Agfa-Gevaert NV

Quarterly Report • Aug 27, 2014

CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2014

The condensed interim financial statements as of June 30, 2014 as well as the related explanatory notes have not been subject to a limited review of KPMG Bedrijfsrevisoren.

1.1 Consolidated statement of financial position

In million Euro	June 30, 2014	Dec. 31, 2013
ASSETS
Non-current assets	1,044	1,066
Intangible assets	609	618
Property, plant and equipment	231	242
Investments	11	11
Deferred tax assets	193	195
Current assets	1,529	1,502
Inventories	561	542
Trade receivables	550	585
Current tax assets	108	95
Other receivables and other assets	120	126
Deferred charges	31	25
Derivative financial instruments	1	3
Cash and cash equivalents	158	126
Total assets	2,573	2,568
EQUITY AND LIABILITIES
Equity	411	368
Equity attributable to owners of the Company	364	325
Share capital	187	187
Share premium	210	210
Retained Earnings	689	664
Reserves	(83)	(91)
Translation reserve	(22)	(28)
Post-employment benefits: remeasurements of
the net defined benefit liability	(617)	(617)
Non-controlling interests	47	43
Non-current liabilities	1,366	1,397
Liabilities for post-employment and long-term
Termination benefit plans	983	1,002
Other employment benefits	11	11
Loans and borrowings	312	319
Provisions	10	11
Deferred income	1	1
Deferred tax liabilities	49	53
Current liabilities	796	803
Loans and borrowings	22	24
Provisions	150	160
Trade payables	241	239
Deferred revenue and advance payments	151	121
Current tax liabilities	59	54
Other payables	86	95
Employee benefits	80	97
Deferred income	3	3
Derivative financial instruments	4	10
Total Equity and Liabilities	2,573	2,568

1.2 Consolidated statement of profit or loss, earnings per share and comprehensive income

In million Euro	6 months ending June 30, 2014	6 months ending June 30, 2013

Consolidated statement of profit or loss

Revenue	1,273	1,437
Cost of sales	(884)	(1,023)
Gross profit	389	414
Selling expenses	(167)	(186)
Research and development expenses	(72)	(75)
Administrative expenses	(86)	(92)
Other operating income	35	97
Other operating expenses	(40)	(79)
Result from operating activities	59	79
Interest income (expense) – net	(8)	(9)
Interest income	1	1
Interest expense	(9)	(10)
Other finance income (expense) – net	(19)	(28)
Other finance income	4	3
Other finance expense	(23)	(31)
Net finance costs	(27)	(37)
Profit (loss) before income tax	32	42
Income tax expense	(3)	(31)
Profit (loss) for the year	29	11
Profit (loss) attributable to:
Owners of the Company	25	8
Non-controlling interests	4	3
Earnings per share
Outstanding shares per end of period	167,751,190	167,751,190
Weighted number of shares used for calculation	167,751,190	167,751,190
Earnings per share (€)	0.15	0.05

In million Euro	6 months ending June 30, 2014	6 months ending June 30, 2013
	Consolidated statement of comprehensive income
Profit (loss) for the period	29	11
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss:
Exchange differences:	6	(9)
Exchange differences on translation of foreign operations	7	(8)
Exchange differences on net investment hedge	(1)	(1)
Income tax on exchange differences on
net investment hedge	-	-
Cash flow hedges:	8	(17)
Effective portion of changes in fair value of
cash flow hedges	(2)	(21)
Change in fair value of cash flow hedges
reclassified to profit or loss	9	4
Income taxes	1	-
Available for sale financial assets:	-	-
Changes in the fair value of available-for-sale
financial assets	-	-
Income taxes	-	-
Items that will not be reclassified subsequently to profit or loss:	-	-
Total of other comprehensive income for the period,
Net of tax	14	(26)
Total comprehensive income for the period Attributable to:	43	(15)
Owners of the Company	39	(19)
Non-controlling interests	4	4

The statement of comprehensive income for the current interim period (second quarter ending June 30, 2014) with comparative statements of comprehensive income for the comparable interim period for the immediately preceding year, as required by IAS34.20, has been included in addendum.

1.3 Consolidated statement of cash flows

In million Euro	6 months ending June 30, 2014	6 months ending June 30, 2013
Profit (loss for the period	29	11
Adjustments for:
Depreciation, amortization and impairment losses	35	44
Changes in fair value of derivative financial instruments	-	(1)
Granted subventions	(4)	(5)
(Gains)/losses on sale of non-current assets	-	(1)
Net finance costs	27	37
Income tax expense	3	31
	90	116
Changes in:
Inventories	(16)	(20)
Trade receivables	38	20
Trade payables	10	(18)
Deferred revenue and advance payments	29	20
Other working capital	(6)	(2)
Non-current provisions	(39)	(89)
Current provisions	(31)	(6)
Cash generated from operating activities	75	21
Income taxes paid	(12)	(6)
Net cash from (used in) operating activities	63	15
Interest received	1	1
Dividends received	-	-
Proceeds from sale of intangible assets	3	1
Proceeds from sale of property, plant and equipment	1	3
Acquisition of intangible assets	(1)	(1)
Acquisition of property, plant and equipment	(12)	(15)
Changes in lease portfolio	(1)	5
Net cash from (used in) investing activities	(9)	(6)
Interest paid	(13)	(14)
Dividends paid	-	-
Proceeds from borrowings	-	10
Repayment of borrowings	(10)	-
Other financial flows	-	(1)
Net cash from (used in) financing activities	(23)	(5)
Net increase (decrease) in cash and cash equivalents	31	4
Cash and cash equivalents at 1 January	125	125
Effect of exchange rate fluctuations	1	(4)
Cash and cash equivalents at 30 June	157	125

1.4 Consolidated statement of changes in equity

	Attributable to owners of the Company
In million Euro	Share capital	Share premium	Retained earnings	Reserve for own shares	Revaluation reserve	Share based payment reserve	Hedging reserve	Remeasurement of the net defined benefit liability	Translation reserve	Total	Non controlling interests	Total equity
Balance at January 1, 2013	187	210	623	(82)	(1)		- (2)	(808)	6	133	36	169
Comprehensive income for the period
Profit (loss) for the period, as restated	-		- 8	-	-		- -	-	-	8	3	11
Other comprehensive income net of tax, as restated	-		- -	-	-		- (17)	-	(10)	(27)	1	(26)
Total comprehensive income for the period	-		- 8	-	-		- (17)	-	(10)	(19)	4	(15)
Balance at June 30, 2013	187	210	631	(82)	(1)		- (19)	(808)	(4)	114	40	154
Balance at January 1, 2014	187	210	664	(82)	1		- (10)	(617)	(28)	325	43	368
Comprehensive income for the period
Profit (loss) for the period	-		- 25	-	-		- -	-	-	25	4	29
Other comprehensive income net of tax	-		- -	-	-		- 8	-	6	14	-	14
Total comprehensive income for the period	-		- 25	-	-		- 8	-	6	39	4	43
Balance at June 30, 2014	187	210	689	(82)	1		- (2)	(617)	(22)	364	47	411

1.5 Selected explanatory notes to the condensed consolidated interim financial statements as of June 30, 2014

1. Reporting entity

Agfa-Gevaert NV (the "Company") is a company domiciled in Belgium. The condensed interim financial statements of the Company as at and for the six months ended June 30, 2014 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 December 31, 2013 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 December 31, 2013. These condensed consolidated interim financial statements were approved by the Board of Directors on August 26, 2014.

3. Significant accounting policies

The Group has applied in these condensed consolidated interim financial statements the same accounting policies as those applied in the consolidated financial statements as at and for the year ended December 31, 2013. The first time application of new or revised IFRSs, which are effective for annual periods beginning on or after January1, 2014 had no impact to the consolidated financial statements.

The condensed consolidated interim financial statements are presented in Euro, rounded to the nearest million.

4. 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 December 31, 2013.

5. 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. In accordance with IAS 36.12, the comparison of the market capitalization of Agfa-Gevaert per June 30, 2014 with the net asset value of the Company at the same moment is an indicator of a possible impairment, requiring carrying out an impairment test.

Based on IAS 36.99 management decided not to carry out a formal impairment test at June 30, 2014 since the annual impairment test performed at the Cash Generating Unit level had not revealed any impairment loss at December 31, 2013 and since the following criteria were met at June 30, 2014:

• The assets and liabilities making up the units have not changed significantly since the fourth quarter 2013;
• The recoverable amount calculation dated from the fourth quarter 2013 resulted in an amount that exceeded the carrying amount of the units by a substantial margin;
• Based on an analysis of events that have occurred and circumstances that have changed since the fourth quarter of 2013, the likelihood that a current recoverable amount determination would be less than the current carrying amount of the units is remote.

In million Euro	June 30, 2014	Dec.31, 2013
Net liability for material countries	875	883
Net liability for termination benefits	71	80
Net liability for non-material countries	37	39
Total net liability	983	1,002

6. Liabilities for post-employment and long-term termination benefit plans

For the measurement of its post-employment benefits as at June 30, 2014, the Group has applied the requirements of IAS19 (revised 2011).

During the first half year of 2014, the evolution in the carrying amount of the defined benefit obligation for the material countries, being minus 8 million Euro is explained by a defined benefit cost included in profit or loss of 25 million Euro, employer contributions and benefits paid directly by the Company amounting to 37 million Euro, the remaining difference is explained by translation differences.

As per 30 June 2014, no actuarial calculations have been performed. Detailed calculations are only performed at year-end. Therefore, in order to understand the Group's sensitivity to the evolution of the discount rates – in general the most decisive factor for the height of the net pension liability – we refer to the Annual Report 2013, disclosure note 20 'Employee Benefits' to the Consolidated Financial Statements.

7. Reportable segments

In million Euro		Graphics	HealthCare			Specialty Products	Total
	2014	2013	2014	2013	2014	2013	2014	2013
Revenue	666	751	507	570	100	116	1,273	1,437
Recurring EBIT (*)	34	17	27	31	3	11	64	59
Segment result (**)	34	-	24	33	3	11	61	44

For the six months ended June 30

(*) Recurring EBIT is the result from operating activities before restructuring and nonrecurring items

(**) Segment result is the profit from operating activities

Reconciliation of reportable segment result

Consolidated profit (loss) before income taxes	32	42
Other finance income (expense) – net	(19) ____	(28) ____
Interest income (expense) – net	(8)	(9)
Other unallocated amounts:
Results from operating activities	____ 59	____ 79
a reportable segment	(2)	35 (1)
Segment result Profit (loss) from operating activities not allocated to	61	44
In million Euro	2014	2013
For the six months ended June 30

(1) The profit from operating activities for the first half year of 2013 that is not allocated to a reportable segment is mainly explained by the impact of the negative past service cost resulting from the closure of the medical plan in the US, to the extend related to the inactive members of the plan (i.e. retirees).

8. Net finance costs

For the six months ended June 30

In million Euro	2014	2013
Interest income on bank deposits	1	1
Interest expense	(9)	(10)
On bank loans	(2)	(3)
On EIB loan	(3)	(3)
On debentures	(4)	(4)
Interest income / (expense) – net	____ (8)	____ (9)
Other finance income	4	3
Other finance expense	(23)	(31)
Other finance income / (expense) – net	____ (19)	____ (28)
Net finance costs	____ (27)	____ (37)

Other finance income / (expense) – net primarily comprise the portion of the defined benefit cost included in profit or loss 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, interests received/paid on other assets and liabilities not part of the net financial debt position, 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. Unusual items affecting the condensed interim financial statements

There are no other unusual items that have affected the condensed interim financial statements as at and for the six months ended June 30, 2014.

10. 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 December 31, 2013.

11. Related party transactions

Transactions with Directors and members of the Executive Management

For the six months ended June 30, 2014 there are compared to last year no significant changes in the compensation of key management personnel.

As of June 30, 2014 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 Group and its business partner Shenzhen Brother Gao Deng Investment Group Co., Ltd. combined as of 2010 their activities aiming at reinforcing the market position in the greater China and the Asian region. Shenzhen Brother Gao Deng Investment Group Co., Ltd. has a 49% stake in Agfa Graphics Asia, the holding company of the combined operations of both parties. The profit allocated to non-controlling interests of this business partner amounts to 4 million euro for the 6 months ending June 2014 (accumulated amount of non controlling interests attributable to Shenzhen Brother amounts to 46 million euro).

The following table summarizes the transaction values and the outstanding balances between the Group and Shenzhen Brother Gao Deng Investment Group Co, Ltd.:

	Transaction values	Balances outstanding
Million euro	June 2014	June 2014
Sales of goods and services to	22	4
Shenzhen Brother
Purchase of goods from	8	-
Shenzhen Brother

12. Financial instruments

Financial instruments include a broad range of financial assets and liabilities. They include both primary financial instruments such as cash, receivables, debt and shares in another entity and derivative financial instruments. They are measured either at fair value or at amortized cost.

Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable, willing parties in an at arm's length transaction. All derivative financial instruments are recognized at fair value in the statement of financial position.

For its financial instruments, the Group has applied in its condensed consolidated interim financial statements the same accounting classification and basis for determining fair values as those applied in the consolidated financial statements as at and for the year ended December 31, 2013. Therefore, we refer to the Annual Report 2013, disclosure note 7 'Financial risk management' - 7.5 'Accounting classification and fair values' which comprises more detailed information in this respect.

The Group aggregates its financial instruments into classes based on their nature and characteristics. The following table shows the carrying amounts and fair values of financial assets and liabilities by category and a reconciliation to the corresponding line items in the statements of financial position. Since the line items "other receivables and other assets" and "Other payables" contain both financial and non-financial items (such as advance payments for services to be received in the future, liabilities for social expenses and payroll), the reconciliation is shown in the column Non financial assets / liabilities. The table does not comprise fair value information for the category Loans and Receivables because their carrying amounts are a reasonable approximation of fair values.

In million Euro	Carrying amounts of Financial assets and liabilities
		June 30, 2014
	Measured at fair value			Measured at	Measured at cost
				amortized
	Held for	Designated	Available	cost Loans and	Non-Financial	Carrying
	trading	at fair	for-sale	receivables **	assets / liabilities	amount in the
		value				statement of
		through				financial
		profit or				position
Fair Value Hierarchy	(2)	loss (1)	(1)
Financial assets
Investments	-	2	7	1	1	11
Trade receivables	-	-	-	550	-	550
Other receivables and other				105	15	120
assets
Derivative Financial
instruments :
- Forward exchange contracts	1	-	-	-	-	1
used for hedging
- Other forward exchange	-	-	-	-	-	-
contracts
- Other swap contracts	-	-	-	-	-	-
Cash and cash equivalents	-	-	-	158	-	158
Total Financial assets	1	2	7	814	16	840
Financial liabilities
Loans and Borrowings
Non current	-	-	-	312	-	312
Of which debenture	-	-	-	188 **	-	188 **
Current	-	-	-	22	-	22
Debenture
Trade payable	-	-	-	241	-	241
Other payables	-	-	-	47	39	86
Derivative Financial
instruments : - Forward exchange contracts	1	-	-			1
used for hedging
- Other forward exchange	2	-	-			2
contracts
- Other swap contracts	1	-	-			1
Total Financial liabilities	4	-	-	622	39	665

Fair Value hierarchy :

(1) 'Financial assets designated at fair value through profit or loss' and 'Available-for-sale financial assets' are categorized in their entirety at fair value hierarchy 1 meaning that fair value is determined based on quoted prices in active markets.

(2) Financial assets and liabilities 'Held for trading' are categorized in their entirety at fair value hierarchy 2 meaning that fair value is determined based on inputs other than quoted prices that are observable for the related asset or liability.

** The fair value of the loans and receivables is not disclosed as this category comprises short term receivables and payables for which the carrying amount is an approximation of fair value, except for the debenture. The fair value of the debenture at 31/12/2013 amounted to 191 million euro being the quoted market price at reporting date. At June 30, 2014 the fair value of the debenture amounts to 192 million euro.

In million Euro	Carrying amounts of Financial assets and liabilities
		December 31, 2013
	Measured at fair value			At amortized	At cost
				cost
	Held for	Designated	Available	Loans and	Non-Financial	Carrying
	trading	at fair	for-sale	receivables **	assets / liabilities	amount in the
		value				statement of
		through				financial
		profit or				position
		loss
Fair Value Hierarchy	(2)	(1)	(1)
Financial assets
Investments	-	2	7	1	1	11
Trade receivables	-	-	-	585	-	585
Other receivables and other				108	18	126
assets
Derivative Financial
instruments :
- Forward exchange contracts	1	-	-	-	-	1
used for hedging
- Other forward exchange	1	-	-	-	-	1
contracts
- Other swap contracts	1	-	-	-	-	1
Cash and cash equivalents	-	-	-	126	-	126
Total Financial assets	3	2	7	820	19	851
Financial liabilities
Loans and Borrowings
Non current	-	-	-	319	-	319
Of which debenture	-	-	-	189 **	-	189 **
Current	-	-	-	24	-	24
Trade payable	-	-	-	239	-	239
Other payables	-	-	-	59	36	95
Derivative Financial
instruments :
- Forward exchange contracts	1	-	-			1
used for hedging
- Other forward exchange contracts	2	-	-			2
- Other swap contracts	1	-	-			1
Total Financial liabilities	4	-	-	641	36	681

Fair Value hierarchy :

(1) 'Financial assets designated at fair value through profit or loss' and 'Available-for-sale financial assets' are categorized in their entirety at fair value hierarchy 1 meaning that fair value is determined based on quoted prices in active markets.

(2) Financial assets and liabilities 'Held for trading' are categorized in their entirety at fair value hierarchy 2 meaning that fair value is determined based on inputs other than quoted prices that are observable for the related asset or liability.

**The fair value of the loans and receivables is not disclosed as this category comprises short term receivables and payables for which the carrying amount is an approximation of fair value, except for the debenture. The fair value of the debenture at 31/12/2013 amounted to 191 million euro being the quoted market price at reporting date.

13. Subsequent events

There are no subsequent events.

Addendum

This information has not been subject to a limited review of KPMG Bedrijfsrevisoren. AGFA-GEVAERT GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the second quarter ending June 2014 / June 2013

In million Euro	Q2 ending June 30, 2014	Q2 ending June 30, 2013
Consolidated statement of profit or loss
Revenue	651	732
Cost of sales	(444)	(521)
Gross profit	207	211
Selling expenses	(83)	(92)
Research and development expenses	(37)	(36)
Administrative expenses	(42)	(46)
Other operating income	19	77
Other operating expenses	(20)	(47)
Result from operating activities	44	67
Interest income (expense) – net	(4)	(5)
Interest income	1	-
Interest expense	(5)	(5)
Other finance income (expense) – net	(9)	(16)
Other finance income	3	-
Other finance expense	(12)	(16)
Net finance costs	(13)	(21)
Profit (loss) before income tax	31	46
Income tax expense (income)	(3)	(23)
Profit for the year	28	23
Profit attributable to:
Owners of the Company	26	21
Non-controlling interests	2	2

In million Euro	Q2 ending	Q2 ending
	June 30, 2014	June 30, 2013

Consolidated statement of comprehensive income

Profit for the period	28
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss:
Exchange differences:	10	(16)
Exchange differences on translation of foreign operations	11	(17)
Exchange differences on net investment hedge	(1)
Income tax on exchange differences on
net investment hedge	-
Cash flow hedges:	6	(11)
Effective portion of changes in fair value of
cash flow hedges	-	(14)
Change in fair value of cash flow hedges
reclassified to profit or loss	5
Income taxes	1
Available-for-sale financial assets:	-
Changes in the fair value of available-for-sale
financial assets	-
Income taxes	-
Items that will not be reclassified subsequently to profit or loss:	-
Total of other comprehensive income for the period,
Net of tax	16	(27)
Total comprehensive income for the period	44
Attributable to:
Owners of the Company	41
Non-controlling interests	3