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adidas Group
Annual Report
2013

Table of contents

  • Page 1
    adidas Group Annual Report 2 0 13

  • Page 2
    ... 2014 Currency-neutral sales development: adidas Group increase at a mid-single-digit rate Wholesale segment increase at a low-single-digit rate Retail segment increase at a high-single- to low-double-digit rate Other Businesses increase at a mid- to high-single-digit rate TaylorMade-adidas Golf...

  • Page 3
    adidas Group Annual Report 2 0 13 We are at home on all the stages of this world: on the field of play, in the stadium, on the track, in the gym, on the golf course, on the catwalk and on the street. For us, sport is so much more than a game. We live and love sport, and we continuously strive to ...

  • Page 4
    ...Net income attributable to shareholders in % of net sales 1) 2) Average operating working capital in % 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 Receivables and other current assets...

  • Page 5
    ...athletic shoe technologies. Today, the brand continues to combine this DNA with the innovation resources of the adidas Group, to design products which deliver uncompromised style with state-of-the-art engineered comfort for metropolitan consumers around the world. For more information on our brands...

  • Page 6
    ... 02.4 02.5 02.6 02.7 02.8 02.9 02.10 OUR GROUP GROUP MANAGEMENT REPORT adidas Group Worldwide Major Sporting Events 2014 Group Strategy Global Sales Strategy Global Brands Strategy Other Businesses Strategy Global Operations Research and Development Employees Sustainability 66 67 68 72 77 86 94 99...

  • 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
    ... BARR BUSINESS UNIT RUNNING ADIDAS HERZOGENAURACH, GERMANY --- F O R T H E L O V E O F S P O R T To be sold in 2014: 8 MILLION PAIRS OF BOOST RUNNING SHOES AWARD! Supernova Glide Boost wins International Editor's Choice Award from Runner's World adidas Group / 2013 Annual Report

  • Page 9
    Find out more here: WWW.ADIDAS-GROUP.COM LOVE_BOOST DECEMBER 2013: LAUNCH Launch of the Supernova Glide Boost adidas Group / 2013 Annual Report

  • Page 10
    Brazuca THE NAME "BRAZUCA" WAS VOTED BY OVER 1 MILLION FANS 13 20 MAT T H I A S M E CKIN G B U S I NE SS UN I T FOOT B A LL A DI DA S HE R Z O G E N A U R ACH, GE R MA N Y --- 2.5 YEARS In development 600 PLAYERS Tested in 10 different countries by 600 players adidas Group / 2013 Annual Report...

  • Page 11
    ... match ball for the 2014 FIFA World Cup, the Brazuca, to life. adidas is football and this summer our iconic match ball once again will be at the heart of the planet's biggest sporting event. The name was picked by Brazilian fans through a huge social media activation and refers to their national...

  • Page 12
    ... R DESIG N H ER ZO G EN A UR AC H , G E RM ANY --- STAN SMITH Named after the American tennis player Stan Smith 2013: 40 TH BIRTHDAY The return of the Stan Smith. Just in time for its 40th birthday, adidas relaunches the icon adidas Group / 2013 Annual Report F O R T H E L O V E O F

  • Page 13
    ... am Jaewon, part of the adidas Originals design team. I am pretty sure that I share a common passion with you: the Stan Smith. I think that this sneaker is one of the all-time greatest. These iconic shoes mean a lot of different things to a lot of different people, from sneakerheads to style setters...

  • Page 14
    ..., my name is Karen, and - together with my great team - we make the magic happen every day to get our extraordinary products to consumers all over the world. We all know it has become incredibly easy for a consumer to purchase a product across multiple channels, such as in stores, online, via mobile...

  • Page 15
    Output by 2015: 100 MILLION PIECES PER YEAR CAPACITY Warehouse capacity: more than 35 million pieces, more than 900,000 boxes and more than 95,000 palettes adidas Group / 2013 Annual Report

  • Page 16
    JANUARY 2013 Reebok and Spartan Race announce a multi-year partnership MARCH 2013 The Reebok Running team competes in the Atlanta Spartan Race and interviews Spartan athletes on site adidas Group / 2013 Annual Report F O R T H E L O V E O F S P O R T

  • Page 17
    ...is Matt and I am part of the Reebok Running Footwear product development team. It's a dream come true to get the opportunity to completely redefine the footwear for a sport. The Spartan Race partnership gave us this unique chance! Our objective was clear - to build a shoe that would conquer any dif...

  • Page 18
    ... with an unforgettable media experience on a private jet at 30,000 feet on route to Las Vegas. The boundaries for innovation are non-existent." O F S O V E P O R T For the love of sport. MEDIA EVENT First golf company PR team to launch a product to media on a jet adidas Group / 2013 Annual Report...

  • Page 19
    Find out more here: WWW.ADIDAS-GROUP.COM LOVE_JETSPEED NOVEMBER 15, 2013: RELEASE Release of JetSpeed, a breakthrough line of metalwoods MEDIA COVERAGE The JetSpeed product received substantial media coverage as a result of the trip adidas Group / 2013 Annual Report

  • Page 20
    25 HOMECOURT STORES TO OPEN GLOBALLY BY THE END OF 2014 Find out more here: WWW.ADIDAS-GROUP.COM LOVE_HOMECOURT JANUARY 1, 2014 HomeCourt retail concept launches in Beijing Brand Centre adidas Group / 2013 Annual Report F O R T H E L O V E O F S P O R T

  • Page 21
    ... brings the spirit of sport to retail, creating a place where consumers can feel the energy of the game and experience the unprecedented breadth and depth of the adidas brand." For the love of sport. APRIL 11, 2014 HomeCourt store opens in Bluewater in the UK adidas Group / 2013 Annual Report

  • Page 22
    ... teens the desirable products and experiences they want and can afford to buy. This love story has only just started." For the love of sport. FEBRUARY 2013 NEO's first fashion show in New York City with Selena Gomez, curated by teenagers from around the world adidas Group / 2013 Annual Report

  • Page 23
    F O R T H E L O V E O F S P O R T 19 20 13 Love letter from: @DreamGiiiirl Laura Find out more here: WWW.ADIDAS-GROUP.COM LOVE_NEO AUGUST 2013 NEO receives first love letter DECEMBER 2013 NEO reaches over 2 million Facebook fans adidas Group / 2013 Annual Report

  • Page 24

  • Page 25

  • Page 26
    ... DA S G LO B A L P R POR TL A N D, USA --- "Hi, my name is Paul and I love the exciting and creative work we do here at adidas Basketball. Every day is inspiring and motivating when you are as passionate about basketball as I am and you work with incredible and interesting products. A great example...

  • Page 27
    ... 01.10 Corporate Mission Statement Strategic Business Plan Operational and Sporting Highlights 2013 Letter from the CEO Executive Board Supervisory Board Supervisory Board Report Corporate Governance Report including the Declaration on Corporate Governance Compensation Report Our Share 24 25 26 30...

  • Page 28
    ... for sports and a sporting lifestyle. 24 20 13 1 We are committed to continuously strengthening our brands and products to improve our competitive position. 2 We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring...

  • Page 29
    ...17 billion, achieving an operating margin of 11% and increasing annual earnings at a compound annual rate of 15%. Our Group sales growth implies outperforming total market growth, both GDP and the sporting goods industry. Our three key "attack markets" North America, Greater China and Russia/CIS are...

  • Page 30
    ...a media event in Herzogenaurach, adidas underlines its leading M AR 05. adidas Originals launches its new 2013 global campaign "Unite All Originals". At the centre of the launch is the adidas collider hosted at : // WWW.ADIDAS.COM/UNITE, an online application enabling people to dive into a world...

  • Page 31
    To Our Shareholders Operational and Sporting Highlights 2013 / 01.3 / Q1 06 01 02 03 05 07 04 27 20 13 08 09 10 12 13 11 Q2 adidas Group / 2013 Annual Report

  • Page 32
    ... rights for the FIFA World Cup and all FIFA events until 2030. 03. At the 2013 Investor Field Trip in Herzogenaurach, the adidas Group assuming responsibility for Global Sales on Board level effective October 1, 2013. / PICTURE 06 19. Reebok announces a new partnership with world-renowned group...

  • Page 33
    To Our Shareholders Operational and Sporting Highlights 2013 / 01.3 / Q3 03 06 07 01 04 05 29 02 20 13 08 10 13 09 11 12 14 Q4 adidas Group / 2013 Annual Report

  • Page 34
    ... to increase consumer desire for its brands through innovation and marketing excellence was again visible in several key categories and markets. This enabled the Group to deliver further progress towards its long-term sustainable margin objectives, which resulted in record earnings per share...

  • Page 35
    ... basis points to 8.7%. / Net income attributable to shareholders excluding goodwill impairment losses increased 6% to â,¬ 839 million. / Operating working capital as a percentage of sales increased 90 basis points to 20.9%. / Equity ratio expanded 2 percentage points to 47.3%. / Net cash at year-end...

  • Page 36
    ... key deliverable of our Route 2015 strategy - to drive quality growth and sustainable success for our Group by fuelling consumer desire with premium products and brand experiences. Let me share with you a few examples: / We called out 2013 as the year of running, and it was exactly that. Sales grew...

  • Page 37
    ...of the Group and its brands in the last three decades. Turning to the future: the passion, the inspiration and the drive for success our employees have shown in delivering results underpin our common desire - to build the leading sporting goods company in the world. And 2014 will be no different. Be...

  • Page 38
    ...lightest performance golf shoe in the company's history. As you know, in 2010 we created our strategic business plan Route 2015. The centrepiece of the plan is to prepare and, in many respects, to transform the Group for long-term sustainable growth and success. Now, just after the half-way point of...

  • Page 39
    ...sport. This is our passion. And we will continue to work in a way that makes us proud of the result. I am convinced that we have everything in place to reach new heights, break records and drive long-term sustainable value. 35 20 13 HE R B ERT H A I NER adidas Group CEO adidas Group / 2013 Annual...

  • Page 40
    ... Deutschland AG, Munich, Germany / Member of the Supervisory Board, Deutsche Lufthansa AG, Cologne, Germany / R O B IN J. STA L K ER C hi ef Fi na nc i al O ffi cer For more information on the adidas Group's Executive Board: WWW.ADIDAS-GROUP.COM EXECUTIVE-BOARD adidas Group / 2013 Annual Report...

  • Page 41
    ... the adidas Group, he has held many senior management positions, including Business Unit Manager, Key Account Manager Europe and Head of Region Europe, Middle East and Africa. In 2009, he became Chief Sales Officer Multichannel Markets. In 2013, Roland Auschel was appointed to the Executive Board...

  • Page 42
    To Our Shareholders Executive Board / 01.5 / All our employees put their entire dedication and energy into our mission of making the adidas Group the global leader in the sporting goods industry. Why? Because we want to create as much sustainable value for all our stakeholders as possible. No ...

  • Page 43
    To Our Shareholders Executive Board / 01.5 / adidas Group / 2013 Annual Report F O R T H E L O V E O F S P O R T

  • Page 44
    ...Chairman of the Works Council Herzogenaurach, adidas AG DR. W OLFG ANG J Ä GER 1) Managing Director, Hans-Böckler-Stiftung, Düsseldorf, Germany DR. STEFAN JENTZSCH Partner, Perella Weinberg Partners UK LLP, London, Great Britain Member of the Supervisory Board, Sky Deutschland AG, Unterföhring...

  • Page 45
    ..., CeramTec GmbH, Plochingen, Germany 41 20 13 HANS RUPRECHT 1) Sales Director Customer Service Central Europe West, adidas AG HEIDI THALER-VEH 1) Member of the Central Works Council, adidas AG CHRISTIAN TOURRES Former Member of the Executive Board of adidas AG adidas Group / 2013 Annual Report

  • Page 46
    ... the Supervisory Board Dear Shareholders, 42 20 13 We look back on 2013 as a challenging but also successful year. Thanks to strong brands and partnerships in the world of sports, as well as first-class innovations, the adidas Group was again able to achieve good overall business results. Growth...

  • Page 47
    ... Reebok India Company. In addition, the Executive Board provided us with information on business development and planned marketing activities in the football category in the run-up to the 2014 World Cup. In August, we dealt intensively with the Group's new logistics and warehousing strategy and the...

  • Page 48
    ... held various management positions within the Group in Germany and abroad in the past 20 years. With the creation of a separate Executive Board function for Global Sales, we have taken into account the importance of Global Sales for our company. At our extraordinary meeting on January 8, 2014, after...

  • Page 49
    ... disclosure to the Supervisory Board and would also require reporting to the Annual General Meeting. There are no direct advisory or other service relationships between the company and a member of the Supervisory Board. Further information on corporate governance at the adidas Group can be found in...

  • Page 50
    ...13 The focal point of the committee's work in February 2013 was a preliminary examination of the annual financial statements and the consolidated financial statements for 2012, including the combined management report of adidas AG and the Group, as well as the Executive Board's proposal regarding...

  • Page 51
    ... combined management report for adidas AG and the Group. The financial statements, the proposal put forward by the Executive Board regarding the appropriation of retained earnings and the auditor's reports were distributed by the Executive Board to all Supervisory Board members in a timely manner...

  • Page 52
    ... our shareholders, business partners, employees and the financial markets. The following report includes the Corporate Governance Report and the Declaration on Corporate Governance issued by the Executive Board and Supervisory Board. Dual board system As a globally operating public listed company...

  • Page 53
    ...the number of women in management positions within the adidas Group. The Supervisory Board thus supports the Group's diversity concepts, particularly regarding management development programmes, with the goal of increasing the representation of women on the Executive Board in the long term. In order...

  • Page 54
    ... 1 new version) Insofar as no further statutory obligations exist, we report the ownership of shares or related financial instruments if it exceeds 1% of the shares issued by adidas AG, but we do not report this on an individual basis for the members of the Boards. Instead, we publish the total...

  • Page 55
    ...team, has for many years been dealing with the rights of employees in the supply chain as well as with the coordination of the environmental strategy and product safety management. In line with the Group-wide sustainability programme, the adidas Group developed a comprehensive environmental strategy...

  • Page 56
    ...Directors' dealings Accounting and annual audit Share ownership of the Executive Board and Supervisory Board At the end of 2013, the total number of shares or related financial instruments held by the members of the Executive Board of adidas AG was well under 1% of the shares issued by the company...

  • Page 57
    ...individual performance of each Executive Board member, the following business-related criteria: / increase in net income attributable to shareholders, / improvement of the average operating working capital as a percentage of sales, and / improvement of the operating margin in the Retail segment. 53...

  • Page 58
    ... operating free cash ï¬,ow, / increase in adidas NEO label sales, and / development of the adidas AG share price. The assessment base for the individual performance criteria is the three-year period from 2012 to 2014. / The LTIP Bonus serves - in line with sustainability-oriented corporate planning...

  • Page 59
    ...component resulting from a management share option plan does not exist and is not planned. The development of the adidas AG share, however, constitutes one of the four performance criteria for the LTIP 2012/2014. The total compensation paid to our Executive Board in the 2013 financial year amounted...

  • Page 60
    ... pensions are adjusted in line with the development of state pensions. Herbert Hainer, Roland Auschel and Erich Stamminger, who belonged to the group of senior executives of adidas AG prior to their Executive Board appointments, will at the time of their retirement receive additional payments from...

  • Page 61
    .... The Supervisory Board members did not receive any loans or advance payments from adidas AG. 04 / Compensation of the Supervisory Board (in â,¬) 2013 2012 Members of the Supervisory Board as at December 31, 2013 Igor Landau (Chairman of the Supervisory Board, Chairman of the General Committee...

  • Page 62
    ... increase in the Group's net income attributable to shareholders excluding impairment losses, we intend to propose an 11% higher dividend compared to 2012 at our 2014 Annual General Meeting. International stock markets maintain positive momentum 01 / 58 20 13 In 2013, international stock markets...

  • Page 63
    ... 03 / The adidas AG share Number of shares outstanding 2013 average Number of shares outstanding At year-end 2013 1) Type of share Free ï¬,oat Initial Public Offering Share split Stock exchange Stock registration number (ISIN) Stock symbol 1) All shares carry full dividend rights. 209,216,186...

  • Page 64
    ... the new adidas Boost technology, which was well perceived by media and the financial community. In addition, the publication of the Group's 2012 financial results on March 7, with positive results in the company's key markets, solid balance sheet improvements and management's proposal to increase...

  • Page 65
    ...key performance indicators (KPIs) provided by the index partner Sustainalytics, a leading provider of ESG research and analysis / TABLE 03. adidas AG share historically outperforms benchmark indices The adidas Group is committed to continuously enhancing shareholder value. The long-term development...

  • Page 66
    ...% 19% 7% Buy Hold Sell 62 20 13 1) At year-end 2013. Source: Bloomberg. Successful Investor Relations activities adidas AG strives to maintain close contact to institutional and private shareholders as well as analysts. In 2013, Management and the Investor Relations team spent around 28 days on...

  • Page 67
    ...Excluding goodwill impairment of â,¬ 265 million. 3) Subject to Annual General Meeting approval. 4) Based on number of shares outstanding at year-end. 5) Based on number of shares traded on all German stock exchanges. 6) As reported by Deutsche Börse AG. 63 20 13 adidas Group / 2013 Annual Report

  • Page 68
    ...am part of Reebok's Brand Communications team. Reebok's latest product innovation in walking is Skyscape, a shoe so lightweight that you may even forget you have them on. My team and I had the privilege to develop an engaging marketing platform that will be activated across all media channels - with...

  • Page 69
    ... Major Sporting Events 2014 Group Strategy Global Sales Strategy Global Brands Strategy Other Businesses Strategy Global Operations Research and Development Employees Sustainability 66 67 68 72 77 86 94 99 105 111 G R O U P M A N A G E M E N T R E P O R T: This report contains the Group Management...

  • Page 70
    ... International Trading, Amsterdam, Netherlands adidas Group Headquarters, Herzogenaurach, Germany adidas Group Russia, Moscow, Russia adidas Global Sourcing, Hong Kong, China adidas Group China, Shanghai, China adidas Group Japan, Tokyo, Japan 2 7 3 8 9 4 10 11 5 adidas Group / 2013 Annual...

  • Page 71
    ...IAAF Continental Cup, Marrakech, Morocco adidas Official Partner of the IAAF SEP 28 BMW Berlin Marathon, Berlin, Germany adidas Main Sponsor DEC 7 - 21 IHF Women's Handball World Championship, Hungary/Croatia adidas Official IHF Sponsor adidas Group / 2013 Annual Report 20 APR 21 MAY 14 MAY...

  • Page 72
    ... prioritise our investments under six key strategic pillars. 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. 118. Therefore...

  • Page 73
    ... Brand Portfolio Build and manage a diverse brand portfolio with distinctive brands covering consumers from sport performance to sport lifestyle. Innovation Maintain a culture of continuous innovation through improvements of products, services and processes. Markets/Channels Focus investment...

  • Page 74
    ...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. Based on our strong brands, premium products...

  • Page 75
    ... EBITDA of less than two times. A strong balance sheet increases our ï¬,exibility to realise value-generating medium- and long-term opportunities in the best interests of our shareholders as they arise. 03 / adidas Group headquarters The Laces building 71 20 13 adidas Group / 2013 Annual Report

  • Page 76
    ...000 points of sale, the Global Sales team is aiming to create desire for the adidas and Reebok brands and grow market share through wholesale partners, own-retail stores and our e-commerce activities. The strategic business plan Route 2015 outlines our long-term priorities: / increasing the share of...

  • Page 77
    ... long-term partnerships with the most dynamic retailers, which include sporting goods chains, department stores, buying groups, lifestyle retail chains and e-tailers. To achieve this, we have established the Global Wholesale S P O R T strategy / DIAGRAM 02. Toolkit drives market management In order...

  • Page 78
    ... the global mandatory range share in all our own stores. / Drive people excellence through improved training and development procedures. / Omni-channel focus: Create a seamless shopping experience for our consumers by connecting our online and ofï¬,ine touchpoints. adidas Group / 2013 Annual Report

  • Page 79
    ...as Outdoor, Women and Kids, largely in our key markets China and Russia. At the end of 2013, the adidas Group had further grown its net store base, operating 2,740 own stores for the adidas and Reebok brands worldwide / SEE RETAIL BUSINESS PERFORMANCE, P. 146. In 2014, we will continue to invest in...

  • Page 80
    ...key markets. / Become the "go-to destination" for all adidas and Reebok products in terms of technologies, benefits and heritage. / Deliver personalised experiences at key consumer touchpoints by leveraging the full potential of our evolving CRM/loyalty solutions. adidas Group / 2013 Annual Report

  • Page 81
    ... part of their lifestyle / DIAGRAM 01. 77 20 13 01 / Brand architecture - portfolio strategy Pure Performer Athletic Stylite Athletic Classic Brand Driven Sport Style Inspired Adopter Style Setter Competitive Sports Active Sports Casual Sports Sports Fashion adidas Group / 2013 Annual...

  • Page 82
    ... only support the commercial functions in their day-to-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...

  • Page 83
    ... China / 02 / adidas Sport Performance Supernova Glide Boost running shoe Brand values Brand attitude Key markets Gaining sales and market share with key growth categories such as running and basketball within adidas Sport Performance. Expanding adidas Sport Style in the fast-fashion business...

  • Page 84
    Group Management Report - Our Group Global Brands Strategy / 02.5 / adidas is mainly targeting competitive sports based on innovation and technology with adidas Sport Performance. This sub-brand is the multisport specialist. The target consumers range from sports participants at the highest level ...

  • Page 85
    Group Management Report - Our Group Global Brands Strategy / 02.5 / As part of our market segmentation strategy and to increase our addressable market to the lifestyle and fashion consumer, several sub-labels under the banner of adidas Sport Style were established To increase our appeal to a ...

  • Page 86
    ... values Brand attitude Key markets Key strategic pillars Net sales in 2013 â,¬ 1.599 billion 82 20 13 11 / The House of Fitness 09 / Reebok ZQuick running shoe Fit for Life Fitness Fitness Training Studio Classics Fitness Running Walking Kids Royal adidas Group / 2013 Annual Report

  • Page 87
    ... expanding its activities in the area of wearable electronics / SEE RESEARCH AND DEVELOPMENT, P. 99. 13 / Reebok Spartan Race obstacle racing 83 20 13 12 / adidas Sport Performance Springblade running shoe 14 / adidas Sport Performance miCoach Smart Run watch adidas Group / 2013 Annual Report

  • Page 88
    ...equity and thus 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 across all communication channels. Both adidas and Reebok regularly bring new global marketing...

  • Page 89
    Group Management Report - Our Group Global Brands Strategy / 02.5 / Activation and validation via a relevant set of promotion partnerships The utilisation of promotion partners such as federations, teams, leagues, events and individuals is an important part of endorsing brand positioning, and an ...

  • Page 90
    ... groups directly and further expand its market share. They contribute to our Group's overall goal: to be the global leader in the sporting goods industry. TaylorMade-adidas Golf Strategy TaylorMade-adidas Golf's mission is to build on its status as the world's leading golf company in terms of sales...

  • Page 91
    ... RESEARCH AND DEVELOPMENT, P. 99. TaylorMade-adidas Golf strives to extend its industry-leading position by introducing at least two major product innovations or evolutions every 12 to 18 months. For example, in 2013, TaylorMade unveiled Speed Pocket technology, which radically increases speed and...

  • Page 92
    ... the new ClimaChill line. 04 / adidas Golf adizero One golf shoe Adams Golf's key strategy for growth is to use its position as the number one hybrid brand on the world's six major professional golf tours, including the PGA Tour, to become the best-selling hybrid brand worldwide. Recent product...

  • Page 93
    ... pointof-sale communications and displays designed to quickly and clearly educate the consumer on product benefits and advantages. Furthermore, TaylorMade-adidas Golf works closely with its key retail partners to ensure a consistent and excellent retail experience for the consumer. Core channels...

  • Page 94
    ...Rockport Total Motion campaign 90 20 13 About Rockport Brand mission Brand attitude Key markets Key strategic pillars Drive product concept recognition Leverage men's and women's opportunity Evolve point-of-sale experience Net sales in 2013 â,¬ 289 million adidas Group / 2013 Annual Report

  • Page 95
    ... and retail, driving convergence to the omni-channel strategic vision. / Elevating presence at the point of sale, through significant investments to further connect with the consumer on an emotional level in both own-retail and wholesale environments. 91 20 13 adidas Group / 2013 Annual Report

  • Page 96
    ... targeted towards the intended consumer segments, for example players or fans. 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. adidas Group / 2013 Annual Report

  • Page 97
    ... with its high-performance positioning in the sport. 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. adidas Group / 2013 Annual Report

  • Page 98
    ... stores / SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 118. In 2013, the adidas Group delivered 82% of its adidas and Reebok products "on time" and "in full" (2012: 78%). For 2014, Global Operations strives to maintain OTIF at a level of around 80%. It is also planned to roll out OTIF to those markets...

  • Page 99
    ... forms part of the Group's strategic business plan Route 2015 and aims at establishing a coherent end-to-end demand and supply planning process across finance, marketing, operations and sales. Other capabilities that the function is building include an increased level of transparency on lead times...

  • Page 100
    ... go-to-market process Global Operations Marketing Design Product Development Sourcing Supply Chain Management Sales Subsidiaries Briefing Concept Product creation Manufacturing Distribution Sales Centre of Excellence Processes and infrastructure of the future Supporting the Group's growth...

  • Page 101
    ... supply chain / SEE SUSTAINABILITY, P. 111. Our Global Operations function manages product development, sourcing and distribution for adidas and Reebok as well as for adidas Golf and Ashworth / DIAGRAM 02. Due to the specific sourcing requirements in their respective fields of business, TaylorMade...

  • Page 102
    Group Management Report - Our Group Global Operations / 02.7 / China share of apparel production decreases In 2013, we sourced 84% of the total apparel volume for adidas, Reebok, adidas Golf and Ashworth from Asia (2012: 84%). Europe remained the second-largest apparel sourcing region, ...

  • Page 103
    ... of the product and user experience creation process R&D within the adidas Group follows a decentralised approach. In line with their strategic and long-term visions and distinctive positioning, each brand runs its own R&D activities, generally with either a category or a technology focus. However...

  • Page 104
    ...engineering and product management functions. The goal of this structure is to create category expertise and improve speed to market. Development and Testing Centre adidas also carried out extensive testing of the official match ball for the 2014 World Cup, Brazuca, to evaluate the effect of ball...

  • Page 105
    ... 2% of total Group employees. In 2014, we expect the number of R&D employees to remain stable. R&D expenses at prior year level Each year, we invest considerable resources into developing and commercialising new technologies as well as fresh design ideas, in order to offer the best experience for...

  • Page 106
    Group Management Report - Our Group Research and Development / 02.8 / Successful product launches across all major adidas categories In 2013, adidas sales were again driven by the latest product offerings, with products launched during the course of the year accounting for 74% of brand sales (2012...

  • Page 107
    Group Management Report - Our Group Research and Development / 02.8 / Reebok introduces new technology platforms In 2013, Reebok's latest products continued to generate the majority of Reebok's sales, with an estimated 59% of footwear sales coming from products launched in 2013 (2012: 67%). Only ...

  • Page 108
    ... and digital sports technologies as well as sustainable product innovation will be at the forefront of adidas R&D activities. Additionally, investments and research emphasis will also include areas such as new manufacturing processes and advanced materials to drive the development of revolutionary...

  • Page 109
    ... for open, innovative and collaborative learning solutions. Online communication platforms to drive employee engagement, collaboration and learning / SEE P. 108 adidas Group / 2013 Annual Report 20 13 01 / Three strategic workstreams supporting achievement of our Route 2015 targets 105

  • Page 110
    ... MBA degrees and three to five years of work experience. The goal of this programme is to prepare them for future management positions within our Group. At year-end 2013, six employees were participating in the BMP globally (2012: 12). The Functional Trainee Programme (FTP) is an 18-month programme...

  • Page 111
    ... (2012: 48). Our global internship programme offers students three to six months of work experience within the adidas Group. It plays a key role in our recruiting strategy. At the end of 2013, we employed 532 interns in Germany (2012: 492). Performance management: To further drive a high-performance...

  • Page 112
    ...2012, the adidas Group has been an active member of the "Charta der Vielfalt" ("Diversity Charter") in Germany in order to share our best-practice knowledge regarding awareness of diversity and inclusion in the work environment. Our efforts to develop mixed leadership talent have become increasingly...

  • Page 113
    ... years) 1) Average length of service (in years) Annual training hours by employee (in hours) 1) At year-end. 06 / Awards The Candidate Experience Award/ The Talent Board The World's Most Attractive Employers/ Universum Female Recruiting Award/Women & Work Fair adidas Group / 2013 Annual Report

  • Page 114
    ...8/ Own retail Logistics Sales Central functions & administration Marketing Production IT Research & development On a full-time equivalent basis, our Group had 43,537 employees on December 31, 2013 (2012: 40,168). Due to the high share of employees working on a part-time basis in the Retail segment...

  • Page 115
    ... Working Group, we work closely with leading companies from a variety of sectors to develop sustainable business approaches and to debate social and environmental topics on a global level. This is also supported by our membership in organisations such as the World Federation of the Sporting Goods...

  • Page 116
    Group Management Report - Our Group Sustainability / 02.10 / Careful supplier selection To improve working conditions throughout our supply chain, Global Operations works closely with our SEA team on supplier selection. The SEA team assesses all potential new suppliers, and orders can only be ...

  • Page 117
    ... efficient in using resources as well as helping reduce operational costs. Our approach is to manage environmental issues as an integral part of our daily operations, positively contributing to the adidas Group's overall business performance. More details on our Environmental Strategy can be found...

  • Page 118
    ...continuously increase the range of more sustainable products by developing sustainable product solutions and using innovative materials. Driving environmental improvements in our supply chain In our supply chain, activities focus on helping suppliers establish sound environmental management systems...

  • Page 119
    ...family tracking the performance of the leading sustainability-driven companies worldwide. In the category "Clothing, Accessories & Footwear", adidas AG was rated as industry leader in sustainability issues and corporate responsibility for the tenth time. 115 20 13 adidas Group / 2013 Annual Report

  • Page 120
    ...UL GA UDIO INTERACTIVE ADIDAS HERZOGENAURACH, GERMANY --- "Hi, my name is Paul and I am privileged to be part of the team that recently launched the most innovative wrist-based running device on the market - miCoach Smart Run. Clean and simple, the miCoach Smart Run tracks everything a runner wants...

  • Page 121
    ...N A GE ME N T R E P OR T 03.1 03.2 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 pursuant to § 315...

  • Page 122
    ... Internal 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...

  • Page 123
    ...Group's positioning within a certain sports category, strengthening our technology portfolio or addressing new consumer segments. 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...

  • Page 124
    ..." (OTIF) measures the adidas Group delivery performance towards customers (Wholesale) and our own-retail stores. Managed by our Global Operations function, OTIF assesses to what degree customers received what they ordered and if they received it on time. It helps our Group to investigate improvement...

  • Page 125
    ... in 2013. The platform is used as a major reference point on a global level, across all markets, functions and brands. It consolidates and harmonises different reporting tools and systems within the adidas Group and enables fact-based decisionmaking on a senior management level. In 2014, the new...

  • Page 126
    ...and Other Businesses. In euro terms, adidas Group revenues decreased 3% to â,¬ 14.492 billion from â,¬ 14.883 billion in 2012. The Group's gross margin increased 1.5 percentage points to 49.3% (2012: 47.7%), driven by the positive impact from a more favourable pricing, product and regional sales mix...

  • Page 127
    ...Management Report - Financial Review Group Business Performance / Economic and Sector Development / 03.2 / The US economy grew modestly in 2013, with GDP, according to the Federal Reserve, expanding 2.3% compared to 1.8% in 2012. Low inï¬,ation and a recovery in the real estate market helped drive...

  • Page 128
    ...digit rate. adidas Group currency-neutral revenues and profitability, as well as that of many competitors and retailers, increased in 2013. In most regions, sales of our Group and other major sporting goods companies grew at a higher rate than GDP and overall consumer spending. 05 / Exchange rate...

  • Page 129
    Group Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / Income Statement adidas Group currency-neutral sales grow 3% In 2013, Group revenues grew 3% on a currency-neutral basis, as a result of sales increases in Retail and Other Businesses. Currency-...

  • Page 130
    Group Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / 11 / Net sales by region (â,¬ in millions) 2013 2012 Change Change (currency-neutral) Western Europe European Emerging Markets North America Greater China Other Asian Markets Latin America Total 1) ...

  • Page 131
    ...Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / 14 / 2013 2012 2011 2010 2009 Gross profit 1) (â,¬ in millions) 7,140 7,103 6,329 5,730 4,712 16 / Gross margin by quarter (in %) 47.5 47.6 49.3 47.4 50.1 48.2 50.1 47.7 Q4 2013 Q4 2012 Q3 2013 Q3 2012...

  • Page 132
    Group Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / Sales working budget as a percentage of sales increases Sales working budget consists of expenses to support the Group's sell-through development. Expenditures relate to advertising and promotion ...

  • Page 133
    ...Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / Number of Group employees up 10% At the end of December 2013, the Group employed 50,728 people. This represents an increase of 10% versus the prior year level of 46,306. New hirings related to the expansion...

  • Page 134
    Group Management Report - Financial Review Group Business Performance / Income Statement / 03.2 / 27 / 2013 2) 2012 3) 2011 2010 2009 Income before taxes 1) (â,¬ in millions) 1,186 1,116 869 806 358 31 / 2013 2) 2012 3) 2011 2010 2009 Diluted earnings per share 1) (in â,¬) 4.01 3.78 2.93 2.71 ...

  • Page 135
    ...33 / Structure of statement of financial position 1) (in % of total assets) 2013 2012 Assets (â,¬ in millions) Cash and cash equivalents Accounts receivable Inventories Fixed assets Other assets â- 2013 â- 2012 1) For absolute figures see adidas AG Consolidated Statement of Financial Position...

  • Page 136
    ...of 2013 / DIAGRAM 36. Short-term financial assets declined 84% to â,¬ 41 million at the end of December 2013 from â,¬ 265 million in 2012 / SEE NOTE 05, P. 205. This development was driven by the decrease in short-term cash investments. Group receivables increased 7% to â,¬ 1.809 billion at the end...

  • Page 137
    ... Management Report - Financial Review Group Business Performance / Statement of Financial Position and Statement of Cash Flows / 03.2 / Liabilities and equity Total current liabilities increased 8% to â,¬ 4.732 billion at the end of December 2013 from â,¬ 4.374 billion at the end of December 2012...

  • Page 138
    ...cash Net cash Net cash used Net cash used Cash and cash Effect of equivalents at generated in investing in financing exchange rates equivalents at the end of from operating activities activities the end of 2012 activities 2013 634 (243) (439) 1,670 (35) 1,587 adidas Group / 2013 Annual Report

  • Page 139
    ... had a positive effect of â,¬ 3 million. The Group's ratio of net borrowings over EBITDA amounted to -0.2 at the end of December 2013 (2012: -0.3) / DIAGRAM 46. Operating cash ï¬,ow, as described in the Internal Group Management System / SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 118, decreased 2% to...

  • Page 140
    ... and a new in-house bank concept. While 2013 has seen the core implementation of standardised and consolidated cash management and payment processes, these functionalities will be further rolled out in the course of 2014. 47 / Total credit facilities (â,¬ in millions) 2013 2012 Bilateral credit...

  • Page 141
    ... and US dollars. At the end of 2013, gross borrowings denominated in euros accounted for 76% of total gross borrowings (2012: 68%). The share of gross borrowings held in US dollars decreased to 14% (2012: 29%) / DIAGRAM 50. 54 / 2013 Interest rate development 1) (in %) 3.8 4.4 4.9 5.1 5.2 Stable...

  • Page 142
    ... Currency effects had a positive impact of â,¬ 3 million on net cash development. Net cash 1) Rounding differences may arise in totals. 56 / 2013 Financial leverage (in %) (5.3) (8.5) (1.7) 4.8 24.3 Effective currency management a key priority As a globally operating company, the adidas Group is...

  • Page 143
    ... functions such as Global Marketing, Group Treasury, Taxes, Legal and Finance. It also administers the shareholdings of the company. Income Statement 58 / Statement of income in accordance with HGB (Condensed) (â,¬ in millions) 2013 2012 Net sales Total output Other operating income Cost...

  • Page 144
    Group Management Report - Financial Review Group Business Performance / Financial Statements and Management Report of adidas AG / 03.2 / Other operating income down 8% In 2013, other operating income of adidas AG decreased 8% to â,¬ 1.165 billion (2012: â,¬ 1.270 billion). This was primarily due ...

  • Page 145
    ... are traded instead of the original shares on US stock exchanges. Two ADRs equal one share / SEE OUR SHARE, P. 58. Cash inï¬,ow from operating activities reï¬,ects net income adidas AG generated a positive cash ï¬,ow from operating activities of â,¬ 89 million (2012: â,¬ 665 million). The change...

  • Page 146
    ... Management Report - Financial Review Group Business Performance / Disclosures pursuant to § 315 Section 4 and § 289 Section 4 of the German Commercial Code / 03.2 / Voting right control if employees have a share in the capital Like all other shareholders, employees who hold adidas AG shares...

  • Page 147
    ... by the Annual General Meeting on May 6, 2010, the Executive Board is furthermore authorised to conduct the share buyback also by using equity derivatives which are arranged with a financial institution in close conformity with market conditions. adidas AG may acquire call options issued for...

  • Page 148
    ... terms. Sales in the Wholesale segment decreased 5% to â,¬ 9.100 billion from â,¬ 9.533 billion in 2012 / TABLE 01. Wholesale gross margin increased 2.4 percentage points to 42.7% from 40.3% in 2012, driven by a more favourable pricing, product and regional sales mix. By brand, the adidas wholesale...

  • Page 149
    ...development by brand In 2013, adidas Sport Performance wholesale revenues grew 1% on a currency-neutral basis. Growth was mainly a result of sales increases in the training, running, football and outdoor categories, partly offset by declines in categories closely related to prior year major sporting...

  • Page 150
    ... Markets. Segmental operating profit decreased 6% to â,¬ 678 million versus â,¬ 724 million in the prior year. Segmental operating margin decreased Retail development by brand In 2013, adidas Group Retail sales increased at both adidas and Reebok. Currency-neutral adidas Sport Performance revenues...

  • Page 151
    ...Q3 2013 Q3 2012 Q2 2013 Q2 2012 Q1 2013 Q1 2012 Retail development by store format Retail store development At December 31, 2013, the adidas Group Retail segment operated 2,740 stores. This represents a net increase of 294 stores or 12% versus the prior year-end level of 2,446. Of the total number...

  • Page 152
    ... Centrally Managed Brands also increased. Currency translation effects negatively impacted revenues in euro terms. Sales of Other Businesses declined 2% to â,¬ 1.946 billion (2012: â,¬ 1.977 billion) / TABLE 17. Gross margin decreased 1.7 percentage points to 41.0% (2012: 42.8%). The positive effect...

  • Page 153
    ...-single-digit rate, respectively. Sales at Rockport also increased, while revenues at Other Centrally Managed Brands were below the prior year level. Revenues in China decreased 12% on a currency-neutral basis as a result of sales declines at TaylorMade-adidas Golf. Sales in Other Asian Markets grew...

  • Page 154
    ... Design Sport. Currency translation effects negatively impacted sales in euro terms. Revenues in Other Centrally Managed Brands increased 8% to â,¬ 112 million (2012: â,¬ 104 million). 21 / Other Businesses net sales by quarter (â,¬ in millions) 493 424 403 486 502 550 548 517 Q4 2013 Q4 2012...

  • Page 155
    ... of new and innovative products at all brands and the positive effects from major sporting events including the 2014 FIFA World Cup, we project top- and bottom-line improvements in our Group's financial results in 2014. We forecast adidas Group sales to increase at a high-single-digit rate on...

  • Page 156
    Group Management Report - Financial Review Subsequent Events and Outlook / 03.4 / Global economy to grow in 2014 According to the World Bank, global GDP is projected to increase 3.2% in 2014 (2013: 2.4%). While several major high-income economies are expected to return to growth in 2014 and inï¬,...

  • Page 157
    ... sales development (in %): adidas Group Wholesale Retail Comparable store sales Other Businesses TaylorMade-adidas Golf Rockport Reebok-CCM Hockey Gross margin Operating margin Net income attributable to shareholders Average operating working capital in % of net sales Capital expenditure Store...

  • Page 158
    ... order backlog development as well as positive retailer and trade show feedback. Currencyneutral adidas Sport Performance sales are forecasted to increase at a mid-single-digit rate, driven by growth in key categories such as football, running and basketball. adidas Originals & Sport Style revenues...

  • Page 159
    ... prior year level (2013: 42.3%). Sales and marketing working budget expenses as a percentage of sales are projected to increase modestly compared to the prior year. Marketing investments will be centred on major sporting events such as the 2014 FIFA World Cup and highly innovative product launches...

  • Page 160
    ... strategic business plan, we project adidas Group sales and net income to increase in 2015. We also expect further improvements in operating margin. Further details of our Route 2015 strategic goals and initiatives are outlined in the Group Strategy section of this Annual Report / SEE GROUP STRATEGY...

  • Page 161
    Group Management Report - Financial Review Subsequent Events and Outlook / 03.4 / 03 / Product Major 2014 product launches Brand Samba Copa Mundial football boot collection miCoach Smart Ball football Argentine Football Association official match ball Supernova Sequence Boost running shoe CH ...

  • Page 162
    ..., a concerted approach to handling, monitoring and reporting is of key importance. Therefore, risk and opportunity management is a Group-wide activity, which utilises critical day-to-day management insight from both global and local business units and functions. adidas Group / 2013 Annual Report

  • Page 163
    ... the macroeconomic environment, developments in the sporting goods industry, as well as internal processes, to identify risks and opportunities as early as possible. The Risk Owners (i.e. all direct reports to the adidas AG Executive Board and the Managing Directors of all our markets) have primary...

  • Page 164
    ... rating of at least minor (financial equivalent: above â,¬ 1 million impact on the relevant income statement 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...

  • Page 165
    ... process within the Group companies and the respective local Managing Director confirm adherence to the Group Finance Manual and International Financial Reporting Standards in a written declaration of completeness, which is provided to Group Accounting on a quarterly basis. 161 20 13 adidas Group...

  • Page 166
    ... on the Group's compliance management system. We launched the adidas Group Fair Play Compliance Framework, which is applicable to the whole Group regardless of brand, market, distribution channel or function. This included the implementation of the global Fair Play hotline and email service, the...

  • Page 167
    ... may be more conservative product purchasing, tight working capital management and an increased focus on cost control. Furthermore, a core element of our positioning in performance sports is the utilisation of an extensive global event and partnership portfolio where demand is more predictable and...

  • Page 168
    ...is sold at the right point of sale to the right consumer at an adequate price / SEE GLOBAL SALES STRATEGY, P. 72. Nevertheless, we still believe that unbalanced product distribution and the inability to effectively manage our different sales channels could have a significant impact on the Group. As...

  • Page 169
    ...to innovate and bring fresh new technologies and designs to market / SEE RESEARCH AND DEVELOPMENT, P. 99. We also seek to enhance consumer demand for our brands through extensive marketing, product and brand communication programmes / SEE GLOBAL BRANDS STRATEGY, P. 77 / SEE OTHER BUSINESSES STRATEGY...

  • Page 170
    ... with retailers could have substantial negative effects on our wholesale activities and thus the Group's business performance. Losing important customers in key markets due to subpar relationship management would result in significant sales shortfalls. adidas Group / 2013 Annual Report

  • Page 171
    ... more closely aligning processes and timelines of major business functions / SEE INTERNAL GROUP MANAGEMENT SYSTEM, P. 118. In addition, our Global Operations function offers sophisticated and tailored replenishment models in order to shorten order-to-delivery times, ensuring availability of products...

  • Page 172
    ... adidas Group the "employer of choice" within our industry. Attractive reward and incentive schemes are designed to further support long-term employee commitment / SEE EMPLOYEES, P. 105. With the expansion of our own-retail activities and the continued growth of our employee base in emerging markets...

  • Page 173
    ... adapt to changing consumer preferences, we focus on streamlining research and development processes to speed up the time to market. We believe innovation is a key success factor in the sporting goods industry and, as a result, shortcomings regarding product innovation, design and development pose...

  • Page 174
    ...are not met, business relations are terminated / SEE SUSTAINABILITY, P. 111. In order to minimise the environmental impact of producing and distributing our products, the adidas Group developed a fully comprehensive environmental strategy (Environmental Strategy 2015). This strategy takes a holistic...

  • Page 175
    ... dedicated teams that monitor the quality of our products on all levels of the supply chain through rigorous testing prior to production, close cooperation with suppliers throughout the manufacturing process, random testing after retail delivery, open communication about defective products and...

  • Page 176
    ... with reference to the conditions at the balance sheet date. We ended the year 2013 with net cash of â,¬ 295 million (2012: â,¬ 448 million). Thus the ratio of net borrowings over EBITDA decreased to -0.2 times at year-end, which is in line with the Group's medium-term guideline of less than...

  • Page 177
    ... monetary assets and liabilities denominated in foreign 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 2012 and 2013. As...

  • Page 178
    ... Opportunity Report / Financial Risks / 03.5 / Based on this analysis, a 10% increase in the euro versus the US dollar at December 31, 2013 would have led to a â,¬ 2 million increase in net income. The more negative market values of the US dollar hedges would have decreased shareholders' equity by...

  • Page 179
    ... and was performed on the same basis for both 2012 and 2013. A 100 basis point increase in interest rates at December 31, 2013 would have increased shareholders' equity by â,¬ 0.00 million (2012: increase by â,¬ 0.00 million) and decreased net income by â,¬ 0.00 million (2012: decrease by â,¬ 0.00...

  • Page 180
    ... markets, which already play an important role in our growth strategy and where our brands are already well positioned. This could give an additional boost to the Group's sales performance. Also, we expect sports participation rates to increase over time, with increasing leisure time, investment...

  • Page 181
    ... and development, designers in the fashion industry, other brands and non-traditional sporting goods retailers. These partnerships have generated multiple new growth avenues for the Group, as we have acquired product or process know-how and gained access to new distribution channels or markets. For...

  • Page 182
    ...various time zones / SEE GLOBAL BRANDS STRATEGY, P. 77. Another opportunity for the Group is the activation of promotion partnerships with individual high-profile athletes as well as global icons such as Lionel Messi for adidas football or Kanye West for adidas Originals. Depending on their success...

  • Page 183
    ...border expansion/ private label risks Competition risks Risks related to risk and control environment Consumer demand risks Operational risks Logistics risks Customer relationship risks Sales and pricing risks Supplier risks Inventory risks Personnel risks IT risks Product innovation and development...

  • Page 184
    ...cantly impacted our reported results in 2013, as well as the lower sales growth in Russia/CIS and at TaylorMade-adidas Golf / SEE INCOME STATEMENT, P. 125. In 2013, operating working capital and cash management were negatively impacted by increased working capital requirements towards the end of the...

  • Page 185
    ...Group's operating margin in the medium to long term. We will also continue to invest in future growth opportunities by utilising the upcoming 2014 FIFA World Cup and innovation platforms such as Boost, expanding our digital activities as well as opening new retail stores / SEE GLOBAL BRANDS STRATEGY...

  • Page 186
    ..., my name is Corry, I am part of the Reebok-CCM Hockey Product Creation team. We live hockey and everybody here is extremely passionate about creating products that help players of all levels to get the most out of this great game. My team and I launched many innovative products in 2013, highlighted...

  • Page 187
    ... 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 188
    ...nancial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group Management Report, which has been combined with the Management Report of adidas AG, includes a fair review of the development and performance of the business...

  • Page 189
    ...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 190
    ...Statement of Financial Position .. / adidas AG Consolidated Statement of Financial Position (IFRS) (â,¬ in millions) Note Dec. 31, 2013 Dec. 31, 2012 Change in % ASSETS Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Inventories Income tax...

  • Page 191
    ... Consolidated Statement of Financial Position / 04.3 / .. / adidas AG Consolidated Statement of Financial Position (IFRS) (â,¬ in millions) Note Dec. 31, 2013 Dec. 31, 2012 Change in % LIABILITIES AND EQUITY Short-term borrowings Accounts payable Other current financial liabilities Income taxes...

  • Page 192
    4 Consolidated Financial Statements Consolidated Income Statement / 04.4 / Consolidated Income Statement .. / adidas AG Consolidated Income Statement (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Change Net sales Cost of sales Gross profit (% of net sales) ...

  • Page 193
    ... Financial Statements Consolidated Statement of Comprehensive Income / 04.5 / Consolidated Statement of Comprehensive Income .. / adidas AG Consolidated Statement of Comprehensive Income (IFRS) (â,¬ in millions) Note Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Net income after taxes...

  • Page 194
    ... Equity / 04.6 / Consolidated Statement of Changes in Equity .. / adidas AG Consolidated Statement of Changes in Equity (IFRS) (â,¬ in millions) Note Share capital Capital reserve Balance at December 31, 2011 Net income recognised directly in equity Net income Total comprehensive income Dividend...

  • Page 195
    Consolidated Financial Statements Consolidated Statement of Changes in Equity / 04.6 / Cumulative currency translation differences Hedging reserves Other reserves 1) Retained earnings Total shareholders' equity Non-controlling interests Total equity... 20 13 adidas Group / 2013 Annual Report

  • Page 196
    ... from investments and other long-term assets Interest received Net cash used in investing activities Financing activities: Repayments of long-term borrowings Proceeds from issue of a convertible bond Repayments of finance lease obligations Dividend paid to shareholders of adidas AG Dividend paid...

  • Page 197
    ... "Group") design, develop, produce and market a broad range of athletic and sports lifestyle products. The operating activities of the adidas Group are divided into six operating segments: Wholesale, Retail, TaylorMade-adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. The...

  • Page 198
    ... 1, 2013, and which have not been applied in preparing these consolidated financial statements are: / IFRS 10 Consolidated Financial Statements (effective date: January 1, 2014): The Group is currently analysing the effects of the new standard. At this point in time, no reliable statement can...

  • Page 199
    ... date is directly recorded in shareholders' equity. The financial effects of intercompany transactions, as well as any unrealised gains and losses arising from intercompany business relations are eliminated in preparing the consolidated financial statements. adidas Group / 2013 Annual Report 20...

  • Page 200
    ... exchange rates on the transaction dates. All cumulative differences from the translation of equity of foreign subsidiaries resulting from changes in exchange rates are included in a separate item within shareholders' equity without affecting the income statement. adidas Group / 2013 Annual Report

  • Page 201
    Consolidated Financial Statements Notes / 04.8 / 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, Spot rates at Dec. 31, 2013 2012 2013 2012 USD GBP JPY CNY RUB 1....

  • Page 202
    ... financial assets. For non-current receivables and other financial assets, the fair value is estimated as the present value of future cash ï¬,ows discounted at the market rate of interest at the balance sheet date. Subsequently, these are measured at amortised cost using the "effective interest...

  • Page 203
    ... with indefinite useful lives in the years ending December 31, 2013 and 2012. In addition, an increase in the discount rate of up to approximately 1.5% or a reduction of cash inï¬,ows of up to approximately 20% would not result in any impairment requirement. adidas Group / 2013 Annual Report

  • Page 204
    ... adidas Group's strategic business plan "Route 2015" / SEE GROUP STRATEGY, P. 68 until 2015 and was prolonged by two further years based on historical and expected growth prospects and margin developments until 2015. It reï¬,ects an expected mid- to high-single-digit sales increase for the majority...

  • Page 205
    ... costs are also expensed as incurred if they do not meet the recognition criteria of IAS 38 "Intangible Assets". The Group spent â,¬ 128 million and â,¬ 128 million on product research and development for the years ending December 31, 2013 and 2012, respectively. adidas Group / 2013 Annual Report

  • Page 206
    ... periods, long-term borrowings are stated at amortised cost using the "effective interest method". Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the term of the borrowing. In 2012, adidas AG issued a convertible...

  • Page 207
    ...part of the cost of the qualifying asset. Income taxes Current income taxes are computed in accordance with the applicable taxation rules established in the countries in which the Group operates. The Group computes deferred taxes for all temporary differences between the carrying amount and the tax...

  • Page 208
    ...for the period from June to December 2012. If this acquisition had occurred on January 1, 2012, total Group net sales would have been â,¬ 14.9 billion and net income attributable to shareholders would have been â,¬ 534 million for the year ending December 31, 2012. adidas Group / 2013 Annual Report

  • Page 209
    ... price of â,¬ 14 million. The remaining 10% of the shares continue to be held by the Group and are recorded under long-term financial assets / SEE NOTE 14. The sale led to a gain of â,¬ 1 million. Notes to the Consolidated Statement of Financial Position 04 Cash and cash equivalents Cash and cash...

  • Page 210
    ... Tax receivables other than income taxes Sundry Other current assets, gross Less: accumulated allowances Other current assets, net 236 133 138 507 1 506 231 136 123 490 1 489 Prepaid expenses relate mainly to promotion agreements and service contracts as well as rents. adidas Group / 2013 Annual...

  • Page 211
    ... a new warehouse facility in Germany. For details see Attachment I to the consolidated financial statements / SEE STATEMENT OF MOVEMENTS OF INTANGIBLE AND TANGIBLE ASSETS, P. 238. 207 20 13 12 Goodwill Goodwill primarily relates to the Group's acquisitions of the Reebok and TaylorMade businesses...

  • Page 212
    ... The reported other trademarks mainly relate to the brand names Ashworth, Adams Golf and Five Ten. The Group tests at least on an annual basis whether trademarks with indefinite useful lives are impaired. This requires an estimation of the fair value less costs to sell of the trademarks. As part of...

  • Page 213
    ...a sale. These shares are unlisted and do not have an active market. There is no intention to sell these shares. Additionally, long-term financial assets include investments which are mainly invested in insurance products and are measured at fair value, as well as other financial assets. Long-term...

  • Page 214
    ... trading days, the share price of adidas AG exceeds the current conversion price of â,¬ 83.10 by at least 30%. According to IAS 32 "Financial Instruments: Presentation", the conversion right represented in the convertible bond constitutes a financial instrument which is covered in the capital...

  • Page 215
    ... to the return of 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 estate tax and motor vehicle tax. Sundry...

  • Page 216
    ...Consolidated Statement of Financial Position / 04.8 / 20 Accrued liabilities Accrued liabilities consist of the following: Accrued liabilities (â,¬ in millions) Jan. 1, 2013 Currency translation differences Usage Reversals Additions Transfers Dec. 31, 2013 Thereof non-current Goods and services...

  • Page 217
    ... to a minimum funding requirement. The Trustee Board is responsible for setting the scheme's funding objective, agreeing the contributions with the company and determining the investment strategy of the scheme. adidas Group / 2013 Annual Report 20 13 Defined contribution pension plans 213

  • Page 218
    ... pension plans in the major countries (â,¬ in millions) Dec. 31, 2013 Dec. 31, 2012 Germany UK Japan Germany UK Japan Active members Former employees with vested rights Pensioners Total 123 31 70 224 - 37 4 41 14 - - 14 112 30 77 219 - 35 3 38 15 - - 15 The Group's pension plans are...

  • Page 219
    ... plans (â,¬ in millions) Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Current service cost Net interest, thereof Interest cost Interest income Expenses for defined benefit pension plans (considered in the consolidated income statement) Actuarial (gains)/losses, thereof: due to experience...

  • Page 220
    ... Composition of plan assets (â,¬ in millions) Dec. 31, 2013 Dec. 31, 2012 Cash and cash equivalents Equity instruments Bonds Real estate Pension plan reinsurance Insurance policies Other assets Fair value of plan assets 14 28 11 1 25 4 0 83 13 24 10 1 24 4 0 76 adidas Group / 2013 Annual Report

  • Page 221
    ...' subscription rights when issuing the new shares at a value not essentially below the stock market price of shares with the same features; this exclusion of subscription rights can also be associated with the listing of the company's shares on a foreign stock exchange (Authorised Capital 2013/III...

  • Page 222
    ... trading days, the share price of adidas AG exceeds the current conversion price of â,¬ 83.10 by at least 30%. The bonds are listed on the Open Market segment of the Frankfurt Stock Exchange. Repurchase of adidas AG shares The Annual General Meeting on May 6, 2010, authorised the Executive Board to...

  • Page 223
    ... by a sound capital position. The Group further aims to maintain net debt below two times EBITDA over the long term. Financial leverage is defined as the ratio between net borrowings (short- and long-term borrowings less cash and cash equivalents as well as short-term financial assets) in an...

  • Page 224
    ... on the resolution of the 2013 Annual General Meeting, the dividend for 2012 was â,¬ 1.35 per share (total amount: â,¬ 282 million). The Executive Board of adidas AG will propose to shareholders a dividend payment of â,¬ 1.50 per dividend-entitled share for the year 2013 to be made from retained...

  • Page 225
    ... The Group has outsourced certain logistics and information technology functions, for which it has entered into long-term contracts. Financial commitments under these contracts mature as follows: 20 13 Financial commitments for service arrangements (â,¬ in millions) Dec. 31, 2013 Dec. 31, 2012...

  • Page 226
    ... Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2013 Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge...

  • Page 227
    ... Amortised cost Fair value recognised in equity Fair value recognised in net income Measurement according to IAS 17 Fair value Dec. 31, 2012 Financial assets Cash and cash equivalents Short-term financial assets Accounts receivable Other current financial assets Derivatives being part of a hedge...

  • Page 228
    ... 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 229
    ...nchen AG) are used in order to calculate the fair value as at December 31, 2013. See column "Valuation method" FAHfT Net gains/losses on financial instruments recognised in the consolidated income statement (â,¬ in millions) Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Financial assets...

  • Page 230
    ... an amount of â,¬ 1 million was reclassified from hedging reserves to the income statement. In the years ending December 31, 2013 and 2012, hedging instruments related to product sourcing were bought to hedge a total net amount of US $ 5.2 billion and US $ 5.1 billion, respectively. The notional...

  • Page 231
    ... overheads. In 2013, marketing working budget accounted for 24% (2012: 25%) 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 / 2013 Annual Report

  • Page 232
    ... within the cost of sales as they are directly assigned to the production costs. Other operating expenses (â,¬ in millions) Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Marketing working budget Sales working budget Marketing overhead 1) Sales force 1) Logistics 1) Research and development...

  • Page 233
    ..., are presented in the consolidated statement of financial position: Deferred tax assets/liabilities (â,¬ in millions) Dec. 31, 2013 Dec. 31, 2012 Deferred tax assets Deferred tax liabilities Deferred tax assets, net 486 (338) 148 528 (368) 160 adidas Group / 2013 Annual Report 20 13

  • Page 234
    ...to be permanently invested in international operations. These earnings, the amount of which cannot be practicably computed, could become subject to additional tax if they were remitted as dividends or if the Group were to sell its shareholdings in the subsidiaries. adidas Group / 2013 Annual Report

  • Page 235
    ... tax income includes tax income of â,¬ 25 million in total (2012: â,¬ 60 million) related to the origination and reversal of temporary differences. The effective tax rate of the Group differs from an assumed tax rate of 30% for the year ending December 31, 2013 as follows: Tax rate reconciliation...

  • Page 236
    ... 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 237
    ... ending Dec. 31, 2013 Year ending Dec. 31, 2012 Operating profit for reportable segments Operating profit for other businesses HQ/Consolidation Marketing working budget Other operating expenses Royalty and commission income Operating profit Financial income Financial expenses Income before taxes...

  • Page 238
    Consolidated Financial Statements Notes / Notes - Additional Information / 04.8 / Depreciation and amortisation (â,¬ in millions) Year ending Dec. 31, 2013 Year ending Dec. 31, 2012 Reportable segments Other businesses HQ/Consolidation Total 132 11 143 286 122 11 127 260 Impairment losses and ...

  • Page 239
    ... as investments in the furnishing and fitting of stores in the Retail segment, in new office buildings, warehouses and IT systems. Cash outï¬,ows from financing activities were mainly related to dividend paid to shareholders of adidas AG and to cash repayments of short-term borrowings. Current...

  • Page 240
    ...2013 Year ending Dec. 31, 2012 Own retail Sales Logistics Marketing 13 26,130 4,521 5,952 3,800 4,450 1,601 1,029 1,035 48,518 24,841 4,627 5,421 3,827 3,933 1,927 1,052 995 46,623 236 20 Central administration Production Research and development Information technology Total Accountant service...

  • Page 241
    ... inï¬,uence on the assets, liabilities, financial position and profit or loss of the Group. 237 Date of preparation The Executive Board of adidas AG prepared and approved the consolidated financial statements for submission to the Supervisory Board on February 14, 2014. It is the Supervisory...

  • Page 242
    ...Acquisition cost January 1, 2012 Currency effect Additions Increase in companies consolidated Transfers from assets held for sale Transfers to assets held for sale Decrease in companies consolidated Transfers Disposals December 31, 2012/January 1, 2013 Currency effect Additions Increase in companies...

  • Page 243
    Consolidated Financial Statements Statement of Movements of Intangible and Tangible Assets / 04.9 / 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 244
    10 Consolidated Financial Statements Shareholdings / 04.10 / Shareholdings .. / Shareholdings of adidas AG, Herzogenaurach (at December 31, 2013) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile Germany 1 GEV Grundstü...

  • Page 245
    Consolidated Financial Statements Shareholdings / 04.10 / .. Shareholdings of adidas AG, Herzogenaurach (at December 31, 2013) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 45 adidas Italy S.p.A 46 adidas Portugal - Artigos de...

  • Page 246
    Consolidated Financial Statements Shareholdings / 04.10 / .. / Shareholdings of adidas AG, Herzogenaurach (at December 31, 2013) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 93 Adams Golf, Ltd. 5) 12) 94 Adams Golf IP, L.P. ...

  • Page 247
    Consolidated Financial Statements Shareholdings / 04.10 / .. Shareholdings of adidas AG, Herzogenaurach (at December 31, 2013) Currency Equity (currency units in thousands) ATTACHMENT II Share in capital held by 6) in % Company and domicile 136 adidas Holding (Thailand) Co., Ltd. 137 adidas (...

  • Page 248
    ... position helping to drive Rockport's powerful brand promise loud and clear to the consumer. From working with internal departments in marketing and product creation right through to supporting our teams in the markets, it's an exciting time for the brand as we begin to more aggressively activate...

  • Page 249
    05.1 05.2 05.3 05.4 05.5 05.6 Ten-Year Overview Glossary Index Declaration of Support Publishing Details & Contact Financial Calendar 246 250 256 257 258 259 05 A D D I T I O N A L I N F O R M AT I O N

  • Page 250
    ...in millions) Total assets 6) Inventories Receivables and other current assets Working capital 6) Net cash/(net borrowings) Shareholders' equity 6) Rounding differences may arise in percentages and totals. 1) 2011 restated according to IAS 8 in the 2012 consolidated financial statements. Prior years...

  • Page 251
    Additional Information Ten-Year Overview / 05.1 / 2010 2009 2008 2007 2006 2) 2005 2004 11,990 5,730 100 110 5,046 1,159 894 (88) 806 238 ...) 3,023 8,379 1,607 1,913 1,733 (2,231) 2,828 5,750 1,230 1,551 2,644 551 2,684 4,434 1,155 1,425 1,336 (665) 1,544 adidas Group / 2013 Annual Report

  • Page 252
    ...continued) 2013 2012 2011 1) Balance Sheet Ratios Net borrowings/EBITDA 3) Average operating working capital in % of net sales Financial leverage 6) Equity ratio 6) Equity-to-fixed-assets ratio 6) Asset coverage I 6) Asset coverage II 6) Fixed asset intensity of investments Current asset intensity...

  • Page 253
    Additional Information Ten-Year Overview / 05.1 / 2010 2009 2008 2007 2006 2) 2005 2004 0.2 20.8% 4.8% 43.5% 97.4% 141.5% 97.7% 44.6% 55.4% 35.5% 78.2% 132.4% 6.1 12.3% 20.2% 1.2 24... 1,352 38,982 1,283 31,344 1,186 26,376 1,087 15,935 706 14,254 637 adidas Group / 2013 Annual Report

  • Page 254
    ... eliminates variances arising from currency translation and thus reï¬,ects the underlying business performance. Concession corners Retail space that is fully operated by one brand of the adidas Group and is part of a larger sales area operated by a retail partner. adidas Group / 2013 Annual Report

  • Page 255
    ... cash expenses such as taxes and interest from the operating profit. Free cash ï¬,ow = operating profit +/- change in operating working capital +/- net investments (capital expenditure less depreciation and amortisation) +/- financial result and income taxes adidas Group / 2013 Annual Report

  • Page 256
    ... investments. / K Key accounts Wholesalers or retailers which are considered to be primary customers for the adidas Group and account for a large percentage of sales. Grassroots events Events that involve the advertising and promotion of products and/or services on a local and/or personal level...

  • Page 257
    ... of cash and short-term financial assets. Net cash/Net borrowings = cash and cash Operating overheads Expenses which are not directly attributable to the products or services sold, such as costs for distribution, marketing overhead costs, logistics, research and development, as well as general and...

  • Page 258
    ... Asian Markets and Latin America. adidas Golf, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. Sell-through An indicator of how fast retailers are selling a particular product to the consumer. Performance business In the sporting goods industry, performance business relates to...

  • Page 259
    ... short-term disposable capital used to finance day-to-day operations. Working capital = total current assets - total current liabilities / SEE ALSO OPERATING WORKING CAPITAL. Toxproof/TÜV Rheinland A safety mark issued by TÜV Rheinland, especially for testing the quantities of toxins in products...

  • Page 260
    ...67 Statement of Cash Flows 131 ff., 192 Statement of Financial Position (Balance Sheet) 131 ff., 186, 205 ff. Structure and Strategy: - adidas Group 68 ff. - Brand Segments 77 ff. Subsequent Events and Outlook 151 ff. Supervisory Board: - Committees 40 - Members 40 f. - Report 42 ff. Supply Chain 68...

  • Page 261
    ...Made Golf Limited, Basingstoke, Great Britain Taylor Made Korea Ltd., Seoul, Korea Textronics, Inc., Wilmington, Delaware, USA The Rockport Company, LLC, Wilmington, Delaware, USA Trafford Park DC Limited (formerly Reebok Finance Limited), London, Great Britain 257 20 13 adidas Group / 2013 Annual...

  • Page 262
    ... adidas Group publications, please see our corporate website or download our Investor Relations and Media App from the App Store. To improve readability, registered trademarks are omitted in this Annual Report. Concept and Design Strichpunkt, Stuttgart / Berlin adidas Group / 2013 Annual Report

  • Page 263
    ...webcast Publication of 2013 Annual Report May 6, 2014 First Quarter 2014 Results Press release, conference call and webcast Publication of First Quarter 2014 Report May 8, 2014 Annual General Meeting Fuerth (Bavaria), Germany Webcast May 9, 2014 Dividend payment (Subject to Annual General Meeting...

  • Page 264
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