FOCUSING ON THE ESSENTIAL ANNUAL REPORT 2003

Transcription

www.loewe.de
Loewe Stock:
Ticker symbol: LOE
ISIN code: DE 0006494107
Phone: + 49 (0) 92 61/99-984
Email: [email protected]
FOCUSING ON THE ESSENTIAL
D-96317 Kronach
ANNUAL REPORT 2003
Industriestrasse 11
FOCUSING ON THE ESSENTIAL
ANNUAL REPORT 2003
THE LOEWE GROUP IN NUMBERS
in EUR million
IAS
2003
2002
2001
2000
1999
1998
Sales
288.9
385.6
392.8
363.6
309.5
283.2
Foreign
140.4
197.9
190.5
151.8
111.0
90.1
48.6
51.3
48.5
41.7
35.9
31.8
288.9
376.2
372.6
339.7
284.3
251.8
0.0
9.4
20.2
23.9
25.2
31.4
Foreign (as percentage of total sales)
Home Media Systems
Telecommunications***
Earnings before interest and taxes (EBIT)*
– 33.3
20.6
20.1
21.9
18.0
14.2
– 33.3
20.6
26.1
22.3
18.5
14.8
0.0
0.0
– 6.0
– 0.4
– 0.5
– 0.6
Earnings per share (EUR)**
– 4.14
1.52
1.45
1.70
1.16
0.88
– 4.14
1.52
2.00
1.74
1.22
–
0.00
0.00
– 0.55
– 0.04
– 0.06
–
0.00
0.85
0.85
0.85
–
–
15.3
Home Media Systems
Home Media Systems (EUR)
Telecommunications (EUR)***
Dividend per share (EUR)
Key figures
Shareholders’ equity
Capital employed
44.7
80.5
75.2
69.5
57.5
111.1
126.9
114.0
100.9
95.2
Return on capital employed (%)**
– 23.4
8.8
9.3
11.9
5.6
1.9
Free cash flow
– 15.0
– 1.3
– 1.8
7.8
10.4
– 1.9
– 14.4
– 7.0
9.0
8.3
10.5
– 0.6
5.7
– 10.8
– 0.5
– 0.1
Home Media Systems
Capital expenditure
20.8
26.4
25.8
23.7
18.5
16.2
Depreciation and amortization
25.2
21.1
22.2
18.5
16.2
16.8
Development costs
Number of employees
14.0
13.3
12.0
11.7
11.3
10.6
1,245
1,261
1,209
1,106
1,087
1,071
*
Since 1999, interest from the allocation to pension reserves has been reported in interest expenses
**
Until 1999 after adjustment for extraordinary expenses, including income tax payable thereon
*** Division to be discontinued
Loewe AG 01 2003
OUR VISION. There’s one thing we’re sure of: The 21st century is the age
of communication. The overwhelming wealth of stimuli that comes along with
such an experience requires that human needs be the focus of ventures in
media, technology, and content.
OUR MISSION. We have a clear mission. Due to its agility, Loewe is in a
position to open up an exclusive personal world of entertainment, information,
and communication through intelligent and simple systems.
LOEWE 2003: FOCUSING ON THE ESSENTIAL
Letter to Shareholders
2
Report of the Supervisory Board
6
Key Events of the Year
8
Loewe Stock
10
Management Report
15
Initiatives with Future
51
Annual Financial Statements and Notes
65
Financial Calendar
101
Home Multimedia, Internet Glossary
102
Contacts
104
Publication Credits
104
2003 02 Executive Board. Loewe AG
DIFFICULT TIMES BRING NEW OPPORTUNITIES.
Loewe AG 03 2003
WE’LL TAKE ADVANTAGE OF THEM.
(from left to right)
Dr. Rainer Hecker
Industrial Engineer, Chairman of the Executive Board. Responsible for sales, product marketing,
marketing communication, customer service, quality and PR. At Loewe since 1982.
Dr. Burkhard Bamberger MBA. Responsible for finance, controlling, human resources, IT and investor relations. At Loewe
since 1998.
Gerhard Schaas
Engineer. Responsible for product development, pre-engineering, production, purchasing and
logistics. At Loewe since 1973.
2003 04 Letter to Shareholders. Loewe AG
The consumer electronics market in Europe declined overall in 2003. Brought about by uncertainties concerning possible loss of employment and ongoing political reform discussions,
the noticeable slowdown in consumption left its mark both within and outside of Germany.
Another important factor was the strong shift in demand toward flat-panel televisions, which
took the entire industry by surprise. Loewe realizes more than four-fifths of sales with televisions. The growth in flat-panel displays has not yet made up for the decline in picture tube
televisions. The technological shift primarily affects our traditional premium market segment.
These conditions made it necessary for Loewe to report one of the worst results in
our more than 80 years of corporate history in the financial year just ended. We definitely fell
short of our targets. With sales of EUR 288.9 million, the loss amounted to EUR 33.3 million
(EBIT). Business both within and outside of Germany contributed to the decline in sales and
earnings. The switch from an outside distributor to a subsidiary in Italy resulted in special
expenses and sales declines in that country which reduced earnings. Furthermore, the marketrelated price declines for picture tube sets and the start of our “Taurus” restructuring program diminished revenues. However, the primary cause for the loss was the low business
volume along with an unfavorable product mix. Especially sales of our particularly high-end
televisions suffered under the consumer restraint.
Despite the high startup costs, we are convinced that we will be able to service our
key markets in Italy, France and the Benelux countries with our own subsidiaries. On January
1, 2004, we also established a sales and marketing company in Austria. Our U.S. subsidiary,
which closed 2003 with another high loss, has been offering the necessary widescreen
plasma and projection products since the beginning of 2004. We will decide whether or not
to continue these activities in the first half of 2004.
We recognized the trend to flat TV sets in the premium segments at an early date
and we have had widescreen plasma televisions in our product range for almost six years. As
early as 2000, we started our far-reaching partnership with Sharp in Japan, the world market
leader in LCD televisions. We have marketed small-screen LCDs for more than three years
and this year we will add large-screen sets (26”, 32” and 37”) to our range.
At the IFA International Consumer Electronics Fair in August last year, we presented
our complete line of new flat-panel products and attracted the praise of both the media and
retailers. Under the motto “More Loewe,” we also made it clear how the high-end branded
product is different from cheap goods. In Berlin, we confidently looked forward to the main
shopping season. Retailers responded well with their orders and underscored the success of
our IFA presentation. The Consumer Electronics Fair was an initial spark. Nonetheless, it did
not bring the customers into the stores in the numbers we expected. Accordingly, the hopedfor Christmas boost did not materialize.
In 2003, a main focus of our new products was on flat-panel display sets. With
the Spheros 42 plasma TV, Loewe presented home cinema in an entirely new dimension:
high-resolution with only a few centimeters of overall depth. The Xelos SL LCD product family
introduced in November represents sophisticated design and the most innovative LCD technology at an attractive price/performance ratio. Compact form, radio reception and integrated
alarm function make the Xelos SL 20 extremely versatile – the ideal second set for the kitchen
or bedroom.
Loewe AG 05 2003
In cooperation with Carl Zeiss and Texas Instruments, Loewe has developed the
Articos 55 projection TV. Its optimum picture quality, maximum depth of definition, high
contrast correction and distortion-free images resulting from fully digitized signal processing
make it highly attractive. All of this clearly sets the Articos 55 apart from previous projection
sets. Even before the market launch, we received an innovation prize for this set. Respected
trade journals selected many of our new sets as test winners. Furthermore, Loewe products
have again been awarded renowned design prizes. One example is the GOOD DESIGN™
Award from Chicago, the world’s most significant design award.
To get Loewe back on track for success, we started the “Taurus” restructuring
program and we initiated specific turnaround projects and actions. On the one hand, we
systematically streamlined our organization and reduced the workforce. With flexible working
hours models, we were further able to reduce personnel expenses within the possibilities
for collective bargaining. A stringent savings policy in material and service costs brought
further savings reaching into the millions. On the other hand, we are pushing ahead with the
introduction of new flat-panel display products. This year we will introduce ten new, high-resolution flat-panel display sets in the medium and large screen range, some of them already
including an integrated hard drive recorder and photo viewer. Starting in the fourth quarter
of 2004, we want to generate more than half our sales with LCD, plasma and rear projection
sets. In the field of picture tube televisions, Loewe will exhaust the existing market, cut the
number of models nearly in half and ensure itself a premium position appropriate to the
market. In order to get the right sets to market as fast as possible, among other things, we
initiated the “Time-to-Market” project as part of the “Taurus” program.
Not least, we are strengthening our relationship with qualified retailers in the key
markets. We are sharpening Loewe’s image as a premium brand by a systematic implementation of the updated brand image. In short: Loewe is making every effort to solidify its strong
market position within the consumer electronics industry and to expand it again with presentday relevance.
To make our Company independent of technology and market-related fluctuations,
we are discussing the possibility of including a strategic investor. However, we are under no
time pressure in this regard.
For the current financial year, we still expect a negative result (EBIT). However, we
are very confident that we will master the future. In its long history, Loewe has repeatedly
been able to build on its strengths and take advantage of market shakeups as an opportunity
for profitable growth. We are now in the midst of such a turning point. Our varied initiatives
– from stepping up the product offensive, strengthening the Loewe brand, expanding our
proven partnership with qualified retailers – will move us in the right direction. Especially in
this crisis, we see many specific opportunities for the attractive premium brand Loewe. We
will take advantage of them and we hope very much that you will continue to accompany
Loewe on this path.
Sincerely yours,
Dr. Rainer Hecker
Chairman of the Executive Board of Loewe AG
2003 06 Report of the Supervisory Board. Loewe AG
DEAR SHAREHOLDERS,
The 2003 fiscal year was very unsatisfactory for the Loewe Group. The accelerating trend away
from traditional picture tube televisions to (still) relatively expensive flat-panel display units
intensified the general consumer buying restraint. In this environment, Loewe could not
achieve its ambitious sales targets as the premium segment for picture tube televisions, where
Loewe is especially well-positioned, was particularly affected by the technology change. Sales
of picture tube televisions declined by 35 percent. The low sales and special charges due to
among other things, restructuring measures, led to a net loss of EUR 33.3 million in year 2003.
In exercising the responsibilities incumbent upon it in accordance with statutory
regulations and the Company’s bylaws, the Supervisory Board continuously oversaw the management of the Company and the management of the Group by the Executive Board and
advised it in basic business policy issues. It was regularly informed concerning the economic
position and development of Loewe and concerning significant departures of the course of
business from plans, defined goals and objectives and discussed these reports and significant
business events with the Executive Board.
Significant subjects of discussion included what economic and technical impact the
rapidly advancing technological change from TV picture tubes to plasma and liquid crystal
flat-panel displays would have on the Company and its product policy. In doing so, product
development milestones, the dependence on suppliers of cathode ray tubes and flat-panel
displays as well as financial consequences were discussed. Another focus was the critical business development in the U.S. and the development of the newly established Italian subsidiary.
Outside of the meetings, the Chairman of the Supervisory Board was in regular contact with the Executive Board in order to discuss issues regarding business policy orientation,
Prof. Dr. Eberhard Scheffler
Chairman of the
Supervisory Board
the implementation of strategy and the necessary or advisable control and structuring
measures. In addition, significant single events such as the filling of management positions
were discussed.
Four meetings of the Supervisory Board took place in the reporting period. The audit
committee and the personnel committee of the Supervisory Board each met once. In addition
to issues related to the audit of financial statements, the audit committee also discussed the
plans and results of the internal audit. The personnel committee dealt with personnel matters
of the Executive Board members.
The current position and the anticipated business development of the Loewe Group
and its companies in the current fiscal year were discussed in all the meetings of the Supervisory Board.
The focus of the meeting on April 11, 2003 was on the individual and consolidated
financial statements for the year ended December 31, 2002 with the associated management
reports and the audit of those financial statements. Based on the results of its own examination, the Supervisory Board approved the cited documents based on the audit report and supplemental notes of the auditor, the reporting of the Executive Board and the audit committee.
A further subject of the discussions was the shift of sales activities in Italy from an outside
distributor to a Loewe subsidiary.
Against the backdrop of sales falling short of expectations, projects for the IFA
International Consumer Electronics Fair and necessary restructuring measures were discussed
in the meeting on June 25, 2003. In addition, basic issues relating to the financing of the
Loewe Group were discussed.
In light of the continued unsatisfactory development of sales and earnings, the Supervisory Board discussed the expected market development, the planned new product launches
and the ensuing sales planning with the Executive Board in the meeting on October 1, 2003.
Consent was given to the establishment of a Company-owned marketing and sales company
in Austria as of January 1, 2004.
Loewe AG 07 2003
In the meeting on December 10, 2003, the Executive Board presented the draft
budget for the following 2004 fiscal year as well as the medium-range sales planning. It also
provided information concerning measures to secure the Group’s financing. The discussions
in the Supervisory Board focused on pending negotiations with lenders, the engagement of
an outside consultant for an in-depth analysis of the business situation and with the aim of
speeding up necessary streamlining measures.
The Executive Board prepared the annual financial statements of the Company for
the year ended December 31, 2003 and the management report for fiscal year 2003 in accordance with the principles of the German Commercial Code and the German Stock Corporation Act. Pursuant to § 292a HGB (Handelsgesetzbuch – German Commercial Code), the
consolidated financial statements of Loewe AG and its subsidiaries have been prepared based
on the International Accounting Standards (IAS). Moreover, a consolidated management
report was prepared. The auditor appointed by the Shareholders’ Meeting on June 25, 2003
has reviewed these accounts. The auditor endorsed the annual financial statements and management report of the Company and its consolidated financial statements and consolidated
management report with an unqualified auditors’ report.
In its meeting on March 16, 2004, the audit committee of the Supervisory Board
thoroughly reviewed the accounting documents of Loewe AG and its Group as of December
31, 2003. It discussed with the auditor the order of events, essential findings and the results
of the audit in detail. According to the conclusive result of its own review, the audit committee approved the presented accounting documents.
The annual financial statements and management report of Loewe AG, its consolidated financial statements and consolidated management report as well as the reports of the
auditor were presented to all Supervisory Board members. The auditors present in the financial
statements meeting on March 23, 2004 reported on important results and focuses of their
review and answered additional questions from the Supervisory Board. The audit committee
chairman gave information concerning the committee’s activities and the results of its review.
According to the conclusive result of its own review of the aforementioned documents, the
Supervisory Board agreed with the findings arrived at by the auditors. The Supervisory Board
has approved the management report and annual financial statements prepared as of December 31, 2003, which can thus be considered adopted. Furthermore, the Supervisory Board
approved the consolidated financial statements and the consolidated management report.
As of March 31, 2003, Mr. Guido Alt resigned from the Supervisory Board because of
other obligations. The Supervisory Board thanks him for his valuable contributions. In the
Shareholders’ Meeting held on June 25, 2003, the shareholders elected Dr. Gerhard Heinrich
as the new member of the Supervisory Board.
In connection with Loewe’s restructuring, which includes a streamlining of top
management, Mr. Thomas Bender resigned from the Executive Board of Loewe AG in May
2003. The Supervisory Board thanks Mr. Bender for his contributions, which reflected great
dedication.
The difficult 2003 fiscal year placed special demands on every member of the
Loewe team. The Supervisory Board thanks the Executive Board and the entire workforce for
the work they have done and their great commitment. The Supervisory Board is convinced
that the measures that have now been introduced and the dedication of all employees will
make it possible for Loewe to master the current difficult phase.
Kronach, March 24, 2004
Prof. Dr. Eberhard Scheffler, Chairman of the Supervisory Board
2003 08 Key Events of the Year. Loewe AG
MARCH
BAMBERG
Together with the government of Upper
Franconia and Bamberg-based Bi-Log AG,
MAY
Loewe organizes the regional competition
“Jugend forscht” (Youth Researches)
NEW YORK
for Upper Franconia. From the start, the
Loewe and the American chain retailer
competition has been one of the largest
Harvey Electronics joined in opening the
and most successful regional competitions
first Loewe Gallery in the United States.
in Germany.
In Midtown Manhattan’s 45th Street, the
new gallery presents Loewe as a technically
JANUARY
BERLIN
innovative and design-oriented premium
Around 500 guests – including a large
brand.
ANTWERP
number of retailers from all over Europe
Loewe Opta Nederland B.V. celebrated its
and investors and journalists from Germany
KRONACH
tenth anniversary in Antwerp. In 1993, Loewe
and abroad – were present at the former
The Siegmund-Loewe-Platz is opened
started out with a 0.2 % market share in
waterworks for the launch of the new
in the heart of Kronach. In doing so, the
the Netherlands, which has grown to over
Mimo product line. Mimo succeeds in
city of Kronach pays homage to Loewe’s
10 % in the ensuing ten years.
packaging the most advanced technology
founder, a man who left a lasting
in an entirely new form.
impression on the city. One of Kronach’s
secondary schools is being renamed as
the Siegmund-Loewe-Realschule.
FEBRUARY
JUNE
APRIL
KRONACH
MUNICH
Loewe has constructed a new logistics center
KRONACH
Loewe introduces the world’s first tele-
with state-of-the-art storage and shipping
Loewe establishes the sales and marketing
vision with an integrated decoder for
techniques with a volume of EUR 4 million.
subsidiary Loewe Italiana. The new company
reception of the Premiere pay-TV channel.
The building has a total area of 6,300 square
is an important component in Loewe’s
Loewe thus offers an additional up-
meters and is primarily used for the storage
internationalization strategy.
grade kit for convenient home cinema
of large plastic parts, displays and packaging
materials.
experience.
MUNICH
In the financial statements press conference
MUNICH
KRONACH/BERLIN
for 2002, Loewe reported slightly increased
Despite the increasingly difficult market
Exactly 80 years ago on February 6, 1923,
revenues in the most important Home Media
environment, Loewe AG was able to gen-
the name Loewe was recorded in the
Systems division. Group earnings before
erate satisfactory revenues and earnings
Commercial Register in Berlin. Founded by
interest and taxes increased to EUR 20.6
in 2002. A restructuring program for
Dr. Siegmund Loewe and others, the com-
million.
the current year is presented in the Share-
pany’s name at that time was Radiofrequenz
GmbH.
holders’ Meeting.
KRONACH/OSAKA
Loewe expanded its partnership with Sharp,
the Japanese world market leader for
LC displays, in the field of super flat, largescreen LCD televisions.
Loewe AG 09 2003
JULY
SEPTEMBER
HAMBURG/MUNICH
Loewe shows off its new products to the
KRONACH
press in Hamburg and Munich in advance of
Loewe takes on 27 new trainees in
the International Electronics Fair. Interest is
administration and technology.
focused on the super flat Spheros 42 television with a high-resolution plasma display.
FÜRTH
“80 years of Loewe – 80 years of broad-
NOVEMBER
KULMBACH
casting in Germany” is the title of an exhibit
Loewe receives the Upper Franconian
in the Radio Museum of the City of Fürth.
Innovation Prize for 2002/2003 in recogni-
Items on display range from the OE 333
KRONACH
tion of the development of the Articos 55
short-range receiver from the 1920s to the
“The Best from 80 Years of Innovation” –
projection television. A high-resolution
complete TV-video-audio system from the
this was the motto of Loewe’s key advertising
TV with perfect picture quality and a 140-
current product line.
campaign for the main shopping season. The
centimeter screen diagonal developed
product-based advertisements were placed in
in cooperation with Carl Zeiss and Texas
the high-circulation target group magazines
Instruments.
“Stern,” “Spiegel,” and “Focus” and also
in the “Süddeutsche Zeitung” and “FAZ”
newspapers starting in December.
AUGUST
DECEMBER
OCTOBER
BERLIN
VIENNA
The Company shows “More Loewe” during
BERLIN
Loewe announces the establishment of
the International Consumer Electronics Fair
The Loewe Aventos 3781 ZW television is
its Austrian subsidiary, Loewe Austria GmbH.
(IFA) in Berlin. The focus is on product innova-
the winner in a test of large-screen picture
In 2003, Loewe’s market share in Austria
tions ranging from the large Articos 55 projec-
tube televisions. According to Stiftung
is 7.1 %. The successful and systematic
tion TV to the integrated hard drive recorder
Warentest consumer testing institute, the
distribution in that country is now being
and the DVB-T receiver for digital terrestrial
Aventos had the best picture and out-
expanded under the direct responsibility
television.
standing sound quality.
of Loewe. Loewe will now make direct
deliveries to qualified retailers without inter-
KRONACH
mediate storage.
The ARD/ZDF morning show was broadcast
live from Loewe in Kronach in the run-up to
HANNOVER
the IFA. The topic of the 18-minute segment
Loewe receives the coveted iF design award
was “Loewe and the Future of Television.”
from the Industrie Forum Hannover for five
of its product innovations and the Loewe
BERLIN
display at the IFA International Consumer
Loewe extends the warranty for all its
Electronics Fair in 2003. The iF design award
products from two to three years. This step
winners include the Loewe televisions Mimo
provides customers and retailers even more
15 and Mimo 28 as well as the Articos 55
safety and for Loewe it underscores the
projection TV, the Xemix 8122 DVD player and
significance of product quality as a character-
the Tremo subwoofer satellite system.
2003 10 Loewe Stock. Loewe AG
LOEWE STOCK
SWITCH FROM MDAX TO SDAX IN MARCH 2003
PROFIT WARNINGS LED TO SIGNIFICANT PRICE EROSION
STABLE COVERAGE ENSURED
SHARE PRICE PERFORMANCE
The Loewe share started 2003 at a price of approximately EUR 11. After the key figures were
published on January 20, the sales and price performance recovered for only a short period of
time. A study by Commerzbank in early February saw little potential for Loewe’s business as
well as consumer’s propensity to buy. The investment recommendation was “sell.” Combined
with the unstable capital markets in the first quarter, this factor pushed the share price down
to approximately EUR 9.
Even before the financial statements press conference, we reported in a late March
ad hoc release that we would not reach our projected sales and earnings targets. The share
price reacted to this once more with an approximately 15 % decline. Immediately after the
ad hoc announcement, the daily trading volume was up to 100,000 shares. The recovery of
the German and European markets starting in April was unable to lift the price. The share
persisted in a narrow range from EUR 8 to 9.50 with low volatility while daily trading volume
remained high. After the dividend was paid subsequent to the Shareholders’ Meeting and
there was further critical coverage by analysts, the share softened to less than EUR 8.
The ad hoc announcement published in August caused the share to drop by approximately 10 % once more. Analysts responded to the abandonment of the growth target for
financial year 2003 and the prospect for a negative year-end result with a general “sell” recommendation for the Loewe share. The price fell to new lows in the EUR 6.50 range.
Loewe share price
After the figures for the first nine months were published, the Loewe share continued
recovers at beginning of
to be under pressure. This was primarily caused by institutional investors who sold off their
new fiscal year
portfolios of Loewe shares with a view to the turn of the year. On December 23, we recorded
the historic low of EUR 5.20. At year-end, sales by institutional investors ran out and the
share price recovered slightly. The price recovery continued in the new financial year. Driven
by speculation about a strategic investor, the price climbed to EUR 8.60.
Loewe AG 11 2003
190
160
130
100
70
40
01/02/03
LOEWE
04/02/03
07/01/03
10/01/03
01/02/04
03/01/04
SDAX
Development of the Loewe share price against SDAX from January 2, 2003 to March 1, 2004 (Frankfurt)
250
200
150
100
50
0
07/08/99
LOEWE
01/03/00
07/03/00
01/02/01
07/02/01
01/02/02
07/01/02
01/02/03
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SDAX
Development of the Loewe share price against SDAX from July 8, 1999 (first listing) to March 1, 2004 (XETRA)
SHAREHOLDER STRUCTURE
The shareholder structure of Loewe AG continues to be marked by a high free float of
approximately 64 % of the share capital. Approximately 23,000 securities accounts in Germany were registered for the Shareholders’ Meeting in June 2003. The Company’s management holds 26 % of the shares. The British venture capital company 3i holds 10 %. Beyond
that, Loewe has not received any reports of shareholdings of 5 % or more. Several large
European mutual funds hold Loewe stock.
INVESTOR RELATIONS GOALS
Our goal is to maintain investors’ attention and the existing first-rate coverage of the Loewe
share to the greatest extent possible. To that end, we will again be represented at capital
market conferences of respected banks in Frankfurt in 2004. At the time each quarterly report
is published, we hold conference calls in English with question and answer sessions. Furthermore, we plan to hold road shows at the most important European stock exchanges if interest
is shown.
01/02/04 03/01/04
The Loewe Spheros 42 is synonymous with
technological innovation. This plasma television
features a low overall depth and a 106 cm
screen diagonal. Its appearance and technology
set new standards.
TRADING VOLUME
The Loewe share is actively traded every trading day on all German stock exchanges and in
XETRA computer trading. Trading volume is highest by far on the Frankfurt Stock Exchange
and in XETRA.
The designated sponsor is Credit Suisse First Boston, Frankfurt. Seydler AG Wertpapierhandelsbank has served as market maker since mid-2003. The average daily trading
volume in the year under review was approximately 28,500 shares.
DIVIDEND
A resolution will be proposed to the Shareholders’ Meeting on June 23, 2004 that no
dividend be distributed for financial year 2003.
Loewe AG 13 2003
CORPORATE GOVERNANCE
ORIENTATION TO CORPORATE GOVERNANCE RECOMMENDATIONS
EXPANDED WORDING OF DECLARATION OF CONFORMITY
COMPLIANCE IS EXPERIENCED ACTIVELY
Already in 2001, Loewe published principles concerning cooperation based on trust between
Corporate governance
the Executive Board and the Supervisory Board in the annual report and in the Internet. This
is extremely important
early commitment reflects our high standards. Loewe is committed to a responsible, fair and
for Loewe
transparent corporate policy. Our objective is to achieve a sustained increase of the company
value in the interest of the shareholders, customers and employees and with consideration
of environmental concerns. The Loewe Corporate Governance Principles are an integral component of our corporate identity.
DECLARATION OF CONFORMITY
The enactment of the Transparency and Publicity Act inserted a new § 161 into the German
Stock Corporation Act. It obligates the Executive Board and Supervisory Board of a listed
company to declare on an annual basis whether the Code has been and will be complied with
and which recommendations in the Code have not been applied.
The Executive Board and Supervisory Board of Loewe AG issued the first statement
of conformity with § 161 German Stock Corporation Act in November 2002. The declaration
stated that Loewe principally complied with the recommendations of the Code. The only
exception is that the consolidated financial statements were not published within 90 days of
the end of the fiscal year. This exception no longer applies. The consolidated financial statements of Loewe AG for fiscal year 2003 will appear on March 26, 2004 and accordingly
within the deadline.
Also, in consideration of the amendments adopted by the Government Commission
The Executive Board and
of the German Corporate Governance Code on May 21, 2003, the recommendations in the
Supervisory Board
Code will be met. The Executive Board and Supervisory Board issued an updated declaration
issued the declaration of
of conformity to this effect on December 21, 2003. The joint declaration by the Executive
conformity in December
Board and Supervisory Board of Loewe AG pursuant to § 161 German Stock Corporation Act
regarding the recommendations of the Government Commission of the German Corporate
Governance Code reads as follows:
“The Executive Board and Supervisory Board of Loewe AG decided on December 21,
2003 to adapt their declaration of conformity pursuant to § 161 German Stock Corporation
Act dated December 10, 2002 to the amendments of the German Corporate Governance
Code (Code Version of May 21, 2003) and therefore declare:
The recommendations of the Government Commission of the German Corporate
Governance Code (Code Version of May 21, 2003) as published in the electronic Federal
Gazette on July 4, 2003 have been and will be followed with the following exception:
Code sub-section 4.2.4, sentence 2
For the protection of privacy, individualized figures concerning the compensation of the
members of the Executive Board have not been and will not be published.”
SUPERVISORY BOARD
The Supervisory Board of Loewe AG comprises six members. They were elected by the Shareholders’ Meeting in 2001 for a term of five years. In place of Guido Alt who resigned from
the Supervisory Board, the shareholders present at the Shareholders’ Meeting of Loewe AG
held on June 25, 2003 elected Dr. Gerhard Heinrich to the board.
A general age limit of 70 years applies to the members of the Supervisory Board. On
the occasion of the resolutions of the Shareholders’ Meeting amending the articles of incorporation in June 2002, the remuneration of the Supervisory Board was redefined with respect
to a fixed and variable component. The basis for the variable component is whether the
earnings per share derived from the particular group income as of December 31 of each fiscal
year were matched or exceeded. The directors & officers liability insurance taken out for the
Supervisory Board contains an appropriate deductible in the amount of 50 % of the particular
Supervisory Board member’s incentive compensation.
EXECUTIVE BOARD
The Executive Board of Loewe AG comprises three members. An age limit of 65 years applies
to the members of the Executive Board. The existing directors & officers insurance contains an
appropriate deductible in the amount of 25 % of the fixed annual remuneration of a member
of the Executive Board. The Rules of Information for the Executive Board adopted by the
Supervisory Board define how the Supervisory Board must be informed in a timely manner
concerning business development, strategy and planning as well as significant business risks.
COMPLIANCE
Principles of compliance
Loewe considers compliance to be important. To that end, we implement measures to prevent
are implemented in the
insider trading and we ensure compliance with regulations under corporate law as well as
Group
regulations relevant to the stock markets and capital markets. The corporate officers and
executives are kept regularly informed concerning the control, management and organization
of the regulatory and capital market-related communications. Principles for the handling of
confidential information are just as much the focus as the definition of insider information,
the establishment of blocking periods or the handling of ad hoc announcements. We inform
newly hired employees about the possibility of coming into contact with insider information
and the necessary course of conduct. Furthermore, information relating to the “insider”
theme is regularly published on the Company’s Intranet pages.
Loewe AG 15 2003
NO PLEASURE IS TEMPORARY,
2003 16 Management Report. Loewe AG
Loewe AG 17 2003
SINCE THE IMPRESSION ALWAYS REMAINS.
JOHANN WOLFGANG VON GOETHE
Diving into other worlds. Feeling fascination. Collecting impressions. Give your
life a special spark. Loewe opens new
dimensions with innovative television
technology. State-of-the-art plasma technologies in products like the Spheros
produce incomparable pictures and fascinating viewing experiences. The Spheros
can float in the middle of the room like
a futuristic vision or be suspended from
the wall. Both placements underscore its
high standards in the premium segment,
as does Loewe.
P. 18
Development of the economy as
a whole
P. 19
Softening market for consumer
electronics
P. 24
Brand and technology position
P. 26
Loewe key economic performance
indicators
P. 44
Risks of future development
P. 49
Outlook
MANAGEMENT REPORT
SHARP MARKET DECLINE FOR PICTURE TUBE SETS
SALES DECLINED; NEGATIVE EARNINGS
RESTRUCTURING INITIATED
EXPANSION OF FLAT-PANEL DISPLAY LINE
CONTINUED UNSATISFACTORY DEVELOPMENT OF THE ECONOMY AS A WHOLE
As in the two previous years, 2003 was also disappointing for the economy. After the terror
attacks in the U.S. and the military intervention in Afghanistan, the 2003 Iraq war shattered
economic confidence in the future. Similarly, continued repercussions of the financial and
non-monetary excesses of the New Economy boom demanded sustained consolidation efforts
to deal with corporate and private indebtedness.
Weak economy in the
eurozone
The economy in the euro area weakened on a wide front until mid-2003. In the
second quarter, several countries of the European Economic Community (EEC) – Germany,
Italy and France in particular – experienced a decline in gross domestic product. The sustained
high level of economic activity in Spain was able to cushion the EEC-wide softening to some
degree. In the second half, the economic development of the EEC countries again shifted
back to a moderate growth path.
Real growth of gross domestic product in 2003 is expected to be 0.5 % for the countries of the currency union. At 2 %, the inflation rate has fallen slightly. Negative developments included the significantly higher national deficits and the unemployment rate, which
increased to almost 9 %.
Last year, the German economy shrank for the second time since reunification. The
real gross domestic product dropped by 0.1 %. It was impossible to achieve the 0.7 % to
1.5 % growth rates that had been predicted at the start of 2003. Almost all demand components of the overall economy dropped. Only public sector consumption and higher inventories
counteracted this trend. Gross fixed capital formation dropped for the third year in a row
while private consumption fell for the second in a row.
Loewe AG 19 2003
Home cinema in new dimensions: The high-resolution plasma TV Spheros 42
on Cube 1 with a Certos DVD unit. The individual rack solutions make the
Spheros 42 an independent design piece.
SOFTENING MARKET FOR CONSUMER ELECTRONICS
The European consumer electronics market declined 3 % to EUR 25.4 billion in 2003. Positive
Strong trend to
developments in Italy and Spain could not compensate for the significant market decline in
flat-panel display sets
Germany and the United Kingdom. The sharp decline in sales of televisions with conventional
picture tubes, video recorders and stereo systems had a dampening effect. The primary
causes are the trend to flat-panel displays and the persistent strong drop in prices. In contrast,
growth was strong for flat-panel display sets, DVD players/recorders and portable stereo
products with MP3 capability.
Loewe is represented with products in roughly two-thirds of the entire market
volume; however, televisions make up about 85 % of its total business volume.
Consumer electronics market in Europe
in Euro billion
2003
2002
Televisions
11.6
11.5
1
0.5
0.7
– 25
TV recorders
+/– in%*
DVD players
3.3
2.4
34
Video recorders
1.2
1.8
– 35
Stereo
Subtotal
Audio, video games, etc.
Total
4.5
5.0
– 10
21.1
21.5
–2
4.3
4.5
–6
25.4
26.0
–3
(Source: GfK, European market, market coverage just under 80 %,
each period December of the previous year to November of the following
year; market data by value based on retail prices)
* The percentage amounts are based on unrounded market figures.
In the case of the DVD players, video recorders and stereo systems offered by Loewe,
the focus is less on the separate marketing of single components than on the integration of
these peripherals into a total system.
The volume of the television market in Europe increased by 4 %. Due to the sharp
price drops in nearly all segments, the sales volume of EUR 11.6 billion was only slightly
higher than in 2002.
Television market in Europe by technology
TV Market in Europe
Loewe Market Share
(in EUR billon)
2003
2002
Picture tubes
9.29
10.41
LCD
0.65
0.13
Plasma
0.99
(in %)
+ /– in %*
2003
2002
+ /–
– 11
6.1
6.5
– 0.4
419
1.2
2.4
– 1.2
0.37
170
1.3
2.7
– 1.4
0.68
0.60
13
–
–
11.61
11.51
1
4.9
5.9
Projection
(front and rear)
Total
(Source: GfK, European market, market coverage just under 80 %, each period December
of the previous year to November of the following year market data by value based on retail prices)
* The percentage amounts are based on the unrounded market figures.
Pure home cinema: The Articos 55 on Cube 2 with Concertos loudspeaker
system. The first Loewe television with high-resolution projection technology,
developed in cooperation with Carl Zeiss and Texas Instruments.
– 1.0
Loewe AG 21 2003
20.8 million picture tube sets were sold in Europe in 2003, 1.1 % more than in the
previous year. Despite the growing significance of new flat-panel display technologies, this
LCD sets show strongest
market growth
represents a 95 % market share by volume. As a consequence of the sharp drop in prices for
picture tube sets, the value of this market declined by 10.8 % to EUR 9.29 billion. It now
represents only 80 % of the total market for televisions in Europe.
LCD televisions have the highest growth rate in flat-panel display sets. 500,000 LCD
sets were sold in 2003. This represents a 680 % increase over 2002. Since these are predominantly small-screen sets with a screen diagonal of up to 20”, the average sales price for
the consumer was only EUR 1,260. Accordingly, the market volume by value increased by only
419 % from EUR 0.13 billion to 0.65 billion. In contrast, just under EUR 1 billion was spent
for plasma sets in 2003. Despite the decline in prices, these exclusively large-screen sets with
a screen diagonal of at least 32” became significantly more expensive in 2003 by 30 %. Their
average sales price is EUR 5,500. Compared to 2002, the number of plasma TVs more than
tripled from 180,000 sets.
Loewe’s market share in the total TV market dropped from 5.9 % to 4.9 % in the year
under review. The main cause for this is Loewe’s still unsatisfactory market position in the flatpanel display segment, whose significance compared to traditional picture tube sets increased
significantly in 2003.
Within the picture tube segment, Loewe’s market share declined slightly to 6.1 %.
Declining demand
An analysis of the price segments makes it clear that Loewe consolidated its positioning in
for high-end picture
the premium segment. In the retail price segment of EUR 1,000 to 2,000 in particular, we
tube sets
were able to expand our market share by 1.9 percentage points to 12.2 %. Nonetheless, consumers’ propensity to purchase high-end picture tube sets is declining. On the other hand,
demand is increasing for economical picture tube sets as well as the still noticeably more
expensive flat-panel display units. For economical picture tube sets under EUR 1,000, the
market share was largely unchanged at 1.6 %. Loewe has hardly any representation in this
segment.
Television market (picture tubes) in Europe by price categories
TV Market in Europe
Loewe Market Share
(in EUR billion)
2003
2002
(in %)
+ /– in %*
2003
2002
+ /–
under EUR 1,000
6,623.9
6,726.0
–2
1.6
1.7
– 0.1
EUR 1,000 – 2,000
2,047.6
2,734.3
– 25
12.2
10.3
1.9
616.3
954.7
– 35
16.0
16.0
0.0
9,287.8 10,415.0
– 11
4.8
5.2
– 0.4
over EUR 2,000
Total
(Source: GfK, European market, market coverage just under 80 %, each period December
of the previous year to November of the following year market data by value based on retail prices)
Loewe was not able to participate in the stormy market growth of LCD televisions.
The market share declined accordingly from 2.4 % to 1.2 %. However, the LCD market is
currently dominated by small-screen sets. Sets with a screen diagonal smaller than 22” make
up roughly two-thirds of the market volume. In contrast, Loewe focuses on large-screen
sets with screen diagonals larger than 28”. Only a few, mostly very expensive LCD sets are
available on the market in this size category.
While the plasma market almost tripled to EUR 1 billion in 2003, Loewe’s growth in
this segment was significantly lower. The market share was reduced from 2.7 % to 1.3 %
because Loewe offered only the Spheros 42 in 2003, which is in the highest pricing category.
Because of the set’s extensive features and value, its price of roughly EUR 9,000 is higher than
the average market price of about EUR 5,500. Apparently, not enough premium customers
were willing to pay an additional premium for a particularly high-quality first-rate product
when purchasing a generally expensive flat-panel display product.
Even LCD and plasma products with aggressive price positioning are still comparatively expensive compared to picture tube sets. Due to their higher price, the especially finefeatured and high-end Loewe premium products were only able to appeal to a small target
group. Added to this was Loewe’s still incomplete product line of LCD and plasma TV sets.
As the market for flat-panel display sets matures, the manufacturing costs will drop and the
opportunities for the premium sellers to differentiate themselves will increase. Loewe should
benefit from this and be able to expand its market share.
Front and rear projection sets show only comparatively moderate growth. In this
case, it is not a matter of a completely novel technical concept but rather the replacement of
the earlier tube projectors by new digital technologies such as DLP (digital light processing).
In mid-December, Loewe introduced its first projection set Articos 55 in relatively low numbers
of units.
European TV market
The television market displayed varied development in the individual European
shows diverse
countries in 2003. While the value of the Italian, Spanish, Benelux and French markets grew
development
robustly, Germany, Switzerland and the United Kingdom declined. With a 7 % decline,
Germany exhibited the worst development by far. With a less than 12 % share, Germany also
brought up the rear in demand for new flat-panel display technologies. In France, Italy and
Switzerland, on average approximately one-fourth of the money spent for televisions went for
flat-panel display sets.
Total television market in Europe (by country)
TV Market in Europe
Share
(in EUR billion)
of new
display
technologies
(in %)
2003
2002
+/– in%*
United Kingdom
2,836.0
2,926.9
–3
2003
20
Germany
2,438.1
2,617.0
–7
12
France
1,943.0
1,865.3
4
26
Italy
1,280.6
1,113.8
15
23
Spain
1,138.8
1,062.7
7
16
Benelux countries
1,038.0
982.1
6
17
Switzerland
382.7
397.3
–4
29
Rest of Europe
543.3
538.3
1
16
11,600.5 11,503.4
1
20
Total Europe
(Source: GfK, European market, each period December
of the previous year to November of the following year)
Loewe AG 23 2003
Loewe’s market share by value in the European television market declined by 5.9 %
to 4.9 % in 2003. Only in France and in the United Kingdom was Loewe able to hold its relatively low market share of roughly 1 %. In Germany, Loewe’s market share sank from 10.6 %
to 9.7 %. Stabilizing factors in Germany were the still low significance of the new flat-panel
display products and Loewe’s good positioning among competent retailers. The greatest losses
were in Italy and the Benelux countries where Loewe’s market share fell by roughly a third. In
Italy, the slump resulted from the difficult market environment for Loewe and was also caused
by the switch from an external distributor to a Company-owned subsidiary in 2003.
Loewe share of the television market in Europe
(by country)
Loewe Market Share
in %
2003
2002
United Kingdom
0.8
0.8
+/–*
0
Germany
9.7
10.6
–8
France
1.3
1.3
0
Italy
2.5
4.0
– 38
Spain
4.9
5.6
– 13
Benelux countries
5.9
9.0
– 34
Switzerland
5.9
6.8
– 13
Rest of Europe
2.4
2.7
– 11
Total Europe
4.9
5.9
– 17
(Source: GfK, European market, each period December
of the previous year to November of the following year)
Outside of Europe, Australia, the Russian Federation and North America are of partic-
Loewe market share
ular significance for Loewe. Loewe’s market share is still relatively low in these markets. In
outside of Europe
these countries, the development of the overall market is less critical for Loewe’s success than
relatively small
the systematic implementation of Loewe’s premium positioning in the market.
In 2003, the average sales price per television set in Europe was EUR 532. This was
approximately 3 % less than in the previous year. In comparison, the price of Loewe sets
was almost unchanged at EUR 1,302. On the market side, the greatest price declines were
observed in flat-panel display sets, where prices were down between 20 % and 33 %. In
picture tube sets, the 12 % price slide is due to the higher share of more economical standard
sets. Despite the significant drop in prices in all market segments, the higher share of more
expensive flat-panel display products led to only a slight reduction of the average price.
LOEWE’S BRAND AND TECHNOLOGY POSITION
Development of
Loewe’s market and competitive environment changed drastically in 2003. New flat-panel
flat-panel display sets
display sets are becoming more attractive to consumers; the demand for high-end picture
is a top priority
tube sets in particular is dropping and new competitors are crowding into the consumer electronics market. Loewe has therefore made the development of flat-panel display sets a top
priority.
FOCUS ON FLAT-PANEL DISPLAY SETS
The existing product line of LCD sets was expanded to include two additional flat-panel display sets. The flat Mimo 15 has been available at retailers since October 2003. With a screen
diagonal of 38 centimeters, the most advanced LCD technology guarantees absolutely flickerfree and distortion-free images of impressive color depth. Flowing lines and soft contours
give the extremely flat design object its appeal.
Another product, the Mimo 20, was developed to market readiness in early 2004.
The launch of this product also makes a software model available for use in hotels. The integrated terrestrial receiver model is offered in addition to cable and satellite receivers.
In November, the Xelos SL 20 was launched as the first representative of the new
Xelos family. The Xelos SL 20 represents sophisticated design at an attractive price-performance ratio. With a liquid crystal display in 4:3 format, its compact form, radio receiver and
integrated alarm function make it highly versatile.
In plasma TVs, the new Spheros 42 sets new optical and technical accents. With only
a few centimeters of overall depth and a screen diagonal of 106 centimeters, it makes home
cinema a reality. The new, high-resolution plasma panel enables the Spheros to offer the
Market launch of the
Articos 55 projection TV
greatest viewing pleasure in brilliant picture quality.
The Articos 55, Loewe’s first television with high-resolution projection technology,
is impressive with an overall depth of only 49 centimeters and a screen diagonal of 140 centimeters. It makes normal television programs a true home cinema experience. Digital light
processing (DLPTM), the most advanced picture standard for projection TV, makes this possible.
Loewe is one of the first manufacturers to offer televisions with integrated Digital
RecorderPlus and is redefining TV viewing habits. Both digital and analog television signals
can be stored on the built-in 80 GB hard drive in many Loewe sets. In late October, the first
Loewe TVs with integrated Digital RecorderPlus were introduced to the retail trade.
The world’s first television with an integrated decoder for reception of the Premiere
pay-TV channel is also from Loewe. The new digital TV upgrade kit with the seal of quality
“Premiere Compatible” represents a systematic enhancement of the Media-Plus concept.
Another focus was the expansion of our activities in digital television. For digital
satellite reception, Loewe introduced the next DVB generation to the market. Furthermore, a
digital receiver was developed for terrestrial reception (DVB-T). Both analog and digital programming can be received in the usual manner using a standardized operating system and an
electronic program guide.
In Internet television, the use of the OnlinePlus module was extended to additional
countries. Since early 2004, development work has been focused on the goal of introducing
the function of a photo viewer for tube sets and flat-panel displays. A card reader for all
current memory formats will then make it possible to present slide shows via the television
set. In the field of new technologies, the primary focus of activities was on the subject areas
media center, home networking and multiroom functionality. Loewe presented the appropriate pilot applications at the IFA International Consumer Electronics Fair.
Loewe AG 25 2003
FURTHER IMPLEMENTATION OF THE INTERNATIONALIZATION STRATEGY
The establishment of a sales and marketing subsidiary in Italy strengthened Loewe’s inter-
Subsidiaries established
national orientation. Loewe Italiana S.r.l. puts us in a position to implement future sales and
in Italy and Austria
marketing objectives in Italy directly. At the same time, preparations were made in the last
quarter to establish a sales and marketing subsidiary in Austria.
IFA – THE FORUM FOR PRODUCT INNOVATIONS
Under the slogan “More Loewe,” we presented numerous innovations at the IFA. Four major
themes demonstrated Loewe’s added value:
Loewe offers “More Intelligence” in home cinema systems. The customer can expect
“More Quality” through the introduction of high-resolution large-screen plasma, LCD and
projection televisions as well as the new HD Real Flatline picture tubes. For Loewe, “More
Possibilities” especially means a variety of rack solutions in addition to individual colors and
high-quality materials. “More Experience” is the sum of more intelligence, more quality
and more possibilities.
NEW ADVERTISING CAMPAIGN
The new Loewe brand campaign, which is focused on personal experience, started in March
2003 under the motto, “Stimulate your senses.” The goal is to sharpen the Loewe profile
as an esthetic, intelligent and inspiring premium brand and further increase the awareness of
the Loewe brand. Due to the changed market conditions in the second half of 2003, the
brand campaign was modified and designed to be more product and sales oriented.
THREE-YEAR WARRANTY ON ALL PRODUCTS
At the start of the IFA, Loewe extended the warranty on all products from two to three years.
In addition to outstanding design, innovative technology and easy operation, top quality is an
important characteristic of Loewe products.
The new digital TV upgrade kits from Loewe with
the quality seal “Premiere Compatible” are fully
integrated in the TV set. External boxes and a mess
of cables are a thing of the past.
LOEWE DESIGN RECEIVES AWARDS
The outstanding quality of Loewe design was honored by several awards last year. The iF
Industrie Forum Hannover awarded five Loewe products the respected iF Seal for excellent
industrial design. The products included the Mimo 15, Mimo 28 and Articos televisions. In
addition, the Loewe stand at IFA 2003 received this award in the category communication
design. The Spheros 42 received the international GOOD DESIGNTM Award 2003 from
the Chicago Athenaeum: Museum of Architecture and Design.
KEY ECONOMIC PERFORMANCE INDICATORS OF LOEWE SIGNIFICANTLY WORSE
Significant decline in
We fell short of our financial goals in the 2003 financial year. The chief cause for this is the
sales and earnings
technological change mentioned above. The otherwise customary sales stimulus caused by the
IFA International Consumer Electronics Fair and the Christmas business stayed below expectations and could not compensate for the sales slump of the first three quarters. Decreased unit
sales, reduced sales prices and a poor product mix were reflected in the 23 % decline in sales
to EUR 289 million.
Key figures
in EUR million
2003
2002
+/– in%
Sales
288.9
376.2
– 23
EBIT
– 33.3
20.6
Net income
– 29.7
10.9
20.8
26.2
1,245
1,250
Capital expenditure
– 21
Employees
(annual average)
The cost cutting and restructuring measures initiated in the second quarter were
only able to provide limited cost relief, so that EBIT of the Loewe Group declined from
EUR 20.6 million to EUR -33.3 million. This includes negative non-recurring factors amounting
to EUR 13.1 million. They relate to the changeover of distribution in Italy to the Companyowned subsidiary (EUR 4.5 million), allowances for the reduced sales potential of picture
tube televisions (EUR 5.6 million), severance packages for the adopted workforce reduction
(EUR 2.0 million) and the risk provision for additional compensation to Loewe contract workshops (EUR 1.0 million).
THE RESTRUCTURING PROGRAM INCLUDES THE FOLLOWING ELEMENTS:
“Taurus” restructuring
program initiated
Adaptation of the organization to the lower business volume was adopted in 2003
and partially implemented. Weekly working hours in production were reduced from 35 to
29 hours in 2003 and short-time work was introduced at year-end. A decision was made
to reduce the number of direct employees to 70. It was also decided to reduce the number
of indirect employees by 120. These measures are to be implemented by mid-2004.
EUR 7.0 million was saved in cost of materials in 2003. In addition, all areas were reviewed
for potential savings and this was considered in the budgeting for financial year 2004.
Loewe AG 27 2003
A significant expansion of our product line for large-screen flat-panel display sets is plan-
ned for 2004. We plan to launch ten new televisions on the market, the first large-screen
LCD TV with a screen diagonal of almost one meter as early as April 2004. The goal is to
generate more than 50 % of sales with flat-panel display sets in the fourth quarter of 2004.
The focus continues to be on internal projects concentrated on optimizing and refining the
Loewe brand image, product line planning, market launch process, international marketing
strategy, premium quality, technological partnerships and the search for a strategic
investor.
In 2003, Loewe employed an average of 1,245 persons. The average number of persons is
only slightly below the comparable figure for 2002 because the workforce adjustment measures initiated during 2003 and affecting 190 employees will not fully take effect until the
first half of 2004. As of the balance sheet date of December 31, 2003, the active workforce
(excluding trainees, persons permanently absent and part-time retirees) was lower than the
year before by 50 persons.
SALES DECLINE IN ALL SIGNIFICANT MARKETS
Despite the stability of the market as a whole, Loewe’s sales revenues declined by 23 % to
EUR 289 million in 2003. All significant markets contributed to this development because
generally there is higher demand for economical picture tube sets and buyer restraint in the
case of very high quality but still expensive flat-panel display sets.
Sales structure by region
in EUR million
2003
2002
+/– in%
Germany
148.5
181.4
– 18
51.4 %
48.2 %
(Percentage share of
total sales)
Benelux countries*
29.7
41.5
– 28
Italy**
17.8
31.0
– 43
Spain
25.6
28.0
–9
United Kingdom
10.1
13.4
– 25
France***
7.7
11.0
– 30
Switzerland
6.2
8.0
– 23
Other European countries
Europe (including Germany)
21.1
24.3
– 13
266.7
338.6
– 21
Australia
8.3
13.3
– 38
Russian Federation
6.1
10.8
– 44
U.S.****
5.7
9.4
– 39
Other non-European countries
2.1
4.1
– 49
22.2
37.6
– 41
288.9
376.2
– 23
Countries outside Europe
Total sales
*
Sales through Loewe Opta Benelux N.V./S.A.
**
Sales through Loewe Italiana S.r.l. since April 2003
***
Sales through Loewe France S.A. since 2002
**** Sales through Loewe Opta, Inc. since 2002
Whether they’re used for tabletop or
standalone units, the Loewe rack solutions
allow for individual and sophisticated
placement options.
In Germany, Loewe’s most important market, sales revenue declined by 18 % to
EUR 148.5 million. This is attributable both to the total TV market, which contracted by 7 %,
as well as Loewe’s reduced market share.
Outside of Germany, external distribution companies perform the sales, marketing
and service of Loewe sets except in the Benelux countries, Italy, France and the U.S. In the
latter countries, Company-owned subsidiaries perform this function. A subsidiary was also
established in Austria as of January 2004.
In 2003, Loewe Opta Benelux generated 28 % lower sales of EUR 29.7 million. In
view of the growing total market, Loewe’s market share declined by 9 % to 5.9 %. To relieve
the cost situation, the Company’s workforce was reduced from 44 persons as of December 31,
2002 to 38 persons as of December 31, 2003. Based on the costs directly attributable to this
business, this activity generated a slightly positive contribution to earnings in 2003 as well.
Since April 1, 2003, Loewe’s business in Italy has been under the aegis of Loewe Italiana S.r.l. On an annual basis, this company’s sales of EUR 17.8 million are 43 % less than the
previous year’s figure. The Italian market did in fact grow by 15 % in 2003; however, a heavy
share of this growth was attributable to the new flat-panel display sets. In addition, this
company’s startup difficulties led to a decline of Loewe’s market share from 4 % to 2.5 %. At
year-end 2003, the number of employees was only 8 because headquarters in Kronach performed most of the logistics and administrative functions. The central warehouse supplies
customers in Italy directly. The transfer of business from the former distribution partner led to
negative non-recurring factors of EUR 4.5 million, which weighed down the Italian business
in 2003.
French subsidiary
is profitable
The revenues of the sales company in France diminished by 30 % to EUR 7.7 million.
The market share by value of flat-panel display products rose especially rapidly in France in
2003 and accounts for more than 25 % of the total television market. The company’s logistics
are closely tied to headquarters in Kronach in order to supply the French customers directly
from the central distribution warehouse in Germany. In the period under review, the company
developed profitably. It employed 18 persons at year-end 2003.
Loewe AG 29 2003
Business in the U.S. failed to meet our expectations in 2003 as well. The demand
for high-end Loewe picture tube sets declined sharply and it was not possible to realize the
planned increase in revenues. A large-screen and high-resolution plasma set from Loewe was
not introduced to the U.S. market until September 2003. Due to software problems, the
picture quality of the plasma set was initially unsatisfactory and optimization measures had to
be taken later to improve it. The resulting delays caused us to significantly fall short of our
sales targets. Sales revenues in the U.S. declined by 39 % from EUR 9.4 million to EUR 5.7
million in 2003. Furthermore, market price reductions for plasma units in the U.S. made it
necessary for Loewe to reduce its sales prices.
This price pressure, the sharp decline in sales revenues and the disadvantageous
currency ratios produced a negative operating result in the U.S. business of roughly EUR 6
million. Loewe is taking the high loss as an occasion to review the future potentials of this
activity.
In the remaining countries, outside distribution partners market Loewe products.
In Spain, the decline in sales was only 9 % since the demand for flat-panel display products is
not yet as strong in this market. In all other countries, however, sales of Loewe products
declined more sharply.
As in the previous years, televisions represent roughly 85 % of total Loewe sales. DVD
players, video recorders, stereo components and accessories round out the Loewe product
line.
Sales structure by product area
in EUR million
2003
2002
+/– in%
Televisions
245.5
318.5
– 23
DVD players
4.1
7.9
– 48
Video recorders
3.4
7.3
– 53
Stereo systems
4.4
6.9
– 36
31.5
35.6
– 12
288.9
376.2
– 23
Accessories and
other revenues
Total sales
The overall decline in sales affects the product areas DVD devices, video recorders and
stereo disproportionately severely. These devices are usually purchased in connection with a
Loewe television as a part of high-end system solutions. Due to the disproportionate decline
in sales of expensive picture tube sets, sales of such peripherals were also sharply down.
Sales structure, televisons
in EUR million
2003
2002
Picture tubes
222.9
304.9
LCD
10.8
4.8
Plasma
10.2
8.8
1.6
0.0
245.5
318.5
Rear projection
Total sales, televisions
U.S. business put
to the test
Within the product group televisions, picture tube sets still accounted for 91 % of
sales in 2003. Sales of the new display technologies were increased. The introduction of additional 15” and 20” LCD sets made it possible to more than double sales of LCD televisions
to EUR 10.8 million. Sales of plasma sets grew less dynamically to EUR 10.2 million. As in the
previous years, our plasma line consists of only one very high-end set, which appeals to only
a small, affluent target group. Sales of projection sets relate to the Articos 55. Due to the late
production start in mid-December it was possible to sell only a small number of the sets in
2003.
DECLINE IN MANUFACTURING COSTS NOT IN LINE WITH DROP IN SALES REVENUES
Manufacturing costs
2003
2002
+/– in%
– 235.7
– 270.7
– 13
Costs as a percentage of sales – 81.6 %
– 72.0 %
Costs in EUR million
Due to the sharp drop in sales, the manufacturing costs declined by EUR 35.0 million;
however, they were up from 72.0 % to 81.6 % in relation to total sales. The primary causes
for this development are lower sales prices of the Loewe products, a worsening of the
product mix due to the higher proportion of standard sets and cost disadvantages resulting
from unutilized production capacity. Furthermore, negative non-recurring factors amounting
to EUR 6.6 million had an impact. The low procurement prices were only enough to compensate partly for this.
SELLING EXPENSES UNCHANGED
Selling expenses
2003
2002
+/– in%
– 74.3
– 74.8
–1
Costs as a percentage of sales – 25.7 %
– 19.9 %
Selling expenses at
previous year’s level
The selling expenses were slightly under those of the previous year; however, they
rose from 19.9 % to 25.7 % in relation to sales. The takeover of Italian sales by a companyowned subsidiary starting in April 2003 brought about an additional EUR 1.6 in selling
expenses that are not included in the comparable figure for 2002.
The costs for advertising were lower than those of the previous year by EUR 3.7 million, those for outgoing freight by EUR 1.1 million. This was offset by the warranty costs,
which increased by EUR 3.2 million. In addition to a negative special factor in the amount of
EUR 1.0 million, the increase is primarily due to higher field failures of picture tube sets and
the extension of the warranty period to three years. Compared to 2002, the costs of the sales
and marketing organization declined by EUR 1.5 million, due in particular to the personnel
adjustment actions, which have already been implemented, and lower material costs. The
other direct selling expenses are EUR 1.0 million higher than in the year before.
Loewe AG 31 2003
SIGNIFICANTLY LOWER ADMINISTRATIVE EXPENSES
Administrative expenses
2003
2002
+/– in%
– 8.8
– 10.9
– 19
– 3.0 %
– 2.9 %
Costs as a percentage of sales
The general administrative expenses were significantly lower than in 2002 primarily
due to the restructuring measures already implemented. Of the EUR 2.1 million reduction,
EUR 1.6 million was attributable to personnel costs and EUR 0.5 million to materials and
service costs and depreciation/amortization.
OTHER OPERATING INCOME REDUCED
Other operating income
2003
2002
– 3.4
0.8
– 1.2 %
0.2 %
Balance of operating income and
expenses in EUR million
Balance of operating income and
expenses as a percentage of sales
The balance of operating income and expenses and the income from affiliated
companies was EUR 3.4 million compared to EUR 0.8 million in 2002.
At EUR 8.4 million, the other operating income was only slightly below the previous
year. The release of provisions no longer needed accounted for EUR 4.2 million (2002:
EUR 3.2 million). The greatest share relates to provisions for disputed license fees of approximately EUR 3 million, with respect to which an agreement was arrived at in 2003.
The other operating expenses rose by EUR 4.3 million to EUR 12.0 million. They
include special factors of EUR 5.5 million and price losses of EUR 1.0 million, due especially
to the price decline of the U.S. dollar.
EBIT NEGATIVE
EBIT
2003
EBIT in EUR million
EBIT as a percentage of sales
2002
– 33.3
20.6
– 11.5 %
5.5 %
The decline in earnings before interest and taxes is primarily due to the sales slump,
the lower sales prices, the worsened product mix and the cost disadvantages resulting
from the unutilized production capacity. Added to this were non-recurring factors of
EUR 13.1 million.
INTEREST EXPENSES HIGHER
Balance of interest expenses and income
2003
2002
+/– in%
– 2.6
– 1.8
44
– 0.9 %
– 0.5 %
Balance of interest expenses
and income in EUR million
Balance of interest expenses
and income as a percentage
of sales
Interest expenses increased from EUR 1.8 million to EUR 2.6 million because the
higher capital needs were increasingly financed by borrowing. Moreover, the terms of interest
worsened for Loewe during the year under review.
TAX INCOME DUE TO DEFERRED TAXES
Income taxes
Taxes in EUR million
Taxation ratio in %
2003
2002
6.2
– 7.6
17.3 %
40.4 %
The tax income in 2003 are the result of capitalization of deferred tax claims amounting to EUR 13.0 million. They are offset almost exclusively by expenses amounting to EUR 6.8
in connection with the tax audit, which has still not been completed.
NEGATIVE GROUP NET INCOME
Group income
Group net income in EUR million
2003
2002
– 29.7
10.9
– 10.3 %
2.9 %
Group net income as a
percentage of sales
As a consequence of the operating loss and the impact on earnings of the
still uncompleted tax audit, the Group net loss after minority interests amounts to
EUR 29.7 million.
Loewe AG 33 2003
CAPITAL EXPENDITURE SIGNIFICANTLY REDUCED
Capital expenditure and depreciation/amortization
in EUR million
2003
2002
Invest-
Depre-
Invest-
Depre-
ments
ciation/
ments
ciation/
amorti-
amorti-
zation
Intangible assets
zation
8.4
9.3
7.4
6.7
and equipment
12.3
15.9
18.7
14.2
Financial assets
0.1
0.0
0.1
0.0
20.8
25.2
26.2
20.9
Property, plant,
Total
Compared to the previous year, capital expenditure was down by EUR 5.4 million to
EUR 20.8 million. We invested EUR 3.8 million in the construction of the new logistics center
in Kronach in 2002. In the year under review, the cost-cutting measures initiated at the start
of the year took hold, affecting all areas. Only in tools for new products did we invest roughly
40 % more than in the previous year.
The intangible assets primarily include own capitalized in-house development services
for products and technology platforms.
New in July 2004: The large Xelos SL 37 with a
high-resolution liquid crystal display in a modern cinema format offers a flicker-free and brilliant picture through the new MediaPlus HD
technology at an attractive price/performance
ratio.
The investments in property, plant and equipment primarily related to tools for new
products at EUR 8.8 million and EUR 2.0 for streamlining investments and adaptations of the
existing production facilities to the higher capacity requirement for flat-panel display units.
At EUR 25.2 million, depreciation/amortization was 21 % above the previous year’s
value. It includes extraordinary write-offs on tools for picture tube sets at EUR 1.6 million.
BALANCE SHEET RATIOS WORSENED
The high loss in 2003 reduced the shareholders’ equity of the Loewe Group to EUR 45.9 million. The shareholders’ equity including minority interests as of December 31, 2003 represents
roughly 23 % of total assets. Despite the systematic minimization of working capital, liabilities
increased by 34 % to EUR 70.0 million.
Key figures, consolidated balance sheet
in EUR million
2003
2002
+/– in%
Non-current assets*
62.9
67.4
–7
Inventories*
46.0
54.6
– 16
Trade accounts receivable*
70.5
81.4
– 13
Other current assets*
21.1
8.3
154
0.0
0.1
200.5
211.8
–5
45.9
81.7
– 44
Assets of the discontinued
division
Total assets
including minority interests
Provisions*
84.3
76.9
10
Liabilities*
70.3
52.6
34
0.0
0.6
200.5
211.8
–5
2003
2002
+/– in%
9.4
10.2
–8
and equipment
53.2
57.0
–7
Financial assets
0.3
0.2
50
62.9
67.4
–7
31.4 %
31.8 %
Provisions and liabilities
of the discontinued division
Total liabilities
* Home Media Systems division only
NON-CURRENT ASSETS LOWER
Non-current assets
in EUR million
Intangible assets
Property, plant,
Total non-current assets
as a percentage of total assets
Loewe AG 35 2003
The intangible assets primarily relate to development costs for new products to be
reported in accordance with the International Accounting Standards (IAS). Property, plant,
and equipment almost exclusively include land and buildings, the production facilities, and
other machinery and office equipment located at the Company’s headquarters in Kronach.
The decline by EUR 4.5 million is primarily attributable to extraordinary write-offs on tools for
picture tube sets but also to the reduced capital expenditure.
INVENTORIES OF FINISHED GOODS IN PARTICULAR SIGNIFICANTLY REDUCED
Inventories
in EUR million
2003
2002
+/– in%
16.4
15.5
6
merchandise
29.6
39.1
– 24
Total inventories
46.0
54.6
– 16
22.9 %
25.8 %
Raw materials and supplies
and work in progress
(factory inventories)
Finished goods and
The 16 % decline in inventories to EUR 46.0 million results from the reduction of
inventories of finished goods and special write-downs of EUR 1.5 million on factory inventories and EUR 4.2 million on finished goods. The factory inventories are excessive because
short-term production cutbacks at year-end could not be adequately compensated by reduced
deliveries of materials.
Finished goods by product group
in EUR million
2003
2002
+/– in%
Televisions
16.7
26.0
– 36
DVD players
0.9
0.7
29
Video recorders
0.6
0.5
20
Stereo systems
3.2
3.1
3
8.2
8.8
–7
29.6
39.1
– 24
Accessories and
other inventories
Total inventories of finished
goods and merchandise
The decline in the finished goods inventory primarily concerns televisions that were
reduced by 36 % to EUR 16.7 million.
Finished goods by company
in EUR million
2003
2002
+/– in%
Loewe Opta GmbH
24.0
32.2
– 25
– 19
Loewe Opta Benelux N.V./S.A.
2.5
3.1
Loewe France S.A.
0.0
0.1
Loewe Italiana S.r.l.
1.1
0.0
Loewe Opta, Inc.
2.0
3.7
– 46
29.6
39.1
– 24
Total inventories of finished
goods and merchandise
Inventories in Germany were reduced by 25 % in 2003 and are at a level appropriate
to the lower business volume. With a view to the rapid price drop in the American market,
significant write-downs were taken on finished goods located in the U.S. The finished goods
inventories in the U.S. declined by almost 50 % to EUR 2.0 million.
Overall, the average inventory range for finished goods is 1.2 months. In the present
situation, this represents the target value.
New in September 2004: More than just flat. The new
Spheros 32 LCD television includes an integrated hard disk
and a photo viewer as standard features.
Loewe AG 37 2003
LOWER RECEIVABLES DUE TO DECLINE IN SALES AND FACTORING
Trade accounts receivable
in EUR million
2003
2002
Loewe Opta GmbH
53.0
71.3
– 26
3.9
5.3
– 26
– 25
+/– in%
Loewe France S.A.
2.4
3.2
Loewe Italiana S.r.l.
9.7
0.0
Loewe Opta, Inc.
1.5
1.6
–6
70.5
81.4
– 13
35.2 %
38.4 %
Total trade accounts
receivable
Year on year, the trade receivables declined by 13 % to EUR 70.5 million. It should be
noted that factoring of accounts receivable at yearend 2003 reduced the debtor portfolio by
EUR 14.0 million. On the other hand, the increase in Italy resulted from the transfer of sales
to the Loewe-owned subsidiary. Adjusted for the effect of factoring and the transfer of
sales in Italy, the average payment period increased from 78 to 93 days because longer times
for payment were allowed on a selective basis to promote sales.
OTHER CURRENT ASSETS UP DUE TO DEFERRED TAX ASSETS
Other current assets
in EUR million
2003
2002
Other short-term receivables
3.0
4.5
– 33
Cash and cash equivalents
2.9
3.7
– 22
Deferred tax assets
15.2
0.1
Total other current assets
21.1
8.3
10.5 %
3.9 %
+/– in%
154
Other short-term receivables were significantly higher than in the previous year due
to the EUR 15.1 million increase in deferred tax assets.
LOSSES REDUCE EQUITY BASE
Shareholders’ equity was reduced by the net loss of EUR 29.7 million and the dividend of
EUR 6.1 million paid for financial year 2002 in June 2003. The equity ratio declined from
38.6 % to 22.5 %.
Shareholders’ equity including minority interests
in EUR million
2003
2002
+/– in%
44.7
80.5
– 44
1.2
1.2
0
including minority interests
45.9
81.7
– 44
22.9 %
38.6 %
Minority interests
Minority interests relate to a 1 % minority stake in Loewe Opta GmbH, a 10 % minority stake in Loewe Opta Benelux N.V./S.A. and a 25 % minority stake in Loewe France S.A.
HIGHER PROVISIONS NECESSARY
Provisions
in EUR million
2003
2002
+/– in%
Pension provisions
27.1
28.2
–4
9.0
1.0
Other provisions
48.2
47.7
1
Total provisions
84.3
76.9
10
42.0 %
36.3 %
Tax provisions
The decline in pension provisions primarily relates to a payment to Loewe Unterstützungskasse e.V., which is not to be consolidated. The increase in tax provisions primarily
resulted from the risk provision for the still uncompleted tax audit for the years 1996 to 2000.
Other provisions
in EUR million
2003
2002
+/– in%
Annual sales compensation
15.5
16.1
–4
9.0
8.4
7
Cost of warranties
Personnel costs
9.7
9.9
–2
License expenses
2.0
4.3
– 53
Other
12.0
9.0
33
Total other provisions
48.2
47.7
1
24.0 %
22.5 %
Loewe AG 39 2003
The need for provisions for bonus payments to retail partners dropped due to the
decline in sales and unattained sales targets. Higher provisions for warranty costs result
from the extension of the warranty period granted in 2003 and planned upgrading of Loewe
televisions, which is to be carried out by factory-authorized workshops. The provisions for
disputed infringements of industrial property rights are also lower because it was possible to
conclude agreements concerning disputed industrial property rights payments in the year
under review.
LIABILITIES INCREASE DUE TO HIGHER BANK LOANS
Liabilities
in EUR million
2003
2002
+/– in%
Long-term bank loans
10.0
3.4
194
Short-term bank loans
21.3
10.6
101
0.9
0.9
0
Short-term portions of
long-term bank loans
Loan from Loewe Opta
Unterstützungskasse
8.9
5.9
51
Subtotal
41.1
20.8
98
Trade accounts payable
21.7
26.3
– 17
7.5
5.5
36
70.3
52.6
34
35.1 %
24.8 %
Additional short-term
liabilities
Total liabilities
Short-term and long-term amounts owed to banks increased from EUR 14.9 million
to EUR 32.2 million. At yearend 2003, the short-term lines were EUR 33.9 million and their
utilization was 63 %. They were thus far unsecured and granted on a short-term basis.
Loewe’s worsened general economic conditions made it necessary to enter into new financing
agreements with the primary lenders. The existing lines were extended to February 28, 2005
and were increased by up to EUR 10.0 million to cover seasonal peak periods in November
and December 2004. In early 2004, extensive security was provided under a security pooling
arrangement to the benefit of the lenders involved.
The noticeable decrease in trade accounts payable is reflected in the reduced production and purchasing volume in the final months of 2003.
LOSSES PUT PRESSURE ON CASH FLOW
In 2003, a negative free cash flow in the amount of EUR 15.0 million was reported. The
primary causes were the high operating losses and capital expenditure of EUR 20.6 million.
A reduction in net current assets of EUR 17.6 million partially compensated for this.
Significant key figures of the consolidated
cash flow statement
in EUR million
2003
2002
Net cash before changes in
net current assets*
– 11.4
31.5
17.6
– 12.4
– 20.6
– 26.1
– 14.4
– 7.0
discontinued division
– 0.6
5.7
Total free cash flow
– 15.0
– 1.3
Change in net current assets*
Net cash used by investing activities*
Free cash flow of
Home Media Systems division
Free cash flow of the
* Home Media Systems division only
The reduction in net current assets primarily relates to inventories, which were down
by EUR 8.6 million, and trade receivables, which decreased by EUR 10.9 million.
Net current assets
in EUR million
2003
2002
Inventories
46.0
54.6
– 8.6
70.5
81.4
– 10.9
– 0.2
Other assets*
+/– in%
2.8
3.0
– 21.7
– 26.3
4.6
Other provisions
– 48.2
– 47.7
– 0.5
Other short-term liabilities
– 7.5
– 5.5
– 2.0
Total net current assets
41.9
59.5
– 17.6
* excluding income taxes
The negative free cash flow of EUR 15.0 million and the dividend of EUR 6.1 million
paid in 2003 were financed by short-term and long-term borrowing.
Loewe AG 41 2003
Loewe Mimo 20: Extremely
flat design object offering
versatile placement variants
and exchangeable front panels
available in Cayenne Red and
Ocean Blue.
CLOSURE OF THE TELECOMMUNICATIONS DIVISION COMPLETED IN 2003
The closure of the Telecommunications division no longer impacted the 2003 financial year.
The following table shows the significant year on year figures:
Key figures of the discontinued division
in EUR million
2003
2002
Sales
0.0
9.4
EBIT
0.0
0.0
Net income
0.0
0.0
Capital expenditure
0.0
0.2
0
11
Employees (annual average)
Perfect home cinema system:
The Nemos 32 on Nemos Rack
with Auro DVD preceiver,
View Vision video recorder, and
Tremo subwoofer satellite
system.
NUMBER OF EMPLOYEES SLIGHTLY DOWN
In 2003, Loewe employed an average of 1,245 persons, the largest number of them at
Company headquarters in Kronach. The average number of persons is only slightly below the
comparable figure for 2002. This is due to the fact that the personnel measures are being
implemented gradually. As of the balance sheet date of December 31, 2003, the active workforce (excluding trainees, persons permanently absent and part-time retirees) was already
lower than in the year before by 50 persons. In the first half of 2004, the personnel adjustments started in the year under review will have a greater impact by affecting 190 persons.
In production, the number of employees was reduced by 4 % on an annual average.
The reduced hours and the short-time work introduced in December 2003 reduce personnel
costs.
Employees by division
Annual average
2003
2002
+/– in%
Marketing, sales, service,
quality
320
320
0
Development
141
137
3
Production
499
520
–4
Administration and services
137
141
–3
94
91
3
54
41
32
1,245
1,250
Trainees
Other (permanently absent,
part-time retirement)
Total employees
Loewe AG 43 2003
The new sales company in Italy raised the workforce in the foreign subsidiaries.
The average number of employees in the U.S. increased because the target workforce based
on the build-up phase in the first half of 2002 had not been reached.
Employees by country
Annual average
2003
2002
Germany
+/– in%
1,166
1,173
–1
Benelux countries
40
45
– 11
France
20
19
5
Italy
4
0
0
USA
15
13
15
1,245
1,250
Total employees
The flexible and requirements-oriented adjustment of personnel structures was a
focus of personnel work in 2003. In addition to making the year’s work schedule variable, we
Adjustment of
personnel structures
also made use of the possibilities for safeguarding employment in production under the collective bargaining agreement. In this regard, we reduced the work week from 35 hours to 29
hours. In the second half, short-time work was introduced to supplement these measures.
This was accompanied by negotiations concerning a reconciliation of interests and a social
compensation plan, which were successfully brought to a conclusion. The stage is now set for
a further systematic reorientation of the Company in the area of personnel.
Loewe attaches great importance to occupational training for young people. Accord-
Loewe’s vocational
ingly, approximately 8 % of our employees are trainees. Of this total, roughly 57 % are train-
training is known for
ing for technical careers and 43 % for careers in administration. Loewe is well known in
quality
the region for the quality of its training programs for students and is recognized as a very
attractive employer. More than 50 % of the graduates regularly obtain good to very good
grades in examinations.
The year 2003 demanded a special degree of dedication, ability, and flexibility from
our employees. The Executive Board wishes to thank all of the employees and the works
councils for their exemplary commitment to Loewe’s interests.
ENVIRONMENTAL ORIENTATION SOLIDLY ROOTED
Loewe attaches great
Loewe’s goal is to go beyond compliance with the legal environmental regulations to continu-
importance to environ-
ously reduce the environmental impact of all Company activities. For that reason, we demand
mental awareness
and support environmental awareness and personal responsibility of our employees.
Loewe is prepared to implement the EU Waste Electronic and Electrical Equipment
Directive and is collaborating with the appropriate committees of the German Electrical and
Electronic Manufacturers’ Association (ZVEI). One result of the association’s activities was the
establishment of the project company “Waste Electrical Equipment Register” (EAR). Loewe
intends to meet the requirement of the European Waste Electronic and Electrical Equipment
Directive to take back all products sold and offered for sale after mid-2005 free of charge
under the framework of a manufacturers’ consortium.
The waste avoidance concept provides for the early involvement of suppliers in selecting suitable packaging materials. The use of reusable packaging with appropriate removal is
always a priority.
Our efforts to bring technically high quality and environmentally safe products to the
market led to an important milestone in 2003. The RC2 remote control unit was the first
Loewe component to go into mass production that is soldered without lead and whose circuit
board is free from halogen-containing flame retardants.
SHAREHOLDERS’ MEETING ON JUNE 25, 2003
Shareholders’ Meeting
At the Shareholders’ Meeting of Loewe AG held on June 25, 2003, all items on the agenda
concurs with proposals
were adopted with only a few opposing votes. The approximately 300 shareholders present
by management
represented roughly 50 % of the subscribed capital.
In place of Guido Alt who resigned from the Supervisory Board, the shareholders
elected Dr. Gerhard Heinrich, a management consultant from Frankfurt, to the board.
No counterproposals or actions in rescission were raised to the resolutions of the
Shareholders’ Meeting.
The next Shareholders’ Meeting of Loewe AG will take place on June 23, 2004 –
again in the Forum Hotel in Munich.
RISKS OF FUTURE DEVELOPMENT
FURTHER DEVELOPMENT OF RISK MANAGEMENT AT LOEWE
Risk management is an integral part of the processes and structures at Loewe and the companies in the Group. Risks are identified and evaluated with the goal of making risks manageable through suitable actions. An essential prerequisite for this is consistent awareness of
risks in all divisions.
Upgrading of risk
management
The risk management system was further optimized in 2003. The standardization of
clearly defined risk areas and fields leads to a transparent risk management structure to which
the various single risks can be assigned. We created an IT integration to make it possible
for the persons responsible for risks to process the single risks decentrally and make central
reporting available.
The single risks are of a quantitative or qualitative nature depending on the degree
of possibilities for identification and evaluation. With respect to quantitative risks, a monetary
loss is determined in the form of the gross risk. By evaluating the safeguards to be applied
and assigning probabilities of occurrence, it is possible to consider all cost and benefit
elements of the remaining net risks.
Despite such measures, it is difficult to assess future developments in a phase of
market upheaval. The most significant single risks are described below.
Loewe AG 45 2003
PRICE EROSION FOR PICTURE TUBE SETS EXCEEDS COST-CUTTING POTENTIALS
The increasing substitution of conventional picture tube televisions by flat-panel display sets is
bringing about a declining market for high-end picture tube sets in Europe. Over the long
term, this category of sets will be exclusively in the low price segment because customers will
be increasingly less willing to pay a price premium for high-end picture tube sets.
The Loewe business model is designed to obtain a price premium with exceptionally
well-featured and customized products, making it possible for a comparatively small manufacturer to compensate for its cost disadvantages in procurement and production. As a consequence of the described market development for picture tube sets and the resulting drop in
production volume, there is the risk that Loewe may no longer be profitable in the segment
of picture tube televisions.
For Loewe, it is therefore critical to exhaust the sales potentials to the best extent
possible while securing a reduced premium positioning in picture tube sets.
The employment of resources for this product category will be reduced to a necessary
minimum. There will be no more product launches of picture tube televisions. The number
Focus on flat-panel
display sets
of products and models will be reduced to be able to produce higher numbers of units per
product family and thus improve the cost structure. All cost elements not honored by the
customer should be eliminated while ensuring that Loewe products retain their premium
character.
POSITIONING OF A COMPETITIVE FLAT-PANEL DISPLAY LINE
The market for televisions with flat-panel displays is characterized by dynamic growth with
high competitive pressure. In addition to the existing competitors, who have already in
part converted their product lines more heavily to flat-panel displays, new competitors are
crowding into the segment. With a market share of less than 2 %, Loewe has thus far participated in this important growth segment to a disproportionately low degree and compared
to picture tube sets, has attained an unsatisfactory market position.
The challenges for Loewe lie in the fact that product life cycles for flat-panel display
sets are significantly shorter than for conventional picture tube sets. In contrast, the product
development process does not differ significantly with respect to throughput time. Furthermore, the cost structure for flat-panel display sets is less favorable for Loewe due to the lower
vertical integration with simultaneously higher material costs for the displays. This could lead
to production capacity utilization problems if the decline in production volume for picture
tube sets should exceed the increase for flat-panel display units. Moreover, the short life
cycles and the high competitive pressure in this market will lead to a rapid drop in prices and
will thus make it more difficult to market Loewe sets with stable pricing.
Loewe is counteracting these risks by developing and introducing a broader product
range of flat-panel display sets. In doing so, a critical focus is on the implementation of
product concepts for shorter life cycles in connection with an optimized product development
process that takes into account the fast-moving market developments. Furthermore, the
existing production capacities should be better utilized through contract manufacturing of
electronic modules for third-party companies.
The implementation and success of these measures requires close operating cooperation with strategic partners who occupy a leading position in the manufacture of flat-panel
displays.
Increased cooperation
with strategic partners
PREMIUM POSITIONING WILL ONLY BE POSSIBLE WHEN THE FLAT-PANEL DISPLAY
MARKET MATURES
The emphasis is still on
The dynamic market growth in flat-panel display sets is presently still highly concentrated on
price in the flat-panel
sets marketed with aggressive pricing, whose features and intrinsic value tend to be low. Even
display market
typical premium customers buy such sets because flatness is perceived as the most important
product characteristic. It outshines all other product characteristics such as picture quality,
ease of use and features. As the flat-panel market matures, these criteria that permitted
Loewe to distinguish itself clearly from the competition in the mature picture tube market will
again gain in importance. In the meantime, there exists a risk for Loewe that the target
segment of well featured and high-end flat-panel display sets will have comparatively little
market significance and consequently the sales potential for Loewe could be limited.
In addition to safeguarding the premium character of Loewe products, Loewe will
therefore have to concentrate more strongly on the marketing of flat-panel display units. Such
sets generate a lower price premium than was the case with the more sharply differentiated
picture tube sets in a mature market environment.
Also in the flat-panel display environment, design will be an important differentiating
and positioning criterion in relation to products of the competition. In this connection, individual design possibilities resulting from flexibility and modularization will become increasingly
important even in the external appearance of the products.
The modular upgradability of Loewe products for integrated Internet use and hard
disk recording, for example, and the flexible connection of digital devices such as PCs, digital
cameras, etc. will provide the customer individual and customized solutions. Scalability in
performance and costs will thus have a high priority.
MASTERY OF THE RELEVANT TECHNOLOGIES
Premium positioning in flat-panel display sets requires that objectifiable competitive advantages are present in significant product characteristics such as picture and sound quality, ease
of use or system capability.
Technology positions
For Loewe, many technology positions that were relevant to picture tube sets can
transferred to flat-panel
be transferred to flat-panel display units. With respect to picture quality, its optimization
display units
is necessary as is close cooperation with the display suppliers who are exclusively based in the
Far East.
With regard to the use of digital platforms from the computer segment, Loewe is
concentrating on the development of a powerful application. At the same time, an attempt is
being made to use the existing contacts with institutes, universities and research institutions
of significant companies more intensively and also expand them.
PROCUREMENT CONDITIONS AND AVAILABILITY OF MATERIALS
The presently declining production and purchasing volume of Loewe may negatively impact
the purchasing conditions. Presently, suppliers have a limited availability of flat-panel displays.
This situation could be followed by a phase of oversupply and thus lead to strong price
volatility. These conditions could negatively affect the procurement conditions and the availability of materials in the future.
Concentration on
key suppliers
Loewe counteracts these problems by systematically bundling volume with key suppliers, reducing the numbers of products and models, refining electronic procurement systems to
reduce suppliers’ processing costs and qualifying alternative components and suppliers. The
expansion of existing cooperative agreements for purchasing and the continuous coordination
of volume demand directly with the supplier companies and their partner organizations is
also of great importance.
Loewe AG 47 2003
PRODUCT QUALITY AND LIABILITY
For premium providers in particular, a high standard of reliability and product quality is critical.
It has become more difficult to achieve high quality goals in recent years because measures
to increase performance led to greater stress on the components used and greater complexity
sharply increased the fault potential in the device software.
Despite systematic quality assurance measures, field failures in picture tube sets have
increased in recent years. Generally, the chief causes relate to the picture tubes or displays
used, line output transformers or the soldering. Furthermore, the greater share of purchased
materials or parts can be expected to result in an even greater dependence on key suppliers
in the future.
In order to counteract these problems, Loewe has for years taken extensive measures
intended to ensure the quality of the products in production and in the market. For example,
as part of formal evaluations, intensive tests are performed in the pilot production series. In
this way, possibilities for early countermeasures can be created and consequential errors can
be avoided.
In software, fully operational standard components are increasingly replacing of individual solutions. For an optimum interaction with the hardware, synchronization points are
defined and analyzed in the hardware-software development. Moreover, a standardized supplier evaluation is performed according to specific and clearly defined quality criteria for the
best possible quality of the supplier material. The basis of this evaluation is intensive supplier
support in the sense of product/system audits and onsite acceptance inspections at the supplier’s premises.
The Xelos SL has a striking and clear
design. With purist appearance and
model variety the Xelos SL blends
into nearly any living environment.
Increased field failures
in picture tube sets
ADDITIONAL FOREIGN COMPANIES
Loewe’s goal is to create an important foundation for positive corporate development by
expanding into European and additional international markets. With the exception of the
Benelux countries, Italy, France, Austria and the U.S., foreign sales are under the aegis of
independent distribution companies. In countries where no suitable distributors are available,
Loewe will service the market through its own sales companies. The advantage of higher
sales revenues through eliminating a marketing stage is offset by additional fixed costs of the
sales organization.
Centralized
administrative functions
To limit this risk, costly decentralized warehousing is avoided by supplying the customers in Italy and Austria directly. Essential administrative functions are centrally located in
Germany.
In the case of the U.S. subsidiary, such streamlining measures are possible only to a
limited degree. Moreover, the products for the North American market require a separate
technology platform, which is connected with high development investments. If the market
acceptance of the newly introduced projection sets do not meet expectations, it will be
necessary to decide if the U.S. business is feasible in the long run.
GREATER BORROWING REQUIREMENTS
Financing needs
The significantly increased borrowing requirements were secured until February 28, 2005
secured
through loan agreements with the principal bankers and other lenders to the extent that
Loewe’s financing is assured even under a very unsatisfactory scenario. The essential condition
for this estimation is that the new flat-panel display units will be introduced on schedule
and will be accepted by consumers.
OTHER RISKS
Despite its international focus, the currency risk is moderate for Loewe since the greatest
share of foreign sales is billed in euros. Risks exist only in the U.S. business due to the fact
that sales are conducted in U.S. dollars and from the increasing purchasing volume of flatpanel displays that must be paid in Japanese yen. These currency risks are partially counteracted through the use of derivative instruments.
With their competence, employees in key positions create the basis for economic
success. In the current restructuring phase characterized by, among other things, measures to
reduce personnel, the retention of these employees is of particular significance. To this end,
Loewe relies on open information concerning the development of its operations, close
involvement in decisions and on the implementation of the restructuring program.
EVENTS AFTER THE END OF THE FINANCIAL YEAR
On February 16, 2004, the principal bankers and other lenders of Loewe agreed on a financing concept to run until February 28, 2005. It involves an extension of the previously committed credit lines of EUR 33.9 million and their increase by up to EUR 10.0 million to cover
seasonal peaks in November and December 2004. Even under a very unsatisfactory scenario,
this financing limit appears adequate to secure Loewe’s financial stability. In return, Loewe
has agreed to transfer significant collateral to the banks.
Loewe AG 49 2003
OUTLOOK
The overall economic conditions should improve slightly in 2004. The anticipated economic
growth of approximately 2 % in the euro area may primarily be supported by stronger
domestic demand and higher capital equipment spending since the upvaluation of the euro
presumably will lower export opportunities. Positive stimuli are expected from the continued
low interest rates and the rate of inflation, which is expected to decrease slightly. In 2004,
the unemployment rate in the euro area will persist at a high level of almost 9 %.
The consumer electronics market should develop similar to the overall economy in
the current financial year. Slight growth is expected in Europe. Germany’s contribution to this
growth will be below average. In the television segment, which is of critical importance to
Loewe, the substitution process in the direction of flat-panel display sets should intensify and
consequently lead to high growth rates as in the previous year. Sales in the still dominant
market segment of television sets with picture tubes will diminish further. The impact of this
on the high-end and high-priced picture tube segment will be especially severe.
Starting in 2004, Loewe plans to launch only but flat-panel display sets on the mar-
Market position in
ket. A 32” and a 37” LCD-based set will be added to the Spheros product family. Together
flat-panel displays to
with the already introduced 20” and 42” sets, Loewe offers a broad line in the premium seg-
be expanded
ment. In addition, the Xelos SL family will be positioned in the mid-range segment to participate more strongly in the dynamic market growth with attractively priced flat-panel display
sets. Building on the 20” set introduced late last year, sets in the sizes 26”, 32”, and 37” and
others will follow in 2004. These sets will be equipped with the most advanced panel generation and occupy a top position in terms of quality. Through the expansion of the product line
with flat-panel display sets, such sets should account for more than 50 % of
sales as early as the fourth quarter.
Loewe also expects sales stimuli from the Articos 55 projection unit, which was
introduced in late 2003. Its market success will be critical, especially for the further business
development in the U.S. Furthermore, the market acceptance of the already introduced highresolution Spheros 42 flat-panel display set must be improved in order to achieve the sales
targets in the U.S. Should these targets not be met in 2004, a decision will have to be made
whether to continue Loewe’s activities in the U.S.
After transferring sales in Italy to a Company-owned subsidiary in 2003, definite
sales growth should be possible in Italy in the current financial year. For Austria, we expect a
seamless takeover of sales activities by the new subsidiary and accordingly a similarly positive
development of sales. In Germany, significantly higher sales of flat-panel display sets in 2004
should compensate for the declining sales of conventional televisions. Only in Australia are
noticeably lower sales expected because the local distribution partner started the year with
excess inventories.
Despite all measures to increase the numbers of units sold, the business volume in
2004 will not reach the sales level of 2001 and 2002. Significant cost relief can be expected
in 2004 because non-recurring factors of roughly EUR 13 million in 2003 will be eliminated
and additional savings of organizational costs of approximately EUR 10 million are planned.
Loewe will further reduce capital expenditure in 2004 and concentrate for the most
part on tools for new products. All other investments will be limited to a necessary minimum.
The number of employees will drop once more in 2004. In addition to the implementation of the workforce reduction measures adopted in 2003, it cannot be ruled out that a
further reduction will be necessary if Loewe’s economic prospects deteriorate.
In 2003, the liquidity requirements were up sharply and they were mainly covered by
higher bank loans and factoring. Based on present knowledge, the financing volume in 2004
is adequate to pay all financial obligations on time, even if Loewe’s economic development
turns out to be very unsatisfactory.
As a whole, after the extremely difficult 2003 financial year, we expect sales to
stabilize with long-lasting cost relief. Nonetheless, it will not be possible to achieve a breakeven operating result in 2004.
The Executive Board
Dr. R. Hecker
Dr. B. Bamberger
G. Schaas
Loewe AG 51 2003
THE ULTIMATE PURPOSE OF SCIENCE IS TRUTH,
2003 52 Initiatives with Future. Loewe AG
Loewe AG 53 2003
WHILE THE ULTIMATE PURPOSE OF THE ARTS IS ENTERTAINMENT.
GOTTHOLD EPHRAIM LESSING
Ideals unite the best of several worlds.
Compromises are forgotten; contradictions dissolve. In order to create true
pleasure, Loewe counts on its ability to
look at the whole picture. We combine
well thought out technology with
experienceable design. The Xelos is such
an example. The future-proof technology
of the equipment guarantees perfect
image and sound enjoyment. Clear forms
and classic elegance provide long-lasting
fascination.
P. 54
Brand mission creates profile
P. 57
Focus on flat-panel displays
P. 61
Expansion of international
distribution
P. 62
Technologies with future
INITIATIVES WITH FUTURE
IFA: SUCCESSFUL TRADE SHOW APPEARANCE UNDERSCORES TECHNOLOGY
AND DESIGN COMPETENCE
INTERNATIONALISM: FOREIGN SUBSIDIARIES ENSURE IMPLEMENTATION OF
TRIED AND PROVEN SALES AND MARKETING STRATEGY
PRODUCTS: FOCUS ON FLAT-PANEL DISPLAY UNITS AND CONSOLIDATION
IN PICTURE TUBE TELEVISIONS
BRAND MISSION CREATES PROFILE
Sharper brand image
Brands provide orientation and give consumers confidence. They create added value, make
for a new future
quality experienceable, and last but not least profile a company’s products. With these
considerations in mind, the Executive Board has been concentrating very intensively on the
strategic realignment of Loewe since mid-2003. The goal is to strengthen the Company’s
position in national and international competition. The changing market conditions and the
paradigm shift to flat-panel display technologies are important underlying conditions that
need to be taken into consideration. In keeping with current developments, we are now
working on a new brand mission. This mission will make Loewe both distinctive and credible
and above all will enhance the competitiveness and attractiveness of our brand. It essentially
determines the future product range alignment and communication strategy. This approach
will allow Loewe to successfully position itself and set itself apart from the competition.
The first steps of the realignment have been initiated and are currently being actively implemented.
COMMUNICATION HIGHLIGHTS
Targeted market
Spring 2003 saw the international market launch of Loewe Mimo, an unusual, delightfully
strategies
different product line. Young, individual, and versatile, it’s a new TV for a new target group.
We launched a large-scale campaign with the product claim “Be different.” It encompassed
image motifs in the popular press and mailings to end consumers. For dealers, we connected
the second placement with a PoS competition where dealers could win a drivers training
session with BMW or Mini.
In summer 2003, Loewe joined forces with Premiere to create an exclusive marketing
package containing a variety of aspects. In addition to classic elements such as a brochure
and mailing, it also included editorial advertisements and a microsite at loewe.de. The central
focus is on our digital TV upgrade kits. In this segment, Loewe offers a technology advantage
that gives end consumers a full range of choices. Analog and digital TV as well as radio via
satellite can be integrated in a TV set.
Loewe AG 55 2003
The ideal second set for the kitchen or bedroom.
The Xelos SL 20 in 4:3 format is highly versatile due to its
compact form and integrated FM tuner for radio reception.
In fall 2003, Loewe started the season by supporting dealerships with a comprehensive campaign. Customized campaigns promoted the announcement of product launches
in the fields of projection TVs and plasma, LCD, and CRT technology. In our communication
efforts, we presented Digital RecordingPlus as a new added benefit.
THE BEST FROM 80 YEARS OF INNOVATION
Eighty years of Loewe, eighty years of competence. To celebrate the Company’s birthday, we
80 years of technical
launched a campaign titled “The Best from 80 Years of Innovation” in November. Instead
knowledge for
of looking back, we look to the future. The campaign advertises Loewe’s innovative television
innovative solutions
generation based on plasma, projection, and LCD technology.
To boost the Christmas business, we also defined specially priced product packages.
The packages accompanied the presentation of the new technologies with the targeted promotion of picture tube television sales. The core message was the perfection of products that
are coordinated with each other in design and technology. In order to actively involve dealers,
we adapted our campaign advertisements for the Christmas business for daily papers. By
doing so, Loewe supported dealers’ sales on a regional level.
MORE LOEWE AT THE IFA
At the IFA international consumer electronics fair in Berlin, Loewe presented itself in a highly
The IFA international
emotional, attention-grabbing setting. Under the motto “More Loewe,” four core subject
consumer electronics fair
areas demonstrated the added value people can expect from Loewe.
was the focal point
More quality.
it was anticipated to be
More possibilities.
More intelligence.
More experience.
The experience lounges made the Loewe booth the most attractive stand at the IFA for many visitors.
The unusual design of the trade show booth echoed the overarching theme architectonically
and effectively called attention to our new products. Openness and transparency, coupled
with detailed product information, dominated the booth’s communication principle. A special
light installation underscored the intention of the booth concept. Various experience lounges
conveyed our innovativeness to the visitors and introduced them to Loewe’s intelligently
integrated solutions and design competence.
The thematic highlight was Loewe flat TV, prominently displayed on a floating monolithic beam. Free-hanging, ring-shaped lamps and large, semi-transparent banners focused
the attention on this product. The well thought out presentation clearly set our trade show
appearance apart from the competition and memorably conveyed the added value of Loewe.
The exceptionally positive response of the media and the bestowal of the iF design award
underscored the special class of our exhibition concept.
LOEWE DESIGN SETS STANDARDS
The booth at the IFA fair is not our only prizewinner. Last year, several Loewe products were
once again awarded the iF seal of approval for excellent industrial design: The Mimo 15,
Mimo 28, and Articos 55 televisions, the Xemix 8122 DA DVD player, and the Tremo subwoofer satellite system. Our products have always captivated consumers with their timeless,
precise, and elegant forms. They retain their appeal for a long time. To date, this quality has
garnered Loewe more than 140 design prizes on a national and international level.
Loewe design
The iF design award is conferred by the Industrie Forum Hannover to pay tribute to
competence wins
design excellence. The prize is awarded by an international, high-ranking jury. In the course of
new awards
the past 50 years, the well-established award has therefore become one of the most coveted
design prizes for companies and designers. Last year, 735 participants from 32 countries competed for this special recognition with 1,630 submissions. In this highly-qualified competitive
environment, Loewe was able to successfully reach the leading position.
Loewe AG 57 2003
The Spheros 42 received one of the most important design prizes in the world, the
GOOD DESIGNTM Award. By conferring the award, the Museum of Architecture and Design in
Chicago paid tribute to the excellent design of this super flat plasma TV. The design for
the Spheros was developed by Phoenix Design of Stuttgart.
PROCOLLEGE EXPANDS NUMBER OF PARTICIPANTS
ProCollege, our central training facility for retail employees, forms the stable basis for our
trusting, longstanding qualification partnership with the trade. The emphasis of the seminar
programs is on retail marketing, product marketing, and technology. The conception, coordination, and training of the product and technology-oriented contents are handled exclusively
by Loewe employees. External specialists contribute their knowledge to seminars on retail
marketing issues. Last year, ProCollege recorded a growing number of participants. In a survey
on dealer satisfaction conducted by a major German consumer research institution in 2003,
electronics retailers gave ProCollege the best score in the industry.
CUSTOMER CARE CENTER AS AN INTEGRAL PART OF THE MARKETING STRATEGY
The Customer Care Center established by Loewe in 2002 was able to continue its excellent
Customer Care Center
performance in the second year of its existence. Due to its rising resonance with end con-
strengthens customer
sumers as well as with retail it has become an indispensable part of Loewe’s marketing strate-
loyalty
gy and the most important instrument for establishing customer loyalty. Our extensive services
for end customers were further expanded in 2003. The center combines mail order, dealer
directories, user support, and returns and complaint management in a central office. Loewe
deliberately works with its own employees who are well prepared for their responsibilities. As
an important market information source, the employees also share their expertise with internal departments such as product marketing, customer service, and quality control.
TECHNICAL SUPPORT USES INTERNATIONAL SERVICE CONCEPTS
In 2003, Technical Support concentrated on the introduction of international service concepts.
We centralized our spare parts department for the first European Loewe subsidiaries in
Kronach while major aspects of the spare parts logistics were outsourced to an external partner. The remainder of the spare parts logistics were also outsourced in early 2004. A number
of surveys rated our customer service activities very favorably in 2003. In the various evaluation categories, Loewe consistently came in at the lead. Loewe’s three-year guarantee did
especially well.
FOCUS ON FLAT-PANEL DISPLAYS
In addition to the last market introduction to complete the range of picture tube sets, impor-
New standards
tant milestones in 2003 included the development of new flat-panel display products and
for design and
the IFA international consumer electronics fair. The new Spheros 42 plasma TV features an
multifunctionality
innovative display, improved technology, and a fascinating design. Its high-resolution display
offers optimum image quality and a 106-centimeter screen diagonal. In technology and
design, the Spheros 42 fits in with the Loewe system line. A variety of different placement
options allow the set to blend into any living environment. In connection with the Concertos
loudspeaker system and the unusual Certos CD/DVD unit, it creates an exclusive home cinema
system capable of meeting the most demanding standards.
Concertos satellite speakers: The design is typical
for Loewe; the technology was developed and
produced by Loewe and Bose. Experience
Loewe sound by Bose.
The modular concept of the Loewe system enables every customer to fulfill their
individual technical desires. The TV-Online upgrade kit turns the Spheros 42 into a Web surfing machine and multimedia center. This combination is unique in the market and effectively
demonstrates Loewe’s technological leadership. In cooperation with the home automation
manufacturer Gira, Loewe developed trendsetting solutions for the networked home. In
connection with Gira’s Home Server 2, Spheros 42 becomes the master control center for an
intelligent home.
In the LCD sector, two additional products were added to the Spheros 20 to expand
the product range of units with screen sizes up to 20”. As the first LCD unit in the Mimo
family, we introduced the Mimo 15 at the IFA for the first time. The Mimo 15 has an integrated FM tuner as well as an alarm function and is also available in a satellite version. Exchangeable front panels are available in 15 optional colors to give the Mimo an individual look.
Various placement solutions such as a wall mount and tabletop and floor stands fulfill personal positioning desires.
As the first representative of the Xelos SL family, the Xelos SL 20 was introduced
to the market in November 2003. With its 20” LCD panel and forward-looking flat screen
technology, the Xelos SL 20 features a linear, appealing design – optionally available as a
satellite version with TV and radio. The tabletop stand is a standard feature; options include
a wall mount or a floor stand.
Loewe AG 59 2003
Large, brilliant pictures, perfect
sound, and innovative technology
that’s easy to use: Combined with
the Concertos subwoofer satellite
system, the Spheros 42 delivers
unbelievable surround sound.
TELEVISION FILMS IN CINEMA QUALITY
The high-resolution display of the Articos 55, the first projection TV in the Loewe product
Technological pre-
family, ensures optimum picture quality. Because its screen measures 140 centimeters diago-
eminence thanks to
nally, it transforms any television show into a cinematic experience. The high-resolution pro-
intensive cooperation
jection guarantees maximum depth of field, high contrast, brilliant colors, and distortion-free
with innovative
images. Equipped with Digital Light Processing (DLP TM), the latest image standard for projec-
partners
tion TVs, the Articos 55 offers visual experiences of exceptional quality. Loewe developed the
unit in cooperation with Carl Zeiss and Texas Instruments, two partners that stand for innovation and highest quality. Both the plasma unit and the projection receiver were introduced
in Europe and the USA.
We also launched the Nemos, the latest and last picture tube-based Real Flatline
product line, at the IFA. In the future, Loewe will concentrate on the continued development
of flat-panel display technology. MediaPlus-HD redefines image quality for picture tube
televisions. Important elements include the high-resolution Real Flat picture tubes and the
advanced signal processing of the new generation Q2550 chassis. As a result, images are
even more detailed and natural. The Loewe philosophy – “The best image using all available
types of signals” – was at the center of all activities in the development of this technology.
We achieved an attractive improvement of the Loewe TV products with the introduction of the forward-looking Digital RecordingPlus hard disk technology. As an integrative solution used for the first time in the Aconda 9381 HD/DR+ and Articos 32 HD/DR+, the Digital
RecorderPlus has opened a new chapter in television history. The Digital RecorderPlus offers
unimaginable possibilities, from time-delayed television viewing using the Time Shift feature
to stopping broadcasts midway, easily programming recordings, and archiving with integrated
titles, all at a recording capacity of up to 100 hours.
INNOVATIVE SOLUTIONS FOR NEW EXPERIENCES
The Loewe product range for the reception of digital television was strategically expanded in
2003. We focused our efforts on entirely new product concepts for the reception of digital
satellite TV (DVB-S) and digital terrestrial reception (DVB-T). Satellite receivers can be integrated
in Loewe 100 Hz televisions with MediaPlus chassis technology. Loewe has taken advantage
of this opportunity to be the first provider to offer the Premiere certification “Premiere Compatible.” As a result, Premiere is an integral part of several Loewe televisions – a totally new
concept. Since November 2003 Loewe has also been offering a fully integrated DVB-T receiver, which puts us in a position to tap additional markets as the broadcasting regions expand.
The new Auro/Tremo audio system is an attractive solution for the medium price
category. The core of this new home cinema system is the Auro DVD preceiver. The Tremo
subwoofer satellite system not only features powerful surround sound, but also has exciting
exterior qualities. The housing of the subwoofer is made of ceramic. The use of this material
marks the beginning of a new era for Loewe and offers extraordinary acoustic performance.
CLEAR COMMITMENT TO LOEWE QUALITY
Extension of warranty
Last year, we realized 43 large-scale projects, among them the new high-resolution display
confirms expectations
technologies based on LCD, plasma, and rear projection. We’re well on the way to transfer-
of quality
ring the outstanding image performance of our picture tube sets to pixel-oriented displays
(projection TV, LCD, plasma). In September, we extended the guarantee for Loewe products
from two to three years. This is a clear sign of the quality of our products. At the same time,
it underscores the quality-conscious selection of the individual components installed in our
systems, since the proportion of outsourced electronics, mechanical parts, and software is
steadily on the rise. The quality of our products is thus increasingly influenced by our
suppliers.
Loewe home cinema system for the entry-level class: The
high-resolution LCD television Xelos SL 37, the Tremo
subwoofer satellite system, and the new DVD preceiver Auro.
A perfect interplay of listening and viewing at an attractive
price/performance ratio.
Loewe AG 61 2003
In 2004 and 2005, we will be concentrating on taking advantage of potentials for
improvement during product creation. The project manual supplies the necessary tools for this
process. It prioritizes projects and defines systems for systematic implementation. The introduction of structured software development and the expansion of software qualification are
central themes. The continuous improvement of product and system performance with
respect to ease of use, picture quality, and serviceability guarantees the sustainable competitiveness of our products. Selecting the right suppliers and integrating key suppliers in projects
are important prerequisites.
The expansion of our quality data information system (QDIS) with respect to production data, field data, and delivery data and the evaluation of this information will further
improve the already very good transparency of our quality data. At the same time, it will help
us significantly accelerate our response time in the event of defects and malfunctions.
EXPANSION OF INTERNATIONAL DISTRIBUTION
Last year, Loewe strengthened the international alignment of the Company by founding a
New subsidiaries
subsidiary in Italy, an important European market and our largest foreign market. At the same
in Italy and Austria
time, we laid the groundwork for the establishment of a new subsidiary in Austria in the
last quarter. By doing so, we are giving ourselves an opportunity to expand our distribution
capacity in terms of quality and quantity and gain direct access to important customers.
Other advantages include the Europe-wide implementation of Loewe’s integrated sales and
marketing strategy. All this gives us additional opportunities for growth.
In light of the changed market structures, we introduced a corresponding supplementary measure in connection with the Taurus restructuring program. The purpose of this measure is to promote significant progress on the basis of the new products in 2004 and to secure
a larger customer base for Loewe in foreign markets.
SUBSIDIARY AND DISTRIBUTOR PROCESSES STREAMLINED
A number of different initiatives pursued in 2003 were designed to ensure an efficient, costoptimized supply chain. For example, we successfully completed a project dedicated to the
direct supply of our French customers in 2003. At the same time, we accomplished the
changeover to direct logistics in two additional countries, Italy and Austria. Other countries
will follow in the current fiscal year. By the end of 2004, we will be able to make full use
of the advantages arising from the reduction of decentralized warehouses and the direct
supply of customers in their respective countries.
WELCOME TO THE FLAT, DIGITAL WORLD
In 2003, our developments focused on the rising dynamics in the fields of digital technology
and displays based on matrix technology. The picture tube television product portfolio was
completed with additional Real Flat models and supplemented with flexible placement solutions. In addition to the display technologies already introduced (picture tubes, LCD, and
plasma), the Articos 55 projection receiver represented our first venture into microdisplaybased projection technology.
DEVELOPMENT OF NEW PRODUCTS
Fascinating solutions for
In the segment of forward-looking LCD screen technology, we expanded our product range
demanding customers
of compact screens with the Mimo 15 and Xelos 20. With the introduction of the Mimo 15,
we were also able to complete the optimization of chassis electronics for compact LCD units.
We developed another 20” product, the Mimo 20, to pilot production. The unit
was launched in early 2004. Since the introduction of the Mimo 20, a software version is also
available to support the use of the 15” and 20” LCD products in hotels. For the entire 15”
and 20” LCD TV range, Loewe made integrated terrestrial reception models available in addition to sets optimized for cable and satellite reception.
The design of additional LCD lines in the 32” and 37” formats was approved and
final design engineering and development initiated. The functional scope of these units will
cover all of the features in the MediaPlus range and as a consequence will set new standards
in the market.
In the field of plasma technologies, both Spheros 42 and Xelos SL 42 stand out.
What makes these products so special is the high-resolution screen that already permits the
playback of HDTV signals. Moreover, it can display PC contents on a large-screen format.
In order to make this possible, we developed forward-looking digital and audio interfaces that
“communicate” with peripheral equipment for the best possible configuration. Loewe uses
technologies such as DDC (Display Data Channel) in the process.
A special challenge was the introduction of the projection receiver Articos 55. The
unit is distinguished by an optical engine which optimizes use of the modern DLP technology.
We expanded the product for the U.S. market with audio/hi-fi components based on the
European home audio systems Certos and Concertos. This means Loewe can now also offer
complete home cinema systems with the various display technologies.
Home cinema constellation: Spheros 42 S,
Certos DVD unit, and Certos Master Unit
on Concertos bass module with Concertos
satellite system and RC1 remote control.
Loewe AG 63 2003
RC2 remote control: Multifunctionality
for all current Loewe products for optimal
ease of use from a single source. The
integrated code database means the RC2
can be used as a universal remote for
components from other manufacturers.
Another addition to the product portfolio is Xemix, a DVD player available in two
different versions. Like the Auro DVD preceiver, Xemix features the unique Loewe user interface. This means users don’t have to relearn separate operation philosophies for their TVs,
VCRs, and DVDs. The RC2 remote control is perfectly calibrated for the operation of the Auro.
It features an illuminated graphic display and offers optimum operating comfort for all current
Loewe equipment. An integrated code database allows the RC2 to be used as a universal
remote control for DVD players, video recorders, and set-top boxes from other manufacturers,
which means it can function for the entire entertainment program.
DIGITAL TELEVISIONS
In addition to flat display products, digital television was another special focus at Loewe in
2003. Loewe introduced the next DVB generation for digital satellite reception. Because it
features a common interface, it is suited for pay TV systems. Pay TV programs can be received
with the same ease that in the past was only possible for free TV programs.
The new module can extract Dolby Digital signals and direct them to an internal
decoder or to external equipment such as the Certos system for surround sound playback.
The software download function via satellite means the platform can continuously be
updated to the latest technical status.
A second focus was the development of the DVB-T digital receiver for terrestrial
reception. All digital receivers feature uniform user interfaces and electronic program guides.
They make it possible to access both analog and digital programs as usual.
PERSONAL VIDEO RECORDING, INTERNET, AND PHOTO VIEWER
Individuality through
The integration of a “personal video recorder” in a television set opens up a totally new
product intelligence
approach to TV viewing. The integrated hard disk and intelligent user interface make it possible to design a personal program to suit just about any wishes. The solution combines the
latest technological standards with highest quality expectations, including optimum picture
quality through flexible data rates depending on the picture content. What makes it so special
is that all important functions can be reached with the push of one or two buttons of the
regular television remote control. In the area of Internet TV, we are perfecting the functionality above all with software improvements.
In the future, Loewe will be offering the photo viewer function both for picture tube
sets and flat-screen units. This function supports users of the booming digital photography
technology. To this end, we integrate a card reader for nearly all storage card formats in the
television sets. With this development, Loewe wants to bring intuitive “slideshows” to the
living room – slideshows that can start immediately, without tedious setup, cumbersome
cables, or complex settings.
TECHNOLOGIES WITH FUTURE
Loewe meets the
Our efforts in the area of new technologies essentially encompass media centers, home
challenges of the future
networking, and multi-room functionality. In collaboration with Fujitsu Siemens, we introduced a media center solution at the IFA. The media center can be used to download videos
on demand from the Internet and view them on the television. In addition, analog and digital
television programs can be received and shows can be stored to hard disk or reproduced on
DVDs.
Together with Miele we expanded the intelligent home networking in the area of
kitchen automation. Here, too, the IFA provided the backdrop for presenting the system.
Whether recorded earlier or live, a fascinating multi-room audio solution now brings audio
programs to every room in a house. The related audio servers use the OnlinePlus platform and
its high-performance SPLICE software.
Beyond product development, we completed a number of joint sponsorship projects
in 2003. As part of the SIPROS project, Loewe and its partners developed the basis for a
widescreen projection receiver. The EMBASSI project explored novel ways to operate multimedia equipment. Two new research projects were initiated in 2003. In connection with the
BMMP project, Loewe is investigating a parametrizable user interface for the Multimedia
Home Platform (MHP). The DYNAMITE project is dedicated to finding ways for the automatic
cooperation of intelligent end equipment. All of these projects take digitalization and flat
display technologies into account. The focus is on the development of Loewe technology in
the field of picture processing.
By using these new technologies we want to create new, customer-oriented applications. They offer user-friendly added benefits and at the same time serve to clearly set Loewe
premium products apart from mass market equipment.
Loewe AG 65 2003
EXPERIENCE IS
2003 66 Annual Financial Statements and Notes. Loewe AG
Loewe AG 67 2003
UNDERSTOOD PERCEPTION.
IMMANUEL KANT
A Loewe is something special. Designed
for people who expect more. Recognizing
the classics of tomorrow in the highlights
of today. Whether technology or design,
our standards go beyond the present.
The Mimo family is an example of a trendsetter in design with unusually soft, flowing lines. As a flexible system equipped
with future-proof technology, the Mimo
can also be individually adapted to future
needs. The details make the picture.
P. 68
Consolidated Income Statement
P. 69
Consolidated Balance Sheet
P. 70
Consolidated Cash Flow Statement
P. 72
Notes to the Consolidated Financial
Statements of Loewe AG
P. 96
Management Bodies and Executive
Officers
P. 100
Independent Auditor’s Report
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED
DECEMBER 31, 2003
Notes January – December January – December
No.
2003
2002
EUR
Sales
Division to be discontinued
%
EUR
thousands
thousands
288,921
385,593
0
– 9,426
288,921
100.0
%
376,167
100.0
– 81.6 – 270,670
– 72.0
Division to be continued
1
Cost of sales*
2 – 235,674
Gross margin
53,247
18.4
105,497
28.0
Selling expenses
3
– 74,292
– 25.7
– 74,783
– 19.9
General administrative expenses
4
– 8,795
– 3.0
– 10,944
– 2.9
5
8,402
2.9
8,268
2.2
Other operating expenses
6
– 11,980
– 4.1
– 7,656
– 2.0
Income from participating interests
EBIT of the division to be continued
Interest and similar income
Interest and similar expenses
7
106
0.0
171
0.1
– 33,312
– 11.5
20,553
5.5
259
0.1
313
0.1
– 2,839
– 1.0
– 2,075
– 0.6
– 35,892
– 12.4
18,791
5.0
0
0.0
– 12.4
18,791
5.0
6,174
2.1
– 7,624
– 2.0
– 29,718
– 10.3
11,167
3.0
Profit from ordinary activities (EBT)
of the division to be continued
of the division to be discontinued
8
Income taxes
0
– 35,892
9
Net loss/income before minority interests
Minority interests
– 21
0.0
– 264
– 0.1
Net loss/income
– 29,739
– 10.3
10,903
2.9
Profit carried forward
17,508
17,690
Dividend payment
– 6,100
– 6,085
Appropriations from other retained earnings and capital reserve
17,558
– 5,000
– 773
17,508
Distributable profit/loss
*the following items up to and including interest and similar expenses only contain
information concerning the division to be continued
Net/loss income
10
– 29,739
10,903
– 4.14
1.52
– 4.14
1.52
– 3.93
1.44
7,176,600
7,176,600
Basic earnings per share**
Basic earnings per share***
Diluted earnings per share****
**
Number of shares issued as of December 31
*** Weighted average number of shares pursuant to IAS
7,176,600
7,159,133
**** Number of shares and options issued
7,575,000
7,575,000
Loewe AG 69 2003
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2003
EUR thousands
Notes
2003
Loewe AG 70 2003
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR
ENDED DECEMBER 31, 2003
2002
EUR thousands
2003
2002
No.
Assets
Operating activities*
Non-current assets *
Profit from ordinary activities
11
Intangible assets
Property, plant, and equipment
Financial assets
9,389
10,250
Depreciation and amortization of non-current assets
53,210
56,956
Book profits (–) on disposals of non-current assets
255
236
62,854
67,442
Decrease (–)/increase (+) in pension provisions
– 35,892
18,791
25,206
20,989
–5
– 76
– 1,065
441
371
– 8,674
– 11,385
31,471
8,633
– 9,503
Income taxes paid
Net cash before changes in net current assets
Current assets*
Inventories
12
45,999
54,632
Change in net current assets
13
70,530
81,447
Decrease (+)/increase (–) in inventories
14
3,002
4,463
Decrease (+) in trade accounts receivable and other assets
15
2,937
3,717
Decrease (–)/increase (+) in other provisions
122,468
144,259
Total current assets
Deferred tax assets
16
15,191
87
Assets of the division to be discontinued
17
0
52
200,513
211,840
11,022
6,391
446
– 2,435
Decrease (–) in trade accounts payable and other liabilities
– 2,496
– 6,888
Change in net current assets
17,605
– 12,435
6,220
19,036
– 20,711
– 26,173
– 118
– 90
Net cash from operating activities
Investing activities
Total assets
Payments for purchases of intangible assets
and property, plant and equipment
Payments for purchases of financial assets
Proceeds from disposals of property, plant, and equipment
Liabilities and shareholders’ equity
120
93
91
80
Net cash used by investing activities
– 20,618
– 26,090
Free cash flow of the division to be continued
– 14,398
– 7,054
Proceeds from disposals of financial assets
18
Subscribed capital
7,177
7,177
38,300
45,358
Free cash flow of the discontinued division**
0
10,500
Total free cash flow
Conditional capital EUR 398 (previous year: EUR 398)
Capital reserve
Other retained earnings
Distributable profit
Total shareholders’ equity
Minority interests
19
– 773
17,508
44,704
80,543
1,188
1,167
– 1,286
Increase (+) in minority interests
0
129
Capital increase
0
490
– 6,100
– 6,085
Borrowing
Provisions for pensions and similar obligations
20
27,105
28,170
Tax provisions
21
6,875
1,000
Deferred tax liabilities
22
2,095
0
Other provisions
23
48,210
47,764
84,285
76,934
9,952
3,350
21,687
26,285
38,697
22,921
Total liabilities
70,336
52,556
0
640
200,513
211,840
Total provisions
Liabilities*
5,768
– 14,986
Financing activities
Dividend payment
Provisions*
– 588
24
Long-term debt
9,602
400
0
– 1,166
Net cash from financing activities
3,502
– 6,232
Cash-effective change in liquidity
– 11,484
– 7,518
Composition of liquidity
12/31/03 12/31/02
Repayment of loans
3,742
– 805
– 21,275
– 10,596
– 10,679
Liquidity
– 18,338
– 6,854
– 11,484
Provisions and liabilities of
the division to be discontinued
25
* The following items up to and including net cash used by investing activities
only include data of the division to be continued
Total liabilities and shareholders’ equity
* of the division to be continued
+/–
2,937
** The free cash flow of the discontinued division is specified on page 94 of the Notes
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF LOEWE AG
BASIS OF PRESENTATION
Pursuant to § 292a German Commercial Code (HGB), the consolidated financial statements
of Loewe AG have been prepared in accordance with the International Accounting Standards
(IAS). These accounting principles remain unchanged from last year.
PRINCIPLES OF CONSOLIDATION
The assets and liabilities reported in the consolidated financial statements have been accounted for and valued in accordance with uniform principles, which have not changed from the
previous year. All intra-Group accounts receivable, liabilities as well as reciprocal sales, payments, income, expenses, and profits have been eliminated.
The Group’s capital has been consolidated under the revaluation method by offsetting
the carrying value of investments in subsidiaries and associated companies against the parent
company’s shareholders’ equity at the time of acquisition.
The following accounting principles that differ from German commercial and
joint-stock company law and are mandatory under IAS were applied for these consolidated
financial statements:
1. The Company’s own development costs are accounted for as internally generated intangible assets in accordance with IAS 38.
2. Deferred taxes are established in accordance with the balance-sheet-oriented liability
method under IAS 12.
3. Pension provisions are accounted for under the projected unit credit method in accordance
with IAS 19.
4. In conformity with IAS 19, provisions for anniversary bonuses and death benefits are
accounted for under the projected unit credit method in accordance with U.S. accounting
rules (Financial Accounting Standards No. 87).
5. Separation of the discontinued division pursuant to IAS 35.
Loewe AG 73 2003
GROUP OF CONSOLIDATED COMPANIES
The following companies were consolidated as of the balance sheet date of December 31,
2003:
Subscribed capital
Interest
Parent company
Loewe AG, Kronach
EUR 7,176,600.00
Subsidiaries
Subgroup Loewe Opta GmbH, Kronach
Loewe Opta GmbH, Kronach
EUR 23,010,000.00
99 %
EUR 30,000.00
100 %
Subsidiaries of Loewe Opta GmbH:
Loewe Pensionsgesellschaft mbH, Kronach
The liquidation of the interest in BAK Vermögensverwaltungs GmbH i. L., Hannover, which
existed in the previous year, has been completed and the company was deleted from the
commercial register.
Loewe Pensionsgesellschaft mbH manages the corporate assets and pension entitlements for former employees of Loewe Opta GmbH.
Loewe Telecom GmbH i. L., Kronach
EUR 1,535,000.00
100 %
The company has been in liquidation since November 2002.
Subgroup Loewe Opta Benelux N.V./S.A.
Loewe Opta Benelux N.V./S.A.,
Antwerp/Belgium
EUR 61,973.38
90 %
EUR 90,756.04
100 %
US$ 1,000.00
100 %
Subsidiary of Loewe Opta Benelux N.V./S.A.:
Loewe Opta Nederland B.V.
Nieuwegein/Netherlands
(uncalled capital EUR 72,604.83)
Loewe Opta, Inc., City of Wilmington,
County of New Castle, Delaware/USA
EUR 957.30
Loewe France S.A., Strasbourg, France
EUR 150,000.00
75 %
Loewe Italiana S.r.l., Verona, Italy
EUR 100,000.00
99 %
CURRENCY TRANSLATION
All consolidated companies except Loewe Opta, Inc., USA are in the euro zone. In conformity
with IAS 21, the currency translation in the balance sheet of Loewe Opta, Inc., USA was
based on the offering price as of the balance sheet date (EUR 1 = USD 1.2529) and on the
average price (EUR 1 = USD 1.1418) in the income statement.
ACCOUNTING PRINCIPLES
Save for one exception, the accounting principles detailed below have not been changed from
those used last year. Only the reporting of deferred taxes was changed from a net method
to a gross method. The structure of the consolidated financial statements is consistent with
the EU accounting directives and accords. Applying IAS 35, the closing items of the Telecommunications division to be discontinued were reported separately as in the previous year.
The accounting of the Home Media Systems division to be continued follows the
going concern principle.
INTANGIBLE ASSETS
Software and other intangible assets are capitalized at cost and amortized on a straight-line
basis over their estimated useful life.
The Group’s development costs are capitalized insofar as they meet the criteria
specified in IAS 38. They are capitalized at the manufacturing costs incurred.
Amortization is charged on a straight-line basis and corresponds to the period during
which the developed products are likely to be sold.
The following amortization rates are applied:
Software
14 % to 66 %
Development costs
33 % to 50 % p. a.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are reported under the net value method.
At the first-time consolidation as of December 31, 1997, hidden reserves in land and
buildings discovered as the result of a valuation survey were disclosed and capitalized. There
were no hidden reserves in other items of property, plant, and equipment. Production facilities
and machinery as well as other equipment, factory and office equipment are reported at cost
or manufacturing cost less depreciation.
Investments acquired during the financial year are reported at acquisition or manufacturing cost.
Buildings are depreciated on a straight-line basis over their estimated useful life. Production facilities, machinery, other equipment, factory and office equipment are depreciated
over their useful life, in some cases on a straight-line basis and in other cases under the
declining-balance method. Write-downs were taken on investments in product-related tooling
for which it can be expected that because of a shortening of the product lives, it will not
be possible to achieve the coverage originally planned. For the sake of simplification, investments acquired in the first half of the year are depreciated at the full annual rate, and those
acquired in the second half at half the annual rate. Minor-value assets costing less than
EUR 410 are immediately written off in full. The following depreciation rates are applied for
straight-line depreciation:
Buildings
2.5 % to 7 %
Production facilities and machinery
7 % to 20 %
Other equipment, factory and office equipment
8 % to 33 %
FINANCIAL ASSETS
Participating interests and investment securities are valued at the lower of acquisition cost or
market value. Other loans are reported at cost less redemption payments and are individually
written down to the extent necessary.
Loewe AG 75 2003
INVENTORIES
Inventories are shown at acquisition or manufacturing cost. Manufacturing cost includes the
cost of materials and labor as well as necessary material and production overheads. Normal
utilization was assumed in determining the costing rates. Inventories that cannot be sold
or those for which their likely selling price, after deduction of selling costs, would not cover
their acquisition or manufacturing costs, are written down accordingly.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are reported at their nominal value less specific value adjustments
for credit risks. Cash discounts, interest and processing costs have been accounted for
by lump sum value adjustments. Receivables in foreign currencies are valued at the lower
of price of origin or the bid price as of the balance sheet date.
OTHER SHORT-TERM RECEIVABLES
Other short-term receivables are reported at their nominal value less specific value adjustments.
DEFERRED TAX ASSETS
Under IAS 12, deferred tax assets are computed on the basis of the differences between the
consolidated financial statements and the tax accounts. These differences relate both to the
differences between the financial statements and tax accounts of the consolidated companies
and to differences arising as a result of the consolidation. The tax rate uniformly applicable
to the Group was reduced to 37.0 % (previous year: 37.5 %) due to the elimination of the
“flood of the century” surcharge. Tax increases that would be incurred in the event of a profit
distribution from shareholders’ equity on which corporate tax has not yet been charged are
not deducted from deferred tax assets. In order to optimize the Group’s tax position, there
are no plans to make such distributions. Deferred tax claims from loss carryforwards are capitalized according to IAS 12 if it is likely that they can be realized. In contrast to the previous
year, deferred tax assets are not offset against deferred tax liabilities. Due to their insignificance, the previous year’s figures are not adjusted.
CASH AND CASH EQUIVALENTS
Cash on hand and bank balances are shown at their nominal value. Bank balances in foreign
currency are reported at the offering price as of the balance sheet date.
SUBSCRIBED CAPITAL
The subscribed capital is reported at nominal value.
PROVISIONS
Pension provisions are calculated in accordance with IAS 19 (revised 2000) according to the
projected unit credit method. These provisions are shown after deduction of the value of the
assets of Loewe Opta Unterstützungskasse e.V.
In addition to the taxes likely to be payable, tax provisions also contain deferred
tax liabilities. Other provisions are set aside where definite obligations exist. The level of the
provisions is set at the amounts likely to materialize.
LONG-TERM DEBT
Bank loans and other liabilities are reported at their repayment amounts.
SHORT-TERM LIABILITIES
The repayment amounts are also recognized for the short-term liabilities.
NOTES TO THE INCOME STATEMENT
The cost-of-sales method is used. The notes below refer to the Home Media Systems division
to be continued. The results of the division to be discontinued have been reported separately.
(1) SALES
Sales represent net revenues from the sale of the Company’s own products, merchandise, and
related services after all sales deductions.
Sales broken down by product line are as follows:
2003
EUR
2002
%
thousands
EUR
%
thousands
Television
including multimedia
245,491
85.0
318,502
DVD players
4,109
1.4
7,918
84.7
2.1
Video recorders
3,435
1.2
7,316
1.9
Stereo systems
4,393
1.5
6,908
1.8
31,493
10.9
35,523
9.5
288,921
100.0
376,167
100.0
%
EUR
Accessories and
other revenues
Total
Sales by region were as follows:
2003
EUR
2002
thousands
%
thousands
Germany
148,476
51.4
181,374
48.2
Europe excluding Germany
118,277
40.9
157,127
41.8
22,168
7.7
37,666
10.0
288,921
100.0
376,167
100.0
Rest of the world
Total
(2) COST OF SALES
The cost of sales comprises the cost of materials for the manufacture of Loewe products and
the cost of purchased merchandise as well as the cost of labor and materials needed to
achieve these sales, unless these costs are shown under administrative and selling expenses,
which are reported separately. They are broken down as follows:
EUR thousands
Merchandise
Purchased services
Personnel and other material costs
Total
2003
2002
161,457
186,891
20,997
31,671
1,459
1,033
51,761
51,075
235,674
270,670
Loewe AG 77 2003
(3) SELLING EXPENSES
Selling expenses comprise the following:
EUR thousands
2003
2002
Advertising costs
20,872
24,349
Freight
11,330
12,245
6,725
3,219
Personnel and other material costs
35,365
34,970
Total
74,292
74,783
Warranties
(4) GENERAL ADMINISTRATIVE EXPENSES
The following expenses were incurred for administration:
EUR thousands
2003
2002
Personnel and social security costs
6,094
7,680
Other material costs and overheads
2,701
3,264
Total
8,795
10,944
For reasons of comparability, the presentation of the previous year’s figures was
structured to match that of the current year.
(5) OTHER OPERATING INCOME
Other operating income comprises the following:
EUR thousands
2003
2002
Billed goods and services
2,148
1,362
Rental income
165
230
Public support funds for development projects
481
1,194
Claims for damages received
46
566
Income from the release of provisions
4,168
3,150
Other income
1,394
1,766
Total
8,402
8,268
Income from the release of provisions mainly relates to provisions for reductions in
earnings and license fees that were no longer needed.
(6) OTHER OPERATING EXPENSES
Other operating expenses relate to:
EUR thousands
2003
2002
2,372
2,253
481
1,195
Currency and price losses
968
1,442
8,159
2,766
11,980
7,656
Billed goods and services as well as
rental income
Expenses for subsidies received
Total
The expenses for billed goods and services correspond to the revenues reported under
other operating income. Significant items in other operating expenses include payments
to former foreign distributors arising from contract termination (EUR 2.3 million), costs for
cancelled purchase contracts (EUR 1.6 million) and severance payments to employees
(EUR 2.3 million).
Under the terms of the profit transfer agreement between Loewe AG and Loewe
Opta GmbH, one member of the Executive Board of Loewe AG who has held a 1 % interest
in the share capital of Loewe Opta GmbH since 1997 is paid an annual equalization payment
in the amount of EUR 73.6 thousand pursuant to § 304 AktG (Aktiengesetz – German Stock
Corporation Act).
(7) INTEREST AND SIMILAR EXPENSES
The interest expenses have increased due to the greater need for borrowing and a worsening
of interest rates. They are broken down as follows:
EUR thousands
2003
2002
Loan interest to banks
1,137
540
316
376
1,050
1,027
336
132
2,839
2,075
Loan interest to Loewe Opta
Unterstützungskasse e.V.
Interest on amounts allocated to
pension provisions
Similar expenses
Total
(8) OPERATING RESULT OF THE TELECOMMUNICATIONS DIVISION
TO BE DISCONTINUED
The operating activities of the Telecommunications division to be discontinued were ended in
2002. The Group no longer carried on any activities in this division in the year under review.
No expenses and income were reported in 2003.
Loewe AG 79 2003
(9) INCOME TAXES
EUR 6,835 thousand of the income tax result relates to tax expenses, almost exclusively from
the not yet completed tax audit for the years 1996 – 2000 and EUR 13,009 thousand relates
to deferred tax income.
The expenses for deferred taxes are broken down as follows:
EUR thousands
Change in deferred tax assets based on the accounting
differences between the consolidated balance sheet
and the commercial balance sheet
– 796
Increase in deferred tax assets on anticipated
realizable loss carryforwards
Increase in deferred tax benefits on retained earnings
+ 13,591
+ 234
Change in the deferred tax claims from the tax-equalization
item as a consequence of the deviations between the
commercial balance sheets and the tax balance sheets
+ 1,192
Provision for existing deferred tax risks
– 1,212
Total
+ 13,009
In the financial year, new valuation allowances were formed on deferred tax assets in
the amount of EUR 2,320 thousand. The total amount of the valuation allowances on
deferred tax assets is EUR 2,907 thousand.
The average effective tax rate is 17.2 % and is thus 19.8 percentage points below the
rate of 37.0 % for deferred taxes. The difference results primarily from additional taxes due
to the still ongoing tax audit for the years 1996 to 2000 and the not yet apparent realizability
of the loss carryforwards in their full amount.
Reconciliation of the applicable 37.0 % tax rate to the average effective tax rate of
17.2 %:
%
Applicable tax rate
Increase in tax credits (old law)
37.0
0.7
Deferred difference between tax accounts and
consolidated balance sheet
1.1
Creation of new valuation allowances on deferred taxes
on loss carryforwards
Additional taxes from the not yet completed tax audit
– 3.2
– 18.3
Other net differences
– 0.1
Average effective tax rate
17.2
(10) EARNINGS PER SHARE
The Group net loss of EUR 29,739 thousand must be related to the 7,176,600 outstanding
shares of Loewe. This results in earnings per share of EUR – 4.14 in the year under review
(previous year: EUR 1.52).
With consideration of the still outstanding 398,400 stock options, the basic earnings
per share are EUR – 3.93. According to the existing option agreements, a further exercise of
the option is possible only if the stock price reaches or exceeds EUR 22.50.
If IAS 33 is used to determine the weighted average number of shares, the number
remains at 7,176,000 with earnings per share also at EUR – 4.14.
2003
2002
Group income (EUR thousands)
– 29,739
10,903
Basic earnings per share in EUR
– 4.14
1.52
according to IAS in EUR
– 4.14
1.52
Diluted earnings per share in EUR
– 3.93
1.44
Basic earnings of the shares determined
Number of shares issued
7,176,600 7,176,600
Weighted average number of shares issued
determined according to IAS
7,176,600 7,159,133
Number of shares issued and options
7,575,000 7,575,000
Loewe AG 81 2003
NOTES TO THE BALANCE SHEET
If not reported separately, the balance sheet items of the Home Media Systems division to be
continued are explained below.
(11) NON-CURRENT ASSETS
The changes in non-current assets were as follows:
EUR thousands
Acquisi-
Addi- Disposals
Re-
tion and
tions (acquisi-
classifi-
ciation/
cations
amorti-
manu-
tion and
facturing
manu-
costs
facturing
(cumu-
costs)
Depre- Carrying Carrying
amount
Depre-
amount
ciation/
at end previous
amorti-
zation
of the
year
(cumu- financial
lative)
zation
in the
year
financial
lative)
year
I. Intangible assets
1. Software and similar assets
6,376
850
214
0
5,398
1,614
1,817
1,052
2. Development costs
14,336
7,564
2,033
0
12,092
7,775
8,433
8,222
Total
20,712
8,414
2,247
0
17,490
9,389
10,250
9,274
40,786
7
16
0
16,835
23,942
24,943
992
16,022
162
636
13
12,777
2,784
4,300
1,691
103,206
12,128
7,123
– 13
81,714
26,484
27,713
13,240
160,014
12,297
7,775
0
111,326
53,210
56,956
15,923
II. Property, plant,
and equipment
1. Land and buildings
2. Production facilities
and machinery
3. Other equipment, factory
and office equipment
Total
III. Financial assets
1. Participating interests
47
1
0
0
25
23
22
0
2. Investment securities
26
70
0
0
0
96
25
0
3. Other loans
189
47
91
0
9
136
189
9
Total
262
118
91
0
34
255
236
9
180,988
20,829
10,113
0
128,850
62,854
67,442
25,206
Intangible assets include product and IT software and development costs. The
development costs primarily include capitalized in-house development expenses. The total
cost of development in 2003 came to EUR 13,986 thousand (2002: EUR 13,280 thousand).
Other intangible assets primarily relate to software.
Land and buildings as well as production facilities and machinery are mainly used for
production in Kronach. Other equipment, factory and office equipment includes office and
other furniture and equipment and high-quality presentation systems for sales as well as tools
used by suppliers.
The amount of capital held in participating interests varies between 7 % and 10 % of
these companies’ nominal capital. These are primarily participations in poolings of interests
for business purposes.
(12) INVENTORIES
The inventories are broken down as follows:
EUR thousands
Work in progress
2003
2002
14,239
13,768
2,140
1,756
Finished goods and merchandise
29,620
39,108
Total
45,999
54,632
The increased inventory of raw materials and supplies is primarily due to the fact that
short-term production cutbacks at year-end made it no longer possible to reduce the deliveries of materials in the same scope.
The decline in finished goods and merchandise results from the systematic reduction
of the finished goods inventory in the fourth quarter of 2003.
The acquisition and manufacturing costs of inventories include write-downs of
EUR 9,623 thousand (2002: EUR 5,458 thousand) in order to ensure the loss-free valuation
of finished goods and merchandise in accounting for obsolete and excess inventories. Writedowns of EUR 3,464 thousand (2002: EUR 1,990 thousand) on raw materials and supplies
and on work in progress have been recognized.
(13) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist entirely of accounts receivable from business operations.
Factoring of accounts receivable in Germany and in the Italian subsidiary reduced the debtor
portfolio by a total of EUR 14.0 million.
The amount reported for trade accounts receivable includes adequate allowances for
insolvency risk, cash discount reductions, processing costs and interest.
Allowances for insolvency risk are measured individually. The existing credit insurance
is recognized for accounts receivable in Germany; available letters of credit, bank guarantees
and credit insurance were recognized accordingly for international receivables.
Loewe AG 83 2003
(14) OTHER SHORT-TERM RECEIVABLES
Other short-term receivables relate to:
EUR thousands
2003
2002
Assets from hedging
696
0
Value-added tax and income tax
402
2,481
Credit balances with suppliers
360
479
Residual receivables from the disposal of
equity interests in subsidiaries
Claims on insurance companies
Claims on the Office of Employment
Advances for travel expenses and personnel
Claims for damages
278
305
37
176
99
0
143
120
0
72
987
830
3,002
4,463
Other prepaid expenses and
other short-term claims
Total
Of the receivables, EUR 72 thousand is due in one to five years (2002: EUR 48 thousand). The remaining receivables are due within one year.
(15) CASH AND CASH EQUIVALENTS
The cash and cash equivalents consist of current deposits with the commercial banks of
EUR 2,937 thousand (2002: 3,717 thousand).
(16) DEFERRED TAX ASSETS
The deferred tax assets reported in the Group primarily include taxes on earnings on anticipated realizable loss carryforwards with a deferred tax claim of EUR 13,777 thousand, timing
differences between the amounts reported in the tax accounts and those recognized in the
consolidated financial statements at EUR 1,180 thousand and a tax credit based on the old
corporation tax law in the amount of EUR 234 thousand.
For the capitalized tax assets on loss carryforwards, it is considered feasible to charge
them to future tax income in a foreseeable time due to positive income prospects.
The timing differences and the deferred tax amounts applicable to them are broken
down as follows:
EUR thousands
Differ- Deferred
ences
taxes
Intangible assets
+ 7,206
– 2,666
Property, plant, and equipment
+ 5,313
– 1,966
Inventories
– 4,112
+ 1,521
+ 716
– 265
–3
+1
Provisions
– 19,353
+ 7,161
Liabilities
+ 7,045
– 2,606
– 3,188
+ 1,180
Accounts receivable and other assets
Prepaid expenses
A uniform income tax rate of 37 % was recognized in the calculation. Since the
deferred items have an effect on taxes primarily in Germany, the use of a uniform tax rate is
permitted. The recognition of deferred taxes was converted from the net reporting used
formerly to gross reporting.
(17) ASSETS OF THE TELECOMMUNICATIONS DIVISION TO BE DISCONTINUED
As of the balance sheet date, all assets of the division to be discontinued have been
liquidated.
EUR thousands
2003
2002
Inventories
0
0
0
26
0
1
0
25
Assets of the division to be discontinued
0
52
Values of current assets
(18) SHAREHOLDERS’ EQUITY
As of the balance sheet date, the Company’s share capital is EUR 7,177 thousand (2002:
EUR 7,177 thousand). It is divided into 7,176,600 no-par value bearer shares.
Because the option prerequisites were not met in financial year 2003, no additional
options were exercised under the stock option plan.
The share capital is conditionally further increased by up to 398,400 shares (conditional capital) to implement the stock option plan. The conditional capital increase serves to
grant pre-emptive rights to the members of the Executive Board, authorized signatories and
other executives of the Company as well as executives of affiliated companies in accordance
with the resolution of the Shareholders’ Meeting.
The authorization contained in § 5 (2) of the articles of incorporation to increase the
share capital, EUR 425,000.00 of which still had not been used, was cancelled by resolution
of the Shareholders’ Meeting of June 26, 2002. Furthermore, the Executive Board was authorized, with the consent of the Supervisory Board, to increase the Company’s share capital by
up to a total of EUR 3,500,000.00 through the issue of up to 3,500,000 bearer shares in
exchange for non-cash or cash contributions on one or several occasions until no later than
June 26, 2007. The shareholders must be granted a subscription right. However, the Executive
Board is authorized, in each case with the consent of the Supervisory Board to exclude the
subscription right in the following cases:
a) for the evening out of fractional amounts
b) to obtain non-cash capital contributions, in particular in the form of companies or business
units
c) in the case of a capital increase in exchange for cash contributions, if the capital increase
does not exceed ten percent of the share capital and the issue price of the shares does not
significantly fall below the stock market price.
The Executive Board is authorized, with the consent of the Supervisory Board, to
establish the further content of the rights inherent in shares and the conditions for the issue
of shares (Authorized Capital 2002).
Loewe AG 85 2003
The changes in the Group’s equity are shown in the following table:
Number
Sub-
Other
Group
Total Minority
Group
of shares
scribed
reserve retained
equity
share- interests
equity
capital
earnings
gene-
holders’
rated
equity
EUR
EUR
units
EUR
Capital
EUR
EUR
EUR
EUR
thousands thousands thousands thousands thousands thousands thousands
Balance as of
12/31/02
7,176,600
7,177
45,358
10,500
17,508
80,543
1,167
81,710
– 6,100
– 6,100
– 29,739
– 29,739
10,500
0
0
7,058
0
0
– 773
44,704
Dividend distribution
for 2002
Net loss for 2003
– 6,100
21
– 29,718
Appropriations from other
retained earnings
– 10,500
Appropriations from the
capital reserve
– 7,058
Balance as of
12/31/03
7,176,600
7,177
38,300
0
The other retained earnings amounting to EUR 10,500 thousand have been entirely
released. In addition, an amount of EUR 7,058 thousand was appropriated from the capital
reserve to largely offset the net loss for the year.
The reporting of a separate statutory reserve in accordance with § 150 (1) and (2) of
the German Joint Stock Corporation Act is not necessary owing to the size of the existing
capital reserve.
(19) MINORITY INTERESTS
Minority interests exist at Loewe Opta GmbH, Kronach (1 %), at Loewe Opta Benelux N.V./S.A.
(10 %) and at Loewe France S.A. (25 %). This item changed as follows:
EUR thousands
Balance as of 01/01/03
Profit increase in 2003
1,167
21
1,188
thereof:
Loewe Opta GmbH
272
563
Loewe France S.A.
353
1,188
1,188
45,892
(20) PENSION PROVISIONS
Pension provisions relate to individual and collective commitments to pay pensions to
employees. In 1997, these commitments were transferred in part to a support fund, which, as
a registered association, is independent of Loewe Opta GmbH. If the assets of Loewe Opta
Unterstützungskasse e.V. prove insufficient to meet these commitments, Loewe Opta GmbH
as the sponsoring company is liable.
In November 2000, further current pension obligations resulting from individual and
collective commitments were transferred to Loewe Pensionsgesellschaft mbH as part of the
contracting out. At the same time, the Company was provided with the funds needed to
meet its commitments. The share capital of Loewe Pensionsgesellschaft mbH is wholly owned
by Loewe Opta GmbH. For this reason, it is included in the consolidation. If the assets of
Loewe Pensionsgesellschaft mbH prove insufficient to meet these commitments, Loewe Opta
GmbH is liable.
The pension commitments have been calculated for both balance sheet dates based
on the following assumptions:
%
2003
2002
Discount rate
5.0
5.0
Anticipated annual increases in wages and salaries
2.0
2.0
Anticipated annual increases in pensions
1.5
1.5
2003
2002
22,013
22,890
of the support fund
14,082
14,900
Net present value of commitments, total
36,095
37,790
8,990
9,620
27,105
28,170
Provisions are reported as follows:
EUR thousands
Net present value of the pension commitments
of the Loewe Group
Net present value of the pension commitments
less assets of the support fund
Provision
The net present value of commitments was determined for both balance sheet dates
on the basis of actuarial valuations under the projected unit credit method in accordance with
IAS 19 (revised 2000).
As of year-end 2003, Loewe Opta Unterstützungskasse e.V. has loaned out nearly
all its assets to Loewe Opta GmbH in the form of a short-term interest bearing loan of
EUR 8.9 million. The loan is reported under other liabilities. No security was provided.
Loewe AG 87 2003
The changes in pension provisions were as follows:
EUR thousands
28,170
a) Changes not recognized as income
Pension payments in 2003
– 2,109
Utilization of assets of Loewe Opta
Unterstützungskasse e.V.
1,255
Transfer from Loewe Opta GmbH to
Loewe Opta Unterstützungskasse e.V.
from a commitment date 10/22/2002
– 1,409
Additions for employer-financed pension
commitments
95
– 2,168
26,002
b) Changes recognized as income
Reported under interest expenses
– Interest expense for own commitments
1,050
Reported under manufacturing, selling and
administrative costs
– Current service cost
– Actuarial gains
421
– 453
Results of Loewe Opta Unterstützungskasse e.V.
– Interest expense for commitments
710
– Interest income from assets
– 338
– Price gains on financial assets
– 296
– Other expenses
9
53
27,105
Actuarial gains and losses are recognized as incurred.
The interest expenses for the Company’s own commitments are reported as interest
expenses.
Pension payments comprise the following:
EUR thousands
Pension payments by Group companies
854
Pension payments by the pension fund
1,255
Total pension payments
2,109
Pension payments of EUR 2,345 thousand are anticipated for 2004.
The pension fund financed the pension payments from the interest income generated
and a transfer of EUR 1,409 thousand from Loewe Opta GmbH.
(21) TAX PROVISIONS
Tax provisions relate almost exclusively to the subsequent payments expected because of the
current tax audit. The reported amounts are expected to be due for payment within one year.
(22) DEFERRED TAX LIABILITIES
The deferred tax liabilities are formed with respect to risks arising from the amended fiscal
legislation.
Tax increases that do not have to be accounted for but that would be incurred if a
profit distribution were made from shareholders’ equity on which corporate tax has not yet
been charged (not planned at present) amount to EUR 1,208 thousand.
(23) OTHER PROVISIONS
Other provisions comprise the following:
EUR thousands
2003
2002
15,470
16,125
Cost of warranties
8,966
8,405
Personnel costs
9,729
9,870
License fees
2,063
4,353
Other
11,982
9,011
Total other provisions
48,210
47,764
The other provisions changed as follows in 2003:
EUR thousands
Balance
Addi-
01/01/03
tions
zation
Utili- Releases
Balance
12/31/03
Annual sales
compensation
16,125
15,338
15,569
424
Cost of warranties
8,405
8,244
7,683
0
15,470
8,966
Personnel costs
9,870
5,549
5,370
320
9,729
License fees
4,353
741
15
3,016
2,063
Other
9,011
9,979
5,657
1,351
11,982
47,764
39,851
34,294
5,111
48,210
Total
other provisions
Provisions for annual sales compensation were determined on the basis of the agreements covering bonuses and other compensation, and apply largely to Germany. Provisions
for warranties are calculated on the basis of anticipated warranty costs in the future, allowing
for the general extension of the warranty period to three years and the planned upgrading of
Loewe televisions to be performed by factory-authorized workshops. Provisions for personnel
costs essentially comprise holiday pay, anniversary bonuses, part-time retirement claims,
variable remuneration and layoff costs. License fee provisions are set aside for license fees
resulting from possible infringements of industrial property rights.
Loewe AG 89 2003
The other provisions include, among other things, items for cancellation costs,
rework, foreign exchange risks and additional costs that may be incurred.
The other provisions are generally due within one year except for an approximately
EUR 2.3 million portion of the provisions for warranties which have a time to maturity of
longer than one year.
(24) LIABILITIES
EUR thousands
12/31/03
Long-term debt
thereof: owed to banks
9,952
12/31/02
3,350
(9,952)
(3,350)
(0)
(0)
– 1 to 5 years
(5,968)
(3,350)
– more than 5 years
(3,984)
(0)
(9,952)
(3,350)
owed to third parties
thereof: due in
thereof: secured by land charges
21,687
26,285
thereof: due in
– less than 1 year
(21,687)
(26,285)
38,697
22,921
thereof: due in
– less than 1 year
(38,697)
(22,921)
(21,275)
(10,596)
Short-term portions of long-term debt
(898)
(902)
thereof: owed to banks
(898)
(898)
(0)
(4)
owed to third parties
thereof: secured by land charges
thereof: resulting from taxes
relating to social security
(898)
(898)
(16,524)
(11,423)
(2,061)
(855)
(1,367)
(1,642)
Total liabilities of the
70,336
52,556
LONG-TERM DEBT
Long-term liabilities relate to bank loans.
The bank loans were granted to Loewe Opta GmbH. The changes in the amounts
reported compared to the previous year result from the granting of a long-term loan in the
amount of EUR 7,500 thousand and the scheduled repayments.
OTHER SHORT-TERM LIABILITIES
Other short-term liabilities relate to loans from Loewe Opta Unterstützungskasse e.V. totaling
EUR 8,900 thousand, tax liabilities, and compulsory social security contributions. All amounts
reported as short-term liabilities are due in less than one year.
(25) PROVISIONS AND LIABILITIES OF THE DIVISION TO BE DISCONTINUED
As of the balance sheet date, all other provisions and liabilities of the division to be discontinued have been settled.
EUR thousands
2003
2002
0
43
Cost of warranties
0
360
Personnel costs
0
–
Other provisions
0
77
0
480
Other provisions
Liabilities
0
4
0
156
0
160
0
640
Total provisions and liabilities
of the division to be discontinued
Loewe AG 91 2003
OTHER INFORMATION
CONTINGENCIES AND OTHER FINANCIAL OBLIGATIONS
Contingencies and other financial obligations are broken down as follows:
EUR thousands
12/31/03 12/31/02
Liabilities from the issue and transfer
of bills of exchange and similar instruments
4,471
0
Liabilities from tenancy and servicing
agreements and leases
– due in 2004
3,506
(previous year 2003)
– due between 2005 and 2008
3,059
2,060
(previous year between 2004 and 2007)
2,599
Outstanding contributions for affiliated companies pursuant to § 24 of the German
Private Limited Companies Act amount to EUR 31 thousand (2002: EUR 31 thousand).
Cash credit lines of EUR 32.5 million for short-term loans as well as an additional discount credit facility of EUR 1.4 million exist with the principal bankers. On February 16, 2003,
Loewe’s principal banks and other financiers agreed a financing plan extending until February
28, 2005. The plan includes an extension of previously commited credit lines of EUR 33.9
million and a further increase of up to EUR 10.0 million in these credit lines in order to cover
peak seasonal requirements. In return, Loewe has undertaken to assign substantial collateral
to the banks.
STAFF AND PERSONNEL COSTS
The average number of employees is as follows:
Employees
2003
2002
Industrial workers
510
529
Salaried employees
641
630
1,151
1,159
94
91
1,245
1,250
Employees as defined by § 285 Sec. 7 HGB
Trainees
Total employees
Division to be discontinued
Industrial workers
0
0
Salaried employees
0
11
Employees as defined by § 285 Sec. 7 HGB
0
11
Trainees
0
0
Total employees
0
11
Total employees
1,245
1,261
The personnel costs included in the operating expenses are broken down as follows:
EUR thousands
Wages and salaries
Compulsory social security contributions
2003
2002
50,882
55,146
9,255
9,154
475
539
60,612
64,839
Expenses for pensions and other
employee benefits
Total
INFORMATION PURSUANT TO §160 (1) SECTION 8 OF THE GERMAN STOCK
CORPORATION ACT
The Company published the following announcement in Börsen-Zeitung No. 8 of January 12,
2002:
“Notification pursuant to § 25 (1) WpHG (Wertpapierhandelsgesetz – German
Securities Trading Act)
In accordance with § 21 (1) German Securities Trading Act, the Company has received
notifications concerning shareholdings of 10 % or more of the voting rights and not meeting
the 5 % voting rights threshold:
J & A Vermögensverwaltungs GmbH, Kronach, has notified us that it exceeded the
5 % threshold and the 10 % threshold on December 27, 2001 and now holds 17.67 % of the
voting rights.
Dr. Rainer Hecker, Kronach has notified us that his share in the voting rights by
attribution pursuant to § 22 (1) No. 2 German Securities Trading Act has exceeded the 10 %
threshold and his share in the voting rights is now 24.75 %, of that amount 17.67 % being
attributed to him through J & A Vermögensverwaltungs GmbH, Kronach in accordance with
§ 22 (1) No. 2 German Securities Trading Act.”
The Company published the following announcement in Börsen-Zeitung No. 99 of
May 25, 2002:
“Publication pursuant to § 41 (3) German Securities Trading Act
1. In a letter dated April 3, 2002, 3i Group plc, 91 Waterloo Road, London, UK, informed us
that the share in the voting rights of Loewe AG belonging to it and attributable to it was
10.22 % on April 1, 2002. Of that amount, 5.11 % of the voting rights are attributable to
3i Group plc in accordance with § 22 (1) No. 1 German Securities Trading Act.
2. In a letter dated April 3, 2002, 3i Investments plc, 91 Waterloo Road, London, UK,
informed us that the share in the voting rights of Loewe AG attributable to it pursuant to
§ 22 (1) No. 6 German Securities Trading Act was 12.22 % on April 1, 2002.
In a supplemental letter dated May 21, 2002, 3i Investments plc, 91 Waterloo Road,
London, UK, informed us that the share in the voting rights of Loewe AG attributable to it
and completely allocable pursuant to § 22 (1) No. 6 German Securities Trading Act was
12.22 % on April 1, 2002.
3. In a letter dated April 3, 2002, 3i Europartners II LP, 91 Waterloo Road, London, UK, notified us that its share in the voting rights was 5.11 % on April 1, 2002.
4. In a letter dated April 3, 2002, 3i Europartners II GP Ltd., 91 Waterloo Road, London, UK,
informed us that the share in the voting rights attributable to it pursuant to § 22 (1) No. 1
German Securities Trading Act was 5.11 % on April 1, 2002.
In a supplemental letter dated May 21, 2002, 3i Europartners II GP Ltd., 91 Waterloo Road,
London, UK, informed us that the share in the voting rights of Loewe AG attributable to
it and completely allocable pursuant to § 22 (1) No. 1 German Securities Trading Act was
5.11 % on April 1, 2002.
Loewe AG 93 2003
5. In a letter dated April 3, 2002, 3i Holdings plc, 91 Waterloo Road, London, UK, informed
us that the share in the voting rights of Loewe AG attributable to it pursuant to § 22 (1)
German Securities Trading Act was 5.11 % on April 1, 2002.
In a supplemental letter dated May 21, 2002, 3i Holdings plc, 91 Waterloo Road, London,
UK, informed us that the share in the voting rights of Loewe AG attributable to it and
completely allocable pursuant to § 22 (1) No. 1 German Securities Trading Act was 5.11 %
on April 1, 2002.”
The Company has not received further notifications pursuant to § 21ff. German
Securities Trading Act.
INFORMATION PURSUANT TO § 161 GERMAN STOCK CORPORATION ACT
JOINT DECLARATION BY THE EXECUTIVE BOARD AND SUPERVISORY BOARD OF
LOEWE AG PURSUANT TO § 161 GERMAN STOCK CORPORATION ACT REGARDING
THE RECOMMENDATIONS OF THE GOVERNMENT COMMISSION OF THE GERMAN
CORPORATE GOVERNANCE CODE
The Executive Board and Supervisory Board of Loewe AG decided on December 21,
2003 to adapt their declaration of conformity pursuant to § 161 German Stock Corporation
Act dated December 10, 2002 to the amendments of the German Corporate Governance
Code (Code Version of May 21, 2003) and therefore declare:
The recommendations of the Government Commission of the German Corporate
Governance Code (Code Version of May 21, 2003) as published in the electronic Federal
Gazette on July 4, 2003 have been and will be followed with the following exception:
CODE SUB-SECTION 4.2.4, SENTENCE 2
For the protection of privacy, individualized figures concerning the compensation of the
members of the Executive Board have not been and will not be published.
This statement of compliance has been continuously accessible to the shareholders
on the Internet since February 10, 2004.
SEGMENT REPORTING
The Group’s activities were split into two divisions until 2002 (primary segments as defined
by IAS 14), the Home Media Systems division to be continued and the Telecommunications
division to be discontinued.
The Home Media Systems division is an organizational unit of the subgroup Loewe
Opta GmbH, the subgroup Loewe Opta Benelux N.V./S.A., Loewe Opta, Inc., USA, Loewe
France S.A. and Loewe Italiana S.r.l. The Telecommunications division was under the aegis of
Loewe Telecom GmbH i. L. and was discontinued in 2002.
The Home Media Systems division is engaged in global sales of television sets
manufactured internally and in cooperative agreements as well as purchased DVD players,
stereo systems, video recorders and other products.
CASH FLOW
The cash flow statements of the division to be continued and of the division to be discontinued are shown in detail in the following table.
EUR thousands
Division to be
Division to be
continued
discontinued
Total
2003
2002
2003
2002
2003
2002
– 35,892
18,791
0
0
– 35,892
18,791
25,206
20,989
0
106
25,206
21,095
– 888
Operating activities
Profit from ordinary activities
plus/minus
Depreciation and amortization of non-current assets
Book profits (–) on disposals of non-current assets
Decrease (–)/increase (+) in pension provisions
Income taxes paid
Net cash before changes in net current assets
Decrease (+)/increase (–) in inventories
–5
– 76
0
– 812
–5
– 1,065
441
0
0
– 1,065
441
371
– 8,674
0
0
371
– 8,674
– 11,385
31,471
0
– 706
– 11,385
30,765
8,633
– 9,503
0
6,644
8,633
– 2,859
Decrease (+) in trade accounts receivable
and other assets
11,022
6,391
52
4,993
11,074
11,384
446
– 2,435
– 480
– 2,694
– 34
– 5,129
and other liabilities
– 2,496
– 6,888
– 160
– 3,278
– 2,656
– 10,166
Changes in net current assets
17,605
– 12,435
– 588
5,665
17,017
– 6,770
6,220
19,036
– 588
4,959
5,632
23,995
– 20,711
– 26,173
0
– 157
– 20,710
– 26,330
– 118
– 90
0
0
– 118
– 90
120
93
0
966
120
1,059
91
80
0
0
90
80
Net cash from investing activities
– 20,618
– 26,090
0
809
– 20,618
– 25,281
Free cash flow
– 14,398
– 7,054
– 588
5,768
– 14,986
– 1,286
Increase (+) in minority interests
0
129
0
0
0
129
Capital increase
0
490
0
0
0
490
– 6,100
– 6,085
0
0
– 6,100
– 6,085
9,602
400
0
0
9,602
400
0
– 1,166
0
0
0
– 1,166
Net cash from financing activities
3,502
– 6,232
0
0
3,502
– 6,232
Cash-effective change in liquidity
– 10,896
– 13,286
– 588
5,768
– 11,484
– 7,518
Composition of liquidity
12/31/03 12/31/02
Increase (+)/Decrease (–) in other provisions
Decrease (–) in trade accounts payable
Net cash from operating activities
Investing activities
Payments for purchases of intangible assets
and property, plant, and equipment
Payments for purchases of financial assets
Proceeds from disposals of property, plant,
and equipment
Proceeds from disposals of financial assets
Financing activities
Dividend payment
Borrowing
Repayment of loans
+/–
2,937
3,742
– 805
– 21,275
– 10,596
– 10,679
Liquidity
– 18,338
– 6,854
– 11,484
Loewe AG 95 2003
STATEMENT OF INCOME BY SEGMENT
The segmental results by division are shown below.
Division to be
Division to be
continued
discontinued
Total
January – December January – December January – December
EUR thousands
Sales
Cost of sales
Gross margin
Selling expenses
General administrative expenses
Income from participating interests
EBIT
Interest and similar income
Interest and similar expenses
Income taxes
Net loss/income before minority interests
Minority interests
Consolidated net loss/income
2003
2002
2003
288,921
376,167
0
– 235,674 – 270,670
0
2002
2003
2002
9,426
288,921
385,593
– 6,628 – 235,674 – 277,298
53,247
105,497
0
2,798
53,247
108,295
– 74,292
– 74,783
0
– 2,235
– 74,292
– 77,018
– 8,795
– 10,944
0
– 653
– 8,795
– 11,597
8,402
8,268
0
366
8,402
8,634
– 11,980
– 7,656
0
– 276
– 11,980
– 7,932
106
171
0
0
106
171
– 33,312
20,553
0
0
– 33,312
20,553
259
313
0
0
259
313
– 2,839
– 2,075
0
0
– 2,839
– 2,075
– 35,892
18,791
0
0
– 35,892
18,791
6,174
– 7,624
0
0
6,174
– 7,624
– 29,718
11,167
0
0
– 29,718
11,167
– 21
– 264
0
0
– 21
– 264
– 29,739
10,903
0
0
– 29,739
10,903
Profit carried forward
17,508
17,690
0
0
17,508
17,690
Dividend payment
– 6,100
– 6,085
0
0
– 6,100
– 6,085
17,558
– 5,000
0
0
17,558
– 5,000
– 773
17,508
0
0
– 773
17,508
Appropriations from other retained
earnings and capital reserve
Distributable loss/profit
MANAGEMENT BODIES OF THE PARENT COMPANY
LOEWE AG
SUPERVISORY BOARD
The following are members of the Supervisory Board:
PROF. DR. EBERHARD SCHEFFLER
Auditor, Hamburg,
Chairman
DR. MARK WÖSSNER
former Chairman of the Executive Board and former Chairman of the
Supervisory Board of Bertelsmann AG, Munich
Deputy Chairman
GUIDO ALT
Chairman of the Executive Board of Caatoosee AG,
Stuttgart (until March 31, 2003)
DR. GERHARD HEINRICH
Partner and Managing Director of Heinrich & Cie.
Unternehmensberatungs GmbH, Frankfurt/Main (as of June 25, 2003)
PROF. DR. ROLF-DIETER LEISTER
Management Consultant, Lucerne
DR. SOENKE MEHRGARDT
Member of the Executive Board of Infineon Technologies AG, Munich
HELMUT RICKE
Businessman, Krefeld
Members of the personnel committee are Prof. Dr. Eberhard Scheffler,
Dr. Mark Wössner and Mr. Helmut Ricke.
The audit committee includes Dr. Soenke Mehrgardt, Mr. Helmut Ricke and
Professor Dr. Eberhard Scheffler.
Loewe AG 97 2003
EXECUTIVE BOARD
The following are Members of the Company’s Executive Board:
DR. RAINER HECKER
Industrial engineer, Kronach
Chairman of the Executive Board
DR. BURKHARD BAMBERGER
MBA, Kronach
THOMAS BENDER
MA, Economist, Igensdorf (until May 14, 2003)
GERHARD SCHAAS
Engineer, Rödental
The Executive Board also constitutes the management of Loewe Opta GmbH.
The other offices held by members of the Supervisory Board are listed on pages 97
and 98; those held by members of the Executive Board are shown on page 98. Information
concerning the shares held by the Company’s management bodies is shown on page 99.
The remuneration of the Company’s Executive Board comprises fixed payments
(EUR 906 thousand) as well as an annual performance-based variable remuneration
(EUR 422 thousand). In financial year 2003, the total remuneration came to EUR 1,328 thousand (2002: EUR 1,578 thousand). The remuneration of the Supervisory Board totaled
EUR 182 thousand (2002: EUR 87 thousand).
Amounts totaling EUR 781 thousand (2002: EUR 77 thousand) were paid to
former members of the Executive Board and to members who had resigned for pensions and
for severance packages. The provisions made for pensions came to EUR 979 thousand (2002:
EUR 993 thousand).
In 2003, Professor Dr. Rolf-Dieter Leister received compensation for consulting
services amounting to EUR 64 thousand.
Other offices held by members of the Supervisory Board of Loewe AG:
PROFESSOR DR. EBERHARD SCHEFFLER
(Chairman of the Supervisory Board)
Smurfit Europa Carton AG, Hamburg
(Member of the Supervisory Board)
Smurfit Verwaltungsgesellschaft mbH, Hamburg
DR. MARK WÖSSNER
DaimlerChrysler AG
Douglas Holding AG
Dussmann AG & Co. KG aA, Berlin
eCircle AG, Munich
thorborgnet GmbH & Co. KG aA, Frankfurt/Main
GUIDO ALT
(until March 31, 2003)
M-W Zander Holding AG
PT Sigma Cipta Carake, Jakarta, Indonesia
DR. GERHARD HEINRICH
(as of June 25, 2003)
Prevent AG, Hamburg
PROF. DR. ROLF-DIETER LEISTER
Berlinwasser Holding AG, Berlin
BÖWE Systec AG, Augsburg
Deutsche Beteiligungs AG, Frankfurt/Main
(Deputy Chairman of the Supervisory Board)
DaimlerChrysler Services AG, Berlin
Südwestdeutsche Medien Holding GmbH, Stuttgart
(Member of the extended Supervisory Board)
ASCOM AG, Bern, Switzerland
(Member of the Board of Directors)
DR. SOENKE MEHRGARDT
Xignal Technologies AG, Unterhaching
HELMUT RICKE
IHH Industrie- und Handelsholding AG, Osnabrück
(Deputy Chairman of the Supervisory Board until September 29, 2003)
Offices held by members of the Executive Board of Loewe AG:
DR. RAINER HECKER
Gesellschaft für Unterhaltungs- und
Kommunikationselektronik (gfu) mbH, Frankfurt/Main
ihk.online&medien.gmbh, Bayreuth
GERHARD SCHAAS
SZ Testsysteme AG, Amerang
IGR Interessengemeinschaft für Rundfunkschutzrechte GmbH, Düsseldorf
Loewe AG 99 2003
SHARES HELD BY THE EXECUTIVE BOARD AND SUPERVISORY BOARD
ON DECEMBER 31, 2003
As of December 31, 2003, the Executive Board held 581,425 (2002: 581,425) shares in
Loewe AG. The Supervisory Board holds 710 (2002: 1,260) shares.
The Executive Board
Dr. R. Hecker
Dr. B. Bamberger
G. Schaas
2003 100 Independent Auditor’s Report. Loewe AG
INDEPENDENT AUDITOR’S REPORT
We have audited the consolidated financial statements prepared by Loewe AG, Kronach –
consisting of the balance sheet, income statement, statement of changes in shareholders’
equity, cash flow statement, notes and segment reporting for the business year from
January 1 to December 31, 2003. The preparation and content of the consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion, based on our audit, as to whether the consolidated financial statements
are consistent with the International Accounting Standards (IAS).
We conducted our audit of the consolidated financial statements in accordance with
the International Standards on Auditing (ISA), German auditing principles and the German
generally accepted standards for the audit of financial statements promulgated by the Institut
der Wirtschaftsprüfer (IDW/Institute of German Auditors). Those standards require that we
plan and perform the audit such that we can detect with reasonable assurance whether the
consolidated financial statements are free of material misstatements. The evidence supporting
the disclosures in the consolidated financial statements is examined primarily on a test basis
within the framework of the audit. The audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the
net assets, financial position, results of operations and cash flows of the Group during the
business year in accordance with the International Accounting Standards (IAS).
Our audit, which covered the Group management report prepared by the management for the business year from January 1 to December 31, 2003, has not led to any reservations. In our opinion, the Group management report on the whole provides a suitable understanding of the Group’s position and suitably presents the risks of future development. Furthermore, we confirm that the consolidated financial statements and the Group management
report for the business year from January 1 to December 31, 2003 meet the requirements
exempting the Company from the obligation to prepare consolidated financial statements and
a Group management report in accordance with German law.
Mönchengladbach, March 16, 2004
Abstoß & Wolters OHG
Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft
Grage
Straaten
Auditor
Auditor
Loewe AG 101 2003
FINANCIAL CALENDAR
PUBLICATION OF THE KEY FIGURES FOR THE 2003 FINANCIAL YEAR
Monday, January 26, 2004
PUBLICATION OF THE 2003 FINANCIAL STATEMENTS
OF THE LOEWE GROUP
Friday, March 26, 2004, 9.30 a.m., Munich
DVFA ANALYSTS’ CONFERENCE
Friday, March 26, 2004, 4.00 p.m., Frankfurt/Main
PUBLICATION OF THE Q1 2004 REPORT
(JANUARY 1, 2004 – MARCH 31, 2004)
Conference call at 10.00 a.m., Wednesday, May 12, 2004
FIFTH ANNUAL SHAREHOLDERS’ MEETING OF LOEWE AG
Wednesday, June 23, 2004, 11.00 a.m., Munich, Forum Hotel
(JANUARY 1, 2004 – JUNE 30, 2004)
Conference call at 10.00 a.m., Thursday, August 12, 2004
(JANUARY 1, 2004 – SEPTEMBER 30, 2004)
Conference call at 10.00 a.m., Wednesday, November 10, 2004
PUBLICATION OF THE KEY FIGURES FOR THE 2004 FINANCIAL YEAR
Conference call at 10.00 a.m., Monday, January 24, 2005
2003 102 Glossary. Loewe AG
HOME MULTIMEDIA
TELEVISION’S FUTURE TODAY. TELEVISION, THE INTERNET AND MULTIMEDIA ARE STEADILY
GROWING CLOSER TOGETHER. AN ENTIRELY NEW WORLD OF ENTERTAINMENT, INFORMATION
AND COMMUNICATION IS EVOLVING, AND IT COVERS AN INCREDIBLY BROAD SPECTRUM
OF GOODS AND SERVICES. INTELLIGENT LOEWE TECHNOLOGY OPENS THE DOOR TO THIS NEW
AND FASCINATING WORLD AND TRANSFORMS VISIONS INTO REALITY.
100 HZ TECHNOLOGY
TV images are transmitted with a frame repetition
rate of 50 Hz. The digital 100 Hz technology doubles
ING
DVB – DIGITAL VIDEO BROADCAST-
the frame frequency so that large picture areas are
As a standard for digital television, DVB regulates the
transmitted flicker-free – the optimal condition for
transmission and reception of TV and radio content
no-fatigue viewing pleasure. 100 Hz televisions from
in digital form. To receive these programs, the Loewe
Loewe combine digital 100 Hz technology with the
digital TV upgrade kits contain not only a sat or twin-
8 bit digital technology of the equipment chassis. Many
sat receiver with an analog tuner and a second digi-
expensive analog circuit elements can be eliminated.
tal/analog combination tuner, but also an MPEG-2
A microprocessor monitors the preset default values
decoder card. The decoder card converts the digital
and counteracts possible aging. This means that the
data back into pictures and sounds of the highest
picture quality stays at a top-notch level for a long
quality.
time.
DIGITAL TV UPGRADE KIT
HIGH-SPEED INTERNET
OnlinePlus is very well prepared for the rapid develop-
The 2 Sat-CI P or Twin-Sat-CI P digital upgrade kits
ment of the online networks. In addition to the inte-
open up the total spectrum of freely accessible
grated ISDN card and the possibility to connect an
unencrypted digital satellite channels (Digital Video
external analog modem via the serial connector, DSL
Broadcasting Satellite). Furthermore, via the common
modems or cable modems can also be connected
interface and using the properly cleared smart card,
via the integrated LAN interface for the use of high-
they make it possible to receive encrypted digital pro-
speed Internet. Of course, TV-OnlinePlus can also
gramming including Premiere. In addition, all digital TV
be integrated into an existing cable network via the
upgrade kits starting with MediaPlus-Chassis Q 2500
LAN interface in order to use the Internet.
offer an additional 1,270 channels – besides the
200 regular channels – so that with a total of 1,470
HOME CINEMA
memory locations, there is an adequate long-term
The combination of a large screen television in
reserve, even with the rapidly growing availability of
16:9 wide screen format and the surround sound from
channels.
several speakers conveys the atmosphere of cinema at
home. Maximum picture and sound quality is achieved
when playing back films recorded on DVD.
Loewe AG 103 2003
INTERNET GLOSSARY
MEDIAPLUS CHASSIS
As the basis of the top-of-the-line Loewe televisions,
HOMESERVER
the MediaPlus chassis offers services such as split
OnlinePlus can be connected to a HomeServer, from
screen, PCS Plus and EPG (electronic program guide).
GIRA for example, via the LAN interface of the module.
Moreover, MediaPlus makes it possible to upgrade your
The HomeServer is used to control and monitor domes-
TV set individually by integrating the upgrade kits for
tic infrastructure based on the European Installation
digital TV, Sat/Twin-Sat, OnlinePlus, VGA, Dolby Digital,
Bus (EIB). TV-Online can be used, for example, to
wireless audio, wireless home automation and the
control blinds, lighting, heat and even security systems
MultiMedia kit.
via a user interface suitable for a television. If you
have detailed questions concerning HomeServer or EIB,
ONLINEPLUS UPGRADE KIT
An integrated OnlinePlus upgrade kit makes it possible
please contact your electrician or GIRA directly.
to use Internet applications such as Loewe Channel
LOEWE CHANNEL
(the portal to the Worldwide Web), e-mail and news-
The Loewe Channel is an Internet-based service for
groups.
the users of TV-OnlinePlus and the MultiMedia kit.
With the content tailored to TV, you use a simple and
WIRELESS HOME AUTOMATION
straightforward navigation bar to select TV program
It makes it possible to conveniently operate many
tips, current news and financial, entertainment and
wireless-based electrical devices in the home such as
sports news, a detailed search engine and your person-
the control of lighting systems, awnings and blinds
alized My Channel. You can use the Loewe Channel
via a TV screen menu and/or the remote control.
via any conventional PC with an Internet connection:
http://channel.loewe.de.
ZAP2WEB
This function of OnlinePlus makes it possible for you
to retrieve Internet pages while a program is playing
on your TV by pressing a button. In cooperation with
ZDF, Internet addresses related to the program showing
on the screen are sent to you free of charge and
displayed in the TV menu. When you press the HMM
button on your remote control, OnlinePlus automatically establishes a connection with the Internet address
that was sent. Of course, you can continue to watch
the current TV program in PiP and obtain important
additional information from the Internet at the
same time.
2003 104 Contacts. Loewe AG
CONTACTS
Loewe AG
Industriestrasse 11
D-96317 Kronach
PO Box 1554
D-96305 Kronach
Investor Relations:
+49 (0) 92 61/99-984
Email:
[email protected]
Fax:
+49 (0) 92 61/99-994
Public Relations:
+49 (0) 92 61/99-477
Email:
[email protected]
Customer Care Center: +49 (0) 18 01/22 25 63 93
Email:
[email protected]
Telephone switchboard: +49 (0) 9261/99-0
Internet:
www.loewe.de
Ticker symbol:
LOE
WKN:
649410
ISIN code:
DE 0006494107
Loewe shares are traded in the Prime Segment of the German Stock Exchange.
Indices:
®
Classic All share®
Prime All share
CDAX®
In addition to the annual report, Loewe publishes interim reports on a quarterly basis
(reviewed by the auditor) that include the consolidated financial statements.
The quarterly reports are complemented by conference calls with journalists and analysts.
PUBLICATION CREDITS
Published by:
Loewe AG, Kronach
Design:
Kuhn, Kammann & Kuhn AG, Cologne/Munich
Photography:
Fotostudio Gick, Michelau (p. 2)
English translation:
ETS-English Translation Services GmbH, Frankfurt
Typesetting:
Zerres GmbH, Leverkusen
Printing:
Druckhaus Kirchner, Kirchlengern

FOCUSING ON THE ESSENTIAL ANNUAL REPORT 2003

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