38 » Other Financial Commitments and Contingencies

adidas has other financial commitments for promotion and advertising contracts, which mature as follows:

Commitments with respect to promotion and advertising contracts maturing after five years have remaining terms of up to 12 years from December 31, 2023. The increase compared to the prior year mainly relates to the prolongation of major sports marketing contracts.

adidas has other financial commitments for leasing and other rental obligations which mature as follows:

The contracts regarding these leases with expiration dates of between one and ten years partly include renewal options and price adjustment clauses.

Service arrangements

adidas has outsourced certain logistics and information technology functions, for which it has entered into long-term contracts. Financial commitments under these contracts mature as follows:

The increase compared to the prior year mainly relates to an obligation entered into in connection with logistics services.

Contingent liabilities

As of December 31, 2023, contingent liabilities exist in connection with guarantees from leases in the amount of € 62 million. These mainly relate to the Reebok business and could not be terminated upon its sale.

Litigation and other legal risks

The company is currently engaged in various lawsuits resulting from the ordinary course of business, mainly in connection with commercial and partnership agreements as well as intellectual property rights. The risks triggered by these lawsuits are covered by provisions if and to the extent a reliable estimate of the company’s potential liability can be made. In the opinion of Management, the ultimate liabilities resulting from such claims will not materially affect the assets, liabilities, financial position and profit or loss of the company. SEE NOTE 18

The company is in dispute with the local revenue authorities in South Africa (SARS) with regard to the customs value of imported products. In June 2018, SARS issued a ruling claiming a customs payment including interest and penalties for the years 2007 to 2013 totaling ZAR 1,871 million (€ 92 million). adidas has applied for a suspension of the payment demand and in 2019 instituted legal action against the decision before the High Court in South Africa. In case the court rules in favor of SARS, adidas intends to appeal the decision at the Supreme Court of South Africa. Based on external legal opinions, Management currently believes that it is more likely than not that the claim made by SARS will eventually not result in an outflow of resources. Therefore, a provision was not recognized in the consolidated statement of financial position.

In connection with the financial irregularities of Reebok India Company in 2012, various legal uncertainties were identified. At this stage, the respective ultimate risk cannot be determined conclusively. However, based on opinions obtained from external counsel and internal assessments, Management assumes that the possibility of any cash outflow in settlement is remote. Therefore, no material negative influence on the assets, liabilities, financial position, and profit of the company is expected.

In connection with the termination of the Yeezy partnership, adidas has initiated arbitration proceedings against Kanye West and entities controlled by him (Defendants) claiming, among others, damages. In this context, Defendants filed certain counterclaims against adidas. Management currently believes that these counterclaims will not result in any cash outflow; therefore, no material negative influence on the assets, liabilities, financial position, and profit or loss of the Group is expected.

In 2023, plaintiff Hampton Roads Shipping Association – International Longshoremen’s Association Funds –, an entity which had purchased adidas American Depository Receipts (ADRs) representing adidas AG shares, initiated a securities class action at the US District Court in Portland (Oregon).

The plaintiff alleges that the company “recklessly or intentionally made false or misleading statements” regarding risks arising from the business partnership with its former partner Kanye West and/or the company’s public commitments to diversity and inclusion by allegedly failing to disclose certain statements and other misconduct of Kanye West.

With respect to loss causation and damages, plaintiff points to specific share price drops for adidas ADRs that it connects to adidas’s alleged misstatements or omissions. Also, on behalf of other adidas ADR holders, plaintiff seeks monetary compensation for damages suffered from price drops of adidas ADRs. The proceedings are at an early stage and a concrete amount of damage is not yet specified.

The company rejects these allegations in full and filed a motion to dismiss in February 2024. Management believes that the complaint will not have any material influence on the assets, liabilities, financial position and profit or loss of the company.