Notes to the Balance Sheet
D. Notes to the Balance Sheet
Total noncurrent assets
22. Property, plant and equipment
For changes to noncurrent assets, please refer to the statement of changes in noncurrent assets above (see this page). The amortization/depreciation of noncurrent assets included in this table is carried in the income statement under the item amortization of intangible assets and depreciation of property, plant and equipment. For extraordinary amortization/depreciation see this page.
The carrying amount of the temporarily unused property, plant and equipment is not material, this also applies to property, plant and equipment which is finally no longer used. There were no pledged items of property, plant and equipment. The amount of commitments for the acquisition of property, plant and equipment (order obligations) totaled 645 thousand euros (previous year: 200 thousand euros).
Leases
There were no finance leases within the meaning of IAS 17. CEWE COLOR also did not act as a lessor for finance leases.
It is much rather the case that there are passive rental and lease relationships, which constitute operating leases in terms of their economic content. This means that the leased assets are not to be allocated to CEWE COLOR, but to the lessor. These are mostly agreements for the use of production and office facilities, vehicles, and in individual cases agreements for office equipment and IT hardware. The total future minimum lease expenses as a lessee from operating leases which cannot be terminated are as follows:
Assets which are leased under operating leases have a total book value of 2.861 million euros (previous year: 4.745 million euros). The total future minimum lease income as a lessor from operating leases which cannot be terminated is as follows:
This relates to the rental of commercial areas as well as equipment – some of which are rented out to customers. The payments received during the fiscal year totaled 2.425 million euros (previous year: 2.498 million euros).
23. Goodwill
Goodwill includes sums from the acquisition of business operations and from capital consolidation. The key individual figures from capital consolidation relate to:
There is no longer any goodwill for CEWE COLOR S.A.S., Paris (France), after an extraordinary write-down last year in the amount of 4.823 million euros. An impairment test for fiscal year 2006 did not require any further write-downs. Impairment testing at the respective subsidiaries takes an income-oriented perspective for the entire cash-generating unit. When determining the value, it was assumed that the companies being valued react on separate regional markets. When estimating the cash flow, quantity and value forecasts for the relevant market were assumed on which the operating budget was also based. Calculations for the amount that can be generated were based on the financial forecasts for the cash-generating unit and an additional estimate period totaling five years. Forecasts and estimates are assumptions regarding the growth of quantities on the sales side, growth in selling prices, purchase price growth, changes in personnel costs, changes in interest rates and general technical developments on the relevant market. Risk-free discounting is based on a discount rate of 4.40 % (previous year: 4.25 %) plus a risk premium of 4.00 % (thus totaling 8.40 %). The discount rate has changed compared to the previous year in line with the valuation of pension provisions; the risk premium has fallen to 91 % (previous year: 98 %).
The corresponding expenses from the previous year are carried in the income statement under the item amortization/depreciation.
24. Intangible assets
Software and similar industrial property rights relate to acquired ERP software, various Office products for workstations as well as new capitalizations and subsequent capitalizations of internally generated assets for own use and to support the market for production, sales and digital photography (invoicing, pricing, ICOS, DWH/VIS, PhotoWorld, Offline-Client, OPS software, DigiFilm Maker). For extraordinary amortization of intangible assets see this page.
There was an order commitment for intangible assets totaling 186 thousand euros (previous year: 408 thousand euros).
25. Financial assets at equity
Last year, this item was used to carry Fotolux-CEWE COLOR Limited, Dnipropetrovsk (Ukraine), which was formed jointly with OOO “Invest�, Dnipropetrovsk (Ukraine). This interest was carried as a joint venture at equity in summarized form. It was carried in the amount of the contribution still to be paid according to the agreement. Additional at equity consolidations (IAS 28) were not possible as there was no material influence on the fi nancial and business policy decisions at affi liated companies. Fotolux-CEWE COLOR Limited, Dnipropetrovsk (Ukraine) was liquidated on September 21, 2006 and the joint venture ended. No expenses resulted for the group during deconsolidation, as the company had not conducted any activities before it was liquidated. The change to the group of consolidated companies resulting from the deconsolidation of Fotolux-CEWE COLOR Ltd., Dnipropetrovsk (Ukraine), only impacts the Consolidated Financial Statements as of December 31, 2006 in that the at-equity carrying amount of the participation is booked out, and the contribution obligation in the same amount (500 thousand euros) was removed. There was no impact on the Consolidated Income Statement.
26. Financial assets
The group’s financial assets include interests in non-consolidated affiliated companies totaling 843 thousand euros (previous year: 837 thousand euros). The other loans totaling 1,286 thousand euros (previous year: 552 thousand euros) relate in particular to the repurchase value of the operating re-insurance and loans issued. Affiliated companies are a company in which CEWE COLOR AG & Co. OHG, Oldenburg, holds a 10 % interest.
27. Noncurrent receivables from income tax refund
The corporation tax balance of 5.605 million euros due to the company is to be discounted as it does not bear interest and as a result of the refund period. The cash value of the claim to be capitalized totals 4.218 million euros. For details please refer to Note 18, Income Taxes (see this page).
28. Noncurrent other receivables and assets
The noncurrent other receivables and assets include noncurrent receivables from customers, prepaid expenses and other assets.
29. Deferred tax assets
Deferred tax assets mostly relate to valuation differences for provisions for pensions and other provisions and the impact on earnings from consolidation; loss carryforwards only led to capitalizations to a low extent. For further information please see the notes on income taxes (see this page).
30. Inventories
The downturn in raw materials, consumables and supplies is due to the consumption of strategic stocks of photographic paper in the previous year and a downturn in income from photo finishing. The increase in finished goods and merchandise is based on the increase in retail revenues.
The depreciation of finished goods, work in progress and merchandise is carried in the
income statement under the item cost of materials. Inventories were not written up. As in the previous year, no inventories are pledged.
31. Current trade receivables
Direct trade accounts receivable are all of a short-term nature and are vis-Ã -vis external third parties. Defaults for write-downs of trade receivables are carried in the income statement under other operating expenses; in fiscal year 2006 this totaled 122 thousand euros (previous year: 298 thousand euros).
32. Current receivables from income tax refunds
This mostly relates to refund claims from advance tax payments made during the current year for fiscal year 2006.
33. Current other receivables and assets
34. Cash and cash equivalents
This item is used to disclose bank balances which are exclusively current in nature, as well as cash in hand. Balances in euros at various banks bore average interest rates of between 0.34% and 2.50 % (previous year: between 0.29 % and 1.75 %). Balances in foreign currency (9.990 million euros, previous year: 7.127 million euros) bore interest in line with the specific rates negotiated; they are measured at the exchange rate on the Balance Sheet date.
35. Subscribed capital
The group’s subscribed capital and the share premium relate to CEWE COLOR Holding AG, Oldenburg, and are disclosed as for this company.
Share capital totals 19.188 million euros and comprises 7,380,000 no-par value bearer shares and 20 no-par value registered shares, or a total of 7,380,020 no-par value shares. Two of the registered shares carry the right to appoint two members to the Supervisory Board of CEWE COLOR Holding AG, Oldenburg.
During fiscal year 2006, the subscribed capital changed as follows:
Based on the authorization of the general Meeting, on May 29, 2006 the Managing Board, with the approval of the Supervisory Board in its meeting on June 1, 2006, resolved to withdraw the 600,000 treasury shares held by CEWE COLOR Holding AG, Oldenburg, via a capital reduction. The capital reduction was executed and entered in the Oldenburg commercial register on July 27, 2006.
In a letter dated December 15, 2006, the heirs of Senator Heinz Neumüller exercised their subscription rights to convert the atypical silent partnership in CEWE COLOR AG & Co. OHG, Oldenburg, to shares with a total amount of 1,980,000 no-par value shares with a nominal value of 5.148 million euros in CEWE COLOR Holding AG, Oldenburg. In line with the conditions of the subscription rights, the conversion became effective as of midnight on December 31, 2006. The participating interest was regarded as an equity instrument in previous years as a result of IAS 32.21 et seq.
According to the conditions of the conversion rights, the compensation to be paid for the subscription of the new shares was independent of the current stock market price and was based on the amounts contributed by the atypical silent partner and the reserve accounts held. In total, these corresponded to the fixed proportionate capitalization of CEWE COLOR Holding AG, Oldenburg. This amount has initially been provisionally identified based on the equity of CEWE COLOR Holding AG, Oldenburg as of December 31, 2006. To the extent that distributions were made by CEWE COLOR Holding AG, Oldenburg, for fiscal year 2006, the compensation is reduced in the same ratio.
As a result of the conversion, the original contingent capital was reduced from 5.200 million euros by 5.148 million euros.
Contingent capital thus remains in the amount of 52 thousand euros to secure the remaining option rights of the holders of subscription right commitment certificates. The contingent capital comprises 20,000 no-par value bearer shares with profit participation rights from the start of the fiscal year following the subscription right being exercised (Section 160 (1) no. 5 of the Aktiengesetz – German Public Limited Companies Act).
When the options are exercised, the interests held in CEWE COLOR & Co. OHG, Oldenburg, by other shareholders fall in the same amount, as only specific other shareholders are authorized to exercise the option. This does not result in a change in the earnings per share. These interests are carried as financial liabilities according to IAS 32 in connection with ED IAS 32.
37. Authorized capital
The Managing Board is authorized, with the approval of the Supervisory Board, to increase the company’s registered share capital on one or several occasions, however, by a maximum of up to 7.8 million euros against cash or non-cash contributions by issuing new shares. In the case of non-cash contributions, shareholders’ subscription rights are excluded.
38. Stock Option Plans
Stock Option Plans I and II have been concluded. The conditions of the first Stock Option Plan were not fulfilled. The second Option Plan commenced on September 1, 2000 and ended at midnight on August 31, 2005. The performance target was 27.50 euros (25 % above the strike price of 22.00 euros) and this amount was exceeded in a qualified manner in March 2005. All of the option holders then exercised their rights between April and June 2005, which means that CeWe Holding AG, Oldenburg thus sold 98,500 shares at a strike price of 22.00 euros.
As a result of a resolution by the general Meeting on June 30, 2005, the basis for further Stock Option Plans (Stock Option Plan II) has been created. The 2005 Stock Option Plan has been set up accordingly via resolutions by the Managing and Supervisory Boards. The subscription rights for employees were offered to the participants on September 9, 2005 and to members of the Managing Board on September 21, 2005, and these could be accepted up to the end of September. During the acquisition period, senior employees bought a total of 124,000 of the options offered during the acquisition period from September 12 to 23, 2005, the Managing Board and managing directors bought a total of 75,500 options in the acquisition period from September 23 to 29, 2005, or a total of 37.8 % of the total of 199,500 options granted. The condition of the resolution by the general Meeting of June 30, 2005 that up to 50 % of the total volume of option rights may be given to the company’s Managing Board and the board members and managing directors of group companies, was thus upheld. In line with the conditions of the 2005 Stock Option Plan, the lock-up period ran through fiscal year 2006. This lock-up period will last until September 30, 2007.
The following options were issued as part of the 2005 Stock Option Plan:
Total scope of the Stock Option Plans
No stock options were issued at any time to members of the Supervisory Board or to members of other supervisory bodies for the company.
Structure of the 3rd Stock Option Plan 2005
The options were offered to top-level executives in Germany and abroad at an option premium of 0.50 euros per option. After expiration of the two-year lock-up period, starting with the term of the option on October 1, 2005, the options may only be exercised if the closing auction prices of shares of CEWE COLOR in Xetra trading by Deutsche Börse AG have totaled at least 115 % of the underlying prices on ten consecutive stock market trading days (performance target).
Strike prices and exercise periods
The 3rd Stock Option Plan 2005 runs for five years and commenced on October 1, 2005. It thus ends at the latest at midnight on September 30, 2010. The two-year lock-up period ends at midnight on September 30, 2007. The underlying prices have been defined as 50.00 euros for options for Managing Board members, and 48.00 euros for participating employees; this means that the performance target for Managing Board members is 57.50 euros and 55.20 euros for participating employees (each 115 % up on the underlying price).
Exercise periods
After the lock-up period has expired and the performance target has been reached, options can only be exercised within six four-week exercise periods. This is also the case for the later sale of shares from option transactions. The exercise periods commence in each case with the publication of the results of the past fiscal year, the financials press conference, the ordinary general Meeting and the dates on which quarterly figures are published. The CEWE COLOR Group’s Compliance Officer ensures that these periods are upheld.
For information on the calculation of the present value of the 2005 Stock Option Plan (IFRS 2.10 et seq.) please see the comments under personnel expenses (see this page).
39. Reports on shareholdings
The following reports *) on shareholdings in CEWE COLOR Holding AG, Oldenburg, were
made to the company:
40. Share premium
The share premium changed as follows:
At the start of fiscal year 2006, the premium is shown that was generated in excess of the nominal amount of the shares (29.175 million euros) for the issue of the 600,002 bearer shares (after the 1:10 share split implemented in 1999 now 6,000,020 bearer shares). As part of the capital reduction via the withdrawal of 600,000 no-par value shares, 1.560 million euros were then added to the share premium according to Section 237 (3) and (5) of the AktG.
The conversion of the atypical silent partnership to 1,980,000 no-par value shares of CEWE COLOR Holding AG, Oldenburg, which became effective as of December 31, 2006, resulted in an addition to the share premium in the amount of 27.868 million euros in excess of the subscribed capital. This amount is from the premium which was paid for issuing the new shares.
41. Treasury shares
Treasury shares are carried under a separate equity item as a so-called counter-equity item (IAS 32). These are measured at their original acquisition costs and incidental acquisition costs and thus reduce equity (cost method).
To service the first and second Stock Option Plans, the company bought back a total of 400,000 no-par value shares in 1999 and 2000. In line with the authorization by the general Meeting from June 20, 2002, the company then acquired a further 175,200 treasury shares in the period from October 1, 2002 to June 28, 2003. This resolution stipulated that all treasury shares, to the extent that these are not needed for Stock Option Programs and employee programs, can also be used as compensation for the acquisition of equity interests in companies or parts of other companies.
During implementation of the third Stock Option Plan, the company sold a total of 98,500 own shares at an underlying price of 22.00 euros in the period from April 27 to May 30, 2005. In line with the resolution by the general Meeting on June 30, 2005, the company bought back a further 9,490 no-par value shares in the period from December 23, 2005 to December 31, 2005.
At the start of the new fiscal year 2006, the company bought a further 113,810 no-par value shares by February 10, 2006, which means that a total of 600,000 treasury shares were held (corresponds to 1.560 million euros of the share capital or 10.0 %). The capital of CEWE COLOR Holding AG, Oldenburg, was reduced by withdrawing these shares.
Based on the new authorization by the general Meeting dated June 1, 2006, a new buyback program was commenced on August 31, 2006. The company bought back 185,166 no-par value shares by December 31, 2006. The new authorization by the general Meeting allows the Managing Board to acquire up to 10 % of the issued no-par value shares, but at the most 600,000 shares, to offer the acquired treasury shares to employees and members of the management as part of Stock Option Plans, to offer them to third parties as compensation during the acquisition of companies, to reduce capital by withdrawing these shares, to re-sell these shares via the stock exchange while upholding the principle of equal treatment, to offer them to shareholders for subscription, or to sell these in another manner.
At the start of fiscal year 2007, in continuation of the current buyback program, the company had bought back a further 24,363 no-par value shares by February 2, 2007. The buyback on the stock exchange was discontinued as of February 5, 2007. After that date, buy-backs will be via a public purchase offer. The offer period runs from February 5, 2007 to March 6, 2007. The offer is for 390,000 shares at a price of 36.07 euros. As of February 23, 2007, the company held a total of 209,529 no-par value shares as treasury shares.
42. Revenue reserves and net retained profits
Revenue reserves and net retained profits are compounded to form a single item in the consolidated financial statements.
The group’s net retained profi ts do not include minority interests totaling 3.836 million euros (previous year: 4.415 million euros).
The net retained profi ts of CEWE COLOR Holding AG, Oldenburg, under HGB accounting are taken as a basis for disbursements. As of December 31, 2006, after addition to the revenue reserveswithin the meaning of Section 58 (2) of the AktG, CEWE COLOR Holding AG’s net retained profits totaled 6.588 million euros. There are disbursement blocks for the treasury shares held by the company (209,529 no-par value shares, previous year: 486,190 no-par value shares) as well as for the new shares issued as a result of conversion (1,980,000 no-par value shares; page 80). The item other revenue reserves is used to carry items including changes to the fair value of hedge transactions that correspond to the hedge accounting conditions set out in IAS 39. During fiscal year 2006, changes in the fair value totaling 379 thousand euros (previous year: –582 thousand euros) were taken directly to equity for hedges for net investments for economically independent foreign subsidiaries. In addition, hedges were realized in net investments in economically independent foreign subsidiaries in the amount of 97 thousand euros (previous year: 66 thousand euros) and insofar as they have proved to be ineffective with regrad to IAS 39.
The conversion differences between the HGB and IAS/IFRS income/loss portion proportionate to the participating interests in previous years for the atypical silent partner in the group’s subsidiaries were offset with the revenue reserves and taken directly to equity.
43. Minority interests
This item is used to disclose the interests held by third-party shareholders in the capital of group companies (total 36 thousand euros; previous year: 13,679 thousand euros). The bulk of the minority interests carried last year related to the interests of the heirs of Senator Heinz Neumüller in the form of an atypical silent partnership in the capital of CEWE COLOR AG & Co. OHG, Oldenburg. As part of the conversion right, these atypical silent partnerships were exchanged for 1,980,000 no-par value shares. As a result, this portion of the minority interests was booked to subscribed capital (page 80) and the share premium (page 84). In addition, minority interests are still carried for Fotolab a.s., Prague (Czech Republic) (32 thousand euros; previous year: 30 thousand euros) and Fotolab Slovakia a.s., Bratislava (Republic of Slovakia) (4 thousand euros; previous year 4 thousand euros).
For information on the changes in equity please see the statement of changes in shareholders’ equity.
44. Noncurrent special taxallowable reserve for investment grants
The special tax-allowable reserve is used to disclose investment grants and investment subsidies from the common task “improvement to the regional economic structure� that have already been granted (IAS 20.24). This item is broken down by maturities according to IAS 1.60. During the previous year, a provision was formed in the amount of 222 thousand euros for repayment commitments. It is now unlikely that this will be used, and as a result the amount was reversed and recognized in income.
45. Noncurrent provisions for pensions
The provisions for pensions throughout the group changed as follows:
The maturities of the provisions for pensions in the entire group were as follows:
Pension commitments are performance-oriented direct commitments within the meaning of IAS19.48 et seq. They mostly comprise individual commitments to the Managing Board and managing directors, and also to executives from previous pension commitments. The commitments include benefits for surviving dependents. Pension payments in foreign countries are granted depending on the specific circumstances in those countries.
The defined benefit obligations according to IAS 19 total 10.773 million euros for commitments made in Germany (previous year: 10.631 million euros). Pension obligations are measured using the projected unit credit method.
During the fiscal year, pensions totaling 254 thousand euros were paid to former members of the executive bodies. The defined benefit obligations under IAS 19 for this group of people total 2.968 euros (previous year: 3.107 million euros).
No more direct commitments have been made to executives since fiscal year 2000. Instead, new executives receive a commitment which is economically equivalent based on a performance-oriented plan from the pension fund of Allianz Lebensversicherung AG. Expenses for this totaled 59 thousand euros in fiscal year 2005 (previous year: 56 thousand euros).
46. Noncurrent deferred tax liabilities
The changes in deferred taxes relate to factors including changes from concluded external tax audits, mostly for noncurrent assets. The changes led to slight differences between the tax base and the IAS/IFRS financial statements. The maturities of the deferred taxes are almost exclusively between 1 and 5 years.
47. Noncurrent other provisions
This item mostly includes provisions for threatened losses, formed for long-term contracts for the laboratory in Hamburg closed in 2002. They relate to the risk of losses from sub-leases given the best possible estimate of the respective local commercial property markets. The present value of the obligations is calculated by discounting, for which the interest rate corresponds to the valuation of noncurrent provisions for pensions (4.40 %, previous year: 4.25 %).
48. Noncurrent financial liabilities
Financial liabilities are exclusively to banks. This item is broken down by maturities according to IAS 1.60. Interest rates for the current medium- and long-term loan agreements are between 2.67 % and 5.65 % (previous year: between 2.67 % and 5.65 %). For further information please see the item current financial liabilities (see this page).
49. Noncurrent other liabilities
The bulk of the liabilities to other shareholders included in the previous year was booked to equity as part of the conversion of the shareholders interests (see this page). These include profi t shares that were contributed as a premium.
50. Current provisions for taxes
This item includes deferred income tax obligations and obligations for other taxes. These changed as follows:
51. Current otherprovisions
Provisions for personnel liabilities include, in particular, provisions for social plans as well as claims vested as part of partial retirement, vacation entitlements still outstanding from the fiscal year, claims to bonuses, claims from overtime, outstanding contributions to insurance companies (e.g., institutions for statutory accident insurance and prevention), etc. Other current provisions relate to warranty commitments, ongoing litigation and other commitments. Restructuring was via the partial closure (Paris, France) and closure (Berlin, Germany) of facilities. In total, obligations totaling 5.1 million euros (previous year: 7.7 million euros) are carried as provisions for restructuring.
52. Current financial liabilities
Current financial liabilities are shown in the following table:
As of December 31, 2006, the CEWE COLOR Group had the following credit lines:
Of these credit lines, 70.620 million euros (previous year: 71.680 million euros) have not been drawn down.
53. Current other liabilities
Part of the liabilities totaling 2.685 million euros (previous year: 3.506 million euros) was calculated using best-possible estimates, e.g., using orders still open. These mostly relate to future charges and the resulting payments for deliveries and performance already received.
54. Financial instruments
There were the following derivative transactions:
There are hedges within the meaning of IAS 39 above all to hedge interest-rate and currency risks from noncurrent loans to group companies with foreign functional currencies and from noncurrent liabilities. When interpreting the positive and negative fair values of the financial instruments, it should be noted that they are offset by underlying transactions with corresponding risks. Irrespective of their purpose, all derivative fi nancial instruments are measured at their fair value. The maturities of derivatives are based on the term of the underlying transaction and are thus, without exception, short to mediumterm. The nominal volume of the derivatives discussed below is not netted. It shows the total of all bid and sell amounts on which the loans are based. The amount of the nominal volume allows conclusions to be drawn regarding the scope of the use of derivatives, however, it does not reflect the group’s risk from the use of derivatives. Risks from changes to interest rates and currencies for the derivatives are measured using the value-at-risk method in line with international banking standards. Based on historical volatilities, the maximum potential loss that could result from a change in market prices is calculated with a confi dence interval of 99 % and a holding period of one day.
