288 mm × 210 mm Annual Report 2010 version: Mon, 11-02-28, 11:44 AM 1st corr 2nd corr page 3 - En_00_Umschlag.indd 286 mm × 210 mm Targets 2010 Results 2010 Outlook 2011 Low- to mid-single-digit currency-neutral sales increase Net sales reach € 11.990 billion Mid- to high-single-digit currency-neutral sales increase Group currency-neutral sales increase 9% Bring major new concepts, technology evolutions and Major 2010 product launches: Bring major new concepts, technology evolutions and revolutions to market, such as: adidas: revolutions to market, such as: adidas: – adiStar Salvation running shoe adidas: – adiZero F50 football boot – adiZero F50 football boot – adiZero F50 Runner running shoe – miCoach training system – miCoach training system – adiPower Predator football boot Reebok: Reebok: Reebok: – ZigTech training shoe – ZigTech training shoe – RealFlex footwear TaylorMade-adidas Golf: – RunTone running shoe – EasyTone Plus footwear – R9 SuperTri driver TaylorMade-adidas Golf: – ClassicLite footwear and apparel collection Rockport: – R9 SuperTri driver TaylorMade-adidas Golf: – TruWalk footwear collection – Burner SuperFast driver and fairway woods – R11 and R11 TP driver Reebok-CCM Hockey: Rockport: Rockport: – 11K skate – TruWalk men’s and women’s footwear – Naomi women’s footwear collection Reebok-CCM Hockey: Reebok-CCM Hockey: – Reebok 11K skate and CCM U+ Crazy Light skate – CCM U+ Crazy Light II stick On a currency-neutral basis, sales to increase: On a currency-neutral basis: On a currency-neutral basis, sales to increase: – at a low- to mid-single-digit rate for the Wholesale – Wholesale segment sales increase 8% – at a mid-single-digit rate for the Wholesale segment segment – Retail segment sales increase 18% – at a low-double-digit rate for the Retail segment – at a high-single-digit rate for the Retail segment – adidas brand sales increase 9% – at a mid-single-digit rate for Other Businesses – at a low-single-digit rate for Other Businesses – Reebok brand sales increase 12% – Other Businesses sales increase 2% – TaylorMade-adidas Golf sales increase 1% Increase gross margin to a level between 46% and 47% Gross margin: 47.8% Gross margin level between 47.5% and 48.0% Increase operating margin to a level around 6.5% Operating margin: 7.5% Increase operating margin to between 7.5% and 8.0% Further reduction of operating working capital as a Operating working capital as a percentage of sales Increase operating working capital as a percentage of sales percentage of sales improves to 20.8% Capital expenditure range € 300 million – € 400 million Capital expenditure: € 269 million Capital expenditure range € 350 million – € 400 million Further reduction of net borrowings; net borrowings/EBITDA Net borrowings reduced substantially to € 221 million; Further reduction of net borrowings; net borrowings/EBITDA ratio to be maintained below 2 year-end financial leverage: 4.8% ratio to be maintained below 2 Diluted earnings per share to increase to a level Net income attributable to shareholders increases 131% to Diluted earnings per share to increase to a level between € 1.90 and € 2.15 € 567 million; diluted earnings per share increases 122% to between € 2.98 and € 3.12 € 2.71 Further increase shareholder value adidas AG share price increases 29%; Further increase shareholder value dividend of € 0.80 per share (subject to Annual General Meeting approval) version: Mon, 11-02-28, 11:44 AM 1st corr 2nd corr page 4 - En_00_Umschlag.indd 286 mm × 210 mm Financial Highlights 2010 Financial Highlights (IFRS) Net sales 01 € in millions 02 2010 2009 Change 2006 3) 10,084 Operating Highlights (€ in millions) 2007 10,299 Net sales 11,990 10,381 15.5% 2008 10,799 EBITDA 1,159 780 48.6% 2009 10,381 Operating profit 894 508 76.0% 2010 11,990 Net income attributable to shareholders 567 245 131.1% Key Ratios (%) Gross margin 47.8% 45.4% 2.4pp Operating expenses as a percentage of net sales 42.1% 42.3% (0.2pp) Net income attributable to shareholders € in millions 03 Operating margin 7.5% 4.9% 2.6pp Effective tax rate 29.5% 31.5% (2.0pp) 2006 3) 483 Net income attributable to shareholders as a percentage of net sales 4.7% 2.4% 2.4pp 2007 551 1) Operating working capital as a percentage of net sales 20.8% 24.3% (3.5pp) 2008 642 Equity ratio 43.5% 42.5% 1.0pp 2009 245 Net borrowings/EBITDA 0.2 1.2 2010 567 Financial leverage 4.8% 24.3% (19.5pp) Return on equity 12.3% 6.5% 5.8pp Balance Sheet and Cash Flow Data (€ in millions) Total assets 10,618 8,875 19.6% Inventories 2,119 1,471 44.1% Receivables and other current assets 2,324 2,038 14.0% Working capital 1,972 1,649 19.6% Net borrowings 221 917 (75.9%) Shareholders' equity 4,616 3,771 22.4% Capital expenditure 269 240 11.8% Net cash generated from operating activities 894 1,198 (25.3%) Per Share of Common Stock (€) Basic earnings 2.71 1.25 116.8% Diluted earnings 2.71 1.22 121.8% Operating cash flow 4.28 6.11 (30.0%) Dividend 0.802) 0.35 128.6% Share price at year-end 48.89 37.77 29.4% Other (at year-end) Number of employees 42,541 39,596 7.4% 1) Twelve-month trailing average. Number of shares outstanding 209,216,186 209,216,186 0.0% 2) Subject to Annual General Meeting approval. Average number of shares 209,216,186 196,220,166 6.6% 3) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. version: Mon, 11-02-28, 11:44 AM 1st corr 2nd corr page 5 - En_00_Umschlag.indd 288 mm × 210 mm Group Brands 2010 version: Mon, 11-02-28, 11:44 AM 1st corr 2nd corr page 6 - En_00_Umschlag.indd 278 mm × 210 mm We know the commitment it takes to achieve success, from the world’s biggest sporting events to the finest details in our latest product innovations. We know how it all fits together. Our employees, athletes and products together with our brands, heritage, talents and aspirations. Our strengths. Our passion. One Team. Thinking smarter, pushing harder and playing stronger. Our Group is fit. Fit for Route 2015. Fit for growth. Fit to win. We are … version: Mon, 11-02-28, 11:04 AM 1st corr 2nd corr page 1 - En_00a_Intro.indd 278 mm × 210 mm Table of Contents Fit for the Future To Our Shareholders adidas .................................................................. 40 Group Management Report – Reebok ................................................................ 58 Operational and Sporting Highlights 2010 ........... 6 Our Group TaylorMade-adidas Golf ...................................... 66 Interview with the CEO ........................................ 10 Corporate Mission Statement ............................. 76 Reebok-CCM Hockey .......................................... 70 Executive Board .................................................. 16 Our Brands .......................................................... 77 Rockport .............................................................. 72 Supervisory Board .............................................. 18 Major Locations and Promotion Partnerships ... 78 Supervisory Board Report .................................. 20 Group Strategy .................................................... 80 Corporate Governance Report including the Global Sales Strategy .......................................... 82 Declaration on Corporate Governance ............ 25 Wholesale ........................................................ 83 Compensation Report ......................................... 30 Retail ............................................................... 84 Our Share ............................................................ 34 eCommerce ..................................................... 86 Global Brands Strategy ....................................... 87 adidas .............................................................. 91 Reebok ............................................................. 96 Other Businesses Strategy ................................. 98 TaylorMade-adidas Golf .................................. 98 Rockport ........................................................ 102 Reebok-CCM Hockey ..................................... 104 Global Operations ............................................. 106 Research and Development .............................. 110 Employees ......................................................... 115 Sustainability ..................................................... 120 2 Table of Contents version: Mon, 11-02-28, 11:04 AM 1st corr 2nd corr page 2 - En_00a_Intro.indd 278 mm × 210 mm Group Management Report – Consolidated Financial Statements Additional Information Financial Review Responsibility Statement .................................. 182 Ten-Year Overview ............................................ 234 Internal Group Management System ............... 126 Auditor’s Report ................................................ 183 Glossary ............................................................ 236 Group Business Performance .......................... 130 Consolidated Statement of Financial Position ... 184 Index .................................................................. 241 Economic and Sector Development .............. 130 Consolidated Income Statement ....................... 185 Declaration of Support ...................................... 242 Income Statement ......................................... 133 Consolidated Statement of Comprehensive Publishing Details & Contact ............................ 242 Statement of Financial Position and Income ........................................................... 186 Financial Calendar 2011 ..................................