Financial Statements and Management Report of adidas AG

adidas AG is the parent company of the adidas Group. It includes operating business functions, primarily for the German market, as well as corporate headquarter functions such as Marketing, IT, Treasury, Taxes, Legal, and Finance. adidas AG also administers the company’s shareholdings.

Operating activities and capital structure of adidas AG

The majority of the operating business of adidas AG consists of the sale of merchandise to wholesale partners and own-retail activities.

In addition to its own trading activities, the results of adidas AG are significantly influenced by its holding function for the company as a whole. This is reflected primarily in currency effects, transfer of costs for services provided, interest result and income from investments in related companies.

The opportunities and risks as well as the future development of adidas AG largely reflect those of the company as a whole. See Outlook See Risk and Opportunity Report

The asset and capital structure of adidas AG is significantly impacted by its holding and financing function for the company. For example, 40% of total assets as at December 31, 2020 related to financial assets (2019: 44%), which primarily consist of shares in affiliated companies. Intercompany accounts, through which transactions between affiliated companies are settled, represent another 21% of total assets (2019: 32%) and 36% of total equity and liabilities as at December 31, 2020 (2019: 42%).

Preparation of accounts

Unlike the consolidated financial statements, which are in conformity with the International Financial Reporting Standards (IFRS), as adopted by the European Union as at December 31, 2020, the following financial statements of adidas AG have been prepared in accordance with the rules set out in the German Commercial Code (Handelsgesetzbuch – HGB).

Net sales decrease 10%

Sales of adidas AG comprise external revenues generated by adidas Germany with products of the adidas and Reebok brands as well as revenues from foreign subsidiaries. Revenues of adidas AG also include royalty and commission income, mainly from affiliated companies, revenues from central distribution, and other revenues. In 2020, adidas AG net sales decreased 10% to € 3.991 billion compared to € 4.444 billion in the prior year. This decline was mainly due to the coronavirus pandemic and the lockdown measures resulting in temporary closures of our own stores as well of our wholesale customers’ stores.

Other operating income up 67%

In 2020, other operating income of adidas AG increased 67% to € 986 million (2019: € 590 million). This development was primarily due to positive currency effects.

Other operating expenses increase 10%

In 2020, other operating expenses for adidas AG rose 10% to € 2.564 billion (2019: € 2.337 billion). This was largely attributable to higher currency losses as well as an increase in service costs.

Depreciation and amortization up 6%

Depreciation and amortization for adidas AG rose 6% to € 127 million in 2020 (2019: € 120 million), mainly as a result of an increase in depreciation and amortization of software.

Operating result slightly below prior year level

In 2020, adidas AG generated an operating profit of € 166 million despite the drop in sales (2019: operating profit of € 170 million).

Financial result declines

The financial result of adidas AG decreased 70% to € 585 million in 2020 (2019: € 1.938 billion). The decrease was attributable to lower income from dividends, partly offset by higher profit transfers from affiliated companies under profit and loss transfer agreements.

Net income below prior year level

Net income, after taxes of € 77 million (2019: € 161 million), amounted to € 674 million in 2020 and was thus 65% below the prior year level (2019: € 1.947 billion).

Total assets above prior year

At the end of December 2020, total assets grew 19% to € 11.959 billion compared to € 10.070 billion in the prior year. This development was mainly a result of increases in cash and cash equivalents as well as securities, partly offset by the decline in receivables and other assets.

Shareholders’ equity up 14%

Shareholders’ equity rose 14% to € 3.533 billion at the end of 2020 (2019: € 3.107 billion). The equity ratio decreased to 29.5% (2019: 30.9%).

Provisions decrease 6%

Provisions were down 6% to € 686 million at the end of 2020 (2019: € 728 million). The decrease primarily resulted from lower provisions for personnel.

Liabilities and other items up 24%

At the end of December 2020, liabilities and other items increased 24% to € 7.740 billion (2019: € 6.235 billion) due to newly issued bonds.

Cash inflow from financing activities reflects change in cash and cash equivalents

adidas AG has a syndicated credit facility of € 1.5 billion and additional bilateral credit lines of € 1. 3 billion. In addition, the company has a multi-currency commercial paper program in an amount of € 2.0 billion. See Treasury

In 2020, operating activities of adidas AG resulted in a cash outflow of € 703 million (2019: € 468 million). The change versus the prior year was a result of the decrease in net income, partly offset by lower receivables from affiliated companies. Net cash inflow from investment activities was € 160 million (2019: € 1.776 billion). This was primarily attributable to lower dividend income and capital expenditure for financial assets. Financing activities resulted in a net cash inflow of € 1.162 billion (2019: net cash outflow of € 1.546 billion). The net cash inflow from financing activities mainly relates to the issuance of bonds, fewer repurchases of adidas AG shares and the fact that no dividends were paid out. As a result of these developments, cash and cash equivalents of adidas AG increased to € 1.256 billion at the end of December 2020 compared to € 636 million at the end of the prior year.

In 2020, the company changed the allocation of dividends received as well as interest paid and received in accordance with the provisions of DRS 21 (Deutsche Rechnungslegungs Standards – German Accounting Standards). Comparative information for the 2019 financial year was adjusted.

adidas AG is able to meet its financial commitments at all times.