AI assistant
Turbon AG — Annual Report 2011
Apr 20, 2012
444_10-k_2012-04-20_1901b359-76f1-4c87-a5e3-313cd80138bf.pdf
Annual Report
Open in viewerOpens in your device viewer
A N N U A L R E P O R T 2 0 1 1
Table of Contents
| At a Glance - Turbon Group | 3 |
|---|---|
| Combined Management Report of the Group and Turbon AG for the Fiscal Year 2011 | 4 |
| Supervisory Board Report for the Fiscal Year 2011 | 18 |
Consolidated Financial Statements
| Consolidated Balance Sheet | ||
|---|---|---|
| Consolidated Statement of Income | 22 | |
| Consolidated Statement of Comprehensive Income | 23 | |
| Consolidated Statement of Changes in Shareholders' Equity | 24 | |
| Consolidated Cash Flow Statement | 26 | |
| Notes to the Consolidated Financial Statement | ||
| General Information | 27 | |
| Principles of Accounting | 27 | |
| Changes in Accounting and Valuation Methods | 28 | |
| New Accounting Standards | 28 | |
| Consolidated Companies | 29 | |
| Methods of Consolidation | 29 | |
| Currency Translation | 29 | |
| Accounting and Valuation Methods | 30 | |
| Use of Estimates | 31 | |
| Capital Management | 31 | |
| Explanations to the Consolidated Balance Sheet | 32 | |
| Explanations to the Consolidated Statement of Income | 47 | |
| Other Information | 50 | |
Responsibility statement
| Shareholdings of Turbon AG | 54 |
|---|---|
| Auditor's Report | 55 |
53
At a glance
Turbon Group
| 2011 | 2010 | 2009 | |
|---|---|---|---|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Consolidated sales | 80,706 | 75,717 | 85,882 |
| Depreciation | 1,210 | 1,234 | 1,715 |
| Earnings before interest and taxes | 6,490 | 4,847 | 6,754 |
| Result from ordinary operations | 5,516 | 3,859 | 5,836 |
| Group net earnings | 3,405 | 2,163 | 3,463 |
| Earnings per share | 1.03 | 0.62 | 0.96 |
| Cash Flow | 4,165 | 3,334 | 5,473 |
| Long-term assets | 19,022 | 20,402 | 20,928 |
| Short-term assets | 40,163 | 37,757 | 34,418 |
| Shareholders' equity | 24,324 | 23,781 | 23,290 |
| Net indebtedness* | 1,046 | 0 | 0 |
| Balance sheet total | 59,185 | 58,159 | 56,356 |
| Equity ratio | 41.1% | 40.9% | 41.3% |
| Employees on average | 1,043 | 1,005 | 953 |
* Financial liabilities less liquid funds
Combined Management Report of the Group and Turbon AG for the Fiscal Year 2011
Turbon AG acts as the holding company of the Turbon Group. Alongside strategic and planning activities, its main tasks are primarily the control and coordination of the Turbon Group companies operating in the market.
Turbon AG and its subsidiaries are engaged in the fi eld of modern offi ce communication where electronic data are converted into documents through printout onto paper. The companies of the Turbon Group develop, manufacture and market printer consumables and have specialized in the segment of toner cartridges for use in laser printers. For this purpose, the Turbon Group has manufacturing and distribution companies in Asia, Europe and the USA.
The company has taken advantage of the facility provided in Section 315 (3) Commercial Code (HGB) and issued a combined Management Report for the Turbon Group and Turbon AG. Since the course of business, the situation of the company and the future development risks of Turbon AG and the Turbon Group are largely the same, the following statements, unless otherwise indicated, apply to the Turbon Group.
Business Environment in 2011
GLOBAL ECONOMY
The International Monetary Fund (IMF), which reports on the development of global economic growth, calculated an increase of 3.8% in 2011. The western industrialized countries consequently recorded only a 1.6% increase in gross domestic product,
and thus a signifi cant decrease compared with the growth rate of 3.2% in 2010. In contrast, the so-called emerging and developing countries achieved GDP growth of 6.2%.
Overall, there is still great uncertainty regarding the overall economic development, especially due to the ongoing eurocrisis. The IMF expects slower growth rates also for 2012. For the euro area the IMF predicts, with a decline in GDP of -0.5%, even a mild recession.
BRANCH SITUATION
In 2011, the most important regional customer markets for the Turbon Group experienced weak growth rates, with the exception of Germany.
This low overall economic growth is also refl ected in the numbers of sold printers and laser cartridges. Above average increases were reached only in the emerging and developing countries. The print volume was even down slightly in western industrialized countries 1 . The only exceptions to the above were the sales of multi-function colour devices and colour print volumes, which reached in the industrialized countries in 2011 two-digit growth rates.
1 Source: International Data Corporation (IDC) 2011, 2012
Consolidated Financial Statements and fi nancial statements of Turbon AG 2011
EARNINGS POSITION
Consolidated sales in the fi scal year 2011 amounted to Euro 80.7 million compared to Euro 75.7 million in the previous year. This is an increase of Euro 5.0 million (6.6%), which was mainly due to Europe (+6.9%) and the USA (+4.6%). In local currency, the increase in the USA was +9.9%.
Our core product, laser cartridges, accounted for Euro 72.2 million (89.4% of aggregate sales). In 2010, this area accounted for 88.3% of sales. All other sales (including impact products) amounted to Euro 8.5 million (10.6%) in 2011 as compared to Euro 8.9 million (11.7%) in the previous year.
The sales development in colour cartridges continues to be above our overall average. In this segment, sales increased signifi cantly to Euro 20.5 million (25.5% of total sales) in 2011 as compared to Euro 17.7 million (23.4% of total sales) in 2010.
Our gross margin improved versus the previous year by 1.5 percentage points to 22.3%. This improvement is due to cost savings in the manufacturing companies and changes to the product mix.
Selling expenses decreased slightly compared to the previous year.
Administration costs were on previous year's level.
After netting other operating income and expenses, 2011 netted out at zero compared to a positive balance of Euro 0.8 million in 2010. Both positions were signifi cantly lower in 2011 than previous year. In previous year we realized gains from the sale of
the Harlow property in England, and higher foreign exchange gains. They were partly off set by higher expenses due to provisions made in connection with the consolidation of the locations in the USA.
The fi nancial result was on previous year´s level at Euro -1.0 million. The main interest expenses are on the bond bearers with a fi xed maturity date of July 2013 (Euro 0.7 million), on interest expenses to be calculated as part of the accruals for pension obligations in Germany and England (Euro 0.2 million), and on interest for factoring.
Earnings before interest and taxes (EBIT) amounted to Euro 6.5 million in 2011 compared to Euro 4.8 million in 2010. The result from ordinary operations was Euro 5.5 million (previous year: Euro 3.9 million), and the consolidated net profi t was Euro 3.4 million (previous year: Euro 2.2 million).
In 2011, the tax expense amounted to Euro 2.1 million (previous year: Euro 1.7 million). The tax rate in the group was 38.3% (previous year: 43.9%).
Earnings per share were Euro 1.03 per share (previous year: Euro 0.62 per share).
Income from ordinary operations in the separate fi nancial statements of Turbon AG was Euro 1.3 million versus Euro 6.9 million in the previous year. The previous-year result included a dividend payment totalling Euro 7.1 million by Turbon Beteiligungs GmbH (formerly Carbotex Beteiligungs GmbH). Earnings before taxes amounted to Euro 1.3 million compared to Euro 6.5 million in the previous year. The result after tax was Euro 1.1 million compared to Euro 5.9 million in the previous year.
FINANCIAL POSITION AND NET WORTH
The balance sheet total as at December 31, 2011 amounted to Euro 59.2 million, which is Euro 1.0 million above the previous year's value of Euro 58.2 million.
The consolidated fi xed assets as at December 31, 2011 amounted to Euro 16.1 million (previous year: Euro 16.6 million). The reduction by Euro 0.5 million was due to depreciation on tangible assets.
Inventories were Euro 17.9 million (previous year: Euro 15.3 million). This increase in inventories is a result of the sales growth.
Trade receivables increased to Euro 11.3 million (previous year: Euro 9.9 million). This was due to higher sales in the last quarter of 2011 compared with the previous year's timeframe. Financing from trade receivables as part of a factoring agreement with the German subsidiary Turbon Europe GmbH remained unchanged (Euro 3.4 million on December 31, 2011).
Other assets diminished by Euro 0.6 million to Euro 3.1 million (previous year: Euro 3.7 million). This resulted mainly from cash fl ow hedges recognized in the income at their maturity in the fi scal year (Euro 0.3 million).
Cash and cash equivalents amounted to Euro 8.9 million at December 31, 2011 (December 31, 2010: Euro 10.3 million). The decrease of Euro 1.4 million resulted mainly from higher capital commitment into inventories. In addition a cash outfl ow of Euro 3.3 million resulted from the dividend payment made in June 2011 for the year 2010.
Equity as of December 31, 2011 was Euro 24.3 million versus Euro 23.8 million in the previous year.
Equity per share as at December 31, 2011 was Euro 7.38 versus Euro 7.22 in the previous year. The equity ratio was 41.1% on December 31, 2011 (previous year: 40.9%).
On the balance sheet date December 31, 2010, Turbon AG held a total of 347,097 units of own shares which do not belong to the Shareholders' Equity (Euro 2.1 million). With the redemption of the shares in April 2011 the shares outstanding as of December 31, 2011 amounted to 3,294,903 pieces.
The long-term liabilities increased in the reporting year from Euro 14.1 million on December 31, 2010 to Euro 14.4 million on December 31, 2011.
The pension reserves on December 31, 2011 were at Euro 2.4 million (previous year: Euro 2.9 million). This position relates to the reserves at Turbon AG and at Keytec (GB) Ltd.
Turbon AG as well as the group had no bank liabilities in the balance sheet. The long-term bond bearer of Euro 10.0 million was off set by liquid assets in the group of Euro 8.9 million.
The short-term accrued taxes on December 31, 2011 were exclusively comprised of income tax accruals at the German and Thai location in the reporting year.
Other reserves and accrued liabilities decreased at the balance sheet date to Euro 4.8 million (previous year: Euro 6.1 million). In 2011, provisions of Euro 1.0 million were released in connection with the consolidation of our activities in the USA at the location in York, PA, and the associated closure of the location in Cinnaminson, NJ.
Other liabilities increased by Euro 0.4 million to Euro 1.7 million (previous year: Euro 1.3 million).
OVERALL STATEMENT ON THE CURRENT ECONOMIC SITUATION
The Executive Board assessed the business development at the time of production of this report as positive and assumes that sales and profi t will develop in accordance with the published forecasts.
MARKET PERFORMANCE
The markets where the Turbon Group is active are infl uenced by a range of diff erent factors.
The printer manufacturers (Original Equipment Manufacturers, OEMs) naturally exert the largest infl uence on the market development as they determine the demand for cartridges through the distribution of printers.
Laser printers continued to represent the leading printer technology in the commercial sector in 2011. Several new monochrome and colour printing systems in various price ranges were introduced to the market in 2011. With regard to pricing policy for consumables, there were no fundamental changes. The OEMs continue to off er their laser cartridges at a high price level; this enables manufacturers of compatible consumables to develop and off er alternatives at attractive prices.
Besides Turbon, there are a variety of suppliers in the market, and Turbon is among the large suppliers. The individual suppliers diff erentiate themselves through their product ranges and particularly through their regional strengths and serviced customer groups. Consolidations, which also aff ected smaller and medium-sized suppliers in 2011, did not have any major impact on the structure of competition in our market.
The Turbon Group distributes their products exclusively through resellers, who then in turn operate in the market with various sales strategies. Focusing on the laser cartridge sales volume of our potential customers, we can diff erentiate between large,
international distributors of offi ce supplies, medium-sized traders which serve the national or regional markets, and small customers. The market strategies of our customers are as diverse as their requirements. Turbon is able to meet these diff erent requirements and provide product and services to large customers as well as a variety of medium-sized and smaller customers.
MARKET POSITION
The most important markets for the Turbon Group are still Europe and North America, which are served by our distribution sites in Germany and the USA.
Turbon's core competences are quality, innovation and environmental friendliness with a simultaneously favorable price-performance ratio.
The Turbon Group is the leader in our market in terms of product quality and reliability due to its high development and manufacturing standards. In the future segment of the technically more sophisticated colour cartridges, the quality of the Turbon products is equivalent to that of OEM cartridges and is signifi cantly above that of the average of compatible products of our competition. Our logistics know-how developed over years allows the smooth link between manufacturing at locations where we can manufacture under conditions that allow us to competitively price our products and our distribution. We can therefore off er a multi-layered performance package in combination with a dedicated customer service.
With this attractively priced service package, we can compete with products from both printer manufacturers and compatible suppliers. Compared to the OEM products, we can off er the same quality at a much more attractive price; compared with other suppliers of compatible products, the above combination of excellent quality and service is our diff erentiating competitive advantage.
ENVIRONMENT
The remanufacturing of Laser Cartridges results in substantial advantages for our environment. The preservation of natural resources has become increasingly important in social discussions and the aspect of environmental friendliness of products increasingly infl uences the buy decision.
The companies of the Turbon Group collect used laser toner cartridges worldwide and send them to our production sites in Thailand and Romania for reconditioning. In addition, our manufacturing plants operate on a Zero Waste Concept basis, which ensures both a maximum level of component reuse and recycling of the material that is no longer usable.
Turbon supplies its customers with environmentally friendly products. Our business model is based on the sustainable preservation of our environment and its resources as well as on additional cost advantages off ered by our products. Our manufacturing processes prevent used laser cartridges being disposed of as waste. This fact allows us to reemphasize the environmental friendliness of our products.
PERSONNEL
The Turbon Group had an average of 1,043 employees in 2011 (1,005 in 2010). The number of employees on December 31, 2011 was 1,093 (2010: 975). Added to these are temporary staff employed indirectly through a temporary employment agency in Thailand. These temporary staff numbered 560 as of December 31, 2011 (2010: 425).
Turbon AG employed 5 members of staff on average during the year and at the end of the year.
We would like to thank all Turbon Group employees for their good work in the fi scal year ended. Our thanks are also due to the employee representatives for their cooperation at all times.
RESEARCH AND DEVELOPMENT
In connection with research and development at the Turbon Group, it should be remembered that we do not manufacture a new product, but we recondition a used product. The primary goal here is the rapid market launch of new, highquality cost-eff ective alternatives to OEM products. The expenses incurred for this purpose in 2011 were approximately Euro 1.1 million. The total expenses mainly concern personnel costs and test and development equipment, mainly at the production sites in Thailand and Romania. The area of colour cartridges is at the centre of our activities.
CAPITAL EXPENDITURE
In 2011, investments in assets was a total of Euro 0.9 million (previous year: Euro 0.5 million).
In 2011, the Turbon AG participated in the course of incorporation as an investor in Bright Parameters GmbH. Turbon is initially 100% of the share capital applied (Euro 25,000) and also provided a loan commitment of up to Euro 100,000. Both idea providers employed by the company were contractually granted the option to take over a total of 49% of the shares of the company.
Business purpose of the company is to design and create CGI objects (computer generated imagery). This includes among other things 3D graphics, visual eff ects and animations.
Target customers of the company are, for example, advertising agencies or commercial customers in various industries. Computer generated imagery emulates not only sophisticated investment assets and consumer goods but also complex technical procedures and processes.
The advantages of computer-aided visualization includes the representations of products prior to their actual availability and the possibilities of rapid and repeated changes of shape,
colour, area or viewing perspective of the displayed object. Another signifi cant advantage includes the time and cost savings compared to traditional fi lm or photo shoots.
The aim of the company for the fi scal year 2012 is to reach the breakeven point.
Risk Report
The companies of the Turbon Group are faced with risks and opportunities which could have an eff ect on the assets of the group, the profi t, the cash fl ow, and also on the intangible assets.
The Turbon Group risk management system enables the company management to identify such developments at an early stage. The risk management system, which is regarded as a group-wide task, detects and evaluates the existing and potential risks that threaten the group's existence. In addition, risk management is an important part of the overall management information system and is seen not only as a tool to avoid risks but also as a tool to identify opportunities for the group.
The group controlling system of the holding (Turbon AG) is the starting point and core of the operative risk monitoring system. Key elements are the monthly reports from the group companies for the balance sheet and income statement, as well as monthly profi t centre reporting, which allows a detailed insight into the economic processes at the companies, and also the comprehensive quarterly reports and the annual reports which are checked by our auditors. The monthly reports are available on an up to date basis so that risks can be identifi ed quickly, thereby allowing a fast response to potentially unfavourable developments. The central evaluation of information is supported by direct access to specifi c
employees in the group companies, who are actively involved in the detection and evaluation of risks.
Other components of internal risk management are cash management, receivables management, inventory management and worldwide production and capacity planning. At the subsidiaries, contracts and agreements which are to be concluded are subjected to an additional central control through special "Legal Reporting".
The group-wide planning, controlling and reporting processes are reviewed on a regular basis for their eff ectiveness and effi ciency. This includes the use of modern IT systems to support the respective processes.
Due to the international nature of its business, the Turbon Group is exposed to a signifi cant amount of varying risks. In order to minimize the fi nancial consequences of potential damage, insurance is taken out where available and commercially sensible. The scope and amounts of these insurance contracts are continually reviewed and revised as necessary.
Major risks for the Turbon Group are described in the following sections, whereby the order in which they appear does not indicate the importance, probability or potential extent of damage.
PROCUREMENT MARKET RISKS
Our production output may be impaired by delivery interruptions or quality defects in raw materials. If we fail to use production facilities of another location in these cases or to serve demands from our inventories, there might be a decline in sales. We secure our supply with raw materials by close cooperation with suppliers to the maximum extent and by parallel procurement from various suppliers.
Our production locations require an adequate supply of previously used laser cartridges (empties) for our remanufacturing process to begin. Accordingly, the collection of empties is an important task for all locations of the group. The Turbon Group has established an effi cient worldwide collection system, which reduces the risk of insuffi cient empties supplies for the Turbon Group.
OPERATIONAL RISKS DUE TO THE LOSS OF TANGIBLE ASSETS OR BUSINESS INTERRUPTION
Fire, natural disaster or other disruption at manufacturing facilities of the Turbon Group can cause substantial damage and loss. This risk is reduced as far as possible by appropriate structural measures and strict organizational requirements. The Turbon Group has taken out insurance with adequate cover in the event of any damage or loss.
SALES RISKS
There is the general risk that price reductions will not be compensated by a corresponding growth in volume. As before, we deal with this situation using strict cost management at all locations.
A general risk in the area of sales is the concentration on a relatively small number of large customers. In 2011, the fi ve largest customers made up 46.6% of our total sales (previous year: 48.5%).
This risk can be reduced by increasing sales with new and recently gained customers. In connection with this, a fl exible structure which enables fast adjustment to fl uctuations in sales is important.
DEFAULT RISKS
We limit default risks by regularly analyzing the creditworthiness of our customer portfolio on the basis of a receivables management policy. Most customer receivables are insured by third-party credit insurance, corporate guarantees or strict payment in advance terms. With respect to all receivables sold in the context of a factoring agreement, the factor bears 100% of the default risk. We have suff ered only small losses in this area over the last few years, mainly as a consequence of our strict receivables policies.
LIQUIDITY RISKS
A suffi cient level with liquidity is a central objective of the fi nancial management in the Turbon Group. Our cash management system provides up-to-date information about the actual fi nancial status and expected cash fl ows from the individual group companies on a central basis. Rolling liquidity planning and control is ensured by a database-based Treasury Management System. Our credit lines are secured by long-term contracts and the fulfi lment of obligations that are preconditions for credit approval. Liquidity is available through the existing factoring agreement.
CURRENCY RISKS
As the Turbon Group transacts a portion of its business, on both the procurement and the sales side, in currencies other than the Euro, currency fl uctuations can aff ect earnings. This risk is particularly increasing due to the growing volatility in currency developments. The group companies report their currency surpluses and defi cits to the group.
At group level, an aggregated net position per each currency is created with the objective of achieving the most comprehensive "natural hedging" possible through proactive currency decisions (e.g. choice of supplier). The most important foreign currencies are the US Dollar and the British Pound.
The main currencies are controlled actively through foreign exchange forwards. For detailed explanations, see Reporting of Financial Instruments in the Notes to the Consolidated Financial Statements 2011.
LEGAL RISKS
Legal risks arise for the Turbon Group from laws, changes in laws and/or jurisdiction. These include in particular risks in the fi eld of product liability, contract law, patent law, tax law and environmental law.
The unimpaired transportation of empties to our manufacturing locations is critical for our success. Therefore, we use great diligence in ensuring that we comply with all statutory requirements (mostly exceeding the required standards) and in cooperating very closely with the responsible authorities. This cooperation enables us to stay very up to date with any possible changes in legal provisions. In addition, our two production locations and the German company are certifi ed in accordance with ISO 14001. This standard governs the environmental management system of duly certifi ed companies.
TAX RISKS
The Turbon Group is exposed to tax risk by external audits and tax assessments which may lead to additional payments.
BALANCE SHEET VALUATION RISKS
The Turbon Group may be subject to balance sheet valuation risks if certain assumptions for the current valuation of balance sheet items are not met due to events in the future.
OVERALL RISK
Overall, the statutory provisions are fully complied with. The instruments of risk management deployed are suffi cient to detect risks threatening survival in suffi cient time. No risks endangering the future of the company are discernible at the present time.
INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM IN RELATION TO THE (GROUP) ACCOUNTING PROCESS (REPORT IN ACCORDANCE WITH SECTIONS 289 (5), 315 (2) NO. 5 HGB)
To supplement the above statements on Turbon AG's management of risk, the material features of the internal control and risk management system regarding the (group) accounting process can be described as follows:
The accounting-related internal control system covers the Accounting and Controlling departments, whose areas of responsibility are assigned clearly within the control system.
The control system comprises all the principles, processes and measures that are necessary to secure eff ective, economical and proper accounting and compliance with the pertinent legal provisions. In addition to manual process controls by way of the "four-eyes-principle" (i.e. dual control), automated IT process controls are an essential part of integrated control measures.
The Executive Board is responsible for implementing and complying with the legal regulations. It reports regularly to the Supervisory Board on the overall fi nancial position of Turbon AG. The Supervisory Board supervises the eff ectiveness of the internal control system. As agreed, the auditor reports to the Chairman of the Supervisory Board promptly on all signifi cant fi ndings and events, relevant to the tasks of the Supervisory Board, which have been identifi ed during the audit of fi nancial statements.
Turbon AG defi nes the accounting policies in order to regulate consistent accounting principles. In addition, group policies contain detailed instructions on how intra-group clearing transactions are to be recorded and settled and how relevant balances are to be reconciled.
The fi nancial statements of consolidated companies are prepared using IT-aided workfl ows. These include, among other things, an authorization concept and testing routines.
Database-supported management information software is used for reporting to the group head offi ce. Then, the separate fi nancial statements are fed into a central consolidation system. At the group level, the Finance and Controlling department is responsible for reviewing the correctness and reliability of the separate fi nancial statements presented.
Report on Relations with Affi liated Companies
There is still dependence on the shareholder group HBT Holdings GmbH / Holger Brückmann-Turbon, in terms of Section 312 German Stock Corporation Act (AktG). A combined voting rights share of 42.90% was notifi ed most recently for this shareholder group.
Accordingly, the Executive Board prepared a report on relations with affi liated companies for fi scal 2011 regarding all relations of the company with this shareholder group, which was granted an unqualifi ed audit opinion of BDO AG Wirtschaftsprüfungsgesellschaft, Düsseldorf.
At the end of the report, the Executive Board declares that the company received appropriate compensation for all legal transactions with the group of shareholders, in accordance with the facts known to the Executive Board at the date of these transactions, and that the company was not disadvantaged in this respect. No measures subject to reporting requirements were undertaken in the year under review.
Information required by Section 289 (4) and 315 (4) German Commercial Code (HGB)
On December 31, 2011, Turbon AG's subscribed capital of Euro 10,333 thousand was divided into 3,294,903 no par registered shares with voting rights. There were no diff ering classes of stocks.
The shareholders have no special rights conferring any particular powers of control.
Beside the above mentioned shareholder group HBT Holdings GmbH / Holger Brückmann-Turbon NCR GmbH, Augsburg holds more than 10% of the voting rights of the company's equity (31.87%).
Pursuant to Section 41 (4d) of the German Securities Trading Act (WpHG), Mr. Brückmann-Turbon and NCR GmbH / NCR Corporation informed the company in February 2012 and March 2012 respectively that they hold mutual rights of fi rst refusal on 1,050,000 no-par-value shares as at February 1, 2012 in accordance with a shareholders' agreement. The agreement can be regarded as a restriction pursuant to Section 289 (4) item 2, and Section 315 (4) item 2, of the German Commercial Code (HGB).
The rules on the appointment and removal of Executive Board members of Turbon AG are taken from Sections 84 et seq. of the German Stock Corporation Act (AktG). The Articles of Association contain no further rules in this respect.
The number of Executive Board members is determined by the Supervisory Board in accordance with Article 7 of the Articles of Association.
The Supervisory Board may appoint an Executive Board member as chairperson or spokesperson for the Executive Board.
Alterations of the Articles are governed by Sections 133 and 179 AktG. The authority to change the wording of the Articles has been delegated to the Supervisory Board in accordance with Section 179 (1) sentence 2 AktG.
According to a resolution at the General Meeting, the Executive Board is authorized to purchase, sell or redeem shares equivalent to 10% of the share capital subject to the approval of the Supervisory Board.
There are no agreements with Turbon AG that are conditional on a change of control as a consequence of a takeover bid.
No indemnity agreements or similar have been made with employees or members of the Executive Board in the event of a takeover bid.
Corporate Governance Report
The Executive Board and Supervisory Board of Turbon AG comply with the principles of good and trusting corporate governance. In the following sections, the Executive Board – also acting on behalf of the Supervisory Board – provides its report on corporate governance pursuant to Section 289a Commercial Code (HGB) and pursuant to sub-section 3.10 of the German Corporate Governance Code.
DECLARATION BY THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF TURBON AG ON THE RECOMMENDATIONS OF THE "FEDERAL GERMAN GOVERNMENT COMMISSION ON THE GERMAN CORPORATE GOVERNANCE CODE" IN ACCORDANCE WITH SECTION 161 STOCK CORPORATION ACT (AKTG)
The Management Board and Supervisory Board of Turbon AG hereby declare that the recommendations in the version of May 26, 2010 - published in the electronic version of the German Federal Gazette on July 2, 2010 - have been and are being complied with fundamentally. Only the recommendations given in Articles 2.3.3, 3.8 Para. 3, 5.3.1, 5.3.2, 5.4.1 Para. 2, 5.4.6 Para. 1 and Para. 2 as well as 7.1.2 of the German Corporate Governance Code have not been applied or are being applied only in a modifi ed form:
ARTICLE 2.3.3, SENTENCE 2
"The company shall also assist the shareholders in the use of postal votes and proxies."
The Company supports its shareholders by off ering the right to vote by proxy. An additional option of postal votes does not exist and is not planned.
Reason: A postal vote is not contained in the Articles of Association of Turbon AG. In our opinion, postal votes involve diffi culties in determining the genuineness of votes cast.
ARTICLE 3.8 PARA. 3
"A similar deductible must be agreed upon in any D&O policy for the Supervisory Board."
No adjustment to the insurance contract regarding a corresponding deductible is planned for the Supervisory Board.
Reason: The existing sense of responsibility of the Management Board and the Supervisory Board will not be improved through the introduction of a deductible.
ARTICLE 5.3.1 AND 5.3.2
"Depending on the specifi cs of the enterprise and the number of its members, the Supervisory Board shall form committees with suffi cient expertise. They serve to increase the effi ciency of the Supervisory Board's work and the handling of complex issues. The respective committee chairmen report regularly to the Supervisory Board on the work of the committees." "The Supervisory Board shall set up an Audit Committee which, in particular, handles issues of accounting, risk management and compliance, the necessary independence required of the auditor, the issuing of the audit mandate to the auditor, the determination of auditing focal points and the fee agreement. The chairman of the Audit Committee shall have specialist knowledge and experience in the application of accounting principles and internal control processes. He should be independent and not be a former member of the Management Board of the company whose appointment ended less than two years ago."
The Supervisory Board elected on June 22, 2011 decided, to set up a Personal Committee.
Reason: The set up of further committees, including an Audit Committee, is not reasonable with regard to the size of six members of Turbon AG's Supervisory Board.
ARTICLE 5.4.1 PARA. 2
"The Supervisory Board shall specify concrete objectives regarding its composition which, whilst considering the specifi cs of the enterprise, take into account the international activities of the enterprise, potential confl icts of interest, an age limit to be specifi ed for the members of the Supervisory Board and diversity. These concrete objectives shall, in particular, stipulate an appropriate degree of female representation."
There is no specifi cation of concrete objectives regarding the composition of the Supervisory Board.
Reason: The composition of the Supervisory Board is aligned exclusively to the interests of the Company within the sense of supporting the short-, medium- and long-term achievement of objectives. The objectives set forth in the German Corporate Governance Code shall be taken into account when possible and reasonable.
ARTICLE 5.4.6 PARA. 1 AND PARA. 2
"Compensation of the members of the Supervisory Board is specifi ed by resolution of the General Meeting or in the Articles of Association. It takes into account the responsibilities and scope of tasks of the members of the Supervisory Board as well as the economic situation and performance of the enterprise. Also to be considered here shall be the exercising of the Chair and Deputy Chair positions in the Supervisory Board as well as the chair and membership in committees. Members of the Supervisory Board shall receive fi xed as well as performance-related compensation. Performance-related compensation should also contain components based on the long-term performance of the enterprise."
Compensation of the Supervisory Board members was specifi ed by the resolution of the General Meeting of July 5, 2001 and is stipulated by fi xed amounts in Section 18 of the Articles of Association. The Chair and the Deputy Chair have also
been considered here. The Chair and membership in committees as well as performance-related compensation are not contained in the Articles of Association. No change in compensation of the Supervisory Board members is planned. Reason: An appropriate fi xed compensation for the activity as a Supervisory Board member and for the membership in committees makes suffi cient allowance for the control function of the Supervisory Board. There is no need for additional performance-related compensation.
ARTICLE 7.1.2
"The Consolidated Financial Statements must be prepared by the Management Board and examined by the auditor and Supervisory Board. Half-year and any quarterly fi nancial reports shall be discussed with the Management Board by the Supervisory Board or its Audit Committee prior to publication. In addition, the Financial Reporting Enforcement Panel and the Federal Financial Supervisory Authority are authorized to check that the Consolidated Financial Statements comply with the applicable accounting regulations (enforcement). The Consolidated Financial Statements shall be publicly accessible within 90 days of the end of the fi nancial year; interim reports shall be publicly accessible within 45 days of the end of the reporting period."
On principle, we adhere to the recommendation. However, the consolidated fi nancial statements and the interim reports are made publicly accessible within the legally defi ned periods of four months and two months, respectively.
Reason: The recommendation is diffi cult to follow in organizational terms so that only the legally defi ned periods are adhered to.
Hattingen, November 2011 For the Executive Board: Signed Aldo C. DeLuca (Spokesman of the Executive Board) Signed Michael H. Pages For the Supervisory Board: Signed Hans-Joachim Scholten (Chairman of the Supervisory Board)
FUNCTIONS AND COMPOSITION OF EXECUTIVE BOARD, SUPERVISORY BOARD AND THE COMMITTEES
The company has a dual-board management and monitoring structure with its Executive Board and Supervisory Board bodies.
The Executive and Supervisory Boards cooperate closely and trustfully in governing and monitoring the company.
As defi ned in the Articles of Association, Turbon AG's Executive Board consists of one or several members. The number of Executive Board members is specifi ed by the Supervisory Board pursuant to the Articles, and the latter may appoint an
Executive Board member as chairperson or spokesperson for the Executive Board.
At present, the Executive Board has two members; Mr. DeLuca was appointed spokesman of the Executive Board.
It is the management body responsible for managing the business of the company on its own responsibility and in the sole interest of the company with the objective of sustainable added value.
The tasks of the Executive Board members are distributed in the context of a matrix organization, based partially on functional and partially on regional aspects.
The Executive Board defi nes the company's strategic direction, coordinates it with the Supervisory Board and ensures its implementation in the course of ordinary business.
In addition, the Executive Board is responsible for ensuring appropriate risk management and risk controlling within the enterprise as well for regular, up-to-date and comprehensive reporting to the Supervisory Board.
Certain transactions are subject to a reservation of consent on the part of the Supervisory Board. In addition, the Executive Board is obliged to notify the Supervisory Board promptly in specifi c cases.
In accordance with Section 96 (1) and Section 101 (1) of the German Stock Corporation Act (AktG) and with Section 1 (1), Section 4 (1) of the Act on One-Third Participation of Employees in the Supervisory Board (DrittelbG) in conjunction with Article 10 of Turbon AG's Articles of Association, the Supervisory Board consists of four members elected by the General Meeting and two members as employee representatives.
The Supervisory Board advises and supervises the Executive Board in issues concerning the management of the company.
The term of offi ce for Supervisory Board members is fi ve years.
The ongoing term of offi ce ends with the ordinary General Meeting 2016.
The Supervisory Board performs its tasks at regular meetings.
A staff committee consisting of two members exists. It reported on its activities as part of the plenary sessions of the total.
The shareholders can safeguard their rights and exercise their voting rights at the General Meeting. Each share has a right to one vote.
Each shareholder who registers in time is entitled to take part in the General Meeting.
Shareholders who are not able to attend personally may have their voting right exercised by a credit institution, a shareholder association or the proxies who are deployed by Turbon AG and bound by the shareholder's instructions or by another authorized representative designated by them.
The invitation to the General Meeting and all reports and information necessary for adopting resolutions are published in accordance with the provisions of the stock corporation law and made available on Turbon AG's website.
COMPENSATION REPORT
Compensation paid to the Executive Board members includes fi xed and variable elements.
Executive Board members receive an annual fi xed basic salary as fi xed compensation. In addition, they receive contributions towards social insurance, a car allowance or a company car with a right of private use as well as contributions to accident insurance to the customary extent.
Executive Board members have unchanged a chance to earn an annual bonus on group earnings and cash fl ow as variable compensation. Payment of an annual bonus requires that a defi ned earnings amount has been exceeded in the fi scal year. Net income exceeding the defi ned amount of earnings is then updated by the change in inventories and change in trade receivables in order to determine the second criterion, the cash fl ow. The annual bonus is calculated by multiplying the generated net income by a specifi c percentage for each Executive Board member. The two specifi c percentages are reduced step by step if the cash fl ow is lower than earned net income. No annual bonus is paid if no minimum earnings amount or no positive cash fl ow is achieved.
Through the strict defi nition of the aforementioned variable compensation, determined on a one-year assessment basis, a sustainable development was already implemented for the Turbon Group.
Due to the revised German Stock Corporation Act (Aktiengesetz), the Executive Board members have had the additional opportunity since the fi scal year 2011 to earn a bonus for sustainable management which involves a multi-year assessment period. The Executive Board shall account for the overall goal of ensuring the company's substance and, beyond that, increasing the company's wealth. In addition to the desired overall improvement of the Group's market position (through profi table growth), various quantifi able fi nancial success factors ("milestones") were defi ned, whereby their achievement enables the identifi cation of a measurable increase in wealth for the company and/or the shareholders. In order to reach these "milestones" it is required to achieve
consistent earnings targets and strict discipline in asset management. For the fi rst four-year assessment period (2011 - 2014), the result from ordinary operations in the group and the dividend became goals to be reached every year, and the generation of liquid funds by successful asset management was determined as a goal to be reached over the entire period. If these bonus criteria are achieved, each of the two board members will be paid a bonus of Euro 100,000 in the year following the assessment period. If a bonus criterion is not fulfi lled, the assessment period ends. At the beginning of the next fi nancial year, a new measurement period commences, which may be based on modifi ed measurement criteria that are then more suitable.
Should the activity as an Executive Board member end early without an important cause, severance payments, if any, will not exceed the value of two years' compensation and compensate no more than the remaining term of the employment contract.
No indemnity agreements have been made with members of the Executive Board in the event of a takeover bid.
The detailed Executive Board and Supervisory Board Compensation Report and the respective amount allocable to individual members of the Executive Board and Supervisory Board can be inferred from the Notes to the Consolidated Financial Statements on pages 51 and 52.
In fi scal year 2011, Turbon AG was not made aware of any reportable trading of Turbon AG shares or of fi nancial instruments relating thereto transacted by board members (Directors' Dealings). The total shares or related fi nancial instruments held by the Executive Board and Supervisory Board members in Turbon AG are less than 1% of the issued shares.
Events after the balance sheet date
There are no events subject to mandatory inclusion in this report.
Outlook
The consolidation of all our manufacturing activities at costadvantageous locations in Thailand and Romania and of our distribution activities in the main markets at a single location, (i.e. Hattingen for Europe and York, PA, for the USA), has substantially strengthened our Group. We maintain our cost competiveness and eff ectively respond to changes in the market, as can be seen by the signifi cantly improved fi gures in 2011.
Furthermore, our early decision to focus on the development of high-quality colour laser cartridges is now paying off . For these technically sophisticated products, we are the market leader in the compatible product segment and are achieving a corresponding sales growth with reasonable margins.
Our aim now must be a better utilization of our gained strength in the market. After having achieved sound sales growth in Europe for several years in a row, our aim in 2012 is to achieve the same in the US market. We plan to achieve consolidated sales of between Euro 86 and 90 million in 2012 and aim to repeat the result fi gures of 2011 at the bottom end of this range. Additional sales should then allow result increases. Our medium-term objective is to again achieve sales fi gures in the three-digit million euro range. This objective continues to be subject to the condition that sales growth only makes sense if the additional sales make an acceptable profi t contribution.
Our continuing good asset and cash management allows us a shareholder-friendly dividend policy and has made us largely independent of outside fi nancing by banks. This was certainly a great advantage in view of past fi nancial and economic crises. The repayment of the bond bearer due in 2013 will therefore be predominantly made from our own funds in order to achieve a further improvement of our balance sheet structure and fi nancial results.
We are continuously aware of the overall economic environment and continue to avoid taking risks that are incalculable or diffi cult to assess. Our main aim of preserving the corporate substance will continue to have top priority in our business decisions.
PROVIDENT INFORMATION
This report contains certain statements oriented to the future which are based on the current assumptions and projections of the management. Various risks, uncertainties and other factors, both known and unknown, can cause the actual results, fi nancial position, development or performance of the company to deviate substantially from the assessment shown here.
Hattingen, March 2012 The Executive Board
Supervisory Board Report for the Fiscal Year 2011
The Supervisory Board advised the Executive Board with respect to fundamental issues of business policy and monitored continuously the management of business in accordance with the tasks assigned pursuant to the legal provisions, articles of association and rules of procedure and in compliance with the recommendations of the German Corporate Governance Code. The Executive Board informed the Supervisory Board at regular intervals of the business and fi nancial position of the company and coordinated all important decisions and measures with the latter.
The ordinary Annual General Meeting on June 22, 2011 reelected the previous shareholder representatives in the Supervisory Board for a fi ve-year period of offi ce. The employees' representatives were also re-elected in March 2011.
SUPERVISORY BOARD ACTIVITIES
The Supervisory board convened a total of fi ve times in fi scal year 2011. All members took part in these meetings.
During its meeting on June 22, 2011, Mr. Hans-Joachim Scholten was appointed as Chairman and Dr. Paul-Michael Günther was appointed as Deputy Chairman of the Supervisory Board. Dr. Paul-Michael Günther was also appointed as Financial Expert. He is an independent Member of the Supervisory Board with expertise in accounting and auditing pursuant to Section 100 (5) of the German Stock Corporation Act (AktG).
The number of committees was reduced to the personnel committee. This was reported, and the reasons for the decision specifi ed, in the Statement pursuant to Section 161 of the German Stock Corporation Act (AktG).
In the meetings of the Supervisory board, we discussed in detail the reports of the Executive Board, particularly the published interim reports, and we also discussed the development of the company and strategic issues together with the Executive Board. In addition, specifi c topics of particular importance were addressed in the Supervisory Board meetings.
The redemption of 347,097 own shares acquired in the years 2009 and 2010 was approved by the Supervisory Board on April 20, 2011.
The appropriation of net earnings for 2010 was discussed in detail at this meeting and this resulted in the decision to increase the earnings-related dividend from Euro 0.40 to Euro 0.50 per share and to additionally distribute an amount of Euro 0.50 per share as a special dividend.
The full Supervisory Board dealt with issues of risk management. Risks threatening the company's survival are not discernable. The risk management system of the Turbon Group meets the legal requirements.
During the reporting period, the personnel committee had two meetings, the former audit committee had two meetings and the former nomination committee for the election of Supervisory Board members had one meeting.
CORPORATE GOVERNANCE
The statement of the Executive Board and the Supervisory Board on the recommendations of the Government Commission "German Corporate Governance Code" according to Section 161 of the German Stock Corporation Act (AktG) was issued in November 2011. The wording of the current statement is reproduced in the full Corporate Governance Report on pages 14 to 15 of the Annual Report. It was also published on the company's web site.
ANNUAL FINANCIAL STATEMENTS OF THE AG AND THE GROUP, AUDIT OF FINANCIAL STATEMENTS
The annual fi nancial statements of Turbon AG and the combined management report and group management report were prepared in accordance with the provisions of the German Commercial Code (HGB), and the consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS).
The auditors of the fi nancial statements, BDO AG Wirtschaftsprüfungsgesellschaft, Düsseldorf, appointed by the general meeting, audited the annual fi nancial statements of Turbon AG, the combined management report and group management report and the consolidated fi nancial statements in compliance with the generally accepted German standards for the audit of fi nancial statements as adopted by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer, IDW) and granted an unqualifi ed audit opinion.
The annual fi nancial statements of Turbon AG, the combined management report and group management report, the consolidated fi nancial statements and the auditor's reports were made available to all Supervisory Board members in due time. These documents were examined by the Supervisory Board. Our examination also covered the completeness and content of the disclosures prescribed by Section 315 (4) Commercial Code (HGB). At the Supervisory Board's meeting, convened to adopt the accounts, on April 19, 2012,
we discussed in detail the fi nancial statement documents in the presence of the auditor, who reported on the signifi cant fi ndings of his audit. Following its examination, the Supervisory Board agreed to the fi ndings obtained by the auditor and raised no objections. The Supervisory Board approved the annual fi nancial statements and the consolidated fi nancial statements. The fi nancial statements are thereby adopted. The proposal for the appropriation of retained earnings was discussed in detail and the proposal made by the Executive Board to propose a dividend of Euro 0.60 to the Annual General Meeting was approved.
With regard to the proposal to the Annual General Meeting 2012 for the appointment of the auditor for the fi scal year 2012, BDO AG Wirtschaftsprüfungsgesellschaft has submitted a statement concerning its independence pursuant to the Corporate Governance Code.
The Executive Board prepared a report on relations with affi liated companies for the fi scal year 2011. This report was reviewed by the auditor and given an unqualifi ed opinion that the statements in the report are accurate and that the consideration given by the Company for the transactions specifi ed in the report was not unreasonably high. The Supervisory Board examined the report on relations with affi liated companies. The auditor reported the Supervisory Board about the fi ndings of the audit. The Supervisory Board agreed to the results of the audit obtained by the auditor. Following its examination, the Supervisory Board also raised no objections to the declaration of the Executive Board.
The Supervisory Board expresses its thanks and recognition to Management and all employees for their work done during the expired fi nancial year and their successful commitment.
Hattingen, April 19, 2012
For the Supervisory Board
Hans-Joachim Scholten Chairman
Consolidated Balance Sheet – Turbon Group
as of December 31, 2011
ASSETS
| Dec. 31, 2011 | Dec. 31, 2010 | ||
|---|---|---|---|
| Notes | 1,000 Euro | 1,000 Euro | |
| Long-term assets | |||
| Intangible assets | (1) | 946 | 1,020 |
| Tangible assets | (1) | 15,080 | 15,510 |
| Financial assets | (1) | 24 | 24 |
| 16,050 | 16,554 | ||
| Other assets | (4) | 1,291 | 1,811 |
| Income tax assets | (5) | 182 | 214 |
| Deferred tax assets | (17) | 1,499 | 1,823 |
| 19,022 | 20,402 | ||
| Short-term assets | |||
| Inventories | (2) | ||
| Raw materials and supplies | 7,433 | 6,460 | |
| Work in progress | 50 | 40 | |
| Finished goods and trading stocks | 10,429 | 8,769 | |
| Advance payments | 25 | 76 | |
| 17,937 | 15,345 | ||
| Trade receivables | (3) | 11,282 | 9,929 |
| Other assets | (4) | 1,840 | 1,840 |
| Income tax assets | (5) | 193 | 323 |
| Cash and cash equivalents | (6) | 8,911 | 10,320 |
| 40,163 | 37,757 | ||
| 59,185 | 58,159 |
SHAREHOLDERS' EQUITY AND LIABILITIES
| Dec. 31, 2011 | Dec. 31, 2010 | ||
|---|---|---|---|
| Notes | 1,000 Euro | 1,000 Euro | |
| Shareholders' Equity | (7) | ||
| Subscribed capital | 10,333 | 10,333 | |
| Capital reserves | 14,956 | 14,956 | |
| Revenue reserves | 1,499 | 3,554 | |
| Retained earnings | 4,212 | 4,100 | |
| Accumulated other comprehensive income | -6,669 | -7,031 | |
| Treasury stock | 0 | -2,125 | |
| Minority interests | -7 | -6 | |
| 24,324 | 23,781 | ||
| Long-term liabilities | |||
| Pension reserves | (8) | 2,406 | 2,857 |
| Deferred tax liabilities | (9), (17) | 1,535 | 1,317 |
| Bond bearer | 9,957 | 9,929 | |
| Other provisions | (9) | 476 | 0 |
| Other liabilities | 6 | 0 | |
| 14,380 | 14,103 | ||
| Short-term liabilities | |||
| Accrued taxes | (9) | 802 | 1,116 |
| Other reserves and accrued liabilities | (9) | 4,767 | 6,133 |
| Trade payables | 13,158 | 11,702 | |
| Liabilities due to other group companies | 12 | 12 | |
| Other liabilities | (10) | 1,742 | 1,312 |
| 20,481 | 20,275 | ||
| 59,185 | 58,159 |
Consolidated Statement of Income – Turbon Group
for the period from January 01 until December 31, 2011
| 2011 | Previous Year | ||
|---|---|---|---|
| Notes | 1,000 Euro | 1,000 Euro | |
| Sales | (11) | 80,706 | 75,717 |
| Cost of sales | (12) | -62,684 | -59,966 |
| Gross profi t | 18,022 | 15,751 | |
| Selling expenses | (13) | -5,647 | -5,762 |
| Administrative expenses | (14) | -5,909 | -5,937 |
| Other operating income | (15) | 684 | 2,192 |
| Other operating expenses | (16) | -660 | -1,397 |
| Earnings before interest and taxes | 6,490 | 4,847 | |
| Financial income | 55 | 27 | |
| Financial expenses | -1,029 | -1,015 | |
| Financial result | -974 | -988 | |
| Result from ordinary operations | 5,516 | 3,859 | |
| Taxes on income | (17) | -2,111 | -1,696 |
| Result after income taxes | 3,405 | 2,163 | |
| Result attributable to | 3,405 | 2,163 | |
| • Shareholders of Turbon AG (Group net income for the year) | 3,406 | 2,164 | |
| • Minority interests | -1 | -1 | |
| Earnings per share (in Euro) | (18) | 1.03 | 0.62 |
Consolidated Statements of Comprehensive Income – Turbon Group
for the period from January 01 until December 31, 2011
| 2011 | Previous Year | ||
|---|---|---|---|
| Notes | 1,000 Euro | 1,000 Euro | |
| Result after income taxes | 3,405 | 2,163 | |
| Actuarial gains and losses | (8) | 414 | 12 |
| Changes in fair values of derivatives designated as cash flow hedges | -337 | 258 | |
| Exchange rate differences | 104 | -530 | |
| Change in deferred taxes | 181 | -87 | |
| Other changes | 70 | 39 | |
| Income and expenses directly off set against shareholders' equity | 432 | -308 | |
| Comprehensive income | 3,837 | 1,855 | |
| Comprehensive income attributable to | 3,837 | 1,855 | |
| • Shareholders of Turbon AG | 3,838 | 1,856 | |
| • Minority interests | -1 | -1 | |
Consolidated Statements of Changes in Shareholders' Equity – Turbon Group
as of December 31, 2011
| Subscribed capital |
Capital reserves | Revenue reserves | |
|---|---|---|---|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| At December 31, 2009 | 10,333 | 14,956 | 1,877 |
| 2009 dividends (0.40€ per share) | |||
| Result after income taxes | |||
| Other comprehensive income | 39 | ||
| Purchase of own shares | 1,638 | ||
| At December 31, 2010 | 10,333 | 14,956 | 3,554 |
| 2010 dividends (1.00€ per share) | |||
| Result after income taxes | |||
| Other comprehensive income | 70 | ||
| Redemption of own shares | -2,125 | ||
| At December 31, 2011 | 10,333 | 14,956 | 1,499 |
| Retained earnings | Accumulated other compre hensive income |
Treasury stock | Turbon shareholders |
Minority interests | Equity |
|---|---|---|---|---|---|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro |
| 3,300 | -6,684 | -487 | 23,295 | -5 | 23,290 |
| -1,364 | -1,364 | -1,364 | |||
| 2,164 | 2,164 | -1 | 2,163 | ||
| -347 | -308 | -308 | |||
| -1,638 | 0 | ||||
| 4,100 | -7,031 | -2,125 | 23,787 | -6 | 23,781 |
| -3,295 | -3,295 | -3,295 | |||
| 3,406 | 3,406 | -1 | 3,405 | ||
| 362 | 432 | 432 | |||
| 2,125 | 0 | ||||
| 4,212 | -6,669 | 0 | 24,331 | -7 | 24,324 |
Consolidated Cash Flow Statement – Turbon Group
for the period from January 01 until December 31, 2011
| 2011 | Previous Year | |
|---|---|---|
| 1,000 Euro | 1,000 Euro | |
| Group net income for the year | 3,405 | 2,163 |
| Depreciation of fixed assets | 1,210 | 1,234 |
| Change in pension reserves | -451 | -53 |
| Cash fl ow | 4,164 | 3,344 |
| Other non-cash expenses and income | 31 | 95 |
| Result on disposals of fixed assets | 22 | -38 |
| Change in inventories | -2,592 | -731 |
| Change in trade receivables | -1,384 | -2,007 |
| Change in other assets | 1,006 | 1,236 |
| Change in short-term provisions | -1,198 | 773 |
| Change in trade payables | 1,456 | 943 |
| Change in other liabilities | 676 | -351 |
| Non cash-effects | 539 | 139 |
| Cash fl ow from operating activities | 2,720 | 3,403 |
| Purchase of intangible assets | -23 | -20 |
| Purchase of tangible assets | -837 | -500 |
| Proceeds from disposals of fixed assets | 33 | 138 |
| Cash fl ow from investing activities | -827 | -382 |
| Dividend payment | -3,295 | -1,364 |
| Redemption of own shares | 0 | -1,638 |
| Cash fl ow from fi nancing activities | -3,295 | -3,002 |
| Change in cash funds from cash relevant transactions | -1,402 | 19 |
| Exchange rate related change in cash funds | -7 | 354 |
| Cash funds at the beginning of the period | 10,320 | 9,947 |
| Cash funds at the end of the period | 8,911 | 10,320 |
| Cash fl ow from operating activities includes: | ||
| Interest receipt | 39 | 16 |
| Interest payment | -751 | -748 |
| Income tax receipt | 1 | 20 |
| Income tax payment | -1,529 | -942 |
Notes to the Consolidated Financial Statements of the Turbon Group
General information
Turbon AG and its subsidiaries are engaged in the fi eld of modern offi ce communication where electronic data are converted into documents through printout onto paper. The companies of the Turbon Group develop, manufacture and market printer consumables and have specialized in the segment of toner cartridges for use in laser printers. For this purpose, the Turbon Group has manufacturing and distribution companies in Asia, Europe and the USA.
Turbon AG, as the group holding company, is registered with the commercial register of the Essen Local Court (Amtsgericht) under HRB 15780. The seat of the company is in Hattingen. The address is Turbon AG, Ruhrdeich 10, 45525 Hattingen, Germany.
The Executive Board prepared the consolidated fi nancial statements and group management reports and management report of Turbon AG as of December 31, 2011 on March 30, 2012 and approved their submission to the Supervisory Board. The consolidated fi nancial statements and group management reports will be submitted to the Supervisory Board for approval at its meeting on April 19, 2012.
Principles of Accounting
The consolidated fi nancial statements of Turbon AG and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS) as recognized by the European Union, the application of which standards on the balance sheet date is mandatory, and additionally in accordance with the provisions to be observed of Section 315a (1) German Commercial Code (HGB).
The IFRS include those issued by the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). All standards and interpretations that were mandatorily applicable on the balance sheet date were applied. As a result, the consolidated fi nancial statements of Turbon AG conform to IFRS as adopted in the EU. We have waived the use of standards whose application is not yet mandatory.
The consolidated fi nancial statements comprise the balance sheet, statement of income, statement of comprehensive income, statement of changes in Shareholders' Equity, the cash fl ow statement and the notes.
The consolidated fi nancial statements are prepared in Euros. Unless otherwise indicated, all amounts are stated in thousand Euros. Assets and liabilities are divided into current and non current assets and liabilities according to their maturities. Short-term assets and liabilities are considered to be due within one year. In accordance with IAS 12, deferred taxes are reported as long-term assets and liabilities. The consolidated statement of income is prepared in accordance with the cost of sales accounting format.
The fi scal year of Turbon AG and its consolidated subsidiaries corresponds always to the calendar year.
The accounting and valuation principles applied in Turbon AG's consolidated fi nancial statements as of December 31, 2011 have been retained, except for any adjustments necessary due to new or revised standards.
Changes in accounting and valuation methods
The following overview presents new or changed standards and interpretations whose application in the current fi scal year is mandatory:
Standard/Interpretation Impact
| Divers | Improvement project (May 2010) | none |
|---|---|---|
| IAS 24 | Related Party Disclosures | none |
| IAS 32 | Classification of Right Issues | none |
| IFRS 1 | Limited Exemption from Comparative IFRS 7 - Disclosures for First-time Adopters | none |
| IFRIC 14 | Prepayments of a Minimum Funding Requirement | none |
| IFRIC 19 | Extinguishing Financial Liabilities with Equity Instruments | none |
New accounting standards
The following overview presents the standards and interpretations issued in the current fi scal year, but whose application is not yet mandatory, since they have not yet been adopted by the EU or are not yet to be applied:
Standard/Interpretation Impact
| IAS 1 | Presentation of Items of Other Comprehensive Income | additional presentation duties |
|---|---|---|
| IAS 12 | Deferred Tax: Recovery of Underlying Assets | no material impact |
| IAS 19 | Employee benefits | none |
| IAS 27 | Separate Financial Statements | none |
| IAS 28 | Investments in Associates and Joint Ventures | none |
| IAS 32 | Offsetting Financial Assets and Financial Liabilities | none |
| IFRS 1 | Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters | none |
| IFRS 7 | Financial Instruments: Disclosures | additional disclosure duties in the Notes |
| IFRS 9 | Financial Instruments | no material impact |
| IFRS 10 | Consolidated Financial Statements | none |
| IFRS 11 | Joint Arrangements | none |
| IFRS 12 | Disclosures of Interests in Other Entities | none |
| IFRS 13 | Fair Value Measurement | additional disclosure duties in the Notes |
| IFRIC 20 | Stripping Costs in the Production Phase of a Surface Mine | none |
Consolidated companies
In addition to Turbon AG, the consolidated fi nancial statements include four (previous year: three) domestic and seven foreign companies, in which Turbon AG directly or indirectly holds the majority of voting rights or exercises unifi ed management.
The newly founded company, Bright Paramters GmbH, Hattingen, is, for the fi rst time, included in the consolidated fi nancial statements as at December 31, 2011. The two idea providers employed by the company were contractually granted the option to take over a total of 49% of the shares in the company.
Whether subsidiaries are included in the consolidated fi nancial statements or not is shown in the list of shareholdings.
Interests in the limited partnership BIL Leasing Verwaltungs-GmbH & Co. Objekt Hattingen KG (sale and lease back property) are not included in the consolidated fi nancial statements of Turbon AG, because, under IAS 27 in conjunction with SIC 12, there is no parent-subsidiary relationship between Turbon AG and this limited partnership nor are the majority of opportunities and risks associated with the leasing agreement with this partnership attributable to Turbon AG. Since this leasing agreement is to be classifi ed as an operating lease according to IAS 17, the leased property is not included in the consolidated balance sheet under this accounting standard either.
The consolidated domestic subsidiary Turbon Europe GmbH satisfi es the requirements of Section 264 (3) Commercial Code (HGB) and is, therefore, exempted from the duty to publish its own annual fi nancial statements and management report for the fi scal year 2011.
Methods of consolidation
The consolidated fi nancial statements are based on the annual fi nancial statements of Turbon AG and the consolidated subsidiaries prepared according to accounting and valuation principles applied uniformly throughout the group. Carrying values based on tax regulations are not included in the consolidated fi nancial statements. The annual fi nancial statements of the affi liated companies are prepared on the closing date of the consolidated fi nancial statements.
Capital consolidation is based on the acquisition method by setting off the costs of acquisition against the pro rata share of revaluated equity at the time of acquiring the individual companies. Positive balancing items which cannot be assigned to undisclosed reserves or undisclosed expenses are shown as goodwill. Negative goodwill arising on consolidation is recognized directly as aff ecting income.
Accounts receivable and accounts payable between the consolidated companies are eliminated.
Intercompany expenses and income are eliminated.
Intermediate results in inventories arising from intercompany supplies and services and in fi xed assets are eliminated.
Accruals for deferred taxes were made on consolidation processes aff ecting net income.
Currency translation
Non-monetary items in foreign currency are valued on the balance sheet date at the rate in application on the date of the fi rst entry in the annual fi nancial statements of the companies. Monetary items are translated at the rate on the balance sheet date. Currency gains and losses resulting from the valuation of monetary balance sheet items in a diff erent currency than Euro are recognized as income or expenses in other operating income or expenses.
The assets and liabilities of all fi nancial statements of subsidiaries prepared in foreign currencies are translated into Euros in the consolidated fi nancial statements at the daily rate of the European Central Bank on the balance sheet date. The consolidated statement of income uses average rates. Diff erences resulting from the currency translation are netted against retained earnings or allocated to the same without aff ecting income.
The exchange rates of the currencies have changed as follows:
| Rate on eff ective date | Average rate | |||
|---|---|---|---|---|
| 1 EUR = | Dec. 31, 2011 | Dec. 31, 2010 | 2011 | 2010 |
| DKK | 7.4342 | 7.4532 | 7.4504 | 7.4467 |
| GBP | 0.8353 | 0.8607 | 0.8678 | 0.8558 |
| RON | 4.3233 | 4.2620 | 4.2386 | 4.2209 |
| THB | 40.9910 | 40.1768 | 42.4248 | 42.2514 |
| USD | 1.2939 | 1.3362 | 1.3917 | 1.3249 |
Accounting and valuation methods
Intangible assets, acquired for remuneration are capitalized at cost and, if subject to wear and tear, written off on a straight line basis over their useful lives of primarily 3 to 5 years. The depreciation of these assets are allocated to administrative expenses. Intangible assets with indefi nite useful life are subjected to an annual impairment test in accordance with IAS 38.108.
Movable items of property, plant and equipment are valued at amortized cost. Maintenance and repair expenses and interest on borrowed capital are recognized as current expenses.
Property, plant and equipment are depreciated on a straight line basis over the forecasted useful life.
Scheduled depreciation is based on useful lives defi ned uniformly throughout the group:
| • Buildings | 20 to 50 years |
|---|---|
| • Land improvements | 3 to 10 years |
| • Technical plant and machinery | 3 to 10 years |
| • Other equipment, fi xtures, fi ttings and equipment |
3 to 20 years |
Property held as fi nancial investment is carried at amortized cost.
The shares in participations disclosed in the fi nancial assets include the book value of BIL Leasing Verwaltungs-GmbH & Co. Objekt Hattingen KG and are allocated to the 'Available for Sale' category. There is no intention to sell.
Financial instruments are based on contracts which give rise to a fi nancial asset of one enterprise and a fi nancial liability or equity instrument of the other enterprise. They are accounted for at the time of the usual purchase or sale on the date of performance, i.e. the date on which the asset is delivered. IAS 39 subdivides fi nancial assets into the following categories:
- Financial instruments held at fair value through profi t and loss
- Held to maturity fi nancial investments
- Loans and receivables
- Available for sale fi nancial assets
Financial instruments are carried at amortized cost or fair value. Financial instruments are always disposed of by payment or – in the event of customer receivables – by sale.
Inventories are assets intended for sale: fi nished goods and goods for resale, semi fi nished goods still in the process of manufacturing or raw materials and consumables used to manufacture the products.
Inventories are valued at the lower of cost or net realizable value. Manufacturing costs correspond to the production related full costs and are determined on the basis of normal capacity. As well as directly assignable costs, they include reasonable portions of necessary material and manufacturing overheads including manufacturing related write off s.
If there are lower net realizable values on the balance sheet closing date, these are used. If the net realizable value of formerly devalued inventories has risen, the resulting write up is shown as a reduction in material expenses and therefore as cost of sales.
Trade receivables and other assets except for derivative fi nancial instruments are carried at amortized cost. Necessary valuation allowances are guided by the actual credit risk. The carrying amounts for receivables are always adjusted using a valuation account.
Cash and cash equivalents include cash in hand and cash in banks payable.
Deferred tax assets on deductible temporary diff erences and tax benefi ts on loss carry forwards are capitalized if it is likely that a tax benefi t be available for the same in the future and it is suffi ciently certain that the loss carry forward can actually be used. Deferred tax liabilities are allocated for temporary
diff erences still to be taxed in the future. The calculation is subject to the tax rates expected to apply in the individual countries at the time of realization. These are always based on the statutory rules in force or enacted on the balance sheet date. Deferred tax assets and liabilities are netted if these exist against the same tax authority. Changes in deferred tax assets and liabilities resulting from changes in tax rates are recognized in income. If profi t and loss are recognized directly in equity, this also applies to the deferred tax assets and liabilities. The assessment of whether deferred tax assets resulting from temporary diff erences or loss carry forwards can be utilized in the future is the subject of forecasts by the individual consolidated companies, utilizing their future earnings forecast. The period utilized for this forecast is 5 years following the current fi scal year.
Pension obligations are based on pension commitments to benefi ts for old age, invalidity and surviving dependants. When determining the amount of provisions, not only the pensions and expectancy rights acquired on the eff ective date are recognized, but also anticipated future increases in wages and salaries and pensions.
Expenses associated with length of service are a component of personnel expenses, interest portions of allocations are recognized in the net interest result.
Actuarial gains and losses are allocated to earnings reserves outside the statement of income. Provisions for pensions in the balance sheet correspond to the defi ned benefi t obligation on the balance sheet date.
In accordance with IAS 37 "Provisions, contingent liabilities and contingent assets", other provisions are allocated if a current (legal or de facto) obligation towards a third party arises from a past event, this obligation is likely to lead to an outfl ow of resources in future and it can be reliably estimated.
Liabilities are carried at amortized cost in the balance sheet.
Sales are entered when the service has been provided or the assets have been delivered and, therefore, the risk has passed to third parties.
Expenses on research and development are recognized as expenses (Euro 1.1 million, previous year: Euro 1.2 million).
Other operating expenses and income are allocated to the total operating result on an accrual basis.
Interest is recognized according to the eff ective interest method on an accrual basis.
Use of estimates
The preparation of the consolidated fi nancial statements according to IFRS requires estimates and assumptions that aff ect the disclosure of assets and liabilities, the indication of contingent liabilities on the balance sheet date and the disclosure of income and expenses. The actual values may diff er in individual cases from the assumptions and estimates made.
The assumptions and estimates refer primarily to the defi nition of useful lives uniformly for the whole group, the saleability of our products, the accounting and valuation of provisions and the possibility of realizing future tax benefi ts.
Capital management
The Turbon Group basically pursues the aim of earning a reasonable return on investment. The Group's capital shown in the balance sheet only serves as a passive control criterion. The sales and EBIT fi gures are used as active control indicators.
Explanations to the Consolidated Balance Sheet
(1) Non-current assets
DEVELOPMENT IN THE PERIOD FROM JANUARY 01 UNTIL DECEMBER 31, 2010
| At cost | |||||
|---|---|---|---|---|---|
| Balance Jan. 01, 2010 |
Additions | Transfers | Disposals | Diff erences from currency conversion |
|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Intangible assets | |||||
| Concessions, industrial-property and similar rights and assets as well as licenses thereto |
3,156 | 20 | 0 | -71 | 116 |
| 3,156 | 20 | 0 | -71 | 116 | |
| Tangible assets | |||||
| Land, equivalents titles and buildings (including on leased land) |
6,682 | 109 | 209 | -387 | 599 |
| Investment property | 11,662 | 0 | 0 | 0 | 0 |
| Production, plant and machinery | 14,007 | 139 | 10 | -205 | 590 |
| Other plant, factory and office equipment | 11,926 | 195 | 0 | -260 | 531 |
| Advance payments and construction in progress | 214 | 57 | -219 | 0 | 1 |
| 44,491 | 500 | 0 | -852 | 1,721 | |
| Financial assets | |||||
| Participations | 24 | 0 | 0 | 0 | 0 |
| Other loans | 229 | 0 | 0 | 0 | 0 |
| 253 | 0 | 0 | 0 | 0 | |
| 47,900 | 520 | 0 | -923 | 1,837 | |
| Accumulated depreciation | Book values | |||||||
|---|---|---|---|---|---|---|---|---|
| Balance Dec. 31, 2010 |
Balance Jan. 01, 2010 |
Deprecia tion during fi nancial year |
Transfers | Disposals | Diff erences from currency conversion |
Balance Dec. 31, 2010 |
Balance Dec. 31, 2010 |
Balance previous year |
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro |
| 3,221 | 2,142 | 0 | 0 | 0 | 59 | 2,201 | 1,020 | 1,014 |
| 3,221 | 2,142 | 0 | 0 | 0 | 59 | 2,201 | 1,020 | 1,014 |
| 7,212 | 2,118 | 211 | -8 | -387 | 128 | 2,062 | 5,150 | 4,564 |
| 11,662 | 2,957 | 258 | 0 | 0 | 0 | 3,215 | 8,447 | 8,705 |
| 14,541 | 13,000 | 414 | 8 | -185 | 392 | 13,629 | 912 | 1,007 |
| 12,392 | 10,923 | 351 | 0 | -251 | 421 | 11,444 | 948 | 1,003 |
| 53 | 0 | 0 | 0 | 0 | 0 | 0 | 53 | 214 |
| 45,860 | 28,998 | 1,234 | 0 | -823 | 941 | 30,350 | 15,510 | 15,493 |
| 24 | 0 | 0 | 0 | 0 | 0 | 0 | 24 | 24 |
| 229 | 229 | 0 | 0 | 0 | 0 | 229 | 0 | 0 |
| 253 | 229 | 0 | 0 | 0 | 0 | 229 | 24 | 24 |
| 49,334 | 31,369 | 1,234 | 0 | -823 | 1,000 | 32,780 | 16,554 | 16,531 |
DEVELOPMENT IN THE PERIOD FROM JANUARY 01 UNTIL DECEMBER 31, 2011
| At cost | |||||
|---|---|---|---|---|---|
| Balance Jan. 01, 2011 |
Additions | Transfers | Disposals | Diff erences from currency conversion |
|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Intangible assets | |||||
| Concessions, industrial-property and similar rights and assets as well as licenses thereto |
3,221 | 23 | 0 | 0 | 19 |
| 3,221 | 23 | 0 | 0 | 19 | |
| Tangible assets | |||||
| Land, equivalents titles and buildings (including on leased land) |
7,212 | 58 | -15 | -104 | -81 |
| Investment property | 11,662 | 0 | 230 | 0 | 0 |
| Production, plant and machinery | 14,541 | 186 | 69 | -1,617 | -39 |
| Other plant, factory and office equipment | 12,392 | 240 | 84 | -244 | -47 |
| Advance payments and construction in progress | 53 | 353 | -368 | 0 | -13 |
| 45,860 | 837 | 0 | -1,965 | -180 | |
| Financial assets | |||||
| Participations | 24 | 0 | 0 | 0 | 0 |
| Other loans | 229 | 0 | 0 | -79 | 0 |
| 253 | 0 | 0 | -79 | 0 | |
| 49,334 | 860 | 0 | -2,044 | -161 |
Property held as a fi nancial investment (object in Meerbusch) is carried at amortized cost. The market value of this property, as determined in a report at the time of initial consolidation on December 31, 2009, is Euro 10.7 million. In the last fi scal year, rental income from this investment was Euro 788 thousand (previous year: Euro 788 thousand). Future rental income will
be Euro 788 thousand per year until 2016. The depreciation has a remaining period of up to 27 years. The directly attributable expenses for this object in fi scal year 2011 were Euro 246 thousand (previous year: Euro 167 thousand). The increase in 2011 resulted from extraordinary maintenance expenses.
| Accumulated depreciation | Book values | |||||||
|---|---|---|---|---|---|---|---|---|
| Balance Dec. 31, 2011 |
Balance Jan. 01, 2011 |
Deprecia tion during fi nancial year |
Transfers | Disposals | Diff erences from currency conversion |
Balance Dec. 31, 2011 |
Balance Dec. 31, 2011 |
Balance previous year |
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro |
| 3,263 | 2,201 | 111 | 0 | 0 | 5 | 2,317 | 946 | 1,020 |
| 3,263 | 2,201 | 111 | 0 | 0 | 5 | 2,317 | 946 | 1,020 |
| 7,070 | 2,062 | 75 | -322 | -92 | -12 | 1,711 | 5,359 | 5,150 |
| 11,892 | 3,215 | 394 | 322 | 0 | 0 | 3,931 | 7,961 | 8,447 |
| 13,140 | 13,629 | 303 | 0 | -1,574 | -22 | 12,336 | 804 | 912 |
| 12,425 | 11,444 | 327 | 0 | -244 | -33 | 11,494 | 931 | 948 |
| 25 | 0 | 0 | 0 | 0 | 0 | 0 | 25 | 53 |
| 44,552 | 30,350 | 1,099 | 0 | -1,910 | -67 | 29,472 | 15,080 | 15,510 |
| 24 | 0 | 0 | 0 | 0 | 0 | 0 | 24 | 24 |
| 150 | 229 | 0 | 0 | -79 | 0 | 150 | 0 | 0 |
| 174 | 229 | 0 | 0 | -79 | 0 | 150 | 24 | 24 |
| 47,989 | 32,780 | 1,210 | 0 | -1,989 | -62 | 31,939 | 16,050 | 16,554 |
Intangible assets include a trademark right with indefi nite useful life at a carrying value of Euro 460 thousand. Although trademark rights are awarded for a defi ned period of time, they are often extended at a negligible cost. The impairment test carried out by comparing the utility value of future license fees with the book value with a discount rate of 9% showed no need for write-downs.
| Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
|
|---|---|---|
| Inventories | ||
| Raw materials and supplies |
7,433 | 6,460 |
| Work in progress | 50 | 40 |
| Finished goods and trading stocks |
10,429 | 8,769 |
| Advance payments | 25 | 76 |
| 17,937 | 15,345 |
Write-downs on inventories in the amount of Euro 66 thousand (previous year: Euro 224 thousand) were made in the fi scal year ended.
(3) TRADE RECEIVABLES
Trade receivables shown for Turbon Europe GmbH, the German subsidiary, in the amount of Euro 3,353 thousand (previous year: Euro 3,372 thousand) have been fi nanced under a factoring agreement.
(4) OTHER ASSETS
Composition of other assets:
| Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
|---|---|
| 632 | 666 |
| 1,849 207 |
2,016 83 |
| 378 | 700 |
| 65 | 186 |
| 3,131 | 3,651 |
The above given position "Deferred charges and prepaid expenses" include the cost for the renovation of parts of the Meerbusch real property of 2009 in connection with the
(2) INVENTORIES long-term renewal of the tenancy (Euro 0.4 million, retransfer over the term of the new tenancy agreement) as well as for a special rental payment (Euro 1.0 million) for BIL Hattingen KG in the context of the prolonged fi nancing for this object (which will be settled over the remaining term of the tenancy agreement to June 2019). Of the other assets, an amount of Euro 1,291 thousand (previous year: Euro 1,811 thousand) has a term to maturity of more than 12 months.
(5) INCOME TAX CLAIMS
Income tax claims result mainly from over-payments to the calculated expenses as well as deducted capital return taxes and corporation tax credits, which will be reimbursed over a period of several years. Of the income tax claims, an amount of Euro 182 thousand (previous year: Euro 214 thousand) has a term to maturity of more than 12 months.
(6) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are short-term, freely disposable cash in banks and cash in hand.
(7) SHAREHOLDERS' EQUITY
The share capital of the Turbon AG is Euro 10,333 thousand (previous year: Euro 10,333 thousand) and is divided up into 3,294,903 (previous year: 3,642,000) no par registered shares.
Turbon AG held 347,097 own shares worth Euro 2,125 thousand separate from equity as at December 31, 2010. Such shares were redeemed and set off against the earnings reserves in April 2011 after approval by the Supervisory Board.
The capital reserve consists almost exclusively of the premium on the capital increase carried out in 1991.
Individual elements in group equity and their development during the years of 2010 and 2011 arise from the Consolidated Statement of Changes in Shareholders' Equity on pages 24 to 25.
(8) PENSION RESERVES
The direct and indirect obligations include those arising from current pensions and expectancy rights for pensions and retirement benefi ts payable in the future.
The company pension scheme for the group is based on performance. The relevant expenses are – unless directly netted with equity – included in the costs of the functional areas. The compound interest on pension rights acquired in previous years and income from investments are shown in net interest income. Unrealized actuarial results are netted against equity in the year under review.
The pension obligations for performance related old age pension schemes are charged according to the project unit credit method as per IAS 19 (Employee benefi ts). In Germany, the calculation is based on the 2005 G Heubeck tables. The pension benefi ts to be expected are spread over the entire length of service of employees.
The valuation is based on the following assumptions:
| Dec. 31, 2011 | Dec. 31, 2010 | |
|---|---|---|
| Discount rate | 5.17% | 5.40% |
| Projected wage / salary growth |
0.00% | 0.00% |
| Projected pension growth |
1.00 - 3.00% | 1.00 - 3.00% |
| Fluctuation | 0.00% | 0.00% |
| Projected return on plan assets |
4.10 - 4.70% | 4.70% |
| Pension age | 60 - 65 | 60 - 65 |
These parameters apply also in the following year for the calculation of costs of the pension rights acquired in the year under review, the compound interest on the pension rights acquired in previous years and the anticipated income from investments. The expected return on plan assets is based on the average interest rate on plan assets in the reported securities.
Wage/salary trends and fl uctuation were set at 0.00% because the only persons entitled to a pension are nonworking persons with a future entitlement to pension benefi ts and current pensioners.
The pension values from the projected unit credit method and the market values of fund investments have changed as follows in the fi scal years 2011 and 2010:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Defi ned benefi t obligation end of prior year |
11,392 | 10,691 |
| Changes of Thai claims | -104 | 0 |
| Current service cost | 0 | 19 |
| Interest cost | 652 | 637 |
| Actuarial gains (-) / losses (+) | 659 | 319 |
| Benefits paid | -574 | -661 |
| Changes in currency | 277 | 387 |
| Defi ned benefi t obligation end of current year |
12,302 | 11,392 |
Plan assets changed as follows in the fi scal years 2011 and 2010:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Plan assets end of prior year |
8,535 | 7,781 |
| Return on plan assets | 399 | 408 |
| Employer contribution on plan assets |
132 | 198 |
| Actuarial gains (+) / losses (-) | 1,073 | 347 |
| Benefits paid by plan assets | -480 | -550 |
| Changes in currency | 237 | 351 |
| Plan assets end of current year |
9,896 | 8,535 |
To cover pension obligations due to employees of the British subsidiary, plan assets mainly comprise fi xed interest bearing securities.
Total expenses on pension commitments are comprised as follows:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Cost of obligations acquired during the year | 0 | 19 |
| Interest expenses on present value of pension obligations | 652 | 637 |
| Expected return on plan assets | -399 | -408 |
| Expenses for commitments | 253 | 248 |
| Actuarial results off set against shareholders´ equity | -414 | -28 |
| Total expenses for commitments | -161 | 220 |
The equity recognized in the reserve for actuarial gains and losses for the year under review is Euro 1,005 thousand (previous year: Euro 591 thousand).
The pension provision is calculated as follows:
| Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
Dec. 31, 2009 1,000 Euro |
Dec. 31, 2008 1,000 Euro |
Dec. 31, 2007 1,000 Euro |
|
|---|---|---|---|---|---|
| Present value of unfunded obligations | 2,260 | 2,224 | 2,208 | 1,995 | 2,062 |
| Present value of funded obligations | 10,042 | 9,168 | 8,483 | 7,366 | 9,460 |
| Present value of pension obligations | 12,302 | 11,392 | 10,691 | 9,360 | 11,521 |
| Fair value of plan assets | -9,896 | -8,535 | -7,781 | -6,927 | -9,002 |
| Present value of pension obligations less plan assets |
2,406 | 2,857 | 2,910 | 2,433 | 2,519 |
| Unrecognised actuarial results | 0 | 0 | 0 | 0 | 0 |
| Provision in accordance with IAS 19 | 2,406 | 2,857 | 2,910 | 2,433 | 2,519 |
| Experience adjustments | |||||
| Pension obligations | -94 | 18 | -196 | 71 | -163 |
| Plan assets | 8 | 0 | 0 | 0 | 0 |
Pension plans and obligations are valued at regular intervals. Actuarial investigations are performed each year for all signifi cant entities.
(9) PROVISIONS
Provisions for taxes include Euro 1,535 thousand for long-term deferred tax assets (previous year: Euro 1,317 thousand).
Changes in provisions were as follows:
| Market-orientated commitments 1,000 Euro |
Human resources commitments 1,000 Euro |
Other commitments 1,000 Euro |
Total 1,000 Euro |
|
|---|---|---|---|---|
| As of Jan. 01, 2010 | 3,143 | 1,206 | 1,346 | 5,695 |
| Currency conversion | 111 | 32 | 0 | 143 |
| Withdrawal | -2,059 | -873 | -746 | -3,678 |
| Release | -320 | -14 | -141 | -475 |
| Allocation | 2,830 | 1,295 | 323 | 4,448 |
| Interest added back | 0 | 0 | 0 | 0 |
| As of Dec. 31, 2010 | 3,705 | 1,646 | 782 | 6,133 |
| thereof long-term | 0 | 0 | 0 | 0 |
| As of Jan. 01, 2011 | 3,705 | 1,646 | 782 | 6,133 |
| Currency conversion | 12 | 32 | 3 | 47 |
| Withdrawal | -3,046 | -702 | -407 | -4,155 |
| Release | -5 | -99 | -69 | -173 |
| Allocation | 1,290 | 1,557 | 514 | 3,361 |
| Interest added back | 0 | 6 | 24 | 30 |
| As of Dec. 31, 2011 thereof long-term |
1,956 0 |
2,440 249 |
847 227 |
5,243 476 |
(10) OTHER LIABILITIES
Other liabilities include liabilities for other taxes of Euro 174 thousand (previous year: Euro 209 thousand) and liabilities for social security of Euro 252 thousand (previous year: Euro 235 thousand). Liabilities for trade income tax of Euro 465 thousand (previous year: Euro 433 thousand) are also included. The remaining increase was primarily due to liabilities for bonus payments to customers. Other liabilities have a term to maturity of less than 12 months.
REPORTING OF FINANCIAL INSTRUMENTS
A distinction is made between primary and derivative fi nancial instruments.
PRIMARY FINANCIAL INSTRUMENTS
The estimated market values of primary fi nancial instruments are not necessarily the values the company would gain in the event of a real transaction at current market rates.
Regular sales and purchases are recognized on the settlement date.
In the assets column, the fi nancial assets, receivables, other assets (excluding deferred charges) and liquid assets are classifi ed as primary fi nancial instruments. Available for sale fi nancial assets are carried at their fair value, reasonably estimated, and all other fi nancial assets are carried at amortized cost.
Primary fi nancial instruments in the liabilities column mainly include liabilities valued at amortized cost.
The fi xed interest-bearing fi nancial liabilities are carried at their repayment rates. The carrying values of liabilities with variable interest rates correspond approximately to their market values, because these interest rates are based on variable interest rates that are based on market interest rates.
The stock of primary fi nancial instruments is shown in the balance sheet, the amount of the fi nancial assets corresponds to the maximum credit risk. Risks of fi nancial assets are covered by valuation allowances where such risks are discernible.
The fair value is taken from stock exchange prices or is determined using recognized valuation methods.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative fi nancial instruments include forward exchange transactions used to hedge against specifi c business transactions. The market values are derived from valuation models whose main input factors are attributable to observable market data. The nominal volume corresponds to the total of all purchase and sale sums underlying the transactions. The forward exchange transactions concluded by Turbon AG have a maximum term to maturity of up to 48 months.
| Book values in valuation categories 2011 |
Valuation categories according IAS 39 |
Book value as of Dec. 31, 2011 |
Balance sheet valuation according to IAS 39 | Fair value as of Dec. 31, 2011 |
||
|---|---|---|---|---|---|---|
| Amortized costs |
Fair value recognized in equity |
Fair value recognized in income |
||||
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | ||
| Assets | ||||||
| Financial assets | AFS | 24 | 24 | 0 | 0 | 24 |
| Cash and cash equivalents | LAR | 8,911 | 8,911 | 0 | 0 | 8,911 |
| Trade receivables | LAR | 11,282 | 11,282 | 0 | 0 | 11,282 |
| Other receivables | LAR | 65 | 65 | 0 | 0 | 65 |
| Derivative financial receivables | n/a | 207 | 0 | 207 | 0 | 207 |
| Net assets from settled foreign exchange contracts |
n/a | 378 | 0 | 378 | 0 | 378 |
| Liabilities | ||||||
| Bond bearer | HTM | -9,957 | -9,957 | 0 | 0 | -9,957 |
| Trade payables | FLAC | -13,176 | -13,176 | 0 | 0 | -13,176 |
| Other liabilities | FLAC | -1,519 | -1,519 | 0 | 0 | -1,519 |
| Derivative financial liabilities | n/a | -223 | 0 | -223 | 0 | -223 |
| Thereof accumulated according to valuation categories IAS 39 |
||||||
| Available for Sale (AFS) | 24 | 24 | 0 | 0 | 24 | |
| Loans and Receivables (LAR) | 20,258 | 20,258 | 0 | 0 | 20,258 | |
| Held to Maturity Investments (HTM) |
-9,957 | -9,957 | 0 | 0 | -9,957 | |
| Financial Liabilities Measured at Amortised Cost (FLAC) |
-14,695 | -14,695 | 0 | 0 | -14,695 | |
| Not allocated | 362 | 0 | 362 | 0 | 362 | |
Hedge Accounting in line with IAS 39 is used for currency derivatives to secure future receivables and liabilities denominated in foreign currencies with the objective of minimizing volatilities in the statement of income.
Fair value hedges serve to hedge against the risk of variations in market value. There was no fair value hedge accounting in the Turbon Group as at December 31, 2011. The same applies to net investment hedge accounting to secure the net assets of foreign investments.
Cash fl ow hedges serve to hedge against the risk of variable cash fl ows. The company concludes foreign exchange transactions to limit the currency risk. Since the hedging relationships are classifi ed as highly eff ective, cash fl ow hedge accounting is applied to these transactions.
The fi nancial assets and liabilities can be subdivided into valuation categories with the following carrying values:
| Book values in valuation categories 2010 |
Valuation categories according IAS 39 |
Book value as of Dec. 31, 2010 |
Balance sheet valuation according to IAS 39 | Fair value as of Dec. 31, 2010 |
||
|---|---|---|---|---|---|---|
| Amortized costs |
Fair value recognized in equity |
Fair value recognized in income |
||||
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | ||
| Assets | ||||||
| Financial assets | AFS | 24 | 24 | 0 | 0 | 24 |
| Cash and cash equivalents | LAR | 10,320 | 10,320 | 0 | 0 | 10,320 |
| Trade receivables | LAR | 9,929 | 9,929 | 0 | 0 | 9,929 |
| Other receivables | LAR | 186 | 186 | 0 | 0 | 186 |
| Derivative financial receivables | n/a | 83 | 0 | 83 | 0 | 83 |
| Net assets from settled foreign exchange contracts |
n/a | 700 | 0 | 700 | 0 | 700 |
| Liabilities | ||||||
| Bond bearer | HTM | -9,929 | -9,929 | 0 | 0 | -9,929 |
| Trade payables | FLAC | -11,714 | -11,714 | 0 | 0 | -11,714 |
| Other liabilities | FLAC | -1,228 | -1,228 | 0 | 0 | -1,228 |
| Derivative financial liabilities | n/a | -84 | 0 | -84 | 0 | -84 |
| Thereof accumulated according to valuation categories IAS 39 |
||||||
| Available for Sale (AFS) | 24 | 24 | 0 | 0 | 24 | |
| Loans and Receivables (LAR) | 20,435 | 20,435 | 0 | 0 | 20,435 | |
| Held to Maturity Investments (HTM) |
-9,929 | -9,929 | 0 | 0 | -9,929 | |
| Financial Liabilities Measured at Amortised Cost (FLAC) |
-12,942 | -12,942 | 0 | 0 | -12,942 | |
| Not allocated | 699 | 0 | 699 | 0 | 699 | |
Derivative fi nancial receivables and liabilities as well as net assets from settled foreign exchange contracts are classifi ed to level 2 1 according to IFRS 7.27.
Financial instruments are recognized in the statement of income with the following net amounts (IFRS 7):
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Net result on fi nancial instruments | -1,053 | -678 |
| Receivables and other assets | -276 | -291 |
| Held to maturity | -777 | -781 |
| Available fo sale | 0 | 394 |
The net result on receivables and other assets include mainly the interest result and write-downs on trade receivables. The net result of fi nancial investments held to maturity result only from the costs related to the fi xed-interest bond bearer. The net result on fi nancial instruments available for sale in the previous year includes an option premium in connection with the real property in Harlow, England.
RISKS FROM FINANCIAL INSTRUMENTS
Because it operates internationally, the Turbon Group is exposed to credit risks, liquidity risks and market risks in the course of its normal business operations. Market risks result in particular from market prices and currency rates. These risks are limited by systematic risk management. The group companies are also subject to strict risk management. Internal directives prescribe areas of action, responsibilities and controls with binding eff ect in close consultation with the Executive Board.
In some cases, derivative fi nancial instruments are used to hedge currency risks from operations and risks from fi nancing operations.
Detailed outlines of risks to which the group is exposed and the aims and processes of risk management are contained in the section "Risk Report" in the Management Report.
CREDIT RISKS
We are exposed to credit risks in our sales business, because customers may not meet their payment obligations. We limit this risk by undertaking regular credit rating analyses of our customer portfolio on the basis of a receivables management directive. This means that all customer receivables over Euro 20 thousand must be secured as far as possible by credit insurance or that other securities must be available. A greater part of the receivables are secured by credit insurance. The requirements for limit approval on the part of credit insurers have become much more stringent. It may be that limits are no longer suffi cient for the full hedging of a customer relationship. In this case, strict historical empirical values with respect to the relevant customers are used to minimize the default risk.
Impairment provisions are formed for overdue receivables by way of a specifi c valuation allowance. The maximum nonpayment risk is limited to the carrying amount.
A stock exchange or market price for a similar fi nancial instrument exists and the data are based on observable market.
Valuation allowances for the receivables disclosed in the following balance sheet items changed as follows:
Overdue, non adjusted receivables in the following amount existed on the balance sheet date:
| Receivables, past due and not impaired |
Book value Dec. 31, 2011 |
thereof neit her impaired nor past due |
thereof not impaired and past due in the following timeframes |
|||
|---|---|---|---|---|---|---|
| as of balance sheet date |
< 30 days | between 30 and 60 days |
> 60 days | |||
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | ||
| Trade receivables | 11,282 | 10,048 | 1,189 | 45 | 0 | |
| Other assets | 2,033 | 1,356 | 478 | 62 | 137 | |
| Receivables, past due and not impaired |
Book value Dec. 31, 2010 |
thereof neit her impaired nor past due |
thereof not impaired and past due in the following timeframes |
|||
| as of balance sheet date |
< 30 days | between 30 and 60 days |
> 60 days | |||
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | ||
| Trade receivables | 9,929 | 8,646 | 1,140 | 87 | 56 | |
| Other assets | 2,172 | 1,235 | 51 | 60 | 826 |
Of the aforementioned, non-adjusted receivables, the greater part has been settled at the time of preparation of these fi nancial statements.
The Turbon Group is exposed to a credit risk on derivative fi nancial instruments, which is caused by non-performance of contractual agreements by the contracting partners. The company limits this risk by concluding transactions only with credit institutions with a fi rst-class credit rating.
LIQUIDITY RISKS
There is a liquidity risk if the liquidity reserves are not suffi cient to meet our fi nancial obligations on time. However, daily cash reporting, an 8-week cash plan updated on a weekly basis as well as a mid-term liquidity plan ensures that such a risk is minimized. Suffi cient credit lines are available with commercial banks, but unutilized at the present time due to suffi cient liquidity. Additional liquidity is available through an existing factoring agreement.
Financial liabilities in the next few months and years will probably result in the following non-discounted payments:
The issue of the bond bearer, which is due for repayment in July 2013 (original term seven years), is linked to various conditions. In addition to the general conditions, there are fi nancial requirements that certain relations as regards the interest and debt ratio must be maintained. These relations were complied within the fi scal year.
MARKET RISKS
The Turbon Group is exposed to market risks primarily because of changes in exchange rates. Currency risks arise mainly with payments and trade receivables and payables.
The Turbon Group also has income and expenses in foreign currencies. At the group level, net items are formed for the most important currencies in the context of centralized currency management and, if necessary, hedged via forward exchange transactions with external contracting counterparties (credit institutions). Since the relevant hedging relationship is classifi ed as highly eff ective, cash fl ow hedge accounting is applied in accordance with the requirements of IAS 39 "Financial Instruments: Recognition and Measurement". The relevant fair values resulting from valuation at market prices are shown in the following table and recognized directly in other comprehensive income, taking account of deferred taxes. The secured cash fl ows will arrive in the next 24 months.
| Dec. 31, 2010 | ||||||
|---|---|---|---|---|---|---|
| Nominal value 1,000 Euro |
Positive Fair value 1,000 Euro |
Negative Fair value 1,000 Euro |
Nominal value 1,000 Euro |
Positive Fair value 1,000 Euro |
Negative Fair value 1,000 Euro |
|
| Foreign exchange contracts | 13,497 | 207 | -223 | 9,607 | 83 | -84 |
| thereoff cash flow hedges | 13,497 | 207 | -223 | 9,607 | 83 | -84 |
Fair values are stated in the balance sheet in other assets or other liabilities. The market values are derived from valuation models whose main input factors are attributable to observeable market data. In 2011, the other comprehensive income changed by changes in the fair market value of derivatives, which are designated as cash fl ow hedges, by Euro -15 thousand to Euro -16 thousand (previous year: Euro -1 thousand). In the year under review, Euro 227 thousand was realised from the market value changes of derivatives designated as cash fl ow hedges, which were initially recognized as profi tneutral in the other comprehensive income. Of this, Euro 99 thousand accounts as sales and Euro 128 thousand as material purchase designated hedging relationships. In the previous
year derivatives which are designated as cash fl ow hedges have been closed completely by transactions with identical nominal and temporal terms. As per December 31, 2011 this item amounted to Euro 378 thousand before taxes in equity.
IFRS 7 requires sensitivity analyses for the presentation of market risks, which show the eff ects of hypothetical changes of relevant risk variables on net income. Currency risks as defi ned by IFRS 7 do not arise on assets and liabilities in Euros. The following table shows the eff ect on the equity of the Turbon Group in each case of a 10% change in the currency risk position:
| 2011 | USD 1,000 Euro |
GBP 1,000 Euro |
Total 1,000 Euro |
|---|---|---|---|
| Scenario 1: Revaluation to € by 10% | 2 | 648 | 650 |
| Scenario 2: Devaluation to € by 10% | -1 | -531 | -532 |
| 2010 | USD | GBP | Total |
| 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Scenario 1: Revaluation to € by 10% | -18 | 489 | 471 |
| Scenario 2: Devaluation to € by 10% | 14 | -400 | -386 |
Explanations to the Consolidated Statement of Income
Segment reporting is based on the internal organizational and reporting structure, which is distinguished by regional markets in which the Turbon Group operates.
Segment Report by Regions
| for the period from January 01 until December 31, 2011 |
Europe | USA | Asia | Regions | Consoli dation |
Group |
|---|---|---|---|---|---|---|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Sales with third parties | 63,495 | 16,003 | 1,208 | 80,706 | 0 | 80,706 |
| Sales with group companies EBIT |
31,194 3,816 |
2,613 -867 |
31,084 3,470 |
64,891 6,419 |
-64,891 71 |
0 6,490 |
| Assets | 115,828 | 37,683 | 28,152 | 181,663 | -122,478 | 59,185 |
| Liabilities | 52,362 | 18,750 | 5,529 | 76,641 | -41,780 | 34,861 |
| Financial income | 246 | 0 | 44 | 290 | -235 | 55 |
| Financial expenses | 1,258 | 6 | 0 | 1,264 | -235 | 1,029 |
| Capital expenditure | 366 | 336 | 158 | 860 | 0 | 860 |
| Depreciation | 670 | 185 | 355 | 1,210 | 0 | 1,210 |
| Average workforce during the period * |
799 | 56 | 188 | 1,043 | 0 | 1,043 |
* Additionally 569 temporary staff in Thailand
| for the period from January 01 until December 31, 2010 |
Europe | USA | Asia | Regions | Consoli dation |
Group |
|---|---|---|---|---|---|---|
| 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | 1,000 Euro | |
| Sales with third parties | 59,392 | 15,294 | 1,031 | 75,717 | 0 | 75,717 |
| Sales with group companies | 29,039 | 2,011 | 27,435 | 58,485 | -58,485 | 0 |
| EBIT | 5,059 | -2,233 | 1,949 | 4,775 | 73 | 4,848 |
| Assets | 115,415 | 33,911 | 24,543 | 173,869 | -115,710 | 58,159 |
| Liabilities | 48,623 | 17,390 | 4,760 | 70,773 | -36,395 | 34,378 |
| Financial income | 229 | 10 | 53 | 292 | -265 | 27 |
| Financial expenses | 1,269 | 11 | 0 | 1,280 | -265 | 1,015 |
| Capital expenditure | 326 | 50 | 144 | 520 | 0 | 520 |
| Depreciation | 716 | 121 | 397 | 1,234 | 0 | 1,234 |
| Average workforce during the period * |
750 | 74 | 181 | 1,005 | 0 | 1,005 |
* Additionally 532 temporary staff in Thailand
The accounting policies used are the same for all segments.
Intercompany sales took place unchanged at the usual armslength rates. The presentation shows balances for the region which have been added together and were not consolidated.
(11) SALES
Sales of Euro 72.2 million (previous year: Euro 66.8 million) were made with laser cartridges. Sales of other products totalled Euro 8.5 million (Euro 8.9 million in the previous year).
(12) COST OF SALES
Cost of sales include the following material expenses:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Cost of raw materials, supplies and trading stock |
-35,877 | -34,615 |
| Cost of purchased services | -17 | -29 |
| -35,894 | -34,644 |
(13) SELLING EXPENSES
Selling expenses decreased by Euro 0.1 million to Euro 5.6 million, mainly due to lower personnel expenses.
(14) ADMINISTRATIVE EXPENSES
As compared to 2010, administrative expenses were unchanged Euro 5.9 million.
(15) OTHER OPERATING INCOME
Other operating income includes in particular the balance after netting currency gains and losses (Euro 250 thousand, previous year: Euro 851 thousand). In previous year other book gains arose from the sale of the property in Harlow, Great Britain (Euro 394 thousand) and various earnings from the release of accruals (Euro 475 thousand).
(16) OTHER OPERATING EXPENSES
In addition to expenses not assigned to the other functional areas, expenses for allocation of accruals as well as write-off of trade receivables are included in the other operating expenses. In the previous year, mainly an accrual of Euro 1,027 thousand was associated with the closure of the facility at Cinnaminson, NJ/USA was included.
(17) TAXES ON INCOME
Recognized as income tax are the income taxes in the individual countries and the deferred tax balances. Expenses on income tax including deferred taxes are comprised as follows:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Current taxes | -1,356 | -1,526 |
| Deferred taxes | -755 | -170 |
| -2,111 | -1,696 |
Allocation of deferred tax balances:
| Deferred tax assets |
Deferred tax liabilties |
|||
|---|---|---|---|---|
| Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
|
| Long term assets |
149 | 169 | 1,065 | 1,099 |
| Invento ries Other short |
299 | 245 | 0 | 0 |
| term assets Pension |
70 | 0 | 185 | 218 |
| reserves Accounts recei vable / accounts payable / other accruals |
76 47 |
102 0 |
0 285 |
0 0 |
| Tax losses carried forward |
858 | 1,307 | 0 | 0 |
| Balance pursuant to conso lidated balance sheet |
1,499 | 1,823 | 1,535 | 1,317 |
Deferred taxes result from temporary diff erences in values between the tax base of assets and liabilities and their carrying amounts under IFRS. Deferred tax receivables and deferred tax liabilities are netted if these exist against the same tax authority and if they meet the obligations of IAS 12.71.
On December 31, 2011, tax losses carried forward were present at the American subsidiary, but also to a lesser extent at the English subsidiary. Deferred tax assets were recognized for losses carried forward where it was suffi ciently probable that these losses carried forward could be used and as long as it can occur before expiration of tax losses carried forward. Normally used as the period for this forecast are the 5 years following the fi scal year.
The following losses carried forward are related to local income taxes:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Tax assets from losses carried forward in the group as of Jan 01 |
26,468 | 18,851 |
| Additions / disposals | -242 | 6,249 |
| Currency related changes |
785 | 1,368 |
| Tax assets from losses carried forward in the group as of Dec 31 |
27,011 | 26,468 |
| Losses carried forward not recognized as of Jan 01 |
-20,566 | -9,431 |
| Losses of current year not useable |
-1,916 | -6,198 |
| Adjustment of losses of previous years not useable |
439 | -4,205 |
| Currency related changes |
-638 | -732 |
| Losses carried forward not recognized as of Dec 31 |
-22,681 | -20,566 |
The reconciliation of computed with actual tax expenses is shown in the following table:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Expected tax on income | -1,819 | -1,246 |
| Losses without deferred taxes |
-325 | -2,218 |
| Gains without deferred taxes |
128 | 138 |
| Deviations from taxable base |
250 | 1,560 |
| Expenses from reduction of tax assets |
-406 | -337 |
| Gains from capitalized tax assets |
47 | 325 |
| Other deviations | 14 | 82 |
| -2 ,111 | -1,696 |
The computed tax result rate is calculated on the basis of the weighted average of the domestic tax rate of 33.0% (previous year: 32.3%). The average foreign tax rate is 28.0% (previous year: 32.1%).
As well as tax expenses and tax income recognized in the statement of income, an amount of Euro 181 thousand (previous year: Euro -87 thousand) was recognized in equity. These result from the existing foreign exchange contracts as well as taxes on actuarial gains and losses at the reporting date.
(18) EARNINGS PER SHARE
Earnings per share of Euro 1.03 (previous year: Euro 0.62) were calculated by dividing consolidated net income (Euro 3,405 thousand; previous year: Euro 2,163 thousand) by the average number of shares issued (3,294,903; previous year: 3,472,557).
Options from stock option plans no longer exist. Therefore diluted earnings per share and undiluted earnings per share are the same both, last year and in the current fi scal year.
(19) OTHER DETAILS OF THE CONSOLIDATED STATEMENT OF INCOME
Personnel expenses are divided up as follows:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Wages and salaries | 12,881 | 13,009 |
| Social security, pension and other benefit costs |
2,548 | 2,864 |
| thereof for pensions | 241 | 269 |
| 15,429 | 15,873 |
Employed by the group on average for the year:
| 2011 | Previous Year | |
|---|---|---|
| Europe | 799 | 750 |
| USA | 56 | 74 |
| Asia | 188 | 181 |
| 1,043 | 1,005 | |
| Additionally tempo rary staff in Thailand |
569 | 532 |
Other information
CONTINGENT LIABILITIES
There were no contingent liabilities on either of the balance sheet dates.
OTHER FINANCIAL OBLIGATIONS
Future fi nancial obligations from rent and lease payments have the following maturities until expiry of the minimum term of the contracts:
| Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
|
|---|---|---|
| Due within one year | 1,718 | 1,970 |
| Due after more than one year and up to five years |
6,101 | 6,246 |
| Due after more than five years |
3,723 | 4,726 |
| 11,542 | 12,942 | |
Included in the Euro 11,542 thousand are the existing leases on the property in Hattingen (headquarters of Turbon AG and Turbon Europe GmbH) totalling Euro 7,067 thousand.
In 2011 rental and lease payments of Euro 2,028 thousand (previous year: Euro 1,852 thousand) are recognized as expenses.
The future fi nancial obligations from payments into the pension fund of Turbon Nordic (Pensions) Ltd. amount to 168 thousand British Pounds within the next two years and will be evaluated every three years. The next evaluation will be in 2013.
CASH FLOW STATEMENT
The cash fl ow statement is presented on page 26.
Cash funds comprise cash in banks and cash on hand.
RELATED PARTY DISCLOSURES
The Turbon Group had the following relationships with related parties from delivery and supply relationships concluded in the past:
| Related companies | Related persons | ||||
|---|---|---|---|---|---|
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
2011 1,000 Euro |
Previous Year 1,000 Euro |
||
| Deliveries and services provided | 1,281 | 988 | 0 | 0 | |
| Deliveries and services received | -162 | -151 | -71 | -71 | |
| Related companies | Related persons | ||||
| Dec. 31, 2011 | |||||
| 1,000 Euro | Dec. 31, 2010 1,000 Euro |
Dec. 31, 2011 1,000 Euro |
Dec. 31, 2010 1,000 Euro |
||
| Trade receivables | 137 | 129 | 0 | 0 | |
| Trade payables | -46 | -51 | -11 | 0 |
Business relationships with related parties are eff ected under the same conditions as with third parties (arm's length transaction).
TOTAL COMPENSATION OF THE SUPERVISORY BOARD AND EXECUTIVE BOARD
The total compensation paid to the Executive Board of Euro 511 thousand in the year under review (previous year: Euro 501 thousand) was split between the individual Executive Board members as follows:
| Aldo C. DeLuca | Michael Pages | |||
|---|---|---|---|---|
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
2011 1,000 Euro |
Previous Year 1,000 Euro |
|
| Compensation | ||||
| • Fixed | 226 | 236 | 186 | 184 |
| • Variable | 66 | 54 | 33 | 27 |
| 292 | 290 | 219 | 211 |
The change in the basic salary of Mr. DeLuca depends on the exchange rate as the basic salary is paid in US Dollars.
Current payments to a former Executive Board Member who retired on December 31, 2000 amounted to Euro 86 thousand in 2011 (previous year: Euro 85 thousand). Pension provisions for former Executive Board members were Euro 2,087 thousand (previous year: Euro 1,985 thousand).
Compensation of the Supervisory Board is governed by Article 18 of the Articles of Association. The members of the Supervisory Board receive annual compensation of Euro 6,136 in addition to reimbursement of expenses,
including value added tax. The chairman receives twice, and the deputy chairman one and a half times this amount. The company takes out adequate business liability insurance (directors and offi cers insurance) for the members of the Supervisory Board. Relevant insurance premiums are paid by the company.
Total compensation of the Supervisory Board of Euro 116 thousand (previous year: Euro 116 thousand) is divided as follows in the year under review:
| Fixed compensation | Consulting services | Total | ||||
|---|---|---|---|---|---|---|
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
2011 1,000 Euro |
Previous Year 1,000 Euro |
2011 1,000 Euro |
Previous Year 1,000 Euro |
|
| Hans-Joachim Scholten | 12 | 12 | 29 | 29 | 41 | 41 |
| Dr. Paul-Michael Günther | 9 | 9 | 42 | 42 | 51 | 51 |
| Thomas Hertrich | 6 | 6 | 0 | 0 | 6 | 6 |
| Simon McCouaig | 6 | 6 | 0 | 0 | 6 | 6 |
| Girolamo Cacciatore | 6 | 6 | 0 | 0 | 6 | 6 |
| Dietmar Kirsch | 6 | 6 | 0 | 0 | 6 | 6 |
DECLARATION ON THE CORPORATE GOVERNANCE CODE
The declaration regarding the German Corporate Governance Code required according to Section 161 AktG was issued and made available to the shareholders.
AUDITORS' FEES
The following fees were recorded as an expense for the services provided by the auditor of the annual and consolidated fi nancial statements, BDO AG Wirtschaftsprüfungsgesellschaft:
| 2011 1,000 Euro |
Previous Year 1,000 Euro |
|
|---|---|---|
| Audits | 119 | 118 |
| Other services for certi fication or estimation |
0 | 4 |
| 119 | 122 | |
Responsibility statement
To the best of our knowledge, we declare that the consolidated fi nancial statements prepared in accordance with enacted accounting principles give a true and fair view of the net worth, fi nancial position and results of operations of the group, and the combined management and group management report includes a fair review of the group's development and performance and of its position, together with a description of the principal opportunities and risks associated with the expected development of the group in the remaining months of the fi nancial year.
Hattingen, March 30, 2012 The Executive Board Aldo C. DeLuca Michael Pages
MEMBERS OF THE SUPERVISORY BOARD AND EXECUTIVE BOARD
SUPERVISORY BOARD
As far as members of the Supervisory Board hold, in addition to their control functions at Turbon AG, mandates in supervisory boards required by statute and comparable control instances of commercial enterprises this is listed below (eff ective date: December 31, 2011):
Hans-Joachim Scholten
Dipl.-Kaufmann, Alzenau – Chairman –
Dr. Paul-Michael Günther
Lawyer, Public Accountant and Tax Consultant, Wuppertal – Deputy Chairman –
DRICON Managing Consultants AG, Frankfurt am Main – Supervisory Board Chairman –
Thomas Hertrich
Tax Director, Europe, NCR GmbH, Aystetten
Simon J. McCouaig
Vice President Europe, Consumables Solutions Europe, NCR Corp., Solihull/GB
Girolamo Cacciatore
Works Council Chairman, Remscheid – Employee Representative –
Dietmar Kirsch
Technical Employee, Langenfeld – Employee Representative –
EXECUTIVE BOARD
Aldo C. DeLuca
Ivyland (PA)/USA – Executive Board Spokesman –
Michael Pages
Moers
Shareholdings of Turbon AG
As of December 31, 2011
| Share of capital (%) |
held thru no. |
||
|---|---|---|---|
| Affi liated companies included in the Consolidated Financial Statements | |||
| 1 | Turbon AG, Hattingen | ||
| 2 | Turbon Europe GmbH, Hattingen | 100.00 | 1 |
| 3 | Turbon International, Inc., York (PA)/USA | 100.00 | 1 |
| 4 | Turbon USA Inc., Pennsauken (NJ)/USA | 100.00 | 3 |
| 5 | Turbon (Thailand) Co., Ltd., Samutprakarn/Thailand | 100.00 | 10 |
| 6 | Keymax Nordic Holding A/S, Tästrup/Denmark | 100.00 | 1 |
| 7 | Keytec (GB) Ltd., Axminster (Devon)/Great Britain | 100.00 | 1 |
| 8 | Kores Nordic Belgium NV-SA, Grimbergen/Belgium | 100.00 | 6 |
| 9 | SC Turbon Romania S.R.L., Oltenita/Romania | 100.00 | 1 |
| 10 | Turbon Beteiligungs GmbH, Hattingen | 100.00 | 1 |
| 11 | Bright Parameters GmbH, Hattingen | 100.00 | 1 |
| 12 | BIL Leasing Verwaltungs-GmbH & Co. Objekt Meerbusch KG, Pullach i. Isartal | 95.00 | 1 |
| Affi liated companies not included in the Consolidated Financial Statements | |||
| 13 | Turbon Nordic (Pensions) Ltd., Harlow (Essex)/Great Britain | 100.00 | 7 |
| 14 | Keytec Industries (GB) Ltd., Axminster (Devon)/Great Britain | 100.00 | 7 |
| Other participations | |||
| 15 | BIL Leasing Verwaltungs-GmbH & Co. Objekt Hattingen KG, Pullach i. Isartal | 95.00 | 1 |
Hattingen, March 30, 2012 The Executive Board Aldo C. DeLuca Michael Pages
Turbon AG, Hattingen
Auditor's Report
We have audited the consolidated fi nancial statements prepared by the Turbon AG, Hattingen, comprising the balance sheet, the income statement and statement of comprehensive income, statement of changes in equity, cash fl ow statement, and the notes to the consolidated fi nancial statements, together with the management report of the group and Turbon AG for the business year from January 1, 2011 to December 31, 2011. The preparation of the consolidated fi nancial statements and management report of the Group and Turbon AG in accordance with IFRS, as they are to be applied within the EU, and supplementary provisions of Section 315 a (1) HGB ["Handelsgesetzbuch": "German Commercial Code"] are the responsibility of the Parent Company's management. Our responsibility is to express an opinion on the consolidated fi nancial statements and the management report of the group and Turbon AG based on our audit.
We conducted our audit of the consolidated fi nancial statements in accordance with Section 317 HGB ["Handelsgesetzbuch": "German Commercial Code"] and German generally accepted standards for the audit of fi nancial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially aff ecting the presentation of the net assets, fi nancial position and results of operations in the consolidated fi nancial statements in accordance with principles of proper accounting and in the management report of the group and Turbon AG are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The eff ectiveness of the accountingrelated internal control system and the evidence supporting the disclosures in the consolidated fi nancial statements and the management report of the group and Turbon AG are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual fi nancial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and signifi cant estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements and the management report of the group and Turbon AG. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the fi ndings of our audit, the consolidated fi nancial statements comply with IFRS, as they are to be applied within the EU, and supplementary provisions of Section 315 a (1) HGB ["Handelsgesetzbuch": "German Commercial Code"] and give a true and fair view of the net assets, fi nancial position and results of operations of the Group in accordance with German principles of proper accounting. The management report of the Group and Turbon AG is consistent with the consolidated fi nancial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Düsseldorf, March 30, 2012 BDO AG Wirtschaftsprüfungsgesellschaft
Horn Massing Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)
TURBON AG
Ruhrdeich 10 45525 Hattingen
Phone: +49 (0) 2324 504 - 0 Fax: +49 (0) 2324 504 - 156
http://www.turbon.de e-mail: [email protected]