adidas-Salomon - 2003 Annual Report /// Financial analysis

adidas-Salomon - 2003 Annual Report /// Financial analysis - Glossary

ADDITIONAL INFORMATION

Glossary


A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


ABS (ASSET-BACKED SECURITIES) ///	Securities (bonds or notes) backed by loan receivables, accounts receivable or other quantifiable assets.

ADR (AMERICAN DEPOSITARY RECEIPT) ///	A negotiable certificate of a foreign-based company held by a US bank that entitles the holder to all dividends and rights of the underlying stock. ADRs are traded similarly to stocks on US exchanges and provide a way for Americans to invest in foreign-based companies by buying their shares in the USA instead of through an overseas exchange. Unsponsored ADRs are issued by a broker or depositary bank without the involvement of the company whose stock underlies the ADR.

ASSET COVERAGE I & II ///	The extent to which a company's non-current assets cover its debt obligations. Expressed as a percentage. They are calculated as follows: Asset coverage I (%): The sum of equity and non-current liabilities divided by non-current assets. Asset coverage II (%): The sum of equity and non-current liabilities divided by non-current assets and inventories.

ATHLETIC SPECIALTY RETAILERS ///	A major distribution channel for adidas products in terms of sales. These stores specialize in merchandising athletic footwear and apparel products to the 12-24 year-old urban consumer group. Key buying motivators of these consumers are design and technology underpinned with strong marketing activities.

BACKLOGS (ALSO CALLED ORDER BACKLOGS) ///	The value of orders received for future delivery. At brand adidas, orders are received approximately six months in advance, depending on the season. This information is used by the market as an indicator of future sales performance.

CLEARANCE SALES ///	Clearance sales are all those sales made outside the course of normal business terms, arising from commercial decisions by management to clear excess stock usually through specific channels and at a significant discount.
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COMMERCIAL PAPER ///	Tradable unsecured promissory notes issued for the purpose of short term financing. Commercial paper is issued on an ongoing, revolving basis with maturities typically between seven days and 12 months or more.

CONVERTIBLE BOND ///	A corporate bond that can be exchanged for a specific number of shares of the company's common stock. Convertible bonds tend to have lower interest rates than non-convertibles because they also accrue value as the price of the underlying stock rises. In this way, convertible bonds reflect a combination of the benefits of stocks and those of bonds.

CORPORATE GOVERNANCE ///	The distribution of rights and responsibilities among different participants in a company, in particular shareholders, the Executive Board, the Supervisory Board.

CORRIDOR APPROACH ///	A range of plus or minus 10% around a company's best estimate of post-employment benefit obligations (IAS 19). Outside that range, it is not reasonable to assume that actuarial gains or losses will be offset in future years.

COST OF SALES ///	The costs of obtaining and manufacturing products. This figure includes costs for raw materials plus the costs of production, customs and delivery to our sales organizations.
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CURRENCY-NEUTRAL ///	Financial figures translated at prior-year exchange rates. This indicates increases or decreases to reported figures by eliminating variances arising from currency translation and is the best indicator of underlying business performance.

CURRENT ASSET INTENSITY OF INVESTMENTS ///	The ratio defines the percentage of total assets tied up in current assets. It is calculated by dividing current assets by total assets.

DSO (DAYS SALES OUTSTANDING) ///	A financial indicator that shows the average number of days it takes to convert a company's accounts receivable into cash. This serves as an indicator of collection efficiency. It is calculated by dividing accounts receivable by sales and multiplying this by the number of days in the respective period.

EQUITY RATIO ///	A ratio which shows the role of shareholders' equity within the financing structure of a company. It is calculated by dividing shareholders' equity by total assets.

EQUITY-TO-FIXED-ASSET RATIO ///	The equity-to-fixed-asset ratio defines the percentage of non-current assets financed by equity. It is calculated by dividing equity by non-current assets.
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FAIR VALUE ///	Amount at which assets are traded fairly between business partners. Fair value is often identical to market price.

FINANCIAL LEVERAGE ///	A ratio which reflects the role of borrowings within the financing structure of a company. It is calculated by dividing net total borrowings by shareholders' equity.

FORWARD CONTRACT ///	Agreement to exchange amounts of one currency for another currency at an agreed fixed rate at a future date.

FUNCTIONAL CURRENCY ///	A currency in which a company conducts most of its business and reports its financial results to the parent company or the investing public.

GOODWILL ///	An intangible asset that quantifies the price that a buyer of a company has paid for the reputation, know-how and market position of the acquired company. Goodwill is the excess of the amount paid over the fair value of the net assets aquired at the purchase date.
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HARDWARE ///	This category of sporting goods comprises all kinds of sports equipment that is used rather than worn by the athlete, such as balls, skis and golf clubs.

HEDGING ///	A strategy used to minimize exposure to changes in prices, interest rates or exchange rates by means of derivative financial instruments (options, swaps, forward contracts, etc.). See also natural hedges.

IBA ///	International Boxing Association

IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARDS) ///	Reporting standards (formerly called IAS), which have been adopted by the International Accounting Standards Board (IASB), an independent, international organization supported by the professional accountancy bodies. The objective is to achieve uniformity and transparency in the accounting principles that are used by businesses and other organizations for financial reporting around the world.

INTEREST COVERAGE ///	A ratio which indicates the ability of a company to cover net interest expenses with income before net interest and taxes. It is calculated by dividing income before interest and taxes by interest.
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INTEREST RATE CAPS ///	Option contracts which place an upper limit on a floating interest rate. The writer of the cap is required to pay the holder of the cap the difference between the floating rate and the reference rate when that reference rate is exceeded. There is a premium to be paid by the buyer of such a contract as market price for the potential pay-out.

INTERNATIONAL FINANCIAL REPORTING INTERPRETATIONS COMMITTEE ///	An accounting body which rules on controversial accounting issues. Its interpretations (SIC) are approved by the International Accounting Standards Board (IASB) and, once adopted, are binding on all IFRS users.

IPO (INITIAL PUBLIC OFFERING) ///	The first public placement of shares by a private company.

LIQUIDITY RATIOS I-III ///	The liquidity ratio measures the extent to which a company can quickly liquidate assets to cover short-term liabilities. They are calculated as follows: Liquidity I: The sum of cash and short-term financial assets divided by current liabilities. Multiplied by 100. Liquidity II: The sum of cash and short-term financial assets as well as accounts receivable divided by current liabilities. Multiplied by 100. Liquidity III: The sum of cash and short-term financial assets as well as accounts receivable and inventories divided by current liabilities. Multiplied by 100.

LOCAL PRODUCTION ///	Products manufactured locally by adidas-Salomon subsidiaries for their domestic market.
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LPGA ///	Ladies Professional Golf Association

MARKET CAPITALIZATION ///	The total market value of all outstanding shares. It is calculated by multiplying the number of shares by the current market price.

MARKETING WORKING BUDGET ///	Promotion and communication spending including sponsorship contracts with teams and individual athletes, as well as advertising, retail support, events and other communication activities, but excluding marketing overhead expenses.

METALWOOD ///	Golf clubs (drivers and fairway woods) which are constructed from steel and/or titanium alloys.The name also pays homage to persimmon wood, which was originally used in the creation of these products. This is the largest golf product category in terms of sales.

MI adidas ///	adidas customization project that gives consumers the opportunity to create their own unique footwear to their personal specifications in terms of function, fit and aesthetics. In 2003, this system was available in Europe, Japan and USA for the running, football, tennis, basketball (USA only) and handball (Europe only) categories.
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MINORITY INTERESTS ///	The part of net income which is not attributable to a company. Outside ownership interests in subsidiaries that are consolidated with the parent company for financial reporting purposes.

NATURAL HEDGES ///	An offset of currency risks that occurs naturally as a result of a company's normal operations, without the use of derivatives. For example, revenue received in a foreign currency and used to pay known commitments in the same foreign currency.

NBA ///	National Basketball Association

OPERATING EXPENSES ///	Costs associated with running a business which are not directly attributable to the products or services sold. This refers to sales and marketing, research and development, as well as general and administrative costs, and depreciation of non-production assets.

OPERATING WORKING CAPITAL ///	A measurement of the net operating assets that a company must procure in order to finance its day-to-day business. It is the sum of receivables and inventories less accounts payable.
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OPTION ///	A financial instrument which ensures the right to purchase (call option) or the obligation to sell (put option) a particular asset (for example shares or foreign exchange) at a pre-determined price (strike price) on or before a specific date.

OWN-RETAIL ACTIVITIES ///	Sales directly generated through a store operated by adidas. adidas own retail includes concept stores, concession corners, e-commerce and factory outlets.

PGA ///	Professional Golf Association

PRIVATE PLACEMENT ///	Placement of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds, and foundations.

PRODUCT LICENSEES ///	Companies that are authorized to use the name of the adidas-Salomon Group's brands to manufacture and distribute products such as sports watches, sports eyewear, toiletries and perfume.
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PROJECTED UNIT CREDIT METHOD ///	The accounting method (IAS 19) used to calculate provisions for pensions and similar obligations. It includes not only the pensions and vested interests accrued as at cut-off date, but also anticipated increases in salaries and pensions.

PROMOTIONAL EXPENSES ///	Costs related to sponsorship of individual athletes, teams, federations and sporting events for the promotion of a company's brand(s).

RETURN ON CAPITAL EMPLOYED ///	An indicator of a company's profitability related to the total financing. It is calculated by dividing income before taxes, minority interests and the financial and extraordinary results by capital employed (defined as the average of shareholders' equity plus minority interests plus net total borrowings for the year).

RETURN ON EQUITY ///	An indicator of company profitability related to the shareholders' financing. It is calculated by dividing net income by shareholders' equity.

SEGMENTAL REPORTING ///	Information regarding the financial position, results of operations in individual operating areas and regions (segments). This gives an indication of developments in the individual segments and their contribution to a group's results.
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SELL-THROUGH ///	The time in which products are sold to the consumer through retailers.

SG&A (SELLING, GENERAL AND ADMINISTRATIVE) EXPENSES ///	Expenses for sales, marketing and research and development, as well as for logistics and central finance and administration.

SHAREHOLDER VALUE ///	A management concept that focuses strategic and operational decision-making on steadily increasing a company's value for shareholders.

SOFT GOODS ///	This category of sporting goods comprises apparel and footwear products.

SOURCING ///	The process of managing external suppliers in order to commercialize, produce and deliver final products to our customers.
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SPEED-TO-MARKET ///	Length of time it takes to get a product from idea to marketplace.

STAKEHOLDERS ///	All parties that have a direct or indirect interest in a company's performance and results. For adidas-Salomon, this includes consumers, retailers, distributors, licensees, supply chain business partners, shareholders, employees, international sports bodies, non-governmental organizations, the media, etc.

SUPPLY CHAIN MANAGEMENT ///	The process of developing, producing and transporting products to customers.

WTA ///	Women's Tennis Association

WORKING CAPITAL ///	Working capital is a company's short-term disposable capital used to finance the day-to-day operations of providing sporting footwear, apparel and hardware to customers. It is calculated as current assets minus current liabilities. See also operating working capital.

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