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2.0 MB

28.04.2004
18:35 Uhr
Seite 1
2003 Annual Report
Dürr AG
Paint Systems
Technologies · Systems · Solutions
is the world’s leading provider of mass-production paint shops
for automobile manufacturers and their suppliers.
Final Assembly Systems
plans and supplies products and complete systems for
final vehicle assembly.
Services
supports the automotive industry worldwide with
production-related services.
Ecoclean
provides systems for parts cleaning, coolant recycling,
and automation in workpiece machining.
Measuring Systems
combines all of the Schenck Group’s activities in measuring technology.
Design:
3st kommunikation, Mainz, Germany
Setting:
Knecht, Ockenheim, Germany
Printing:
Societätsdruck, Walldorf, Germany
Binding:
Thalhofer, Schönaich, Germany
“ethabind” jacket, patented
Dürr 2003 Annual Report
240645_Duerr_Umschlag_E
Key figures for the Dürr Group (US-GAAP)
2003
Changes
2002
2001
8.8 %
2,082,137
2,196,169
89,136
127,837
Paint Systems
Sales and earnings
Sales
in € k
2,264,508
EBITDA
in € k
48,392
(earnings before interest expense, taxes,
depreciation and amortization)
2003
Changes
2002
2001
Total sales
in € m
1,243.2
17.9 %
1,054.3
1,094.5
Total incoming orders
in € m
1,400.1
8.8 %
1,286.8
1,036.5
EBITDA
in € m
40.3
39.2
61.7
in € m
45.3
39.2
61.7
2,837
2,952
before restructuring expenses
EBITDA before restructuring expenses
in € k
72,720
89,136
127,837
EBIT (earnings before interest expense and taxes)
in € k
17,862
55,070
83,675
EBIT before restructuring expenses
in € k
43,456
55,070
83,675
Final Assembly
Total sales
in € m
436.6
7.9 %
404.7
425.2
EBT (earnings before taxes)
in € k
– 6,947
22,620
39,790
Systems
in € m
405.4
– 14.9 %
476.2
351.3
EBT before restructuring expenses
in € k
18,647
22,620
39,790
EBITDA
in € m
15.6
15.4
Consolidated net loss (income)
in € k
– 31,270
12,018
20,003
Employees at year’s end
– 1.0 %
1,609
1,631
Fixed assets
in € k
569,110
– 5.9 %
604,890
646,093
Non-fixed assets
in € k
1,037,345
– 7.0 %
1,115,355
1,130,823
Equity
in € k
215,211
– 18.0 %
262,296
292,982
14.65
15.96
in € k
36,603
–
36,603
36,603
in € k
53,607
0.9 %
53,142
51,692
Other accruals
in € k
272,026
5.5 %
257,782
Financial debt
in € k
296,828
– 16.1 %
353,774
Net financial debt on annual average
in € k
221,488
– 33.5 %
333,207
443,806
Net financial debt at year’s end
in € k
96,969
– 21.2 %
123,067
289,758
Total assets
in € k
1,665,821
– 7.0 %
1,790,301
1,835,684
Capital expenditures
in € k
16,645
– 43.4 %
29,402
40,424
Measuring
Total sales
Depreciation and amortization
in € k
30,530
– 10.4 %
34,066
44,162
Systems
EBITDA
Services
Financial and capital structure
In % of total assets
Of which capital stock
Pension accruals
12.92
2,808
11.4
1,593
Total sales
in € m
146.5
1.8 %
143.9
134.0
in € m
146.5
2.4 %
143.1
134.3
EBITDA
in € m
11.2
10.8
5.3 %
4,272
3,727
Ecoclean
– 1.0 %
10.3
4,499
Total sales
in € m
215.5
– 2.9 %
221.9
277.3
in € m
176.9
– 25.3 %
236.7
243.2
279,746
EBITDA
in € m
10.1
15.0
22.2
439,639
EBITDA
in € m
11.6
Statements of cash flows
15.0
22.2
932
– 13.6 %
1,079
1,084
364.9
– 5.4 %
385.9
428.9
in € m
369.7
– 3.0 %
381.2
411.3
in € m
– 16.2
10.4
17.4
in € m
EBITDA
Net cash provided by operating activities
in € k
56,415
198,659
188,444
Net cash used in investing activities
in € k
– 29,472
– 40,417
– 44,799
Net cash used in financing activities
in € k
– 47,424
– 74,237
– 40,028
in € m
1.6
2,861
– 6.1 %
10.4
17.4
3,046
3,224
The Corporate Center (see p. 57) had 54 employees on December 31, 2003 (2002: 59);
the Corporate Center’s EBITDA amounted to € – 7.5 million (2002: € – 2.3 million).
Personnel
Employees (average for the year)
12,957
2.7 %
12,620
12,561
12,747
– 1.2 %
12,902
12,675
608,313
– 6.0 %
647,080
647,404
Personnel expenses
in € k
1,224
Key figures of interest to the capital markets
in €
Dividend per share
in €
– 2.19
–*
0.84
1.40
0.80
1.10
2,196
2,082
2,265
65.4
115.3
127.8
89.1
48.4
72.7
99
00
01
02
03
03*
140
120
2,000
100
Market price of Dürr shares
High
in €
19.30
26.00
29.00
Low
in €
13.15
14.80
17.10
Close
in €
19.30
16.00
24.30
in k
14,298
14,298
14,298
in € m
276
229
347
Market capitalization at year’s end
2,042
Consolidated EBITDA in € m
2,500
Earnings per share
No. of shares at year’s end
Consolidated sales in € m
1,500
80
1,000
60
40
500
20
0
0
99
00
01
02
03
* Dividend proposed to the annual shareholders’ meeting
* Before restructuring expenses
Immaterial variances may occur in this report due to roundings in the computation of sums and percentages.
Key figures for the Dürr Group
EBITDA
28.04.2004
18:35 Uhr
Seite 2
Key figures for the Dürr Group (US-GAAP)
2003
Changes
2002
2001
in € k
2,264,508
8.8 %
2,082,137
2,196,169
in € k
48,392
Paint Systems
Sales and earnings
EBITDA
89,136
127,837
(earnings before interest expense, taxes,
depreciation and amortization)
EBITDA before restructuring expenses
Changes
2002
2001
Total sales
in € m
1,243.2
17.9 %
1,054.3
1,094.5
in € m
1,400.1
8.8 %
1,286.8
1,036.5
EBITDA
in € m
40.3
39.2
61.7
EBITDA
89,136
127,837
39.2
61.7
2,808
– 1.0 %
2,837
2,952
in € m
436.6
7.9 %
404.7
425.2
in € m
405.4
– 14.9 %
476.2
351.3
EBITDA
in € m
11.4
in € k
72,720
EBIT (earnings before interest expense and taxes)
in € k
17,862
55,070
83,675
EBIT before restructuring expenses
in € k
43,456
55,070
83,675
Final Assembly
Total sales
EBT (earnings before taxes)
in € k
– 6,947
22,620
39,790
Systems
EBT before restructuring expenses
in € k
18,647
22,620
39,790
Consolidated net loss (income)
in € k
– 31,270
12,018
20,003
Services
Financial and capital structure
in € m
45.3
15.6
15.4
1,593
– 1.0 %
1,609
1,631
Total sales
in € m
146.5
1.8 %
143.9
134.0
in € m
146.5
2.4 %
143.1
134.3
EBITDA
in € m
10.3
Fixed assets
in € k
569,110
– 5.9 %
604,890
646,093
Non-fixed assets
in € k
1,037,345
– 7.0 %
1,115,355
1,130,823
Equity
in € k
215,211
– 18.0 %
262,296
292,982
14.65
15.96
in € k
36,603
–
36,603
36,603
Pension accruals
in € k
53,607
0.9 %
53,142
51,692
Other accruals
in € k
272,026
5.5 %
257,782
Financial debt
in € k
296,828
– 16.1 %
353,774
Net financial debt on annual average
in € k
221,488
– 33.5 %
333,207
443,806
Net financial debt at year’s end
in € k
96,969
– 21.2 %
123,067
289,758
Total assets
in € k
1,665,821
– 7.0 %
1,790,301
1,835,684
Capital expenditures (without operator models)
in € k
16,645
– 43.4 %
29,402
40,424
Measuring
Total sales
in € m
364.9
– 5.4 %
385.9
428.9
in € k
30,530
– 10.4 %
34,066
44,162
Systems
in € m
369.7
– 3.0 %
381.2
411.3
EBITDA
in € m
– 16.2
10.4
17.4
in € m
1.6
10.4
17.4
3,046
3,224
In % of total assets
Of which capital stock
12.92
Ecoclean
4,499
11.2
10.8
5.3 %
4,272
3,727
Total sales
in € m
215.5
– 2.9 %
221.9
277.3
in € m
176.9
– 25.3 %
236.7
243.2
279,746
EBITDA
in € m
10.1
15.0
22.2
439,639
EBITDA
in € m
11.6
Statements of cash flows
932
– 13.6 %
15.0
22.2
1,079
1,084
EBITDA
in € k
56,415
198,659
188,444
in € k
– 29,472
– 40,417
– 44,799
in € k
– 47,424
– 74,237
– 40,028
12,620
12,561
2,861
– 6.1 %
The Corporate Center (see p. 57) had 54 employees on December 31, 2003 (2002: 59);
the Corporate Center’s EBITDA amounted to € – 7.5 million (2002: € – 2.3 million).
Personnel
Employees (average for the year)
Personnel expenses
in € k
12,957
2.7 %
12,747
– 1.2 %
12,902
12,675
608,313
– 6.0 %
647,080
647,404
1,224
Key figures of interest to the capital markets
in €
Dividend per share
in €
– 2.19
–*
0.84
1.40
0.80
1.10
2,196
2,082
2,265
65.4
115.3
127.8
89.1
48.4
72.7
99
00
01
02
03
03*
140
120
2,000
100
Market price of Dürr shares
High
in €
19.30
26.00
29.00
Low
in €
13.15
14.80
17.10
Close
in €
19.30
16.00
24.30
in k
14,298
14,298
14,298
in € m
276
229
347
2,042
Consolidated EBITDA in € m
2,500
Earnings per share
Consolidated sales in € m
1,500
80
1,000
60
40
500
20
0
0
99
00
01
02
03
* Before restructuring expenses
Immaterial variances may occur in this report due to roundings in the computation of sums and percentages.
Key figures for the Dürr Group
Sales
2003
28.04.2004
18:35 Uhr
Seite 1
2003 Annual Report
Dürr AG
Paint Systems
Services
Ecoclean
Measuring Systems
Design:
Setting:
Printing:
Binding:
1
The Dürr Group is one of the world’s leading suppliers of production
systems and manufacturing support services for the automotive
industry. Our customers include all significant automobile manufacturers and many parts and components suppliers. We offer
innovative and environmentally sound solutions that contribute
substantially to lower costs, higher quality, and greater flexibility
in the development and production of vehicles.
Our range of products and services covers the entire life cycle of
production systems: planning, realization, modernization, and services
during operation. We enhance our customers’ competitiveness with
trend-setting solutions.
Our strengths include motivated and customer-oriented employees,
global presence, and outstanding innovating power. On this basis, we
will increase our profitability and the value of the company.
2
4
Enhancing profitability
“The year 2004 is a crucial one for Dürr on its way to
more profitability. The
program will be vigorously
implemented with the aim of improving the Dürr Group’s
efficiency.” Stephan Rojahn, Chairman of the Board of
Management
48
2003 at a glance
The year’s important events at a glance.
61
Securing technological leadership
We will continue to pursue intensive R&D work in the
future to maintain our position as technological leader.
We plan to raise R&D spending in fiscal 2004.
3
Contents
4
8
12
Letter from the Chairman of the
Board of Management
Report of the Supervisory Board
Dürr stock
Reports from the business units
18
24
30
36
42
Paint Systems
Services
Ecoclean
Measuring Systems
48
2003 at a glance
Consolidated management report
50
51
52
58
61
62
Economic environment
Strategy
Business development
Financial position
Development and innovation
Purchasing management
62
64
64
66
67
Employees
Environmental protection
Risk management
Events subsequent
to the reporting date
Outlook
Consolidated financial statements
71
72
73
74
75
76
Independent auditors’ report
Consolidated statements of income
Consolidated balance sheets
Consolidated statements of equity
Consolidated statements
of cash flows
Notes to the consolidated financial
statements
112 Dürr worldwide
115 Glossary
Letter from the Chairman
of the Board of Management
Board of Management of Dürr AG
Stephan Rojahn (55), Chairman
Kay Bönisch (43)
Ecoclean, Measuring Systems
Finance,
Public & Investor Relations,
Controlling,
Global Sourcing,
Human Resources,
Corporate Audit,
Legal
Dr. Reinhold Grau (50)
Dr. Norbert Klapper (41)
Paint Systems
Final Assembly Systems,
R&D, Information Technology,
Services
Sales & Marketing
Quality Management
Letter from the Chairman of the Board of Management
5
Groundwork laid for earnings enhancement
High sales in 2003
Earnings burdened by restructuring and allowances
earnings enhancement program under way
Share price up by 21 %
No dividend planned for 2003
Significant earnings improvement expected in 2004
Dear Stakeholders,
Fiscal 2003 was a year of light and shade for Dürr. On the one hand, we achieved
considerable successes. We managed to raise sales by almost 9 % to a record level of
€ 2,264.5 million and register strong order intake of € 2,356.2, despite a very difficult
market environment. We may also be quite proud of winning the largest single contract
in our history. In spring 2003, General Motors awarded us an order to build three
large paint shops in North America.
On the other hand, for the first time since going public in 1990, we showed negative
earnings before taxes in the amount of € 6.9 million (2002: positive result of
€ 22.6 million). Besides margin pressure and exchange rate effects, the main reason
for that was restructuring expenses in the amount of € 25.6 million. With special
burdens caused by necessary restructuring measures left out of account, earnings
before taxes come to a positive € 18.7 million, and EBITDA to € 72.7 million.
Furthermore, a valuation allowance of € 23.0 million was taken on deferred tax assets
loss carryforwards, which led to a net loss for 2003 of € 31.3 million.
Main goal: Earnings enhancement with
Our main goal is to improve the Dürr Group’s operating profitability on a lasting
basis. We set out resolutely to achieve that by starting the
earnings enhancement program in spring 2003. With strict discipline, we are pursuing four main lines
of attack in this connection: cutting costs, reducing risk, improving net working capital,
and streamlining our portfolio of locations and products. The program consists of
over 200 individual measures throughout the Group. We already successfully set some
of them in motion last year. But 2003 was mainly devoted to laying the groundwork,
while 2004 is the first year of full implementation. We have set ourselves correspondingly ambitious rate-of-return targets for the medium term. We intend to raise the
return on sales (ROS) to 5 %, the return on capital employed (ROCE) to 15 %, and the
return on equity (ROE) to 25 %.
will help us create the basis for meeting
these targets.
6
Attractive range of products and services
Dürr is on the right path not only with
. We also have all the necessary means
at our disposal to consistently expand our position among leading providers of
production systems and production-related services to the automotive industry.
Dürr’s range of products and services deals with all key stages of automobile production. We are represented in the painting and final assembly of vehicles, modules,
and components. We also supply testing systems for vehicle development and
quality assurance as well as measuring and balancing systems for the production
of rotating parts. In the production of engine and transmission components, we
support our customers with innovative cleaning and filtration technologies. In the
framework of our life cycle concept, we offer solutions for the entire service life
of production systems, from planning and realization to services during operation
to technological upgrading. Our focus is not only on automobile manufacturers,
but also increasingly on their suppliers. There are good business opportunities in
the latter segment, since the major suppliers are taking over more and more
functions from the automobile manufacturers and therefore need appropriate
production and testing systems.
We offer our customers technologies, systems, and solutions to improve their
competitive position in a closely contested market. Our products and services are
therefore aimed at cutting costs, increasing flexibility and quality, and improving
the environmental compatibility of the production process.
We occupy leading market positions in all our areas of operation, which we have
achieved by means of innovative technology and competitive prices. About 6 %
of our sales flow annually into developing new solutions. We also do not intend to
cut our R&D spending in the future despite all the attention focused on costs.
Last, but not least, Dürr is an international company that is represented in all automobile manufacturing regions of the world. That enables us to utilize business
opportunities that arise from our customers’ expansion into low-wage countries
and new markets. In particular, we are greatly increasing our capacities in
China. Our global positioning helps us to balance fluctuations in demand among
customers, regions, and business units to a large extent.
Competitiveness improved
The mentioned restructuring expenses were related to
measures to improve
competitiveness in the Paint Systems, Ecoclean, and especially Measuring Systems
business units. An important single project is the closing of a loss-making premanufacturing operation in Darmstadt, Germany, which incurred charges totaling
€ 18.4 million. That step is necessary to enable us to cultivate price advantages in
attractive procurement markets and substantially reduce costs in Measuring Systems.
Another accomplishment on the path to more competitiveness is the squeeze-out
at Carl Schenck AG that we initiated in February 2004 to increase our shareholding to
100 %. That will help to synchronize organization and management throughout the
Dürr Group. Internal cooperation will also improve, for example, in the areas of purchasing, development, and financial management. The squeeze-out will also relieve
Schenck of the costs of fulfilling disclosure requirements and of being listed on the stock
exchange as well as a large part of the expenses for annual shareholders’ meetings.
Letter from the Chairman of the Board of Management
7
Positive stock performance – omission of dividend planned for 2003
After a weak start, Dürr stock showed clear rallying tendencies in 2003 and an advance
of 21 % by year’s end. Because of negative earnings, however, the Board of Management and the Supervisory Board will propose to shareholders at their annual meeting
to omit the dividend payment for fiscal 2003. With a view to the initiated earnings
enhancement measures, we are confident, however, that we will be able to resume
dividend payments in the future and our shareholders will participate appropriately
in the company’s success.
Outlook for the Dürr Group
The year 2004 is a crucial one for Dürr on its way to more profitability. The
program will be vigorously implemented with the aim of improving the Dürr Group’s
efficiency. Against that background, we expect significantly positive earnings for
the current fiscal year. Sales will probably be slightly below the high figure reached
in 2003.
With this Annual Report we hope to give you an informative insight into our company.
Not only the texts and figures are meant to serve that purpose, but also the largesize pictures. They capture moments in the working world of our business units and
clearly illustrate the basis of our ability to perform, which is the daily dedication of
Dürr employees.
On behalf of my colleagues and myself, I would like to thank all our employees for the
creative and motivated efforts that they again made in the past year. We also extend
thanks to our customers and business partners for their good cooperation and to our
shareholders for the trust that they have shown in us.
Stuttgart, April 2004
Stephan Rojahn
Chairman of the Board of Management
Dr.-Ing. E. h. Heinz Dürr
In 2003, the Supervisory Board performed the duties assigned to it by law and the
articles of association. It advised the Board of Management, and regularly and diligently monitored that body’s management of the company. The Supervisory Board
was involved in all decisions of fundamental importance for the Dürr Group. The
Board of Management informed the Supervisory Board in a timely and comprehensive manner about the economic situation and development of the company, about
company planning, including financial, investment and personnel planning, and
about transactions requiring Supervisory Board consent and substantial business
occurrences. The Supervisory Board adopted its resolutions after thorough review
on the basis of detailed written and oral reports.
The Supervisory Board came together at five regular meetings in 2003. No member
of the Supervisory Board attended less than three meetings. The Personnel Committee
met three times, while the Mediation Committee was not convened. The Audit Committee met on April 22, 2004, to discuss the 2003 financial statements. The composition
of the Supervisory Board remained unchanged in 2003. Mr. Peter Krüger, the representative of our executive personnel, left the Supervisory Board as of December 31,
2003. Mr. Harald Rüber has taken his place. The Supervisory Board thanks Mr. Krüger
for his constructive cooperation and dedicated efforts on behalf of the company and
its employees.
Also outside the meetings, the Chairman of the Supervisory Board maintained close
contact with the Board of Management and obtained timely reports on current
developments and important events, primarily from the Chairman of the Board of
Management. He furthermore discussed the company’s business policy, strategic
orientation, and financial situation with the Chairman of the Board of Management
and reported the results of these discussions to the entire Supervisory Board, either
immediately or at its next meeting.
The Board of Management and the Supervisory Board regularly discussed the situation
with respect to orders, sales and earnings as well as the financial position of the
Group and the individual business units. The Supervisory Board paid special attention
to the handling of major orders and the associated opportunities and risks. Above all,
9
it sought and obtained information on several occasions regarding the major Paint
Systems order placed by General Motors in the first quarter of 2003, the largest single
order in the company’s history.
In common with the Board of Management, the Supervisory Board considers substantially improving the Dürr Group’s profitability as the most important management
task. In that connection, it was extensively informed about the goals, measures and
status of the
earnings enhancement program, which was initiated in spring
2003. Implementing
will continue to be a focus of deliberations in the future.
In the meeting on October 6, 2003, the Supervisory Board appointed Mr. Kay Bönisch
as a regular member of Dürr AG’s Board of Management, effective as of November 1,
2003. In the framework of the Board of Management’s new assignment of duties,
adopted by the Supervisory Board at its meeting on December 12, 2003, Mr. Bönisch
has assumed responsibility for the areas of finance and controlling, taxes, legal
affairs, personnel, and risk management as of February 1, 2004. At the meeting on
February 19, 2004, Mr. Bönisch was furthermore appointed Employee Affairs Director
of Dürr AG. In all the above-mentioned functions, he follows Dr. Wolfgang Baur, who
left the company as of January 31, 2004, to take up a new position. The Supervisory
Board thanks Dr. Baur for the great personal dedication with which he worked on
behalf of the Dürr Group as a member of the Board of Management since 1999.
In its meeting on April 9, 2003, the Supervisory Board decided that a new tranche of
the DISOP stock option plan would not be issued in 2003. It will consider and decide
the question of a further DISOP tranche again in the current fiscal year.
Another object of deliberations was the German Corporate Governance Code. In
December 2003, the Supervisory Board and the Board of Management jointly issued
for the second time – pursuant to Sec. 161 of the German Stock Corporation Law – a
declaration of compliance to the effect that Dürr is largely following the recommendations of the Government Commission German Corporate Governance Code. Please
refer to pages 15 and 16 for details concerning corporate governance at Dürr AG.
The Board of Management reported regularly and in a timely manner to the
Supervisory Board about existing risks. The Supervisory Board advised the Board of
Management regarding the expansion of risk control and monitoring systems.
The annual financial statements and management report prepared by the Board of
Management as of December 31, 2003, together with the consolidated financial
statements and consolidated management report of Dürr AG, were examined by the
auditors engaged by the Supervisory Board after appointment by the annual shareholders’ meeting, and have received an unqualified audit report. The annual financial
statements and consolidated financial statements, the management report and consolidated management report, the proposal for the use of unappropriated profit of
Dürr AG, and the auditors’ reports concerning the auditing of the annual financial statements and of the consolidated financial statements were submitted to all members
of the Supervisory Board in good time before the meeting held to approve the financial
statements, and were discussed in detail with the Board of Management at that meeting of the Supervisory Board on April 28, 2004. The auditors who signed the audit
reports for the annual financial statements and the consolidated financial statements
of Dürr AG also participated in that meeting with regard to the relevant points on the
agenda, and reported concerning their audit. The Supervisory Board took approving
note of the audit result.
10
The Supervisory Board examined the annual financial statements and consolidated
financial statements and the management report and consolidated management
report. This examination by the Supervisory Board revealed no cause for objection.
The Supervisory Board concurs in the assessment of the business situation and
future development of the consolidated Group as presented in the consolidated
management report.
The Supervisory Board approves the annual financial statements prepared by the
Board of Management, which are hereby ratified. The Supervisory Board approves the
Board of Management’s proposal for the use of the unappropriated profit of Dürr AG.
The Supervisory Board also approves the consolidated financial statements.
The Supervisory Board has examined the report prepared by the Board of Management pursuant to Sec. 312 of the German Stock Corporation Law concerning relationships with associated enterprises for the period from January 1 to December 31, 2003
(dependent company report). The dependent company report was also examined
by the auditors appointed by the annual shareholders’ meeting, and has been issued
the following unqualified audit report pursuant to Sec. 313 (3) of the German Stock
Corporation Law:
“After examination and assessment in accordance with our professional duties, we
confirm that:
1. the factual information given in the report is correct,
2. the performance rendered by the company in connection with the transactions
mentioned in the report was not unduly high,
3. regarding the measures mentioned in the report, no circumstances argue in favor
of a materially different judgment than that made by the Board of Management.”
The examination of the dependent company report by the Supervisory Board revealed
no cause for objection. The Supervisory Board concurs in the results of the examination of the dependent company report by the auditors. According to the final results
of the examination by the Supervisory Board, there are no objections to be raised
against the declaration by the Board of Management at the end of the dependent
company report.
The Supervisory Board thanks the Board of Management, all employees, and the
representatives of the staff for their dedication in the past year, as well as the shareholders for the confidence they have placed in the company.
Stuttgart, April 28, 2004
The Chairman
Dr.-Ing. E. h. Heinz Dürr
11
Members of the Supervisory Board
Dr.-Ing. E. h. Heinz Dürr1
Werner Kramp 3
Entrepreneur, Berlin
Chairman
Chairman of the Works Council of
Schenck Final Assembly Products
GmbH, Püttlingen
Peter Weingart1, 3
Chairman of the Group Works
Council of Dürr AG, Stuttgart
Deputy Chairman
Prof. Dr. Norbert Loos1, 2
Managing Partner of Loos
Beteiligungs-GmbH, Stuttgart
Deputy Chairman
Peter Krüger3
Manager of Commercial Order
Processing of Dürr Systems GmbH,
Stuttgart
(until December 31, 2003)
Günter Lorenz1, 3
Lieselotte Dedek-Fried 2, 3
Principal Authorized Representative
of IG Metall administrative offices,
Darmstadt
Member of the Works Council of
Schenck RoTec GmbH, Darmstadt
Harald Rüber 3
Benno Eberl 2, 3
Trade Union Secretary of IG Metall
administrative offices, Stuttgart
Head of Project Development
at Dürr Systems GmbH, Stuttgart
(since January 1, 2004)
Joachim Schielke
Prof. Dipl.-Ing. Jörg Menno Harms
Chairman of the Managing Board
of Hewlett Packard GmbH
and Holding GmbH, Böblingen
Member of the Board of Management
of Landesbank Baden-Württemberg,
Stuttgart
Dr. Heinz Gerd Stein 2
Dr. Tessen von Heydebreck
Member of the Board of
Management of Deutsche Bank AG,
Frankfurt/Main
1
Member of the Mediation Committee and Personnel Committee
Member of the Audit Committee
3
Representative of the employees
2
Business Consultant, Duisburg
Dürr stock
Now drawing great attention in the SDAX
2003: 21 % share price increase
Capital market communication strengthened
Corporate Governance Code largely implemented
The negative trend on the stock markets continued at the beginning of 2003. It hit
bottom in March, when the DAX fell significantly below 2,500 points. In addition to
weak economic development, huge political uncertainties, arising particularly from
the Iraq War, were mainly responsible for the deep decline of prices on a broad front.
At the end of the first quarter, the markets started advancing again significantly.
At year’s end, the DAX was up 37 %, and the MDAX 47 %. The TecDAX and SDAX each
rose by 51 % from January to December 2003.
Dürr's stock followed the general downward trend on the markets at the beginning
of the year. It reached its lowest point in the XETRA electronic trading system on
March 13, 2003, at € 13.15. It subsequently advanced and reached its high for the year
on December 30, 2003, closing at € 19.30. That yields a price increase of 21 % for 2003.
Dürr ensured liquidity in XETRA with a designated sponsor.
2003: Forty-three analyses written about Dürr
Dürr was admitted to Deutsche Börse’s new Prime Standard segment in January 2003,
where the Dürr stock belongs to the Prime Industrial Index. Since March 24, 2003, our
stock is no longer quoted in the MDAX, but rather in the SDAX, an index of 50 selected
small caps. The reason for this change was the reduction of the MDAX from 70 to 50
stocks. Despite the change, we were able to increase the interest taken in our company
by banks and analyst firms: In fiscal 2003, 15 institutions wrote a total of 43 analyses
about Dürr, which is eight more than in the previous year. Most of the recommendations were “buy” or “hold.” The analyses can be called up on the Investor Relations
pages of our website, www.durr.com.
13
Dürr stock
No dividend payment planned for 2003
Earnings per share declined in fiscal 2003 to € – 2.19, after € 0.84 in the previous year.
Given the negative earnings, the Board of Management and the Supervisory Board
will propose to the annual shareholders’ meeting that no dividend be paid for fiscal
2003 (previous year: € 0.80). We are making every effort, however, to substantially
improve our profitability so that we will be able to pay our shareholders an attractive
dividend in the future. We have embarked on the right path to that end with our
earnings enhancement program.
Changes in shareholder structure
Our shareholder structure changed in fiscal 2003 as follows: Süd-Kapitalbeteiligungsgesellschaft mbH, a holding of Landesbank Baden-Württemberg (LBBW), acquired
the 11.0 % of Dürr AG’s capital stock previously held by its associated company LBBW
Trust GmbH on September 30, 2003. Kreissparkasse Biberach has held 5.6 % of the
capital stock since April 15, 2003. The shares held by Heinz Dürr GmbH and BWK GmbH
Unternehmensbeteiligungsgesellschaft remain unchanged at 48.9 % and 7.0 %, respectively. The free float amounts to 27.5 % of the capital stock; Heinz und Heide DürrStiftung GmbH accounts for 4.5 %, institutional and private investors for 23.0 %.
Dürr stock price development in the XETRA from January to December 2003
compared with indexed development of the DAX, MDAX, SDAX*, and Prime Industrial Index**
in €
25
ISIN DE0005565204
Reuters symbol DUEG
20
Bloomberg code DUE GY
15
10
5
J
F
M
Dürr stock in the XETRA
A
M
DAX
** Since recalculation on March 24, 2003
** Since initial calculation on March 24, 2003
J
J
MDAX
A
S
SDAX
O
N
D
Prime Industrial Index
14
Key figures
2003
2002
2001
in k
14,298
14,298
14,298
Earnings per share
in €
– 2.19
0.84
1.40
Cash flow per share
in €
– 0.02
3.32
5.20
Dividend per share
in €
0.80
1.10
Share price high
in €
26.00
29.00
–*
19.30
Share price low
in €
13.15
14.80
17.10
Share price close
in €
19.30
16.00
24.30
Price-earnings ratio at year’s end
–
19.0
17.4
Price-cash flow ratio at year’s end
–
4.8
4.7
276
229
347
in € m
Capital market communication strengthened further
At road shows in Europe and the United States and at conferences with banks and
investors, the Board of Management provided information about Dürr’s key financial
data, strategy, and potential opportunities. Furthermore, when announcing business
figures and other important events, we invited the financial community to participate
in conference calls and analyst meetings. A highlight in our financial calendar was
the second Dürr Capital Markets Day, which took place on October 13, 2003, at our
technology center for cleaning systems in Monschau, Germany. Analysts, investors
and bank representatives were able to communicate directly with the Board of
Management there and become acquainted with new technologies and products.
Dürr is also present at numerous road shows and investor events during the current
fiscal year. The most important dates are presented on page 17.
Dürr regularly provides detailed information about the company’s development. We
keep analysts, journalists, and investors abreast of current events on equal terms
and in a timely manner. The Internet is a quick and convenient communication channel.
On our website (www.durr.com), we offer information for shareholders, including
financial reports, key figures, data regarding our stock, and company press releases.
Dürr has broadcast its annual shareholders’ meeting live on the Internet since 2001.
Corporate Governance Code: Declaration of compliance submitted
Since its introduction in February 2002, the German Corporate Governance Code has
quickly become the yardstick for transparency and the responsible management and
control of listed stock corporations. The Code is based on statutory guidelines, mainly
from the Stock Corporation Act, and contains comprehensive recommendations for
the cooperation of management and supervisory boards, for open communication with
the capital markets, and for the protection of shareholders’ interests. The Code’s goal is
to strengthen the confidence of domestic and foreign investors in German companies.
Dürr stock
15
According to Sec. 161 of the German Stock Corporation Law, the board of management and the supervisory board of a listed stock corporation are obliged to declare
once every year that the recommendations of the Government Commission German
Corporate Governance Code were and are being complied with, or which recommendations were or are not being applied. Dürr AG fulfills most of the mandatory provisions of the Code, in the meantime also Items 2.3.3 and 6.6. The implementation of
further provisions is planned. The deviations from the Code are specified below with
the corresponding reasons. They are also presented on the Investor Relations pages
(Corporate Governance) of our website (www.durr.com).
In accordance with Sec. 161 of the German Stock Corporation Law, the Board of
Management and the Supervisory Board of Dürr AG declare:
“Dürr AG complies with the recommendations of the Government Commission
German Corporate Governance Code with the following exceptions:
Item 3.8 Paragraph 2
If the company takes out a D&O (directors and officers’ liability insurance) policy
for the Management Board and Supervisory Board, a suitable deductible shall
be agreed.
A D&O insurance policy with no deductibles exists for the members of the Board
of Management and the Supervisory Board. This is a group insurance policy
for executives at home and abroad, although a differentiation between members
of the executive body and employees does not appear appropriate. In addition,
a deductible is not usual abroad and would therefore make it difficult to recruit
executives from abroad.
Item 4.2.4
Compensation of the members of the Management Board shall be reported in
the Notes to the Consolidated Financial Statements, subdivided according to fixed,
performance-related, and long-term incentive components. The figures shall be
individualized.
We report the sum of salaries of the members of our Board of Management in the
Notes to our consolidated financial statements. In our view a separate, individualized item broken down into fixed and performance-related components would not
provide any additional benefit for the shareholders. As Dürr AG Board of Management operates according to the principle of collective responsibility, the decisive
factor is the incentives provided for the Board of Management as a whole. In other
respects, there is a risk that listing these figures separately will lead to a leveling
of performance-related and task-related differences in pay.
Item 5.4.1 Sentence 2
Furthermore, ... an age limit to be specified for the members of its Supervisory
Board shall be taken into account.
Dürr sees no necessity for defining an age limit for members of its Supervisory
Board.
16
Item 5.4.5 Paragraph 1 Sentence 3
Also to be considered [for specifying the compensation of the members of the
Supervisory Board] shall be … the chair and memberships in committees.
Because of the success-related compensation of the members of our Supervisory
Board, there is no separate remuneration for the chair or for membership in
committees.
Item 5.4.5 Paragraph 3
The compensation of the members of the Supervisory Board shall be reported
separately in the Notes to the Consolidated Financial Statements, subdivided
according to components. Also payments made by the enterprise to the members of the Supervisory Board or advantages extended for services provided
individually, in particular, advisory or agency services shall be listed separately
in the Notes to the Consolidated Financial Statements.
We report the sum of salaries of the members of our Supervisory Board in the
Notes to our consolidated financial statements. A separate, individualized statement of salaries subdivided according to components would, in our view, not
provide any additional benefit for the shareholders.
The possibility of obtaining the expertise of individual members of our Supervisory
Board for special topics at any time represents a special advantage for Dürr.
Cooperation is based on the conditions that are usual in the industry, which are
also maintained in comparable transactions with third parties. Hence, we see no
necessity for individualized publication.
Item 7.1.2 Sentence 2
The Consolidated Financial Statements shall be publicly accessible within 90 days
of the end of the financial year; interim reports shall be publicly accessible within
45 days of the end of the reporting period.
At present we are unable to comply with all the recommended deadlines. However,
in the medium term we plan to comply in full with this recommendation. Our
consolidated financial statements are published within four months of the end
of the fiscal year. Our half-year report is publicly accessible within 60 days; the
interim reports for the first quarter and for the first nine months of the fiscal year
are accessible within 45 days of the end of the reporting period.”
Dürr AG
Public & Investor Relations
Otto-Dürr-Strasse 8
70435 Stuttgart
Germany
Phone: +49-7 11-1 36-17 85
Fax: +49-7 11-1 36-10 34
[email protected]
www.durr.com
17
Dürr stock
Financial calendar for 2004
Financial press conference
April 29, 2004, Stuttgart
Publication of the 2003 Annual
Report
DVFA analysts’ conference
April 29, 2004, Frankfurt/Main
Interim report on first quarter
of 2004
May 14, 2004
Road show in Germany
and Great Britain
May 2004
Third Dürr Capital Markets Day
October 13, 2004
Road show in Great Britain
October 2004
Interim report on first nine months
of 2004 and conference call
November 12, 2004
Road show in USA
November 2004
German Equity Forum and
road show in France
November 2004
Annual shareholders’ meeting
June 9, 2004, Stuttgart
Interim report on first half
of 2004 and conference call
August 25, 2004
Road show in Germany
September 2004
Analysts’ conference
End of November or beginning
of December 2004
Paint Systems
business unit
Automobiles around the world are painted using
Dürr systems. Innovative technologies that stand for
unparalleled quality, efficiency, and environmental
compatibility plus reliable project handling and global
expertise are the basis of the Paint Systems business
unit’s market leadership. Paint Systems generated about
half of the Group’s sales again in 2003.
21
Paint Systems business unit
Paint Systems
Biggest order in Dürr’s history makes
for higher order intake
General Motors orders package of three paint shops
Order completion shortened
Ecopaint painting robot on the path of success
2003
Changes
2002
2001
Amounts in € m
Total sales
1,243.2
17.9 %
1,054.3
1,094.5
1,400.1
8.8 %
1,286.8
1,036.5
39.2
61.7
EBITDA
40.3
EBITDA before
restructuring expenses
45.3
2,808
– 1.0 %
39.2
61.7
2,837
2,952
The Paint Systems business unit achieved
above-average total incoming orders in
fiscal 2003 despite sluggish conditions in
the automotive industry and a declining
market volume. The crucial factor driving
this positive trend was a large project from
General Motors (GM). The US automobile
manufacturer ordered three uniformly
equipped paint shops from Dürr for different sites in North America.
This project is unique in its scope – and it is the largest individual order in Dürr’s
history. Besides the technology we offer, our expertise in handling large projects
proven on earlier large-scale projects and our close collaboration with GM during
the planning stage made Dürr GM’s partner of choice. Additional factors were the
standardization and modularization of our products, which we have advanced in recent
years and which allow not only lower costs through economies of scale in purchasing, but also shorter processing times and greater fail-safeness during start-up and
routine production. For our reliable project handling in connection with this and
other contracts, General Motors honored us in April 2004 with its renowned “Supplier
of the Year Award.”
Continued positive development in Asia
In Asia, we benefited from the dynamic development of added manufacturing capacities in the automotive industry. Earnings in China doubled, primarily as a result of
the completion of large orders. About 10 % of the business unit’s total sales were in
the Chinese market. In South Korea, where Dürr has been represented by its own
company since 1995, demand increased considerably as a result of local automobile
manufacturers’ growth strategies. We were able to capitalize on our solid market
position to win orders for capacity expansion, plant modernization, and improvement
of environmental standards in paint shops. We are building a new paint shop in the
USA for our South Korean customer Hyundai.
22
In Europe, the automotive industry placed mostly smaller orders for modernization
and conversion projects following several high-volume years. We continued our successful cooperation with the BMW Group in the areas of robot painting equipment
and powder painting. BMW ordered additional fully automated lines for primer and
top coat application for its Regensburg plant in Germany. In France, we reacted to
the unsatisfactory utilization situation and initiated an adjustment of capacity.
With several new orders, we successfully continued the worldwide marketing of our
innovative RoDip dip-painting system. Its quality and cost advantages have made
RoDip one of the leading processes in the last three years.
Start-ups in every significant market
Paint Systems
We underscored our market and technological leadership again in 2003 by completing
a number of trend-setting, showcase projects. In Europe, for example, complete Dürr
paint shops were started up at Ferrari (Maranello, Italy), Peugeot Citroën (Mulhouse,
France), and BMW (Dingolfing, Germany). All three systems feature powder-painting
technology and meet high environmental standards. In Changchun (China), we completed a top-coat application line for the FAW-VW joint venture. In Wuhu, in Southern
China, we handed over a complete paint shop to the domestic manufacturer SAIC Chery
Automobile. For the motorcycle manufacturer Harley-Davidson, we quickly built two
painting systems at its Tomahawk, Wisconsin, and York, Pennsylvania, sites in the USA.
Product lines
Line simulation shortens order processing times
Paint Systems Automotive
Complete automotive paint
shops, including buildings,
materials flow and process
systems, and control and
supervisory control systems
Application Technology
Systems for automated
application of paint and highviscosity materials
To allow Dürr customers to put new vehicle models on the market faster, we have
again shortened the planning and construction times for our systems. A key focus of
this effort was on the further development of virtual reality programs with which
complete paint shops can be planned, designed three-dimensionally, and simulated
on the computer. This does not only shorten the planning stage of projects, but it also
allows the engineers to identify interfacing problems early that might occur when
the individual processing stations of the paint shop are linked. At the same time we
changed our assembly processes. As part of our new pre-assembly strategy, our
line modules will no longer be assembled at the customer’s site. Instead, they are
pre-assembled at Dürr’s or the subcontractor’s manufacturing sites. This saves
time and cuts costs, allows for better quality control, and simplifies our work at the
customer’s site.
Paint Systems Industrial
Complete paint shops for auto-
Application technology: Dürr’s painting robots in demand worldwide
mobile component suppliers
We also further strengthened our market-leading position in the field of automated
paint application. The decisive factor here was the market success of the Dürr
Ecopaint painting robot – a technology leader. In fiscal 2003, we celebrated not only
the delivery of our 1,000th painting robot, but also a new sales record of almost
500 orders. Ecopaint painting robots – the most successful technology of its kind in
the world – are now in operation in 24 countries. Advantages in terms of quality,
efficiency, and environmental compatibility have enabled the Ecopaint painting robot
to oust conventional painting machines almost entirely from the market, in new
business since it was first introduced in 1999.
and other industrial sectors
Environmental Systems
Exhaust-air purification
systems for paint shops and
other areas of industrial
production
23
Paint Systems business unit
At our Customer Open House event in Bietigheim-Bissingen, Germany, in May 2003,
we presented a series of product innovations. The centerpiece was the new EcoBell 2
generation of high-rotation atomizers for interior and exterior body painting. EcoBell 2
allows maximum paint outputs, speeds up the painting process, and significantly
improves material utilization rates for wet paints. In the area of software, we presented
our EcoMotionGuard S control system for robot monitoring and the EcoScreen 3-DOn-Site line visualization system.
Supplier industry: Potential for continued growth
Following its establishment in 2000, the Paint Systems Industrial
product line quickly occupied a large market share of the automobile component supply industry. In 2003, we once again
achieved a considerable sales plus in this area. In China, we
entered into a cooperation with the domestic company Hightech
Ltd. Co. to improve our access to the market. Together with
our new partner, we were quickly able to land two large orders.
The Dürr painting robot achieved
a new sales record in 2003 with
about 500 new orders.
After completing the market cultivation stage and defraying
the related expenses, Paint Systems Industrial will focus in the
future on improving profitability. We expect demand from the
component supply industry to continue to rise in the coming years
as increasing modularization of vehicle production and more
outsourcing result in parts and module suppliers performing
more and more of the painting work.
Environmental technology: Gratifying performance
Business developed positively last year in the Environmental Systems product line,
which specializes in exhaust-air purification systems. Market successes in the automotive industry as well as in our other key sectors, the chemical, pharmaceutical,
and semiconductor industries, contributed substantially to that. In light of rising
demand in North America, we expanded our range of energy management services.
Those involve analyzing how our customers can reduce energy consumption and
the costs of operating their exhaust-air purification systems.
business unit
The Final Assembly Systems business unit realizes intelligent solutions for the final stage of vehicle assembly,
whether individual products, systems, or complete plants.
The advantages that we rely on in this connection are
optimal quality, lower costs, and maximum flexibility.
For automobile manufacturers, that means the ability
to assemble vehicles with different features in the
shortest time, on one and the same line, at low cost,
and of high quality.
27
Final Assembly Systems business unit
Continued growth
Sales increased significantly
Goal: Global leadership as a full-range final assembly supplier
Two-pronged strategy: Products business and system business
2003
Changes
2002
2001
Amounts in € m
Total sales
436.6
7.9 %
404.7
425.2
405.4
– 14.9 %
476.2
351.3
EBITDA
11.4
1,593
– 1.0 %
15.6
15.4
1,609
1,631
Set up at the beginning of 2002, the Final
Assembly Systems business unit significantly raised its total sales in 2003. Despite
appreciable capital spending restraint in
the automotive industry, we increased our
market share as a provider of full-range
final assembly systems and strengthened
our position as one of the world’s largest
suppliers.
We are pursuing the goal of growing further and achieving world market leadership
in the medium term. Here, we are focusing both on business involving individual
machines and units, and on general contractor projects for complete final assembly
plants.
Initial position is good for further growth. Against the background of stiff competition,
automobile manufacturers greatly need to automate and increase the flexibility of
their operations. We are well prepared for this: Our fundamental approach in Final
Assembly Systems is to offer the widest range of products in the competitive field,
relying on our own solutions in assembly, testing, filling, and conveying technologies. We can supply about 70 % of the equipment and software solutions needed
for complete final assembly.
Systems business: Successful large-scale projects
Our capability to handle large-scale projects has been proved again in 2003. For Magna
Steyr Fahrzeugtechnik in Graz (Austria), for example, we put a complete final assembly
line into operation. For Volkswagen in Germany, we performed an extensive remodeling of its Mosel plant. Ford Motor Company has assigned us a new major project
involving the renovation of an entire assembly line, including conveyor systems at its
Otosan plant in Turkey.
28
Final Assembly Products: International expansion
Final Assembly Products maintained its leading position in the core European market
despite a weak economic trend. The main factor responsible for that was our technological leadership, whether in the area of assembly and handling equipment or filling
stations dispensing vital operating materials (oil, fuel, air-conditioning refrigerant,
etc.) or testing technology for vehicle final inspection.
We are consistently intensifying our activities in China. This
market already accounted for 20 % of our sales of Final Assembly
Products in 2003. We are also going to expand our market position further in North America; the restructuring of the US company
Dürr Production Systems is under way.
Demand was strong again in 2003 for products with a high degree
of automation. A good example is our so-called “marriage station”
for the joining of power trains and car bodies. Our innovative
robot solution for automatic mounting of windshields and windows also met with a positive response.
We expanded our range of products for electronic testing of
vehicles by introducing the x-tronic product family. The concept
allows numerous electronic tests to be moved up – from a centralized station at the end of line to individual assembly stages.
Possible errors can thus be identified and rectified earlier. We
see good application prospects for x-tronic, since more and more
vehicle functions are becoming electronically controlled.
The new automatic guided
vehicle system (AGV) from
Dürr offers more flexibility in
final assembly operations.
We presented a new method that makes chassis tuning possible
earlier in the assembly line rather than at the end of line. The
advantages are greater flexibility in assembly planning, better
utilization of tuning robots, and lower engineering expenditure
at the end of line.
Further growth in conveyor systems for final assembly
The Automation and Conveyor Techniques product line contributed substantially to
increased sales in Final Assembly Systems. This is due, on the one hand, to extensive
intragroup deliveries of conveyor systems to the Paint Systems business unit, mainly
for turnkey paint shops in the USA. On the other hand, we also achieved further growth
as a supplier of conveyor systems for vehicle final assembly. An important factor for
that was our improved competitiveness resulting from cost savings. Moreover, we
registered good demand for product innovations, with which we further rounded off
our range of conveyor systems for final assembly. That includes, for example, our
automatic guided vehicle system (AGV). It is equipped with MOVITRANS, our contactfree power and data transfer system, and therefore does not need an on-board battery
or a guide rail with sliding contacts. This allows greater flexibility in operational routing
and significantly improved availability. The AGV with MOVITRANS is used, above all,
in pre-assembly of the power train and at the marriage stations.
Final Assembly Systems business unit
29
We achieved a particular success in China by obtaining an order to supply the conveyor
systems for both the paint shop and final assembly section of a new plant being built
by Shanghai General Motors (SGM). We are utilizing the Paint Systems business unit’s
existing infrastructure as the basis for further expansion of our conveyor systems
business in China. We also intend to increase locally based engineering and procurement activities in particular. In the area of body-in-white conveyor systems, we
continued the good trend of the previous years thanks primarily to several orders
received in the USA.
Factory planning: Product range enlarged
We enlarged our range of products in the area of factory planning in 2003. Besides
planning final assembly lines and testing centers for vehicle development, we also
increased our offering of concepts for the production periphery, including logistics,
traffic areas, and plant infrastructure. At the same time, we made our internal
processes more efficient by introducing a less complex organizational structure.
Product lines
Assembly Turn Key
Turnkey final assembly plants
including project management
Final Assembly Products
Handling and assembly equipment, filling systems, and
testing equipment for final
vehicle inspection
Automation and Conveyor
Techniques
Conveyor systems for body
and paint shops as well as
final assembly in automobile
production
DSEngineering
Planning of final assembly
plants and testing centers
for vehicle and component
development
Services
business unit
Global presence, technical expertise, and specialization in
the automotive industry are the factors contributing to the
success of the Services business unit. Another competitive
advantage is our broad range of services. It extends from
cleaning, maintaining, and repairing production equipment
to logistics and facility management to fleet management
and pay-on-production models. We are thus benefiting from
the outsourcing trend in the automotive industry.
33
Services business unit
Services
Prerequisites created for more growth
Excluding exchange rate effects: Significant sales growth
New business areas expanded further
Market success in China
2003
Changes
2002
2001
Amounts in € m
Total sales
146.5
1.8 %
143.9
134.0
146.5
2.4 %
143.1
134.3
EBITDA
10.3
4,499
5.3 %
11.2
10.8
4,272
3,727
The Services business unit – represented
by the US-based Premier Group acquired
in 1999 – increased its total sales again in
2003. However, Services was particularly
affected by the devaluation of the US dollar,
since the business unit generates a considerable part of its sales in the USA. At the
preceding year’s exchange rates, its total
sales would have increased by 19 % instead
of by 1.8 %
There are good prospects for future growth in the services business. To enable themselves to focus on their core competencies, automobile manufacturers and their
suppliers are increasingly outsourcing tasks in all areas of production to highly efficient service partners like Premier. They thus obtain advantages such as lower costs
and higher quality. For the Dürr Group, expanding the service business importantly
contributes to at least partly offsetting ordering cycles in the plant engineering sector.
Moreover, the experience that Premier gathers during operation of production facilities
helps us in the technical improvement of our products.
Range of services widened
To take advantage of existing market opportunities, we systematically expanded
our range of services in 2003. That applies primarily to the mature European and
North American automobile markets, where Premier is strongly pursuing the strategy
of providing innovative business models and technically sophisticated services.
That differentiates us from smaller, local suppliers and at the same time supplements the core business of equipment cleaning, which is characterized by growing
price pressure.
34
A promising business area that we will expand further in the coming years is the
management of transport equipment used by automobile manufacturers and their
suppliers in their factories. We achieved an important success in this area in 2003.
We entered a contract with a major automotive industry supplier that ensures us
preferred status worldwide in the award of service contracts for the management
of forklifts, lift trucks, and other transport equipment. In that connection, we take
over coordination of vehicle leasing and maintenance as well as management of
spare parts.
Premier is also increasingly gaining strong status as a technical
service provider in the area of maintaining and repairing production equipment. In Poland, where we have greatly expanded
our position in recent years, we have received, for example, a
demanding order for the maintenance of robots used in bodyin-white production.
We have further intensified our consulting activities, especially in
North America. The Premier Tech consulting program – under
which we advise customers on issues related to plant and equipment maintenance – is an important element here.
Services growth market: The
automotive industry is outsourcing more and more
Services
Product lines
Manufacturing Support
Services
Technical services in the
factories of automobile manufacturers and their suppliers
Pay on production
Pay-on-production models
for automobile manufacturers
and their suppliers
Wheel fitting is another area in which we are registering growing demand. In Great Britain, which is now the most important
Western European market for the Services business unit, we have
invested for example in a new system for fitting and balancing
complete wheels in the framework of an existing pay-on-production model. It makes significant capacity increases possible
and is an important foundation for long-term collaboration with
our customer.
With our expanded range of services, we are in a position to offer comprehensive
service packages in addition to individual services. That considerably improves our
initial position when contracts are awarded. In our home market of North America,
we are using the additional services to reinforce and expand our leading position. On
the one hand, we are putting existing customer relationships on a broader basis,
beyond that of plant and equipment cleaning. On the other hand, we are moving forward in the acquisition of new customers. In Europe, we will intensify our efforts to
cultivate the market, with the aim of further increasing our market shares. In addition
to Great Britain, where we already occupy the leading position, Germany and France
are at the forefront in that connection.
Services business unit
35
Asia and South America: Market cultivation intensified
We successfully intensified our efforts to cultivate markets in South America and the
emerging automobile markets of Asia in 2003. Equipment cleaning was the mainstay
of our growth there. In these low-cost manufacturing markets of the automotive
industry, our consistent orientation to quality gives us a competitive edge. Compared
with local competitors, we often have better-trained employees who reliably meet
the high international quality standards of manufacturers and their suppliers.
We increased our share of the growing Chinese market. An important step in that
process was a multiple-year contract for equipment cleaning in a new automobile
paint shop. By founding a company in Thailand, Premier has created a platform to
cultivate the Southeast Asian market. We expect increasing market volume in this
region resulting from international automobile groups locating operations there.
We also continued the good development of 2002 in Mexico. Among the most
important new contracts is one involving a pay-on-production model for an automotive supplier, in which we have completely taken over operation of a paint shop
for vehicle trim parts.
Ecoclean
business unit
To prevent engine and transmission failures, the individual
parts must be completely cleaned prior to assembly –
preferably with Dürr Ecoclean machines. Our high-tech
systems for pre-cleaning, intermediate cleaning, and
final cleaning during the production process are leading
the way in quality assurance for automobile manufacturers and their suppliers. And that has made us the
market and technology leader in this area.
39
Ecoclean business unit
Ecoclean
Leadership position maintained in
a difficult market environment
Reduced capital spending in the automotive industry
Cost-cutting measures implemented
Development of new markets accelerated
2003
Changes
2002
2001
Amounts in € m
Total sales
215.5
– 2.9 %
221.9
277.3
176.9
– 25.3 %
236.7
243.2
15.0
22.2
EBITDA
10.1
EBITDA before
11.6
932
– 13.6 %
15.0
22.2
1,079
1,084
In the Ecoclean business unit, the continuing weakness of economic development
found expression in fiscal 2003 in declines of
total new orders and total sales. Customers
from the automotive industry, including
especially those in the United States, have
postponed planned capital expenditures
in the near term.
However, in light of the dynamic evolution
of engine and transmission technology,
we expect demand in Europe and the USA
to increase moderately in the second half
of the year. The reason is that automobile
manufacturers need high-performance systems for parts cleaning, coolant recycling,
and workpiece transport and handling if
they want to produce new generations of
engines and transmissions efficiently and
to a high standard of quality.
Strengthening our profitability
We reacted to the weak market and declining earnings by implementing additional
measures to improve profitability. Major projects in the framework of the
earnings enhancement program included reducing materials costs and placing more
manufacturing orders with low-cost suppliers in Eastern Europe. We also improved
the coordination of manufacturing activities at our Monschau (Germany), Loué (France),
and Barcelona (Spain) sites, which allowed us to reduce capacities in Barcelona. We
also trimmed capacities in North America in an effort to adapt our cost structure to
the difficult market situation there.
We also continued to differentiate our Ecoclean product range: In addition to our
sophisticated high-end systems, we also increasingly provide simpler, less expensive
machines. This gives us pricing leverage on top of our technological edge, both of
which help us succeed on the market. Intense competitive pressures and the emergence of a growing number of smaller suppliers with aggressive pricing strategies
have made technology and pricing crucial factors for maintaining our leadership
position on the market.
40
Focusing on growth markets
Focusing on growth-driven manufacturing markets in the automotive industry is
another way we are working to secure our market position over the long term. For
instance, by establishing a sales and service office in China, we have laid the foundations for further developing the market there. The new unit is off to a promising
start with a large order from a Chinese automotive joint venture.
Further developing crossover concepts and deburring technology
Once again in 2003, we concentrated our innovative efforts on
developing crossover concepts that unite cleaning, coolant
recycling, and workpiece handling in a single system. Such compact systems offer our customers not only reduced operating
expenses and investment costs but also greater flexibility in
planning their production lines. We also introduced an innovative
system for deburring workpieces mechanically. The system uses
a robot, which passes each workpiece to a series of deburring
tools that are set to precisely match the workpiece’s geometry. The
advantages of the process are clear – precision, effectiveness,
and lower costs.
Major orders from the automotive industry
In the past fiscal year, Dürr Ecoclean once again won by far the
largest share of the major orders placed by the automotive
industry for cleaning systems. An important factor behind this
success was our special expertise in handling complex projects
in every automobile manufacturing region of the world. We filed
extensive orders for General Motors at its US site in Ypsilanti
as well as for Volkswagen in Mexico and Audi in Hungary. Our
innovative cleaning and coolant recycling system, XINC, was
in high demand.
Ecoclean systems make maximum
precision possible in cleaning and
deburring workpieces.
Automation technology and coolant recycling held their own despite
a weak US market
Although weak demand in the core US market affected business development for
the Automation product line, we were still able to maintain our leadership position.
A major contribution came from two extensive orders placed by a US automobile
manufacturer to whom we supplied the conveyor systems for linking machining
centers in the production of cylinder heads.
We experienced declines in coolant recycling business in North America, but our
business development was positive in Germany and in the newly developed Chinese
market. We reacted to the continued decline in market volume in Great Britain by
closing Henry Filters (Europe) Ltd.
Ecoclean business unit
41
Internationalization of our non-automotive business
The Cleaning Industrial product line, which primarily delivers to automotive suppliers and machinery builders, kept sales stable despite the weak economy. Demand
was down in Germany, the line’s principal market, but we were able to offset this
with increased market development abroad. For example, we had first-time orders
from India, Israel, and Turkey. We also strengthened our position in the key North
American market.
In product development, we further optimized our technologies for hydrocarbonbased cleaning and improved the cost-performance ratio of our systems. Dürr Ecoclean
received Bosch’s “Supplier Award” for the second year running, in fiscal 2003. With
this award, the automobile component supplier recognized top quality, flexibility, and
reliability in the delivery of injection-valve cleaning systems.
Ecoclean
Product lines
Cleaning Automotive
Cleaning technology for
the production of power
train components for
the automotive industry
Cleaning Industrial
Cleaning technology for
automotive suppliers and
other industrial companies
Coolant Filtration
Coolant recycling systems
Automation
Automation systems
for workpiece transport
and handling
Measuring Systems
business unit
Measuring of static and dynamic forces is the Measuring
Systems business unit’s core area of expertise. Whether
for test systems used in vehicle development, balancing
and diagnostics systems, or measuring and process
technology, our innovating power, customer orientation
and our global presence place us among the top companies in the world in all three areas.
45
Measuring Systems business unit
Measuring Systems
Additional measures taken
to improve earnings
Closing pre-manufacturing operation enhances competitiveness
Continued growth in Asia
High-tech innovations in measuring technology
2003
Changes
2002
2001
Amounts in € m
Total sales
364.9
– 5.4 %
385.9
428.9
369.7
– 3.0 %
381.2
411.3
EBITDA
– 16.2
10.4
17.4
EBITDA before
1.6
2,861
– 6.1 %
10.4
17.4
3,046
3,224
Business development in the Measuring
Systems business unit was characterized by
an unsatisfactory demand in North America
and Europe, which further increased price
pressure. We therefore resolutely pushed
ahead with measures aimed at improving
our cost position. After our fiscal 2002
restructuring effort, which considerably
improved the profitability of the Measuring
and Process Systems and the Balancing
and Diagnostic Systems product lines, we
transferred our focus to the other two
product lines:
Pre-Manufacturing Services
A key factor for long-term cost reduction is the October 2003 decision by the management of Carl Schenck AG to close its loss-making pre-manufacturing operation in
Darmstadt, Germany. This step will improve the business unit’s competitiveness
considerably. Rather than producing parts and components unprofitably internally,
Measuring Systems can now work increasingly with less expensive suppliers. The
expense of € 18.4 million required for closing the operation was a heavy burden on
2003 earnings, and will pay for itself within two years. Around 350 jobs will be cut
before the end of 2004 as a result of the measure.
Development Test Systems (Schenck Pegasus)
In this product line, our main focus was on improving project management and order
processing to safeguard order-related margins. Parallel to this, we introduced a
process-oriented organizational structure and we cut around 70 jobs in Darmstadt.
In the business unit as a whole, we continued to modularize our products. We also
improved international cooperation within the product lines – in both manufacturing
and product development, where we established relevant centers of competence covering all regions of the world.
46
Continued growth in Asia
In Asia, the Measuring Systems business unit continued its growth of the previous
years. Particularly in China, the dynamic development of new production sites resulted
in increasing demand. Our strong presence in Asia is an important basis for our successful business there. In addition to our sales and marketing capability, we also have
extensive manufacturing capacities in this region, which gives us production cost
advantages for our Asian customers as well as for the European and American markets.
Development Test Systems: Technical and regional position improved
Despite an unsatisfactory business trend, the Development Test Systems product line
(Schenck Pegasus) improved its regional and technical position among the leading
suppliers of testing systems for automobile development. The newly established joint
venture Schenck-TKS Test Systems has improved our access to the Japanese automotive industry considerably. The companies participating in the joint venture are
Schenck Pegasus GmbH, testing systems specialist Tokyo Koki Seizosho Ltd., and
Horiba Ltd., the market leader in emissions testing systems.
Measuring Systems
We received a major order from the USA for the supply of two test stands to the EPA
(Environmental Protection Agency), which will be used to test diesel truck engines
under various conditions. The decisive factor for the customer was the extremely high
level of measuring accuracy provided by the system, which is equipped with the
STARS software platform. The test results will in part be used in definition of new
regulations on permissible levels of diesel engine emissions in the USA.
Product lines
Development Test Systems
(Schenck Pegasus)
Engine, power train, vehicle,
exhaust, and brake testing
systems as well as wind
tunnel scales for automobile
We proved our innovating power by launching a high-tech testing system used to
minimize the noise emission of new transmission models. The heart of the system is
a computer-controlled asynchronous machine that perfectly simulates the pulsating
torque of a combustion engine and the acceleration of the crankshaft. Transmission
noise can then be measured more accurately without interference from engine noise.
In addition, replacing the original engine with an electric motor has many advantages
for test set-up and execution.
development
Balancing and Diagnostic Systems: Range of services expanded
Balancing and Diagnostic
Systems (Schenck RoTec)
Balancing and diagnostic
systems for rotating and
oscillating components
Measuring and Process
Systems (Schenck Process)
Systems and components
for weighing, feeding, automation, and screening
in industrial processes
Pre-Manufacturing Services
Manufacture of mechatronic
parts and components,
primarily for internal use
The Balancing and Diagnostic Systems product line (Schenck RoTec) generates around
60 % of its sales in the automotive industry. The rest comes from the machinery and
aerospace sectors as well as the power stations and electrical engineering industries.
In fiscal 2003, we maintained our leading position in balancing and diagnostic systems worldwide despite difficult market conditions. A major contribution came from
the expansion of our service business. For example, we broadened the range of
consulting services we offer – whether for product development, production planning,
or manufacturing plant optimization – as well as our range of training, leasing, and
maintenance services. We are also developing more local centers where we balance
workpieces for our customers.
47
We are systematically adding more and more functions to our balancing machines.
For example, in the wheels and tires business area, we delivered the first fully automated line that not only assembles, inflates, and balances automobile wheels, but
also installs the equalizing weights. This cuts production time, reduces unit costs, and
ensures maximum quality in measuring and execution.
Measuring and Process Systems: Global network expanded
Our Measuring and Process Systems product line (Schenck
Process) is the only global, single-source supplier of systems and
components for weighing, feeding, screening, and automation
in industrial processes. We are among the top three suppliers in
all of these fields. Our customers are primarily from the cement,
steel, mining, chemical, plastics, and logistics industries.
Business development in 2003 was satisfactory overall, but the
Australian and Chinese markets saw the strongest growth. The
largest single order of the year came from China, where we
supplied a mining company with a modular coal washing plant
that reduces the hazardous substances in the coal and thus
makes it suitable for global markets.
Balancing systems from the
are primarily used by the automotive industry, for example, in
the quality control of installationready engines.
In an effort to further strengthen our market position in China, we
established Schenck Mineral System Co. Ltd., which manufactures processing equipment for the mining industry. In Colombia,
too, a new company – Schenck Americas S.A. – started up operations in 2003 with the aim of intensifying market development in
Central and South America.
The most important innovation in weighing technology in 2003 was the DISOBOX – an
“intelligent” analog digital converter that can convert even the smallest analog
measuring signals directly into a digital stream of data. This means weight and load
information can be transferred simply and reliably, and processed more easily.
2003 at a glance
April
January
July
introduced
A very special birthday
Change in the
On April 10, the Dürr Board
On July 16, Heinz Dürr celebrates
top management
of Management presents
his 70th birthday together with
On January 1,
the comprehensive
the staff at our Stuttgart head-
Stephan Rojahn becomes
earnings enhancement
quarters. As the high point of the
Chairman of Dürr AG’s Board
program at the company’s
festivities, the staff brass band is
of Management.
financial press conference.
accompanied by “HD” on piano.
March
May
Largest order in the
Fourteenth regular annual
company’s history
shareholders’ meeting
Dürr gets the nod from General
On May 28, more than 500 Dürr
Motors to build three large paint
shareholders were informed about
shops in North America.
the facts and figures and the goals
and prospects of their company
in Stuttgart.
September
September
November
President of the Federal Republic
Start of operation in Graz
Kay Bönisch on board
of Germany Johannes Rau
Dürr completes the assembly
On November 1,
gathers information about Asia’s
line for the new BMW X3 at
Kay Bönisch joins
top growth market at Schenck’s
Magna Steyr Fahrzeugtechnik’s
the Dürr Board of
subsidiary in Shanghai.
plant in Graz, Austria.
Management.
High-level visit in China
September
October
November
Opening ceremony in Mulhouse
Closing of Schenck’s
Robot milestone
At its plant in Mulhouse, France,
pre-manufacturing operation
On November 20, Dürr celebrates
Peugeot Citroën opens one of
Carl Schenck AG’s Board of
delivering its 1,000th painting robot
the most innovative and largest
Management decides to close
in Bietigheim-Bissingen, Germany.
paint shops, built by Dürr.
its loss-making pre-manufac-
The guest of honor is Annette Schavan,
turing operation in Darmstadt,
Minister for Youth, Education and
Germany. A benefits program
Sport of the German Federal State of
is set up for 350 employees.
Baden-Württemberg.
Consolidated
management report
Economic environment
Improvement at year’s end
The development of the global economy fell short of expectations, particularly in
the first half of 2003. The Iraq crisis and the SARS outbreak had a persistent negative
impact on the investment climate. Capacity utilization of companies stagnated at a
low level while the unemployment rate held steady at a high level. In the euro area,
the strong euro also pulled down exports. Expansive economic policy in the USA,
Great Britain, and Japan boosted production there considerably at the end of the year.
Rising share prices also gave companies greater financial latitude.
Worldwide gross domestic product (GDP) increased by 3.7 % in 2003. In the industrialized nations, the growth rate was 2.2 %. The US economy led the way with 3.1 %.
While growth in the European Union (including the acceding EU states*) slowed from
1.2 % in 2002 to 0.9 % in 2003, Germany slipped into a shallow recession with – 0.1%
growth. China experienced continued strong growth of 9.1 % while Eastern Asia lost
some ground, growing just 3.8 %. Japan’s zero-interest-rate policy and corporate
restructuring efforts that are now largely complete have put the country’s economy
back on track for growth. Japan’s GDP grew 2.7 % in 2003.
Regionally varied demand for automobiles
Around 56 million automobiles were sold worldwide in 2003. Uncertainty among
consumers due to the unstable geopolitical situation and the weak economy resulted
in a second consecutive year of declining sales in the USA and Europe. As a result,
many automobile manufacturers adjusted their production capacities by reducing staff
and/or working hours and cutting their capital spending budgets.
* Acceding EU member states as of May 1, 2004:
Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia
51
In the USA, the world’s largest automobile market, sales dropped by 1 % from the
previous year, to 16.6 million vehicles. The trend toward light trucks continued, and this
vehicle class now accounts for more than 50 % of the passenger vehicle segment.
Market development was marked by restraint on the part of consumers and continued
discounts and financing offers on the part of automakers. An end to the price battle
among manufacturers is currently not in sight. In South America, the unfavorable
economic situation resulted in a significant drop in demand. In Brazil, the principle
market for automakers, demand was down 3 %. Capacity utilization also remained low.
In Western Europe, sales fell to 14.2 million vehicles in 2003. Despite the roll-out of
new mass-market models, sales recovered only slightly in the second half of the
year. The diesel boom continued, and the share of diesel-fueled vehicles among all
new vehicle registrations has tripled since 1990. In Germany, car sales stagnated
at 3.2 million units. The trend in Eastern Europe was mixed, but on the whole, sales
rose by 6 % to 2.2 million.
The Eastern Asian markets continued to grow in importance in 2003. China led the
way once again, with automobile sales there surging 74 % on their 2002 levels, to
just under 2.0 million vehicles in 2003. With its high growth rates, China is becoming
a major growth engine for the entire region and for the global automobile industry.
But the Chinese market has also seen a dramatic dip in prices as automobile manufacturers have tried to secure market shares through aggressive pricing policies. At
4.5 million units, vehicle sales in Japan held steady at the previous year’s level.
Strategy
The Dürr Group is one of the world’s leading suppliers of production systems and
manufacturing support services for the automotive industry. Around 85 % of Group
sales come from the automotive sector.
Automobile manufacturers and their suppliers face intense international competition.
In an effort to meet the expectations of as many different customer groups as possible,
they are constantly increasing the variety of models they produce. At the same time,
model life cycles are becoming shorter and customers’ quality standards are increasing. Price pressures and environmental requirements will also continue to rise in the
future. In addition, automobile manufacturers are outsourcing more and more stages
of their value chains. Therefore, suppliers and equipment manufacturers still have
potential for growth despite the automotive market's stagnation worldwide.
Dürr is utilizing this potential. Over the past years, we have systematically expanded
our planning, systems, and services offerings and adapted them to our customers’
needs. Dürr provides cutting-edge solutions for the key stages of the automotive value
chain. Our products and services are at work in the painting and final assembly of
vehicles, modules, and components. We also provide testing systems for vehicle
development and quality assurance as well as measuring systems and balancing
systems for the manufacture of rotating parts. We assist our customers in the manufacture of engine and transmission components with our innovative cleaning and
filtration technology.
52
Our technologies are key prerequisites for more flexible and cost-effective manufacturing. Dürr products and systems solutions allow manufacturers to increase automation and productivity as well as improving quality, and they ensure the highest
degree of environmental compatibility – at every stage of a production line’s life. That’s
what Dürr’s life cycle concept is all about. It covers everything from planning automotive plants and production processes to supplying individual products and complete
systems. It also includes technical modernization. In addition, we provide services
for operating installations in the areas of production, spare parts and customer service
businesses as well as customized pay-on-production models.
As a globally positioned group of companies, Dürr can provide its customers with
expert service at all of their automotive manufacturing sites around the world. Besides
the established European and American markets, we are increasingly focusing our
attention on the regions in Asia that show the greatest potential for growth, particularly
China. Our international presence and our broad range of products and services
allow us to smooth out many of the cyclical fluctuations in demand among individual
regions, customers, and product lines. On the whole, we are well positioned to grow
profitably as a key partner to the automotive industry.
Business development
Incoming orders up once again
Despite a continued weak economy, consolidated incoming orders for the Dürr Group
in 2003 were € 2,356.2 million, surpassing the previous year’s already high figure
by € 9.5 million. Adjusted for exchange rate effects, the 2003 figure even exceeded
the previous year’s figure by € 236.7 million or 10 %. In light of the fact that market
volume has been shrinking for years, these figures underscore our outstanding market
position overall. The very high level of incoming orders resulted primarily from a
large-scale painting systems order from General Motors, which the Paint Systems and
Final Assembly Systems business units will complete in North America by the end of
2006. The project is the largest individual order in Dürr's history. For more information
about this order, please refer to p. 21.
The Paint Systems business unit registered incoming orders amounting to € 1,400.1 million in 2003, thus surpassing the previous year’s figure once again (€ 1,286.8 million).
This increase is largely attributable to the large order from General Motors.
Total incoming orders for the Final Assembly Systems business unit amounted to
€ 405.4 million. This falls short of the previous year’s very high figure of € 476.2 million,
which was due to large-scale final assembly projects. Despite the decline in new
orders, Final Assembly Systems was still able to gain new market shares as a provider
All amounts are in euros.
The terms “previous year” or “previous year’s figure” always refer to fiscal 2002.
53
of vehicle final assembly systems. For the first time, Dürr received
an order for final assembly conveyor systems in China.
The Services business unit was hit especially hard by the devaluation of the US dollar since it does a large share of its business
in the USA. Nevertheless, at € 146.5 million, total incoming orders
were still slightly better than the already high previous year’s
figure (€ 143.1 million). Adjusted for currency fluctuations, the
figure was 19 % better. Services particularly attracted new orders
from the United States, China, Great Britain, the Netherlands,
and Eastern Europe.
Total incoming orders in the Ecoclean business unit were down
to € 176.9 million (previous year: € 236.7 million). This was primarily a consequence of continued lower demand for industrial
cleaning technology in the United States. We achieved market
successes with our innovative crossover concept, XINC, which
combines cleaning and coolant recycling systems and thus
reduces capital investment and operating costs.
Paint Systems was able to
increase its total new orders
and total sales in fiscal 2003.
At € 369.7 million, total incoming orders in the Measuring Systems
business unit fell slightly short of the previous year’s figure
(€ 381.2 million). Adjusted for exchange rate fluctuations, new
orders were at the same level as in 2002 despite the weak market
environment. We posted positive development in China and
Australia, which at least partially offset the sluggish business
in North America.
Total incoming orders by business unit in 2003
Consolidated incoming orders by sales region in 2003
Total: € 2,498.6 million
Total: 2,356.2 million
Services
€ 146.5 m (5.9 %)
Asia/Africa/Australia
€ 321.5 m (13.7 %)
Ecoclean
€ 176.9 m (7.1 %)
South America
€ 26.2 m (1.1 %)
Measuring Systems
€ 369.7 m (14.8 %)
North/Central America
€ 1,044.5 m (44.3 %)
Final Assembly
Systems
€ 405.4 m (16.2 %)
Paint Systems
€ 1,400.1 m (56.0 %)
Total incoming orders: new orders received by business unit, including intragroup
orders from other business units.
Germany
€ 429 m (18.2 %)
Other
EU member states
€ 421.3 m (17.9 %)
Other
European countries
€ 113.7 m (4.8 %)
54
Sales above the previous year
The Dürr Group closed fiscal 2003 with consolidated sales of € 2,264.5 million (previous
year: € 2,082.1 million). Adjusted for currency effects, sales were up to € 2,437.1 million, which would mean an increase of € 355.0 million or 17 % over the previous year.
In light of the difficult market environment, we can consider the high level of sales a
particular success.
At € 1,243.2 million, total sales in the Paint Systems business unit outperformed the
already very high previous year’s figure of € 1,054.3 million. This is largely attributable
to a strong orders inflow from the United States in fiscal 2002 and 2003.
The Final Assembly Systems business unit increased its total sales considerably, to
€ 436.6 million (previous year: € 404.7 million). On the one hand, this success was
due to growth in Final Assembly Systems business. On the other hand, we were also
able to increase conveyor systems sales, for instance through internal deliveries to
the Paint Systems business unit.
Despite the weak US dollar, total sales in the Services business unit rose slightly to
€ 146.5 million (previous year: € 143.9 million). Adjusted for currency fluctuations, the
total sales figure was 19 % better than the previous year.
Total sales in the Ecoclean business unit were down slightly, to € 215.6 million
(previous year: € 221.9 million). The primary reason for this decline was weak demand
in the United States.
The Measuring Systems business unit billed € 364.9 million, down from the previous
year’s € 385.9 million. This drop was primarily due to unsatisfactory business development in North America and Europe, which we could not offset despite the positive
trend in China and Australia.
Total sales by business unit in 2003
Consolidated sales by sales region in 2003
Services
€ 146.5 m (6.1 %)
€ 287.5 m (12.7 %)
Ecoclean
€ 215.5 m (9.0 %)
South America
€ 29.3 m (1.3 %)
Measuring Systems
€ 364.9 m (15.1 %)
€ 763.5 m (33.7 %)
Final Assembly
Systems
€ 436.6 m (18.1 %)
Paint Systems
€ 1,243.2 m (51.7 %)
Total sales: sales by business unit, including intragroup sales to other business units.
Germany
€ 571.1 m (25.2 %)
Other
EU member states
€ 520.5 m (23.0 %)
Other
European countries
€ 92.6 m (4.1 %)
55
Orders on hand remain high
As of December 31, 2003, Dürr had a very large consolidated catalog of orders on
hand, which amounted to € 1,386.6 million (previous year: € 1,381.4 million). Adjusted
for currency fluctuations, the figure was € 1,523.3 million, which represents a 10 %
increase over the previous year. Thus, many parts of the Group have a solid level of
capacity utilization for fiscal 2004.
Total orders on hand by business unit
as of December 31, 2003
Services
€ 66.3 m (4.4 %)
Ecoclean
€ 99.5 m (6.7 %)
Measuring Systems
€ 126.9 m (8.5 %)
Final Assembly
Systems
€ 251.5 m (16.8 %)
Paint Systems
€ 950.0 m (63.6 %)
Earnings burdened by restructuring expenses and valuation allowances
We posted a negative income before income taxes and minority interests (EBT) of
€ 6.9 million in 2003 (previous year: positive result of € 22.6 million). Besides continued margin pressure and exchange rate effects, which amounted to a € 4.1 million
burden on earnings, restructuring expenses of € 25.6 million were primarily responsible for the decline. Before restructuring expenses, income before income taxes was
€ 18.7 million, which is € 3.9 million less than the fiscal 2002 figure.
The € 25.6 million in restructuring expenses are linked to capacity and location adjustments through which we are improving our competitiveness. Of this, € 16.4 million
went toward the closure of the Measuring Systems business unit’s pre-manufacturing
operation in Darmstadt, Germany (for further information, see p. 45). The remaining
€ 9.2 million went to the Paint Systems (€ 5.0 million), Measuring Systems (€ 2.7 million), and Ecoclean (€ 1.5 million) business units, where they were used primarily for
personnel measures.
56
Fiscal 2003 was also burdened by one-time charges that do not represent restructuring
expenses as defined under US-GAAP. As in the previous year, these one-time charges
amounted to about € 20 million and were largely for valuation allowances and writedowns in connection with an unconsolidated subsidiary (€ 5.9 million), spending for
interest rate hedges that were no longer needed (€ 5.1 million), and inventory writedowns as a result of the closure of the Measuring Systems business unit’s pre-manufacturing operation in Darmstadt, Germany (€ 2.0 million).
Earnings before interest expense, taxes, depreciation, and amortization (EBITDA)
amounted to € 48.4 million in fiscal 2003. Before restructuring expenses, EBITDA
was € 72.7 million (previous year: € 89.1 million). Earnings before interest expense
and taxes (EBIT) amounted to € 17.9 million. Before restructuring expenses, EBIT
was € 43.5 million (previous year: € 55.1 million). Depreciation fell from € 34.1 million
to € 30.5 million as a result of a drop in capital spending over the past years.
With scheduled loan repayments and Group-wide working capital management, we
were able to reduce our net debt considerably in fiscal 2003. As a result, our net financial expense improved by € 4.7 million to € – 20.5 million (previous year: € – 25.2 million). This primarily includes scheduled interest expenses on loans taken out to finance
our acquisitions in the previous years.
The net loss for fiscal 2003 was € 31.3 million, following a net income of € 12.0 million
in 2002. The loss was due in part to restructuring and one-time expenses but also to
a valuation allowance of € 23.0 million on deferred tax assets for loss carryforwards
(for further information, please refer to the notes to the consolidated financial statements, p. 87). Earnings per share fell to € – 2.19 (previous year: € 0.84).
The Paint Systems business unit increased its income before income taxes to € 27.3 million despite expenses for structural reductions in France (previous year: € 23.3 million).
The increase over the previous year was primarily made possible by systematic product standardization and improvements in order handling.
Income before income taxes in the Final Assembly Systems business unit was down
from € 10.0 million to € 7.4 million. This was primarily due to expenses connected with
the further expansion of our Polish subsidiary Dürrpol Sp. z o.o. and to delays in the
restructuring of the US company Dürr Production Systems Inc.
In the Services business unit, income before income taxes dipped slightly to € 7.1 million
(previous year: € 7.5 million). If exchange rates had remained unchanged, this income
would have been up by € 0.9 million, or 12 %, from the previous year.
At € 6.2 million, the Ecoclean business unit did not match its previous year’s income
before income taxes of € 10.4 million. This was due to the weak US market and the
resulting heavy pressure on prices as well as the € 1.5 million in restructuring expenses
mentioned above.
Income before income taxes in the Measuring Systems business unit was down from
€ – 4.5 million in 2002 to € – 29.0 million in 2003. This is primarily due to high restructuring expenses with which Measuring Systems laid important groundwork for
improved competitiveness and profitability in the future. Another reason for the drop
was that earnings were burdened by unsatisfactory business and earnings develop-
57
ment in the Development Test Systems product line. By contrast, the Balancing and
Diagnostic Systems and Measuring and Process Systems product lines posted strong
positive results.
The pretax result for the Corporate Center was € – 25.9 million (previous year:
€ – 24.1 million). This includes headquarters costs, special projects, and primarily
interest expenses associated with strategic acquisitions made.
earnings enhancement program in implementation stage
Dürr has increased consolidated sales considerably over the past fiscal years as a
result of acquisitions. However, earnings development has not kept pace with sales
growth. After many years of expansion, our most important task now is to focus all
of our energies on improving the Group’s operating profitability. We laid the groundwork for this when we adopted the
earnings enhancement program in the
spring of 2003.
is a Group-wide program that currently comprises more than
200 individual measures aimed at creating the most important conditions for a turnaround in earnings. The program has four main thrusts:
Cost reduction
In particular, streamlining in our purchasing organization should achieve a lasting
reduction in the cost of sales for the Group. The newly defined “Global Sourcing”
unit will take on an important control function in this respect. It will push ahead the
bundling of purchasing volumes throughout the Group, the use of less expensive
procurement markets, and the expansion of online procurement. Another important
point for cost reduction is the systematic standardization and harmonization of our
products. We will also further reduce our selling and administrative expenses as part
of
. Translocational task performance will also allow us to slim down some
of our structures.
Risk reduction
We are systematically streamlining our key order-handling processes in order to keep
earnings risks in this area to a minimum. Central measures include improving project
controlling and staff qualifications and standardizing the project management
process throughout the Group.
Reduction of net working capital
We have intensified our receivables and inventory management in order to improve
our liquidity position. Our objective is to achieve a long-term reduction in all areas of
net working capital within the Dürr business units.
Location and portfolio consolidation
Within the scope of
, we will discontinue certain activities, tighten up our
structures, and utilize synergies by combining locations. An important measure is the
closure of the loss-making pre-manufacturing operation in Darmstadt, Germany
(Measuring Systems business unit), which was decided in October 2003 by the Board
of Management of Carl Schenck AG and will result in a reduction of 350 jobs by the
58
end of 2004. We also closed operations within the Paint Systems (Angoulême, France)
and Ecoclean (Warwick, Great Britain) business units. We combined some US locations
in the Paint Systems and Measuring Systems business units.
Although the main focus of
in fiscal 2003 was on defining goals and planning
individual projects, we already posted considerable contributions to earnings. The
main year of implementation is 2004.
will be implemented swiftly and will
penetrate deep into all areas of the Group. Earnings enhancement is a top priority
for each and every level of management within the Group.
Financial position
Total assets decreased further
As a result of the reduction of fixed and non-fixed assets, total assets were down in
fiscal 2003 to € 1,665.8 million (previous year: € 1,790.3 million).
Fixed assets were down by € 35.8 million to € 569.1 million, equivalent to 34.2 % of
total assets (previous year: 33.8 %). In line with our restrictive capital spending policy,
we reduced our capital expenditures to € 16.6 million (previous year: € 29.4 million).
Combined with currency effects, this resulted in a decline in property, plant and equip-
Asset position
Shareholders’ equity 13 %
34 % Fixed assets
62 % Non-fixed assets
4%
Accruals 19 %
Liabilities 64 %
Deferred taxes and
prepaid expenses
Deferred taxes and
deferred income
Assets
Liabilities and shareholders’ equity
4%
December 31, 2003
Shareholders’ equity 15 %
34 % Fixed assets
62 % Non-fixed assets
4%
Accruals 17 %
Liabilities 65 %
Deferred taxes and
prepaid expenses
Deferred taxes and
deferred income
Assets
3%
December 31, 2002
59
ment to € 169.2 million (previous year: € 192.0 million). The largest
item in fixed assets is still intangible assets, at € 379.1 million
or 22.8 % of total assets (previous year: € 390.4 million or 21.8 %).
The goodwill included in this figure declined from € 355.5 million
to € 346.1 million as a result of currency effects. The impairment
test for this goodwill did not require a valuation allowance.
Dürr supplies the handling
and assembly systems for
the installation of complete
vehicle modules.
Non-fixed assets were down to € 1,037.3 million (previous year:
€ 1,115.4 million) and represented 62.3 % of total assets, as
at the end of 2002. Whereas receivables and other assets, net,
at € 772.4 million, were at the same level as the previous year
(€ 777.3 million), we reduced inventories, net, by 39.3 % to
€ 65.1 million (previous year: € 107.3 million). The principal factor
here was that we continued to improve inventory management.
On the liabilities side, equity was down € 47.1 million from the
previous year to € 215.2 million. The decline results from dividends
paid for fiscal 2002, currency translations that had no effect
on earnings, and the net loss for fiscal 2003. The equity ratio is
12.9 % (previous year: 14.7 %).
Accruals totaled € 325.6 million as of December 31, 2003 (previous year: € 310.9 million). Of this, € 95.7 million (previous year: € 99.6 million) are order-specific accruals for
post-contract costs, warranties, and anticipated losses on pending transactions. Tax
accruals account for € 10.0 million (previous year: € 14.0 million), and pension accruals
account for € 53.6 million (previous year: € 53.1 million).
As of December 31, 2003, liabilities were reduced by € 96.8 million to € 1,055.7 million.
Net cash provided by operating activities positive once again
In fiscal 2003, net cash provided by operating activities was € 56.4 million. This is
below the previous year's figure (€ 198.7 million), due to unusually high advance payments by customers. Net cash used in investing activities declined, as expected, to
€ – 29.5 million (previous year: € – 40.4 million). At € – 47.4 million, net cash used in
financing activities was considerably less than the previous year’s figure (€ –74.2 million). The Group’s cash and cash equivalents amounted to € 199.9 million (previous
year: € 230.7 million). Taking into account a factoring of € 23.8 million, we were
able to reduce our net debt below the already low level from the previous year to
€ 97.0 million by year’s end (previous year: € 123.1 million). Average net debt for
2003 was € 221.5 million. Once again, this was down by around € 100 million from
the previous year (€ 333.2 million).
60
Dürr cut back its capital expenditures to € 16.6 million in 2003 (previous year: € 29.4 million). The Paint Systems business unit invested € 5.8 million (previous year: € 12.0 million). Around € 2 million of this were for remodeling the painting systems development center in Bietigheim-Bissingen, Germany, and another € 2 million went toward
consolidating locations in the USA. Capital expenditures by the Final Assembly
Systems business unit amounted to € 3.4 million (previous year: € 2.8 million), of
which some € 2 million were used for rationalization measures at assembly plants.
The Services business unit invested € 2.3 million (previous year: € 4.3 million) in
order to enhance its range of technical services. The Ecoclean business unit reported
capital expenditures of € 1.3 million (previous year: € 6.1 million). This spending
was primarily for replacement items. Capital expenditures in the Measuring Systems
business unit amounted to € 3.8 million (previous year: € 4.2 million) that went
toward consolidating two locations in the United States and investments for improving the IT infrastructure.
Capital expenditures by business unit in 2003
Total: € 16.6 million
Ecoclean
€ 1.3 m (7.8 %)
Services
€ 2.3 m (13.9 %)
Final Assembly
Systems
€ 3.4 m (20.5 %)
Paint Systems
€ 5.8 m (34.9 %)
Measuring Systems
€ 3.8 m (22.9 %)
Control and profit-and-loss transfer agreements
Dürr AG did not sign any additional control or profit-and-loss transfer agreements
in 2003.
Report on relationships with associated companies
In conformity with Sec. 312 of the German Stock Corporation Law, the Board of
Management of Dürr AG prepared a report on relationships with associated companies,
in which it issued the following concluding declaration: “We declare that under
the circumstances known to us at the time when transactions were carried out or
a measure was implemented or refrained from, our company received fair and
reasonable consideration in each transaction, and was not placed at a disadvantage
by implementing or refraining from the measure in question.”
61
Development and innovation
Dürr invested € 33.1 million directly in research and development (R&D) in fiscal 2003
(previous year: € 35.3 million). This represents 1.5 % of the Group’s sales. If we also
consider project-related R&D spending that is included under client orders, the R&D
ratio is almost 6 % and thus unchanged from the previous year.
As of December 31, 2003, Dürr had a total staff of 209 people employed in R&D. In
addition, many other employees also work on innovative solutions as part of orderspecific development projects.
Our R&D activities are key factors in our ability to continuously improve the products
and services portfolio we offer and strengthen our position in the market and among
competitors. With innovative technologies, we create incentive for companies to replace
or upgrade existing lines, especially in mature markets.
In fiscal 2003, we completed major development projects and presented them to our
customers. Among these developments was a new generation of paint atomizers
that enables paint savings of up to 70 % in the application of metallic paints. Our automatic guided vehicle (AGV), which runs without batteries, strengthens our position as
a provider of final assembly systems. The Measuring Systems business unit designed
a new system for transmission and drivetrain testing that simulates the conditions
created by a combustion engine. This new development allows us to break new ground
in noise optimization. For additional information about these and other Dürr innovations, please read the reports from the individual business units (Paint Systems
p. 22/23, Final Assembly Systems p. 28, Ecoclean p. 40, Measuring Systems p. 46/47).
We achieved a major marketing success with one of our key customers in the USA
with our EMOS-SM (Equipment Monitoring and Operating System -System Management) supervisory control systems software. The customer will be the first to use
EMOS-SM throughout an entire automotive plant instead of just in individual manufacturing areas. With this product, we have added a solution for controlling entire
factories to our range of supervisory control systems.
We will continue to pursue intensive R&D work in the future to maintain our position
as technological leader. We plan to raise R&D spending in fiscal 2004. A major focus
will be on increasing our development of modular factory concepts. We will also continue to promote the consistent use of virtual reality applications. With both of these
initiatives, we are taking a proactive approach to fulfilling the key demands of our
customers in the automotive industry.
62
Purchasing management
Our purchasing volume represents roughly two-thirds of Group sales. Therefore,
our purchasing organization plays a key role, particularly for the swift implementation
of our
earnings enhancement program. The Global Sourcing unit – which
coordinates purchasing on an international level – was established and placed under
the direct control of the Chairman of the Board of Management in order to strengthen
the demand position of the business units and achieve cost savings.
This strategy of coordinating the placement of important orders within the individual
business units worldwide has paid off, and we will continue to expand it further. In
addition, for selected product groups, Dürr has established purchasing teams that work
across the different business units to pool purchasing volumes and achieve savings
through volume. We will expand this approach to cover additional high-demand goods
and services.
In fiscal 2003, we also signed additional worldwide framework agreements with
efficient suppliers whom we evaluate periodically. In particular, suppliers whose overall performance in terms of quality, costs, and ability to deliver is strong over the long
term will be able to expand their business with Dürr. By stepping up our purchasing
activities in Asia, Eastern Europe, and South America, we will tap additional potential
for cost savings and procurement that is not affected by exchange rate fluctuations.
Employees
As of December 31, 2003, Dürr employed 12,747 people, around 1% less than in the
previous year (12,902). The number of employees in our personnel-intensive Services
business unit increased to 4,499 (previous year: 4,272) as a result of new projects. In
contrast, the number of people employed in the Group’s engineering units decreased
by 4.4 % to 8,248 as of December 31, 2003 (previous year: 8,630). Flexible working
hours and a high level of outsourcing allow us to react quickly to fluctuations in
capacity utilization.
Training and continuing education at a high level
Despite a difficult economic environment, we maintained a high number of trainees
(257 as of December 31, 2003). This will allow us to continue to recruit qualified young
talent from within the company in the future and fulfill our responsibility to society.
Our continuing education program has also helped us secure and further increase the
already high level of qualification among our personnel. Continuously adapting our
education offerings to meet the needs of our workforce and generate the greatest
possible benefit is an essential feature of our human resources development efforts.
63
Staff and university marketing effort continued
We successfully continued our cooperation with technical and
business universities and disciplines in fiscal 2003. For example,
in a practice-oriented project seminar series on the subject of
risk management, students of controlling at the University of
Stuttgart, Germany, came up with some interesting results for
the further development of the Dürr Group’s risk management
system.
We also promote interest in engineering disciplines among
pupils at schools with a natural sciences focus by providing field
trips, job-search coaching, and information.
“Prevention First” pilot project attracts numerous participants
Well prepared: Training
In fiscal 2003, we stepped up our activities to promote healthcare
among the members of our staff. A large number of our personnel participated in the “Prevention First” pilot project, which
was jointly funded by Dürr, health insurance companies, and
the participants themselves. Sports medicine specialists were
on hand to assist and evaluate the program, which helped us
achieve a demonstrable reduction in illness-related absences.
has traditionally had a
high status at Dürr.
Staff by business unit as of December 31, 2003
Staff by region as of December 31, 2003
Total: 12,747
Total: 12,747
Corporate Center
54 (0.4 %)
875 (6.9 %)
Ecoclean
932 (7.3 %)
South America
842 (6.6 %)
Final Assembly
Systems
1,593 (12.5 %)
Paint Systems
2,808 (22.0 %)
Services
4,499 (35.3 %)
Measuring Systems
2,861 (22.5 %)
3,283 (25.7 %)
Other
European countries
879 (6.9 %)
Germany
4,630 (36.3 %)
Other
EU member states
2,238 (17.6 %)
64
Environmental protection
Environmental risks are low overall at Dürr production sites. The principal emphasis is
on assembly processes carried out in a way that keeps energy consumption and waste
generation low. Almost all of our locations in Germany and the United States use
ISO 14001-certified environmental management systems. When selecting our suppliers,
we attach great importance to environmental management and sustainability.
Environmental standards in automobile production will increase worldwide in the
coming years. And that is why we shall focus our product development even more
intensely on criteria such as emission reduction and resource conservation.
Risk management
Dürr views risk management as a central management task and an important part of
the management process. Risk management at Dürr is broken down into four steps:
risk identification, assessment, control, and monitoring. We have developed suitable
tools for each of these steps and will continue to push forward their implementation
in fiscal 2004. These tools include a risk management manual, a Dürr-specific risk profile, and a risk structure sheet for each type of risk. Dürr’s controlling and internal
control systems also contribute to consistent, effective risk management. There are
no apparent risks that might jeopardize the company’s continuing existence.
General economic development
Besides the overall economic situation, the situation within the automotive industry
in particular has an impact on business developments at Dürr. For this reason, we
systematically analyze the development of manufacturers and suppliers on a regular
basis. This allows us to identify changes in demand at an early stage and take any
necessary measures.
Competitors
Dürr is faced with a variety of competitive situations. Some are oligopolistic while
others are highly differentiated and polypolistic. Our actions within each of our business units must match these different competitive structures appropriately. For this,
we employ the generally accepted tools. For instance, we use regular benchmarking
to compare our position with that of our competitors.
Clients and market
Dürr is able to recognize changes in the demands of the automotive industry and
the resulting risks at an early stage. This is because, as a key supplier, we maintain
ongoing, close cooperation with our customers. Project and development partnerships with manufacturers and suppliers, for example, allow us to coordinate our
production systems with any new methods or materials being used in automobile
design at an early stage.
65
Order handling and business processes
Dürr completes large-scale projects valued in the millions on a regular basis. These
projects are characterized by a high degree of technical complexity and long turnaround times. We use appropriate tools to minimize schedule and earnings risks,
including project management manuals and risk and opportunity checklists. The
progress of large system projects is analyzed on a regular basis by the Board of
Management and other senior executives.
The most important of Dürr’s key processes are long-term contract manufacturing
and product construction. There is also our Services business unit, which is focused
exclusively on providing services. Our risk management system also covers support
processes in addition to our key processes. The risk management tools we use
to control risks in each of our business processes are as diverse as the processes
themselves.
Suppliers
With respect to procurement, technological aspects and the price/performance ratio are
of particular importance to Dürr. We depend on reliable, high-quality, cost-effective
supply sources. That is why our experts regularly monitor our suppliers’ quality standards and their reliability. In order to reduce procurement risks, we maintain longterm business relationships, especially with preferred suppliers of technically complex
components.
Currency risks
Because Dürr operates worldwide, we must take exchange rate fluctuations into
account. For us, the primary risks associated with differences in foreign exchange
rates arise when we convert business figures from our foreign subsidiaries into
euros (translation risk). The currency risk (transaction risk) from product exports is
relatively low since a large portion of our added value is generated locally in the
countries where the orders are fullfilled. We also use financial derivatives (see the
notes to the consolidated financial statements, p. 102/3) and centralized foreign
currency management to protect ourselves from currency risks. We hedge major
goods and services transactions with forward exchange contracts, and smaller
orders through macro-hedging.
Information technology
Information technology is of key importance to Dürr’s business processes. We use the
latest security solutions to protect our data and infrastructure against intrusion. We
have also continuously increased the availability and fail-safeness of our server and
storage systems for business-critical applications.
Legal dispute with Alstom
Integral parts of the acquisition of the Air Industries Group from Alstom in fiscal 2000
were an equity guarantee for the consolidated Group and a margin guarantee for
selected orders. The two parties involved – Alstom S.A. on the one hand, and Dürr AG
and Dürr Systems GmbH on the other – disagree on the actual amounts of these
66
guarantees. Since May 2001, arbitration proceedings before the International Chamber
of Commerce (ICC) in Paris have been pending. No final decision has yet been issued.
A decision against us might have an adverse impact on future earnings.
Financing
We financed acquisitions in previous years with long-term loans. The terms of these
loans require us to maintain certain balance sheet and earnings ratios. If these ratios
change, the participating lenders may modify the associated terms of the loans.
We use interest swaps to control interest rate risk.
Events subsequent to the reporting date
New CFO since February 1, 2004
Kay Bönisch, who has been a regular member of the Board of Management of Dürr AG
since November 1, 2003, took over responsibility for finance and controlling, tax
matters, legal affairs, human resources, and risk management on February 1, 2004.
In addition, the Supervisory Board appointed Mr. Bönisch Labor Director of Dürr AG
on February 19, 2004. In all of the above-mentioned functions, Mr. Bönisch succeeds
Dr. Wolfgang Baur, who left the Dürr Group on January 31, 2004, to pursue a new
professional function.
Organizational changes in Final Assembly Systems
As of the start of 2004, we introduced a leaner organizational structure in the Final
Assembly Systems business unit. Final Assembly Systems now comprises two product
lines: Final Assembly Products and Automation and Conveyor Techniques. We have
reassigned the activities of the former Assembly Turn Key (systems for final assembly)
and DSEngineering (factory planning) product lines to the Automation and Conveyor
Techniques product line. These activities will be continued to the full extent under
their new product line. The organizational change simplifies internal reporting and
control of the business unit.
Squeeze-out initiated at Carl Schenck AG
In its February 19, 2004, meeting, the Supervisory Board of Dürr AG approved the initiation of a process that will force the minority shareholders of Carl Schenck AG to sell
their shares to the majority shareholder for cash. Dürr AG currently holds 98.7 % of the
shares of Carl Schenck AG. The “squeeze-out” (provided for by German corporate
law) will make the organization and management of the Dürr Group more consistent.
Thus, it can reduce the cost of Group structures and double reporting. It will also
eliminate the costs to Carl Schenck AG of fulfilling disclosure requirements, listing,
and a large part of the expenses for annual general meetings.
67
Outlook
Economic recovery in 2004 will be moderate at best
The geopolitical uncertainties that have curbed the economy have not yet been fully
overcome. Nevertheless, we can see a slow relaxation of business and consumer sentiment in the industrialized nations. Monetary policies also remain highly expansive.
However, capacity utilization and employment rates have yet to increase significantly.
Therefore, at best, it seems only a moderate economic recovery will be possible in
the second half of the year.
For the global economy, a growth rate of 4.4 % is expected for 2004; the economies of
the industrialized nations are expected to grow by 3.2 %. The forecast for the USA is
4.5 %. This will be due primarily to extensive tax cuts, low inflation, and rising defense
spending. The US Federal Reserve is likely to raise the extremely low interest rates
over the course of the year. The European Union (including acceding states) is likely
to be slow in overcoming the current stagnation phase, with growth forecast at just
1.9 %, as the strong euro and high deficits in many national budgets slow down growth.
We expect interest rates to remain low in 2004. For Germany, sluggish growth of 1.6 %
is forecast. However, domestic demand will suffer from consumer uncertainties about
future political reforms. For China, GDP growth is expected to be 8.5 % while Eastern
Asia could return to its previous growth rate of 5.0 % if there is a sharp increase in
production. Against the background of increasing domestic demand, higher capital
spending on the part of companies, and a stabilized labor market, Japan’s economy
could grow by 2.8 %.
GDP growth
2004*
2003
2002
Germany
1.6
– 0.1
0.2
EU**
1.9
0.9
1.2
USA
4.5
3.1
2.4
Eastern Asia
5.0
3.8
4.5
China
8.5
9.1
8.2
Japan
2.8
2.7
0.1
In %
** Forecast
** Including acceding states
Source: German Institute for Economic Research (DIW)/Institute for World Economics
68
A consistent recovery of the automotive sector is not expected in 2004. Therefore,
we expect the conservative spending trend in the automotive industry to continue.
At best, manufacturers and suppliers may see some potential for growth from a certain need for replacements resulting from consumers’ purchasing reluctance in recent
years. In China, the tremendous growth in production will continue during the next
two to three years. However, there is a risk that excess capacities will develop that can
no longer be absorbed by the domestic market. This would lead to increased price
pressure.
Paint Systems
The incoming orders and sales figures for the Paint Systems business unit experienced a higher-than-average increase in fiscal 2003 following a large system order
from General Motors. For fiscal 2004, we expect both of these figures to return to their
normal levels. Nevertheless, we expect to see increases in earnings. The personnel
capacity adjustments we made in fiscal 2003 should contribute to this increase in
profitability. In addition, we shall reduce the large number of our leased employees.
The strategy of the Final Assembly Systems business unit is
focused on building on profitability, growth, and market leadership. The challenges faced by the business unit vary by market
and region. For fiscal 2004, we anticipate an increase in incoming
orders and a slightly lower sales figure due to exchange rate
effects. We shall continue to improve our cost position through
the
earnings enhancement program. Therefore, we
expect earnings to be higher than in fiscal 2003, although we can
also assume that more intense competition will put increased
pressure on margins.
Services
Dürr offers a complete range
The Services business unit will continue to push ahead with the
development of new lines of business in the future. This will put us
in a position to benefit from the continuing outsourcing trend in
the automotive industry. We shall increase our presence in Asia,
Eastern Europe, and Mexico in particular, since manufacturers
and suppliers in these less expensive manufacturing markets are
stepping up development of new production capacities. For fiscal
2004, we expect sales and earnings to increase.
of products for non-polluting
powder painting.
Ecoclean
The Ecoclean business unit will continue to pursue the standardization of its products. We will also push ahead with our efforts
to reduce procurement costs and combine and relocate stages of
our value chain to low-wage countries. We expect a slight increase
in demand in Europe and the United States in the second half of
the year. For this reason, we anticipate that incoming orders,
sales, and earnings will grow slightly in the current fiscal year.
69
Measuring Systems
The Measuring Systems business unit expects a slight increase in incoming orders
and sales for fiscal 2004, particularly in North America. We shall expand our global
presence in a targeted way and concentrate more on selected markets and customer
groups. We shall thus create a vital basis for qualitative growth. We shall continue
our extensive cost-reduction program in order to improve our earnings situation. We
are aiming at a balanced result in fiscal 2004.
Group outlook
The Dürr Group’s prime objective is to improve profitability. To do so, we will resolutely
push ahead with our
earnings enhancement program. We expect strong positive results for fiscal 2004. Sales are likely to fall slightly short of the high 2003 figure.
Risks to our outlook
This outlook and other portions of the Annual Report include forward-looking statements about future developments. As is the case for any business activity conducted
in a global environment, such forward-looking statements are always subject to
uncertainty. Our information is based on the conviction and assumptions of the Board
of Management of Dürr AG, as developed from the information currently available.
However, the following factors may affect the success of our strategic and operating
measures: geopolitical risks, changes in general economic conditions (especially a
prolonged recession in Europe or North America), exchange rate fluctuations and
changes in interest rates, new products launched by competitors, and a lack of customer acceptance for new Dürr products or services, including growing competitive
pressure. Should any of these factors or other imponderable circumstances arise,
or should the assumptions underlying the forward-looking statements prove incorrect,
actual results may differ from those projected. Dürr AG undertakes no obligation
to provide continuous updates of forward-looking statements and information. Such
statements and information are based upon the circumstances as of the date of
their publication.
Stuttgart, March 2004
Dürr Aktiengesellschaft
The Board of Management
70
Consolidated financial statements
71
72
73
74
75
76
Consolidated statements of cash flows
Notes to the consolidated financial
statements
71
(on the full financial statements)
We have audited the consolidated financial statements, comprising the balance sheet, statement
of income, the statement of changes in shareholders’ equity and cash flows as well as the notes
to the consolidated financial statements, prepared by Dürr Aktiengesellschaft, Stuttgart, for the
fiscal year from January 1, 2003 to December 31, 2003. The preparation and the content of the
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion whether the consolidated financial statements are in accordance with the United States Generally Accepted Accounting Standards (US-GAAP), based on
our audit.
We conducted our audit of the consolidated financial statements in accordance with the German
audit regulations and the generally accepted German standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we
plan and perform the audit such that it can be assessed with reasonable assurance whether the
consolidated financial statements are free of material misstatement. Knowledge of the business
activities and the economic and legal environment of the Group and evaluations of possible
misstatements are taken into account in the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the evidence supporting the amounts
and disclosures in the consolidated financial statements are examined 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 for the fiscal year in accordance with US-GAAP.
Our audit, which also extends to the group management report prepared by the Management
Board for the fiscal year from January 1, 2003 to December 31, 2003, has not led to any reservations. On the whole, the group management report in our opinion provides a suitable understanding of the Group’s position and suitably presents the risks of future development. In addition, we confirm that the consolidated financial statements and the group management report
for the fiscal year from January 1, 2003 to December 31, 2003 satisfy the conditions required for
the Company’s exemption from its obligation to prepare consolidated financial statements and
the group management report in accordance with German law.
Stuttgart, March 30, 2004
Ernst & Young AG Wirtschaftsprüfungsgesellschaft
Prof. Dr. Langenbucher
Wirtschaftsprüfer
[German Public Auditor]
Hochrein
Wirtschaftsprüferin
[German Public Auditor]
72
for Dürr Aktiengesellschaft, Stuttgart, for the years ended December 31, 2003 and 2002
Note
2003
2002
2,264,508
2,082,137
– 1,899,156
– 1,700,957
365,352
381,180
– 322,606
– 326,039
– 33,073
– 35,335
Amounts in € k
Net sales
Cost of sales
Gross margin
Selling, administrative,
and other operating expenses
(5)
Research and development expenses
Other operating income
(6)
29,491
27,984
Restructuring expenses and impairment
(7)
– 25,594
–
13,570
47,790
(8)
– 20,517
– 25,170
– 6,947
22,620
– 24,109
– 9,352
Income before financial income, income taxes
and minority interests
Financial income (expense), net
Income before income taxes
and minority interests
Income taxes
(9)
Income before minority interests
– 31,056
13,268
Minority interests
– 214
– 1,250
Net loss (income)
– 31,270
12,018
– 2.19
0.84
Basic and diluted earnings per share in €
The accompanying notes are an integral part of these consolidated financial statements.
73
Consolidated financial statements for Dürr AG
for Dürr Aktiengesellschaft, Stuttgart, as of December 31, 2003 and 2002
Note
2003
2002
Goodwill
(10)
346,091
355,538
Other intangible assets, net
(10)
33,042
34,910
Property, plant and equipment, net
(10)
169,234
191,975
Investments
(11)
Amounts in € k
Assets
Fixed assets
20,743
22,467
569,110
604,890
Non-fixed assets
Inventory, net
(12)
65,135
107,345
Receivables and other assets, net
(13)
772,351
777,300
–
3
Short-term investments
Cash and cash equivalents
Deferred taxes
(9)
Prepaid expenses
Total assets
199,859
230,707
1,037,345
1,115,355
53,670
64,744
5,696
5,312
1,665,821
1,790,301
(thereof short-term 2003: € 1,060,632 thousand; 2002: € 1,153,129 thousand)
Capital stock
(14)
36,603
36,603
Additional paid-in capital
(14)
159,000
159,000
Retained earnings
(14)
12,877
55,586
Accumulated other comprehensive income
(14)
6,731
11,107
215,211
262,296
Minority interests
5,163
8,199
Accruals
(16)
325,633
310,924
Liabilities
(18)
1,055,657
1,152,425
(9)
57,810
49,874
6,347
6,583
1,665,821
1,790,301
Deferred taxes
Deferred income
Total liabilities and shareholders’ equity
(thereof short-term 2003: € 1,183,920 thousand; 2002: € 1,129,326 thousand)
74
Accumulated
other comprehensive income
Minimum
Additional
Deferred
pension
Net
Cumulative
compen-
liability
derivative
translation
losses
adjustment
Sub-total
Total
Capital
paid-in
Retained
stock
capital
earnings
sation adjustment
Comprehensive
income
Amounts in € k
Balance at
January 1, 2002
36,603
159,048
59,296
– 44
– 119
– 6,784
44,982
38,079
292,982
Net income 2002
–
–
12,018
–
–
–
–
–
12,018
12,018
Other comprehensive
income (loss)
–
–
–
–
– 74
– 4,668
– 22,230
– 26,972
– 26,972
– 26,972
Comprehensive income
–
–
–
–
–
–
–
–
–
– 14,954
Adjustment of
stock options
–
– 48
–
48
–
–
–
–
–
Amortization of deferred
compensation income
–
–
–
–4
–
–
–
–
–4
Dividends
–
–
– 15,728
–
–
–
–
–
– 15,728
Balance at
December 31, 2002
36,603
159,000
55,586
–
– 193
– 11,452
22,752
11,107
262,296
Net loss 2003
–
–
– 31,270
–
–
–
–
–
– 31,270
– 31,270
Other comprehensive
income (loss)
–
–
–
–
43
8,383
– 12,802
– 4,376
– 4,376
– 4,376
– 35,646
Comprehensive income
–
–
–
–
–
–
–
–
–
Dividends
–
–
– 11,439
–
–
–
–
–
– 11,439
36,603
159,000
12,877
–
– 150
– 3,069
9,950
6,731
215,211
Balance at
December 31, 2003
75
Consolidated statements of cash flows
2003
2002
– 31,270
12,018
214
1,250
Amounts in € k
Net loss (income)
Minority interests
Dividends paid to minority shareholders
– 418
– 54
30,530
34,066
Net gain on disposal of property, plant and equipment
– 2,637
– 180
Deferred income taxes
12,586
131
– 94
– 782
Non-cash income from associated companies
Non-cash expenses (income) from stock option program
Non-cash expenses from dedesignation of derivatives
–
–4
5,084
–
36,110
– 12,134
– 40,459
54,433
Changes in operating assets and liabilities
Inventory
Receivables
Short-term investments
3
–
Accruals
28,043
– 192
Liabilities (other than bank)
18,392
108,843
Other assets and liabilities
Purchases of other intangible assets
Purchases of property, plant and equipment
Purchases of other investments
Acquisitions, net of cash acquired
Proceeds from the disposal of fixed assets
Net change in short-term debt
331
1,264
56,415
198,659
– 7,453
– 12,693
– 16,645
– 29,402
– 775
– 230
– 7,187
– 924
2,588
2,832
– 29,472
– 40,417
– 3,681
– 11,129
Proceeds from long-term debt to banks
–
4,752
Redemption of long-term debt to banks
– 32,304
– 52,132
Dividends paid
– 11,439
– 15,728
– 47,424
– 74,237
Effect of exchange rates on cash and cash equivalents
– 10,367
– 3,179
Change in cash and cash equivalents
– 30,848
80,826
At the beginning of the year
230,707
149,881
At the end of the year
199,859
230,707
Cash paid for:
Interest
25,133
34,475
Income taxes
12,544
12,932
76
Notes to the consolidated financial statements for the year 2003
1. Summary of significant accounting policies
The Company
The legal predecessor of Dürr Aktiengesellschaft (“Dürr AG” or “Company”) was Dürr Beteiligungs-GmbH headquartered in Stuttgart. The Company was transformed on November 4, 1989
into Dürr AG, located in Stuttgart. Dürr AG and its subsidiaries (“Dürr” or the “Group”) develop
and manufacture paint finishing plants, final assembly, and conveyor systems as well as environmental systems and industrial cleaning technology. In addition, the performance spectrum of
Dürr includes manufacturing support services, the manufacture of systems for process control,
for the automation of production processes, for the balancing of revolving parts and assemblies,
as well as diagnosis technology. Dürr’s main customers are the major companies in the automobile industry worldwide.
Basis of presentation
The consolidated financial statements of Dürr AG were prepared in accordance with United
States Generally Accepted Accounting Principles (US-GAAP) and in line with Directive 83/349/EG.
Consolidation principles
The consolidated financial statements include the accounts of Dürr AG and companies in which
Dürr AG has a controlling financial interest. Investments in which the Company exercises significant influence, but which it does not control (generally 20 – 50 % ownership interest) are accounted
for using the equity method of accounting (associated companies). All significant intercompany
transactions have been eliminated.
All other investments have been accounted for at cost. The item “Minority interest” represents
the separate investments in nine subsidiaries (2002: seven).
Use of estimates
The preparation of the consolidated financial statements pursuant to US-GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at balance sheet date, and the reported
amounts of revenues and expenses during the reporting period. Actual results could vary from
these estimates.
Areas requiring significant estimates include the treatment and valuation of unbilled work in
process using the percentage-of-completion method, allowance for doubtful accounts, contingencies and other accruals. In addition, material estimates and assumptions have been used in
determining the fair value of the Group’s tangible and intangible long-lived assets, and for the
impairment tests of goodwill conducted at the respective reporting units.
Foreign currency translation
The functional currency of each of the subsidiaries of Dürr AG is the local currency of the country
and transactions
in which each subsidiary is located. The assets and liabilities of subsidiaries stated in any currency
other than the euro are translated at the spot rate as of each balance sheet date. The statements
of income are translated at the average annual rate for the period. Differences arising from the
translation of assets and liabilities as compared to their translation in earlier periods and from
the translation of income and expenses are included in “Accumulated other comprehensive
income.”
77
Differences from any other currency translations are included in the consolidated statement of
income under “Other operating income” and “Other operating expenses.” The aggregate foreign
currency exchange gain (2002: loss) recognized in the consolidated statement of income for the
year ended December 31, 2003, was € 2,515 thousand net (2002: € – 311 thousand).
Through its US subsidiaries, the Group holds net assets amounting to € 76,004 thousand
(2002: € 93,698 thousand). These net assets were translated from US dollars into euros as of
December 31, 2003, using an exchange rate of 1.2499 (2002: 1.0416).
Intangible assets
Intangible assets are franchises or licenses, patents and similar rights, and goodwill, respec-
and property,
tively.
plant and equipment
Dürr amortizes franchises, patents and similar rights with defined useful lives (between three
and 20 years) to their estimated residual book value on a straight-line basis over their prospective
useful lives. Goodwill and other intangible assets with indefinite useful lives are not amortized
but are reviewed at least annually for impairment.
Dürr reviews the impairment of goodwill using a two-stage test at business unit level. In the first
step, the fair value of a reporting unit including the goodwill is compared to its carrying amount.
If the fair value is lower than the carrying value, in a second step the fair value of the goodwill
of the reporting unit is compared with the carrying value of this goodwill. The fair value of the
goodwill is defined as the difference between the fair value of the reporting unit and the fair value
of all assets and liabilities of the reporting unit. If the fair value of the goodwill is lower than its
carrying amount, the difference is recorded as an impairment. As of December 31, 2003, goodwill
of € 346,091 thousand (2002: € 355,538 thousand) was recognized in the accounts.
Goodwill recognized on associated companies is tested for impairment in accordance with
Accounting Principles Board (APB) Opinion No. 18 “The Equity Method of Accounting for Investments in Common Stock.”
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the respective classes
of assets. The useful lives range from three to five years for computer hardware, five to ten
years for furniture and fixtures, five to 15 years for machinery and equipment, and 15 to 50 years
for buildings and improvements. Certain low-value items are expensed as incurred in the year
of acquisition. This policy does not have a material effect on the consolidated financial statements.
The cost of property, plant and equipment includes major expenses and replacement parts that
extend the useful life of the asset or increase its capacity and interest associated with significant
capital additions. When assets are either sold or retired, their cost and related accumulated
depreciation and amortization are eliminated. Gains and losses on the disposal of such assets
are recorded as “Other operating income” or “Other operating expenses.” Maintenance and
small repairs are expensed when incurred.
Pursuant to the Statement of Financial Accounting Standards (SFAS) No. 144 “Accounting for
the Impairment or Disposal of Long-Lived Assets” the Group also records any impairment losses
on the carrying amount of long-lived assets if circumstances indicate that their value is permanently impaired. Impairment is determined by comparison of the carrying amount of the respective assets with the undiscounted cash flows expected to be generated by the asset in future. If
recognition of an impairment loss is considered necessary for such assets, the loss corresponds
to the difference between the carrying amount and lower fair value. Fair value is generally
78
based on an estimate or the discounted future cash flows expected from the assets. During the
fiscal years 2003 and 2002, Dürr did not record any impairment losses on buildings. In the
course of restructuring Schenck Fertigungs & Service GmbH, Darmstadt (Germany), impairment
losses were recorded on property, plant and equipment of € 1,266 thousand.
As a result of combining the sites used by the subsidiary companies Schenck RoTec Corporation
and Schenck Pegasus Corporation at the location in Troy/Michigan (USA), the Schenck RoTec
building in Orion/Michigan (USA) is no longer used. There are plans to sell the building in fiscal
2004; sale documents have already been prepared. The anticipated sales proceeds will be allocated to the Measuring Systems business unit.
Further, due to the combination of sites used by the subsidiaries Dürr Industries Inc., Plymouth/
Michigan (USA), and Dürr Environmental Inc., Plymouth/Michigan (USA), in a single location, the
building of Dürr Environmental Inc. in Wixom/Michigan (USA), is no longer used. The Company
plans to sell the building in fiscal 2004. The anticipated sales proceeds will be allocated to the
Paint Systems business unit.
The carrying amounts of the two buildings of € 5,147 thousand (2002: € 6,197 thousand) are disclosed in current assets, within the category other assets; a reclassification was also made as of
December 31, 2002, accordingly from property, plant and equipment to other assets.
Investments
Investments in associated companies and in other unlisted companies on which Dürr does not
exert a significant influence are recorded as investments. The Group’s share of profits and losses
is shown as changes in the carrying amount and recognized in the consolidated statement of
income under the financial expense. Dividends received are deducted from the carrying amount.
Write-downs are made on the lower carrying amount to allow for impairments in value which
are expected to be permanent.
The marketable securities disclosed in the financial assets are classified as available-for-sale
securities and therefore valued at fair value on the balance sheet date. Unrealized gains and
losses on these securities are reported under “Accumulated other comprehensive income” taking
account of any deferred taxes. There were no adjustments to “Accumulated other comprehensive income” in the year ended December 31, 2003, and the year ended December 31, 2002, as
the unrealized changes in fair value were immaterial.
Leases
The companies in the Dürr Group are lessees of land, buildings, office and operating equipment.
The majority of leases are classified as operating leases. When the leases meet the definition of
capital leases, the leased asset is capitalized at acquisition cost (net present value of future
minimum lease payments less costs incurred for insurance, maintenance and taxes on any profit
thereon). An obligation is also established at that time for the same amount. The upper limit for
the capitalization of a leased asset and the liability is its fair value. The leased asset is depreciated
over the shorter of the estimated useful life or the lease term. Interest is imputed on the obligation using the effective interest method over the lease term.
Trade receivables
Receivables are recognized at the lower of nominal value or realizable value.
Dürr reviews its debtors on a regular basis in order to reduce its credit exposure. The appraisals
of the separate debtor accounts which are either overdue or in default are performed by management.
79
The Group evaluates the recoverability of its receivables based on a combination of factors.
Should Dürr become aware of any issues which would impinge on the ability of certain customers to meet their financial obligations, Dürr posts a specific allowance to reduce the amounts
due to the Group to the reasonably expected recoverable amount. For all other customers, the
Group records doubtful receivables on the basis of the period overdue, current business circumstances and the Group’s historical experience. Hedges against commercial and political risks
inherent in receivables are governed by Group policy, if need be, by taking out domestic or foreign credit insurance coverage or involving commercial banks.
All short-term liquid financial assets with an original term of up to three months are recognized
as cash and cash equivalents.
Stock-based compensation
In accordance with the provisions of SFAS No. 123, Dürr has elected to account for stock-based
awards issued to employees using the intrinsic value method prescribed in APB Opinion No. 25.
Accordingly, compensation cost for stock-based awards granted to employees is measured as
the excess of the market value of the Company’s stock on the measurement date over the amount
the employee must pay to acquire the stock.
For stock-based employee compensation awards in which all terms are fixed on the grant date,
the intrinsic value of the option is measured on the basis of the estimated fair market value of
the Company’s common stock on that date. The intrinsic value of awards in which some of the
award terms are dependent upon future events (a “variable award”) is measured in each reporting period based on the estimated fair market value of the Company’s stock at the end of each
reporting period until all terms under the award become known. Compensation costs for either
type of award are recognized over the employee’s service period, which is generally equivalent
to the vesting period of the award.
The Dürr International Stock Option Plan (DISOP) was accounted for as a variable plan under
which no amount was recorded as compensation cost for the year ended December 31, 2003
(2002: € – 4 thousand).
If the compensation costs for these allocations had been determined in accordance with SFAS
No. 123 “Accounting for Stock-Based Compensation,” this would not affect the Group’s net loss
for the year and earnings per share because the best estimate of the fair market value corresponds with the intrinsic value as of December 31, 2003, and December 31, 2002, respectively.
Accruals/liabilities
Accruals for pension obligations are calculated using the projected unit credit method.
Current liabilities and short-term accruals are recorded based on reasonable estimates.
Contingent liabilities are accrued when it is probable that a liability will be incurred and the
amount can be reasonably estimated.
Income taxes
Dürr computes the income tax burden using the so-called liability method in accordance with
SFAS No. 109, “Accounting for Income Taxes.” Under this standard, deferred taxes are determined
according to the difference between the US-GAAP carrying value in the balance sheet and the
tax law values of assets and liabilities based on the enacted statutory tax rates for those years
in which the difference is expected to be reversed. Valuation allowances are only recorded on
deferred tax assets if a lapse of the tax benefit is more likely than its realization or if the tax loss
carry forwards are larger than tax income in the near future.
80
Earnings per share
If there are dilutive elements present, two different ratios for earnings per share must be disclosed. The ratio “Earnings per share” does not take account of dilutive effects; it is calculated
by dividing the net loss (income) of the Group by the weighted average number of common
shares outstanding. In addition to the number of common shares outstanding, “Earnings per
share (diluted)” recognizes shares that could be issued on the basis of outstanding options.
The calculation is as follows (all amounts in thousands, or thousands of euros, respectively,
except per share amounts which are stated in euros). There were no dilutive effects in the years
ended 2003 and 2002.
2003
Revenue recognition
2002
Net loss (income)
– 31,270
12,018
Weighted average of shares outstanding
14,298.2
14,298.2
Weighted average of shares outstanding (diluted)
14,298.2
14,298.2
Earnings per share
– 2.19
0.84
Earnings per share (diluted)
– 2.19
0.84
Dürr derives its revenues mainly from long-term construction contracts. Long-term construction
contract revenues are recognized on the percentage-of-completion method based on costs
incurred relative to total estimated costs. The completed-contract method is used for smaller
contracts in which it has been determined that the financial position and results of operations
are fairly presented. The completed-contract method is also used in situations where estimated
costs to complete cannot be reliably determined.
Billings issued to customers and cash received from customers are not recorded as sales but
deducted without effect on income from cost in excess of billings on uncompleted contracts or
set against prepayments received in excess of costs on uncompleted contracts.
To the extent that costs have been incurred on contracts, but the amounts cannot be billed
under the terms of the contracts, they are reported together with the corresponding proportion
of income as cost and estimated earnings on uncompleted contracts. The invoicing of such
amounts is dependent on certain contractually defined milestones being reached. Cost and
estimated earnings includes directly allocable costs (material, labor cost, and cost of services
provided by third parties) as well as the appropriate portion of production overheads and the
estimated earnings.
Also included in cost and estimated earnings on uncompleted contracts are amounts that Dürr
seeks or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders in dispute or unapproved as to both scope and price,
or other customer-related causes of unanticipated additional contract costs, claims and pending
change orders. These amounts are recorded at their estimated net realizable value when realization is probable and can be reasonably estimated. No profits in addition to these accumulated
costs are reported. Changes to orders that have not been finalized require the use of estimates.
Therefore, it is reasonably possible that revisions to the estimated recoverable amounts of
recorded pending change orders will be made in the future. Any legal costs incurred in this
respect are expensed as incurred.
81
The percentage-of-completion method is based on the use of estimates. Due to the uncertainties
inherent in the estimation process, it is reasonably possible that completion costs, including
those arising from contract penalty provisions and final contract settlements, will need to be
subsequently revised. Such adjustments of expenses and income are shown in the period in
which the need for adjustment is determined. Accruals for potential losses are recognized in the
period in which losses are identified.
Shipping costs are included in the cost of sales.
Research and development
Research and development costs which are not incurred in connection with current long-term
expenses
contracts are expensed as incurred.
Advertising costs
Advertising costs amounted to € 3,952 thousand for the year ended December 31, 2003, (2002:
€ 5,101 thousand) and were expensed as incurred.
Concentrations of credit risk
The development of Dürr as an automotive supplier is dependent on the economic conditions of
the automotive industry and in particular its willingness to invest. A significant portion of the
Group’s revenues is concentrated with a limited number of customers because the worldwide
market for automobiles is dominated by a small number of large corporations.
New accounting provisions
In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable
Interest Entities.” FIN 46 expands upon existing accounting guidance that addresses when a
company should include in its financial statements the assets, liabilities and activities of another
entity. A variable interest entity (VIE) is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights
or (b) has equity investors that do not provide sufficient financial resources for the VIE to support
its activities. FIN 46 requires a VIE to be consolidated by a company if that company is subject to
a majority of the risk of loss expected from the variable interest entity’s activities, or is entitled
to receive a majority of the entity’s residual income, or both. Pursuant to FIN 46, the requirement
to consolidate applies immediately for all VIEs founded after January 31, 2003, and for VIEs with
which the company enters into business relationships after that point in time.
On October 9, 2003, FASB Staff Position Interpretation No. 46-6, “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities,” was issued, which defers the implementation date for the Group for VIEs formed before February 1, 2003, to December 31, 2003. On
December 17, 2003, the FASB modified the reporting date for initial application and the enforcement date of FIN 46. This resulted in a further deferral of FIN 46 for VIEs which are not specialpurpose entities created before February 1, 2003, to no later than the end of reporting periods
subsequent to March 15, 2004.
For the fiscal year 2003 and in future, FIN 46 will therefore be applied as follows in the
Dürr Group:
Initial application
Type of VIE
VIE formed or received after January 31, 2003
February 1, 2003
Variable interest in special-purpose entities
before February 1, 2003
December 31, 2003
Variable interest in companies formed
before February 1, 2003, with the exception
of special-purpose entities
March 31, 2004
82
The introduction of FIN 46 to certain VIEs in fiscal 2003 did not have a major impact on the consolidated net assets, financial position, and results of operations of the Group. Nor does the
Group expect the introduction of FIN 46 on the other VIEs to have a major effect on the consolidated net assets, financial position, and results of operations of the Group.
The initial application of FIN 46 had the following effects on the Dürr consolidated financial statements as of December 31, 2003:
In previous years, Dürr had entered into sale-and-lease-back contracts with three companies
which qualify as VIEs under FIN 46. In the fiscal years 1998 and 2000, Dürr sold land and buildings
for € 35 million to these companies and leased the assets back under sale-and-lease-back contracts. These companies founded by third parties obtained finance by issuing debt and equity
capital paper to independent investors in order to acquire land and buildings from Dürr. These
fixed assets were leased back by Dürr and used in normal business operations. Dürr confirmed
that the Group is not the main beneficiary of these companies and is therefore not required to
consolidate them. The maximum risk for Dürr comes to € 5 thousand.
2. Consolidation group
The Group consists of Dürr Aktiengesellschaft and 110 foreign and domestic subsidiaries
(2002: 104). The consolidated financial statements contain nine companies in which minority
shareholders hold interests (2002: seven). Seven companies (2002: eight) are consolidated
using the equity method. Three companies (2002: five) are accounted for using the at cost method.
In the fiscal year 2003, eight companies were included in the consolidated financial statements
for the first time. One company has left the consolidation group. Another company was no longer
included because it was merged with another subsidiary.
The financial statements of consolidated companies are prepared as of December 31, 2003. Three
associated companies have a different balance sheet date. In these cases, the most recent financial statements available, as of December 31, 2002, March 31, 2003, and September 30, 2003, were
considered. The time lag in reporting is consistent from period to period. Dürr does not anticipate
any material impact on the net assets, financial position and results of operations as a result of the
inclusion of more recent financial statements.
83
3. Mergers and acquisitions
The following acquisitions were recognized using the purchase method in accordance with
APB Opinion No. 16 and SFAS No. 141. Assets and liabilities were acquired at fair market value.
Goodwill has been recognized where the purchase price exceeds the fair value of the acquired
net assets. The statement of income of the Group contains the results of the acquired companies
from the time of acquisition.
Dürr AIS S.A.S.
On February 17, 2000, Dürr acquired a 50 % holding in Alstom Automation S.A., Courbevoie
(France) (since being a member of Dürr AG it was initially renamed Dürr AIS S.A. and then in
fiscal 2002 became Dürr AIS S.A.S.), for a price of € 7,000 thousand from Alstom S.A. The purpose
of the company is the planning and installation of entire paint shops for automobile manufacturers and automotive suppliers.
Dürr Systems GmbH, a 100 % subsidiary of Dürr AG, exercised the option agreed in the purchase agreement on April 30, 2001, and increased its ownership to 100 % by purchasing the
remaining 50 % of Dürr AIS S.A.S. for a purchase price of € 7,000 thousand, thus increasing the
investment to 100 %. The total purchase price paid plus direct acquisition costs amounted to
€ 14,279 thousand.
The following table presents the sum of the value of the first 50 % of the assets and liabilities
acquired on February 17, 2000, accounted for through April 30, 2001, using the equity method of
accounting for investments and the fair market value of the remaining 50 % of the acquired
assets and liabilities as of April 30, 2001.
Amounts in € k
Goodwill
Other fixed assets
Non-fixed assets
Liabilities assumed
Deferred taxes
94,003
5,030
216,244
– 294,497
– 7,859
12,921
Carl Schenck AG
During the year ended December 31, 2003, the Dürr Group acquired a further 42,871 (approximately 2.76 %) no-par value shares of Carl Schenck AG, Darmstadt (Germany), for € 5,656 thousand, giving rise to goodwill of € 4,149 thousand. As a result, the Dürr Group held 98.72 % of
the shares in Carl Schenck AG as of December 31, 2003.
Carl Schenck AG and its associated companies are a global leader in the manufacture of systems
and plants for process control procedures, the automation of production processes and balancing
of revolving parts and assemblies.
Dürr Korea Inc.
Effective October 27, 2003, additional shares were taken over in Dürr Korea Inc., Seoul (South
Korea), for a purchase price of KRW 1.4 billion; this gave rise to goodwill of € 318 thousand. As of
December 31, 2003, 100 % of the shares of Dürr Korea Inc. were held by Dürr. The company produces and sells industrial painting equipment.
84
4. Personnel expenses
Personnel expenses included in the consolidated statements of income are as follows:
2003
2002
Wages and salaries
492,946
523,182
Social security contributions
115,367
123,898
608,313
647,080
9,362
8,574
Amounts in € k
Thereof pension costs
5. Selling, administrative,
Selling, administrative, and other operating expenses are comprised of the following:
and other operating
expenses
2003
2002
Amounts in € k
Selling expenses
146,508
152,122
General and administrative expenses
141,734
136,274
Other operating expenses
34,364
37,643
322,606
326,039
Other operating expenses mainly contain impairment losses of non-fixed assets of € 8,391 thousand (2002: € 3,064 thousand), foreign currency transaction losses of € 7,488 thousand (2002:
€ 6,435 thousand) as well as additions to other accruals of € 1,408 thousand (2002: € 686 thousand).
6. Other operating income
Other operating income contains gains on disposition of property, plant and equipment of € 410
thousand (2002: € 395 thousand), rental and lease income of € 262 thousand (2002: € 343 thousand), income from the release of accruals of € 3,180 thousand (2002: € 6,326 thousand), income
from the reversal of valuation allowances of € 1,608 thousand (2002: € 775 thousand) as well as
foreign currency transaction gains of € 10,003 thousand (2002: € 6,124 thousand).
7. Restructuring expenses
and impairment charges
In the fiscal year ended December 31, 2003, restructuring expenses and impairment charges
amounting to a total of € 25,594 thousand were recorded.
The largest single project was the restructuring of Schenck Fertigungs & Service GmbH,
Darmstadt (Germany). By the end of fiscal 2004, 350 jobs will be lost at this company. Schenck
Fertigungs & Service GmbH delivers parts and components to product lines within the
Measuring Systems business unit and to a lesser extent to external customers. The reason for
the closure of the loss-making company is the lack of competitiveness which is reflected in
structural cost disadvantages such as inadequate capacity utilization and high personnel costs.
Dürr AIS S.A.S., Courbevoie (France), was also restructured during the fiscal year ended December 31, 2003. By the end of fiscal 2004, some 150 jobs will be lost both in the engineering and
administration segments. The purpose of the company is the planning and installation of entire
paint shops for automobile manufacturers and automotive suppliers. The reasons for the personnel cuts are higher labor costs and capacity underutilization.
85
A capacity adjustment at Schenck Pegasus GmbH, Darmstadt (Germany), and the associated
redundancy scheme also caused restructuring expenses of € 2,387 thousand.
The above issues give rise to personnel expenses of € 22,278 thousand and impairment charges
on property, plant and equipment of € 1,266 thousand. The remaining restructuring expenses of
€ 2,050 thousand relate to actions taken at companies in the USA, Spain and Mexico.
The table below shows the development of the accrual for restructuring measures by business
units:
Paint
Systems
Measuring
Ecoclean
Systems
Dürr Group
Amounts in € k
Jan. 1, 2003
–
–
–
–
Currency effect
–
–
–
–
Addition
4,987
1,487
17,854
24,328
Utilization
– 716
– 1,244
– 1,504
– 3,464
Reversal
Dec. 31, 2003
–
–
–
–
4,271
243
16,350
20,864
8. Financial income
(expense), net
2003
Investment result
94
782
4,198
6,498
Interest and similar expenses
– 24,809
– 32,450
Net interest
– 20,611
– 25,952
Financial income (expense), net
– 20,517
– 25,170
Other interest and similar income
9. Income taxes
2002
Amounts in € k
Income before income taxes and minority interests amounts to € – 6,947 thousand
(2002: € 22,620 thousand).
Income taxes are broken down as follows:
2003
2002
Amounts in € k
Current taxes
Germany
2,015
2,544
Foreign
9,508
6,677
10,690
– 4,216
Deferred taxes
Germany
Foreign
1,896
4,347
24,109
9,352
86
The income taxes include the domestic federal corporate income tax including a solidarity surcharge and trade taxes on income. Comparable taxes of foreign legal entities are also shown
under this position.
Owing to the Tax Reduction Act passed in October 2000, the corporate income tax rate was 26.5 %
plus a solidarity surcharge of 5.5 % thereon for the year ended December 31, 2003. This results in
a nominal tax rate of 27.9 % on income. Including German trade tax, the total tax burden amounted
to 40.2 % (2002: 39 %).
In September 2002, the law to assist flood victims was passed which provides for a one-off increase in the tax rate for fiscal 2003 from 25 % to 26.5 %. For this reason, as of December 31, 2002,
a total tax rate of 40.2 % was used for differences reversing during the year ending December 31,
2003, and 39 % for differences reversing in later periods.
For fiscal 2003, Dürr has disclosed expenses from taxes on income of € 24,109 thousand. As a
result of accumulated losses in the past three years in certain tax jurisdictions, Dürr has increased
the valuation allowance for deferred tax assets by € 22,984 thousand; in tax jurisdictions with
positive results Dürr has disclosed tax expenses.
Dürr evaluates the deferred taxes regularly. The ability to recognize tax income from deferred
taxes depends on being able to make the most of taxable income in the future and using up loss
carryforwards before they come under the stature of limitation. Based on past experience, only
taxable income forecast in the near future is considered in the valuation of deferred tax assets.
The following table shows the reconciliation of expected income taxes to the reported tax
expense using the German corporate tax rate of 40.2 % (2002: 39 %).
2003
2002
Amounts in € k
Expected income (expense) for income taxes
– 2,793
8,822
Foreign tax rate differential
– 1,433
– 4,809
5,274
2,356
22,984
3,467
Non-deductible expenses
Changes in valuation allowance on
deferred tax assets
Other
Actual expense for income taxes
77
– 484
24,109
9,352
87
Deferred tax assets and liabilities are summarized as follows:
2003
2002
As of December 31, amounts in € k
Intangible assets
552
1,180
Property, plant and equipment and investments
2,936
2,832
Inventories and receivables
8,932
20,598
Tax loss carryforwards
52,469
31,719
Accruals
13,170
9,550
Liabilities
17,707
15,721
Valuation allowances
Deferred tax assets
95,766
81,600
– 30,112
– 7,803
65,654
73,797
Intangible assets
11,440
8,896
Property, plant and equipment and investments
23,516
25,642
Inventories and receivables
20,198
17,729
Accruals
14,337
5,870
303
790
Other
Deferred tax liabilities
69,794
58,927
Deferred tax liabilities (assets), net
– 4,140
14,870
Deferred tax assets and liabilities are shown in the consolidated balance sheets as follows:
2003
Amounts in € k
Deferred tax assets
Total
2002
> 1 year
Total
> 1 year
53,670
29,477
64,744
25,997
– 57,810
– 28,193
– 49,874
– 25,136
(assets), net
– 4,140
1,284
14,870
861
As of December 31, 2003, the tax loss carryforwards amounted to € 138,234 thousand (2002:
€ 81,561 thousand), of which € 132,687 thousand (2002: € 66,776 thousand) can be carried forward
indefinitely, € 617 thousand (2002: € 8,776 thousand) have to be realized by 2008 and € 4,930 thousand (2002: € 6,009 thousand) by 2013 at the latest. The Group also has German trade tax loss
carryforwards totaling € 104,927 thousand (2002: € 65,028 thousand) which can be carried forward
indefinitely.
As of December 31, 2003, deferred tax assets amounting to € 3,453 thousand (2002: € 12,514 thousand) and deferred tax liabilities amounting to € 14,093 thousand (2002: € 15,858 thousand) were
recorded as a result of consolidation adjustments.
88
10. Intangible assets,
Details regarding the changes in the Group’s intangible assets and property, plant and equip-
net, and property, plant
ment are presented in the consolidated fixed assets schedule in note 24 “Development of fixed
and equipment, net
assets.” Amortization of licenses, patents, and similar rights came to € 6,098 thousand (2002:
€ 6,666 thousand), and depreciation of property, plant and equipment to € 23,818 thousand
(2002: € 27,347 thousand). No residual book values were assumed when calculating the amortization on additions to licenses, patents, and similar rights. The weighted average useful life for
licenses, patents, and similar rights acquired in the year ended December 31, 2003, is 5.1 years.
The estimated amortization of intangible assets for each of the next five years amounts to
€ 6,225 thousand, € 5,791 thousand, € 5,544 thousand, € 5,233 thousand, and € 4,398 thousand.
The following table presents the movements in goodwill by business unit for the Dürr Group as
of December 31, 2001, December 31, 2002, and December 31, 2003.
Final
Paint
Assembly
Systems
Systems
Ecoclean
Services
Measuring
Systems
Dürr Group
135,576
90,150
22,056
67,801
59,964
375,547
– 2,986
– 3,145
– 3,223
– 10,020
– 1,798
– 21,172
Amounts in € k
Book value as of Dec. 31, 2001
adjustment
Initial application of SFAS No. 142
–
–
–
–
724
724
Additions in 2002
–
198
–
–
241
439
132,590
87,203
18,833
57,781
59,131
355,538
– 2,239
– 2,271
– 2,172
– 9,047
1,934
– 13,795
adjustment
Purchase price adjustment
Additions in 2003
–
–
– 119
–
–
– 119
318
1,866
–
–
2,283
4,467
130,669
86,798
16,542
48,734
63,348
346,091
In fiscal 2003, four (2002: four) buildings were capitalized as capital leases; Dürr is not legal proprietor of these buildings. The depreciation expense recorded on these buildings is included
in the depreciation of property, plant and equipment, net. The following table shows the acquisition cost and accumulated depreciation for these buildings reported under property, plant and
equipment, net.
2003
2002
Historical cost
19,582
20,078
Accumulated depreciation
– 7,772
– 6,512
Net book value
11,810
13,566
89
In fiscal 2003, a contract was entered into that provides for the division of the former operating
land of the Dürr Group in Darmstadt-Arheilgen (Germany) in two phases. According to the contract, in phase I the buyer takes over the plots in exchange for payment of a purchase price and
the development of the whole site and receives an option on the plots of phase II to be exercised
by March 31, 2005. If the buyer does not make use of the purchase option for the phase II
plots by 2005, Dürr will receive all the development work performed by the buyer for these
plots free of charge so that Dürr will then be in possession of fully developed building land.
Dürr capitalized the claim to development work under other assets.
11. Investments
Goodwill of € 5,760 thousand (2002: € 5,760 thousand) relating to investments in associated
companies is included.
12. Inventory, net
Inventory is broken down as follows:
2003
2002
48,840
51,090
Raw materials and manufacturing supplies
Finished goods
Prepayments
Valuation allowances
6,993
6,124
19,789
58,932
– 10,487
– 8,801
65,135
107,345
Raw materials and manufacturing supplies and finished goods are stated at the lower of cost or
market as of balance sheet date. Raw materials and manufacturing supplies of € 30,532 thousand
(2002: € 33,748 thousand) are recognized at average cost and € 7,656 thousand (2002: € 8,449 thousand) using the FIFO (“first in, first out”) method.
13. Receivables and
Receivables and other assets, net, are comprised of the following:
other assets, net
2003
2002
429,204
450,773
Trade receivables
Trade receivables from associated companies
Cost and estimated earnings in excess of billings
Other assets
4,887
5,618
253,449
231,290
84,811
89,619
772,351
777,300
90
The majority of the Group’s receivables are from automobile manufacturers. Generally, these
receivables are not secured by bank guarantees or other collateral. The receivables for the year
ended December 31, 2003, are reported net of valuation allowances for doubtful receivables of
€ 13,512 thousand (2002: € 13,712 thousand). As of December 31, 2003, 56.0 % (2002: 49.4 %) of
the trade receivables were due from six (2002: six) customers.
Cost and estimated earnings
The following table provides a summary of the cost and estimated earnings in excess of billings
on uncompleted contracts
and for the related invoiced amounts for all projects.
2003
2002
Cost and estimated earnings
Less billings
581,419
378,583
– 684,852
– 573,437
– 103,433
– 194,854
These amounts are offset on a project-by-project basis and are included in either receivables
or liabilities (see note 18 “Liabilities”).
2003
2002
Cost and estimated earnings in excess of billings
253,449
231,290
Billings in excess of cost and estimated earnings
– 356,882
– 426,144
– 103,433
– 194,854
Other assets mainly consist of tax receivables, amounts due from suppliers, receivables from
employees and indemnification receivables.
In addition, the carrying amount for two buildings of € 5,147 thousand (2002: € 6,197 thousand)
is also disclosed under other assets; the amount as of December 31, 2002, was appropriately
reclassified from property, plant and equipment. Dürr plans to sell the buildings in 2004.
€ 765,749 thousand (2002: € 771,015 thousand) of the receivables and other assets, net, are due
within one year.
91
14. Shareholders’ equity
Capital stock
As of December 31, 2003, the capital stock came to € 36,603 thousand, divided into 14,298,200
no-par common shares, issued to bearer.
Each share represents € 2.56 of the capital stock.
Authorized capital
By resolution of the annual shareholders’ meeting on May 31, 2001, the Board of Management is
(Dürr AG)
authorized through May 30, 2006, to increase capital stock by a total of up to € 16,219,904 through
the issuance of up to 6,335,900 shares of voting common stock and/or non-voting preferred stock,
each representing € 2.56 of capital stock, in exchange for cash.
Conditional capital
Furthermore, on May 30, 2001, the shareholders authorized the Board of Management, with the
(Dürr AG)
approval of the Supervisory Board to increase capital stock by a total of up to € 10,240 thousand
through the issuance of up to 4 million shares of voting common stock and/or non-voting preferred stock, each representing € 2.56 (conditional capital I) of capital stock. The conditional capital
increase can be used to issue convertible bonds with a nominal value of up to € 102,400 thousand, which can have a term of up to 15 years. The authorization is granted through May 30, 2006.
In conjunction with the Dürr International Stock Option Plan, the Board of Management is further
authorized to increase capital stock by up to € 2,560 thousand through the issuance of up to
1 million common voting stock, each representing € 2.56 (conditional capital II) of capital stock.
Dividends
The amount of dividends available for distribution to shareholders is regulated by the German
Stock Corporation Law (Aktiengesetz), and is based upon the unappropriated net profit of Dürr AG
as reported in its statutory financial statements prepared in accordance with German GAAP
(HGB). It is to be put to the annual shareholders’ meeting that the unappropriated net profit be
carried forward.
Accumulated other
The changes in the components of other comprehensive income (loss) for the year ended
comprehensive income
December 31, 2003, and the related tax effects are as follows:
2003
Amounts in € k
Pretax
2002
Tax effects
Net
Pretax
Tax effects
Net
1,537
– 690
847
– 14,448
5,729
– 8,719
Net losses on derivatives hedging
fluctuations in cash flows
Change in unrealized
derivative gains (losses)
12,324
– 4,788
7,536
6,662
– 2,611
4,051
Net derivative gains (losses)
Realized losses
13,861
– 5,478
8,383
– 7,786
3,118
– 4,668
adjustment
– 12,802
–
– 12,802
– 22,230
–
– 22,230
70
– 27
43
– 121
47
– 74
1,129
– 5,505
– 4,376
– 30,137
3,165
– 26,972
Additional minimum
pension liability
Change in other
comprehensive income
92
15. Stock-based compensation
Dürr International Stock
By resolution dated May 30, 2001, the annual shareholders’ meeting authorized the Board of
Option Plan (DISOP)
Management of Dürr AG to establish and implement a stock option plan. Under this plan the
Company is authorized to issue 1 million shares.
Based on this resolution, Dürr granted options to managers of Dürr AG and of some legal entities
(the participants). The option entitles the participants to subscribe for one ordinary share in
the Company at a defined exercise price. The defined exercise price is the average closing price
(€ 23.75) of the shares in Dürr AG on the XETRA of the Frankfurt Stock Exchange on the 10 trading
days immediately preceding the grant date, reduced by the aggregate value of dividends per
share between the grant date and when the shares are exercised.
In order to participate in the plan, the managers invested in the Company’s shares. The participants have been granted five options for every two purchased shares.
The option will lapse five years after the grant date or when the participant ceases to be employed
by the Company or any of its legal entities, whichever is earlier.
The option may only be exercised after the expiration of a two-year waiting period, and if one of
the defined performance targets has been met. The defined performance targets are as follows:
1. Outperformance with regard to the CDAX Machinery (stock exchange index until March 21,
2003; rolled forward unpublished by Deutsche Börse AG) between the grant date and the
expiry of the waiting period. Outperformance is given when the increase of the Dürr AG
share from the beginning to the end of the defined period is higher than the respective
increase of the index.
2. Average increase of 10 % of the earnings per share (EPS) in the period beginning at the end
of the last fiscal year before the grant date and ending at the end of the last fiscal year before
the waiting period expires.
Further, the options can only be exercised during the exercise window of 15 German banking
days following the publication of the quarterly reports or the annual financial statements of the
Company by the Board of Management.
In the years ended December 31, 2003 and 2002, Dürr did not issue any further options to participants under the stock option plan. In the year ended December 31, 2003, all the 94,795 (2002:
11,400) stock options outstanding expired.
The following table summarizes the status of the Company’s stock options as of December 31,
2003 and 2002.
2003
2002
–
94,795
As of December 31
Options outstanding
Quantity
Weighted average remaining life
Years
–
3.83
Weighted average exercise price
in €
–
22.65
–
–
–
–
Options exercisable
Quantity
Weighted average exercise price
in €
93
16. Accruals
Accruals are broken down as follows:
2003
2002
Pensions
Taxes
Other accruals
Thereof current
53,607
53,142
9,955
13,990
262,071
243,792
325,633
310,924
257,933
241,759
Other accruals mainly relate to post-contract costs, anticipated losses on transactions, restructuring expenses, warranties, legal costs, and labor costs.
17. Pensions and other
post-employment benefits
Pension entitlements have been granted to the members of the Board of Management of Dürr AG
and the members of the Board of Management and general managers of German subsidiaries
based on salary and years of service with the Group.
At Dürr subsidiaries, those workers who were employed at the German locations in Filderstadt
and Wyhlen and at the Schenck companies at the time their companies were acquired were
entitled to pension benefits. The pensions are based on years of service. The payments foreseen
by the pension plans are calculated on actual contributions plus an element that is dependent
on years of service. In addition, the pension benefits available to the employees of the domestic
Dürr subsidiaries include a life insurance program (BZV) of € 708 thousand (2002: € 593 thousand)
in line with the industry tariff group.
The 1998 mortality tables published by Dr. Heubeck have been used to calculate the German
pension obligations.
The US subsidiaries of Dürr have pension plans covering all non-union employees at these subsidiaries. The plans provide benefits based on a career-average earnings formula.
The US subsidiaries contribute to external pension funds for union employees. The pension
expenses for these employees in 2003 amounted to approximately € 699 thousand (2002:
€ 923 thousand).
In addition, Dürr’s US subsidiaries have a “401(k)” profit sharing plan for certain employees. The
benefits are based on years of service and the employees’ compensation. The Group’s contribution is discretionary and is determined annually by management. The pension expenses for
these employees in 2003 amounted to approximately € 2,355 thousand (2002: € 2,832 thousand).
94
The following table presents further information on these plans:
2003
2002
Changes in projected benefit obligation
Projected benefit obligation at the beginning of the year
Foreign currency exchange rate differences
68,330
73,578
– 3,328
– 3,431
Service cost
2,819
3,609
Interest cost
3,778
4,220
Actuarial gains or losses
646
– 5,507
Benefits paid
– 4,584
– 4,214
Effect of curtailment
– 1,472
–
176
75
66,365
68,330
2003
2002
Others
Projected benefit obligation at the end of the year
Change in plan assets
Fair value of plan assets at the beginning of the year
Foreign currency exchange rate differences
18,173
20,908
– 3,116
– 2,633
Actual return on plan assets
1,966
– 233
Employer contributions
1,060
1,270
– 1,783
– 1,139
Benefits paid
Other
Fair value of plan assets at the end of the year
146
–
16,446
18,173
2003
2002
49,919
50,157
2,748
2,148
As of December 31, amounts € k
Funded status*
Actuarial unrecognized net gains
Unrecognized prior service costs
plan changes not yet considered
– 783
– 934
Other
– 234
– 351
51,650
51,020
Net amount recognized
* Difference between the projected benefit obligation and the fund’s assets
The accumulated benefit obligation without taking future wage and salary increases into account
amounts to € 63,737 thousand at year-end 2003 (2002: € 63,481 thousand).
The unfunded accumulated benefit obligation for plans without taking future wage and salary
increases into account which have accumulated benefit obligations in excess of plan assets
at the end of the period, the accumulated benefit obligation without taking into account future
wage and salary increases amounts to € 47,922 thousand as of December 31, 2003 (2002:
€ 48,156 thousand). The fair value of the plan assets is € 395 thousand (2002: € 461 thousand).
95
For plans where the projected benefit obligation at the end of the fiscal year exceeds the fair
value of the plan assets, the projected benefit obligation as of December 31, 2003, amounted to
€ 56,671 thousand (2002: € 68,330 thousand). The fair value of the plan assets is € 6,664 thousand (2002: € 18,173 thousand).
As of September 1, 2003, Schenck Corporation, Deer Park/New York (USA), curtailed the pension
commitments. The resulting curtailment of US$ 1,679 thousand reduces the projected benefit
obligation at the end of the fiscal year 2003.
The net amount recognized is contained in the following balance sheet captions:
2003
2002
–
– 1,699
– 1,712
– 108
Intangible assets
Prepaid expenses
Other comprehensive income
– 245
– 315
Pension accruals
53,607
53,142
Net amount recognized
51,650
51,020
Net periodic pension costs are broken down into the following components:
2003
2002
Amounts in € k
Service cost
2,819
3,609
Interest cost
3,778
4,220
– 1,228
– 1,575
49
55
Expected return on plan assets
Amortization of unrecognized items
Curtailment
– 1,472
–
209
235
4,155
6,544
Other pension expenses
Net periodic pension costs
The cut-off date for the valuation of pension commitments and fund assets is December 31,
2003; the valuation date for pension expenses is January 1, 2003.
The following averages were used to calculate pension commitments:
2003
2002
In %
Average valuation factors
Discount rate
5.60
5.76
Long-term salary increases
2.92
2.98
The following averages were used to calculate net periodic pension costs:
2003
2002
Discount rate
5.76
6.07
Expected long-term return on plan assets
7.25
8.00
Long-term salary increases
2.98
3.48
In %
Average valuation factors
96
18. Liabilities
Liabilities consists of the following:
Total
Amounts in € k
Liabilities to banks
(2002)
Billings in excess of cost and
estimate earnings
(2002)
Accounts payable
(2002)
Liabilities payable to associated
companies
(2002)
1 < x < 5 years
> 5 years
296,828
158,704
126,910
11,214
(353,774)
(114,798)
(233,548)
(5,428)
356,882
349,237
7,645
–
(426,144)
(411,880)
(14,264)
–
279,778
279,666
112
–
(222,908)
(222,831)
(77)
–
6,919
6,919
–
–
(6,086)
(6,086)
–
–
115,250
95,497
16,053
3,700
(2002)
(143,513)
(100,651)
(37,398)
(5,464)
December 31, 2003
1,055,657
890,023
150,720
14,914
(1,152,425)
(856,246)
(285,287)
(10,892)
Other liabilities
(December 31, 2002)
Liabilities due to banks
Of which due
< 1 year
In the year ended December 31, 2001, Dürr secured a contract for a term loan (“syndicated loan”)
with Deutsche Bank AG, Landesbank Baden-Württemberg, Deutsche Bank Luxembourg S.A.,
and other banks of € 200,000 thousand and US$ 50,000 thousand. As of December 31, 2003,
€ 80,000 thousand (2002: € 100,000 thousand) and US$ 30,000 thousand (2002: US$ 40,000 thousand) of the term loan had been used. Variable interest based on EURIBOR and LIBOR is payable
quarterly or on demand.
Further, Dürr has entered into a revolving credit facility in fiscal 2001 with Deutsche Bank AG,
Landesbank Baden-Württemberg, Deutsche Bank Luxembourg S.A., and other banks of
US$ 50,000 thousand. The revolving credit facility is payable no later than 2006. On December 31, 2003, US$ 50,000 thousand of the revolving credit line (2002: US$ 50,000 thousand) had
been used. Variable interest based on EURIBOR and LIBOR is payable quarterly or on demand.
As security for the loan borrowed in fiscal year 2001, the Group has deposited shares in subsidiaries with net assets totaling € 99,908 thousand (2002: € 144,404 thousand).
The agreements with the consortium of banks contain certain covenants which require the
Group to maintain financial ratios at the end of each calendar quarter. In the event of noncompliance with these covenants, the consortium of banks could demand repayment with a
two-thirds majority. As of December 31, 2003, all these financial ratios had been maintained.
97
At December 31, 2003, Dürr had lines of credit and lines of guarantee at various banks totaling
€ 947,148 thousand (2002: € 999,590 thousand). Under the credit arrangements, the Group has
the option to borrow amounts at various interest rates. Use of the credit lines is unrestricted,
except for € 50,000 thousand (2002: € 50,000 thousand) which is to be used for acquisitions.
Aggregate amounts of liabilities to banks maturing during the next five years and thereafter are
as follows:
2004
2005
2006
2007
2008
Thereafter
158,704
2,515
120,073
2,124
2,198
11,214
Amounts in € k
All lines of credit and guarantee can be summarized as follows:
2003
Total lines of credit and guarantee
947,148
Drawings on lines of credit/guarantee
761,677
Thereof due within one year
440,576
Thereof due after one year
321,101
€ 104,672 thousand (2002: € 120,746 thousand) of liabilities to banks are payable in US dollars
and € 792 thousand (2002: € 5,582 thousand) in pound sterling. The remaining amounts are
generally payable in euros. Loans of € 16,570 thousand (2002: € 17,838 thousand) are secured by
liens on hand.
Total interest costs in fiscal 2003 amounted to € 24,809 thousand (2002: € 32,450 thousand), none
of which were capitalized in the years ended December 31, 2003 and 2002. The weighted average
interest rate for short-term liabilities to banks as of December 31, 2003, was 4.35 % (2002: 4.19 %).
Besides the syndicated loan, Dürr has taken out a number of loans from various banks. These
loans have terms of up to 17 years, are charged interest once every three or six months (between
3.75 % and 6.95 % p.a. or the three-month or six-month EURIBOR plus 0.60 % /0.50 % respectively)
and some are secured by liens on land.
Other liabilities
Other liabilities primarily contain social security liabilities of € 13,488 thousand (2002: € 16,165 thousand), tax liabilities of € 31,847 thousand (2002: € 37,954 thousand), obligations under capital
leases of € 11,419 thousand (2002: € 12,861 thousand) and derivative financial instruments of
€ 16,545 thousand (2002: € 27,750 thousand).
98
19. Segment information
The Dürr Group is comprised of a strategic management holding and five business units
(2002: five), differentiated by product and services, each responsible for their own products
and results.
Paint Systems
The Paint Systems business unit plans and manufactures products and systems for large-scale
production line painting for automotive producers and their suppliers.
The Final Assembly Systems business unit – formerly Automotion – was established at the
beginning of 2002 and organizationally bundles the activities of the Dürr Group as a provider of
products and systems for the final assembly of automobiles.
Services
The Services business unit offers product-related services for the automotive industry.
Ecoclean
The Ecoclean business unit is a specialist in systems for cleaning parts and coolant recycling
as well as automation technology used to interlink processes.
Measuring Systems
The Measuring Systems business unit comprises activities in measuring technology of the
Schenck Group. The business unit includes these product lines: Balancing and Diagnostic
Systems, Measuring and Process Systems, Development Test Systems (for vehicle development)
and Pre-Manufacturing Services (development and supply of mechanical parts and components).
The Corporate Center comprises other fully consolidated companies.
The principles underlying the Group’s management reporting and controlling are substantially
the same as those described in the consolidated financial statements according to US-GAAP.
The Company measures the performance of its business units by income before income taxes
in accordance with the disclosure in the consolidated statements of income.
Revenues related to transactions between the business units are generally recorded at values
that approximate the prices that would be offered to independent third parties. Revenues are
allocated to regions generally based on the location of the customer. Business unit assets and
long-lived assets are allocated on the basis of the location of the subsidiary reporting these
assets.
99
In the following tables, disclosures are made on the business units for the years ended December 31, 2003 and 2002.
Final
Paint
Assembly
Measuring
Corporate
Systems
Systems
Services
Ecoclean
Systems
Center
Dürr Group
1,237,175
312,564
146,082
209,591
359,096
–
2,264,508
Amounts in € k
2003
Revenues with
external customers
Revenues with other
business units
5,988
124,017
401
5,962
5,829
–
1,243,163
436,581
146,483
215,553
364,925
–
2,406,705
27,267
7,382
7,114
6,183
– 29,036
– 25,857
– 6,947
Business unit assets
693,239
314,704
93,232
149,566
339,850
75,230
1,665,821
5,825
3,440
2,346
1,251
3,775
8
16,645
11,247
3,157
2,797
2,849
9,304
1,176
30,530
Employees as of Dec. 31, 2003
2,808
1,593
4,499
932
2,861
54
12,747
1,044,292
305,960
143,603
210,170
378,112
–
2,082,137
10,057
98,777
306
11,685
7,777
–
1,054,349
404,737
143,909
221,855
385,889
–
23,305
10,001
7,488
10,384
– 4,527
– 24,031
22,620
Business unit assets
675,755
314,103
106,000
156,453
407,157
130,833
1,790,301
12,014
2,761
4,340
6,085
4,180
22
29,402
12,763
4,483
3,287
3,154
9,542
837
34,066
Employees as of Dec. 31, 2002
2,837
1,609
4,272
1,079
3,046
59
12,902
Total revenues
142,197*
2002
Revenues with
external customers
Revenues with other
business units
Total revenues
128,602*
2,210,739
* These sales were eliminated in the Group.
Sales with third parties and long-lived assets break down by region as follows:
Other
North/
Other EU
European
Central
South
Africa/
Asia/
Germany
countries
countries
America
America
Australia
Dürr Group
2003
571,072
527,258
85,892
763,480
29,320
287,486
2,264,508
2002
517,411
592,457
75,701
567,014
70,609
258,945
2,082,137
2003
182,684
152,593
6,924
197,068
7,404
8,296
554,969
2002
188,093
141,939
5,725
237,013
7,603
8,335
588,708
Amounts in € k
Revenues with
external customers
Long-lived assets
100
Sales with one major customer amounted to 18.1 % of consolidated net revenues in the year ended
December 31, 2003, and 12.6 % in the year ended December 31, 2002. The revenues were reported
by the business units Paint Systems, Services, Final Assembly Systems, Ecoclean, and Measuring
Systems. Another major customer accounted for 9.9 % of consolidated net revenues in the year
ended December 31, 2003, and 12.6 % in the year ended December 31, 2002, allocated among the
Paint Systems, Final Assembly Systems, Ecoclean, Measuring Systems, and Services business
units.
Entities known to be under common control are considered as a single customer.
20. Related party
transactions
Dr.-Ing. E. h. Heinz Dürr is Chairman of the Supervisory Board of Dürr AG. Dr.-Ing. E. h. Heinz Dürr
is also a member of the Administrative Board of Landesbank Baden-Württemberg.
Mr. Joachim Schielke is a member of the Supervisory Board of Dürr AG and a member of the Board
of Management of Landesbank Baden-Württemberg. The Group has various loans and lines of
credit at Landesbank Baden-Württemberg totaling € 84,401 thousand (2002: € 97,891 thousand).
Drawings on these lines of credit amounted to € 10,025 thousand (2002: € 10,734 thousand).
Dr. Tessen von Heydebreck is a member of the Supervisory Board of Dürr AG and also a member
of the Board of Management of Deutsche Bank AG. Dürr has received various loans and lines of
credit totaling € 114,401 thousand (2002: € 118,641 thousand). Drawings on these lines of credit
amounted to € 31,578 thousand (2002: € 17,718 thousand).
See note 18 “Liabilities” for further details regarding the various loans from Landesbank BadenWürttemberg and Deutsche Bank AG.
The Group’s derivative financial instruments and interest rate swaps are mainly transacted
through Deutsche Bank AG and Landesbank Baden-Württemberg. We refer to note 22 “Financial
instruments” for details on the forward exchange transactions and interest rate swaps.
The Board of Management confirms that all the above transactions with related parties were
performed at arm’s length conditions.
21. Contingencies and other
financial obligations
Contingencies
As of December 31, 2003, the Company had the following contingencies:
2003
2002
114,905
122,456
Amounts in € k
Liabilities from guarantees, notes and
check guarantees
Other
10,667
5,802
125,572
128,258
101
Rental and lease agreements
The Group companies have concluded lease and rental agreements for buildings, facilities,
offices and vehicles at a range of locations. The contracts terminate at various dates between
2004 and 2018. The future minimum payments until the earliest possible contractually agreed
termination are as follows:
Total
2004
2005
2006
2007
2008
Thereafter
20,684
15,024
10,092
8,378
7,527
35,720
97,425
2,519
2,383
2,169
2,050
1,941
5,144
16,206
Amounts in € k
Non-cancelable leases
Capital leases
Total related rental expenses in the year ended December 31, 2003, amount to € 25,774 thousand
(2002: € 27,856 thousand). The interest portion for the total minimum payments for capital leases
amounts to € 4,787 thousand (2002: € 5,592 thousand); the repayment portion amounts to
€ 11,419 thousand (2002: € 12,861 thousand), of which € 1,597 thousand (2002: € 1,561 thousand)
are short term.
Other financial commitments
The other financial commitments that do not result from rental and lease agreements are listed
below.
2004
2005
2006
2007
2008
33,629
34,049
7,766
7,836
7,920
Total
Thereafter
Amounts in € k
Other continuous
obligations
Risks
34,244
125,444
The Group operates in countries where political and commercial risks exist. From a current
perspective, the Group is not aware of the effects of such risks for the Group and the risks are
therefore not included in the accompanying consolidated financial statements.
Dürr may be involved in lawsuits, including product liability, in the normal course of business.
Currently, there are no such matters pending that the Board of Management expects to be
material in relation to the Group’s business, financial position, or results of operations. Legal
costs are expensed as incurred.
There is litigation pending related to a tax field audit conducted in fiscal year 2000. A demand
for back tax of € 900 thousand plus possible interest is currently being negotiated. The Board
of Management estimates the chances of the Group winning the litigation as more likely than not.
The legal counseling and consulting fees associated with the case are expensed as incurred.
Dürr is currently involved in arbitration proceedings against Alstom S.A. regarding the acquisition of Dürr AIS S.A.S., Courbevoie (France). In the agreement underlying this transaction,
Alstom S.A. on the one hand, as well as Dürr AG, and Dürr Systems GmbH respectively on the
other, agreed to an equity guarantee for the acquired Dürr AIS S.A.S. and associated companies
as well as a gross margin guarantee for certain projects. The parties to the contract cannot agree
on the actual amount of these guarantees. Since May 2001, the arbitration proceedings have
therefore been pending at the International Chamber of Commerce (ICC), Paris (France). At a
hearing on March 3, 2003, the court of arbitration decided to appoint an independent expert.
According to the report of this expert from March 2004, both Alstom S.A. and Dürr have raised
justifiable claims. The next hearing before the court of arbitration has been scheduled for
April 15, 2004. Expert proceedings are expected to be initiated to determine the actual claims.
102
As of December 31, 2003, and December 31, 2002, Dürr has therefore recorded a receivable
based on its claim against Alstom S.A. Depending on the result of arbitration, the reported
receivable may have an effect on earnings in the coming fiscal years. Dürr considers it to be
more probable than not that the main claims of Dürr will be asserted.
22. Financial instruments
Use of financial instruments
The Group uses derivative financial instruments to reduce the impact of changes in foreign
exchange rates and interest rates on its cash flows and changes in the fair values of assets and
liabilities. Interest swaps are also used to minimize the net interest payments. Dürr is exposed
to credit loss in the event of non-performance by the other parties (financial institutions) to the
financial instruments described below.
All derivatives as well as the underlying transactions are subject to daily internal controls and
valuation in line with a policy set by the Board of Management. Derivatives are only entered
into with banks with a good credit rating. Interest rate swaps are entered into only with German
banks.
Entering into derivative contracts is limited to the economic hedge of known business risks.
Fair market values
The carrying amounts and fair market values of the major financial instruments as of December 31,
2003 and 2002, are as follows:
2003
2002
Book value
Fair value
Book value
Fair value
– 296,828
– 297,789
– 353,774
– 356,185
Interest rate swaps
– 14,681
– 14,681
– 27,363
– 27,363
4,456
4,456
3,093
3,093
Forward exchange contracts
The fair value of financial derivatives has been estimated on the basis of the following methods
and assumptions:
The fair value of cash and cash equivalents, receivables, short-term investments and liabilities
approximate their carrying amounts owing to their short-term liquidity. For long-term debt the
fair value is estimated based on the current rates offered to the Group for debt with the same
or similar remaining maturities and terms. For foreign currency exchange forward contracts,
the fair values were estimated on the basis of the difference between the contractually agreed
exchange rates and forward rate prevailing on the balance sheet date. The fair values of the
interest rate swaps are estimated as the present value of expected future cash flows.
Accounting and disclosure
Foreign currency exchange forward contracts and interest rate swaps are recognized in the
of derivative financial
consolidated balance sheet at fair value. If the criteria for hedge accounting are fulfilled, the
instruments and hedge
instruments are accounted for as cash flow hedges as described in the following paragraph.
accounting (SFAS No. 133)
Otherwise the changes in market value are recorded in the consolidated statement of income
at each balance sheet date.
103
Cash flow hedges
The Group uses interest rate swaps to hedge the effect of the change in market interest rates
on interest payments for existing and forecasted debt to banks. In addition, foreign currency
exchange forward contracts were entered into in the year ended December 31, 2003, to hedge
against exchange rate fluctuations on cash flows from purchase and sales transactions. The
effective portion of the change in market value of interest swaps and foreign currency exchange
forward contracts classified as cash flow hedges is recorded through “Accumulated other comprehensive income.” When the hedged transaction affects income, the amount from the interest
swaps and forward exchange transactions recorded in other comprehensive income is reclassified into interest expense (interest swaps) and cost of sales (foreign currency exchange forward
contracts) in the income statement. Due to the ineffectiveness of interest swaps, a net loss of
€ 112 thousand (2002: net loss of € 369 thousand) was recorded for the year ended December 31,
2003. Due to the improved liquidity situation, the interest hedges of a number of expected liabilities to banks were discontinued in fiscal 2003 and limited losses in the amount of € 3,106 thousand were reclassified from equity to the income statement. It is anticipated that € 210 thousand
(2002: € 3,813 thousand) of net losses included in “Accumulated other comprehensive income”
will be reclassified to income during the next 12 months due to the realization of the hedged
interest payments as well as purchase and sales transactions. As of December 31, 2003, Dürr had
entered into derivative financial instruments with a maximum maturity of 36 (2002: 48) months
to hedge its exposure to interest risks and currency risks of planned transactions.
23. Additional local
disclosure requirements
Exempting conditions
As a publicly traded company, Dürr AG makes use of the option to prepare exempting consoli-
pursuant to Sec. 292a of
dated financial statements according to an internationally recognized set of accounting standards
the German Commercial
instead of according to German GAAP as set forth in Sec. 292a HGB. Dürr AG has also applied
Code (HGB)
the German Accounting Standard (GAS) No. 1/1a to ensure the requisite compliance of group
accounting with the 7th EU Directive.
Exemption pursuant to
Premier Manufacturing Support Services GmbH & Co. KG, Frankfurt/Main (Germany), has
Sec. 264b HGB
made use of the exemption option from the preparation of financial statements pursuant to
Sec. 264b HGB.
Exemption from the require-
The company Ingeniería Agullo S.A., Barcelona (Spain), has made use of the exemption option
ment to prepare consolidated
from the preparation of consolidated financial statements pursuant to Spanish law.
financial statements for a
Spanish sub-group
Main differences between
The main differences between US-GAAP and German GAAP (HGB), as these pertain to the con-
US-GAAP and German GAAP
solidated financial statements of Dürr AG, are presented below.
(HGB)
The German and US accounting systems are based on fundamentally different considerations.
While accounting according to HGB emphasizes the principle of prudence and the protection
of creditors, the prime objective of US accounting is to provide information of relevance to
investors for the decision-making process.
The comparability of the financial statements, both between fiscal years and between different
companies, as well as the determination of profits on an accrual basis are accorded more importance under US-GAAP than under HGB.
104
Accruals (SFAS No. 5, SFAS No. 87 and SFAS No. 88)
In US accounting practice, accruals are generally not shown separately but under liabilities. To
satisfy the provisions of the corresponding EU directive, Dürr still discloses accruals separately
in the balance sheet, contrary to American accounting practice.
In US accounting, the possibilities to recognize accruals are far more restricted than under HGB.
Accruals have to be recognized when an obligation exists towards a third party, when its utilization
is probable, and when the anticipated accrual amount can be reliably estimated.
Accruals for future expenses are not permitted under US-GAAP.
Under US-GAAP, pension accruals – unlike under German accounting principles – are determined
taking anticipated wage and salary increases into account. For calculation purposes, the US-GAAP
figure includes the market interest rates of the countries concerned and not the discount rate of
6 % applicable in German tax law.
Pursuant to US accounting standards, accruals for restructuring measures may only be recorded
if all the following criteria are satisfied cumulatively:
(1) the preparation of a formal plan and its binding approval by the management before the
balance sheet date,
(2) the obligation to inform the employees concerned in such a way that the individual person
can determine his claim,
(3) the determination within the plan of the number of employees concerned, including the
nature or function of their activities as well as their locations, and
(4) the preclusion of material changes to the plan within the implementation phase.
Under HGB, the general prerequisites apply as regards the recognition and valuation of accrued
liabilities. An accrual for payments on account of a redundancy scheme pursuant to Sections
111, 112 BetrVG (Labor Management Relations Act) is only recognized for tax purposes if the
company has informed the works council before the balance sheet date of the planned substantial alteration to the establishment, or if the substantial alteration to the establishment had
been decided or was economically unavoidable and the works council was informed during the
preparation of the financial statements before the balance sheet date (Rule No. 31c Sec. 6 EStR
[German income tax regulations]).
Goodwill (SFAS No. 142)
Under US-GAAP, goodwill must be capitalized and reviewed annually for impairment or whenever there is any indication for impairment. Pursuant to HGB, goodwill can be amortized on a
regular basis or offset against equity. These options are not permitted by US-GAAP.
Unrealized gains (SFAS No. 52 and SFAS No. 133)
Under HGB, the principle of imparity requires that only unrealized losses are recognized, while
under US-GAAP, unrealized gains must also be recognized. This difference is particularly evident
in the recognition of unrealized gains from end-of-period valuation of amounts denominated in
foreign currencies and derivative financial instruments.
Long-term construction contracts (SOP 81-1 and ARB Opinion No. 45)
Under German law, revenues and expenses in connection with long-term construction contracts
are recorded according to the principle of realization. Under US-GAAP, they are recognized
according to the percentage-of-completion method.
105
Leases (SFAS No. 13 and SFAS No. 98)
Under US-GAAP, leased assets are capitalized by the economic owner and not the legal owner.
With the capital lease, the risks and rewards from the ownership of the leased asset largely lie
with the lessee although the lessee does not have legal title to the asset. Under US-GAAP, such
a capital lease is treated similarly to a purchase. This means that the lessee capitalizes the leased
asset and shows a liability in the same amount while the lessor posts a receivable from sales
financing and revenues from the sale of the leased asset.
Deferred taxes (SFAS No. 109)
Under US-GAAP, deferred tax assets and liabilities have to be recognized that result from temporary differences between tax carrying values and the carrying values in the consolidated balance
sheet. Due to the reduced future tax payments, tax loss carryforwards represent an economic
benefit. Therefore, when the loss arises, the future (deferred) tax benefit has to be capitalized
subject to its realizability.
Derivative financial instruments (SFAS No. 133, SFAS No. 137, and SFAS No. 138)
According to US-GAAP, all derivative financial instruments must be recognized at fair value. Special
accounting treatment, in which fluctuations in fair values are recognized in “Accumulated other
comprehensive income” rather than directly affecting income, is permitted when specific restrictive criteria are met. The application of hedge accounting depends on the nature of the underlying
transactions and financial instruments used for hedging those transactions. If the criteria for hedge
accounting are not met, the fluctuations in fair value of the derivatives are posted to income in the
period of occurrence. Global macro hedges do not qualify for hedge accounting under US-GAAP.
Minority interests
HGB follows the entity theory, which requires that minority interests be classified as a part of
equity. In addition, the income or loss attributable to minority interests is included in the consolidated entity’s net income or loss. Under US-GAAP, in accordance with the parent company
theory, minority interests are not considered part of equity but are classified separately between
equity and liabilities. The income or loss attributable to minority interests is recorded as income
or expense and is therefore excluded from the consolidated entity’s net income or loss.
German Corporate
The statement required by Sec. 161 of the German Stock Corporation Law (AktG) was issued by
Governance Code/statement
the Board of Management and the Supervisory Board of Dürr AG and Carl Schenck AG and made
pursuant to Sec. 161 AktG
available to shareholders.
Other disclosures
Annual average labor force:
2003
2002
Manual workers
6,127
5,720
Salaried employees
6,500
6,572
Trainees/apprentices
330
328
12,957
12,620
As of December 31, 2003, Dürr employed 12,747 people (2002: 12,902).
106
Members of the Board of Management
Stephan Rojahn
Kay Bönisch
Chairman (since January 1, 2003)
(since November 1, 2003)
Finance, Controlling, Human Resources,
Global Sourcing, Internal Auditing,
Legal
Public & Investor Relations,
Carl Schenck AG*
(Chairman since February 1, 2003)
Dürr Systems GmbH* (since January 1,
2003, Chairman since January 20, 2003)
Carl Schenck AG* (since February 2, 2004)
INTX AG* (since February 1, 2004, Chairman)
Dürr Inc.* (since February 1, 2004)
Premier Manufacturing Support Services
Inc.* (since February 1, 2004)
Dürr Ecoclean Inc.*
(since March 5, 2003, Chairman)
Dürr Inc.* (Chairman)
Olpidürr S.p.A.* (since January 1, 2003)
Verind S.p.A.* (since January 1, 2003)
Dr. Reinhold Grau
Paint Systems
Research & Development,
Information Technology, Sales & Marketing
Dr. Wolfgang Baur
(until January 31, 2004)
INTX AG*
Dürr Inc.* (since October 14, 2003)
Finance, Controlling, Human Resources,
Dürr Japan K.K.*
Legal, Information Technology
Dürr Ltd.*
Carl Schenck AG* (until January 31, 2004)
INTX AG* (until January 31, 2004, Chairman)
Dürr Paintshop Equipment and Engineering
(Shanghai) Co. Ltd.*
Dürr Paintshop Systems Engineering
Competence Call Center AG
(Shanghai) Co. Ltd.* (since March 1, 2004)
Dürr Systems Spain S.A.*
(until January 31, 2004)
Olpidürr S.p.A.*
Dürr Inc.* (until January 31, 2004)
Verind S.p.A.*
Premier Manufacturing Support Services
Inc.* (until January 31, 2004)
107
Frank Haun
(until March 31, 2003)
Dr. Norbert Klapper
Final Assembly Systems, Services
Quality Management
Carl Mahr Holding GmbH
Dürr Inc.* (since October 14, 2003)
Dürr Ecoclean Inc.*
(until April 3, 2003, Chairman)
Ingeniería Agullo S.A.* (until March 31, 2003)
Interautomation Inc., CAN*
(until March 31, 2003, Chairman)
Nagahama Seisakusho Ltd.*
(until March 31, 2003)
(Shanghai) Co. Ltd.* (since March 1, 2004)
Dürr Production Systems Inc.*
(since February 1, 2004)
Premier Manufacturing Support
Services Inc.*
Schenck Corporation*
Schenck Ltd.*
STIC-HAFROY S.A.* (until March 31, 2003)
Portfolio distribution of board members
Membership in statutory supervisory boards
Membership in comparable domestic or
foreign control bodies of business enterprises
* Group mandate
Total remuneration for members of the Board of Management came to € 1,912 thousand in the
year ended December 31, 2003. Remuneration of € 669 thousand was paid to former members
of the management. The pension accruals for this group came to € 8,861 thousand for the year
ended December 31, 2003.
The remuneration of the members of the Board of Management of Dürr AG comprised fixed
and variable components. When assessing the fixed component, the Supervisory Board takes
into account the economic situation of the Dürr Group and also the duties and responsibilities
of the respective board members. The biannual review considers both the personal performance
of each board member as well as the performance of the board as a whole and takes these into
account when making any adjustments. The amount of the variable remuneration components
depends to a large extent on the success of the company.
Another component of the variable remuneration is DISOP (Dürr International Stock Option Plan).
DISOP is characterized by risks and acts as a long-term incentive and has a vesting period. The
Supervisory Board decides annually on the issue of new DISOP tranches.
In fiscal 2003, there were no securities transactions that have to be reported in accordance with
Sec. 15a of the German Securities Trading Act (WpHG), nor did the members of the Board of
Management possess any securities on December 31, 2003, which had to be reported in accordance with Fig. 6.6 of the German Corporate Governance Code.
108
Members of the Supervisory Board
Dr.-Ing. E. h. Heinz Dürr1
Benno Eberl 2, 3
Entrepreneur, Berlin
Trade Union Secretary of IG Metall
Chairman
administrative offices, Stuttgart
Benteler AG
ThyssenKrupp Aufzüge GmbH
Dussmann AG & Co. KGaA
(Deputy Chairman)
Krone GmbH (Chairman)
ThyssenKrupp Elevator AG
Stinnes AG (until November 4, 2003)
(Deputy Chairman)
Carl-Zeiss-Stiftung (until December 31,
2003, Trust Commissioner)
Landesbank Baden-Württemberg
(Member of the Administrative Board)
Prof. Dipl.-Ing. Jörg Menno Harms
Chairman of the Board of Management of
Hewlett Packard GmbH and Holding GmbH,
Böblingen
Peter Weingart1, 3
Heraeus Holding GmbH
Chairman of the Group Works Council
Jenoptik AG
of Dürr AG, Stuttgart
Württembergische
Deputy Chairman
Hypothekenversicherung AG
Dürr Systems GmbH* (Deputy Chairman)
CA Leuze GmbH & Co. KG
(Member of the Administrative Board)
Groz Beckert KG (Deputy Chairman)
Prof. Dr. Norbert Loos1, 2
Managing Partner of
Loos Beteiligungs-GmbH, Stuttgart
Dr. Tessen von Heydebreck
Deputy Chairman
Member of the Board of Management of
Behr GmbH & Co.
Deutsche Bank AG, Frankfurt/Main
BWK GmbH Unternehmensbeteiligungs-
BASF AG
gesellschaft
BVV Versicherungsverein des
Carl Schenck AG*
Bankgewerbes a.G.
(Chairman until January 31, 2003)
Deutsche Bank Privat- und
Dr. Haas GmbH (Chairman)
Geschäftskunden AG*
Hans R. Schmidt Holding AG
Dt. Euroshop AG
(Chairman)
DWS Investment GmbH*
LTS Lohmann Therapie-Systeme AG
Gruner + Jahr AG
(Chairman)
Trumpf GmbH + Co. KG
LTS AG, USA (Chairman)
Deutsche Bank Luxembourg S.A.*
(Chairman)
Deutsche Bank OOO, Moscow* (Chairman)
Deutsche Bank Polska S.A.* (Chairman)
Deutsche Bank Rt., Budapest* (Chairman)
Lieselotte Dedek-Fried2, 3
Deutsche Bank Trust Corp.*
Member of the Works Council of
DB Trust Company America*
Schenck RoTec GmbH, Darmstadt
EFG Eurobank Ergasias S.A.
109
Werner Kramp 3
Dr. Heinz Gerd Stein2
Chairman of the Works Council of Schenck
Business Consultant, Duisburg
Final Assembly Products GmbH, Püttlingen
AXA Versicherung AG
Chairman of the Group Works Council,
Bankgesellschaft Berlin AG
Carl Schenck AG, Darmstadt
Howaldtswerke-Deutsche Werft AG
until February 28, 2003
Landesbank Berlin – Girozentrale –
WILO AG
Peter Krüger 3
Manager Commercial Order Processing of
Dürr Systems GmbH, Stuttgart
(until December 31, 2003)
Evangelisches und Johanniter Klinikum
Duisburg/Dinslaken/Oberhausen
gem. GmbH
Hülskens Holding GmbH & Co.
INTAC International, Inc.
Kunststoffwerk Philippine GmbH & Co. KG
Günter Lorenz1, 3
Principal Authorized Representative of IG Metall
administrative offices, Darmstadt
Siemens VDO Automotive AG
(Chairman)
Saarpor Klaus Eckhardt GmbH Neunkirchen
Kunststoffe KG (Chairman)
Thumann & Heitkamp Verwaltungs-GmbH
ThyssenKrupp Budd Company
ThyssenKrupp Elevator Holding Corp.
Harald Rüber 3
Manager Commercial Project Processing
of Dürr Systems GmbH, Stuttgart
(since January 1, 2004)
Total remuneration for members of the
Supervisory Board amounted to € 406 thousand
in the year ended December 31, 2003.
Joachim Schielke
In fiscal 2003, there were no securities trans-
Member of the Board of Management of
actions that have to be reported in accordance
Landesbank Baden-Württemberg, Stuttgart
with Sec. 15a of the German Securities Trading
ICS Informatik Consulting Systems AG
Internationales Bankhaus Bodensee AG*
(Chairman)
Süd Private Equity Management
GmbH & Co. KGaA* (Deputy Chairman)
MKB Mittelrheinische Bank GmbH*
(Deputy Chairman)
MMV Leasing GmbH (Deputy Chairman
of the Advisory Board)
Rehabilitationsklinik Bad Wurzach GmbH
1
Member of the Mediation Committee and Personnel Committee
Member of the Audit Committee
3 Employee representative
Membership in statutory supervisory boards
Membership in comparable domestic or foreign control bodies
of business enterprises
* Group mandate
2
Act (WpHG), nor did the members of the
Supervisory Board possess any securities on
December 31, 2003, which had to be reported
in accordance with Fig. 6.6 of the German
Corporate Governance Code.
110
24. Development of fixed assets
Intangible assets
Licenses,
patents and
Goodwill
similar rights
Prepayments
Total
341,743
61,996
200
403,939
Amounts in € k
Acquisition and manufacturing
cost at Jan. 1, 2003
Changes in consolidation group
4,467
–
–
4,467
Additions
–
6,533
920
7,453
Disposals
119
3,573
–
3,692
–
19
–
19
1,120
412,186
Reclassifications
cost at Dec. 31, 2003
346,091
64,975
Accumulated amortization
at Jan. 1, 2003
–
28,882
76
28,958
Additions
–
6,054
44
6,098
Disposals
–
2,003
–
2,003
Accumulated amortization
at Dec. 31, 2003
–
32,933
120
33,053
Net book value at Dec. 31, 2003
346,091
32,042
1,000
379,133
355,538
34,766
144
390,448
Property, plant and equipment
Land, land rights
Other
and buildings
equipment,
Prepayments
including buildings
Machines and
furniture and
and construction
on third-party land
equipment
fixtures
in progress
Total
Amounts in € k
183,108
74,653
134,896
3,384
396,041
Additions
3,183
3,976
8,594
892
16,645
Disposals
6,394
3,192
19,958
106
29,650
Reclassifications
2,081
818
364
– 3,282
– 19
181,978
76,255
123,896
888
383,017
57,993
54,815
102,886
–
215,694
at Jan. 1, 2003
Additions
5,441
7,085
11,292
–
23,818
Disposals
3,523
2,881
19,325
–
25,729
– 31
– 18
49
–
–
59,880
59,001
94,902
–
213,783
122,098
17,254
28,994
888
169,234
132,458
21,503
34,498
3,516
191,975
Reclassifications
at Dec. 31, 2003
111
Investments
Investments
in associated
Other
Marketable
companies
investments
securities
Other loans
Total
18,274
2,105
578
1,957
22,914
Amounts in € k
Additions
476
–
17
758
1,251
Disposals
1,181
–
27
383
1,591
17,569
2,105
568
2,332
22,574
at Jan. 1, 2003
1,609
200
–
–
1,809
Additions
592
21
1
–
614
Disposals
592
–
–
–
592
1,609
221
1
–
1,831
15,960
1,884
567
2,332
20,743
17,842
1,904
579
2,142
22,467
at Dec. 31, 2003
Stuttgart, March 30, 2004
Dürr Aktiengesellschaft
The Board of Management
Stephan Rojahn
Kay Bönisch
Dr. Reinhold Grau
Dr. Norbert Klapper
112
Dürr worldwide
Germany
Dürr AG
Stuttgart, phone: +49-7 11-136-0
[email protected]
INTX AG
[email protected]
Carl Schenck AG
Darmstadt, phone: +49-61 51- 32-0
[email protected]
Dürr AIS GmbH
Butzbach, phone: +49-60 33-80-5 00
[email protected]
Dürr Environmental GmbH
[email protected]
Dürr Systems GmbH
[email protected]
Bietigheim-Bissingen,
phone: +49-71 42-78-0
[email protected]
Services GmbH & Co. KG
Stuttgart, phone: +49-7 11-1 36-26 46
[email protected]
Premier Brasil Serviços de Suporte
para Indústria Ltda.
São Paulo, phone: +55-11-56 33 36 84
[email protected]
Dürr Ecoclean GmbH
Filderstadt, phone: +49-7 11-70 06-0
[email protected]
Schenck do Brasil
Indústria e Comérçio Ltda.
São Paulo, phone: +55-11-56 33 35 00
[email protected]
Monschau, phone: +49-24 72-83-0
[email protected]
Schenck Fertigungs & Service GmbH
Darmstadt, phone: +49-61 51-32-20 61
[email protected]
Schenck Pegasus GmbH
Darmstadt, phone: +49-61 51-32-30 98
[email protected]
Schenck Process GmbH
Darmstadt, phone: +49-61 51-32-10 28
[email protected]
Schenck RoTec GmbH
Darmstadt, phone: +49-61 51-32-23 11
[email protected]
Dürr Canada Inc.
Windsor, phone: +1-7 34-4 59 68 00
[email protected]
Dürr Acco Canada Inc.
Windsor, phone: +1-5 86-7 55 75 00
[email protected]
Services of Canada Ltd.
Alliston, phone: +1-7 05-4 35 50 77
[email protected]
Interautomation Inc.
Oakville, phone: +1-9 05-8 27 77 55
[email protected]
Ochtrup, phone: +49 -25 53-9 27-0
[email protected]
DSEngineering GmbH
Darmstadt, phone: +49-61 51-32-39 43
[email protected]
Dürr Automotion GmbH
[email protected]
Brunswick, phone: +49-5 31-21 59-0
[email protected]
Darmstadt, phone: +49-61 51-32-42 01
[email protected]
Dürr Somac GmbH
Chemnitz, phone: +49-37 18-1 22-0
[email protected]
Australia
Dürr Pty. Ltd.
Adelaide, phone: +61-8-82 38 34 63
[email protected]
Schenck Australia Pty. Ltd.
North Ryde, phone: +61-2-98 78 41 00
[email protected]
Austria
Dürr Anlagenbau Ges.m.b.H.
Zistersdorf, phone: +43-25 32-25 46
[email protected]
Schenck Ges.m.b.H.
Braunau, phone: +43-77 22-62 38 70
[email protected]
Brazil
Schenck Final Assembly Products GmbH
Püttlingen, phone: +49-68 98-6 92-0
[email protected]
Dürr Brasil Ltda.
São Paulo, phone: +55-11-56 33 35 00
[email protected]
China
(Shanghai) Co. Ltd.
Shanghai, phone: +86-21-62 19 37 19
[email protected]
Premier Automobile Manufacturing
Support Services (Shanghai) Co. Ltd.
Shanghai, phone: +86-21-50 64 32 04
[email protected]
Dürr Special Material Handling GmbH
Grenzach-Wyhlen, phone: +49-76 24-3 10
[email protected]
Paint Systems
Canada
Services
Schenck Shanghai Machinery Corp. Ltd.
Shanghai, phone: +86-21-62 65 96 63
[email protected]
[email protected]
Schenck Shanghai Testing
Machinery Corp. Ltd.
Shanghai, phone: +86-21-3 06 45 99
Schenck (Tianjin) Mineral System Co. Ltd.
Tianjin, phone: +86-22-83 96 37 20
[email protected]
Ecoclean
Measuring Systems
113
Dürr worldwide
Colombia
Schenck Américas S.A.
Bogotá, phone: +57-1-3 60 33 70
[email protected]
Services (UK) Ltd.
Warwick, phone: +44-19 26-41 89 26
[email protected]
Schenck Ltd.
Banbury, phone: +44-12 95-25 11 22
[email protected]
Czech Republic
Services s r.o.
Mladá Boleslav, phone: +42-03-2 63 02 15
[email protected]
Schenck spol. s r.o.
Prague, phone: +42-02-33 09 41 11
[email protected]
Schenck Test Automation Ltd.
Worcester, phone: +44-19 05-61 33 61
[email protected]
Schenck Vægt- og Maskinfabrik ApS
Bagsværd, phone: +45-44-98 22 55
[email protected]
France
Dürr AIS S.A.S.
Courbevoie, phone: +33-1-43 34 74 00
[email protected]
Dürr Automotion S.A.
Massy, phone: +33-1-69 93 29 00
[email protected]
STIC-HAFROY S.A.
Loué, phone: +33-2-43 39 78 00
[email protected]
Schenck S.A.S.
Le Pecq, phone: +33-1-30 09 13 00
[email protected]
Dürr Japan K.K.
Yokohama, phone: +81-45-4 75 36 71
[email protected]
Nagahama Seisakusho Ltd.
Osaka, phone: +81-72-6 96 33 01
[email protected]
Schenck-TKS Test Systems Ltd.
Kanagawa, phone: +81-42-7 80 53 81
[email protected]
SRH Systems Ltd.
Worcester, phone: +44-19 05-61 33 61
[email protected]
Mexico
India
Denmark
Japan
Dürr India Pvt. Ltd.
Chennai, phone: +91-44-4 32 36 20
[email protected]
Schenck Avery Ltd.
Noida, phone: +91-120-2 56 31 74
[email protected]
Schenck Jenson & Nicholson Ltd.
Ranchi, phone: +91-651-2 29 07 35
[email protected]
Dürr de México S.A. de C.V.
Naucalpan de Juarez,
phone: +52-55-53 29 11 88
[email protected]
Services de México, S. de R.L. de C.V.
Saltillo, phone: +52-84-44 16 86 87
[email protected]
Netherlands
Services B.V.
Born, phone: +31-46-4 89 42 87
[email protected]
Italy
Olpidürr S.p.A
Novegro di Segrate,
phone: +39-02-70 21 21
[email protected]
Polisistem S.r.l.
Turin, phone: +39-011-61 26 26
[email protected]
Carl Schenck Machines
en Installaties B.V.
Rotterdam, phone: +31-10-4 11 75 40
[email protected]
Poland
Verind S.p.A.
Rodano, phone: +39-02-95 32 09 74
[email protected]
Dürrpol Sp. z o.o.
Radom, phone: +48-48-3 61 01 00
[email protected]
CPM S.p.A.
Beinasco, phone: +39-0 11-3 98 84 11
[email protected]
Services Poland Sp. z o.o.
Gliwice, phone: +48-32-2 70 98 33
[email protected]
Great Britain
Dürr Ltd.
Warwick, phone: +44-19 26-41 88 00
[email protected]
Schenck Automation Systems Ltd.
Warwick, phone: +44-19 26-41 88 55
[email protected]
Paint Systems
Schenck Italia S.r.l.
Paderno Dugnano,
phone: +39-02-91 00 24 41
[email protected]
Services
Schenck Polska Sp. z o.o.
Warsaw, phone: +48-22-6 65 40 11
[email protected]
Ecoclean
Measuring Systems
114
Russia
Dürr Systems GmbH
Moscow, phone: +7-095-9 26 06 26
[email protected]
Ingeniería Agullo S.A.
Barcelona, phone: +34-93-2 92 11 00
[email protected]
Acco Systems Inc.
Warren/MI, phone: +1-5 86-7 55 75 00
[email protected]
Industrias Schenck S.A.
Madrid, phone: +34-91-7 46 19 80
[email protected]
Dürr Production Systems Inc.
Farmington/MI, phone: +1-2 48-4 78 35 00
[email protected]
Singapore
Carl Schenck Singapore Pte. Ltd.
Singapore, phone: +65-7 75 80 98
[email protected]
Services Inc.
Cincinnati/OH, phone: +1-5 13-7 31 35 90
[email protected]
Sweden
Services A.B.
Trollhättan, phone: +46-52-08 48 74
[email protected]
Slovakia
Schenck Slovakia spol. s r.o.
Bratislava, phone: +42-12-55 56 34 70
[email protected]
Dürr Automation Inc.
Wixom/MI, phone: +1-2 48-9 60 46 30
[email protected]
Thailand
Services (Thailand) Co., Ltd.
Bangkok, phone: +66-26-73 31 08
[email protected]
South Africa
Dürr South Africa Ltd.
Port Elizabeth, phone: +27-41-3 63 58 88
[email protected]
Schenck Africa (Pty.) Ltd.
Johannesburg, phone: +27-11-4 93 53 40
[email protected]
South Korea
Auburn Hills/MI, phone: +1-2 48-7 45 81 50
[email protected]
Henry Filters Inc.
Bowling Green/OH,
phone: +1-4 19-3 52 75 01
[email protected]
H.R. Black Co. Inc.
Sterling Heights/MI,
phone: +1-5 86-2 64 20 20
[email protected]
Ukraine
Schenck Ukraina TOW
Kiev, phone: +38-044-4 90 26 96
[email protected]
Schenck AccuRate Inc.
Whitewater/MI, phone: +1-2 62-4 73 24 41
[email protected]
Schenck Pegasus Corporation
Troy/MI, phone: +1-2 48-6 89 90 00
[email protected]
USA
Dürr Korea Inc.
Seoul, phone: +82-2-5 69 22 44
[email protected]
Behr Systems Inc.
Auburn Hills/MI, phone: +1-2 48-7 45 85 00
[email protected]
Schenck RoTec Corporation
Troy/MI, phone: +1-2 48-6 89 90 00
[email protected]
Schenck Korea Ltd.
Seoul, phone: +82-2-5 62 77 06
[email protected]
Dürr AIS Inc.
Wixom/MI, phone: +1-2 48-6 68 21 00
[email protected]
Schenck Trebel Corporation
Deer Park/NY, phone: +1-5 16-2 42 40 10
[email protected]
Dürr Environmental Inc.
Plymouth/MI, phone: +1-7 34-4 59 68 00
[email protected]
Spain
Dürr Systems Spain S.A.
Madrid, phone: +34-91-5 5176 63
[email protected]
San Sebastián, phone: +34-94-3 3170 00
[email protected]
Valladolid, phone: +34-98-3 39 70 02
[email protected]
Somerville/NJ, phone: +1-9 08-6 85 46 00
[email protected]
Dürr Inc.
[email protected]
Dürr Industries Inc.
[email protected]
Viladecans, phone: +34-93-6 47 25 25
[email protected]
Paint Systems
Services
Ecoclean
Measuring Systems
115
Glossary
Glossary
A
F
Application technology
General term for all products related to the
spray application of paint and high-viscosity
materials. Important products that fall under
the heading of “application technology”
include painting robots, paint atomizers, paint
supply systems, and color change systems.
Filling systems
Systems dispensing materials essential for
automobile operation (fuel, brake fluid, engine
oil and coolant, transmission oil or fluid, airconditioning refrigerant, windshield washer
fluid, power steering fluid, and air for air
suspension systems) in the final assembly
stage of production.
Asynchronous machine
A driving and loading device used in engine
and transmission test stands.
B
Body-in-white
Manufacturing, joining and welding, gluing or
riveting of all body parts to produce the basic
unfinished car body.
C
Chassis tuning
For optimal vehicle handling, the position of
the wheels must be perfectly oriented to the
road. The chassis is therefore measured and
manually or automatically tuned to the correct
values in the final assembly stage.
Coolant recycling
Coolants are used in workpiece machining
operations such as boring and milling. They
cool the workpieces and tools, reduce friction
and wear, and bind any metal shavings. The
recycling systems cool the used coolant and
remove the shavings through a filtration
process so the coolant can be reused in the
machining process.
Fleet management
Management of transport equipment fleets
(forklifts, lift trucks, etc.) includes, for example,
coordination of leasing and maintenance as
well as management of spare parts.
H
High-viscosity materials
Sprayable materials, often containing PVC, that
are applied to car bodies to seal weld seams
or as cavities or as underbody protection.
Adhesives and liquid insulation materials also
fall under this general term.
L
Light trucks
Lightweight commercial vehicles. The category
of light trucks includes pick-ups, vans, and
sport utility vehicles.
M
Power train
All components involved in propelling an
automobile: engine, clutch, transmission,
differential, and drive shafts, as well as
propshaft for rear axle drive.
Products business
Business with machines and stand-alone
products or units. Compared with systems
business (total plant or line business),
products business (machine business) is
characterized by shorter order processing
times and lower order values.
S
Supervisory control systems
Centralized computer system for controlling
and supervising control of a complete
production plant.
Systems business
Realization of complete lines or plants
comprising multiple individual products or
equipment. Examples include paint shops
and final assembly lines. Systems business
(total plant or line business) is characterized
by high order values and processing times
that sometimes extend over several years.
T
Test systems
Dürr supplies testing systems for two stages
in the automobile value chain:
Marriage
Joining and bolting together of power train,
chassis, and body in vehicle final assembly.
Vehicle development: functions and
features of future car models and
components are tested, for example fuel
consumption, exhaust emission, wind
resistance, and braking effectiveness.
Prototypes are usually used for the tests.
P
D
Deburring
This is the process of removing from workpieces thin ridges (“burrs”) left during boring
or milling operations, for instance. If these
burrs are not removed, they could break off
later and cause damage to or even the failure
of the engine or transmission.
Dip painting
Process used for priming vehicle bodies. In dip
painting, the bodies are completely immersed
in the paint. The liquid paint adheres to the
entire outer surface as well as the cavities.
After dipping, the paint is dried and cured
as in other painting processes.
E
End of line
The area in the process of vehicle final
assembly where fully assembled vehicles are
tuned, tested, and prepared for shipping.
Paint atomizers
Paint atomizers ensure that paint is applied in
an even spray stream. High-rotation atomizers
reduce the paint to a fine spray mechanically
and generate a bell-shaped spray stream.
Air atomizers generate an oval spray stream.
Electrostatic attraction is used to ensure a
high degree of application efficiency (paint
utilization).
Powder painting
Instead of wet paint, this process applies
powder paint using spray guns or highrotation atomizers. The paint is then baked
on (i.e. melted and fused) in an oven. The
advantages of powder painting are a solventfree process and lower energy consumption.
In addition, it is possible to achieve almost
100 % utilization efficiency of powder paint if
overspray is captured and recycled into the
painting process.
End of line: functions of fully assembled
vehicles are tested, for example headlights and ABS.
V
Vehicle final assembly
Final assembly of the body and all subassemblies and components of an automobile,
including inspection and tuning at the end
of line.
Virtual reality (VR)
A three-dimensional, animated environment
that is generated on a computer and through
which users can “move” with the help of
software or electronic devices such as headmounted displays (HMD). VR software is
used, for instance, in planning automobile
manufacturing plants. It provides an image
that looks and runs just like a real plant,
including all production lines and processes.
116
Publisher:
Dürr AG
Otto-Dürr-Strasse 8
70435 Stuttgart
Germany
Please contact us for
further information:
Dürr AG
Public & Investor Relations
Phone: + 49-7 11-1 36 -0
Fax:
+ 49-7 11-1 36 -17 16
[email protected]
[email protected]
www.durr.com
The English translation of our
2003 Annual Report is based on
the original German version.
The German version shall prevail.
28.04.2004
18:35 Uhr
Seite 1
2003 Annual Report
Dürr AG
Paint Systems
Services
Ecoclean
Measuring Systems
Design:
Setting:
Printing:
Binding:
28.04.2004
18:35 Uhr
Seite 1
2003 Annual Report
Dürr AG
Paint Systems
Services
Ecoclean
Measuring Systems
Design:
Setting:
Printing:
Binding:

2.0 MB

Transcription

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