Executive Board 37 20 11 adidas Group 2011 Annual Report

  • Page 42
    ...SHAREHOLDERS 01.4 Supervisory Board 01.4 Supervisory Board Supervisory Board Members 38 20 11 01 02 03 04 05 06 07 08 09 10 11 12 Standing Committees Steering Committee: Igor Landau (Chairman), Sabine Bauer, Willi Schwerdtle General..., Christian Tourres adidas Group 2011 Annual Report

  • Page 43
    .... 3) Since December 19, 2011. 2) Since October 1, 2011; formerly General Manager, Procter & Gamble GmbH, Schwalbach am Taunus, Germany. 4) Since November 1, 2011; formerly Chairman of the Works Council Herzogenaurach, adidas AG. 5) Since January 28, 2011. adidas Group 2011 Annual Report

  • Page 44
    ... Audit Committee Chairman were informed regularly in written and oral form on the current developments of the business situation and major business transactions by the Chief Executive Officer and the Chief Financial Officer. The Executive Board regularly provided adidas Group 2011 Annual Report

  • Page 45
    ... centre will support the growth targets set out by the Executive Board as part of the Group's strategic business plan Route 2015. At our Supervisory Board meeting held on November 2, 2011, we intensively discussed the possibility of acquiring Five Ten, a leading brand in outdoor action sports and...

  • Page 46
    ...German Corporate Governance Code. The current degree of internationality of our Supervisory Board members, which is vital for a successful, globally operating company, is to be maintained to the current extent. At the Supervisory Board elections taking place in 2014, we intend to increase the number...

  • Page 47
    ...effectiveness of the systems. The Audit Committee was informed regularly regarding current compliance cases. At its November meeting, it dealt with the 2011 Internal Audit Report, which did not detect any major infractions in business processes, and subsequently took note of the planning of Internal...

  • Page 48
    ...annual financial statements of adidas AG were thus approved. 44 20 11 Expression of thanks The Supervisory Board wishes to thank the Executive Board, the management of the Group companies, the Works Council and all adidas Group employees for their tremendous personal dedication, their performance...

  • Page 49
    ...Board member is a partner of, they do not have business or personal relations with adidas AG or the Executive Board SEE SUPERVISORY BOARD REPORT, P. 40 . At its meeting held on February 9, 2011, and in accordance with the recommendations of the German Corporate Governance Code, the Supervisory Board...

  • Page 50
    ... business development and planning as well as the risk situation and coordinates the strategy of the company and its implementation with the Supervisory Board. Moreover, the Executive Board provides the Supervisory Board with the annual financial statements of adidas AG and the annual consolidated...

  • Page 51
    ... Executive Board members meet the recommendation of the Code. Compensation of the Supervisory Board (section 5.4.6 subsection 2) In order to ensure the independence of the Supervisory Board in their supervisory functions, the members of the Supervisory Board do not receive any performance-related...

  • Page 52
    ... the product cycle from the supply chain to the final consumer. In order to ensure standardised and exemplary actions and behaviour, in 2006 the adidas Group introduced a Code of Conduct which is applicable in all regions and business areas. Guidelines for day-to-day behaviour in everyday work are...

  • Page 53
    ...the adidas Group developed the Environmental Strategy 2015. The objective of the strategy is to make processes more efficient at every stage of the value chain. This ranges from areas such as product design, development and sourcing, logistics and IT systems, to improving the efficiency of company...

  • Page 54
    ... Board in line with corporate planning. When determining the LTIP 2009/2011, the Supervisory Board defined the following performance criteria with different weightings: - Increase of consolidated net income - Reduction of net debt (adjusted for non-operating effects) - Increase of sales growth...

  • Page 55
    ... (annual average rate 2011) was used as the basis for calculation. 02 Executive Board Total Compensation in 2010 (â,¬ in thousands) Non-performance-related compensation components Performance-related compensation component Performance Bonus Compensation component with long-term incentive effect...

  • Page 56
    ...The Executive Board members did not receive any additional compensation for mandates within the adidas Group. - The Executive Board members did not receive any loans or advance payments from adidas AG. - adidas AG maintains a consequential loss and liability insurance for Board members of the adidas...

  • Page 57
    ... OUR SHAREHOLDERS 01.7 Compensation Report Compensation of the Supervisory Board The compensation of the Supervisory Board members is determined by the Annual General Meeting and regulated by § 18 of the Articles of Association of adidas AG. The compensation is linked to the size of the Group and...

  • Page 58
    ... and the strong increase in the Group's net income attributable to shareholders in 2011, we intend to propose a 25% higher dividend compared to the prior year at our 2012 Annual General Meeting. 54 20 11 01 The adidas AG share Number of shares outstanding 2011 average At year-end 2011 1) Type of...

  • Page 59
    ...11 44.25 40 30-day moving average 43.22 â- High and low share prices 1) Based on daily Xetra closing prices. 04 adidas AG market capitalisation at year-end (â,¬ in millions) 10,515 10,229 7,902 5,252 10,438 2011 2010 2009 2008 2007 adidas Group 2011 Annual Report 43.95 Source: Bloomberg...

  • Page 60
    TO OUR SHAREHOLDERS 01.8 Our Share 01.8 adidas AG share historically outperforms benchmark indices The adidas Group is committed to continuously enhancing shareholder value. The long-term development of our share price reï¬,ects investor confidence and the growth potential of our Group. Over the ...

  • Page 61
    ... ratio Dividend yield Shareholders' equity per share Price-earnings ratio at year-end Average trading volume per trading day 3) DAX-30 ranking at year-end 4) by market capitalisation by turnover 2011 1 1) At year-end 2011. Source: Bloomberg. Award-winning Investor Relations activities adidas AG...

  • Page 62
    ... GROUP MANAGEMENT REPORT Group Strategy Global Sales Strategy Wholesale Strategy Retail Strategy eCommerce Strategy Global Brands Strategy adidas Strategy Reebok Strategy Other Businesses Strategy TaylorMade-adidas Golf Strategy Rockport Strategy Reebok-CCM Hockey Strategy Global Operations Research...

  • Page 63
    ... T O G W E W IN Reebok launches the campaign "The Sport Of Fitness Has Arrived". Partnering with CrossFit, this multi-touchpoint campaign celebrates the passion and camaraderie that can be found in fitness, to make it fun and something everyone can do. Together we win. 02 OUR GROUP

  • Page 64
    ... our investments under our six key strategic pillars DIAGRAM 01. 60 20 11 Creating long-term shareholder value Creating long-term value for our shareholders through significant operating cash ï¬,ow generation drives our overall decision-making process SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 114...

  • Page 65
    ... 2010, the Group unveiled its 2015 strategic business plan named "Route 2015", which defines strategies and objectives for the period up to 2015. This plan is the most comprehensive the adidas Group has ever developed, incorporating all brands, sales channels and Group functions globally. The key...

  • Page 66
    ... America, Japan and the UK as key growth markets SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . Of these markets, the three attack markets North America, Greater China and Russia/CIS are targeted to contribute over 50% of the sales increase we anticipate as part of Route 2015. adidas Group 2011 Annual...

  • Page 67
    ... adidas Group's inventory risk and increasing availability of products sold at best price as we re-produce based on customer demand. 63 20 11 Retail Space Management to amplify our brands at POS Retail Space Management (RSM) comprises all business models helping our Global Sales function to expand...

  • Page 68
    ... product packages to groups of comparable customers. With 40,000 different partners around the world that operate more than 100,000 points of sale, this segmentation is broadly based on a distinction between sports and lifestyle retailers that either have an up-market "brand-driven" positioning...

  • Page 69
    ... concept stores to increase the number of distribution points for our lifestyle offering. Another area of focus in 2012 will be the further expansion of the store base of the adidas NEO label, the vertical business model for the Group SEE GLOBAL BRANDS STRATEGY, P. 68 . Furthermore, we will test new...

  • Page 70
    ... to best-in-class retailers in order to measure existing business performance and evaluate potential investments. Stores not achieving their required KPIs have been, and will continue to be, closed down. New stores must be supported by a business plan that meets predefined criteria. Each new store...

  • Page 71
    ....2 GROUP MANAGEMENT REPORT - OUR GROUP Global Sales Strategy eCommerce Strategy eCommerce Strategy At the beginning of 2010, a leadership team was put in place to define and outline the strategic direction of the Group's eCommerce activities for the adidas and Reebok brands. Although both brands...

  • Page 72
    ... within adidas and Reebok that were identified as key contributors and game changers for the adidas Group include: - Gaining sales and market share in the key global categories running and basketball with adidas Sport Performance - Expanding adidas Sport Style into fast fashion with the adidas NEO...

  • Page 73
    ... respective positioning to life, through the creation of products and communications that not only support the commercial functions in their day-today business activities, but also provide the platform and framework for long-term market share and profitability improvements. While adidas and Reebok...

  • Page 74
    ... and innovative brand marketing campaigns and developing communication techniques that build brand equity and support the achievement of the Group's commercial goals. A key tenet of our marketing and communication strategy is to harness the emotion of sport and the benefits of a sporting lifestyle...

  • Page 75
    ... support Reebok's repositioning in Classics, Reebok also began a multi-faceted partnership with platinum music producer Swizz Beatz in 2011, collaborating on a wide range of creative content in the realms of dance, music, art and style. adidas Group 2011 Annual Report 20 11 The performance brand...

  • Page 76
    ...sales and market share with key growth categories such as running and basketball within adidas Sport Performance Focus areas Key strategic pillars - Leading the industry in the fields of customisation and interactivity across categories - Expanding adidas Sport Style in the fast-fashion business...

  • Page 77
    ... and apparel technologies. Building on its success around major sporting events, the brand strives to increase its strong market position by continuously creating the industry's top products and fully leveraging its outstanding portfolio of sports marketing partners. adidas Group 2011 Annual Report

  • Page 78
    02.3 GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy adidas Strategy 02.3 Basketball: increasing global footprint via innovation and icons adidas is committed to strengthening its position in basketball by expanding its footprint in the critical North American and Chinese markets and ...

  • Page 79
    02.3 GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy adidas Strategy Training: creating new consumer experiences At adidas, training is the biggest category for both men and women. Training supports the preparation and recovery needs of serious athletes across all sports disciplines and...

  • Page 80
    ... GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy adidas Strategy 02.3 09 adidas Sport Performance Terrex Active Shell Jacket adidas Originals - celebrating originality The market for streetwear and lifestyle sports fashion represents a unique opportunity for sporting goods companies...

  • Page 81
    ... design adidas Sport Style: style your life What once started as a niche business has developed into a significant contributor and future opportunity for the Group. To best tap the potential of the sports fashion market, adidas Sport Style is targeting this market with a clear multi-label strategy...

  • Page 82
    ... its history and again today, Reebok's success is based on its courage to challenge convention: developing innovative products, creating new markets and the latest athletic style. Inspired by its roots in fitness, Reebok is a global sports brand that is committed to empowering consumers to...

  • Page 83
    ... with this partnership, Reebok launched the Reebok CrossFit product line, a range designed with the input of top CrossFit athletes PICTURE 18 . Created to be the best functional training gear on the market, this line currently has limited distribution with select retailers and online. In 2012 and...

  • Page 84
    02.3 GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy Reebok Strategy 02.3 Evolving communication strategy to match long-term brand positioning To communicate its positioning in fitness, Reebok is launching the "Sport Of Fitness Has Arrived" campaign in 2012 PICTURE 19 . This multi-...

  • Page 85
    02.3 GROUP MANAGEMENT REPORT - OUR GROUP Global Brands Strategy Reebok Strategy - RealFlex: RealFlex was launched in a number of markets in 2011, to outstanding reception. This running and training shoe answers the lightweight, natural movement needs of the consumer, delivering multi-directional ...

  • Page 86
    ... expand its market share. In this way, they contribute together to our Group's overall goal: to be the global leader in the sporting goods industry. 82 20 11 TaylorMade-adidas Golf Strategy TaylorMade-adidas Golf's mission is to be the leading global performance golf company in terms of sales...

  • Page 87
    ..., social media and marketing campaigns, involving key assets and best-in-class point-ofsale support to drive sell-through of new products. 02 TaylorMade Sergio García at the "White Out" event in New York Pricing strategically determined to increase market share Expanding market share in golf is...

  • Page 88
    ... high-performance golf balls, bring them to market and build credibility among Tour professionals. In 2011, TaylorMade's status as a maker of premium golf balls solidified as more Tour pros and consumers used the five-layer Penta TP. TaylorMade's plans to increase golf ball market share in 2012...

  • Page 89
    ... market, starting by taking the accessories business in-house (the brand had licensed its name to an outside company for the past six years), which will allow closer control over design and help the brand gain a larger share of a category which offers significant growth opportunities. adidas Golf...

  • Page 90
    ... to life by using performance technology to make style comfortable. This positioning builds on Rockport's existing brand equity in comfort and technological innovation while also focusing on developing a stylish and contemporary brand. Rockport's world-class and international design resources appeal...

  • Page 91
    02.4 GROUP MANAGEMENT REPORT - OUR GROUP Other Businesses Strategy Rockport Strategy Key strategic product initiatives and innovation In 2011, Rockport further increased its focus on product design. The brand continues its commitment to incorporate new innovation concepts and advanced technologies...

  • Page 92
    ...to different consumer groups, supported by its dedication to innovate for the leading athletes in the sport. In-arena and partnership-based marketing programmes, consumer campaigns and web-based initiatives are designed to create brand exposure, increasing demand for Reebok-CCM Hockey products. 13...

  • Page 93
    ... also announced. Manufacturing activities will be maintained mainly to develop and manufacture performance products for pro level athletes. Pricing strategy mirrors product positioning - Skates: The focus in the skate category is to drive market share increases through products addressing critical...

  • Page 94
    ... to 60 days - Establish a regional source base Supporting the Group's growth projects Support the company's Route 2015 priorities - Build fast-fashion creation, sourcing and supply chain management capabilities - Further roll-out of processes and systems - Offer short lead time production models...

  • Page 95
    ...our factories and distribution centres. These are also critical for our ï¬,exible make-to-stock service which aims to improve product availability and inventory utilisation by planning and building inventory buffers at different locations further up the supply chain. adidas Group 2011 Annual Report

  • Page 96
    ... assume end-toend responsibility for the Group's supply chain with all market operations and local sourcing functions moving into Global Operations by 2013. Local systems and processes are being reviewed and harmonised for ultimate integration into global structures. adidas Group 2011 Annual Report

  • Page 97
    ..., TaylorMade, Rockport, Reebok-CCM Hockey and the Sports Licensed Division are not serviced through Global Operations, but instead utilise their own purchasing organisation. In order to quickly seize short-term opportunities in their local market or react to trade regulations, Group subsidiaries may...

  • Page 98
    ... The majority of purchased apparel products Approximately 66% of adidas and Reebok branded hardware produced in China In 2011, the bulk (i.e. 98%) of adidas and Reebok branded hardware products, such as balls and bags, was also produced in Asia (2010: 98%). China remained our largest source country...

  • Page 99
    ... Group. In line with their strategic and long-term visions and distinctive positioning, each brand runs its own research, design and development activities. These teams generally have either a category or a technology focus. R&D is closely integrated with the sourcing, design and product marketing...

  • Page 100
    GROUP MANAGEMENT REPORT - OUR GROUP 02.6 Research and Development 02.6 01 Major R&D activities and locations Main activities Major locations 96 20 11 adidas The adidas innovation team is divided into groups that focus on performance footwear, apparel and hardware innovation, within which there...

  • Page 101
    ... and time-consuming product changes in the latter stages of the development process. 03 R&D expenses (in % of net sales) 0.9 0.8 0.8 0.8 0.8 2011 2010 2009 2008 2007 04 R&D expenses (in % of other operating expenses) 2.1 2.0 2.0 1.9 2.1 2011 2010 2009 2008 2007 adidas Group 2011 Annual Report

  • Page 102
    ... to the Group's net income in 2011. We expect this development to continue in 2012 as our launch schedule includes a full pipeline of innovative products SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . Successful product launches across all major adidas categories In 2011, adidas sales were again...

  • Page 103
    ... pumps Due to the different business model for the Rockport brand as a leather shoe company, the impact from new styles is significantly lower compared to our other brands. Products launched in 2011 accounted for an estimated 58% of sales (2010: 52%). In 2011, R&D efforts concentrated on making...

  • Page 104
    ...the market each year SEE GROUP STRATEGY, P. 60 . In 2012, customisation, digital sports technologies and sustainable product innovation will be at the forefront of adidas R&D activities as we aim to position the brand as both a sustainable and technology leader in the sporting goods industry. Reebok...

  • Page 105
    ... our employees with targeted development activities both on- and off-the-job. Today, PEP is consistently used in all business units of the adidas Group. The online version has a coverage of 76% Group-wide. The target for 2012 is to reach an online coverage of 96%. adidas Group 2011 Annual Report

  • Page 106
    ... is executed regionally. This programme is tailored to employees from different functional areas and brands that show potential for director positions. - People Manager Development Programme (PDP): A global programme which is executed locally. The programme targets employees at team leader level who...

  • Page 107
    ... consolidated in a succession management risk analysis. The succession management process is supported by a system solution which hosts position and employee data related to performance, potential, career aspirations, mobility, etc. Our system solution is applied in 91% of the adidas Group business...

  • Page 108
    ...number of employees Total employees (in %) Male Female Management positions (in %) Male Female Average age of employees (in years) 1) Average length of service (in years) Annual training hours by employee (in hours) 1) At year-end. 46,824 50% 50% 73% 27% 30 3.5 17.0 adidas Group 2011 Annual Report

  • Page 109
    ...our Global Operations function, in order to support the Group's sales growth, also contributed to the overall increase in the number of employees. Furthermore, a change in the internal definition of full-time equivalents also impacted this development. On a full-time equivalent basis, our Group had...

  • Page 110
    ... role to the ongoing success of the adidas Group. 07 Number of employees 1) 2011 2010 Employees 2) Full-time equivalents 3) Employees 2) Full-time equivalents 3) Own retail Sales Logistics Marketing Central administration Production Research & development IT Total 24,649 5,067 5,334...

  • Page 111
    ... and train our suppliers in improving their social and environmental performance. Careful supplier selection To improve working conditions throughout our supply chain, the Group function Global Operations works closely with our SEA team on supplier selection. The SEA team assesses all potential new...

  • Page 112
    ...and adidas Group business entities. In this way, the consideration of acceptable working conditions becomes a routine part of business activities. In 2011, the SEA team conducted 170 training sessions and workshops (2010: 193) DIAGRAM 01 . 01 Number of trainings 170 193 216 251 267 2011 2010 2009...

  • Page 113
    ...concept. The adidas brand consolidates its sustainable product research and development within this sustainable product creation programme. The first adidas "Better Place" products were introduced globally in 2009 in response to increasing consumer demand for sustainable sports apparel and footwear...

  • Page 114
    ... by adidas Group SEA compliance staff - meet a defined Key Performance Indicator (KPI) rating for factories' compliance performance - have a management plan in place that details the factory's compliance programme and future targets - are publicly disclosed on the adidas Group website quarters of...

  • Page 115
    ... DJSI World (DJSI = Dow Jones Sustainability Index) DJSI STOXX DJSI EURO STOXX FTSE4Good Europe Index ASPI Eurozone Index Ethibel Sustainability Index Excellence Europe ECPI Ethical Index EMU STOXX Global ESG Leaders SEE OUR SHARE, P. 54 . For more information adidas Group 2011 Annual Report

  • Page 116
    03 03.1 03.2 FINANCIAL REVIEW GROUP MANAGEMENT REPORT Internal Group Management System Group Business Performance Economic and Sector Development Income Statement Statement of Financial Position and Statement of Cash Flows Treasury Financial Statements and Management Report of adidas AG Disclosures...

  • Page 117
    ... She wears the JANAE HEEL Style Made Comfortable with Style Made Comfortable with The culmination of years of development, Rockport will introduce truWalk Zero in spring 2012. A market-leading innovation to claim ownership of lightness in the brown shoe industry. Featuring advanced lightweight...

  • Page 118
    ... Group Management System The principal financial 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...

  • Page 119
    ... within a sports category, strengthening our technology portfolio or addressing new consumer segments. The strategies of any potential acquisition candidate must correspond with the Group's strategic direction. Maximising return on invested capital above the cost of capital in the long term is...

  • Page 120
    ... of the Group's operating performance. We also benchmark the Group's financial results with those of our major competitors on a quarterly basis. To assess current sales and profitability development, Management analyses sell-through information from our own-retail activities as well as short-term...

  • Page 121
    ... process led by Group Finance Integrated KPIs + Financials Feedback results Operations Review Sales Review All channels All markets Marketing Review 03 adidas Group targets versus actual key metrics 2010 Actual 2011 Initial outlook 1) 2011 Actual 2012 Targets Sales (year-over-year change...

  • Page 122
    ...-neutral Group sales increased 13% as a result of double-digit growth in the Wholesale and Retail segments as well as in Other Businesses. In euro terms, adidas Group revenues grew 11% to â,¬ 13.344 billion from â,¬ 11.990 billion in 2010. The Group's gross margin decreased 0.3 percentage points to...

  • Page 123
    ... expansion of activities in digital, mobile and social media. In addition, the pace of consolidation in the industry increased in 2011, with several acquisitions, both on a manufacturer and a retailer level, during the year. Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 USA 2) Euro area 3) Japan 4) China...

  • Page 124
    ...0000 International brands drive Asian sporting goods industry expansion Strong wage growth and consumer spending supported increases in Asia's sporting goods industry, which grew at a high-single-digit rate in 2011. Growth in China's sportswear industry was mainly driven by international brands, as...

  • Page 125
    ...'s major markets. Currency translation effects had a mixed impact on regional sales in euro terms TABLE 09 . 121 20 11 Group sales increase driven by double-digit growth in all segments In 2011, currency-neutral Wholesale revenues increased 11%, mainly due to double-digit sales growth at adidas...

  • Page 126
    ... points The gross margin of the adidas Group decreased 0.3 percentage points to 47.5% in 2011 (2010: 47.8%) DIAGRAM 15 . The increase in input costs more than offset the positive impact from a more favourable product and regional sales mix as well as a larger share of higher-margin 2011 2010...

  • Page 127
    ... the Group's financial results in 2010 SEE NOTE 29, P. 208 . store openings to support the Group's retail expansion. In addition, higher expenditure at the point of sale as well as new product launches at Reebok contributed to this development. By brand, adidas sales working budget decreased 1% to...

  • Page 128
    ... year level of 42,541. New hirings related to the expansion of the Group's own-retail store base were the main driver of this development. On a full-time equivalent basis, the number of employees increased 12% to 40,637 at the end of 2011 (2010: 36,444) SEE EMPLOYEES, P. 101 . 25 Operating margin...

  • Page 129
    ...GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Income Statement Operating margin improves 0.1 percentage points Group operating profit increased 13% to â,¬ 1.011 billion in 2011 versus â,¬ 894 million in 2010 DIAGRAM 23 . As a result, the operating margin of the adidas Group...

  • Page 130
    ... borrowings Accounts payable Long-term borrowings Other liabilities Total equity â- 2011 â- 2010 11,380 10,618 2.5% 2.6% 16.6% 16.0% 8.7% 12.6% 25.4% 25.3% 46.8% 43.5% 1) For absolute figures see adidas AG Consolidated Statement of Financial Position, p. 174. adidas Group 2011 Annual Report

  • Page 131
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Statement of Financial Position and Statement of Cash Flows Other current financial assets up 55% Other current financial assets grew 55% to â,¬ 304 million at the end of December 2011 from â,¬ 197 million in 2010 SEE ...

  • Page 132
    ... adidas Group's own-retail activities SEE NOTE 27, P. 201 . Cash and cash Net cash generated equivalents at the from operating activities end of 2010 1) 792 (566) (491) 1,156 906 39 Shareholders' equity (â,¬ in millions) 5,327 4,616 3,771 3,386 3,023 1) Includes a positive exchange rate effect...

  • Page 133
    ... and intangible assets (excluding acquisitions). Group capital expenditure increased 39% to â,¬ 376 million in 2011 (2010: â,¬ 269 million). The Retail segment accounted for 26% of Group capital expenditure (2010: 23%). Investments primarily related to the expansion of our store base for the adidas...

  • Page 134
    ... are reviewed on a quarterly basis. We maintain good relations with numerous partner banks, thereby avoiding a high dependency on any single financial institution. Banking partners of the Group and our subsidiaries are required to have at least a BBB+ long-term investment grade rating by Standard...

  • Page 135
    ... . The positive effect from lower interest rates on short-term borrowings was partly offset by the negative effect from local borrowings in currencies which carry a higher average interest rate. Fixed-rate financing amounted to 77% of the Group's total gross borrowings at the end of 2011 (2010: 76...

  • Page 136
    ... within the Group's medium-term guideline of less than two times. Efficient management of our capital structure continues to be a top management priority SEE SUBSEQUENT EVENTS AND OUTLOOK, P. 163 . 51 Financing structure 1) (â,¬ in millions) 2011 2010 Cash and short-term financial assets Bank...

  • Page 137
    ... functions such as Global Marketing, Group Treasury, Taxes, Legal and Finance, and it also administers the shareholdings of the company. Income Statement 54 Statement of income in accordance with HGB (condensed) (â,¬ in millions) 2011 2010 Net sales Total output Other operating income Cost...

  • Page 138
    03.2 GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Group Business Performance Financial Statements and Management Report of adidas AG 03.2 Other operating income declines 2% In 2011, other operating income of adidas AG declined 2% to â,¬ 1.254 billion. This was primarily due to a decrease in income ...

  • Page 139
    ... REPORT - FINANCIAL REVIEW Group Business Performance Financial Statements and Management Report of adidas AG Disclosures pursuant to § 315 Section 4 and § 289 Section 4 of the German Commercial Code Liabilities decline 10% Liabilities decreased â,¬ 187 million to â,¬ 3.385 billion (2010...

  • Page 140
    ... Group Business Performance GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Disclosures pursuant to § 315 Section 4 and § 289 Section 4 of the German Commercial Code 03.2 Executive Board appointment and dismissal Pursuant to § 6 of the Articles of Association and § 84 AktG, the Supervisory Board...

  • Page 141
    ..., in accordance with common practice, entitle the creditor to termination and early calling-in of any outstanding amounts. No compensation agreements exist between adidas AG and members of the Executive Board or employees relating to the event of a takeover bid. adidas Group 2011 Annual Report

  • Page 142
    ... adidas Sport Style. Currency-neutral Reebok revenues increased at a low-single-digit rate. Currency translation effects negatively impacted segmental revenues in euro terms. Sales in the Wholesale segment grew 10% to â,¬ 8.971 billion from â,¬ 8.181 billion in 2010 TABLE 01 . Wholesale gross margin...

  • Page 143
    ...Performance adidas Sport Style Reebok 07 Wholesale segmental operating profit by quarter (â,¬ in millions) Q4 2011 Q4 2010 523 525 813 813 586 607 802 626 Wholesale development by brand In 2011, adidas Sport Performance wholesale revenues grew 10% on a currency-neutral basis. Growth was mainly...

  • Page 144
    ...-digit rate. Currency translation effects had a mixed impact on regional sales in euro terms TABLE 09 . 09 Retail net sales by region (â,¬ in millions) 2011 2010 Change Change (currency-neutral) Western Europe European Emerging Markets North America Greater China Other Asian Markets Latin America...

  • Page 145
    ...FINANCIAL REVIEW Business Performance by Segment Retail Business Performance Retail development by brand In 2011, adidas Group Retail sales increased at a double-digit rate at both adidas and Reebok. Currency-neutral adidas Sport Performance revenues grew 15% in the period. adidas Sport Style sales...

  • Page 146
    ... points to 27.0% from 26.0% in 2010 TABLE 16 . This was the result of the stable gross margin as well as the positive effect resulting from lower segmental operating expenses as a percentage of sales. 15 Retail number of stores 2011 2010 Concept stores Factory outlets Other formats Total â- 2011...

  • Page 147
    ... China Latin America Other Businesses development by segment In 2011, TaylorMade-adidas Golf revenues grew 16% on a currencyneutral basis. Growth at TaylorMade was primarily driven by strong double-digit revenue increases in both metalwoods and putters. Sales for adidas Golf also increased, mainly...

  • Page 148
    ...and adidas SLVR as well as the first-time consolidation of Five Ten in the fourth quarter. Currency translation effects had no impact on sales in euro terms. Revenues in Other Centrally Managed Brands increased 13% to â,¬ 64 million (2010: â,¬ 57 million). 144 20 20 Other Businesses net sales by...

  • Page 149
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.4 Risk and Opportunity Report 03.4 Risk and Opportunity Report The adidas Group continuously explores and develops opportunities to sustain earnings and drive long-term increases in shareholder value. We acknowledge that in our daily business we are ...

  • Page 150
    ..., others closely observe brand, distribution channel and price point developments as well as changes in other areas such as input prices, financial market conditions or technological developments. The Risk Owners use various instruments in the risk and opportunity identification process such as...

  • Page 151
    ... with an opportunity value of above â,¬ 1 million on the relevant metric. Secondly, Group Risk Management aggregates the reported risks and, also on a quarterly basis, provides the adidas AG Executive Board with a consolidated Group-wide report based on the Risk Owners' input. Material changes in...

  • Page 152
    .../brand image risks Own-retail risks Risks related to rising input costs Supplier risks Inventory risks Customer risks Regulatory risks Risks related to key event or promotion partnerships Product innovation and development risks Personnel risks IT risks Compliance-related risks Legal risks Social...

  • Page 153
    ... to innovate and bring fresh new technologies and designs to market SEE RESEARCH AND DEVELOPMENT, P. 95 . We also seek to enhance consumer demand for our brands through extensive marketing, product and brand communication programmes SEE GLOBAL BRANDS STRATEGY, P. 68 . And we focus on supply chain...

  • Page 154
    ... MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report Strategic and operational risks 03.4 Reputation/brand image risks The adidas Group faces considerable risk if we are unable to uphold high levels of consumer awareness, affiliation and purchase intent for our brands. Negative media...

  • Page 155
    ...activity and inventory obsolescence as well as reduced liquidity due to higher operating working capital requirements. Similarly, a sudden increase in demand can lead to product shortfalls at the point of sale. In this situation, our Group faces the risk of missed sales opportunities and/or customer...

  • Page 156
    ...environment. Our goal is to make the adidas Group the "employer of choice" within our industry. Attractive reward and incentive schemes are designed to further support long-term career opportunities and planning SEE EMPLOYEES, P. 101 . With the expansion of our own-retail activities and the increase...

  • Page 157
    ...strategic direction and five-year plan is aligned with the adidas Group's overall Route 2015 strategic business plan. New quality reviews for major projects have been implemented to ensure that the progress, quality and costs of those projects are regularly evaluated by members of senior management...

  • Page 158
    ...GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Risk and Opportunity Report Compliance-related risks Financial risks 03.4 Risks related to product counterfeiting and imitation As popular consumer brands which rely on technological and design innovation as defining characteristics, the Group's brands...

  • Page 159
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.4 Risk and Opportunity Report Financial risks Other activities to mitigate credit risks include retention of title clauses as well as, on a selective basis, credit insurances, accounts receivable sales without recourse and bank guarantees. Objective ...

  • Page 160
    ... currencies. Moreover, all outstanding currency derivatives were re-evaluated using hypothetical foreign exchange rates to determine the effects on net income and equity. The analysis was performed on the same basis for both 2010 and 2011. Based on this analysis, a 10% increase in the euro versus...

  • Page 161
    ...'s profitability, liquidity and financial position. In line with IFRS 7 requirements, we have analysed the impact of changes in the Group's most important interest rates on net income and shareholders' equity. The effect of interest rate changes on future cash ï¬,ows is excluded from this analysis...

  • Page 162
    ... new social experiences to drive sports participation Ongoing fusion of sport and lifestyle Emerging markets as long-term growth drivers Women's segment offers long-term potential Increasing consumer demand for functional apparel Growing popularity of "green" products Social media offering new...

  • Page 163
    ... strategic business plan. After the successful introduction in emerging markets, mainly Greater China and Russia, in 2012, we will open 10 adidas NEO label pilot stores in Germany in order to test this fastfashion model in a mature market SEE ADIDAS STRATEGY, P. 72 . adidas Group 2011 Annual Report

  • Page 164
    ... 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 commercially SEE GLOBAL BRANDS STRATEGY, P. 68 . Social media offering new ways to engage consumers...

  • Page 165
    ... in developing unique and relevant products that fit specific functional and aesthetic requirements SEE GROUP STRATEGY, P. 60 . For example, the adidas, Reebok and TaylorMade brands all offer different personalisation and customisation platforms reï¬,ecting each brand's strategy. Key concepts...

  • Page 166
    ... and Opportunity Report GROUP MANAGEMENT REPORT - FINANCIAL REVIEW Financial opportunities Management assessment of overall risks and opportunities 03.4 Financial opportunities Favourable financial market changes Favourable exchange and interest rate developments can potentially have a positive...

  • Page 167
    ... results in 2012. We forecast adidas Group sales to increase at a mid- to high-single-digit rate on a currencyneutral basis due to growth in the Wholesale and Retail segments as well as in Other Businesses. Group gross margin is expected to be around 47.5%. Pressures from higher input costs will...

  • Page 168
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.5 Subsequent Events and Outlook 03.5 In Latin America, GDP growth rates are likely to moderate to a level of around 3.5% in 2012. A healthy labour market, strong domestic investment levels, robust private consumption rates and industrial production are...

  • Page 169
    ... - FINANCIAL REVIEW 03.5 Subsequent Events and Outlook 01 adidas Group 2012 outlook Currency-neutral sales development (in %): adidas Group Wholesale Retail Comparable store sales Other Businesses TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Gross margin Operating margin Earnings per share...

  • Page 170
    ... markets. In addition, improvements in the Retail segment as well as at the Reebok brand will positively inï¬,uence Group gross margin development. Furthermore, product price increases are also forecasted to benefit the Group gross margin development. Operating margin to continue to expand In 2012...

  • Page 171
    ...Germany, and the increased deployment of SAP and other IT systems in major subsidiaries within the Group. All investments within the adidas Group in 2012 are expected to be fully financed through cash generated from operating activities. Excess cash to be used to support growth initiatives In 2012...

  • Page 172
    ... earnings at a compound annual growth rate of 15% and to reach an operating margin of 11% sustainably by 2015 at the latest. For 2013, in line with our mid-term guidance, we project adidas Group sales and net income to increase compared to 2012. In order to reach our strategic goals and create long...

  • Page 173
    GROUP MANAGEMENT REPORT - FINANCIAL REVIEW 03.5 Subsequent Events and Outlook 02 Product Major 2012 product launches Brand adizero Rose 2.5 basketball shoe adizero adios 2 running shoe adipure Trainer training shoe adipure Adapt running shoe Climacool Seduction running shoe Climacool Freshride ...

  • Page 174
    ... Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes Notes to the Consolidated Statement of Financial Position Notes to the Consolidated Income Statement Notes - Additional Information Statement of Movements of Intangible and Tangible Assets Shareholdings...

  • Page 175
    ... Day's style. ©2011 Taylor Made Golf Company, Inc. adidas, the 3-Bars logo, and the 3-Stripes mark are registered trademarks of the adidas Group. E T H E R W E W IN adidas Golf, known for its technology-infused, game-enhancing apparel and footwear, launches an entirely new apparel line...

  • Page 176
    ... of the assets, liabilities, financial position and profit or loss of the Group, and the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated...

  • Page 177
    ...nancial statements prepared by adidas AG, Herzogenaurach, comprising the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash ï¬,ows and the notes, together with the management report of the Company and the Group for...

  • Page 178
    ... Other non-current financial assets Deferred tax assets Other non-current assets Total non-current assets Total assets Rounding differences may arise in percentages and totals. The accompanying notes are an integral part of these consolidated financial statements. adidas Group 2011 Annual Report

  • Page 179
    ... of Financial Position .. adidas AG Consolidated Statement of Financial Position (IFRS) (â,¬ in millions) Note Dec. 31, 2011 Dec. 31, 2010 Change in % LIABILITIES AND EQUITY Short-term borrowings Accounts payable Other current financial liabilities Income taxes Other current provisions Current...

  • Page 180
    ... FIN A NCI A L S TATEMENTS 04.4 Consolidated Income Statement 04.4 Consolidated Income Statement .. adidas AG Consolidated Income Statement (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Change Net sales Cost of sales 35 13,344 7,000 6,344 47.5% 93...

  • Page 181
    ... Income .. adidas AG Consolidated Statement of Comprehensive Income (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2011 Year ending Dec. 31, 2010 Net income after taxes Net gain on cash ï¬,ow hedges, net of tax Actuarial loss of defined benefit plans (IAS 19), net of tax Asset ceiling effect...

  • Page 182
    ... at December 31, 2011 1) Reserves for actuarial gains/losses and share option plans. Rounding differences may arise in percentages and totals. The accompanying notes are an integral part of these consolidated financial statements. 20 11 25 26 209 722 25 26 209 722 adidas Group 2011 Annual Report

  • Page 183
    ... interests Total equity (451) 330 (41) 31 (18) (10) 3,350 567 (73) 0 3,771 918 (73) 0 4,616 878 (167) 0 5,327 5 2 (0) 3,776 179 920 (73) 0 7 (1) (2) 4,623 877 (169) 0 4 5,331 20 11 (121) 94 (10) 123 (28) (10) 3,844 671 (167) 0 (27) 113 (38) 4,348 adidas Group 2011 Annual Report

  • Page 184
    ... long-term borrowings Proceeds from issue of a Eurobond Dividend paid to shareholders of adidas AG Dividend paid to non-controlling interest shareholders Cash repayments of short-term borrowings Net cash used in financing activities Effect of exchange rates on cash Net (decrease)/increase of cash...

  • Page 185
    ... 91074 Herzogenaurach, Germany. adidas AG and its subsidiaries (collectively the "adidas Group" or the "Group") design, develop, produce and market - increasingly through own-retail activities - a broad range of athletic and sports lifestyle products. The operating activities of the adidas Group are...

  • Page 186
    ... items denominated in non-functional currencies of the subsidiaries are generally translated into the functional currency at closing exchange rates at the balance sheet date. The resulting currency gains and losses are recorded directly in the income statement. adidas Group 2011 Annual Report

  • Page 187
    ...in a separate item within shareholders' equity without affecting the income statement. A summary of exchange rates to the euro for major currencies in which the Group operates is as follows: Exchange rates (â,¬ 1 equals) Average rates for the year ending Dec. 31, 2011 2010 2011 Spot rates at Dec. 31...

  • Page 188
    ...sale Primarily non-current assets and liabilities expected to be recovered principally through sale rather than through continuing use are classified as held for sale. These are measured at the lower of their carrying amount and fair value less costs to sell...are met. adidas Group 2011 Annual Report

  • Page 189
    ... long-term average growth rate of the business to which the trademarks are allocated. The discount rate is based on a weighted average cost of capital calculation derived using a five-year average market-weighted debt/ equity structure and financing costs referencing the Group's major competitors...

  • Page 190
    ... on a weighted average cost of capital calculation considering a five-year average market-weighted debt/equity structure and financing costs referencing the Group's major competitors for each cash-generating unit (or groups of units). The discount rates used are after-tax rates and reï¬,ect the...

  • Page 191
    ... methods for intangible assets. Advertising and promotional expenditures Production costs for media campaigns are included in prepaid expenses (other current and non-current assets) until the services are received, and upon receipt expensed in full. Significant media buying costs are expensed...

  • Page 192
    ... those cash-generating units operating in the outdoor product segment at the time of the acquisition. The goodwill is denominated in the local functional currency SEE NOTE 02 . If this acquisition had occurred on January 1, 2011, total Group net sales would have been â,¬ 13.4 billion and net income...

  • Page 193
    ... majority of short-term financial assets are marketable securities relating to structured deposits. 07 Other current financial assets Other current financial assets consist of the following: Other current financial assets (â,¬ in millions) Dec. 31, 2011 Dec. 31, 2010 06 Accounts receivable...

  • Page 194
    ... benefits. In 2011, reversals of impairment losses were recorded in an amount of â,¬ 1 million (2010: â,¬ 7 million). For details see Attachment I to the consolidated financial statements SEE STATEMENT OF MOVEMENTS OF INTANGIBLE AND TANGIBLE ASSETS, P. 216 . adidas Group 2011 Annual Report

  • Page 195
    ...to the Consolidated Statement of Financial Position 12 Goodwill 13 Trademarks and other intangible assets Goodwill primarily relates to the Group's acquisitions of the Reebok and TaylorMade businesses as well as acquisitions of subsidiaries, primarily in the United States, Australia/New Zealand...

  • Page 196
    ...market price in an active market. Therefore, existing contractual settlements were used in order to calculate the fair value as at December 31, 2011. Dividends are distributed by FC Bayern München AG instead of regular interest payments. Additionally, long-term financial assets include investments...

  • Page 197
    ... maturities were classified as long-term borrowings as they represented permanent funding volumes that were covered by the committed mid-term syndicated loan, which ends in 2012. For further details on future cash outï¬,ows SEE RISK AND OPPORTUNITY REPORT, P. 145 . adidas Group 2011 Annual Report

  • Page 198
    ...lling customer claims with regard to the return of faulty products sold by the Group. The amount of the provision follows the historical development of returns, allowances and warranty as well as current agreements. Provisions for taxes other than income taxes mainly relate to value added tax, real...

  • Page 199
    ..., rebates and sales commissions. Accrued liabilities for payroll and commissions mainly consist of accruals for outstanding salary payments, such as bonuses and overtime, as well as outstanding vacation. Other accrued liabilities partly include accruals for interest. adidas Group 2011 Annual Report

  • Page 200
    ... of plan assets Funded status Present value of unfunded obligation Asset ceiling effect Net defined benefit liability Thereof: liability Thereof: adidas AG Thereof: asset Thereof: adidas AG 76 (67) 9 184 1 194 195 154 (1) (1) 74 (67) 7 163 1 171 172 138 (1) (1) adidas Group 2011 Annual Report

  • Page 201
    ... accepted capital market principles. In the UK, the assumed long-term rate of return on each asset class is assumed to be in line with long-term government bonds, with an additional investment return of 3.5% for equity securities and 1.0% for corporate bonds. In Germany, the plan assets are invested...

  • Page 202
    ...Consolidated Statement of Financial Position 04.8 The expected payments for 2012 amount to â,¬ 9 million. Thereof, â,¬ 6 million relate to benefits paid directly by the Group companies and â,¬ 3 million to employer contributions paid into the plan assets. In 2011, the actual return on plan assets...

  • Page 203
    ...had not been used. At the same time, the Annual General Meeting granted the Executive Board a new authorisation to repurchase adidas AG shares up to an amount totalling 10% of the nominal capital until May 5, 2015. The authorisation may be used by the company but also by its subsidiaries or by third...

  • Page 204
    ... of the 2011 Annual General Meeting, the dividend for 2010 was â,¬ 0.80 per share (total amount: â,¬ 167 million). The Executive Board of adidas AG will propose to shareholders a dividend payment of â,¬ 1.00 per dividend-entitled share for the year 2011 to be made from retained earnings of â,¬ 312...

  • Page 205
    ... are assigned to seven subsidiaries as at December 31, 2011 and 2010, respectively SEE ATTACHMENT II TO THE CONSOLIDATED FINANCIAL STATEMENTS, SHAREHOLDINGS OF ADIDAS AG, HERZOGENAURACH, P. 218 . These subsidiaries were partly acquired in connection with the acquisition of Reebok and partly through...

  • Page 206
    ...39 Carrying amount Dec. 31, 2011 11 202 20 Measurement according to IAS 39 Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2011 Financial assets Cash and cash equivalents Short-term financial assets Accounts...

  • Page 207
    ... Held for Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) 566 âˆ' 566 1,872 18 3,504 12 adidas Group 2011 Annual Report

  • Page 208
    ... 39 Carrying amount Dec. 31, 2010 Measurement according to IAS 39 Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2010 204 20 11 Financial assets Cash and cash equivalents Short-term financial assets Accounts...

  • Page 209
    ... Trading (FAHfT) Loans and Receivables (LaR) Available-for-Sale Financial Assets (AfS) Financial Liabilities Measured at Amortised Cost (FLAC) Financial Liabilities at fair value through profit or loss Held for Trading (FLHfT) 336 - 336 1,824 14 3,723 28 205 20 11 adidas Group 2011 Annual Report

  • Page 210
    ... 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 availablefor-sale are based on quoted market prices in an active market or...

  • Page 211
    ... swaps for liquidity management purposes and hedging transactions. adidas Group 2011 Annual Report 20 Net gains or losses on loans and receivables comprise mainly impairment losses and reversals. Net gains or losses on financial liabilities measured at amortised cost include effects from early...

  • Page 212
    .... In 2011, marketing working budget accounted for approximately 25% (2010: 26%) of the total other operating expenses. Expenses for central administration include the functions IT, Finance, Legal, Human Resources, Facilities & Services as well as General Management. adidas Group 2011 Annual Report

  • Page 213
    ... expenses Personnel expenses 1,439 152 55 1,646 1,338 132 51 1,521 Personnel expenses are primarily included within other operating expenses. Personnel expenses which are directly attributable to the production costs of goods are included within the cost of sales. adidas Group 2011 Annual Report

  • Page 214
    ... to additional tax if they were remitted as dividends or if the Group were to sell its shareholdings in the subsidiaries. Tax expenses Deferred tax assets, net as at January 1 Deferred tax income Change in consolidated companies 1) Change in deferred taxes attributable to effective portion of...

  • Page 215
    ... design, distribution and marketing of athletic and sports lifestyle products. Following the Group's internal management reporting and in accordance with the definition of IFRS 8 "Operating Segments", six operating segments have been identified: Wholesale, Retail, TaylorMade-adidas Golf, Rockport...

  • Page 216
    ... not reported separately to the Executive Board of adidas AG. 212 20 11 Segments (â,¬ in millions) Wholesale Retail Other Businesses Total 2011 2010 2011 2010 2011 2010 2011 2010 Net sales (non-Group) Segmental operating profit Segmental assets Segmental liabilities Capital expenditure...

  • Page 217
    ... of stores in the Retail segment, in new office buildings and IT systems as well as the purchase of shortterm financial assets. Cash outï¬,ows from financing activities were mainly related to repayment of short-term borrowings totalling â,¬ 273 million (2010: â,¬ 198 million) and dividends paid...

  • Page 218
    ...fied as related parties who solely received remuneration in connection with their function as key management personnel. For information about the remuneration of the Supervisory Board and the Executive Board of adidas AG SEE NOTE 39 SEE COMPENSATION REPORT, P. 50 . Dec. 31, 2011 Dec. 31, 2010 39...

  • Page 219
    ... for submission to the Supervisory Board on February 15, 2012. It is the Supervisory Board's task to examine the consolidated financial statements and give their approval and authorisation for issue. Herzogenaurach, February 15, 2012 The Executive Board of adidas AG adidas Group 2011 Annual Report

  • Page 220
    ... 31, 2010 / January 1, 2011 Currency effect Additions Impairment losses Reversals of impairment losses Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2011 Net carrying amount...

  • Page 221
    04.9 CONSOLIDATED FIN A NCI A L S TATEMENTS Statement of Movements of Intangible and Tangible Assets ATTACHMENT I Internally generated software Total intangible assets Land and buildings Technical equipment and machinery Other equipment, furniture and fixtures Construction in progress Total ...

  • Page 222
    ...business. 6) The number refers to the number of the company. 7) Sub-group Onfield. 8) Sub-group Reebok-CCM Hockey, Inc. 9) Sub-group Reebok International Limited. 10) Profit and loss transfer agreement. 11) Sub-group Taylor Made Golf Co., Inc. 12) Sub-group adidas Brazil. adidas Group 2011 Annual...

  • Page 223
    CONSOLIDATED FIN A NCI A L S TATEMENTS 04.10 Shareholdings .. Shareholdings of adidas AG, Herzogenaurach (at December 31, 2011) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 40 Reebok Pensions Management Limited 5) 9) 41 Reebok...

  • Page 224
    ...Shareholdings of adidas AG, Herzogenaurach (at December 31, 2011) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 89 Life Sport Ltd. 90 adidas (South Africa) (Pty) Ltd. North America 91 adidas North America, Inc. 92 adidas America...

  • Page 225
    ...10 Shareholdings .. Shareholdings of adidas AG, Herzogenaurach (at December 31, 2011) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 134 adidas Sports (China) Co. Ltd. 135 adidas (China) Ltd. 136 Zhuhai adidas Technical Services...

  • Page 226
    05 05.1 05.2 05.3 05.4 05.5 05.6 ADDITIONAL INFORMATION Ten-Year Overview Glossary Index Declaration of Support Publishing Details & Contact Financial Calendar 224 228 234 235 236 237 T O G E T H E R W E W IN

  • Page 227
    ... and takes its cue from the experimental city of Brasília. Portraits are collaged with architectural images that define the city and are a meditation on the bond between human beings and their environment. Together we win. T O G E T H E R W Y-3 E W IN 05 A DDITION A L INFORM ATION

  • Page 228
    ... 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) Net Sales by Brand (â,¬ in millions) adidas Reebok TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Net Sales by Product...

  • Page 229
    A DDITION A L INFORM ATION 05.1 Ten-Year Overview 2008 2007 2006 1) 2005 2004 2003 2002 10,799 5,256 89 103 4,378 1,280 1,070 (... 2,644 551 2,684 4,434 1,155 1,425 1,336 (665) 1,544 4,188 1,164 1,335 1,433 (1,018) 1,285 4,261 1,190 1,560 1,445 (1,498) 1,081 adidas Group 2011 Annual Report

  • Page 230
    ...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) Net cash generated from operating activities (in â,¬) Dividend...

  • Page 231
    A DDITION A L INFORM ATION 05.1 Ten-Year Overview 2008 2007 2006 1) 2005 2004 2003 2002 1.7 24.5% 64.6% 35.5% 73.6% 127.7% 89.1% 48.2% 51.8% 10.5% 55.1% 109.8% 8.4 ...,692 38,982 1,283 31,344 1,186 26,376 1,087 15,935 706 14,254 637 15,686 709 14,716 758 adidas Group 2011 Annual Report

  • Page 232
    ... our products. Own-production expenses are also included in the Group's cost of sales. Capital expenditure Total cash expenditure used for the purchase of tangible and intangible assets, excluding acquisitions and finance leases. B Backlogs Also called order backlogs. The value of orders received...

  • Page 233
    ... business, e.g. planning, manufacturing, sales and marketing. with a special leasing company for a specific, nonterminable initial leasing term. The investment risk is borne by the lessee. Days of Sales Outstanding (DSO) Average time of receipt of outstanding payments from customers. Financial...

  • Page 234
    ... the means to make large and long-term investments. K Key accounts Wholesalers or retailers which are considered to be primary customers for the Group and account for a large percentage of sales. Grassroots events Grassroots events involve the advertising and promotion of products and/or services...

  • Page 235
    ...market value of all shares outstanding. Market capitalisation = number of shares outstanding Ã- current market price. OHSAS 18000 OHSAS 18000 is an international occupational health and safety management system specification. P Performance business In the sporting goods industry, business related...

  • Page 236
    ... = overall market rate - risk-free rate. Stakeholders All groups that have a direct or indirect interest in the efforts and results of a company, e.g. lenders, shareholders, consumers, retailers, suppliers, licensees, business partners in the supply chain, employees, international sport federations...

  • Page 237
    ... tax rate. 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 ALSO OPERATING WORKING CAPITAL . World Business Council for Sustainable Development (WBCSD) The WBCSD is a global...

  • Page 238
    ...Cash Flows 126 ff., 180, 213 Statement of Financial Position (Balance Sheet) 126 ff., 174 f., 189 ff. Structure and Strategy: - adidas Group 60 ff., Booklet 6 f. - Brand Segments 68 ff. Subsequent Events and Outlook 163 ff. Supervisory Board: - Committees 42 f. - Members 38 f. - Report 40 ff. Supply...

  • Page 239
    ... Made Korea Ltd., Seoul, Korea The Rockport Company, LLC, Wilmington, Delaware, USA World of Commerce GmbH & Co. KG, Herzogenaurach, Germany World of Commerce Management GmbH, Herzogenaurach, Germany Zhuhai adidas Technical Services Limited, Zhuhai, China 235 20 11 adidas Group 2011 Annual Report

  • Page 240
    .../investors adidas Group is a member of DIRK (German Investor Relations Association). This report is also available in German. For further adidas Group publications, please see our corporate website. To improve readability, registered trademarks are omitted in this Annual Report. Concept and Design...

  • Page 241
    ... of 2011 Annual Report May 3, 2012 First Quarter 2012 Results Press release, conference call and webcast Publication of First Quarter 2012 Report May 10, 2012 Annual General Meeting Fuerth (Bavaria), Germany Webcast May 11, 2012 Dividend payment (Subject to Annual General Meeting approval...

  • Page 242
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