Annual ReportAnnual Report Adidas

Brendan Rochelle

Section 004

Executive Summary• The Adidas-Solomon AG have very strong numbers when

it comes to overall cash flow, marketability, and sales Adidas is one of the better companies in the world. As for investing, it would be wise to have this company in a diversified portfolio because the earnings are not high but they are definitely stable. Adidas is a good strong company with a long history of quality as well as a history of keeping up with the youth market and inventing new technology everyday.

• http://www.adidas-group.com/en/investor/reports/annually/2005/en/f_fin_cbs.html

Introduction

• Herbert Hainer

• Herzogenaurach, Germany

• December 31, 2005

• Adidas is a sport oriented company offering equipment for many different sporting areas

• Europe

Audit Report Summary

Independent Auditors

• Dr. Erle Wirtschaftsprüfer

• Gebele Wirtschaftsprüfer

• The Audit report for Adidas is given the thumbs for meeting any and all criteria for the audit. The independent auditors state that the company is in good standing and are currently at the top of their industry.

Stock Market Dealings

• 37.79 €

• 33.38 - 44.00

• 1.30

• October 11, 2006

• I would add this Adidas into a diversified portfolio. They do well on an average basis and are always coming up with new technology.

Industry War Room

• “2005 was another successful year for the Adidas-Salomon AG share. Our share increased 35% compared to the 2004 year end level.” (Adidas) Adidas was planning a buyback of shares but instead used free cash to purchase Reebok. This will only add to sales and keeps stockholders stocks going up. “Over the last ten years, our share has gained 312%. It thereby developed significantly better than both the DAX-30, which increased 140%, and the MSCI World Index, which rose 86% during the same period.” (Adidas) All this adds up to Adidas being a very solid and strong company to put your money behind.

Income Statement

• The Adidas income statement is set up as a multi step income statement.

2005 2004 % change

Gross profit 3,197,072 2,813,402 13.6%

Income from Ops. 434,401 332,569 30.6%

Net Income 390,448 321,213 21.6%

All % changes in the Adidas company from 2004 to 2005 increased. Adidas seems only to be getting stronger.

Balance Sheet

2005

Assets= Liabilities + Stockholders Equity

5,750,241= 3,037,928 + 2,712,313

2004

Assets= Liabilities + Stockholders Equity

4,433,884 = 2,870,189 + 1,563,695

Adidas has only been showing how strong they are becoming. Equity alone increased by 73%.

Statement of Cash Flows

• Cash from operations are almost double the net income for years 2004 and 2005.

• In 2004 Adidas spent money on investments. In 2005 the investments paid off and Adidas’s investment side are very knowledgeable.

• Adidas mainly concentrated on the short term investments.

• Cash has increased over the last two years for Adidas.

Accounting Procedures

Recognition of Revenues• Sales are recorded net of returns,

discounts, allowances and sales taxes when title passes based on the terms of the sale.

Cash and Cash Equivalents• Cash and cash equivalents represent cash

and short-term bank deposits with maturities of three months and less.

Accounting Procedures Cont’.

Inventories

• Merchandise and finished goods are valued at the lowest price possible.

Property and Equipment

• All property and equipment totals are minus the Accumulated depreciation.

Financial AnalysisLiquidity Ratios

2005 2004

Working Capital 2,576,205 1,336,081

Current Ratio 2.44 1.79

Receivable Turnover 6.98 5.60

Avg. days sales uncltd. 52.3 65.2

Inventory Turnover 2.80 2.64

Avg. days inv. on hand 130.4 138.3

Financial Analysis Profitability Ratios

2005 2004

Profit Margin 5.8% 5.5%

Asset Turnover 1.15 1.32

Return on Assets 6.8% 7.2%

Return on Equity 14.5% 20.8%

Adidas’ numbers and percentages look very enticing. The profitability and liquidity are great but to invest it might be wise to choose a company with a higher earning ratio.

Financial Analysis Solvency Ratios

2005 2004

Debt to Equity 1.13 1.9

Adidas has been strong enough to keep control of their company. With a 1.13 debt to equity ratio Adidas is the controller in the finance and operations portion. Not their creditors.

Financial Analysis Market Strength Ratios

2005 2004

Price/Earnings per share 8.19 7.9

Dividend Yield 0.81 1.09

Adidas shows stable financial statements but buying stock in Adidas won’t get you all of the bang for your buck.