of Cash Flows
Changes in accounting policy The Group’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS as adopted by the EU).
In 2010, there were changes in IFRS, which were reflected in the Group’s consolidation and accounting principles
see Note 1, p. 188. However, the impact on the Group’s consolidated financial statements from any such changes was not material in the reporting period.
Total assets increase 20%
At the end of December 2010, total assets grew 20% to € 10.618 billion versus
€ 8.875 billion in the prior year see 35. This was primarily the result of an increase in current assets. An increase in non-current assets also impacted this development.
Group inventories up 44%
Group inventories increased 44% to
€ 2.119 billion at the end of December 2010 versus € 1.471 billion in 2009 see Note 8, p. 197. On a currency-neutral basis, inventories grew 34%, which reflects our expectations for continued growth in the coming quarters see 36.
Accounts receivable increase 17%
At the end of December 2010, Group receivables increased 17% to
€ 1.667 billion (2009: € 1.429 billion) as a result of the Group sales growth
see Note 6, p. 196. On a currency-neutral basis, receivables were up 7%. This growth is lower than the 9% currency-neutral Group sales increase in the fourth quarter of 2010 and mirrors strict discipline in the Group’s trade terms management and concerted collection efforts in all segments see 37. Other current financial assets up 23%
Other current financial assets grew 23%
to € 197 million at the end of December 2010 from € 160 million in 2009 see Note 7, p. 196. This development was mainly due to the increase in the fair value of financial instruments.
Other current assets up 8%
Other current assets increased 8% to
€ 390 million at the end of December 2010 from € 360 million in 2009, mainly as a result of an increase in tax receivables other than income taxes
see Note 9, p. 197.
Assets held for sale decrease 63%
At the end of December 2010, assets held for sale declined 63% to € 47 million compared to € 126 million in 2009. This decrease was due to the reclassification of certain assets held for sale back to fixed assets, as it is not considered likely that they will be sold in the foreseeable future see Note 10, p. 197. Assets held for sale primarily relate to the planned sale of land and buildings in Herzogenaurach, Germany, as well as a warehouse in the Netherlands.
Fixed assets increase 7%
Fixed assets increased 7% to
€ 4.076 billion at the end of December 2010 versus € 3.794 billion in 2009.
Fixed assets include property, plant and equipment, goodwill, trademarks and other intangible assets as well as long-term financial assets. Additions in an amount of € 271 million were primarily related to the continued expansion of our own-retail activities, investments into the Group’s IT infrastructure as well as the further development of the Group’s headquarters in Herzogenaurach. A net transfer of fixed assets from assets held for sale totalling
€ 76 million also contributed to the increase. Moreover, currency translation effects in an amount of € 216 million on fixed assets denominated in currencies other than the euro positively impacted this development. Additions were partly offset by depreciation and amortisation amounting to € 263 million as well as disposals of € 17 million.
Group Management Report – Financial Review Group Business Performance Statement of Financial Position and Statement of Cash Flows 141 Accounts payable
€ in millions
1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards.
Shareholders’ equity
€ in millions
1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards.
Total assets
€ in millions
1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards.
Inventories
€ in millions
1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards.
Accounts receivable
€ in millions
1) Including Reebok, Rockport and Reebok-CCM Hockey from February 1, 2006 onwards. Other non-current assets down 20%
Other non-current assets decreased 20%
to € 100 million at the end of December 2010 from € 126 million in 2009, mainly driven by a decline in prepaid promotion partnerships see Note 16, p. 200. Accounts payable increase 45%
Accounts payable were up 45% to
€ 1.694 billion at the end of December 2010 versus € 1.166 billion at the end of 2009 see 38. On a currency-neutral basis, accounts payable increased 36%, reflecting the growth in inventories during the fourth quarter.
Other current financial liabilities increase 21%
At the end of December 2010, other current financial liabilities increased 21%
to € 123 million from € 101 million in 2009, primarily as a result of an increase in the negative fair value of financial instruments see Note 18, p. 200. Other current provisions up 47%
Other current provisions were up 47%
to € 470 million at the end of 2010 versus € 320 million at the end of 2009.
This primarily relates to increases in provisions for returns, allowances and warranty see Note 19, p. 201.
142 Group Management Report – Financial Review Group Business Performance Statement of Financial Position and Statement of Cash Flows
2010 capital expenditure by segment
2010 capital expenditure by type
41
Change in cash and cash equivalents€ in millions Cash and cash
equivalents at the end of 2009
Net cash
1) Includes a positive exchange rate effect of € 55 million.
40
775
894 (330)
(238)
1,156 Current accrued liabilities grow 35%
Current accrued liabilities increased 35%
to € 842 million at the end of 2010 from
€ 625 million in 2009, mainly due to an increase in accruals for payment of goods and services not yet invoiced see Note 20, p. 201.
Other current liabilities up 4%
Other current liabilities were up 4% to
€ 241 million at the end of 2010 from
€ 232 million in 2009, mainly due to increases in customers with credit balances see Note 21, p. 202. Equity grows due to increase in net income
Shareholders’ equity rose 22% to
€ 4.616 billion at the end of December 2010 versus € 3.771 billion in 2009 see
39. The net income generated during the period was the main contributor to this development. Currency translation effects in an amount of € 330 million positively impacted this development, partly offset by the dividend in an amount of € 73 million paid during the period
see Note 25, p. 204. Expenses related to off-balance sheet items
Our most significant off-balance sheet commitments 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 13% to € 544 million in 2010 from € 480 million in the prior year, mainly due to the continued expansion of the adidas Group’s own-retail activities see Note 27, p. 207. Cash flow reflects improved Group profitability
In 2010, net cash inflow from operating activities was € 894 million (2009:
€ 1.198 billion). The decrease in cash provided by operating activities compared to the prior year was primarily due to higher operating working capital requirements, partly offset by the improved Group profitability. Net cash outflow from investing activities was
€ 330 million (2009: € 162 million).
This was mainly related to spending for property, plant and equipment such as investments in the furnishing and fitting of stores in our Retail segment, in new office buildings and in IT systems, as well as to the purchase of short-term financial assets. Net cash outflow from financing activities totalled € 238 million (2009:
€ 512 million).
Cash outflows from financing activities were related to the repayment of short-term borrowings totalling € 198 million and dividends paid in an amount of
€ 73 million, partly offset by an increase in long-term borrowings in an amount of € 33 million. Exchange rate effects in an amount of € 55 million positively impacted the Group’s cash position in 2010 (2009: € 7 million). As a result of all these developments, cash and cash equivalents increased by € 381 million to € 1.156 billion at the end of December 2010 compared to € 775 million at the end of December 2009 see 40. Capital expenditure grows 12%
Capital expenditure is the total cash expenditure for the purchase of tangible and intangible assets.
Group capital expenditure increased 12% to € 269 million in 2010 (2009:
€ 240 million). The Retail segment accounted for 23% of Group capital expenditure (2009: 30%). Investments primarily related to the expansion of our store base for the adidas and Reebok brands. Expenditure in the Wholesale segment accounted for 12%
of total capital expenditure (2009: 10%).
Capital expenditure in Other Businesses accounted for 10% of total expenditure (2009: 6%). The remaining 55% of Group capital expenditure was recorded in HQ/Consolidation (2009: 54%) and was mainly related to investments into new office buildings and IT infrastructure
see 41 and Global Operations, p. 106.
Group Management Report – Financial Review Group Business Performance Disclosures pursuant to § 315 Section 4 of the German Commercial Code 143