BALANCE SHEET AND CASH FLOW STATEMENT
NO CHANGES IN ACCOUNTING POLICY
The Group’s consolidated
financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS). In line
with IFRS, several new or amended standards and interpretations
were applied for the first time in 2007. 
see Note 1
In 2007, there were no changes in the Group’s consolidation
and accounting principles. Therefore, changes in accounting
policy and changes in management discretion in the application
of accounting
standards had no impact on the structure of
the Group’s balance sheet in the reporting period.
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| 1)
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For absolute figures |
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| 1)
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For absolute figures
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TOTAL ASSETS DECREASE 1 %
At the end of 2007, total assets
decreased 1 % to € 8.325 billion versus € 8.379 billion in the
prior year, mainly due to currency effects which had a negative
impact on the Group’s US dollar-denominated assets.
INVENTORIES UP 1 %
Group inventories increased 1 % to
€ 1.629 billion at the end of 2007 versus € 1.607 billion in 2006.
On a currency-neutral basis, inventories grew 7 %. The
increase was driven by higher inventory levels in emerging
markets, reflecting the Group’s high sales growth expectations
for these countries in particular.
RECEIVABLES INCREASE 3 %
At the end of 2007, Group receivables
increased 3 % to € 1.459 billion (2006: € 1.415 billion).
On a currency-neutral basis, receivables grew 8 %. This is well
below sales growth in the fourth quarter of 2007 and reflects
strict discipline in the Group’s trade terms management and
concerted collection efforts in all segments.
OTHER CURRENT ASSETS UP 28 %
Other current assets
increased 28 % to € 529 million at the end of 2007 from
€ 413 million in 2006. This development was mainly due
to higher prepayments for promotion contracts and higher
fair values of financial instruments.
FIXED ASSETS DECREASE 7 %
Fixed assets decreased by
7 % to € 3.726 billion at the end of 2007 versus € 3.988 billion
in 2006. This was mainly due to € 286 million of negative
currency
translation
effects on fixed assets held in currencies
other than the euro. In addition, the transfer of € 17 million of
fixed assets to assets held-for-sale impacted this development.
Additions of € 295 million were partly offset by depreciation and
amortization of € 215 million as well as disposals in an amount
of € 37 million.
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| 1)
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Restated due to application of amendment to IAS 19.
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| 2)
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Including Reebok business segment from February 1, 2006 onwards.
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| 1)
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Including Reebok business segment from February 1, 2006 onwards.
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| 1)
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Including Reebok business segment from February 1, 2006 onwards.
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ASSETS HELD-FOR-SALE INCREASE 35 %
Assets held-for-sale
mainly relate to the planned sale of land and buildings
in Herzogenaurach, Germany. In addition, two warehouses in
the UK and the Maxfli trademark were reclassified as assets
held-for-sale at the end of 2007. The Maxfli trademark was
sold in February 2008. see Subsequent Events As a result
of these additions, assets held-for-sale increased 35 % to
€ 80 million (2006: € 59 million).
OTHER NON-CURRENT ASSETS INCREASE 8 %
Other non-current
assets increased by 8 % to € 147 million at the end of
2007 from € 134 million in 2006, mainly driven by higher fair
values of financial instruments.
ACCOUNTS PAYABLE UP 13 %
Accounts payable increased
13 % to € 849 million at the end of 2007 versus € 752 million
in 2006. On a currency-neutral basis, accounts payable were
up 22 %. The increase is primarily due to increased product
deliveries from suppliers in the last quarter of the year,
reflecting
the Group’s sales growth expectations.
OTHER CURRENT LIABILITIES GROW 15 %
Other current liabilities
increased 15 % to € 266 million at the end of 2007 from
€ 232 million in 2006, primarily as a result of increased current
forward contracts.
OTHER NON-CURRENT LIABILITIES INCREASE 65 %
Other
non-current liabilities increased 65 % to € 69 million at the
end of 2007 from € 43 million in 2006, primarily as a result of
increased non-current forward contracts.
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| 1)
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Restated due to application of amendment to IAS 19.
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| 2)
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Including Reebok business segment from February 1, 2006 onwards.
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| 1)
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Includes a negative exchange rate effect of € 1 million.
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EQUITY BASE FURTHER STRENGTHENED
The Group’s equity
base was further strengthened compared to the prior year.
Shareholders’ equity rose 7 % to € 3.023 billion at the end of
2007 versus € 2.828 billion in 2006. The net income generated
during the period more than offset negative currency translation
effects.
EXPENSES RELATED TO OFF-BALANCE SHEET ITEMS
Our
most important off-balance sheet assets are operating leases,
which are related to retail stores, offices, warehouses and
equipment. The Group has entered into various operating
leases as opposed to property acquisitions to reduce exposure
to property value fluctuations. Rent expenses increased 21 %
to € 337 million in 2007 from € 278 million in the prior year,
mainly due to the continued expansion of adidas own-retail
activities.
CASH FLOW DEVELOPMENT REFLECTS OPERATIONAL
STRENGTH
In 2007, cash inflow from operating activities was
€ 780 million. It was primarily used to finance working capital
needs in accordance with the seasonality of our business.
Cash outflow for investing activities was € 285 million and was
mainly related to spending for property, plant and equipment
such as investment in the furnishing and fitting of adidas
and Reebok own-retail stores. In addition, investments also
related
to the Reebok integration. Major integration projects
included the construction of the shared adidas and Reebok
warehousing
and distribution center in the UK. Cash outflow
for financing activities totaled € 510 million and was related
to the payment of dividends as well as the reduction of long-term
borrowings. Operating activities provided less cash than
used in investing and financing activities. As a result of this
development
and a negative exchange rate effect of € 1 million,
cash and cash equivalents decreased by € 16 million to
€ 295 million at the end of 2007 (2006: € 311 million).
CAPITAL EXPENDITURES FOCUS ON OWN-RETAIL ACTIVITIES
Capital expenditure is the total cash expenditure for the purchase
of tangible and intangible assets and the construction
of tangible
assets. Group capital expenditures increased 4 % to
€ 289 million in 2007 (2006: € 277 million). The adidas segment
accounted for 52 % of Group capital expenditures (2006: 49 %). Expenditures in the Reebok segment accounted for
20 % of total expenditures (2006: 26 %). The majority of adidas
and Reebok expenditures focused on the expansion of own-retail
activities. TaylorMade-adidas Golf capital expenditures
accounted for 4 % of total expenditures (2006: 5 %). The
remaining
24 % of total capital expenditures was recorded
in the HQ / Consolidation segment (2006: 20 %) and was mainly
related to integration initiatives such as the construction of
the shared warehouse facility in the UK and the Group-wide
harmonization of IT systems.
