Financial Statements and Management Report of adidas AG Information

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, 42% of total assets as of December 31, 2022, related to financial assets (2021: 43%), which primarily consist of shares in affiliated companies. Intercompany accounts, through which transactions between affiliated companies are settled, represent another 42% of total assets (2021: 17%) and 28% of total equity and liabilities as of December 31, 2022 (2021: 32%).

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, 2022, 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 8%

Sales of adidas AG comprise external revenues generated by adidas Germany with products of the adidas and Reebok (until February 2022) 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. From March 2022 onwards the commission income for the Reebok sales is shown in other revenues. In 2022, adidas AG net sales increased 8% to € 4,814 million compared to € 4,475 million in the prior year.

Other operating income up 89%

In 2022, other operating income of adidas AG increased 89% to € 1,226 million (2021: € 649 million). This development was primarily due to higher positive currency effects.

Other operating expenses increase 39%

In 2022, other operating expenses for adidas AG increased 39% to € 3,415 million (2021: € 2,462 million). This was largely attributable to higher currency losses.

Depreciation and amortization up 20%

Depreciation and amortization for adidas AG relating to intangible and tangible fixed assets increased 20% to € 140 million in 2022 (2021: € 117 million).

Operating result significantly below prior year level

In 2022, adidas AG generated an operating loss of € 117 million. This was significantly below the prior year level of plus € 32 million and mainly due to higher expenses.

Increase of the financial result

The financial result of adidas AG increased 17% to € 2,237 million in 2022 (2021: € 1,916 million). The increase was attributable to higher income from dividends partially offset by lower profit transfers from affiliated companies under profit and loss transfer agreements.

Net income above prior year level

Net income, after taxes of € 63 million (2021: € 98 million), amounted to € 2,057 million in 2022 and was thus 11% above the prior year level (2021: € 1,850 million).

Balance sheet

Total assets below prior year

At the end of December 2022, total assets decreased 5% to € 10,475 million compared to € 11,061 million in the prior year. This development was mainly a result of the decrease in cash and cash equivalents as well as securities that was only partially offset by the increase in receivables and other assets.

Shareholders’ equity down 27%

Shareholders’ equity decreased 27% to € 2,767 million at the end of 2022 (2021: € 3,801 million). The equity ratio decreased to 26.4% (2021: 34.4%), mainly due to the repurchase of adidas AG shares in the amount of € 2,500 million.

Provisions increase 5%

Provisions were up 5% to € 833 million at the end of 2022 (2021: € 797 million). The increase primarily resulted from higher provisions for pending risks concerning valuation units.

Liabilities and other items up 6%

At the end of December 2022, liabilities and other items increased 6% to € 6,875 million (2021: € 6,463 million). This is mainly due to the issuance of bonds in 2022.

Cash outflow from investing activities reflects change in cash and cash equivalents

adidas AG has a syndicated credit facility of € 2,000 million and additional bilateral credit lines of € 900 million. In addition, the company has a multi-currency commercial paper program in an amount of € 2,000 million. SEE TREASURY

In 2022, operating activities of adidas AG resulted in a cash outflow of € 1,699 million (2021: cash inflow of € 811 million). The change versus the prior year was mainly a result of higher receivables. Net cash inflow from investment activities was € 2,518 million (2021: € 1,785 million). This was primarily attributable to higher dividend income. Financing activities resulted in a net cash outflow of € 2,223 million (2021: € 2,252 million). The net cash outflow from financing activities mainly relates to the repurchase of adidas AG shares, the dividend payment, and the issuance of bonds. As a result of these developments, cash and cash equivalents of adidas AG decreased to € 195 million at the end of December 2022 compared to € 1,600 million at the end of the prior year.

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