Statement of Financial Position and Statement of Cash Flows

EXPECTED DIVESTITURE OF THE REEBOK BUSINESS IMPACTS BALANCE SHEET ITEMS

At December 31, 2021, all assets and liabilities of the Reebok business are presented as assets and liabilities classified as held for sale due to a signed agreement to sell that business. The closing of the transaction is expected during the first quarter of 2022. At the end of 2021, assets of € 2.033 billion and liabilities of € 594 million were allocated to the Reebok business. However, a restatement of the 2020 balance sheet items is not permitted under IFRS.

ASSETS

At the end of December 2021, total assets were up 5% to € 22.137 billion versus € 21.053 billion in the prior year, mainly due to the write-up of the Reebok trademark and as right-of-use assets from leasing agreements increased.

Total current assets increased 15% to € 13.944 billion at the end of December 2021 compared to € 12.154 billion in 2020. Cash and cash equivalents were down 4% to € 3.828 billion at the end of December 2021 from € 3.994 billion in the prior year. The net cash generated from operating activities was more than offset by the net cash used for investing and financing activities, which included the repayment of the € 600 million eurobond, the repurchase of adidas AG shares for a total consideration of € 1.004 billion as well as the dividend payment of € 585 million. Currency effects had a positive impact on cash and cash equivalents in an amount of € 57 million. Inventories decreased 9% to € 4.009 billion at the end of December 2021 from € 4.397 billion in 2020, reflecting the reclassification of the Reebok inventory to assets held for sale due to the expected divestiture of the Reebok business. The strong sell-through of the company’s products, successful inventory management as well as the impact from industry-wide supply chain challenges also contributed to the decline. On a currency-neutral basis, inventories decreased 12%. SEE NOTE 07

Inventories € in millions¹

Accounts receivable increased 11% to € 2.175 billion at the end of December 2021 (2020: € 1.952 billion), reflecting the company’s strong top-line growth. On a currency-neutral basis, receivables were up 6%. Other current financial assets increased to € 745 million (2020: € 702 million), mainly due to an increase in the fair value of financial instruments and short-term deposits, partly offset by a decrease in custom claims. Other current assets were up 6% to € 1.062 billion at the end of December 2021 (2020: € 999 million). Assets classified as held for sale increased to € 2.033 billion (2020: € 0 billion) reflecting the reclassification related to the expected divestiture of the Reebok business and the write-up of the Reebok trademark. See Note 05 See Note 06 See Note 08

Accounts receivable € in millions¹

Total non-current assets decreased 8% to € 8.193 billion at the end of December 2021 from € 8.899 billion in 2020, mainly related to a decrease in fixed assets and other non-current financial assets. Fixed assets decreased 6% to € 6.696 billion at the end of December 2021 versus € 7.149 billion in 2020, as trademarks decreased 98% to € 16 million at the end of December 2021 (2020: € 750 million). This was solely due to the reclassification of the Reebok trademark as asset held for sale related to the expected divestiture of the Reebok business. Right-of-use assets increased 6% to € 2.569 billion (2020: € 2.430 billion) due to lease modifications and positive currency effects. Other non-current financial assets decreased 61% to € 160 million from € 414 million at the end of 2020, mainly due to cash proceeds from former discontinued operations. Deferred tax assets were up 2% to € 1.263 billion from € 1.233 billion in 2020, mainly due to the recognition of deferred tax assets on previousy unrecognized tax losses and movements in taxable and deductible temporary differences. See Note 34

LIABILITIES AND EQUITY

Total current liabilities were up 2% to € 8.965 billion at the end of December 2021 from € 8.827 billion in 2020. Short-term borrowings decreased to € 29 million at the end of December 2021 (2020: € 686 million), mainly reflecting the repayment of the € 600 million eurobond. Accounts payable declined by 4% to € 2.294 billion at the end of December 2021 versus € 2.390 billion in 2020, mainly reflecting the normalization of payment terms and a reclassification to liabilities held for sale related to the expected divestiture of the Reebok business. On a currency-neutral basis, accounts payable decreased 6%. Current lease liabilities remained fairly stable at € 573 million at the end of December 2021 versus € 563 million in 2020. Other current financial liabilities were down 19% to € 363 million from € 446 million in 2020, mainly as a result of a decrease in the fair value of financial instruments. Other current provisions were down 9% to € 1.458 billion at the end of December 2021 versus € 1.609 billion in 2020, mainly due to a reduction of the provision for returns and a reclassification to liabilities held for sale related to the expected divestiture of the Reebok business. Current accrued liabilities were up 24% to € 2.684 billion at the end of December 2021 from € 2.172 billion in 2020, partly due to higher accruals for personnel costs related to the company’s annual bonus for its senior management. Other current liabilities were up 9% to € 434 million at the end of December 2021 from € 398 million in 2020. Liabilities classified as held for sale increased to € 594 million at the end of December 2021 (2020: € 0 million) related to the expected divestiture of the Reebok business. See Note 20 See Note 21

Accounts payable € in millions¹

Total non-current liabilities remained stable at € 5.334 billion at the end of December 2021 compared to € 5.535 billion in the prior year. Long-term borrowings stayed nearly flat at € 2.466 billion at the end of December 2021 compared with € 2.482 billion in the prior year. Non-current lease liabilities increased 5% to € 2.263 billion at the end of December 2021 from € 2.159 billion in the prior year as currency effects were partially offset by a reclassification related to the expected divestiture of the Reebok business. Other non-current financial liabilities were down 55% to € 51 million at the end of December 2021 from € 115 million in the prior year related to embedded derivative financial instruments. Deferred tax liabilities decreased 49% to € 122 million at the end of December 2021 from € 241 million in the prior year, mainly due to a reclassification related to the expected divestiture of the Reebok business. Other non-current provisions decreased 35% to € 149 million at the end of December 2021 from € 229 million in the prior year, mainly as a result of reduced provisions for personnel. SEE NOTE 22

Shareholders’ equity increased 17% to € 7.519 billion at the end of December 2021 versus € 6.454 billion in 2020, mainly driven by the net income generated during the year, an increase in hedging reserves of € 226 million and a currency effect of € 308 million. This development was partly offset by the repurchase of adidas AG shares for a total consideration of € 1.004 billion and the dividend of € 585 million paid to shareholders for the 2020 financial year. See Note 25

Equity ratio^{1, 2, 3} in %

OPERATING WORKING CAPITAL

Operating working capital decreased 2% to € 3.890 billion at the end of December 2021 compared to € 3.960 billion in 2020. On a currency-neutral basis, operating working capital was down 6%. Average operating working capital as a percentage of sales decreased 5.3 percentage points to 20.0% (2020: 25.3%), reflecting the strong top-line growth, the company’s successful inventory management, and the impact from industry-wide supply chain challenges.

Average operating working capital^{1, 2} in % of net sales³

INVESTMENT ANALYSIS

Capital expenditure is defined as the total cash expenditure for the purchase of tangible and intangible assets (excluding acquisitions and right-of-use assets according to IFRS 16). Capital expenditure increased 51% to € 667 million (2020: € 442 million). Capital expenditure for property, plant, and equipment was up 34% to € 494 million compared to € 368 million in the prior year. The company invested € 173 million in intangible assets (2020: € 64 million). Depreciation and amortization, excluding impairment losses and reversal of impairment losses of tangible and intangible assets, decreased 9% to € 516 million in 2021 (2020: € 561 million).

Controlled space initiatives, which comprise investments in new or remodeled own-retail and franchise stores as well as in shop-in-shop presentations of our products in our customers’ stores, accounted for 44% of total capital expenditure (2020: 42%). Expenditure for IT and logistics represented 27% and 19%, respectively (2020: 14% and 8%, respectively). In addition, expenditure for administration accounted for 10% (2020: 4%). From a segmental perspective, the majority of the capital expenditure was recorded centrally at headquarter level, which accounted for 49% (2020: 49%). From a regional perspective, capital expenditure in EMEA accounted for 19% (2020: 12%) of the total capital expenditure, on par with Greater China at 19% (2020: 21%), followed by APAC with 5% (2020: 9%), North America with 4% (2020: 8%), and Latin America with 3% (2020: 2%).

Capital expenditure by type in % of total CAPEX

Capital expenditure by segments in % of total CAPEX

LIQUIDITY ANALYSIS

Due to the increase in operating profit, net cash generated from operating activities increased to € 3.192 billion in 2021 (2020: € 1.486 billion). Net cash generated from continuing operating activities increased to € 2.873 billion (2020: € 1.366 billion).

In 2021, net cash used in investing activities increased to € 424 million (2020: € 115 million) and net cash used in continuing investing activities increased to € 415 million (2020: € 105 million). This development was due to increased investing activities in 2021 compared to a lower investment base in 2020. This change was mainly related to expenditures for property, plant, and equipment, purchase of trademarks, and other intangible assets. Net cash used from financing activities amounted to € 2.991 billion (2020: € 479 million net cash generated) and net cash used from continuing financing activities amounted to € 2.952 billion (2020: € 514 million net cash generated). This development was mainly due the repayment of the eurobond, the repurchase of adidas AG shares as well as the dividend payment. Exchange rate effects positively impacted the company’s cash position by € 57 million (2020: negative impact of € 75 million).

As a result of all these developments, cash and cash equivalents decreased by € 165 million to € 3.828 billion at the end of December 2021 compared to € 3.994 billion at the end of December 2020.

Adjusted net borrowings at December 31, 2021, amounted to € 2.963 billion, compared to € 3.148 billion in 2020. The company’s ratio of adjusted net borrowings over EBITDA amounted to 1.0 at the end of December 2021 (2020: 1.6). See Treasury

Change in cash and cash equivalents € in millions¹

Adjusted net borrowings/EBITDA^{1, 2, 3, 4} € in millions

OFF-BALANCE-SHEET ITEMS

The company’s most significant off-balance-sheet items are commitments for promotion and advertising as well as other contracts. These contracts are related to short-term leases as well as leases for offices and warehouses, which are not yet considered according to IFRS 16. Minimum future payments for other contracts were € 396 million at December 31, 2021, compared to € 323 million at the end of December 2020, representing an increase of 23%. At the end of December 2021, financial commitments for promotion and advertising decreased 4% to € 5.712 billion in 2021 (2020: € 5.948 billion). See Note 37 SEE NOTE 38