Ecco Annual Report 2012 en

annual report 2012
ECCO Sko A/S Industrivej 5 6261 Bredebro Denmark A/S Reg. No. 43.088 CVR No. 45 34 99 18
Banks Sydbank Nordea Danske Bank
CONtents
FIVE YEAR SUMMARY 6 HIGHLIGHTS FROM 2012 7 MANAGEMENT REPORT 8 FINANCIAL HIGHLIGHTS 10 DESIGN AND PRODUCTS 13 PRODUCTION AND SOURCING 16 18 MARKET DEVELOPMENT EMPLOYEES AND KNOWLEDGE RESOURCES 22 RISK FACTORS AND RISK MANAGEMENT 24 CORPORATE RESPONSIBILITY 26 32 STATEMENT BY THE MANAGEMENT MANAGEMENT 33 INDEPENDENT AUDITORS REPORT 34 ACCOUNTING POLICIES 36 ANNUAL ACCOUNTS 39 NOTES 44 GROUP STRUCTURE 52 ECCO 50 YEARS 54
FIVE YEAR SUMMARY

Financial highligHts DKK 000 Net revenue Profit before amortisation and depreciation Amortisation and depreciation Profit before financials Net financials Profit before tax Income taxes Group profit Minority interests Profit for the year Fixed assets Current assets Assets Equity Other liabilities Debt Equity and liabilities 2012 2011 2010 2009 2008
8,061,236 1,512,381 (306,429) 1,205,952 (66,083) 1,139,869 (320,843) 819,026 (135,354) 683,672
7,088,826 1,276,606 (329,871) 946,735 (42,944) 903,791 (250,601) 653,190 (98,555) 554,635
6,111,148 994,720 (341,973) 652,747 (21,711) 631,036 (155,423) 475,613 (65,635) 409,978
5,041,200 768,307 (272,383) 495,924 (36,261) 459,663 (114,306) 345,357 (46,120) 299,237
5,374,142 1,033,467 (206,396) 827,071 (81,220) 745,851 (171,982) 573,869 (46,470) 527,399
1,787,585 1,460,309 1,441,547 1,441,468 1,502,268 3,884,149 3,686,546 3,208,473 2,740,680 2,894,782 5,671,734 5,146,855 4,650,020 4,182,148 4,397,050 3,121,885 2,931,289 2,586,961 2,431,839 2,473,419 260,283 254,359 173,871 152,820 102,747 2,289,566 1,961,207 1,889,188 1,597,489 1,820,884 5,671,734 5,146,855 4,650,020 4,182,148 4,397,050
Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Number of employees (as of 31 December)
795,509 (593,639) (323,503) 19,426
669,684 (338,596) (370,956) 19,759
700,151 (236,732) (453,316) 17,537
984,524 (222,925) (576,525) 14,781
788,592 (482,718) (322,762) 16,328
Key ratios Operating margin ROAIC Return on assets Investment ratio Return on equity Solvency ratio Liquidity ratio
15.0% 13.4% 22.3% 19.3% 21.1% 18.5% 1.9 1.0 22.6% 20.1% 55.0% 57.0% 2.4 2.5
10.7% 14.8% 14.3% 0.7 16.3% 55.6% 2.2
9.8% 11.6% 10.7% 0.8 12.2% 58.1% 2.3
15.4% 19.2% 17.3% 2.3 23.2% 56.3% 1.9
DEFINITIONS OF KEY RATIOS

Operating margin: Profit before financials x 100 Investment ratio: Investments for the year
Net revenue Amortisation and depreciation 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 Liquidity ratio: Current assets Short-term debt
ECCO Annual Report 2012
Highlights from 2012

Business performance 2012 was an exceptionally good year for ECCO. Many factors contributed, but more than anything an extraordinary effort by the entire global ECCO team. The flooding of ECCOs factory in Ayutthaya in Thailand in October 2011 was a major setback for ECCO, reducing its production capacity overnight by a third. All other units were asked to increase production to minimise the effect on ECCOs customers. These events galvanised the entire ECCO organisation into a superb effort throughout 2012. But it was also the solid performance in the marketplace by many of ECCOs successful products such as Sculptured, BIOM and ECCOs golf shoes which helped create a very satisfactory result. ECCO saw strong progress in its Asian and North American markets. Its core European markets delivered overall improved results. This development further strengthened ECCOs geographical diversification. ECCOs total volume for the first time exceeded 20 million pairs 20.2 million pairs were sold. Likewise, ECCOs accessories businesses made good progress with revenue growth of 15% and ECCO Leather increased external sales by 29%. Financial performance - Net revenue was DKK 8,061 million an increase of DKK 972 million equal to 13.7%. Profit before tax was DKK 1,140 million a growth of - 26% over 2011. This is a profit before tax ratio of 14.1%, against 12.7% last year. - The years company tax is calculated at DKK 321 million, against DKK 251 million in 2011. - The years result is DKK 684 million, against DKK 555 million last year. - The total assets increased from DKK 5,147 million to 5,672 million, and the equity increased from DKK 2,931 million to DKK 3,122 million. - ECCO Skos solidity at year-end was slightly down from 57.0% to 55.0%. - The return on equity increased from 20.1% to 22.6%. Organisational changes in 2012 In mid-2012, ECCO introduced a simpler and more - efficient management structure. - ECCOs three regional sales organisations in North America, Asia and EMEA (Europe, Middle East and Africa) were brought together in a new Global Sales organisation, headed by Michel Krol, a member of ECCOs Managing Board. - All global leather, shoe production and sourcing activities were gathered in a new Global Production organisation, headed by Panos Mytaros, a member of ECCOs Managing Board. - Steen Borgholm, previously Regional Director Asia, was appointed CFO and joined ECCOs Managing Board. Gerd Rahbek-Clemmensen, Managing Director of - ECCO Holding A/S, the ECCO Group parent company, joined the Supervisory Board of ECCO Sko A/S. Outlook - ECCO views 2013 as a year of consolidation after the extraordinary growth during 2012. - This growth will be lower than in 2012, but ECCO has strong new products in the market and also expects positive results from its reorganisation.
MANAGEMENT REPORT
It is not often that most initiatives and plans meet with success. But for ECCO, 2012 became one of those years where nearly everything went well creating the background for yet another record-breaking year. ECCO is one if not the only of the worlds shoe producers that controls the entire value chain from cow to consumer. The process starts with ECCOs designers. Next, the product development team turns the designers ideas into reality and production takes over. ECCO makes leather at its own tanneries and cuts it, stitches uppers and injects soles at its own shoe factories. From ECCOs distribution centres, shoes are sent to the stores many owned by ECCO and sold to ECCOs consumers. This is a very expensive set-up and at times complex to operate, but it also has many advantages. This was proven in 2012 when ECCO had to cope with the massive challenges created by the flooding in Thailand in late 2011. Being in control of the entire value chain allowed ECCO to increase production overnight in its other factories in Europe and Asia. This also enabled ECCO to move shoes from stocks to market and to communicate immediately with ECCO customers through ECCOs network of sales offices. The 19,500 ECCO employees rose enthusiastically to the challenge, and across the world many put in extraordinary efforts to minimise delivery problems for ECCOs customers. This more than anything created ECCOs success in 2012. Strong product performance ECCO, in parallel, saw great demand for its products. The Golf division continued its strong performance and ECCO is now the 4th largest golf footwear brand in the world. In Mens shoes, ECCO had strong formal products such as Helsinki, New Jersey and Biarritz, and casual styles such as Remote and Androw. In the Ladies division, the new Sculptured products were much sought after. The Sculptured family grew and now includes Sculptured, Sculptured 65, Sculptured Sign and Sculptured 65 Sandal. The newest development is Sculptured 75, which proves that ECCO has been able to develop high-heeled ladies shoes without compromising on comfort and design. ECCOs marketing department, in connection with Sculptured, launched the SMILE campaign, demonstrating that you can smile even if you wear high heels all day long. The campaign ran on a global basis and was a great success. In ECCOs Performance division, products such as ECCO Offroad, BIOM Lite Ladies and BIOM Grip Mens were bestsellers. Market development ECCO continued its build-up of many international markets to reduce its historical dependence on its Northern European markets. The markets in Asia now account for 24.2% of ECCOs revenue against 20.2% in 2011; North America grew to 19.1% in 2012 against 17.9% in 2011; and as a result, EMEA (Europe, Middle East and Africa) saw its percentage of revenue reduced to 56.6% - although the region saw its overall performance improve. This geographical diversification also added to the improved result and this strategy will continue. ECCO is now active in 91 markets across the globe. Streamlined management structure As costs increase continuously and in Asia quite rapidly increased efficiency becomes crucial. ECCO streamlined its management structure and today bases its operation on four pillars: Brand & Products, Production, Sales and Administration. Each is managed by a member of ECCOs
ECCOs Managing Board from left: Steen Borgholm Executive Vice President, Finance and Group CFO; Michael Hauge Srensen Chief Operating Officer; Dieter Kasprzak (sitting) President & Chief Executive Officer; Michel Krol Executive Vice President, Global Sales; Panos Mytaros Executive Vice President, Global Production; Andreas Wortmann Executive Vice President, Brand & Products. The photo was shot in an old decommissioned tannery in the Copenhagen Meat Packing District, now a fashionable city centre for food, culture and various events.
Managing Board respectively, Andreas Wortmann, Panos Mytaros, Michel Krol and Steen Borgholm. The Managing Board is headed by Dieter Kasprzak and its activities are coordinated by ECCOs COO Michael Hauge Srensen. The new organisation allows faster decision making, more efficiency and increased consumer contact, as tasks are delegated as close to the market as possible. In 2011 and 2012 ECCO has worked intensively on improving its operational processes. Many initiatives have been launched to simplify and improve the daily operation. And the first results are promising. 2013 will see the roll-out of most of the projects and the effects should be visible this year.
One further focus area in 2013 will be ECCOs supply chain. Customers expect more frequent deliveries of attractive new products, easy purchase processes and an ever higher level of service. ECCOs control of the entire supply chain should allow ECCO to meet these expectations. Consolidation in 2013 Looking ahead into 2013, economic uncertainty remains high and a number of economies probably will struggle, with negative impact on consumer sentiment and demand. After several years of aggressive growth, ECCO will restrain growth in 2013 to allow the organisation to consolidate the results achieved.
FINANCIAL HIGHLIGHTS
ECCOs financial result in 2012 was very satisfactory and the company remains financially strong. Group net revenue increased by 13.7% to DKK 8,061 million. Net sales of shoes and accessories increased by DKK 881 million. The split between sales in ECCOs three regions demonstrates the continuous improvement in geographical diversification. ECCO Leather increased its external sales by DKK 85.5 million. Importantly, most of this growth is in premium leathers and ECCO Leather is gaining a strong position in the leather goods market. In 2012 the profit before tax was the highest ever achieved at DKK 1,140 million an increase of 26%. The profit before tax ratio also improved from 12.7% in 2011 to 14.1% in 2012. Corporate tax is calculated at DKK 321 million, which is equivalent to a tax rate of 28.1% versus 27.7% in 2011.
Europe Asia Pacific Americas
Net revenue 2008-2012

9,000 8,000 7,000
million DKK
8,061 7,089 6,111 5,374 5,041
6,000 5,000 4,000 3,000 2,000 1,000 0
Net revenue split by region 2008-2012
The years result, after tax and minorities, increased from DKK 555 million in 2011 to DKK 684 million in 2012 an increase of 23.3%.
Profit before tax and profit margin 2008-2012
Cash flow from operations increased to DKK 796 million from DKK 670 million in 2011 despite higher working capital requirements.
million DKK
in %
1,200 1,000 800 600 400 200 0 2008 2009 2010 2011 746 631 13.9% 460 9.1% 10.3% 12.7% 904
1,140
25.0% 20.0% 15.0%
Investments increased from DKK 339 million in 2011 to DKK 594 million in 2012. The investments were primarily made in land, buildings and machinery. By the end of 2012, ECCO Skos equity was DKK 3,122 million, equivalent to a solidity of 55.0%.
14.1% 10.0% 5.0% 0.0% 2012
Profit before tax (PBT)
PBT%
10 ECCO Annual Report 2012
Net working capital and ratio to net sales 2008-2012
3,000 2,500 2,000 1,500 1,000 500 2008 2009 2010 2011 2012 36% 1,936 2,123 1,568 31% 1,818 2,395
40% 38% 36% 34% 32% 30% 30% 30% 30% 28% 26% 24% 22% 20%
million DKK
Net Working Capital (NWC)
NWC%
Total investments 2008-2012

700 600 500
million DKK
594 483
400 300 223 200 100 0 2008 2009 2010
339 237
2011
2012
Equity development and solidity 2008-2012

3,500 3,000 2,500
million DKK
60% 58% 2,473 2,432 2,587 57% 2,931 3,122 58%
2,000 1,500 1,000
56%
56%
56% 55% 54%
52% 500 0 2008 2009 2010 2011 2012 50%
ECCO in 2012 established a new organisation that allows for faster decision-making, more efficiency and increased consumer orientation as tasks are delegated as close to the market as possible such as in its 1,095 ECCO branded stores.
Equity
Solidity
ECCO Annual Report 2012 11
ECCOs starting point is that everything begins with the foot. In 2012 the development of ECCOs collection continued with a main focus on incorporating the BIOM natural motion concept into the entire Performance collection.
DESIGN AND PRODUCTS

Everything begins with the foot All ECCO shoes are designed at the ECCO Design Centre in Denmark, and they have all been made with one common starting point in mind the foot! ECCO shoes are designed not only to look attractive but also to be comfortable and feel good. This is the challenge both designers and the Research & Development team face every time a new ECCO shoe is being created. Throughout the design process, considerations are made on how to combine great look with functionality and comfort. Designing an attractive ECCO shoe and ensuring great fit always go hand in hand. ECCOs design philosophy builds on the tradition and heritage of Scandinavian design where simplicity, functionality and quality are combined into unique products. Each ECCO shoe brings together the long tradition and heritage of Scandinavian design with a stylish and modern design approach combined with innovative shoemaking. The ECCO R&D team builds on years of shoemaking experience and combines this knowledge with the possibilities offered by ECCOs technology. The competences within direct injection shoemaking are continuously developed. In 2012 the initial steps were taken to reorganise the R&D area. The R&D teams in Denmark and Portugal will eventually be merged to create one integrated development flow, from the first commercial briefing to the designers, and continuing right through to the smooth handover to production. This new structure in R&D will create an even stronger and more efficient development flow, yet will still be flexible and capable of responding rapidly to new ideas from the design team. Ladies Having a strong focus on attracting new consumers to the ECCO brand, the Ladies Modern Casual segment has increased over the last seasons and is now the biggest category. One of the best performing products in 2012 was ECCO Spin, a casual but sports inspired lifestyle product in vibrant colour combinations. New innovations within ECCOs unique direct injection technology have resulted in new designs that were previously not possible to produce. It all began in 2011 when the first Sculptured shoe was launched. This was the starting point of one of the most successful categories within ECCO. The Sculptured family grew fast and now includes Sculptured, Sculptured 65, Sculptured Sign and Sculptured 65 Sandal. The newest development is the Sculptured 75, which demonstrates that ECCO has been able to develop high heeled ladies shoes without compromising on comfort and look. The SMILE campaign behind the Sculptured 65 product was ECCOs first product focused campaign approach for years and was globally aligned and strongly executed. In Australia, ECCOs 2.8 km catwalk was pronounced a world record and earned a Guinness World Records book entry. All in all, the SMILE campaign caught much media attention around the world. Mens ECCO Mens continues to be a strong and solid pillar within the ECCO portfolio. Focus in 2012 was to further build on ECCOs strong foundation within the Mens Formal category. Products like Helsinki, Birmingham and Biarritz dominated sales. New products in the Casual category were launched to rejuvenate the collection and to attract new consumers. For some years, the sneakers area has been a major trend in the market and the development of ECCO Androw is a great example of ECCOs interpretation. Kids The strategy of Kids was re-focused with a clearer selection of attractive markets. The Kids Casual collection is a strong pillar within the Kids area, dominated by seasonal products such as Urban Safari sandals and winter boots with Gore-Tex. However, the launch and expansion of the BIOM concept with its natural motion philosophy is very successful and will be expanded further.
ECCO Golf Street, Spring & Summer 2012
Performance In 2012 products such as ECCO Offroad, BIOM Lite Ladies and BIOM Grip Mens were bestsellers. The development of the collection continued with the main focus on incorporating the BIOM natural motion concept into the entire Performance collection. The Performance area is special in relation to the other product divisions because part of the collection is only distributed through sports distribution channels. A true highlight of 2012 was when the Scandinavian Outdoor Group voted BIOM Hike as the best hiking boot of the year. Another success is the ECCO BIOM Trail. The product won the test of the Danish Lbemagasinet (running magazine), winning over 28 other trail shoes. Golf ECCO Golf continues to stand out as one of best performing areas in ECCO, and in 2012 ECCO became the worlds fourth biggest golf footwear brand. The Golf division maintained its leadership in the hybrid category, with the Golf Street being the No. 1 product. The biggest news in 2012 was the launch of the BIOM Hybrid, which marries the best of the Golf Street with the BIOM philosophy.
Awards At Europes largest consumer golf show Rhein Golf Show in Cologne, Germany the Golf Street was honoured as the most innovative product. In November at the Pro Shop Europe Awards, ECCO BIOM Hybrid was also voted as the Product of the Year. Accessories In 2012 ECCO launched a new strategy for Accessories, utilising its Scandinavian design capabilities with leather expertise to create a new line of leather goods. The ECCO Natal a soft, slouchy sac bag best showcases the new direction, which will be followed up with a recognisable line of leather goods in 2013. The strongest leather style for ECCO continues to be the business bag which appeals to ECCO consumers around the world.
ECCO Sculptured 65, Autumn & Winter 2012
ECCO Bradley, Autumn & Winter 2012
ECCO Spin, Spring & Summer 2012
ECCO Androw, Spring & Summer 2012
ECCO Snowrush, Autumn & Winter 2012
ECCO Natal, Spring & Summer 2012
ECCO Biarritz, Autumn & Winter 2012
ECCO BIOM Hike, Autumn & Winter 2012
ECCO BIOM Lite, Spring & Summer 2012
In 2012 all production and sourcing activities were brought together in a single coherent production unit with an aim to ensure full alignment within the production of leather and of shoes. ECCO in Indonesia encompass a tannery and a shoe factory with over 7,000 employees, making this ECCOs largest facility.
PRODUCTION AND SOURCING

Unique within the shoe industry, ECCO continues to control and own its value chain, including its own tanneries and shoe factories. ECCOs current production footprint encompasses four tanneries located in the Netherlands, Thailand, China and Indonesia, and five shoe factories in Slovakia, Portugal, Thailand, China and Indonesia. Furthermore, ECCO has a global sourcing organisation located in China. In July 2012 all production and sourcing activities were brought together in a single organisation in order to establish one flow for shoe production and sourcing, and to ensure best practice sharing and synergies across the shoe production organisations. Shoe production The first part of 2012 was impacted by the recovery efforts following the October 2011 flooding in Thailand. One third of ECCOs total production for the Spring/ Summer 2012 season was reallocated from Thailand to other ECCO production units and external suppliers. This included restarting production in ECCOs factory in Portugal. In Indonesia the production of uppers was increased in the newly built Factory 3. Overall despite the recovery challenges the global production output was in line with expectations and the production was fully restored by the second half of the year. Capacity included the start-up of temporary production in rented facilities in Lopburi in Thailand. Production was restarted already in March 2012, and by May 2012, ECCO was producing more than half its normal output in Thailand. In a remarkable effort, ECCO production staff from Ayutthaya travelled four hours by bus every day throughout the year to Lopburi to operate the temporary factory. Renovation of the tannery in Indonesia ECCOs tannery in Indonesia was completely rebuilt in 2012. A substantial number of the tannery machines were replaced, with new drying units, new piping, electricity and water preparation, as well as new offices. The lay-out was designed to create more efficient production flow. Various other improvements, such as roof insulation and roof windows, were installed to improve the general working environment.
THE NETHERLANDS SLOVAKIA
PORTUGAL
SHOE PRODUCTION
CHINA (XIAMEN)
LEATHER PRODUCTION
THAILAND
INDONESIA
ECCOs current production footprint encompasses four tanneries and five shoe factories across Europe and Asia. It is unique to the shoe industry that ECCO controls and owns most of its value chain, including its own tanneries and shoe factories. This gives ECCO a firm grip on production, and product quality and cost.
New finishing plant in the Netherlands ECCO Leather Groups external sales increased by 29% in 2012, and the group achieved a strong supplier position in the premium leather goods industry. To further improve the service levels to this important customer group, ECCO Leather in 2012 decided to build a new finishing plant in the Netherlands next to the ECCO Leather headquarters in Dongen. The facility will start production in the autumn of 2013. Leather & shoemaking academies In 2012 ECCO established educational facilities so that it could offer its young leather and shoe specialists in-depth management training. ECCO Leather Academy and ECCO Shoe Making Academy started in January 2012, training 20 young ECCO employees. The ECCO Leather Academy cooperates with external universities, and most of the 12 participants already had a graduate background. The one year intensive training covers both scientific and managerial subjects. All 12 participants have now returned to
their factories in managerial roles. A new group of 12 started courses early in 2013. The ECCO Shoe Making Academy runs a two year sandwich course, with a greater emphasis on practical training, and the eight 2012 participants will graduate at the end of 2013. A new intake of 10 employees began their training early in 2013. ECCO realises that to retain staff it is necessary to offer this advanced, highly focused education, and ECCO expects to be able to develop most of its future managers internally, via its academies.
MARKET DEVELOPMENT
During 2012 ECCO initiated a reorganisation of its global sales activities to manage its three sales regions Americas, Asia Pacific and Europe, Middle East & Africa in a new unified Global Sales organisation. The new Global Sales organisation has been set up to secure current market development within the different distribution channels; wholesale, retail, e-commerce, m-commerce and outlets. Overall, the ambition is to increase ECCOs branded retail space so that it is in line with ECCOs brand aspirations, ensuring that consumers will have an attractive shopping experience at every touch point they have with the ECCO brand. These three regions cover a total of 91 markets in which ECCO products are sold today. At year-end consumers were able to purchase ECCO products in a total of 1,095 ECCO branded stores, of which ECCO Sko A/S owns and operates 181, and its sister company KRM a further 123 stores. The remaining 791 branded stores are partner-operated stores. Furthermore, ECCO products are sold from more than 14,000 other selling points across the world, including shopin-shops, shop points and multi-brand wholesale locations.
ECCOs EMEA region comprises Eastern and Western Europe, Russia, the Middle East and Africa. The region is ECCOs largest and accounts for 57% of ECCOs global sales. Revenue development by region 2008-2012
9,000 8,000 7,000
million DKK
1,460 1,210 1,020 606 3,503 1,139 929 715 3,202 1,009 3,632 1,367 1,851
6,000 5,000 4,000 3,000 2,000 1,000 -
4,178
4,324
Europe
Asia Pacific
Americas
ECCO in 2012 covered a total of 91 markets via 1,095 ECCO branded stores and more than 14,000 other selling In 2012 ECCO covered a total of 91 markets via 1,095 ECCO branded stores and than 14,000 other selling points across the world. ECCOs Ocean Terminal Store in Hong Kong is one of more ECCOs best performing stores. points across the world. ECCOs Ocean Terminal Store in Hong Kong is one of ECCOs best performing stores.
EMEA 2012 has been a good year within the EMEA region. A total of 100 new ECCO stores were opened in 2012. ECCOs store and shop-in-shop concepts have worked well and their expansion has been extended in the plans for 2013. ECCOs focus on leading market developments within e-commerce has made very positive progress in 2012. The result has been significant net sales growth, and expansion into a total of 12 markets via an e-commerce set-up. ECCOs product ranges again proved commercially viable with good sell-through figures. ECCO received several awards, particularly within the Golf and Performance ranges.
Net revenue in EMEA 2008-2012
5,000 4,500 4,000 3,500
million DKK
Asia Pacific ECCOs Asia Pacific region comprises all of Asia, Australia and New Zealand, and accounts for 24% of ECCOs total sales.
4,178 3,503 3,632 3,202
4,324
3,000 2,500 2,000 1,500 1,000 500 0 2008 2009 2010 2011 2012
ECCOs Asia Pacific region comprises all of Asia, Australia and New Zealand, and accounts for 24% of ECCOs global sales.
ECCO in 2012 established a unified Global Sales organisation to secure the current market development within the different distribution channels: wholesale, retail, e-commerce, m-commerce and outlet.
Net revenue in Asia Pacific 2008-2012

2,000 1,800 1,600 1,400
million DKK
Net revenue in Americas 2008-2012

1,851 1,600 1,400 1,210 1,460 1,139 1,020 929
1,367
million DKK
1,200 1,000 800 600 400 200 0
1,200 1,000 800 600 400 200 0 2008 2009 606 715
1,009
2010
2011
2012
2008
2009
2010
2011
2012
By the end of 2012 ECCO, in this region, had a total of 147 ECCO branded stores, of which 68 were owned and operated by ECCO. Additional to this, ECCO products were sold from close to 800 shop-in-shops and 1,200 other selling points. ECCO enjoys a strong market position and good brand recognition in several key Asian markets, most importantly in China, which is now ECCOs second largest market in size. Expansion into new markets In December 2012 ECCO entered the South Korean market in a joint venture with a local distribution partner. South Korea is a promising market with 50 million inhabitants with strong purchasing power and a climate well suited for ECCOs range of products. In Indonesia, ECCO has had a production facility since 1991, but no sales activities. In December 2012 retail activities began via a local distributor. Indonesia is a high growth market with a population of 240 million people. North America ECCOs Americas region is ECCOs smallest, but the USA remains ECCOs single largest market, with continued significant growth opportunities.
By the end of 2012, ECCO Americas had a total of 87 ECCO branded stores, of which 72 were owned and operated by ECCO and the remainder were run by partners.
ECCOs Americas region encompasses Canada and the USA, and accounts for 19% of ECCOs global sales.
Gaining market share ECCO realised double digit sales growth in the USA, which reflected increased market share in important product categories. In Canada, the market position was maintained. A continued controlled expansion in retail was pursued in specific geographical clusters.
Employees and knowledge resources

ECCO people ECCO is a multicultural company with 19,500 employees and operating in 91 countries. ECCO recognises the importance of investing in people, as it is the employees of ECCO who drive the company forward. Attract and retain ECCO is determined to attract and retain the best people for our global community. ECCO offers employees lifelong training, new challenges and mobility in ECCOs businesses around the globe. In 2012, ECCO University was established to provide a range of global and local courses within the areas of Finance, Project Management, Business Administration, and Strategic Leadership. Promoting from within ECCO has a policy to promote from within the Group, whenever possible. Many of ECCOs current leaders including senior management began their careers as young trainees with ECCO. Trainee programmes and talent management One recurring initiative is that, every year, ECCO offers talented young individuals the opportunity to be a part of one of three ECCO Trainee programmes. The duration of these programmes is either two or three years long, and they are supported with individual career plans. Another initiative is ECCOs Talent Management programme. During 2012 a number of talented ECCO employees were invited to attend this two-year sandwich course to ensure a strong pipeline of talents and future leaders for ECCO. The above 2012 initiatives help ECCO to attract, retain, and develop competent people enabling ECCO to compete in the global market.
ECCO has a policy wherever possible to promote from within the Group. Today, many ECCO leaders including senior management started their careers as young trainees with ECCO. In 2012 ECCO established educational facilities to be able to offer its young leather and shoe specialists an in-depth management training.
Composition of employees by geography 2008-2012
Composition of employees by function (end of year 2012 in %)
9.3%
19,759 16,328 15,000 14,781 17,537 19,426
2.9%
5.8%
20,000
HQ 2.9% Leather 5.8% Production 81.9%
10,000
Sales 9.3%
5,000
81.9%
0 2008 2009 2010 2011 2012
Europe
Asia Pacific
Americas
HQ
Leather
Production
Sales
Risk factors and risk management

FINANCIAL RISKS Due to the international scope of ECCOs business activities, the Groups results and its equity are affected by several financial factors, which the Group monitors and manages continuously. 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 requires hedging. The overall policy defines that all significant currency exposures are hedged when the exposure arises, with a hedging horizon of 13 to 27 months, corresponding to the Groups business model. With a few exceptions, the currency used in transactions between the parent company and a sales subsidiary is the local currency of the sales subsidiary, thereby placing the foreign exchange risk with the parent company, which sets up a corresponding hedge. The currency used in transactions with external distributors is DKK, EUR or USD. ECCOs own production units are paid in EUR and external suppliers are primarily paid in EUR or USD. The production units thus bear the risk relating to the currency exposure in currencies other than the local currency. Such positions are hedged locally to the extent permitted by local foreign exchange regulations. Interest rate risks The Groups interest rate risks relate to fluctuations in interest rates on the Groups net interest-bearing debt. Interest rate risk is reduced by taking up fixed-interest loans or by entering into interest rate swaps. At yearend 2012 the Group had DKK 602 million of fixed rate debt (including floating rate debt swapped into fixed rate debt), representing 87% of the Groups long-term debt and 61% of the Groups total interest bearing debt. Credit risks The Group has no material credit risks other than what has been recognised in the financial statements. Liquidity risk It is the responsibility of the Groups treasury function to ensure that the Group has adequate access to funding at all times. The increase in the Groups aggregate credit facilities has led to an improvement in the Groups un-utilised credit facilities and the Group holds sufficient facilities to cater for the seasonal fluctuations. Material events after 31 December 2012 The management is of the opinion that no material events have occurred after the end of the accounting year that could significantly impact the Groups financial status. OPERATIONAL RISKS Goals The aim of ECCOs work with enterprise risk management is to maintain a structure and environment for managing risks according to organisational requirements, and in response to relevant changes in ECCOs business environment. It is a key element in this work to constantly raise awareness in the organisation of the need for risk management and for this to be considered in all decision-making, as well as to facilitate continued improvement of risk management practices throughout the organisation. Organisation ECCOs enterprise risk management defines that the Supervisory Board is ultimately accountable for risk management and for providing assurance to stakeholders that key risks are properly managed. ECCOs Managing Board is accountable for the oversight and strategic management of risks under their control. Together they determine ECCOs strategic approach to risk. Current and potential risks are prioritised and ECCOs enterprise risk list is defined based on the likelihood of an event happening that may have an impact on business objectives. Improvement in 2012 During 2012 ECCOs major operational risks were defined and assessed, and an enterprise risk management framework was implemented. Risk reports and action plans were developed, along with a roll-out of risk mitigation tools.
ECCOs direct injection technology is essential to the company. Machines are located at all its five shoe factories here in Indonesia. This helped ECCO recover quickly from the flooding of ECCOs factory in Thailand in 2011.
Corporate responsibility
The ECCO Code of Conduct outlines the core principles that govern how ECCO conducts its business. The Code applies to all employees, suppliers and business partners worldwide. It is built on a foundation of respect for people, the environment and society. It sets out clear principles and high ethical and legal standards in the areas of human rights, education, health and safety, and the environment. People ECCO believes in treating others with dignity and care, and the health, safety and well-being of employees is a primary concern. Society ECCO operates in very diverse communities, with different cultures, religions, languages and traditions. ECCO always wishes to be a good citizen, wherever we work. For example ECCO in Xiamen, China has worked closely with authorities to help local people with handicaps get jobs with ECCO. In 2012 this effort was honoured when ECCO in Xiamen, received Chinas National Advanced Enterprise for Employment award from the State Council, the highest employer award ever granted at a national level. The State Council honoured ECCO for making an outstanding contribution to creating employment positions for physically-challenged employees, serving as a role model and enjoying a positive social reputation. ECCO was also commended for contributing to the local community. Particularly notable was the fact that 73% of ECCOs 3,300 Xiamen employees reside in the local area, which is an unusually high proportion for labour-intensive companies in China. ECCO also seeks to cooperate with its local societies in other ways. ECCOs tannery in the city of Dongen, in the Netherlands, partnered with local government, schools, and artists to carry out a unique project, Courageous Leather, designed to highlight the historical roots of the industry. Professional artists and over 300 children from various local primary schools visited ECCOs tannery to gain inspiration and knowledge of the leather-making process. Leather was provided by ECCO to all participants. The children then embarked on an artistic journey lasting
The health, safety and well-being of employees continue to be primary concerns. ECCO does business fairly and creates an environment of cooperation and inclusion in the workplace.
several months, culminating in a presentation of musical performances, drawings and paintings in the tannery production hall for over 1,000 members of the local community. GOOD GOVERNANCE From paper to practice Every day the ECCO Code of Conduct and related policies are transformed from paper to practice. ECCO has an internal Code of Conduct audit team of 25 employees who part-time conduct audits at ECCOs own tanneries and shoe factories, and at external suppliers. Our internal audit team is reinforced with external professional organisations such as the Leather Working Group (LWG). Key areas assessed by the rigorous Leather Working Group protocol include environmental management systems, water usage, energy consumption, air emissions, effluent treatment and waste management. Other external auditors concentrate on issues related to working conditions, such as health and safety, working hours and salaries.
If an audit reveals inadequate performance, ECCO works with the supplier to ensure that the necessary improvements are made. ECCO will discontinue a relationship if the supplier is not willing to collaborate on the measures requested. In 2012, 80 audits were conducted and five supplier contracts were terminated.
ENVIRONMENT As a global manufacturer of leather and shoes, we consume natural resources every day. As we continue to increase production, we implement environmentally sound methods and technology. Turning waste into energy After investing in a highly advanced wastewater facility for leather production in 2011, ECCO Tannery Holland and its partner company Waterstromen, commissioned a new facility for the generation of renewable energy. Consequently, in early 2012 a large biomass digester, which turns organic waste into usable fuel, was put into operation. This biogas digester provides a source of renewable fuel and also helps to dispose of waste materials by converting waste from both the leather-making processes, and the wastewater treatment plant, into biogas. The majority of this biogas is used to produce energy which is used to run production processes that previously depended on non-renewable fossil fuels. The remaining biogas is used to heat installations. Starting in 2013, all excess organic material from the hides will be converted into biogas, but in the meantime any residual waste produced by the new digester is delivered and fed as a fuel into a power plant to generate electricity with reduced environmental impact. This project enables ECCO Tannery Holland to reduce waste and to substitute virtually all of its consumption of non-renewable natural gas with renewable biogas. The aim is to use more than 40% of the total tannery waste and replace up to 60% of the total natural gas consumption with biogas. One step at a time ECCOs water management follows the policy of reduce, reuse and recycle. In addition to wastewater treatment, ECCO has worked to improve water efficiency by applying best practice technologies and implementing effective water management techniques. Many efforts during the year targeted process management, increasing the number of possibilities to carefully monitor and measure consumption at every step and station of production.
ECCO in Thailand is implementing a solar installation for water heating to reduce LPG consumption in the tannery. Planned in 2012, a 1,537 m2 solar thermal system will in 2013 go into production with a capacity to heat up water of 78 m3 per day. Currently, the installation is commissioned to be the biggest solar project in Thailand.
Primary focus areas involved ECCOs tanneries:

16.00
14.06
Increased energy efficiency
Energy (MJ per pair)
At ECCOs tannery in Indonesia automated dosing was installed to reduce water used in recipes. At the tannery in Xiamen, China, a recovery system was established so that the hide draining process could recycle 80% of the water used. The Xiamen tannery also established a system to recycle water used in the wastewater treatment plant, saving an average of 290 tons of water per week. At the tannery in the Netherlands, new work processes were introduced to reduce the use of water in cleaning processes. Throughout all ECCOs tanneries, additional flow meters were installed in order to track process requirements.
14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2009
12.68 11.19 11.08
2010
2011
2012
Slight increase in waste

0.38
0.37
Waste (kg per pair)
These process integrated measures have led to a significant reduction of water consumption and a significant reduction of waste. ECCO in Thailand is implementing a solar installation for water heating to reduce LPG (liquefied petroleum gas) consumption in the tannery. Planned in 2012, the 1,537 m2 solar thermal system will come into operation in 2013, with a capacity to heat up 78 m3 of water per day. The installation, when commissioned, will be the biggest solar water heating installation in Thailand. MEASURING PERFORMANCE - Shoe Production Energy consumption, measured in megajoules per pair, has dropped 21% since 2009, with a decline of 1% per pair of shoes in 2012. This continual reduction has been achieved through successful energy efficiency projects and increased use of renewable energy sources. The amount of waste per pair of shoes rose by 1% in 2012. Heavier shoe materials coupled with sudden relocations to other facilities after the Thailand flooding in 2011 account for this increase. ECCO has made significant gains in recycling rates, showing an increase of 34% since 2009. Overall performance in 2012 improved by 4%. Production in Portugal led the way by recycling 64% of its total waste.
0.37
0.36 0.36
0.36 0.35 0.34 0.33 0.32 0.31 0.30 0.29 2009 2010 2011 2012
0.32
Increase in recycled waste

0.18
0.16
0.16
0.14
0.15
Recycled waste (kg per pair)
0.14
0.12
0.12 0.10 0.08 0.06 0.04 0.02 0.00 2009 2010 2011 2012
Energy (MJ per sq ft)
MEASURING PERFORMANCE - Leather production Energy consumption in our tanneries, measured in megajoules per square foot of leather, was seemingly higher in 2012 than in 2011. However, due to a fundamental change in production processes these figures are not directly comparable. The processing of raw hides reached record highs in 2011 partly replacing processing of finished leathers. This type of processing requires less energy, which strongly impacted overall energy consumption. During 2012, the beam house in Indonesia was closed due to renovation. This closure created a major shift in production among ECCOs four tanneries, increasing the processing of wet blue to finished leather, which consumes twice the energy as the processing of raw hides.
Tannery energy consumption

2.80 2.70 2.60 2.50 2.40 2.30 2.20 2.10 2009 2010 2011 2012
2.34 2.69 2.67 2.63
Decline in tannery waste
The amount of waste generated per square foot showed a sharp decrease of 29% from 2011 to 2012.
Waste (gram per sq ft)
350 300 250 200 150 100 50 0 2009 2010 2011 2012
285 285 295
209
This substantial reduction of waste in 2012 can be attributed to the decrease in the production of raw hides to wet blue. Another major contributor was a highly advanced wastewater treatment plant and biogas system in the Netherlands, which became fully operational in 2012. The 2012 waste and recycled waste figures thus represent a transitional phase in which ECCO will be working to make the processing metrics more compatible and transparent. The change in the types of products processed by the tanneries also impacted the volumes of recycled waste, which showed a decrease of 34%. Recycled waste per square foot decreased proportionally with the amount of waste generated in 2012. The amount of wastewater per square foot decreased by 9% compared to 2011. This decrease is linked to water consumption. The sharp increase in the production of wet blue to finished leather in 2012 required considerably less water, thus reducing the overall amount of wastewater. Water consumption has shown a steady decrease over the past four years, a drop of 16% since 2009. The decrease in water consumption of 2% from 2011 to 2012 was due to the change in production patterns.
Recycled waste in tanneries

0.16
Recycled waste (kg per sq ft)
0.15 0.15 0.14
0.14 0.12
0.10
0.10 0.08 0.06 0.04 0.02 0.00 2009 2010 2011 2012
Decrease in wastewater
0.0120
Wastewater (m3 per sq ft)
0.0100 0.0080 0.0060 0.0040 0.0020 0.0000
0.0097
0.0097 0.0088 0.0080
2009
2010
2011
2012
Continued decrease in water consumption

0.0108
0.0110
Water (m3 per sq ft)
0.0105 0.0100 0.0095 0.0090 0.0085 0.0080 2009
0.0100
0.0093
0.0091
2010
2011
2012
At ECCOs tannery in Dongen, the Netherlands, new work processes was introduced to reduce the use of water in cleaning processes.
STATEMENT BY THE MANAGEMENT

The Supervisory Board and Managing Board of ECCO Sko A/S have today considered and adopted the Annual Report for 2012. 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 Groups and the Parent Companys assets, liabilities and financial position as of 31 December 2012 and of the results of the Groups and the Parent Companys operations and the consolidated cash flows for the financial year ended 31 December 2012. 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 shareholders at the Annual General Meeting. Bredebro, 28 February 2013
MANAGEMENT
Managing board
Dieter Kasprzak
President & Chief Executive Officer
Michael Hauge Srensen

Chief Operating Officer
Steen Borgholm
Executive Vice President, Finance and Group CFO
Andreas Wortmann
Executive Vice President, Brand and Products
Michel Krol
Executive Vice President, Global Sales
Panos Mytaros
Executive Vice President, Global Production
Supervisory board
Hanni Toosbuy Kasprzak

Chairman
Karsten Borch
Vice Chairman
Dieter Kasprzak
Member of ECCO Supervisory Board
Gerd Rahbek-Clemmensen
Mogens Munk-Rasmussen
Gitte Jochimsen
Employee Representative
Kjeld Mortensen
Employee Representative
Independent auditors report

To the shareholders of ECCO Sko A/S Independent auditors report on the consolidated financial statements and the parent company financial statements We have audited the consolidated financial statements and the parent company financial statements of ECCO Sko A/S for the financial year 1 January 31 December 2012. The consolidated financial statements and the parent company financial statements comprise accounting policies, income statement, balance sheet, statement of changes in equity and notes for the Group as well as for the parent company and consolidated cash flow statement. The consolidated financial statements and the parent company financial statements are prepared in accordance with the Danish Financial Statements Act. Managements responsibility for the consolidated financial statements and the parent company financial statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with the Danish Financial Statements Act and for such internal control that Management determines is necessary to enable the preparation of consolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on the consolidated financial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the parent company financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the
parent company financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Companys preparation of consolidated financial statements and parent company financial statements that give a true and fair view 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 Companys 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 consolidated financial statements and the parent company financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit has not resulted in any qualification.
Opinion In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Groups and the parent companys financial position at 31 December 2012 and of the results of the Groups and the parent companys operations and consolidated cash flows for the financial year 1 January 31 December 2012 in accordance with the Danish Financial Statements Act. Statement on the Managements review Pursuant to the Danish Financial Statements Act, we have read the Managements review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information provided in the Managements review is consistent with the consolidated financial statements and the parent company financial statements.
Esbjerg, 28 February 2013 John Lesbo

State Authorised Public Accountant
Sren Jensen KPMG Statsautoriseret Revisionspartnerselskab

State Authorised Public Accountant
Accounting policies
Basis of preparation The financial statements of the Parent Company and the Group for 2012 are presented in accordance with the provisions of the Danish Financial Statements Act applicable to class C companies. Basis of consolidation The consolidated financial statements comprise ECCO Sko A/S and subsidiaries in which ECCO Sko A/S has a controlling influence on the companys operations. The consolidated financial statements are prepared 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, intercompany accounts and gains on intercompany sales and purchases between the consolidated companies are eliminated. On acquisition of subsidiaries, the share of the acquired companys net asset value is determined based on the Groups 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 differences arising on the translation of the opening equity of foreign subsidiaries at the exchange rates ruling on 31 December, and differences 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 subsidiaries, 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 undertakings is stated separately. Income statement Net revenue: Sales are recognised on dispatch of products, when the risk has been passed to the customer. 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 consumables used for in-house production. Cost also includes consumption of commercial products. Other external costs: Other external costs comprise costs relating to the companys primary, ordinary activity, including lasts, cutting dies, maintenance, rent of plant, premises, office expenses, sales promotion expenses, fees, etc. Staff costs: Staff costs comprise remuneration to employees, including pension and social security costs. Profit from subsidiaries: Profit from subsidiaries comprise the proportionate share of profit after tax. Unrealised intercompany profits: Unrealised intercompany profits comprise profits unrealised in the Group on trading in products between consolidated companies. Income taxes: Estimated tax on the profit for the year is recognised in the income statement along with the years change in deferred tax. ECCO Sko A/S and the Danish subsidiaries are encompassed by the Danish regulations regarding mandatory 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 administrative company in the joint taxation and settles al 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 according 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 is part of the income statement 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 regulations 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 con-tribution to the administrative company. Deferred tax is calculated as the difference between the carrying 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 accumulated 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 write-downs 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 patents/trademarks are recognised in the income statement when incurred.
Goodwill on consolidation: Goodwill on consolidation is determined at the date of acquisition as the difference between the cost and the net asset value of the acquired company applying the Groups accounting policies. Consolidated goodwill 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 shares are acquired at a price higher than the value determined 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 less accumulated 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 20-30 years - Plant and machinery, vehicles, fixtures and fittings 5-10 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 re-valued, 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 Groups accounting policies, less unrealised intercompany profits. 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 proposed in respect of the
Accounting policies
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 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 re-measured 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 statement 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. 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 Groups 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.
annual ACCOUNTS 2012
Income statement 2012

Group Note DKK 000 2012 2011 Parent Company 2012 2011
1 Net revenue 8,061,236 7,088,826 5,085,385 4,404,835 Change in inventories of finished products and work in progress 210,371 138,515 94,618 135,177 Costs of raw materials and consumables (3,541,872) (2,937,517) (4,048,477) (3,550,029) Other external costs (1,508,449) (1,446,555) (271,624) (268,261) 2 Staff costs (1,708,905) (1,566,663) (352,180) (338,786) 5.6 Amortisation and depreciation (306,429) (329,871) (70,334) (80,240) Profit before financials 1,205,952 946,735 437,388 302,696 3 Financial income 257,573 158,180 269,256 126,496 Financial expenses (323,656) (201,124) (265,701) (125,542) Profit from subsidiaries - - 370,935 323,787 Intercompany profit - - (18,119) 3,876 Profit before tax 1,139,869 903,791 793,759 631,313 Income taxes (320,843) (250,601) (110,087) (76,678) 4 Group profit 819,026 653,190 683,672 554,635 Minority interests (135,354) (98,555) - 11 Profit for the year 683,672 554,635 683,672 554,635
Proposed allocation: Revaluation reserve for undistributed profit in subsidiaries 122,967 55,263 Retained earnings 274,705 141,372 Proposed dividend 286,000 358,000 683,672 554,635
Balance sheet as of 31 December 2012

Group Assets Note DKK 000 FIXED ASSETS: Intangible rights 5 Total intangible assets Land and buildings Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress 6 Total property, plant and equipment 7.8 Investments in subsidiaries 8 Receivables from subsidiaries 9 Deferred tax Total long-term financial assets TOTAL FIXED ASSETS CURRENT ASSETS: Raw materials and consumables Work in progress Finished products and commercial products Total inventories Trade receivables Receivables from subsidiaries Receivables from affiliated companies Other receivables 4 Income taxes 13 Prepayments Total receivables Securities Cash TOTAL CURRENT ASSETS TOTAL ASSETS Parent Company
2012 2011 2012 2011
30,088 34,763 12,030 12,933 30,088 34,763 12,030 12,933 783,110 644,860 136,500 139,194 402,697 225,233 3,661 5,466 266,438 227,127 73,650 84,818 133,079 201,416 105,268 30,870 1,585,324 1,298,636 319,079 260,348
- - 1,533,851 1,428,646 - - 1,018,019 899,289 172,173 126,910 72,267 51,573 172,173 126,910 2,624,137 2,379,508
1,787,585 1,460,309 2,955,246 2,652,789
322,342 41,867 1,313,186
334,444 32,204 1,112,478
- - 573,901
479,283
1,677,395 1,479,126 573,901 479,283 1,121,800 1,087,214 252,728 226,108 - - 727,499 603,224 121,129 69,026 - 334,672 309,555 45,818 86,611 39,082 - 39,082 29,958 66,420 96,341 31,543 37,465 1,683,103 1,562,136 1,096,670 983,366 34,973 34,401 24 43 488,678 610,883 3,209 11,277 3,884,149 3,686,546 1,673,804 1,473,969 5,671,734 5,146,855 4,629,050 4,126,758
Balance sheet as of 31 December 2012

Group Parent Company
Equity and liabilities 2012 2011 2012 2011 Note DKK 000 Share capital 4,950 4,950 4,950 4,950 Revaluation reserve - - 1,059,685 1,041,685 Retained earnings 3,116,935 2,926,339 2,057,250 1,884,654 10 Total equity 3,121,885 2,931,289 3,121,885 2,931,289 11 Minority interests 200,427 208,681 Provisions 59,856 45,678 - - -
Credit institutions 693,240 514,510 665,629 475,314 12 Total long-term debt 693,240 514,510 665,629 475,314 Short-term part of long-term debt 59,861 75,629 59,861 75,629 Credit institutions 258,959 255,136 119,909 92,355 Trade payables 523,404 511,338 126,456 126,923 Payables to subsidiaries - - 291,786 240,411 Payables to affiliated companies 1,628 1,107 - 4 Income taxes 106,967 29,847 - Other payables 468,020 454,301 77,784 65,498 13 Deferred income 177,487 119,339 165,740 119,339 Total short-term debt 1,596,326 1,446,697 841,536 720,155
Total debt 2,289,566 1,961,207 1,507,165 1,195,469 TOTAL EQUITY AND LIABILITIES 5,671,734 5,146,855 4,629,050 4,126,758
14 Contingent liabilities and collateral security 15 Fees to auditors appointed at the Annual General Meeting 16 Information about shareholder conditions
Consolidated cash flow statement 2012

DKK 000 2012 2011
Cash flow from operating activities Profit before tax 1,139,869 903,791 Adjustment for non-cash operating items: Amortisation and depreciation 306,429 329,871 Exchange rate adjustments (141,198) 61,517 Tax adjustments 34,252 (3,599) Working capital adjustments: (198,269) (222,945) (Increase)/decrease in inventories (Increase)/decrease in receivables (81,885) (294,996) Increase/(decrease) in payables 12,587 95,151 Increase/(decrease) in other payables 71,866 77,548 Increase/(decrease) in provisions 14,178 18,842 Income taxes paid (362,320) (295,496) 795,509 669,684 Cash flow from investing activities Payments to invest in fixed assets: Intangible assets Tangible assets
(15,710) (22,575) (577,929) (316,021) (593,639) (338,596)
Cash flow from financing activities Minority interests (132,288) (49,116) (Repayment of)/proceeds from new long-term debt 178,730 51,367 Increase/(decrease) in short-term debt (11,945) (111,207) Dividend paid (358,000) (262,000) (323,503) (370,956) Cash flow from operating, investing and financing activities Cash and cash equivalents at beginning of year Cash and cash equivalents at year-end (121,633) (39,868) 645,284 685,152 523,651 645,284
Breakdown of cash and cash equivalents: Securities 34,973 34,401 Cash 488,678 610,883 523,651 645,284
Notes
1. Segment information
Group 2012 2011 DKK 000 Segment information Shoes & accessories 7,636,111 6,754,712 Others 425,125 334,114 Total net revenue 8,061,236 7,088,826 Net revenue shoes & accessories ECCO Europe, Middle East & Africa 4,324,499 4,178,048 ECCO Americas 1,460,136 1,210,084 ECCO Asia / Pacific 1,851,476 1,366,580 Total shoes & accessories 7,636,111 6,754,712
Reference is made to the ECCO Group structure page 52 regarding the definition of the geographic regions.
2. Staff costs and management and staff information

2012 2011 2012 2011 DKK 000 Salaries 1,515,869 1,385,894 331,924 319,568 Pensions 58,370 59,744 19,613 18,571 Other social security costs 134,666 121,025 643 647 Staff costs 1,708,905 1,566,663 352,180 338,786 Average number of employees Number of employees at year-end 19,551 19,426 18,763 19,759 562 570 554 566
Fees to Managing Board and Supervisory Board: Managing Board Supervisory Board
- -
- 68,833 70,060 - 700 700
Notes
3. Financial income
Parent Company 2012 2011 DKK 000 In the Parent Company, interest income from subsidiaries amounted to 29,579 23,156
4. Income taxes
Cost Debt Cost Debt 2012 2012 2012 2012 DKK 000 Income taxes payable as at 1 January - 29,847 - (29,958) Beginning of year adjustment - 45,523 - Income taxes payable as at 1 January, adjusted - 75,370 - (29,958) Income taxes paid in 2012 - (120,480) - (2,311) Prior-year adjustment 9,566 9,566 1,762 1,762 Estimated tax for 2012 357,722 357,722 129,019 129,019 Pre-paid tax - (241,840) - (127,807) Income taxes recorded directly at equity - (12,123) - (9,787) Years adjustment of deferred tax (46,445) - (20,694) Exchange rate adjustment - (330) - 320,843 67,885 110,087 (39,082)
5. Intangible assets
Group DKK 000 Cost at 1 January 143.629 50.226 Currency translations (990) Additions 22.487 12.964 Disposals (52.675) Cost at 31 December 112.451 63.190 Accumulated amortisation at 1 January 108.866 37.293 Currency translation (1.099) Amortisation 20.494 13.867 Amortisation on assets sold (45.898) Accumulated amortisation at 31 December Carrying amount at 31 December Amortised over 82.363 30.088 5-10 years 51.160 12.030 5-10 years Parent Company
Notes
6. Tangible Fixed Assets
Land and buildings Plant and machinery Fixtures and fittings, tools and equipment Property, plant and equipment in progress
DKK 000 GROUP Cost at 1 January 1,194,927 833,598 1,070,345 201,416 Currency translation (1,260) (15,206) (4,486) (3,976) Additions 274,825 268,087 187,980 (42,552) Disposals (95,017) (32,760) (103,818) (21,809) Cost at 31 December 1,373,475 1,053,719 1,150,021 133,079 -
Accumulated depreciation at 1 January 550,067 608,365 843,218 Currency translation 614 (14,874) (5,362) Depreciation 83,633 85,712 116,590 Depreciation on disposals (43,949) (28,181) (70,863) Accumulated depreciation at 31 December Carrying amount at 31 December 590,365 783,110 651,022 402,697 883,583 266,438
133,079
PARENT COMPANY Cost at 1 January 306,005 68,329 444,107 30,870 Additions 10,925 272 31,228 96,037 Disposals (218) (280) (12,393) (21,639) Cost at 31 December 316,712 68,321 462,942 105,268 -
Accumulated depreciation at 1 January 166,811 62,863 359,289 Depreciation 13,613 2,077 40,773 Depreciation on disposals (212) (280) (10,770) Accumulated depreciation at 31 December Carrying amount at 31 December Depreciated over 180,212 136,500 20-30 years 64,660 3,661 5-10 years 389,292 73,650 3-5 years
105,268 -
Notes
7. Investments in subsidiaries
Ownership interest SHOE PRODUCTION ECCO (Thailand) Co., Ltd. ECCO Slovakia, a.s. Eccolet (Portugal) Fbrica de Sapatos, Lda. P.T. ECCO Indonesia ECCO China Holding (Singapore) Pte. Ltd. ECCO (Xiamen) Co. Ltd. (China) ECCO (Dongguan) Business Consultancy Co. Ltd. (China) LEATHER Danna Leather (Xiamen) Co. Ltd. (China) ECCO Tannery Holding (Singapore) Pte. Ltd. ECCO Tannery (Xiamen) Co. Ltd. (China) ECCO Tannery (Thailand) Co. Ltd. ECCO Tannery (Holland) B.V. (the Netherlands) ECCO Leather B.V (the Netherlands) PT. ECCO Tannery Indonesia SALES ECCO Asia Pacific Limited (Hong Kong) ECCO Baltic SIA (Latvia) ECCO China Wholesale Holding (Singapore) Pte. Ltd. ECCO Distributors Ltd. (Ireland) ECCO EMEA Sales SE (the Netherlands) ECCO EMEA B.V. (the Netherlands) ECCO Exportadora Ltda (Brazil) (under liquidation) ECCO India Trading Private Limited ECCO Internet, Inc. (USA) ECCO Japan Co. Ltd. ECCO Korea Limited ECCO Macao Limited ECCO Middle East A/S (Denmark) ECCO Retail LLC (USA) ECCO Schuhe GmbH (Germany) ECCO Schuhe Schweiz GmbH (Switzerland) (under liquidation) ECCO (Shanghai) Co. Ltd. (China) ECCO Shoes (NZ) Limited (New Zealand) ECCO Shoes Canada, Inc. ECCO Shoes Hellas S.A. (Greece) (dormant) ECCO Shoes Hong Kong Ltd. ECCO Shoes International Ltd (Switzerland) ECCO Shoes Romania S.R.L. ECCO Shoes Pacific Pty. Ltd. (Australia) ECCO Singapore Pte. Ltd. ECCO USA, Inc. Eccolet Portugal ApS (Denmark) Share capital
95% 100% 100% 100% 80% 80% 80%
200,000 7,634 2,770 43,976,000 16,000 15,600 500
t. THB t. EUR t. EUR t. IDR t. USD t. USD t. USD
100% 100% 100% 100% 100% 100% 100%
2,175 13,300 17,000 185,000 1,000 400 37,403,550
t. USD t. EUR t. USD t. THB t. EUR t. EUR t. IDR
100% 50% 50% 50% 100% 100% 99% 100% 100% 98% 51% 100% 100% 100% 100% 100% 50% 100% 100% 51% 100% 100% 100% 100% 100% 100% 100%
21,500 2 200 1 121 23 48 66,830 100 100,000 200 25 2,250 2,300 1,790 170 2,100 100 6,502 60 3,000 2,250 0,25 3,250 2,510 7,500 200
t. HKD t. LVL t. USD t. EUR t. EUR t. EUR t. BRL t. INR t. USD t. JPY t. KRW t. MOP t. DKK t. USD t. EUR t. CHF t. USD t. NZD t. CAD t. EUR t. HKD t. CHF t. RON t. AUD t. SGD t. USD t. DKK
Notes
8. Financial fixed assets, subsidiaries
Investments in subsidiaries Receivables from subsidiaries
2012 2011 2012 2011 DKK 000 Cost at 1 January 671,819 670,736 899,289 480,284 Additions 122,798 1,083 545,763 722,748 Disposals (17,474) - (427,033) (303,743) Cost at 31 December 777,143 671,819 1,018,019 899,289 Accumulated revaluation at 1 January 1,041,685 923,924 - Currency adjustment of foreign subsidiaries (12,958) 9,122 - Adjustment of currency hedging of future sales in subsidiaries (92,009) 53,376 - Profit after tax of subsidiaries 370,935 323,787 - Dividend (247,968) (268,524) - Net revaluation 18,000 117,761 - Accumulated revaluation at 31 December 1,059,685 1,041,685 - Intercompany gains (302,977) (284,858) - Carrying amount at 31 December 1,533,851 1,428,646 1,018,019 899,289
9. Deferred tax
2012 2011 2012 2011 DKK 000 Deferred tax comprises: Inventories, unrealised intercompany gains 62,254 70,731 70,745 70,731 Other assets and tax deficit 109,919 56,179 1,522 (19,158) Recognised at 31 December 172,173 126,910 72,267 51,573 Recognised at 1 January (126,910) (129,395) (51,573) (55,787) Total adjustment 45,263 (2,485) 20,694 (4,214) Currency translation 1,182 - - Of which adjusted in equity (4,788) 3,599 (4,788) 3,599
Notes
10. Equity
Group DKK 000 The share capital consists of: 112 shares (in amounts from DKK 500 to DKK 1,658,200) Share capital at 1 January Decrease in share capital (cancellation of own shares) Total share capital at 31 December Reserve for net revaluation according to the equity method Reserve for net revaluation at 1 January Net revaluation Reserve for net revaluation at 31 December Brought forward from prior years Retained share capital Proposed dividend in respect of the financial year Dividend paid Exchange rate adjustment to year-end exchange rates Gain/(loss) on financial swaps Retained from profit for the year Adjustment of currency hedges of future sales Total retained earnings Total equity 2012 2011
Parent Company 2012 2011
4,950 - 4,950
5,500 (550) 4,950
4,950 - 4,950
5,500 (550) 4,950
- - - 2,926,339 - 286,000 (358,000) (12,958) (15,182) 397,672 (106,936) 3,116,935 3,121,885
- - - 2,581,461 550 358,000 (262,000) 9,122 (13,589) 196,635 56,160 2,926,339 2,931,289
1,041,685 18,000 1,059,685 1,884,654 - 286,000 (358,000) - (15,182) 274,705 (14,927) 2,057,250 3,121,885
923,924 117,761 1,041,685 1,657,537 550 358,000 (262,000) (13,589) 141,372 2,784 1,884,654 2,931,289
11. Minority interests

Group 2012 2011 DKK 000 Minority interests at 1 January 208,681 147,035 Additions 11,492 (6,858) Disposals (143,780) (42,258) Share of profit for the year 135,354 98,555 Exchange rate adjustments (11,320) 12,207 Minority interests at 31 December 200,427 208,681
Notes
12. Long-term debt
2012 2011 2012 2011 DKK 000 Long-term debt due more than five years after the end of the financial year
140,051
144,647
140,051
144,647
13. Prepayments
Prepayments consist of forward contracts etc.
14. Contingent liabilities and collateral security

2012 2011 2012 2011 DKK 000 CONTINGENT LIABILITIES Rent and lease liabilities Guarantees and letters to suppliers and subsidiaries
803,879 81,043
1,038,545 68,655
13,318 41,512
22,815 40,383
COLLATERAL SECURITY The following assets have been lodged in security of the Groups loans from credit institutions and other long-term debt: Bearer mortgages on property, plant and equipment 186,418 223,455 168,666 162,367 Guarantee for import duty 42,577 37,407 14,900 14,900
The company is taxed jointly with other Danish companies in the ECCO Group. As a wholly owned subsidiary the company is jointly and unlimited liable together with the other companies as regards joint taxation of Danish taxation at source on dividends, interests and royalties within the joint taxation group. Parent Company and Group are involved in litigation disputes which are not expected to have any material impact.
Notes
15. Fees to auditors appointed at the Annual General Meeting
2012 2011 2012 2011 DKK 000 Total fees to auditors appointed at the Annual General meeting: KPMG 12,449 9,801 2,503 1,983 Others 2,879 1,710 1,431 15,328 11,511 3,934 1,983 KPMG Auditors fee 7,701 6,194 1,147 1,023 Other assurance services and statements 249 533 - Tax consulting 4,125 2,603 1,166 548 Others 373 471 189 412 KPMG in total 12,448 9,801 2,502 1,983 Others Auditors fee 605 857 - Tax consulting 875 845 48 Others 1,400 8 1,384 Others in total 2,880 1,710 1,432
16. Information about shareholder conditions

The companys 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 of ECCO Sko A/S ECCO Sko A/S related parties with controlling influence comprise the companys 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 interest.
Group structure as of 31 December 2012

ECCO Sko A/S
Subsidiaries, sales
REGION EUROPE, MIDDLE EAST & AFRICA
REGION Americas
THE NETHERLANDS ECCO EMEA B.V. THE NETHERLANDS ECCO EMEA Sales SE
GERMANY ECCO Schuhe GmbH DENMARK ECCO Retail A/S
USA ECCO USA, Inc. USA ECCO Retail LLC U SA ECCO Internet, Inc. CANADA ECCO Shoes Canada, Inc.
AUSTRIA (branch) ECCO Austria, Zweigniederlassung ECCO EMEA Sales SE BELGIUM (branch) ECCO Belgum, branch van ECCO EMEA Sales SE CYPRUS (branch) ECCO Cyprus, ECCO EMEA Sales SE CZECH REPUBLIC (branch) ECCO EMEA Sales SE - organizan sloka DENMARK (branch) ECCO EMEA Sales Danmark, filial af ECCO EMEA Sales SE, Holland FINLAND (branch) ECCO Finland, filial till ECCO EMEA Sales SE FRANCE (branch) ECCO EMEA Sales SE HUNGARY (branch) ECCO EMEA Sales SE Hungarian Branch Office ITALY (branch) ECCO EMEA Sales SE - Italian branch
NORWAY (branch) ECCO Norway POLAND (branch) ECCO EMEA Sales SE Spka Europejska oddzia w Polsce PORTUGAL (branch) ECCO EMEA Sales SE Sucursal em Portugal SLOVAKIA (branch) ECCO EMEA Sales SE, organizan zloka SPAIN (branch) ECCO EMEA SALES SE, SUCURSAL EN ESPAA SWEDEN (branch) ECCO Sweden, filial till ECCO EMEA Sales SE (Nederlnderna) SWITZERLAND (branch) ECCO EMEA Sales SE, Amsterdam, Zweigniederlassung Schweiz, Hnenberg UK (branch) ECCO EMEA SALES SE
DENMARK ECCO Middle East A/S UNITED ARAB EMIRATES ECCO Middle East A/S (Branch) IRELAND (JV) ECCO Distributors Ltd. LATVIA (JV) ECCO Baltic SIA
Accessories: SWITZERLAND ECCO Shoes International AG
Subsidiaries, Production
REGION Asia/Pacific
ECCO SHOE factories
HONG KONG ECCO Asia Pacific Limited H ONG KONG ECCO Shoes Hong Kong Limited MACAO ECCO Macao Limited TAIWAN ESHK Ltd. Taiwan Branch
SLOVAKIA ECCO Slovakia, a.s. INDONESIA PT. ECCO Indonesia THAILAND ECCO (Thailand) Co., Ltd. SINGAPORE (JV) ECCO China Holding (Singapore) Pte. Ltd. CHINA ECCO (Xiamen) Co. Ltd. PORTUGAL (Product development) Eccolet (Portugal) Fbrica de Sapatos, Lda.
SINGAPORE ECCO Singapore Pte. Ltd. AUSTRALIA ECCO Shoes Pacific Pty. Ltd. NEW ZEALAND ECCO Shoes (NZ) Limited INDIA ECCO India Trading Private Limited SINGAPORE (JV) ECCO China Wholesale Holding (Singapore) Pte. Ltd. CHINA ECCO (Shanghai) Co., Ltd. JAPAN (JV) ECCO Japan Co., Ltd.
ECCO Leather
THE NETHERLANDS ECCO Leather B.V. T HE NETHERLANDS ECCO Tannery (Holland) B.V. INDONESIA PT. ECCO Tannery Indonesia HAILAND T ECCO Tannery (Thailand) Co., Ltd. INGAPORE S ECCO Tannery Holding (Singapore) Pte. Ltd. CHINA ECCO Tannery (Xiamen) Co. Ltd. C HINA Danna Leather (Xiamen) Co., Ltd.
Dormant companies have been left out
YEARS
ECCO was founded in 1963 by Birte and Karl Toosbuy. Today Hanni Toosbuy Kasprzak, their daughter, is the owner of the ECCO Group. ECCO has come a long way over the past 50 years - from a small shoe factory in Bredebro with just a few employees and a small production of womens shoes, to a modern, global shoe enterprise with 19,500 employees and sales of over 20 million pairs per year. 1960s The beginning in Bredebro Karl Toosbuy was trained as a shoemaker at Hertz shoe factory in Copenhagen where he mastered the craftsmanship of shoemaking. His was only 33 years
old when he became head of production at Nordsko shoe factory in Copenhagen. But, almost from the beginning of his career, Karl Toosbuy wanted to have his own factory. This was not just his dream it was his unwavering goal. And so he and his wife, Birte, bought the factory in Bredebro in 1963, and began to build their business. There was a considerable element of personal risk: money was generated by selling the family home in Copenhagen, and by raising loans. Both Birte and Karl Toosbuys fathers lent the young couple money for the new enterprise. 1970s The quest for the uncompromising shoe During the 1970s, the Scandinavian footwear industry was in financial crisis and many manufacturers were forced to close. Karl Toosbuy realised the importance of taking a number of strategic decisions to safeguard the companys financial prospects and secure its position in future markets. So ECCO set about establishing upper production abroad. In 1974, in Brazil, followed by India and
Yugoslavia in 1978 and, later by Thailand. In parallel ECCO worked on the development of a new type of shoes to fit the foot. In 1978 ECCO launched the first design classic: Joke. 1980s Technological Innovation For ECCO, the 1980s was a decade of technological innovation. Perhaps the most significant turning point was the acquisition of the first Desma machine in 1981. Direct injection technology had been developed originally for the mass production of low-cost shoes. But Karl Toosbuy took this a stage further: he realised that it would be possible to create a production system that used direct injection technology to produce high quality shoes quickly and efficiently. And this gave ECCO a significant competitive advantage in the 1980s. In 1984 it was necessary to establish a production subsidiary and the first factory outside Denmark was inaugurated in Portugal. 1990s International growth The decade was characterised by massive growth on all fronts. ECCO built a new factory in Indonesia and set up others in Thailand and Slovakia. Thailand
and Indonesia also saw the building of new tanneries. Sales subsidiaries were added in Hong Kong, Australia and New Zealand, Finland, Sweden, Belgium and Poland. These were heavy investments for a company of ECCOs size, but put the company among the worlds leading shoe manufacturers. 2000s Change of the guard In 2003, Karl Toosbuy decided to set up production in China. He met some resistance from his Board but pointed out that the idea was not to make cheap shoes there. He wanted to make shoes of the highest quality and believed the new factory would enable ECCO to embed the brand in the consciousness of the vast Chinese market over a 10 to 20 year period. Karl Toosbuy was a visionary to the last. He died in 2004, proud and satisfied with his lifes work; and glad that his daughter had agreed to continue the company as a family owned business. Hanni Toosbuy Kasprzak and her husband, Dieter Kasprzak, took over the management and now run ECCO in partnership, as Chairman and CEO.
Inspired by the old ECCO classics JOKE, FREE and TIME, ECCO has developed a 50th Anniversary shoe: the ECCO MIND. This shoe embodies both where ECCO has been and where ECCO is going. The ECCO MIND will be launched this spring.

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annual report 2012

Banks Sydbank Nordea Danske Bank

FIVE YEAR SUMMARY

795,509 (593,639) (323,503) 19,426

669,684 (338,596) (370,956) 19,759

700,151 (236,732) (453,316) 17,537

984,524 (222,925) (576,525) 14,781

788,592 (482,718) (322,762) 16,328

10.7% 14.8% 14.3% 0.7 16.3% 55.6% 2.2

9.8% 11.6% 10.7% 0.8 12.2% 58.1% 2.3

15.4% 19.2% 17.3% 2.3 23.2% 56.3% 1.9

DEFINITIONS OF KEY RATIOS

Average assets Assets Liquidity ratio: Current assets Short-term debt

ECCO Annual Report 2012

Highlights from 2012

ECCO Annual Report 2012

ECCO Annual Report 2012

ECCO Annual Report 2012

Net revenue 2008-2012

8,061 7,089 6,111 5,374 5,041

6,000 5,000 4,000 3,000 2,000 1,000 0

Net revenue split by region 2008-2012

25.0% 20.0% 15.0%

14.1% 10.0% 5.0% 0.0% 2012

Profit before tax (PBT)

10 ECCO Annual Report 2012

Net working capital and ratio to net sales 2008-2012

Net Working Capital (NWC)

Total investments 2008-2012

400 300 223 200 100 0 2008 2009 2010

Equity development and solidity 2008-2012

60% 58% 2,473 2,432 2,587 57% 2,931 3,122 58%

2,000 1,500 1,000

56% 55% 54%

52% 500 0 2008 2009 2010 2011 2012 50%

ECCO Annual Report 2012 11

12 ECCO Annual Report 2012

DESIGN AND PRODUCTS

ECCO Annual Report 2012 13

ECCO Golf Street, Spring & Summer 2012

14 ECCO Annual Report 2012

ECCO Sculptured 65, Autumn & Winter 2012

ECCO Bradley, Autumn & Winter 2012

ECCO Spin, Spring & Summer 2012

ECCO Androw, Spring & Summer 2012

ECCO Snowrush, Autumn & Winter 2012

ECCO Natal, Spring & Summer 2012

ECCO Biarritz, Autumn & Winter 2012

ECCO BIOM Hike, Autumn & Winter 2012

ECCO BIOM Lite, Spring & Summer 2012

ECCO Annual Report 2012 15

PRODUCTION AND SOURCING

16 ECCO Annual Report 2012

THE NETHERLANDS SLOVAKIA

ECCO Annual Report 2012 17

6,000 5,000 4,000 3,000 2,000 1,000 -

18 ECCO Annual Report 2012

4,178 3,503 3,632 3,202

ECCO Annual Report 2012 19

20 ECCO Annual Report 2012

Net revenue in Asia Pacific 2008-2012

Net revenue in Americas 2008-2012