Agfa-Gevaert NV

Quarterly Report • Aug 24, 2011

CONDENSED INTERIM FINANCIAL STATEMENTS AS OF 30 JUNE 2011

1.1 Consolidated balance sheet

	For the period ending
	30 June 2011	31 December 2010
	(in millions of euro)
ASSETS
Non-Current Assets	1,194	1,253
Intangible assets	651	680
Property, plant and equipment	298	313
Investments	18	14
Deferred tax assets	227	246
Current Assets	1,786	1,833
Inventories	717	583
Trade receivables	664	619
Current tax assets	79	68
Other receivables and other assets	216	295
Cash and cash equivalents	83	239
Deferred charges	25	19
Derivative financial instruments	2	10
Total Assets	2,980	3,086

	For the period ending
	30 June 2011	31 December 2010
EQUITY AND LIABILITIES
Total Equity	1,036	1,063
Equity Attributable to Equity Holders of the Company	1,005	1,033
Share capital	187	187
Share premium	210	210
Retained earnings	721	703
Reserves	(81)	(68)
Translation differences	(32)	1
Non-controlling interest	31	30
Non-current liabilities	1,016	1,053
Liabilities for post-employment and long-term termination benefit plans	540	559
Liabilities for personnel
commitments	14	14
Loans and borrowings	383	379
Provisions	21	24
Deferred income	5	6
Deferred tax liabilities	53	71
Current Liabilities	928	970
Loans and borrowings	13	21
Trade payables	269	246
Deferred revenue & advance
payments	168	152
Current tax liabilities	43	50
Other liabilities	152	182
Liabilities for personnel commitments	82	114
Provisions	197	200
Deferred income	4	4
Derivative financial instruments	-	1
Total Equity and Liabilities	2,980	3,086

1.2 Consolidated income statement

30 June

	2011	2010
	(in millions of euro)
CONSOLIDATED INCOME STATEMENT
Revenue	1,499	1,400
Cost of sales	(1,052)	(906)
Gross profit	447	494
Selling expenses	(198)	(188)
Research and development expenses	(83)	(77)
Administrative expenses	(99)	(104)
Other operating income	112	167
Other operating expenses	(122)	(172)
Result from operating activities	57	120
Interest income / (expense) Net	(5)	(6)
Interest income	1	1
Interest expense	(6)	(7)
Other finance income / (expense) Net	(38)	(39)
Other finance income	80	112
Other finance expense	(118)	(151)
Net Finance Costs	(43)	(45)
Profit before income tax	14	75
Income tax expenses	(5)	(18)
Profit/loss for the period	9	57
Profit attributable to:
Owners of the company	7	57
Non-controlling interest	2	-

EARNINGS PER SHARE	30 June
	2011	2010
Earnings per share:
Outstanding shares per end of period	167,751,190	124,788,430
Weighted number of shares used for calculation	167,751,190	124,788,430
Earnings per share (in euro)	0.04	0.46

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Profit for the period	9	57
Other comprehensive income for the period recognised directly in equity, net of tax
Exchange differences on translation of foreign operations	(35)	99
Cash Flow Hedges :
Gains (losses) arising during the year recognised in equity	3	(3)
Reclassification adjustment for gains included in profit and loss	(4)	-
Roll-over of commodity contracts :
Gains (losses) arising during the year recognised in equity	-	-
Reclassification adjustment for gains included in profit and loss	-	-
Total other comprehensive income	(36)	96
Total comprehensive income	(27)	153
attributable to owners of the
Company	(28)	153
attributable to non-controlling
interests	1	0

The statement of comprehensive income for the current interim period with comparative statements of comprehensive income for the comparable interim period for the immediately preceding year, as required by IAS 34.20, has been included in addendum.

1.3 Cash flow statement

	30 June
	2011	2010
	(in millions of euro)
Result from operating activities………………………	57	120
Depreciation, amortisation and impairment losses	46	47
Changes in fair value of derivative financial instruments	1	2
Adjustment for other non-cash income	-	(2)
Gains/losses on retirement of non-current assets	-	(1)
Gain from bargain purchase	-	(4)
Change in non-current provisions	(49)	(39)
Change in current provisions	(32)	(13)
Income taxes paid	(11)	(13)
Change in inventories	(134)	(53)
Change in trade receivables including cash inflows from securitisation	(12)	19
Change in trade payables	31	21
Change in deferred revenue and advance payments	20	35
Change in other working capital	(42)	(34)
Net cash from/(used in) operating activities	(125)	85
Cash outflows for additions to intangible assets.	(3)	(3)
Cash outflows for additions to property, plant and equipment	(24)	(14)
Cash inflows from disposals of intangible assets	-	3
Cash inflows from disposals of property, plant and equipment	1	2
Cash inflows from lease portfolio	6	15
Cash outflows for acquisitions	(5)	(16)
Interest and dividends received	1	2
Cash inflows from other investing activities	1	(5)
Net cash from/(used in) investing activities	(23)	(16)
Net issuances of debt	6	(54)
Interest paid	(11)	(11)
Other financial flows	(1)	—
Net cash from/(used in) financing activities	(6)	(65)
Change in cash and cash equivalents due to business activities	(154)	4
Change in cash due to change in consolidation scope	-	—
Change in cash and cash equivalents due to exchange rate
fluctuations	(3)	13
CHANGE IN CASH AND CASH EQUIVALENTS	(157)	17
Cash and cash equivalents at 1 January	238	118
Cash and cash equivalents at closing	81	135

1.4 Statement of changes in equity

	Share capital	Share premium	Retained earnings	Reserve for own shares	Revaluation reserve	Share based payments reserve	Hedging reserve	Translation differences	Total	Non controlling interest	Total equity
Balance at 1/01/2011	187	210	703	(82))	-	12	2	1	1,033	30	1,063
Comprehensive income for the period
Profit for the period	-	-	7	-	-	-	-	-	7	2	9
Other comprehensive income
Foreign currency translation differences	-	-	-	-	-	-	-	(34)	(34)	(1)	(35)
Effective portion of changes in fair value of cash flow hedges, net of tax	-	-	-	-	-	-	(1)	-	(1)	-	(1)
Total comprehensive income and other comprehensive income for the period	-	-	7	-	-	-	(1)	(34)	(28)	1	(27)
Transactions with owners, recorded directly in equity
Reclassification – share based payments recorded in profit or loss statement in previous periods……………………….	-	-	11	-	-	(12)	-	1	-	-	-
Total transactions with owners, recorded directly in equity	-	-	11	-	-	(12)	-	1	-	-	-
Balance at 30/06/2011	187	210	721	(82)	-	-	1	(32)	1,005	31	1,036

	Share capital	Share premium	Retained earnings	Reserve for own shares	Revaluation reserve	Share based payments reserve	Hedging reserve	Translation differences	Total	Non controlling interest	Total equity
Balance at 1/01/2010	140	109	820	(296)	-	12	2	(66)	721	3	724
Comprehensive income for the period
Profit for the period	-	-	57	-	-	-	-	-	57		57
Other comprehensive income
Foreign currency translation differences	-	-	-	-	-	-	-	99	99		99
Effective portion of changes in fair value of cash flow hedges, net of tax	-	-	-	-	-	-	(3)	-	(3)	-	(3)
Total comprehensive income and other comprehensive income for the period	-	-	57	-	-	-	(3)	99	153	-	153
Balance at 30/06/2010	140	109	877	(296)	-	12	(1)	33	874	3	877

Selected explanatory notes to the condensed consolidated interim financial statements as of 30 June 2011

1. Reporting entity

Agfa-Gevaert NV (the "Company") is a company domiciled in Belgium. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates. The consolidated financial statements of the Group as at and for the year ended 31 December 2010 are available on the Company's website: www.agfa.com.

2. Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2010. These condensed consolidated interim financial statements were approved by the Board of Directors on 23 August 2011.

3. Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2010. The condensed consolidated interim financial statements are presented in Euro, rounded to the nearest million.

4. Unusual items affecting the condensed interim financial statements

During the first half year of 2011, no unusual items affected the condensed financial statements.

In the condensed financial statements as of 30 June 2010, an amount of EUR 8 million was recognized from the final installments of a patent cross license agreement, entered into in September 2009, of which the revenue recognition criteria were met only during the second quarter of 2010.

5. Critical accounting estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from estimates.

In preparing the condensed consolidated interim financial statements, the judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2010.

6. Impairment testing of goodwill and other intangible assets with indefinite useful life

An impairment test is to be carried out once a year, and this at the same time, unless indicators would trigger an impairment loss on an earlier moment. The Group performs its impairment test during the fourth quarter. The increase of the silver price since 31 December 2010 and the comparison of the market capitalization of Agfa-Gevaert per 30 June 2011 with the net asset value of the Company at the same moment are both indicators of a possible impairment in accordance with IAS 36.12. In accordance with IAS 36.8 and 9 these indicators require carrying out an impairment test. Based on IAS 36.99 management decided not to carry out a formal impairment test at 30 June 2011 since the annual impairment test performed at the Cash Generating Unit level had not revealed any impairment loss at 31 December 2010 and that the following criteria were met at 30 June 2011:

• The assets and liabilities making up the units have not changed significantly since the fourth quarter 2010;
• The recoverable amount calculation dated from the fourth quarter 2010 resulted in an amount that exceeded the carrying amount of the units by a substantial margin; and
• Based on an analysis of events that have occurred and circumstances that have changed since the fourth quarter 2010, the likelihood that a current recoverable amount determination would be less than the current carrying amount of the units is remote.

7. Reportable segments

For the six months ended 30 June

in millions of euro		Graphics		HealthCare Specialty Products				Total
	2011	2010	2011	2010	2011	2010	2011	2010
Revenue	791	736	577	572	131	92	1,499	1,400
Recurring EBIT (*)	32	71	41	63	5	6	78	140
Operating profit for reportable segments	18	66	36	53	5	4	59	123

(*) Recurring EBIT = Operating profit for reportable segments excluding restructuring and non-recurring items amounting to 13 mio EUR and 6 mio EUR respectively (16 mio EUR and 1 mio EUR for 2010)

Reconciliation of reportable segment profit

For the six months ended 30 June

	30 June 2011	30 June 2010
Total operating profit for reportable segments Results from operating activities not allocated to	59	123
reportable segments	(2) ____	(3) ____
Total result from operating activities	57	120
Net finance costs	(43) ____	(45) ____
Profit before income tax	14	75

8. Net finance costs

Net finance costs for the first half year of 2011 and 2010 comprise the following income and expenses:

	30 June 2011	30 June 2010
Interest income on bank deposits	1	1
Interest expense	(6)	(7)
On bank loans	(2)	(3)
On debentures	(4)	(4)
Interest income / (expense) - net	____ (5)	____ (6)
Other finance income	80	112
Other finance expense	(118)	(151)
Other finance income / (expense) - net	____ (38)	____ (39)
Net finance costs	____ (43)	____ (45)

Other finance income / (expense) – net primarily comprises the portion of the net periodic pension cost that is treated as other finance income / (expense) and the interest portion of other interest-bearing provisions. Other finance income / (expense) moreover includes the impact of discounting of assets and liabilities, results on the disposal of marketable securities, changes in fair value of derivative financial instruments that are not part of a hedging relationship and are not linked to operating activities, as well as exchange results on non-operating activities.

9. Contingencies

There were no significant changes in contingencies as those disclosed in the consolidated financial statements of the Group as at and for the year ended 31 December 2010.

10. Related party transactions

Transactions with Directors and members of the Executive Management

Key management personnel compensation included in the condensed consolidated interim income statements for the first half year of 2011 and 2010 can be detailed as follows:

	30 June 2011	30 June 2010
Directors	0.3	0.3
Executive Management	2.2	2.2

As of 30 June 30 2011 there were no loans outstanding to members of the Executive Management nor to members of the Board of Directors.

Other related party transactions

Transactions with related companies are mainly trade transactions and are priced at arm's length. The revenue and expenses related to these transactions are immaterial to the condensed consolidated interim financial statements as a whole.

11. Subsequent events

There are no subsequent events.

Addendum AGFA-GEVAERT GROUP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the Quarter ending June 2011 / June 2010

30 June
Q2 2011 only	Q2 2010, only
(in millions of euro)
763	736
(547)	(471)
216	265
(98)	(99)
(40)	(40)
(49)	(53)
53	92
(57)	(96)
25	69
(2)	(3)
1	-
(3)	(3)
(18)	(19)
28	56
(46)	(75)
(20)	(22)
5	47
(1)	(8)
4	39
2	39
2	-

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Profit for the period	4	39
Other comprehensive income for the period recognised directly in equity, net of tax
Exchange differences on translation of foreign operations	(5)	50
Cash Flow Hedges :
Gains (losses) arising during the year recognised in equity	-	(4)
Reclassification adjustment for gains included in profit and loss	(2)	-
Roll-over of commodity contracts :
Gains (losses) arising during the year recognised in equity	-	-
Reclassification adjustment for gains included in profit and loss	-	-
Total other comprehensive income	(7)	46
Total comprehensive income	(3)	85
attributable to owners of the
Company	(5)	85
attributable to non-controlling
interests	2	0