Softing AG — Interim / Quarterly Report 2009

Aug 14, 2009

Quarterly Financial Report 2/2009

Softing: Second quarter results again reflect economic crisis

Softing: Second quarter results again reflect economic crisis

Dear shareholders, employees, partners and friends of Softing AG,

From the Ifo Institute to the OECD, many leading economic research organizations say they have seen signs that Germany's most important export markets are already on the road to recovery. The decisive questions for us are whether this is true and, above all, when the investments essential to most of our customers will kick in again after production picks up. However, we do not think anyone can reliably answer these questions right now.

The economic environment in which Softing operates as a provider of hardware and software for industrial automation and automotive electronics continues to be quite difficult. In the second quarter, Softing was unable to make up for the decline in sales and earnings compared to the previous year, and our EBIT is down from EUR 0.8 million last year to EUR –0.7 million.

The year-on-year comparison of our key financial figures is shown in the table below:

All figures	Quarterly	Quarterly	Six-month	Six-month
in EUR million	report	report	report	report
	II/2009	II/2008	2009	2008
Incoming orders	4.4	7.6	10.8	16.4
Sales	5.2	8.9	11.4	16.0
Earnings (EBIT)	–0.7	0.8	– 1.6	1.4
Net income/loss	–0.7	0.5	– 1.2	1.0
Earnings per share	– 0.14	0.10	– 0.24	0.18
in EUR

Whatever the origins of the crisis, the consequences are clear: Our customers' sales are falling, so they are ordering fewer goods and services from Softing. The first operational response to this external situation must be to promptly adapt our cost structures to the economic environment.

In the first quarter, we decided to focus on business which would be profitable in the medium to long term. This led to unavoidable personnel adjustments in the Automotive Electronics division, which have impacted costs in the first and second quarter. We see no need to make further adjustments in the second half of the year, as we are confident that we can get by using the usual mechanisms to adapt our capacity to the current order situation.

In order to resume profitable growth, entrepreneurial thinking and innovation are just as important as the condition of the market. This is why we are investing more heavily in strengthening our presence in promising foreign markets and intensifying our cooperation with distributors. We are also using our good judgment to expand our product range in key strategic areas. In these difficult times, Softing is positioning itself as an innovative, cost-conscious and effective partner for sophisticated industrial automation and automotive electronics solutions.

I am certain that Softing will make it through this economic crisis successfully, and when investments pick up again in machine and plant construction and the automotive sector, we will be set to gain momentum quickly. The first green shoots of recovery are apparent, though it is still too early to say precisely what course this recovery will take.

Our strong position and the expertise and dedication of our employees give us great staying power and a promising future. Together, we will overcome the challenges currently facing us. I am also aware of the financial concessions our employees have made, and I would like to thank all of Softing's employees for their support!

This year's Annual General Meeting took place on May 26. All resolutions were adopted by a strong majority, which clearly affirms both the management and our corporate strategy. With the backing of our shareholders, we will be able to systematically implement our strategic plans.

You can find out more about the results of the Annual General Meeting on the Investor Relations page of the Softing website under "Annual Shareholders' Meeting."

The Supervisory Board members elected at our last Annual General Meeting – Dr. Horst Schiessl, Mr. Andreas Kratzer, and our new member Mr. Michael Wilhelm – have an exciting time in office ahead of them. The Executive Board and Supervisory Board must now tackle the challenges of the present while setting the course for Softing's future technological and economic success – a course which should lead Softing quickly and directly to the light at the end of the tunnel.

We hope that you, dear friends of Softing AG, remain committed to the company and continue to accompany its future development.

With warm regards,

Dr. Wolfgang Trier

Stock Price – Directors' Holdings – Financial Calendar

Directors' Holdings as of 06/30/2009

Boards		Shares	Options
	As of	As of		As of		As of
	06/30/2009	03/31/2009		06/30/2009		03/31/2009
Executive Board
Dr. Trier	831,205	831,205		–		–
Dr. Siedentop	–	–		–		–
Supervisory Board
Dr. Schiessl	–	–		–		–
Butscher (until 05/26/2009)	–	–		–		–
Mr. Kratzer	8,000	8,000		–		–
Mr. Wilhelm (since 05/26/2009)	–	–		–		–

Financial Calendar

Quarterly Report 2/2009	08/14/2009
German Equity Forum, Frankfurt/Main	11/09 –11/2009
Quarterly Report 3/2009	11/13/2009
2009 Annual Report	03/31/2010
Quarterly Report 1/2010	05/14/2010
Quarterly Report 2/2010	08/13/2010
Quarterly Report 3/2010	11/15/2010

Contact: Softing AG

Investor Relations Phone: +49 (89) 4 56 56-0 Fax: +49 (89) 4 56 56-492 InvestorRelations@softing.com www.softing.com

Group Management Report for the 2/2009 Quarterly Financial Report

Economic Environment

The ongoing global economic crisis has resulted in a sharp decline in growth in the second quarter too. The forecasts for 2009 call for a massive worldwide economic slump. The German economy is expected to shrink by over six percent. Softing therefore anticipates a decline in sales and earnings both in Automotive Electronics and Industrial Automation for 2009.

Earnings

Sales in the Automotive Electronics division in the first six month of 2009 fell by 43% to EUR 4.2 million (previous year: EUR 7.4 million). Industrial Automation recorded a sales decrease of just 16% to EUR 7.2 million (previous year: EUR 8.6 million). The consolidated sales of the Softing Group thus decreased by more than 29% to EUR 11.4 million (previous year: EUR 16.0 million) in the first half of 2009. EBIT in the reporting period came in at EUR –1.6 million (previous year: EUR 1.4 million). As of June 30, 2009, orders on hand in the Group totaled EUR 3.25 million (March 31, 2009: EUR 3.97 million).

Assets and Financial Position

The equity of the Softing Group in the first six months of 2009 decreased to EUR 14.2 million (December 31, 2008: EUR 15.9 million). Cash and cash equivalents in the second quarter of 2009 declined by EUR 0.4 million to EUR 4.1 million, compared to EUR 4.5 million as of March 31, 2009.

Research and Product Development

In the first six months of 2009, Softing capitalized a total of EUR 1.3 million (previous year: EUR 1.1 million) for the development of new products and the enhancement of existing ones. Other significant amounts were expensed.

Employees

As of June 30, 2009, the Group had 222 employees (previous year: 237). During the reporting period, no stock options were issued to employees.

Opportunities for the Future Development of the Company

As of the reporting date of June 30, 2009, the Company's risk structure had not deviated significantly from the description in the consolidated financial statements for the year ended December 31, 2008. Material changes are also not expected for the remaining six months of 2009. For more information, please refer to our Group Management Report in the 2008 Annual Report, page 19 et seq.

Outlook

Due to the volatile and uncertain economic environment, it is currently not possible to forecast specific sales and earnings figures for the Softing Group for the year 2009.

Events after the Balance Sheet Date

There were no events of special importance after the balance sheet date June 30, 2009.

Consolidated Balance Sheet

According to IFRS as of June 30, 2009, unaudited

Assets	Quarterly	Financial
	report	statements
	06/30/2009	12/31/2008
	EUR	EUR
Cash and cash equivalents	3,499,619	4,992,483
Marketable securities	600,000	574,713
Trade accounts receivable	3,594,454	5,451,318
Inventories	2,554,686	2,502,978
Prepaid expenses and other current assets	1,250,076	1,158,696
Total current assets	11,498,835	14,680,188
Property, plant and equipment	774,240	807,175
Intangible assets	4,213,624	4,103,382
Goodwill	3,095,011	2,734,952
Borrowings	3,676	0
Deferred taxes	1,318,614	1,111,160
Total non-current assets	9,405,165	8,756,669
Total assets	20,904,000	23,436,857

Liabilities and shareholders' equity
Liabilities to banks	437,183	0
Trade accounts payable	937,868	772,409
Provisions	145,558	121,440
Income tax liabilities	177,254	293,313
Deferred income and other current liabilities	2,810,213	4,238,543
Total current liabilities	4,508,076	5,425,705
Liabilities under long-term construction contracts	107,431	217,715
Deferred taxes	1,270,075	1,284,045
Pension provisions	732,922	601,543
Other non-current liabilities	82,555	0
Total non-current liabilities	2,192,983	2,103,303
Issued capital	5,637,198	5,637,198
Capital reserves	1,683,820	1,683,820
Treasury shares	–1,336,284	–1,084,848
Minority interest	– 43,694	175,919
Accumulated profits (incl. retained earnings)	8,261,901	9,495,760
Total equity	14,202,941	15,907,849
Total liabilities and shareholders' equity	20,904,000	23,436,857

Softing 2009 6

Consolidated Income Statement

According to IFRS as of June 30, 2009, unaudited

	Quarterly report	Quarterly report	Six-month report	Six-month report
	II/ 2009	II/2008	2009	2008
	04/01/2009	04/01/2008	01/01/2009	01/01/2008
	– 06/30/2009	– 06/30/2008	–06/30/2009	– 06/30/2008
	EUR	EUR	EUR	EUR
Revenue	5,199,387	8,891,856	11,402,151	16,000,463
Other operating income	175,517	109,604	352,523	201,697
Other own work capitalized	575,831	487,010	1,143,946	930,147
Cost of purchased materials and services	– 1,322,157	– 2,577,357	–2,641,100	– 4,497,359
Staff costs	–3,563,518	–4,180,538	– 8,056,183	–7,695,284
Depreciation and amortization	–685,760	–599,431	–1,372,912	– 1,162,368
Other operating expenses	–1,097,419	– 1,325,706	– 2,389,640	– 2,340,637
Operating income/loss	– 718,119	805,438	–1,561,215	1,436,659
Interest income and expenses	–21,676	– 5,474	– 22,323	– 1,063
Result before income taxes	–739,795	799,964	–1,583,538	1,435,596
Income taxes	–25,994	– 232,019	184,120	–424,280
Result before minority interest	– 765,789	567,945	–1,399,418	1,011,316
Minority interest	47,464	– 19,311	195,641	–19,311
Net income/loss	–718,325	548,634	–1,203,777	992,005
Earnings per share (basic)	– 0.14	0.10	– 0.24	0.18
Earnings per share (diluted)	– 0.14	0.10	– 0.24	0.18
Average number of shares outstanding
(basic)	5,023,001	5,448,961	5,084,000	5,465,857
Average number of shares outstanding
(diluted)	5,023,001	5,448,961	5,084,000	5,465,857

Consolidated Cash Flow Statement

According to IFRS as of June 30, 2009, unaudited

		Six-month report	Six-month report
		2009	2008
		01/01/2009	01/01/2008
		– 06/30/2009	– 06/30/2008
		EUR (in thsds)	EUR (in thsds)
	Cash flow from operating activities
	Net income/loss	–1,399	1,011
	Exchange differences recognized in equity	–7	0
+	Depreciation/amortization	1,373	1,162
+	Increase in provisions	50	184
+/–	Change in net working capital	343	– 1,373
=	Net cash provided by operating activities	360	984
	Cash flow from investing activities
	Acquisition of subsidiaries, less acquired cash and cash equivalents	– 348	– 485
–	Payments made for investments in self-produced intangible assets	– 1,269	– 1,102
–	Payments made for investments in other intangible assets and
	in property, plant and equipment	–109	– 369
=	Net cash used in investing activities	–1,726	–1,956
	Cash flow from financing activities
–	Buy-back of treasury shares	– 251	– 364
+	Cash repayments of amounts borrowed	148	12
=	Net cash provided by financing activities	– 103	– 352
–	Decrease in cash and cash equivalents	– 1,469	– 1,324
+	Cash and cash equivalents at beginning of period	5,567	4,927
=	Cash and cash equivalents at end of period	4,098	3,603

Changes in Shareholders' Equity

01/01/09 – 06/30/09

EUR (in thsds)	Issued capital	Capital reserves	Retained earnings	Accumu- lated profits	Treasury shares	Minority interest	Total
Balance as of December 31, 2008	5,637	1,684	25	9,471	– 1,085	176	15,908
Purchase of treasury shares					– 251		–251
Measurement of financial instruments			– 23				– 23
Currency translation			–7				– 7
Minority interest						– 220	–220
Net loss 2009				–1,204			–1,204
Balance as of June 30, 2009	5,637	1,684	– 5	8,267	– 1,336	–44	14,203

01/01/08 – 06/30/08

EUR (in thsds)	Issued capital	Capital reserves	Retained earnings	Accumu- lated profits	Treasury shares	Minority interest	Total
Balance as of December 31, 2007	5,637	1,684	– 149	7,000	– 314	0	13,858
Purchase of treasury shares					– 316		– 316
Measurement of financial instruments			– 48				– 48
Currency translation							0
Minority interest						225	225
Net income 2008				992			992
Balance as of June 30, 2008	5,637	1,684	– 197	7,992	–630	225	14,711

Notes to the Consolidated Financial Statements for Q2/2009

This Quarterly Financial Report was prepared using the same accounting policies as in financial year 2008.

Segment Reporting

As of June 30, 2009

	Quarterly report II/ 2009 04/01/2009 – 06/30/2009 EUR (in thsds)	Quarterly report II/2008 04/01/2008 – 06/30/2008 EUR (in thsds)	Six-month report 2009 01/01/2009 –06/30/2009 EUR (in thsds)	Six-month report 2008 01/01/2008 – 06/30/2008 EUR (in thsds)
Automotive Electronics
Revenue	1,999	4,173	4,220	7,425
Segment result (EBIT)	– 104	72	– 1,022	63
Depreciation/amortization	139	199	333	389
Segment assets	–	–	5,222	7,651
Segment liabilities	–	–	1,848	3,092
Capital expenditure (not including
long-term investments)	87	170	166	269
Industrial Automation
Revenue	3,200	4,719	7,182	8,575
Segment result (EBIT)	–614	733	– 539	1,374
Depreciation/amortization	547	400	1,040	773
Segment assets	–	–	8,894	8,680
Segment liabilities	–	–	2,968	3,519
Capital expenditure (not including
long-term investments)	588	576	1,194	1,048
Not distributed
Revenue	–	–	–	–
Segment result (EBIT)	–	–	–	–
Depreciation/amortization	–	–	–	–
Segment assets	–	–	6,788	6,451
Segment liabilities	–	–	1,885	1,460
Capital expenditure (not including
long-term investments)	6	130	13	150
Total Revenue	5,199	8,892	11,402	16,000
Segment result (EBIT)	–718	805	– 1,561	1,437
Depreciation/amortization	686	599	1,373	1,162
Segment assets	–	–	20,904	22,782
Segment liabilities	–	–	6,701	8,071
Capital expenditure (not including
long-term investments)	681	876	1,373	1,467

The division into business segments in accordance with IFRS 8 is shown in the above table.