ANNUAL REPORT 2000 New Management: Our Mission and Goals pages 2, 8 Share Price Development: Improved Throughout 2000 page 4 Platform to Grow: New Strategies for the Brands page 12 Net Sales Development: Record Level g 5.8 billion page 28 2001 Outlook: Net Earnings to Increase 15% page 50 2000: KEY POINTS IN BRIEF Net Sales (euros in millions) 2000 1999 1998 1997 1996 0 1,000 2,000 3,000 4,000 5,000 6,000 Income (euros in millions) 2000 1999 1998* 1997 1996 0 100 200 300 400 500 600 Income before taxes and minority interests Net income * Before special effect Earnings Per Share (in euros) 2000 1999 1998* 1997 1996 0123456 * Before special effect Financial Highlights Operating Highlights (euros in millions) 2000 1999 Net sales 5,835 5,354 Income before taxes and minority interests 347 398 Net income 182 228 Key Ratios (in %) Gross margin 43.3 43.9 Selling, general and administrative expenses as a percentage of net sales 34.5 33.8 Effective tax rate 40.3 38.4 Net income as a percentage of net sales 3.1 4.3 Equity ratio 20.3 19.0 Per Share of Common Stock (euros) Earnings per share 4.01 5.02 Dividend per ordinary share 0.92* 0.92 Share price at year-end 66.00 74.55 * Dividend proposal – subject to Annual General Meeting approval Table of Contents 1 adidas-Salomon ANNUAL REPORT 2000 2 Mission Statement 4 Shareholder Information 6 Management Speaks Out 12 Strategy Consolidated Accounts (IAS) 61 28 Management Discussion & Analysis Glossary 100 52 Corporate Governance Financial Highlights: Five Year Overview 104 58 Major Subsidiaries Segmental Information: Three Year Overview 106 Financial Calendar 108 TABLE OF CONTENTS 2 Mission Statement adidas-Salomon is a global leader in the sporting goods Our strategy is simple: continuously strengthen our brands industry and offers the broadest portfolio of products. and products to improve our competitive position and financial performance. We are building a world of sports. That means passion for competition and a sporting lifestyle underlies everything we do: adidas-Salomon has the highest market share in Europe and we intend to reinforce and extend this position. By the end of Ⅲ Consumers are our focus and our top priority. We are 2003, we aim to double sales in Asia from the 1999 level, and continuously improving the quality, look, feel and image of we will be well on our way to achieving a 20% share of the our products to match and exceed consumer expectations US footwear market. The resulting sales growth, together with and to provide them with the highest value. added efficiencies and working capital improvements, will drive Ⅲ We strive to bring innovation in technology and design to the 15% earnings growth in each of the next three years. our footwear, apparel and hardware products in order to help athletes of all skill levels achieve peak performance. Ⅲ We are a global organization that is socially and environ- mentally responsible, creative and financially rewarding for our employees and shareholders. Mission Statement 3 adidas-Salomon ANNUAL REPORT 2000 4 Shareholder Information 2000 Monthly Share Price Development Solid Development of adidas-Salomon Share Dividend Sustained at g 0.92 Despite a turbulent year on the stock markets, the adidas- The adidas-Salomon Executive Board will propose paying a 140 Salomon share price developed favorably in the second half dividend of c 0.92 per share to the Annual General Meeting 120 of 2000. At year-end the share price was c 66.00, down 11% of Shareholders on May 10, the same amount as in 1999. from 1999 year-end, but up 32% from its first quarter low. This represents a total payout of approximately c 42 million. 100 This performance was slightly lower than the German DAX-30 The decision to maintain a stable dividend level represents 80 Index, which declined 8% over the same period, and clearly Management’s confidence in its ability to achieve its 2001 behind the Standard & Poor’s SuperCap Footwear Index, a 60 financial targets, despite the net income decline in 2000. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec composite of the Group’s major footwear competitors in adidas-Salomon America, which increased 30% over the year as a result of the The proposal represents a total payout ratio of 23%, which is DAX-30 Index rebounding sporting goods environment in the United States. above the defined range of the Company’s dividend policy, Standard & Poor’s SuperCap Footwear Index which recommends a payout ratio of between 15 and 20% of First quarter declines in the adidas-Salomon share price consolidated net income. Management views 2000 as a year 2000 Quarterly DAX-30 Comparison were driven by company, industry and market factors. At of consolidation and restructuring and is increasing the payout (in %) adidas-Salomon, Management changes and the c 38 million percentage to reward long-term shareholders. In 2001 and Growth and Efficiency Program were announced. Profit warn- beyond, adidas-Salomon will return to a dividend payout ratio 10 ings were issued in the industry, which pushed share prices consistent with its established dividend policy. 0 down dramatically. In addition, interest rate increases and mixed economic signals in the United States and the falling Investor Relations Program Extends Offering –10 euro raised overall market skepticism. Open and consistent communication with shareholders, poten- –20 tial investors and other members of the financial community is Q1/00 Q2/00 Q3/00 Q4/00 As the year progressed, however, confidence in the new Man- a high priority for adidas-Salomon. In addition, the transition of adidas-Salomon agement’s plans increased, the athletic footwear retail industry new Management in 2000 brought a strong mandate to extend DAX consolidated and strengthened in the United States and investor and strengthen our relationship with each of these important insecurity about the “new economy” drove increased interest groups. It is our belief that this communication is critical to a in our share and industry. Analyst sentiment also improved. fair valuation of the adidas-Salomon share. Dividend Payout Ratio adidas-Salomon outperformed the DAX-30 after the first (in % of Net Income) quarter and showed consistent improvement, gaining strongest 2000 momentum in the fourth quarter. In November, adidas-Salomon 1999 was the top performer in the DAX-30. The adidas-Salomon * 1998 share price continued to appreciate in early 2001. 1997 1996 0 5 10 15 20 25 Target range * Before special effect Shareholder Information 5 adidas-Salomon ANNUAL REPORT 2000 Share Information (in euros) 2000 1999 per share Income 4.01 5.02 Dividend* 0.92 0.92 Including tax credit 1.12 1.31 Shareholders’ equity 17.98 14.99 Year-end price** 66.00 74.55 High** 73.10 103.00 Low** 49.81 68.35 Investor Relations activities focused on introducing new The Investor Newsletter function makes investor-relevant press Number of shares outstanding (in millions) 45.35 45.35 Management to the financial community. In addition to increased releases, annual and quarterly report notification and updates Dividend payout (in millions)* 41.72 41.74 investor meetings and industry conference participation, to the financial calendar available. Investor e-mail inquiries can Dividend payout ratio 23% 18% adidas-Salomon conducted its first ever Investor Day event in be made at [email protected]. Copies of the annual Price-Earnings ratio 16.46 14.85 New York in October. Presentations were made to detail the report can also be ordered online. This site was recently ranked Dividend yield 1.39% 1.23% new global marketing strategy, plans for North America and number two and number three among DAX companies in two * 2000: dividend proposal ** Closing price on the Frankfurt stock exchange global supply chain management. leading German financial publications. Type of share No-par-value share In new media activities, the Investor Relations internet site adidas-Salomon is committed to extending and improving its Initial Public Offering November 17, 1995 www.adidas.com/investor was improved and expanded in 2000. dialog with private and institutional investors going forward. Stock exchange Frankfurt, Paris The site now includes corporate history, investor news, current In 2001, we will be webcasting all our analyst conferences to Stock registration number 500 340 and historical share price information, quarterly earnings reports ensure full disclosure to all interested parties. After a successful Important indices DAX-30 and presentations, as well as a list of financial analysts who premiere in 2000, we also intend to broadcast our shareholders’ CDAX-Consumer-Cyclical Index cover our Company and a summary of their recommendations. meeting on the internet. Dow Jones Stoxx Dow Jones Euro Stoxx 6 Letter from Chief Executive Officer In 1997, we acquired the Salomon group and added four great brands – Salomon, TaylorMade, Mavic and Bonfire – to our renamed company, adidas-Salomon. This expansion marked a This is the last annual report that I will be writing to you as CEO new era in our business and made us the only sports company of adidas-Salomon, and I am very pleased and proud to be in the world to be leaders in footwear, apparel and hardware. handing over a company which is in great shape. Over the last No other company in our industry can match that. eight years, we have seen massive changes and enormous achievements in our firm. Now is the time to put all of these Now that the Salomon group has been successfully integrated things into perspective. into adidas, we are beginning to see the real benefits of the acquisition. The continuously improving results of all the new Let me take you back to the early 1990s.