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 14 years from December 31, 2024. The increase compared to the prior year mainly relates to the prolongation and renewal of major sports marketing contracts.

Service arrangements

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

The reduction compared to the prior year mainly relates to an obligation for a distribution center, which was recognized as a lease liability in 2024 after the distribution center went into operation.

Contingent liabilities

As of December 31, 2024, contingent liabilities exist in connection with guarantees from leases in the amount of € 58 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 (€ 95 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 had initiated in 2022 arbitration proceedings against Kanye West and entities controlled by him (Defendants) claiming, among others, damages. In this context, Defendants filed certain counterclaims against adidas. The dispute was settled by the parties in July 2024; as a result thereof, the parties withdrew their respective claims.

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 company rejects these allegations in full and filed a motion to dismiss in February 2024. In August 2024, the US District Court in Portland (Oregon) granted the motion to dismiss as requested by the company. In October 2024, the plaintiff appealed the judgment of the court of first instance. The matter is currently pending at the US Court of Appeals for the Ninth Circuit. Management believes that the complaint will not have any material influence on the assets, liabilities, financial position and profit or loss of the company.

The Company is currently involved in a dispute with the German customs authorities. The central question is around the correct calculation of customs duties and import VAT for products imported into Germany from outside the European Union. In December 2021, the main customs office in Nuremberg began customs audits for the period starting October 2019; these audits have been suspended since March 2023. The customs authorities have issued tax amendment notices for the period from October 2019 to the end of 2021. The company has met the payment obligation for the resulting additional customs duties in full, but has lodged an appeal against the respective notices. In December 2024, the European Public Prosecutor's Office supported by the customs investigation carried out a search at selected adidas sites in Germany and Austria in connection with these customs and tax law issues. The European Public Prosecutor's Office is investigating suspected import duty evasion (customs duties and import VAT). The company is cooperating fully with the customs and law enforcement authorities. Management currently, among other things, believes based on external expert opinions that the effects of this dispute will not have any material influence on the assets, liabilities, financial position, and profit or loss of the company.