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, 43% of total assets as of December 31, 2021, related to financial assets (2020: 40%), which primarily consist of shares in affiliated companies. Intercompany accounts, through which transactions between affiliated companies are settled, represent another 17% of total assets (2020: 21%) and 32% of total equity and liabilities as of December 31, 2021 (2020: 36%).

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 of December 31, 2021, the following financial statements of adidas AG have been prepared in accordance with the rules set out in the German Commercial Code (Handelsgesetzbuch – HGB).

INCOME STATEMENT

NET SALES INCREASE 12%

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 2021, adidas AG net sales increased 12% to € 4.475 billion compared to € 3.991 billion in the prior year.

OTHER OPERATING INCOME DOWN 34%

In 2021, other operating income of adidas AG decreased 34% to € 649 million (2020: € 986 million). This development was primarily due to less positive currency effects.

OTHER OPERATING EXPENSES DECREASE 4%

In 2021, other operating expenses for adidas AG decreased 4% to € 2.462 billion (2020: € 2.564 billion). This was largely attributable to less currency losses, but partly offset due to the increased expenses for IT and maintenance costs.

DEPRECIATION AND AMORTIZATION DOWN 8%

Depreciation and amortization for adidas AG decreased 8% to € 117 million in 2021 (2020: € 127 million).

OPERATING RESULT BELOW PRIOR YEAR LEVEL

In 2021, adidas AG generated an operating profit of € 32 million. This was significantly below the prior year level of € 166 million and mainly due to less positive currency effects.

INCREASE OF THE FINANCIAL RESULT

The financial result of adidas AG increased 228% to € 1.916 billion in 2021 (2020: € 585 million). The increase was attributable to higher income from dividends and higher profit transfers from affiliated companies under profit and loss transfer agreements.

NET INCOME CONSIDERABLY ABOVE PRIOR YEAR LEVEL

Net income, after taxes of € 98 million (2020: € 77 million), amounted to € 1.850 billion in 2021 and was thus 174% above the prior year level (2020: € 674 million).

BALANCE SHEET

TOTAL ASSETS BELOW PRIOR YEAR

At the end of December 2021, total assets decreased 8% to € 11.061 billion compared to € 11.959 billion in the prior year. This development was mainly a result of decreases in receivables and securities.

SHAREHOLDERS’ EQUITY UP 8%

Shareholders’ equity rose 8% to € 3.801 billion at the end of 2021 (2020: € 3.533 billion). The equity ratio increased to 34.4% (2020: 29.5%).

PROVISIONS INCREASE 16%

Provisions were up 16% to € 797 million at the end of 2021 (2020: € 686 million). The increase primarily resulted from higher provisions for personnel.

LIABILITIES AND OTHER ITEMS DOWN 16%

At the end of December 2021, liabilities and other items decreased 16% to € 6.463 billion (2020: € 7.740 billion). This results mostly from the repayment of a bond in 2021.

CASH INFLOW FROM INVESTING 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 € 1.0 billion. In addition, the company has a multi-currency commercial paper program in an amount of € 2.0 billion. See Treasury

In 2021, operating activities of adidas AG resulted in a cash inflow of € 811 million (2020: outflow of € 703 million). The change versus the prior year was a result of the significant increase in net income, partly offset by lower payables. Net cash inflow from investment activities was € 1.785 billion (2020: € 160 million). This was primarily attributable to higher dividend income. Financing activities resulted in a net cash outflow of € 2.252 billion (2020: net cash inflow of € 1.162 billion). The net cash outflow from financing activities mainly relates to the repurchases of adidas AG shares, the repayment of a bond and the paid dividends. As a result of these developments, cash and cash equivalents of adidas AG increased to € 1.600 billion at the end of December 2021 compared to € 1.256 billion at the end of the prior year.

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