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Exquisite elegant footwork.
Unpredictable moves.
Once in possession of the ball, Kaką is almost unstoppable.
His anticipation and creativity bring football to another level.
 
innovative
 
 

Annual Report 2005

Glossary

Financial Glossary


ABS (Asset-Backed Securities)
Securities (bonds or notes) backed by loan receivables, accounts receivable or other quantifi - able assets.
ADR (American Depositary Receipt)
A negotiable certifi cate 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.
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.
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.
Commercial Paper
Tradable unsecured promissory notes issued for the purpose of short-term fi nancing. 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 specifi c 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 refl ect a combination of the benefi ts 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 benefi t 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 fi gure includes costs for raw materials plus the costs of production, customs and delivery to our sales organizations.
Currency-Neutral
Financial fi gures translated at prior-year exchange rates. This indicates increases or decreases to reported fi gures by eliminating variances arising from currency translation and is the best indicator of underlying business performance.
Current Asset Intensity of Investments
The current asset intensity of investments defi nes the percentage of total assets tied up in current assets. It is calculated by dividing current assets by total assets.
Diluted Earnings Per Share (EPS)
Diluted EPS is a performance indicator that expresses a company's net income used to determine diluted earnings per share in relation to the weighted average number of shares for diluted earnings per share.
Diluted EPS = (net income + interest expense on convertible bond net of tax)/(weighted average number of shares outstanding during the year + weighted share options + shares from assumed conversion of convertible bond).
Earnings Per Share (EPS)
Earnings per share is a performance indicator that expresses a company's net income in relation to the number of ordinary shares issued.
Earnings per share = net income/weighted average number of shares outstanding during the year.
Equity Ratio
The equity ratio shows the role of shareholders' equity within the fi nancing structure of a company. It is calculated by dividing shareholders' equity by total assets.
Equity-To-Fixed-Asset Ratio
The equity-to-fi xed-asset ratio defi nes the percentage of non-current assets fi nanced by equity. It is calculated by dividing equity by non-current assets.
Fair Value
Amount at which assets are traded fairly between business partners. Fair value is often identical to market price.
Finance Lease
A method of acquiring an asset that involves a series of rental payments extending over the whole expected lifetime of the asset.
Financial Leverage
This ratio refl ects the role of borrowings within the fi nancing 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 fi xed rate at a future date.
Free Cash Flow
Free Cash Flow is calculated as net cash provided by operating activities minus capital expenditures. It indicates a company's level of financial flexibility.
Free cash flow = Operating profit - income tax + depreciation - capital expenditures +/- changes in working capital
Functional Currency
A currency in which a company conducts most of its business and reports its fi nancial results to the parent company or the investing public.
Goodwill
An intangible asset that quantifi es 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 acquired at the purchase date.
Gross Margin
The gross margin reveals how much a company earns taking into consideration the costs that it incurs for producing its products and/or services.
Gross profi t = net sales - cost of sales.
Gross margin = (gross profi t/net sales) x 100.
Hedging
A strategy used to minimize exposure to changes in prices, interest rates or exchange rates by means of derivative fi nancial instruments (options, swaps, forward contracts, etc.). See also natural hedges.
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 fi nancial reporting around the world.
Institutional Investor
Entity with large amounts to invest, such as investment companies, mutual funds, brokerages, insurance companies, pension funds, investment banks and endowment funds.
Interest Coverage
The interest coverage ratio 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.
Interest Rate Caps
Option contracts which place an upper limit on a fl oating interest rate. The writer of the cap is required to pay the holder of the cap the difference between the fl oating 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 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 fi nancial assets divided by current liabilities multiplied by 100.
Liquidity II: The sum of cash and short-term fi nancial assets as well as accounts receivable divided by current liabilities multiplied by 100.
Liquidity III: The sum of cash and short-term fi nancial assets as well as accounts receivable and inventories divided by current liabilities multiplied by 100.
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 Overhead
Comprises marketing personnel, general and administrative costs.
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.
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 fi nancial 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.
Net Borrowings
Net borrowings are the portion of gross borrowings not covered by the sum of cash and shortterm fi nancial assets.
Net borrowings = long-term borrowings + short-term borrowings - cash - short-term financial assets.
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 Lease
Method of hiring assets over periods less than the expected lifetime of those assets. An operating lease is accounted for by the lessee without showing an asset or a liability on his balance sheet. Periodic payments are accounted for by the lessee as operating expenses for the period
Operating Working Capital
The operating working capital measures 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 minus accounts payable. (Also see working capital.)
Operating working capital = receivables + inventories - accounts payable.
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 predetermined price (strike price) on or before a specific date.
Over-the-Counter (OTC) Market
Over-the-counter means that the stock is not listed on a stock exchange. In such cases, brokers negotiate directly with one another over computer networks and by phone.
Price-Earnings Ratio (P/E Ratio)
A stock's market price divided by its current or estimated future earnings per share. The P/E Ratio is used by investors as a fundamental measure of the attractiveness of a particular security versus other securities. The lower the ratio relative to another security or the average of the stock market, the lower the market's profi t growth expectations.
Private Placement
Placement of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds, and foundations.
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).
Retail Investor
An individual who purchases amounts of securities for him-/herself, as opposed to an institutional investor.
Return on Capital Employed (ROCE)
A measure of the returns that a company is realizing from its capital.
ROCE = (IBT + fi nancial result + extraordinary income)/(average of shareholders' equity + minority interests + total net borrowings).
Return on Equity (ROE)
An indicator of company profi tability related to the shareholders' fi nancing. It is calculated by dividing net income by shareholders' equity.
Segmental Reporting
Information regarding the fi nancial 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.
SG&A (Selling, General and Administrative) Expenses
Expenses for sales, marketing, research and development, as well as for logistics and central fi nance and administration.
Shareholder Value
A management concept that focuses strategic and operational decision-making on steadily increasing a company's value for shareholders.
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.
Synergies
Additional savings or revenue growth when one combined enterprise is created from two or more separate parts.
Tax Rate
Additional savings or revenue growth when one combined enterprise is created from two or more separate parts.
Working Capital
Working capital is a company's short-term disposable capital used to fi nance the day-to-day operations of providing sporting footwear, apparel and hardware to customers. It is calculated as current assets minus current liabilities.
Working Capital Turnover
The working capital turnover ratio shows how often a working capital item was used in and replaced by the generation of sales in the period under review. The ratio shows how long working capital is tied up and is an indicator of the volume of capital needed. The higher the ratio, the more positive it is deemed to be. Working capital turnover = revenues/working capital.

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Industry and General Glossary


Chassis
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.
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 specifi c channels and at a signifi cant discount.
Classics
Retro products that continue to be in demand because of their authentic unique heritage style.
COR
'Coeffi cient of restitution'. A measurement of the clubface's ability to rebound the ball, expressed as a percentage that is determined by a ball's speed off the clubhead divided by the speed at which it strikes the clubhead.
Directional Accounts
High-profile boutiques and metropolitan accounts that target trendsetting sports lifestyle consumers.
Emerging Markets
The term refers to economies that are currently small, but that have the potential for growth in size and importance in coming years. The defi nition applies to countries in Asia, Latin America, Eastern Europe and the Middle East, such as former CIS countries, Turkey, Bulgaria, Indonesia, Philippines, Mexico, Malaysia, Brazil, India and Thailand.
FIFA
World Football Federation ("Fédération Internationale de Football Association")
Fundamental Research
Fundamental research is an activity designed to broaden scientifi c and technical knowledge not directly linked to industrial or commercial objectives.
Hardware/Hard Goods
This category of sporting goods comprises all kinds of sports equipment that is used rather than worn by the athlete, such as balls and golf clubs.
IAAF
International Association of Athletics Federation
IOC
International Olympic Committee
Key Accounts
Wholesaler's or manufacturer's primary customers that account for large percentages of sales.
Make-To-Stock
The process of finishing goods on the basis of forecasts before an order is placed.
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.
MLB
Major League Baseball
MLS
Major League Soccer (MLS) is the United States professional soccer league.
NBA
National Basketball Association
NFL
National Football League
PGA
Professional Golf Association
Product Licensees
Companies that are authorized to use the name of a brand or company to manufacture and distribute products. For adidas these products include sports watches, sports eyewear, toiletries and perfume.
Promotion Partnerships
Partnerships where consideration is passed to an individual athlete, team or club in exchange for the services of the party concerned in promoting the adidas Group, or the sponsorship of an event in the form of cash or promotional material.
Quick Response Fulfillment Program
This program enables manufacturers to optimize sales order processing to ensure that products are delivered to customers in the right quantity, to the correct destination, and at the appropriate time.
Sell-Through
The sell-through is an indicator of how fast retailers are selling a particular product to the consumer.
Sourcing
The process of managing external suppliers in order to commercialize, produce and deliver fi nal products to our customers.
Supply Chain Management
The process of developing, producing and transporting products to customers.
Top-Value Brand
A brand at the upper end of value or budget market.
Torque
The force which tends to cause rotation. Torque is determined by multiplying the applied force by the distance from the pivot point to the point where the force is applied.
UEFA
Union of European Football Associations
WTO
World Trade Organization

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adidas Group Specific Glossary


a3®
adidas a3® is a three-dimensional energy management system consisting of several pieces that can be placed under the forefoot and/or heel. The pieces are tuned to a particular need such as cushion and guidance for optimal performance.
CGB
TaylorMade's CGB performance cartridge, including fi ve metal inserts, centralizes clubhead weight to concentrate the mass behind the hitting area to promote power and an easy launch. It is used in the rac™ CGB irons.
ClimaCool®
ClimaCool® is an integrated system of technologies that work together to regulate the athlete's body temperature.
Clima® Apparel Line
An adidas apparel technology consisting of four styles for every weather to enhance the wearer’s performance and comfort. Available apparel styles are: ClimaLite®, ClimaCool®, ClimaWarm®, ClimaProof®.
Continuing Operations
The part of the adidas Group's business that was not divested in October 2005 (roughly equals the segments adidas and TaylorMade-adidas Golf).
Discontinued Operations
The part of the adidas Group's business that was divested in October 2005 (roughly equals the Salomon business segment).
Emerging Employees
adidas defines emerging employees as trainees, interns and apprentices.
Ground Control System™ (GCS™)
GCS™ is the fi rst actively functional midsole system that distinguishes vertical from horizontal cushioning for more stability, increased motion control and signifi cantly reduced stress on knees and ankles.
Inverted Cone Technology
The Inverted Cone, which is milled directly onto the inner side of the clubface, increases the size of the club's COR Zone. ICT allows a larger area of the face to deliver consistently higher ball speed, resulting in consistently longer drives.
Modular Football Boot
This football boot concept allows players to customize, adapt and tune their boots to any weather, any pitch and their very own personal style.
Movable Weight Technology™
Movable Weight Technology™ allows the golfer to adjust the center of gravity in the clubhead by moving two weight cartridges. This gives the player the power to change the fl ight of the ball by making the club draw-enhancing or neutral.
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.
PowerPulse™ Technology
Technology used in Predator® football boots that shifts the boot's centre of gravity closer to the point of impact, allowing more powerful shots on goal.
Predator® Elements
adidas' football boot technology that uses strategically placed rubber elements. The Power Zone features strategically placed vertical rubber elements on top of the forefoot which give more power behind every shot. The Swerve Zone features strategically placed rubber elements at the side of the football boot. The elements give every shot and pass the swerve and control.
rac™
TaylorMade's rac™ technology helps to channel impact energy to strategic areas of the clubhead, promoting an outstanding feel. It is the base technology of all of TaylorMade's irons.
RE*AX Technology
TaylorMade RE*AX shaft features a technology developed by Fujikura, maker of the No. 1 shaft on the PGA Tour. This technology reduces ovaling and creates greater stability from the top of the shaft to the tip.
Standards of Engagement
Set of guidelines for our suppliers that set minimum social, environmental and health and safety standards we expect them to achieve.
TaylorMade Launch Control (TLC)
TaylorMade’s rac™ technology helps to channel impact energy to strategic areas of the clubhead, promoting an outstanding feel. It is the base technology of all of TaylorMade’s irons.
Thermal Bonding Technology
Thermal bonding interlocks the fi bers of a football through the use of heat energy. The heat in the thermal bonding process softens the surface of the fi ber. At the melting point, fi bers in contact with each other will form strong bonds, which hold the fabric together. As a result, footballs are more consistent in shape. Thermal bonding serves as replacement technology for hand-sewn footballs.
Vision Asia
Vision Asia is an internal strategic program based on six pillars to drive sales and profi tability in Asia. Our focus is to deliver a real competitive advantage and cover the challenges of growth, retail development, sourcing capabilities, marketing effi ciency and the competition for talents, in which we are engaged in this region.
World Class Supply Chain
World Class Supply Chain is an internal project to improve our end-to-end business performance allowing us to respond to market needs in a more meaningful and differentiated way.

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