annual report 2010 - ecco · a number of strategic learning programmes for ecco’s global...

AnnuAl RepoRt 2010

– We WAnt to Be

the Best shoe

CompAny in the

WoRld

ouR Vision

ECCO Sko A/S

Industrivej 5

DK-6261 Bredebro

Comp. Reg. No. 43.088

VAT No. 45 34 99 18

Supervisory Board

Hanni Toosbuy Kasprzak

Chairman

Karsten Borch

Vice Chairman

Torsten E. Rasmussen

Mogens Munk-Rasmussen

Gitte Jochimsen

Employee representative

Jakob Møller Hansen

Employee representative

Managing Board

Dieter Kasprzak

President / Chief Executive Officer

Michael Hauge Sørensen

Chief Operating Officer

Annemette Nøhr

Executive Vice President / Chief Financial Officer

Jens Christian Meier

Executive Vice President / Group Production & Logistics

Andreas Wortmann

Executive Vice President / Brand & Products

Michel Krol

Executive Vice President / Managing Director, ECCO EMEA B.V.

Panos Mytaros

Executive Vice President / Managing Director, ECCO Leather Group

Auditors

KPMG

Banks

Danske Bank

Sydbank

Nordea

ContentsECCO - ANNuAL REPORT 2010

The beginning - 1

Milestones - 3

Our brand - 7

A tremendous effort by dedicated ECCO staff - 9

Consolidated financial highlights and key ratio - 12

Annual result 2010 - 13

Financial matters - 14

A result created by people with passion - 15

Working at ECCO - 17

Corporate responsibility - 19

The ECCO Code of Conduct - 20

How we make shoes - 21

Design - 23

Product development - 25

Making leather - 27

Production - 29

Our shoes - 31

ECCO, the world’s fourth largest golf shoe brand - 33

Fred Couples on GOLF STREET - 34

The GOLF STREET phenomenon - 34

ECCO - ANNuAL ACCOuNTS 2010

Statement by the management on the Annual Report - 35

Independent auditors’ report - 37

Accounting policies - 38

Income statement for the year ended

31 December 2010 - 41

Balance sheet as of December 2010 - 42

Consolidated cash flow statement for the year ended

31 December 2010 - 44

Notes to the Group and Parent Company

financial statements - 45

ECCO Group structure as of 31 December 2010 - 53

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1

the Beginning…

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it WAs A tRue gReenfield stARt

Farmland stretched for miles

around the small factory building

on the outskirts of Bredebro,

where Birte and Karl Toosbuy

had assembled a small team to

get production up and running.

Initially limited to ladies’ shoes

under the Venus brand, it was a

tough start. The Toosbuys worked

extremely long hours, tackled

endless problems and sometimes

doubted whether they would

succeed. On one occasion, poor

quality supplies from India almost

brought down the business.

Money was tight and recycling

was commonplace. Every piece

of string was rolled up and saved

and boxes from a nearby

TV shop were used to pack and

dispatch the finished shoes.

The staff’s dedication was total.

Karl Toosbuy loved to recount

the incident when a member of

staff borrowed her father’s

tractor to get through the

snow to get to work. He had

never experienced that in

Copenhagen.

The first real breakthrough came

in the late 1970s when ECCO’s

Chief Designer Ejnar Truelsen

created the “JOKE”.

This was followed by a series of

other revolutionary shoes, some

of which are still in production

today. At the same time, Karl

Toosbuy bought his first direct

injection machine to apply

high-tech production technology

to the business. So confident

was he in the machine that he

bought a second one before

the results from the first had

materialised.

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3

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1978 - ECCO JOKE

Karl Toosbuy wanted to make

shoes that broke with all

tradition - shoes that fitted the

foot and were flexible, light and

comfortable. The first was ECCO

JOKE followed by ECCO FREE

and ECCO TIME.

1980 - DESMA NO. 1

The German produced DESMA

machine was the first high-tech

production equipment to be

installed in Denmark. It enabled

mass production of a consistently

high quality.

1981 - LAuNCH OF SOFT

The next generation of ECCO

shoes, the SOFT, became the

best-selling ECCO shoe ever. The

SOFT and its later versions are still

greatly in demand 30 years on.

1984 - PRODuCTION IN PORTuGAL

In 1984, ECCO, which had until

then procured its raw materials

in Brazil, Yugoslavia and India,

began production at its first

fully owned factory abroad

– in Portugal. The employees

produced 19,600 pairs a day at

peak production.

1990 - ECCO AMERICAS

ECCO was initially represented

by a distributor in the uS. In 1990,

however, ECCO established its

own organisation, which built the

uS into the single largest market

for ECCO shoes. ECCO Canada

set up operations in 1996.

1991 - PRODuCTION IN

INDONESIA

Needing a stable supply of

uppers for its factories in Denmark

and Portugal, ECCO built a

factory in Indonesia in 1991. The

plant included a beam house

and a tannery because of the

plentiful supply of local hides.

Shoe production followed later.

Today, ECCO Indonesia is ECCO’s

largest production unit with over

5,500 employees.

1993 - PRODuCTION IN THAILAND

Three years after the opening of

the Indonesian factory, demand

had risen to such an extent that

a further production unit was

required. The decision was made,

therefore, to build a shoe factory

and a tannery in Thailand.

1994 - TØNDER & FuTuRA

In 1994, ECCO bought a former

agricultural college in Tønder,

Denmark, and transformed

it into the ECCO Centre, the

company’s conference and

training centre. Karl Toosbuy and

his son-in-law, Dieter Kasprzak,

went on to develop FuTuRA here

– the ECCO Group’s design and

development centre.

milestones

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5

milestones

1996 - FIRST FLAGSHIP SHOP,

LONDON

Historically, ECCO was a

wholesaler. The opening of

the first flagship retail shop in

London’s famous Oxford Street,

therefore, heralded a significant

change. Since then, ECCO has

steadily increased the number

of fully owned shops across the

world.

1999 - PRODuCTION IN SLOVAKIA With more than two-thirds of all

products sold in Europe, ECCO

opened yet another factory, this

time in Slovakia. This enabled

ECCO to reduce time to market

and improve its supply chain to

European markets.

2002 - ECCO ASIA PACIFIC

Focus turned to Asia. From a

newly established headquarters

in Hong Kong, a team set out to

turn ECCO into Asia’s best known

comfort shoe brand. Today,

ECCO shoes are sold in more

than 600 shops in 15 countries

throughout the region and

through a successful joint venture

in China.

2003 - LAuNCH OF SHARK

Another milestone was reached

with the launch of the SHARK

shoe. Once again, ECCO’s

designers broke with tradition

and pushed ECCO’s production

capabilities to the limit.

2005 - PRODuCTION IN XIAMEN

At the inauguration of the ECCO

factory in Xiamen, China, Karl

Toosbuy declared that ECCO

had not come to Xiamen to

produce low-cost shoes. He knew

that the Chinese employees

would make high quality

products and he expected China

to become the world’s largest

market for shoes.

2008 - TANNERY XIAMEN

ECCO’s Leather Group decided

to build a tannery alongside the

shoe factory in Xiamen. From the

outset, the aim was to break with

traditional layout and operational

methods. At its opening in 2008,

the tannery was the world’s most

advanced – both operationally

and environmentally.

2009 - LAuNCH OF BIOM

Several years of close

collaboration with the German

Sports Institute of Cologne

resulted in revolutionary running

shoes using natural motion. BIOM,

as the shoes are called, became

an instant success.

2010 - ECCO EMEA

In 2010, to improve service to

customers in core markets, ECCO

combined its sales offices in the

Netherlands, the uK, Germany

and Poland into one regional

service centre in Amsterdam.

From here, a multilingual team

supports the ECCO organisations

in Europe, the Middle East and

Africa.

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7

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There is a basic truth that guides

our values and practices: our

Danish roots. What differentiates

ECCO as a brand and as a

company is not just our shoes

but also our entire approach to

shoemaking.

As a brand, ECCO rests on three

guiding principles that make us

unique.

SCANDINAVIAN DESIGN

Across the world, Scandinavian

design is regarded as exclusive

and stylish, yet functional and

simple - and always of high

quality. ECCO shoes are no

exception. Our follow-the-foot

design philosophy, with its simple,

elegant aesthetics, is rooted in

Scandinavian design.

PASSION FOR SHOEMAKING

We are passionate about making

shoes and everything that goes

with it - from tanning leather to

stitching. We relentlessly pursue

new ideas, new technologies,

higher standards and better ways

of doing things. We are proud of

our products and our company.

We have passion for what we do

– and passion creates quality.

INNOVATIVE NEW CONCEPTS

Karl Toosbuy wanted to make

shoes that did not need to

be broken in. They should fit

like a glove. That became

the beginning of ECCO’s

revolutionary concept: to

create shoes that were more

comfortable, lasted longer

and enabled people to move

naturally.

ouR BRAnd

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With a turnover increase of more

than 21% compared to 2009,

ECCO experienced a strong

recovery after a challenging

2009.

The profit before tax reached

DKK 631 million, an increase of

37%, or 10.3% of net turnover.

The management considers

this result satisfactory given

the continued high investment

level, in particular, increased

capacity to meet growing

consumer demand.

The solidity of the Group was

maintained at a healthy level of

55.6%. Equity increased by DKK

155 million to DKK 2,587 million.

Across the world, ECCO prod-

ucts were in high demand. The

response from consumers was

especially strong in the latter

part of 2010, with very positive

response to the Autumn/Winter

2010 Collection and the newly

launched brand campaign,

which focused on ECCO’s

Scandinavian heritage.

The BIOM collection, which was

launched in 2009, reached new

heights in 2010 in a number of

strategic markets breaking new

grounds in terms of distribution

channels and conceptual

execution.

ECCO’s Golf collection was very

well received globally. A clear

highlight of the collection was

the GOLF STREET spikeless shoe

which was one of the most

talked about products in the

golf industry.

Consumer demand was par-

ticularly strong in a number of

emerging markets, including

China and Poland. Russia, one

of ECCO’s most important mar-

kets, experienced a record year.

ECCO’s core Scandinavian and

German markets showed excel-

lent growth, while markets such

as the Netherlands and the

united Kingdom recovered at

a slower pace. The important uS

market also showed a positive

development.

In 2010, ECCO made a number

of strategic investments across

the value chain. ECCO took

over the majority shareholding

in ECCO Retail Japan Co., Ltd.

as part of the company’s over-

all expansion plan for the Asia

Pacific region.

The investment in ECCO owned

and operated shops and partner

shops continued as in previous

years.

Investments were also made to

further boost production cap-

acity to meet growing demand.

ECCO’s strategy of controlling

the entire value chain includes

investments in tanneries and

leather production. This segment

of ECCO’s business reached

a milestone in 2010 as the

company experienced a sharp

increase in internal as well

as external demand. This

strengthened ECCO’s position

as a world leader in quality

leather production.

In 2010, ECCO continued its

focus on organisational develop-

ment. A number of strategic

learning programmes for ECCO’s

global leadership team were

initiated, and ECCO increased

the intake of candidates for

A tRemendous effoRt By dediCAted eCCo stAff

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the ECCO International Trainee

Education (EITE).

ECCO’s Executive Vice President

Michael Hauge Sørensen was

appointed new Chief Operating

Officer and take over the daily

management of ECCO with

effect from 1 January 2011.

Dieter Kasprzak will continue as

Chief Executive Officer for ECCO

and will focus on ECCO’s activ-

ities within the areas of design

and production.

In addition to the appointment

of a COO, ECCO has appoin-

ted two further members of the

Managing Board: Panos Mytaros,

who is Managing Director ECCO

Leather Group and Michel Krol,

who is Managing Director ECCO

EMEA (Europe, Middle East and

Africa) from 1 January 2011.

With an order book above

previous years for the spring

summer season, the company

has a positive outlook for 2011

and will continue to invest at a

level higher than in 2010.

ECCO’s success in 2010 is the

result of the tremendous effort

by our more than 17,500 em-

ployees and their dedication to

ECCO. Their passionate efforts

enable us to take our ambitions

a step further so that ECCO can

continue its quest to become

the best shoe company in the

world.

ECCO´s Managing Board, from left: Executive Vice President / Brand & Products Andreas Wortmann, Executive Vice President / Managing Director, ECCO Leather Group Panos Mytaros, President / Chief Executive Officer Dieter Kasprzak, Chief Operating Officer Michael Hauge Sørensen, Executive Vice President / Group Production & Logistics Jens Christian Meier, Executive Vice President / Managing Director, ECCO EMEA B.V.Michel Krol, Executive Vice President / Chief Financial Officer Annemette Nøhr

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ConsolidAted finAnCiAl highlights And key RAtios

FINANCIAL HIGHLIGHTS 2010 2009 2008 2007 2006DKK ’000

Net revenue 6,111,148 5,041,200 5,374,142 5,219,525 4,470,403Profit before amortisation and depreciation 994,720 768,307 1,033,467 1,041,971 937,822Amortisation and depreciation (341,973) (272,383) (206,396) (208,943) (178,360)Profit before financials 652,747 495,924 827,071 833,028 759,462Net financials (21,711) (36,261) (81,220) (77,304) (49,979)Profit before tax 631,036 459,663 745,851 755,724 709,483Income taxes (155,423) (114,306) (171,982) (194,314) (209,423)Group profit 475,613 345,357 573,869 561,410 500,060Minority interests (65,635) (46,120) (46,470) (23,832) (10,588) Profit for the year 409,978 299,237 527,399 537,578 489,472 Fixed assets 1,441,547 1,441,468 1,502,268 1,217,827 1,121,303Current assets 3,208,473 2,740,680 2,894,782 2,997,382 2,529,377Assets 4,650,020 4,182,148 4,397,050 4,215,209 3,650,680 Equity 2,586,961 2,431,839 2,473,419 2,073,447 1,729,513Other liabilities 173,871 152,820 102,747 73,193 57,079Debt 1,889,188 1,597,489 1,820,884 2,068,569 1,864,088Equiity and liabilities 4,650,020 4,182,148 4,397,050 4,215,209 3,650,680 Cash flow from operating activities 700,151 984,524 788,592 263,610 427,374Cash flow from investing activities (236,732) (222,925) (482,718) (305,055) (234,809)Cash flow from financing activities (453,316) (576,525) (322,762) (114,347) (188,958) Number of employees (as of 31 December) 17,537 14,781 16,328 14,957 12,670

KEY RATIOSOperating margin 10.7% 9.8% 15.4% 16.0% 17.0%ROAIC 14.8% 11.6% 19.2% 21.2% 21.9%Return on assets 14.3% 10.7% 17.3% 19.2% 20.5%Investment ratio 0.7 0.8 2.3 1.5 1.3Return on equity 16.3% 12.2% 23.2% 28.3% 32.5%Solvency ratio 55.6% 58.1% 56.3% 49.2% 47.4%Liquidity ratio 2.2 2.3 1.9 2.2 3.0

DEFINITIONS OF KEY RATIOSOperating margin: Profit before financials x 100 Investment ratio: Investments for the year Liquidity ratio: Current assets

Net revenue Amortisation and depreciation Short-term debt

ROAIC: Profit before financials x 100 Return on equity: Profit for the year x 100

Average assets Average equity

Return on assets: Profit before tax x 100 Solvency ratio: Equity x 100

Average assets Assets

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The ECCO Group’s profit before

tax amounted to DKK 631 million

compared to DKK 460 million

in 2009, an increase of DKK 171

million or 37%.

TuRNOVER

The ECCO Group’s net turnover

increased by more than 21%

from DKK 5,041 million to DKK

6,111 million in 2010.

All business areas of shoes,

accessories and leather experi-

enced growth, with shoes still

being the main driver with 92%

of the Group’s total net turn-

over.

The net turnover for shoes in-

creased by 19%, which was due

to a combination of growth in

the number of pairs sold and a

positive development in aver-

age prices. The net turnover

for accessories increased by

42%, accounting for 2.5% of the

Group’s total net turnover. The

leather business experienced a

very strong year when focus on

external sales of leather started

to pay off. The Group’s sale of

leather increased by 103%.

The Group’s profit before finan-

cials and tax was DKK 653

million compared to DKK 496

million in 2009. This result was

mainly achieved through the

significant increase in net turn-

over.

Operating margin was 10.7% in

2010 compared to 9.8% in 2009.

Net financials totalled DKK -21.7

million compared to DKK -36.3

million in 2009. Exchange rate

adjustments on debt in foreign

currencies had a positive

impact in 2010 of DKK 27.7 mil-

lion against a positive impact in

2009 of DKK 26.3 million. Group

interest expenses totalled DKK

49.4 million compared to DKK

62.6 million in 2009.

Income taxes amounted to DKK

155 million with an effective

tax rate of 24.6% compared to

24.9% in 2009.

Profit for the year after tax and

minority interests totalled DKK

410.0 million compared to DKK


EquITY AND CASH FLOW

Consolidated total assets in-

creased by DKK 468 million and

amounted to DKK 4,650 million

against DKK 4,182 million in

2009.

Return on average invested

capital (ROAIC) was 14.8%

against 11.6% in 2009.

Equity as of 31 December 2010

was DKK 2,587 million, an

increase of DKK 155 million.

The solvency ratio was 55.6% at

the end of 2010 compared to

58.1% in 2009.

Return on equity was 16.3% in

2010 against 12.2% in 2009.

Cash flow from operating

activities amounted to DKK

700.2 million against DKK 984.5

million in 2009.

Net cash flow from investments

and financing amounted to

DKK -690 million against DKK

-799 million in 2009.

Consolidated net cash flow was

DKK 10.1 million against DKK


AnnuAl Result 2010

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FINANCIAL RISKS

Due to the international scope

of ECCO’s business activities,

a number of financial issues

affects the result of the Group’s

operations and its equity.

The approach to handling

financial risks is determined by

the Supervisory Board and the

Managing Board.

FOREIGN EXCHANGE RISKS

ECCO is exposed to more than

20 different currencies and the

majority of these exposures are

so substantial that they require

hedging. Accordingly, our over-

all policy defines that all signifi-

cant net currency positions are

hedged when the currency

exposure arises and aims for

a hedging horizon of 12 to 27

months, corresponding to the

Group’s business model.

With few exceptions, the

currency used in transactions

between ECCO Sko A/S (Parent

Company) and a sales subsid-

iary is the local currency of the

sales subsidiary, thereby allo-

cating the foreign exchange risk

to the Parent Company, which

sets up a corresponding hedge.

The exceptions are handled

individually in relation to the

local market. The currency used

in transactions with external

distributors is either DKK, EuR

or uSD.

ECCO’s own production units

are settled in EuR and exter-

nal suppliers are primarily paid

in EuR or uSD. The production

units thus bear the risk relating

to the net currency position in

other currencies than the local

currency. Such positions are

hedged locally to the extent

permitted by local foreign

exchange regulations.

INTEREST RATE RISKS

The Group’s interest rate risks

relate to fluctuations in interest

rates on the Group’s net interest

bearing debt and financing of

repayments. Interest rate risk

is reduced by taking up fixed-

interest loans or by entering into

interest rate swaps. At year-

end 2010 the Group had DKK

348 million of fixed rate debt

(including floating rate debt

swapped into fixed rate debt),

representing 75% of the Group’s

long-term debt and 38% of the

Group’s total interest bearing

debt.

CREDIT RISKS

The Group has no material

credit risks other than what has

been recognised in the finan-

cial statements.

Letters of credit, bank guaran-

tees or debtor insurance are

used for selected markets/

customers.

LIquIDITY RISK

It is the responsibility of the

Group’s treasury function to

ensure that the Group has ad-

equate access to funding at all

times. The Group’s aggregate

credit facilities have increased

from approx. DKK 1,860 million

at the end of 2009 to approx.

DKK 1,965 million at the end of

2010.

Material eveNts after 31 DeceMber 2010The management is of the

opinion that no material events

have occurred after the end of

the accounting year that could

significantly impact the Group’s

financial status.

finAnCiAl mAtteRs

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A Result CReAted By people With pAssionEmployees are ECCO’s greatest

resource and it is their commit-

ment and drive that makes

ECCO what it is today. ECCO

people have a passion for what

they do and a drive to achieve

the very best.

With almost 17,500 employees

from over 50 countries, ECCO

is a genuine multinational busi-

ness, a mix of nationalities,

cultures, languages and

backgrounds. ECCO’s Danish

headquarters alone is home

to people from more than

20 nations. Welcoming and

encouraging diversity provides

a deeper understanding of the

countries and cultures in which

we operate.

ECCO offers its employees

advanced professional

courses and, wherever possible,

prefers to promote from within

the company. By doing so, we

enhance the sense of family

and ensure that our people and

products remain at the heart of

our business.

JING ZHAO,

Project Leader,

Strategy

“I started out the year in our

Lean department developing

and following the progress of

our Lead Factory project in

Xiamen, which aims to optimise

stability and flexibility in produc-

tion. Then I moved into the

Strategy department and had

the chance to utilise the

capabilities on a larger scale,

throughout the supply chain.

It has been a great learning

experience for me. I get ideas

and inspiration from those

around me and I’m happy

to be a part of ECCO’s

development.”

NIKOLAI RABæK CHRISTENSEN

Global Division Manager -

Performance Branding

“It has been a very exciting

year. For me, the highlight of

this year has been the creation

of the new business unit ECCO

Sport. I am sure that we have

just seen the beginning of

our success within the sports

industry, including our BIOM

running and fitness shoes. The

new business unit enables us

to exploit this huge potential.

It has been fantastic to be a

part of the team building up

ECCO Sports, and I am now

getting ready for a new

challenge in the Asia-Pacific

region.”

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XINYAN ZHOu

Enterprise Portal Developer,

Corporate IT

“In 2010, we developed and

implemented a new version of

our intranet, the ECCO Portal,

that has proven to be much

more user friendly than the

former version. It is a pleasure

for me to see how the Portal

has become an important part

of my colleagues’ daily work

and an effective interface

that connects people across

the entire ECCO Group. I also

developed Portal components

in 2010, and I am especially

proud of my new Reporting

System that enables our quality

& Environment employees

throughout the Group to report

information electronically

instead of manually.”

ELLA MADSEN,

Shoe Technician,

Pilot Production

“What I remember best from

2010 was ECCO’s new collab-

oration with the young students

from the Kolding School of

Design. The students were given

the assignment to design ECCO

shoes of the future, and I was

to help them transform their

creative ideas into physical

models. It was an exciting

process. Each time that I arrived

at the school, they came flying

from all directions. They really

had some interesting ideas and

they were very enthusiastic,

which led to some very unique

shoes that were displayed here

at ECCO.”

MOHAMAD RIBuANTO

3D CAD Constructor,

Product Development

“As 3D CAD Constructor, I trans-

form shoe sketches made by

designers into 3D computer

models and select the best fit-

ting last for making samples.

I used to work in the Design

Center in Tønder, but in 2010

I moved to Bredebro to work

more closely together with the

Product Development depart-

ment. This has been a very posi-

tive move because I can co-

operate with developers, speak

with technicians and share

details with the Mould & Last

department on a daily basis,

making my work process much

more efficient. For me, moving

to Bredebro has made 2010

a great year.”

CæCILIE CINDIE KOLDORF,

EITE Trainee, Sponsorship

and Events

“It has been an incredible year!

I joined Sponsorships and Events

in 2010 as my first job rotation

and worked on the Walk In Style

fashion show, ECCO’s largest PR

event. It was great to be given

so much responsibility as a

trainee and be part of the

entire event process, but it

was also a lot of work. There

were countless details to

coordinate, from the first

meetings with ECCO’s CEO

Dieter Kasprzak and our

designers, to arrangements with

the press, PR agencies, stylists,

magazines, right down to the

music and flowers on the

night itself.”

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At ECCO, learning is a priority –

and important to the success of

the company. ECCO operates

a system of continuous learning

from an employee’s first

introduction to the company

throughout an employee’s life

with the company. Employees

are provided with ongoing

opportunities for professional

training, constant challenges

and internal mobility in a global

network.

Continuous learning ensures

that all employees are familiar

with the core values and high

ethical standards of ECCO

formulated in the Code of

Conduct and also helps teach

employees how to prevent and

minimise the risk of accidents.

Lifelong learning helps ECCO

maintain competitive edge on

the market and commitment

to sustainable solutions for the

future.

CAREER OPPORTuNITIES

ECCO believes in empowering

its employees right from the

beginning, and believes that

every individual and every ac-

WoRking At eCCo

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tion can make a difference. We

value individuals who act with

a social conscience, think inde-

pendently and take initiative.

At ECCO, we invest in our

people. Our ambition is to be

a highly attractive workplace,

providing employees with on-

going opportunities for profes-

sional training, constant chal-

lenges and internal mobility in

a global network. We invest in

our employees’ professional

and personal development and

provide them with challenging

and rewarding opportunities for

career growth.

In 2010, ECCO welcomed fif-

teen new trainees to the EITE

(ECCO International Trainee

Education), Graduate and

Specialist Trainee Programmes.

These three programmes com-

bine expatriation, job rota-

tion and hands-on production

experience. ECCO traditionally

recruits internally whenever pos-

sible, so trainees have excellent

opportunities for a career within

the ECCO Group once they

graduate.

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OuR APPROACH

At ECCO, we want to be good

corporate citizens, wherever

we work. We work by clear

principles that stipulate that

we will behave in a correct

and decent manner. Our com-

mitment to being a responsible

company is incorporated in the

ECCO Code of Conduct.

The ECCO Code of Conduct

provides information to guide

employees and partners around

the globe so that they conduct

business in accordance with the

company’s ethical standards.

Corporate responsibility includes

how we behave towards our

employees, communities, the

environment and our business

partners.

WE OWN AND MANAGE

EVERY STEP

ECCO is the only major shoe

manufacturer to own and

manage every step in the

shoemaking process. This

allows us to carefully monitor

and control the impacts of

all our operations. As a large

employer, ECCO understands its

responsibility and accepts it.

Read more about ECCO’s

corporate responsibilty in

2010 online:

eccocorporate.com

CoRpoRAte ResponsiBility

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1. eCCo is a guest in each of the countries in which it operates and respects the local culture.

2. eCCo supports, respects and takes a proactive approach to protecting internationally defined human rights.

3. eCCo respects equal opportunities and fights discrimination in the workplace.

4. eCCo respects the individual’s right to religious freedom.

5. eCCo respects the right to freedom of association.

6. eCCo wishes to provide employees with a workplace free of harassment or abuse and condemns any form of enforced labour.

7. eCCo supports the un Convention on the Rights of the Child.

8. eCCo provides training, education and further development of human resources at all levels.

9. eCCo aims to be a leader within the environment, health and safety and supports sustainable development.

10. eCCo wishes to ensure that it complies with all relevant laws and regulations.

21

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designIt all starts at ECCO’s Design Center.

ECCO’s designers search for inspiration from many sources – from fashion, art,

architecture, the car industry – and, of course, they closely follow what is happening

in society.

Nevertheless, they are always influenced by Scandinavian design, nature around

them and our ECCO heritage. No shoe ever leaves the Design Center without it first

being checked for lightness, softness, flexibility, comfort and fit.

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pRoduCt deVelopment

Product Development bridges the gap between Design

and Production. Shoemakers and engineers from the

Product Development department are responsible for

converting the ideas of ECCO designers into fully

specified prototypes for the end product.

The process requires in-depth knowledge of all the

materials required as well as insight into shoe construction,

production machinery and methods.

ECCO’s product development units in Denmark and

Portugal supply the ECCO tanneries and shoe factories

with detailed instructions on how to produce materials

and shoes.

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mAking leAtheRECCO has been producing leather since 1986 and

the ECCO Leather Group today comprises four

production units in the Netherlands, Indonesia,

Thailand and China.

While 85% of ECCO’s leather consumption is

produced at ECCO’s own tanneries, the ECCO

Leather Group also handles the external purchasing

of the remaining 15%.

ECCO Leather Group also sells leather to third

parties. Over 38% of the Leather Group’s production

is sold to non-ECCO companies.

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pRoduCtionAs an innovative shoemaker, Karl Toosbuy always

saw the ECCO factories as the key to the company’s

success.

He also realised that shoemaking would always

involve a large element of manual work, with

craftsmen producing most of the shoes by hand.

He tried, therefore, to compensate for this by

automating the process wherever possible.

He developed technology, brought in assembly lines

and introduced robot technology and large-scale

assembly machines.

As a result, ECCO is the world leader in direct

injection technology. As new shoes are developed

and designed in Denmark, construction details

are transferred electronically to ECCO’s four main

factories in Thailand, Indonesia, Slovakia and China.

Although many processes have been automated,

the key to shoemaking remains the handcrafted

element, which is time-consuming and demanding.

Because ECCO’s philosophy is “quality first”, ECCO

trains its operators in a variety of skills. Following

a period at the ECCO training school, they gain

experience on the job and attend further courses

to become even better shoemakers.

Craftsmanship guarantees quality.

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ouR shoes

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On a hill next to ECCO’s branch in Tønder stands a monumental bronze sculpture of a foot - 6 metres high. It is there

to remind everyone that the foot is the inspiration behind all ECCO shoes. Today, ECCO makes shoes for everyone

and for every occasion. Casual and formal. Kids’ shoes. Outdoor shoes. Shoes based on natural motion and shoes

for golfers. They all take their starting point in the foot.

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Over the past decade, ECCO

has become the world’s fourth

largest golf shoe brand in terms

of sales, and a leader in the

luxury category. This achieve-

ment has been built, in part,

through relationships with some

of the best and most high profile

golfers – men and women

competing, and winning, on

pro circuits around the world.

The roots of this strategy can be

traced back to the origins

of ECCO Golf. When company

founder Karl Toosbuy first

developed a passion for golf,

fellow Dane Thomas Bjørn was

one of the world’s top-ranked

players. Thus, more than a

decade ago, Bjørn became

the first high-profile Tour player

to wear ECCO Golf shoes and

showcase the brand logo in

competition.

Since then, dozens of top-

ranked players have chosen to

compete in the unique comfort,

quality, performance and style

inherent to each pair of ECCO

golf shoes. They have won and

set record scores on the PGA,

European, Asian, LPGA, Ladies

European, Nationwide and

Challenge Tours.

ECCO Golf sponsored 13 Staff

Players in 2010, who won eight

combined tournaments. Perhaps

none was more of a fairytale

than Iben Tinning’s victory at

the Dubai Ladies Masters.

Competing in her final tourna-

ment as a professional, the

Danish legend wrapped her

amazing career in fitting fashion.

Notably, she also became the

first Tour player to win wearing

the new BIOM Golf Natural

Motion shoe.

It was Fred Couples, however,

who experienced the greatest

success and created a truly

global phenomenon that saw

the GOLF STREET become 2010’s

single biggest golf industry story.

eCCo, the WoRld’s fouRth lARgest golf shoe BRAnd

fACt Box:ECCO 2010 STAFF PLAYERS

• Fred Couples

• Stuart Appleby

• Aaron Baddeley

• Thomas Bjørn

• Thongchai Jaidee

• John Bickerton

• Bradley Dredge

• Steven Jeppesen

• Iben Tinning

• Thorbjørn Olesen

• Arjun Atwal

• Linda Wessberg

• Jennifer Johnson

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ECCO Golf sales reached new

heights in 2010. This was driven

in part by the launch of GOLF

STREET, a hybrid sport-casual

shoe designed to be worn on

and off the course.

GOLF STREET truly took the

world by storm via ECCO staff

player Fred Couples. One of the

game’s most popular and suc-

cessful players, Couples began

wearing GOLF STREET at the

start of his inaugural Champions

Tour season. The buzz about his

casual shoes reached incredible

heights during Couples’ stir-

ring performance at the 2010

Masters.

Magazine editors, newspaper

writers and TV commentators

gushed over “Freddy’s cool

kicks,” his “golf sneakers” and

“casual style.” Global press

coverage also soared, with

ECCO and GOLF STREET high-

lighted in the world’s most

powerful media outlets. These

included the BBC, Bloomberg,

CBS, CNBC, Fox, NBC, New

York Times, Reuters, The Times

(London), Wall Street Journal

and countless others.

The term “Fred Couples golf

shoes” rose to number four

among all Google searches.

By the end of the year, Couples

had won four events and GOLF

STREET was widely heralded as

2010’s single biggest golf indus-

try story. In total, the editorial

coverage for ECCO Golf shoes

reached a potential audience

of nearly 4 billion people and

produced an ad equivalency

exceeding $50 million.

the golf stReet phenomenon

fRed Couples on golf stReet“Clearly the GOLF STREET is a

non-traditional shoe but it’s still

probably the most comfortable

shoe that I have ever worn. I

love being able to leave my

hotel room or house and play golf

without changing into golf shoes.

These shoes can be worn any-

where which makes them a lot

easier to put on in themorning

and take off when I get home.

The comfort is unbelievable and

I love their style”.

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stAtement By the mAnAgement on the AnnuAl RepoRt 2010

The Supervisory Board and

Managing Board of ECCO Sko

A/S have today considered and

adopted the Annual Report for

2010.

The Annual Report is presented

in accordance with the Danish

Financial Statements Act. We

consider the accounting policies

to be appropriate to the effect

that the Annual Report gives a

true and fair view of the Group’s

and the Parent Company’s

assets, liabilities and financial

position as of 31 December 2010

and of the results of the Group’s

and the Parent Company’s oper-

ations and the consolidated cash

flows for the financial year ended

31 December 2010.

The management review from

ECCO Sko A/S gives a true and

fair view within the framework of

generally accepted guidelines

for the area.

We recommend that the Annual

Report be adopted by the share-

holders at the Annual General

Meeting.

Bredebro, 23 March 2011

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mAnAging BoARd

supeRVisoRy BoARd

Jakob Møller HansenEmployee representative

Gitte JochimsenEmployee representative

Hanni Toosbuy KasprzakChairman

Karsten BorchVice Chairman

Torsten E. RasmussenMogens Munk-Rasmussen

Panos MytarosExecutive Vice President

Managing Director, ECCO Leather Group

Michel KrolExecutive Vice President

Managing Director, ECCO EMEA B.V.

Andreas WortmannExecutive Vice President

Brand & Products

Annemette NøhrExecutive Vice President Chief Financial Officer

Jens Christian MeierExecutive Vice President

Group Production & Logistics

Michael Hauge SørensenChief Operating Officer

Dieter KasprzakPresident

Chief Executive Officer

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independent AuditoRs’ RepoRt

TO THE SHAREHOLDERS OF

ECCO SKO A/S

We have audited the financial

statements of ECCO Sko A/S for

the financial year 1 January – 31

December 2010, pages 38-52.

The financial statements comprise

accounting policies, income

statement, balance sheet, cash

flow statement and notes. The

financial statements have been

prepared in accordance with the

Danish Financial Statements Act.

In addition to our audit, we have

read the management’s review

prepared in accordance with

the Danish Financial Statements

Act and issued a statement in this

regard.

MANAGEMENT’S RESPONSIBILITY

Management is responsible for the

preparation and fair presentation

of the financial statements in

accordance with the Danish

Financial Statements Act. This

responsibility includes: designing,

implementing and maintaining

internal control relevant to the

preparation and fair presentation

of financial statements that are

free from material misstatement,

whether due to fraud or error;

selecting and applying appropriate

accounting policies; and making

accounting estimates that are

reasonable in the circumstances.

Further, it is the responsibility

of management to prepare a

management’s review that gives a

fair review in accordance with the

Danish Financial Statements Act.

AuDITORS’ RESPONSIBILITY AND

BASIS OF OPINION

Our responsibility is to express an

opinion on the financial statements

based on our audit. We conducted

our audit in accordance with

Danish Standards on Auditing.

Those standards require that we

comply with ethical requirements

and plan and perform the

audit to obtain reasonable

assurance whether the financial

statements are free from material

misstatement.

An audit involves performing

procedures to obtain audit

evidence about the amounts

and disclosures in the financial

statements. The procedures

selected depend on the auditors’

judgement, including the

assessment of the risks of material

misstatement of the financial

statements, whether due to

fraud or error. In making those risk

assessments, the auditors consider

internal control relevant to the

company’s preparation and

fair presentation of the financial

statements in order to design audit

procedures that are appropriate

in the circumstances, but not

for the purpose of expressing

an opinion on the effectiveness

of the company’s internal

control. An audit also includes

evaluating the appropriateness

of accounting policies used and

the reasonableness of accounting

estimates made by management,

as well as evaluating the overall

presentation of the financial

statements. We believe that the

audit evidence we have obtained

is sufficient and appropriate to

provide a basis for our audit

opinion. Our audit did not result in

any qualification.

OPINION

In our opinion, the financial

statements give a true and fair

view of the company’s financial

position at 31 December 2010 and

of the results of its operations and

its cash flows for the financial year

1 January – 31 December 2010

in accordance with the Danish

Financial Statements Act.

STATEMENT ON THE

MANAGEMENT’S REVIEW

Pursuant to the Danish Financial

Statements Act, we have read

the management’s review. We

have not performed any other

procedures in addition to the

audit of the financial statements.

On this basis, it is our opinion

that the information given in the

management’s review is consistent

with the financial statements.

Esbjerg, 23 March 2011

KPMGStatsautoriseret Revisionspartnerselskab

John LesboState Authorised Public Accountant

Søren JensenState Authorised Public Accountant

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ACCounting poliCies

BASIS OF PREPARATION

The financial statements of the

Parent Company and the Group

for 2010 are presented in accord-

ance with the provisions of the

Danish Financial Statements Act

applicable to class C companies.

BASIS OF CONSOLIDATION

The consolidated financial state-

ments comprise ECCO Sko A/S and

subsidiaries in which ECCO Sko A/S

has a controlling influence on the

company’s operations. The consoli-

dated financial statements are pre-

pared on the basis of the audited

financial statements of ECCO

Sko A/S and its subsidiaries by

adding items of a similar nature.

The financial statements used for

consolidation are adapted to the

accounting policies of the Group.

On consolidation, intercompany

income and expenses, inter-

company accounts and gains on

intercompany sales and purchases

between the consolidated com-

panies are eliminated. On acquisi-

tion of subsidiaries, the share of

the acquired company’s net asset

value is determined based on the

Group’s accounting policies. If the

acquisition price deviates from the

net asset value, the difference is

allocated, wherever possible,

to the assets and liabilities or

provisions that have a higher or

lower value.

The income statements of foreign

subsidiaries are translated at

average exchange rates, and

the balance sheet is translated at

the exchange rates ruling on the

balance sheet date. Exchange dif-

ferences arising on the translation

of the opening equity of foreign

subsidiaries at the exchange rates

ruling on 31 December, and differ-

ences between the net profit of

subsidiaries at average exchange

rates and the exchange rates ruling

at 31 December are recognised

in equity. Currency translation of

receivables from foreign subsid-

iaries, where the receivables are

part of the total investment in the

subsidiary, is recognised directly in

equity.

MINORITY INTERESTS

Minority interests’ share of profits

and equity of subsidiary under-

takings is stated separately.

INCOME STATEMENT

Net revenue: Sales are recog-

nised on dispatch of products, and

net revenue consists of amounts

invoiced excluding VAT and less

returned products, discounts and

rebates.

Raw materials and consumables:

Raw materials and consumables

include raw materials and consum-

ables used for in-house production.

Cost also includes consumption of

commercial products.

Other external costs: Other exter-

nal costs comprise costs relating to

the company’s primary, ordinary

activity, including lasts, cutting dies,

maintenance, rent of plant, prem-

ises, office expenses, sales promo-

tion expenses, fees, etc.

Staff costs: Staff costs comprise

remuneration to employees, includ-

ing pension and social security

costs.

Profit from subsidiaries: Profit from

subsidiaries comprise the propor-

tionate share of profit after tax.

Unrealised intercompany profits:

unrealised intercompany profits

comprise profits unrealised in the

Group on trading in products and

fixed assets between consolidated

companies.

Income taxes: Estimated tax on the

profit for the year is recognised in

the income statement along with

the year’s change in deferred tax.

No tax is set aside for investments in

subsidiaries as it is intended to hold

the investments for more than three

years.

ECCO Sko A/S and the Danish sub-

sidiaries are encompassed by the

Danish regulations regarding man-

datory joint taxation. Subsidiaries

are part of the joint taxation

from the moment where they are

a part of the consolidation in the

annual accounts to the moment

where they are omitted from the

consolidation.

ECCO HOLDING A/S is the adminis-

trative company in the joint taxa-

tion and settles all payments of

corporate tax in the Danish

subsidiaries with the tax authorities.

The current Danish corporate

tax is allocated by paying a joint

taxation contribution between the

companies in the joint taxation. The

contribution is allocated accord-

ing to the taxable income in the

companies. Companies in the

joint taxation with a taxable deficit

receive a joint taxation contribution

from companies which have been

able to use this deficit to reduce

their taxable income.

The tax of this year, which consists

of the current corporate tax, the

joint taxation contribution and

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ACCounting poliCies

the change in deferred tax – also

changes which are caused by

reduction of the corporate tax

rate – is part of the income state-

ment with the share which can be

allocated to profit of the year, and

is part of the equity with the share

which can be allocated to entries

in equity.

According to the Danish regula-

tions regarding mandatory joint

taxation, the debt of ECCO Sko A/S

and the Danish subsidiaries towards

the tax authorities is settled when

the companies have paid the joint

taxation contribution to the admin-

istrative company.

Deferred tax is calculated as the

difference between the carry-

ing amounts and tax values of

current assets and fixed assets.

Furthermore, the tax value of tax

losses carried forward is recognised

in the amount at which they are

expected to be used.

If, on a net basis, there is a tax

asset, the amount of future tax

savings is recognised, provided

that it is deemed more likely

than not that the deduction

can be offset against future

taxable profits.

BALANCE SHEET

Intangible assets: Intangible assets

are recognised at cost less accu-

mulated amortisation. Amortisation

is charged on a straight-line basis

over 5-10 years.

Development projects:

Development projects which are

clearly defined and identifiable

and which are deemed to be

marketable in the form of new

products in a future potential

market are recognised as

intangible assets.

Development costs are recognised

at cost under intangible assets and

are amortised over the expected

useful life of the project, when the

criteria for such treatment are met.

Development costs that do not

meet the criteria for recognition in

the balance sheet are recognised

as costs in the income statement

when incurred.

Recognised development costs

are measured at the lower of cost

less accumulated amortisation and

writedowns and the recoverable

amount.

Patents and trademarks: The costs

of registering new patents and

trademarks are recognised and

amortised over the term of the

patent / trademark or its economic

life (5 years).

Costs of maintaining existing pa-

tents/trademarks are recognised

in the income statement when

incurred.

Goodwill on consolidation:

Goodwill on consolidation is deter-

mined at the date of acquisition

as the difference between the

cost and the net asset value of

the acquired company applying

the Group’s accounting policies.

Consolidated goodwill acquired

from and including 1 January

2002 is capitalised and amortised

on a straight-line basis over the

expected useful economic life,

determined on the basis

of earnings projections for the

individual business areas, not to

exceed 10 years. When the Parent

Company acquires shares at a

price higher than the value deter-

mined applying the equity method,

such excess value is recognised as

an intangible asset and amortised

over the same period as goodwill

on consolidation.

Property, plant, and equipment:

Property, plant and equipment

are recognised at cost plus any

revaluation and less accumu-

lated depreciation. Depreciation

is charged on a straight-line basis

over the expected useful lives of

the assets.

The expected useful lives are as

follows:

- Buildings 20 years

- Plant and machinery, vehicles,

fixtures and fittings 5 years

- Computer software 3 years

Depreciation is not charged on

land and staff housing. Assets

with a cost of less than DKK 12

thousand per unit are charged

to the income statement in the

year of acquisition. Investment

grants are offset against the

assets that form the basis for

the grants.

If an asset type is revalued, this

applies to all assets within that

group of assets.

Investments: Investments in

subsidiaries are recognised

applying the equity method at the

proportionate share of the equity of

the companies, determined based

on the Group’s accounting

policies, less unrealised

intercompany profits.

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Dividend receivable in subsidiaries

is recognised in the balance sheet

when adopted by the shareholders

at the Annual General Meeting.

Dividends to be paid by the

Parent Company are recognised

as a liability in the financial

statements at the time of adoption

by the shareholders at the Annual

General Meeting. Dividend pro-

posed in respect of the financial

year is stated as a separate line

item in the equity note.

Inventories: Raw materials are

measured at cost determined

on the basis of the most recent

purchases. Work in progress and

finished products are measured

at calculated cost, consisting

of the cost of raw materials and

consumables and manufacturing

costs plus a share of production

overheads. Commercial products

are valued at acquisition price.

Products with a net realisable value

lower than the cost or acquisition

price are written down to the

lower value.

Receivables: Receivables are

measured at amortised cost less

provisions for anticipated losses

determined based on an individual

evaluation.

Securities: Securities are measured

at the most recently quoted market

price.

Financial instruments: Derivative

financial instruments are initially

recognised in the balance sheet

at cost and subsequently

remeasured at their fair value.

Derivative financial instruments are

included in other receivables and

other debt. Changes in the fair

value of derivative financial

instruments that meet the criteria

to be designated as fair value

hedges of a recognised asset or

a recognised liability are

recognised in the income state-

ment together with any changes

in the fair value of the hedged

asset or hedged liability. Changes

in the fair value of derivative

financial instruments that meet the

conditions for hedging future assets

or liabilities are recognised in equity

under retained earnings. Income

and expenses relating to such

hedge transactions are transferred

from equity on realisation of the

hedged item.

Treasury shares: The cost of treasury

shares is recognised directly on

the company’s share capital and

is consequently not stated as an

asset in the balance sheet.

Currency translation: Receivables

and payables denominated in

foreign currencies are translated

to the exchange rate ruling at

year-end.

Provisions: Provisions comprise

anticipated costs of warranty

obligations restructuring, etc.

Provisions are recognised

when, as a consequence of a

past event, the company has a

legal or constructive obligation,

and it is likely that the obligation

will materialise.

CASH FLOW STATEMENT

The cash flow statement shows

the Group’s cash flow during the

year and liquidity position at the

beginning and end of the year.

The cash flow statement is divided

into three principal areas:

operating, investing and financing

activities. Cash and cash

equivalents in the cash flow

statement comprise cash and

securities carried as current assets.

In the statements, figures in

brackets represent losses or

items deducted.

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inCome stAtement foR the yeAR ended 31 deCemBeR 2010

Group Parent Company

2010 2009 2010 2009Note DKK ’000

1 Net revenue 6,111,148 5,041,200 4,027,916 3,326,366 Change in inventories of finished products and work in progress 17,473 (252,463) (58,488) (367,274) Costs of raw materials and consumables (2,529,332) (1,718,903) (3,062,976) (2,128,327) Other external costs (1,262,485) (1,165,306) (257,810) (352,268) 2 Staff costs (1,342,084) (1,136,221) (288,914) (275,675) 5,6 Amortisation and depreciation (341,973) (272,383) (87,063) (74,804) Profit before financials 652,747 495,924 272,665 128,018 3 Financial income 193,329 132,684 96,038 78,076 Financial expenses (215,040) (168,945) (98,927) (103,453) Profit from subsidiaries - - 271,959 212,059 Intercompany profit - - (68,731) 17,645 Profit before tax 631,036 459,663 473,004 332,345 4 Income taxes (155,423) (114,306) (63,026) (33,108) Group profit 475,613 345,357 409,978 299,237 11 Minority interests (65,635) (46,120) - - Profit for the year 409,978 299,237 409,978 299,237

Proposed allocation:

Revaluation reserve for undistributed profit in subsidiaries 98,171 66,957 Retained earnings 49,807 (107,720) Proposed dividend 262,000 340,000 409,978 299,237

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BAlAnCe sheet As of 31 deCemBeR 2010


Assets 2010 2009 2010 2009Note DKK ’000

FIXED ASSETS: Intangible rights 38,371 39,144 15,594 18,162 5 total intangible assets 38,371 39,144 15,594 18,162 Land and buildings 663,401 631,520 132,751 137,288 Plant and machinery 226,939 248,600 3,916 5,347 Other fixtures and fittings, tools and equipment 275,800 378,465 103,303 139,695 Property, plant and equipment in progress 107,641 70,320 60,723 38,801 6 total property, plant and equipment 1,273,781 1,328,905 300,693 321,131 7,8 Investments in subsidiaries - - 1,305,925 1,189,017 8 Receivables from subsidiaries - - 480,284 643,363 9 Deferred tax 129,395 73,419 55,787 27,823 total long-term financial assets 129,395 73,419 1,841,996 1,860,203 tOtal fiXeD assets 1,441,547 1,441,468 2,158,283 2,199,496 CuRRENT ASSETS: Raw materials and consumables 250,014 190,746 - - Work in progress 29,951 18,476 - - Finished products and commercial products 976,216 970,218 344,106 402,594 total inventories 1,256,181 1,179,440 344,106 402,594 Trade receivables 979,294 670,477 219,071 149,973 Receivables from subsidiaries - - 782,949 449,241 Other receivables 234,335 102,446 51,098 2,340 4 Income taxes 52,465 68,314 Prepayments 53,511 60,803 27,371 29,362

total receivables 1,267,140 886,191 1,080,489 699,230

securities 32,771 27,408 161 212

cash 652,381 647,641 24,663 134,673 tOtal cUrreNt assets 3,208,473 2,740,680 1,449,419 1,236,709 tOtal assets 4,650,020 4,182,148 3,607,702 3,436,205

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BAlAnCe sheet As of 31 deCemBeR 2010

Equity and liabilities 2010 2009 2010 2009Note DKK ’000

Share capital 5,500 5,500 5,500 5,500 Revaluation reserve - - 923,924 738,869 Retained earnings 2,581,461 2,426,339 1,657,537 1,687,470

10 total equity 2,586,961 2,431,839 2,586,961 2,431,839

11 Minority interests 147,035 132,990 - -

Provisions 26,836 19,830 - - Credit institutions 463,143 430,887 439,133 410,771

12 total long-term debt 463,143 430,887 439,133 410,771

Short-term part of long-term debt 101,752 136,951 101,752 136,951 Credit institutions 340,220 392,210 14,231 127,034 Trade payables 417,294 281,518 105,312 107,426 Payables to subsidiaries - - 196,738 116,228 4 Income taxes 70,687 - 16,814 - Other payables 415,834 305,701 67,104 55,734 Deferred income 80,258 50,222 79,657 50,222

total short-term debt 1,426,045 1,166,602 581,608 593,595

total debt 1,889,188 1,597,489 1,020,741 1,004,366

tOtal eQUitY aND liabilities 4,650,020 4,182,148 3,607,702 3,436,205

13 Contingent liabilities and collateral security 14 Fees to auditors appointed at the Annual General Meeting 15 Related parties


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ConsolidAted CAsh floW stAtementfoR the yeAR ended 31 deCemBeR 2010

2010 2009DKK ’000

Cash flow from operating activitiesProfit before tax 631,036 459,663 Adjustment for non-cash operating items:Amortisation and depreciation 341,973 272,383 Exchange rate adjustments 42,602 (60,035) Tax adjustments 2,016 3,891 Working capital adjustments:(Increase)/Decrease in inventories (76,741) 321,944 (Increase)/Decrease in receivables (433,414) 55,160 Increase/(Decrease) in payables 135,776 59,978 Increase/(Decrease) in other payables 140,169 18,890 Increase/(Decrease) in provisions 7,006 3,349 Income taxes paid (90,272) (150,699) 700,151 984,524 Cash flow from investing activitiesPayments to invest in fixed assets:Intangible assets (18,360) (15,585) Property plant and equipment (218,372) (207,340) (236,732) (222,925) Cash flow from financing activitiesChange in minority interests (58,383) 1,738 (Repayment of)/proceeds from new long-term debt 32,256 124,503 Increase/(Decrease) in short-term debt (87,189) (426,766) Dividend paid (340,000) (276,000) (453,316) (576,525)

cash flow from operating, investing and financing activities 10,103 185,074 Cash and cash equivalents at beginning of year 675,049 489,975 cash and cash equivalents at year-end 685,152 675,049

Breakdown of cash and cash equivalents:Securities 32,771 27,408 Cash 652,381 647,641 685,152 675,049

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notes to the gRoup AndpARent CompAny finAnCiAl stAtements


2010 2009 2010 2009DKK ’000

Salaries 1,202,742 1,010,866 272,937 259,872 Pensions 40,475 33,808 14,311 14,090 Other social security costs 98,867 91,547 1,666 1,713 staff costs 1,342,084 1,136,221 288,914 275,675 Average number of employees 15,827 15,011 552 558 Number of employees at year-end 17,537 14,781 548 549 Fees to Managing Board and Supervisory Board: Managing Board - - 32,921 17,709 Supervisory Board - - 700 600

2. Staff costs and management and staff information

1. Segment information

Group

2010 2009DKK ’000 segment information Shoes & accessories 5,780,644 4,846,352 Others 330,504 194,848

total net revenue 6,111,148 5,041,200

Net revenue shoes & accessories ECCO Europe West and East 1,924,054 1,680,418ECCO Europe Central 1,707,840 1,521,987 ECCO Americas 1,139,397 928,681 ECCO Asia/Pacific 1,009,353 715,266

total shoes & accessories 5,780,644 4,846,352

Reference is made to the ECCO Group structure page 53-54 regarding the definition of the geographic regions.

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3. Financial income

Parent Company

2010 2009DKK ’000In the Parent Company, interest income from subsidiaries amounted to 21,662 19,396


4. Income taxes

Cost Debt Cost Debt 2010 2010 2010 2010DKK ’000

Income taxes payable as at 1 January - (52,465) (68,314)Income taxes paid in 2010 - 52,286 68,135Prior-year adjustment 179 179 179 179Estimated tax for 2010 213,245 213,245 92,827 92,827of which paid (142,558) (76,013)Year’s adjustment of deferred tax (58,001) (29,980) 155,423 70,687 63,026 16,814

DKK ’000 Cost at 1 January 142,438 46,496 Currency translation (3,604) - Additions 16,965 1,909 Disposals (2,927) - cost at 31 December 152,872 48,405 Accumulated amortisation at 1 January 103,294 28,334 Currency translation (4,820) -Amortisation 20,349 4,517 Amortisation on assets sold (4,322) (40)

accumulated amortisation at 31 December 114,501 32,811

carrying amount at 31 December 38,371 15,594

Amortised over 5-10 years 5-10 years

5. Intangible assets


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6. Property, plant and equipment

DKK ’000

GrOUP Cost at 1 January 1,017,465 898,775 1,104,226 70,320Currency translation 37,579 56,008 (43,213) 3,496Additions 47,030 55,762 101,691 33,825Disposals 17,279 (76,351) (107,548) -

cost at 31 December 1,119,353 934,194 1,055,156 107,641

Accumulated depreciation at 1 January 385,945 650,175 725,761 -Currency translation (3,574) 26,410 (17,094) -Depreciation 62,032 105,375 154,217 -Depreciation on disposals 11,549 (74,705) (83,528) -

accumulated depreciation at 31 December 455,952 707,255 779,356 -

carrying amount at 31 December 663,401 226,939 275,800 107,641 PareNt cOMPaNY Cost at 1 January 279,938 67,486 393,733 38,801Additions 8,570 329 34,442 21,922Disposals (1,302) (2,623) (10,181) -

cost at 31 December 287,206 65,192 417,994 60,723

Accumulated depreciation at 1 January 142,650 62,139 254,038 -Depreciation 13,029 1,674 67,843 -Depreciation on disposals (1,224) (2,537) (7,190) -

accumulated depreciation at 31 December 154,455 61,276 314,691 -

carrying amount at 31 December 132,751 3,916 103,303 60,723

Depreciated over 20 years 5 years 3-5 years -

Land and

buildings

Plant and

machinery

Fixtures and fittings, tools

and equipment

Property, plant and equipment

in progress

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7. Investments in subsidiaries Ownership interest Share capital

ECCO (Thailand) Co., Ltd. 95% 200,000 t. THBECCO Slovakia, a.s. 100% 7,634 t. EuREcco’let (Portugal) - Fábrica de Sapatos, Lda. 100% 2,770 t. EuRPT. ECCO Indonesia 100% 43,976,000 t. IDRECCO China Holding (Singapore) Pte. Ltd. 80% 16,000 t. uSDECCO (Xiamen) Co. Ltd. (China) 80% 15,600 t. uSD Danna Leather (Xiamen) Co., Ltd. (China) 100% 75 t. uSDECCO Tannery Holding (Singapore) Pte. Ltd. 100% 12,000 t. EuRECCO Tannery (Xiamen) Co. Ltd. (China) 100% 17,000 t. uSDECCO Tannery (Thailand) Co., Ltd. 100% 185,000 t. THBECCO Tannery (Holland) B.V. (The Netherlands) 100% 1,000 t. EuRECCO Leather B.V. (The Netherlands) 100% 400 t. EuRPT. ECCO Tannery Indonesia 100% 37,403,550 t. IDR ECCO Asia Pacific Limited (Hong Kong) 100% 21,500 t. HKDECCO Baltic SIA (Latvia) 50% 2 t. LVLECCO Belgium N.V. 100% 360 t. EuRECCO Boty Ceská republika s.r.o. (Czech Rep.) 100% 5,000 t. CZKECCO China Wholesale Holding (Singapore) Pte. Ltd. 50% 200 t. uSDECCO Cyprus Limited 100% 2 t. EuRECCO e-store ApS (Denmark) 100% 125 t. DKKECCO EMEA Sales SE (The Netherlands) 100% 120 t. EuRECCO Europe East and Middle East Sp. z o.o. (Poland) 100% 12,500 t. PLNECCO Europe B.V. (The Netherlands) 100% 23 t. EuRECCO Exportadora Ltda (Brazil) (dormant) 100% 48 t. BRLECCO France Diffusion S.a.r.l. 100% 50 t. EuRECCO Hungary Kft. (Hungary) 100% 500 t. HuFECCO India Trading Private Limited 100% 66,830 t. INRECCO Internet, Inc. (uSA) 100% 100 t. uSDECCO Macao Limited 100% 25 t. MOPECCO Middle East A/S (Denmark) 50% 2,250 t. DKKECCO Norge A/S (Norway) 100% 15,000 t. NOKECCO (Portugal) Sales Comercialização de Sapatos, Lda. 100% 800 t. EuRECCO Retail A/S (Denmark) 100% 1,000 t. DKKECCO Retail LLC (uSA) 100% 300 t. uSDECCO Retail Japan Co., Ltd. 90% 400,000 t. JPYECCO Scarpe Italia S.r.l. 100% 100 t. EuRECCO Schuhe GmbH (Germany) 100% 1,790 t. EuRECCO Schuhe Schweiz GmbH (Switzerland) 100% 170 t. CHFECCO Shoes Netherlands B.V. 100% 18 t. EuRECCO (Shanghai) Co., Ltd. (China) 50% 2,100 t. uSDECCO Shoes (NZ) Limited (New Zealand) 100% 100 t. NZDECCO Shoes Canada, Inc. 100% 6,502 t. CADECCO Shoes Hellas S.A. (Greece) (dormant) 51% 60 t. EuRECCO Shoes Hong Kong Limited 100% 3,000 t. HKDECCO Shoes International AG (Switzerland) 100% 2,250 t. CHFECCO Shoes Pacific Pty. Ltd. (Australia) 100% 3,250 t. AuDECCO Shoes Poland Sp. z o.o. 100% 10,000 t. PLNECCO Shoes Slovakia, s.r.o. 100% 166 t. EuRECCO Shoes uK Limited 100% 4,000 t. GBPECCO Singapore Pte. Ltd. 100% 2,510 t. SGDECCO Shoes Iberica, S.L. (Spain) 100% 4 t. EuRECCO Sverige AB (Sweden) 100% 1,000 t. SEKECCO Trading GmbH (Austria) 100% 400 t. EuRECCO uSA, Inc. 100% 7,500 t. uSDECCO Wholesale Limited (uK) (dormant) 100% 1,200 t. GBPEccolet Portugal ApS (Denmark) 100% 200 t. DKKOy ECCO-Suomi Ab (Finland) 100% 102 t. EuRSalgsselskabet ECCO Danmark A/S 100% 1,000 t. DKK

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8. Investments in subsidiaries

Investmentsin subsidiaries

Receivables from subsidiaries

2010 2009 2010 2009DKK ’000

Cost at 1 January 670,151 666,019 643,363 724,318 Additions 585 4,132 134,429 83,097 Disposals - - (297,508) (164,052)

cost at 31 December 670,736 670,151 480,284 643,363

Accumulated revaluation at 1 January 738,869 672,491 - -

Currency translation of foreign subsidiaries 87,406 (4,818) - - Regulation in connection with foreign currency hedging of future sales of subsidiaries (522) 4,239 - - Profit after tax of subsidiaries 271,959 212,059 - - Dividend (173,788) (145,102) - -

Net revaluation 185,055 66,378 - -

accumulated revaluation at 31 December 923,924 738,869 - -

intercompany gains (288,735) (220,003) - -

carrying amount at 31 December 1,305,925 1,189,017 480,284 643,363

9. Deferred tax

2010 2009 2010 2009DKK ’000

Deferred tax comprises: Inventories, unrealised intercompany gains 71,700 56,210 71,700 56,210 Other assets 57,695 17,209 (15,913) (28,387)

recognised at 31 December 129,395 73,419 55,787 27,823

recognised at 1 January (73,419) (78,845) (27,823) (34,392)

total adjustment 55,976 (5,426) 27,964 (6,569)

Of which adjusted in equity (2,016) (3,891) (2,016) 3,109


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10. Equity

2010 2009 2010 2009DKK ’000

The share capital consists of:112 shares (in amounts from DKK 500 to DKK 1,658,200)

total share capital 5,500 5,500 5,500 5,500

Reserve for net revaluation according to the equity method Reserve for net revaluation at 1 January - - 738,869 672,491 Net revaluation - - 185,055 66,378

reserve for net revaluation at 31 December - - 923,924 738,869

Brought forward from prior years/revaluation reversed 2,426,339 2,467,919 1,687,470 1,795,428 Proposed dividend in respect of the financial year 262,000 340,000 262,000 340,000 Dividend paid (340,000) (276,000) (340,000) (276,000) Exchange rate adjustment to year-end exchange rates 87,406 (4,818) - - Currency translation of subordinated loan capital in subsidiaries 2,273 (577) 2,273 (577) Gain/(loss) on financial swaps 2,459 (2,493) 2,459 (2,493) Retained from profit for the year 147,978 (40,763) 49,807 (107,720) Adjustment of currency hedges of future sales (6,994) (56,929) (6,472) (61,168)

total retained earnings 2,581,461 2,426,339 1,657,537 1,687,470

total equity 2,586,961 2,431,839 2,586,961 2,431,839

The nominal value of treasury shares is DKK 550 thousand; they were acquired in 1989 at DKK 6,875 thousand. The treasury shares are carried at DKK 0.


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Group

2010 2009DKK ’000 Minority interests at 1 January 132,990 86,266 Additions - 22,602 Disposals (58,383) (20,864) Share of profit for the year 65,635 46,120 Exchange rate adjustments 6,793 (1,134)

Minority interests at 31 December 147,035 132,990

11. Minority interests

12. Long-term debt


2010 2009 2010 2009DKK ’000 Long-term debt due more than five years after the end of the financial year 147,820 38,383 147,820 38,383

13. Contingent liabilities and collateral security


2010 2009 2010 2009DKK ’000 CONTINGENT LIABILITIES

Rent and lease liabilities 799,309 725,399 14,174 19,821 Guarantees and letters to suppliers and subsidiaries 38,911 7,362 6,089 1,223 Sponsorships 11,100 13,531 11,100 13,531 COLLATERAL SECuRITY

The following assets have been lodged in security of the Group’s loans from credit institutions and other long-term debt:

Bearer mortgages on property, plant and equipment 230,973 148,261 168,474 80,000 Guarantee for import duty 33,150 6,574 14,900 -

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14. Fees to auditors appointed at the Annual General Meeting


2010 2009 2010 2009DKK ’000 Total fees to auditors appointed at the Annual General Meeting:

KPMG 9,051 8,692 2,192 1,954 Others 1,947 1,766 - 55 10,998 10,458 2,192 2,009

KPMGAuditor’s fee 6,209 5,799 1,169 1,041 Other assurance services and statements 259 - - -Tax consulting 1,783 1,974 562 612Others 800 919 461 301KPMG in total 9,051 8,692 2,192 1,954

OthersAuditor’s fee 1,098 1,008 - -Other assurance services and statements 31 - - -Tax consulting 816 568 - -Others 2 190 - 55Others in total 1,947 1,766 - 55

15. Information about shareholder conditions

The company’s list pursuant to Section 55 of the Danish Companies Act of shareholders with more than 5% of the votes or more than 5% of the nominal value of the share capital includes:

- ECCO HOLDING A/S, Bredebro, Denmark is the parent company ECCO Sko A/S- Kasprzak Holding ApS, Bredebro, Denmark

ECCO Sko A/S’ related parties with controlling influence comprise the company’s shareholders, the Supervisory Board, the Managing Board as well as relatives of these persons. Related parties also comprise companies in which the individuals mentioned above have material interests.

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gRoup stRuCtuRe As of 31 deCemBeR 2010

ECCO SKO A/S

SuBSIDIARIES, SALES

THE NETHERLANDSECCO Europe B.V.

THE NETHERLANDS ECCO EMEA Sales SE

THE NETHERLANDS ECCO Shoes Netherlands B.V.

UKECCO Shoes uK Limited

BELGIUMECCO Belgium N.V.

FRANCEECCO France Diffusion S.a.r.l.

PORTUGALECCO (Portugal) Sales Comercialização de Sapatos, Lda.

SPAINECCO Shoes Iberica, S.L.

ITALYECCO Scarpe Italia S.r.l.

SWEDENECCO Sverige AB

DENMARKSalgsselskabet ECCO Danmark A/S

DENMARKECCO Retail A/S

DENMARKECCO e-store ApS

NORWAYECCO Norge A/S

FINLANDOy ECCO-Suomi Ab

GERMANYECCO Schuhe GmbH

AUSTRIAECCO Trading GmbH

SWITZERLANDECCO Schuhe Schweiz GmbH

POLANDECCO Europe East and Middle East Sp. z o.o.

POLANDECCO Shoes Poland Sp. z o.o.

THE CZECH REP.ECCO Boty Ceská republika s.r.o.

SLOVAKIAECCO Shoes Slovakia, s.r.o.

HUNGARYECCO Hungary Kft.

CYPRUSECCO Cyprus Limited

LATVIAECCO Baltic SIA

DENMARKECCO Middle East A/S

UNITED ARAB EMIRATESECCO Middle East A/S (Branch)

reGiON ECCO AMERICASreGiON ECCO EuROPE, MIDDLE EAST & AFRICA

USAECCO uSA, Inc.

USAECCO Retail LLC

uSAECCO Internet, Inc.

CANADAECCO Shoes Canada, Inc.

Accessories:

SWITZERLANDECCO Shoes International AG

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Dormant companies have been left out

SuBSIDIARIES, PRODuCTION

SLOVAKIAECCO Slovakia, a.s.

INDONESIAPT. ECCO Indonesia

THAILANDECCO (Thailand) Co., Ltd.

SINGAPOREECCO China Holding (Singapore) Pte. Ltd.

CHINAECCO (Xiamen) Co. Ltd.

PORTUGAL (Product development) Ecco’let (Portugal) – Fábrica de Sapatos, Lda.

ECCO SHOE factOries

ECCO leather

THE NETHERLANDSECCO Leather B.V.

THE NETHERLANDSECCO Tannery (Holland) B.V.

INDONESIAPT. ECCO Tannery Indonesia

THAILANDECCO Tannery (Thailand) Co., Ltd.

SINGAPOREECCO Tannery Holding (Singapore) Pte. Ltd.

CHINA

ECCO Tannery (Xiamen) Co. Ltd.

CHINADanna Leather (Xiamen) Co., Ltd.

reGiON ECCO ASIA/PACIFIC

HONG KONGECCO Asia Pacific Limited

HONG KONGECCO Shoes Hong Kong Limited

MACAOECCO Macao Limited

TAIWANESHK Ltd. Taiwan Branch

SINGAPOREECCO Singapore Pte. Ltd.

AUSTRALIAECCO Shoes Pacific Pty. Ltd.

NeW ZealaND ECCO Shoes (NZ) Limited

INDIAECCO India Trading Private Limited

SINGAPORE

ECCO China Wholesale Holding (Singapore) Pte. Ltd.

CHINAECCO (Shanghai) Co., Ltd.

JAPAN

ECCO Retail Japan Co., Ltd.

ECCO Sko A/S

Industrivej 5

DK-6261 Bredebro

Tel.: +45 74 91 16 25

Fax: +45 74 71 03 60

ecco.com

Comp. Reg. No. 43.088

VAT No. 45 34 99 18

annual report 2010 - ecco · a number of strategic learning programmes for ecco’s global...

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