Annual Report • Mar 11, 2011
Annual Report
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Annual report 2010
On 1 December 2010, Barco achieved a Guinness World Record for 'brightest digital cinema projector', with a light output of 43,000 lumens.
| (In thousands of euro) | 2010 | 2009 | 2008 |
|---|---|---|---|
| Income statement before restructuring & impairment | |||
| Orders | 978,263 | 618,192 | 762,610 |
| Orderbook | 426,900 | 331,354 | 351,296 |
| Net sales | 896,999 | 638,066 | 725,288 |
| Gross Profit | 287,516 | 167,951 | 245,139 |
| EBIT | 45,135 | -29,537 | 8,903 |
| Profit/(loss) before taxes | 43,625 | -70,593 | -21,384 |
| EBITDA (a) | 98,752 | 24,076 | 67,900 |
| Ratios | |||
|---|---|---|---|
| EBIT on sales | 5.0% | -4.6% | 1.2% |
| EBITDA on sales | 11.0% | 3.8% | 9.4% |
| Net financial cash (/debt) on EBITDA | 9.0% | 97.6% | -48.3% |
| Restructuring & impairment | - | -39,386 | -26,696 |
| (In thousands of euro) | 2010 | 2009 | 2008 |
|---|---|---|---|
| Balance sheet & personnel | |||
| Equity | 395,591 | 344,265 | 403,176 |
| Balance sheet total | 754,699 | 572,475 | 720,727 |
| Net financial cash/(debt) (e) | 8,857 | 23,486 | -32,802 |
| Operating capital employed (d) | 327,608 | 267,700 | 361,148 |
| Net Working capital (d) | 177,145 | 127,055 | 196,692 |
| Personnel on 31 December | 3,499 | 3,217 | 3,522 |
| Ratios | |||
|---|---|---|---|
| DSO (a) | 59 | 67 | 72 |
| Inventory turns (b) | 2.3 | 2.7 | 2.2 |
| DPO (c) | 67 | 55 | 51 |
| ROCE (%) (d) | 9.7% | -9.0% | 2.1% |
(a) DSO = ((Trade debtors, net) / (sales past quarter))*90
(b) Inventory turns = 12 / [Inventory / (Average Monthly Sales x Material Cost of Goods Sold %)] (c) DPO = Trade Payables / (Material cost + Services and other costs) x 365
(d) For calculation see page 73
(e) For calculation see page 121
| (In thousands of euro) | 2010 | 2009 | 2008 |
|---|---|---|---|
| Income statement after restructuring & impairment | |||
| EBIT | 45,135 | -68,923 | -17,794 |
| EBITDA (b) | 98,752 | 15,833 | 47,223 |
| Free cash flow (c) | -7,009 | 59,435 | 20,056 |
| Net income from continuing operations | 43,625 | -64,210 | -21,384 |
| Net income from discontinued operations | - | 4,289 | 39,642 |
| Net income attributable to the equityholder | 43,625 | -59,919 | 18,258 |
| Ratios | |||
|---|---|---|---|
| EBIT on sales | 5.0% | -10.8% | -2.5% |
| EBITDA on sales | 11.0% | 2.5% | 6.5% |
| Net financial cash (/debt) on EBITDA | 9.0% | 148.3% | -69.5% |
(a) EBIT+ depreciation on capital expenditure (PP&E) + amortization on capitalized development cost (b) = (a) + impairment on capitalized development and goodwill (c) For calculation see page 72
| (In euro) | 2010 | 2009 | 2008 |
|---|---|---|---|
| Key figures per share | |||
| Number of shares on 31 December (in thousands) | 12,670 | 12,670 | 12,670 |
| Per share (in euro) | |||
| EPS | 3.66 | -5.02 | 1.53 |
| Diluted EPS | 3.41 | -5.02 | 1.44 |
| Yearly return (a) | 69.5% | 59.2% | -61.1% |
| Price/earnings ratio (b) | 16.2% | -5.7% | 11.7% |
| Share price (in euro) | |||
|---|---|---|---|
| Average closing price | 37.46 | 23.40 | 35.54 |
| Highest closing price | 49.43 | 35.56 | 52.20 |
| Lowest closing price | 28.23 | 9.80 | 13.10 |
| Closing price on 31 Dec | 48.28 | 28.49 | 17.90 |
| Average number of shares traded daily | 30,235 | 37,430 | 55,126 |
| Stock market capitalization on 31 December (in millions) | 611.7 | 361.0 | 226.8 |
(a) increase/decrease share price + gross dividend, divided by closing share price (b) share price 31 Dec / net result per share
• Medical display company FIMI joins Barco
• Exclusive digital cinema projector supplier for 60th Berlinale
• Giant LED façade for American Eagle Outfitters on Times Square
• Major digital cinema deals with Cinemark, Malco, Jinyi, Zhejiang, Rave, Movie Tavern and Starplex
• Barco on tour with Bon Jovi, Alice in Chains and John Mayer
• Barco omnipresent at Shanghai World Expo
• Lockheed Martin chooses Barco for US Navy displays
• Barco collaboration platform for Swedish fire brigades
• Barco video wall helps keep Shanghai Honqiao Airport safe
• Biggest video wall in the China telecom industry
• Monitoring Belgium's power grid at Elia
• Acquisition of digital signage specialist dZine
• Barco ensures safety of 1 million travelers at São Paulo Metrô
• China's State Grid Corporation chooses Barco video wall to help monitor the country's electricity network.
• Delhi Police's first C4I surveillance center selects Barco
• Dutch newscasters choose LED-lit video walls
• U2 360° tour worldwide success with Barco's flexible LED display
• Barco projects at Commonwealth Games
• 1,000 Barco-certified digital cinema engineers
• Launch of Barco's enhanced 4K digital cinema projector
• Digital cinema contracts in Australia, New Zealand, Germany and the United Arab Emirates
• Air traffic control displays at the US Army STARS sites
• Cinemark chooses Barco for all of its Latin American cinemas
• Riverside County Regional Medical Center and Shin Kong Hospital choose Barco
• Hong Kong International Airport uses Barco's arrival management software
• Barco achieves Guinness World Record – brightest digital cinema projector
| Key figures Year in review LETTER FROM THE CHAIR MAN & THE CEO |
2 4 10 |
|---|---|
| business | |
| Our company | 15 |
| Our strenghts | 19 |
| Our strategy | 20 |
| Our objectives | 22 |
| Awards | 23 |
PAGE 70
COMMENTS ON THE RESULTS
| 26 |
|---|
| 28 |
| 28 |
| 29 |
| 30 |
| 31 |
| 32 |
| Digital planetariums | 36 |
|---|---|
| HSBC Bank Brasil | 38 |
| Reliance Petroleum | 38 |
| Deutsche Post DHL | 39 |
| Airways New Zealand | 40 |
| Customer loyalty | 40 |
| American Eagle Outfitters | 41 |
| US Navy Submarine Bridge Trainer |
42 |
| 2010 World Expo | 43 |
| HMV Hammersmith Apollo |
44 |
| J&JPRD, a Division of Janssen Pharmaceutica | 45 |
BARCO CONSOLIDATED
| BG Bergmannstrost |
46 |
|---|---|
| Microsoft Technology Center |
47 |
| FIFA World Cup 2010 |
47 |
| 50 |
|---|
| 51 |
| 51 |
| 51 |
| 51 |
| 52 |
| 53 |
| Board of Directors |
56 |
|---|---|
| Executive management team |
58 |
| Comments on the results |
70 |
|---|---|
| ---------------------------------- | ---- |
| Information about the share |
78 |
|---|---|
| Ownership of the company's shares |
78 |
| Dividend | 78 |
| Daily average shares traded 2010 |
79 |
| Financial calendar |
79 |
| Analysts covering Barco |
79 |
| Evolution of the share price |
80 |
| Investor relations |
81 |
| Income statement |
84 |
|---|---|
| Balance sheet |
86 |
| Cash flow statement |
87 |
| Changes in equity |
89 |
| Notes to the consolidated financial statements |
96 |
| Auditor's report |
136 |
| Balance sheet after appropriation Income statement Proposed appropriation Barco nv result |
139 140 140 |
|---|---|
| Contact information |
141 |
Dear shareholder,
2010 was a good year for Barco. The decisive measures we took in 2009 to reduce the complexity of the company and to right-size the businesses helped Barco weather the economic downturn and enjoy a very robust recovery. Hence, one of the worst years in the company's history was followed by one of the best years ever.
Incoming orders reached an all time high of 978 million euro, up 58% versus 2009, fuelled by unprecedented growth in digital cinema. All regions posted impressive growth numbers but North America topped the ranks with more than 90% growth year-on-year.
Sales on the other hand grew 41% year-onyear to 897 million euro, 529 million euro of which was realized during the second half of the year.
Barco's profitability improved steadily throughout the year with EBIT recovering strongly from -4.6% in 2009 to +5% or 45 million euro in 2010.
Investors returned to Barco and our share price rose from 28.49 euro at the end of 2009 to 48.28 euro on 31 December, 2010.
But 2010 was a record breaker in a more literal sense as well, when Barco entered the Guinness Book of Records with the world's brightest digital cinema projector (43,000 lumens).
In part thanks to the acquisition of FIMI in Italy, Barco strengthened its global leadership position in the segment of digital visualization systems for radiology and cardiovascular display applications. With 59% growth in sales in 2010 and with EBIT contribution exceeding 10%, Barco's Healthcare Division is solidly positioned at the very core of Barco.
We do anticipate further investments in new technology platforms such as the mobile point of care applications that will extend Barco's reach into new market segments. Barco's Healthcare Division is hence well positioned for future growth as the medical profession and the patient care industry will further adopt digital technologies at a rapid pace.
The introduction of a second generation projector product line in Barco's digital cinema business unit made Barco the supplier of choice to the global movie theater industry, which is rapidly converting from analog to digital projection systems. With more than 300 million euro in orders booked during 2010 and with more than 14.000 digital projectors installed in movie theaters across the globe, Barco is the leading supplier to this rapidly growing industry. For the first time in the company's history, Barco managed to compete effectively and successfully in mid segment volume markets at contribution levels that turned out to be best-in-class despite intense competition and despite rapid increases in working capital needs.
Throughout the year we took further steps to restore or recapture global leadership positions in all of our other divisions. For example, the introduction of a new generation of LED cubes in large displays in the control rooms market met with enthusiastic response from customers. We are quite optimistic about the prospects for future growth in this division. Another example can be found in our simulation business where the launch of full 360° simulation dome capabilities resulted in solid contracts for deliveries in 2011 and beyond. Orders in this division went up 56% year-onyear and Barco is well positioned to again 'lead through technology' in this demanding industry.
Finally, the acquisitions of dZine and former Element Labs have generated new growth platforms for Barco in the entertainment and digital signage markets. Here we have changed our value propositions to become less hardware- and more software-centric. We also learned to approach our customers with more integrated systems rather than simple modular displays.
Restoring profitable growth through the introduction of newer and better performing products was one of the dimensions we worked on to build a better company for all our stakeholders. Throughout the year we pushed very hard to strengthen our ability to better serve our customers with services and on-time deliveries and with more robust and more reliable products. In this way, we set new standards not just in terms of performance, but most importantly in terms of reliability and quality. Our corporate initiatives on operational excellence and customer intimacy have fuelled important gains in productivity and in customer satisfaction.
Our ability to serve our customers has been greatly improved, making Barco a better partner for the future despite the fact that Barco cut its indirect costs by as much as 10 percentage points over the past two years.
How sustainable is the progress we made in 2010? And how can Barco achieve its long term objectives of generating double digit growth, double digit operating income, 20% return on capital employed, our famous 10-10- 20 ambition?
To answer these questions, we took a hard look at our business portfolio both in terms of market attractiveness as well as in terms of our ability to 'win' in these markets.
In close collaboration with the Board, we analyzed and studied several strategic options and decided to lock in on just four major core businesses which we believe can meet our long term objectives of growth and profitability. In an effort to align strategy with structure, we regrouped our activities into four core divisions and moved all of our other activities into a ventures group. The four core divisions
are: Healthcare, Control Rooms & Simulation, Entertainment and Defense & Aerospace. The ventures group includes our Lighting and LED activities as well as dZine, Silex and Orthogon activities. Ventures will benefit from a higher degree of autonomy and increased focus on aggressively pursuing growth for Barco and on realizing our corporate objectives within a three year horizon.
Barco can thus look at the future with great confidence. The company is well positioned in all of its four core divisions while five emerging ventures still hold a lot of promise for future growth.
Barco will continue to lead through technology as it has historically done, but will also excel in terms of customer intimacy and operational excellence. Several initiatives around key account management, customer services, first time right, etc. are energizing the company into new levels of excellence.
Furthermore in 2010, the company has made good progress in terms of gaining market share in the emerging and rapidly growing BRIC countries, China in particular. These markets still offer tremendous potential for future growth.
Thank you
Finally we have created a strong 'Team Barco' culture and a lot of internal talent is being groomed and positioned for 'homegrown leadership' in years to come.
In 2010 the traditional engineering company has successfully embraced customer-centricity and operational excellence and is now well positioned for a brighter future.
Being debt free, the company also has the financial strength to continue to invest in growth while creating sustainable shareholder value.
We hope that the drastic measures we took to reposition the company in 2009 and the record breaking results of new Barco in 2010 have restored your trust and confidence in the company.
We would like to thank our customers and shareholders, for their continued support during these challenging times of change. We especially thank our employees, who went the extra mile and should be proud of the results we achieved.
Eric Van Zele Herman Daems
President & CEO Chairman of the Board
Barco is a global technology company that designs and develops visualization solutions for a variety of selected professional markets.
Barco offers user-friendly imaging products that optimize productivity and business efficiency, and encompass the entire visualization spectrum.
Barco has its own facilities for Sales & Marketing, Customer Support, R&D and Manufacturing in Europe, America and Asia-Pacific. The company (NYSE, Euronext Brussels: BAR) is active in more than 90 countries with about 3,500 employees worldwide. In 2010, Barco posted sales of 897 million euro.
Monitoring, Control Rooms & Medical Imaging
Employees per functional group
3499*
Manufacturing & Logistics 1,265 // Research & Development 652 // Customer Projects 253 // Customer Service 322 Marketing 124 // Procurement 122 // Quality, Supply Chain & Support 64 // Sales 420 // Administration 278
*number of full-time equivalents (FTEs), excluding temporary workforce Database Corporate Associates per 31/12/2010
• Russia • Spain • Sweden • Switzerland • Turkey • United Arab Emirates • United Kingdom
• Belgium • China • France • Germany
On 1 January 2010, FIMI, based in Saronno, Italy, joined the Barco group. FIMI used to be a fully owned subsidiary of Royal Philips Electronics' Healthcare business, with an annual sales volume of close to 40 million euro.
On 17 March 2010, Barco announced the acquisition of all intellectual property, products and know-how of Element Labs. Element Labs, based in Santa Clara, California, was an LED display company mainly focused on the middle segment of the video display market. Its offering greatly expanded Barco's LED portfolio for indoor, outdoor, rental as well as fixed video installations.
On 16 July 2010, Barco closed the acquisition of Belgium-based digital signage company dZine. Through this acquisition, Barco significantly broadened its offering of digital visualization with the addition of advanced software tools for content creation and management that have an installed base covering over 55 countries.
Change the way we work on a day-to-day basis by focusing on leadership and company culture.
2010-2011
2009
Internal targets 2010 results 2010
targets 2011
| Technology leadership |
LED-lit video wall and enhanced 4K DLP digital cinema projection |
|---|---|
| Grow sales | Record sales figure of 897 million euro |
| Focus on emerging economies (BRIC) |
Close to 20% of company's incoming orders in 2010 |
| Strengthen leadership in digital cinema and healthcare markets |
Organic growth of 154% in digital cinema, and growth of 59% in medical imaging (organic growth is 18%) |
| Restore profitability |
45 million euro EBIT |
| Gross profit margin of 32-35% |
Gross profit margin of 32% |
| Operational excellence |
Considerably improved |
| Secure customer loyalty | Customer loyalty 12 points above industry benchmark |
| Create shareholder value |
Share value up 70% |
Creating shareholder value through:
Best staging for a corporate or association event (\$50K-\$199K range):
Columbia F10 project for the Columbia Sportswear Company Barco technology used: high-brightness projection, image processing, LED
Freeman at the Millers-Coors Distributers Conference Business Session Barco technology used: high-brightness projection, image processing
General Motors at the North American International Auto Show Barco technology used: 325 LED tiles
Barco achieves Guinness World Record Since 1 December 2010, Barco's DP2K-32B digital cinema projector holds the Guinness World Record for "brighest projector", with a staggering light output of 43,000 lumens. This equals the combined light output of about 1,700 regular flashlights.
ARCHI-TECH award for high-brightness projection at the Caroline Herrera Boutique in the United States ••• Two PRO AV Spotlight awards for New York City Hall's situation room and The Block house of worship project ••• For the fourth time in a row, Barco won big at the Frost & Sullivan awards for its constant innovation in medical display technology ••• Supplier performance award from NAV Canada for air traffic control display implementation ••• Society for Environmental Graphic Design merit award for the LED project for American Eagle Outfitter's flagship store on Times Square ••• BIRTV award for the DP2K digital cinema projector ••• League of American Communications Professionals platinum award for Barco's 2009 annual report ••• Six CRTA Science & Technology Innovation Awards for various high-profile projects in China
25% more compact than similar products – Read more on the HDX projector on page 29
RP-360 dome – Read more on the fully immersive training dome on page 28
The new smooth gray – Read more on the Coronis 10MP display on page 31
No other rugged display can withstand a temperature
Our extremely rugged TX displays are fully MIL-STD-461F EMI/EMC compliant for extreme conditions.
Highest contrast ratio in the world
The SIM range of projectors was developed especially for training and simulation, with all the necessary features that modern simulators need, to get as close to reality as possible.
Display an unlimited number of sources with Barco's networked visualization concept for control rooms
Our OL and OVL series of LED-lit video walls ensure long-term reliability and accurate, display-wide image uniformity.
Barco's event projectors comprise a total portfolio, ranging from the most silent, cost-conscious units available up to the brightest event projectors on the market.
Spearheaded by the world-record winning DP2K-32B projector, Barco offers the most complete range of digital cinema projectors in the world. 14,000 1,000
Installed base of Barco's digital cinema projectors
The new Coronis Fusion 10MP display system offers 10 million pixels of grayscale perfection to medical professionals.
Good training and preparation are essential for any job. But when lives are at stake, preparation is crucial. Such is the case for pilots, whether civilian or military.
"Simulators help pilots train for routine takeoff, landing, airborne navigation and refueling scenarios as well as for difficult missions or emergencies in complex environments," explains Kurt Doornaert, Business Development Manager for Barco's simulation team, "so it is evident that for this training to be successful, a pilot's simulated experience needs to be as close to reality as possible."
"To achieve a sense of realism in terms of what the pilot in training is seeing, an uninterrupted, immersive image of extremely high resolution is needed. Flight simulation, therefore, has been using domed setups and high-resolution projection for many years," continues Mr. Doornaert. One of its limiting factors, however, was the fact that the images were still front projected (i.e. from behind the pilot). Rear projection (from the outside) would require too many projectors to achieve the same total screen resolution.
This limitation is no more: due to the development of a native 10 megapixel projector that comes equipped with the right features to create seamless composite images together with other projectors, rear projection is a reality for simulation. Barco has designed and manufactured a number of industry firsts for this project, including screens, mirrors and the system's mechanical structure.
The new liquid crystal on silicon (LCoS) based projector at the heart of the simulation display is the star of the show, however. "To give you an idea," Mr. Doornaert says, "Current off-the-shelf high-definition projectors have a 2.1 megapixel resolution, while our simulation projector has a 10 megapixel resolution. Thanks to advances in contrast, it also quadruples the contrast ratio of today's best systems."
"Numerous partners and customers in the simulation industry have visited our fully operational demo unit at our headquarters in Belgium," says Mr. Doornaert, "and we can say that their response was unanimously positive. But, it is really something that needs to be seen and experienced to understand it."
For many years, Barco's SLM-R12+ projector was the mainstay of numerous events and fixed installations all over the world. The HDX projector is the successor to this legacy. It offers active 3D, wireless control and on-board image processing.
Barco's HDX combines active 3D as found in digital cinema with the robust, efficient build that is the result of extensive experiences in the events market. In addition, internal image processing based on Barco's successful Image-PRO automatically scales input sources.
The HDX features a color LCD interface, including a preview mode. The HDX also allows for easy, wireless control with tablet computers and smartphones and the unit makes use of only five, quickly serviceable and replaceable modular components. SLM and even FLM projector lenses are fully compatible with those of the HDX, and its design is 25% smaller than comparable products. It fits into into standard flight cases, so it is always ready to go at a moment's notice.
The first member of the HDX family, the HDX-W14, comes with a 14,000 lumens light output and a WUXGA (1920x1200) resolution, which is flexible enough to light up any medium-tolarge sized venue and can easily accommodate HD content.
In the highly competitive cinema business, theater owners are constantly aiming to make the difference by creating the best possible cinema experience for their audience. One of the elements that plays a role in creating this "premium experience" is 4K resolution.
But what is this 4K resolution exactly? Wim Buyens, General Manager Entertainment Division, clarifies: "Today, digital cinemas are using 2K as the standard resolution. In practice, this corresponds with an image size of 2048 x 1080 pixels. When we talk about 4K, we refer to a resolution of 4,096 x 2,160 wide, i.e. four times more."
It goes without saying that the arrival of 4K cinema has impact on a manufacturer's product offering. "Barco's portfolio of digital cinema projectors was known to contain the most complete range of 2K projectors on the market. With the addition of DLP Cinema® Enhanced 4K models, we have extended this offering even further. This way, we can offer our customers even more options to choose from," Mr. Buyens says.
"The new 4K cinema projectors act as the flagship of the range, mainly focusing on premium cinema screens and venues", Mr. Buyens likes to add. "For moviegoers, this extra resolution will result in razor-sharp movie images combined with consistent color uniformity, rich contrast and vibrant, accurate colors, even on the largest cinema screens."
But there's more. The new 4K projector also benefits from its superior lamp efficiency and highly efficient optical design. This will result in a record light output and a superior visual 3D experience.
Barco DP4K-32B – Ensuring a razor-sharp and ultra-bright movie experience in 2D and 3D.
Over the years, medical display manufacturers have developed various techniques to increase the number of visible grayscales on medical-grade monitors. Most of these techniques, however, introduce unwanted image artifacts. With the launch of its new "SmoothGray" technology, Barco has realized a major breakthrough.
SmoothGray made its debut inside Barco's state-of-the-art Coronis Fusion 10MP display system. According to Geert Carrein, Market Director at Barco, the system's main benefit lies in the fact that it enables grayscale values to be shown with more precision and in better correspondence with the sensitivity of the human visual system. For radiologists, this makes it easier to detect subtle but meaningful details, such as pulmonary nodules or pneumothoraces.
When asked how SmoothGray actually achieves this, Mr. Carrein responds: "In fact, SmoothGray is an umbrella term for a number of diverse technical improvements, which mutually reinforce each other. The system unites advanced high-bit computation hardware, a unique dithering algorithm and optimized display drivers to send the analog video signal to the LCD panel. By applying a high precision control of the frame switching, SmoothGray generates grayscale steps so fine that it is difficult to measure the difference from one shade to the next."
Clinical tests with SmoothGray have produced conclusive evidence in favor of this new technique. When measuring multiple grayscale values on a display without SmoothGray, errors can be as high as 0.9 Just Noticeable Differences (JNDs). On a display equipped with SmoothGray, this JND error is significantly smaller: every sequential luminance step on the screen (JND error) is always < 0.3.
With LED being the illumination source of the future, Barco embraced LED projection and combined it with brand-new technologies, establishing a significant performance increase for video walls in terms of image quality, maintainability and cost of ownership.
"Barco's new line of rear-projection video walls with LED-based illumination, i.e. the OL and OVL series, combines the typical benefits of LED-lit systems with unique technologies. Taking full responsibility for the entire development, we have succeeded in creating a firstclass product series that is truly efficient and ready for use in 24/7 applications," comments Mathieu Massart, Director Product Management Displays at Barco.
Last year, Barco launched its first LED-lit rearprojection video walls, equipped with an advanced heat management system. As LEDs typically generate high temperatures on a very small surface, the heat can significantly affect the video wall's performance, in that it will emit lower light output, show color shift and eventually have a reduced lifetime. That's why efficient heat management is crucial for LEDbased systems. Mr. Massart explains: "Barco developed a novel liquid cooling technique which, unlike air-cooled systems, brings the LED temperature down to an optimal level. By cooling the LEDs directly by a jet stream of coolant, our LED video walls manage to be 20% brighter than any other video wall on the
market. Liquid cooling also prolongs the lifetime of the LEDs inside the video walls to an exceptional 80,000 hours."
Barco's first LED-lit rear-projected video walls were available in a widescreen 16:9 aspect ratio. With the new series, Barco has made its novel liquid-cooled LED technology available for traditional 4:3 environments, with screen sizes up to 80 inch, offering a valid alternative for new installations in 4:3 environments or for upgrades of legacy lamp-based video walls. "Upgrading from a lamp-based system
to Barco's LED-lit solution is simple, timeefficient and requires no training or expertise. This means that the downtime of the system will be reduced to a strict minimum," adds Mr. Massart.
Whereas the typical advantages of LED include low maintenance and saturated colors, Barco managed to add numerous benefits. Mr. Massart explains: "Barco's new LED video walls are basically intervention-free for more than 5 years, while showing a crisp image with saturated colors, which is of utmost importance in control room environments. Moreover, next to liquid cooling, Barco's LED video walls are equipped with Sense6 auto-calibration technology, which reduces the power of the LED drivers. This allows the video walls to produce the most uniform and vibrant colors on the display, while saving up to 30% power without sacrificing contrast ratio."
"Barco has profound expertise in LED as we have been manufacturing LED signage since the nineties," Mr. Massart continues. "Today, Barco processes more than 2 million LEDs every week. We know LED inside out, which makes our LED-lit rear-projection video walls the most mature and robust on the market. And uniquely, we have been able to develop LED-lit video walls that are a perfect fit for a wide range of control room applications. The result is an integrated control room visualization solution that provides the coolest engine, the warmest colors and the brightest picture."
24/7 diagnostic confidence at Bergmannstrost AG Hospital – Read more on page 46
Hammersmith Apollo HMV Theatre converts to digital projection – Read more on page 44
Customer loyalty 12 points above benchmark Read more on page 40
Leading Japanese planetariums in Tokyo, Yaizu and Toyota now use Barco projection with an extreme pixel density.
A high-brightness, energy-efficient LED display covering nearly 100m².
"Over 150 million pixels of KPIs displayed in smooth, clean graphics."
Reliance Petroleum uses Barco video walls to monitor the refinery of 1 billion barrels of oil per day.
(Curitba, Brazil) "Within the first months already, HSBC Bank Brasil raised its operating efficiency by 20 to 30%."
Gunther Lamers, Head of the Data Center
20 rear-projection display cubes help ensure 24/7 uptime of HSBC's financial services.
Barco provided the customized Multi-purpose Control Display Units (MCDU) and its MOSArt Open System development platform to Northrop Grumman (NG) for deployment into both cockpit and rear operator systems of the Hawkeye aircraft. The MOSART system enables Northrop Grumman application developers to use the unit's advanced 3D graphics (OpenGL) and video capability. Monitoring 107,000 square meters of opera-
"In 2008, we set a quantifiable climate protection goal. So for the new video wall we wanted LED technology for its low energy consumption and worry-free operation."
Rainer Henss, Vice-President Corporate Security Service Branch
tions while reducing carbon footprint.
Collaborative Flow Management system: how to save 16 million euro in two years.
"The Barco system enables us to be proactive in managing our network and assigning priorities to better manage the needs of our passengers connecting to other flights."
Bob Fletcher, Head of Operations Support
Each year, an independent research firm polls Barco's customer base on their satisfaction with our solutions and services. Crucially, the results also indicate how likely our customers are to do business with us again, and in what areas we can improve.
80
The industry loyalty benchmark for business-to-business companies is 68. Barco consistently scores well above that grade, and 2010 saw a slight increase to 80 or a score that is 12 points above the industry benchmark. Satisfaction improved across nearly all market segments, with the most marked increase in Europe.
15,000 square feet of LEDs, including a 25-story LED tower and an indoor bank of 21 Barco video walls.
"American Eagle's Times Square display represents yet another standard in technical and artistic achievement in outdoor LED displays."
(Newport, Rhode Island, USA)
An array of projectors provides trainees with a "wraparound" immersive training
"Once we saw the pictures on screen, we realized that this was the best way to go. The picture quality is amazing, and the install couldn't have been simpler."
Nate Alchesky, General Manager Palladio 16 Cinemas
environment. Starring in the largest single-site 3D cinema multiplex in California.
No less than 250 Barco visualization products, distributed over 16 pavilions, visualized the current and future concepts of corporations and countries to an audience of over 70 million people.
Creating the best and biggest film premières in London's West End.
"Barco and Future Projections were contracted in view of their dedication to high-quality, reliable projectors and their high service commitment."
Peter Hall, Future Projections
"Compared to other displays, Barco is superior in terms of color homogeneity, color intensity and brightness."
Erio Barale-Thomas, Pathologist, J&JPRD, Beerse, Belgium
Providing ultimate slide-to-eye confidence to one of the most innovative pharmaceutical companies in the world.
Helping save precious time while guaranteeing 24/7 diagnostic confidence.
"I am so glad to work with Barco. It really is the most experienced player in the field of medical display devices, worldwide."
Dr. Rainer Braunschweig, Head Radiologist, Bergmannstrost
High-resolution Barco projection and collaboration software create an unparalleled user experience.
"This allows us to present our customers with a full technology solution for their collaboration needs."
Frederic Aatz, Director, Microsoft Technology Center
FIFA World Cup 2010 (South Africa)
All across South Africa's football stadiums, Barco's LED visualization played a prominent role in lighting up the world's most widely watched quadrennial sports event.
Green design: Over 50% of Barco's new 2010 products is green – Read more on page 52
Barco's Ironman made it and crossed over 225km Read more on page 52
Each year, the student clubs of Ghent, Belgium organize a huge festival to celebrate the opening of the academic year. Barco was a highly conspicuous sponsor of the festival's running event around the Boekentoren ('Book tower'), designed by famous architect Henri Vande Velde.
For the 60th edition of the Berlinale movie festival, Barco once again rolled out an impressive visualization fleet as the festival's exclusive projection supplier.
"We are glad to be working with Barco's digital cinema projectors for our anniversary edition. We have worked with them on the four previous editions and know we can trust the projectors to perform flawlessly for the festival's entire duration."
Dieter Kosslick, Berlinale Director
"Music for Life" is an annual, country-wide and week-long charity event by Belgian radio station Studio Brussel. 2010's good cause of choice was the fight on malaria. Barco employees in Belgium collected nearly 3,000 euro.
The Ghent Film Festival is Belgium's biggest in this category, and is tied to the World Soundtrack Awards. Barco has been one of the festival's key sponsors for a very long time, and contributed to the 2010 edition with its full range of digital cinema projectors.
The annual Barco High Tech Awards in Belgium reward engineering projects of undergrad students with exceptional merit. Because of Barco's long-standing sponsorship and belief in nurturing future research, the Award was named after Barco.
Glenn De Vos, Service and installation Manager, participated in the 2010 World Championship Ironman in Kona, Hawaii, also known as "the mother of all triathlons", with sponsoring from Barco. Glenn swam 3.8 km, cycled 180 km and finished with running a 42 km marathon, in extreme weather conditions. Truly a man of steel.
2010 was the year of greener products. Barco designed a new medical display with only green products and a complete absence of potentially hazardous materials, while energy-conscious projectors and LED displays with anti-light pollution technologies hit the media market.
In last year's annual report, we wrote about the successful installation of solar panels in Barco's Kuurne and Kortrijk facilities in Belgium. Having been operational for almost a year, they have generated nearly 330,000 kWh and, according to data from DEFRA, cut back carbon dioxide emissions for the company by 179 tons.
Early 2011, New York's Museum of the Moving Image used seventeen Barco projectors in a remarkable, immersive 3D exhibition centered on the reality of virtuality. Barco was proud to sponsor both the art collectives and the museum in this exhibition.
"The opening was a big hit! This is the most successful project we have realized so far and we are very happy with the projectors. Vis itors are amazed when they leave the installation."
Thomas Soetens, Workspace Unlimited
Herman Daems is chairman of the Board of Gimv (a private equity firm listed on NYSE/ Euronext), chairman of the Board of BNP Paribas Fortis and chairman of the Board of Barco nv. In 2004 and 2005, he was chairman of the European Private Equity and Venture Capital Association. Today, he is also chairman of the Belgian Corporate Governance Commission and chairman of IPEV, the international Private Equity Valuation Guidelines board which sets guidelines for assessing values in private equity funds. Herman Daems is a member of the executive committee of the Belgian employers association and holds several board positions. Professor Daems was on the faculty of the Harvard Business School. Today he is on the faculty of K.U. Leuven. Daems studied theoretical physics and economics and holds a PhD in economics.
Eric Van Zele is serving as President & CEO of Barco nv since January of 2009. He also serves as Chairman of the Board of Reynaers Aluminium nv in Duffel, Belgium. Prior to 2009, he was a Director on the Management Board of the Indian Avantha Group and served as President & CEO of Pauwels International from 2004 through 2008. Prior to that, he was President & CEO of Telindus nv (2000-2003) and Vice President of Raychem Corporation (Menlo Park, CA, 1972-1999). Eric Van Zele holds a Master's degree in mechanical engineering (K.U. Leuven 1972) and post graduate degrees in management from Stanford University (1992).
Bruno Holthof is Chief Executive Officer (CEO) of the Antwerp Hospital Network, a Belgian hospital group employing 7,000 healthcare pro-
| Chairman | Herman Daems(1) | Chairman of the Board of Directors | |
|---|---|---|---|
| Gimv and BNP Paribas Fortis | 2012* | ||
| President & CEO | Eric Van Zele (3) | 2014* | |
| Directors | Praksis BVBA (represented by Bruno Holthof, CEO of the Antwerp Hospital Network) (2) | 2014* | |
| Lumis BVBA (represented by Luc Missorten, CEO of Corelio and | |||
| board member of LMS and Bank Degroof) (2) | 2014* | ||
| Marc Ooms BVBA (represented by Marc Ooms, non-executive director of several companies) (1) | 2012* | ||
| Jan P. Oosterveld (2) | Member of various Boards | ||
| Professor at IESE Business School Barcelona, Spain | 2011* | ||
| Dr ir Vandeurzen Management Firm NV (represented by Urbain Vandeurzen, | |||
| Chairman and CEO of LMS) (2) | 2011* | ||
| Marc Vercruysse (1) | Chief Financial Officer Gimv | 2012* | |
| Christina von Wackerbarth (2) | Member of the Board of Mobistar | ||
| Leadership development coach at Insead | 2012* | ||
| Secretary | Walter Bracke | General Counsel |
fessionals. Before becoming CEO, Bruno Holthof was a partner at McKinsey & Company. During this period, he served a wide range of healthcare clients in Europe and the United States and gained significant expertise in the areas of strategy, organization and operations. Bruno Holthof holds an MBA from the Harvard Business School and an MD/PhD from the K.U. Leuven.
Luc Missorten is Chief Executive Officer of Corelio, a leading Belgian multimedia company. He also serves on the board of LMS and Bank Degroof. Before joining Corelio, he was Chief Financial Officer at Inbev (1995-2003) and UCB (2004-2007). He started his career at Linklaters (formerly De Bandt & Van Hecke) and also worked at Citibank for 10 years. Luc Missorten holds a law degree from K.U. Leuven, Belgium and completed educational programs at the College of Europe in Bruges (Certificat de Hautes Etudes Européennes) and the University of California - Berkeley (LL.M "Master of Laws").
Marc Ooms is non-executive director of several companies: Sea-Invest Corporation, European Bulk Terminals, I.V.C., BMT, PinguinLutosa and Food Invest International.
Jan P. Oosterveld retired in 2004 as a member of the Group Management Committee of Royal Philips Electronics, in charge of corporate strategy, corporate alliances, corporate redesign and restructuring, CEO of Philips Asia and Chairman of the Board of Directors of LG.Philips LCD, the joint venture with LGE in Seoul, Korea. He holds a Master's degree in mechanical engineering from the Technical University Eindhoven, the Netherlands and in business administration from the IESE Business School, Barcelona, Spain. He is a professor at IESE and owns a consultancy company. He is the Chairman of the Supervisory Board of Crucell NV, the Netherlands and a member of the Board of Directors of Candover Plc. UK, and of Cookson Plc, UK.
Dr Urbain Vandeurzen is a Civil Engineer in Mechanical Engineering (K.U. Leuven, 1978) and attained a PhD in Applied Sciences in 1982. He started his career as an assistant at the K.U. Leuven, and as a scientific researcher at the IWONL (1978 - 1980). In 1980, Urbain Vandeurzen became Chairman and CEO of LMS, a position he has held ever since. Under his leadership, LMS grew to a company of 900 people, with 30 offices worldwide. Over a period of 30 years, the company evolved from a niche company into a world leader in simulation- and test software and in consultancy services for the mechanical industry. During his career, Dr Vandeurzen has been widely involved in various employers' organizations (including as Chairman of Voka – Flanders' Chamber of Commerce and Industry) and as Chairman or Member of the Board of various business companies and research organizations. At present, he is a member of the Senate of the K.U. Leuven, a member of the Board of Directors of the Prince Albert Fund and a member of the Board of Directors of the Research Foundation – Flanders (FWO).
Marc Vercruysse has been CFO and member of the Management Committee of Gimv since 1998. Before becoming CFO, he was internal auditor with Gimv, senior investment manager and head of Structured Finance. He is also on the board of directors of several unlisted companies.
After several assignments as magazine Editorin-Chief, Christina von Wackerbarth became VNU Belgium's publishing director in 1994. She took over the operational group management of VNU Magazines International in January 1998. From 1999 to 2003, she was General Manager Television and COO of VRT, the Belgian public broadcasting company. Since then, Christina has been active as Media Consultant and Executive Coach, among others for the Leadership Development Centre at Insead. She also serves on the Board of Directors of Mobistar, the second largest Belgian mobile telecom operator. Christina von Wackerbarth holds a degree in Romance philology and linguistics, completed an Advanced Management Program at Insead and holds a Master's degree in Consulting and Clinical Coaching from HEC Versailles/Insead.
Walter Bracke is General Counsel for Barco. He has more than 35 years of experience as an inhouse legal counsel in large corporations. Walter worked in real estate and building before joining Union Carbide, one of the world's leading petrochemical companies, where he was responsible for legal and governmental affairs in Europe, Middle East and Africa. After the merger between Union Carbide and Dow Chemical, he joined Barco. Walter has been Secretary of the Board of Directors since June 2008. He graduated Juris Doctor from the Ghent University in 1970.
Filip Pintelon joined Barco in December 2008 and held the positions of President of Avionics & Simulation and President of Media, Entertainment & Simulation before assuming the role of COO. Prior to joining Barco, he was Corporate Vice President of the Testing Systems Division at LMS, Belgium. Before his time with LMS, Filip held several management positions at Andersen Consulting (Accenture) and The Boston Consulting Group, with assignments across Europe and the USA. He obtained an MBA from the Vlerick Leuven Gent Management School, following his graduation in 1986 as a Master's degree in Mathematics/Informatics at the K.U. Leuven.
Carl Peeters is Chief Financial Officer of Barco nv. He started with Barco in 1987 and held positions of Marketing Manager and Division Manager in the former Graphics division of Barco until 1996. Later he was responsible for Mergers & Acquisitions for the Barco Group. He was appointed CFO of BarcoNet when this division was spun off from Barco as a separate public company in 2000. He rejoined Barco after the delisting of BarcoNet in 2002. Until 2010, Carl held the position of the business group Monitoring, Control & Medical and was appointed CFO of Barco by end of 2010. Carl holds a degree in Applied Economics and a post graduate degree in Business Administration.
Jan Van Acoleyen, Senior Vice President & Chief Human Resources Officer, holds a Master's degree in Educational Sciences from the K.U. Leuven and an executive MBA from the University of Antwerp. Prior to joining Barco,
Eric Van Zele President & Chief Executive Officer
| Senior Vice Presidents Barco nv | |
|---|---|
| Filip Pintelon | Chief Operating Officer and General Manager Control Rooms & Simulation Division a.i. |
| Carl Peeters | Chief Financial Officer |
| Jan Van Acoleyen | Chief Human Resources Officer |
| Jacques Bertrand | Chief Sales Officer |
| Dave Scott | General Manager Defense & Aerospace Division |
| Piet Candeel | General Manager Healthcare Division |
| Wim Buyens | General Manager Entertainment Division |
| Luc Vandenbroucke | Senior Vice President Barco, responsible for Barco's wholly owned ventures |
| JP Tanghe | Senior Vice President Barco, responsible for Corporate Communication, |
| Investor Relations and Corporate Marketing | |
| Compliance Officer |
A Core Leadership Team (CLT) was set up in line with 'Barco redefined', as presented on the company's Analyst & Investor Day on 18 February 2011. It consists of Eric Van Zele, Filip Pintelon, Carl Peeters, Jan Van Acoleyen, Jacques Bertrand, Dave Scott, Piet Candeel and Wim Buyens.
Jan held senior international HR positions in high tech companies such as Alcatel and Agfa-Gevaert.
Jacques Bertrand joined Barco in 1986 after obtaining a degree in Electronic Engineering. He acquired his first experience in sales and product management in the former Graphics division of Barco and moved to Singapore in 1993 to become responsible for the start up and expansion of Barco Graphics in Asia-Pacific. In 2000, Jacques moved to Tokyo and was appointed President Barco Japan. In January 2005, he was promoted to President Barco Asia-Pacific and resided in Hong Kong. As from 1 February 2011, Jacques is Chief Sales Officer of Barco and resides in Belgium.
Dave Scott is General Manager of the Defense & Aerospace Division. He holds a degree in Electrical Engineering (BSEE) from Virginia Polytechnic Institute and State University. Prior to his career with Barco, he was an architect/ designer of color graphics display technology, holding positions from research engineer to vice president of Engineering at former companies. He was co-founder of Chromatics Inc. in 1976, which was acquired by Barco in 1990. In 1994, he was appointed as Executive Vice President/General Manager of Barco Display Systems division (renamed BarcoView in 1998), responsible for BarcoView US activities. In 2001, Dave became Chief Operating Officer for BarcoView, responsible for the worldwide Command and Control business unit. In January 2004, he assumed the position of President Barco North America, with responsibility with regional management. In November 2010, Mr. Scott assumed his present position while maintaining legal responsibility for managing the North American region as the head of Barco, Inc.
Piet Candeel is General Manager of the Healthcare Division. Prior to his present position, Piet occupied several positions in marketing, sales and general management over the past 25 years in a variety of business units
As Senior Vice President of Barco, JP Tanghe is responsible for Corporate Communication, Investor Relations and Corporate Marketing. He is also the Compliance Officer of Barco. In 1991, he started with the company as Manager JP Tanghe
Piet Candeel
Jan Van Acoleyen
Human Resources and General Affairs of one of Barco's divisions. Soon after that, he was put in charge of International Human Resources for the Barco Group. Prior to his career in Barco he was a consultant in marketing and human resources management and was appointed Director Human Resources of LVD n.v., an international Belgium-based company. JP Tanghe holds a Master's degree in philosophy and literature (1973) from the K.U. Leuven. He is an Honorary Fellow of the Hogenheuvel College at the same university. JP is also a member of the board of the Belgian Investor Relations Association (BIRA) and of the boards of the Flanders-China Chamber of Commerce (FCCC) and the Chamber of Commerce Canada-Belgium-Luxembourg (CCCBL).
in Barco. He was one of the early associates of the medical activities in Barco in 1995 and has since lined up with the continued growth of the division. He had an assignment in Edinburgh, Scotland when Barco acquired Voxar in 2004. Piet holds an Officer Degree in Nautical Electronics, a post-graduate in Marketing from EHSAL Brussels and an MBA from the University of Antwerp (UFSIA).
Wim Buyens is General Manager of the Entertainment Division. He started at Barco in November 2007 as Vice President Digital Cinema within the Media & Entertainment Division. Prior to joining Barco, Wim worked at the high end technology company Bruel & Kjaer in Denmark for over 10 years where he held several management positions as Marketing Director, European Sales Director and Division Director Aerospace and Defense. Wim holds a degree in Engineering and obtained his executive management experience at Stanford University and IMD in Lausanne.
Luc Vandenbroucke presently is Senior Vice President Barco. He oversees five businesses in order to make them grow in an entrepreneurial and profitable way. Before this, as President Europe, Middle East, Africa and Latin America, he was responsible for building the customer front end, including the first level customer service. Prior to this, he was President of the division BarcoView. He took up several positions in Marketing & Sales after joining Barco in 1975 and was also actively involved in the start up of new ventures. Luc holds a Commercial Engineer degree from the K.U. Leuven and a degree of Expert in International Trade from the International Trade Invest Institute of Antwerp. He was a member of the Board of Metris N.V. until it was acquired by Nikon, and a guest lecturer at the K.U. Leuven, dept. of Economics. He is an Honorary Fellow of the Hogenheuvel College of the K.U. Leuven where he was co-founder of the chair for entrepreneurship. Next to this he is an independent member of the Flemish Foreign Affairs Council, advisor to the Flemish Government.
The undersigned declare that:
Eric Van Zele, CEO Carl Peeters, CFO
Reference is made to the Belgian Corporate Governance Code 2009, http://www.corporategovernancecommittee.be/en/2009_code/latest_edition/ default.aspx and Barco's Corporate Governance Charter, which is available for download at www.barco.com/investors/en/corporategovernance.
Reference is made to Title 1 of the Corporate Governance Charter on www.barco.com for an overview of the responsibilities of the Board of Directors and for a survey of topics discussed at board meetings. On 10 March 2011, the board consisted of nine directors. All non-executive directors hold or have held senior positions in leading international companies or organizations. In 2010, the board of directors met 11 times. One of the meetings was held in San Francisco, US.
Overview of the number of meetings attended by all directors in 2010:
| Meetings attended | |
|---|---|
| Executive director and Chief Executive Officer • Eric Van Zele |
11 |
| Non-executive directors | |
| • Herman Daems, Chairman |
10 |
| • Marc Ooms |
11 |
| • Marc Vercruysse |
7 |
| Independent, non-executive directors | |
| • Bruno Holthof |
11 |
| • Luc Missorten |
11 |
| • Jan P. Oosterveld |
11 |
| • Urbain Vandeurzen |
9 |
| • Christina von Wackerbarth |
11 |
The audit committee is composed of three members, Jan P. Oosterveld (Chairman until the Annual Shareholders Meeting of 29 April 2010), Marc Vercruysse and Luc Missorten (Chairman appointed at the Annual Shareholders Meeting of 29 April 2010), all of whom are non-executive directors. Mr. Oosterveld and Mr. Missorten are independent directors.
The Board of Directors sees to it that the audit committee possesses sufficient relevant expertise, particularly regarding financial, accounting and legal matters, to be able to carry out its function effectively. Reference is made to the short biographies of the above mentioned members of the Audit Committee to testify to their competence in accounting and auditing, as required by the Companies Code, Art. 119, 6°. These biographies can be found on pages 56 and 57 of this annual report.
The members of the audit committee are appointed for a period that does not exceed the duration of a director's mandate. Title 2 (2.2) of the Corporate Governance Charter on www.barco.com gives an overview of the responsibilities of the audit committee. The tasks assigned to the audit committee are carried out for the entire group. The audit committee meets at least four times per year. Each year, the audit committee assesses its composition and its operation, evaluates its own effectiveness, and makes the necessary recommendations regarding these matters to the board of directors.
Both the statutory auditor and the head of the internal audit have direct and unlimited access both to the chairman of the audit committee and the chairman of the Board of Directors. In 2010, the audit Committee met seven times.
Overview of the number of meetings attended by the members of the Audit Committee:
The remuneration & nomination committee consists of three non-executive directors: Herman Daems (Chairman), Marc Ooms and Christina von Wackerbarth.
The board of directors has made use of the possibility to combine the remuneration committee and the nomination committee into a single committee. In line with the Corporate Governance Charter of the company, either the chairman of the Board of Directors or a non-executive director chairs this committee. The chairman of the board of directors does not chair the remuneration and nomination committee when it is dealing with the remuneration of the chairman.
The remuneration and nomination committee meets at least two times per year, as well as any time changes are necessary in the composition of the Board of Directors, be it appointments or reappointments. The CEO participates in the meetings when the remuneration and nomination plan proposed by the CEO for members of the executive management team is discussed, but not when his own remuneration is being decided. In fulfilling its responsibilities, the remuneration and nomination committee has access to all resources that it deems appropriate, including external advice.
Title 2 (2.3) of the Corporate Governance Charter on www.barco.com gives an overview of the responsibilities of the Remuneration & Nomination Committee. In 2010, the remuneration & nomination committee met three times.
Overview of the number of meetings attended by the members of the remuneration & nomination committee:
| Meetings attended | |
|---|---|
| • Jan P. Oosterveld |
7 |
| • Marc vercruysse |
6 |
| • Luc Missorten |
7 |
| Meetings attended | |
|---|---|
| • Herman Daems |
3 |
| • Marc Ooms |
3 |
| • Christina von Wackerbarth |
3 |
The members of this committee are Herman Daems (chairman), Bruno Holthof, Eric Van Zele, Jan P. Oosterveld and Urbain Vandeurzen.
The Board of Directors has set up a strategic committee including the chairman and the CEO. The chairman presides over this strategic committee. Members of the executive management and other members can be invited to attend meetings of the strategic committee. The committee meets when an issue is introduced by the CEO. The committee meets at least one time per year to evaluate the existing strategy.
Upon the proposal of the CEO, the strategic committee discusses options that could influence the strategic path followed by the company. Possible points that may be discussed in this committee include acquisitions, mergers and the sale of a given activity. Other important strategic choices can also be discussed in the committee, such as investing in new technologies, markets or regions that could have an important impact on the future of the company. This relates to investments running over a number of years that involve a minimum engagement by the company of ten million euro over the entire duration of the project. In 2010, the strategic committee met 3 times.
Overview of the number of meetings attended by the members of the strategic committee:
| Meetings attended |
|---|
| 3 |
| 3 |
| 3 |
| 3 |
| 3 |
In line with Belgian Corporate Governance guidelines, the Board of Directors of Barco regularly carries out a process of self-evaluation. The intention is to evaluate the functioning of the Board as a whole and of its committees. In this respect individual and private interviews are held with each of the directors, leading to a report which is submitted to the full board for review and action. The topics discussed are: the quality of the interaction between management and board, the quality of the information and documents submitted to the board, the preparation of the board meetings, the quality of the discussions and decision-making of the board, the extent to which all relevant strategic, organizational and managerial issues are addressed by the board, and the contribution of all board members to the decision-making process at the board. This process allows for actions to be taken, aiming at the continuous improvement of the governance of the company.
The above is fully in line with the Belgian Code on Corporate Governance. Reference is also made to Title 1 (1.3) of the company's Corporate Governance Charter on www.barco.com
On 29 April 2010, pursuant to article 17 of the articles of association, the general meeting set the aggregate annual remuneration for the year 2010 at 1,865,000 euro for the entire Board of Directors. This means that this amount also includes the remuneration for the executive director. In this respect it takes into account on target performance. Performance in 2010 however, was above target, leading to a total amount of 1,943,433 million euro in total being paid out to the entire Board of Directors.
In line with internal rules the general meeting grants a fixed remuneration of 20,000 euro to non-executive directors and an additional amount based on attendance at meetings of the board and of the committee(s) a director is a member of. The attendance fee per meeting of the board and the committees is set at 2,500 euro. The chairman of the audit committee receives an attendance fee of 5,000 euro per meeting. These remunerations are charged as general costs.
| fixed remuneration attendance |
variable board attendance |
variable committee |
total 2010 |
|
|---|---|---|---|---|
| • Herman Daems | 200,000* | |||
| • Marc Ooms | 20,000 | 27,500 | 7,500 | 55,000 |
| • Marc Vercruysse** | 20,000 | 17,500 | 15,000 | 52,500 |
| • Bruno Holthof | 20,000 | 27,500 | 0 | 47,500 |
| • Luc Missorten | 20,000 | 27,500 | 27,500 | 75,000 |
| • Jan P. Oosterveld | 20,000 | 27,500 | 32,500 | 80,000 |
| • Urbain Vandeurzen |
20,000 | 22,500 | 7,500 | 50,000 |
| • Christina von Wackerbarth |
20,000 | 27,500 | 7,500 | 55,000 |
* 156,000 euro plus 44,000 euro in retirement benefits
** amount paid to Gimv
For the Executive Director and the Corporate Senior Vice Presidents, the remuneration is determined by the remuneration & nomination committee, in line with the rules described in the company's 'Corporate Governance Charter' under Title 4 ('Remuneration'), available on www. barco.com.
Barco wants to be an attractive company for top talent in the technology market space based on sustainable human resources practices. Competitive reward, together with career and development opportunities, is at the heart of Barco's employee value proposition. Barco strives overall for a position above the market median on the total reward proposition with a substantial variable part based on company, team and individual performance. 2010 variable pay was fully conditional on company profitability.
The reward packages of the senior executive and extended management teams are reviewed by the remuneration and nomination committee on an annual basis. The committee assesses overall market competitiveness (based on bi-annual external market data), individual market positioning and sustained individual performance. This review results in updated individual reward packages and reward policies, as well as the criteria for the annual Barco Bonus plan.
The 2010 variable pay is based on EBIT, free cash flow, orders, sales, quality and individual targets.
In 2010 20,000 stock options were granted to the CEO. No stock options were exercised and no stock options lapsed.
In 2010, 15,950 stock options were granted to the Corporate Senior Vice Presidents. Given the recent changes in the management team, the remuneration and nomination committee felt it not appropriate to communicate any part of the individual remuneration of the Corporate Vice Presidents. No stock options were exercised and no stock options lapsed.
Reference is made to page 125 of this Annual Report for an overview of the warrants exercisable under the warrant plans. The group of Corporate Senior Vice Presidents in office on 10 March 2011 is presented on pages 58 and 59 in this annual report.
Barco's Board of Directors and its executive management are responsible for assessing the company risks and the effectiveness of internal controls.
Barco has set up a risk assessment and internal control framework aligned with the prescriptions as set forward by the Belgian Corporate Governance Code 2009. This framework is built upon the five basic components of internal control and is aligned with the needs and size of the company.
Barco has several measures in place in order to create a control environment that is sufficiently supportive to the other control components. Amongst others;
Barco has identified and analyzed all its key corporate risks as disclosed in the 'Risk Factors' section in this annual report. These corporate risks are communicated to the various levels of management. Each manager is also responsible to analyze the risks specifically applicable to their own area of responsibility. On a quarterly basis, a bottom up risk analysis exercise is performed in order to identify and document the current risk factors. Action plans are defined for all key risks.
Control measures to mitigate the corporate risks referred to above are described in the 'Risk Factors' section. In addition, control activities are embedded in all key processes and systems in order to assure proper achievement of the company objectives.
Barco recognizes the importance of timely, complete and accurate communication and information both top down as well as bottom up. The company therefore has put several measures in place to assure amongst others:
The quality of Barco's risk management and internal control framework is assessed by:
are clarified in the Internal Audit Charter which was approved by the audit committee and the Board of Directors. The key mission of Internal Audit as defined in the Internal Audit Charter is following: "the Internal Audit Department is an independent, objective assurance and advisory function designed to add value to the organization by bringing a systematic, disciplined approach to evaluate the internal control system and provide recommendations to improve it".
The most important features of the risk assessment and internal control framework related to the financial reporting are the following:
In line with the Royal Decree of 5 March 2006, which came into force on 10 May 2006, members of the board of directors and the executive committee must notify the BFIC (Banking, Finance and Insurance Commission) of any transactions involving shares or other financial instruments of Barco within 5 business days after the transaction. These transactions are made public on the web site of the BFIC http://www.cbfa.be and also on the Barco website (http://www.barco.com/investors/en/tradingdisclosure/default.asp), where by the end of the first month following every quarter, all transactions by "insiders" in financial instruments related to Barco, are made public by the Compliance Officer of Barco.
Reference is also made to Title 7 (1) of the Company's Corporate Governance Charter on www.barco.com
The law provides a means of settling conflicts of interest that arise within the context of a director's mandate. In the interest of the company, the board of directors has decided in this matter that its members must assume a number of additional obligations, which can be summarized as follows:
The legal provisions on conflicts of interest for directors apply to the decisions that fall under the power of the board of directors and that meet the following conditions:
The direct consequences of the applicability of these provisions are that the directors in question:
• must report their conflicting interest relating to property to the board of directors before a decision is taken;
A director who is a director or business manager of a customer or supplier or who is employed by a customer or supplier shall report this fact to the board of directors prior to the deliberations concerning a topic on the agenda relating (whether directly or indirectly) to this customer or supplier. This obligation also applies when a family member of the director has the above-mentioned position. The same rule applies when a director or their family members (whether directly or indirectly) hold more than 5% of the shares with voting rights of a customer or supplier. Subsequently, the director in question:
These legal provisions are not applicable when the customer or supplier is a listed company and the participation of the director (or their family members) takes place within the framework of assets that have been placed under the management of an asset manager who manages these assets in accordance with his own judgment, without taking the director (or their family members) into account. The directors are conscious of the great importance of the above rules in relation to the good management of Barco nv and they commit themselves to taking the greatest of care to ensure that these rules are observed.
Ernst & Young Bedrijfsrevisoren CV De Kleetlaan 2 - 1831 Brussel
Represented by Lieve Cornelis (Partner) & Jan De Luyck (Partner)
In 2010, remuneration paid to the statutory auditor for auditing activities amounted to 375,248 euro. Remuneration paid to the statutory auditor for special assignments was 81,278 euro.
Risk is an inherent factor of any business enterprise. Barco recognizes that a wide variety of risks exists and takes the necessary measures to reduce the potential impact of these risks on all aspects of its global operations. While not exhaustive, Barco specifically recognizes following risks as deserving attention:
Barco is active in very specialized, selected professional markets for visualization. In order to remain or become a market leader in each of its key markets, the company annually invests considerably in research & development. In 2010, this was 71.4 million euro, or 8.0% of sales. The main challenge in this respect is to define the right products to introduce in each of the company's markets. Risks associated with this challenge are:
Expected sales volumes may not be achieved
due to shortage of components.
This shortage may be a global phenomenon as was the case in 2010, due to the economic crisis. It may however, also be linked to the introduction of new products that require new components, which may not immediately be available in required volumes.
Barco's strategy is aimed at long-term growth and security. However, a failure to execute this strategy could negatively impact results and share value. This includes the inability to safeguard intellectual property rights and other ways of improper strategy execution. A similarly negative effect could result from not adapting quickly enough to paradigm shifts within the industry.
As Barco is traditionally active in very specialized, selected professional markets, this implies a strategic risk from technology commoditization and low-cost competition moving up the technology ladder. Counteracting measures initiated by Barco include intensified attention for the market mid-segments to increase its business in these markets by offering a broader product range to its customer base.
Barco has sometimes been, and may also be in the future, involved in legal actions, which are a normal aspect of doing business. These legal actions may be related to:
The above is an incomplete list. If necessary, provisions, which are understood to be sufficient, are made. However, any litigation case may result in unexpected costs.
Within a company of Barco's size and scope, employees' individual actions could result in a breach of company ethics. This can result in a negative effect on the company image, the business and the share value. This risk is higher in emerging markets as corporate governance systems and the monitoring of ethical standards may still be less developed than in more mature markets.
Through a strict worldwide application of its Corporate Governance Charter and diligent internal control Barco aims at reaching the highest level of compliance with its Corporate Governance Charter and the company ethics an a global scale.
Since Barco extensively uses IT systems and platforms to support its operations, configuration, hardware and software failures may occur, which could hamper these operations. Proper fail-safe and recovery procedures are in place to mitigate these risks.
In terms of addressing safety risks inherent to
any modern IT infrastructure, Barco's facility and IT management is fully compliant with ITAR and C-TPAT guidelines, proactively scans its network for vulnerabilities, strictly regulates access to its networks, and regularly performs disaster recovery exercises.
The results of the company are reported in euro. This means that the results of the operations and the financial position of Barco entities that work in other currencies than the euro, need to be translated in euro in the company's consolidation process. As there is an ongoing fluctuation between these foreign currencies and the euro, a negative impact may occur on the company's consolidated results.
The most important currency and risk in this respect is the US dollar. Around 45% of the company's total annual sales are realized in USD or USD-related currencies. The evolution of the exchange rate of the USD versus the euro cannot be predicted, which results in an ongoing risk in forecasting sales volumes for the whole group, also because of the time elapsing between order and actual delivery and invoice. At the same time profit margins may be negatively affected. At least as important however, is the fact that some of Barco's main competitors are USD-based. Because of that decreases in value of the USD against the euro may give these competitors a competitive advantage over Barco.
Barco has made great efforts in recent years to increase its competitive position and its natural hedging against the USD by increasing its operational costs in USD or USD-related currencies and by purchasing more components in these currencies. The company is set to continue on this course.
Outside of the immediate business environment Barco is active in, an overall negative economic climate, lack of liquidity in the financial markets or a global stock market collapse may have a negative effect on Barco, its customers and its partners. Customers and partners may either be slowed down by a recession, or unable to secure the cash to make due investments. To mitigate its own risks, in 2009 Barco secured a revolving credit facility of 85 million euro with a banking consortium, as well as adopted a pro-active cash generating strategy. In addition, the fact that Barco is doing business in many markets and geographical regions may reduce the impact of bad economic climates as these may not affect all markets and regions equally.
As Barco's business is introducing new cuttingedge technological applications, finding the right human resources for product management, R&D, business development and operations is a constant challenge. The global distribution of Barco's sales & marketing activities, service organization, R&D and manufacturing reduces this risk to a large extent. This risk is further mitigated by Barco's internal talent and career development and company-wide learning programs. Nevertheless, in today's recovering economy, attracting and retaining talent is a challenge for any company.
In all its operations and in all locations worldwide, Barco strictly adheres to all laws and regulations with regard to environmental safety. Nevertheless, unexpected circumstances or accidents may expose Barco to litigation. Moreover, Barco may be subjected to remediate historical environmental conditions on any of its sites, without being the actual or only cause of the environmental problem. As a good corporate citizen, Barco took its responsibility in this respect in previous cases and the company will keep doing so in the future.
Events of an exceptional nature may be related to the company itself, such as a fire, or events on a larger scale, such as flooding or other extreme weather conditions. On a global scale these events can also be terrorist attacks or health epidemics, destabilizing part or all of the world's economy. The list of the abovementioned exceptional events is not complete. Exceptional events may destroy a site of the company or part of it. Particularly in the case of an R&D and/or a manufacturing site, such events may strongly affect the competitive position of the company, as they may slow down or stop deliveries to customers or postpone the introduction of new products. As is the case with the actual damage caused by exceptional events, the competitive or commercial damage is insured as well. However, it is impossible to calculate beforehand what the real competitive negative impact of such events may be.
Part of Barco's long-term growth strategy is based on acquisitions. Despite the fact that Barco has well-defined parameters within which it looks for potential acquisitions and that it carries out the due-diligence processes with utmost care, acquisitions always bring along risks. These risks may be associated with the integration of the acquired company in the group. The growth of the acquired business may be below expectations or the acquired technological know how may not be as valuable as anticipated. The above risks may result in goodwill impairment.
Growth in Russia and the CIS sphere
154.8% growth in digital cinema, thanks to the world's most complete portfolio digital cinema projectors
| In thousands of euro |
2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| Sales | EBIT | % EBIT | Sales | EBIT | % EBIT | |
| Media, Entertainment & Simulation | 471,993 | 27,042 | 5.7% | 308,427 | -41,357 | -13.4% |
| Monitoring, Control & Medical | 427,862 | 18,093 | 4.2% | 335,154 | 11,815 | 3.5% |
| Eliminations | -2,856 | -5,515 | ||||
| Group | 896,999 | 45,135 | 5.0% | 638,066 | -29,537 | -4.6% |
The measures Barco took in 2009 to weather the crisis and restore profitability have led to robust growth in 2010. The company has clearly delivered on its promises for profitable growth in 2010. Sales realized in 2010 were 897 million euro, a robust growth of 40.6% compared to the 638.1 million of 2009. Organic growth was 32.3%.
Digital cinema grew sales year-on-year by 154.8% to 255.8 million euro. In medical imaging sales grew by 59.1% to 180.7 million euro. With 61.7%, avionics grew strongly as well. The other divisions realized single digit growth rates in sales for the full year, but grew sales by double digits in the second half of the year. With 529 million euro shipped during the last six months of 2010, as much as 59% of the full year shipments was realized during the second semester, an increase of 44% versus semester one.
Sales in Europe, Middle East, Africa and Latin America (EMEALA) represented 42.7% of consolidated sales, while 35.6% of sales were realized in North America and 21.7% in Asia Pacific. Compared to 2009, sales grew by 28.9%, 66.4% and 30.7% respectively. Among the best performing countries or regions for growth were the Benelux, Italy, the Nordic region, Mexico, the US, Canada, Australia, New Zealand, China, South East Asia, illustrating a global positive turn in business.
Order intake in 2010 was 978.3 million euro, an increase of 58.3% against 618.2 million euro in 2009. Organic growth in incoming orders was 49.7%. The regional distribution of order intake figures is about the same as for sales but growth figures compared to 2009 are even higher than for sales. The EMEALA region had a growth of 45.9% year-on-year, North America 94.3% and the APAC region 40.6%. The company realized growth in almost all countries where Barco is active, with outspoken performances in the Benelux, the Nordic region, Mexico, the US, Australia, New Zealand, China and South Korea.
Barco's order book at the end of 2010 stood at 426.9 million euro. At the end of December 2009 the order book was 331.4 million euro.
Gross profit increased by 71.1% to 287.5 million euro or 32.1% of sales. In 2009, gross profit was 168.0 million euro and gross profit margin was 26.3%. Gross profit margin remained at more than 35% in the Monitoring, Control Room & Medical Imaging Division, while it grew strongly from 16.2% to 28.7% in the Media, Entertainment & Simulation Division.
EBITDA was 98.8 million euro, which was 11% of sales, compared to 24.1 million euro or 3.8% of sales the year before. EBIT was 45.1 million euro compared to minus 29.5 million euro (before restructuring and impairment costs) in 2009. EBIT margin in 2010 was 5.0%. Currency Evolution sales per year half 2010 vs 2009
% 2009 19% 60.9%
1st half 2nd half
(in million euro)
exchanges had a positive impact on EBIT of 6.8 million euro compared to the year before.
While indirect costs had already been reduced from 41.5% of sales in 2008 to 38.8% in 2009, they were further brought down to below 30% of sales in the second half of 2010.
Research and development expenses increased year-on-year from 69.2 million euro to 71.4 million euro. In percentage of sales however, research and development expenses went down from 10.8% of sales to 8.0% of sales. Sales and marketing expenses increased from 94.3 million euro to 114.6 million euro, but relative to sales they decreased from 14.8% of sales to 12.8% of sales. General and administration expenses increased in absolute numbers but decreased in percentage of sales: from 41.7 million euro or 6.5% of sales to 49.0 million euro or 5.5% of sales.
Other operating result was minus 7.4 million euro. 2009 had an other operating result of 7.7 million euro positive.
Free cash flow over 2010 was slightly negative (minus 7.0 million euro) due to some investments in 3D-related technology licenses and higher working capital needs, resulting from the high increase in orders and sales. Gross operating cash flow was very strong though, driven by the high top line growth and better margins than in 2009.
Capex for 2010 excluding capitalized development was 11.0 million euro, compared to 5.5 million euro the year before.
On 31 December 2010, trade receivables were at 201 million euro, up 66 million from end December 2009. DSO was reduced to 59 days, down 12% from 67 days at the end of 2009. At 230.4 million euro, inventory was 84.2 million euro higher than at end 2009. Inventory turns were at 2.3 compared to 2.7 end of 2009. End June 2010 inventory turns were at 2.1. Trade payables were 125.4 million euro, compared to 67.9 million euro at the end of December 2009. DPO was 67 days end of 2010 compared to 55 days the year before.
At the end of December 2010, Barco had a net cash position of 8.9 million euro, compared to a net cash position of 23.5 million euro on 31 December 2009. No dividend was paid in 2010 and neither were any shares bought back.
| In thousands of euro |
2010 | 2009 | 2008 |
|---|---|---|---|
| Cash flow from operating activities | |||
| EBIT after restructuring & impairment | 45,135 | -68,861 | -17,793 |
| Impairment of capitalized development costs and goodwill | 1,278 | 31,144 | 6,046 |
| Restructuring provision (personnel) | -3,735 | -4,598 | 11,733 |
| Amortization capitalized development cost | 39,058 | 40,849 | 46,136 |
| Depreciation of tangible and intangible fixed assets | 13,282 | 12,768 | 12,861 |
| Loss on tangible fixed assets | - | -856 | -322 |
| Gross operating free cash flow | 95,018 | 10,446 | 58,660 |
| Changes in trade receivables | -55,438 | 34,414 | 32,772 |
| Changes in inventory | -68,240 | 43,670 | 18,302 |
| Changes in trade payables | 55,340 | -1,995 | -23,036 |
| Other changes in net working capital | 21,007 | 11,166 | 10,153 |
| Change in net working capital | -47,331 | 87,256 | 38,191 |
| Net operating free cash flow | 47,687 | 97,702 | 96,852 |
| Interest income/expense | -1,448 | -1,669 | -3,726 |
| Income taxes | 393 | 461 | -17,222 |
| Cash flow from operating activities | 46,632 | 96,493 | 75,904 |
| Cash flow from investing activities | |||
| Expenditure on product development | -41,107 | -32,801 | -47,006 |
| Purchases of tangible and intangible fixed assets | -13,397 | -5,486 | -9,674 |
| Proceeds on disposals of tangible and intangible fixed assets | 863 | 1,228 | 832 |
| Cash flow from investing activities (excluding acquisitions) | -53,641 | -37,058 | -55,848 |
| Free cash flow (continuing business excluding acquisitions) | -7,009 | 59,435 | 20,056 |
The accompanying notes are in integral part of this statement.
Barco generated a free cash flow of -7.0 million euro in 2010 (2009: +59.4 million euro; 2008: +20.1 million euro). In 2010, Barco realized a full EBIT turnaround compared to 2009, resulting in a gross operating free cash flow of 95.0 million euro (10.4 million euro in 2009), partly offset by 47.3 million euro increase of the net working capital. The net interest expenses further decreased in 2010 compared to 2009 and 2008. During 2010 and 2009, the net tax payments were positive. The expenditure on product development has been reinforced during 2010, leading up to 41.1 million euro investments in product development.
| In thousands of euro |
2010 | 2009 | 2008 |
|---|---|---|---|
| Trade debtors | 200.983 | 134.805 | 168.325 |
| Inventory | 230,421 | 146,264 | 189,104 |
| Trade payables | -125,353 | -67,852 | -67,004 |
| Other working capital | -128,906 | -86,163 | -93,733 |
| Total working capital | 177,145 | 127,055 | 196,692 |
| Long term assets & liabilities | 150,463 | 140,645 | 164,456 |
| Operating capital employed | 327,608 | 267,700 | 361,148 |
| Goodwill | 52,891 | 32,265 | 57,265 |
| Operating capital employed (incl goodwill) | 380,499 | 299,965 | 418,413 |
| EBIT before restructuring & impairment | 45,135 | -29,537 | 8,903 |
| ROCE after tax (%) | 9.7% | -9.0% | 2.1% |
Mainly driven by the significant sales increase in 2010 compared to 2009, the Barco group has realized a positive EBIT of 45.1 million euro in 2010 compared to a negative EBIT before restructuring of 29.5 million euro in the previous reporting period. By consequence, the group achieves a positive ROCE in 2010 amounting to 9.7%.
Sales in MES increased by 53.0% to 472.0 million euro in 2010, from 308.4 million euro in 2009. The digital cinema business performed extremely well, with Barco launching a new series of projectors that serves the whole range of the market and put Barco into a global leadership position. Shipments in digital cinema grew by 154.8% to 255.8 million euro, 179 million euro of which was realized in the second half of the year. The Chinese manufacturing site for digital cinema is now fully operational. For digital cinema, North America and the APAC markets were the strongest. VLS/DS (video & lighting solutions and digital signage) realized the highest growth in the North America and EMEALA markets. The projector segment of VLS grew by more than 20%. The repositioning of the outof-home LED business to digital signage through the acquisition of dZine in July 2010, bringing advanced software tools for content creation and management, will further broaden Barco's offering to the market. Sales in the simulation market were flat year-on-year with a growth in top line in the APAC market compensating for the decrease in North America.
Order intake in MES increased by 96.1% from 283.9 million euro in 2009 to 556.6 million euro in 2010. With an increase of over 200% for digital cinema and almost 60% for simulation, these two markets were the main contributors to the growth in order intake of the MES business group. Order intake in the VLS/DS market increased by almost 20%. Growth in order intake for MES was carried by all three regions, with an outperformance of digital cinema in North America. For VLS/DS the APAC region realized the highest growth, while simulation grew the most in the EMEALA region.
The order book at the end of December 2010 was 177.5 million euro, compared to 87.5 million euro the year before.
At 135.4 million euro, gross profit for the MES business group was up 170.8% compared to the year before. Gross profit margin was 28.7% compared to 16.2% in 2009.
The projector segment of VLS has healthy margins while simulation also continues to be a high margin business. In VLS/DS operational costs have been right sized and the market is recovering slowly. Extraordinary project costs and warranties however, have continued to negatively impact results.
MES EBITDA margin for 2010 was 10.2%. EBIT for 2010 was at 27.0 million euro, a 5.7% margin, compared to minus 41.4 million euro in 2009. EBIT in digital cinema was double digit. In simulation it was single digit, while it was still negative in the VLS/DS market.
Research & development expenses amounted to 28.2 million euro or 6.0% of sales.
Sales in MCM increased by 27.6% (13.8% of which was organic growth) from 335.2 million euro in 2009 to 427.9 million euro in 2010. The main growth driver was medical imaging, with 59.1%, 17% of which was organic. FIMI, which was acquired end December 2009, contributed well to the growth in sales of the division. The medical imaging business is set to continue its solid performance, as it is investing in the expansion of new sales channels and the development of new customer solutions that are widening the product portfolio in the healthcare market. Sales in avionics increased 61.7%, as this division benefits from increased demand for cockpit retrofit systems. The other two business units also contributed, be it with single digit figures. Traffic, surveillance and monitoring (TSM) succeeded in recapturing market share as its newly introduced LED cubes for control rooms met with high demand. Defense experienced some softness in demand. The best growth market for shipments for the MCM group as a whole was North America.
Order intake in MCM increased by 24.5% (10.3 % of which organic) from 339.5 million euro in 2009 to 422.7 million euro in 2010. All divisions within the business group contributed to this growth. The medical business in particular did very well with an increase in incoming orders of 68.7%. Excluding the FIMI acquisition, organic growth in order intake was 21.6%. The avionics business reached double digit growth in order intake. In the TSM units, the introduction of the new LED powered cubes continued to improve the competitive position in the market. A market for retrofitting installed base also started to emerge. All divisions of the MCM group had a growing order intake in North America and the APAC region. In the EMEALA region, only the medical imaging business unit could realize growth in order intake.
The order book at the end of December 2010 was 249.6 million euro, compared to 244.5 million euro the year before.
At 152.2 million euro, gross profit for the MCM business group increased by 29.1% compared to 2009. Gross profit margin was 35.6% compared to 35.2% the year before. In TSM, price erosion was offset by the move of operations from Karlsruhe (Germany) to Noida (India).
MCM's EBITDA margin for 2010 was 11.8%. EBIT for 2010 was at 18.1 million euro, a 4.2% EBIT margin, compared to 11.8 million euro in 2009, a 3.5% margin. The EBIT margin of the medical imaging business unit was in the double digits.
Research & development expenses amounted to 43.1 million euro or 10.0% of sales.
| In euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Number of shares on 31 Dec (in thousands) | 12,670 | 12,670 | 12,670 |
| Per share | |||
| Net result (1) | 3.44 | -5.02 | 1.53 |
| Gross dividend | 1.00 | 0 | 0 |
| Net dividend (2) | 0.75 | 0 | 0 |
| Net dividend (3) | 0.85 | 0 | 0 |
| Gross dividend yield (%) (4) | 2.1 | 0 | 0 |
| Yearly return (%) (5) | 73.0 | 59.2 | -61.1 |
| Pay-out ratio (%) (6) | 29.1 | 0 | 0 |
| Price/earnings ratio (%) (7) | 13.2 | -5.7 | 11.7 |
| Net equity | 30.95 | 27.17 | 31.82 |
(1) net income from continuing operations + net income from discontinued operations
(2) without VVPR-strip (withholding tax of 25%)
(3) with VVPR-strip (withholding tax of 15%)
(4) gross dividend / closing rate on 31 Dec
(5) increase / decrease share price + gross dividend paid out, divided by closing share price
(6) gross dividend / net result
(7) share price 31 Dec / net result per share
| In euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Share price | |||
| Per share | |||
| Average closing price | 37.67 | 23.40 | 35.54 |
| Highest closing price | 48.59 | 35.56 | 52.20 |
| Lowest closing price | 28.23 | 9.80 | 13.10 |
| Closing price on 31 Dec | 48.28 | 28.49 | 17.90 |
| Average number of shares traded daily | 35,551 | 37,430 | 55,126 |
| Stock market capitalization on 31 Dec (in millions) | 611.7 | 360.97 | 226.79 |
Barco share BAR ISIN BE0003790079 Barco VVPR-strip BARS ISIN BE0005583548
Reuters BARBt.BR Bloomberg BAR BB
| Market capitalization 31 Dec 2010 | 611,705,427 |
|---|---|
| Highest capitalization | 615,633,113 |
| Lowest capitalization | 357,672,830 |
| Share price 31 Dec 2009 | 28.49 euro |
| Share price 31 Dec 2010 | 48.28 euro |
| Average number of shares traded | |
| On daily basis (2010) | 35,551 |
| Yearly volume (2010) | 295.79 million euro |
| Velocity (2010) | 62.66% |
On 31 December 2010, the capital amounted to 54,169,171.60 euro, represented by 12,669,955 shares. Ownership of the company's shares was as follows:
| VIM | 9.87% | (1,249,921 shares) |
|---|---|---|
| Franklin Templeton Investments Corp. | 4.95% | (627,181 shares) |
| Templeton Investment Counsel, LLC | 5.02% | (636,239 shares) |
| Barco | 5.82% | (737,963 shares) |
| Public | 74.34% | (9,418,651 shares) |
| Total | 100% | (12,669,955 shares) |
After two years of not paying a dividend, the Board of Directors decided to recommend to the general assembly to pay a dividend of 1 euro (gross) per share over 2010. This is 0.75 euro net, on withholding tax of 25%, and 0.85 on withholding tax of 15% (with VPPR strip). At 1 euro, the pay-out ratio is 29.06%.
| VIM | 9.20% | (1,249,921 shares) |
|---|---|---|
| Franklin Templeton Investments Corp. | 4.62% | (627,181 shares) |
| Templeton Investment Counsel, LLC | 4.68% | (397,984 shares) |
| Barco | 5.43% | (636,239 shares) |
| Public | 76.07% | (10,337,455 shares) |
| Total | 100% | (13,588,759 shares) |
| • Communication of results 2H10 and FY10 |
9 February 2011 |
|---|---|
| • Analyst & Investor Day 2011 |
18 February 2011 |
| • Trading update 1Q11 |
22 April 2011 |
| • Annual General Shareholders meeting |
28 April 2011 |
| • Communication of results 1H11 |
20 July 2011 |
| • Trading update 3Q11 |
26 October 2011 |
| Bank Degroof | Thibaud Rutsaert |
|---|---|
| Exane BNP Paribas |
Arnaud Goossens |
| Flemish Federation of Investors and Investor Clubs G | ert De Mesure |
| Goldman Sachs International | Freddie Neave |
| ING | Emmanuel Carlier |
| KBC Securities | Nico Melsens |
| Leleux Associated Brokers | Frédéric Liefferinckx |
| Petercam | Stefaan Genoe |
| Royal Bank of Scotland | Jeroen van Harten Wim Gille |
| SG Private Banking |
Danny Van Quaethem |
The Barco share closed at 48.28 euro when markets closed on 31 December 2010. With an increase of 69.46% over 2010, the share continued on its growth path started in 2009, when the share price grew 59.16% over the full year. 2009 was the year of rightsizing the company in the wake of the global economic crisis and of creating cash. This was the first stage of a three-step strategy announced at the beginning 2009, to turn around the company.
This announcement was also a promise to the shareholders. And as Barco lived up to its promise, investors' confidence in the company grew towards the end of the year.
2010 was a year of very important growth for Barco. Sales grew by 258.9 million euro or 40.6% to 897.0 million euro. Order intake even grew by 58.3% to 987.3 million euro. EBIT increased to 45.1 million euro from minus 29.5 million the year before, an EBIT margin of 5.0%. It did not go unnoticed that besides the strong growth in the digital cinema and medical imaging businesses, the other business units of Barco had a combined growth of sales of 19.4% and of 21.5% in incoming orders in the second half of 2010, boding well for 2011.
Barco realized profitable growth in 2010. The second promise to the shareholders was met and over 2010 almost 70% was added to the share price.
The company was ready for the third phase of its turnaround strategy: preparing itself for continued sustainable growth in the years to come. On 18 February 2011 Barco's management presented 'Barco redefined' to an international public of analysts and investors. In the meantime the share price closed at 56.44 euro on Tuesday 1 March, an increase of 16.90 euro since 31 December 2010.
Barco wishes to thank its shareholders for their ongoing confidence in the company, its board of directors, its management and its employees, on its path to sustainable growth.
By continuing its long-standing practice of international road shows to meet investors and inviting them also to Barco's Customer Center at its headquarters in Belgium, the company was able to consolidate the wide international distribution of its shareholders. End June 2010, institutional investors were identified as holding 59.4% of all shares of the company. Of all shares held by identified institutional investors, 30.6% were held in Belgium, 22.8% in the UK, 17.3% in the USA, 9.9% in France, 8.6% in Canada and 5.7% in Germany, to name only the countries with an institutional shareholdership above 3%. Barco holds 5.82% of its own shares. 22.5% of the shares are estimated as held by private investors, leaving 12.3% of the shares whose the ownership was unidentified end June 2010. The five largest shareholders accounted for 24.7% of all shares of Barco while the 10 largest held 38.8% of the shares end June 2010.
Value-oriented investors continue to dominate Barco's shareholdership with 31% of shares held, although they have been declining since June 2009, when the percentage they held was 33%. This may be due to the fact that Barco endured a tough 2H09 on account of exposure to the video & lighting and out of home media markets, which suffered severely because of the global economic crisis. However, the positive
Geographical distribution of shares held by identified institutional shareholders in number of shares
evolution of the company's results in 2010 and particularly in the second half, may bring about a return of value investors in the near future. GARP (growth at reasonable price) investors accounted for 18% of shares held versus 22% the year before. Growth investors kept their holdings at a low 16%. The very strong growth of 2010 order intake of 58.3% to 987 million euro may lead to expectations for ongoing strong growth. This in turn may very well forecast a comeback of growth investors in the near future. Barco traditionally benefits from a large proportion of low turnover investors. These investors have a longer investment horizon and are less sensitive to short-term phenomena, resulting in a natural stabilizing effect on the shareholder base.
In 2010, Barco continued to offer the financial community of analysts, investors and shareholders the highest level of transparency and will keep doing so in 2011. Besides road shows and company visits, calls with analysts and investors are made on a daily basis. The company kicked off 2011 with a well-appreciated Analyst & Investor Day on 18 February 2011, to present 'Barco redefined', Barco's third step in its strategy for continued, sustainable and profitable growth in the years to come.
Geographical distribution of shares held by identified institutional shareholders in number of shareholders
This chapter of the Annual Report contains the IFRS audited consolidated financial statements including the notes thereon prepared in accordance with the International Financial Reporting Standards as adopted by the European Union.
The chapter Comments on the results (page 70) provides an analysis of the developments during the financial year 2010 and the results and is based on the IFRS consolidated financial statements and should be read in conjunction with these statements.
(in million euro)
The completely refurbished Customer Center in Kuurne shows customers our wide range of products and systems for various markets
| In thousands of euro | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Net sales | 2 | 896,999 | 638,066 | 725,288 |
| Cost of goods sold | 2 | -609,484 | -470,115 | -480,149 |
| Gross profit | 4 | 287,516 | 167,951 | 245,139 |
| Research and development expenses | 4 | -71,371 | -69,234 | -77,087 |
| Sales and marketing expenses | 4 | -114,555 | -94,251 | -116,196 |
| General and administration expenses | 4 | -49,006 | -41,665 | -51,119 |
| Other operating income (expense) - net | 4 | -7,449 | 7,662 | 8,166 |
| EBIT before restructuring and impairment | 45,135 | -29,537 | 8,903 | |
| Restructuring and impairment costs | 6 | - | -39,386 | -26,696 |
| EBIT after restructuring and impairment | 45,135 | -68,923 | -17,794 | |
| Interest income | 912 | 3,803 | 4,435 | |
| Interest expense | -2,422 | -5,472 | -8,161 | |
| Other non-operating income (expense) - net | - | - | 135 | |
| Income before taxes | 43,625 | -70,593 | -21,384 | |
| Income taxes | 7 | - | 6,383 | - |
| Net income from continuing operations | 43,625 | -64,210 | -21,384 | |
| Net income from discontinued operations | 3 | - | 4,289 | 39,642 |
| Net income | 43,625 | -59,919 | 18,258 | |
| Non-controlling interest | - | - | - | |
| Net income attributable to the equity holder of the parent | 43,625 | -59,919 | 18,258 | |
| Earnings per share (in euro) | 8 | 3.66 | -5.02 | 1.53 |
| Diluted earnings per share (in euro) | 8 | 3.41 | -5.02 | 1.44 |
| Earnings (continuing) per share (in euro) | 8 | 3.66 | -5.38 | -1.79 |
| Diluted earnings (continuing) per share (in euro) | 8 | 3.41 | -5.38 | -1.79 |
The accompanying notes are an integral part of this income statement.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Net income | 43,625 | -59,919 | 18,258 |
| Exchange differences on translation of foreign operations (a) |
9,000 | 830 | -7,818 |
| Net (loss)/gain on cash flow hedges | -1,949 | -229 | 390 |
| Income tax | 361 | 78 | -133 |
| Net (loss)/gain on cash flow hedges, net of tax | -1,589 | -151 | 258 |
| Other comprehensive income (loss) for the period, net of tax | 7,411 | 679 | -7,560 |
| Total comprehensive income for the period, net of tax, attributable to equity holder of the parent |
51,036 | -59,241 | 10,698 |
The accompanying notes are an integral part of this cash flow statement
(a) Translation exposure gives rise to non-cash exchange gains/losses. Examples are foreign equity and other long-term investments abroad. These long term investments give rise to periodic translation gains/losses that are non-cash in nature until the investment is finally liquidated. The comprehensive income line commonly shows a positive result in case the foreign currency in countries where investments were made appreciates versus the euro, and a negative result in case the foreign currency depreciates. In 2010, positive exchange differences in the comprehensive income line were mainly booked on foreign operations held in Indian Rupee, US Dollar, Singapore dollar and Australian dollar.
| In thousands of euro | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| ASSETS | ||||
| Goodwill | 9 | 52,891 | 32,265 | 57,265 |
| Capitalized development cost | 10 | 59,378 | 54,434 | 69,038 |
| Other intangible assets | 11 | 8,573 | 5,204 | 2,325 |
| Land and buildings | 11 | 30,525 | 30,988 | 33,378 |
| Other tangible assets | 11 | 25,657 | 23,193 | 29,058 |
| Investments | 326 | 19,327 | 327 | |
| Deferred tax assets | 12 | 41,742 | 32,125 | 33,871 |
| Other non-current assets | 14 | 17,339 | 6,109 | 5,302 |
| Non-current assets | 236,431 | 203,645 | 230,565 | |
| Inventory | 13 | 230,421 | 146,264 | 189,104 |
| Trade debtors | 14 | 200,983 | 134,805 | 168,325 |
| Other amounts receivable | 14 | 32,044 | 25,850 | 30,172 |
| Cash and cash equivalents | 15 | 46,041 | 45,901 | 72,119 |
| Prepaid expenses and accrued income | 8,780 | 9,092 | 7,484 | |
| Assets from discontinued operations | 3 | - | 6,918 | 22,960 |
| Current assets | 518,269 | 368,831 | 490,162 | |
| Total assets | 754,699 | 572,475 | 720,727 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to equityholders of the parent | 17 | 395,590 | 344,264 | 403,173 |
| Non-controlling interests | 1 | 1 | 3 | |
| Equity | 395,591 | 344,265 | 403,176 | |
| Long-term debts | 15 | 12,674 | 11,906 | 13,672 |
| Deferred tax liabilities | 12 | 7,331 | 5,299 | 3,215 |
| Other long-term liabilities | 16 | 13,288 | 5,446 | 5,813 |
| Non-current liabilities | 33,293 | 22,652 | 22,700 | |
| Current portion of long-term debts | 15 | 2,643 | 2,393 | 1,983 |
| Short-term debts | 15 | 24,039 | 8,116 | 89,266 |
| Trade payables | 18 | 125,353 | 67,852 | 67,004 |
| Advances received on contracts in progress | 33,659 | 27,493 | 19,180 | |
| Tax payables | 23,574 | 12,203 | 20,989 | |
| Employee benefit liabilities | 47,598 | 28,450 | 38,055 | |
| Other current liabilities | 6,522 | 3,997 | 4,636 | |
| Accrued charges and deferred income | 14,154 | 10,801 | 7,821 | |
| Provisions | 19 | 48,273 | 38,824 | 40,355 |
| Liabilities from discontinued operations | 3 | - | 5,429 | 5,562 |
| Current liabilities | 325,815 | 205,558 | 294,851 | |
| Total equity and liabilities | 754,699 | 572,475 | 720,727 |
The accompanying notes are an integral part of this balance sheet.
The balance sheet per 31 December 2010 does not contain discontinued operations, resulting in no differences between the reported and the continuing balance sheet. The balance sheet per 31 December 2009 and 2008 include discontinued operations, on which detailed information is included in Note 3. The above mentioned balance sheet relates to the continuing business for the 3 years, whereas the balance sheet from reported business is included in Note 25.
| In thousands of euro | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Cash flow from operating activities | ||||
| EBIT after restructuring & impairment | 4 | 45,135 | -68,861 | -17,793 |
| Impairment of capitalized development costs and goodwill | 4 | 1,278 | 31,144 | 6,046 |
| Restructuring provision and charges (personnel) | -3,735 | -4,598 | 11,733 | |
| Amortization capitalized development cost | 4 | 39,058 | 40,849 | 46,136 |
| Depreciation of tangible and intangible fixed assets | 11 | 13,282 | 12,768 | 12,861 |
| Loss on tangible fixed assets | - | -856 | -322 | |
| Share options recognized as cost | 17 | 290 | 330 | 640 |
| Discontinued operations: cash flow from operating activities | - | -97 | 5,285 | |
| Gross operating cash flow | 95,308 | 10,679 | 64,585 | |
| Changes in trade receivables | -55,438 | 34,414 | 32,772 | |
| Changes in inventory | -68,240 | 43,670 | 18,302 | |
| Changes in trade payables | 55,340 | -1,995 | -23,036 | |
| Other changes in net working capital | 21,007 | 11,166 | 10,153 | |
| Discontinued operations : change in net working capital | 3 | - | -7,528 | 1,070 |
| Change in net working capital | -47,331 | 79,728 | 39,261 | |
| Net operating cash flow | 47,977 | 90,407 | 103,846 | |
| Interest income/expense | -1,448 | -1,669 | -3,726 | |
| Income taxes | 393 | 461 | -17,222 | |
| Other non-operating results | -7 | - | - | |
| Discontinued operations : income taxes | 3 | - | 373 | 148 |
| Cash flow from operating activities | 46,915 | 89,572 | 83,047 |
| In thousands of euro | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Cash flow from investing activities | ||||
| Expenditure on product development | 4 | -41,107 | -32,801 | -47,006 |
| Purchases of tangible and intangible fixed assets | 11 | -13,397 | -5,486 | -9,674 |
| Proceeds on disposals of tangible and intangible fixed assets | 863 | 1,228 | 832 | |
| Acquisition of Group companies, net of acquired cash | 24 | -9,876 | - | -36,423 |
| Disposal of Group companies, net of disposed cash | 1.2 | 1,976 | - | - |
| Other investing activities | 1 | -19,000 | - | |
| Discontinued operations : cash flow from investing activities | 3 | - | 22,774 | 59,539 |
| Cash flow from investing activities | -61,541 | -33,284 | -32,733 | |
| Cash flow from financing activities | ||||
| Dividends paid | - | - | -28,556 | |
| Share issue | - | - | 8 | |
| Acquisition of own shares | - | - | -1,217 | |
| Payments of long-term liabilities | -1,406 | -1,766 | -1,131 | |
| Proceeds from (+), payments of (-) short-term liabilities | 16,173 | -80,739 | -20,638 | |
| Cash flow from financing activities | 14,766 | -82,505 | -51,533 | |
| Net decrease in cash and cash equivalents | 141 | -26,217 | -1,219 | |
| Cash and cash equivalents at beginning of period | 45,901 | 72,119 | 73,337 | |
| Cash and cash equivalents at end of period | 46,042 | 45,901 | 72,119 |
The accompanying notes are an integral part of this cash flow statement
| In thousands of euro | Share capital and premium |
Retained earnings |
Share based payments |
Cumulative translation adjustment |
Cash flow hedge reserve |
Own shares |
Equity attributable to equityholders of the parent |
Non controlling interest |
Equity |
|---|---|---|---|---|---|---|---|---|---|
| Balance on 1 January 2008 | 185,311 | 308,759 | 2,218 | -30,769 | 506 | -44,421 | 421,605 | 2 | 421,607 |
| Net income | - | 18,258 | - | - | - | - | 18,258 | - | 18,258 |
| Dividend | - | -28,556 | - | - | - | - | -28,556 | - | -28,556 |
| Other comprehensive income (loss) for the period, net of tax | - | - | - | -7,818 | 258 | - | -7,560 | - | -7,560 |
| Capital increase | 8 | - | - | - | - | - | 8 | - | 8 |
| Acquisition of own shares | - | - | - | - | - | -1,220 | -1,220 | - | -1,220 |
| Share-based payment | - | - | 640 | - | - | - | 640 | - | 640 |
| Balance on 31 December 2008 | 185,319 | 298,461 | 2,858 | -38,587 | 764 | -45,641 | 403,174 | 2 | 403,176 |
| Balance on 1 January 2009 | 185,319 | 298,461 | 2,858 | -38,587 | 764 | -45,641 | 403,174 | 2 | 403,176 |
| Net income | - | -59,919 | - | - | - | - | -59,919 | - | -59,919 |
| Other comprehensive income (loss) for the period, net of tax | - | - | - | 830 | -151 | - | 679 | - | 679 |
| Share-based payment | - | - | 330 | - | - | - | 330 | - | 330 |
| Balance on 31 December 2009 | 185,319 | 238,542 | 3,188 | -37,757 | 613 | -45,641 | 344,264 | 1 | 344,265 |
| Balance on 1 January 2010 | 185,319 | 238,542 | 3,188 | -37,757 | 613 | -45,641 | 344,264 | 1 | 344,265 |
| Net income | - | 43,625 | - | - | - | - | 43,625 | - | 43,625 |
| Other comprehensive income (loss) for the period, net of tax | - | - | - | 9,000 | -1,589 | - | 7,411 | - | 7,411 |
| Share-based payment | - | - | 290 | - | - | - | 290 | - | 290 |
| Balance on 31 December 2010 | 185,319 | 282,166 | 3,478 | -28,757 | -975 | -45,641 | 395,590 | 1 | 395,591 |
The accompanying notes are an integral part of this statement.
The consolidated financial statements of the Barco group have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the EU. All standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) effective year-end 2010 and adopted by the European Union are applied by Barco.
The consolidated financial statements are presented in thousands of euro and are prepared under the historical cost convention, except for the measurement at fair value of investments and derivative financial instruments. The financial statements were authorized for issue by the board of directors on 7 February 2011. The chairman has the power to amend the financial statements until the shareholders' meeting of 28 April 2011.
The consolidated financial statements comprise the financial statements of the parent company, Barco nv, and its controlled subsidiaries, after the elimination of all intercompany transactions.
Subsidiaries are consolidated from the date the parent obtains control until the date control ceases. Acquisitions of subsidiaries are accounted for using the purchase method of accounting. Control exists when Barco has the
power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are prepared according to the parent's company reporting schedule, using consistent accounting policies.
Non-controlling interests represent the portion of profit or loss and net assets not held by the group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from shareholder's equity.
Investments in associated companies over which the company has significant influence (typically those that are 20-50% owned) are accounted for under the equity method of accounting and are carried in the balance sheet at the lower of the equity method amount and the recoverable amount, and the pro rata share of income (loss) of associated companies is included in income.
The company's interest in the jointly controlled entity is accounted for by proportionate consolidation, which involves recognizing a proportionate share of the joint venture's assets, liabilities, income and expenses with similar items in the consolidated financial statements on a line-by-line basis.
Goodwill represents the excess of the cost of the acquisition over the fair value of identifiable net assets and contingent liabilities of a subsidiary or associated company at the date of acquisition.
Goodwill is carried at cost less any accumulated impairment losses.
Research and development costs are expensed as incurred, except for development costs, which relate to the design and testing of new or improved materials, products or technologies, which are capitalized to the extent that it is expected that such assets will generate future economic benefits and the recognition criteria of IFRS are met. Capitalized development costs are amortized on a systematic basis over their expected useful lives. General estimate of useful life is 2 years, unless a longer or shorter period can be justified. This period is not exceeding 4 years.
Intangible assets acquired separately are capitalized at cost.
Intangible assets acquired as part of a business combination are capitalized at fair value separately from goodwill if the fair value can be measured reliably on initial recognition. Other intangible assets are amortized on a straightline basis not exceeding 5 years.
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Generally, depreciation is computed on a straight-line basis over the estimated useful life of the asset. The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount.
Estimated useful life is:
| • buildings | 20 years |
|---|---|
| • installations | 10 years |
| • production machinery |
5 years |
| • measurement equipment |
4 years |
| • tools and models |
3 years |
| • furniture | 10 years |
| • office equipment |
5 years |
| • computer equipment |
3 years |
| • vehicles | 5 years |
| • demo material |
1 to 3 years |
• leasehold improvements and finance leases: cf. underlying asset, limited to outstanding period of lease contract
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognized.
Finance leases, which effectively transfer to the group substantially all risks and benefits incidental to ownership of the leased item, are capitalized as property, plant and equipment at the fair value of the leased property, or, if lower, at the present value of the minimum lease payments. The corresponding liabilities are recorded as long-term or current liabilities depending on the period in which they are due. Lease interest is charged to the income statement as a financial cost using the effective interest method. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating leases, where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term, are classified as operating leases. Operating lease payments are expressed in the income statement on a straight line basis over the lease term.
Investments are treated as financial assets available for sale and are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. For investments quoted in an active market, the quoted market price is the best measure of fair value. For investments not quoted in an active market, the carrying amount is the historical cost, if a reliable estimate of the fair value cannot be made. An impairment loss is recorded when the carrying amount exceeds the estimated recoverable amount.
Other non-current assets include long-term interest-bearing receivables and cash guarantees. Such long-term receivables are accounted for as loans and receivables originated by the company and are carried at amortized cost. An impairment loss is recorded when the carrying amount exceeds the estimated recoverable amount.
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first in first out (FIFO) basis. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs of completing the sale.
In addition to the cost of materials and direct labor, the relevant proportion of production overhead is included in the inventory values.
Revenue is recognized when it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. For product sales, revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, and collectability is probable.
For contract revenue, the percentage of completion method is used, provided that the outcome of the contract can be assessed with reasonable certainty.
For sales of services, revenue is recognized by reference to the stage of completion.
Government grants related to development projects for which costs are capitalized, are classified as deferred income and recognized as income in proportion to the depreciation of the underlying fixed assets. Government grants related to research projects and other forms of government assistance are recognized as income upon irreversible achievement and by reference to the relevant expenses incurred.
Trade debtors and other amounts receivable are shown on the balance sheet at nominal value (in general, the original amount invoiced) less an allowance for doubtful debts. Such an allowance is recorded in operating income when it is probable that the company will not be able to collect all amounts due. Allowances are calculated on an individual basis, and on a portfolio basis for groups of receivables that are not individually identified as impaired.
Cash and cash equivalents consist of cash on hand and balances with banks and short-term investments with an original maturity date or notice period of three months or less. It is the group's policy to hold investments to maturity. All investments are initially recognized at fair value, which is the cost at recognition date. Gains and losses are recognized in income when the investments are redeemed or impaired, as well as through the amortization process.
Provisions are recorded when the group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made to the amount of the obligation.
The group recognizes the estimated liability to repair or replace products still under warranty at the balance sheet date. The provision is calculated based on historical experience of the level of repairs and replacements. A provision for restructuring is only recognized when the group has approved a detailed and formal restructuring plan, and the restructuring
has either commenced or has been announced publicly before the balance sheet date.
The transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.
All loans and borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the loan/borrowing. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any issue costs and any discount or premium on settlement.
Trade and other payables are stated at fair value, which is the cost at recognition date.
Employee benefits are recognized as an expense when the group consumes the economic benefit arising from service provided by an employee in exchange for employee benefits, and as a liability when an employee has provided service in exchange for employee benefits to be paid in the future. General pension plans are defined contribution plans. Obligations for these plans are recognized as an expense in the income statement as incurred. Pension obligations caused by legal requirements and some exceptional cases where the additional pension plan includes defined benefit obligations, are treated as post employment benefits of a defined benefit type.
Transactions in foreign currencies are recorded at the rates of exchange prevailing at the date of transaction or at the end of the month before the date of the transaction. At the end of the accounting period the unsettled balances on foreign currency receivables and liabilities are valued at the rates of exchange prevailing at the end of the accounting period. Foreign exchange gains and losses are recognized in the income statement in the period in which they arise.
In the consolidated accounts all items in the profit and loss accounts of foreign subsidiaries are translated into euro at the average exchange rates for the accounting period. The balance sheets of foreign group companies are translated into euro at the rates of exchange ruling at the year-end. The resulting exchange differences are classified in a separate component of 'other comprehensive income', until disposal of the investment.
Derivative financial instruments are recognized initially at cost, which is the fair value of the consideration given (in the case of an asset) or received (in the case of a liability) for it. Transaction costs are considered in the initial measurement of all financial assets and liabilities. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The fair values of derivative interest contracts are estimated by discounting expected future cash flows using current market interest rates and yield curve over the remaining term of the instrument. The fair value of forward exchange contracts is their market price at the balance sheet date.
Derivative financial instruments that are either hedging instruments that are not designated or do not qualify as hedges are carried at fair value with changes in value included in the income statement.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognized asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognized directly in 'other comprehensive income' with the ineffective part recognized directly in profit and loss.
Current taxes are based on the results of the group companies and are calculated according to local tax rules.
Deferred tax assets and liabilities are determined, using the liability method, for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Tax rates used are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax credits and tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Goodwill is reviewed for impairment at least annually. For other tangible and intangible assets, at each balance sheet date, an assessment is made as to whether any indication exists that assets may be impaired. If any such indication exists, an impairment test is carried out in order to determine if and to what extent a valuation allowance is necessary to reduce the asset to its value in use (the present value of estimated future cash flows) or, if higher, to its fair value less cost to sell. The fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction less the costs to sell while value in use is the present value of the future cash flows expected to be derived from an asset. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the assets belong. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognized in the income statement. Reversal of impairment losses recognized in prior years is included as income when there is an indication that the impairment losses recognized for the asset are no longer needed or the need has decreased, except for impairment losses on goodwill, which are never reversed.
Barco created warrants for staff and nonexecutive directors as well as for individuals who play an important role for the company. According to the publication of IFRS2, the cost of share-based payment transactions is reflected in the income statement.
The warrants are valued at grant date, based on the share price at grant date, exercise price, expected volatility, dividend estimates, and interest rates. Warrant cost is taken into result on a straight-line basis from the grant date until the first exercise date.
The group calculates both basic and diluted earnings per share in accordance with IAS 33, Earnings per share. Under IAS 33, a basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares outstanding during the period plus the dilutive effect of warrants outstanding during the period. As diluted earnings per share can not be higher than basic earnings per share, diluted earnings per share are kept equal to basic earnings per share in case of negative net earnings.
A discontinued operation is a component of the group that either has been disposed of, or is classified as held for sale and represents a separate major line of business and is part of a single coordinated plan to dispose of a separate major line of business or is a subsidiary acquired exclusively with a view to resale. The group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Immediately before classification as held for sale, the group measures the carrying amount of the asset (or all the assets and liabilities in the disposal group) in accordance with applicable IFRSs. Then, on initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of their carrying amounts and fair value less costs to sell. Impairment losses are recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.
The accounting policies adopted are consistent with those of the previous financial year except as follows.
The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2010:
• IFRIC 15 Agreements for the Construction of Real Estate, effective 1 January 2010
• IFRIC 16 Hedges of a Net Investment in a Foreign Operation, effective 1 July 2009
The IFRS accounting standards adopted as from 2010 did not have a material impact on the consolidated financial statements of Barco.
Following new standards and interpretations have been issued as of the date of approval of these financial statements but were not yet effective on the balance sheet date:
• IFRIC 14 Prepayments of a Minimum Funding Requirement, effective 1 January 2011
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, effective 1 July 2010
Barco will apply the new standards and interpretations applicable for the group as soon as these are effective. Barco did not elect for early application of these standards and interpretations. The adoption of these standards, interpretations and amendments to published standards will have no significant impact on the results of Barco.
1 The Practice Statement is not an IFRS. Consequently, an entity need not comply with the Practice Statement to comply with IFRSs. 2 Not yet endorsed by the EU as per 27 December 2010
Certain items previously reported under specific financial statement captions have been reclassified to conform to the current year presentation.
Prior-period amounts have been revised to reflect changes in the warranty provision as part of the Cost of goods sold instead of as part of Other operating income (expense) - net and depot repair as part of the Cost of goods sold instead of as part of Sales and marketing expenses.
The table below outlines the impact of these restatements on the income statement accounts of 2009 and 2008:
| In thousands of euro | Impact restatement 2009 | Impact restatement 2008 |
|---|---|---|
| Increase cost of goods sold | -8,362 | -2,260 |
| Decrease gross profit | -8,362 | -2,260 |
| Decrease sales and marketing expenses | 2,676 | 2,260 |
| Increase other operating income (expenses) - net | 5,686 | - |
| EBIT before restructuring and impairment | - | - |
There is no impact on net income or on retained earnings as of 31 December 2010, 31 December 2009 and 31 December 2008.
We refer to the chapter 'Risk factors' on page 66 for an overview of the risks affecting businesses of the Barco Group.
• Deferred tax assets are recognized for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. In making its judgment, management takes into account elements such as long-term business strategy and tax planning opportunities (see
note 12 'Deferred tax assets – deferred tax liabilities').
reached a defined milestone according to an established project management model. In determining the amounts to be capitalized management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.
• Impairment of development costs: Barco tests the capitalized development for impairment if there are indications that capitalized development might be impaired (see note 10. 'Capitalized development costs').
| Belgium B | arco Coordination Center NV P | resident Kennedypark 35, 8500 Kortrijk; BE 0431.157.278, RPR Kortrijk | 100% |
|---|---|---|---|
| Belgium B | arco Integrated Solutions NV P | resident Kennedypark 35, 8500 Kortrijk; BE 0429.790.271, RPR Kortrijk | 100% |
| Belgium B | arco Silex SA | Scientific Parc, rue du Bosquet 7, 1348 Ottignies, | 100% |
| Louvain-La-Neuve; BE 0445.977.591, RPR Nivelles | |||
| Belgium | dZine NV | t Hoge 49, 8500 Kortrijk; BE 0447.294.615, RPR Kortrijk | 100% |
| Belgium | Innovative Designs NV P | resident Kennedypark 35, 8500 Kortrijk; BE 0427.422.976, RPR Kortrijk | 100% |
| Czech Republic B | arco Manufacturing s.r.o. B | illundská 2756, 272 01 Kladno | 100% |
| Denmark B | arco A/S | c/o Grant Thornton, Stockholmsgade 45, Postbox 869, 2100 Copenhagen | 100% |
| France B | arco SAS | 177 avenue Georges Clémenceau, Immeuble 'Le Plein Ouest', 92000 Nanterre | 100% |
| France B | arco Silex SAS | ZI Rousset-Peynier, Immeuble CCE -CD6, Route de Trets, 13790 Peynier |
100% |
| France B | arcoView Texen SAS | 7 rue Roger Camboulives, Parc Technologique de Basso Cambo, 31000 Toulouse | 99,98% |
| Germany B | arco Control Rooms GmbH A | n der Rossweid 5, 76229 Karlsruhe | 100% |
| Germany B | arco GmbH G | reschbachstrasse 2-4, 76229 Karlsruhe | 100% |
| Germany B | arco Orthogon GmbH H | astedter Osterdeich 222, 28207 Bremen | 100% |
| Italy | Barco S.r.l. | Via Monferrato 7, 20094 Corsico-MI | 100% |
| Italy | FIMI S.r.l. | c/o Studio Ciavarella, via Vittor Pisani n. 6, 20124 Milano | 100% |
| Netherlands B | arco B.V. | Schootense Dreef 22, 5708HZ Helmond | 100% |
| Netherlands B | arco Folsom B.V. | Schootense Dreef 22, 5708HZ Helmond | 100% |
|---|---|---|---|
| Norway B | arco Norway AS | Bogstadveien 30, 0355 Oslo | 100% |
| Poland B | arco Sp. z o.o. | Marywilska 16, 03-228 Warsaw | 100% |
| Russia B | arco Services OOO | ulitsa Kondratyuka, 3, 129515 Moscow | 100% |
| Spain B | arco Electronic Systems, S.A. T | ravesera de las Corts 371, 08029 Barcelona | 100% |
| Sweden B | arco Sverige AB | c/o Grant Thornton, Kungsgatan 15, Box 2230, 403 14 Göteborg | 100% |
| United Kingdom B | arco Ltd. | Farley Hall, London Road, Binfield, RG42 4EU Bracknell, Berkshire |
100% |
| United Kingdom V | oxar | Bonnington Bond, 2 Anderson Place, EH6 5NP Edinburgh, Scotland |
100% |
| Americas | |||
| Brazil B | arco Ltda. | Av. Dr Cardoso de Melo, 1855 - 8 Andar - Cj 81, Vila Olimpia, 04548-005 Sao Paulo | 100% |
| Canada B | arco Visual Solutions, Inc. | 2000 Mansfield Drive, Suite 1400, Montreal, H3A 3A2 Quebec | 100% |
| Mexico B | arco Visual Solutions S.A. de C.V. | c/o Franco Alanis y Asociados, S.C., Marco Franco, Eje Central Lazaro Cardenas 887 | |
| Esq. Eugenia Col. Independencia, 03600 D.F. C.P. Mexico | 100% | ||
| USA B | arco Federal Systems LLC | 1209 Orange Street, 19801 Wilmington-DE | 100% |
| USA B | arco Lighting Systems, Inc. | 350 N. St. Paul St., 75201 Dallas-TX | 100% |
| USA B | arco, Inc. | 1209 Orange Street, 19801 Wilmington-DE | 100% |
| Asia-Pacific | |||
| Australia B | arco Systems Pty. Ltd. | 2 Rocklea Drive, Port Melbourne, VIC 3207 | 100% |
| China | Barco Trading (Shanghai) Co., Ltd. | Rm501, 180 Hua Shen Road, Wai Gao Qiao Free Trade Zone, Shanghai | 100% |
| China B | arco Visual (Beijing) | No. 16 Changsheng Road, Chang Ping Park, Zhong Guan Cun | |
| Electronics Co., Ltd. | Science and Technology Park, Chang Ping District, 102200 Beijing | 100% | |
| China B | arco Visual (Beijing) Trading Co., Ltd. | Floor 3, No. 16 Changsheng Road, Chang Ping Park, Zhong Guan Cun | |
| Science and Technology Park, Chang Ping District, 102200 Beijing | 100% | ||
| Hong Kong B | arco China (Holding) Ltd. | Suite 2801, 28/F., Central Plaza, 18 Harbour Road, Wanchai | 100% |
| Hong Kong B | arco Ltd. | Suite 2801, 28/F., Central Plaza, 18 Harbour Road, Wanchai | 100% |
| Hong Kong | Barco Visual Electronics Co., Ltd. | Suite 2801, 28/F., Central Plaza, 18 Harbour Road, Wanchai | 100% |
| India | Barco Electronic Systems Pvt. Ltd. | c/o Perfect Accounting & Shared Services P.Ltd., E-20, 1st & 2nd Floor, | |
| Main Market, Hauz Khas, 110016 New Delhi | 100% | ||
| Israel | Barco Electronic Systems Ltd. | 53 Etzel Street, 75706 Rishon Lezion | 100% |
| Japan B | arco Co., Ltd. | Yamato International Bldg 8F, 5-1-1 Heiwajima, Ota-ku, 143-0006 Tokyo | 100% |
| Japan B | arco Toyo Co., Ltd. | Yamato International Bldg 8F, 5-1-1 Heiwajima, Ota-ku, 143-0006 Tokyo | 50% |
| Korea B | arco Ltd. | Sungdo Venture Tower, 165-2, Samsung-dong, Gangnam-gu, 135-881 Seoul | 100% |
| Malaysia B | arco Sdn. Bhd. | No. 13A, Jalan SS21/56B, Damansara Utama, 47400 Petaling Jaya, Selangor | 100% |
| Singapore B | arco Pte Ltd. | No. 10 Changi South Lane, #04-01 Ossia Building, 486162 Singapore | 100% |
| Taiwan B | arco Ltd. | 11F., No. 102, Guangfu S. Rd., Da-an Dist., 10694 Taipei City | 100% |
On 31 December 2009 Barco closed the acquisition of 100% of the shares of the Italy-based display company FIMI Srl, which before was a fully owned subsidiary of Royal Philips Electronics. Through the acquisition Barco reaffirms its growth strategy in the medical market by further expanding its footprint and tapping into new market segments, such as mobile point of care devices. This deal also contains for Barco the starting point to build a client relationship with Philips.
In 2010 FIMI Srl has contributed 47.1 million euro to the total turnover of the group, resulting into 4.1 million euro EBIT contribution. This contribution in the first year was negatively impacted by IFRS restatements recorded in the opening balance sheet. The IFRS restatements related to fair value adjustments on inventory and the valuation of the customer list, which is amortized over 5 years.
The acquisition has been accounted for using the acquisition method conform IFRS 3 Business Combinations (Revised). The following table summarizes the consideration paid for FIMI Srl and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
| In thousands of euro | before acqui sition date |
1-01-2010 |
|---|---|---|
| Non-current assets | 4,630 | 9,097 |
| Intangible assets (customer list) | - | 5,000 |
| Capitalized development cost | 3,136 | 2,603 |
| Tangible assets and other intangible assets | 1,494 | 1,494 |
| Current assets | 16,676 | 17,468 |
| Inventory | 9,436 | 10,277 |
| Trade & other receivables | 7,240 | 7,191 |
| Non-current liabilities | -2,852 | -3,434 |
| Provisions | -3,875 | -2,796 |
| Net deferred tax (asset) / liabilities | 1,023 | -638 |
| Current liabilities | -10,226 | -10,526 |
| Cash | 81 | 81 |
| Net assets | 8,308 | 12,685 |
| Goodwill | 15,285 | |
| Total acquisition cost | 27,970 |
The total acquisition cost includes the amount paid at closing of 19.2 million euro and includes an earn-out payable of 10 million euro over the next five years. The earn-out equals to 35% of the cumulative net purchase value of the Philips group with the Barco group over the next five years and is limited to 2.5 million euro per year.
The goodwill and the customer list recognized at acquisition is related to the 'surprix' Barco was willing to pay because of access to the Philips and group and complementary technological expertise and talent of the FIMI workforce and the synergies expected to be achieved from integrating FIMI into the medical imaging business unit. The earn-out of 10 million euro is fully considered as additional goodwill at the moment of acquisition as there is a high probability that this amount will be reached over the coming 5 years. For 2010, these earn-out conditions were already realized. The total goodwill of 15.3 million euro is allocated to the business group Monitoring, Control Rooms & Medical Imaging.
In July 2010 Barco acquired 100% of the shares of the Belgium-based digital signage solutions company dZine NV. Through this acquisition, Barco broadens its offering of digital visualization products with the addition of advanced software tools for content creation and management. This acquisition fits within Barco`s strategy to position itself as a total value-added solutions provider in the digital signage market.
The total acquisition cost paid at closing amounts to 8.3 million euro. The contract further provides for two additional earn-out payments. The first additional earn-out payment of maximum 2 million euro is determined based on the net assets per 31 December 2010 and depends on the 2010 EBITDA minus development capitalization. Per 31 December 2010 the criteria for this additional earn-out have not been fulfilled. The second earn-out payment of maximum 5 million euro depends on the earn-out profit over the 3 year period 1 January 2010 till 31 December 2012. This second earn-out payment, if any, will be accounted for as remuneration.
In 2010 dZine has contributed 5.6 million euro to the total turnover of the group, resulting in 0.8 million euro EBIT contribution. No important IFRS restatements have been accounted for in the opening balance sheet of dZine.
The acquisition has been accounted for using the acquisition method conform IFRS 3 Business Combinations (Revised). The following table summarizes the consideration paid for dZine and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
| In thousands of euro | 7-01-2010 |
|---|---|
| Non-current assets | 1,423 |
| Capitalized development | 994 |
| Other non-current assets | 429 |
| Current assets | 2,626 |
| Inventory | 1,227 |
| Trade & other receivables | 1,399 |
| Non-current liabilities | -302 |
| Current liabilities | -1,089 |
| Cash | 300 |
| Net assets | 2,958 |
| Goodwill | 5,342 |
| Total acquisition cost | 8,301 |
The goodwill recognized at acquisition relates to new sales opportunities resulting from the combining of Barcos hardware know-how with dZines content creation and management software expertise. Benefits are expected to arise from the dZines core team which will function as Barcos center of competence for digital signage technology. The 5.3 million euro goodwill is allocated to the Media, Entertainment & Simulation business segment.
Per 17 March 2010 Barco has acquired the products, intellectual property (IP) rights and know-how of Element Labs, an LED video systems expert based in Santa Clara, California. The total acquisition cost amounts to 1.9 million euro and equals the relative fair value of the acquired assets.
On 2 February 2009, Barco closed the divestment of its Advanced Visualization (AVIS) activities to Toshiba Medical Systems Cooperation. Barco Group has received 27 million euro in cash, subject to adjustments, as stipulated in the contract, for which 4 million euro was put in escrow. The escrow has been cashed for 50% in April 2010 and the remaining 50% will be cashed in July 2011. According to IFRS 5, the results and cash flows of the AVIS activities until 31 January 2009 are shown as a separate line 'discontinued operations'.
In June 2008, Barco acquired in the US the company High End Systems, Inc, (after acquisition changed name to Barco Lighting Systems Inc.), a global technology provider of automated luminaries, digital lighting and lighting controls. The total value of the transaction amounted USD 55 million.
The condensed balance sheet of High End Systems determined in accordance with IFRS immediately before and after acquisition date is presented below:
| In thousands of euro | before acqui sition date |
after acquisi tion date |
|---|---|---|
| Non-current assets | 1,364 | 1,364 |
| Current assets | 15,595 | 16,175 |
| Inventory | 7,336 | 7,916 |
| Trade debtors | 5,726 | 5,726 |
| Other current assets | 2,533 | 2,533 |
| Current liabilities | -8,212 | -8,492 |
| Net assets | 8,747 | 9,047 |
| Goodwill | 24,654 | |
| Total acquisition cost | 33,701 |
On 30 September 2008, the divestiture of BarcoVision to the Italian Itema Group has been closed, after the approval of this transaction by the antitrust commission of the European Union. This divestment includes Loepfe AG, Loepfe SRL, BarcoVision LLC, BarcoVision Ltd, Sedo GmbH and Belgian Monitoring Systems BVBA, which was founded in 2007.
The mechanical assembly activity of the former division Barco Manufacturing Services was divested, effective as of 1 January 2008. On 1 September 2008 the divestment of Barco's software development unit for maritime safety and surveillance was closed.
On 21 November 2008 the divestment of the Advanced Visualization activities was announced. Barco's Advanced Visualization (AVIS) group is specialized in 3D clinical software solutions, marketed worldwide under the product names 'Voxar 3D' and 'Voxar 3D Enterprise'. The divestment includes all AVIS assets, including its full product portfolio. On 2 February 2009, Barco closed the divestment of its Advanced Visualization (AVIS) activities to Toshiba Medical Systems Corporation.
According to the requirements of IFRS 5, net income of these activities are shown separately on the face of the income statement as 'Net income from discontinued operations' in the 2008 figures. The same was done for the net cash flows attributable to the operating, investing and financing activities of discontinued operations in 2008.
Assets and liabilities of AVIS were presented separately on the face of the balance sheet per 31 December 2008, as 'Assets and liabilities from discontinued operations'. Assets and liabilities of Barco Vision are no longer included per 31 December 2008. Disclosures were represented accordingly.
As of 2010, Barco's activities are organized in two business groups, with each business group, Media Entertainment & Simulation and Monitoring, Control Rooms & Medical Imaging being responsible for the management of its business worldwide.
The Media Entertainment & Simulation business group (MES) brings together the former Media & Entertainment Division and the Simulation part of the former Avionics & Simulation Division.
The former Security & Monitoring Division, Medical Imaging Division and the Avionics part of the Avionics & Simulation Division have been integrated in the Monitoring, Control Rooms & Medical Imaging business group (MCM). As a consequence of the aforementioned, prior-year financials have been restated.
Prior period amounts have also been restated to reflect changes in the warranty provision as part of the Cost of goods sold instead of as part of Other operating income (expense) and depot repair expenses on products sold as part of the Cost of goods sold instead of as part of Sales and marketing. (see Significant accounting policies, Reclassifications).
Management monitors the operating results of its business groups separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss. Group financing (including finance costs and finance revenue) and income taxes are managed on a group basis and are not allocated to operating segments.
Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties. Interdivision revenues are eliminated in consolidation.
| In thousands of euro | 2010 | 2009 | Variance 2010-2009 |
|||
|---|---|---|---|---|---|---|
| Net sales | 471,993 | 100.0% | 308,427 | 100.0% | 163,566 | |
| external sales | 471,096 | 99.8% | 305,244 | 99.0% | 165,852 | |
| interdivision sales | 897 | 0.2% | 3,183 | 1.0% | -2,286 | |
| Cost of goods sold | -336,432 | -71.3% | -258,373 | -83.8% | -78,059 | |
| Gross profit | 135,561 | 28.7% | 50,054 | 16.2% | 85,507 | |
| EBIT before restructuring & impairment | 27,042 | 5.7% | -41,357 | -13.4% | 68,399 | |
| Restructuring & impairment costs | - | - | -29,567 | - | 29,567 | |
| EBIT after restructuring & impairment | 27,042 | 5.7% | -70,924 | -23.0% | 97,966 | |
| Amortization capitalized development | 16,120 | 3.4% | 18,286 | 5.9% | -2,167 | |
| Depreciation tangible fixed assets and software | 4,942 | 1.0% | 5,223 | 1.7% | -281 | |
| EBITDA before restructuring | 48,103 | 10.2% | -17,847 | -5.8% | 65,950 | |
| EBITDA after restructuring | 48,103 | 10.2% | -20,109 | -6.5% | 68,212 | |
| Capitalized development | 17,483 | 3.7% | 15,105 | 4.9% | 2,378 | |
| Capital expenditures tangible fixed assets and software | 3,816 | 0.8% | 2,942 | 1.0% | 873 | |
| Segment assets | 321,769 | 205,617 | ||||
| Segment liabilities | 152,743 | 88,537 |
| In thousands of euro | 2010 | 2009 | Variance 2010-2009 |
|||
|---|---|---|---|---|---|---|
| Net sales | 427,862 | 100.0% | 335,154 | 100.0% | 92,708 | |
| external sales | 425,903 | 99.5% | 332,821 | 99.3% | 93,081 | |
| interdivision sales | 1,960 | 0.5% | 2,333 | 0.7% | -373 | |
| Cost of goods sold | -275,655 | -64.4% | -217,258 | -64.8% | -58,397 | |
| Gross profit | 152,207 | 35.6% | 117,896 | 35.2% | 34,311 | |
| EBIT before restructuring & impairment | 18,093 | 4.2% | 11,815 | 3.5% | 6,278 | |
| Restructuring & impairment costs | - | - | -9,819 | -2.9% | 9,819 | |
| EBIT after restructuring & impairment | 18,093 | 4.2% | 1,996 | 0.6% | 16,097 | |
| Amortization capitalized development | 24,216 | 5.7% | 22,562 | 6.7% | 1,654 | |
| Depreciation tangible fixed assets and software | 8,340 | 1.9% | 7,545 | 2.3% | 795 | |
| EBITDA before restructuring | 50,649 | 11.8% | 41,922 | 12.5% | 8,727 | |
| EBITDA after restructuring | 50,649 | 11.8% | 33,183 | 9.9% | 17,466 | |
| Capitalized development | 23,624 | 5.5% | 17,696 | 5.3% | 5,928 | |
| Capital expenditures tangible fixed assets and software | 7,203 | 1.7% | 2,811 | 0.8% | 4,393 | |
| Segment assets | 308,472 | 230,617 | ||||
| Segment liabilities | 129,776 | 84,965 |
| In thousands of euro | 2010 | 2009 |
|---|---|---|
| External sales | ||
| Media, Entertainment & Simulation | 471,096 | 305,244 |
| Monitoring, Control Rooms & Medical Imaging | 425,903 | 332,821 |
| Total external sales segments | 896,999 | 638,065 |
| Net Income | ||
| EBIT before restructuring & impairment | ||
| Media, Entertainment & Simulation | 27,042 | -41,357 |
| Monitoring, Control Rooms & Medical Imaging | 18,093 | 11,815 |
| Restructuring & impairment | ||
| Media, Entertainment & Simulation | - | -29,567 |
| Monitoring, Control Rooms & Medical Imaging | - | -9,819 |
| EBIT after restructuring & impairment | ||
| Media, Entertainment & Simulation | 27,042 | -70,920 |
| Monitoring, Control Rooms & Medical Imaging | 18,093 | 1,996 |
| Total EBIT after restructuring & impairments | 45,135 | -68,924 |
| Interest income (expense) - net | -1,510 | -1,669 |
| Income taxes | 0 | 6,383 |
| Net income from continuing operations | 43,625 | -64,210 |
| Net income from discontinued operations | - | 4,289 |
| Net income | 43,625 | -59,920 |
| Net Income attributable to equityholders of the parent | 43,625 | -59,920 |
| In thousands of euro | 2010 | 2009 |
| Segment assets | ||
| Media, Entertainment & Simulation | 321,769 | 205,617 |
| Monitoring, Control Rooms & Medical Imaging | 308,472 | 230,617 |
| Total segment assets | 630,241 | 436,234 |
| Segment liabilities | ||
| Media, Entertainment & Simulation | 152,743 | 88,537 |
| Monitoring, Control Rooms & Medical Imaging | 129,776 | 84,965 |
| Total segment liabilities | 282,520 | 173,502 |
| in number of employees | 2010 | 2009 |
|---|---|---|
| Number of employees at year end | ||
| Media, Entertainment & Simulation | 790 | 875 |
| Monitoring, Control Rooms & Medical Imaging | 1,134 | 1,445 |
| General Services (a) |
1,575 | 837 |
| Total | 3,499 | 3,157 |
(a) General services include functionally organized functions such as:
• Operations, logistics and purchasing functions;
• G&A functions including mainly general and divisional management, finance and accounting, information technology and human resources;
• Regional sales and corporate marketing functions.
During 2010, the employees active in sales and marketing functions have been transferred from the two business groups to general services.
Management directs sales of the Group based on the regions to which the goods are shipped or the services are rendered and has three reportable regions Europe, Middle East, Africa and Latin America (EMEALA), North America (NA) and Asia-Pacific (APAC).
We refer to 'Comments on the results' on page 70 for a split of revenue from external customers based on the geographical location of the customers to whom the invoice is issued.
There is no significant (i.e. representing more than 30% of the Group's revenue) concentration of Barco's revenues with one customer.
Below table gives an overview of the assets per region and the most important capital expenditures in non-current assets per region:
| In thousands of euro | 2010 | 2009 | 2008 | |||
|---|---|---|---|---|---|---|
| Total assets | ||||||
| Europe - Middle East - Africa - Latin America | 484,470 | 64.2% | 363,200 | 63.4% | 416,450 | 57.8% |
| North America | 140,584 | 18.6% | 100,841 | 17.6% | 123,987 | 17.2% |
| Asia-Pacific | 122,983 | 16.3% | 88,489 | 15.5% | 117,945 | 16.4% |
| Group | 7,049 | 0.9% | 19,945 | 3.5% | 62,345 | 8.7% |
| Total | 755,086 | 100.0% | 572,475 | 100.0% | 720,727 | 100.0% |
| Capitalized development | ||||||
| Europe - Middle East - Africa - Latin America | 35,545 | 86.5% | 25,721 | 78.4% | 40,175 | 85.5% |
| North America | 4,027 | 9.8% | 4,880 | 14.9% | 5,212 | 11.1% |
| Asia-Pacific | 1,535 | 3.7% | 827 | 2.5% | 1,620 | 3.4% |
| Group corrections | - | 0.0% | 1,374 | 4.2% | - | 0.0% |
| Total | 41,107 | 100.0% | 32,801 | 100.0% | 47,006 | 100.0% |
| Capital expenditure PP&E and other intangible assets | ||||||
| Europe - Middle East - Africa - Latin America | 8,685 | 64.8% | 6,702 | 85.3% | 7,246 | 75.9% |
| North America | 667 | 5.0% | 397 | 5.1% | 487 | 5.1% |
| Asia-Pacific | 4,045 | 30.2% | 756 | 9.6% | 1,812 | 19.0% |
| Total | 13,397 | 100.0% | 7,855 | 100.0% | 9,545 | 100.0% |
Per 31 December 2010, there are no discontinued operations included in the consolidated income statement, cash flow statement or balance sheet.
In 2009, Barco realized a net gain of 4.3 million euro relating to discontinued operations, mainly consisting to the sale of Barco's Advanced Visualization (AVIS). In 2008, the 39.6 million euro net gain from discontinued operations involved the sale of Barco Vision (37.8 million euro gain) and the sale of Barco's software development unit for maritime safety and surveillance (MSS) (1.9 million euro gain).
The income statement of the discontinued operations in 2009 and 2008 was composed as follows:
| In thousands of euro | 2009 | 2008 |
|---|---|---|
| Revenues | 499 | 53,180 |
| Expenses | -887 | -48,971 |
| Income before taxes | -387 | 4,209 |
| Income taxes (a) | -2,883 | -958 |
| Non-operating result | 7,560 | 36,390 |
| Net income from discontinued operations | 4,289 | 39,641 |
| Earnings per share for profit from discontinued operations | ||
| - basic | 0.36 | 3.32 |
| - diluted | 0.34 | 3.13 |
(a) Income taxes relate to the gain on the sold Advanced Visualization (AVIS) activities.
The cash flow statements of 2009 and 2008 contain respectively 15.5 million euro and 66 million euro positive net cash flows relating to discontinued operations.
The 2009 cash flow statement of discontinued operations shows the cash flow generated by Barco's Advanced Visualization (AVIS) group including the part of the sales price (23 million euro) which has already been received. The remaining part of the sales price, 4 million euro has been put in escrow, whereof 50% has been received in 2010 and the remaining 50% is expected to be cashed during 2011.
The 2008 cash flow statement of discontinued operations includes the cash received upon the sale of Barco Vision and Barco's software development unit for maritime safety and surveillance (MSS) and cash received from the prior divestment of Barco Manufacturing Services. It also shows the cash flow generated by Barco Vision over the year 2008 until the date of divestment.
The cash flow statement relating discontinued operations is composed as follows:
| In thousands of euro | 2009 | 2008 |
|---|---|---|
| Cash flow from operating activities | ||
| EBIT | -387 | 4,209 |
| Amortization capitalized development cost | 253 | 5,763 |
| Depreciation of tangible and intangible fixed assets | 12 | 1,375 |
| Gains and losses on tangible fixed assets | 26 | -9 |
| Gross operating cash flow | -97 | 11,339 |
| Changes in trade receivables | 1,815 | 3,012 |
| Changes in inventory | 148 | -616 |
| Changes in trade payables | -131 | 1,162 |
| Other changes in net working capital | -9,360 | -4,104 |
| Change in net working capital | -7,528 | -546 |
| Net operating cash flow | -7,625 | 10,793 |
| Income taxes | 373 | -975 |
| Cash flow from operating activities | -7,252 | 9,818 |
| Cash flow from investing activities | ||
| Expenditure on product development | -179 | -5,792 |
| Purchases of tangible and intangible fixed assets | - | -216 |
| Proceeds on disposals of tangible and intangible fixed assets | - | -278 |
| Disposal of Group companies, net of disposed cash | 22,953 | 62,510 |
| Cash flow from investing activities | 22,774 | 56,224 |
Cash flow from discontinued operations 15,522 66,042
The consolidated balance sheet contains per 31 December 2009 assets classified as discontinued operations for an amount of 6.9 million euro and 22.9 million euro per 31 December 2008. The major classes of assets are the following:
| In thousands of euro | 2009 | 2008 |
|---|---|---|
| Goodwill | - | 15,544 |
| Capitalized development cost | - | 4,339 |
| Deferred tax assets | 1,918 | - |
| Other non-current assets | 3,916 | - |
| Land and buildings | - | - |
| Inventory | - | 149 |
| Trade debtors | - | 1,816 |
| Other amounts receivable external | 1,081 | 39 |
The consolidated balance sheet contains per 31 December 2009 liabilities classified as discontinued operations for an amount of 5.4 million euro and 5.6 million euro per 31 December 2008. The major classes of liabilities are the following:
| In thousands of euro | 2009 | 2008 |
|---|---|---|
| Trade payables & other payables | 1 | 862 |
| Provisions for liabilities and charges | - | 5 |
| Accrued charges and deferred income | - | 4,696 |
| Deferred tax liabilities | 5,428 | - |
See note 1.2 for further information on divestments.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Sales | 896,999 | 638,066 | 725,288 |
| Cost of goods sold | -609,484 | -470,115 | -480,149 |
| Gross profit | 287,516 | 167,951 | 245,139 |
| Gross profit as % of sales | 32.1% | 26.3% | 33.8% |
| Indirect costs | -234,932 | -205,150 | -244,402 |
| Other operating income (expenses) - net | -7,449 | 7,662 | 8,166 |
| EBIT before restructuring and goodwill impairment | 45,135 | -29,537 | 8,903 |
| EBIT before restructuring and goodwill impairment as % of sales | 5.0% | -4.6% | 1.2% |
The gross profit increased with 120 million euro in 2010 compared to 2009, resulting from the increased sales level and the improvement of the gross profit margin from 26.3% in 2009 to 32.1% in 2010.
We refer to sales and EBIT per business group and sales per region in note 2. Segment information. Please also refer to chapter Comments on the results for more explanation on sales and income from operations on page 70.
| In thousands of euro | 2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Research and development expenses | (a) | -71,371 | -69,234 | -77,087 |
| Sales and marketing expenses | (b) | -114,555 | -94,251 | -116,196 |
| General and administration expenses | (c) | -49,006 | -41,665 | -51,119 |
| Indirect costs | -234,932 | -205,150 | -244,402 | |
| Other operating income (expense) - net | (d) | -7,449 | 7,662 | 8,166 |
| Indirect costs and other operating income (expenses) - net | -242,381 | -197,488 | -236,236 |
Indirect costs, excluding the impact of net capitalized development expenses represent 26% of sales in 2010, compared to 31% in 2009 and 34% in 2008. The indirect cost increase in 2010 versus 2009 related for an amount of 10.9 million euro to acquisitions.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Research & development expenses | 72,142 | 61,186 | 77,957 |
| Capitalized development expenses | -41,107 | -32,801 | -47,006 |
| Amortization capitalized development expenses | 39,058 | 40,849 | 46,136 |
| Impairment of capitalized development expenses | 1,278 | - | - |
| Capitalized development, net | -771 | 8,048 | -870 |
| Research and development expenses, net | 71,371 | 69,234 | 77,087 |
Research and development cash expenses represent 8.0% of sales in 2010, compared to 9.6% in 2009 and 10.7% in 2008. The ratio of capitalized development expenses versus the research and development cash expenses increased in 2010 to 57% (2009: 54%; 2008: 60%), having a positive impact on EBIT. The capitalization of development expenses is in 2010 in line with the amortization charges.
In 2010, the impairment costs on capitalized development expenses have been presented on the line 'Research and development expenses'. In 2009 and 2008, the impairment losses have been included in 'Restructuring and impairment costs', because the 2009 and 2008 impairment losses related to the overall restructuring program executed within the Barco group. For more explanation on impairment costs on capitalized development we refer to note 10.
Research and development activities are spread over the business groups as follows:
| In thousands of euro | Group | Media, Entertainment & Simulation |
Monitoring, Control Rooms & Medical Imaging |
|---|---|---|---|
| Research & development expenses | 72,142 | 29,471 | 42,671 |
| Capitalized development expenses | -41,107 | -17,483 | -23,624 |
| Amortization capitalized development expenses | 39,058 | 16,120 | 22,938 |
| Impairment of capitalized development expenses | 1,278 | - | 1,278 |
| Capitalized development, net | -771 | -1,363 | 592 |
| Research & development expenses, net | 71,371 | 28,108 | 43,263 |
Research and development cash expenses, as percentage of sales, amount to 6.2% in the Media, Entertainment & Simulations business group (2009: 7.4%) and 10.0% in the Monitoring, Control Rooms & Medical Imaging business group (2009: 11.5%).
| In thousands of euro | 2010 | % of sales | 2009 | % of sales | 2008 | % of sales |
|---|---|---|---|---|---|---|
| Sales and marketing expenses | 114,555 | 12.8% | 94,251 | 14.8% | 116,196 | 16.0% |
Sales and marketing expenses include all indirect costs related to the sales and customer service organization which are not billed as part of a product or service to the customer as well as the costs related to regional or divisional marketing activities. In 2009, the cost reductions mainly related to reduced sales costs and marketing expenses. The expenses for customer service activities were kept at the same level as the previous year.
| In thousands of euro | 2010 | % of sales | 2009 | % of sales | 2008 | % of sales |
|---|---|---|---|---|---|---|
| General and administration expenses | 49,006 | 5.5% | 41,665 | 6.5% | 51,119 | 7.0% |
General and administration expenses include the costs related to general and divisional management, finance and accounting, information technology, human resources and investor relations.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Bank charges | -3,188 | -1,151 | -1,134 |
| Bad debt provisions (net of write-offs and reversals of write-offs) | -2,358 | 1,480 | -4,869 |
| Other provisions (net of additions and reversals of provisions) | -2,333 | 2,707 | 5,846 |
| Cost of share-based payments | -290 | -330 | -640 |
| Gains on disposal of tangible fixed assets | 89 | 1,082 | 473 |
| Investment grants | 1,978 | 2,764 | 3,863 |
| Other (net) | -1,346 | 1,110 | 4,627 |
| Total | -7,449 | 7,662 | 8,166 |
In 2010, the bank charges contain credit insurance premiums for an amount of 2.4 million euro.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Sales | 896,999 | 638,066 | 725,288 |
| Material cost | -502,969 | -393,611 | -386,347 |
| Services and other costs | -70,661 | -61,490 | -96,072 |
| Personnel cost | -258,276 | -199,348 | -230,139 |
| Capitalized development cost | 41,107 | 32,801 | 47,006 |
| Amortization capitalized development | -40,336 | -40,849 | -46,136 |
| Depreciation property, plant, equipment and software | -13,282 | -12,768 | -12,861 |
| Other operating income (expense) - net (note 4) | -7,449 | 7,662 | 8,166 |
| EBIT before restructuring and impairment | 45,135 | -29,537 | 8,903 |
The table below provides information on the major items contributing to the EBIT, categorized by nature.
Personnel cost includes the cost for temporary personnel for an amount of 8.2 million euro (in 2009 5.8 million euro, in 2008 7.6 million euro). Average number of employees in 2010 was 3,296 (versus 3,310 in 2009 and 3,644 in 2008), including 2,345 white-collars (in 2009 2,367; in 2008 2,606) and 951 blue-collars (in 2009 943; in 2008 1,038).
| In thousands of euro | 2009 | 2008 | |
|---|---|---|---|
| Restructuring costs | (a) | 6,086 | 19,058 |
| Impairment on goodwill (note 9) | 25,000 | 1,592 | |
| Impairment on contracts in progress (CIP) | (b) | 2,156 | - |
| Impairment on capitalized development (note 10) | 6,144 | 10,338 | |
| Government grants on capitalized development | - | -4,292 | |
| Total | 39,386 | 26,696 |
(a) In order to realign the company to the new economic realities and strategic priorities, Barco took a charge of 6.1 million euro for people related restructuring costs in 2009. Key elements of this are related to footprint reductions in the US and Europe, to centralize functions and offshore production towards Asia.
(b) Similar to the impairment testing on development costs, Barco performed the testing on capitalized customer project costs. Two of these projects in the avionics unit generated the impairment charge of 2.1 million euro in 2009.
In 2010, no restructuring and impairment costs have been booked on the income statement line 'Restructuring and impairment costs'. An impairment loss of 1.3 million euro relating to capitalized development is included in the income statement line 'Research and development expenses' (see note 4 and note 10). For more explanation on the impairment on goodwill we refer to note 9 and on the impairment on capitalized development we refer to note 10.
| In thousands of euro | 2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Current versus deferred income taxes | ||||
| Current income taxes | 6,969 | 10,216 | -10,628 | |
| Deferred income taxes | -6,969 | -3,833 | 10,628 | |
| Income taxes | 0 | 6,383 | - | |
| Income taxes versus income before taxes | ||||
| EBIT after restructuring and impairment | 45,135 | -68,923 | -17,794 | |
| Interest income (expense) - net | -1,510 | -1,669 | -3,726 | |
| Other non-operating income (expense) - net | - | - | 135 | |
| Income before taxes | 43,625 | -70,593 | -21,384 | |
| Income taxes | 0 | 6,383 | - | |
| Effective income tax rate | 0.0% | 9.0% | - | |
| Income before taxes | 43,625 | -70,593 | -21,384 | |
| Theoretical tax rate | 34.0% | 34.0% | 34.0% | |
| Theoretical tax credit/(cost) | -14,832 | 24,002 | 7,271 | |
| Non-taxable goodwill impairment | - | -8,498 | - | |
| Non-deductible items | -1,290 | -1,148 | -1,856 | |
| Special tax status | (a) | 6,726 | 9,763 | 9,071 |
| Investment allowances | (b) | 1,620 | 2,337 | 2,683 |
| Set-up of deferred tax assets, not recognised in prior years | (c) | 10,841 | 380 | 591 |
| Losses available for offsetting against future taxable income | - | - | - | |
| Deferred tax assets, not recognised in current year | (c) | -2,723 | -26,747 | -25,350 |
| Effect of different tax rates in foreign companies | 151 | 603 | 7,273 | |
| Effect of change in expected tax rate on deferred taxes | - | - | 317 | |
| Tax adjustments related to prior periods | -493 | 5,691 | - | |
| Reported taxes related to current income before taxes | - | 6.383 | - |
(a) Notional interest deduction and conversion of investment allowances into research and development tax credit
(b) Spread taxation on capital expenditure and research and development costs of prior years
(c) See note 12
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Net income from continuing operations | 43,625 | -64,210 | -21,383 |
| Weighted average of shares | 11,931,992 | 11,931,992 | 11,938,869 |
| Basic earnings per share (in euro) | 3.66 | -5.38 | -1.79 |
| Net income from discontinued operations | - | 4,289 | 39,642 |
| Weighted average of shares | 11,931,992 | 11,931,992 | 11,938,869 |
| Basic earnings per share (in euro) | - | 0.36 | 3.32 |
| Basic earnings per share (in euro) | 3.66 | -5.02 | 1.53 |
| Net income from continuing operations | 43,625 | -64,210 | -21,383 |
| Weighted average of shares (diluted) | 12,782,566 | 12,710,845 | 12,671,896 |
| Diluted earnings per share (in euro) (a) |
3.41 | -5.38 | -1.79 |
| Net income from discontinued operations | - | 4,289 | 39,642 |
| Weighted average of shares (diluted) | 12,782,566 | 12,710,845 | 12,671,896 |
| Diluted earnings per share (in euro) | - | 0.34 | 3.13 |
| Diluted earnings per share (a) |
3.41 | -5.02 | 1.44 |
(a) The difference between the weighted average of shares and weighted average of shares (diluted) is due to exercisable warrants. As diluted earnings per share can not be higher than basic earnings per share, diluted earnings are kept equal to basic earnings per share in case of net losses instead of net income.
For more detailed information concerning these, please refer to note 17.
| In thousands of euro | 2010 | 2009 | 2008 | |||
|---|---|---|---|---|---|---|
| At cost | ||||||
| On 1 January | 58,401 | 58,401 | 65,287 | |||
| Acquisitions | 20,626 | - | 24,654 | |||
| Expenditure | - | - | - | |||
| Discontinued operations | - | - | -31,540 | |||
| On 31 December | 79,027 | 58,401 | 58,401 | |||
| Impairment | ||||||
| On 1 January | 26,136 | 1,136 | 17,132 | |||
| Impairment losses | - | 25,000 | - | |||
| Discontinued operations | - | - | -15,996 | |||
| On 31 December | 26,136 | 26,136 | 1,136 | |||
| Net book value | ||||||
| On 1 January | 32,265 | 57,265 | 48,155 | |||
| On 31 December | 52,891 | 32,265 | 57,265 |
Acquisitions in 2010 include goodwill related to the acquisition of FIMI for 15.3 million euro and dZine for 5.3 million euro. For more detailed information concerning these acquisitions, please refer to note 1.2.
Acquisitions in 2008 include goodwill related to the acquisition of High End Systems for 24.7 million euro.
The goodwill related to discontinued operations in 2008 (net book value of 15.5 million euro) concerns the carrying amount of goodwill related to the Advanced Visualization business.
In 2009, the impairment tests on goodwill resulted in impairment charges recorded for an amount of 25 million euro, fully related to the business group Media, Entertainment & Simulation. The global recession, which started end of 2008, had a profound impact on the fundamentals of Barco's Media, Entertainment & Simulation business group. Total spending in the events markets dropped to less than half of levels recorded before the crisis and the conversion of analog to digital billboards came to a virtual standstill (-80%). Consequently the value of the acquisitions Barco made in prior years to strengthen its position in these markets dropped very substantially which in turn fuelled the need for impairments on goodwill.
No impairments on goodwill are recognized in 2010. See further for explanations on the impairment testing performed.
Goodwill acquired in a business combination is allocated on acquisition to the cash-generating units that are expected to benefit from that business combination. These cash-generating units correspond to the division level, which is one level below business group level. Therefore, impairment testing is performed at division level.
The carrying amount of goodwill (after impairment) has been allocated to the divisions within the business groups as follows (in thousands of euro):
| IN THOUSANDS OF EURO |
2010 | 2009 | 2008 |
|---|---|---|---|
| Media, Entertainment & Simulation | 23,437 | 18,095 | 43,095 |
| Monitoring, Control Rooms & Medical Imaging | 29,454 | 14,170 | 14,170 |
| Total goodwill (net book value) | 52,891 | 32,265 | 57,265 |
The goodwill (net book value) of Media, Entertainment & Simulation relates to the business units video & lighting solutions, digital signage and simulation. The goodwill (net book value) in the business group Monitoring, Control Rooms & Medical Imaging relates to the business units medical imaging, traffic, surveillance & monitoring and defense. The business units digital cinema and avionics have no goodwill on the balance sheet.
The group performed its annual impairment test in the fourth quarter of 2010 consistently with prior years. The group considers the relationship between its market capitalization and its book value, amongst other factors, when reviewing the indicators of impairment. At 31 December 2009, the market capitalization of the group was close to the book value of its equity, indicating a potential need for impairment of goodwill and impairment of the assets of the operating segments. This is no longer the case at 31 December 2010 as the market capitalization then exceeded the equity of the group with more than 30%.
The annual impairment tests were performed for each cash-generating unit (typically one level below business group level). The recoverable amount for each of the cash generating units has been determined based on a value-in-use calculation using cash flow projections generated by divisional management covering a five year period. Due to the level of uncertainty around future years, these financial projections have been adjusted to more conservative levels for the purpose of our impairment testing. The pre-tax discount rate applied to projected cash flows is 10% (2009: 10.5%, 2008: 10%) and cash flows beyond the five year period are extrapolated using a conservative growth rate of 0% (2009: 0%, 2008: 0%).
The impairment tests did not reveal the need to recognize impairment losses in 2010.
The calculation of value-in-use for all divisions is most sensitive to the following assumptions:
Sales growth rate used during the projection period – Sales growth used over the projected period has been kept conservatively at zero percent for the cash-generating units within the Monitoring, Control Rooms & Medical Imaging business group, since even then there is no risk for impairment. The Media, Entertainment & Simulation business group (excluding digital cinema) has encountered the highest impact due to the economic crisis. For prudency reasons, in our impairment testing, we did not yet foresee to fully recover from this fall-back in 2010 and 2011, but gradually in the years after. Therefore, a growth of 3% per year is assumed for the five year period.
EBIT as percentage of sales – EBIT as percentage of sales is based on average percentages over the three years preceding the start of the budget period. EBIT levels increase over the projected period for anticipated efficiency improvements. Efficiency improvements can be cost reductions as well as margin improvements. An increase of 1 percentage point per annum was applied for all divisions, except for the medical imaging business unit and the video & lighting system business unit.
For the medical imaging business unit a stable EBIT as percentage of sales is kept conservatively at 10% over the whole budget period, which is below the average over the last three years, since even then there is no risk for impairment.
For the video & lighting system business unit, which had a negative EBIT level in 2009 and despite several improvements also still in 2010, a breakeven EBIT for 2011 is forecasted and the 2007 EBIT level (i.e. EBIT margin level before the economical crisis) of 7.5% is forecasted to be reached gradually again in 2014. In 2010 orders and sales increased versus the prior year, gross profit margins increased with more than 10 percentage points back to historic levels and costs were reduced. Further measures have been decided and are currently implemented to fully right-size the cost structures and limit quality costs related to projects.
Growth rate estimates – The long-term rate used to extrapolate the projection has been kept conservatively at zero % for all divisions.
Discount rates – Discount rates reflect the current market assessment of the risks specific to Barco Group. The discount rate was estimated based on a (long-term) pre-tax cost of capital, the risks being implicit in the cash flows.
The long term discount rate was determined on group level and amounted to 10% for the year 2010 and has been applied to all cashgenerating units.
With regard to the assessment of value-in-use of the Monitoring, Control Rooms & Medical Imaging business group, management believes, based on sensitivity analysis performed, that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.
For the Media, Entertainment & Simulation business group, the previous year impairment tests resulted in goodwill impairment charges recorded of 25 million euro in 2009. As per 31 December 2010, the estimated recoverable amount, after impairment of goodwill and capitalized development recorded, is still close to its carrying value and, consequently, changes in the key assumption would result in additional impairment losses. The implications of the key assumptions for the recoverable amount are discussed below:
Sales growth rate used during the budget period – Management has considered the possibility of lower than budgeted sales growth during the budget period. For the Media, Entertainment & Simulation business group, a negative sales growth from 2011 until 2015 would result in an additional impairment.
EBIT percentage on sales – Management has considered the possibility of lower than budgeted EBIT percentages on sales. For the Media, Entertainment & Simulation business group, a reduction of 1% of the long-term EBIT percentage on sales would result in an additional impairment. In case management would not be able to realize the turnaround from 2010 to 2011 in the video & lighting system business unit, then a negative EBIT percentage of more than 3% would result in an additional impairment. Based on current management plans and measures being implemented, management assesses this sensitivity risk as remote.
Discount rates – Change in the weighted average cost with 0.5% would result in an additional impairment.
Growth rate estimate – Only a decrease (which would result in a negative sales evolution) in the long-term rate used to extrapolate the projection would result in an additional impairment.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| At cost | |||
| On 1 January | 268,376 | 238,308 | 247,807 |
| Expenditure | 41,107 | 32,801 | 47,006 |
| Sales and disposals | - | -3,274 | -21,056 |
| Acquisition of subsidiary | 12,651 | - | 492 |
| Disposal of subsidiary | - | - | -13,818 |
| Translation (losses)/gains | 575 | 541 | -22,122 |
| On 31 December | 322,708 | 268,376 | 238,308 |
| Impairment | |||
| On 1 January | 16,482 | 10,338 | - |
| Expenditure | 1,278 | 6,144 | 10,338 |
| On 31 December | 17,760 | 16,482 | 10,338 |
| Amortization | |||
| On 1 January | 197,459 | 158,932 | 168,423 |
| Amortization | 39,058 | 40,849 | 46,136 |
| Sales and disposals | - | -3,274 | -21,056 |
| Acquisition of subsidiary | 9,054 | - | - |
| Disposal of subsidiary | - | - | -9,479 |
| Translation (losses)/gains | - | 953 | -25,092 |
| On 31 December | 245,570 | 197,459 | 158,932 |
| Net book value | |||
| On 1 January | 54,434 | 69,038 | 79,383 |
| On 31 December | 59,378 | 54,434 | 69,038 |
Consistent with the tests performed in the two previous years, Barco performed impairment tests in the fourth quarter of 2010. Based upon these tests, impairment costs have been recognized for an amount of 1.3 million euro. Similar impairment tests revealed the need to recognize impairment losses on capitalized development in 2009 and 2008 for respectively 6.1 million euro and 10.3 million euro (see note 6). The impairment losses recognized represent the write down of certain specific capitalized development projects.
The recognized impairment losses on capitalized development are allocated to the business groups as follows:
| In thousands of euro | 2010 | 2009 |
|---|---|---|
| Media, Entertainment & Simulation | - | 3,276 |
| Monitoring, Control Rooms & Medical Imaging | 1,278 | 2,869 |
| Total | 1,278 | 6,144 |
| In thousands of euro | 2010 | 2009 | 2008 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| intangible Other assets |
Other intangible assets under contruction |
intangible assets Total other |
Land and buildings |
Plant, machinery and equipment |
Furniture, office equipment and vehicles |
Other property, equipment plant and |
Assets under construction |
tangible assets Total other |
Total | Total | Total | |
| At cost | ||||||||||||
| On 1 January | 19,225 | 2,378 | 21,603 | 64,644 | 82,979 | 42,863 | 7,191 | 538 | 133,570 | 219,817 | 217,523 | 199,937 |
| Expenditure | 427 | - | 427 | 963 | 5,168 | 2,854 | 890 | 717 | 9,629 | 11,019 | 7,864 | 9,891 |
| Sales and disposals | - | -203 | -203 | - | -1,119 | -1,207 | - | - | -2,326 | -2,529 | -6,036 | -4,606 |
| Acquisition of subsidiary | 5,136 | - | 5,136 | - | 8,089 | 337 | 461 | 33 | 8,920 | 14,056 | - | 7,567 |
| Disposal of subsidiary | - | - | - | - | - | - | - | - | - | - | - | -2,642 |
| Transfers | - | - | - | - | -416 | 279 | 164 | -27 | - | - | - | - |
| Translation (losses)/gains | 166 | - | 166 | 1,458 | 957 | 761 | 515 | 1 | 2,234 | 3,858 | 467 | 7,377 |
| On 31 December | 24,954 | 2,175 | 27,129 | 67,065 | 95,658 | 45,887 | 9,221 | 1,262 | 152,028 | 246,222 | 219,817 | 217,523 |
| Depreciation | ||||||||||||
| On 1 January | 16,399 | - | 16,399 | 33,656 | 67,990 | 36,827 | 5,559 | - | 110,377 | 160,432 | 152,762 | 133,055 |
| Depreciation | 1,930 | - | 1,930 | 2,298 | 5,874 | 2,589 | 591 | - | 9,054 | 13,282 | 12,766 | 12,861 |
| Sales and disposals | - | - | - | - | -545 | -977 | - | - | -1,522 | -1,522 | -5,461 | -5,073 |
| Acquisition of subsidiary | 99 | - | 99 | 6,414 | 231 | 195 | 6,840 | 6,939 | - | 6,294 | ||
| Disposal of subsidiary | - | - | - | - | - | - | - | - | - | - | - | -2,391 |
| Transfers | - | - | - | - | -243 | 83 | 160 | - | - | - | - | - |
| Translation (losses)/gains | 128 | - | 128 | 586 | 686 | 593 | 344 | - | 1,623 | 2,337 | 366 | 8,015 |
| On 31 December | 18,556 | - | 18,556 | 36,540 | 80,176 | 39,346 | 6,849 | - | 126,371 | 181,467 | 160,432 | 152,762 |
| Carrying amount | ||||||||||||
| On 1 January | 2,826 | 2,378 | 5,204 | 30,988 | 14,989 | 6,036 | 1,632 | 538 | 23,195 | 59,385 | 64,761 | 66,882 |
The capital expenditures performed by the Barco group in 2010 amounted 11.0 million euro, compared to 7.8 million euro in the previous year.
The net book value other intangible assets and tangible fixed assets acquired through acquisitions amounts to 7.1 million euro. This amount mainly consists of a 5 million euro customer list of FIMI, included in the other intangible assets. We refer to Note 1.2 on 'Acquisitions and divestments' and Note 24 on 'Cash flow statement: effect of acquisitions and disposals' for more details on these transactions.
| Assets | Liabilities | Net assets (liability) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| In thousands of euro | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 |
| Capitalized development cost | 149 | - | - | -7,961 | -6,268 | -6,393 | -7,812 | -6,268 | -6,393 |
| Patents, licenses, | -864 | 1,282 | 246 | - | -1,123 | - | -864 | 159 | 246 |
| Tangible fixed assets and software | 1,883 | 1,213 | 377 | -2,914 | -2,987 | -2,831 | -1,031 | -1,774 | -2,454 |
| Other investments | - | - | - | - | -19 | -19 | - | -19 | -19 |
| Inventory | 18,469 | 13,131 | 10,113 | -804 | -1,798 | -2,442 | 17,665 | 11,333 | 7,671 |
| Trade debtors | 1,861 | 1,208 | 601 | -3,527 | -3,174 | -82 | -1,666 | -1,966 | 519 |
| Provisions | 2,966 | 578 | 3,722 | -273 | -186 | -438 | 2,693 | 392 | 3,284 |
| Employee benefits | 2,425 | 2,358 | 2,347 | - | - | - | 2,425 | 2,358 | 2,347 |
| Deferred revenue | 1,135 | 1,042 | 1,341 | -46 | -105 | -1,580 | 1,089 | 937 | -239 |
| Other items | 3,292 | 1,424 | 2,079 | -3,250 | -5,480 | -2 | 42 | -4,056 | 2,077 |
| Tax value of loss carry forwards | 15,517 | 13,225 | 13,177 | - | - | - | 15,517 | 13,225 | 13,177 |
| Tax value of tax credits | 6,352 | 12,504 | 10,441 | - | - | - | 6,352 | 12,504 | 10,441 |
| Gross tax assets/(liabilities) | 53,185 | 47,965 | 44,443 | -18,774 | -21,139 | -13,787 | 34,411 | 26,825 | 30,657 |
| Set off of tax | -11,443 | -15,840 | -10,572 | 11,443 | 15,840 | 10,572 | - | - | - |
| Net tax assets/(liabilities) | 41,742 | 32,125 | 33,871 | -7,331 | -5,299 | -3,215 | 34,411 | 26,825 | 30,657 |
Deferred tax assets and liabilities are attributable to the following items:
Movements in the deferred tax assets / (liabilities) arise from the following:
| In thousands of euro | As at 1 January |
Recognized through income statement |
Recognized through equity |
Acquisitions and disposals |
Exchange gains and losses |
As at 31 December |
|---|---|---|---|---|---|---|
| Capitalized development cost | -6,268 | -1,495 | - | 136 | -185 | -7,812 |
| Patents, licenses, | 159 | 333 | - | -1,375 | 19 | -864 |
| Tangible fixed assets and software | -1,774 | 591 | - | - | 152 | -1,031 |
| Other investments | -19 | 19 | - | - | - | - |
| Inventory | 11,333 | 5,073 | - | 791 | 468 | 17,665 |
| Trade debtors | -1,966 | 173 | - | 13 | 113 | -1,666 |
| Provisions | 392 | 2,523 | - | -297 | 75 | 2,693 |
| Employee benefits | 2,358 | -3 | - | - | 70 | 2,425 |
| Deferred revenue | 937 | 84 | - | - | 68 | 1,089 |
| Other items | -4,056 | 3,640 | 361 | 41 | 57 | 42 |
| Tax value of loss carry forwards | 13,225 | 2,184 | - | - | 108 | 15,517 |
| Tax value of tax credits | 12,504 | -6,152 | - | - | - | 6,352 |
| Total | 26,825 | 6,969 | 361 | -691 | 947 | 34,411 |
On top of the tax losses and tax credits for which a net deferred tax is recognized (net deferred tax asset of respectively 15.5 million euro and 6.3 million euro), the Group owns tax losses carried forward and other temporary differences on which no deferred tax asset is recognized amounting to 102 million euro as of 31 December 2010 (at 34% tax rate resulting in a non recognized deferred tax asset of rounded 35 million euro). Deferred tax assets have not been recognized on these items because it is not probable that future profit will be available against which the benefits can be utilized. The tax losses carried forward and other temporary differences on which no deferred tax asset is recognized have no expiration date.
Deferred tax assets relate for the major part to the tax value of loss carry forwards and tax credits and almost fully relate to Belgium. In assessing the realizability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will be realized within the foreseeable future. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the group will need to generate future taxable income in the countries where the net operating losses were incurred. Based upon the level of historical taxable income, the usage of loss carry forwards and tax credits in 2010 for an amount of 2.7 million euro (see Note 7) and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes as at 31 December 2010, it is probable that the group will realize all of the recognized benefits of these deductible differences.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Raw materials and consumables | 101,801 | 62,434 | 65,793 |
| Work in progress | 62,452 | 42,161 | 43,026 |
| Finished goods | 103,924 | 77,952 | 102,843 |
| Contracts in progress | 31,345 | 25,889 | 31,515 |
| Write-off on inventories | -69,101 | -62,172 | -54,073 |
| Inventory | 230,421 | 146,264 | 189,104 |
| Inventory turns (a) |
2.3 | 2.7 | 2.2 |
(a) Inventory turns = 12 / [Inventory / (Average Monthly Sales x Material Cost of Goods Sold %)]
The amount of write-offs recognized as expense in 2010 amounts to 9.2 million euro (2009: 20.5 million euro and 2008: 11.1 million euro). During 2010, the acquisitions of subsidiaries resulted in acquired net inventory for an amount of 13.0 million euro.
| In thousands of euro | 2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Trade debtors - gross | 211,128 | 142,623 | 173,115 | |
| Trade debtors - bad debt reserve | (a) | -10,145 | -7,817 | -10,790 |
| Trade debtors - net | (b) | 200,983 | 134,805 | 162,325 |
| V.A.T. receivable | 9,809 | 7,670 | 6,356 | |
| Taxes receivable | 17,476 | 16,218 | 14,928 | |
| Interest rate swap (note 19) | 4 | 14 | 19 | |
| Currency rate swap (note 19) | 287 | 155 | -77 | |
| Other | 4,468 | 2,873 | 8,946 | |
| Other amounts receivable | 32,044 | 26,931 | 30,172 | |
| Other non-current assets | (c) | 17,339 | 6,109 | 5,302 |
| Number of days sales outstanding (DSO) | (d) | 59 | 67 | 72 |
Per 31 December 2010, the number of days sales outstanding continues to decrease compared to the two previous reporting periods, reaching 59 days at the end of 2010. The bad debt reserve decreased in proportion to the gross amount of trade debtors from 5.48% per 31 December 2009 to 4.80% per 31 December 2010.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| On 1 January | -7,817 | -10,790 | -6,850 |
| Acquisition of subsidiaries | -471 | - | |
| Additional provisions | -3,598 | -672 | -6,034 |
| Amounts used | 1,185 | 2,152 | 927 |
| Amounts unused | 1,283 | 1,493 | 1,166 |
| Translation (losses) / gains | -727 | - | - |
| On 31 December | -10,145 | -7,817 | -10,790 |
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Not due | 151,007 | 106,612 | 125,746 |
| Overdue less than 30 days | 24,790 | 12,055 | 25,917 |
| Overdue between 30 and 90 days | 16,629 | 11,039 | 11,422 |
| Overdue more than 90 days | 18,702 | 12,917 | 16,029 |
| Total gross | 211,128 | 142,623 | 179,114 |
| Bad debt reserve | -10,145 | -7,817 | -10,790 |
| Total | 200,983 | 134,805 | 168,324 |
The increase in the other non-current assets mainly relates to prepayments performed for 3D related technology licenses and long-term receivables in the frame of vendor financing programs.
DSO = (( Trade debtors, net) / (sales past quarter)) * 90
| In thousands of euro | 2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Deposits | (a) | 11,986 | 10,629 | 40,733 |
| Cash at bank | (b) | 33,983 | 35,214 | 31,294 |
| Cash in hand | 72 | 58 | 92 | |
| Cash and cash equivalents | 46,041 | 45,901 | 72,119 | |
| Long-term financial receivable | (c) | 2,172 | - | - |
| Long-term debts | (d) | -12,674 | -11,906 | -13,672 |
| Current portion of long-term debts | (d) | -2,643 | -2,393 | -1,983 |
| Short-term debts | (e) | -24,039 | -8,116 | -89,266 |
| Net financial cash / (debt) | 8,857 | 23,486 | -32,802 |
Deposits are short-term, highly liquid investments, which are readily convertible to known amounts of cash. At closing date, deposits include:
| In thousands of euro | 2010 | 2009 |
|---|---|---|
| • deposits in INR, with an average interest rate of 7.17% | 3,675 | 4,719 |
| • deposits in EUR, with an average interest rate of 0.84% | 5,091 | 4,328 |
| • deposits in USD, with an average interest rate of 0.23% | 2,245 | - |
| • deposits in other currencies | 975 | 1,582 |
| Total deposits | 11,986 | 10,629 |
Cash at bank is immediately available. It is denominated in the following currencies:
| 2010 | 2009 | |
|---|---|---|
| • EUR | 49.7% | 43.5% |
| • USD | 24.2% | 33.5% |
| • CNY | - | 5.7% |
| • INR | 9.0% | - |
| • Others | 17.1% | 17.3% |
During 2010, Barco entered into a specific vendor financing mechanism, resulting in a long-term financial receivable for an amount of 2.2 million euro per 31 December 2010 and a long-term debt for the same amount. Both neutralize each other in the determination of the net cash position, as all material risks and rewards are transferred upon realization of the sales transaction.
This long-term financial receivable is presented on the face of the balance sheet on line 'Other non-current assets'.
Analysis of long-term financial debts, including the current portion of long-term financial debts, as to currencies:
| In thousands of euro | 2010 | 2009 |
|---|---|---|
| • EUR | 6,079 | 7,247 |
| • USD | 8,237 | 6,548 |
| • Other | 1,001 | 506 |
| Total | 15,317 | 14,300 |
Analysis of long-term financial debts including the current portion of long-term financial debts, as to interest rates:
| In thousands of euro | Effective interest rate | Maturity | 2010 | 2009 |
|---|---|---|---|---|
| • variable, limited by cap-floor agreements | Euribor 3M + 0.70% | 2014 | 1,750 | 2,250 |
| (as described in Note 19) | Euribor 3M + 0.75% | 2014 | 1,625 | 2,250 |
| Euribor 3M + 0.80% | 2014 | 1,750 | 2,250 | |
| Euribor 3M + 0.89% | 2014 | 512 | 509 | |
| • variable, swapped into fixed | 3.86% | Later than 2015 | 6,492 | 6,508 |
| • variable/fixed (offset by long-term receivable) | 2,172 | - | ||
| • fixed (various) | 1,015 | 533 | ||
| Total | 15,316 | 14,300 |
In July 2009, the group restructured its portfolio of bank borrowings by stepping into a 85 million euro revolving Credit Facility agreement with a tenor of 2.5 years, thereby securing a very healthy liquidity profile and extending the consolidated average duration of the group debt portfolio. The Revolving Credit Facility is being issued and borrowed by Barco NV and Barco Coordination Center NV and is supported by a number of other significant subsidiaries within the group, acting as co-obligors.
During 2010 and as per 31 December 2010, Barco is meeting all requirements of the loan covenants on the Revolving Credit Facility.
Analysis of the short-term financial debts on 31 December 2010:
| In thousands of euro | 2010 | 2009 | |||
|---|---|---|---|---|---|
| Effective interest rate | Balance | Effective interest rate | Balance | ||
| EUR | 0.7% | 20,000 | 0.7% | 2,260 | |
| USD | 3.8% | 3,218 | 3.2% | 2,707 | |
| CNY | - | - | 5.3% | 2,241 | |
| Other | 821 | 908 | |||
| Total | 24,039 | 8,116 |
As per 31 December 2010, 23.2 million euro of the 85 million euro Credit Facility was drawn by means of short term debt.
The long-term debts, excluding the current portion of the long-term debts, are payable as follows:
| In thousands of euro | 2010 |
|---|---|
| Payable in 2012 | 2,354 |
| Payable in 2013 | 2,270 |
| Payable in 2014 | 1,444 |
| Payable in 2015 | 114 |
| Later | 6,492 |
| Total long-term debts | 12,674 |
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Governmental loans | 5,133 | 5,239 | 5,527 |
| Earn-out payment | 7,500 | - | - |
| Other | 655 | 207 | 285 |
| Other long-term liabilities | 13,288 | 5,446 | 5,812 |
In the agreement with Royal Philips Electronics relating to the acquisition of FIMI Srl in 2010, an additional earn-out of 10 million euro is foreseen, payable by Barco NV over the period 2011 until 2014. The earn-out equals to 35% of the cumulative net purchase value of the Philips Group with FIMI over the next five years and is limited to 2.5 million euro per year. The other long-term liabilities include 7.5 million earn-out expected to be payable as of 2012. The 2.5 million earn-out payable early 2011 is presented on the line 'Other current liabilities'.
The other long-term liabilities, excluding the current portion of the long-term liabilities, are repayable as follows:
| In thousands of euro | 2010 |
|---|---|
| Payable in 2012 | 3,642 |
| Payable in 2013 | 3,005 |
| Payable in 2014 | 2,995 |
| Payable in 2015 | 496 |
| Later | 3,150 |
| Total other long-term liabilities | 13,288 |
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Share capital | 54,169 | 54,169 | 54,169 |
| Share premium | 131,150 | 131,150 | 131,150 |
| Share-based payments | 3,478 | 3,188 | 2,858 |
| Acquired own shares | -45,641 | -45,641 | -45,641 |
| Retained earnings | 282,166 | 238,542 | 298,461 |
| Cumulative translation adjustment | -28,757 | -37,757 | -38,587 |
| Derivatives | -975 | 613 | 764 |
| Equity attributable to equity holders of the parent | 395,590 | 344,264 | 403,174 |
In 2010 no warrants were exercised under the existing plans. As a result thereof the company's share capital remained unchanged at 54.2 million euro on 31 December 2010. Also the total number of shares outstanding remained unchanged at 12,669,955. All shares are fully paid.
Since no warrants were exercised in 2010 the share premium remained unchanged at 131 million euro on 31 December 2010.
On 1 June 2004 the extraordinary shareholders' meeting approved a new warrant scheme effective for a period of five years and decided that the board of directors could create for the benefit of the staff up to 400,000 warrants, each one entitling subscription to one share. In 2007, 110,000 warrants were granted. In 2008 no warrants were granted. In 2009, 106,470 warrants were granted. On 31 December 2009 no warrants remained available for distribution to employees under the 2004 warrant scheme since the five year term thereof, which commenced on 1 June 2004, expired on 31 May 2009.
On 11 June 2010, 3 new warrant schemes have been approved by the extraordinary shareholders' meeting. These 3 warrant schemes entitle the board of directors to create maximum 100,000 warrants before 31 December 2010; each warrant entitling subscription to one share. In October 2010, 93,100 warrants have been granted to employees and management of the group based upon these warrant schemes. On 31 December 2010, no warrants remained available for distribution under the 2010 warrant schemes given the expire dates of the plans per 31 December 2010.
The total number of outstanding warrants on 31 December 2010 amounted to 918,804 which can lead to the creation of the same number of shares. These warrants may be exercised under the following conditions:
| Allocation date | End term | Exercise price | Balance on 31 Dec 2009 |
Granted in 2010 | Exercised in 2010 |
Cancelled in 2010 |
Expired in 2010 | Balance on 31 Dec 2010 |
|---|---|---|---|---|---|---|---|---|
| 09/16/99 | 09/15/091 | 93.58 euro | 121.958 | (460) | 121.498 | |||
| 07/13/00 | 07/12/101 | 91.92 euro | 130.259 | (912) | 129.347 | |||
| 06/18/02 | 06/17/121 | 42.01 euro | 105.812 | 105.812 | ||||
| 06/24/022 | 06/23/12 | 40.55 euro | 983 | (923) | 60 | |||
| 06/24/02 | 06/23/121 | 42.70 euro | 7.666 | 7.666 | ||||
| 11/04/02 | 11/03/121 | 42.40 euro | 4.000 | 4.000 | ||||
| 06/23/03 | 06/22/13 | 50.75 euro | 47.247 | (90) | 47.157 | |||
| 06/23/032 | 06/22/13 | 50.50 euro | 880 | (500) | 380 | |||
| 09/15/03 | 09/14/13 | 57.52 euro | 950 | 950 | ||||
| 03/29/04 | 03/28/14 | 67.00 euro | 60.532 | (45) | 60.487 | |||
| 03/29/042 | 03/28/14 | 66.50 euro | 915 | (330) | 585 | |||
| 09/12/05 | 09/11/15 | 60.51 euro | 55.857 | (50) | 55.807 | |||
| 09/12/052 | 09/11/15 | 63.15 euro | 1.540 | (330) | 1.210 | |||
| 09/12/053 | 09/11/15 | 61.35 euro | 10.245 | (50) | 10.195 | |||
| 11/09/06 | 11/08/16 | 65.05 euro | 65.053 | (45) | 65.008 | |||
| 11/09/062 | 11/08/16 | 66.15 euro | 1.575 | (360) | 1.215 | |||
| 11/12/07 | 11/11/17 | 50.68 euro | 80.320 | (100) | 80.220 | |||
| 11/12/072 | 11/11/17 | 51.53 euro | 3.450 | (713) | 2.737 | |||
| 12/15/07 | 12/14/17 | 50.48 euro | 25.000 | 25.000 | ||||
| 05/28/09 | 05/27/19 | 19.62 euro | 90.800 | 90.800 | ||||
| 05/28/09 | 05/27/19 | 24.00 euro | 15.070 | 15.070 | ||||
| 05/28/09 | 05/27/19 | 23.57 euro | 600 | (100) | 500 | |||
| 10/28/10 | 10/27/15 | 35.85 euro | 33.450 | 33.450 | ||||
| 10/28/102 | 10/27/20 | 35.85 euro | 35.500 | 35.500 | ||||
| 10/28/103 | 10/27/15 | 41.75 euro | 24.150 | 24.150 | ||||
| TOTAL | 830,712 | 93,100 | 0 | -1,058 | -3,950 | 918,804 |
(1) For a large number of warrants this last exercise date was extended with three years according to article 407 of the law of 24 December 2002
(2) Deviation of exercise price as a result of the implementation of the UK sub plan
(3) Deviation of exercise price as a result of the implementation of the US sub plan
No warrants were exercised during 2010.
The cost of these warrant plans is included in the income statement. The warrants are valued at grant date, based on the share price at grant date, exercise price, expected volatility, dividend estimates and interest rates. The warrant cost is taken into result on a straight-line basis from the grant date until the first exercise date. The share-based payment expenses amounted to 0.3 million euro in 2010 (2009: 0.3 million euro; 2008: 0.6 million euro).
Barco did not acquire own shares in 2010 and 2009. Therefore the number of own shares acquired by Barco NV up to 31 December 2010 remains unchanged at 737,963. During the year 2008, Barco acquired 27,900 own shares for a total amount of 1.2 million euro.
The change in retained earnings is caused by the net income of 2010.
In 2010, exchange differences on translation of foreign operations mainly related to the Indian Rupee (3.6 million euro), the American dollar (2.0 million euro), the Singapore dollar (1.4 million euro) and the Australian dollar (1.1 million euro). In 2008 the Indian Rupee became significantly weaker compared to the euro and compared to the year before. In 2010 and 2009 exchange differences on the translation of the Indian operations were marginal compared to 2008.
Derivative financial instruments are disclosed in note 20.
| In thousands of euro |
2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Trade payables | 125,353 | 67,852 | 67,004 | |
| Days payable outstanding (DPO) | (a) | 67 | 55 | 51 |
(a) DPO = Trade Payables / (Material cost + Services and other costs) x 365
| In thousands of euro | Balance sheet 2010 |
Acquisition of subsidiary |
Additional provisions made |
Amounts used |
Unused amounts reversed |
Transfers | Translation (losses) / gains |
Balance sheet 2009 |
Balance sheet 2008 |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Technical warranty | (a) | 26,520 | 648 | 18,265 | -10,136 | -1,307 | 105 | 534 | 18,412 | 16,820 |
| Risks on contracts in progress | (b) | 6,337 | - | 2,337 | - | - | - | - | 4,000 | 237 |
| Pension obligations | (c) | 5,972 | 1,893 | 703 | -927 | -26 | - | 121 | 4,208 | 4,887 |
| Restructuring provision | (d) | 3,351 | - | - | -3,077 | - | 344 | 23 | 6,061 | 10,433 |
| Social claims and severance payments |
466 | - | 217 | -277 | -65 | -357 | 44 | 904 | 1,238 | |
| Patent infringements | - | - | - | - | - | - | - | - | 1,290 | |
| Other claims and risks | 5,627 | 443 | 5,826 | -4,953 | -963 | -92 | 127 | 5,240 | 5,450 | |
| Provisions | 48,273 | 2,984 | 27,348 | -19,370 | -2,361 | - | 848 | 38,825 | 40,355 |
Provisions for technical warranty are based on historical experience of the level of repairs and replacements. Additional provisions are set up when a technical problem is detected. There are three different technical warranty provisions: provisions related to 'normal' (mostly 2 years) warranty period, provisions related to extended warranty periods and provisions for specific claims/issues.
As soon as Barco considers that it is probable that the contract costs on a contract in progress will exceed the contract revenue, the expected losses are recognized as an expense.
In general, pension plans at Barco are defined contribution plans. Obligations for these plans are recognized as an expense in the income statements as incurred. Expenses for these plans amount to 7.9 million euro in 2010 (in 2009: 9.2 million euro; in 2008: 11.6 million euro). In some specific cases a pension plan includes a defined benefit obligation. According to IAS 19, provisions are set up in these situations.
As per 31 December 2010, the defined benefit obligations are composed of:
• Early retirement plans in Belgium 1,712 • Local legal requirements (mainly France, Japan, Korea and Italy) 1,535 • A small number of individual plans 2,725 Total 5,972
Early retirement plans are recognized as liability and expense when the company is committed to terminate the employment of the employees affected before the normal retirement date.
During 2010, the restructuring plans initiated in the previous year have been further executed; this will continue in the coming year.
General risk factors are described in the director's report 'Risk Factors'.
Derivative financial instruments are used to reduce the exposure to fluctuations in foreign exchange rates and interest rates. These instruments are subject to the risk of market rates changing subsequent to acquisition. These changes are generally offset by opposite effects on the item being hedged.
Barco incurs foreign currency risk on recognized assets and liabilities when they are denominated in a currency other than the company's local currency. Such risks may be naturally covered when a monetary item at the asset side (such as a trade receivable or cash deposit) in a given currency is matched with a monetary item at the liability side (such as a trade payable or loan) in the same currency.
Forward exchange contracts and selectively option contracts are used to manage the currency risk arising from recognized receivables and payables, which are not naturally hedged. This is particularly the case for the USD (and USD-related currencies), for which receivables are systematically higher than payables. No hedge accounting is applied to these contracts.
The balances on foreign currency monetary items are valued at the rates of exchange prevailing at the end of the accounting period. Derivative financial instruments that are used to reduce the exposure of these balances are rated in the balance sheet at fair value. Both changes in foreign currency balances and in fair value of derivative financial instruments are recognized in the income statement.
Barco selectively designates forward contracts to forecasted sales. Hedge accounting is applied to these contracts. The portion of the gain or loss on the hedging instrument that will be determined as an effective hedge is recognized directly in comprehensive income. On 31 December 2010, there were no forward contracts outstanding under hedge accounting treatment.
Main sensitivity to currency fluctuations is related to the evolution of the USD versus the euro. This sensitivity is caused by following factors:
Barco uses following hedging instruments to manage its interest rate risk:
Barco has an outstanding variable loan of 8.7 million US dollar (6.5 million euro) in place, of which variable interest rate conditions have been swapped into a fixed 3.86%.
The swap is determined as an effective hedge of the loan for a similar portion and meets the hedging requirements of IAS 39. The fair value of the hedging instrument is therefore recognized directly in comprehensive income under hedge accounting treatment.
Barco entered in 2004 into a 15 million euro amortizing loan agreement with variable interest rate. Through the cap / floor structure, variability on the interest rate conditions of this loan (currently outstanding at 5.1 million euro) is restricted within a range of 2% and 5%.
The cap / floor loan agreements don't meet the hedging requirements of IAS 39 and are therefore treated as financial instruments held for trading. They are valued at fair value and changes in fair value are recognized in the income statement.
Effective base rate on the 5.1 million euro amortizing loan agreement is currently fixed at 2% (due to low EURIBOR rates and included floor agreement), whereby based on forward-looking interest rate view, management doesn't expect the interest rate to rise above this floor level in the immediate foreseeable future.
Credit evaluations are performed on all customers requiring credit over a certain amount. The credit risk is monitored on a continuous basis. In a number of cases collateral is being requested before a credit risk is accepted. Specific trade finance instruments such as letters of credit and bills of exchange are regularly used in order to minimize the credit risk. In 2010, Barco concluded credit insurances in order to cover credit risks on specific customers with whom Barco entered into vendor financing agreements. Such vendor financing agreements are concluded and monitored on a case by case basis.
A policy defining acceptable counter parties and the maximum risk per counter party is in place. Short-term investments are done in marketable securities or in fixed term deposits with reputable banks.
Set out below is an overview of the carrying amounts of the group's financial instruments that are showing in the financial statements. In general, the carrying amounts are assumed to be a close approximation of the fair value.
| In thousands of euro | 2010 | 2009 | 2008 | ||
|---|---|---|---|---|---|
| Carrying amount / Fair value (approx.) | |||||
| Financial assets | |||||
| Trade receivables | 200,983 | 134,805 | 168,325 | ||
| Other receivables | 32,044 | 25,850 | 30,172 | ||
| Loan and other receivables | 31,754 | 25,681 | 30,230 | ||
| Interest rate swap | 4 | 14 | 19 | ||
| Currency rate swap | 287 | 155 | -77 | ||
| Other non-current assets | 17,339 | 6,109 | 5,302 | ||
| Cash and short-term deposits | 46,041 | 45,901 | 72,119 | ||
| Total | 296,407 | 212,665 | 275,918 | ||
| Financial liabilities | |||||
| Financial debts | 15,317 | 13,791 | 15,376 | ||
| Floating rate borrowings | 14,302 | 13,258 | 14,986 | ||
| Fixed rate borrowings | 1,015 | 533 | 390 | ||
| Other debts | 13,288 | 5,943 | 6,091 | ||
| Short-term debts | 24,039 | 8,116 | 89,266 | ||
| Trade payables | 125,353 | 67,852 | 67,004 | ||
| Dividends payable | 2,142 | 2,222 | 2,694 | ||
| Interest rate swap | 1,134 | 92 | 36 | ||
| Other liabilities | 6,522 | 1,683 | 1,905 | ||
| Total | 187,794 | 99,699 | 182,372 |
The fair value of the financial assets and liabilities is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
As at 31 December 2010, the carrying amounts of such receivables, net of allowances, are assumed not to be materially different from their calculated fair values.
• The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases as well as other non-current financial liabilities is estimated by discounting future cash flows using the effective interest rates currently available for debt on similar terms, credit risk and remaining maturities. As at 31 December 2010, the effective interest rate is not materially different from the nominal interest rate of the financial obligation, hence the carrying amounts of such liabilities are assumed not to be materially different from their calculated fair values.
• The group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate (cap/floor) swaps and foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves.
As at 31 December 2010, the Group held the following financial instruments measured at fair value:
| In thousands of euro | 2010 | 2009 |
|---|---|---|
| Assets measured at fair value | ||
| Financial assets at fair value through profit or loss | ||
| Foreign exchange contracts - non-hedged | 327 | 25 |
| Interest rate swap | 4 | 14 |
| Financial assets at fair value through equity | ||
| Foreign exchange contracts - hedged | - | 690 |
| Interest rate swap | - | |
| Liabilities measured at fair value | ||
| Financial liabilities at fair value through profit or loss | ||
| Foreign exchange contracts - non-hedged | 56 | 540 |
| Interest rate swap | 157 | 92 |
| Financial liabilities at fair value through equity | ||
| Foreign exchange contracts - hedged | - | 20 |
| Interest rate swap | 977 | 20 |
The group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
All fair values mentioned in the above table relate to Level 2.
During the reporting period ending 31 December 2010, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
Management evaluates its capital needs based on the following data:
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Net financial cash / (debt) | 8,857 | 23,486 | -32,802 |
| Equity | 395,591 | 344,265 | 403,176 |
| % Net financial cash (debt) / Equity | 2.2% | 6.8% | -8.1% |
| In thousands of euro | 2010 | 2009 | 2008 |
| Equity | 395,591 | 344,266 | 403,176 |
| Total equity and liabilities | 754,699 | 572,475 | 720,727 |
Barco reinforced its investment level in 2010 in order to sustainably support its growth, including the acquisition of dZine mid 2010. Although the combined effect resulted in a net cash outflows, the group ended 2010 with a net cash position of 8.9 million euro. Management considers current ratios as healthy and sufficient for the further development of the group.
| In thousands of euro | 2010 | 2009 | 2008 | ||||
|---|---|---|---|---|---|---|---|
| Non-cancellable operating leases are payable as follows: | |||||||
| Less than one year | 4,775 | 5,311 | 6,273 | ||||
| Between one and five years | 8,808 | 7,788 | 10,261 | ||||
| More than five years | 883 | 526 | 416 | ||||
| Total | 14,466 | 13,626 | 16,950 |
Non-cancellable operating leases mainly relate to leases of factory facilities, warehouses and sales offices. During the current year, 6.6 million euro was recognized as an expense in the income statement in respect of operating leases of factory facilities, warehouses and sales offices (in 2009: 5.1 million euro; in 2008: 5.5 million euro).
| In thousands of euro | 2010 | 2009 | 2008 | |
|---|---|---|---|---|
| Guarantees given to third parties | (a) | 23,351 | 22,986 | 22,145 |
| Mortgage obligations given as security | (b) | |||
| • book value of the relevant assets | 203 | 724 | 5,584 | |
| • total of the mortgage | 2,384 | 2,384 | 14,626 | |
| Buy back obligations | (c) | 11,300 | 6,700 | 9,800 |
(a) Guarantees given to third parties mainly relate to guarantees given to customers for ongoing projects, guarantees given to suppliers for investment projects and to authorities for commitments related to VAT, duties, etc.
(b) There are no outstanding debts guaranteed by the mortgage obligations.
(c) Barco appeals on a vendor-lease program with the obligation to take back sold goods, in case of insolvency of the client. No buy-back provision is set up for this risk as all risks and rewards are transferred upon the sale. Total possible value of the obligation to take back sold goods is 11.3 million euro (6.7 million euro in 2009 and 9.8 million euro in 2008). Average remaining duration of these contracts is 7 years.
At the end of 2007, Barco reached agreements for the sale of important parts of the Manufacturing Services division. These agreements stipulate that the buyers will remain Barco's leading suppliers for the mechanical assembly activities. These commitments gradually decrease from 90% in the first year after the sale of the activities (i.e. 2008) to 82% in 2012. In 2008, Barco reached an additional agreement for cable assembly, which included a purchase commitment gradually decreasing in 2011 and 2012.
The prices used in all purchase agreements are based on following principles:
• price continuity with customary adjustments for existing products;
• agreed price calculation models and competitiveness obligations for new products.
The agreements include quality and on-time delivery specifications.
For more information with respect to remuneration for directors and members of the executive management, please refer to the 'Corporate governance' section on page 62 of the annual report.
The table below shows the effect of acquisitions and disposals on the balance sheet movement of the group. The 2010 acquisitions relate to Fimi, dZine and Element Labs, leading to a combined investment of 38.2 million euro. See Note 1.2 for more information on these acquisitions.
The 2009 effect relates to the disposal of the Advanced Visualization activities. In 2008, the effect relates for the major part to the acquisition of High End Systems and the disposal of Barco Vision.
| In thousands of euro | Acquisitions | Disposals | ||||
|---|---|---|---|---|---|---|
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |
| Non-current assets | 12,021 | - | 1,862 | - | -5,172 | -13,393 |
| Capitalized development cost | 3,597 | - | 500 | - | -4,265 | -5,671 |
| Customer list | 5,000 | - | - | - | - | - |
| Tangible assets and other intangible assets | 2,112 | - | 1,232 | - | -229 | -10,557 |
| Deferred tax assets | 1,299 | - | 130 | - | -678 | 2,865 |
| Other non-current assets | 13 | - | - | - | - | -30 |
| Current assets | 21,848 | - | 14,318 | - | 3,052 | -26,520 |
| Inventory | 12,963 | - | 7,143 | - | -64 | -9,190 |
| Trade debtors & other receivables | 8,885 | - | 7,175 | - | 3,116 | -17,330 |
| Non-current liabilities | 5,035 | - | -21 | - | - | 2 |
| Long-term debts, interest-bearing liabilities | - | - | -21 | - | - | 2 |
| Deferrred tax liabilities | 1,991 | - | - | - | - | - |
| Provisions | 3,044 | - | - | - | - | - |
| Current liabilities | 11,615 | - | -4,389 | - | 2,205 | 14,544 |
| Trade payables | 4,539 | - | -2,577 | - | - | 6,063 |
| Other payables | 7,076 | - | -1,813 | - | 2,205 | 8,481 |
| Net-identifiable assets and liabilities | 17,218 | - | 11,769 | - | 85 | -25,367 |
| Non-operating profit (losses) on disposals | - | - | - | - | -7,508 | 69,208 |
| Goodwill on acquisitions | 20,626 | - | 24,654 | - | -15,544 | -255 |
| Received consideration | - | - | - | - | 22,967 | 62,510 |
| Acquired cash | 382 | - | - | - | - | - |
| Purchase price | 38,227 | - | 36,423 | - | - | - |
Out of the total purchase price relating to the 2010 acquisitions (38.2 million euro), 19 million euro purchase price of FIMI Srl was already paid end of 2009; during 2010 an amount of 10 million euro has been paid, mainly relating to the acquisition of dZine and the asset deal with Element Labs. The remaining part of the purchase price concerns earn-out amounts payable as of 2011.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are carried in terms of historical cost using the exchange rate at the date of the acquisition.
| In thousands of euro | Note | 31 Dec 2010 | 31 Dec 2009 | 31 Dec 2008 | 31 Dec 2010 | 31 Dec 2009 | 31 Dec 2008 |
|---|---|---|---|---|---|---|---|
| Continuing business | Reported business | ||||||
| ASSETS | |||||||
| Goodwill | 9 | 52,891 | 32,265 | 57,265 | 52,891 | 32,265 | 72,809 |
| Capitalized development cost | 10 | 59,378 | 54,434 | 69,038 | 59,378 | 54,434 | 73,378 |
| Other intangible assets | 11 | 8,573 | 5,204 | 2,325 | 8,573 | 5,204 | 2,364 |
| Land and buildings | 11 | 30,525 | 30,988 | 33,378 | 30,525 | 30,988 | 33,378 |
| Other tangible assets | 11 | 25,657 | 23,193 | 29,058 | 25,657 | 23,193 | 29,263 |
| Investments | 326 | 19,327 | 327 | 326 | 19,327 | 327 | |
| Deferred tax assets | 12 | 41,742 | 32,125 | 33,871 | 41,742 | 34,042 | 34,701 |
| Other non-current assets | 14 | 17,339 | 6,109 | 5,302 | 17,339 | 10,025 | 5,302 |
| Non-current assets | 236,431 | 203,645 | 230,565 | 236,431 | 209,479 | 251,521 | |
| Inventory | 13 | 230,421 | 146,264 | 189,104 | 230,421 | 146,265 | 189,252 |
| Trade debtors | 14 | 200,983 | 134,805 | 168,325 | 200,983 | 134,805 | 170,140 |
| Other amounts receivable | 14 | 32,044 | 25,850 | 30,172 | 32,044 | 26,931 | 30,185 |
| Cash and cash equivalents | 15 | 46,041 | 45,901 | 72,119 | 46,041 | 45,901 | 72,119 |
| Prepaid expenses and accrued income | 8,780 | 9,092 | 7,484 | 8,780 | 9,095 | 7,509 | |
| Assets from discontinued operations | 3 | - | 6,918 | 22,960 | - | - | - |
| Current assets | 518,269 | 368,831 | 490,162 | 518,269 | 362,997 | 469,206 | |
| Total assets | 754,699 | 572,475 | 720,727 | 754,699 | 572,475 | 720,727 | |
| EQUITY AND LIABILITIES | |||||||
| Equity attributable to equityholders of the parent | 17 | 395,590 | 344,264 | 403,173 | 395,590 | 344,264 | 403,173 |
| Non-controlling interests | 1 | 1 | 3 | 1 | 1 | 3 | |
| Equity | 395,591 | 344,265 | 403,176 | 395,591 | 344,265 | 403,176 | |
| Long-term debts | 15 | 12,674 | 11,906 | 13,672 | 12,674 | 11,906 | 13,672 |
| Deferred tax liabilities | 12 | 7,331 | 5,299 | 3,215 | 7,331 | 10,727 | 3,215 |
| Other long-term liabilities | 16 | 13,288 | 5,446 | 5,813 | 13,288 | 5,446 | 5,813 |
| Non-current liabilities | 33,293 | 22,652 | 22,700 | 33,293 | 28,080 | 22,700 | |
| Current portion of long-term debts | 15 | 2,643 | 2,393 | 1,983 | 2,643 | 2,393 | 1,983 |
| Short-term debts | 15 | 24,039 | 8,116 | 89,266 | 24,039 | 8,116 | 89,266 |
| Trade payables | 18 | 125,353 | 67,852 | 67,004 | 125,353 | 67,852 | 67,135 |
| Advances received on contracts in progress | 33,659 | 27,493 | 19,180 | 33,659 | 27,493 | 19,315 | |
| Tax payables | 23,574 | 12,203 | 20,989 | 23,574 | 12,203 | 20,995 | |
| Employee benefit liabilities | 47,598 | 28,450 | 38,055 | 47,598 | 28,451 | 38,430 | |
| Other current liabilities | 6,522 | 3,997 | 4,636 | 6,522 | 3,997 | 4,851 | |
| Accrued charges and deferred income | 14,154 | 10,801 | 7,821 | 14,154 | 10,802 | 12,516 | |
| Provisions | 19 | 48,273 | 38,824 | 40,355 | 48,273 | 38,824 | 40,360 |
| Liabilities from discontinued operations | 3 | - | 5,429 | 5,562 | - | - | - |
| Current liabilities | 325,815 | 205,558 | 294,851 | 325,815 | 200,131 | 294,851 | |
| Total equity and liabilities | 754,699 | 572,475 | 720,727 | 754,699 | 572,475 | 720,727 |
There are no major events subsequent to the balance sheet date which have a major impact on the further evolution of the company.
Statutory auditor's report to the general meeting of shareholders of Barco NV on the consolidated financial statements for the year ended 31 December 2010.
In accordance with the legal requirements, we report to you on the performance of our mandate of statutory auditor. This report contains our opinion on the consolidated financial statements as well as the required additional comments.
We have audited the consolidated financial statements of Barco NV and its subsidiaries (collectively referred to as 'the Group') for the year ended 31 December 2010, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2010, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of € 754.699 thousand and the consolidated statement of income shows a profit for the year, share of the Group, of € 43,625 thousand
The board of directors is responsible for the preparation and fair presentation of the consolidated financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated 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.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the legal requirements and the auditing standards applicable in Belgium, as issued by the Institute of Registered Auditors (Institut des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the Group's preparation and fair presentation of the consolidated 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 Group's internal control. We have evaluated the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by the Group and the presentation of the consolidated financial statements, taken as a whole. Finally, we have obtained from the board of directors and the Group's officials the explanations and information necessary for executing our audit procedures. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated financial statements for the year ended 31 December 2010 give a true and fair view of the Group's financial position as at 31 December 2010 and of the results of its operations and its cash flows in accordance with IFRS as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.
The preparation and the assessment of the information that should be included in the directors' report on the consolidated financial statements are the responsibility of the board of directors.
Our responsibility is to include in our report the following additional comments, which do not modify the scope of our opinion on the consolidated financial statements:
• The directors' report on the consolidated financial statements deals with the information required by law and is consistent with the consolidated financial statements. We are, however, unable to comment on the description of the principal risks and uncertainties which the entities included in the consolidation are facing, and on their financial situation, their foreseeable evolution or the significant influence of certain facts on their future development. We can nevertheless confirm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate.
Ghent, 7 February 2011
Ernst & Young Bedrijfsrevisoren BCBVA Statutory auditor represented by
Partner Partner
.
Lieve Cornelis Jan De Luyck
The financial statements of the parent company, Barco NV, are presented below in a condensed form.
The accounting principles used for the statutory annual accounts of Barco NV differ from the accounting principles used for the consolidated annual accounts: the statutory annual accounts follow the Belgian legal requirements, while the consolidated annual accounts follow the International Financial Reporting Standards. Only the consolidated annual financial statements as set forth in the preceding pages present a true and fair view of the financial position and performance of the Barco Group.
The management report of the Board of Directors to the Annual General Meeting of Shareholders and the annual accounts of Barco NV, as well as the Auditor's Report, will be filed with the National Bank of Belgium within the statutory periods. These documents are available on request from Barco's Investor Relations department, and at www.barco.com.
The statutory auditor's report is unqualified and certifies that the non-consolidated financial statements of Barco NV for the year ended 31 December 2010 give a true and fair view of the financial position and results of the company in accordance with all legal and regulatory dispositions.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Fixed assets | 667,750 | 701,893 | 713,276 |
| Intangible fixed assets | 46,355 | 41,240 | 64,540 |
| Tangible fixed assets | 21,242 | 22,295 | 26,103 |
| Financial fixed assets | 588,162 | 633,004 | 621,195 |
| Amounts receivable after more than one year | 11,991 | 5,354 | 1,438 |
| Current assets | 358,916 | 259,380 | 270,195 |
| Stocks and contracts in progress | 133,329 | 87,128 | 97,467 |
| Amounts receivable within one year | 175,387 | 118,812 | 121,812 |
| Investments (own shared) | 45,845 | 45,845 | 45,845 |
| Cash at bank and in hand | 73 | 2,860 | 46 |
| Deferred charges and accrued income | 4,282 | 4,736 | 5,025 |
| TOTAL ASSETS | 1,026,666 | 961,273 | 983,471 |
| Capital and reserves | 343,710 | 254,192 | 281,667 |
| Capital | 54,169 | 54,169 | 54,169 |
| Share premium account | 131,150 | 131,150 | 131,150 |
| Reserves | 52,058 | 52,059 | 52,058 |
| Accumulated profits | 104,881 | 15,685 | 42,125 |
| Investment grants | 1,452 | 1,128 | 2,164 |
| Provisions | 24,412 | 20,250 | 22,446 |
| Provisions for liabilities and charges | 24,412 | 20,250 | 22,446 |
| Deferred taxes | - | - | - |
| Creditors | 658,544 | 686,832 | 679,357 |
| Amounts payable after more than one year | 34,367 | 30,765 | 37,895 |
| Amounts payable within one year | 624,177 | 656,067 | 641,462 |
| TOTAL LIABILITIES | 1.026.666 | 961.273 | 983.471 |
The financial fixed assets changes consist of the intercompany sale of shares of Barco Integrated Solutions and purchase of shares of Barco Coordination Center. The liabilities include mainly intercompany debts (494 million euro), mainly towards Barco Coordination Center NV.
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Sales | 567,124 | 410,992 | 444,284 |
| Operating income/(loss) | 28,705 | -22,709 | -46,445 |
| Financial result | -4,670 | -11,213 | -22,240 |
| Extra-ordinary result | 77,834 | 12,091 | 75,759 |
| Income taxes | -3 | -4,609 | -144 |
| Profit/(loss) for the year | 101,866 | -26,440 | 6,930 |
| In thousands of euro | 2010 | 2009 | 2008 |
|---|---|---|---|
| Profit/(loss) for the year for appropriation | 101,866 | -26,440 | 6,930 |
| Profit brought forward | 15,685 | 42,125 | 36,413 |
| Profit to be appropriated | 117,551 | 15,685 | 43,343 |
| Transfer to other reserves | 0 | 0 | 1,218 |
| Profit to be carried forward | 104,881 | 15,685 | 42,125 |
| Gross dividends | 12,670 | 0 | 0 |
| Total | 117,551 | 15,685 | 43,343 |
Barco NV sales in 2010 amounts to 567 million euro, which is 38% higher than in 2009 and 27.6% higher than the sales realized in 2008. In 2010, the performance of the digital cinema and medical imaging businesses are the main drivers for the increase in sales and operating income.
Due to the restructuring and cost containment actions, the operating loss could be limited in 2009 to -22.7 million euro (-5.5% on sales), compared to an operating loss of -46.4 million euro in 2008 (-10.4%).
The movement in financial results relates to received dividends from affiliates (6.9 million euro) and the lower interest expenses incurred in 2010 compared to the prior years.
The extra-ordinary income in 2010 relates to gain (81 million euro) realized on the intercompany sale of shares of Barco Integrated Solutions NV to Barco Coordination Center NV, and the impairment on the investment in Barco Denmark (3 million euro). In 2009, the extra-ordinary income relates to the sale of Avis business. The extra-ordinary income in 2008 includes the gain realized on the contribution in kind of its participation in Barco BV in Barco Creative Systems NV.
The board of directors of Barco NV proposed a gross dividend of 1 euro per share relating to the result as of 31 December 2010.
Pres. Kennedypark 35 BE-8500 Kortrijk Tel.: +32 (0)56 23 32 11 Fax: +32 (0)56 26 22 62
Pres. Kennedypark 35 BE-8500 Kortrijk Tel.: +32 (0)56 23 32 11 Fax: +32 (0)56 26 22 62
Stock exchange NYSE Euronext Brussels
More information can be obtained at the Investor Relations Department of the group management:
JP Tanghe Senior Vice President Barco Tel.: +32 (0)56 26 23 22 Fax: +32 (0)56 26 22 62 E-mail: [email protected]
All rights reserved
Barco Corporate Marketing Focus Advertising
JP Tanghe Senior Vice President Barco
President Kennedypark 35 8500 Kortrijk - Belgium
www.barco.com
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