158
100 % FUTURE 2010 ANNUAL REPORT
100 % FUTURE2010 ANNUAL REPORT
THE ALNO GROUP AT A GLANCE
2010
2009
2008
2007
467.3
493.4
511.2
602.2
2010
2009
2008
2007
+ 1.0
+ 17.3
+ 19.3
– 26.4
REVENUE IN EUR MILL.
EBITDA IN EUR MILL.
REVENUE 2010 AT HOME AND ABROAD
EBIT BEFORE RESTRUCTURING ITEMS IN EUR MILL.
28.4 % Abroad 71.6 % Germany
2010
2009
2008
2007
– 2.2
– 24.2
+ 0.2
– 23.4
GROUP FINANCIAL FIGURES YEAR-ON-YEAR
Group financial figures (IFRS) 2010 2009 2008 2007
Consolidated income statement
Revenues EUR mill. 467.297 493.373 511.204 602.218
Total operating revenues EUR mill. 472.366 496.109 525.443 608.395
EBITDA before restructuring items EUR mill. 9.948 15.966 20.401 0.348
EBIT before restructuring items EUR mill. – 2.156 – 24.220 0.214 – 23.434
EBT before restructuring items EUR mill. – 3.216 – 40.507 – 13.829 – 34.891
Restructuring profit/loss EUR mill. – 8.962 1.306 – 1.135 – 26.069
EBT EUR mill. – 12.178 – 39.201 – 14.964 – 60.960
Consolidated net profit/loss EUR mill. – 13.084 – 38.964 – 22.638 – 60.720
Earnings per share (diluted and basic) EUR – 0.78 – 2.46 – 1.44 – 5.09
Consolidated balance sheet
Non-current assets EUR mill. 86.598 85.295 109.921 125.440
Investments in property, plant and equipment EUR mill. 15.220 15.117 10.585 15.566
Cash and cash equivalents EUR mill. 3.041 2.857 3.174 4.215
Equity EUR mill. – 69.722 – 71.132 – 36.964 – 14.375
Subscribed capital EUR mill. 45.231 41.124 41.124 41.124
Total assets EUR mill. 157.698 165.026 198.243 228.199
Consolidated cash flow statement
Cash flow from operating activities EUR mill. 11.540 21.210 – 17.108 – 2.144
Cash flow from investing activities EUR mill. – 14.300 – 15.967 – 10.581 – 14.849
Cash flow from financing activities EUR mill. 2.488 – 5.303 27.003 15.265
Net change in cash and cash equivalents EUR mill. – 0.272 – 0.060 – 0.686 – 1.728
Employees
Employees as of December 31 1,787 1,900 1,853 2,314
Year-average number of employees 1,840 1,885 2,010 2,428
Personnel expenses EUR mill. 97.900 98.539 102.871 120.232
Personnel expenses per employee on a year-average basis EUR tousand 53.21 52.28 51.18 49.52
Revenue per employee on a year-average basis EUR tousand 253.97 261.74 254.33 248.03
COMPANY PROFILE
Development, production and marketing of kitchen furniture,
sale of electrical appliances and accessories
Second-largest manufacturer of fitted kitchens in Germany, fourth-largest in Europe
Traditional, well-established German company with around 1800 employees; founded in 1927
Four internationally recognized Group brands for all price segments:
ALNO, WELLMANN, IMPULS and PINO
Quality, design and innovation as the drivers of excellent value for money;
high customer benefit, and value creation
Four production sites in Germany (Brilon, Enger, Coswig, Pfullendorf),
plus three subsidiaries abroad
Customer base: primarily resellers from the flat-pack furniture and self-service
market segments, furniture stores, kitchen specialists, real estate developers
More than 7,000 sales partners in 64 countries: 75 purchasing
associations plus independent dealers
Highest brand awareness and affinity among kitchen furniture manufacturers in Germany (78 %)
3
100 % FUTURE
ALNO HAS SET ITSELF MAJOR OBJECTIVES. THE COMPANY IS TO BECOME MORE PROFITABLE AND MORE COMPETITIVE. INITIAL POSITIVE INTERIM RESULTS REFLECT THAT THE COMPANY IS ON COURSE.
—
2010 Annual Report
—
4
5
CONTENTS
008 018
040
084
TO THE SHAREHOLDERS
08 The Managing Board
09 Report of the Supervisory Board
14 Information about the shares
SpEciAL: 1OO % FuTuRE
20 ALNO brands
22 100 % Passion – ALNO Marecucina
28 1OO % Expertise – Esprit Home series
34 1OO % Clarity – ALNO‘s restructuring
SiNGLE-ENTiTY AND GROup MANAGEMENT REpORT
42 Economic and business report
64 Report on events after the balance sheet date
68 Report on opportunities and risks / Forecast report
74 Other information
cONSOLiDATED ANNuAL FiNANciAL STATEMENTS
86 Consolidated income statement
87 Consolidated statement of comprehensive income
88 Consolidated balance sheet
89 Consolidated cash flow statement
90 Statement of changes in consolidated equity
91 Notes to the consolidated financial statements
154 AuDiT OpiNiON
155 RESpONSiBiLiTY STATEMENT
157 Imprint
6
HISTORY
FORMATION
1927
A carpentry workshop is established by Albert Nothdurft in
Wangen near Göppingen
1957
Production starts at Pfullendorf, Baden-Württemberg
1958
The original carpentry workshop evolves to become
Alno Möbelwerke GmbH & Co. KG (a 51 % interest is
held by AEG Group between 1970 and 1982)
GROWTH
1960
Strong growth spurt until 1970: sales rise from
EUR 2.5 billion to EUR 35.2 million within ten years
Number of employees increased from 95
to 677 over this period
1969
Start of the establishment of foreign subsidiaries:
1969 ALNO France S.à.r.l.
1970 N.V. ALNO (Belgium)
1972 ALNO Italia S.p.A. und ALNO Iberica, S.A.
1974 ALNO (Schweiz) AG (Switzerland)
1980 ALNO UK Ltd.
1984 ALNO Nederland (Netherlands)
1990
Introduction of multi-brand strategy
Founding of Impuls Küchen GmbH in Brilon
(North Rhine-Westphalia)
1992
Founding of ALNO Austria
1994
Founding of pino Küchen GmbH in Klieken (Saxony-Anhalt)
FORMATION GROWTH
1927 1957 1958
1960 1969
7
CONSOLIDATION
1995
IPO opens the company to the capital markets
2000
Raimund Denk becomes Chief Executive Officer of ALNO AG
2002
Dr. Frank Gebert becomes Chief Executive Officer of ALNO AG
2003
Merger with the Casawell Service Group
(Wellmann, Geba, Wellpac)
Takeover of Gustav Wellmann KG
Sale of ALNO‘s non-kitchen business interests
Focus on core business
2004
Realignment of the Casawell Group
Sale of Casawell‘s non-kitchen business interests
2005
Founding of ALNO Middle East and opening
of a production site in Dubai
RESTRUCTURING
2007
Dr. Georg Kellinghusen becomes Chief Executive Officer
of ALNO AG
Küchen Holding GmbH becomes major shareholder
Restructuring starts
2009
Jörg Deisel becomes Chief Executive Officer of ALNO AG
Distinguished as one of Germany‘s „Superbrands
2009/2010“
2010
Launch of the „ALNO 2013“ future concept
2011
Max Müller becomes Chief Executive Officer of ALNO AG
CONSOLIDATION RESTRUCTURING
1969 1990 1992 1994
1995 2000 20042002 20052003
2007 2009 2010 2011
8
THE MANAGING BOARD
The Managing Board of ALNO AG underwent a change on April 6, 2011.
MAx MüLLER Managing Board Chairman/Chief Executive OfficerAppointed since April 6, 2011
Along with his activity as ALNO Chief Executive Officer, Max Müller is president of the board of directors of two Swiss investment companies, Comco Hold-ing AG and Starlet Investment AG. He was previously Chairman of the manage-ment of Adler Bekleidungswerke AG & Co. KG. He restored the ailing company to profitability, and turned it into one of the most profitable member companies of the ASKO Group.
JöRG ARTMANN Managing Board member responsible for Central AreasAppointed since June 1, 2009
Jörg Artmann is the Managing Board member responsible for Finance, Person-nel and IT. In his previous position he was active as Finance & Administration Director at Bauknecht Hausgeräte GmbH since 2004. Artmann commenced his career at Mars GmbH. Among other posts he held at Mars, he was CFO for Iberia, and CFO for Scandinavia.
CHRISTOPH FUGHE Managing Board member responsible for SalesAppointed since June 4, 2011
Before being appointed to the Managing Board, Christoph Fughe was Head of Sales at ALNO AG. He has been responsible for global sales of the four brands of ALNO, WELLMANN, IMPULS and PINO since May 2009. He had previously held the position of Head of Sales at Häcker Küchen GmbH & Co. KG. Here, he was responsible for creating new sales channels, and doubled the company’s revenue over this period.
9
In fiscal year 2010 the Supervisory Board of ALNO Aktiengesellschaft (ALNO AG) scrupulously per-formed its functions and duties as required by law, the articles of incorporation and its procedural rules. During the course of these activities it dealt, in detail, with the situation of the company and constantly advised and supervised the Managing Board.
The co-operation between the Supervisory Board and the Managing Board was characterised by intensive and open dialogue.
The Managing Board provided the Supervisory Board with regular, up-to-the-minute and compre-hensive information in written and verbal reports on all issues which were of fundamental impor-tance for the company. There were in-depth discussions, in particular, on the restructuring efforts of the Managing Board, corporate planning, current business trends, strategic development, the risk situation and risk management. Discrepancies between the actual course of business and forecasts were identified and explained in detail by the Managing Board. The Managing Board co-ordinated the company’s strategic orientation with the Supervisory Board, and reported on the status of implementation of the strategy in regular intervals. When taking resolutions, the Super-visory Board was always involved at an early stage.
The Chairman of the Supervisory Board also received regular information from the Managing Board Chairman on current developments in the company’s business, its risk management and key trans-actions.
The Supervisory Board reviewed and took decisions on all transactions for which approval by the Supervisory Board was required by law, the articles of incorporation or its procedural rules. In addi-tion, key individual business transactions were discussed. Moreover, the Supervisory Board or the Chairman of the Supervisory Board in 2010 received information upon request from the Managing Board and the auditor in various discussion meetings, on any risks for the individual companies’ net assets, financial positions and results of operations, and discussed the measures put in place.
SUPERVISORY BOARD MEETINGS
In the reporting year, 2010, the Supervisory Board held five face-to-face meetings, as well as five telephone conferences. Additional resolutions were passed by circulation of voting papers. One member of the Supervisory Board attended less than half of the meetings.
Conflicts of interest, which would require disclosure to the Supervisory Board and the handling of which would need to be reported to the General Meeting, did not arise.
REPORT OF THE SUPERVISORY BOARD
10
KEY ISSUES DISCUSSED IN PLENARY MEETINGS OF THE SUPERVISORY BOARD
The Supervisory Board’s regular discussions focused on the current market situation and market trends, the consistent review and monitoring of the company’s asset, financial and liquidity posi-tion, as well as the Group’s strategic orientation.
The Managing Board presented the company targets for fiscal year 2010 at a Supervisory Board meeting on January 15, 2010. Furthermore, the medium-term targets until 2013, based on the “ALNO 2013” concept, were presented and explained to the Supervisory Board. After an in-depth discussion and review, the Supervisory Board approved the targets presented for fiscal year 2010 and the “ALNO 2013” concept.
The current status of the “ALNO 2013” concept was discussed at the meeting held on March 17, 2010. The current stage of the financing process also formed part of the discussions.
On April 27, 2010, the Supervisory Board met with the auditors of Ernst & Young GmbH, Wirt-schaftsprüfungsgesellschaft, Ravensburg, to discuss the consolidated financial statements of the ALNO Group as at December 31, 2009, and, in particular, the annual financial statements of ALNO AG as at December 31, 2009, as well as a number of balance sheet items. All of the documents for the annual financial statements were audited to ensure compliance with the law, the articles of incorporation and their designated purpose. The Managing Board and auditors answered all of the questions in detail and to the Supervisory Board’s satisfaction. In addition, the audit committee reported on the results of its review and proposed that the annual financial statements of ALNO AG and the consolidated financial statements of the ALNO Group be approved as prepared and presented. Subsequently, the Supervisory Board approved the annual financial statements and the consolidated financial statements of ALNO AG. The annual financial statements were thus adopted. At the recommendation of the audit committee, Ernst & Young GmbH, Wirtschaftsprüfungsges-ellschaft, Ravensburg, was instructed to audit the annual financial statements for fiscal year 2010. The report of the Supervisory Board and the joint corporate governance report were discussed and approved. The Managing Board reported on the business performance as at March 2010 and key business events. The meeting also centred around the presentation of the restructuring report prepared by PricewaterhouseCoopers AG Witschaftsprüfungsgesellschaft, as well as the recapitalization agreement negotiated with all of the financing partners on the basis of this report.
In a telephone conference on May 5, 2010, it was agreed that the agenda for the General Meeting, including the proposed resolutions, be approved by circulation of voting papers. The agenda for the General Meeting 2010 was approved on May 6, 2010.
A new Chairman of the Supervisory Board was appointed in a meeting immediately following the Gen-eral Meeting on June 23, 2010, as the ongoing status proceedings had made it necessary to call elect a new Supervisory Board. The Supervisory Board elected Mr. Henning Giesecke as Chairman of the Supervisory Board of ALNO AG. As part of the reconstitution of the Supervisory Board, both the rules of procedure of the Supervisory Board concerning the formation of committees and the rules of procedure of the Managing Board concerning reservation of consent by the Supervisory Board were revised and approved by the Supervisory Board. In addition, the members sitting on the various committees were newly elected. Moreover, the Managing Board reported on the business performance of ALNO AG as at May 2010 and on the current status of the financing process. Finally, the employment contracts of Chairman of the Board Jörg Deisel and Management Board member Michael Paterka were extended.
11
During the Supervisory Board meeting on October 14, 2010, the Managing Board discussed the financial statements for the first half of 2010 with the Supervisory Board and reported on the current business performance. This meeting focused the status of the financing process.
During a telephone conference on November 3, 2010, the Supervisory Board approved the resolution of the Managing Board to defer the company’s capital increase commenced on October 20, 2010. The reason for this deferment was that two key potential investors were to be given the opportunity to participate in the capital increase at a later time.
ACTIVITIES OF THE COMMITTEES
In order to perform its duties efficiently, the Supervisory Board formed a number of different com-mittees. Up to the General Meeting of June 23, 2010, these were the audit committee, the HR committee and the mediation committee. Subsequent to the General Meeting, an audit committee and a general committee were formed.
The audit committee met on April 26, 2010. This meeting focused on discussing the annual finan-cial statements and management report, as well as the consolidated financial statements and the contractual relationship with the auditor (including fees). Special consideration was given to the findings of the reorganization report by PricewaterhouseCoopers. In this connection the audit com-mittee discussed the reorganization agreement concluded with the financing partners in detail. In addition, the members of the audit committee agreed on specific aspects of the accounting proc-ess, the preparation of the annual financial statements, the management report and the financial report for the first half of the year by e-mail or telephone.
The mediation committee, the HR committee and the general committee did not convene during fiscal year 2010.
ANNUAL AND CONSOLIDATED FINANCIAL STATEMENTS
Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Ravensburg, audited ALNO AG’s annual financial statements (HGB), ALNO AG’s consolidated financial statements (IFRS) and the manage-ment report, which was combined with the Group management report, and issued these with an unqualified audit opinion.
The auditor confirmed that the Managing Board had set up an efficient risk management system in line with statutory requirements, as well as an internal control system.
The documents to be audited and the auditor’s report were presented to all members of the Supervisory Board in good time. In its meeting on April 14, 2011, the Supervisory Board was informed in detail of the preliminary annual financial statements and the preliminary consolidated financial statements. The documents to be audited and the auditor’s report were discussed in detail both during the audit committee meeting on May 30, 2011 and in a telephone conference of the Supervisory Board on May 30, 2011. In both of these meetings, the auditor reported on the key findings of the audit and was available to answer questions and provide additional informa-tion. After a thorough discussion and based on its own review, the Supervisory Board concurred with the results of the audit of the annual financial statements and the consolidated financial
12
statements. Having concluded its review, the Supervisory Board did not have any objections to the annual financial statements or the consolidated financial statements. In a telephone confer-ence May 30, 2011 the Supervisory Board expressly approved the annual financial statements and management report, which was combined with the group management report, for fiscal year 2010, as prepared by the Managing Board. The annual financial statements are thus adopted. The Supervisory Board also approved the IFRS consolidated financial statements and Group manage-ment report as prepared by the Managing Board for fiscal year 2010.
DEPENDENT COMPANY REPORT
The Managing Board has submitted its report on the company’s relationships with affiliated com-panies to the Supervisory Board together with the corresponding report prepared by the auditors.
The auditor issued the following unqualified opinion:
“Based on our audit and assessment in accordance with professional standards, we confirm that
1. The factual statements made in this report are correct,
2. The payments made by the company in connection with the legal transactions described in this report were not unreasonably high.”
The auditor participated in the Supervisory Board’s discussion of the report on relationships with affiliated companies and presented the key results of the audit.
The Supervisory Board’s review of the report by the Managing Board and the audit report did not give any grounds for objection; the Supervisory Board concurred with the results of the audit. The Supervisory Board did not raise any objections to the Managing Board’s declaration at the end of the report on ALNO AG’s relationships with affiliated companies according to the final results of its review.
CORPORATE GOVERNANCE
The Supervisory Board also discussed the further developments in corporate governance in fiscal year 2010, paying particular attention to the changes made to the Corporate Governance Code in the amendment of May 26, 2010. In application of the new requirements on Managing Board member’s fees and the relevant recommendations in the Code, the Supervisory Board deliberated on the remuneration system for the Managing Board and reviewed whether Board emoluments were reasonable. No Managing Board members were present during these discussions. Furthermore, the Supervisory Board determined that, in its opinion, it had a sufficient number of independent mem-bers, as well as one independent member with professional knowledge of accounting and auditing.
13
The Managing and Supervisory Boards reported on ALNO AG’s corporate governance as part of the corporate governance declaration on pages 74 ff. The Managing and Supervisory Boards of ALNO AG issued a new declaration of conformity with the recommendations of the German Corporate Governance Code Government Commission pursuant to Section 161 of the Aktiengesetz (AktG - German Public Limited Companies Act) on October 7, 2010. This declaration is printed on pages 74 ff of the annual report and is permanently accessible to shareholders at www.alno.ag.
CHANGES TO THE MANAGING AND SUPERVISORY BOARDS
Due to the fact that the number of employees at ALNO AG has fallen to below 2,000 and continues to remain at this level, the Managing Board in January 2010 initiated status proceedings in accord-ance with Section 97 of the German Stock Corporation Act (AktG). These were completed with the conclusion of the Ordinary General Meeting of ALNO AG on June 23, 2010. Upon completion of these proceedings, the Supervisory Board will be constituted in accordance with the provisions of the German One-Third Employee Representation Act (“Drittel beteiligungsgesetz”), rather than consisting of equal numbers of representatives, as has been the case until now. As part of the amendment of the articles of incorporation to comply with the One-Third Employee Representation Act, the number of Supervisory Board members was reduced from twelve to nine. As a result of the status proceedings, the existing Supervisory Board was dissolved at the end of the Ordinary General Meeting on June 23, 2010. Therefore new shareholders’ representatives were elected at the General Meeting on June 23, 2010. The following shareholders’ representatives continue to sit on the Supervisory Board: Mr. Werner Devinck, Dr. oec. Jürgen Diegruber, Mr. Christoph Maaß, Mr. Anton Walther and Mr. Armin Weiland. Henning Giesecke was newly elected to the Supervi-sory Board and succeeds Hans-Peter Haase, who did not stand for re-election for age reasons. Supervisory Board members Mr. Rudolf Wisser, Mr. Jörg Kespohl and Mr. Gerhard Meyer are the employees’ representatives. Messrs. Hans-Peter Haase, Andreas Bilz, Michael Föst and Ralph Ossiander left the Supervisory Board of ALNO AG effective June 23, 2010.
The Supervisory Board would like to thank its former members for their work and commitment, and, in particular, Mr. Hans-Peter Haase particularly for his work as Chairman of the Supervisory Board.
The Supervisory Board also wishes to thank the Managing Board and all employees of the ALNO Group’s companies for their hard work and personal dedication in fiscal year 2010.
Düsseldorf, May 30, 2011
On behalf of the Supervisory Board
Henning Giesecke Supervisory Board Chairman
14
THE ALNO SHARE
The ALNO share largely decoupled from the overall German equity market in 2010. After the “ALNO 2013” future concept had been officially launched at the start of the year, the share price reported significant gains during the spring, reaching its high for the year (on an intraday basis) of EUR 6.15 on March 31, 2010. The stock then relinquished some of its gains through to June. A slight upturn commenced at the start of the third quarter before the onset of a longer-lasting downtrend from September. The share nevertheless ended 2010 with a marked year-on-year price appreciation: the closing price on December 30, 2010, the last trading day of the year, was EUR 3.00. This represents a 22.0% share price increase over the course of the year, and is equivalent to a market capitalization of EUR 52.2 million.
ALNO AG mandated ICF Kursmakler AG as Designated Sponsor in July 2010 in order to improve the share’s tradability, and thereby also make it more attractive for investors in the future. The aim is to thereby improve the share’s liquidity in ongoing Xetra trading through the placing of additional manual bids and offers. This measure has already had a positive effect over recent months, with computer trading turnover (Xetra) already significantly above that on the Frankfurt Stock Exchange by the end of the year. After a total of 189,545 shares were traded in January 2010 (Frankfurt), the number of shares traded in December 2010 was 413,419 (Xetra and Frankfurt).
ALNO (FRANKFURT) 04.01.10 – 31.12.10
5.5
5.0
4.5
4.0
3.5
3.0
2.5
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
15
SUCCESSFUL CAPITAL MEASURES AS PART OF “ALNO 2013”
The placing of two capital increases in the first half of 2010 resulted in an increase in the share capital from previously EUR 41,123,869.80 to EUR 45,231,297.80. This generated EUR 10.0 million of proceeds for ALNO AG. The General Shareholders’ Meeting of June 23, 2010 also authorized the Managing Board increase the company’s share capital until June 22, 2015, with the Supervisory Board’s assent, once or on several occasions, by a total of up to EUR 22,615,647.60.
On this basis, a further capital increase from authorized capital against cash contributions was approved on October 14, 2010 as part of the restructuring agreement. In this context, the share capital was to be increased by up to EUR 22,615,647.60 to up to EUR 67,846,945.40 through issuing up to 8,698,306 new shares. The subscription price was fixed at EUR 3.00. This capital increase was launched on October 20, but temporarily postponed in November in order to enable significant potential investors to participate in the capital increase. The capital increase was subsequently resumed in February 2011. Investors and shareholders had already submitted subscription guarantees of EUR 20 million as of this date - from the company’s perspective, an indication of major confidence in the work that had already been performed as part of “ALNO 2013”. The capital increase was fully concluded on March 3, 2011, and the entire authorized capital was placed with investors. Gross issue proceeds of EUR 26.1 million
KEY DATA (DECEMBER 31, 2010):
German Securities Identification Number (WKN) 778 840
ISIN DE 0007788408
Ticker symbol ANO
Transparency level (market segment) General Standard (Regulated Market)
Stock exchanges Regulated Market: Frankfurt (General Standard), Stuttgart, OTC: Berlin, Munich, Düsseldorf
Type of shares Ordinary no par value bearer shares (no par shares)
Initial listing July 27, 1995
Share capital as of December 31, 2010 45,231,297.80
Share capital as of April 15, 2011 67,846,945.40
Number of shares as of December 31, 2010 17,396,653
Number of shares as of April 15, 2011 26,094,979
SHARE PERFORMANCE DATA
Closing price December 31, 2009 EUR 2.46
CLOSING pRICE DECEMBER 31, 2010 EUR 3.00
pERCENTAGE ChANGE + 22.0 %
Year high* EUR 6.15
Year low* EUR 2.45
* Basis: Frankfurt Stock Exchange intraday prices
16
accrued to ALNO AG as a consequence. The restructuring agreement that had been concluded with the consortium banks, existing shareholders and investors in April 2010 was modified and supplemented in parallel. This resulted in a further EUR 50 million of immediate relief for the Group balance sheet as of December 31, 2011. Managing Board members confirmed their confidence in the company by acquiring a total of 200,000 new shares as part of the capital increase.
With the complete conclusion of the capital increase, the free float has expanded from previously 8.8 % to over 30 %, which has made the share significantly more attractive for investors who value trading liquidity.
ALNO AG’s SHAREHOLDER STRUCTURE HAS CORRESPONDINGLY CHANGED AS FOLLOWS:
9.69 % ABAG Aktienmarkt Beteiligungs AG
8.77 % Free float
18.64 % IRE Beteiligungs GmbH
62.90 % Küchen Holding GmbH
100 %
SHAREHOLDER STRUCTURE OF ALNO AG AS OF DECEMBER 31, 2010 * on the basis of voting rights an-nouncements as of March 9, 2011
** on the basis of voting rights an-nouncements as of April 19, 2011
18.81 % IRE Beteiligungs GmbH*
3.90 % ABAG Aktienmarkt Beteiligungs AG**
35.33 % Küchen Holding GmbH*
41.96 % Free float*
SHAREHOLDER STRUCTURE OF ALNO AG AS OF APRIL 15, 2011
100 %
DIRECTOR’S DEALINGS
In 2010, there were no mandatory announcements of share transactions conducted by managerial persons pursuant to Section 15a of the German Securities Trading Act (WpHG). The following transactions were realized after the end of the period under review:
17
INVESTOR RELATIONS
ALNO AG has set itself the objective of providing all market participants with the highest degree of transparency in order to thereby make a contribution to re-establishing the ALNO share as an interesting investment. The company worked intensively on implementing related planned measures in 2010. In addition to regular contact with investors, analysts and the financial media, a second research house, Vara Research, was mandated to prepare equity studies on the company along with Hauck & Aufhäuser. ALNO also mandated ICF Kursmakler AG as a Designated Sponsor, which has already fed through to a significant improvement in the shares’ tradability on the Xetra trading system. The Managing Board conducted roadshows in a total of 14 cities in six countries in order to present ALNO AG’s business model and future prospects to investors as part of the recent capital increase.
Along with statutorily requisite ad hoc announcements, explanatory and supplementary corporate news announcements were also published in order to inform all capital market participants as rapidly and in as much detail as possible about current events and trends. The company also published detailed quarterly financial reports in English. ALNO AG plans to continue and intensify these measures during the new business year. In addition, the company intends to participate actively at capital market conferences in order to present the company’s business model and future potential to interested investors.
2011 FINANCIAL CALENDAR
May 30, 2011
Q1 2011 quarterly report
July 14, 2011
2011 Shareholders’ General Meeting
August 31, 2011
2011 half-yearly report
18. November 2011
Q3 2011 quarterly report
DATE PERSON SUBMITTING NUMBER OF SHARES TRANSACTION VOLUMEN IN EUR
3/3/2011 Armin Weiland 40,000 Purchase 120,000
3/3/2011 Dr. Jürgen Diegruber 40,000 Purchase 120,000
2/3/2011 Henning Giesecke/ HB conbet GmbH
50,000 Purchase/allocation from capital increase
150,000
2/3/2011 Jörg Deisel 100,000 Purchase/allocation from capital increase
300,000
2/3/2011 Jörg Artmann 66,666 Purchase/allocation from capital increase
199,998
2/3/2011 Michael Paterka 33,335 Purchase/allocation from capital increase
100,002
1818
1919
1OO % FUTURE
1OO % PASSION
1OO % EXPERTISE
1OO % CLARITY
20 ALNO brands
22 Special: 1OO % Future
2020
ALNO BRANDS
ALNO COMBINES FOUR PROMINENT AND INDEPENDENT BRANDS UNDER ONE ROOF. EACH OF THEM SUCCESSFULLY ADDRESSES VERY DIFFERENT CUSTOM-ERS. KITCHENS FOR ALL AGE GROUPS AND UNUSUAL IDEAS – TOGETHER, THEY CREATE 100 % ALNO.
1OO % ALNO AG
2121
ALNO
ALNO is the Group‘s premium brand. It has stood for the highest quality, excellent design, and outstanding service for more than 80 years. Tailored designs are offered in all areas. Our customers value outstanding craftsmanship, and a kitchen that corresponds exactly with their wishes.
WELLMANN
WELLMANN represents variety and innovation within the Group. These kitchens are distinguished by lov-ing, and sometimes also extravagant design, as well as a host of high-quality details. The most recent ex-ample is the ESPRIT Home Kitchen design produced by WELLMANN. This brand addresses customers in the mid price segment.
IMPULS
IMPULS is the brand for kitchens in the low to medium price segment. It stands for modern furnishings fea-turing individual designs at attractive prices. IMPULS offers a rapid delivery service providing customers with complete kitchens within ten days.
PINO
PINO is the ALNO Group‘s entry-level brand. It offers a fresh, modern and uncomplicated product range. PINO is primarily addressed to younger people for whom modernity and value for money are important. PINO kitchens are also distinguished by strong and fresh trend colors.
2222
1OO% PASSION
COOKING MAY BE A CALLING. YOU CAN COOK WITH LOVE AND DEVOTION IN AN ALNO MARECUCINA K ITCHEN – AND WITHOUT COMPROMISES. HIGH-QUALITY MATERIALS COMBINED WITH AN EXPERIENCE OF MEDI-TERRANEAN FLAIR AND LUXURY: THIS IS THE ALNO MARECUCINA.
2323
1OO% PASSION
100 % Design – We embody a passion for design
and quality with our ALNO Marecucina
24
1OO% DESIGN
25
26
27
Try and picture this: A house on the sea – you stand in the kitchen and look out at the beautiful vista with its dunes and waves. This idealistic vision appeals to us all. In such an atmosphere, it becomes easy to cook with passion. With its soft, rounded shapes and Mediterranean flair, the „Marecucina“ would be the perfect fit in such an environment – but not just there!
The design, which resonates with that ideal lifestyle while remaining truly innovative, started with a vague idea. Others carried it along, convinced that the idea had a future. ALNO is fortunate to have people who are ready and willing to risk being different, who think outside the box and go beyond the norms. With this mindset, they develop products that exceed expectations. Simply put: Their development team does a great job.
In developing the Marecucina, ALNO involved the professionals at Blum practically right from the start. We soon realized just how important this was: After approving the basic form, it was clear that unique, innovative solutions would be called for in overcoming the challenges posed by such a design. This kitchen was to set new standards. The round contours along the entire length of the „ship“ presented us with some considerable technical challenges. This shape of course impacted how fittings, drawers and other details were implemented. Addtionally, the fronts and doors were considerably wider and heavier than those used in normal kitchens and some of these also needed to be rounded. Even hinges and drawers had to be adapted to the design.
We often met with the product development team from ALNO during the implementation phase, which spanned the course of several months. At these meetings we discussed progress, possible improve-ments and exchanged new ideas with each other. It was easy to see that ALNO wasn‘t treating us merely as a supplier, but rather as a strategic partner. They showed great trust in our ability to implement the specified innovations in a quality manner. That is a good feeling – one that intensifies the relationship.
The Marecucina kitchen is a niche product, and will no doubt remain one, if for no other reason than the fact that it wouldn‘t fit in most apartment kitchens. But as far as the ALNO name and its image as a highly innovative kitchen provider are concerned, the Marecucina will likely have a much greater impact. It connects at an emotional level and has a high recognition value, while offering that special touch of luxury. And that is exactly what all of us want: Products that allow us to realize our dreams. The presentation of the Marecucina at the furniture trade shows connected with visitors on this level. With the booth background portraying an image of the sea, visitors couldn’t help but be drawn into the kitchen’s nautical world.
We have worked very closely with ALNO for about 17 years and have often cooperated with the company on various innovations throughout this period. We hold ALNO in high regard, especially its reliability – always meeting or exceeding its end of the deal, even if these were only confirmed by a handshake. The spoken word is highly valued at this long-standing and accomplished company. And you gain the same impression from the employees that work there as well – they go the extra mile for their company, because of its trust in them. It is good to see a product that everyone is proud to stand behind, a product that was realized in spite of difficulties and setbacks, through the energy and willpower of people who constantly sought new solutions and spared no efforts in implementing them.
WHAT EVERYONE DREAMS OF
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HUBERT SCHWARzManaging Director Blum GmbH Deutschland
gets easily excited when speaking about the „Marecucina“ design concept – after all, there‘s a little Blum in there. As a long-standing and key ALNO supplier, the Blum team was involved in the development of this design at a very early stage. With about EUR 1.1 billion in revenue, Blum is the market leader in hinges, pull-out systems and folding systems and a main supplier of ALNO‘s fittings.
28
COOKING IS A LIFESTYLE AESTHETIC. KITCHENS THAT EXPRESS MODERN AND INDIVIDUAL LIFE-STYLES – THIS IS WHAT ALNO‘S ESPRIT HOME KITCHENS ARE ABOUT: CLEAR FORMS, A SENSE OF LIGHTNESS, AND LOVING DETAILS IN WHICH EVERYONE CAN EXPRESS THEIR PERSONAL LIFESTYLE CHOICES.
1OO% E XPERT I SE
29
1OO% E XPERT I SE
100 % Lifestyle – Into the future with ESPRIT
30
1OO% LIFESTYLE
31
1OO% LIFESTYLE
32
33
WE SHARE THE SAME VISION OF PEOPLE’S LIFESTYLE AESTHETICS
—
URSULA BUCK Executive Director Licenses at Esprit
Esprit entered into a licensing partnership with ALNO for the Esprit Home Series last year. ALNO‘s first Esprit Home Kitchen was presented at the Living Kitchen International furniture trade fair in Cologne in early 2011.
“I think we’re all familiar with the situation where, at a party, everyone always ends up in the kitchen – talking, laughing, being happy. The centre of friendship, hospitality and fun seems to be located somewhere here between the stove and the fridge. And it’s precisely here where we wish to meet lifestyle-oriented customers’ individual aesthetics – with a kitchen design that corresponds exactly with their personal lifestyle feeling.
That’s why, every year, we develop five different contemporary lifestyle themes. Everyone should be able to see themselves and their lives reflected in one of these themes: whether trendy and fresh, classic and elegant, strikingly eccentric, or simple and minimalist. The idea is to let this design flow into the overall interior layout, and to create a uniform look for our customers’ entire living space. After all, the kitchen forms a central point in our lives.
ALNO understood Esprit’s design language very well, and implemented the basic idea behind this lifestyle concept very rapidly and with great accuracy. It consists of a kitchen comprising indi-vidual modules that can be freely structured. It goes into the finest detail, and reflects high design standards. And also a lot of individual things that are instantly recognizable as part of Esprit Home Kitchens. The side walls and bases feature a high-quality wood appearance, which sets them off clearly from the body parts of the individual cabinets. This generates an overall feeling of lightness, which is exactly what we wanted to achieve. We soon agreed that the Esprit lifestyle comes to life in these kitchens.
Together with ALNO, we immediately had a specific vision of how a kitchen should appear for a modern public that is aware of fashion and trends. “Fashion meets kitchen” was our declared objective. And that’s what we fully achieved. All of the kitchen furniture items that ALNO developed for us are coordinated individually and perfectly to the other products from the Esprit Home Series.
Before we decided on a licensing partner, it was important to us that not only the design, but also the quality, should be right. This applies to everything the kitchens are made of: they must be designed with functionality in mind, surfaces must be practical in terms of texture and durability, and the individual components must be produced from very good materials. The appearance of the wood, the elegant chrome edges, or the striking glass wall coverings behind the working areas – these are the things that are immediately perceptible when standing in an Esprit kitchen for the first time – and these are precisely the things that make ALNO’s Esprit Home Kitchens high-quality products. This is what you can see, feel and experience. And not least, this is why our decision was in favor of ALNO. There are few companies that offer such a high-quality blend of design and quality.
Since we already offered kitchen articles and accessories, the time had come for us to also adapt kitchen furniture to the design world. With ALNO, we have found the perfect concept and the optimal partner for the Esprit Home Kitchen world. For us, the year 2011 represented the ideal start.
34
1OO% CLARITY
LAST YEAR BROUGHT ABOUT MANY CHANGES TO THE GROUP. ABOVE ALL, MORE EFFECTIVE STRUCTURES, AND MORE UNIFIED WORKING PROCESSES. OLD HABITS WERE BROKEN, AND NEW WAYS OF THINKING EMBARKED ON. WE WILL NOW MAKE THE MOST OF THIS MOMENTUM.
35
1OO% CLARITY
100 % Synergy – We have already taken the
first step towards high-quality customer care
36
1OO% SYNERGY
37
1OO% SYNERGY
A lot has changed over the space of the last year. The changes that we set in motion with the restructuring will affect us all: in production, administration, sales and product development. Struc-tures that had been in place for decades were dissolved, people who had previously not known each other entered into dialogue, and thought processes were initiated that have partially led to surprising results and processes.
Today, the dialogue is no longer about problems relating to a single location that require solving, but rather about the joint development of Group-wide solutions with the help of cross-location teams. In doing so, we have successfully awakened the ALNO team spirit by increasingly bringing people into closer contact with one another. This has allowed working processes to be compared, and unified solutions to be found, thereby allowing these factors to work together in many places. Cultural change that affects us all has arrived, and many of our customers and suppliers have also seen significant evidence of this for some time now.
With our shift from an organization entailing four locations operating in parallel, albeit separately, towards a Group-oriented functional structure, it was in part quite simple innovations that have brought about major changes: for example, the unified Group profile towards the external world that we have meanwhile implemented – nobody in Enger or Brilon now answers the telephone with “Müller, Gustav Wellmann GmbH & Co. KG” or “Schmidt, Impuls Küchen GmbH”. Instead, the caller now always speaks with an “ALNO” staff member. Callers no longer interact with separate sales contacts for each brand, but instead have one personal contact who covers all our brands, and who is there to provide technical expertise and advice. ALNO has acquired a personal face as a consequence.
Earlier than we planned, we were successful in partially orientating our customer care on a cross-brand basis, thereby providing our customers with higher quality service. We have also achieved the objective of positioning the ALNO product brand in a qualitatively higher kitchen segment. The associated and clearer separation of all four Group brands from each other, and precise positioning in certain sales channels, is important both for addressing customers, and for brand recognition value, and consequently comprises a significant success factor.
To this we have added newly launched and cross-location managerial responsibilities. The four hermetically separated locations of four companies competing with each other no longer exist. We have brought the organization to life, and created uniform standards, and a new awareness for interaction within the Group. Cooperation among the teams has already generated many sugges-tions for improvement. The implementation of these suggestions is feeding through to good results.
A further example: just a few months ago, the four locations were operating quite different methods for order processing, debtor management, and complaints processing. Unification, and the possibility that has thereby been created to examine a customer’s credit lines in one step across all our brands has already reduced our receivables default risk, and significantly cut the backlog of open payments.
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HANSJöRG ROLLSHAUSENHead of Group Controlling
Hansjörg Rollshausen has been on the ALNO Group staff since 2009. He has been active as head of Group Controlling since 2010, and in this function has carried joint responsibility for the realization of the measures planned as part of the „ALNO 2013“ future concept.
WE HAVE TAKEN THE FIRST STEP TOWARDS HIGHER QUALITY CUSTOMER CARE
38
The development and introduction of the new WELLMANN program was also an enormous achieve-ment on the part of the entire workforce, even if not all aspects of this program ran smoothly from the start. We nevertheless needed to modify the entire product construction logic, which was a major technical challenge for our staff. In overall terms, however, this important project was imple-mented much more rapidly than planned, since market demand for these new kitchen models is very good. Today, we are already realizing 85 % of our sales with the new WELLMANN models, and only 15 % with the old models. We were not aiming to reach this level until autumn 2011.
The possibility of entering into cooperation with ESPRIT also represented a great additional business opportunity for us. ESPRIT home kitchens are located exactly between the ALNO and WELLMANN brands in terms of price and equipment. The decision that these kitchens were to be manufactured at Pfullendorf was wonderful news for the employees at this location. In addition, the expansion of components production at this location represented greater job security for its staff, especially given the general volume decline in the production of the ALNO brand.
I am very proud of the many important milestones that we have already achieved in terms of the restructuring of the Group, and I look forward to the implementation of the many tasks that still lie ahead of us, and on which we will continue to work intensively in order to firmly return the ALNO Group to a sound and successful growth path.
Integration of Alno, Wellmann, Impuls and Pino
Uniform standards for four companies
A sense of working together within the Group
Companies no longer competing with each other
39
Impuls
Wellmann
espRIT- HOme-KITCHens
ALNO cooperation with Esprit production
in Pfullendorf
Wellmann pROGRam Today‘s portfolio consists mainly of new models
85 %sales
1OOPERCENT
EFFICIENCY
alnO
alnO aG
pInO
4040
4141
SINGLE-ENTITY AND GROUP MANAGEMENT REPORT
42 Economic and business report
64 Report on events after the balance sheet date
68 Report on opportunities and risks / Forecast report
74 Other information
42
GROUP MANAGEMENT REPORTOF ALNO AKTIENGESELLSCHAFT, PFULLENDORF, FOR THE 2010 FINANCIAL YEAR
A. ECONOMIC AND BUSINESS REPORT I. GROUP STRUCTURE AND BUSINESS ACTIVITIES
The ALNO Group develops, produces and sells kitchen furniture and accessories for the German market and export. The Group parent company is ALNO AG, which exercises holding company and central administration functions, as well as operating the Pfullendorf location and the export area. The ALNO Group’s main administrative headquarters is located in Düsseldorf. The ALNO Group owns a total of five production locations, four of which are located in Germany, and one in Dubai (United Arab Emirates).
The Group’s most important current sales markets are in Germany and Western Europe. The com-pany has a centrally managed export sales operation for this purpose, and also operates a global base of trading partners. As of the December 31, 2010 reporting date, ALNO AG maintains sales companies in three European states for export market processing, which are aggregated under ALNO International GmbH (“ALNO International”).
With its ALNO, WELLMANN, IMPULS and PINO brands, which are tailored to meet the require-ments of different price segments, the ALNO Group is one of the world’s largest kitchen furniture manufacturers. It is the second largest kitchen furniture producer in Germany, and is one of the top five in Europe.
The company’s furniture production was restructured as part of the “ALNO 2013” future concept: previously, each of the four German locations (Pfullendorf, Brilon, Enger, and Coswig) produced its own kitchen brand. In future, the focus at Pfullendorf will be on selected specialty product ranges (high-gloss finish kitchens, for example). High-volume series production is now located at Enger. Final production for the IMPULS and PINO brands remains at the Brilon and Coswig (Anhalt) sites.
At the Dubai location, kitchen furniture is produced and sold especially for local project business in the Gulf region. The shares in the company located there, ALNO Middle East FZCO, Dubai, United Arab Emirates (“ALNO Middle East”), are 50 % held by ALNO AG and 50% held by Al Khayyat Investments LLC, Dubai, United Arab Emirates.
As part of the “ALNO 2013” future concept, five of the previously eight ALNO Group foreign sub-sidiaries were converted in the 2010 fiscal year into pure sales units, and liquidated. ALNO Austria Möbelvertriebsgesellschaft mbH, Wiener Neudorf, Austria, ALNO N.V., Deinze, Belgium, ALNO Iberica S.A., Madrid, Spain, ALNO Nederland B.V., Dongen, Netherlands, and ALNO Italia S.r.l., Florence, Italy were liquidated during the course of the 2010 fiscal year.
STRUCTURE OF THE ALNO GROUPAS OF DECEMBER 31, 2010
ZweitmarkenholdingImpuls Pino GmbH Pfullendorf
ALNO AG
94 %
94 %
ALNO Middle East FZCODubai (VAE)
ALNO International GmbHPfullendorf
ALNO France S.A.R.L.Cagnes-Sur-Mer (F)
ALNO (Schweiz) AGEmbrach (CH)
ALNO UK Ltd.Dewsbury (GB)
pino Küchen GmbH Coswig (Anhalt)
GVG tielsa Küchen GmbH & Co. KGEnger
EuroSet Küchentechnik GmbHEnger
Wellmann Bauteile GmbHEnger
TIGNARIS Bet.gesellschaft mbH& Co. Objekt Pfullendorf KGGrünwald
MINERVA Grundstücks-Vermie-tungsgesellschaft mbH & Co. Objekt Pfullendorf OHG Grünwald
Gustav Wellmann GmbH & Co. KG Enger
Casawell Service GmbHEnger
Impuls Küchen GmbH Brilon
100 %
100 %94.74 %
100 %0.07 %
100 %
100 %
50 %
100 %
100 %
100 %
5,26 %
99,93 %
100 %
6 %
6 %
100 %
43
ALNO USA Kitchen Cabinets Inc.New Castle/Delaware (USA) (ruhend)
Wellmann-Polska sp.z.o.o. (PL)(in Liquidation) 100 %
100 %
44
II. GROUP STEERING
The Group is managed using key sales and value-creation figures. The individual Group divisions are managed on a monthly, weekly and daily basis over the course of a year through continuous analyses of deviations from budgeted figures and previous year’s figures in all key operating areas. Along with key figures relating to sales, production quality, and function-specific efficiency management, the most important individual indicators that are deployed at segment level are profit and loss, sales per item, and sales figures for cabinet unit figures. Cost centers and cost types are monitored and analyzed separately at a higher aggregation level. Quality management based on the DIN EN ISO 9001 standard accompanies and secures the quality of the product range and business processes. All of the ALNO Group production companies are certified companies that are subjected to continuous external reviews by different institutions.
III. EMPLOYEES
As of the December 31, 2010 reporting date, the ALNO Group employed 1,787 staff members (excluding the three Management Board members), as well as 96 trainees. The previous year’s staff numbers comprised 1,900 individuals, plus 95 trainees. Of these, 1,176 individuals were employed in production (previous year: 1,225), and 136 were employed in administration (previous year: 146). A total of 354 individuals worked in marketing and sales (previous year: 401), and 121 in other areas (previous year: 128).
As of the end of the reporting period, employees were distributed among the individual sites as follows: Pfullendorf 698 (previous year: 783), Enger 583 (previous year: 559), Brilon 248 (previous year: 256), Coswig 206 (previous year: 199), and 52 in foreign subsidiaries (previous year: 103).
As part of “ALNO 2013”, the personnel base at the Pfullendorf site was reduced by a total of 151 employees, with full effect partially from January 1, 2011 In this context, 129 termination agreements were concluded, and the affected staff were initially taken on by an Employment and Qualification Company. As of the year-end, 45 individuals left the Employment and Qualification Company because they had found new positions. A further 22 jobs were discontinued due to free posts not being filled, or to the suspension of new appointments at the Pfullendorf site. The costs for all measures amounted to approximately EUR 7.5 million.
45
121OTHER AREAS
136 ADMINISTRATION
354MARKETING/ SALES
1.176 PRODUCTION
GROUP EMPLOYEES DIVIDED BY FUNCTIONS AS OF DECEMBER 31, 2010
1.787 TOTAL
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IV. MARKET AND COMPETITIVE ENVIRONMENT
Economic environment
In all markets of relevance for the ALNO Group, the 2010 fiscal year was characterized by significant indications of economic recovery following the global economic crisis. Gross domestic product (GDP) in Germany grew by 3.6 % year-on-year in 2010 (2009: – 4.7 %). This represents the highest annual growth rate since German reunification. Exports were up by 14.2 % at the same time.1 Eurozone (EU 27) GDP increased by 1.8 %, according to Eurostat. In the markets that are of particular importance for the ALNO Group outside Germany, Austria reported a further fall in GDP of 2.0 %, following the previous decrease in 2009, and the UK saw GDP drop by 1.8 %.2 Switzerland reported growth of 2.6 %.
The International Monetary Fund (IMF) anticipates that German economic output will be up by 2.2 % in 2011. The IMF expects the Eurozone to grow by 1.5 %, and that the global economy will report 4.4 % GDP growth.3 It nevertheless remains to be seen how the catastrophe in Japan, and political changes in North Africa, will impact macroeconomic trends.
As far as consumers’ spending and investment behavior is concerned, trends in labor market data, building investments, and consumer prices, are of significance in the kitchen sector. Favorable labor market prospects boosted private consumer spending in 2010, which was up by 2.4 %. This had particular effects on the furniture market, since this is a so-called “postponable” market: depending on end-customers’ personal financial situations, the purchase of such consumer durables is either realized or postponed.
In addition, an historically low level of interest rates in 2010 contributed to the first resumption of growth in residential construction investments for years. With price-adjusted growth of 4.4 %, the recovery was also stronger than that in construction investments overall. There was a 1.2 % decline compared with 2008 in the 2009 crisis year.4 On the basis of its future construction estimates, the Munich-based Ifo Institute expects that the number of completed residential properties will undergo a significant increase by 2015 due to the recovering economy, replacement requirements in some regions, and favorable construction loans.5
COMPLETED RESIDENTIAL PROPERTIES IN GERMANY 2000 – 2015
240
200
160
120
80
40
2001 2003 2005 2007 2009 2011 2013 2015
Single-storey dwellings
1+2 family homes
1,000 units | Source: Federal Of f ice of Statistics, ifo construction estimates
A purchasing power study for Germany that was conducted by “GfK Geomarketing” arrives at an equally positive conclusion for 2011. This study forecast the purchasing power will grow by EUR 499 per head of the population, from EUR 19,185 in 2010, to an average of EUR 19,684 in 2011 This trend is attributed to the rapid overcoming of the financial crisis, and to higher wage expectations. In the GfK’s opinion, the inflation trend is one factor that might affect forecast purchasing power. Higher contributions, for example to health insurance, are also anticipated for many in 2011. As a consequence, total purchasing power in Germany amounts to EUR 1,610.2 billion for 2011, according to the GfK’s estimates. This figure stood at EUR 1,550.2 billion in 2010.
1 Federal Office of Statistics: Press release No. 061, February 15, 2011
2 Federal Office of Statistics 2010
3 International Monetary Fund, World Economic Outlook, January 25, 2011
4 Federal Office of Statistics, Press release No. 22, January 19, 2011
5 HDH/VDM, Wirtschaft Kompakt, Edition 1, January 2011
47
Furniture wholesaling/retailing
With 0.1 % growth in 2010, retail furniture sales recovered slightly from the previous year’s 0.7 % decline. The Federal Association of German Furniture, Kitchen and Installation Specialist Traders (Bundesverband des Deutschen Möbel-, Küchen- und Einrichtungsfachhandels [“BVDM”]) reported that the uptrend was significantly detectable since the summer. Consumers spent EUR 29.7 billion (including VAT) on furniture and kitchens, according to provisional figures.6
Furniture production
Furniture with a value of EUR 15.6 billion was produced in Germany in 2010, according to data published by the Federal Office of Statistics. This represents a 2.2 % increase compared with the 2009 crisis year, when furniture production was down by more than 12 %. Of the total value of furniture produced in 2010, 29.3 % was attributable to seating furniture, and 29.1 % to other furniture, which includes, among other items, wooden furniture for bedrooms, dining rooms, and living rooms, as well as metal and plastic furniture. A further 22.5 % was attributable to kitchen furniture made of wood.
The Association of German Furniture Industries (Verband der Deutschen Möbelindustrie [“VDM”]) describes a similar situation. As of March 2001, the VDM was confident that the furniture industry was on a slow but constant uptrend following the crisis. According to the VDM, German compa-nies were well positioned as the result of investments, rationalization measures, and modernization measures that have been implemented over the previous ten years. The fact that there were almost no insolvencies in the sector, and that job cuts were moderate, reflected this.7 In overall terms, there were more than 92,000 employees (– 3.2 % year-on-year) in more than 1,040 operations (consisting of more than 20 employees) in the furniture industry at the start of 2011.8
Kitchen furniture
Germany is largest production location for kitchen furniture in Europe, with respect to both kitchens sold and production. The German Kitchen Furniture Industry Association (VdDK) reported that sales by the German kitchen industry had increased by 1.6 % in 2010 to reach EUR 3.8 billion. In Germany, year-on-year growth amounted to 1.1 % to a total of EUR 2.4 billion. Growth abroad stood at 2.5 %, to an amount of almost EUR 1.4 billion. The export ratio was approximately 37 %, according to the VdDK. In this context, it was particularly the second half of the year that reflected a positive trend. For instance, Asia reported an almost full recovery, and there was an uptrend to report in both Eastern Europe and France. The sector continued to report weakness, however, in the Netherlands, Spain and the USA, because these markets have been particularly affected by the bursting of real estate market bubbles.
Due to positive economic trends, the association takes a confident view of sector trends for 2011, and anticipates that the German kitchen furniture industry will report sales growth of 3 %. Trends in materials prices might nevertheless feed through to cost increases.
There were 56 kitchen furniture manufacturers in Germany in 2010 with 50 and more employees (previous year: 57). Together, these companies employed 14,412 staff, 2.4 % fewer than in 2009.9
Market positioning
The ALNO Group’s market share in Germany amounted to approximately 15.6 % in the 2010 fiscal year, when measured in terms of the value of kitchen furniture sold, and to approximately 22.6 % when measured in terms of the volume of kitchen furniture sold.10 The market share in Europe stood at approximately 4.0 % in the 2009 fiscal year.11 As a consequence, the ALNO Group is the second largest kitchen manufacturer in Germany, and one of the top five in its sector in Europe.
6 BVDM, press release Januar 11, 2011
7 HDH/VDM, Wirtschaft Kompakt, Edition 1, January 2011
8 HDH/VDM, press release January 13, 2010
9 HDH, Monatsbericht nach Fach-zweigen 2010, January 12, 2010
10 Gesellschaft für Konsumforschung, presentation for the kitchen trading panel for the ALNO Group, 2010, pages 47-48
11 CSIL, Centre for Industrial Studies, The European Market for Kitchen Furniture, May 2010 – R2601, page 5
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V. PRODUCTS AND PRODUCTION
The ALNO Group develops, produces and sells high-quality products in the kitchen-related residential environment. As part of “ALNO 2013”, a start was been made in the 2010 fiscal year to unify product and production standards, and to improve production capacity utilization. The aim is to reduce product and production complexity, and to improve cost structures through economies of scale in purchasing and logistics.
Products
Important successes were achieved as part of “ALNO 2013” in the 2010 fiscal year. The number of colors and fronts within the Group underwent further significant streamlining: ALNO reduced the number of fronts to 238 across the four brands (2009: 268).
At the same time, ALNO AG presented numerous new and innovative products and concepts. For example, the new WELLMANN product range was presented for the first time at the Eurocucina (Milan) international kitchen furniture trade fair in April 2010. Compared with the old product range, this product range is differentiated by its new construction, and the newly introduced vertical grid based on the ALNO brand construction platform. The vertical grid offers a more orderly and a more optically appealing joint alignment. For wholesalers and retailers, the adapted cupboard/vertical grid also offers the advantage that the kitchen is easier to plan.
The Marecucina maritime design study, which is in the shape of a ship’s hull, and which was also presented for the first time at Eurocucina, received a lot of attention from the media and consumers. This concept stylefully combines elements such as sails, masts, ships’ storage areas, walnut surfaces and decorative chrome inlays into the overall design. The rounded forms of the lower cupboards and working surfaces are reminiscent of an elegant boat’s pantry, bridging the gap between vacations and the everyday. The positive reactions prompted ALNO to further develop the Marecucina from a design study to readiness for series production by the autumn. The Marecucina was then presented in three variants at our annual in-house trade fair (ALNO Design Tour): a freestanding version, a so-called L-form, and a classic row solution.
A modernized ALNO product range was also presented at the “ALNO Design Tour” in autumn 2010, allowing expertise in glass kitchens for the premium segment to be deepened further.
In September 2010, ALNO announced a total of five new programs (ALNODUR, ALNOFINE, ALNOVETRINA, ALNOSATINA and ALNOART Stoneglas) in 17 front designs for 2011. There were also numerous expansions of existing programs. A total of eight new models, including ALNOPLAN, ALNOLOOK and ALNOSILK, have been expanded with 12 front designs, and are available both with matt glass, as well as with high gloss, and foil-coated.
The new WELLMANN product range forms the basis for a licensing agreement that was concluded in the year under review with ESPRIT INTERNATIONAL Ltd. (“ESPRIT”). As a consequence, ALNO AG has been a licensing partner of ESPRIT, and exclusive partner for the kitchens area, since September 2010. ESPRIT-specific product attributes under the name “ESPRIT home” kitchens are marketed on the basis of the WELLMANN kitchens brand in this context. The first kitchen of this type was presented in January 2011 at the “Living Kitchen” International Kitchen Show in Cologne.
Significance events also included the comprehensive geographic launch of the 10-day kitchen from the IMPULS product brand. After the successful realization of a six-month pilot operation with selected customers, IMPULS kitchens have been available across the whole of Germany as so-called rapid delivery kitchens since September 2010. This has allowed the ALNO Group to respond to changes in customer requirements, and it is of the view that it can significantly improve service for customers.
49
The ALNOSTAR SATINA, which became known as a “2011 trend study”, transferred to series production in May 2010, and is now available in four color designs (earth brown, white, magnolia white, and platinum blue). A particularity of this model is that the furniture fronts are completely structured in a velvety special-security glass. Its surface is etched to give rise to a transparent satin finish with a depth effect that is typical of glass.
Production
A technically and administratively more streamlined manufacturing structure should help the ALNO Group to engage on a level playing field with its competitors in the future. Numerous measures were implemented in the past fiscal year in order to achieve this objective: given the strategy of using identical components, a uniform construction platform for the production of the ALNO and WELLMANN brands was developed, among other measures. The launch of a new product for the WELLMANN brand, which is planned as part of this, commenced on schedule in October 2010, and supports the repositioning of the Group rounds that has been launched.
The focus at the Pfullendorf site was on adjusting the factory’s structure and capacities to the utilization situation. The aggregation of similar product families allowed processes to be optimized, and cost-savings were realized, including on energy, through a switch from two shifts to one shift. At the same time, the goods acceptance function was centralized within the assembly plant.
The plant at Enger received a new production line for fronts processing to prepare for the new WELLMANN kitchen generation that is now manufactured there. At Brilon, the rapid delivery kitchen was implemented as part of everyday production, and throughput times for cabinet production were tangibly reduced.
The company also plans future investments in machines at its production sites to boost the performance and quality of the production of working surfaces and upper cabinets, as well as in in-house logistics.
VI. MARKETING AND SALES
Marketing
The ALNO Group reported an 80 %% year-on-year increase in show kitchen placings at its in-house trade fair. The by far largest proportion of show kitchens was placed through the kitchen specialists sales channel. As a consequence, the trade fair represents a good overall signal that the aim has been achieved of repositioning ALNO and WELLMANN in line with their target groups.
Market surveys confirm that ALNO is on the right path
A survey entitled “ALNO Strategy Check”, which was conducted in August 2010 across the whole of Germany by the Düsseldorf-based sector information service “markt intern” (specialist furniture wholesaling/retailing), also shows that the measures implemented as part of “ALNO 2013” were already taking effect at that time. In overall terms, 77.1 % of survey participants assessed the restructuring strategy as good (45.7 %), or even as very good (31.4 %). A total of 52.9 % felt that the new strategy was also being put into daily practice (35.3 % felt that there was no change). Only 11.8 % responded that they had not yet detected the strategy change in daily contact. The overall assessment of the perception on the market also improved. In response to the questions “How did you assess ALNO previously?” And “How do you assess ALNO today?”, the respondents awarded an average school grade of 2.4 for “today” (on a scale of 1 to 6, with ‘1’ signifying ‘excellent’ and ‘6’ indicating a ‘fail’). By way of comparison, the study generated a school grade of 2.7 for “previously”, in other words, before the launch of “ALNO 2013”.
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A study that ALNO AG mandated in September 2010 from the tns emnid opinion research institute also showed that the company is on the right path with its brand strategy: this survey entailed conducting telephone questionnaires of 1,005 individuals with net household incomes of at least EUR 2,500 (this represents the buyer segment for kitchens from the ALNO product brand). The survey’s aim was to generate data about the motivations and criteria that are applied when kitchens are purchased, in order to avoid relying on “subjective opinions”. Of the individuals surveyed, 76 % mentioned “quality/value”, and 64 % cited “design”, as important or very important criteria when deciding to purchase a kitchen. “Durability” (97 %) and “functionality” (95 %) also topped the list of priorities. From ALNO’s perspective, the ALNO product brand has long stood for high quality and first-class design, which also implies “durability” and “functionality”.
Sales
Kitchens manufactured by the ALNO Group are primarily sold in Germany to furniture and specialist kitchen wholesalers/retailers, as well as self-service and cash-and-carry markets, which are pre-dominantly organized into purchasing associations. Around 84 % of kitchen furniture is sold through such purchasing associations. Independent dealers also operate for the company. In overall terms, ALNO works together with more than 7,000 sales partners in 64 countries.
In order to secure market shares, and expand them in the future, the sales reorientation particularly includes strengthening the “Kitchen specialists/kitchen studios” sales channel for the ALNO and WELLMANN brands. The company also aims to improve sales quality through refraining from enter-ing into low-margin business. To this end, a new pricing policy for the ALNO brand was successfully implemented in the 2010 fiscal year, which allowed some strategically important major customers to be re-acquired.
The sales organization in Germany had already been reorganized over the course of 2009 in order to achieve the objective of more clearly positioning Group brands in the future, and of dismantling the competition among sales teams that had prevailed until then. For this reason, and for the first time in the 2010 fiscal year, employees were no longer allocated to individual brands, but to their relevant strengths in line with the different sales channels.
Sales abroad are to be boosted once the restructuring measures there have been concluded. This will entail strengthening the sales function, and trading partners will be given better service and training. ALNO AG achieved an important sales success in China in September 2010. From there, the company received a further major order to equip a residential estate in Shanghai with a total of 631 kitchens from the classic ALNOTERM program. Delivery ran to schedule in December 2010.
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Design and innovation awards
Over the past few months (and partially after the end of the reporting period), ALNO AG won further important awards for some of the innovative and successful products that it presented in 2010: for example, ALNO received the “interior innovation award 2011” for the Marecucina concept study. This is awarded by the German Design Council (Rat für Formgebung) at the Cologne International Furniture Trade Fair. It is one of the highest design prizes within the German interior design sector. This kitchen, which also generated a great deal of international attention, was also awarded the title “Kitchen Innovation of 2011”, by the LifeCare consumer initiative.
ALNOSTAR SATINA, whose fronts are produced entirely from satin-finished glass, also received this award. In May 2010, this kitchen had already received the sought-after “red dot design award” from Essen for its innovative quality, functionality and production quality, and the “iF product design award 2010” presented by the Designforum.
Consumers from the LifeCare initiative also awarded ALNO its “Consumers’ favorite brand” seal of quality in its highest “Platinum” category – this time for the ALNOSTAR SATINA and ALNO Marecucina products. This underscored how ALNO’s products reflect consistent consumer-orientation. Companies only receive this prize if they have been distinguished with the “Kitchen Innovation of the Year” award for at least six products.
Following the end of the fiscal year, in January 2011, ALNO showed further new kitchen models from its 2011 collection at the “Living Kitchen” kitchen trade fair in Cologne, along with the ESPRIT home kitchens.
VII. RESEARCH AND DEVELOPMENT
The ALNO Group operates its central product development from its Pfullendorf site. Development focuses on product and application innovations that are developed systematically and on a specific target group basis above and beyond all product lines. All value-creation processes are also subject to continuous efficiency optimization. The range of products and services is continuously reviewed, and includes regular innovations, which, in some areas, comprise unique selling propositions on the market.
In line with its aim of positioning ALNO as a premium brand, the company aims in the future to develop products and application innovations systematically from market requirements and end-customer needs. Product development is aimed at supplying ALNO, as the company’s core brand, with constant product and design innovations, thereby demonstrating its superior market position. To this end, the company will further expand its expertise in the glass materials group, and in the case of metallic varnishes. The ALNO brand is particularly distinguished by its expertise in varnish technology. Further projects include the introduction of the handleless kitchen program in the mid price segments, the updating of the basic front program, the re-development of structural elements, and the expansion of the new opening and functional systems into the standard product range of the PINO, IMPULS and WELLMANN brands.
A total of 325 property rights have been filed for the ALNO Group in Germany and abroad, or have already been registered. Of this number, 298 comprise brands, 23 comprise design patents, 3 comprise patents, and 1 comprise registered designs.
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VIII. TARGETS AND STRATEGY
The primary objective of the Managing Board and of all corporate units is to restore the com-pany to financial health, competitiveness and sustainable profitability. The ALNO AG Supervisory Board approved the extensive “ALNO 2013” future concept in January 2010. This future concept is intended to structure administrative processes and production structures more efficiently. The reorientation of the brand and sales strategy is also targeted at strengthening the international impact of all Group brands. In parallel, synergies are to be exploited, and the complexity of products and production is to be reduced.
In this context, “ALNO 2013” should not only be regarded as a concept for fundamental restructur-ing, but also as the basis for a paradigm shift.
Under the central “ALNO – One Company” mission statement, the desired cultural change can be characterized particularly by the following aspects:
• Value-creating factors will be of central significance. Quality will be given priority over quantity in this context. Performance-based measures comprise absolute and relative profitability, cash flow, and return on capital.
• Priority is given to Group interests ahead of the interests of the company’s individual locations. With the reorganization of Group structures that has already occurred, a shift is to be made away from site-related corporate functions towards cross-Group and customer-oriented process thinking. Individual corporate functions will be centralized along the value chain. This is particularly intended to exploit Group synergies, and to efficiently structure and position the overall organization.
Targets and measures:
IMPROVING THE EARNINGS POSITION AND ENHANCING MARKET SHARES IN GERMANY
In order to achieve this objective, the Group will need to refrain from entering into low-profitability or unprofitable business in the future. In addition, the company will also focus on boosting its gross profit margin, which is to be attained through improved furniture quality and more efficient purchasing, in particular. A marketing and sales campaign with a clear focus on sales channels and customer groups, which is realized through a reorganization of the sales organization under one operational management for all brands and products, and which has already been implemented, also supports this objective. Synergies are to be exploited to a greater extent, and processes are to undergo continuous improvement, in order to realize the planned enhancement of the gross profit margin. Product and production complexity is to be reduced at the same time. Fixed costs are also to be lowered, and financial stability is to be strengthened.
REORIENTATION AND STRENGTHENING OF THE SALES FUNCTION, AND STRENGTHENING OF THE EXPORT BUSINESS
The sales function has already been restructured to reflect customer groups and products in order to position the Group brands more clearly. As a consequence, kitchens from the ALNO brand will be sold exclusively through furniture retailers, kitchen specialists and real estate developers. WELLMANN is oriented to delivering the mid-segment in these channels. The IMPULS and PINO brands will be placed in the lower segments of the retail furniture trade and the flat-pack furniture business, with PINO positioned as an entry-price brand. IMPULS will also be deployed in project business. The foreign subsidiaries have already been partially liquidated or restructured into sales units, and switched to direct invoicing. This will relocate the administrative tasks of the export function to Germany. The sales function abroad is also to be strengthened by the servicing and training of trading partners. Among other measures in this context, working groups have been set up to strengthen sales, and the product portfolio has been adjusted to reflect local customer and market requirements. New growth markets for the ALNO Group will also need to be tapped, and
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existing joint ventures will need to be continued, or to be newly founded. The company also plans to expand its project business. The ALNO Group aims to significantly boost its export share in the medium term, from the current level of around 30 %.
IMPROVEMENT OF THE BALANCE SHEET STRUCTURE
The complete restructuring of the balance sheet structure of the ALNO Group also forms part of the “ALNO 2013” concept. Activities planned as part of this include various financing and capital measures as part of the restructuring agreement concluded with the financing partners on April 23, 2010 (“Restructuring Agreement I”). The ALNO Group’s balance sheet structure already underwent a significant improvement as the result of new factoring agreements in March 2010. The capital increase that was successfully concluded after the end of the reporting period, and the conclusion of a further restructuring agreement (“Restructuring Agreement II”) on February 9, 2011 will also exert a positive impact on consolidated equity of around EUR 70 million. In the medium term, the ALNO Group is aiming for an equity ratio that is typical for its sector. The company also retains its objective of significantly reducing its working capital.
PROCESS OPTIMISATIONS
In order to exploit Group synergies, the location-oriented organization has already been replaced by a central organization split according to functional areas. This is aimed at eliminating internal Group rivalries, reducing overlaps in sales and administrative functions, and at establishing incentive and management systems. These also include uniform order reporting and handling processes, as well as a unified IT system landscape. A Group-wide resource planning system (ERP system) is also to be introduced. This is also aimed at a strong orientation towards customer requirements.
In order to tap cost potentials, and to concentrate capital expenditure on efficient production locations, mass production will be relocated from the Pfullendorf location to Enger. Predominantly selected specialty product ranges and series entailing low volumes are to be produced at the Pfullendorf plant in the future. The construction platform has also been unified for the ALNO and WELLMANN brands. Series production of the new WELLMANN product currently occurs at the Enger site on the basis of a uniform construction platform with ALNO. Some of the land and build-ings at the Pfullendorf site are to be transferred to alternative utilization due to the partial relocation of manufacturing. This means that parts will be rented or sold. Some land and buildings that were not required for operational purposes were already sold in 2010. Besides this, there are no specific plans for further disposals.
The number of employees within the ALNO Group is to be reduced further by the end of 2013. Some of the related requisite measures have already been implemented, and mainly affected the Pfullendorf site. Future personnel adjustments will be focused on the administrative area, and will affect all current locations, albeit to different extents.
In overall terms, the company anticipates significant synergy effects from the adjustments to the group structures and processes, and on the basis of optimized operating procedures, and conse-quently also a more favorable cost structure.
Beyond 2013, the company’s Managing Board takes the view that particularly the following factors are of central significance for the corporate strategy: The company aims to exploit global growth opportunities beyond Europe. The ALNO Group will place a major focus on Asia. The Group will also endeavor to enter the global project business market in order to also gradually tap the retail business in selected countries as part of the next step. Above and beyond this, the company is also planning to grow further as part of potential consolidation trends in the European furniture industry, insofar as the Managing Board regards this as strategically and commercially expedient at the relevant time.
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IX. FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE ALNO GROUP
General business trends
The income statement of the ALNO Group (on IFRS basis) is presented according to the nature of expense method. All of the figures for the 2010 fiscal year refer to the continuing operations.
Business during the period under review was characterized by the further advance of the implemen-tation of the “ALNO 2013” future concept. Although there was a decline in revenue compared with the previous year, the positive trend continued for two of the total of four Group brands – IMPULS and PINO. Among other things, the IMPULS brand benefited over the course of the year from the market launch of the rapid delivery kitchen. This decline was particularly due to the company’s conscious decision to refrain from entering into low-margin revenues as part of “ALNO 2013” and as part of the realization of a new pricing policy.
Revenue and earnings
The following table shows the key figures for the continuing operations for 2008 to 2010.
In EUR thousand FY 2010 FY 2009 FY 2008
Revenues 467,297 493,373 511,204
Changes in inventories and own work capitalized – 1,993 – 3,724 113
Cost of materials 271,907 278,654 290,079
Gross profit 193,397 210,995 221,238
Gross profit (as % of revenue) 41.4 % 42.8 % 43.3 %
Other operating income 7,062 6,460 14,126
Personnel expenses 97,900 98,539 102,871
Other operating expenses 92,611 102,950 112,092
EBITDA before restructuring items 9,948 15,966 20,401
Depreciation/amortization/impairment losses 12,104 40,186 20,187
Operating results (EBIT) before restructuring items – 2,156 – 24,220 214
Financial result – 1,060 – 16,287 – 14,043
Earnings before income taxes (EBT) and before restructuring items – 3,216 – 40,507 – 13,829
Restructuring profit/loss – 8,962 1,306 – 1,135
Profit/loss before income taxes (EBT) – 12,178 – 39,201 – 14,964
Consolidated revenues amounted to EUR 467.3 million in the 2010 fiscal year, representing a 5.3 % decline compared with EUR 493.4 million in the previous year.
Domestic revenues were down by around 3.3 % to EUR 334.6 million. As part of repositioning and product range streamlining, the management also consciously refrained from entering into low-margin revenues in the first half of 2010 in order to boost profitability. This effect was also still evident in the third quarter since agreements on higher prices that the company entered into with important major customers did not take effect until August. The first positive effects arising from the new price structures are anticipated in the second quarter of 2011. Particularly in the fourth quarter of 2010, there were also negative effects from start-up problems for the new WELLMANN product range at the Enger site.
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As in the previous year, export business put the brakes on sales growth in 2010 due to the continued real estate crisis in Southern Europe and the UK. This situation was worsened by the liquidation of five foreign subsidiaries, which occurred to schedule as part of “ALNO 2013”. These foreign subsidiaries were converted into sales units. As a result of the lower sales activities that arose as a consequence of this, revenue outside Germany fell by 9.9 % to EUR 132.7 million. The overall export ratio decreased correspondingly from 29.8 % to 28.4 %.
Revenues both in Germany and abroad reported the following trends:
YearGermany Change Abroad Change Export ratio Total
** * in % * * in %
2008 339,122 172,082 33.7 % 511,204
2009 346,103 6,981 2.1 % 147,270 – 24,812 – 14.4 % 29.8 % 493,373
2010 334,620 – 11,483 – 3.3 % 132,677 – 14,593 – 9.9 % 28.4 % 467,297
* in EUR thousend
The foreign business is divided as follows:
Year
Total exports
Total Europe
Change Of which foreign
subsidiaries
Change Rest of World
Change
* * * in % * in % * in %
2008 172,082 154,592 108,813 17,490
2009 147,270 133,512 – 21,080 – 13.6 % 81,448 – 27,365 – 25.1 % 13,758 – 3,732 – 21.3 %
2010 132,677 108,089 – 25,423 – 19.0 % 27,681 – 53,767 – 66.0 % 24,588 10,830 78.7 %
* in EUR thousend
Changes in inventories and own work capitalized amounted to EUR – 2.0 million, compared with EUR – 3.7 million in the prior-year period.
The cost of materials declined from EUR 278.7 million to EUR 271.9 million. At 58.4 %, the cost of materials ratio was above the previous year’s level of 56.9 %. Gross profit fell from EUR 211.0 million to EUR 193.4 million on a consolidated basis, which resulted in a lower gross profit margin of 41.4 %, following 42.8 %. This was due to a mix of different effects from the subsidiaries. A particular burden was felt from the revenue losses for the ALNO brand, which carries the highest gross margin.
Other operating income was up from EUR 6.5 million to EUR 7.1 million, which was mainly due to higher income from asset disposals, and higher income from the de-recognition of liabilities. There was little change in the personnel expense, which stood at EUR 97.9 million compared with EUR 98.5 million in the previous year. The personnel expense ratio was up from 20.1 % in the previous year to 21.1 % as a consequence. This was due to the assumption of 63 employees from the former Group company GEBA Möbelwerke GmbH by Wellmann Bauteile GmbH as of November 1, 2009. The effects from the workforce reduction at Pfullendorf that was carried out in the second half of 2010 will not exert its full impact until 2011, when it will consequently lead to a lower personnel expense.
The marked decline in other operating expenses from EUR 103.0 million to EUR 92.6 million is due to the volume decline, the related lower logistics and assembly costs, and lower administrative and marketing expenses in 2010. There was also a reduction in costs for consultants and external service-providers.
EBITDA before restructuring measures fell due to the lower absolute level of gross profit, which was down from EUR 16.0 million in the previous year to EUR 9.9 million as part of the sales decline.
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Amortization of intangible assets, and depreciation of property, plant and equipment, fell from EUR 40.2 million to EUR 12.1 million. As in the previous year, this mainly reflected impairment charges of around EUR 24 million, which were necessitated by IAS 36 impairment tests. The correspond-ingly lower basis for 2010 resulted in lower scheduled depreciation/amortization charges, which will continue to be felt over the coming years. Impairment charges of only EUR 2.3 million were incurred in the 2010 fiscal year as part of impairment tests.
In terms of EBIT before restructuring items, this allowed a significant increase from EUR – 24.2 million in the previous year to EUR – 2.2 million. As a consequence, the company achieved the forecast that the Managing Board issued on April 30, 2010 of improving the operating result before restructuring costs.
There was a significant year-on-year improvement in the financial result from EUR – 16.3 million to EUR – 1.1 million. In this context, financial income improved significantly from EUR 0.1 million to EUR 10.4 million, while financing expenses fell in parallel from EUR 16.5 million to EUR 11.5 million. The increase in financial income resulted mainly from the earnings-effective reporting of the “Banks’ Loan Waiver (Part 1)” of EUR 10.0 million pursuant to the Restructuring Agreement of April 23, 2010, since the company was successful in implementing the suspensive conditions arising from the restructur-ing agreement for this portion of the banking waiver. The marked decline in financial expenses is attributable to lower interest charges negotiated as part of this restructuring agreement. This item was also affected in the previous year by interest payments arising from several shareholder loans, expenses arising from the planned capital increase that was finally postponed, and expenses arising from derivative financial instruments.
This fed through to a marked increase in EBT before restructuring measures from EUR – 40.5 million in the previous year to EUR – 3.2 million.
At EUR 7.5 million, most of the restructuring charges were attributable to the workforce reduction at the Pfullendorf site. The remaining EUR 1.5 million was distributed among job cuts abroad as part of the liquidation of five of the eight subsidiaries, and to costs for the preparation of the restructuring survey. A positive result of EUR 1.3 million was reported in the previous year in connection with the partial release of restructuring provisions formed in previous years for the professional qualification companies.
As a consequence, EBT underwent a marked year-on-year increase improvement from EUR – 39.2 million to EUR – 12.2 million.
The consolidated result from continuing activities rose year-on-year from EUR – 39.4 million to EUR – 13.1 million. The Group net loss for the year underwent a significant improvement from EUR – 39.0 million in the previous year to EUR -13.1 million as a consequence.
This is equivalent to earnings per share on the continuing operations of EUR – 0.78, compared with EUR – 2.46 on the previous year.
The following comparison of the first and second halves of the fiscal year provides an insight into the 2010 earnings position:
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In EUR thousand FY 2010 30/6/2010
to 31/12/20101/1/2010
to 30/6/2010Semi-annual
change
Revenues 467,297 233,571 233,726 – 155
Changes in inventories and own work capitalized – 1,993 – 1,374 – 619 – 755
Cost of materials 271,907 136,837 135,070 – 1,767
Gross profit 193,397 95,360 98,037 – 2,677
Gross profit margin 41.4 % 40.8 % 41.9 %
Other operating income 7,062 2,305 4,757 – 2,452
Personnel expenses 97,900 46,910 50,990 4,080
Other operating expenses 92,611 48,276 44,335 – 3,941
EBITDA before restructuring items 9,948 2,479 7,469 – 4,990
Depreciation/amortization/impairment losses 12,104 6,143 5,961 – 182
EBIT before restructuring items – 2,156 – 3,664 1,508 – 5,172
Financial result – 1,060 2,042 – 3,102 5,144
EBT before restructuring items – 3,216 – 1,622 – 1,594 – 28
Restructuring profit/loss – 8,962 – 8,993 31 – 9,024
EBT – 12,178 – 10,615 – 1,563 – 9,052
A comparison of the two half-years of 2010 shows that revenue in the second half of the year was approximately at the level of the first six months. Earnings were down, by contrast, which was due to several special factors over the July to December 2010 period. For instance, revenue fell short of the company’s expectations, particularly in the third quarter, due to customer responses to the new pricing policy for the ALNO brand, which had a negative impact on earnings. The second half year, in particular, was also affected by the production switch to the new WELLMANN product range.
Segment results
The following section presents the earnings positions of the individual segments of the ALNO Group (before consolidation).
ALNO SEGMENT
31/12/2010EUR mill.
31/12/2009EUR mill.
Change y-o-y EUR mill.
Change y-o-y in percent
Net revenue 103.8 134.4 – 30.6 – 22.8 %
Gross profit 53.8 66.8 – 13.0 – 19.5 %
Gross profit as % 51.8 % 49.7 %
EBITDA – 17.3 2.7 – 20.0 > – 100.0 %
EBIT – 20.2 – 19.9 – 0.3 – 1.5 %
The ALNO segment comprises ALNO AG in Düsseldorf, which produces branded kitchens in the upper and middle price segments at the Pfullendorf site.
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Revenue volumes for ALNO AG fell by EUR 30.6 million year-on-year, or by – 22.8 %. Along with weak export business, the revenue decline was due to product range streamlining and repositioning within the Group, which affected ALNO the most. The company’s conscious refraining from entering into low-margin revenues with the aim of sustainably improving profitability also contributed to this. A positive consequence of this measure was that the gross profit margin increased from 49.7 % to 51.8 %, reflecting a 2.1 percentage point improvement.
The decline in EBITDA from EUR 2.7 million to EUR – 17.3 million is due, firstly, to the lower level of gross profit in absolute terms, which in turn reflected the EUR 13.0 million revenue fall, and, secondly, to restructuring expenses of EUR 7.5 million for the workforce reduction at Pfullendorf. Other operat-ing income stood at EUR 4.9 million, or 19.5 % below the previous year’s level. Personnel expenses were down by EUR 1.2 million, or 2.8 %, to EUR 41.3 million. At EUR 41.4 million, other operating expenses were EUR 4.5 million, or 9.8 %, below the previous year’s level.
IMPULS SEGMENT
31/12/2010EUR mill.
31/12/2009EUR mill.
Changes y-o-y EUR mill.
Changes y-o-y in percent
Net revenue 121.3 109.7 11.6 10.6 %
Gross profit 43.6 39.2 4.4 11.2 %
Gross profit as % 35.9 % 35.7 %
EBITDA 10.9 8.9 2.0 22.5 %
EBIT 8.1 6.0 2.1 35.0 %
The Impuls Küchen GmbH subsidiary, which is based at Brilon, reported significant 20 % revenue growth of EUR 11.6 million to EUR 121.3 million. At the same time, gross profit was up by EUR 4.4 million, or 11.2 %, as a consequence of which the gross profit margin stood at 35.9 %. Thanks to the improved gross profit, EBITDA increased by EUR 2.0 million, or 22.5 %, to reach EUR 10.9 million. This was also supported by the 10.7 % fall in personnel expenses to EUR 12.7 million. Other operating expenses, rose by 15.3 % to EUR 22.2 million, by contrast, due to higher consulting costs, and a higher level of cost transfers within the Group.
PINO SEGMENT
31/12/2010EUR mill.
31/12/2009EUR mill.
Changes y-o-y EUR mill.
Changes y-o-y in percent
Net revenue 93.6 90.6 3.0 3.3 %
Gross profit 29.9 29.3 0.6 2.1 %
Gross profit as % 31.9 % 32.3 %
EBITDA 6.8 8.1 – 1.3 – 16.0 %
EBIT 5.0 6.3 – 1.3 – 20.6 %
The PINO segment comprises pino Küchen GmbH, Coswig (Anhalt), which produces kitchens in the lower price segment. PINO reported revenue growth of EUR 3.0 million, or 3.3 %, to EUR 93.6 million in the 2010 fiscal year. At the same time, gross profit was up by 2.1 % to EUR 29.9 million. EBITDA declined by EUR 1.3 million, from EUR 8.1 million to EUR 6.8 million, by contrast. This is primarily due to the marked increase in other operating expenses that was accompanied by a fall in other operating income.
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WELLMANN SEGMENT
31/12/2010EUR mill.
31/12/2009EUR mill.
Changes y-o-y EUR mill.
Changes y-o-y in percent
Net revenue 137.6 136.5 1.1 0.8 %
Gross profit 57.7 57.5 0.2 0.3 %
Gross profit as % 42.0 % 42.1 %
EBITDA – 1.6 11.8 – 13.4 < – 100 %
EBIT – 5.9 7.4 – 13.3 < – 100 %
The WELLMANN segment, which primarily comprises Gustav Wellmann GmbH & Co. KG, produces kitchens in the medium price segment. The company reported EUR 1.1 million of revenue growth, or 0.8 %, to EUR 137.6 million. With a 0.3 % increase in gross profit to EUR 57.7 million, the gross profit margin of 42 % was held at approximately the previous year’s level. The significant decline in EBITDA and EBIT is particularly attributable to the EUR 8.9 million reduction in the extraordinary result, which was characterized in the previous year by extraordinary income arising from the receivables waiver on the part of ALNO AG, as well as from income arising from the release of provisions for the social plan and litigation risks. The personnel expense also increased by EUR 3.7 million to EUR 30.0 million due to the transfer of 63 employees from GEBA, and to the start of the reduction in the workforce at the Enger site. There was a slight increase in other operating expenses compared with the prior-year period.
FOREIGN SUBSIDIARIES SEGMENT
In the 2010 fiscal year, the Foreign Subsidiaries Segment was characterized by the liquidation of five foreign subsidiaries. There now remain only three. For this reason, revenue fell from EUR 81.4 million in the previous year to currently just EUR 27.7 million. There was a parallel fall in EBITDA of EUR 2.2 million, from EUR 2.7 million in the previous year to EUR 0.5 million.
Net assets
There was little change in the ALNO Group’s total assets, which fell from EUR 165.0 million as of December 31, 2009, to EUR 157.7 million as of December 31, 2010.
On the assets side of the balance sheet, non-current assets underwent a slight increase to EUR 86.6 million, compared with EUR 85.3 million as of December 31, 2009. Property, plant and equipment was up from EUR 70.0 million to EUR 72.3 million, primarily due to the investments that were made in the production facilities at the Enger site.
Current assets fell from EUR 79.7 million to EUR 71.1 million, which is mainly due to the factoring at two subsidiaries that was introduced at the start of the fiscal year, and improved receivables management at the Group. Trade receivables fell from EUR 46.5 million to EUR 32.4 million as a consequence. There was a countervailing and significant increase in inventories from EUR 24.7 million to EUR 28.2 million. This was mainly connected with the start of series production for the new WELLMANN product range. Kitchens from both the old and the new model were produced during a transitional phase. This effect will discontinue in 2011.
On the equity and liabilities side of the balance sheet, and due to the two capital increases during the period under review, subscribed capital was up from EUR 41.1 million to EUR 45.2 million, and the capital reserve was topped up from EUR 36.5 million to EUR 42.4 million. Consolidated equity stood at EUR – 69.7 million, compared with EUR – 71.1 million as of December 31, 2009. One of the most important objectives of the “ALNO 2013” future concept is a sustainable increase in equity within the next few years. An important step on this path was achieved after the end of
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the period under review with the successful placing of the capital increase, and the conclusion of a further restructuring agreement (please see “B. Report on events after the balance sheet date”).
Non-current liabilities amounted to EUR 34.9 million as of the end of 2010, compared with EUR 36.8 million. Pension provisions rose from EUR 16.2 million to EUR 17.0 million due to general interest-rate adjustments. Other non-current financial liabilities, which primarily include bank borrowings, fell from EUR 14.1 million as of December 31, 2009 to EUR 13.1 million.
Current liabilities, by contrast, were reduced from EUR 199.4 million to EUR 192.5 million. Among other factors, this was due to a loan waiver on the part of the four consortium banks in an amount of EUR 10.0 million. Other financing liabilities fell in this connection from EUR 87.4 million to EUR 73.1 million. The largest item in this context reflects bank borrowings of EUR 67.7 million (previous year: EUR 80.3 million). Current trade payables and other liabilities increased from EUR 102.0 million to EUR 111.1 million due to the greater utilization of supplier loans over the course of 2010.
Liquidity and financial position
Cash flow from operating activities amounted to EUR 11.5 million in 2010, compared with EUR 21.2 million in the previous year. This was particularly due to the lower balance on interest payments, and the financial result.
Net funds of EUR 14.3 million were deployed for investments (previous year: EUR 16.0 million), which were almost fully attributable to investments in property, plant and equipment.
Cash flow from financing activities stood at EUR 2.5 million (previous year: EUR – 5.3 million). This item is mainly composed of inflows from capital increases (EUR 10.0 million), and from the drawing down of financial liabilities (EUR 1.5 million). This was offset by the redemption of financial liabilities (EUR – 7.5 million), and outgoing payments for financing costs (EUR – 1.5 million).
CHANGES IN NET DEBT
There was a further decrease in the net debt at the ALNO Group (other financial liabilities and shareholder loans less cash and cash equivalents) as of December 31, 2010 compared with the previous year’s reporting date due to the successful realization of the two capital increases. Net debt stood at EUR 83.5 million, compared with EUR 104.4 million at the end of the 2009 fiscal year. There will be a further significant reduction in net debt in 2011 with the recent restructuring package that was agreed following the end of 2010.
31/12/2010In EUR
31/12/2009In EUR
Change in EUR thousand
Change in percent
Shareholder loans and other financial liabilities
non-current 13,057 14,129 – 1,072 – 7.6
current 73,495 93,122 – 19,627 – 21.1
86,552 107,251 – 20,699 – 19.3
Less cash and cash equivalents – 3,041 – 2,857 – 184 – 6.4
83,511 104,394 – 20,883 – 20.0
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X. SINGLE-ENTITY FINANCIAL STATEMENTS FOR ALNO AG ON THE BASIS OF THE GERMAN COMMERCIAL CODE (HGB)
ALNO AG’s single-entity income statement (HGB) for 2010
In EUR thousand 2010 2009
Revenues 103,833 134,444
Changes in inventories and own work capitalized – 2,193 – 2,140
Other operating income 20,507 24,928
Total operating revenue 122,147 157,232
Cost of materials 48,073 65,374
Personnel expenses 41,443 43,531
Other operating expenses and other taxes 41,684 44,748
131,200 153,653
EBITDA – 9,053 3,579
Depreciation/amortization/impairment losses 7,310 6,788
EBIT – 16,363 – 3,209
Financial result 13,359 – 6,002
EBT – 3,004 – 9,211
Extraordinary result – 11,630 – 704
Taxes on income 11 0
Net loss for the year – 14,623 – 9,915
ALNO AG was obliged to absorb a revenue decline in the 2010 fiscal year. Although revenues in Germany were down by 29.7 %, the revenue decline abroad was more moderate, at 5.6 %. By contrast, net revenue per cabinet was increased from around EUR 193 to EUR 208, due to the company’s decision to refrain from entering into low-margin sales.
In the single-entity financial statements of ALNO AG prepared on the basis of the German Com-mercial Code (HGB), the gross profit margin in the 2010 fiscal year increased by 1.8 percentage points to 51.6 % (previous year: 49.8 %), and reflects the further significant improvement in sales quality also at ALNO AG. This is primarily due to the disproportionate fall in the cost of materials compared with revenues.
The personnel expense was reduced by EUR 2.1 million, or by 4.8 %, to EUR 41.4 million (previous year: EUR 43.5 million) primarily due to the workforce reduction measures that were started in the year under review, and which will not exert their full impact until 2011.
Other operating expenses and other taxes fell by EUR 3.1 million, or 6.8 %, to EUR 41.7 million. Rev-enue-dependent sales expenses fell in line with the revenue decline, and were offset by significantly higher expenses for trade fairs and exhibitions. There was a significant reduction in administrative expenses, which is mainly due to lower consultancy costs, and lower costs for external services.
Other operating income reduced by EUR 4.4 million, or 17.7 %, to EUR 20.5 million in the year under review. Although there was higher income due to costs transferred within the Group, the previous year’s figure contains significantly higher income from the reversal of specific valuation allowances (+ EUR 10.9 million), particularly relating to Gustav Wellmann GmbH & Co. KG.
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There was a significant, EUR 19.4 million, year-on-year improvement in the financial result. This increase in financial income resulted mainly from the earnings-effective reporting of the “Banks’ Loan Waiver (Part)” of EUR 10.0 million pursuant to the Restructuring Agreement of April 23, 2010, since the company was successful in implementing the suspensive conditions arising from this restructuring agreement for this portion of the banking waiver. The marked decline in interest expenses is attribut-able to lower interest charges negotiated as part of this restructuring agreement. This item was also affected in the previous year by interest payments arising from several shareholder loans, expenses arising from the planned capital increase that was finally postponed, and expenses arising from derivative financial instruments. Impairment losses of EUR 2.8 million will also apply to participating interests in associated companies (previously: EUR 7.6 million). There was a EUR 3.7 million improve-ment in the net balance of income and expenses arising from profit-and-loss transfer agreements.
The extraordinary result deteriorated by EUR 10.9 million year-on-year, which is attributable to work-force reduction expenses of EUR 7.5 million at the Pfullendorf site, consultancy costs of EUR 0.7 million connected with the restructuring, and EUR 0.2 million of expenses incurred as part of the liquidation of subsidiaries. In addition, the transition to the German Accounting Law Modernization Act (“BilMoG”) as of January 1, 2010 resulted in an extremely charge of EUR 3.2 million.
ALNO AG’s single-entity balance sheet (HGB) as of December 31, 2010
In EUR thousand 31/12/2010 31/12/2009
ASSETS
Non-current assets
Intangible assets 5,638 5,516
Property, plant and equipment 15,373 19,305
Non-current financial assets 105,482 108,282
126,493 133,103
Current assets
Inventories 9,104 9,882
Receivables and other assets 22,547 20,447
Securities 0 2,008
Cash in hand and bank balances 116 2
31,767 32,339
Prepayments and accrued income 498 391
Assets-side differential amount 154 0
158,912 165,833
EQUITY AND LIABILITIES
Equity
Subscribed capital 45,231 41,242
Capital reserve 42,437 36,544
Accumulated deficit – 56,389 – 46,675
31,279 30,993
Provisions 30,118 27,239
Liabilities 97,515 107,601
158,912 165,833
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The slight increase in intangible assets results primarily from additions arising from the purchase of customer bases from foreign subsidiaries.
The decline in property, plant and equipment is due to lower investment volumes compared with depreciation, and sales of land and buildings in the year under review.
The fall in financial assets arises from the EUR 2.8 million impairment loss applied to the carrying amount of the participating interest in ALNO International GmbH.
The slight fall in inventories is attributable to the lower level of business activities, and to the working capital measures that were implemented.
Receivables and other assets were up by EUR 2.1 million, primarily due to higher VAT receivables.
The equity ratio increased from 18.7 % to 19.7 % year-on-year. There was a EUR 0.3 million increase in equity to EUR 31.3 million. The EUR 14.6 million net loss for the year is offset by a EUR 10.0 million capital increase, and a EUR 4.9 million waiver by a shareholder of a mezzanine loan.
Provisions increased by EUR 2.9 million to EUR 13.1 million, which is predominantly attributable to the revaluation of the pension provision and other provisions as part of the German Accounting Law Modernization Act (BilMoG).
The fall in liabilities is mainly due to lower bank borrowings due to the banking waiver.
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B. REPORT ON EVENTS AFTER THE BALANCE SHEET DATE
Restructuring Agreement II and successful conclusion of the capital increase that was launched in 2010
On February 9, 2011, the company, the consortium banks, Küchen Holding GmbH, Munich, IRE Beteiligungs GmbH, Stuttgart, Bauknecht Hausgeräte GmbH, Stuttgart, and Starlet Investment AG, Nidau/Switzerland, concluded a further restructuring agreement that supplements the agreement was concluded in April 2010. In this connection, all parties committed themselves to restructuring contributions that are to reach a total minimum level of EUR 70 million over the course of 2011. Consolidated equity will undergo a sharp improvement once the measures that have been regulated in the new restructuring agreements have been successfully implemented.
Investors and shareholders issued subscription guarantees totaling EUR 20.0 million when the capital increase, which was postponed in November 2010, was resumed. This rights issue from authorized capital was resumed in February 2011, and was successfully concluded on March 3, 2011. A total of 8,698,326 new no par value ordinary bearer shares (no par shares), each with a nominal amount in the share capital of EUR 2.60, were issued. The issue price was EUR 3.00. As a consequence, the company generated total gross issue proceeds of EUR 26.1 million, and the share capital increased by EUR 22,615,647.60 to EUR 67,846,945.40. The capital increase was entered in the commercial register on March 4, 2011.
Starlet Investment AG has obligated itself to relieve the ALNO Group of trade payables due to Bauknecht Hausgeräte GmbH, and to associate companies of Bauknecht Hausgeräte GmbH, to an amount of at least EUR 25.0 million. With respect to a partial amount of EUR 12.5 million, this is to occur by May 31, 2011, by way of a waiver, or by depositing the receivables as a non-cash capital contribution into the capital reserve of ALNO AG. With regard to a further partial amount of EUR 12.5 million, this is to occur through contributing these receivables as part of a capital increase against non-cash capital contributions, to the extent that this partial amount is of value. The obliga-tion is subject to the suspensive condition that the capital increase is performed successfully with gross issue proceeds of at least EUR 20.0 million, and that the capital increase is entered in the commercial register by May 30, 2011; and, with regard to the further partial amount that is to be contributed as part of a capital increase against non-cash capital contributions, additionally under the suspensive condition that ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH satisfy certain co-operation obligations relating to the realization and performance of the capital increase against non-cash capital contributions (in particular, through corresponding exercising of voting rights at the Shareholders’ General Meeting), as well as with regard to the contribution of the partial amount of receivables. If, and to the extent, that the contribution of the further partial amount of EUR 12.5 million has not occurred by December 31, 2011, Starlet Investment AG has obligated itself to waive these receivables for the company and its associated companies by way of deposit into the company’s capital reserve at the latest by, and with effect of, December 31, 2011, unless the capital increase against non-cash capital contributions fails to occur due to an infringement on the part of ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH against their co-operation duties.
Under the suspensive conditions that the capital increase is successfully performed with gross issue proceeds of at least EUR 20.0 million, and that the capital increase is entered in the commercial register by May 30, 2011, as well as the relieving of the ALNO Group from trade payables of at least EUR 25.0 million by Starlet Investment AG, ALNO AG and Bauknecht Hausgeräte GmbH have agreed to reduce the existing overdraft facility to zero. The consortium banks have agreed to this reduction.
Küchen Holding GmbH has obligated itself to relieve the ALNO Group of loan liabilities to the consortium banks in an amount of EUR 25.0 million. In the first step, and at the option of Küchen Holding GmbH, this relief is to occur either by way of purchase of receivables with full discharge of
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the debtor, or through other agreements that lead to the same economic result for the consortium banks. In the instance of the purchase of the receivables, Küchen Holding GmbH intends in a second step to contribute the valuable portion of the receivables acquired from the consortium banks as a non-cash capital contribution to the company as part of a capital increase against non-cash capital contributions by December 31, 2011. The obligation on the part of Küchen Holding GmbH is subject to the suspensive conditions that the capital increase is successfully performed with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, that the ALNO Group is relieved of trade payables by Starlet Investment AG, and that certain co-operation duties are satisfied by ALNO AG, IRE Beteiligungs GmbH and Starlet Investment AG with regard to the realization and performance of the capital increase against non-cash capital contributions (in particular, through corresponding exercising of voting rights at the Shareholders’ General Meeting), as well as with regard to the contribution loan receivables. If, and to the extent that, the contribution of the loan receivables has not occurred by December 2011, 31, Starlet Investment AG has obligated itself to waive these receivables for the company and its associated companies by way of deposit into the company’s capital reserve at the latest by, and with effect of, December 2011, unless the capital increase against non-cash capital contributions fails to occur due to an infringement on the part of ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH against their co-operation duties.
The consortium banks have obligated themselves to conclude the agreements with Küchen Holding GmbH that are requisite for the relieving of the ALNO Group of loan receivables. This obligation is subject to the suspensive conditions that the capital increase is performed successfully with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, and that the ALNO Group is released from the aforementioned trade payables by Starlet Investment AG. The consortium banks have also declared their waiver of the debtor warrant as granted by ALNO AG as part of Restructuring Agreement I. This waiver is subject to the suspensive condition that the capital increase is performed with gross issue proceeds of at least EUR 20.0 million, and that it is entered in the commercial register by May 30, 2011. The second waiver of EUR 10.0 million arising from Restructuring Agreement I that was concluded on April 23, 2010 was cancelled as part of this agreement under the suspensive condition that the capital increase is performed with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, and that the ALNO Group is relieved of trade payables in an amount of at least EUR 25.0 million by Starlet Investment AG. A further extension of the loan terms until December 31, 2010 will be examined in a favorable light under further terms whereby a restructuring survey to be compiled by Pricewaterhouse Coopers AG Wirtschaftsprüfungsgesellschaft for ALNO AG issues a positive forecast relating to the company’s continued existence, and that the capital increase is entered in the commercial register by May 30, 2011. Under these terms, the consortium banks will also support ALNO AG in its application for a federal state guarantee.
Finally, and as part of the Restructuring Agreement II, the company obligates itself, at corresponding written request by Küchen Holding GmbH, which must be submitted to the company by December 31, 2011, to issue convertible bonds from conditional capital under exclusion of subscription rights for the company shareholders to majority shareholders in Küchen Holding GmbH or to third parties to be nominated by Küchen Holding GmbH. When converted, these convertible bonds will entitle to the subscription of shares to a level of up to 10% of the company’s share capital. Küchen Holding GmbH has obligated itself to pledge that these convertible bonds will be subscribed for.
ALNO AG has obligated itself to the consortium banks to solicit the support of professional consult-ants for its further restructuring.
The restructuring agreements presented above are regarded as an integral component of the Group restructuring, and consequently as an elementary basis for the further realization of the planned restructuring measures.
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Production of ESPRIT home kitchens in Pfullendorf
On April 4, 2011, the company’s management also announced that the ESPRIT home kitchens would be produced at the Pfullendorf site. Renovation of the roof and further investments in Plant 1 are connected with the planned expansion of components production for Group supply. In order to neutrally structure start-up costs, the Works Council has declared that the workforce is prepared to make a contribution to the investments through the waiving of hours worked. Far-reaching flexibility in terms of personnel capacity and working hours was also negotiated in Pfullendorf. The site is to sustainably improve its competitiveness as a result of these measures. The decision to produce the ESPRIT home kitchens in Pfullendorf fits into the “ALNO 2013” strategy to manufacture specialty ranges, exclusive products and series entailing small unit volumes there in the future, since the ESPRIT home kitchens fall into both categories.
Changes to the Managing Board
At its meeting held on April 6, 2011, the Supervisory Board of ALNO AG reached a decision concerning a new Managing Board team. Max Müller was unanimously appointed to be the new Managing Board Chairman (CEO) with immediate effect. His future departmental responsibilities include Marketing, Development, Production, Purchasing, Logistics and Quality. Christoph Fughe became the new Managing Board member responsible for the Sales area. He was previously Head of Sales for ALNO AG. Jörg Artmann remains the Managing Board member responsible for Finance (CFO), Personnel and IT. Jörg Deisel (who as CEO was previously responsible for Sales, Marketing and Development) and Michael Paterka (who was the Managing Board member responsible for Production, Purchasing, Logistics and Quality) have left the company.
Expansion of factoring volumes
With an agreement dated December 8/28, 2010, the ALNO Group increased its previous factoring volume with GE Capital Bank AG from EUR 20 million to EUR 45 million with effect as of January 1, 2011. In addition to the existing subsidiaries Impuls Küchen GmbH and pino Küchen GmbH, the factoring arrangement now additionally includes Gustav Wellmann GmbH & Co. KG. The three companies can utilize the factoring volumes on a variable basis up to the maximum amount of EUR 45 million.
On April 5, 2011, ALNO AG signed a further factoring agreement with GE Capital Bank AG, whereby ALNO AG trade receivables are to be sold in an amount of EUR 15 million. The contract has yet to be signed by GE Capital Bank AG, since certain terms have yet to be satisfied. Once this agreement has been successfully concluded, the ALNO Group will increase its previous factoring volumes with GE Capital Bank AG from EUR 45 million to EUR 60 million. The four companies should then also be able to utilize the factoring volumes on a variable basis up to the maximum amount of EUR 60 million.
Liquidation of ALNO France
A resolution was passed in spring 2011 to close the foreign subsidiary ALNO France S.á r.l., Cagnes-sur-Mer, France.
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Extension of the original restructuring survey of June 24, 2010 by Pricewaterhouse Coopers
At the start of 2010, Pricewaterhouse Coopers AG Wirtschaftsprüfungsgesellschaft (“PwC”) was engaged to prepare a restructuring survey for the ALNO Group according to the standard IDW S6 of the Institut der Wirtschaftsprüfer. In its restructuring survey dated June 24, 2010, PwC issued the ALNO Group with a positive forecast for a going concern, to the extent that financing is secured in line with the Restructuring Agreement I of April 23, 2010, and that the pending activities in the company’s forecast are implemented.
In spring 2011, PwC was mandated to produce an update of the restructuring statement for the ALNO Group. In its (draft) updated restructuring survey of May 13, 2011, PwC arrives at the conclusion that, from today’s perspective, the ALNO Group remains completely financed under certain preconditions, and that no change arises relating to the restructuring statement as presented in the restructuring survey of June 24, 2010. PwC nevertheless points out that the restructuring of the ALNO Group will require more time than was planned in the previous year.
PwC notes that the liquidity position appears to be secured only under the following terms, and on the basis of the following assumptions, including with the liquidity-effective financial measures of the Restructuring Agreement II (in particular, the capital increase), which have already been realized:
• The corporate planning that has been adjusted by PwC, including the defined effects arising from potentials, must be achieved. This requires that the measures planned by the Managing Board are implemented stringently.
• Commercial credit insurers and suppliers must not implement negative changes to their payment terms compared with the current status, and/or compared with the planned level.
• Local financing lines must be maintained in line with the planning.
• Existing credit lines must be available beyond December 31, 2011.
• The existing EUR 45 million factoring facility, and the additionally planned EUR 15 million factoring facility, must be available beyond February 28, 2012.
• The financing shortfalls apparent in the August 2011 planning, as well as in the first quarter of 2012, must be met by appropriate measures (e.g. granting of supplier loans, drawing down of a new loan backed by a federal state, the issuing of a bond, or further internal measures to secure liquidity).
The continuation of corporate activities on the part of ALNO AG and/or on the part of the ALNO Group depend on the aforementioned terms and assumptions occurring as planned, or being applicable as planned. The Managing Board of ALNO AG assumes that these terms and assumptions will occur as planned, or will be applicable as planned.
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c. REPORT ON OPPORTUNITIES AND RISKS / FORECAST REPORT
I. RISK AND FORECAST REPORT
RISK REPORT
Risk management system
In order to implement and secure its business transactions, the ALNO Group has developed proce-dures and formed committees that allow the Managing Board to identify going-concern risks for the company at an early juncture. Risks are identified, evaluated, managed and monitored in the ALNO Group based on a system that is implemented Group-wide to identify and monitor risks at an early stage. Dealing with risks successfully is based on the objective of balancing return and risk. From 2009, the risk management system placed all of the risk-bearing decisions in the entire Group on a uniform quality platform, thus making them transparent and verifiable for the management team and the affected employees.
Risk management is based on risk controlling at the operating level, strategic controlling for share-holdings, and an internal monitoring system for the early recognition of going-concern risks. Operat-ing risk controlling comprises constantly updated risk information. The Managing Board receives constant information thanks to an end-to-end reporting system, and also receives corresponding ad hoc information if required. Strategic controlling for participating interests takes into account the risks and opportunities based on analyses of the market and competition, which form the basis for management decisions. In addition, the controlling for participating interests also monitors whether business targets are achieved, and manages the Group’s companies using uniform key performance indicators. As a result, this system creates the foundations for early recognition of risks, and the implementation of measures to minimise risks.
In 2007, additional controlling bodies were put in place that report on restructuring projects, and their impacts on earnings and risks at regular intervals, as a rule, once per month. Within the Group, it must be possible to recognise risks from redundancies, inefficiencies or bottlenecks in the operating process. The activities then put in place must be performed in view of their impact on the company’s most important partners, its customers. ALNO AG hedges its trade receivables, in particular, using credit insurance, and its integrated Group receivables management system ensures appropriate control of liquidity in line with customer needs and security considerations. Liquidity controlling, man-aged on a Group basis, monitors cash flow developments, and, at the same time, provides relevant parameters for rapid management decisions. In order to hedge against insolvency risk arising from partial retirement obligations, ALNO AG has invested in securities in a corresponding amount. These were measured in the consolidated financial statements at market values on the balance sheet date.
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Financial risks
The ALNO Group utilises forecasting and management tools that recognise liquidity risks at an early stage in order to hedge against financial risks. ALNO AG essentially acts as financial coordinator for all Group companies so as to ensure the most advantageous and permanently adequate cover of financing needs for business operations. The necessary information potential is updated monthly, and is subjected to a divergence analysis within the framework of rolling financial planning. This financial forecast, with its one-year horizon, is supplemented by a daily cash flow development forecast that is continuously reconciled with actual cash flows. The ALNO Group continuously monitors the liquidity reserves on hand.
A considerable portion of the credit lines that have been granted to the ALNO Group are currently made available on an “until further notice” basis, and can consequently be called due at any time. Most of the ALNO Group’s master credit agreements may be cancelled without notice if, among other things, a significant deterioration occurs, or threatens to occur, to the economic circumstances of the ALNO Group or to the value of a collateral item, thereby jeopardising the repayment of the loans. Should significant credit lines be called due, or were key master credit agreements to be cancelled on an extraordinary basis and be called due for repayment, the ALNO Group would be forced to raise additional capital in the form of debt or equity. In addition, a significant portion of the bank loans utilised by the ALNO Group carries variable interest rates. Rising interest rates, or other disadvantageous modifications to the terms of the loans, could result in the debt utilised by the ALNO Group becoming more expensive, resulting in a greater burden on the financial result.
The intra-Group financial equalisation carried out in Germany within the framework of cash pooling leads to a reduction in the volume of external financing with a positive effect on the Group’s net interest. The internal financial equalisation ensures the use of liquidity surpluses of individual Group companies for the internal financing of other Group companies. The intra-Group cash pooling was reduced from November 2009.
As part of the Group’s receivables management, minimum creditworthiness requirements, as well as upper exposure limits, are laid down for all ALNO Group business partners. The basis in this context is a prescribed limits system, compliance with which is continuously monitored. In addition, the ALNO Group secures trade receivables with commercial credit insurance, which reimburses the loss incurred up to the contractually agreed proportional amount in the event of a receivables default subject to a deductible.
Liquidity risks
The primary focus for the 2011 and 2012 fiscal years remains on securing the Group’s liquidity position. From as early as 2009, the Managing Board of ALNO AG started to develop a concept to secure its liquidity and future. The extensive restructuring measures arising from this concept, and which were already partially in the implementation stage in spring 2011, are described in detail under B. “Report on events after the balance sheet date”. From the perspective of the Managing Board of ALNO AG, the long-term liquidity requirements of the ALNO Group will only be partially satisfied with the successful implementation of the Restructuring Agreement II of February 9, 2011. The liquidity shortfalls in August 2011 and in the first quarter of 2010 that are contained in the current corporate and liquidity planning need to be closed by measures yet to be implemented by the Managing Board (e.g. issuing a bond, a federal state guarantee, or similar).
The ALNO Group also utilises factoring as a financing source to a significant extent. The provision of the financing by the factoring companies presupposes the existence of corresponding receivables. Should the ALNO Group be required to satisfy receivables on a shorter term basis than expected due to modifications to the factoring agreements that it utilises, the ALNO Group’s liquidity would face a significant burden.
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Exchange rate risks
Currency exchange-rate risks exist with regard to deliveries to countries outside the Eurozone, particularly deliveries to Switzerland and the United Kingdom. Currency exchange-rate trends are subject to constant monitoring. There were no forward currency transactions in place as of the balance sheet date. ALNO will implement exchange rate hedging measures if new currency risks arise as part of the further international expansion.
Price risks
The most important commodities for ALNO are wood, plastics and metal. Price changes for these materials on the market could exert a corresponding impact on the Group’s margin trends.
Materials prices
The market for wood and metal products was confronted with significant price increases in the 2011 fiscal year. The current situation on commodities markets means that a reduction in materials prices cannot be expected until the final quarter of 2011 at the earliest. In line with this trend, high fuel prices lead to the expectation that distribution costs will increase above budget. Further bundling of transported items is indispensable as a countermeasure.
Services
A significant increase in fuel prices is feeding through to particular risks in terms of transportation cost trends. ALNO has bundled and streamlined its freight consignments in order to counter this.
Market risks
The ALNO Group operates in the kitchen furniture sector, a market that is characterised by intense competition. Tough price competition on the part of providers, particularly in the lower price ranges, is resulting in ever greater margin pressure, and is crowding out less competitive manufacturers at the same time. Activities on the part of competitors and wholesalers/retailers could significantly reduce the revenues and earnings level of the ALNO Group.
The ALNO Group’s customers are primarily resellers, most of whom are organised into purchasing associations. If important purchasing associations were to reduce their ordering volumes, cancel master agreements, be required to file for bankruptcy, and if the ALNO Group proved unable to acquire new customers to a comparable extent, or if existing customers proved unable to increase their ordering volumes to the same extent, this might result in a marked decline in capacity utilisation and revenues, and lead to receivables defaults for the ALNO Group.
In addition, the repositioning of the ALNO Group brand world that was launched in the previous year, and the new sales structure that has already been set up, must be further established. This also carries risks.
Germany is the ALNO Group’s primary sales market, and accounts for an approximately 70 % share of total revenues. The United Kingdom, France, Austria, Switzerland, Spain, Italy and the Benelux countries are additional notable sales markets. These markets have reported different growth rates in the past. Particularly markets abroad, such as the Spanish market, have been subject to negative influences. ALNO AG assumes that individual markets will continue to report different growth rates in the future, and remain dependent on economic influences.
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IT risks
A large part of the production, inventory administration, and accounting system of the ALNO Group is operated primarily on the basis of IT systems. A breakdown of the IT or production systems could result in a production standstill, thereby leading to significant financial losses for the company. ALNO AG has also outsourced almost all of its IT systems. Should disruptions occur to the contrac-tual relationship relating to the rendering of services in ALNO AG’s entire IT area, this would have a detrimental effect on all of the working processes of the company’s data-processing.
Corporate strategy risks
With its “ALNO 2013” future concept, the ALNO Group has started a concept that includes multi-levelled changes within the Group. In order to identify all risks at an early stage that might arise from this concept, ALNO commissioned a restructuring survey from PwC in 2010 that was extended in 2011 on the basis of corporate planning for the years 2011 to 2014 (please refer to B. “Report on events after the balance sheet date”).
In order to stabilise the net assets, financial position and net assets of the ALNO Group, the company’s assessment is that, as part of the “ALNO 2013” future concept, among other things measures are required to boost efficiency in the administrative and sales area, to reduce costs, and to ensure profitable growth, particularly through the repositioning of the brands. These measures require investments and corresponding funds. An IT project that serves to unify the IT structure to support a centralised financing organisation is currently considerably behind schedule. In particular, this may lead to delays in the centralisation of administrative structures. Further funds might need to be raised if the measures can only be implemented with a time delay, or with greater than intended investments, or should the targeted measures fail to have the anticipated success and intended effect.
REPORT ON OPPORTUNITIES
Shipments and sales
Further market potentials exist with respect to the WELLMANN brand already for the current fiscal year.
The “Esprit Kitchens” model series has not been included in the medium-term planning with respect to potential sales. The number of “Esprit licensing agreements” that have been concluded is already ahead of the planned volume.
The Group will publish a so-called “ALNO performance commitment” at its in-house trade fair in 2011. In this performance commitment, all customers are given binding commitments concerning important service parameters (e.g. processing periods for complaints, registration of new custom-ers, response following receipt of orders) - relating to the Group, but also on a differentiated basis according to the individual brands. This will allow ALNO to achieve a new distribution quality on the market that offers sales opportunities. As an example, a communication process logistics has been newly tested for Spain, which is resulting in sustained customer satisfaction and more stable logistics processes.
In 2010, ALNO successfully established its “rapid delivery service” for the IMPULS brand, in other words, with rising sales and earnings. No competitor has launched a comparable offering on the market to date. By contrast with competitors, experts from different industrial sectors have been brought together within the ALNO management team over the last 24 months. This allows experi-ence from other industries to be integrated into kitchen manufacturing and marketing. Analogously to the “rapid delivery service” topic, an Internet-based online ordering opportunity is to be created together with one customer for the PINO Brand (“PINO Online”), that enables the ordering and
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invoicing process to be fully automated. From ALNO’s perspective, this activity represents a prior step to tapping two market segments that have previously not been addressed by German kitchen manufacturers: firstly, a general process standardisation in the takeout and large-area sales chan-nels within Germany, which allows, along with the “block kitchen” topic, other parameters, such as minimum volumes, logistics deadlines etc, to be established analogously to the market for a self-assembly furniture. Secondly - and this is the strategic objective – it allows an entry to be made into the self-assembly furniture market with “the proper kitchens”.
Marketing
Responsibility for the show kitchen process is allocated to the “Marketing” area at ALNO. Competitors in Germany work predominantly with their own assembly teams. With the exception of a very small “supervisory team”, ALNO has completely outsourced its show kitchen assembly. In the case of in-sourcing, it is assumed that the complaints ratio will fall for show kitchens since the Group’s own personnel create their own kitchens with a higher level of specialist expertise.
Purchasing
Regular make-or-buy analyses are systematically performed, as is the case with components manu-facturing. Along with the minimisation of risk relating to supplier price increases, this generates the opportunity for cost reductions.
Logistics
As part of its “ALNO 2013” project, the Group is planning to establish logistics expertise to a greater extent as an in-house capability. This relates to materials planning know-how. From today’s perspective, it is to be assumed that this will also be connected with cost reductions.
Production
Corresponding in-sourcing topics from the “Purchasing” area should be mentioned in this con-text. The reactivation of components production at Pfullendorf opens up further potentials for the additional in-sourcing of carcass components. It also gives the Group the opportunity to “shift” production volumes between plants.
Quality
Error costs are to be further reduced above and beyond the planned volume. The opportunity exists at ALNO to reduce the complaints ratio, and consequently corresponding costs, through quality improvement projects with wholesalers/retailers, or further training of the sales force. The same applies for a consistent quality audits at suppliers, with the possibility of a more targeted regression.
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II. FORECAST REPORT
In all markets of relevance for the ALNO Group, the 2010 fiscal year was characterised by a significant indications of economic recovery following the global economic crisis. In parallel, and as part of the current restructuring, the reorganisation of the Group, the creation of standard technical platforms across the Group, and the production switched to the new WELLMANN product range, comprise factors that had a particular impact on sales and earnings trends.
From the Managing Board’s perspective, good preconditions for a positive corporate trend in the new financial year were created on the basis of the milestones achieved as part of “ALNO 2013”: for instance, the new pricing policy for the ALNO brand was successfully transferred to new agree-ments, and start-up difficulties connected with the launch of the new WELLMANN products have meanwhile been addressed. With the restructuring of the foreign subsidiaries that has almost been concluded in the meantime, the ALNO Group can also re-intensify its sales activities abroad.
For 2011, the management anticipates that EBITDA will undergo a further improvement compared with the reported 2010 figure. Revenue should be at least at the level of 2010. From the perspective of the Managing Board, 2011 will be prospectively characterised by the following topics: Higher investments are planned in the administrative/IT area, but also in the factories. The Group restructur-ing will also be continued as planned. Among other aspects, this also means that we will continue to consistently and clearly position our brands. This particularly concerns the ALNO and WELLMANN brands. At the same time, production flexibility is to be further increased by introducing a joint techni-cal platform for the PINO and IMPULS brands, as is already the case with ALNO and WELLMANN. In addition, we plan to implement further capital measures as agreed in the Restructuring Agreement II. A slight increase in revenue and a further improvement in EBITDA is expected for 2012.
For the ALNO segment, a slight revenue decline, and a slightly improved EBITDA, is expected for 2011, compared with 2010. For 2012, the Managing Board anticipates that revenue will increase to the 2010 level, and a further improvement in EBITDA. For the WELLMANN, IMPULS and PINO segments, a slight increase in revenue is expected in each case for the subsequent two years, and EBITDA lying slightly above the 2010 level.
From the company’s perspective, the precondition for this is that kitchen furniture market is not about to confront a double-digit fall in sales, and that revenue trends within the Group can be stabilised at the level of the fiscal year elapsed.
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d. OTHER INFORMATION
I. CORPORATE MANAGEMENT STATEMENT / CORPORATE GOVERNANCE REPORT
Corporate Governance Declaration (Section 289a of the German Commercial Code [HGB]) and Corporate Governance Report
DECLARATION WITHIN THE MEANING OF SECTION 161 OF THE GERMAN STOCK CORPORATION ACT (AKTG)
Corporate Governance means the responsible, transparent and well-ordered management and control-ling of companies. The German Corporate Governance Code (hereinafter: Code) aims to standardize and systemize the implementation of the rules for company management and control that apply in Germany for German and international investors, to thereby reinforce trust in the management of German companies. According to Section 161 of the German Stock Corporation Act (AktG), listed com-panies undertake to issue an annual declaration as to whether they have met, or will meet, the Code’s recommendations, or which recommendations were not applied, or will not be applied, and why not.
In May 2010, the Code underwent its annual review and adjustments by the Government Commis-sion German Corporate Governance Code. There were primarily changes to the composition of management and supervisory boards. The Government Commission German Corporate Governance Code is strengthening efforts to introduce diversity into the structure of governing bodies, and to achieve an appropriate inclusion of women.
The Managing and Supervisory boards of ALNO AG expressly greet the Code’s recommendations, and the objectives that are being thereby pursued. Both boards continued to concern themselves intensively with the Code’s recommendations and their implementation this year, and have complied with the recommendations apart from a few exceptions. The joint declaration of conformity by the Managing and Supervisory boards is reproduced below, and has been published online at www.alno.ag.
DECLARATION BY THE MANAGING AND SUPERVISORY BOARDS OF ALNO AG ON THE RECOMMENDATIONS OF THE GERMAN CORPORATE GOVERNANCE CODE WITHIN THE MEANING OF SECTION 161 OF THE GERMAN
STOCK CORPORATION ACT (AKTG)
The Managing and Supervisory boards of ALNO AG state that between the last declaration of compliance on December 1, 2009 and July 1, 2010, the recommendations of the German Corporate Governance Code in the version of June 18, 2009 (published on August 5, 2009), and from July 2, 2010, the recommendations of the German Corporate Governance Code in the version of May 26, 2010 (published on July 2, 2010), were, and are, complied with, with the following exceptions:
• The General Meeting, together with the convening documents, is not convened using electronic means, since the company regards convening of the General Meeting as not yet practicable using electronic means (Code Item 2.3.2).
• The German Corporate Governance Code recommends a deductible for the D&O insurance for supervisory board members. ALNO AG remains of the view that the deductible is not required with regard to the responsibility and motivation of the members of the Supervisory Board when perform-ing their duties. By way of divergence from Item 3.8 of the Code, the existing D&O insurance policy for members of ALNO AG’s Supervisory Board does not include a deductible as a consequence.
• Item 4.2.3 (4) of the Code recommends that, when entering into employment contracts with manag-ing board members, payments made to a managing board member who steps down early from managing board activities without an important reason, should not exceed the value of two years of remuneration including ancillary benefits (settlement cap), and should not remunerate more than the residual term of the employment contract. The employment contracts for ALNO AG Managing Board members contain no settlement cap, and have not contained such a provision, including since when the respective recommendation in the Code was adopted in 2008. The company does not regard
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agreeing a settlement cap as requisite. Rather, it is convinced that the Supervisory Board will act in the company’s interest when a Managing Board member leaves the company, and that it will not grant an inappropriate settlement. A divergence from Item 4.2.3 (4) of the Code is notified for this reason. To this extent, ALNO AG’s declarations of compliance from the years 2008 and 2009 have been amended.
• A remuneration report (Code Item 4.2.5 (1) Sentence 1) was prepared. This is published in the notes to the consolidated financial statements in the annual report, since it relates to compulsory information in the notes to the consolidated financial statements within the meaning of Section 314 (1) No. 6 of the German Commercial Code (HGB). For this reason, the remuneration report does not form part of the corporate governance report. The corporate governance report nevertheless refers to the remuneration report in the notes to the consolidated financial statements.
• According to Item 5.3.3 of the Code, the supervisory board should form a nomination committee that proposes appropriate candidates to the supervisory board for its election proposals to the general meeting. The company’s Supervisory Board has not formed such a committee since, according to the experience it has gained to date, it does not regard this as necessary in order to propose appropriate candidates.
• With the new version of the Code of May 26, 2010, new recommendations were introduced into Item 5.4.1 (2) and (3) of the Code, whereby the supervisory board should state specific targets for its composition, which, when taking into account its specific corporate situation, reflect the company’s international activity, potential conflicts of interest, a fixed age limit for supervisory board members, and diversity. These specific targets should include the appropriate involvement of women, in particular. Supervisory board proposals to the relevant elective bodies should take these targets into account. The objectives and the status of implementation should be published in the corporate governance report. The Supervisory Board of ALNO AG has already in the past provided a specific target relating to the maximum age of its members. As of the date of the issuing of this declaration of compliance, the Supervisory Board is still conducting an internal examination of which further specific targets mentioned in Item 5.4.1 (2) of the Code are important for the composition of the Supervisory Board given ALNO AG’s specific situation. Following the conclusion of this internal analysis, the Supervisory Board may formulate further specific objectives for its composition – particularly relating to an appropriate involvement of women. To this extent, provisional divergence from Item 5.4.1 (2) of the Code is declared. With regard to the internal discussion that is still ongoing at the time when this declaration of compliance is issued, as to whether and which objectives above and beyond the age limit should be determined, no further targets can yet be taken into consideration in any election proposals. It is also not yet possible to make a corresponding report in the Corporate Governance Report. For this reason, provisional divergence from Item 5.4.1 (3) of the Code is also declared.
• The Supervisory Board members receive no performance-related remuneration (Code Item 5.4.6 (2) Sentence 1). ALNO AG believes there is no current necessity to change this in view of the Supervisory Board’s controlling and monitoring function. The remuneration paid by ALNO AG to the Supervisory Board members for services personally rendered is published in the notes to the consolidated financial statements in the annual report, and is consequently not included in the Corporate Governance Report (Code Item 5.4.6 (3) Sentence 2).
• The consolidated financial statements are not yet published within 90 days after the end of the fiscal year, and the interim reports are not yet published within 45 days of the end of the period under review (Code Item 7.1.2 Sentence 3). The company intends to bring its consolidated financial statements and interim reporting more into line with these periods.
Düsseldorf, October 7, 2010
For the Managing Board For the Supervisory Board
Max Müller Henning Giesecke
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RELEVANT INFORMATION ON CORPORATE GOVERNANCE PRACTICES THAT ARE APPLIED ABOVE AND BEYOND LEGAL REQUIREMENTS
ALNO AG’s approach
ALNO AG’s commitment is to conduct all of its business in a way that is ethically and legally irreproach-able. ALNO AG has built its “one group concept” on an approach that introduces employees and partners to the essence of the company’s culture, represents the company’s identity, and describes the principles of sustainable and socially responsible activity.
Corporate policy on a code of business conduct
ALNO AG has approved an internal corporate policy on a code of business conduct. As well as basic behavioral requirements, this document governs how to deal with business partners and third parties, with company equipment, and with information. It is applicable for all employees in the ALNO Group, including executives and the Managing Board. The corporate policy also covers issues such as the environment, occupational health and safety, and the right to lodge complaints, and obtain information. Checks are regularly conducted at all companies within the Group to ensure that the Group’s code of business conduct is being adhered to. These checks are performed in conformity with the relevant national procedures and legal provisions.
Transparency and accounting
In annual and interim reports, ad hoc disclosures, and press releases, ALNO AG regularly informs its shareholders and interested members of the public about its position, and significant commercial changes within the company. The corporate information published by the company can also be accessed on the company’s website at www.alno.ag.
The company’s accounting system migrated to International Financial Reporting Standards (IFRS) with effect from fiscal 2005.
DESCRIPTION OF HOW THE MANAGING AND SUPERVISORY BOARDS OPERATE, AND THE COMPOSITION AND OPERATION OF THEIR COMMITTEES
The Managing Board
The Managing Board of ALNO AG currently consists of three members, and manages the company at its own responsibility. In doing so, it is bound to pursue the company’s interests, and is obligated to sustainably enhance the company’s value. The Supervisory Board appoints the members of the Managing Board. The Supervisory Board also determines the precise number of Managing Board members, and also appoints its Chairperson and his or her Deputy, if required.
Pursuant to ALNO AG’s Articles of Incorporation, the Managing Board has prepared internal rules of procedure with the approval of the Supervisory Board. These govern, in particular, the manage-ment of the company as a whole, and of the individual companies, distribution of the divisions, the Chairperson’s responsibilities, disclosure obligations to the Supervisory Board, and how to deal with conflicts of interest. The Managing Board regularly convenes meetings to discuss the course of business, and to pass resolutions. In addition, the Managing Board reports to the Supervisory Board on a regular basis, and in a timely and comprehensive fashion on all issues relevant to the company relating to planning, business growth, ongoing projects, the risk situation and risk management, and coordinates the company’s strategic direction with the Supervisory Board.
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The Supervisory Board
ALNO AG’s Supervisory Board monitors and counsels the Managing Board in its management of the company, and is involved in making decisions of fundamental importance to the company. The Supervisory Board of ALNO AG was equally represented with six shareholder representatives and six employee representatives until the General Meeting on June 23, 2010. As part of the status procedure pursuant to Section 2010 of the German Stock Corporation Act (AktG), which was launched by the company’s Managing Board in January 2010, the Supervisory Board was reduced to nine members, and has consisted of six shareholder representatives and three employee repre-sentatives since the General Meeting on June 23, 2010, pursuant to the provisions of the One-Third Participation Act.
In line with the Articles of Incorporation, the Supervisory Board has also prepared its own internal rules of procedure. These rules govern, in particular, the convening of meetings, the formation of committees and the tasks assigned to them, and the necessary prerequisites for Supervisory Board members. The Supervisory Board meets at least twice every six months. The Supervisory Board Chairperson decides whether the Managing Board members are to participate in the meetings. The meetings are convened at least two weeks in advance. The invitation to the meetings announces the agenda, and communicates the proposed resolutions. In individual cases, the Supervisory Board exercises the option to pass resolutions in writing or by telephone. No former member of the company’s Managing Board is a member of the Supervisory Board.
Each member of the Supervisory Board is obliged to disclose any conflicts of interest without delay. Any significant and non-temporary conflicts of interest arising for a Supervisory Board member will result in the termination of that member’s mandate.
The Chairperson of the Supervisory Board is in regular contact with the Managing Board, and, in particular, with the Chairperson of the Managing Board, and advises him or her on the company’s strategy, business development and risk management.
Each year, in the Supervisory Board’s report and at the company’s General Meeting, the Supervisory Board Chairperson discusses the activities of the Supervisory Board and its committees in detail.
Until the General Meeting on June 23, 2010, the Supervisory Board had formed three committees, an audit committee, an HR committee and a conciliation committee, pursuant to Section 27 (3) in combination with Section 31 (3) of the German Codetermination Act (MitbestG). Since the General Meeting, the Supervisory Board has formed the following committees: an audit committee and a presidential committee.
The HR committee consisted of three members, and prepared decisions relating to the staffing of the Managing Board, and agreements with the Managing Board members. It also planned long-term succession with the Managing Board.
THE HR COMMITTEE CONSISTED OF THE FOLLOWING MEMBERS:
• Mr. Hans-Peter Haase (Chairman)
• Dr. Jürgen Diegruber
• Mr. Michael Föst
The presidential committee has performed the tasks of the HR committee since the General Meeting of June 23, 2010. The presidential committee also prepares for the Supervisory Board meetings, supervises the resolutions that have been passed, and represents the company to former Management Board members, to the extent that such representation is not the responsibility of the Managing Board.
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THE PRESIDENTIAL COMMITTEE CONSISTS OF THE FOLLOWING THREE MEMBERS:
• Mr. Henning Giesecke (Chairman)
• Mr. Werner Devinck
• Dr. Jürgen Diegruber
The audit committee deals, in particular, with the preparation of negotiations and resolutions of the Supervisory Board in relation to questions of accounting, risk management and compliance, the required independence of the auditor, the issuing of the audit assignment to the auditor, the determina-tion of the main areas on which the audit should focus, and the fees agreed with the auditor. The audit committee consisted of six members until the General Meeting of June 23, 2010. The audit committee has consisted of three members since this General Meeting.
THE AUDIT COMMITTEE CONSISTED OF THE FOLLOWING MEMBERS UNTIL THE GENERAL MEETING::
• Mr. Anton Walther (Chairman)
• Dr. Jürgen Diegruber
• Mr. Hans-Peter Haase
• Mr. Jörg Kespohl
• Mr. Christoph Maaß
• Mr. Ralph Ossiander
THE AUDIT COMMITTEE HAS CONSISTED OF THE FOLLOWING MEMBERS SINCE THE GENERAL MEETING:
• Mr. Anton Walther
• Dr. Jürgen Diegruber
• Mr. Jörg Kespohl
In addition, the company had a conciliation committee comprising four members on the basis of parity pursuant to Section 31 (3) of the German Codetermination Act (MitbestG). This committee was tasked with submitting a proposal to the Supervisory Board for the appointment or withdrawal of a Managing Board member, if the required two-thirds majority had not been reached at a previous resolution. Since the Codetermination Act is no longer applicable since the number of long-term employees has fallen below 2,000, a conciliation committee was no longer formed after the General Meeting of June 23, 2010.
THE CONCILIATION COMMITTEE CONSISTED OF THE FOLLOWING MEMBERS:
• Mr. Hans-Peter Haase (Chairman)
• Mr. Rudolf Wisser
• Dr. Jürgen Diegruber
• Mr. Gerhard Meyer
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Further details on the members of the Managing and Supervisory boards, and on the remuneration paid to the Managing Board, are provided in this annual report in the notes to the consolidated financial statements under point K.
The Supervisory Board members received payments of In EUR thousand 268,333 for their activities in fiscal 2010. This remuneration breaks down as follows:
2010 in EUR thousand
Mr. Henning Giesecke (Chairman) from June 23, 2010 22.500
Hans-Peter Haase (Chairman) until June 23, 2010 26.250
Rudolf Wisser (Deputy Chairman) 31.250
Werner Devinck 21.250
Dr. Jürgen Diegruber 26.250
Christoph Maaß 21.250
Anton Walther 25.000
Armin Weiland 20.000
Jörg Kespohl 22.500
Gerhard Meyeruntil June 23, 2010 and
again from August 26, 2010 19.583
Andreas Bilz until June 23, 2010 10.000
Michael Föst until June 23, 2010 11.250
Ralph Ossiander until June 23, 2010 11.250
268.333
The payment of fees to members of the Supervisory Board for consulting activities are presented in this annual report in the notes on the consolidated financial statements under point K.
The Supervisory Board members held no shares as of December 31, 2010. The Managing Board members held 55,643 shares as of December 31, 2010.
Further details on corporate governance can also be found in the Articles of Incorporation of ALNO AG, which are publicly available on the company’s website at www.alno.ag.
II. REPORTING PURSUANT TO SECTIONS 289 (4) AND 315 (4) OF THE GERMAN COMMERCIAL CODE (HGB)
As the parent company of the ALNO Group, ALNO AG utilizes an organized market in the meaning of Sec-tion 2 (7) of the German Securities and Takeover Act (WpÜG) as the result of its issued voting shares, and consequently reports pursuant to Sections 289 (4) and 315 (4) of the German Commercial Code (HGB).
COMPOSITION OF THE SUBSCRIBED CAPITAL
As of December 31, 2010, the subscribed capital amounts to EUR 45,231,297.80, and is split into 17,396,653 ordinary shares. The shares are issued as bearer shares, and are fully paid in.
RESTRICTIONS AFFECTING VOTING RIGHTS OR THE TRANSFER OF SHARES
Restrictions affecting voting rights or the transfer of shares, including those arising from agreements between shareholders, relate exclusively to a binding of voting rights. As part of a standstill and shareholder agreement, IRE Beteiligungs GmbH has granted an irrevocable authorization to Küchen Holding GmbH to exercise voting rights arising from shares held by IRE Beteiligungs GmbH at the discretion of Küchen Holding GmbH. The Managing Board is aware of no further restrictions besides this. Each share grants one vote, pursuant to Section 22 of the Articles of Incorporation.
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DIRECT OR INDIRECT INTERESTS IN THE SHARE CAPITAL
Notifications made to ALNO AG pursuant to the German Securities Trading Act (WpHG) results in the following overview of shareholdings as of December 31, 2010 (on the basis of German Securities Trading Act notifications made most recently to ALNO AG):
Company holding the interest Share of voting rights Date when interest commenced
IRE Beteiligungs GmbH, Schorndorf 1) 18.64 % 22/07/2010
Bauknecht Hausgeräte GmbH, Schorndorf 1), 2) 18.64 % 22/07/2010
Whirlpool Greater China Inc., Benton Harbor, MI/USA 1), 3) 18.64 % 22/07/2010
Küchen Holding GmbH, Munich 4) 75.27 % 10/04/2007
Milano Investments S.à r.l., Luxembourg, Luxembourg 5) 75.27 % 10/04/2007
HOLDERS OF SHARES WITH SPECIAL RIGHTS
There are no shares with special rights lending control authorizations.
TYPE OF VOTING RIGHT CONTROL IN THE INSTANCE OF EMPLOYEE INTERESTS
The Managing Board is unaware of any voting right control for the instance that employees hold an interest in the share capital, and do not directly exercise their controlling rights.
STATUTORY REGULATIONS AND PROVISIONS OF THE ARTICLES OF INCORPORATION CON-CERNING THE NOMINATION AND WITHDRAWAL FROM OFFICE OF MANAGING BOARD MEMBERS,
AND CONCERNING AMENDMENTS TO THE ARTICLES OF INCORPORATION
Managing Board members are appointed and withdrawn from office pursuant to Section 84 of the German Stock Corporation Act (AktG). The General Meeting implements amendments to the Articles of Incorporation pursuant to Sections 133 and 179 of the German Stock Corporation Act (AktG). The General Meeting has utilized the option granted by Section 179 (1) Sentence 2 of the German Stock Corporation Act (AktG) in Section 12 (2) in combination with Section 12 (1) of the Articles of Incorporation, to transfer the authority to the Supervisory Board to implement amendments that affects only the wording of the Articles of Incorporation.
MANAGING BOARD AUTHORISATIONS TO ISSUE AND REPURCHASE SHARES
By way of a resolution of the Ordinary Shareholders’ General Meeting of ALNO AG of June 23, 2010, the Managing Board, with the Supervisory Board’s assent, was authorized by way of amendment to the Articles of Incorporation to increase the company’s issued share capital until June 23, 2010 by up to an amount totaling EUR 22,615,647.60 through issuing new ordinary shares against cash and/or non-cash capital contributions, either wholly or in partial amounts, and either once or on several occasions. This resolution was entered in the commercial register on August 31, 2010.
1 As part of a standstill and share-holder agreement, IRE Beteiligungs GmbH has granted an irrevocable authorization to Küchen Holding GmbH to exercise voting rights arising from shares held by IRE Beteiligungs GmbH at the discre-tion of Küchen Holding GmbH.
2 These voting rights are attributable in their entirety to IRE Beteiligungs GmbH pursuant to Section 22 (1) Sentence 1 No. 1 of the German Securities Trading Act (WpHG).
3 The voting rights of Bauknecht GmbH are attributable in their entirety to Whirlpool Greater China Inc. pursuant to Section 22 (1) Sentence 1 No. 1 of the German Securities Trading Act (WpHG).
4 Of these voting rights, 18.64 % are to be attributed to Küchen Holding GmbH pursuant to Section 22 (1) Sentence 1 No. 6 of the German Securities Trading Act (WpHG).
5 Of these voting rights, 56.63 % are attributed to Milano Invest-ments S.à r.l. pursuant to Section 22 (1) Sentence 1 No. 1 of the German Securities Trading Act (WpHG), and 18.64 % pursuant to Section 22 (1) Sentence 1 No. 6, Sentences 2 and 3 of the German Securities Trading Act (WpHG).
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The Managing Board is authorized, with the Supervisory Board’s assent
• to exclude shareholders’ subscription rights for fractional amounts.
• to totally exclude shareholders’ subscription rights in order to offer the new shares in the company to third parties against non-cash capital contributions as part of business combinations or to acquire companies or parts of companies, and other assets including loan liabilities and other liabilities.
• to exclude shareholders’ subscription rights if the capital increase against cash does not exceed 10 % of the share capital, and the issue price is not significantly less than the stock market price of the shares of equal class that are already listed.
• to exclude shareholders’ subscription rights to the extent that it is necessary to grant bearers of option rights or creditors of convertible bonds that are issued by the company or its subordinate Group companies subscription rights to new shares to the extent that they would be entitled following the exercise of option or conversion rights, or satisfaction of conversion obligations.
The authorized capital has not been utilized as of December 31, 2010, and consequently continued to amount to EUR 22,615,647.60.
The Ordinary General Meeting of June 23, 2010 passed a resolution to approve a conditional capital increase. The Managing Board was authorized until June 22, 2015, to issue once or on several occasions by the company or by companies in the direct or indirect majority ownership of the company (Group companies) convertible and/or warrant bonds with a total value of up to EUR 100,000,000.00 with a term of up to 20 years (debentures), and to take over the guarantee for such debentures issued by subordinate Group companies, and to grant the bearers of bonds or bond creditors warrant and/or conversion rights to a total of up to 8,698,326 ordinary shares in the company with a proportionate amount of the issued share capital of up to EUR 22,615,647.60 according to the more detailed specifics of the relevant terms of the bond. The conditional capital increase is to be implemented only to the extent that the warrants and/or conversion rights from the warrant and/or convertible bonds are utilized, or the conversion obligations from the bonds are fulfilled, and to the extent that a cash compensation cannot be granted, or treasury shares used, to fulfill the obligation. The Management Board is authorized to determine the further specifics relating to the performance of the conditional capital increase (Conditional Capital 2010). The conditional capital was entered in the commercial register on August 31, 2010.
By way of resolution of the General Meeting of ALNO AG of July 29, 2009, the Managing Board was authorized to acquire treasury shares up to 10 % of the issued share capital entered in the balance sheet as of the date of the General Meeting pursuant to Section 71 (8) No. 8 of the German Stock Corporation Act (AktG). This authorization was valid until January 29, 2011. The existing authoriza-tion of the Managing Board was cancelled by way of a resolution of the General Meeting of June 23, 2010, and with effect as of the elapse of the day of the General Meeting. By way of resolution of the General Meeting of June 23, 2010, and with effect as of June 24, 2010, the Managing Board was authorized to acquire treasury shares pursuant to Section 24 (1) No. 8 of the German Stock Corporation Act (AktG). The authorization to acquire treasury shares up to 10 % of the issued share capital entered in the balance sheet as of the date of the General Meeting is valid until June 22, 2015.
SIGNIFICANT AGREEMENTS THAT ARE SUBJECT TO A CHANGE OF CONTROL FOLLOWING A
TAKEOVER OFFER
There were no such agreements as of the balance sheet date.
COMPENSATION AGREEMENTS
The company has entered into no agreements with Managing Board members or employees for the instance of a takeover offer.
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III. KEY CHARACTERISTICS OF THE ACCOUNTING-RELATED INTERNAL CONTROLLING AND RISK MANAGEMENT SYSTEM PURSUANT TO SECTIONS 289 (5) AND 315 (2) NO. 5 OF THE GER-MAN COMMERCIAL CODE (HGB)
According to the reasons given for the German Accounting Law Modernization Act (BilMoG) that came into force on May 29, 2009, the internal controlling system comprises the principles, proce-dures and measures to ensure the effectiveness and economic efficiency of the accounting system, proper accounting approaches, and compliance with the relevant legal regulations. This also includes the Group controlling function to the extent that it relates to accounting. As is the case with the latter, and as part of the internal controlling system, the risk management system with respect to the accounting process relates to controlling and supervisory processes for accounting, particularly in the case of trade law balance sheet items that report the company’s risk hedging measures.
PRESENTATION AND EXPLANATION OF THE KEY CHARACTERISTICS OF THE INTERNAL CONTROLLING
SYSTEM AND RISK MANAGEMENT SYSTEM WITH RESPECT TO THE ACCOUNTING PROCESS
The key characteristics of ALNO AG’s internal controlling system and risk management system with respect to the (Group) accounting process can be described as follows:
• The ALNO Group is distinguished by clear organizational, corporate, and controlling and super-visory structures.
• The company operates planning, reporting, controlling and early warning systems and processes across the Group to ensure comprehensive analysis and steering of earnings-relevant risk factors and going-concern risks.
• The functions in all areas of the accounting process (e.g. financial accounting and controlling) are clearly allocated.
• The IT systems deployed in the accounting function are protected against unauthorized access.
• Recourse is predominantly made to standard software in the area of the financial systems utilized.
• An adequate system of internal guidelines (consisting of risk management and guidelines that are valid across the Group, among other items) has been set up, and can be adjusted as required.
• The departments that are involved in the accounting process comply with quantitative and qualita-tive requirements.
• The completeness and correctness of accounting data are regularly checked using random samples and plausibility checks, as well as through individual controls and the software that is deployed. A risk controller has been installed at all segmental levels who manages the risk management process at the segment level, and to subject stated to plausibility checks.
• For the purpose of consolidation, ALNO AG has established processes to intra-Group receivables and liabilities, and income and expenses.
• Recourse is made to external services (e.g. actuaries, valuation surveyors etc) for significant complex balance sheet questions that are subject to discretionary assessment.
• Significant processes that are relevant to accounting are subject to regular analytical checks.
• The “two sets of eyes” principle is applied consistently to all accounting-relevant processes.
• The Group controlling function checks accounting-relevant processes.
• Among other matters, the Supervisory Board concerns itself with significant questions relating to accounting, risk management, the audit mandate and its focal points.
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The internal controlling and risk management system relating to the accounting processes, whose key characteristics were described above, ensures that business matters are reported, prepared and assessed correctly in balance sheet terms, and are transferred on this basis to the external accounting. The clear organizational, corporate, and controlling and supervisory structures, and the sufficient equipping of the accounting function in terms of both personnel and materials, create the basis that allows the areas involved to work efficiently on the accounts. Clear legal and company-internal rules and guidelines ensure that the accounting process is standardized and proper. The clearly defined checking mechanisms within the areas that are involved in accounting, checks by the controlling function, and early risk identification by the risk management function, ensure that accounting is both free of errors and coherent.
ALNO AG’s internal controlling and risk management system ensures that accounting at ALNO AG and that all companies included in the consolidated financial statements occurs on a standardized basis, and complies with statutory and legal requirements, as well as internal guidelines. In particular, the standard Group risk management system, which fully complies with statutory requirements, has the task of identifying risks at the right time, of measuring them, and of communicating them appropriately. This allows appropriate, relevant and reliable information to the provided promptly to the recipients of the reports.
IV. BASIC ASPECTS OF THE REMUNERATION SYSTEM PURSUANT TO SECTIONS 289 (2) NO. 5 AND 315 (2) NO. 4 OF THE GERMAN COMMERCIAL CODE (HGB)
The total remuneration of Managing Board members complies with the statutory requirements of the German Stock Corporation Act (AktG). Managing Board members received fix compensation, which also includes benefits in kind, particularly the provision of company cars. The fixed components ensure basic compensation that allows Managing Board members to orientate their official duties to the well-understood interests of the company, and to the duties of a proper businessman, without depending on purely short-term profit targets. Employment contracts also include variable special compensation that depends on the company’s financial results.
The remuneration report, which is included in the notes to the single-entity annual financial state-ments according to the German Commercial Code (HGB), and in the notes to the IFRS consolidated financial statements, includes more details, including individualized compensation. The remuneration report forms part of the management report.
V. REPORT ON DEPENDENT COMPANIES
The Managing Board has prepared the report concerning relations between ALNO AG and associ-ated companies (report on dependent companies) for the 2010 fiscal year, and has presented it to the auditor. The Managing Board declares that, in the case of legal transactions listed in the report concerning relations with associated companies, the company received an appropriate consideration for each legal transaction according to the circumstances that were known at the time when the legal transactions were performed.
Düsseldorf, May 30, 2011
ALNO Aktiengesellschaft
The Managing Board
8484
8585
CONSOLIDATED FINANCIAL STATEMENT
86 Consolidated income statement
87 Consolidated statement of comprehensive income
88 Consolidated balance sheet
89 Consolidated cash flow statement
90 Statement of changes in consolidated equity
91 Notes to the consolidated financial statements
86
In EUR thousand Notes 2010 2009
Continuing operations
Revenues C. 1 467,297 493,373
Changes in inventories and own work capitalized C. 2 – 1,993 – 3,724
Other operating income C. 3 7,062 6,460
Total operating revenue 472,366 496,109
Cost of materials C. 4 271,907 278,654
Personnel expenses C. 5 97,900 98,539
Other operating expenses C. 6 92,611 102,950
Restructuring charge (income) (+/–) C. 7 8,962 – 1,306
EBITDA 986 17,272
Amortization of intangible assets and depreciation of property, plant and equipment C. 8 12,104 40,186
Operating result – 11,118 – 22,914
Profit/loss from investments accounted for using the equity method D. 4 93 109
Financial income C. 9 10,382 138
Financial expenses C. 9 11,535 16,534
Financial result – 1,060 – 16,287
Profit/loss before income taxes – 12,178 – 39,201
Taxes on income (+ = expense/ – = income) C. 10 906 170
Profit/loss from continuing operations – 13,084 – 39,371
Discontinued operations
Profit/loss from discontinued operations E 0 407
Group net loss for the year – 13,084 – 38,964
Earnings in EUR per share (diluted and basic) Q – 0.78 – 2.46
Of which profit/loss from continuing operations in EUR per share (diluted and basic) Q – 0.78 – 2.49
CONSOLIDATED INCOME STATEMENTFOR THE PERIOD FROM JANUARY 1 TO DECEMBER 31, 2010, ACCORDING TO IFRS
87
In EUR thousand Notes 2010 2009 adjusted (B.4.)
Group net loss for the year – 13,084 – 38,964
Change in difference from currency translation 289 – 2
Actuarial gains and losses from provisions for pensions D. 11 – 873 – 45
Deferred taxes on actuarial gains and losses from provisions for pensions C. 10 169 – 26
Changes in the value of securities taken directly to equity 0 – 6
Deferred taxes on actuarial gains and losses from provisions for pensions C. 10 0 2
Other comprehensive income – 415 – 77
Total comprehensive income – 13,499 – 39,041
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE PERIOD FROM JANUARY 1 TO DECEMBER 31, 2010, ACCORDING TO IFRS
88
CONSOLIDATED BALANCE SHEETAS OF DECEMBER 31, 2010, ACCORDING TO IFRS
In EUR thousand Notes 2010 2009
ASSETS
Intangible assets D. 1 5,088 5,477
Property, plant and equipment D. 2 72,278 69,984
Non-current financial assets D. 3 3,431 3,279
Investments accounted for using the equity method D. 4 2,181 1,930
Financing receivables D. 5 2,665 2,656
Deferred tax assets C. 10 0 296
Trade receivables D. 6 636 1,086
Other assets D. 8 319 587
A. Non-current assets 86,598 85,295
Inventories D. 7 28,181 24,724
Trade receivables D. 6 32,360 46,548
Other assets D. 8 7,511 5,500
Income tax refund entitlements C. 10 7 102
Cash and cash equivalents D. 9 3,041 2,857
B. Current assets 71,100 79,731
Total ASSETS 157,698 165,026
EqUITy AND LIABILITIES
Subscribed capital D. 10. a 45,231 41,124
Capital reserve D. 10. b 42,437 36,544
Accumulated other comprehensive income D. 10. c – 157,390 – 148,800
A. Equity – 69,722 – 71,132
Pension provisions D. 11 16,973 16,201
Deferred tax liabilities C. 10 257 52
Other provisions D. 12 3,773 5,457
Other financial liabilities D. 14 13,057 14,129
Deferred government grants D. 15 781 807
Trade payables and other liabilities D. 16 82 152
B. Non-current liabilities 34,923 36,798
Other provisions D. 12 7,712 4,021
Shareholder loans D. 13 365 5,735
Other financial liabilities D. 14 73,130 87,387
Trade payables and other liabilities D. 16 111,096 102,044
Liabilities for income taxes C. 10 194 173
C. Current liabilities 192,497 199,360
Total EqUITy AND LIABILITIES 157,698 165,026
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In EUR thousand Notes 2010 2009
Cash flow from operating activities
Group net loss for the year – 13,084 – 38,964
Income taxes 906 170
Financial result 1,060 16,287
Amortization of intangible assets and depreciation of property, plant and equipment 12,104 40,186
Income taxes received 95 393
Income taxes paid – 215 – 92
Gain/loss from disposal of property, plant and equipment, and intangible assets 163 565
Interest received 93 96
Interest paid – 10,219 – 12,758
Elimination of non-cash items
Change in other provisions, provisions for pensions and deferred government grants 5,197 – 151
Other non-cash income/expenses 1,639 2,833
Net change in other provisions – 4,493 – 4,262
Cash flow from operating activities before changes in working capital – 6,754 4,303
Change in working capital
Change in inventories – 3,457 6,436
Change in trade receivables and other assets 11,870 – 2,273
Change in trade payables and other liabilities 9, 881 12,744
Net cash used in operating activities 11,540 21,210
Cash flow from investment activities
Payments for investments in
Intangible assets – 575 – 994
Property, plant and equipment – 15,220 – 15,117
Financial assets – 152 0
Proceeds from the disposal of property, plant and equipment 1,647 144
Net cash used in investing activities – 14,300 – 15,967
Cash flow from financing activities
Proceeds from financial liabilities
Shareholder loans 0 4,458
Third parties 1,500 0
Proceeds from capital increases 10,000 0
Payments for financing costs – 1,493 – 1,558
Repayment of financial liabilities – 7,519 – 8,203
Net cash received from (previous year: used in) financing activities 2,488 – 5,303
Net change in cash and cash equivalents – 272 – 60
Cash and cash equivalents at the start of the period 1,258 1,319
Exchange-rate-related changes in cash and cash equivalents – 5 – 1
Cash and cash equivalents at the end of the period D. 9 981 1,258
CONSOLIDATED CASH FLOW STATEMENTFOR THE PERIOD FROM JANUARY 1 TO DECEMBER 31, 2010, ACCORDING TO IFRS
90
Subscribed capital
Capital reserve Accumulated other comprehensive income
Consolidated equity
Consolidated retained earnings
Currency translation
reserve
Other transactions taken directly to equity
In EUR thousandAdjusted (B.4.)
Change in pension
provisions
Change in value
of securities
Notes D.10 a D.10 b D.10 c D.10 c D.10 c D.10 c
January 1, 2009 41,124 36,544 – 113,888 – 902 143 15 – 36,964
Group net loss for the year – 38,964 – 38,964
Other comprehensive income – 2 – 71 – 4 – 77
Total comprehensive income – 38,964 – 2 – 71 – 4 – 39,041
Deferred tax on IPO costs – 127 – 127
Waiver of receivables by shareholders 5,000 5,000
Withdrawal from capital reserve to compensate for losses – 5,000 5,000 0
December 31, 2009 41,124 36,544 – 147,979 – 904 72 11 – 71,132
Group net loss for the year – 13,084 – 13,084
Other comprehensive income 289 – 704 0 – 415
Total comprehensive income – 13,084 289 – 704 0 – 13,499
Capital Increase 4,107 5,893 10,000
Waiver of receivables by shareholders 4,909 4,909
Withdrawal from capital reserve to compensate for losses – 4,909 4,909 0
December 31, 2010 45,231 42,437 – 156,154 – 615 – 632 11 – 69,722
STATEMENT OF CHANGES IN CONSOLIDATED EQUITYFOR THE PERIOD FROM JANUARY 1 TO DECEMBER 31, 2010, ACCORDING TO IFRS
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF ALNO AKTIENGESELLSCHAFT, PFULLENDORF, FOR THE 2010 FISCAL YEAR
A. COMPANY PURPOSE
ALNO Aktiengesellschaft, Düsseldorf (hereinafter referred to as “ALNO AG”), a listed company under German law, and its subsidiaries (hereinafter referred to as the “Group”) produce and sell fitted kitchens for the global market, mostly under the ALNO, IMPULS, PINO and WELLMANN brands. Please refer to our remarks in the parent company and Group management reports for information about the ALNO Group’s group structure and principal activities. The Group has its registered office at Peter-Müller-Strasse 14/14a, 40468 Düsseldorf, Germany. ALNO AG’s ultimate parent company is Milano Investments S.à r.l., Esch-sur-Alzette, Luxembourg.
B. ACCOUNTING METHODS1. PRINCIPLES FOR THE PREPARATION OF THE FINANCIAL STATEMENTS
The consolidated financial statements of ALNO AG for 2010 are in line with the standards and interpretations of the International Financial Reporting Standards Board (IASB), London, which are effective on the balance sheet date, and which are to be applied in the EU, and the supplementary provisions pursuant to Section 315a of the German Commercial Code (HGB).
All amounts are stated in thousands of euros unless there is a note to the contrary.
The consolidated financial statements and Group management report, with which the Management report for ALNO AG is combined, were released by the Managing Board to be passed on to the Supervisory Board on May 27, 2011.
On the assumption of a going concern, the consolidated financial statements were prepared on the basis of amortized cost, with the exception of financial assets, which require measurement at fair value.
The primary objective of the Managing Board and of all corporate units is to restore the com-pany to financial health, competitiveness and sustainable profitability. The ALNO AG Supervisory Board approved the extensive “ALNO 2013” future concept in January 2010. This future concept is intended to structure administrative processes and production structures more efficiently. The reorientation of the brand and sales strategy is also targeted at strengthening the international impact of all Group brands. In parallel, synergies are to be exploited, and the complexity of products and production is to be reduced.
At the start of 2010, Pricewaterhouse Coopers AG Wirtschaftsprüfungsgesellschaft (“PwC”) was engaged to prepare a restructuring survey for the ALNO Group according to the standard IDW S6 of the Institut der Wirtschaftsprüfer. In its restructuring survey dated June 24, 2010, PwC issued the ALNO Group with a positive forecast for a going concern, to the extent that financing is secured in line with the Restructuring Agreement I of April 23, 2010, and that the pending activities in the company’s forecast are implemented.
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In spring 2011, PwC was mandated to produce a continuation of the restructuring statement for the ALNO Group. In its (draft) updated restructuring a survey of May 13, 2011, PwC arrives at the conclusion that, from today’s perspective, the ALNO Group remains completely financed under certain preconditions, and that no change arises relating to the restructuring statement as presented in the restructuring survey of June 24, 2010. PwC nevertheless points out that the restructuring of the ALNO Group will require more time than was planned in the previous year.
PwC notes that the liquidity position appears to be secured only under the following terms, and on the basis of the following assumptions, including with the liquidity-effective financial measures of the Restructuring Agreement II (in particular, the capital increase), which have already been realized:
• The corporate planning that has been adjusted by PwC, including the defined effects arising from potentials, must be achieved. This requires that the measures planned by the Managing Board are implemented stringently.
• Commercial credit insurers and suppliers must not implement negative changes to their payment terms compared with the current status, and/or compared with the planned level.
• Local financing lines must be maintained in line with the planning.
• Existing credit lines must be available beyond December 31, 2011.
• The existing EUR 45 million factoring facility, and the additionally planned EUR 15 million factoring facility, must be available beyond February 28, 2012.
• The financing shortfalls apparent in the August 2011 planning, as well as in the first quarter of 2012, must be met by appropriate measures (e.g. granting of supplier loans, drawing down of a new loan backed by a federal state, the issuing of a bond, or further internal measures to secure liquidity).
The continuation of corporate activities on the part of ALNO AG and/or on the part of the ALNO Group depend on the aforementioned terms and assumptions occurring as planned, or being applicable as planned. The Managing Board of ALNO AG assumes that these terms and assumptions will occur as planned, or will be applicable as planned.
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2. AMENDMENTS TO ACCOUNTING METHODS
Newly applicable standards
The ALNO Group observed the amended or new standards and interpretations from the IASB, for which application is mandatory in 2010 to the extent that these had been adopted by the EU. In detail, these were:
• Amendments to IFRS 2 – Share-based Payment
• Amendments to IFRS 3 – Business Combinations
• Amendments to IFRS 5 as part of improvements of IFRS 2008
• Amendments to IAS 27 – Consolidated and Separate Financial Statements
• Amendments to IAS 39 – Financial Instruments: Recognition and Measurement
• IFRIC 12 – Service Concession Arrangements
• IFRIC 15 – Agreements for the Construction of Real Estate
• IFRIC 16 – Hedging of a Net Investment in a Foreign Operation
• IFRIC 17 – Distribution of Non-cash Assets to Owners
• IFRIC 18 – Transfers of Assets from Customers
• Improvements to IFRS 2009
The following section details the provisions which are relevant to the ALNO Group, and their impacts on the consolidated financial statements.
• Amendments to IFRS 3 – Business Combinations:
This standard was subject to extensive revision as part of the convergence project (IASB and FASB). The key changes relate particularly to the introduction of an option when measuring non-controlling (minority) interests between reporting proportional identifiable net assets (the so-called purchased goodwill method), and the so-called full goodwill method, whereby the entire goodwill of the acquired company is reported, including the portion attributable to minority (non-controlling) interests. Inciden-tal purchase costs are to be expensed immediately in the future. Further notable changes include the re-measurement of existing participating interests through profit or loss when control is obtained for the first time (step acquisitions), and the mandatory recognition of any consideration attached to the occurrence of future events. The accounting treatment of assets and liabilities resulting from business combinations before the first-time application of the new standard has not resulted in any changes to the consolidated financial statements on the basis of prospective application.
• Amendments to IAS 27 – Consolidated and Separate Financial Statements:
The changes result from the joint project by IASB and FASB to revise the accounting standards that apply to business combinations. The changes primarily relate to accounting for non-controlling interests (minority interests) that will participate in their full amount in future in the Group’s losses, and transactions which lead to a loss of control at a subsidiary, and for which the impact is to be recognized in income in future. Remaining interests are to be measured at fair value. The effects of the sale of participating interests which do not lead to a loss of control are, in contrast, to be taken directly to equity. First-time compliance has resulted in no changes to ALNO AG’s consolidated financial statements.
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• Improvements to IFRSs 2009:
Improvements to IFRSs 2009 relate to a group of standards reflecting modifications to various standards and interpretations. With the exception of regulations that are referred to separately below, the ALNO Group is assuming that these amendments will continue to have no effect on its consolidated financial statements in the future:
IFRS 8 – Operating Segments: The disclosure of assets is now only required if used in standard reporting. Assets form part of regular reporting at the ALNO Group, and will consequently continue to be listed in segment reporting.
IAS 7 – Cash Flow Statements: This clarifies that expenses may only be classified as investment expenditure if they result in the recognition of an asset in the balance sheet.
IAS 17 – Leases: The special guidelines for the classification of land leases were abolished. The general guidelines will apply in the future.
IAS 36 – Impairment of Assets: This clarifies that a cash generating unit to which goodwill is allocated as part of a business combination may not be larger than an operating segment in the meaning of IFRS 8. Any aggregation of individual operating segments permitted under IFRS 8 to form a report-able segment is consequently not a permissible level at which goodwill can be tested for impairment.
Published standards that do not yet require mandatory application
The IASB also issued or amended the following standards and interpretations, which were adopted by the European Union but whose application is not yet mandatory, and will not be applied voluntarily ahead of time. They are to be used for reporting periods that start on or after the date they come into effect.
• Amendments to IAS 24 – Related Party Disclosures (comes into effect on: January 1, 2011)
• Amendments to IAS 32 – Financial Instruments: Presentation (comes into effect on: February 1, 2010)
• Improvements to IFRSs 2010 (comes into effect on: January 1, 2011; exception: amendments to IAS 21, 27, 28 and 31, as well as IFRS 3, which come into effect already on July 1, 2010)
• Amendments to IFRIC 14 – Prepayments of a Minimum Funding Requirement (comes into effect on: January 1, 2011)
• IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments (comes into effect on: July 1, 2010)
The following section details the provisions which are relevant to the ALNO Group, and their impacts on the consolidated financial statements.
• Amendments to IAS 24 – Related Party Disclosures:
Changes to IAS 24 have led to a change in the definition of related parties. In addition, government-related entities have been exempted from the requirement to provide information on transactions with the government and other entities over which the same government has control. Both amendments have no effect on the consolidated financial statements of ALNO AG.
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• Improvements to IFRSs 2010:
These improvements to IFRSs relate to a group of standards reflecting modifications to various standards and interpretations. With the exception of regulations that are referred to separately below, the ALNO Group is assuming that these amendments will have no effect on its consolidated financial statements:
IFRS 3 – Business Combinations: The number of measurement options is to be reduced. With regard to components of non-controlling interests, which evidence a current ownership right, and entail a claim to a percentage portion of net assets in the instance of liquidation, future measurement is permissible either at fair value, or on the basis of the percentage share of the current ownership right to the identifiable net assets of the acquired company. Other components of non-controlling interests are to be measured at fair value calculated as of the acquisition date.
IFRS 7 – Financial Instruments: Disclosures: This standard clarifies that qualitative disclosures relating to risks connected with financial instruments should support and clarify the respective quantitative disclosures. Amendments to quantitative credit risk information envisage new disclosures for financial assets relating to the amount that best reflects maximum credit risk. Disclosures that have been required to date lapse in this connection.
IAS 1 – Presentation of Financial Statements: The analysis of other comprehensive income can be presented in the future either in the statement of consolidated changes in equity, or in the notes to the consolidated financial statements.
IAS 34 – Interim Financial Reporting: Events requiring mandatory reporting were supplemented in the standard whereby it was clarified that the list is not conclusive.
IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments: This interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability are to be classified as consideration paid. The issued equity instruments are to be measured at fair value. If this fair value cannot be measured reliably, measurement must be based on the fair value of the extinguished liability. Gains and losses are to be recognized immediately through profit or loss. This interpretation is to be complied with prospectively, and may be applied within the ALNO Group depending on further restructuring agreements.
The following standards that were newly issued by the IASB, as well as the following amendments to existing standards, have not yet been adopted by the European Union. They do not yet require mandatory application, and have also not been voluntarily applied ahead of time.
• IFRS 9 – Financial Instruments: Classification and Measurement (comes into effect on: January 1, 2013)
• IFRS 10 – Consolidated Financial Statements (comes into effect on: January 1, 2013)
• IFRS 11 – Joint Arrangements (comes into effect on: January 1, 2013)
• IFRS 12 – Disclosure of Interests in Other Entities (comes into effect on: January 1, 2013)
• IFRS 13 – Fair Value Measurement (comes into effect on: January 1, 2013)
• Amendment to IFRS 7 – Financial Instruments: Disclosures (comes into effect on: July 1, 2011):
• An amendment to IAS 12: Deferred Tax (comes into effect on January 1, 2012)
The amendments must be applied for fiscal years commencing on or after the date when they come into force. The following section details the provisions which are relevant to the ALNO Group, and their impacts on the consolidated financial statements.
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• IFRS 9 – Financial Instruments: Classification and Measurement:
The IASB prepared this standard as the first part of the project to extensively rework accounting for financial instruments. It includes new regulations for the classification and measurement of financial assets and liabilities. This stipulates that financial assets are either to be carried at amortized cost or recognized at fair value through profit or loss. Equity instruments must always be carried at fair value. When they are acquired, however, there is the option to recognize fluctuations in the value of equity instruments under equity. In this case, only dividend income is recognized through profit or loss. At present, the consolidated financial statements take changes in the value of securities carried at fair value (debt instruments) directly to equity. As a result of changes from IFRS 9, these changes in value will have to be recognized through profit or loss after IFRS 9 has come into effect. Due to the minor extent of the changes in value previously taken directly to equity, application of the new standard will not have a material impact on ALNO AG’s consolidated financial statements.
On October 28, 2010, the IASB published IFRS 9 expanded to include financial liabilities. The basic model entails as far as possible measuring all financial liabilities at amortized cost. Measurement at fair value through profit or loss is now envisaged only for derivatives evidencing liabilities on the part of the accounting company. IFRS 9 gives rise to significant changes particularly in the area of the fair value option for financial liabilities. Since the ALNO Group does not exercise this option, the application of the new standard is not anticipated to have any impact on ALNO AG’s consolidated financial statements.
• IFRS 10, 11 and 12 – New regulations relating to consolidation:
On May 12, 2011, the IASB published three new standards with IFRS 10, 11 and 12, and to revise standards with IAS 27 and 28, relating to the accounting treatment of corporate combinations, which are applicable from 2013.
IFRS 10 is the result of the “Consolidation” project, and will replace the consolidation principles in IAS 27 and SIC-12. IAS 27 continues to contain the regulations applicable to separate financial statements. IFRS 10 focuses on the introduction of a standard consolidation model for all companies that are based on control of subsidiaries by the parent company. As a consequence, the concept of control is applicable both to parent-subsidiary relationships based on voting rights, and to parent-subsidiary relationships resulting from other contractual agreements. As a result, the concept of control is to be applied in the future to special purpose entities that are currently consolidated according to the so-called risk and reward concept.
IFRS 11 results from the “Joint Ventures” project, and will replace IAS 31. Proportional consolida-tion will be discontinued with the cancellation of the IAS 31. Parallel modifications to terminology and classification are to be taken into account, as a consequence of which not all joint ventures currently consolidated on a proportional basis are to be accounted for using the equity method in the future. The equity method is applied using the IAS 28 regulations adjusted to reflect the subsequent modifications.
IFRS 12 aggregates the revised disclosure requirements for IAS 27 and IFRS 10, IAS 31 and IFRS 11, and IAS 28, into one standard.
It is currently being investigated whether the inclusion of special purpose entities changes as a result of the new regulations. The discontinuation of proportional consolidation for joint ventures will have no effects on the consolidated financial statements, sent joint ventures are already including using the at-equity method.
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• IFRS 13 – Fair Value Measurement:
This new standard concludes the project to create a uniform and comprehensive measurement standard. IFRS 13 regulates how fair value is to be measured to the extent that another IFRS prescribes fair value measurement (or fair value disclosure). IFRS 13 does not regulate what is to be measured at fair value. A new fair value definition is applicable that characterizes the fair value as the disposal price of an actual or hypothetical transaction between any given independent market participants under normal market conditions. This standard is almost comprehensively applicable. Only IAS 17 and IFRS 2 are excluded. While the scope of these regulations is almost unchanged for financial instruments, other items such as investment property, intangible assets, and property, plant and equipment, are now regulated more comprehensively and more precisely. As far as financial instruments are concerned, market and credit risk effects can now be included in fair value at the netted level of a portfolio if their connection is demonstrable. The three-level fair value hierarchy that is already well known is to be applied comprehensively. In the case of “declining market activities” (previously “inactive markets”), two examination steps are now to be performed. In other words, to determine whether (a) trading activities have diminished, and (b) whether actual transactions were not in line with the market – the market price may only be diverged from if both of these factors are given.
The changes relating to the consolidated financial statements are currently being investigated.
• Amendment to IFRS 7 – Financial Instruments: Disclosures
This amendment to IFRS 7 envisages additional disclosures for transactions that entail a transfer of financial assets. These particularly focus on residual risks remaining with the transferring party. Further-reaching disclosure requirements also arise for reporting periods at the end of which a disproportionately high number of transfers occur. The first-time application of these amendments will result in effects on disclosures in the notes to the consolidated financial statements to the extent that financial assets are transferred, and the risks and opportunities connected with the ownership of these assets remain at least partially within the Group.
3. CONSOLIDATION PRINCIPLES
Consolidated group
The ultimate group company is ALNO AG, which is entered in the commercial register of the Düssel dorf Local Court (HRB 64224). The consolidated financial statements of ALNO AG as of December 31, 2010, include ALNO AG and eleven German and three (previous year: eight) foreign companies according to the principles of full consolidation. ALNO AG either directly or indirectly holds a 100 % interest in these companies, with the exception of the special purpose entities.
Five foreign companies were liquidated in 2010. ALNO Austria Möbelvertriebsgesellschaft m.b.H., Wiener Neudorf / Austria was liquidated on July 28, 2010. ALNO IBERICA S.A., Madrid / Spain, was liquidated on September 20, 2010, and ALNO NEDERLAND B.V., Dongen / Netherlands was liquidated on September 30, 2010. The subsidiary ALNO BELGE N.V., Deinze / Belgium was liqui-dated on December 9, 2010, and the subsidiary ALNO ITALIA s.r.l., Florence/Italy was liquidated on December 27, 2010. The intention is that the foreign markets affected will now be supplied directly by the German production companies. These companies’ income and expenses were included in the consolidated income statement until the date when they were liquidated. The expected costs were also fully reported, particularly those for the release of personnel. There were no deconsolidation gains / losses.
According to IAS 27 in combination with SIC 12, two special purpose entities are fully consolidated. This is unchanged year-on-year. ALNO AG enjoys economic control of these enterprises.
ALNO Middle East FZCO, Dubai, UAE, (ALNO Middle East), (equity interest: 50 %) is included in the consolidated financial statements using the equity method.
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Consolidation methods
All of the companies included in the consolidated financial statements prepare their annual financial statements on the same balance sheet date as ALNO AG’s single-entity financial statements. This is consequently the balance sheet date for the consolidated financial statements. The consolidated financial statements are prepared based on uniform accounting of valuation methods (IFRS), as applicable in the EU.
Capital is consolidated using the acquisition method pursuant to IFRS 3. On the date when control is obtained, the remeasured assets and liabilities of the subsidiary, as well as its contingent liabili-ties – to the extent that they do not depend on future events – are netted with the fair value of the consideration rendered for the shares. Contingent purchase price payments are included at their expected amount in the fair value of the consideration rendered, and are recognized on the equity and liabilities side of the balance sheet. Subsequent adjustments of contingent purchase price payments are recognized through profit or loss. Incidental costs incurred as part of the purchase are expensed on the date when they arise.
Any remaining positive difference is carried as goodwill. Capitalized goodwill is tested for impair-ment on the balance sheet date. Any negative differences resulting during capital consolidation are recognized in income.
Income and expenses, and receivables, liabilities and provisions between consolidated companies are eliminated. Inter-company profits or losses in non-current assets and inventories arising from intra-Group deliveries are eliminated. Deferred taxes are recognized on consolidation entries with an effect on profit or loss. Intra-Group guarantees are eliminated.
Subsidiaries are no longer included in the consolidated financial statements as soon as the parent loses control over the subsidiary.
Currency translation
The consolidated financial statements are prepared in euros, the functional currency of ALNO AG.
The financial statements of the foreign subsidiaries are translated to euros using the functional cur-rency concept (IAS 21). Since all of the companies included conduct their business independently, the respective national currency is generally the functional currency. As a consequence, assets and liabilities are translated at the closing rate on the balance sheet date; items in the consolidated income statement are translated using average annual exchange rates; equity is recorded at histori-cal exchange rates. Differences resulting from the use of different exchange rates are taken directly to equity.
Any currency translation differences that may arise from intra-Group receivables and liabilities denominated in foreign currencies, for which settlement is neither planned nor likely within a fore-seeable period, are taken directly to the currency translation reserve in equity in the consolidated financial statements in accordance with IAS 21.32.
Monetary assets and liabilities denominated in foreign currencies in the single-entity financial state-ments are recognized with the rate applying on the transaction date, and are translated at the rate applying on the reporting date on each reporting date. Exchange-rate differences are recognized in income, and carried under other operating income and expenses. Non-monetary items denominated in foreign currencies are translated at the exchange rate on the transaction date.
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Exchange rate gains and losses are netted in the consolidated income statement.
The following exchange rates to the euro were used:
je EUR 31/12/2010 31/12/2009 Average exchange rate 2010 Average exchange rate 2009
GBP 0.8567 0.8999 0.8589 0.8917
CHF 1.2466 1.4876 1.3833 1.5102
4.SUMMARY OF SIGNIFICANT ACCOUNTING METHODS
Revenue recognition
Revenues are booked on the date on which risks are transferred after delivery, based on the condi-tions of sale less returns, discounts, rebates and VAT. Only the product sales resulting from ordinary business activities and the associated ancillary services are reported as revenues.
Income from services rendered is recorded in line with their percentage of completion if the amount of income can be reliably determined, and it is likely that there will be an inflow of economic benefit.
Other income is recognized in line with the contractual agreements, or after a service has been realized.
Financial result
The net financial result includes, in particular, interest income from cash investments, and interest expenses on loans.
Interest income is recognized on the date on which it arises.
Financing costs are capitalized as part of cost if they can be attributed to a qualified asset. They are otherwise expensed immediately.
Income taxes
Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the tax authorities (IAS 12). Calculation of the amount is based on tax rates and tax laws applying as of the reporting date.
“In addition, the deferred tax charges or refunds identified under IAS 12 arising from temporary differences between the IFRS carrying amounts in the consolidated financial statement and the local tax base, and from consolidation, are carried as either deferred tax assets or deferred tax liabilities.” In addition, deferred tax assets may be carried for tax loss carryforwards if it is sufficiently likely that the resultant tax reductions will actually occur in the future. The tax forecast for the next four years is used to assess the impairment of deferred tax assets for tax loss carryforwards. The policy continues to be applied that, when recognizing deferred tax assets, consideration is given to assessing whether taxable temporary differences, which relate to the same tax authority and same tax subject.
Deferred taxes are calculated on the basis of the tax rates that apply, or are expected with sufficient certainty to apply, at the time of realization in the individual countries.
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The carrying amount of deferred tax assets is reviewed at every reporting date, and reduced to the extent to which it is no longer likely that an adequate taxable profit will be available against which the deferred tax asset can at least be partially offset. Deferred tax assets that are not recognized on the balance sheet are reviewed at every reporting date, and recognized to the extent to which it has become likely that a future taxable profit will enable the deferred tax asset to be realized.
Deferred tax assets and liabilities are netted if the conditions for netting tax liabilities with tax receivables apply.
In addition, no deferred tax assets and liabilities are recognized if they result from the initial rec-ognition of goodwill, an asset, or a liability, as part of a business transaction that is not a business combination, and if this initial recognition impacts neither the accounting result before income taxes nor taxable earnings.
Deferred taxes relating to items posted directly to equity are recognized in equity, and not in the income statement.
Value added tax
Income, expenses, intangible assets, and property, plant and equipment are recorded after VAT has been deducted, to the extent that VAT is recoverable from a tax authority. Receivables and liabilities are recognized including VAT. Provisions are carried without taking VAT into account.
The amount of VAT to be refunded by a tax authority, or which is to be paid to a tax authority, is carried under other assets or liabilities.
Intangible assets
Acquired and internally generated intangible assets are capitalized at cost according to IAS 38 if it is likely that their use will result in future economic benefits, and if it is possible to reliably estimate the costs of the asset.
The cost of intangible assets solely comprises directly allocable costs.
With regard to the accounting for, and measurement of, goodwill, please refer to our comments on consolidation methods, and the information in the section “Impairment testing for goodwill”.
Other intangible assets, mostly software and other industrial property rights, are carried at cost, and are subjected to amortization over a useful life of between two and ten years.
Research costs and non-capitalized development costs are carried as expenses on the date on which they arise.
Intangible assets are either derecognized on disposal, or at the date when economic benefit is no longer expected from the continued use or sale of the asset. The gains or losses resulting from the disposal of the asset are calculated as the difference between the net realizable value and the carrying amount of the asset, and are recognized in income in the consolidated income statement in the period in which the asset is derecognized.
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Property, plant and equipment
Property, plant and equipment is measured at cost less depreciation and impairment losses within the meaning of IAS 16.
Straight-line, pro rata depreciation is used, based on the following estimated useful lives:
Years
Buildings 25 – 60
Machines, operating and office equipment 2 – 25
Computer hardware 3 – 7
Property, plant and equipment is either derecognized on disposal, or at the date where no economic benefit is any longer expected from the continued use or sale of the asset. The gains or losses resulting from the disposal of the asset are calculated as the difference between the net realizable value and the carrying amount of the asset, and are recognized in income in the consolidated income statement in the period in which the asset is derecognized.
The assets’ residual values, useful lives and depreciation methods are reviewed at the end of each fiscal year, and modified where necessary.
Investment grants and subsidies received do not reduce the costs of the relevant assets, but are deferred as liabilities within the meaning of IAS 20.24, and are reversed to income over the useful lives of the subsidized assets.
Finance leases
ALNO AG leases office and operating equipment. Economic ownership of the leased items is to be allocated to the lessee in line with IAS 17 if this party bears all the major opportunities and risks associated with the item (finance lease). All leased assets that qualify as finance leases are capital-ized in the consolidated financial statements at their market value, or the present value of the lease installments, whichever is lower. These are depreciated over their useful lives or the term of the lease agreement, whichever is shorter.
Impairment tests
IMPAIRMENT TESTING FOR GOODwILL
Goodwill from business combinations is allocated to the cash generating units that obtain the benefits from the combination. The EUR 2,535 thousand of goodwill allocated to ALNO AG in previous years was fully written off due to the impairment test that was conducted in the 2009 fiscal year. The EUR 1.483 thousand of goodwill remaining within the ALNO Group is attributed entirely to the CASAWELL Group. The CASAWELL Group comprises Gustav Wellmann GmbH & Co. KG and its subsidiaries.
Goodwill impairment tests are conducted at the end of each fiscal year, as well as during the fiscal year if there are any indications that value impairment has occurred.
The recoverable amount for the respective cash generating unit is calculated in order to perform the impairment test according to IAS 36.
The recoverable amount is the higher of the fair value of the cash generating unit less costs to sell, and the asset’s value in use.
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Value in use is the present value of estimated cash flows that are expected from the continued use of a cash generating unit, and its disposal at the end of its useful life. Value in use is calculated according to IAS 36 using the discounted cash flow method based on data from the current approved company forecast, and corrected to reflect expansion investments and planned restructur-ing measures. The forecasting horizon in this respect is four years. The discounting of cash flows entails the use of a weighted average cost of capital (WACC), taking into account the risk-free interest rate, a market risk premium (multiplied by the beta factor), a growth discount applied to the perpetual return, borrowing costs, and capital structure. In so doing, the forecast for the cash flows is based on the results of the individual Group companies calculated in a detailed forecasting process, supported by empirical values and external economic data.
The calculation of fair value less costs of self is performed on the basis of expert surveys, or on the basis of the best possible in-house estimates of realistically expected sales prices.
An impairment loss is reported if the recoverable amount is less than the carrying amount of the cash generating unit. Goodwill impairments are not reversed pursuant to IAS 36.
The corporate planning is essentially based on the following assumptions:
At ALNO AG (including property leasing companies), a change in revenue of –9.6 % to 17.0 % per annum was assumed. The following rates of change were also imputed: between – 17.4 % and 5.8 % per annum for shipment volumes in Germany, and of between – 5.8 % and 10.0 % per annum for shipment volumes abroad; price adjustments of between 1.2 % and 8.8 % per annum in Germany, and price adjustments between – 3.0 % and 6.7 % per annum for price adjustments abroad. In terms of purchasing prices, material costs were imputed to increase by 11.7 % per cabinet in 2011, and by between – 1.3 % and 11.6 % per annum per cabinet from 2012. In terms of personnel cost planning, an annual decline of between – 0.4 % and – 7.3 % per annum was assumed on the basis of the declining number of employees.
A change in revenue of between – 1.3 % and 19.2 % per annum was assumed at the CASAWELL Group. The following rates of change were also imputed: between – 10.1 % and 15.9 % per annum for shipment volumes in Germany, and of between 7.4 % and 12.6 % per annum for shipment volumes abroad; price adjustments of between 2.0 % and 4.9 % per annum in Germany, and price adjustments between 2.1 % and 11.4 % per annum for price adjustments abroad. In terms of purchasing prices, a change in material costs per cabinet of between – 2.9 % and 6.3 % per annum was imputed from 2011. In terms of personnel cost planning, an annual change of between – 4.6 % and 4.2 % per annum was assumed on the basis of a slight decline in the number of employees.
Security discounts of 10 % to 20 % have been applied to the free cash flows calculated as part of the forecasting process.
Based on these cash flow forecasts, the value in use of the cash generating units has been determined based on costs of capital before income taxes of 7.83 % (previous year: 8.37 %) for ALNO AG, and 10.66 % (previous year: 11.65 %) for the CASAWELL Group. The following factors were also included in the calculation for the 2010 fiscal year: a risk-free interest rate of 3.25 % (previous year: 4.25 %), a market risk premium of 5.0 % (previous year: 5.0 %), and a beta factor of 1.10 (previous year: 0.89), which was derived from the average of comparable companies. The cost of debt borrowing before income taxes, which was derived from the average of comparable companies, amounted to 5.67 % (previous year: 5.78 %). A 28.0 % tax rate was applied to the pre-tax observation (previous year: 28.0 %). The equity to debt ratio is 83 % to 17 % in line with the average capital structure of comparable companies.
A 1 % growth rate is assumed for cash flows subsequent to the end of the four-year planning horizon. This growth rate corresponds to the long-term average growth rate for the kitchen furniture industry.
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Overview of the cash generating units:
In EUR thousand ALNO CASAWELL
Carrying amount 9,483 22,553
Value in use – 8,384 80,740
The recoverable amount for ALNO AG and the CASAWELL Group was calculated based on value in use. Fair value less costs to sell was used in the previous year for the ALNO AG assets due to their negative value in use. Along with impairment losses applied to ALNO AG’s goodwill in an amount of EUR 2,535 thousand, this also resulted in additional impairment losses applied to intangible assets and property, plant and equipment (please refer to C.8. “Amortization of intangible assets and depreciation of property, plant and equipment”). This basis also resulted in the application of further impairment losses applied in 2010 to 2010 additions in an amount of EUR 2,325 thousand, since the new planning figures for the impairment test were not available until spring 2011. Despite negative value in use, no further impairment losses were necessitated for 2010, however, on the basis of the impairment tests conducted as of December 31, 2010 as part of the preparation of the financial statements.
As shown above, the forward-looking assumptions on which the calculations are based are subject to various estimation uncertainties. These uncertainties may exert a significant impact on the calcula-tions’ results. The following section explains how the values in use of the ALNO AG and CASAWELL cash generating units change given scenarios that diverge from planning (relating only to a change in the level of the perpetual return as the value-driving factor).
ALNO AG:
In EUR thousand WACC
Free cash flow – 2 % – 1 % 0 % 1 % 2 %
– 20 % – 7,156 – 9,661 – 11,522 – 12,959 – 14,103
– 10 % – 5,032 – 7,850 – 9,943 – 11,560 – 12,847
0 % – 2,908 – 6,038 – 8,384 – 10,162 – 11,591
10 % – 784 – 4,227 – 6,786 – 8,763 – 10,335
20 % 1,341 – 2,416 – 5,208 – 7,364 – 9,079
CASAWELL:
In EUR thousand WACC
Free cash flow – 2 % – 1 % 0 % 1 % 2 %
– 20 % 86,601 74,677 65,815 58,971 53,526
– 10 % 96,715 83,300 73,331 65,631 59,506
0 % 106,829 91,923 80,740 72,291 65,485
10 % 116,943 100,546 88,362 78,951 71,464
20 % 127,057 109,169 95,877 85,612 77,444
IMPAIRMENT TEST FOR MISCELLANEOUS INTANGIBLE ASSETS AND PROPERTY, PLANT AND EqUIPMENT
Miscellaneous intangible assets and property, plant and equipment are tested for indicators of possible impairment on the balance sheet date. An impairment test within the meaning of IAS 36 is implemented if there are any such indicators.
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In order to perform the impairment test, the recoverable amount for the individual asset is identified, or, if no cash inflows can be allocated to the individual asset, the recoverable amount is identified for the cash generating unit. Cash generating units are defined as the smallest units that independently generate cash inflows. These are the individual companies within the ALNO Group.
The recoverable amount is the higher of the fair value of the cash generating unit or asset less costs to sell, and the value in use of the cash generating unit or asset.
An impairment loss is reported if the recoverable amount is less than the carrying amount of the cash generating unit or asset.
If the reason for previous impairment no longer applies, the impairment loss is reversed, to a maximum, however, of amortized cost.
Accounting for interests in joint ventures
Interests in joint ventures are included in the consolidated financial statements using the equity method pursuant to IAS 31.38.
The acquisition costs are increased or reduced by the proportionate profit / loss for the year. Distri-butions reduce, and capital increases increase, the carrying amount of the participation. Changes in equity are also recorded proportionately under consolidated equity. If there are any indicators of impairment, an impairment test within the meaning of IAS 36 is implemented. There were no indicators of impairment within the meaning of IAS 36 on the balance sheet date.
Inventories
Raw materials, consumables and supplies, and merchandise are generally measured pursuant to IAS 2 at average purchase costs including ancillary purchase costs, or at net realizable value, whichever is lower.
Work in progress and finished goods/services are measured at a cost pursuant to IAS 2, however, at maximum at the net realizable value. Production costs comprise all costs directly allocable to the production process as well as reasonable portions of the production-related overheads.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, and estimated necessary selling costs.
Financial and other assets
Financial assets comprise, in particular, cash and cash equivalents, securities, and trade accounts receivable.
No use was made of the option to recognize financial assets as financial assets at fair value through profit or loss on first-time recognition.
Pursuant to IAS 39, trade receivables are classified as “loans and receivables” originated by the company, and are recognized at amortized cost using the effective interest method. Appropriate individual value allowances are applied to the doubtful receivables in the amount of the difference between the carrying amount of the asset and the present value of the expected future cash flows. Individual write-downs are recorded in a value allowance account. If the value allowance is lower in subsequent periods, the value allowance is reversed to amortized cost at maximum. Value allow-ances and reversals are recognized in income in the consolidated income statement. Receivables are derecognized if they cannot be collected.
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Securities and participating interests in investees are classified as “available-for-sale” financial assets. They are generally measured at fair value after initial recognition.
In the case of securities, fair value corresponds to the market price. Gains and losses from fair value changes are taken directly to equity until the financial asset has been disposed of, or until impairment is ascertained. In the instance of impairment, the accumulated net loss is removed from equity, and recognized in profit or loss.
Participating interests in investees are measured at cost, since there is no active market, and their fair values cannot be reliably calculated since there are no company forecasts. Any indicators of impairment are recognized in income.
Financial assets are generally recognized on their settlement date.
Financial assets are derecognized if the contractual rights to cash inflows from the asset have expired, or if all risks and opportunities have essentially been transferred. They are also derecognized on their settlement date.
Financial assets are also derecognized if their transfer results in neither the significant opportunities and risks connected with their ownership being transferred to the acquirer, nor being retained, and where the power of disposal over the financial assets has transferred to the acquirer. The rights and obligations arising or remaining as the result of this transfer are reported separately as assets or liabilities. If, by contrast, the power of disposal over the transferred financial assets remains with the ALNO Group, the assets that have been sold continue to be reported to the level of the continuing commitment. At the same time, a related liability is reported among other liabilities. Differences between the recognized assets and liabilities are reported in the financial result.
Other assets are carried at cost, and cash and cash equivalents are recognized at nominal value.
Pension provisions
The ALNO Group operates a defined benefit pension plan for former members of its Managing Board, and its executives in Germany and abroad.
ALNO’s pension plan is a defined benefit plan within the meaning of IAS 19.27, and includes a direct commitment by the company to provide agreed benefits to current and former employees; actuarial risks and investment risks are essentially borne by the company. The provision is calculated using the Projected Unit Credit Method according to IAS 19 to the extent that it is not covered by existing plan assets. Interest expenses are carried under financial expenses.
The Group uses the option of taking all actuarial gains and losses that occur during the fiscal year directly to equity.
Other provisions
Other provisions are formed within the meaning of IAS 37 if a current – legal and constructive – obli-gation to third parties is likely that can lead to an outflow of resources that can be reliably estimated. Provisions for expenses are generally not formed.
Provisions are measured in the amount of the best possible estimate of the expense that is required to fulfill the obligation on the balance sheet date. Non-current provisions are carried at their fulfillment amount, and discounted to the balance sheet date, according to IAS 37, to the extent that the effect is material. In the event of discounting, the increase in the provision caused by the passage of time is carried under financial expenses.
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Financial liabilities
No use is made of the option to recognize financial liabilities as financial liabilities at fair value through profit or loss on first-time recognition.
Financial liabilities mostly comprise shareholder loans and liabilities to banks. All financial liabilities within the meaning of IAS 39 are generally carried at amortized cost (financial liabilities measured at cost), which corresponds to the fair value of the consideration received including transaction costs. Current financial liabilities also generally include the portion of non-current loans for which the remaining term is less than one year.
Financial liabilities which the loan providers have waived are derecognized through profit or loss within the financial result. A new financial liability arises if a debtor warrant was agreed for these liabilities, and the occurrence of the condition is likely. In this case, the liability is recognized at its discounted nominal value, and discounted over its term.
Derivative financial instruments
In 2008, ALNO AG concluded derivative financial instrument transactions with a term until August 2010 to hedge itself against the risk of changes in interest rates. The derivative financial instruments required classification as held-for-trading since they do not meet the stringent accounting criteria for hedge transactions according to IAS 39. Changes to the market value of the derivative financial instruments are reported in the financial result in the income statement.
Trade payables and other liabilities
Trade payables are carried at the amount invoiced by the supplier.
Accruals are carried at the amount owed, which is estimated in some cases, and are carried under other liabilities.
Liabilities from finance leases are also carried under other liabilities at the present value of the future lease payments. These are classified as current and non-current liabilities in line with the term of the lease agreement. Lease payments are broken down into interest payments and redemptions of the remaining liability so that there is a constant interest rate on the remaining lease liabilities over the period. The interest portion is recognized in income under financial expenses.
Lease payments for operating leases are carried as expenses in the consolidated income statement over the period of the lease on a straight-line basis.
Miscellaneous other liabilities are carried at their repayment amount.
Trade payables and other liabilities are derecognized if the underlying obligation is satisfied, has been terminated, or has expired.
Correction to the consolidated statement of comprehensive income and consolidated statement of changes in equity
In the previous year, and the valuation adjustment to deferred tax assets relating to IPO costs of EUR 127 thousand was presented as part of consolidated other comprehensive income in the consolidated statement of total comprehensive income, although the item is closely connected with owner transactions, and should consequently be reported separately in the consolidated statement of changes in equity. The previous year’s presentation was corrected. This change of presentation increased consolidated other comprehensive income by EUR – 127 thousand, from EUR – 204 thousand to EUR – 77 thousand. This increased 2009 consolidated total comprehensive income from EUR – 39,168 thousand to EUR – 39,041 thousand.
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5. KEY DISCRETIONARY DECISIONS, ASSUMPTIONS AND ESTIMATES
Discretionary decisions
The management took the following discretionary decisions when applying the accounting and valuation methods:
Two leasing companies are consolidated as special purpose entities since ALNO AG has economic control of these companies. These are leasing companies, which solely rent the buildings and associated land on the company property to ALNO AG, and which have been doing so for several years. Agreements that the lessor concludes in connection with the leased items are subject to approval by ALNO AG. Any resulting payment obligations are cross-charged in full to ALNO AG. ALNO AG enjoys the right to purchase the leased objects after the expiry of the rental agreement.
Estimates and assumptions
Assumptions have been made and estimates used in the preparation of the consolidated financial statements that impact the disclosure and amount of the assets and liabilities, income and expenses, and contingent liabilities carried in the statements.
When testing goodwill and non-current assets for impairment, the assumptions made and estimates used mainly relate to the cash flow forecasts and the discount factors (please refer to B.4. “Impair-ment testing for goodwill” and C.8. “Amortization of intangible assets and depreciation of property, plant and equipment”).
There are further uncertainties in connection with the capitalization of future tax refunds, where assumptions were made regarding the date on which they are expected to occur, and the amount of the future taxable income over the next four years. In addition, future tax relief was calculated based on the assumption that there will be no detrimental change in the shareholder situation that could lead to a removal of losses carried forward within the meaning of Sections 8 Paragraph 4 and 8c of the German Corporate Income Tax Act (KStG) (please refer to C.10. “Income taxes”).
Assumptions and estimates also made when determining economic useful lives for non-current assets (please refer to B.4. “Intangible assets” and “Property, plant and equipment”), and when determin-ing the parameters to calculate pension provisions (please refer to D.11. “Pension provisions”) and partial retirement (please refer to D.12. “Other provisions”). The provision for warranties is subject to assumptions and estimates that relate to the period of time between the date of delivery and the period of warranty, and the future warranty charges (please refer to D.12. “Other provisions”). Value allowances applied to trade receivables are also subject to estimates that relate in particular to anticipated future cash inflow (please refer to D.6. “Trade receivables”).
These estimates and assumptions are based on premisses that reflect the knowledge available on the date when the consolidated financial statements are prepared. Although these assumptions and estimates have been made to the best of the management’s knowledge, the actual results may differ.
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C. NOTES TO THE CONSOLIDATED INCOME STATEMENT
The consolidated income statement has been prepared using the nature of expense method.
1. REVENUES
In EUR thousand 2010 2009
Income from the sale of goods 458,997 481,799
Other revenues 8,300 11,574
Total 467,297 493,373
Other revenues mostly stem from incidental product-related sales to the Group’s regular customers or other third parties, such as the sale of materials that are no longer required. They also include EUR 46 thousand (previous year: EUR 458 thousand) of revenues from services provided.
2. CHANGES IN INVENTORIES AND OwN wORK CAPITALIZED
In EUR thousand 2010 2009
Changes in inventories – 2,409 – 4,247
Other own work capitalized 416 523
Total – 1,993 – 3,724
3. OTHER OPERATING INCOME
Other operating income is composed as follows:
In EUR thousand 2010 2009
Income from the disposal of assets 399 89
Prior-period income 2,460 2,432
Income from reversal of individual value allowances 792 694
Income from insurance payments 82 74
Rental and lease income 577 775
Currency translation gains 478 409
Other income 2,274 1,987
Total 7,062 6,460
Prior-period income mostly includes income from the reversal of provisions and the derecognition of liabilities. Other income comprises income from social facilities, refunds from the Federal Labor Agency, income from payments received for derecognized receivables, and advertising costs subsidies.
Currency translation losses were netted with currency translation gains in the amount of EUR 707 thousand (previous year: EUR 280 thousand).
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4. COST OF MATERIALS
In EUR thousand 2010 2009
Cost of raw materials and consumables used 267,485 274,140
Cost of purchased services 4,422 4,514
Total 271,907 278,654
5. PERSONNEL EXPENSES
In EUR thousand 2010 2009
Wages and salaries 81,270 81,735
Social security contributions 16,384 16,498
Retirement benefits 246 306
Total 97,900 98,539
The company employed an average of 1,840 staff during the year (previous year: 1,885):
Number of employees 2010 2009
Hourly-paid employees 1,077 1,086
Salaried employees 763 799
Total 1,840 1,885
Germany 1,768 1,774
Abroad 72 111
Social security contributions include employer contributions to government pension insurance schemes for employees in the amount of EUR 7,459 thousand (previous year: EUR 7,467 thousand). Wages and salaries also include top-up amounts under the German Partial Retirement Act of EUR 64 thousand (previous year: EUR 331 thousand), compensation for pensions discounts of EUR 0 thousand (previous year: EUR 3 thousand), and other compensation (unconnected with the restructuring) of EUR 411 thousand (previous year: EUR 1,164 thousand).
Social security contributions include refunds from the Federal Labor Agency of EUR 121 thousand (previous year: EUR 121 thousand). These refunds were made for the social security expenses to be borne by the ALNO Group as part of short-time working at the Group’s German companies. They are netted with the respective expenses.
As a result of defined contribution benefit obligations received, an amount of EUR 186 thousand was carried under retirement benefit expenses for the company pension scheme (previous year: EUR 237 thousand).
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6. OTHER OPERATING EXPENSES
In EUR thousand 2010 2009
Sales expenses 47,264 50,704
Administrative expenses 25,070 31,207
Rent and leasing 7,307 7,358
Maintenance costs 7,095 7,460
Prior-period expenses 613 491
Addition to individual value allowances for trade accounts receivable 1,935 2,728
Bad debts 998 858
Other taxes 714 693
Losses on the disposal of assets 562 654
Other expenses 1,053 797
Total 92,611 102,950
Other expenses mostly include expenses from additions to provisions and accruals.
Non-capitalized development costs were recognized in income in the amount of EUR 1,232 thousand (previous year: EUR 1,105 thousand).
7. RESTRUCTURING CHARGE ( INCOME)
As a result of the ALNO Group’s unsatisfactory results of operations, the company started to restruc-ture its German companies in 2007, and its foreign companies at the end of 2008. The ALNO AG Supervisory Board approved the “ALNO 2013” future concept on January 15, 2010. A key aim of this program is to sustainably improve Group profitability and competitiveness. The introduction of efficient administrative processes and manufacturing structures across the entire Group forms the focus of the related comprehensive structural modifications.
A restructuring profit/loss of EUR – 8960 thousand was generated in 2010 (previous year: EUR 1306 thousand). The other operating expenses of EUR 4,594 thousand (previous year: EUR 933 thousand) relate to consultancy costs, and the addition to the provision for the Employment and Qualification Company at the Pfullendorf location. The personnel expenses of EUR 4638 thousand comprise settle-ment payments (previous year: EUR 386 thousand). The income of EUR 270 thousand (previous year: EUR 2,625 thousand) was generated from the release of provisions that are no longer required for the Employment and Qualification Company at the Enger site.
In EUR thousand 2010 Restructuring2010 According to the
income statement
Other operating income 7,332 – 270 7,062
Personnel expenses 102,538 – 4,638 97,900
Other operating expenses 97,205 – 4,594 92,611
In EUR thousand 2009 Restructuring2009 According to the
income statement
Other operating income 9,085 – 2,625 6,460
Personnel expenses 98,925 – 386 98,539
Other operating expenses 103,883 – 933 102,950
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8. AMORTIZATION OF INTANGIBLE ASSETS AND DEPRECIATION OF PROPERTY, PLANT AND EqUIPMENT
The composition of the amortization/depreciation can be seen in the statement of changes in non-current assets.
In EUR thousand 2010 2009
Intangible assets 955 1,870
Property, plant and equipment 8,824 14,331
Depreciation and amortization 9,779 16,201
Impairment losses 2,325 23,985
Total 12,104 40,186
In total, the following groups of assets are affected by impairment losses:
In EUR thousand 2010 2009
Goodwill 0 2,535
Other intangible assets 9 988
Land and buildings 0 9,167
Technical plant and machinery 0 6,275
Operating and office equipment 2,316 5,020
Total 2,325 23,985
With regard to the assets of the ALNO AG cash generating unit (including the leasing companies), fair value less costs to sell was still applied for the 2010 additions since there were no planning figures during the year, and consequently the negative value in use of December 31, 2009 was still applicable (please refer to B.4. “Impairment testing for goodwill”). This generated an impairment loss of EUR 0 thousand for other intangible assets (previous year: EUR 969 thousand), and an impairment loss of EUR 2,293 thousand for property, plant and equipment (previous year: EUR 20,378 thousand). The impairment test implemented as of December 31, 2010 on the basis of the new planning figures resulted in no goodwill impairment requirement (previous year: EUR 2,535 thousand). In addition, no further impairment charges were required for the other assets of the ALNO AG cash generating unit.
The impairment tests that were implemented also resulted in the application of impairment losses to intangible assets and property, plant and equipment at the foreign subsidiaries due to the continued poor earnings prospects in the United Kingdom, and the closure of the locations in Belgium and Italy, of EUR 32 thousand (previous year: EUR 103 thousand).
Of the impairment losses, EUR 2,293 thousand (previous year: EUR 15,954 thousand) is attributable to the ALNO segment, and EUR 0 thousand (previous year: EUR 5 thousand) to property compa-nies contained in the Other segment. The impairment losses of EUR 32 thousand at the foreign subsidiaries (previous year: EUR 103 thousand) were booked at Group level, and are consequently reported separately in the consolidation column. In addition, the previous year’s consolidation column contained a goodwill impairment loss of EUR 2,535 thousand.
There were no further events or circumstances which led to impairment losses or write-ups being recognized as of the balance sheet date.
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9. FINANCIAL RESULT
Financial expenses include interest expenses from the utilization of credit lines and shareholder loans totaling EUR 9,800 thousand (previous year: EUR 12,790 thousand), and expenses arising from deriva-tive financial instruments totaling EUR 130 thousand (previous year: EUR 1,200 thousand). They also include interest expenses arising from the unwinding of the discount on pension provisions, and from finance leases. The expenses connected with the planned but ultimately postponed capital increase of EUR 390 thousand was also included in the financial result (previous year: EUR 1,558 thousand).
Along with the positive earnings effect from the declared receivables waiver in an amount of EUR 10,000 thousand (previous year: EUR 0 thousand), financial income includes income from securities and investments of EUR 43 thousand (previous year: EUR 54 thousand); the remaining financial income results from other interest income arising from interest on financial assets.
10. INCOME TAXES
Breakdown of income taxes:
In EUR thousand 2010 2009
Consolidated income statement
Actual income tax expense:
Current income tax expense 258 201
Adjustments of current income taxes incurred in the previous year Income taxes – 12 6
Deferred taxes:
Tax loss carryforwards 325 1,566
Origination and reversal of temporary differences 335 – 1,603
Income tax expense reported in the consolidated income statement 906 170
In EUR thousand 2010 2009
Statement of changes in consolidated equity
Deferred taxes taken directly in equity:
Actuarial losses for pension provisions 169 – 26
IPO costs 0 – 127
Available-for-sale securities 0 2
Income taxes recorded under equity 169 – 151
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Deferred taxes comprise the following items:
In EUR thousandConsolidated balance sheet Consolidated income statement
2010 2009 2010 2009
Deferred tax liabilities
Property, plant and equipment 3,997 3,661 336 – 1,905
Inventories 216 138 78 – 98
Receivables and other assets 420 110 310 – 1
Miscellaneous provisions 103 31 72 0
Currency translation differences 0 – 1 – 9 – 1
Netting – 4,479 – 3,887 — —
257 52 787 – 2,005
Deferred tax assets
Intangible assets 2,158 1,896 262 – 966
Property, plant and equipment 848 0 848 1,222
Inventories 0 74 – 74 54
Pension provisions 742 569 4 121
Other provisions 432 1,033 – 601 – 152
Other liabilities 14 0 14 124
Tax loss carryforwards 285 610 – 325 1,566
Currency translation difference 0 1 – 1 – 1
Netting – 4,479 – 3,887 — —
0 296 127 1,968
Deferred tax expense (previous year: tax income) 660 – 37
The reconciliation between expected and actual income taxes is as follows:
In EUR thousand 2010 2009
Profit/loss before income taxes on continuing operations – 12,178 – 39,201
Profit/loss before income taxes on discontinued operations 0 407
Profit/loss before income taxes – 12,178 – 38,794
Expected income taxes – 3,410 – 10,862
Impact of different basis for measurement/tax rates 68 – 99
Losses from the fiscal year not considered 1,864 1,449
Revaluation (previous year: devaluation) or non-recognition of deferred assets on temporary differences – 1,688 4,980
Change in deferred tax assets on loss carryforwards 325 1,566
Non-tax-deductible operating expenses
Goodwill impairment 0 710
Other non-tax-deductible operating expenses 2,737 2,878
Taxable shareholders’ receivables waiver 1,375 0
Tax impact due to prior-period issues – 438 – 444
Other differences 73 – 8
Current income taxes 906 170
Taxes on income reported in the consolidated income statement 906 170
Income taxes due to discontinued operations 0 0
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The effective income tax rate – defined as 28 % in the ALNO Group (previous year: 28 %) – is derived from the application of a corporation tax rate of 15 % (previous year: 15 %) plus the solidarity sur-charge of 5.5 % on the corporation tax, and a weighted trade tax on earnings before income taxes.
For this reason, the deferred taxes for the German companies were calculated using future income tax charges of 28 %.
The foreign currency translation generated a EUR – 9 thousand change in the deferred tax liabilities, and a EUR 1 thousand change in deferred tax assets.
The corporation tax loss carryforwards in Germany for which no deferred tax assets were formed amounted to EUR 142,450 thousand (previous year: EUR 143,310 thousand). The German trade tax loss carryforwards not taken into account amounted to EUR 163,988 thousand as of the balance sheet date (previous year: EUR 164,628 thousand). No deferred taxes were capitalized for foreign tax loss carryforwards in an amount of EUR 2,820 thousand (previous year: EUR 3,628 thousand). This amount, EUR 0 thousand (previous year: EUR 2,714 thousand) can be used for a limited period.
The interest carried forward as a result of the German earnings-stripping rule, for which no deferred tax assets were formed, totaled EUR 14,603 thousand as of the balance sheet date (previous year: EUR 12,755 thousand).
The disclosed income tax earnings improved by EUR 426 thousand (previous year: EUR 450 thou-sand) as a result of the utilization of previously unconsidered tax loss carryforwards of EUR 2,652 thousand (previous year: EUR 2,414 thousand).
Deferred tax assets on loss carryforwards were reduced by EUR 246 thousand (previous year: EUR 1,435 thousand) to EUR 0 thousand (previous year: EUR 246 thousand) for the pooling of tax interests for ALNO AG during the fiscal year. Deferred tax assets on loss carryforwards were formed in the previous year only in the amount by which deferred tax liabilities exceeded deferred tax assets from temporary differences.
The deductible temporary differences for which no deferred tax assets were recognized due to a lack of value retention amounted to EUR 13,739 thousand (previous year: EUR 19,768 thousand).
A write-up will be performed if positive taxable income is achieved in 2011 within the ALNO AG pooling of tax interests. The amount of the write-up depends on the anticipated taxable profits based on the four-year tax forecast.
As a result of a longer-standing history of losses, the trade tax loss carryforwards for Gustav Wellmann GmbH & Co. KG, Enger, are formed only in the amount by which deferred tax liabilities exceed deferred tax assets from temporary differences. To this extent, deferred tax assets on loss carryforwards were increased by EUR 96 thousand to EUR 285 thousand (previous year: EUR 189 thousand).
At one foreign company, deferred tax assets on loss carryforwards were increased by EUR 175 thousand to EUR 0 thousand.
Tax deferrals of EUR 768 thousand (previous year: EUR 747 thousand) were not applied to taxable temporary differences arising from interests in subsidiaries in an amount of EUR 54,839 thousand (previous year: EUR 53,384 thousand), since the parent company cannot influence the temporal progression of the release of the temporary difference, and it is likely that the temporary difference will not be released within the foreseeable future.
Liabilities from income taxes amounted to EUR 194 thousand (previous year: EUR 173 thousand), and receivables from income tax refund claims totaled EUR 7 thousand (previous year: EUR 102 thousand).
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D. NOTES TO THE CONSOLIDATED BALANCE SHEET
1. INTANGIBLE ASSETS
In EUR thousand
Industrial property rights,
and similar rights and assets Goodwill
Prepayments and assets under
construction Total
Accumulated acquisition costs
Balance at January 1, 2009 25,766 4,090 755 30,611
Additions 495 0 499 994
Disposals – 791 0 0 – 791
Balance at December 31, 2009 25,470 4,090 1,254 30,814
Currency translation 7 0 0 7
Additions 314 0 261 575
Disposals – 810 0 0 – 810
Balance at December 31, 2010 24,981 4,090 1,515 30,586
Accumulated amortization/ impairment losses
Balance at January 1, 2009 20,663 72 0 20,735
Additions
Amortization 1,870 0 0 1,870
Impairment losses 988 2,535 0 3,523
Disposals – 791 0 0 – 791
Balance at December 31, 2009 22,730 2,607 0 25,337
Currency translation 7 0 0 7
Additions
Amortization 955 0 0 955
Impairment 9 0 0 9
Disposals – 810 0 0 – 810
Balance at December 31, 2010 22,891 2,607 0 25,498
Carrying amounts
December 31, 2010 2,090 1,483 1,515 5,088
December 31, 2009 2,740 1,483 1,254 5,477
January 1, 2009 5,103 4,018 755 9,876
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2. PROPERTY, PLANT AND EqUIPMENT
In EUR thousand
Real property, equivalent rights and buildings
Technical plant and
machinery
Other equip-ment, opera-
ting and office equipment
Prepayments and assets
under const-ruction Total
Accumulated acquisition costs
Balance at January 1, 2009 117,996 130,189 62,928 429 311,542
Currency translation 0 0 74 0 74
Additions 43 1,214 9,918 3,942 15,117
Transfers 0 415 0 – 415 0
Disposals – 38 – 5,089 – 13,558 0 – 18,685
Balance at December 31, 2009 118,001 126,729 59,362 3,956 308,048
Currency translation 0 0 114 0 114
Additions 35 3,065 9,562 2,558 15,220
Transfers 0 3,803 19 – 3,822 0
Disposals – 4,152 – 4,361 – 7,600 0 – 16,113
Balance at December 31, 2010 113,884 129,236 61,457 2,692 307,269
Accumulated amortization/ impairment losses
Balance at January 1, 2009 59,092 112,387 49,732 0 221,211
Currency translation 0 0 36 0 36
Additions
Depreciation 1,517 3,038 9,776 0 14,331
Impairment losses 9,167 6,275 5,020 0 20,462
Disposals – 31 – 4,898 – 13,047 0 – 17,976
Balance at December 31, 2009 69,745 116,802 51,517 0 238,064
Currency translation 0 0 90 0 90
Additions
Depreciation 1,256 1,785 5,783 0 8,824
Impairment losses 0 0 2,316 0 2,316
Disposals – 2,889 – 4,324 – 7,090 0 – 14,303
Balance at December 31, 2010 68,112 114,263 52,616 0 234,991
Carrying amounts
December 31, 2010 45,772 14,973 8,841 2,692 72,278
December 31, 2009 48,256 9,927 7,845 3,956 69,984
January 1, 2009 58,904 17,802 13,196 429 90,331
Property, plant and equipment that is available to the Group as part of a financing lease was written off in the previous year. The leased assets were mostly information and communication equipment, as well as operating fittings in buildings within other plant, operating and office equipment.
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3. FINANCIAL ASSETS
As of December 31, 2010, financial assets totaled EUR 3,431 thousand (previous year: EUR 3,279 thousand).
Financial assets include investment securities to protect partial retirement obligations against insol-vency in the amount of EUR 3,426 thousand (previous year: EUR 3,274 thousand), which were pledged to employees, and participating interests in associated companies of EUR 5 thousand (previous year: EUR 5 thousand).
4. INVESTMENTS ACCOUNTED FOR USING THE EqUITY METHOD
As of December 31, 2010, ALNO Middle East reported the following assets and liabilities in its balance sheet, which are attributable to ALNO AG in line with its 50 % equity interest.
In EUR thousand 31/12/2010 31/12/2009
Assets 6,121 5,017
of which non-current 1,701 1,063
of which current 4,420 3,954
Liabilities 3,940 3,087
of which non-current 1,977 1,826
of which current 1,963 1,261
Income and expenses were attributable to ALNO AG in the following amounts in 2010:
In EUR thousand 2010 2009
Income 4,462 3,816
Expenses 4,369 3,636
The earnings of EUR 93 thousand attributable to ALNO AG in 2010 increased the carrying value of the equity investment through profit or loss. In addition, the carrying amount of the participating interest in the company increased due to currency translation differences in an amount of EUR 158 thousand, which was taken directly to the equity of ALNO AG.
The earnings attributable to ALNO AG of EUR 180 thousand in 2009 were netted with the negative net assets in the amount of EUR 71 thousand in a side ledger. The surplus of EUR 109 thousand increased the carrying amount of the participating interest, and is recognized in income. In addition, the carrying amount of the participating interest in the company increased due to currency translation differences in an amount of EUR 20 thousand, which was taken directly to the equity of ALNO AG.
5. FINANCING RECEIVABLES
Non-current financial receivables mainly include loans granted to ALNO Middle East of EUR 2,000 thousand (previous year: EUR 2,000 thousand).
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6. TRADE ACCOUNTS RECEIVABLE
In EUR thousand TotalResidual term
Up to one year 1 to 5 years More than 5 years
December 31, 2010 32,996 32,360 636 0
December 31, 2009 47,634 46,548 1,086 0
Receivables sales on the part of the ALNO Group in an amount of EUR 10,910 thousand (previous year: EUR 0 thousand) do not satisfy the criteria for a complete derecognition of the receivables. As of December 31, 2010, this resulted in a carrying amount of trade receivables of EUR 410 thousand (previous year: EUR 0 thousand). The chief risks consist of foreign currency risks and interest-rate risks arising from potentially delayed settlement of the receivables. The liabilities connected with the transferred and non-de-recognized receivables amount to EUR 536 thousand (previous year: EUR 0 thousand), and are included among other liabilities.
The term structure of trade receivables was as follows as of the balance sheet date:
Carrying amount
Neither overdue nor impaired
Unimpaired and overdue in the following periods
In EUR thousandLess than 30
days
Between 30 and
365 daysMore than 365 days
December 31, 2010 32,996 23,050 3,076 4,632 108
December 31, 2009 47,634 37,717 4,307 3,524 172
The impaired receivables had a gross value of EUR 10,789 thousand (previous year: EUR 11,731 thousand).
Impairments to trade receivables changed as follows:
In EUR thousand 2010 2009
January 1 9,817 8,352
Currency translation differences 59 30
Amount utilized 2,360 599
Reversal 792 694
Addition 1,935 2,728
December 31 8,659 9,817
With regard to the unimpaired trade receivables, there were no indicators on the balance sheet date that the debtors would be unable to fulfill their payment obligations.
7. INVENTORIES
In EUR thousand 31/12/2010 31/12/2009
Raw materials, consumables and supplies 19,364 14,292
Work in progress 2,897 4,353
Finished goods and merchandise 6,078 6,202
Prepayments received – 158 – 123
Total 28,181 24,724
The impairments applied to inventories increased by EUR 158 thousand, from EUR 1,929 thousand in the previous year to EUR 2,087 thousand in 2010 (previous year: reduction of EUR 399 thousand).
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8. OTHER CURRENT ASSETS
In EUR thousand TotalResidual term
Up to one year 1 to 5 years More than 5 years
31, Dezember 2010 7,830 7,511 319 0
31. Dezember 2009 6,087 5,500 587 0
Other current assets primarily contain claims to VAT refunds, receivables from the sale of a piece of land and from employees, and prepaid expenses. This item as of December 31, 2010 also includes the costs of EUR 1103 thousand incurred for the IPO that was implemented in March 2011.
Other non-current assets primarily comprise receivables for partial retirement due from the Federal Labor Agency.
Impairments to other assets changed as follows:
In EUR thousand 2010 2009
January 1 112 0
Currency translation differences 1 0
Amount utilized 0 0
Reversal 10 0
Addition 26 112
December 31 129 112
The impaired other assets had a gross amount of EUR 208 thousand (previous year: EUR 112 thousand).
The unimpaired receivables include no overdue items.
9. CASH AND CASH EqUIVALENTS
Cash and cash equivalents comprise cash on hand and bank balances. Cash and cash equivalents that are not freely available comprise bank deposits as security.
Cash and cash equivalents are composed as follows as of the balance sheet date:
In EUR thousand 31/12/2010 31/12/2009
Cash and cash equivalents 3,041 2,857
Cash and cash equivalents not freely available – 2,060 – 1,599
Total 981 1,258
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10. EqUITY
a. Subscribed capital
As of December 31, 2010, the subscribed capital amounts to EUR 45,231 thousand, and is split into 17,396,653 ordinary shares. The shares are issued as bearer shares, and are fully paid in. Each ordinary share has a notional share in the subscribed capital of EUR 2.60.
In EUR thousand
Balance at January 1, 2009 41,124
Changes 2009 0
Balance at December 31, 2009 41,124
Changes 2010 4,107
Balance at December 31, 2010 45,231
On April 9, 2010, the Managing Board, with the assent of the Supervisory Board, passed a resolution to increase the company’s issued share capital against cash as part of the capital measures approved by the Ordinary Shareholders’ General Meeting of ALNO AG on July 26, 2008. The company’s share capital of EUR 41,123,869.80 was increased to EUR 43,177,583.80 through issuing 789,890 ordinary shares. The new shares were issued at EUR 6.33 per share. IRE Beteiligungs GmbH subscribed for and acquired the new shares. The excess amount of the non-cash capital contribution of EUR 2,946,289.70 was added to the capital reserve, after which the capital reserve amounted to EUR 39,490,074.62. The capital increase was entered in the commercial register on March 30, 2010.
On May 17, 2010, the Managing Board, with the assent of the Supervisory Board, passed a resolution to increase the company’s issued share capital against cash as part of the capital measures approved by the Ordinary Shareholders’ General Meeting of ALNO AG on July 26, 2008. The company’s share capital of EUR 43,177,583.80 was increased to EUR 45,231,297.80 through issuing 789,890 ordinary shares. The new shares were also issued at EUR 6.33 per share. IRE Beteiligungs GmbH, Stuttgart, subscribed for and acquired the new shares. The excess amount of the non-cash capital contribution of EUR 2,946,289.70 was added to the capital reserve, after which the capital reserve amounted to EUR 42,436,364.32. The capital increase was entered in the commercial register on June 16, 2010.
On February 10, 2011, a resolution was passed by the Managing Board, with Supervisory Board assent, to resume the capital increase from authorized capital that had been postponed in November 2010. The capital increase was implemented on March 3, 2011 through issuing 8,698,326 ordinary shares each with a notional share in the share capital of EUR 2.60. The issue price was EUR 3.00. As a consequence, the share capital increased by EUR 22,615,647.60 to EUR 67,846,945.40. The excess amount of the non-cash capital contribution of EUR 3,479,330.40 was added to the capital reserve, after which the capital reserve amounted to EUR 45,915,694.72. The capital increase was entered in the commercial register on March 4, 2011.
Below we present the respective current mandatory shareholder announcements pursuant to Sec-tion 21 (1) of the German Securities Trading Act (WpHG), and the proportionate voting rights on the date when the proportionate voting rights reached, exceeded or fell below the reporting thresholds pursuant to Section 21 (1) of the German Securities Trading Act (WpHG). The actual percentage of voting rights on the balance sheet date may differ as a result of acquisitions or sales that do not have a reporting requirement.
On March 31, 2006, Mr. Alexander Nothdurft, Munich, notified us pursuant to Section 21 (1) Sen-tence 1 of the German Securities Trading Act (WpHG) that his percentage of voting rights in the ALNO AG fell below the threshold of 5 % on March 28, 2006, and amounted to 3.38 % as of this date.
On March 31, 2006, Mr. Oliver Nothdurft, Munich, notified us pursuant to Section 21 (1) Sentence 1 of the German Securities Trading Act (WpHG) that his percentage of voting rights in the ALNO AG fell below the threshold of 5 % on March 28, 2006, and amounted to 3.24 % as of this date.
The above announcements were published in the Frankfurter Allgemeine Zeitung on April 5, 2006.
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On April 10, 2007, Küchen Holding GmbH, Munich, Germany, and Milano Investments S.à r.l., Luxem-bourg, Luxembourg, notified us pursuant to Section 21 (1) Sentence 1 of the German Securities Trading Act (WpHG) that their voting right share in ALNO AG had reached and exceeded the 75 % voting right threshold on March 26, 2007. Since that date, their voting right share in ALNO AG amounted to 75.27 %. Of the 75.27 % of the voting rights, 23.21 % are to be attributed to Küchen Holding GmbH pursuant to Section 22 (1) Sentence 1 Number 6 of the German Securities Trading Act (WpHG). Of the 75.27 % of the voting rights, 52.06 % are attributed to Milano Investments S.à r.l., Luxembourg, Luxembourg, pursuant to Section 22 (1) Sentence 1 Number 6 of the German Securities Trading Act (WpHG), and 23.21 % pursuant to Section 22 (1) Sentence 1 Number 6, Sentences 2 and 3 of the German Securities Trading Act (WpHG).
The above announcement was published on April 14, 2007 in the Frankfurter Allgemeine Zeitung, and sent to Bloomberg Europe, Reuters, dpa, Redaktion dow jones and dpa afx.
On October 22, 2009, Erste Private Investmentclub Börsebius Zentral (GbR), Cologne, Germany, exceeded the 5 % and 10 % voting right thresholds in ALNO AG, Pfullendorf, Germany. The vot-ing right share of the Erste Private Investmentclub Börsebius Zentral (GbR), Cologne, Germany, amounted to 10.66 % as of this date. This corresponds to 1,686,636 voting rights.
The above announcement was published on November 3, 2009 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
On December 15, 2009, ABAG Aktienmarkt Beteiligungs AG, Cologne, Germany, with its voting right share in ALNO AG, Pfullendorf, Germany, exceeded the 3 %, 5 % and 10 % thresholds, and held 10.66 % as of this date. This corresponds to 1,686,636 shares.
The above announcement was published on January 8, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
Bauknecht Hausgeräte GmbH, Stuttgart, Germany, on behalf of and at the order of Whirlpool Greater China Inc., Benton Harbor, Michigan/USA, notified the following to us pursuant to Sections 21 (1), 22 (1), 22 (1) Sentence 1 Number 1, 24 of the German Securities Trading Act (WpHG), and for IRE Beteiligungs GmbH, Stuttgart, Germany, pursuant to Sections 24, 21 (1) of the German Securities Trading Act (WpHG):
On December 15, 2009, IRE Beteiligungs GmbH with its voting right share in ALNO AG, Pfullendorf, Ger-many, fell below the 15 % threshold, and held 12.41 % as of this date. This corresponds to 1,962,844 shares.
On December 15, 2009, Bauknecht Hausgeräte GmbH, Stuttgart, Germany, with its voting right share in ALNO AG, Pfullendorf, Germany, fell below the 15 % threshold, and held 12.41 % as of this date. This corresponds to 1,962,844 shares. These voting rights are attributable in their entirety to Bauknecht Hausgeräte GmbH pursuant to Section 22 (1) Sentence 1 Number 1 of the German Securities Trading Act (WpHG). The chain of controlled companies is called: IRE Beteiligungs GmbH.
On December 15, 2009, Whirlpool Greater China Inc., Benton Harbor, Michigan, USA, with its voting right share in ALNO AG, Pfullendorf, Germany, fell below the 15 % threshold, and held 12.41 % as of this date. This corresponds to 1,962,844 shares. These voting rights are attributable in their entirety to Whirlpool Greater China Inc. pursuant to Section 22 (1) Sentence 1 Number 1 of the German Securities Trading Act (WpHG). The chain of controlled companies is called: Bauknecht Hausgeräte GmbH and IRE Beteiligungs GmbH.
The above announcement was published on January 8, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
On December 18, 2009, ABAG Aktienmarkt Beteiligungs AG, Cologne, Germany, notified as pursuant to Section 27a (1) of the German Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE000778840, had exceeded the threshold of 10 %, and amounted to 10.66 % as of this date. This investment serves to implement strategic objectives, particularly its position-ing as a strategic investor. The party that is required to make notification does not intend to acquire further
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voting rights through purchase or in another manner within the next twelve months. The party that is required to make notification is not endeavoring to exert influence on the composition of the issuer’s Man-aging or Supervisory boards. The party that is required to make notification is not striving for a significant modification to the company’s capital structure, especially with respect to the relationship between equity and debt financing, and its dividend policy. The funds derive from the party’s own resources.
The above announcement was published on January 8, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
IRE Beteiligungs GmbH notified us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, exceeded the threshold of 15 % on April 30, 2010, and amounted to 16.58 % as of this date (2,752,737 voting rights).
Bauknecht Hausgeräte GmbH, Stuttgart, Germany, notified us pursuant to Sections 21 (1), 24 of the Ger-man Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, exceeded the threshold of 15 % on April 30, 2010, and amounted to 16.58 % as of this date (2,752,737 voting rights). Of these voting rights, 16.58 % (2,752,737 voting rights) are to be attributed to it pursuant to Section 22 (1) Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: IRE Beteiligungs GmbH.
Whirlpool Greater China Inc., Benton Harbor, Michigan, USA, notified us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, exceeded the threshold of 15 % on April 30, 2010, and amounted to 16.58 % as of this date (2,752,737 voting rights). Of these voting rights, 16.58 % (2,752,737 voting rights) are to be attributed to it pursuant to Section 22 (1) Sentence 1 Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: Bauknecht Hausgeräte GmbH, IRE Beteiligungs GmbH.
The above announcement was published on May 21, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
On May 31, 2010, IRE Beteiligungs GmbH, Stuttgart, Germany, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, fell below the threshold of 15 % on May 20, 2010, and amounted to 14.77 % (2,452,737 voting rights) as of this date.
On May 31, 2010, Bauknecht Hausgeräte GmbH, Stuttgart, Germany, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, fell below the threshold of 15 % on May 20, 2010, and amounted to 14.77 % (2,452,737 voting rights) as of this date. Of these voting rights, 14.77 % (2,452,737 voting rights) are to be attributed to it pursuant to Section 22 (1) Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: IRE Beteiligungs GmbH.
On May 31, 2010, Whirlpool Greater China Inc., Benton Harbor, Michigan, USA, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, fell below the threshold of 15 % on May 20, 2010, and amounted to 14.77 % (2,452,737 voting rights) as of this date. Of these voting rights, 14.77 % (2,452,737 voting rights) are to be attributed to it pursuant to Section 22 (1) Sentence 1 Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: Bauknecht Hausgeräte GmbH, IRE Beteiligungs GmbH.
The above announcement was published on May 31, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
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ABAG Aktienmarkt Beteiligungs AG, Cologne, Germany, notified us pursuant to Section 21 (1) of the German Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, fell below the threshold of 10 % on June 16, 2010, and amounted to 9.70 % (1,686,636 voting rights) as of this date.
Erste Private Investmentclub Börsebius Zentral (GbR), Cologne, Germany, notified us pursuant to Section 21 (1) of the German Securities Trading Act (WpHG) that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, fell below the threshold of 10 % on June 16, 2010, and amounted to 9.70 % (1,686,636 voting rights) as of this date. Of these voting rights, 9.70 % (1,686,636 voting rights) are to be attributed to it pursuant to Section 22 (1) Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: ABAG Aktienmarkt Beteiligungs AG.
The above announcement was published on July 8, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
On July 22, 2010, IRE Beteiligungs GmbH, Stuttgart, Germany, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, exceeded the threshold of 15 % on June 16, 2010, and amounted to 18.64 % (3,242,627 voting rights) as of this date.
On July 22, 2010, Bauknecht Hausgeräte GmbH, Stuttgart, Germany, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE 0007788408, WKN: 778840, exceeded the threshold of 15 % on June 16, 2010, and amounted to 18.64 % (3,242,627 voting rights) as of this date. Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: IRE Beteiligungs GmbH.
On July 22, 2010, Whirlpool Greater China Inc., Wilmington, USA, informed us pursuant to Sections 21 (1), 24 of the German Securities Trading Act (WpHG), that its percentage of voting rights in ALNO AG, Pfullendorf, Germany, ISIN: DE0007788408, WKN: 778840, exceeded the threshold of 15 % on June 16, 2010, and amounted to 18.64 % (3,242,627 voting rights) as of this date. Of these voting rights, 18.64 % (3,242,627 voting rights) are to be attributed to it pursuant to Section 22 (1) Sentence 1 Number 1 of the German Securities Trading Act ( WpHG). Attributed voting rights in this context are held via the following companies that it controls, whose percentage voting rights in ALNO AG to 3 % in each case or more: Bauknecht Hausgeräte GmbH, IRE Beteiligungs GmbH.
The above announcement was published on July 23, 2010 via the Deutsche Gesellschaft für Ad-hoc-Publizität (DGAP).
Authorized capital
By way of a resolution of the Ordinary Shareholders’ General Meeting of ALNO AG of June 26, 2008, the Managing Board, with the Supervisory Board’s assent, was authorized by way of bylaw amend-ment to increase the company’s issued share capital until June 26, 2013 by up to an amount totaling EUR 20,561,933.60 through issuing new ordinary shares in exchange for cash and/or non-cash capital contributions, either wholly or in partial amounts, and either once or on several occasions. This resolution was entered in the commercial register on August 27, 2008.
By way of resolution of the Managing Board, and with the assent of the Supervisory Board, of April 9, 2010 and May 17, 2010, the share capital was increased by EUR 4,107,428.00 to EUR 45,231,297.80 through issuing 789,890 new ordinary shares against cash in each instance. The authorized capital still amounts to EUR 16,454,505.60 following this partial utilization.
By way of a resolution of the Ordinary Shareholders’ General Meeting of ALNO AG on June 23, 2010, the previous authorized capital was cancelled, and replaced by a new authorized capital. The Managing Board was authorized, with Supervisory Board’s assent, to increase the company’s share capital until June 22, 2015, once or on several occasions, by up to EUR 22,615,647.60
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through issuing up to 8,698,326 ordinary shares against cash contributions or non-cash capital contributions (Authorized Capital 2010). The authorized capital was entered in the commercial register on August 31, 2010.
Shareholders are entitled to statutory subscription rights. The new shares may also be underwritten by a bank or several banks with the obligation to offer them to shareholders for subscription (indirect subscription right).
The Managing Board is authorized, with the Supervisory Board’s assent
• to exclude shareholders’ subscription rights for fractional amounts.
• to totally exclude shareholders’ subscription rights in order to offer the new shares in the company to third parties against non-cash capital contributions as part of business combinations or to acquire companies or parts of companies, and other assets including loan liabilities and other liabilities.
• to exclude shareholders’ subscription rights if the capital increase against cash does not exceed 10% of the share capital, and the issue price is not significantly less than the stock market price of the shares of equal class that are already listed.
• to exclude shareholders’ subscription rights to the extent that it is necessary to grant bearers of option rights or creditors of convertible bonds that are issued by the company or its subordinate Group companies subscription rights to new shares to the extent that they would be entitled following the exercise of option or conversion rights, or satisfaction of conversion obligations.
On February 10, 2011, a resolution was passed by the Managing Board, with Supervisory Board assent, to resume the capital increase from authorized capital that had been postponed in November 2010. The capital increase was implemented on March 3, 2011 through issuing 8,698,326 ordinary shares each with a notional share in the share capital of EUR 2.60. The issue price was EUR 3.00. As a consequence, the share capital increased by EUR 22,615,647.60 to EUR 67,846,945.40. The company’s authorized capital was thereby fully placed as part of the offering. The capital increase was entered in the commercial register on March 4, 2011.
Conditional capital
The Ordinary Shareholders’ General Meeting of July 26, 2007 passed a resolution to approve a conditional capital increase. The Managing Board was authorized until July 25, 2012, to issue once or on several occasions by the company or by companies in the direct or indirect majority ownership of the company (Group companies) options and/or convertible debentures with a total value of up to EUR 100,000,000.00 with a term of up to 20 years (debentures), and to take over the guarantee for such debentures issued by subordinate Group companies, and to grant the bearers or creditors of debentures option and/or conversion rights to a total of up to 5,761,049 ordinary shares in the company with a proportionate amount of the issued share capital of up to EUR 14,978,727.40 according to the more detailed specifics of the relevant terms of the debenture. The conditional capital increase is only be performed to the extent that option or conversion rights arising from the debentures are utilized, respectively conversion obligations arising from the debentures are satisfied, and to the extent that no cash settlement is granted, or treasury shares are utilized to service them. The Management Board is authorized to determine the further specifics relating to the performance of the conditional capital increase (Conditional Capital 2007/I). The conditional capital was entered in the commercial register on September 21, 2007.
The Ordinary General Shareholders’ Meeting of ALNO AG on June 23, 2010, cancelled the authoriza-tion that was approved by the General Shareholders’ Meeting of July 26, 2007 to issue bonds with warrants and/or convertible bonds, as well as the Conditional Capital 2007/I.
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According to the wording of the resolution, the Managing Board was authorized until June 22, 2015 to issue bonds with warrants and/or convertible bonds with a total nominal amount of up to EUR 100,000,000.00 with a term of up to 20 years, once or on several occasions, by the company, or companies in the direct or indirect majority ownership of the company (“subordinate Group companies”), and to guarantee such bonds with warrants and/or convertible bonds issued by the company’s subordinate Group companies. The bearers or creditors of bonds with warrants and/or convertible bonds are to be granted option and/or conversion rights to a total of up to 8,698,326 ordinary no par value shares in the company with a notional amount in the issued share capital of up to EUR 22,615,647.60 according to the more detailed specifics of the relevant terms of the bonds with warrants and/or convertible bonds (“terms”).
The conditional capital increase is to be implemented only to the extent that the warrants and/or conversion rights from the warrants and/or convertible bonds are utilized, or the conversion obliga-tions from the bonds are fulfilled, and to the extent that a cash compensation cannot be granted, or treasury shares used, to fulfill the obligation. The Managing Board is authorized to determine the further specifics relating to the performance of the conditional capital increase (Conditional Capital 2010). The conditional capital was entered in the commercial register on August 31, 2010.
Acquisition of treasury shares
By way of resolution of the Shareholders’ General Meeting July 29, 2009, the Managing Board was authorized to acquire treasury shares pursuant to Section 71 Paragraph 1 Number 8 of the German Stock Corporation Act (AktG). The authorization to acquire treasury shares up to 10 % of the issued share capital entered in the balance sheet as of the date of the Shareholders’ General Meeting was valid until January 29, 2011.
By way of a resolution of ALNO AG’s General Shareholders’ Meeting of June 23, 2010, the existing authorization to acquire and utilize treasury shares was cancelled. According to the wording of the resolution of June 23, 2010, the Managing Board was authorized to acquire treasury shares up to 10 % of the share capital existing at the date of the resolution pursuant to Section 71 (1) Number 8 of the German Stock Corporation Act (AktG). The authorization may be exercised either wholly or in partial amounts, once or on several occasions, in the pursuit of one or several purposes by the company, or by third parties on the company’s behalf. The acquired shares, together with other treasury shares, may at no time exceed 10 % of the issued share capital. The authorization came into effect on June 24, 2010, and is valid until June 22, 2015.
Shares are acquired at the Managing Board’s election either through the stock market or by means of a public purchase offer addressed to all of the company’s shareholders.
If the purchase is implemented via the stock market, the consideration paid by the company for each share (excluding incidental purchase costs) may be neither more than 10 % more, nor more than 10 % less, than the company’s stock market share price calculated on the stock market trading day at the opening auction on the XETRA electronic trading system (or a comparable successor system) of the Frankfurt Stock Exchange.
If the purchase is implemented through a public purchase offer to all of the company shareholders, the offered purchase price, or the threshold limits of the purchase price range, per share (excluding incidental purchase costs) may be neither more than 20 % more, nor more than 20 % less, then the average closing price of the company’s shares on the XETRA electronic trading system (or a comparable successor system) of the Frankfurt Stock Exchange on the last three stock market trading days before the publication of the offer. The offer can be adjusted if significant price fluctua-tions arise after the publication of the offer. In this instance, reference is made to the corresponding average closing price on the last three stock market trading days before the publication of the adjustment. The volume of the offer can be limited. If the offer is oversubscribed, acceptance must be on the basis of the ratio of the respective shares offered. Provision can be made for a preferential acceptance to purchase offered shares in small unit volumes of up to 100 shares per shareholder.
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The Managing Board is authorized, with the Supervisory Board’s assent, to utilize the company’s shares, which are acquired on the basis of this authorization or on the basis of an authorization that was issued at an earlier time, for the following purposes:
The shares may also be sold in another manner than through the stock market or by offer to all shareholders, if the shares are sold in return for cash payment at a price that is not significantly less than the company’s stock market price at the time of disposal. This authorization applies only to the extent, however, that shares sold on the basis of this authorization may not exceed a proportional amount equivalent to a total of 10 % of the share capital, neither on the date when this authorization becomes effective, nor on the date when this authorization is exercised. The maximum 10 % limit reduces by the proportional amount of the share capital attributable to those shares that are issued during the duration of this authorization as part of a capital increase under exclusion of subscription rights pursuant to Section 186 (3) Sentence 4 of the German Stock Corporation Act (AktG). The 10 % maximum limit is also reduced by the proportional amount of the share capital attributable to those shares that were issued to service bonds with conversion or option rights, or which are to be issued, to the extent that the bonds were issued during the period of this authorization under exclusion of subscription rights in corresponding application of Section 186 (3) Sentence 4 of the German Stock Corporation Act (AktG).
The shares may be sold in return for non-cash payment, particularly also in connection with the business combinations, and the acquisition of companies, parts of companies, and participating interests in companies.
The shares may be offered for purchase to individuals who are employed by the company or by its associated companies.
The shares may be utilized to satisfy the company’s obligation arising from bonds with warrants and/or convertible bonds that are issued or guaranteed by it in the future.
The authorization may be exercised either wholly or in partial amounts, once or on several occasions, and in the pursuit of one or several purposes by the company. Shareholders’ subscription rights to these treasury shares are excluded to this extent. Above and beyond this, the Managing Board, with Supervisory Board assent, may exclude subscription rights for fractional amounts when selling treasury shares as part of an offer to all of the company’s shareholders.
The Managing Board is also authorized to withdraw and cancel the acquired treasury shares, with the Supervisory Board’s assent, and without a further resolution being required to be passed by the Shareholders’ General Meeting.
b. Capital reserve
The capital reserve changed as follows during the year under review:
In EUR thousand
Balance at January 1, 2009 36,544
Changes 2009 0
Balance at December 31, 2009 36,544
Changes 2010 5,893
Balance at December 31, 2010 42,437
As part of the capital increases in 2010, surplus amounts of EUR 5,893 thousand were added to the capital reserve.
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c. Accumulated other comprehensive income
With regard to the changes in accumulated other comprehensive income, please refer to the statement of changes in consolidated equity, and the consolidated statement of comprehensive income.
Accumulated other comprehensive income includes consolidated retained earnings, the IPO costs taken directly to equity, the currency translation reserve, and other transactions taken directly to equity.
Consolidated retained earnings include the accumulated consolidated earnings for the reporting period, IPO costs taken directly to equity, and the reserve arising from re-measurements applied as of the date of first-time application of IFRS. The receivables waiver of EUR 4,909 thousand (previous year: EUR 5,000 thousand) that was issued by the shareholders was also carried under this item in the year under review.
The other transactions taken directly to equity relate to the actuarial gains and losses from the pension provisions, changes in the fair value of securities, and the respective associated deferred taxes. The amounts reported in 2010 are presented in the consolidated statement of comprehensive income.
d. Capital management
The Group has negative consolidated equity of EUR 69,722 thousand, which is composed as follows:
In EUR thousand 31/12/2010 31/12/2009
Subscribed capital 45,231 41,124
Capital reserve 42,437 36,544
Accumulated other comprehensive income – 157,390 – 148,800
Total – 69,722 – 71,132
The restructuring agreement was signed on February 7, 2011 includes significant equity enhance-ment measures of approximately EUR 80.0 million, which are described in detail in Section O. “Events after the balance sheet date”.
This measure aims at a significant improvement in consolidated equity.
The ALNO Group’s net financial debt increased by EUR 16,137 thousand in the fiscal year, and is as follows:
31/12/2010 inEUR thousand
31/12/2009 inEUR thousand
Change in EUR thousand
Change in percent
Shareholder loans and other financial liabilities
non-current 13,057 14,129 – 1,072 – 7.6
current 73,495 93,122 – 19,627 – 21.1
86,552 107,251 – 20,699 – 19.3
Less cash and cash equivalents – 3,041 – 2,857 184 6.4
Net financial debt 83,511 104,394 – 20,883 – 20.0
Total assets 157,698 165,026 – 7,328 – 4.4
Net financial debt as % of total assets 53.0 % 63.3 %
Net financial debt fell by EUR 20,883 thousand year-on-year, or 20.0 %. This is mainly due to receivables waivers by shareholders in an amount of EUR 4,909 thousand and by the financing banks in an amount of EUR 10,000 thousand, as well as to the cash inflows of EUR 10,000 thousand from the capital increases performed in the 2010 fiscal year that were used to redeem debt. This decline is offset by an increase in trade payables of EUR 7,921 thousand, as a consequence of which total assets fell
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by EUR 7,320 thousand year-on-year, or 4.4 %. The decline in total assets was mainly due to lower trade receivables in a year-on-year comparison. This also reflects the factoring that was introduced at two subsidiaries. In overall terms, net financial debt relative to total assets fell from 63.3 % to 53.0 %.
ALNO AG’s equity in its single-entity (German Commercial Code/HGB) financial statements as of December 31, 2010 amounted to EUR 31,279 thousand (previous year: EUR 30,993 thousand). The increase in equity of EUR 286 thousand is due to the shareholders’ receivables waivers in an amount of EUR 4,909 thousand, and the total of EUR 10,000 thousand of capital increases implemented in 2010, which is offset by the net loss for the year. ALNO AG monitors changes in its equity on a monthly basis.
11. PENSION PROVISIONS
The ALNO Group’s employee pension scheme essentially rests on defined benefit pension com-mitments. As a rule, period of service and pensionable compensation are the determinants of the calculation of pensions. The commitments mentioned are measured on the basis of expert actuarial opinions. The legal, economic and fiscal circumstances in the country concerned form the basis for the opinions. The measurement parameters are consequently country-specific.
The provisions are valued according to the projected unit credit method pursuant to IAS 19, tak-ing future developments into account. In Germany, which, at over 99.9 % (previous year: 99.2 %), constitutes the major part of the provision, a discounting rate of 5.4 % (previous year: 6.0 %) is used as a base. Abroad, the discounting rate is 5.4 % (previous year: 5.8 %).
Existing commitments are measured in Germany with an increase in wages and salaries of 1.0 % (previous year: 1.0 %), and an average increase in pensions of 1.0 % and 1.5 % respectively (previous year: 1.0 % and 1.5 % respectively). No increase in wages and salaries is assumed abroad. The average pension increase abroad is assumed to be 5,0 % (previous year: 5,0 %). Staff turnover is ascertained on a company-by-company basis, and is calculated in Germany at 0.0 % and 1.0 % respectively (previous year: 0.0 % and 1.0 % respectively). A staff turnover rate of 3.6 % is assumed abroad (previous year: 3.6 %).
The expected return on plan assets is calculated with an interest rate of 4.2 % in Germany and 3.4 % abroad (previous year: 4.5 % and 3.4 % respectively). The expected return on plan assets corresponds to the average yield on the long-term investments on which the plan assets are based. There was actual income on plan assets of EUR 140 thousand (previous year: expense of EUR 18 thousand).
Plan assets abroad are invested in the form of long-term life insurance; investment in plan assets in Germany is handled centrally by Allianz Global Investors. The plan assets reported in the balance sheet are not used by the company itself.
The following amounts were recognized in the consolidated income statement:
In EUR thousand 2010 2009
Current service costs 31 22
Interest expense 1,003 961
Expected return on plan assets – 43 – 41
991 942
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Apart from the interest expense, which is reported under financial expenses, the expenses are recognized under expenses for retirement benefits.
In EUR thousand 2010 2009 2008 2007 2006
Defined benefit obligation financed by provisions 16,957 16,061 16,258 16,651 18,793
Defined benefit obligation financed by funds 1,236 1,132 936 1,184 1,369
Defined benefit obligation (DBO) 18,193 17,193 17,194 17,835 20,162
Fair value of plan assets – 1,220 – 992 – 888 – 1,083 – 1,112
Pension provision 16,973 16,201 16,306 16,752 19,050
Experience gains (–) or losses (+) – 117 429 – 30 38 – 200
The changes in the present value of the defined benefit obligations are as follows:
In EUR thousand 2010 2009
Obligation at the start of the fiscal year concerned 17,193 17,194
Interest expense 1,003 961
Current service costs 31 22
Pension payments during the period – 1,030 – 1,028
Actuarial gains (–) or losses (+) 970 9
Currency translation 26 35
Obligation at the end of the relevant fiscal year 18,193 17,193
The changes in the fair value of the plan assets are as follows:
In EUR thousand 2010 2009
Plan assets at the start of the relevant fiscal year 992 888
Expected return on plan assets 43 41
Employer contributions 70 67
Actuarial gains (+) or losses (-) 97 – 36
Currency translation 18 32
Plan assets at the end of the relevant fiscal year 1,220 992
The actuarial gains and losses include an actuarial loss of EUR 51 thousand (previous year: EUR 79 thousand) owing to the observation of the upper limit pursuant to IAS 19.58 (b). The change was reported directly under equity with other actuarial gains and losses in an amount of EUR – 822 thousand. Actuarial losses amounted to EUR – 726 thousand as of the balance sheet date (previous year: actuarial gain of EUR 147 thousand).
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12. OTHER PROVISIONS
In EUR thousand 1.1.2010 Utilization Reversal Transfer AdditionCurrency
difference 31/12/2010
Non-current provisions
Personnel expenses 5,061 – 321 – 44 – 1,873 631 0 3,454
Legal retention requirements 396 0 – 80 0 3 0 319
5,457 – 321 – 124 – 1,873 634 0 3,773
Current provisions
Guarantees, damage compensation, and pending losses 1,542 – 1,036 – 183 0 1,190 10 1,523
Restructuring 351 – 81 – 270 0 3,697 0 3,697
Financial statement and tax consultancy costs 380 – 364 – 16 0 359 3 362
Personnel expenses 1,658 – 1,595 – 50 1,873 88 0 1,974
Taxes 90 – 66 0 0 131 1 156
Total 4,021 – 3,142 – 519 1,873 5,465 14 7,712
The provisions for personnel expenses primarily consist of provisions for partial retirement arrange-ments customary in Germany. The provision for partial retirement comprises expenses for wages and salary payments to staff members in their release phase (fulfillment arrears), and additional top-up amounts for the entire residual duration of partial retirement. In addition, severance payments within the framework of partial retirement amounting to EUR 194 thousand (previous year: EUR 275 thousand) are included. Calculation of the provision takes into account a discounting rate of 3.5 % (previous year: 2.3 %). An amount of EUR 268 thousand (previous year: EUR 555 thousand) is reported under other non-current assets for the anticipated refunds from the Federal Labor Agency in respect of entitlements under the Partial Retirement Act.
The provision for guarantees, compensation for damage, and anticipated losses includes free-of-charge deliveries owing to faulty goods, missing parts, and other defects, which are measured at their manufacturing cost in production. Furthermore, the provision covers risks in connection with claims for compensation for damages from customers and suppliers, which are recognized at the level of the anticipated recourse. In addition, provisions are recognized for anticipated losses on delivery commitments for which the unavoidable costs of their performance exceed the expected economic benefit.
The restructuring provision includes expenses for severance pay and layoff salaries that are still anticipated, as well as payments as part of the employment and qualification company that are still outstanding.
The non-current provisions relating to partial retirement agreement will be consumed mainly within the next two years. The other non-current personnel provisions and the retention provision will be consumed within the next ten years.
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13. SHAREHOLDER LOANS
During the fiscal year, there were financial liabilities of EUR 365 thousand (previous year: EUR 5,375 thousand), which were granted by shareholders of ALNO AG.
14. OTHER FINANCIAL LIABILITIES
In EUR thousand31/12/2010
TotalResidual term
Up to one year 1 to 5 years More than 5 years
Liabilities to banks 80,798 67,741 7,378 5,679
Miscellaneous financial liabilities 5,389 5,389 0 0
Total 86,187 73,130 7,378 5,679
In EUR thousand31/12/2009
TotalResidual term
Up to one year 1 to 5 years More than 5 years
Liabilities to banks 94,456 80,327 7,808 6,321
Derivative financial instruments 1,015 1,015 0 0
Miscellaneous financial liabilities 6,045 6,045 0 0
Total 101,516 87,387 7,808 6,321
Apart from loans that are regularly prolonged under master agreement with banks, there are loans on which monthly, quarterly, semi-annual or annual repayments are made.
Some of the loan agreements carry variable rates of interest, and some carry fixed rates of interest. The interest rates vary mainly between 4.3 % p.a. and 9.0 % p.a. (previous year: between 4.5 % p.a. and 9.5 % p.a.).
Liabilities to banks include foreign-currency loans amounting to GBP 792 thousand (previous year: GBP 634 thousand) and CHF 1,600 thousand (previous year: CHF 1,925 thousand).
The miscellaneous financial liabilities essentially result from supplier factoring.
Covenants were agreed for one subsidiary’s loan. These relate to the equity ratio, and the upper limit for calculated Group cost transfers. The agreed covenants had not been breached as of the balance sheet date.
The liabilities to banks are secured by mortgages and assignment of entitlements to the restitution of free portions of mortgages, and by the assignment of machines and technical plant as security. Furthermore, the liabilities to banks are secured by the assignment of receivables and claims from the supply of goods and services to customers, and from central claims settling agencies, by the pledging of non-capitalized brand name rights, the assignment of stocks of goods, as well as the pledging of the limited partnership interests in Gustav Wellmann GmbH & Co. KG, Enger, and the shares in Casawell Service GmbH, Enger, Impuls Küchen GmbH, Brilon, and pino Küchen GmbH, Coswig (Anhalt).
As of the balance sheet date, the assets provided as collateral were reported in the consolidated balance sheet with the following carrying amounts:
In EUR thousand 31/12/2010 31/12/2009
Land and buildings 45,486 47,861
Technical plant and machinery 6,002 4,907
Inventories 14,184 14,349
Trade accounts receivable 14,408 26,996
Total
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15. DEFERRED GOVERNMENT GRANTS
The deferred government grants amounting to EUR 781 thousand (previous year: EUR 807 thousand) include investment subsidies for a subsidiary in the new federal states. In the fiscal year, EUR 26 thousand (previous year: EUR 36 thousand) was released to profit or loss.
16. TRADE PAYABLES AND OTHER LIABILITIES
In EUR thousand31/12/2010
TotalResidual term
Up to one year 1 to 5 years More than 5 years
Trade payables 80,396 80,396 0 0
Other liabilities 30,782 30,700 82 0
of which customer bonuses 15,952 15,952 0 0
of which personnel 7,249 7,249 0 0
of which invoices outstanding 2,716 2,716 0 0
of which other taxes 1,426 1,426 0 0
of which relating to social security 315 315 0 0
of which finance leases 49 49 0 0
Total 111,178 111,096 82 0
In EUR thousand31/12/2009
TotalResidual term
Up to one year 1 to 5 years More than 5 years
Trade payables 72,475 72,475 0 0
Other liabilities 29,721 29,569 152 0
of which customer bonuses 13,916 13,916 0 0
of which personnel 6,106 6,106 0 0
of which invoices outstanding 2,882 2,882 0 0
of which other taxes 2,375 2,375 0 0
of which relating to social security 276 276 0 0
of which finance leases 172 123 49 0
Total 102,196 102,044 152 0
The liabilities for finance leasing are as follows:
31/12/2010In EUR thousand
MaturityUp to one year 1 to 5 years More than 5 years
Nominal lease payments 52 0 0
Discounting – 3 0 0
Present values 49 0 0
31/12/2009In EUR thousand
MaturityUp to one year 1 to 5 years More than 5 years
Nominal lease payments 132 52 0
Discounting – 9 – 3 0
Present values 123 49 0
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E. DISCONTINUED OPERATIONSIn fiscal 2007, the profit/loss of GEBA Möbelwerke GmbH, Löhne, (GEBA), which was sold in April 2007, and the profit/loss arising from the deconsolidation of the company, were reported separately from the profit/loss from continuing operations in the consolidated income statement. In the 2009 fiscal year, a settlement agreement was reached with the purchasers at that time, which led to the release of the provision for legal costs amounting to EUR 407 thousand, which was recognized in 2007 in the profit/loss from discontinued operations. For this reason, the income from the release was also reported in the profit/loss from discontinued operations in the previous year.
F. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
GENERAL INFORMATION
In accordance with IAS 7 (Cash Flow Statements), the consolidated cash flow statement shows how the Group’s cash and cash equivalents have changed due to cash flows from operating, investing and financing activities, as well as due to fluctuations in exchange rates over the course of the year under review.
The composition of cash and cash equivalents as of the relevant fiscal year-end can be seen under D.9.
RESULTS
In the case of net cash and cash equivalents employed for operating activities, there was a cash inflow of EUR 11,540 thousand in the year under review (previous year: EUR 21,210 thousand). The decline of EUR 9,670 thousand results primarily from a reduction in cash flow from operating activities before working capital changes. This worsened by EUR 11,057 thousand, from EUR 4,303 thousand to EUR – 6,754 thousand. After a working capital reduction of EUR 16,907 thousand in the previous year, a further reduction of EUR 18,294 thousand was achieved in 2010. The introduction of factoring at two subsidiaries exerted a particularly positive impact in this context. This allowed a significant reduction in capital tied up in trade accounts receivable. These fell by EUR 14,638 thousand year-on-year.
In terms of investing activities, there was a cash outflow of EUR 14,300 thousand in the year under review, compared with EUR 15,967 thousand in the previous year. The decline results primarily from the reported cash outflows arising from the sale of various pieces of land at the Pfullendorf location.
The EUR 7,791 thousand increase in cash flow from financing activities to EUR 2,488 thousand arises especially from the cash inflows of EUR 10,000 thousand from the two capital increases that were implemented in 2010. The cash outflows for the capital increase that was performed in 2011 were also reported in cash flow from financing activities.
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G. NOTES ON SEGMENT REPORTING
Within the framework of segment reporting, the ALNO Group’s activities are classified by operating segments in accordance with the rules of IFRS 8. Segments that are reported to the Managing Board are not summarized. This classification is orientated towards internal steering and reporting, and comprises the ALNO, Wellmann, Impuls, pino, Foreign Subsidiaries, and Other Companies segments.
The ALNO segment includes ALNO AG in Düsseldorf, which produces brand-name kitchens in the upper and middle price segments at the Pfullendorf site, whereas the Wellman segment contains kitchens in the middle price segment, which are manufactured at the Enger location. The Impuls segment comprises Impuls Küchen GmbH in Brilon, and the pino segment pino Küchen GmbH in Coswig (Anhalt); both produce kitchens in the lower price segment. The sales companies in other European countries are aggregated under Foreign Subsidiaries. Two property companies and one intermediate holding company are reported under Other Companies.
The segment information is based on the same reporting, accounting and valuation methods as the consolidated financial statements. Internal revenues indicate the level of revenues between Group companies; these were performed at market prices.
The plenary Managing Board is the decision-maker with regards to the allocation of resources and the assessment of the profitability of the reporting segments.
The segment information by operating segments is as follows:
2010By segment in EUR thousand ALNO
WELL-MANN IMPULS PINO ATG Other FS Total
Revenues
External revenues 98,331 130,067 117,966 93,252 27,681 0 0 467,297
Internal revenues 5,502 7,484 3,299 367 0 1,724 – 18,376 0
Total revenues 103,833 137,551 121,265 93,619 27,681 1,724 – 18,376 467,297
Result
Segment result before income taxes (EBT) – 20,218 – 9,694 7,754 4,748 – 315 665 4,882 – 12,178
Taxes on income – 124 – 291 – 13 106 – 458 – 73 – 53 – 906
Net profit/loss for the period – 20,342 – 9,985 7,741 4,854 – 773 592 4,829 – 13,084
Depreciation/amortization 656 4,337 2,743 1,839 210 87 – 93 9,779
Impairment losses 2,293 0 0 0 215 0 – 183 2,325
Financial income 10,376 18 775 724 43 0 – 1,554 10,382
Financial expenses 10,360 3,795 1,168 937 458 819 – 6,002 11,535
Profit/loss from investments accounted for using the equity method 0 0 0 0 0 0 93 93
Assets and liabilities
Segment assets 107,917 56,335 38,061 28,165 9,212 64,034 – 146,026 157,698
Segment liabilities 134,206 55,312 30,960 23,230 10,020 10,771 – 37,079 227,420
Investments accounted for using the equity method 4,000 0 0 0 0 0 – 1,819 2,181
Segment information
Investments 3,356 6,158 2,978 3,292 11 0 0 15,795
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The consolidated revenues eliminate internal revenues within the ALNO Group.
The consolidation entries in the “Segment profit/loss before income taxes” line are composed as follows:
In EUR thousand 2010 2009
Equity consolidation 4,481 7,341
Consolidation of liabilities – 444 – 18,170
Other consolidation entries 845 416
Total 4,882 – 10,413
The other consolidation entries relate to the elimination of intra-Group inventories, impairment losses applied at Group level, and the earnings effect arising from at-equity measurement.
The figures in the consolidation column for depreciation/amortization and impairment losses arise from impairment losses applied at Group level. In addition, the previous year’s impairment losses included goodwill impairment losses of EUR 2,535 thousand.
2009By segment in EUR thousand ALNO
WELL-MANN IMPULS PINO ATG Other FS Total
Revenues
External revenues 103,258 122,089 99,947 86,631 81,448 0 0 493,373
Internal revenues 31,186 14,451 9,732 3,955 17 1,715 – 61,056 0
Total revenues 134,444 136,540 109,679 90,586 81,465 1,715 – 61,056 493,373
Result
Segment result before income taxes (EBT) – 37,759 617 5,516 6,350 1,457 – 4,969 – 10,413 – 39,201
Taxes on income 665 – 26 136 – 44 – 237 – 632 – 32 – 170
Profit/loss on discontinued operations 407
Net profit/loss for the period – 37,094 591 5,652 6,306 1,220 – 5,601 – 10,445 – 38,964
Depreciation/amortization 6,672 4,431 2,913 1,796 309 265 – 185 16,201
Impairment losses 15,954 0 0 0 0 5,393 2,638 23,985
Financial income 2,672 32 1,027 1,366 122 0 – 5,081 138
Financial expenses 20,506 6,788 1,505 1,275 685 869 – 15,094 16,534
Profit/loss from investments accounted for using the equity method 0 0 0 0 0 0 109 109
Assets and liabilities
Segment assets 104,690 50,917 40,061 30,825 17,690 64,112 – 143,269 165,026
Segment liabilities 138,173 42,623 32,920 25,727 18,456 11,444 – 33,185 236,158
Investments accounted for using the equity method 4,000 0 0 0 0 0 – 2,070 1,930
Segment information
Investments 5,029 6,415 2,782 1,767 143 0 – 25 16,111
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The consolidation entries in the area of financial income and expenses comprise the elimination of intra-Group interest payments, and the elimination of intra-Group impairment losses applied to participating interests in an amount of EUR 4,418 thousand (previous year: EUR 9,952 thousand).
The consolidation entries in the segment assets area are composed as follows:
2010 2009
Equity consolidation – 108,367 – 110,770
Consolidation of liabilities – 30,718 – 26,174
At equity measurement – 1,819 – 2,070
Other consolidation entries – 5,122 – 4,255
Total – 146,026 – 143,269
Other consolidation entries relate to the netting of deferred taxes applied at Group level in an amount of EUR 4479 thousand (previous year: EUR 3887 thousand), the elimination of intra-Group inventories, and impairment losses applied to non-current assets.
The consolidation entries in the segment liabilities area are composed of the elimination of intra-Group liabilities, and the netting of deferred taxes.
Regional revenues are calculated on the basis of the delivery location. The ALNO Group has no external customer that generates 10 % or more of total revenue.
Total revenues by region in EUR thousand 2010 2009
Germany 334,620 346,103
Rest of Europe 108,089 133,512
Rest of the World 24,588 13,758
Total 467,297 493,373
Intangible assets, property, plant and equipment, and investments measured at equity in EUR thousand 2010 2009
Germany 79,536 77,269
Rest of Europe 11 122
Total 79,547 77,391
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H. MANAGEMENT OF FINANCIAL RISKS1. RISK MANAGEMENT PRINCIPLES
The essential features of financial policy are laid down annually by the Managing Board, and moni-tored by the Supervisory Board. Group Treasury is responsible for implementing financial policy, and also for day-to-day risk management. Certain transactions require the approval of the Managing Board, which is, moreover, kept regularly informed about the extent and amount of the current risk assessment. Group Treasury regards the effective management of market risk as one of its main responsibilities. In order to be able to assess the effects of different conditions on the market, simulation calculations are performed using various worst-case and market scenarios.
The Group is exposed to financial risks arising from financial assets and liabilities, and also from forecast transactions. Financial assets such as trade receivables, and cash and cash equivalents, result directly from day-to-day business activities. Furthermore, financial assets include the securi-ties that serve to secure partial retirement entitlements. Financial liabilities particularly include bank loans and current account overdrafts, as well as trade payables. The main purpose of the financial liabilities is to finance the Group’s business operations.
The Group’s main risks arising from financial assets and liabilities include interest-rate fluctuations risks, and also liquidity, foreign currency, and default risks.
The risk of changes in the fair value of securities (price risk) does not represent a material risk from the Group’s point of view, owing to the low-risk investment strategy.
2. CURRENCY RISKS
Currency risk describes the risk that the fair value or future cash flows of monetary items may be affected by exchange rate fluctuations.
Currency risks generally arise from investments, financing measures, and operations undertaken in a currency other than the company’s functional currency. By contrast, the Group Treasury function generally does not closely follow foreign currency risks that do not affect the Group’s cash flows, for example, arising from the translation of the assets and liabilities of foreign company units to the Group’s currency.
There was no major risk in the investment area as of the balance sheet date.
Foreign currency risks in the financing area arise from bank loans and current account overdrafts denominated in foreign currencies, as well as loans in foreign currency which have been granted to finance Group companies.
With effect as of January 1, 2010, the plants based in Germany mainly supply and invoice customers in Switzerland and the United Kingdom directly. Invoices are prepared in euros. For this reason, the ALNO Group sales area incurs no significant currency risks.
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The following table shows the sensitivity of the Group’s earnings before income taxes to changes in the fair value of monetary foreign currency items. There are no effects impacting equity directly.
Rate changesEffect on earnings in EUR thousand
Income (+) / expense (–)
GBP CHF GBP CHF
2010 + 10.0 % + 10.0 % + 248 + 102
– 10.0 % – 10.0 % – 248 – 102
2009 + 10.0 % + 10.0 % + 220 + 168
– 10.0 % – 10.0 % – 220 – 168
3. INTEREST-RATE FLUCTUATION RISKS
Interest-rate fluctuation risk is the risk that the fair value or future cash flows of financial assets and liabilities might fluctuate owing to changes in interest rates on the market. The Group is subject to interest-rate fluctuations primarily in the Eurozone. In order to minimize the effects of interest-rate fluctuations in these areas, ALNO AG manages the interest-rate risk for net financial liabilities denominated in euros. Financial liabilities in foreign currency exist only to a minor extent. In 2008, derivative financial instruments with a nominal volume of EUR 50,000 thousand and a term until August 2010 were executed to hedge against interest-rate fluctuations risks. There were no longer any derivative financial instruments as of the balance sheet date.
In the following interest-rate sensitivity analysis, only those financial liabilities are taken into account that carry variable interest. The sensitivity analysis was prepared on the assumption that the level of the financial liabilities, and also the relationship between fixed and variable interest, remain constant.
If the market interest-rate level as of December 31, 2010 had been 150 basis points (previous year: 100 basis points) higher (lower), the Group net income/loss, and consequently also its equity, would have been EUR 1,451 thousand (previous year: EUR 539 thousand) lower (higher).
4. DEFAULT RISKS
Default risk is the risk that contractual partners in the area of financial assets might fail to meet their payment obligations.
In business operations, outstanding accounts are continuously monitored by area, in other words, on a decentralized basis. As part of the Group’s receivables management, minimum creditworthi-ness requirements, as well as upper exposure limits, are laid down for all ALNO Group business partners. The basis in this context is a prescribed limits system, compliance with which is continu-ously monitored. In addition, the ALNO Group secures trade receivables with commercial credit insurance, which reimburses the loss incurred up to the contractually agreed amount in the event of a receivables default. Default risks are accounted for by means of individual value allowances. Trade receivables are secured by commercial credit insurers, and by the del credere liability of the central claims settling agencies with an overall ratio of 90 % (previous year: 90 %). Companies within the ALNO Group decide on a specific case basis whether credit insurance is to be utilized.
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Kitchens manufactured by the ALNO Group are primarily sold in Germany to furniture and specialist kitchen wholesalers/retailers, as well as self-service and cash-and-carry markets, which are pre-dominantly organized into purchasing associations. Around 84 of kitchen furniture is sold via such purchasing associations. Due to these market structures, the ALNO Group depends on a limited number of customers. The default risk of individual large customers, however, is met by commercial credit insurance or the del credere liability of the central claims settling agencies.
The maximum default risk is expressed by the carrying amounts of the financial assets recognized in the balance sheet.
An overview of the default risk for unimpaired financial assets, and changes in specific valuation allowances, is presented under item D.6. “Trade accounts receivable”.
5. LIqUIDITY RISKS
Liquidity risk refers to the risk that the Group might encounter difficulties with the contractual set-tlement of its financial liabilities.
ALNO AG acts as financial coordinator for all Group companies so as to ensure the most advanta-geous and permanently adequate cover of financing needs for business operations. The necessary information potential is updated monthly, and is subjected to a divergence analysis within the framework of rolling financial planning with a one-year planning horizon.
This financial forecast is supplemented by daily cash flow development forecast for the domes-tic companies that is continuously reconciled with actual cash flows. The foreign companies are updated monthly. ALNO AG continuously monitors the liquidity reserves on hand.
The intra-Group financial equalization carried out in Germany within the framework of cash pool-ing, which takes into consideration statutory regulations from the subsidiaries’ perspective, leads to a reduction in the volume of external financing with a positive effect on the Group’s net interest result. The internal financial equalization ensures the use of liquidity surpluses of individual Group companies for the internal financing of other Group companies. Cash pooling is managed on a manual basis.
Receivables of Wellmann KG in a value of up to EUR 26,000 thousand, and of Impuls and pino in a value of up to a total of EUR 20,000 thousand were also assigned in the past as part of factoring agreements, in order to expand the requisite scope for liquidity maneuver for the ALNO Group. As the result of the introduction of reverse factoring in 2007, payment target extensions to suppliers were realized with a financing effect of up to EUR 3,600 thousand.
The contractually agreed interest and redemption payments of financial liabilities are presented in the following table. All liabilities outstanding as of the balance sheet date, and for which payments were contractually agreed, are included. Budget figures for future new liabilities are not included. Amounts denominated in foreign currencies were in each case translated at the closing rate. The variable interest payments were calculated on the basis of the last interest rates fixed before the balance sheet date. Financial liabilities repayable on demand are always assigned to the earliest time frame.
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In EUR thousandCarrying amount
31/12/2010Due in
2011 2012 – 2015 2016 et seq.
Other financial liabilities
Liabilities to banks 80,798 72,840 10,226 8,621
Miscellaneous financial liabilities 5,389 5,739 0 0
Trade payables 80,396 82,054 0 0
Shareholder loans 365 399 0 0
Loans under finance leases 49 52 0 0
In EUR thousandCarrying amount
31/12/2009Due in
2010 2011 – 2014 2015 et seq.
Other financial liabilities
Liabilities to banks 94,456 87,002 11,878 9,738
Miscellaneous financial liabilities 6,045 6,514 0 0
Derivative financial instruments 1,015 1,015 0 0
Trade payables 72,475 74,770 0 0
Shareholder loans 5,735 6,250 0 0
Loans under finance leases 172 132 52 0
With regard to the measures to secure the company’s continued existence and liquidity, please refer to the remarks in the sections B.1. “Principles for the preparation of the financial statements” and O. “Events after the balance sheet date”.
6. OTHER NOTES CONCERNING FINANCIAL ASSETS AND LIABILITIES
Fair value
The following table shows the carrying amounts and fair values of all financial assets and liabilities recognized in the Group.
In EUR thousand 31/12/2010 31/12/2009
Financial assets Carrying amount Fair value Carrying amount Fair value
Cash and cash equivalents LaR 3,041 3,041 2,857 2,857
Trade receivables LaR 32,996 32,996 47,634 47,634
Financial receivables LaR 2,665 2,665 2,656 2,656
Securities AfS 3,426 3,426 3,274 3,274
Shares in investee companies AfS 5 * 5 *
Financial liabilities
Trade payables FLaC 80,396 80,396 72,475 72,475
Other liabilities
invoices outstanding FLaC 2,716 2,716 2,882 2,882
customer quantity rebates FLaC 15,952 15,952 13,916 13,916
Liabilities under finance leases ** 49 49 172 172
Shareholder loans FLaC 365 365 5,735 5,735
Derivative financial instruments FLHfT 0 0 1,015 1,015
Other financial liabilities FLaC 86,187 86,187 100,501 100,501
* Fair value cannot be measured reliably.** Not a measurement category within the meaning of IAS 39.
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Aggregated by measurement category as per IAS 39
In EUR thousand 31/12/2010 31/12/2009
Carrying amount Fair value Carrying amount Fair value
Loans and Receivables (LaR) 38,702 38,702 53,147 53,147
Available-for-Sale (AfS)
measured at fair value 3,426 3,426 3,274 3,274
measured at amortized cost 5 * 5 *
Financial liabilities held for trading (FLHfT) 0 0 1,015 1,015
Financial liabilities measured at cost (FLaC) 185,616 185,616 195,509 195,509
* Fair value cannot be measured reliably.
The reported securities are recognized entirely at market value.
The shares in investee companies are recognized at amortized cost since there is no active market for them. Their fair value can also not be measured reliably in any other manner.
The carrying amounts of the current financial assets and liabilities correspond to their fair values owing to their short terms.
The carrying amounts of the long-term financial assets and liabilities correspond to their fair values owing to their interest rates being in line with the market.
The derivative financial instruments reported in the previous year were recognized entirely at fair value. The calculation was performed on the basis of discounted future cash flows applying the Black & Scholes method. This entailed utilizing market interest rates and volatilities applicable for the residual duration of the financial instruments.
The following hierarchy is applied in order to determine and report the fair value of financial instruments:
• Level 1: Fair value is determined with the aid of prices quoted in active markets.
• Level 2: Fair values determined with the aid of measurement methods under which the input factors relevant to fair value are based on observable market data.
• Level 3: Fair values determined with the aid of measurement methods under which the input factors relevant to fair value are not based on observable market data.
Securities in an amount of EUR 3,426 thousand (previous year: EUR 3,274 thousand) that are measured at fair value within the ALNO Group fall under Level 1, and derivative financial instruments in an amount of EUR 0 thousand (previous year: EUR 1,015 thousand) fall under Level 2.
The following net gains and losses – by valuation category – arose on financial assets and liabilities:
2010 In EUR thousand Interest ImpairmentOther net
gains/losses Total
Loans and receivables 143 – 1,935 – 195 – 1,987
Available-for-sale (fair value) 0 0 43 43
Financial liabilities held for trading 0 0 – 130 – 130
Financial liabilities measured at cost – 9,800 0 10,520 720
2009 In EUR thousand Interest ImpairmentOther net
gains/losses Total
Loans and receivables 84 – 2,728 – 76 – 2,720
Available-for-sale (fair value) 0 0 48 48
Financial liabilities held for trading 0 0 – 1,200 – 1,200
Financial liabilities measured at cost – 12,790 0 674 – 12,116
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The impairments on “loans and receivables” relate to the allocation to individual value allowances on trade receivables. Other net gains and losses include income from the collection of receivables written off, and from the reversal of individual value allowances, as well as expenses of writing off receivables.
The other net gains and losses reported in the category “available-for-sale – measured at fair value” include income from securities investments, and the unrealized value changes recognized in equity.
The other net losses in the “financial liabilities held-for-trading” category relate to the expenses arising from derivative financial instruments.
Other net gains and losses from “financial liabilities measured cost” include income from derecog-nized liabilities, the income from the declared receivables waiver including debtor warrant, and the expense arising from the reporting date measurement of foreign currency loans.
I. CONTINGENCIES AND OTHER FINANCIAL OBLIGATIONS
As of December 31, 2010, there are liabilities under guarantee agreements amounting to EUR 406 thousand (previous year: EUR 339 thousand).
The EUR 10,000 thousand loan waiver by the consortium banks includes a debtor warrant whereby the liabilities are reactivated depending on the achievement of a given key quantity as of December 31, 2013. On the basis of current planning, it is not anticipated that this key quantity will be achieved. There will also be a full waiver of the liability if the conditions mentioned under Point O. occur. The last condition was satisfied on March 4, 2011.
Other financial obligations exist at the following levels:
In EUR thousandDue in
2011Due in
2012 – 2015Due in
2016 and later Total
Rental and lease contracts with third parties 3,680 5,531 1,204 10,415
Other contracts with third parties 12,324 31,230 11,596 55,150
Investment projects in progress 2,273 0 0 2,273
Supply contracts 2,550 1,600 800 4,950
Total 20,827 38,361 13,600 72,788
The investment projects in progress amounting to EUR 2,273 thousand relate in full to property, plant and equipment.
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J. RELATED PARTIES
Insofar as they are not already included in the consolidated financial statements as consolidated entities, persons or companies which can be controlled by the reporting entity, or which are able indirectly or directly to exercise control over the reporting entity, are deemed to be related parties.
In detail, these are the following business relationships:
Group of persons Major shareholders Joint ventures
Business relationships2010
In EUR thousand2009
In EUR thousand2010
In EUR thousand2009
In EUR thousand
Procurement of goods and services 95,621 86,723 0 0
Interest expense 2,595 3,419 0 0
Interest income 0 0 101 0
Other expenses 7 19 0 0
Financial and trade receivables 0 0 2,311 2,100
Financial liabilities 1,455 6,198 0 0
Trade payables and other liabilities 50,626 49,288 0 0
Interest rate6.5 % or 9 %
or Euribor + 9 %3.5 % or 9 %
or Euribor + 9 % 3 % 0 %
Major shareholders with whom business relationships exist comprise (directly) Küchen Holding GmbH, Munich, and IRE Beteiligungs GmbH, Stuttgart, and (indirectly) RCG International Oppor-tunities S.à r.l., Luxembourg, Cognis S.à r.l., Luxembourg, and Bauknecht Hausgeräte GmbH, Stuttgart.
The joint venture relates to ALNO Middle East.
The amount for procured goods and services essentially relates to ALNO AG’s supply contract with Bauknecht Hausgeräte GmbH, Stuttgart. This contract regulates the supply of electrical appliances to the ALNO Group, and was concluded on conditions customary on the market. The supply agreement has a term until November 30, 2015, and contains an interest-bearing overdraft facility.
As part of the service agreement with Küchen Holding GmbH, this company invoiced a total of EUR 735 thousand for consultancy activities (previous year: EUR 315 thousand). In addition, EUR 207 thousand was invoiced for further consulting services and travel costs of a partner of Küchen Holding GmbH (previous year: EUR 209 thousand).
Major shareholders declared a receivables waiver of EUR 4,909 thousand in the year under review (previous year: EUR 5,000 thousand). This was reported directly to equity under accumulated consolidated earnings.
The loans granted by major shareholders have a term until December 31, 2011.
Business transactions and compensation relating to members of executive bodies are listed in section L.
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K. SUPERVISORY BOARD AND MANAGING BOARD
The SUPERVISORY BOARD consists of:
Shareholder representatives:
• Hans-Peter Haase, Neubiberg (Chairman) (until June 23, 2010)Managing Director of Küchen Holding GmbH, Munich
• Henning Giesecke, Zell (Chairman) (from June 23, 2010)Managing Director of GSW Capital Management GmbH, Munich, and Managing Director of HBconbet GmbH, Zell
• Werner Devinck, Knokke-Heist, BelgiumGeneral Manager of Bauknecht Hausgeräte GmbH, Stuttgart
• Dr. oec. Jürgen Diegruber, GräfelfingManaging Partner of German Capital GmbH, Munich
• Christoph Maaß, JesteburgGeneral Manager of Borco-Marken-Import Matthiesen GmbH & Co. KG, Hamburg
• Anton Walther, Sulzbach/TaunusLawyer, auditor, tax consultant
• Armin Weiland, BergManaging Partner of German Capital GmbH, Munich
Employee representatives:
• Rudolf Wisser, Messkirch (Deputy Chairman)Seconded Works Council member at ALNO AG, Düsseldorf
• Andreas Bilz, Minden (until June 23, 2010)Trade Union Secretary at IG-Metall, Minden
• Michael Föst, Balingen (until June 23, 2010)2nd authorized representative/treasurer at IG Metall Albstadt
• Jörg Kespohl, Löhne Commercial employee at Gustav Wellmann GmbH & Co. KG, Enger
• Gerhard Meyer, Brilon (until June 23, 2010, and again from August 26, 2010)Works Council member at Impuls Küchen GmbH, Brilon
• Ralph Ossiander, Greifenberg (until June 23, 2010)Head of Group Quality at ALNO AG, Düsseldorf
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Further mandates exercised by Supervisory Board members in supervisory boards and other controlling bodies in the meaning of Section 125 Paragraph 1 Clause 5 of the German Stock Corporation Act (AktG) include:
• Hans-Peter Haase, NeubibergManaging Director of Alphaptose GmbH, Eutin (pro bono) Managing Board member of Facionic AG, Cologne (pro bono)
• Henning Giesecke, Zell Supervisory Board member of Rothenberger AG, Kelkheim Deputy Supervisory Board Chairman at Endurance Capital AG, Munich Deputy Supervisory Board Chairman at Leifeld Metal Spinning AG, Ahlen (from October 25, 2010) Supervisory Board member at Kofler Energies AG, Munich (from November 30, 2010) Administrative Board member at Erste Abwicklungsanstalt, Düsseldorf (from May 1, 2010) Supervisory Board member at Ikaalisten Kylpnla OY, Helsinki (from December 17, 2010)
• Werner Devinck, Knokke-Heist, Belgium Supervisory Board member at Bestuurder Whirlpool Benelux N.V., Strombeek-Bever, BelgiumSupervisory Board member at Bestuurder Whirlpool Nederland B.V., Breda, Netherlands General Manager of Whirlpool Austria GmbH, Wiener Neudorf, Austria General Manager of IRE Beteiligungs GmbH, Stuttgart Administrative Board member of Bauknecht AG Schweiz, Lenzburg, Switzerland
• Dr. oec. Jürgen Diegruber, Gräfelfing President of the Board of Directors at Caldergroup Swiss AG, St. Gallen, Switzerland, and Director at Calder Finco UK Ltd, Chester, United Kingdom Chairman of the Shareholder Committee, Milano Investments S.á r.L., Esch-sur-Alzette, Luxembourg Member of the Board of Directors at Leclanché S. A., Yverdon-les-Bains, Switzerland Member of the Board of Directors, Calder Group Limited, Chester, UK
• Christoph Maaß, JesteburgSupervisory Board member at Master Consulting AG, Frankfurt am Main
• Armin Weiland, BergMember of the Board of Directors at RES Finco AG, St. Gallen, Switzerland Member of the Board of Directors at Leclanché S. A., Yverdon-les-Bains, Switzerland Advisory Board member at Tarvos Investments GmbH, Munich Chairman of the Board of Directors at RES NewCo AG, St. Gallen, Switzerland Chairman of the Board of Directors at Energy Group Holding AG, St. Gallen, Switzerland President of the Board of Directors at The Energy Holding AG, St. Gallen, Switzerland
Mr. Gerhard Meyer, employee representative on the Supervisory Board, was appointed by way of an order of the Ulm Local Court of August 26, 2010.
The Supervisory Board members received payments of EUR 268 thousand for their activities in the 2010 fiscal year (previous year: EUR 310 thousand).
No fees were paid to Supervisory Board members for consultancy activities, as in the previous year. As part of the service agreement with Küchen Holding GmbH, this company invoiced a total of EUR 735 thousand for consultancy activities (previous year: EUR 315 thousand). The Supervisory Board members held no shares as of December 31, 2010 (previous year: 1,000 shares).
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THE MANAGING BOARD MEMBERS COMPRISE:
• Max Müller, Magglingen/Switzerland (Managing Board Chairman/CEO; responsible for Marketing, Development, Production, Purchasing, Logistics and Quality) (from April 6, 2011)
• Jörg Artmann, Düsseldorf (Managing Board member responsible for Finance/CFO, Personnel, IT)
• Christoph Fughe, Bad Salzuflen (Managing Board member responsible for Sales, from April 6, 2011)
• Jörg Deisel, Witten (Managing Board Chairman/CEO; responsible for Sales, Marketing and Develop-ment) (until April 6, 2011)
• Michael Paterka, Ravenstein (Managing Board member responsible for Purchasing, Logistics and Quality) (until April 6, 2011)
The Managing Board members held 55,643 ordinary shares as of the balance sheet date (previous year: 55,643).
COMPENSATION REPORT
Responsibility, objectives and structure of Managing Board compensation
The Supervisory Board transferred responsibility for determining the structure and level of ALNO AG Managing Board compensation to the presidential committee, which, for its part, regularly informs the Supervisory Board about its resolutions, and seeks approvals from the plenary board as required. The Supervisory Board also holds consultations concerning the structure of the Managing Board compensation system, and reviews it regularly.
The aim of the Managing Board compensation system is to appropriately remunerate Managing Board members according to their area of activity and responsibility, and to thereby clearly and directly take into account both joint and personal Managing Board performance, and corporate performance, through a high degree of variability.
To this end, the compensation system includes individual fixed basic salaries, and variable compensa-tion components with medium- and long-term incentive effect and risk character. This structure, its individual components, and the total compensation are reviewed every year in order to safeguard the competitiveness and appropriateness of Managing Board compensation.
As a consequence, 2010 Managing Board compensation was composed of the following components that are presented in detail below.
The fixed basic salary including non-cash compensation, which is paid out in 12 monthly installments, is based on the area of responsibility of the relevant Managing Board member.
The variable compensation component, which is based on the company’s medium- and long-term value trend, generally reflects the consolidated EBIT margin and consolidated free cash flow, as well as individually agreed targets.
Level of Managing Board compensation in 2010
The following information includes payments that were pledged or granted to individual Managing Board members of ALNO AG with respect to their activity as Managing Board members. Total Managing Board compensation is calculated by adding cash payments together with monetary benefits arising from non-cash compensation. The latter primarily comprises the provision of company cars. A total of EUR 2,071 thousand was reported as expenditure in 2010 (previous year: EUR 1,148 thousand). Of this amount, EUR 979 thousand (previous year: EUR 948 thousand) was attributable to fixed compensation components, in other words, compensation components that were unrelated to performance, and EUR 1,092 thousand
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(previous year: EUR 209 thousand) to variable, performance-related compensation components with medium- and long-term incentive effect. The variable compensation relates exclusively to 2010, including extraordinary variable compensation of EUR 725 thousand, which was granted in April 2010.
Of the total expenses for 2010, EUR 1,186 thousand is attributable to Mr. Deisel (previous year: EUR 534 thousand), of which EUR 438 thousand (previous year: EUR 379 thousand) comprises fixed com-pensation components, and EUR 748 thousand (previous year: EUR 155 thousand) comprises variable compensation components (of which extraordinary: EUR 548 thousand). An amount of EUR 493 thousand is attributable to Mr. Artmann (previous year: EUR 170 thousand), of which EUR 280 thousand (previous year: EUR 163 thousand) comprises fixed compensation components, and EUR 213 thousand (previous year: EUR 7 thousand) comprises variable compensation components (of which extraordinary: EUR 113 thousand). An amount of EUR 392 thousand is attributable to Mr. Paterka (previous year: EUR 299 thousand), of which EUR 261 thousand (previous year: EUR 261 thousand) comprises fixed compensation components, and EUR 131 thousand (previous year: EUR 47 thousand) comprises variable compensation components (of which extraordinary: EUR 64 thousand).
Pension plans
From October 1, 2010, a defined contribution pension plan for Mr. Deisel and his surviving dependents was agreed for the event of entitlement (reaching the 60-year age limit, invalidity or death) for the duration of his employment by the company, for which a total amount of EUR 400 thousand is paid annually. A proportional amount of EUR 100 thousand was paid for this plan for the 2010 fiscal year. The amount is paid proportionally along with monthly salary payments to Mr. Deisel’s separate pension account. As a matter of principle, it is impossible for him to exert control over the pension account before the onset of entitlement. There are otherwise no obligations arising from pension commitments or similar pension regulations for the Managing Board members active during 2010.
Key commitments to one Managing Board member given early discontinuation of his activity
There are no arrangements to pay settlement fees to Managing Board members if they discontinue their activities before the end of their employment contracts.
Payments to former Managing Board members of ALNO AG and their surviving dependents
Payments paid to former ALNO AG Managing Board members and their surviving dependents amounted to EUR 447 thousand during the fiscal year (previous year: EUR 445 thousand). Provisions were formed for a total of EUR 7,515 thousand (previous year: EUR 7,011 thousand) for pension obligations to former Managing Board members and their surviving dependents.
Employee equity compensation plan
On October 22, 2007, the company set up an employee equity compensation plan (virtual stock option program) with a term until October 21, 2009, which has been extended until October 21, 2010, as part of which Managing Board members and leading ALNO Group employees may receive cash incentive payments in addition to their compensation. A number of external consultants who had been working on a long-term basis for ALNO AG were also included in the incentive program. Receipt of the incentive payment depends on program participants making their own investments, and on the performance of the company’s share price. The program expired as of October 21, 2010, as a consequence of which no liability for the employee equity compensation plan was recognized as of the balance sheet date.
As of December 31, 2010, the Managing Board held a total of 44,643 shares from this employee equity compensation plan, of which Mr. Paterka held 44,643 (previous year: 44,643). Incentive payments have not been rendered from this plan, however.
Apart from the employee equity compensation plan, no other stock options have been issued to the Managing and Supervisory boards.
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L. EXEMPTION FROM DISCLOSURE REQUIREMENTS
The subsidiaries Impuls Küchen GmbH, Brilon, pino Küchen GmbH, Coswig (Anhalt), Zweitmarken-holding Impuls Pino GmbH, Pfullendorf, ALNO International GmbH, Pfullendorf, Gustav Wellmann GmbH & Co. KG, Enger, and Grundstücksverwaltungsgesellschaft tielsa Küchen GmbH & Co. KG, Enger, are exempt from disclosure requirements in accordance with Section 264 (3) and Section 264 b of the German Commercial Code (HGB). The consolidated financial statements and the Group management report are published in the electronic Federal Gazette (Bundesanzeiger).
M. SHAREHOLDINGS
Name and registered office Share of capital as %
INTERESTS IN SUBSIDIARIES
ALNO in Germany
Impuls Küchen GmbH, Brilon 100
pino Küchen GmbH, Coswig (Anhalt) 100
Zweitmarkenholding Impuls Pino GmbH, Pfullendorf 100
Gustav Wellmann GmbH & Co. KG, Enger 100
Casawell Service GmbH, Enger 100
EuroSet Küchentechnik GmbH, Enger 100
Grundstücksverwaltungsgesellschaft tielsa Küchen GmbH & Co. KG, Enger 100
Wellmann Bauteile GmbH, Enger 100
ALNO International GmbH, Pfullendorf 100
ALNO abroad
ALNO (Schweiz) AG, Embrach/Switzerland 100
ALNO France S.à.r.l., Cagnes-sur-Mèr/France 100
ALNO U.K. Ltd, Dewsbury/United Kingdom 100
INTERESTS IN JOINT vENTURES
ALNO Middle East FZCO, Dubai/UAE 50
SPECIAL-PURPOSE ENTITIES:
MINERVA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Pfullendorf OHG, Grünwald 0
Tignaris Beteiligungsgesellschaft mbH & Co. Objekt Pfullendorf KG, Grünwald 0
N. AUDITORS’ FEESThe following expenses were incurred for the audit of the consolidated financial statements:
In EUR thousand 2010 2009
Audit 391 397
Other certification services 463 114
Tax consultancy services 133 49
Other services 4 10
Total 991 570
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The item relating to auditing services for the financial statements includes fees for the legally mandatory auditing of the single-entity and consolidated financial statements of ALNO AG as of December 31, 2010, and for the auditing of the dependent company report pursuant to Section 313 of the German Stock Corporation Act (AktG) for the 2010 fiscal year.
The “other certification services” primarily include expenses for the preparation of a letter of comfort as part of the capital increase that was planned in autumn 2010, but which was eventually postponed until 2011.
Tax consultancy services include costs for current tax consulting.
Other services relate to accountancy consultancy services.
O. EVENTS AFTER THE BALANCE SHEET DATE
RESTRUCTURING AGREEMENT II AND SUCCESSFUL CONCLUSION OF THE CAPITAL INCREASE THAT wAS LAUNCHED IN 2010
On February 9, 2011, the company, the consortium banks, Küchen Holding GmbH, Munich, IRE Beteiligungs GmbH, Stuttgart, Bauknecht Hausgeräte GmbH, Stuttgart, and Starlet Investment AG, Nidau/Switzerland, concluded a further restructuring agreement that supplements the agreement was concluded in April 2010. In this connection, all parties committed themselves to restructuring contributions that are to reach a total minimum level of EUR 70 million over the course of 2011. Consolidated equity will undergo a sharp improvement once the measures that have been regulated in the new restructuring agreements have been successfully implemented.
Investors and shareholders issued subscription guarantees totaling EUR 20.0 million when the capital increase, which was postponed in November 2010, was resumed. This rights issue from authorized capital was resumed in February 2011, and was successfully concluded on March 3, 2011. A total of 8,698,326 new no par value ordinary bearer shares (no par shares), each with a nominal amount in the share capital of EUR 2.60, were issued. The issue price was EUR 3.00. As a consequence, the company generated total gross issue proceeds of EUR 26.1 million, and the share capital increased by EUR 22,615,647.60 to EUR 67,846,945.40. The capital increase was entered in the commercial register on March 4, 2011.
Starlet Investment AG has obligated itself to relieve the ALNO Group of trade payables due to Bauknecht Hausgeräte GmbH, and to associate companies of Bauknecht Hausgeräte GmbH, to an amount of at least EUR 25.0 million. With respect to a partial amount of EUR 12.5 million, this is to occur by May 31, 2011, by way of a waiver, or by depositing the receivables as a non-cash capital contribution into the capital reserve of ALNO AG. With regard to a further partial amount of EUR 12.5 million, this is to occur through contributing these receivables as part of a capital increase against non-cash capital contributions, to the extent that this partial amount is of value. The obliga-tion is subject to the suspensive condition that the capital increase is performed successfully with gross issue proceeds of at least EUR 20.0 million, and that the capital increase is entered in the commercial registere by May 30, 2011; and, with regard to the further partial amount that is to be contributed as part of a capital increase against non-cash capital contributions, additionally under the suspensive condition that ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH satisfy certain co-operation obligations relating to the coming into existence and performance of the capital increase against non-cash capital contributions (in particular, through corresponding exercising of voting rights at the Shareholders’ General Meeting), as well as with regard to the contribution of the partial amount of receivables. If, and to the extent, that the contribution of the further partial amount of EUR 12.5 million has not occurred by December 31, 2011, Starlet Investment AG has obligated itself to waive these receivables for the company and its associated companies by way of deposit into the company’s capital reserve at the latest by, and with effect of, December 31,
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2011, unless the capital increase against non-cash capital contributions fails to occur due to an infringement on the part of ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH against their co-operation duties.
Under the suspensive conditions that the capital increase is successfully performed with gross issue proceeds of at least EUR 20.0 million, and that the capital increase is entered in the commercial register by May 30, 2011, and that the ALNO Group is relieved of trade payables of at least EUR 25.0 million by Starlet Investment AG, ALNO AG and Bauknecht Hausgeräte GmbH have agreed to reduce the existing overdraft facility to zero. The consortium banks have agreed to this reduction.
Küchen Holding GmbH has obligated itself to relieve the ALNO Group of loan liabilities to the consortium banks in an amount of EUR 25.0 million. In the first step, and at the option of Küchen Holding GmbH, this relief is to occur either by way of purchase of receivables with full discharge of the debtor, or through other agreements that lead to the same economic result for the consortium banks. In the instance of the purchase of the receivables, Küchen Holding GmbH intends in a second step to contribute the valuable portion of the receivables acquired from the consortium banks as a non-cash capital contribution to the company as part of a capital increase against non-cash capital contributions by December 31, 2011. The obligation on the part of Küchen Holding GmbH is subject to the suspensive conditions that the capital increase is successfully performed with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, that the ALNO Group is relieved of trade payables by Starlet Investment AG, and that certain co-operation duties are satisfied by ALNO AG, IRE Beteiligungs GmbH and Starlet Investment AG with regard to the realization and performance of the capital increase against non-cash capital contributions (in particular, through corresponding exercising of voting rights at the Shareholders’ General Meeting), as well as with regard to the contribution loan receivables. If, and to the extent that, the contribution of the loan receivables has not occurred by December 2011, 31, Starlet Investment AG has obligated itself to waive these receivables for the company and its associated companies by way of deposit into the company’s capital reserve at the latest by, and with effect of, December 2011, unless the capital increase against non-cash capital contributions fails to occur due to an infringement on the part of ALNO AG, IRE Beteiligungs GmbH and Küchen Holding GmbH against their co-operation duties.
The consortium banks have obligated themselves to conclude the agreements with Küchen Holding GmbH that are requisite for the relieving of the ALNO Group of loan receivables. This obligation is subject to the suspensive conditions that the capital increase is performed successfully with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, and that the ALNO Group is relived of the aforementioned trade payables by Starlet Investment AG. The consortium banks have also declared their waiver of the debtor warrant as granted by ALNO AG as part of Restructuring Agreement I. This waiver is subject to the suspensive condition that the capital increase is performed with gross issue proceeds of at least EUR 20.0 million, and that it is entered in the commercial register by May 30, 2011. The second waiver of EUR 10.0 million arising from Restructuring Agreement I that was concluded on April 23, 2010 was cancelled as part of this agreement under the suspensive condition that the capital increase is performed with gross issue proceeds of at least EUR 20.0 million, that the capital increase is entered in the commercial register by May 30, 2011, and that the ALNO Group is relieved of trade payables in an amount of at least EUR 25.0 million by Starlet Investment AG. A further extension of the loan terms until December 31, 2010 will be examined in a favorable light under further terms whereby a restructuring survey to be compiled by Pricewaterhouse Coopers AG Wirtschaftsprüfungsgesells-chaft for ALNO AG issues a positive forecast relating to the company’s continued existence, and that the capital increase is entered in the commercial register by May 30, 2011. Under these terms, the consortium banks will also support ALNO AG in its application for a federal state guarantee.
Finally, and as part of the Restructuring Agreement II, the company obligates itself, at corresponding written request by Küchen Holding GmbH, which must be submitted to the company by December 31, 2011, to issue convertible bonds from conditional capital under exclusion of subscription rights for the company shareholders to majority shareholders in Küchen Holding GmbH or to third parties
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to be nominated by Küchen Holding GmbH. When converted, these convertible bonds will entitle to the subscription of shares to a level of up to 10 % of the company’s share capital. Küchen Holding GmbH has obligated itself to pledge that these convertible bonds will be subscribed for.
ALNO AG has obligated itself to the consortium banks to solicit the support of professional consult-ants for its further restructuring.
The restructuring agreements presented above are regarded as an integral component of the Group restructuring, and consequently as an elementary basis for the further realization of the planned restructuring measures.
PRODUCTION OF ESPRIT HOME KITCHENS IN PFULLENDORF
On April 4, 2011, the company’s management also announced that the ESPRIT home kitchens would be produced at the Pfullendorf site. Renovation of the roof and further investments in Plant 1 are connected with the planned expansion of components production for Group supply. In order to neutrally structure start-up costs, the Works Council has declared that the workforce is prepared to make a contribution to the investments through the waiving of hours worked. Far-reaching flexibility in terms of personnel capacity and working hours was also negotiated in Pfullendorf. The site is to sustainably improve its competitiveness as a result of these measures. The decision to produce the ESPRIT home kitchens in Pfullendorf fits into the “ALNO 2013” strategy to manufacture specialty ranges, exclusive products and series entailing small unit volumes there in the future, since the ESPRIT home kitchens fall into both categories.
CHANGES TO THE MANAGING BOARD
At its meeting held on April 6, 2011, the Supervisory Board of ALNO AG reached a decision concerning a new Managing Board team. Max Müller was unanimously appointed to be the new Managing Board Chairman (CEO) with immediate effect. His future departmental responsibilities include Marketing, Development, Production, Purchasing, Logistics and Quality. Christoph Fughe became the new Managing Board member responsible for the Sales area. He was previously Head of Sales for ALNO AG. Jörg Artmann remains the Managing Board member responsible for Finance (CFO), Personnel and IT. Jörg Deisel (who as CEO was previously responsible for Sales, Marketing and Development) and Michael Paterka (who was the Managing Board member responsible for Production, Purchasing, Logistics and Quality) have left the company.
EXPANSION OF FACTORING VOLUMES
With an agreement dated December 8/28, 2010, the ALNO Group increased its previous factoring volume with from EUR 20 million to EUR 45 million with effect as of January 1, 2011. In addition to the existing subsidiaries Impuls Küchen GmbH and pino Küchen GmbH, the factoring arrangement now additionally includes Gustav Wellmann GmbH & Co. KG. The three companies can utilize the factoring volumes on a variable basis up to the maximum amount of EUR 45 million.
On April 5, 2011, ALNO AG signed a further factoring agreement with GE Capital Bank AG, whereby ALNO AG trade receivables are to be sold in an amount of EUR 15 million. The contract has yet to be signed by GE Capital Bank AG, since certain terms have yet to be satisfied. Once this agreement has been successfully concluded, the ALNO Group will increase its previous factoring volumes with GE Capital Bank AG from EUR 45 million to EUR 60 million. The four companies should then also be able to utilize the factoring volumes on a variable basis up to the maximum amount of EUR 60 million.
LIqUIDATION OF ALNO FRANCE
A resolution was passed in spring 2011 to close the foreign subsidiary ALNO France S.á r.l., Cagnes-sur-Mer, France.
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UPDATING OF THE ORIGINAL RESTRUCTURING SURVEY OF JUNE 24, 2010 BY PRICEwATERHOUSECOOPERS
At the start of 2010, Pricewaterhouse Coopers AG Wirtschaftsprüfungsgesellschaft (“PwC”) was engaged to prepare a restructuring survey for the ALNO Group according to the standard IDW S6 of the Institut der Wirtschaftsprüfer. In its restructuring survey dated June 24, 2010, PwC issued the ALNO Group with a positive forecast for a going concern, to the extent that financing is secured in line with the Restructuring Agreement I of April 23, 2010, and that the pending activities in the company’s forecast are implemented.
In spring 2011, PwC was mandated to produce an update of the restructuring statement for the ALNO Group. In its (draft) updated restructuring a survey of May 13, 2011, PwC arrives at the conclusion that, from today’s perspective, the ALNO Group remains completely financed under certain preconditions, and that no change arises relating to the restructuring statement as presented in the restructuring survey of June 24, 2010. PwC nevertheless points out that the restructuring of the ALNO Group will require more time than was planned in the previous year.
PwC notes that the liquidity position appears to be secured only under the following terms, and on the basis of the following assumptions, including with the liquidity-effective financial measures of the Restructuring Agreement II (in particular, the capital increase), which have already been realized:
• The corporate planning that has been adjusted by PwC, including the defined effects arising from potentials, must be achieved. This requires that the measures planned by the Managing Board are implemented stringently.
• Commercial credit insurers and suppliers must not implement negative changes to their payment terms compared with the current status, and/or compared with the planned level.
• Local financing lines must be maintained in line with the planning.
• Existing credit lines must be available beyond December 31, 2011.
• The existing EUR 45 million factoring facility, and the additionally planned EUR 15 million factoring facility, must be available beyond February 28, 2012.
• The financing shortfalls apparent in the August 2011 planning, as well as in the first quarter of 2012, must be met by appropriate measures (e.g. granting of supplier loans, drawing down of a new loan backed by a federal state, the issuing of a bond, or further internal measures to secure liquidity).
The continuation of corporate activities on the part of ALNO AG and/or on the part of the ALNO Group depend on the aforementioned terms and assumptions occurring as planned, or being applicable as planned. The Managing Board of ALNO AG assumes that these terms and assump-tions will occur as planned, or will be applicable as planned.
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P. DECLARATION OF CONFORMITY PURSU-ANT TO SECTION 161 OF THE GERMAN STOCK CORPORATION ACT (AKTG)
On October 7, 2010, the Managing and Supervisory boards reviewed and reissued the declaration relating to the recommendations of the “Government Commission German Corporate Governance Code” pursuant to Section 161 of the German Stock Corporation Act (AktG). The declaration is permanently available to shareholders on the company’s website, and is reproduced in the 2010 Group management report.
The Managing and Supervisory boards reported on corporate governance within the ALNO Group in the annual report for the fiscal year as of December 31, 2010, in accordance with Figure 3.10 of the German Corporate Governance Code. Information regarding the compensation of the Managing Board is available in section L. “Supervisory Board and Managing Board”.
Q. EARNINGS PER SHARE
Earnings per share are calculated by dividing the consolidated net profit for the year accruing to the shareholders by the weighted number of shares issued. There was no dilution resulting from “potential shares”, neither in the year under review nor in the previous year.
In EUR thousand 2010 2009
Profit/loss from continuing operations – 13,084 – 39,371
Profit/loss from discontinued operations 0 407
Group net loss for the year – 13,084 – 38,964
Minority interests 0 0
Number of shares issued in thousands (weighted average) 16,877 15,817
Earnings per share on continuing operations in EUR – 0.78 – 2.49
Earnings per share for the discontinued operations in EUR 0.00 0.03
Earnings per share in EUR – 0.78 – 2.46
Düsseldorf, May 30, 2011
ALNO Aktiengesellschaft
The Managing Board
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AUDIT OPINION
We have audited the consolidated financial statements prepared by ALNO Aktiengesellschaft, Düssel-dorf, comprising the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity, and the notes to the consolidated financial statements, together with the group management report, which has been combined with the management report of the company, for the fiscal year from January 1 to December 31, 2010. The preparation of the consolidated financial statements and the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315a (1) HGB [“Handelsgesetzbuch”: German Commercial Code] is the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with Section 317 HGB [“Handelsgesetzbuch”: German Commercial Code] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany [IDW]). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effective-ness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315a (1)HGB [“Handelsgesetzbuch”: German Commercial Code], and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks relating to future development.
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Without qualifying this opinion, we refer to the fact that negative equity of EUR 69,722 thousand is recorded in the consolidated balance sheet of ALNO Aktiengesellschaft – in contrast to the separate financial statements – due to losses incurred. In addition, we refer to the discussions in the group management report, which has been combined with the company’s management report. Section “b. Report on events after the balance sheet date” states that the ALNO Group’s ability to continue as a going concern depends on whether the listed conditions and assumptions – reaching budgeted targets, maintaining or extending financing at current terms, closing anticipated financing gaps – materialize or apply as planned.
Ravensburg, May 30, 2011
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
Nover Prüsse
Wirtschaftsprüfer Wirtschaftsprüfer(German Public Auditor) (German Public Auditor)
RESPONSIBILITY STATEMENTOF ALNO AG PURSUANT TO SECTION 297 (2) CLAUSE 4 OF THE GERMAN COMMERCIAL CODE (HGB) RELATING TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SINGLE-ENTITY AND GROUP MANAGEMENT REPORTS FOR THE 2010 FISCAL YEAR:
To the best of our knowledge, and in accordance with the applicable accounting principles for interim reporting, the consolidated financial statements give a true and fair view of the assets, financial position and profit or loss of the Group, and the interim Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Düsseldorf, May 30, 2011
ALNO Aktiengesellschaft
The Managing Board
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LEGAL NOTE
This annual report contains forward-looking statements. Forward-looking state-ments are statements that do not relate to historical events and facts. These statements are based on assumptions, forecasts and estimates of future devel-opments by the Managing Board. These assumptions, forecasts and estimates were generated on the basis of all information available at the current time. If the assumptions relating to future trends on which these statements and esti-mates are based do not occur, actual events may diverge from those currently anticipated. Neither the Managing Board nor the company can vouch that the forward-looking statements will actually occur. Beyond their statutory obliga-tions, the Managing Board and the company assume no obligation to update any statements, or to adjust them to reflect future events and developments.
This annual report and the information that it contains represent neither an offer to sell, nor a solicitation to purchase or to subscribe for, ALNO AG securities either in the Federal Republic of Germany or in any other country. ALNO AG shares may be sold or offered for purchase in the United States of America only after prior registration, or without prior registration only on the basis of an exemption from the registration requirement according to the US Securities Act of 1933 in its current valid version. ALNO AG does not intend to implement a public offering of shares in the United States. The ALNO AG annual report is published in both German and English. The German version is definitive in the instance of any differences.
