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Sartorius Group 2002 Annual Report
Sartorius Group2002 Annual Report
Key Figures
All figures are given in millions of ¤, unless otherwise specified 2002 2001 2000 1999 1998Accounting Method IAS IAS IAS HGB7) HGB7)
Results
Sales revenue 476.5 449.3 414.1 267.7 245.2
– Germany 89.7 90.5 83.3 64.5 62.5
– All other countries 386.8 358.8 330.8 203.2 182.7
EBITDA 36.3 33.9 25.0 31.5 25.9
EBIT 13.5 13.8 7.5 18.9 15.1
Profit before tax 7.5 8.5 4.9 18.9 14.4
Net profit for the period 1) 4.0 3.0 0.9 9.9 7.7
Sales per employee (¤ in thousands) 126 121 116 107 107
As a % of sales revenue
EBITDA 7.6 % 7.5 % 6.0 % 11.8 % 10.6 %
EBIT 2.8 % 3.1 % 1.8 % 7.0 % 6.2 %
Profit before tax 1.6 % 1.9 % 1.2 % 7.1 % 5.9 %
Net profit for the period 0.8 % 0.7 % 0.2 % 3.7 % 3.1 %
Balance sheet
Balance sheet total 398.1 408.6 338.4 250.3 214.9
Equity 132.6 138.0 145.6 145.1 138.4
Equity ratio 33 % 34 % 43 % 58 % 64 %
Return on equity 2) 2.9 % 2.1 % 0.6 % 7.0 % 7.6 %
ROCE 3) 3.4 % 3.7 % 2.5 % 8.1 % 8.4 %
ROA 4) 5.2 % 5.8 % 4.3 % 13.3 % 13.2 %
Capital turnover 5) 1.5 1.6 1.8 1.7 2.0
Finances and capital expenditures
Cash earnings acc. to the DVFA6) | SG 34.6 28.3 21.2 17.6 18.6
As a % of sales revenue 7.3 % 6.3 % 5.1 % 6.6 % 7.6 %
Net cash flow 0.6 – 49.1 – 63.1 – 11.7 – 3.5
Depreciation 22.7 20.1 17.5 12.6 10.8
Capital expenditures 33.8 76.6 34.8 17.3 11.1
As a % of sales revenue 7.1 % 17.1 % 8.4 % 6.5 % 4.5 %
Net debt | credit 133.1 127.2 62.1 – 21.1 – 45.6
Employees
Average number employed 3,778 3,719 3,560 2,508 2,299
Total as of Dec. 31 3,741 3,745 3,642 2,925 2,333
– Sartorius AG 1,825 1,798 1,713 1,531 1,477
– Subsidiaries 1,916 1,947 1,929 1,394 856
Staff costs 179.3 173.5 164.2 114.8 100.9
Staff costs per employee (¤ in thousands) 47 47 46 46 44
R & D
R & D costs 23.0 24.6 25.5 19.1 16.8
As a % of sales revenue 4.8 % 5.5 % 6.1 % 7.1 % 6.9 %
1) As of 2000, after minority interest because of the IAS2) Return on equity = net profit | average equity3) ROCE = EBIT | average balance sheet total4) For the ROA calculation scheme, see page 355) Capital turnover = sales revenue | average operating assets;
see page 35 for the calculation6) DVFA = German Association of Financial Analysts and Investment Consultants7) HGB = German Commercial Code
Throughout the Annual Report, differences may be apparent as a result of rounding during addition.
January 2002The new business area organizationwithin the divisions at Sartorius AGbecomes effective. The MechatronicsDivision is subdivided into the follow-ing areas: Laboratory Mechatronics,Industrial Mechatronics, Service andBearing Technology; the BiotechnologyDivision, into Vivascience/Biolab, Bioprocess, BBI and Food & Beverage.
Effective January 1, 2002, Dr. GuentherMaaz is the President of the Mecha-tronics Division. Michel Warter, mem-ber of the Executive Board of Sarto-rius AG, decides to leave the companyfor personal reasons on April 30,2002.
Dr. Theo Thijssen takes over as Presi-dent of the Environmental Technolo-gy Division.
Effective January 1, 2002, Mr. OlafGrothey is the new Vice President ofthe Human Resources area withGroup-wide responsibility.
Sartorius is represented at the “Enomaq” trade fair in Zaragoza,Spain.
February 2002The President of Lower Saxony’s parli-ament, Prof. Rolf Wernstedt, visitsSartorius AG’s “Plant 2001.”
The former Bundestag President, Prof.Rita Suessmuth, visits Sartorius Colle-ge and “Plant 2001” in Goettingen,Germany.
In recognition of his services in pro-moting the development of sciencesand the economy in Russia, Prof. UtzClaassen receives a medal of honorand a diploma from the Presidency ofthe Moscow-based Russian Academyof Natural Sciences.
Sartorius continuously employs morethan 2,000. The German Codetermi-nation Law is thus applicable and theSupervisory Board has equal numbersof shareholder and employee repre-sentatives.
Sartorius Corporation inauguratesrenovated and extended factory faci-lities in Edgewood, New York.
“High Tech in Lower Saxony”: at theSartorius College, business people,scientists and politicians discuss theprospects of technology transfer.
The latest trends in DNA chip techno-logy are the topic of a scientific sym-posium attended by 80 participants atthe Sartorius College.
The Group subsidiary Vivascience AGlaunches its new VivapureTM kits forprotein purification.
Sartorius AG is admitted to the TOP-Club-Deutschland, which selects thetop innovative companies in Germany.Federal Minister of Economics WernerMueller awards Prof. Utz Claassen acertificate.
At the “Day of Architecture” in LowerSaxony, a jury selects the SartoriusCollege, among others, as an exampleof high building quality.
Sartorius qualifies yet again amongthe “Best of TOP 100 Germany 2002”of mid-size companies.
Sartorius is represented at the “Bio2002” trade fair in Toronto, Canada.
July 2002A delegation of Chinese economicsponsors from Maanshan visits Sarto-rius AG’s “Plant 2001.” The visitorsfrom China take a special interest inthe plant’s technologies for environ-mental protection.
August 2002Sartorius AG’s annual report receivesan award in the competition for the“Best Annual Report” conducted bythe German business journal “manag-er magazin”: it wins second place inthe S-DAX sector.
At the Sartorius College, Lower Saxo-ny’s Environment Minister, WolfgangJuettner, and Minister of Economics,Thomas Oppermann, discuss “produc-tion-integrated environmental protection” with companies of theregion.
The District President of Braun-schweig, Germany, Dr. Axel Saipa,is a guest at Sartorius AG.
March 2002In the presence of the Chief Ministerof Karnataka, Shri. S. M. Krishna, Prof.Utz Claassen inaugurates the Sarto-rius Knowledge Center in Bangalore,India. This new Center provides aplatform for the Group, enablingcustomers, employees and partners toshare the latest scientific and tech-nical information.
Vivascience introduces a new productfamily based on membrane chroma-tography to the market segments of“bioprocessing” and “biotechnologylabs.”
Federal Vice Chairman of the ChristianDemocratic Union (CDU) and CDU partyleader in Lower Saxony’s parliament,Christian Wulff, visits Sartorius AG.
Sartorius presents its products at the“Alimentaria” in Barcelona, Spain, andat the “Pittcon” in New Orleans, LA,USA.
April 2002Lower Saxony’s European MinisterWolfgang Senff visits Sartorius AG.
The Sartorius subsidiary B. Braun Bio-tech International (BBI) and the pro-cess system manufacturer, Diessel,agree on extensive cooperation to usethe engineering and manufacturingcapacity levels they have in common.
The Group companies at Sartorius,Boekels and GWT present their pro-ducts at the “Analytica” trade show inMunich and the “Interpack” in Dues-seldorf, Germany.
May 2002Sartorius AG is listed under the newshare index NISAX20 in Lower Saxony.
World Cup Soccer Tournament 2002in South Korea: The Korean NationalInstitute of Health (KNIH) uses theSartorius AirPort MD8 air sampler toward off any possible bioterroristattacks.
June 2002The Chairman of the SupervisoryBoard at Sartorius AG, Prof. Dr. Dres.h.c. Arnold Picot, receives his secondhonorary doctorate from the Univer-sity of St. Gallen in Switzerland.
The Supervisory Board appoints OlafGrothey as Executive for Labor Rela-tions and member of the ExecutiveBoard.
Sartorius AG’s Annual Shareholders’Meeting takes place in Goettingen,Germany.
Lower Saxony’s Justice Minister Prof. Christian Pfeiffer visits the com-pany to obtain information about itsdevelopment.
Sartorius supports the “go sportseurotour”; this campaign is a jointproject of the youth organization inthe German Federal Sports Association,the Sports Association of the state ofLower Saxony, the administrativedistrict of Osnabrueck and the StateChancellory of Lower Saxony in thefour tour locations of Walz and DobreMiasto (Poland) and Jurmala andBauska (Latvia).
September 2002Sartorius AG and the Sartorius subsi-diary Global Weighing Technologies(GWT) supply explosion-protectedhigh-tech weighing products for theinternational space project ISS.
The company management andemployees of Sartorius AG jointlydonate to the fund to help flood victims in Wittenberg, Germany.
The electronics manufacturing unit ofSartorius AG receives a special awardas “Contract Manufacturer of theYear.”
October 2002Because of its sustained growth inemployment figures, Sartorius ranksamong the companies in “Europe’s500 GrowthPlus.“
In the contest for the “Best Coopera-tion,“ the proposal made by Groupsubsidiary BBI, its cooperation partnerDiessel and by Sartorius AG reachesthe final qualifying round.
Sartorius presents its products at thetrade shows “Macropack“ in Utrecht,Holland, the “Fakuma“ in Friedrichs-hafen, Germany, and the “r&d“ inBasel, Switzerland.
November 2002Sartorius AG opens a new trainingcenter in Goettingen for industrialmechanical engineers, industrial elec-tronics engineers and mechatronicsspecialists.
Prof. Utz Claassen, who has been thechairman of the industrial associationSpectaris for a full year, receives an“Innovation Award 2002” for hisinnovative management of the asso-ciation.
“Consistent information and treat-ment of employees as partners in theworkplace are decisive prerequisitesfor economic success”: this motto wasthe deciding factor for including Sar-torius in the book on top jobs thatprovides a guide to the best employ-ers among German mid-size compa-nies (“TopJob – die besten Arbeitge-ber im deutschen Mittelstand”).
Effective November 11, 2002, Dr. Joachim Kreuzburg is appointedto the Executive Board of SartoriusAG. After the current Group CEO andExecutive Board Chairman, Prof. UtzClaassen, leaves the company tobecome Chairman of the Board ofManagement at the EnBW Group onMay 1, 2003, in Karlsruhe, Dr. Kreuz-burg will assume the position of Spokesman of the Executive Board.
Also effective November 11, 2002, thePresident of the Mechatronics Divi-sion, Dr. Guenther Maaz, is appointedas a member of the Executive Board.
Sartorius presents its products at thefollowing trade shows: “Het Instru-ment”, Utrecht; “Expo Quimica”, Bar-celona; “Embalage”, Paris; “Brau,”Nuremberg; and “Medica,” Duesseldorf.
December 2002The “Internationale Forum Design“ in Hanover, Germany, confers thecoveted “iF design award 2003“ to theMelsungen-based Sartorius Groupsubsidiary BBI. The company’s BIO-STAT® B-DCU multi-fermenter systemwins this award.
With the goal of enhancing theirmarketing position, Munktell FilterAB and Sartorius AG enter into a jointventure for cooperation between theirsubsidiaries Binzer & Munktell FilterGmbH and Spezialpapier FiltrakGmbH.
The German-language GAMP Forum(GAMP: Good Automated Manufactur-ing Practice) meets for the first timeat the Sartorius College.
Sartorius AG participates in the “Vini-tech” trade show in Bordeaux, France.
January 2003In Berlin, Prof. Utz Claassen is hon-ored as “Knowledge Manager of theYear” in the category of companieswith more than 250 employees.
February 2003The University of Hannover, BioRegioNand Sartorius organize a symposiumon cell cultures for 100 scientists and business people at the Sartorius College.
The Sartorius Group and Alfa Laval, aworld leader in centrifugal separation,heat transfer and fluid handling, andheadquartered in Lund, Sweden, signan alliance agreement. The agreementcreates a strong global position forthe two companies within the beerfiltration sector and provides for furt-her development of crossflow filtration technology.
Prof. Utz Claassen receives the “Offi-cer’s Cross of the Order of Merit ofLower Saxony” from the Prime Minis-ter of Lower Saxony, Sigmar Gabriel.
March 2003Sartorius AG steps up its activities inHungary. In the Budapest suburbs ofBudakeszi, Prof. Utz Claassen officiallyopens the new domicile of the Sartoriusbranch office S-Membran Kft.
The Technical Competence Center inBeijing at Sartorius China is officiallyopened.
Sartorius is represented at the tradeshows “Pittcon” in Orlando, Florida,USA, “IPACK-IMA” in Milan, Italy, andthe “Hispack” in Barcelona, Spain.
Highlights
Sartorius Group2002 Annual Report
To Our Shareholders
Perspectives . . . . . . . . . . . . . . . . . . . . . . . . 8
Executive and Supervisory Boards . . . . . . 12
Report of the Supervisory Board . . . . . . . 14
Report of the Executive Board on the German Corporate Governance Codex . . . 20
Corporate Governance at Sartorius . . . . . 22
Sartorius Shares . . . . . . . . . . . . . . . . . . . . 25
Group Management Report
Economic Report . . . . . . . . . . . . . . . . . . . 39
Macroeconomic Environment . . . . . . . . . . 39
Sector Situation . . . . . . . . . . . . . . . . . . . . 40
Group Business Development . . . . . . . . . . 42
Business Development for theBiotechnology Division . . . . . . . . . . . . . . . 58
Business Development for theMechatronics Division . . . . . . . . . . . . . . . 64
Business Development for theEnvironmental Technology Division . . . . . 70
Business Development by Region . . . . . . . 70
Net Worth and Financial Position . . . . . . 78
Forecast Report . . . . . . . . . . . . . . . . . . . . 83
Future Macroeconomic Environment . . . . 83
Sector Situation in Future . . . . . . . . . . . . 84
Business Development in Future . . . . . . . 85
Risk Report . . . . . . . . . . . . . . . . . . . . . . . . 88
Contents
Forward-looking Statements Contain Risks
This Annual Report contains statements concerning the Sartorius Group’s future per-formance. These statements are based onassumptions and estimates. Although we areconvinced that these forward-looking state-ments are realistic, we cannot guaranteethat they will actually apply. This is becauseour assumptions harbor risks and uncertain-ties that could lead to actual results diver-ging substantially from the expected ones. It is not planned to update our forward-looking statements.
This is a translation of the original German-language annual report. Sartorius shall notassume any liability for the correctness ofthis translation. The original annual report is the legally binding version. Furthermore,Sartorius reserves the right not to be re-sponsible for the topicality, correctness,completeness or quality of the informationprovided. Liability claims regarding damagecaused by the use of any information pro-vided, including any kind of information that is incomplete or incorrect, will there-fore be rejected.
Financial Statements and Notes
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . 94
Group Income Statement . . . . . . . . . . . . . 95
Group Statement of Changes in Equity . . 96
Cash Flow Statement . . . . . . . . . . . . . . . . 97
Notes to the Financial Statements . . . . . . 98
Independent Auditors’ Report . . . . . . . . 127
Executive and Supervisory Boards | Mandates . . . . . . . . . . . . . . . . . . . . . . . . 128
Supplementary Information
Financial Schedule . . . . . . . . . . . . . . . . . 134
Contacts . . . . . . . . . . . . . . . . . . . . . . . . . 135
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . 136
Addresses . . . . . . . . . . . . . . . . . . . . . . . . 142
Summary of the Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
About This Publication . . . . . . . . . . . . . . 148
45
: Company Profile
Our Company Profile
The Sartorius Group is among the global marketand technology leaders in three of the key marketsof the future: biotechnology, mechatronics andenvironmental technology. We offer a broad spec-trum of products and system solutions to ourcustomers in the pharmaceutical, biotechnology,chemical, and food and beverage industries as well as the public sector. Sartorius’ expertise inbiotechnology covers applications for biomolecularand microbial separations, cell culture technology,concentration, fermentation and purification. Inmechatronics, the interdisciplinary combination ofmechanical and electronic engineering and infor-mation technology, we cover all our customer’sprocess areas with our extensive range of productsfor laboratory and industrial weighing and electro-chemistry. In the field of environmental technolo-gy, which is a rather recent field for Sartorius, weconcentrate on offering innovative products forthis strongly growing market by building uponSartorius’ core areas of expertise in biotechnologyand mechatronics. Over 50 subsidiaries and agenciesin a total of 110 countries have resulted in ourglobal presence and ensure that we are in touchwith our local customers around the world. In theinternational competitive arena, we currently rankas No. 3 in our segments of biotechnology; inmechatronics, we are No. 2.
Sartorius is synonymous with future-oriented, tech-nologically excellent products, services and systemsolutions that set the standards in precision andquality.
Mission
We intend to become the leading supplier of prod-ucts and solutions covering our customers’ entireprocess chain. We would like to place our areas of core expertise in biotechnology, mechatronicsand environmental technology at the service ofour customers all over the world and continuouslysupplement these areas with innovative productsthat set the pace for the future.
Beyond the technical excellence of our products,we intend to set an example in all dimensions ofour entrepreneurial activities. We see ourselvescommitted to the self-defined model of economic,social and ecological responsibility, which meansnot only economic success, but also conscientiousinteractions with people and the environment.Here, our goal is to increase our shareholder valueon a sustainable basis and to be successful byconsistently creating value in all countries in whichwe are represented in order to serve the interestsof our customers, shareholders and employees aswell as society as a whole.
Employees and Corporate Culture
We are aware that our employees are our mostvaluable assets. Our success depends decisively ontheir commitment, their motivation and theircapabilities. For this reason, we promote an inno-vative, performance-oriented corporate culturewith flat hierarchies and strict results orientation.By translating the adage ”Knowledge is power“into our in-house motto of “Sharing knowledge ispower,” we ensure a continuous improvement pro-cess within our company. Thus, we fulfill the pre-requisites for creating a corporate culture of opencommunication and a policy of transparent infor-mation.
In this connection, all employees are encouragedto be flexible, to take the highest level of personalresponsibility in all their activities, and to thinkglobally. By offering targeted training and furthereducation courses, we aim at developing the talentof our employees. We would like to set standardsin knowledge management, just as we have withour products, as we have already begun by found-ing the Sartorius College in Goettingen, Germany,and the Knowledge Center in Bangalore, India, and shall continue in this endeavor.
Sartorius: Precision and Process Expertise
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To Our Shareholders
The Sartobind ® S15
Membrane Adsorber Module
Frequently, target substances, such as a protein
in this case, are only present in strongly diluted
quantities in an aqueous solution. Using a Sarto-
bind ® S15 Membrane Adsorber module, this
target protein is isolated by ion exchange and,
at the same time, multiply concentrated. A salt
solution is used to detach the protein from the
Membrane Adsorber; a sample vial collects drops
of pure target protein for further analysis.
Depending on the type of Membrane Adsorber
used, biomolecules, such as proteins, DNA and
even viruses, can be specifically removed on the
basis of their affinity or charge from a complex
mixture of substances.
Dear Shareholders and Investors,Ladies and Gentlemen,
The year 2002 proved to be an exceptionally difficult year for customerand capital markets in a way that scarcely anyone had anticipated earlier,or could have even anticipated at all. Converging in a way that hasrarely ever occurred, restraint and restriction negatively affected bothindustrial investments and shareholder activity, and did so worldwide.
Although the degree of impact that these developments had differedfrom region to region and from division to division, they also affectedour company. However, our ability to respond quickly and clearly to theemerging global economic situation and our early and timely technolo-gical structural evolution focusing on biotechnology have resulted in anunbroken trend of overall steady growth at Sartorius, despite the diffi-cult economic climate that persisted in 2002 as well. Compared with thedevelopments of the economy as a whole, our company has indeedachieved respectable results, with a clearly positive tendency within the2002 business year.
In 2002, Group sales revenue grew 6.1% to a new record high of ¤ 476.5million. This means record-high sales revenue for the ninth time in succession. Adjusted for the impact of foreign exchange rates, organicgrowth was even 8.1%. Seen against the background of the world eco-nomic growth and of our markets, this is indeed a highly encouragingresult. The evolution of our two large divisions shows a highly divergentpattern, however. While the sales revenue of the Mechatronics Divisionin 2002 shrank by 7.1% to ¤ 221.9 million, sales posted for the Biotech-nology Division expanded by 21.1% to ¤ 254.6 million. Thus, since 1996the Biotechnology Division’s sales revenue has more than tripled, and,at 53 % of Group sales revenues in 2002, surpassed that of the Mecha-tronics Division for the first time. The Biotechnology Division’s outstand-ing development of growth clearly demonstrates that the technologicalstructural change initiated in this division, the acquisition strategyimplemented and the investment in the “Plant 2001” have all been onthe right track and important for focusing on the black.
The overall earnings situation in 2002 has also shown considerable results – particularly when measured against what the financial sectionsof newspapers have been commonly reporting. In 2002, earnings beforeinterest, taxes, depreciation and amortization, EBITDA, just as our salesrevenue, have reached a historic high: they rose 7.1% to ¤ 36.3 million.Earnings before interest and taxes, EBIT, when adjusted for the expensesof restructuring the Industrial Mechatronics business area and for thoserelated to building up the Vivascience organization, also attained thehighest level ever reported: adjusted EBIT surged 42.3 % to ¤ 24.9 million.This several-year development of the adjusted EBIT shows in particularthat our strategic and structural measures implemented have alsobegun to have a positive impact on earnings.
Perspectives
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: Perspectives
In 2002, unadjusted EBIT declined slightly: it fell 2.2 % to ¤ 13.5 million.However, the highly positive trend from the second to the fourth quar-ters must not be overlooked. It shows that the restructuring measures inthe Industrial Mechatronics area have taken effect and, beyond this,reflects the positive development at "Plant 2001.” Posting ¤ 14.1 million,the Biotechnology Division achieved its by far best EBIT ever; by contrast,in the wake of an exceptionally difficult first half, the MechatronicsDivision could only achieve an EBIT of ¤ 0.3 million, despite the quicklyimplemented cost cuts. The Environmental Technology Division, which isstill being built up as scheduled, had a negative impact of ¤ 0.9 millionon Group EBIT.
In 2002, net profit after minority interest rose 33 % to ¤ 4 million; earn-ings per share climbed from ¤ 0.18 the previous year to ¤ 0.23. However,more important and encouraging is that cash flows from operating activities increased 31.6% to ¤33.7 million. Here, stringent working capitalmanagement played a significant role. Overall, working capital wasreduced by ¤ 9.5 million from December 31, 2001, to December 31, 2002.
Following an absolute record high in 2001, the Group capital expendi-ture volume was reduced in 2002 as planned: it was still ¤ 33.8 million,down from ¤ 76.6 million the year before. In the process, the companysucceeded in generating a positive net cash flow again. With an equityratio of 33%, the balance sheet structure at December 31, 2002, continuesto be robust.
The workforce remained stable to the greatest extent, despite the diffi-cult economic climate. Overall, 3,741 persons were employed at Decem-ber 31, 2002; of this number, 1,825 worked at Sartorius AG and 1,916at Sartorius subsidiaries. Because sales revenue grew, the share of staffcosts could also be reduced yet again. In 2002, it was 37.6 % and thusone percentage point lower than that a year ago as well as more thanfive percentage points below that in 1999. The value contributed peremployee in 2002 continued to rise.
So much for a brief review of the financial year ended December 31,2002. As you always need to assess annual performance also relative tothe market situation, the development of business activity and to thecompetitive situation, our 2002 fiscal year can perhaps be summarizedas follows, according to my feeling, in analogy to sports: “By deployinggreat efforts following a half-time score of 0:2, we still scored 3:2, ulti-mately winning the game.” What is important now is to maintain thisdrive of the second half in the next game – to put it more accurately,in the game in progress – i.e., the business year 2003. This is all themore important given that we probably cannot assume that the basicmacroeconomic data and market conditions of the current year will bevery helpful. Again, using the sports analogy, this means in other words:“another away match that can be won only with high motivation andconcentration.”
Since the beginning of the strategic refocusing of the Group in thespring of 1997, Sartorius, as I already emphasized in our 2001 AnnualReport, has systematically pursued a long-term strategy designed tohave a lasting impact. In the situation in which Sartorius was 6 yearsago, “restructuring our company in an expansive way” was the primaryconsideration to secure its long-term viability and competitiveness. Our concept entailing the following activities has proved its efficacy:enhancement of the capacity usage of our existing structures; expansionof our product, technology, brand and business area portfolios; proactivetechnological structural change; market definition oriented toward pro-cess chains; and focus on innovation and investments for the future.From 1996 to 2002, we were able to boost Group sales revenue by 127%.
The success of our strategic refocus also had an impact on the earningsside: from 1997 to 2002, our cumulative EBIT was 947 % higher than the corresponding figure reported for the previous 6-year period, eventhough we did not opt for measures designed to optimize earnings inthe short term, but rather chose approaches aimed at increasing ourlong-term potential and, thus, sustainably optimizing profit and share-holder value.
An example of this is our acquisition strategy that, according to myassessment, can be considered highly successful both from a Group view-point and from a general stance based on a comparison of experiences.We did not make any overpriced acquisitions, nor have we overburdenedour balance sheet with excessive goodwill; rather, we focused on favor-able relations between purchase prices and attainable potentials and ontransactions offering real synergies. The successful restructuring of GWTexemplifies the correctness of this approach. In the second half of 2002,GWT posted an EBIT margin of 8 % of sales revenue, based on a produc-tivity increase by 56 % within approx. 36 months.
Besides our acquisition strategy, we can cite our triad strategy, and our considerable efforts made in knowledge management as key com-ponents of the increases in potential we have achieved so far.
The substantial strategic and structural roadblocks have been clearedaway. The companies we acquired have essentially been very sensiblyintegrated; our strategic positioning in the triad is established, as is ourtechnological new focus. All signs are clearly pointing the way aheadtoward sustained success. Of course, there is still an operating agenda.The relative priorities on our time axis, incidentally including those be-tween growth and earnings, may well change and must change.
From left to right: Dr. Guenther Maaz,Dr. Joachim Kreuzburg, Prof. Dr. Dres. h. c. Arnold Picot,Prof. Dr. Utz Claassen, Dr. Eric Janssens, Olaf Grothey
Dr. Joachim Kreuzburg,Prof. Dr. Dres. h. c. Arnold Picot,Prof. Dr. Utz Claassen
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: Perspectives
Continuing to tap the potential associated with our new “Plant 2001,”refining our technological and market-based definition of the future ofmechatronics, and further enhancing our positioning and earnings sit-uation in the USA are the essential tasks of the months and years tocome. The Sartorius Group plans on and must continue to grow; it planson and must continue to increase its profitability. A company is never“finished.” In this sense, we are glad, but are still not satisfied by a longshot.
Upon the publication of this annual report, so to speak, I will be resigningfrom my position at Sartorius, dear shareholders, in order to face a newchallenge. In this context, allow me to thank you and our customers,suppliers, banks, business partners and friends very much for your con-fidence and your support. Please “keep the scales tipped” in favor ofSartorius. By selecting Dr. Joachim Kreuzburg, the company has foundan excellent successor for me. He will continue to shape the destiny ofthe Group, certainly by sustaining continuity and focusing on the future,and will surely be highly successful in these undertakings. I believe thatthe Group is brilliantly positioned for the future not only in terms ofstrategy, but also in terms of personnel.
The process of structural and cultural change of a company normallytakes at least ten years. During the past six years at Sartorius, manypositive moves and completely new changes “from head to toe” havebeen made. This willingness to change must be retained in the future aswell. In this process of change, the people within the company continueto remain at the focus. They are our greatest asset, they are our future,and my special thanks go to them. Because I know these people, I haveconfidence: confidence in the team, confidence in the company, andconfidence in its future. I am convinced, dear shareholders, that theSartorius team and company will justify your confidence, too.
Sincerely,
Prof. Dr. Utz ClaassenChairman of the Executive Board and Group CEO
Goettingen, March 2003
Dr. Joachim Kreuzburg, Prof. Dr. Dres. h. c. Arnold Picot,Prof. Dr. Utz Claassen
Executive Board
Prof. Dr. Utz ClaassenGraduate Economist (Dipl.-Ökonom)Chairman and Group CEO since April 1, 1997Born May 7, 1963Hanover, GermanyAppointed until Dec. 31, 2004Will remain in this position until April 30, 2003
Olaf GrotheyFormer Employees’ Council ChairmanMember and Executive for Labor Relations since June 19, 2002Born Jan. 22, 1960 Goettingen, GermanyAppointed until June 19, 2005
Dr. Eric JanssensGraduate Chemical Engineer (Dipl.-Chemiker)Member since Dec. 7, 2001Born Sept. 21, 1955Melsungen, GermanyAppointed until Dec. 7, 2004
Dr. Joachim KreuzburgGraduate Engineer (Dipl.-Ingenieur)Member since Nov. 11, 2002Spokesman since May 1, 2003 Born April 22, 1965Hanover, GermanyAppointed until Nov. 11, 2005
Dr. Guenther MaazGraduate Physicist (Dipl.-Physiker)Member since Nov. 11, 2002Born Sept. 13, 1949Uslar, GermanyAppointed until Nov. 11, 2005
Supervisory Board
Prof. Dr. Dres. h.c. Arnold PicotGraduate in Business Economics (Dipl.-Kaufmann)Chairman until Sept. 3, 2002, and since Sept. 12, 2002 Member from Sept. 4 to 11, 2002Executive Director of the Institute of OrganizationFaculty of Economics at the Ludwig- Maximilian University in MunichGauting, Germany
Gerd-Uwe BoguslawskiGraduate Social Manager (Dipl.-Sozialwirt)Vice Chairman since Sept. 12, 2002Member since Sept. 4, 2002Executive Director of the German Metalworkers’ Union, IG-MetallGoettingen, Germany
Dr. Dirk BastingGraduate Chemical Engineer (Dipl.-Chemiker)President of the Executive Board of Lambda Physik AGGoettingen, Germany
Annette BeckerBusiness Administrator (Kauffrau)Member since Sept. 4, 2002Exempted member of the Employees’ Council,Sartorius AG Goettingen, Germany
Christiane BennerGraduate Sociologist (Dipl.-Soziologin)Member since Sept. 4, 2002Specialist for Information TechnologyRegional Management of the German Metalworkers’ Union IG-MetallHanover, Germany
Uwe BretthauerGraduate Engineer (Dipl.-Ingenieur)Employees’ Council Chairman at Sartorius AGsince Jan. 14, 2002 Former Employees’ Council Vice Chairman Goettingen, Germany
Olaf GrotheyFormer Employees’ Council Chairman Member until June 18, 2002Goettingen, Germany
Dr. Erwin HardtGraduate in Business Economics (Dipl.-Kaufmann)Vice Chairman until Sept. 3, 2002Member since Sept. 3, 2002Feldafing, Germany
Prof. Dr. Gerd KriegerLawyerMember since Sept. 4, 2002Duesseldorf, Germany
Rolf MichaelisGraduate Engineer (Dipl.-Ingenieur)Member since Sept. 4, 2002Vice Chairman of the Employees’ Council at Sartorius AG since Jan. 14, 2002Goettingen, Germany
Prof. Dr. rer. nat. Dr.-Ing. E.h. Heribert Offermanns(Ph.D. in Natural Sciences)(Ph.D. in Engineering, h.c.)Graduate Chemical Engineer (Dipl.-Chemiker)Honorary Professor at the Johann-Wolfgang-Goethe University of Frankfurt am MainHanau, Germany
Hermann SchierwaterGraduate Political Economist (Dipl.-Volkswirt)Member from Sept. 5, 2002 to March 31, 2003Senior Vice President of Group Strategy, Marketing and Corporate Communications, Sartorius AGGoettingen, Germany
Dr. Michael SchulenburgGraduate Engineer (Dipl.-Ingenieur)Member since Sept. 4, 2002Member of management at Cognis DeutschlandGmbH & Co. KG, DuesseldorfMettmann, Germany
Executive and Supervisory BoardsRegular Members during Fiscal 2002
Michel WarterMember until April 30, 2002 Born Nov. 11, 1945E.S.C.P.CPA, ParisParis, France
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: Executive and Supervisory Boards
In 2002, the Supervisory Board carried out the duties incumbent upon itlegally and in line with the bylaws. It monitored the management of thecompany and regularly advised the Executive Board on managementissues. In line with the rules of procedure of the Executive Board, it wasensured at all times that the Supervisory Board was directly involved inall decisions with significant consequences for the company.
The Executive Board regularly informed the Supervisory Board in detailby means of both written and verbal reports on all material issues re-lating to corporate planning and the strategic development of SartoriusAG. In addition, the Executive Board provided regular information onthe progress of transactions, the situation of the company and the Groupas well as risk management. Any deviations from the plans drawn upwere discussed and approved on an individual basis.
The Chairman of the Supervisory Board was informed very promptly and in considerably greater detail than is customary by members of theExecutive Board, in particular by the Chairman of the Executive Board,about the current development and material transactions. There wereongoing intensive coordinating discussions between the Chairman of theSupervisory Board and the Chairman of the Executive Board on impor-tant topics, developments and key individual issues. The SupervisoryBoard once more found this level of communication to be very con-structive and exemplary.
In fiscal 2002, four ordinary and one extraordinary Supervisory Boardmeetings were held. All the members of the Supervisory Board attendedat least half the meetings.
Due to the fact that the German Codetermination Law was applied forthe first time, the meetings after September 2002 were held with atotal of 12 members with an equal number of representatives of boththe shareholders and the workforce.
All urgent decisions by the Chairman of the Supervisory Board wereconfirmed by the Supervisory Board in the subsequent ordinary meet-ings.
Report of the Supervisory Board
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: Report of the Supervisory Board
Role of the Committees
At its constituting meeting on September 12, 2002, the newly formedSupervisory Board with equal representation set up a total of threecommittees. All three committees comprise an equal number of repre-sentatives from the shareholder and the employee side. The existingPersonnel Committee has been transformed into the newly created Exec-utive Task Committee. A corresponding overview of the individual committees can be found in the list of Supervisory Board members inthe annual report.
Each of the Executive Task, Audit and Conciliation Committees thathave now been set up comprise identical people, whereby the Chairmanof the Supervisory Board has also assumed the position of Chairman inthe Executive Task and Conciliation Committees.
The Executive Task Committee assumes the tasks of the former PersonnelCommittee. It therefore has to decide on the conclusion, amendmentand termination of contracts of employment with the members of theExecutive Board, for example. In addition, it is responsible for determin-ing the annual bonuses and agreeing to any potential ancillary activitiesheld by members of the Executive Board including the assumption ofseats on Supervisory Boards outside the Group. Provided that notifica-tion of ancillary activities of this nature has been given, the Committeegranted its express approval.
Furthermore, the Executive Task Committee prepares meetings and re-solutions of the Supervisory Board in order to increase the efficiency ofwork carried out by the Supervisory Board and structure complex mat-ters in advance. The respective committee Chairman regularly reports tothe Supervisory Board on the committee’s work.
The Executive Task Committee, or the former Personnel Committeewhere applicable, met four times in 2002. The focus of the discussionswas on issues relating to appointments and remuneration of membersof the Executive Board. The Conciliation Committee pursuant to Section27, Subsection 3, of the German Codetermination Law did not need tobe convened.
The newly formed Audit Committee, which met twice in the year underreview, dealt with issues relating to accounting and risk management,the independence of the auditor, awarding the audit mandate to theauditor, determining the focus of the audit and agreeing on the fee.
Focus of Discussions in the Supervisory Board
Reports on the company’s situation formed a regular part of SupervisoryBoard meetings. The requirements of the Corporate Governance Codewere discussed at various meetings, including the issue of the extent towhich the Group is to follow these recommendations. In the meeting onMarch 15, 2002, the Supervisory Board was principally concerned withthe annual and consolidated financial statements as of December 31,2001. Other topics included the implementation and status of a cost-cutting program launched throughout the Group. In addition, the exten-sive agenda for the Annual Shareholders’ Meeting on June 19, 2002, wasdiscussed. The focus of the discussions was on the substantial changesto the bylaws. These became necessary because the German Codetermi-nation Law must now be applied for the first time due to the fact thatthere are now more than 2,000 permanent domestic employees in theGroup.
There were detailed discussions on personnel topics and the procedurewith regard to compliance with the German Corporate Governance Codeat the meeting on June 19, 2002.
In addition, the Executive Board informed the Supervisory Board aboutthe creation of task forces for the individual divisions.
At the meeting on September 12, 2002, the entire Supervisory Boardreconstituted itself after the shareholder representatives were elected atthe Annual Shareholders’ Meeting on June 19, 2002. Following the elec-tion of the employee representatives by the workforce on September 4,2002, the newly elected Supervisory Board met for the first time in themeeting on September 12, 2002. As a member of the representatives formanagerial employees, Hermann Schierwater was appointed a memberof the Supervisory Board by the Goettingen Local Court (Amtsgericht).At the meeting on September 12, the Supervisory Board elected Prof.Arnold Picot as Chairman and Mr. Gerd-Uwe Boguslawski as his deputyas well as the members of the Executive Task Committee, Audit Com-mittee and Conciliation Committee.
In addition, the Supervisory Board discussed the draft of the rules ofprocedure in detail. The Executive Board presented the operating statusin the newly formed business areas within the Biotechnology andMechatronics Divisions. The focus of the meeting was on the presentationby the Executive Board of Vivascience AG from Hanover, in which theBoard described the status of the development of this consolidatedcompany. The Executive Board also informed the Supervisory Board indetail of the progress with the integration of “Plant 2001.”
In the extraordinary meeting on November 11, 2002, only personneltopics were discussed.
In the meeting on December 12, 2002, the Supervisory Board dealt withthe German Corporate Governance Code in detail. New rules of procedurewere approved for both the Supervisory Board and the Executive Board.In addition, the declaration by the Executive Board and the SupervisoryBoard required by Section 161 of the German Stock Corporation Law(AktG) relating to the German Corporate Governance Code was adopted,the budget was approved and the 5-year planning submitted by theExecutive Board of Sartorius AG was acknowledged.
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: Report of the Supervisory Board
Corporate Governance Code and Declaration of Compliance
The Supervisory Board discussed the implementation of the GermanCorporate Governance Code at Sartorius AG in depth in its meetings onJune 19, 2002, and December 12, 2002, and approved the implementa-tion of the Code. The Supervisory Board and the Executive Board wereof the opinion that the code is to be implemented with three company-specific exceptions. On the basis of this approval, the Supervisory Boardadopted rules of procedure for the Executive Board adjusted in line with the Code and new rules of procedure for the Supervisory Board ofSartorius AG. In the next Annual Shareholders’ Meeting on June 18,2003, the Executive Board and the Supervisory Board will propose anadjustment to Supervisory Board remuneration as demanded by theCode. Accordingly, pursuant to the standard at comparable companies,work in Supervisory Board committees is also to be remunerated infuture. This is expected to depend on attendance at meetings of theSupervisory Board and meetings of the Supervisory Board committees.
All obligations relating to the Supervisory Board were incorporated into the newly adopted rules of procedure of the Supervisory Board.According to this, existing conflicts of interest must be reported toSupervisory Boards. No such conflicts of interest arose in the periodunder review.
On December 12, 2002, the Executive Board and the Supervisory Boardsubmitted the first declaration of compliance in line with Section 161of the German Stock Corporation Law, according to which Sartorius AGmeets the recommendations of the government Commission of the Ger-man Corporate Governance Code with three exceptions. One exceptionis the remuneration rules for work performed by members of the Super-visory Board in committees. With regard to adjusting the bylaws to thenew remuneration regulations, the Executive Board and the SupervisoryBoard will submit a corresponding motion at the Annual Shareholders’Meeting.
Another exception is the non-compliance with deadlines for publishingthe consolidated financial statements and interim reports. The intentionis to conform to the deadlines stated in the German Corporate Gover-nance Code for the first time in 2004. It is not yet possible to guaranteethem in 2003 due to the fact that planning for fiscal 2003 is at anadvanced stage and deadlines are set in advance. However, it is also dueto the switch to a new business area structure, the conversion of theaccounting standards from the German Commercial Code to IAS and the introduction of a new management information system. Therefore,both the Executive Board and the Supervisory Board have submitted the corresponding declaration of non-compliance with the Code by wayof precaution.
The last item in which Sartorius AG deviates from the requirements of the Code is the D&O insurance taken out for the Executive and theSupervisory Boards. According to the Code, an appropriate deductibleshould be agreed here with the insurance company. As the amount con-sidered as an appropriate deductible has not been conclusively regulatedto date in either the jurisprudence or legal literature, a declaration ofnon-compliance with the Code concerning this item was issued as aprecautionary measure. Once there is clarification of what constitutesan appropriate deductible, the Supervisory Board of Sartorius AG willimmediately discuss the topic once more.
Audit of the Annual and Consolidated Financial Statements
Pursuant to the resolution of the Annual Shareholders’ Meeting on June19, 2002, the annual financial statements of Sartorius AG for the fiscalyear from January 1, 2002, to December 31, 2002, drawn up in accordancewith the German Commercial Code, together with the management reportwere audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesell-schaft, Hanover, the company subsequently commissioned by the Super-visory Board to perform the audit.
The auditor awarded an unqualified audit certificate.
The consolidated financial statements of Sartorius AG were drawn up inline with IAS. The auditor also awarded the submitted consolidatedfinancial statements and the Group management report an unqualifiedaudit certificate.
The focal points of the audit for the auditor were the consolidatedcompanies GWT in Hamburg, Germany, and Dr. Hans Boekels GmbH & Coin Aachen, Germany, as well as the consolidated company Sartorius S.p.A.in Italy. The annual financial statement documents and audit reportswere distributed to all members of the Supervisory Board on time. Theywere the subject of intense discussion in the Audit Committee on March11, 2003, and at the meeting of the Supervisory Board on March 17,2003. The auditors took part in the discussion of the annual financialstatements and the consolidated financial statements in both the AuditCommittee and in the Supervisory Board. They reported on the key find-ings of the audits and were available to members of the SupervisoryBoard to provide any additional information.
On the basis of its own examination of the annual financial statementsof Sartorius AG, the Sartorius consolidated financial statements, themanagement report and the Group management report, the SupervisoryBoard agreed with the result of the audit by the auditor. In the meetingon March 17, 2003, the Supervisory Board endorsed the annual finan-cial statements and the consolidated financial statements. The annualfinancial statements are thereby approved. In addition, the SupervisoryBoard concurred with the proposal for the appropriation of the retainednet profit submitted by the Executive Board.
Prof. Dr. Dres. h. c. PicotChairman of the Supervisory Board
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: Report of the Supervisory Board
Appointment of the Supervisory Board and Executive Board
On June 19, 2002, the Annual Shareholders’ Meeting reappointed allthe members of the Supervisory Board for the first time on the basisof the German Codetermination Law.
On June 19, 2002, the Supervisory Board appointed Mr. Olaf Grotheyas a member of the Executive Board and the Executive for Labor Re-lations of Sartorius AG with effect the same day.
On November 11, 2002, the Supervisory Board appointed Dr. JoachimKreuzburg and Dr. Guenther Maaz as members of the Executive Boardof Sartorius AG with effect the same day. Dr. Kreuzburg will assumethe position of Spokesman of the Executive Board of Sartorius AG onMay 1, 2003.
The Chairman of the Executive Board, Prof. Claassen, will resign fromthe Executive Board of Sartorius AG with effect from April 30, 2003,and will assume the position of Chairman of the Board of Managementat EnBW Energie Baden-Wuerttemberg AG in Karlsruhe. The membersof the Supervisory Board would like to thank Prof. Claassen for hisextraordinary commitment during his successful employment with theGroup and for his work on behalf of the company and its employees.Under Prof. Claassen’s management, Sartorius AG was strategicallyfurther developed in a special way, and could improve its shareholdervalue with lasting effect. The Supervisory Board is convinced that theExecutive Board has adopted the correct measures to lead the SartoriusGroup to a promising future. On behalf of the Supervisory Board, Iwish Prof. Claassen every success in his new position.
The Supervisory Board would like to thank the Executive Board, theentire management as well as all employees and employee represen-tatives for their outstanding commitment, the work they performedand the success they achieved.
Prof. Dres. h.c. Arnold Picot Chairman of the Supervisory Board
Munich, March 2003
The Codex intends to promote the confidence ofinternational and national investors, customers,company employees and the public in the manage-ment and controlling of German joint stock cor-porations listed on the stock exchanges. Followingthe initial publication of the Codex in February2002, the Government Commission of the GermanCorporate Governance Codex has been responsiblefor continuously adapting and updating the Codexprinciples since then.
Sartorius AG welcomes the adoption of the GermanCorporate Governance Codex. It is in the interestof the business location of Germany and of the companies there, and will contribute towardsstrengthening the confidence of both domesticand international investors in the German economy.
We dealt with the rules of the German CorporateGovernance Codex at an early stage to ensure ourcompliance. The issues involved in implementingthese rules were intensively discussed between theExecutive Board and the Supervisory Board, andwere on the primary agenda of numerous ExecutiveBoard meetings. In this connection, new rules ofinternal procedure were adopted for the Supervisoryand Executive Boards and a compliance officerwas appointed to be responsible for the implemen-tation of and compliance with the German Cor-porate Governance Codex. Our so-called declarationof compliance was submitted in due time onDecember 2002. This declaration states that weessentially follow the German Corporate Gover-nance Codex and differ from it only concerningthree items. These concern the Codex’s new struc-ture of remuneration for the Supervisory Board,compliance with the publication deadlines of theGroup financial statements and the interim reportsand the deductible for our Directors & Officersinsurance. Compliance with these rules has not beenpossible to date for the following reasons:
On September 6, 2001, the Federal Government ofGermany appointed the “Commission of the GermanCorporate Governance Codex” to draw up inter-nationally and nationally recognized principles forgood and responsible corporate management andcontrolling (“Corporate Governance”). Thereupon,the Commission introduced the German CorporateGovernance Codex (“Deutscher Corporate Gover-nance Kodex”) on February 26, 2002, to the public.When the German Transparency and Publicity Law(TransPuG) entered into force on July 19, 2002,the German Corporate Governance Codex wasadopted in Section 161 of the German Stock Cor-poration Law.
The Codex summarizes the German principles ofcorporate management, controlling and transpar-ency in a concise and easy-to-understand manner.
It takes up the essential legal requirements forcorporate management and controlling of corpo-rations listed on the stock exchange in Germany.In the form of (“must-follow”) recommendations,the Codex allows for internationally and nationallyrecognized standards implemented in practice andprovides the individual companies with (“should/can-follow”) suggestions for good and responsiblecorporate management and controlling.
Report of the Executive Boardon the German Corporate Governance Codex
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To date, the remuneration of the SupervisoryBoard that is set forth in the bylaws of Sartorius AGhas not considered membership or chairmanshipin a Supervisory Board committee. This remuner-ation can be adjusted, as required by the GermanCorporate Governance Codex, only by amendingthe company’s bylaws, which will be up for a voteat the next general meeting of the Supervisoryand Executive Boards.
The required compliance with 90-day deadlines atthe end of a business year for publication of theconsolidated financial statements and with 45-daydeadlines at the end of a reporting period for thepublication of interim reports cannot yet be guar-anteed at the moment. Our interim reports will betentatively published within the 45-day deadline.Since this will not be the case for every report, wehave added this item to our declaration of com-pliance by way of precaution. The reasons for non-compliance with these deadlines essentially lie inthe restructuring of our Group. The new businessarea structure, conversion of our accounting stan-dards from the German Commercial Code to theIAS and our new management information systemare contributing toward the improvement of thecorporation’s transparency and publicity; however,this does require a certain amount of time duringthe initial implementation phase, which is reflectedby the non-compliance with the deadlines. Thesemeasures will most likely be completed in 2003.
A deductible, or excess, for our directors & officersinsurance has intentionally not been agreed upon– as, incidentally, a large number of other jointstock corporations or public limited companies havenot done so either, because there is still somelegal uncertainty about how much this deductibleshould be in order to be adequately sufficient interms of the German Corporate Governance Codex.Neither jurisprudence nor legal literature has beenable to answer this issue in a consistent manner.As long as this uncertainty persists, our corporationwill not expose itself to any remaining risk entailedby a possibly imprecisely interpretable declarationof compliance with the German Corporate Gover-nance Codex. As soon as there is legal certaintyabout this issue, the Supervisory and ExecutiveBoards of Sartorius AG will promptly address theissue of agreeing upon a reasonable deductible.
: Corporate Governance
Dr. Joachim Kreuzburg
Olaf Grothey
Dr. Guenther Maaz
Dr. Eric Janssens
Prof. Dr. Utz Claassen
Sartorius AG welcomes the adoption of the Ger-man Corporate Governance Codex. It is in theinterest of the business location of Germany andof the companies there, and will contribute towardsstrengthening the confidence of both domesticand international investors in the German economy.In keeping with the deadline, we submitted thefollowing declaration of compliance pursuant toSection 161 of the German Stock CorporationLaw. This declaration documents the complianceof our joint stock corporation listed on the Ger-man stock exchange with the German CorporateGovernance Code as follows:
Declaration of Sartorius AG's Compliance withthe German Corporate Governance Code
§ 1Sartorius AG hereby declares its compliance withthe recommendations handed down by the Govern-ment Commission on the German CorporateGovernance Code for management and supervisionof stock corporations as amended on 7 November2002 (hereinafter referred to as “the Code"), withthe exceptions described under § 2 and § 3 below.
§ 2Compensation of Supervisory Board members forholding a position of Chair or Member in a com-mittee must be regulated in the Articles of Associ-ation. The Executive Board and Supervisory Boardwill suggest a suitable amendment to the Articlesof Association at the Annual Shareholders’ Meetingscheduled to take place on 18 June 2003.
§ 3Sartorius AG will diverge from the following sec-tions of the Code:
3.8Directors and Officers (D&O) Liability InsuranceD&O insurance was effected for both ExecutiveBoard and Supervisory Board on 23 October 1997.No deductible has been agreed on with the insur-ance provider.
7.1.2Publication of Consolidated Financial Statementsand Interim ReportsThe deadlines of 90 days after the end of thebusiness year for publication of the ConsolidatedFinancial Statements and 45 days after the end ofthe reporting period for publication of InterimReports have not been met to date. Sartorius AGexpects to comply with the Code regarding thisparagraph in 2004.
Goettingen, 12 December 2002
Supervisory Board | Executive Board
Corporate Governance at Sartorius
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Therefore, we essentially meet the requirements of the German Corporate Governance Codex, apartfrom only a few exceptions, which are explainedin the following:
To date, the remuneration of the Supervisory Boardthat is set forth in the bylaws of Sartorius AG hasnot considered membership or chairmanship in a Supervisory Board committee. This remunerationcan be adjusted, as required by the German Corporate Governance Codex, only by amendingthe company’s bylaws, which will be up for a voteat the next general meeting of the Supervisoryand Executive Boards.
The required compliance with 90-day deadlines atthe end of a business year for publication of theconsolidated financial statements and with 45-daydeadlines at the end of a reporting period for thepublication of interim reports cannot yet be guar-anteed at the moment. Our interim reports will betentatively published within the 45-day deadline.Since this will not be the case for every report, wehave added this item to our declaration of compli-ance by way of precaution. The reasons for non-compliance with these deadlines essentially lie inthe restructuring of our Group. The new businessarea structure, conversion of our accounting stan-dards from the German Commercial Code to the IAS and our new management information systemare contributing toward the improvement of thecorporation’s transparency and publicity; however,this does require a certain amount of time duringthe initial implementation phase, which is re-flected by the non-compliance with the deadlines.These measures will most likely be completed in 2003.
A deductible, or excess, for our directors & officersinsurance has intentionally not been agreed uponin the Directors & Officers Insurance policy signedon October 23, 1997 – as, incidentally, a largenumber of other joint stock corporations or publiclimited companies have not done so either. Thereason is that there is still some legal uncertaintyabout how much this deductible should be inorder to be adequately sufficient in terms of theGerman Corporate Governance Codex. Neitherjurisprudence nor legal literature has been able toanswer this issue in a consistent manner. As longas this uncertainty persists, our corporation willnot expose itself to any remaining risk entailed bya possibly imprecisely interpretable declaration ofcompliance with the German Corporate GovernanceCodex. As soon as there is legal certainty aboutthis issue, the Supervisory and Executive Boards of Sartorius AG will promptly address the issue ofagreeing upon a reasonable deductible.
: Corporate Governance
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Sartorius Shares
The Sartopore ® Capsule Series
They feature ease of use and outstanding per-
formance specifications. Sartopore ®2 150 is
ready for immediate use; its pleated double
membrane elements made of polyether sulfone
provide a filter area of 150 cm2 within the
smallest space. The capsules are used for parti-
cle-removing and sterile filtration of ultrapure
solutions, such as injectables, reagent-grade
water and a large number of therapeutic drugs.
They are ideal for laboratory applications and
scale-up trial runs.
Share Price Development
In the 2002 trading year, the Sartorius AG sharesalso found themselves at the mercy of the difficultcapital market environment. Both the ordinaryand the preference shares were trading lower atyear-end than at the start of the year. However,the prices of the ordinary and preference sharesdiverged considerably at times. While the ordinaryshares proved to be relatively resistant to shareprice setbacks up to the mid-year point, the moreliquid preference shares reported some consider-able price declines from April onwards.
The ordinary shares opened the year at ¤ 8.50 andclosed at ¤ 6.40 at year-end, a performance ofminus 25 %. On an end-of-day basis, an annuallow of ¤ 4.60 was reached on October 10, 2002.The shares have since recovered from this. Thepreference shares started trading in Frankfurt at ¤ 7.00 in January 2002, reached the year low onOctober 9, 2002 at ¤ 3.21 and closed at ¤ 3.70 inDecember 2002: a performance of minus 47 %. In the same period, the German DAX share indexposted a 5155.26-point drop to 2892.63 points,corresponding to a 44 % loss. The SDAX, in whichthe preference shares were represented, fell from2375.93 points to 1709.28 points within a one-year period: this corresponds to a 28 % loss.
The widely divergent share price trend exhibitedby the two share categories meant that the pre-ference shares were traded at a discount of morethan 42 % at year-end (start of the year: 18 %)compared with the ordinary shares. We find a highdiscount of this nature difficult to comprehendfrom a rational perspective in view of the factthat, with the exception of the voting rights, thepreference shares carry the same rights as theordinary shares but also bear a higher dividend.
Facts about Sartorius Shares
ISIN DE0007165607 ordinary sharesDE0007165631 preference shares
Designated Commerzbank AGsponsors Nord/LB (since April 1, 2003)
Market segment Prime Standard
Stock exchanges Xetrawhere traded Frankfurt
HanoverBerlinBremenDuesseldorfHamburgMunichStuttgart
Number of shares 18,720,000 no-par individualshare certificates
of which 9,360,000 ordinary shares9,360,000 preference shares
of which shares 8,528,056 ordinary sharesoutstanding 8,519,017 preference shares
with a calculated par value ¤ 1 per share
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: Sartorius Shares
Sartorius Shares in ¤(January 2002 – March 2003)
10,0
12,0
11,0
9,0
8,0
7,0
6,0
5,0
4,0
3,0
Preference sharesOrdinary shares
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March
Sartorius Shares in Comparison to the SDAX and DAX (indexed)(January 2002 – March 2003)
110
130
120
100
90
80
70
60
50
40
Preference sharesOrdinary sharesDAXSDAX
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March
Trading Volume and Share Price Development
Change2002 2001 2002–2001
SMAX trading volume 1,116 3,080 – 64 %in millions of ¤
SMAX trading volume 198 339 – 42 %in millions of shares
Average daily trading in number of shares
Preference shares 11,804 19,770 – 40 %
Ordinary shares 3,177 6,544 – 51 %
Market capitalization 94,5 146.0 – 35 %in millions of ¤
Preference shares in ¤ * 3.70 7.00 – 47 %
Ordinary shares in ¤ * 6.40 8.60 – 26 %
SDAX 1,709.3 2,365.2 – 28 %
DAX 2,892.6 5,160.1 – 44 %
*Closing share prices in Frankfurt on the last trading day of the yearSources: Deutsche Börse, Bloomberg
Market Capitalizationin millions of ¤
2001
2002
* Reporting date on March 21, 2003
2000
1999
1998
1997
2003*
0 50 100
150
200
250
146
202
132
143
123
92
95
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: Sartorius Shares
Market Capitalization and Trading Volume
The market capitalization of the Sartorius shares(preference and ordinary shares including therepurchased shares) fell from ¤ 145.1 million at thestart of the year 2002 to ¤94.5 million at year-end:a drop of 34.9 %. For the year ended December 31,2002, market capitalization on the basis of thefree float, a determinant for inclusion in the index,amounted to ¤ 31.5 million. Preference sharesworth ¤15.9 million and ordinary shares worth ¤6.4million were traded in the year 2002 as a whole(source: Deutsche Börse). The average daily num-ber of ordinary shares traded fell by 51.5 % to3,177 compared with 6,544 in the previous year.An average of 11,804 preference shares were tradeddaily. This is 40.3 % less than the 19,770 average in the previous year (source: Bloomberg). Thisdevelopment goes hand in hand with the generalturnover trend on the German stock exchanges. Accordingly, the value of shares traded on all German stock exchanges in a one-year periodamounted to ¤ 956,642 million – a 13.7 % decline(source: Deutsche Börse).
Resegmentation of the German Stock Market
Effective January 1, 2003, Deutsche Börse reseg-mented the German stock market, resulting in thetwo segments Prime Standard and General Stan-dard. At the end of 2002, Sartorius AG applied forand received admission to the higher Prime Stan-dard, as expected. Companies in the Prime Standardmust meet high international transparency criteriaover and above those laid out for the GeneralStandard. These include regular quarterly reporting,the use of international accounting standards (IASor U.S. GAAP), the publication of a corporatecalendar listing the most important dates and theconductance of at least one analysts’ conferenceper year. In addition, ad-hoc disclosures and on-going reporting have to be drawn up in both Ger-man and English. Admission to the Prime Standardrepresents the prerequisite for inclusion in one ofthe Deutsche Börse indices.
The index environment also changed on March 24,2003. In addition to the DAX, MDAX and SDAX forthe classic sectors, there is a new index, the Tec-DAX 30, for the technology sectors, which tracksthe 30 largest equities of the new NEMAX 50. The“Neuer Markt” and “SMAX” segments will be dis-continued at the end of 2003. The resegmentationof the German stock market resulted in funda-mental changes for the Sartorius AG shares, whichwere previously listed in the SDAX.
Deutsche Börse now regards Sartorius AG as atechnology company rather than a classic company,which is also in line with the way we see ourselves.Thus, there is now the opportunity for the Sartoriusshares to be included in the NEMAX 50 and theTecDAX 30, respectively, instead of the SDAX andthe MDAX. As of the reporting date on January 31,2003, the preference shares of Sartorius AG didnot meet all the criteria required for inclusion inthe NEMAX 50, namely, 1. the company is one ofthe 60 largest in terms of market capitalization of the free float; 2. the company is one of the 60largest in terms of trading volume. With regard to market capitalization of the free float, we areranked 44. However, in terms of trading volume,we are only ranked 65. As a result, we have notyet been included in the NEMAX 50. In agreementwith Deutsche Börse, Sartorius AG ceased to belisted in the SMAX at the end of 2002. In view ofthe fact that the SMAX is to be discontinued atthe end of 2003, a double-listing in both the PrimeStandard and the SMAX did not really make senseto us from a cost / benefit perspective. The currentsituation, where the company finds itself withouta listing in any Deutsche Börse index, is unsatis-factory for Sartorius AG. We are therefore strivingto step up investor relations work and correspond-ingly increase the volume of Sartorius shares traded to meet the criteria for acceptance to theNEMAX 50 and the TecDAX 30, respectively.
Sartorius Shares in the Focus of Analysts
As a result of the overall weak development onthe capital market with a simultaneous reductionin research capacity within the banking sector,analysts’ interest in companies listed in the SDAXcontinued to wane in 2002. Like those of manyother small to medium-sized companies, the Sartorius shares were also affected by this develop-ment. However, they did manage to stir the inter-est of a number of analysts. Accordingly, BayerischeLandesbank maintained its “overweight” rating inSeptember and again in November. In April, Inde-pendent Research awarded the preference sharesan “overweight” rating, downgraded this to “hold” in June and reiterated the “hold” rating inNovember. Following publication of the preliminaryfigures for the financial year of 2002, analysis atIndependent Research set Sartorius AG’s preferenceshares to “buy” in March 2003. The analysts at ACResearch advised investors to “accumulate” Sartoriusshares following the publication of the first-quarter2002 figures, and July saw analysts at “Oberbaye-rischer Börsenbrief“ issue a “buy” recommendationfor the Sartorius shares.
Investor Relations
At roadshows both at home and abroad and intalks held at the Group headquarters in Goettingen,Germany, we have established new contacts withinstitutional investors and intensified existingcontacts. In addition, Sartorius AG delivered a pre-sentation about the company at the end of Aprilduring a DVFA analysts’ conference and, at thebeginning of December, to a large audience ofinstitutional investors and analysts at the GermanMid Cap Conference (GMCC) in Frankfurt, Germany.
Our Annual Report once more came out very wellin the Annual Report ranking by the German busi-ness journal “manager magazin.” In the SDAX, theSartorius Group’s Annual Report took secondplace, an outstanding achievement. In the overallevaluation across all indices, the Annual Reportreceived a "good” rating and was ranked 26th. The pole positions were almost exclusively held bylarger companies from the DAX and the MDAX,respectively.
Sartorius Shares in the Newly Launched NISAX20
Sartorius preference shares are included in theNISAX20, newly launched by the bank Norddeut-sche Landesbank in 2002. As with the DeutscheBörse indices, the market capitalization of the freefloat is the determinant for weighting within theLower Saxony share index, which comprises 20companies. In addition to the Sartorius shares, thisregional index also includes the shares of Continen-tal, Hannover Re, TUI and Volkswagen, amongothers. We view the NISAX20 as an interesting toolfor intensifying the share culture, with potentialpositive effects for the corresponding index stocks.The index was launched in May 2002 with anindex status of 1,000 points; as of December 31,2002, it stood at 633.88 points.
Conversion of the WKN Code to ISIN
Effective April 22, 2003, the six-digit WKN codewill be replaced by the internationally valid 12-digit ISIN format. The ISIN (International SecuritiesIdentification Number) is a 12-digit code consist-ing of three elements: The first two charactersrepresent the country code, for example, DE forGermany. This is followed by a national identifi-cation number consisting of nine characters. InGermany, this corresponds to the existing WKNcode. The third element is a one-digit numericalcheck digit. With the help of the ISIN, investorscan clearly identify securities throughout theworld, thereby facilitating cross-border securitiestrading, clearing and settlement as well as theadmission of securities to trading. The ISIN forSartorius shares can be found in the table entitled“Facts about Sartorius Shares” on page 26.
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Dividends
At the Annual Shareholders’ Meeting on June 18,2003, the Executive Board and the SupervisoryBoard will propose paying a dividend of ¤ 0.26 foreach preference share and ¤ 0.24 for each ordinaryshare from Sartorius AG’s retained annual profitof ¤ 4.4 million. This means that neither the divi-dends nor the distributed profits at ¤ 4.3 millionhave changed relative to fiscal 2001. Own shares,defined as treasury shares, which are held underthe share buyback program, are not entitled todividend payments.
Preference sharesOrdinary shares
Total Dividends¤ in millions
4.6
4.8
4.4
4.2
4.0
1998
Dividend Growthin ¤ per share
2001
2000
1999
1998
2002 0.260.24
0.260.24
0.260.24
0.260.24
0.240.22
4.2
1999
4.7
2000
4.3
2001
4.3
2002
4.3
0.18
0.20
0.22
0.24
0.26
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: Sartorius Shares
Key Figures for Sartorius Shares
All figures in ¤ per share, Mar. 21, 2003 2002 2001 2000 1999 1998unless otherwise specified
Dividend per ordinary share 0.24 0.24 0.24 0.24 0.22
Dividend per preference share 0.26 0.26 0.26 0.26 0.24
Total dividends * ¤ in K *** 4,262 4,262 4,262 4,680 4,234
Tax credit per ordinary share 0.00 0.00 0.10 0.10 0.05
Tax credit per preference share 0.00 0.00 0.11 0.11 0.05
Dividend yield for ordinary shares ** 2.8 % 1.8 % 3.3 % 2.7 % 2.4 %
Dividend yield for preference shares ** 3.7 % 3.0 % 3.7 % 4.0 % 2.2 %
Ordinary shares Reporting date 6.3 6.4 8.6 13.0 7.2 8.8
High 10.7 14.4 14.4 10.2 20.3
Low 4.6 6.4 6.0 5.4 8.0
Preference shares Reporting date 3.6 3.7 7.0 8.6 6.9 6.5
High 7.8 8.9 11.5 9.0 19.7
Low 3.2 5.0 5.8 5.4 5.9
Book value 7.1 7.4 7.8 7.8 7.4
Market value | Book value – ordinary shares 90 % 117 % 167 % 93 % 119 %
Market value | Book value – preference shares 52 % 95 % 111 % 90 % 88 %
Market capitalization, ¤ in K *** 92,196 94,536 146,016 202,176 132,350 143,387
Number of ordinary shares 9,360,000 9,360,000 9,360,000 9,360,000 9,360,000 9,360,000
Number of preference shares 9,360,000 9,360,000 9,360,000 9,360,000 9,360,000 9,360,000
Closing prices at the Frankfurt Stock Exchange
*** Calculated on the basis of the number of shares entitled to dividends:for 2002, amounts as suggested by the Executive and Supervisory Boards of Sartorius AG
*** The particular dividend in relation to the year-end price of the previous year*** K = thousands
Return On Assets
For the purpose of value-oriented corporate controlwe apply the key ratio Return On Assets (ROA),which represents the ratio of earnings before inter-est, taxes and amortization (EBITA) and averageoperating assets. We slightly modified the calcu-lation method compared to last year’s mode(without assets from future tax relief) and adjustedthe comparison values accordingly. In fiscal 2002,we posted a slight decline in this ratio from 5.8 %to 5.2 %. Because of the Biotechnology Division’slarge share contributed to Group earnings, thisdivision reported an ROA of 7.8 %, up from 4.3 % ayear earlier. Because of its weak earnings situation,the Mechatronics Division posted only a return of1.2 % (previous year: 7.4 %). The capital turnoverof the Divisions remained relatively constant. Forthe medium term, we are continuing to set oursights on achieving a target return of 22 % for theSartorius Group, which we intend to reach byincreasing our profitability while maintaining arelatively constant amount of capital employed.
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ROA (Return on Assets) Group Biotechnology | MechatronicsEnvironmental
Technology
¤ in millions 2002 2001 2002 2001 2002 2001
Sales revenue 476.5 449.3 254.6 210.3 221.9 239.0
EBIT 13.5 13.8 13.2 5.4 0.3 8.4
Amortization of goodwill 2.8 2.3 1.5 1.1 1.2 1.3
EBITA 16.3 16.2 14.7 6.4 1.5 9.7
Investment 188.6 177.8 128.6 110.2 60.1 67.6
Working capital 128.3 133.7 71.4 66.0 56.9 67.7
Net operating assets 316.9 311.4 200.0 176.2 117.0 135.2
Net operating assets (12-month average) 314.2 280.7 188.1 149.8 126.1 130.9
ROA (EBITA | Net operating assets) 5.2 % 5.8 % 7.8 % 4.3 % 1.2 % 7.4 %
Return on sales revenue 3.4 % 3.6 % 5.8 % 3.1 % 0.7 % 4.1 %
Capital turnover 1.5 1.6 1.4 1.4 1.8 1.8
ROA (Return on sales x capital turnover) 5.2 % 5.8 % 7.8 % 4.3 % 1.2 % 7.4 %
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Group Management Report
Vivaflow Crossflow
With Vivaflow crossflow units, even relatively
large volumes of biologicals can be quickly
concentrated. For this purpose, a liquid is con-
ducted into loops via a membrane, thereby
removing volume from the sample. The biologi-
cally active substances are retained and are
available as concentrates for further analyses.
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: Economic Report | Macroeconomic Environment
Macroeconomic Environment
After the global economy regained some impetus atthe start of 2002 in the wake of a healthy recoveryin the USA, it slipped back into a phase of weak-ness at the mid-year point. The growing conflictin Iraq, reporting scandals and the associatedshare price declines on the international financialmarkets were the main causes. According to esti-mates by the Institute for Economic Research (ifo),global production increased by 2.5 % in the year2002 compared with a 2.2 % rise in the previousyear. Like the European Commission (Eurostat), theInternational Monetary Fund (IMF) estimates glo-bal economic growth at 2.8 % in 2002.
In the euro zone, growth in 2002 undershot thatof the global economy. According to informationfrom Eurostat, real gross domestic product (GDP)only climbed by 0.8 % against 1.4 % in 2001. Aswell as the Association of German Banks, the Ger-man Institute for Economic Research (DIW) is alsoexpecting economic growth of 0.8 % in the eurozone.
Economic development in Germany was somewhatmuted compared with the rest of the euro zone.In 2002, economic growth here was just 0.2 % in2002 according to the ifo, an estimate that is alsoshared by the DIW and the Association of GermanBanks.
Underpinned by an expansive economic policy, theAmerican economy reported relatively robust growthin 2002 at 2.4 % (source: DIW, Eurostat). However,the various institutes are still divided on the extentto which this development can be viewed as stable.
In an international comparison, Asia achieved thehighest growth rate, with an increase in GDP of4.7 % according to an estimate by the IMF whichexcludes Japan. The Kiel Institute for World Eco-nomics (IfW) puts growth in East Asia at 4.2 %,excluding China and Japan. However, the develop-ment in Asia must be regarded on a differentiatedbasis. While Japan has not yet overcome its crisis(+0.3 %), China reported strong economic growthwith an 8.2% increase in gross domestic product(source: IfW).
Growth track successfully continued in 2002
: Consolidated sales revenue rose 6.1% to ¤ 476.5million
: EBITDA increased 7.1% to ¤ 36.3 million
: Adjusted EBIT climbed 42.3 % to ¤ 24.9 million
: At ¤ 13.5 million, EBIT almost at the level of theprevious year
Positive business development driven by the Biotech-nology Division, where we significantly increasedsales revenue and earnings
Declines in sales revenue and earnings in theMechatronics Division triggered by general eco-nomic activity
Percentage of sales revenue generated by the Bio-technology Division surpasses that of the Mecha-tronics Division for the first time in the Group’shistory
Prerequisites in place for a substantial improve-ment in earnings in the Mechatronics Division dueto the successful conclusion of the restructuringmeasures in Industrial Mechatronics
Should the overall economic situation improve inthe second half of 2003, sales revenue and earn-ings increases are expected
Olaf Grothey, Dr. Joachim Kreuzburg and Dr. Guenther Maaz were newly appointed to theExecutive Board
Dr. Joachim Kreuzburg will be the Spokesman ofthe Executive Board starting May 1, 2003
Economic Report
Sector Situation
Sector Situation for the Biotechnology Division
Biotechnology is one of the fastest growing sectorsand can be described as one of the 21st century’stechnologies of the future. Biotechnology companiesuse discoveries from modern biology, chemistryand physics to develop medicines. More than half ofnewly licensed medicines already originate fromthe biotechnology industry. According to informa-tion from Ernst & Young, there were more than4,200 biotechnology firms worldwide in 2001 withcombined sales revenue of some U.S.$35 billion.As biotechnology is a very complex and research-intensive business, the number of profitable bio-technology companies is still very low comparedwith the number of companies as a whole. How-ever, successful products are making it possible formore and more biotechnology companies to oper-ate at a profit.
The sector that is relevant for us as a biotechno-logy supplier covers applications relating to bio-molecular and microbial separation technology,concentration, purification, fermentation and cellculture. Our customers are principally companiesfrom the pharmaceutical, biotechnology, chemical,and food and beverage industries. In the past,capacity bottlenecks arose particularly in the areaof fermentation. As a result, it was possible todiscern a separate economic cycle in this particularsub-area in 2002.
The trends that were already predominant in thepast on the sub-markets that are relevant for uscontinued into 2002. These included the globaliza-tion of the pharmaceutical market, which continuedto make headway, and the associated internationalharmonization of official requirements, wherebythe American regulatory authority, the FDA, is stillthe authoritative body worldwide. At the same time,time to market and yield perspectives are increas-ingly determining the development and productionof pharmaceutical products. The result of this isthat orders are almost exclusively awarded to quali-fied suppliers. The international markets are increas-ingly governed by globally positioned providers for biotechnological process techniques. We believethat, in addition to Sartorius, the global marketrelating to our products is currently dominated bythe providers Millipore and Pall. We consider our-selves to be excellently positioned on this marketin terms of product portfolio and market share.
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: Economic Report | Sector Situation
Sector Situation for the Mechatronics Division
There has been a sharp increase in the economicsignificance of this relatively young sector in thepast few years. Industrial applications are predomi-nantly used in measuring, testing and controlengineering. Due to their high ratio of value added,Mechatronics products are generally allocated tocapital goods. The sector development is thereforeheavily reliant on the overall economic situation,whereby the sub-market that is relevant for us expe-riences the business cycles relatively early on. In2002, the weak economic environment resulted inmany industrial segments exercising investmentrestraint. This negatively impacted the business devel-opment of the entire sector and led to the overallmarket shrinkage. This in turn resulted in increasedferocious competition. However, to some extentthere were positive aspects to the strained overalleconomic situation: service providers benefited fromgreater investment in repairs, maintenance andservicing instead of in new investment.
In the Mechatronics Division, we predominantlyproduce balances, scales and measuring equipmentfor laboratory and industrial applications and alsooffer associated services. The most importantcustomers for our Mechatronics products arefound in the chemicals, pharmaceutical and foodand beverage industries. Our customers also includepublic institutes, such as universities and researchfacilities. According to experts, the market forlaboratory and industrial scales shrank by approxi-mately 10 % worldwide in 2002. Industrial applica-tions were hit particularly hard by the weak deve-lopment of demand. Here, the decline in salesrevenue resulted in rising cost pressure, which notall competitors were able to withstand. Conse-quently, some withdrew from certain market seg-ments over the course of the year. The global mar-ket that is relevant for us is still dominated byMettler-Toledo and Sartorius.
Sector Situation for the Environmental TechnologyDivision
Environmental Technology is a very multi-disciplinedsector. It incorporates the area of energy genera-tion and supply, purification of drinking water andwaste water and the reduction and prevention ofpollution. There are attractive growth opportunitiesin all these areas. These are mainly due to the factthat the global population is growing continuouslyand global resources are in ever shorter supply. As a result of investment restraint, there could bemajor fluctuations in the sector development inthe short and medium-term. However, these will nothave a lasting impact on sector growth in the long-term.
Group Business Development
Sales and Order Intake
In spite of the overall tough macroeconomic envi-ronment, the Sartorius Group successfully continuedalong its growth track in 2002. Consolidated salesrevenue rose 6.1% to ¤476.5 million compared with¤ 449.3 million in the previous year. Adjusted forexchange rate fluctuations, the increase in sales rev-enue was even higher at 8.1 %. The positive salesrevenue development was driven by the Biotechno-logy Division, where we increased sales revenue by21.1% to ¤ 254.6 million from ¤ 210.3 million in2001. In contrast, in the Mechatronics Division, wesuffered a 7.1 % decline in sales revenue to ¤ 221.9million compared with ¤ 239.0 million in the pre-vious year. As expected, we did not generate anysales revenue in the Environmental TechnologyDivision, which is still in the process of being esta-blished.
For the first time in the Group’s history, sales reve-nue in the Biotechnology Division exceeded salesrevenue in the Mechatronics Division viewed overthe year as a whole. The sales revenue developmentdemonstrates how successful the Group’s activelymanaged structural change towards biotechnologyhas been.
Compared with the previous year, order intakedeclined by 4.4 % to ¤ 459.6 million from ¤ 481.0million. In the Biotechnology Division, we posted a slight drop of 1.1 %; this is primarily due to twomajor orders won in the previous year in the fer-mentation business. The Mechatronics Divisionreports a 7.6 % drop in order intake.
20022001
Sales Revenue per Quarter¤ in millions
2nd quarter
3rd quarter
4th quarter
Total
1st quarter 112101
121118
115106
129124
477449
0 100
200
300
400
500
Percentages of Sales Revenue by Divisionin %
Biotechnology
BiotechnologyMechatronics
Mechatronics
1998 1999 2000 2001 2002
3862
3961
4357
4753
5347
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: Economic Report | Group Business Development
Group Sales Revenue Development¤ in millions
2000
2001
1999
1998
2002
200
250
300
350
400
450
500
414
268
245
477
449
Change in Group Sales Revenue 5-year index in %
225
250
200
175
150
125
100
100
19991998
109
2000
169
2001
183
2002
194
Earnings
Following negative half-year earnings, we achieveda considerable improvement in the earnings situa-tion in the second half of the year. The main positiveimpact came from the realignment, flexibilizationand restructuring measures implemented from themid-year point in the Mechatronics Division. As aresult of scaling back general administration costsand restrictive investment management, we re-duced additional costs, which also contributed to animprovement in the net cash flow. In the fourthquarter in particular, we thus achieved exception-ally good earnings. In addition to an encouragingsales revenue development at year-end, the conclu-sion of major projects at BBI and the excellentdevelopment reported by the Bioprocess businessareas in the USA also had a positive impact here. Theflexibilization of working hours, whereby vacationand overtime credits were reduced in line with theorder intake, resulted in an additional impact onearnings. Overall, this resulted in EBIT of ¤ 13.5 mil-lion for the year as a whole. Earnings are thereforeonly slightly down on the figure for the previousyear of ¤ 13.8 million.
In addition to the restructuring measures inIndustrial Mechatronics, which had a ¤ 2.2 millionnegative impact on earnings, costs for the struc-tural expansion at Vivascience amounting to ¤ 9.2million (previous year: ¤3.7 million) also negativelyimpacted earnings. EBIT adjusted for these twocost blocks amounts to ¤ 24.9 million and thereforesurpasses the figure for the previous year of ¤17.5million, an increase of 42.3 %.
At ¤ 14.1 million, the largest contribution to earn-ings came from the Biotechnology Division; theamount in 2001 was ¤ 5.4 million including Envi-ronmental Technology. Despite the considerableearnings increase in the second half of the year, theMechatronics Division only made a minimal con-tribution to earnings of ¤ 0.3 million, down from¤ 8.4 million in the previous year. As scheduled,the loss for the Environmental Technology Divisionamounted to ¤ 0.9 million.
Earnings 2002 2001¤ in mn %* ¤ in mn %*
EBITDA 36.3 7.6 33.9 7.5
EBITA 16.3 3.4 16.2 3.6
EBIT 13.5 2.8 13.8 3.1
Profit before taxes 7.5 1.6 8.5 1.9
Net profit 4.0 0.8 3.0 0.7
Earnings per share (in ¤) 0.23 0.18
* as a % of sales revenue
Share of Earnings (EBIT) by Divisionin %
Biotechnology|EnvironmentalTechnology
Mechatronics
Biotechnology|EnvironmentalTechnologyMechatronics
1999 2000 2001 2002
4357
3664
3961
982
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EBITEBITDA
Group EBITDA and EBIT ¤ in millions
2001
2000
1999
1998
2002 13.536.3
13.833.9
7.525.0
18.931.5
15.125.9
0 10 20 30 40
: Economic Report | Group Business Development
Sartorius Group Research and Development Costs As a % of sales revenue
7.0
8.0
6.0
5.0
4.0
3.0
2.0
1998
1.0
6.9
1999
7.1
2000
6.1
20015.
52002
4.8
Sartorius Group Research and Development Costs ¤ in millions
2000
2001
1999
1998
2002
0
25.5
16.8
Group 2002 2001
R&D costs in millions of ¤ 23.0 24.6
As a % of sales revenue 4.8 5.5
Number of patents & 289 183trademark applications
Registered patents and trademarks 108 149
5 10 15 20 25
19.1
24.6
23.0
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: Economic Report | Group Business Development
Development of Group Staff CostsAs a % of sales revenue
42
43
41
40
39
38
37
1998
41.2
1999
42.9
2000
39.7
2001
38.6
2002
37.6
Development of Group Staff Costs¤ in millions
2000
2001
1999
1998
2002
0 50 100
150
200
164
173
179
115
101
Value Contributed * per Employee ¤ in thousands
75
80
70
65
60
1998
63
1999
61
2000
70
2001
74
2002
79
* Sales revenue – staff costs
Capital Expenditures
In each of the past four financial years, the SartoriusGroup had increased investment significantly. Withthe scheduled completion of the investment in the“Plant 2001” in fiscal 2002, we halted this trend.Over the last few years, the “Plant 2001” projecthad absolutely dominated our investing activities.In addition, we responded to the effects of the over-all weak economic environment in the second halfof fiscal 2002 in the form of restrictive investmentmanagement. As a result, we substantially reducedGroup investment in fixed assets (excluding finan-cial assets) by 55.9 % to ¤ 33.8 million comparedwith the previous year when it stood at ¤ 76.6 mil-lion. Accordingly, the investment rate, at 7.1% ofsales revenue, was significantly lower than the rateof 17.1 % in 2001. In the medium-term, we arestriving to achieve an average investment rate ofbetween 3 % and 5 %.
Investment Rate (Capital Expenditures)As a % of sales revenue
15
20
10
5
0
1998
4.5
1999
6.5
2000
8.4
2001
17.1
2002
7.1
Capital expenditures Depreciation
Capital Expenditures | Depreciation¤ in millions
2001
2000
1999
1998
2002 33.822.7
76.620.1
34.817.5
17.312.6
11.110.8
0 25 50 75
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: Economic Report | Group Business Development
Sartorius GroupProf. Utz Claassen, Executive Board Chairman & Group CEO until April 30, 2003
Dr. Joachim Kreuzburg, Executive Board Spokesman Starting May 1, 2003
Mr. Olaf Grothey, Executive for Labor Relations
Organizational Structure
MechatronicsDivision President and Executive Board member: Dr. Guenther Maaz
BiotechnologyDivision President and Executive Board member: Dr. Eric Janssens
Environmental TechnologyDivision President: Dr. Theo Thijssen
Laboratory MechatronicsIndustrial MechatronicsServiceBearing Technology, formerly known as “Hydrody-namic Bearings Technology”
Vivascience | BiolabBioprocessBBIFood & Beverage
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: Economic Report | Group Business Development
Organization and Administration
After having split the Group into the three divisionsBiotechnology, Mechatronics and EnvironmentalTechnology in 2001, we expanded the organization-al structure with decentralized business areas as of January 1, 2002. We clearly separated these busi-ness areas based on market and product-orientedperspectives. We subgrouped the BiotechnologyDivision into the business areas Vivascience/Biolab,Bioprocess, BBI and Food & Beverage. We subdividedthe Mechatronics Division into the business areasLaboratory Mechatronics, Industrial Mechatronics,Service and Bearing Technology. The EnvironmentalTechnology Division, which is in the process of beingset up, is not subdivided. The respective senior vicepresidents of the business areas bear full responsi-bility for all functions and earnings. Thanks to thenew organizational structure, we are in a positionto respond even more quickly to market and cus-tomer-specific changes. At the same time, we arethereby increasing transparency and reducing thecomplexity of operations.
Together with the introduction of the new organi-zational structure, we have initiated a ManagementInformation System (MIS); this maps the new orga-nizational structure in full. MIS makes it possible toreport all information required for managing theGroup comprehensively and promptly. The systemis the most state-of-the-art version currentlyavailable.
Annual Financial Statements of Sartorius AG
While the consolidated financial statements aredrawn up in accordance with the InternationalAccounting Standards (IAS), we applied the provi-sions of the German Commercial Code, HGB, inthe annual financial statements of Sartorius AGas is stipulated. The balance sheet net profit ofSartorius AG is the key reference value for the pay-ment of dividends to our shareholders.
The sales revenue of Sartorius AG increased 1.9 %in fiscal 2002 to ¤215.6 million, up from ¤211.7million in 2001. Here, Sartorius AG increased salesrevenue outside Germany year-on-year by 3.3 %from ¤ 137.3 million to ¤ 141.9 million. As a resultof the weak economic cycle in Germany, domesticsales revenue fell 0.9% to ¤73.7 million from ¤74.4million in the previous year. Sales revenue in theBiotechnology Division rose 6.9 % to ¤ 96.4 millionfrom ¤ 90.1 million in the previous year, whilesales revenue in the Mechatronics Division fell 1.9%to ¤ 119.3 million from ¤ 121.6 million in 2001. At 55 %, the Mechatronics Division neverthelessgenerated the larger percentage of sales revenue.The ratio of sales revenue generated outside theGroup to the total sales revenue of Sartorius AGamounted to 61%.
EBIT fell 45.0% to ¤ 6.6 million from ¤ 12.0 milliona year ago. These earnings include the lower valua-tion of treasury shares and the dividend incomefrom various subsidiaries. The increase in dividendincome reflects Sartorius AG’s changing status froma pure parent company to a business that increas-ingly resembles a holding company. The growingnumber of shareholdings and the optimization ofour capacity within the European, North Americanand Asian/Pacific markets means that Sartorius AGgenerates considerable earnings contributions fromsubsidiaries, which are then transferred to theparent company.
As borrowing was extended, the financial result fell16.8% to –¤4.3 million from –¤3.7 million in 2001.
At year-end December 31, 2002, Sartorius AGemployed 1,825 staff members. This equates to 27more employees than in the previous year, therebymaking Sartorius AG the largest company withinthe Group. While the number of employees in theBiotechnology Division increased by 3.6 % to 751,the Mechatronics Division posted a slight drop of0.5 % to 1,068 employees. The Environmental Tech-nology Division employs six staff members.
Sartorius AG’s balance sheet total grew 1.6 % to ¤ 306.3 million from ¤ 301.3 million the previousyear. Property, plant and equipment, which consti-tutes 59 % of fixed assets, rose to ¤ 105.0 millionfrom ¤97.3 million in 2001. Following a heavy phaseof investment in 2001, which was shaped by thenew construction of the “Plant 2001,” investment inintangible and tangible assets dropped by 65.5 %to ¤ 22.8 million from ¤ 66.0 million in the previousyear.
Thanks to our stringent working capital manage-ment, Sartorius AG’s inventories fell 10.0% to ¤39.4million from ¤ 43.8 in 2001.
As of the balance sheet date of December 31, 2002,the value of the treasury shares amounted to ¤ 8.4million against ¤ 13.0 million in 2001 due to theirlower valuation.
Following the investment in the “Plant 2001” andthe associated increase in external funding in 2001,liabilities to banks rose once more in fiscal 2002by 9.1 % to ¤ 118.4 million from ¤ 108.6 million inthe previous year. However, it must be taken intoaccount that the Group’s funding is increasinglyconcentrated in Sartorius AG. We have replaced a certain amount of short-term lending with long-term, assisted and therefore low-interest loans. Asof the balance sheet date, the percentage of longand medium-term liabilities to banks to total lia-bilities to banks amounted to 46 %.
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: Economic Report | Group Business Development
The cash flows from operating activities rose 20 %to ¤19.5 million from ¤16.3 million in 2001; theycovered a large percentage of the cash flows frominvesting activities amounting to – ¤ 27.9 millioncompared with – ¤ 73.9 million in 2001. In fiscal2002, 70 % of capital expenditures were financedby the cash flows from operating activities com-pared with 22% the previous year. This led to a 86%reduction in the cash flow from financing activitiesto ¤ 8.1 million from ¤ 57.8 million in 2001.
A further focus in fiscal 2002 was the complete pro-vision of capacity in the “Plant 2001” and the associ-ated optimization of the production processes, fromwhich we are anticipating positive earnings effectsin the Biotechnology Division in future. Based on theassumption of a sector upturn in the second halfof the year, we are also anticipating that earningswill improve in the Mechatronics Division. We areexpecting the Environmental Technology Division topost a slight loss. Overall, we are expecting SartoriusAG to deliver a positive business performance infiscal 2003.
The complete financial statements of Sartorius AGwill be published in the German Federal Gazetteand are filed under HRB 1970 of the GoettingenCommercial Register, Germany. A printed versionof these statements can be separately requestedfrom Sartorius AG.
Income Statement for Sartorius AG (acc. to the German Commercial Code) Summary
¤ in millions 2002 2001
Sales revenue 215.6 211.7
Gross performance 215.0 215.3
EBITDA 22.3 24.4
Depreciation 15.7 12.4
EBIT 6.6 12.0
Financial result –4.3 –3.7
Profit before taxes 2.2 8.3
Net profit for the period 1.7 6.1
A. Fixed assets Dec. 31, 2002 Dec. 31, 2001¤ in mn ¤ in mn
I. Intangible assets 1.8 2.5
II. Property, plant and equipment 105.0 97.3
III. Financial assets 72.6 65.5
179.3 165,.3
B. Current assets
I. Inventories 39.4 43.8
II. Trade and other receivables 74.8 74.9
III. Securities 8.4 13.0
IV. Cash on hand, desposits in banks 3.9 4.2
126.6 135.9
C. Prepaid expenses 0.4 0.1
306.3 301.3
A. Equity Dec. 31, 2002 Dec. 31, 2001¤ in mn ¤ in mn
I. Issued capital 18.7 18.7
II. Capital reserves 101.4 101.4
III. Earnings reserves 16.3 16.3
IV. Retained profits incl. net profit for the period 4.4 7.0
140.8 143.4
B. Special item with an equity portion 0.5 1.0
C. Special item for investment allowances for fixed assets 2.4 0
D. Provisions 29.7 30.8
E. Liabilities 132.9 126.2
306.3 301.3
Assets
Balance Sheet for Sartorius AG (acc. to the German Commercial Code)
Equity and Liabilities
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: Economic Report | Group Business Development
Appropriation of Profits
At the Annual Shareholders' Meeting, the ExecutiveBoard and the Supervisory Board will propose pay-ing the same dividends as fiscal 2001 from SartoriusAG's retained annual net profit of ¤ 4,430,610.73;¤ 0.26 for each preference share and ¤ 0.24 foreach ordinary share. The remaining balance sheetnet profit for Sartorius AG, ¤ 168,932.87, is to becarried forward to the new account.
Value Added in the Sartorius Group
The calculation of value added highlights the in-crease in value achieved by the Sartorius Group inthe social and community business environment.In fiscal 2002, the distributable value added rose to¤ 193.3 million from ¤ 187.9 in 2001. The valueadded rate remained at a relatively constant levelat 40%. At 93%, the employees received the majorportion of distributable value added in relation tostaff costs.
Statement of Value Added for the Group
Source, ¤ in mn 2002 2001
Sales revenue 476.5 449.3
Other income 10.8 10.9
Corporate performance 487.3 460.2
– Purchased materials and services 271.3 252.2
Gross value added 216.0 208.0
– Depreciation 22.7 20.1
Distributable value added 193.3 187.9
Net value added 40 % 41%In % of corporate performance
Utilization, ¤ in mn
Employees (staff costs) 179.3 93 % 173.5 92 %
Public sector (taxes) 3.1 2 % 4.9 3 %
Lenders (interest) 6.4 3 % 5.9 3 %
Shareholders (dividends)* 4.3 2 % 4.3 2 %
Company incl. minority shareholders 0.2 0 % – 0.6 0 %
Distributable value added 193.3 100 % 187.9 100 %
* Dividend for 2002 suggested by the Executive and Supervisory Boards of Sartorius AG
Social Commitment
Sartorius is aware of its social responsibility andpursues various sponsoring and supporting activi-ties in the fields of science, education and sport.In this connection, we sponsor various courses andplaces at the Universities of Goettingen and Claus-thal-Zellerfeld, at the Max-Planck Institute of Experi-mental Medicine in Goettingen and at the “GivatHaviva” Institute in Israel. With the action program“n-21: Schools in Lower Saxony online,” we arehelping to create Internet proficiency in the schoolsin our region. In the form of an endowment, Sartorius supports the “Niedersächsische Institut fürWirtschaftsforschung e.V.,” whose main role is todescribe, analyze and assess the economic develop-ment of Lower Saxony. As part of our sport sponsor-ing, we promoted the young talents of the Goettin-gen basketball team BG Sartorius. We also supportthe “go sports eurotour” program run by the Ger-man Sports Youth in Lower Saxony, which targetsthe prevention of violence and drugs amongyoung people.
Employees
For the year ended December 31, 2002, the num-ber of employees within the Sartorius Group fellmarginally from 3,745 as at December 31, 2002 to3,741. While we have increased the number ofemployees at Sartorius AG by 1.5 % from 1,798 to1,825, the number at the subsidiaries has fallen by 1.6 % to the current level of 1,916, down from1,947 the previous year.
Within the context of the restructuring of theIndustrial Mechatronics business area, we focusedon the higher-margin component business at GWTand shed approximately 45 jobs by adjusting person-nel capacity in the project business. We addition-ally adjusted personnel capacity at Boekels. Thisgoes a long way to explaining the 3.6 % decreasein personnel in the Mechatronics Division to 2,088employees against 2,167 in 2001. At the sametime, we increased the number of employees in theBiotechnology Division by 4.4% to 1,647 comparedwith 1,577 the previous year. The EnvironmentalTechnology Division employs six staff members.
The majority of employees work in Productionand Sales; 44% and 34% respectively. 14% of theworkforce are employed in Administration while 8% of our employees work in the area of Researchand Development.
New Managerial Staff
In the meeting on November 11, 2002, the Supervi-sory Board of Sartorius AG unanimously appointedDr. Joachim Kreuzburg as a member of the ExecutiveBoard with immediate effect. Within the ExecutiveBoard, Dr. Kreuzburg is responsible for the Finance,Controlling and Investor Relations areas. Followingthe departure of the Chairman of the ExecutiveBoard, Prof. Utz Claassen, Dr. Kreuzburg will assumethe position of Spokesman of the Executive Boardwith effect on May 1, 2003. On November 11, 2002,the Supervisory Board of Sartorius AG also unani-mously appointed Dr. Guenther Maaz, the Presidentof the Mechatronics Division, to the ExecutiveBoard with immediate effect.
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: Economic Report | Group Business Development
Group Employees by Functionin %
Administra-tion
Sales
R&D
Production
0 10 20 30 40
14
34
8
44
Sartorius Group Employees 2002 2001 %*
At year-end (Dec. 31) 3,741 3,745 0
of which Sartorius AG 1,825 1,798 2
% of total 49 48
of which at subsidiaries 1,916 1,947 – 2
% of total 51 52
Average annual number 3,778 3,719 2
Staff costs in millions of ¤ 179 173 3
Staff costs per employee 47 47 2in thousands of ¤
Sales revenue per employee 126 121 4in thousands of ¤
Value contributed per employee 79 74 6in thousands of ¤
* Change in %
Business Development for the BiotechnologyDivision
Business development in our Biotechnology Divi-sion is relatively unaffected by economic industrycycles, as the end products manufactured with thehelp of our products, such as medicines and food,represent part of the population’s primary needs.A large percentage of our products are consumergoods. Therefore, there are generally no majorfluctuations in terms of sales revenue and order in-take in this area. In contrast, the fermenters pro-duced by the consolidated company BBI are capitalgoods. For this reason, sales revenue and orderintake can experience greater fluctuations here.
Sales and Order Intake
Thanks to our excellent strategic positioning andthe fact that the industry cycles performed posi-tively in our markets, the Biotechnology Divisionposted strong growth despite the weak economicenvironment as a whole. Sales revenue rose 21.1%to ¤ 254.6 million from ¤ 210.3 million the pre-vious year. After currency adjustments, sales revenueactually rose 23.3 %. In particular, sales revenuewith fermentation systems from the consolidatedcompany BBI rose very considerably. All otherbusiness areas also posted sales revenue increases.
At ¤ 233.6 million, order intake fell 1.1 % comparedwith the particularly high order intake amountingto ¤ 236.3 million as a result of two major ordersin the fermentation business at BBI won in theprevious year. Outside the fermentation business,the Biotechnology Division reported higher orderintake across the board.
Change in Sales Revenue for the Biotechnology Division5-year index in %
250
300
200
150
100
1998
100
1999
113
2000
192
2001
227
2002
274
Sales Revenue Development for the Biotechnology Division¤ in millions
2000
2001
1999
1998
2002
50 100
150
200
250
300
178
210
105
93
255
Biotechnology 2002 2001
¤ in millions
Order intake 233.6 236.3
Sales revenue 254.6 210.3
EBITDA 26.6 16.4
As a % of sales revenue 10.5 7.8
Depreciation 12.5 11.1
EBIT 14.1 5.4
As a % of sales revenue 5.6 2.6
Employees as of Dec. 31 1,647 1,577
Capital expenditures 25.3 63.3
As a % of sales revenue 9.9 30.1
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: Economic Report | Business Development for the Biotechnology Division
Production
The year 2002 was shaped by the start-up of ope-rations at the “Plant 2001.” The BiotechnologyDivision is now based on highly-efficient, flexibleproduction with sufficient capacity for furthergrowth. The organizational and production processeshave been restructured and optimized in the newproduction premises. This resulted in an increase inefficiency throughout the whole of filter produc-tion. In addition, the clean room production that wenow practice means that we are setting new qualitybenchmarks worldwide in the production of filterelements. Production volume was stepped up with-out any disruptions following the commissioningof the new production operation. As a result of thetargeted expansion of our finished-goods ware-house before relocation, we were able to meet thedelivery deadlines agreed with customers, evenduring the start-up phase. We have also extendedproduction capacity for BBI fermenters at the Melsungen site. Our capacity planning takes intoaccount the fact that the investment nature ofthese products is difficult to forecast with regardto future development. We therefore concentratesome capital expenditures on expanding our coreexpertise, namely the development of controlsystems.
In April 2002, BBI concluded a far-reaching cooper-ation agreement with the process systems manu-facturer and engineering partner Diessel GmbH &Co. in Hildesheim, Germany. The objective of thealliance between BBI and Diessel is to accommodatethe enormous global demand for fermentationsystems by expanding the companies’ sales, engi-neering and manufacturing capacities, which theyhave in common. The cooperation between the twocompanies also perfectly complements our prod-uct portfolio. In future, the range of products willinclude fermentation systems with a volume ofbetween 0.5 and 30,000 liters.
Earnings
In fiscal 2002, the Biotechnology Division made a substantial contribution to Group earnings. Divi-sional earnings growth was exceptionally strong inrelation to sales revenue, with EBIT increasing sig-nificantly by 162.0% to ¤ 14.1 million from ¤ 5.4million the previous year. Consequently, the EBITmargin increased from 2.6 % to 5.6 %. In additionto BBI, the major earnings contribution came fromthe Bioprocess business area. The positive effectsof the relocation to the new “Plant 2001” were felthere for the first time. We continuously optimizedthe production processes over the course of theyear, thereby achieving significant cost cuts. Thesewill also have an increasingly positive impact onearnings over the coming financial years.
The start-up phase of the “Plant 2001” and theongoing structural expansion at Vivascience nega-tively impacted earnings in the first few months.The effect on earnings resulting from the structuralexpansion totaled ¤ 9.2 million. Earnings adjustedfor the costs of the structural expansion thereforeamount to ¤ 23.3 million; this corresponds to anincrease of 156.0 % against the previous year’sfigure of ¤ 9.1 million.
Products
We generate a large percentage of sales revenue inthe Bioprocess business area with standard prod-ucts. In fiscal 2002, we did not carry out any majormodifications to these products in line with theneeds of the market. The Sartopore 2 product rangehas been exceptionally well received since its mar-ket launch. This is mainly due to the high level ofchemical compatibility and the sterile product vari-ants. The products can be used directly by customersfor a wide range of purposes without complex pre-parations. With Sartoclear, Sartocell and Sartofluor150, we launched three new product ranges in2002 that contribute towards rounding off our prod-uct portfolio and that also open up synergy poten-tial to some extent with our fermentation business.These product innovations mean that we are asignificant step closer to achieving our objective ofpositioning ourselves as a complete solution pro-vider for biotechnological production processes.
In the Food & Beverage business area, we achievedextraordinary success with our PS (polyether sul-fone) range of filters as well as posting solid growthwith our standard products. These filters have arelatively long lifetime and therefore represent ahigh-quality and, at the same time, inexpensivealternative for our customers. The success of thisproduct range, especially in wine and sparklingwine filtration, is not only highlighted by the factthat the growth rates far outstrip market growthbut also by the large number of new customers,who provide us with additional cross-sellingpotential.
We have greatly extended the range of Vivasciencekits for protein development. Our “Membrane Ad-sorber” technology on which these kits are basedplayed a decisive role in this. The close cooperationwith reference customers and scientific institutessecures us a high success rate when developingnew products.
In fiscal 2002, we carried out two major orders aswell as various other high-volume orders in thefermentation business. In addition to the develop-ment and construction of a large-scale fermenter,taking the respective customer-specific requirementsinto account, orders of this nature also regularlyinclude assembling the product at the customer’ssite. With our standard fermenters, we won thecoveted “iF design award 2003” from InternationalForum Design in Hanover with the BIOSTAT® B-DCUmulti-fermenter system, launched in 2002.
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: Economic Report | Business Development for the Biotechnology Division
Procurement
In fiscal 2002, we rigorously pursued our procure-ment policy geared towards securing materialrequirements as economically as possible and on asustained basis. We concluded new supply agree-ments with a large number of strategic suppliersthat considerably boost the uninterrupted, reliablesupply of materials. In order to guarantee that prod-ucts continue to be delivered in perfect condition,we generally aim at working very closely with oursuppliers starting at the product developmentstage. In addition, we are increasingly integratingour suppliers fully in our quality managementsystem to ensure the high quality of our productsacross the entire value-added chain.
We have at least two qualified suppliers for allstrategically important materials. In this way we canavoid being over-reliant on one supplier. In theevent that this is, on occasion, not possible, we holdappropriate back-up stock in reserve for criticalcommodities and materials. In spite of the increasein the volume of sales revenue, the average inven-tories were maintained at a low level. Overall, pur-chase prices remained constant.
Marketing
The focus of our marketing activities was on strength-ening our key account management. By conclud-ing long-running supply agreements with our majorcustomers, we are safeguarding our future salesrevenue potential. In our customers’ pharmaceuticalproduction processes in particular, the productsused are validated from development to the pre-clinical phase through to the clinical phases andtherefore cannot be easily interchanged. Supplier-customer relationships are therefore generallylong-term. The demands on the part of our cus-tomers in relation to quality, adherence to dead-lines, speed and scope of service continued to growin fiscal 2002. Our major international customersexpect complex process solutions and competentadvice on the spot, regardless of where their manu-facturing site is located. We therefore further ex-panded the range of services we offer. We no longeronly offer our customers our own products; wenow offer complete problem solutions includingthe necessary engineering, documentation, vali-dation and consultation services. We have used thehigher expectations of our customers to our ownadvantage and have gained additional market share,in particular, for filter elements.
To meet the high demands of the North Americanmarket and use the huge market potential there, we have transferred certain segments of productmanagement from Goettingen to New York. As aresult, it is now possible for us to respond quicklyand specifically to future customer requirementsand emerging market changes on the spot, withthe decentralized Competence Center retaining global responsibility.
Our “Plant 2001” represents an important market-ing tool. It has been repeatedly visited and auditedby the most important pharmaceutical producersin the world. In each and every case, their verdictwas positive. The extraordinarily high productquality, which is made possible by our clean roomproduction, is a convincing argument when con-cluding supply agreements.
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: Economic Report | Business Development for the Biotechnology Division
Research and Development
In 2002, we concentrated our research and develop-ment activities on developing new products andoptimizing and validating manufacturing processesin the new “Plant 2001.” In conjunction with theproduction departments, we achieved decisive im-provements in processes and product quality. Wereduced expenses incurred by the BiotechnologyDivision for research and development by 14% to ¤ 8.6 million from ¤ 9.9 million in 2001. This dropis partly due to the increasing capitalization ofresearch and development services.
In the production area, we set up pilot manufactur-ing, the purpose of which is to produce prototypesfor new products for use in customer tests underproduction conditions. The intention behind thissetup is to significantly accelerate the transfer ofinnovative products to production once they arereleased, and considerably cut the time it takes fornewly developed products to be launched on themarket.
By conducting major projects in fermentation, wemade considerable progress in developing conceptsof modular systems and central process control formonitoring complete production lines. At the sametime, we demonstrated the successful applicationof these systems. As a result, the prerequisites forthe successful completion of similar projects infuture have improved considerably.
For the development of software, we also increas-ingly employed capacity from subsidiaries in Indiaand the Philippines, which are able to developnew software products competently, quickly andinexpensively.
In terms of developments relating to future pro-jects, we are concentrating at Vivascience on morekits for the proteomics market. At BBI the focus is on complex systems of a disposable nature for cellculture technology and at Sartorius AG we arefocusing on special membranes for fuel cells.
Capital Expenditures
At 75 %, the Biotechnology Division once more hadthe largest percentage of the total capital expen-ditures of the Sartorius Group in fiscal 2002. How-ever, at ¤ 25.3 million, capital expenditures in thisdivision clearly remained below the previous year’slevel of ¤ 63.3 million (– 60.0 %). At 9.9 %, the in-vestment rate was also considerably lower than in2001 when it amounted to 30.1 %. Like the yearsbefore it, fiscal 2002 was shaped by the capital ex-penditures in the “Plant 2001.” As it is now com-plete, these capital expenditures no longer apply.As is stipulated, we capitalized the costs of some ¤ 2 million for the validation work necessary in the“Plant 2001” after its completion. In addition, themain investment in the Biotechnology Division infiscal 2002 was in strengthening and consolidatingthe structures at BBI and Vivascience. If the develop-ment of business remains positive, this will repre-sent a focus of our investing activities in future.
Biotechnology 2002 2001
R&D costs in millions of ¤ 8.6 9.9As a % of sales revenue 3.4 4.7
Number of patent & 201 101trademark applications
Number of patents & trademarks 52 92
Business Development for the MechatronicsDivision
Fiscal 2002 was a tough year for the MechatronicsDivision, which is traditionally more cyclically sensi-tive than the Biotechnology Division. The knock-on effects of the weak economic cycle were notice-ably felt in Industrial Mechatronics in particular.This is reflected in declining sales revenue andorder intake.
Sales and Order Intake
Year-on-year, order intake fell 7.6% to ¤ 226.0 mil-lion from ¤ 244.7 million a year ago. Divisional salesrevenue declined accordingly by 7.1 % to ¤ 221.9million from ¤ 239.0 in 2001. The decline in salesrevenue adjusted for exchange rate fluctuations is5.2 % in the Mechatronics Division. In view of thecontinuing difficult cyclical environment, it wasalready clear early on in the year that we would notachieve our ambitious sales revenue targets in thisDivision.
Although services support our products through-out their entire life cycle and the Service businessarea is therefore largely reliant on the developmentof business in the Laboratory Mechatronics andIndustrial Mechatronics business areas, we generatedencouraging sales revenue growth here. This is be-cause our customers increasingly invested in main-tenance and repair work. In the Bearing Techno-logy business area, the development of business wasrelatively robust as shown by the moderate salesrevenue growth. However, even combined this wasnot sufficient to compensate for the drop in salesrevenue at a divisional level as we suffered somesubstantial declines in sales revenue in both theLaboratory Mechatronics and Industrial Mechatronicsareas. In addition to lower sales revenue volume, a trend towards cheaper products was also respon-sible for the decline in sales revenue. In EasternEurope and Asia, we exceeded the expected salesfigures. However, we predominantly sold productsonly at the lower end and middle of the price scaledue to the way in which demand is structured inthese regions. In Western Europe and in the USA inparticular, it became clear that our planned unitsales figures could not be achieved.
Mechatronics 2002 2001
¤ in millions
Order intake 226.0 244.7
Sales revenue 221.9 239.0
EBITDA 10.5 17.5
As a % of sales revenue 4.7 7.3
Depreciation 10.2 9.0
EBIT 0.3 8.4
As a % of sales revenue 0.1 3.5
Employees as of Dec. 31 2,088 2,167
Capital expenditures 8.5 13.4
As a % of sales revenue 3.8 5.6
Change in Sales Revenue for the Mechatronics Division5-year index in %
150
175
125
100
75
1998
100
1999
107
2000
155
2001
157
2002
146
Sales Revenue Development for the Mechatronics Division¤ in millions
2000
2001
1999
1998
2002
125
150
175
200
225
250
236
239
163
152
222
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: Economic Report | Business Development for the Mechatronics Division
Earnings
As a result of the moderate sales revenue develop-ment, the trend of earnings in the MechatronicsDivision was also unsatisfactory. After the knock-oneffects of the weak economic cycle were alreadynoticeably felt at the start of the year, our manage-ment adjusted production capacity, making it moreflexible and introducing extensive restructuringmeasures in Industrial Mechatronics.
The flexibilization measures mainly comprised areduction in work hours for a large number ofemployees within the Mechatronics Division atSartorius AG. In the course of the restructuringmeasures concluded at GWT, we focused on thehigher-margin component business and simulta-neously adjusted personnel capacity in the projectbusiness by shedding 45 jobs. We also adjustedpersonnel capacity at Boekels while simultaneouslyincreasing productivity.
Initially, these alignment and restructuring mea-sures negatively impacted half-year earnings by ¤2.2million. However, in the second half of the year,these measures eased the pressure on the cost sideconsiderably. As early as the third quarter, divisio-nal earnings once more reached break-even on aquarterly basis. We continued the positive trendof the third quarter into the fourth quarter. In addi-tion, entries in the annual financial statements inconnection with the reduction in vacation and flex-time credits had a positive impact. As a result, weagain concluded the fourth quarter with a positiveresult. This meant that we completely balancedthe losses accrued in the first six months of the year.Full-year EBIT for the Mechatronics Divisionamounts to ¤ 0.3 million against ¤ 8.4 million inthe previous year.
Production
Our production capacity is set up so that theGroup-wide demand for weighing systems andweigh cells is predominantly met in Goettingen,where we achieve the greatest vertical integration.We achieve global flexibility by virtue of the factthat we focus on locally based factories within thecontext of our triad strategy. With our own pro-duction facilities in Denver, Goettingen and Peking,Sartorius is represented in the key economicregions in the world, namely North America, Europeand Asia / Pacific. We are able to utilize regionalstrengths at these locations and take national andcultural characteristics of the respective marketsinto account when producing our products.
We standardized our production and reduced thenumber of components that are incorporated intoour products. By simplifying production, we haveensured that costs will be reduced in relation to theinspection of incoming shipments in future andhave made it possible to save warehousing space.In addition, we now increasingly purchase preas-sembled modules instead of individual components.The purchase volume per article has thereforeincreased. Consequently, we reduced the unit pur-chase prices and steadily cut internal process costs.In the Industrial Mechatronics Division, we adoptedfar-reaching restructuring measures. Here, wecompletely restructured the majority of productionprocesses at the Hamburg and Aachen sites anddecreased the number of process stages. The consoli-dated company GWT has disposed of its projectbusiness. The focus is now on the higher-margincomponent business. Overall, these measures result-ed in a considerable improvement in effectivenessand efficiency.
In fiscal 2002, the corporate subdivision, the Sarto-rius manufacturing unit, in which we also produceelectronic components for external customers, wasawarded the special prize “Contract Manufacturerof the Year” by Fachverband Elektronik-Designe. V., by the Syska consulting firm and the Germanelectronics journal “Elektronikpraxis.”
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: Economic Report | Business Development for the Mechatronics Division
Products
In Laboratory Mechatronics, we launched a numberof new ranges of balances in line with the trendtowards standardized, easy-to-use equipment. Withthe launch of the new series of Pinnacle labora-tory balances, we established the Denver Instrumentbrand at the high end of the market. Despite theirease of use, the majority of our balances boast spe-cial functions such as extended measuring, count-ing and weighing applications all the way to auto-matic and documented calibration of the balances.We achieved excellent sales success in the course ofthe launch of the new standard MA45 moistureanalyzer and the SpeedCal multi-channel pipettecalibration system, a joint development betweenSartorius and the Fraunhofer Institute. Furthermore,with the CP series, we launched the most exten-sive and complete range of balances currently onthe market.
The launch of the new Combics product range wasthe focus of the Industrial Mechatronics Division.This was the first time that Sartorius had launcheda product range that represents a complete systemof rugged, flexibly-configured industrial scales. TheCombics range meets the trend towards tailor-madeindividual solutions, as each customer can configurehis own product so that it completely matches hisrequirements.
In addition to traditional repairs and servicing, weincreasingly offered services in our technical Servicearea that ensure that products are state-of-the-art.Particular importance was attached to servicesthat enable the customer to fulfill conditions re-lating to quality assurance and production reliability. In the case of our customers from the food andpharmaceutical branches in particular, demandson the repeatability and documentation capabilityof weighing equipment are rising continuously.Thanks to our metrological know-how and expe-rience, we are in a position to meet these require-ments for our customers.
In the Bearing Technology business area, we pre-dominantly supplied the market with our successfulproduct portfolio. We used our design capacity torealize customer-specific innovations.
Procurement
As a result of the decline in sales revenue, the pur-chase volume in the Mechatronics Division fellaccordingly in fiscal 2002. We now accomplish themajority of our purchase volume with preferredsuppliers, with whom we have concluded targetagreements with respect to adherence to deadlinesand quality key ratios. The standardization of ourproducts makes it possible for us to achieve lowerpurchase prices due to larger delivery quantitiesfrom each supplier. On average, we negotiated pricecuts from our suppliers for purchased goods andproducts, thereby reducing costs on the procurementside. Restructured supply agreements and improve-ments to the logistics processes contributed to thefact that we reduced purchase and transport costsslightly and decreased the quantity of purchasedparts in stock against the previous year.
Marketing
We currently differentiate our laboratory weighingtechnology products according to three qualitycategories. In the low-end range, in particular, weendeavor in this context to tap into new fields ofapplication, for example in consumer-related areas.For this reason, we have redefined the productrange for our low-end ACCULAB brand. Within thescope of implementing our multi-brand strategyfor the “Denver Instrument” brand, we had a typicalbrand design created, and unveiled this at the“Analytica 2002” trade show.
Laboratory automation represents an importantgrowth segment for us. We are already successfullyrepresented here in the market with our initialproducts. We took an important step in expandingthese activities with the presentation of a fully-automated weighing robot at the “Analytica 2002.”
In conjunction with the corresponding productdevelopments, we regraded the laboratory weighingproduct portfolio in fiscal 2002 and refocused ittowards the sales channels “direct sales” and “Labo-ratory /Balance Dealers.” We continued to expandour OEM business consistently by further standard-izing the range of weigh cells and electronic parts.
In industrial weighing technology, we intend tomake greater use of the synergy potential betweenSartorius, Boekels and GWT with a range of mea-sures. Our plan is to gradually unify our market pre-sence. In future, we intend to increasingly offerall three Industrial Mechatronics brands bundledfrom a single source.
With the launch of the customer magazine “Weigh-Ahead,” we created a communication media thatstrengthens customer contact, thereby increasingcustomer loyalty.
Capital Expenditures
The Mechatronics Division consumed 25 % of totalcapital expenditure; at ¤ 8.5 million, the amountinvested in this Division was considerably less thanthe ¤ 13.4 million the previous year. The invest-ment rate fell from 5.6 % in 2001 to 3.8 % in 2002.The reasons for this substantial decline are theexceptionally high level of capital expenditures inthe previous year and also the problematic generaleconomic conditions. Our reaction to these negativefactors was to initiate restrictive investmentmanagement.
One of the areas that investing activities focused onwas the optimization of logistics processes at theGoettingen site. Considerable improvements wereachieved here by reorganizing the usage of spaceconcept. This was made possible by relocating majorparts of the Biotechnology Division to the “Plant2001.” We will continue to invest in this area infiscal 2003.
We also progressed as planned with the expansionof the site in China in fiscal 2002, within the con-text of our triad strategy. We also created additionalcapacity by building a new plant annex, whichallows us to meet customers’ requirements andsteadily growing demand in the Asian growthmarket.
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: Economic Report | Business Development for the Mechatronics Division
Research and Development
In 2002, we spent ¤13.5 million on research and de-velopment services in the Mechatronics Division. R & D expenditure was therefore 7.5 % less than the¤ 14.6 million in 2001. The reduction in workinghours for the majority of employees in the R&D areaof Sartorius AG in the second half of 2002 wasone of the factors that contributed towards the re-duction of costs. In Laboratory Mechatronics, wecontinued to make progress in the development ofnew products. For example, we developed the CP2Pmicrobalance through to serial production readiness.In this balance, µg resolution has been implement-ed using monolithic technology for the first time.The CP2P is one of the products in the CP series,which thereby represents the most extensive andcomplete range of balances on the market. Wealso reduced the complexity of our products withregard to the large number of subassemblies.
The R & D performance in Industrial Mechatronicswas shaped by the ongoing development of therange of Combics industrial scales. In 2003, we willmodify this range of scales to meet the require-ments of the American market and fulfill additionalcustomer-specific requests.
Under the project name “INCASE,” we are develop-ing an intelligent sensor system to weigh anddetermine the position of car passengers in coopera-tion with partners from the automotive industry.There has already been a great deal of interest in“INCASE” from the automotive industry at varioustrade shows. This is because it will be mandatory toincorporate such systems in new vehicles in theUSA from the 2005 model year onwards.
Mechatronics 2002 2001
R&D costs in millions of ¤ 13.5 14.6As a % of sales revenue 6.1 6.1
Number of patent & 88 82trademark applications
Registered patents & trademarks 56 57
Business Development for the EnvironmentalTechnology Division
Over the course of the year, we progressed with theexpansion of the Environmental Technology Divisionset up at the start of 2002. The objective of thisDivision is to tap long-term future potential by usingthe know-how available within the company withsimultaneous investment in R & D projects that arebased specifically on this. Sartorius already has abroad spectrum of methods for separating impuri-ties from liquids and gases. We are using thisknowledge and experience to develop the Environ-mental Technology Division in close cooperationwith the established areas of business. We use theinfrastructure of the Biotechnology Division to doso. In this way, we keep start-up costs to a mini-mum.
At the present moment, an interdisciplinary task-force is developing the product portfolio and refer-ence applications. The focus of the developmentactivities is on the analysis of liquids and gases andthe purification of process media with the objec-tive of recycling. Sartorius also dedicates a greatdeal of time and effort to fuel cell technology.Membrane technology manufacturing expertise isadvantageous here. In conjunction with scientificand industrial partners, we are developing mem-brane sandwiches for fuel cells.
As scheduled, the Division did not achieve anysales revenue in fiscal 2002. The loss of ¤ 0.9 mil-lion in terms of EBIT is in line with our internalbudget targets.
Business Development by Region
While the percentage of consolidated sales revenuegenerated in Europe increased in fiscal 2002 againstthe previous year, the share generated by NorthAmerica and Asia / Pacific fell slightly. The ratio ofsales revenue generated in Europe to consolidatedsales revenue is 58 % compared with 54 % in theprevious year.
The regional distribution of EBIT also shows changesrelative to the previous year. Thanks to a consider-able increasing earnings, North America made a sub-stantial contribution to total earnings in fiscal 2002.
Share of Sales Revenue Contributed by Region in %
Other markets
Other marketsAsia | PacificNorth AmericaEurope
Asia | Pacific
North America
Europe
1998 1999 2000 2001 2002
592065
5112361
5152753
5172454
3162258
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: Economic Report | Business Development for the Environment Technology Division | Regions
Business Development in Europe
In 2002, sales revenue in Europe was ¤277.9 million.That corresponds to a 15 % increase against theprevious year’s figure of ¤ 240.9 million. This highlyencouraging development in Europe, in spite ofthe economically tough business environment, mustbe seen on a differentiated basis with regard tothe Biotechnology and Mechatronics Divisions. WhileMechatronics, and Industrial Mechatronics in par-ticular, suffered sales revenue losses, the Biotechno-logy Division reported strong sales revenue growthin most European countries. The fermentation busi-ness of BBI, the consolidated company based inGermany, contributed the decisive share of the con-siderable increase in sales revenue posted by theBiotechnology Division. EBIT in Europe fell from ¤3.1million to – ¤ 0.6 million. The weak business devel-opment within the Mechatronics Division had aparticularly negative impact. We allocated the fullamount of the negative impacts on earnings thatarose in conjunction with the restructuring inIndustrial Mechatronics to Europe.
In 2002, we implemented organizational restruc-turing measures at the European consolidated com-panies and partly switched to supplying our cus-tomers directly through Sartorius AG. Furthermore,we have decreased the inventories at the Europeanconsolidated companies and reduced the rate ofturnover for receivables.
The number of employees in Europe dropped slightlyby 2 % to 2,857 against 2,901 in the previous year.This is primarily due to the personnel cutback atthe Industrial Mechatronics companies (GWT andBoekels).
In fiscal 2003, we are expecting a difficult cyclicalenvironment in Europe and believe that the growthtrend will continue. At the same time, the contin-uation of the reorganization initiated is intendedto help improve the earnings situation.
Europe
¤ in millions 2002 2001
Sales according to customer 277.9 240.9
Sales according to company location 327.7 294.4
EBITDA 18.6 19.5
As a % of sales revenue * 5.7 6.6
Depreciation 19.2 16.4
EBIT – 0.6 3.1
As a % of sales revenue * – 0.2 1.1
Employees as of Dec. 31 2,857 2,901
Capital expenditures 29.3 73.8
As a % of sales revenue * 8.9 25.1
R&D costs 21.8 23.3
As a % of sales revenue * 6.7 7.9
*according to company location
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: Economic Report | Business Development by Region
Change in Sales Revenue in Europe5-year index in %
150
175
125
100
75
1998
100
1999
101
2000
137
2001
150
2002
173
Sales Revenue Development in Europe¤ in millions
2000
2001
1999
1998
2002
150
175
200
225
250
275
220
241
163
161
278
Business Development in North America
In 2002, sales revenue in North America fell 4 % to¤ 105.2 million against ¤ 110.0 million in 2001.However, EBIT for the region rose considerably by83% to ¤10.6 million compared with ¤5.8 millionin 2001 and this was in spite of the tough economicenvironment and political uncertainty with regardto the war in Iraq. The consolidated company Sarto-rius Corporation thus generated its best earningsto date. These record earnings are above all due toan increase in sales revenue in the Bioprocessbusiness area of more than 13 % with a simulta-neous improvement in the product mix. Furthermore,Sartorius North America streamlined organizationat all levels of the Mechatronics Division and out-sourced production of the “ACCULAB” product lineto the production site in Denver. Consequently,we only produce Mechatronics products at one sitein the USA.
As of December 31, 2002, we employed a total of437 staff members in North America against 436 inthe previous year. For 2003, we are planning furthergrowth in the region. On the condition of corre-sponding economic growth, we are expecting salesrevenue to climb in both divisions.
We intend to improve the infrastructure of ourNorth American consolidated company in order tomeet the change in the sector environment on theMechatronics markets and to continue to increasethe sales and earnings power of the company.
North America
¤ in millions 2002 2001
Sales according to customer 105.2 110.0
Sales according to company location 103.6 106.3
EBITDA 13.4 9.0
As a % of sales revenue * 12.9 8.4
Depreciation 2.8 3.2
EBIT 10.6 5.8
As a % of sales revenue * 10.2 5.5
Employees as of Dec. 31 437 436
Capital expenditures 2.4 1.4
As a % of sales revenue * 2.3 1.3
R&D costs 1.2 1.3
As a % of sales revenue * 1.1 1.2
*according to company location
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: Economic Report | Business Development by Region
Change in Sales Revenue in North America5-year index in %
200
225
175
150
125
1998
100
100
1999
125
2000
222
2001
221
2002
211
Sales Revenue Development in North America¤ in millions
2000
2001
1999
1998
2002
0 25 50 75 100
125
111
110
62
50
105
Business Development in Asia | Pacific
2002 was a year of contradictory developments inthe Asia / Pacific area. On the one hand, there wasonce more evidence of a positive developmenttowards sustained economic growth in most coun-tries following the 1997 economic crisis. On theother, the regions are suffering from the decline inAmerican demand, the ongoing weak Japaneseeconomy and the critical situation in the Gulf andin North Korea.
In 2002, sales revenue for Sartorius in this regionwas ¤ 77.6 million and was therefore almost un-changed relative to the previous year’s figure of ¤ 78.0 million. As a result of the way in whichdemand is structured, we are still predominantlyselling balances and scales at the lower end ofthe price segment in this region.
EBIT in the Asia /Pacific region fell 28 % to ¤ 3.5million from ¤ 4.9 in 2001. This is in part due to thecontinued unsatisfactory trend of earnings exhi-bited by our Japanese consolidated company. How-ever, it is also in part due to higher structuralexpansion costs compared with the previous yearas a result of the continued expansion of our Chinese consolidated company. In addition, specialprojects at Sartorius India, which had a positiveimpact on earnings in the previous year, were nolonger applicable.
Asia | Pacific
¤ in millions 2002 2001
Sales according to customer 77.6 78.0
Sales according to company location 45.2 48.6
EBITDA 4.3 5.5
As a % of sales revenue * 9.5 11.3
Depreciation 0.7 0.6
EBIT 3.5 4.9
As a % of sales revenue * 7.8 10.2
Employees as of Dec. 31 447 408
Capital expenditures 2.1 1.5
As a % of sales revenue * 4.7 3.0
R&D costs 0.0 0.0
As a % of sales revenue * 0.0 0.0
*according to company location
The number of employees in the region amountsto 447. This corresponds to a 10 % increase overthe previous year when 408 staff members wereemployed. This planned increase in the number ofemployees is largely due to the annex to extendour plant in China. We linked the Chinese site upto the Sartorius SAP R/3 network in 2002.
We view China and India as important markets ofthe future. In fiscal 2002, the Chinese consolidatedcompany BSISL was once more awarded the con-tract to supply monolithic weighing systems for aproject financed by the World Bank to reform thehigher training and educational system.
For 2003, we are expecting sales revenue growthto continue and earnings to improve in most coun-tries in this region.
Business Development in “Other Markets”
In the other markets, we suffered declines in salesrevenues at a comparatively low absolute leveloverall. Nevertheless, there were also gratifying de-velopments here. For example, we managed tomaintain sales revenue at almost the level of theprevious year despite the economic, political andsocial problems in South America.
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: Economic Report | Business Development by Region
Change in Sales Revenue in Asia | Pacific5-year index in %
300
350
250
200
150
1998
100
100
1999
129
2000
284
2001
350
2002
348
Sales Revenue Development in Asia | Pacific¤ in millions
2000
2001
1999
1998
2002
0 25 50 75 100
63
78
29
22
78
Net Worth and Financial Position
Consolidated Balance Sheet
For the year ended December 31, 2002, the balancesheet total of the Sartorius Group fell slightly from¤ 408.6 million to ¤ 398.1 million. Tangible assetsincreased again by 4.7 % to ¤ 144.2 million from ¤137.7 million in the previous year. Improved work-ing capital management led to a reduction in cur-rent assets from ¤ 217.2 million to ¤ 197.9 million.We improved our working capital key ratios relat-ing to the rate of turnover for inventories andreceivables to 53 and 73 days, respectively, against61 and 83 days in the previous year.
According to IAS, treasury shares that we have ac-quired through our stock repurchase program arefully deducted from equity and therefore not report-ed under current assets. At year-end December 31,2002, our equity ratio was 33 % compared with 34 % in the previous year. We are endeavoring toincrease this balance sheet ratio in future by im-proving earnings. As a result of the improvementin the net profit in fiscal 2002, the return onequity climbed from 2.1 % to 2.9 %.
The key ratio ROA, which we define as a value-oriented management variable within the Group anduse to measure the operating business success inrelation to deployed capital, fell from 5.8% to 5.2%.The drop is mainly due to the considerable declinein earnings in the Mechatronics Division and thesharp increase in average net operating assets as aresult of building a new plant. Please refer to thesection “The Sartorius Shares” in the front part ofthe Annual Report for more details on the calcu-lation method.
20022001
Balance Sheet Ratiosin %
Current and other assets
Equity and liabilities
Equity
Liabilities
Assets
Fixed assets 4541
5559
3334
6766
20 30 40 50 60 70
20022001
Balance Sheet Ratios (Maturity)in %
Assets
Current and other assets
Fixed assets 4541
5559
0 20 40 60 80
Short-term capital
Long-term capital 5546
4554
Equity and liabilities
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: Economic Report | Net Worth and Financial Position
2002 2001
Return on equity
Net profit
Equity*
ROA
EBITA
Operating assets*
Rate of inventory turnover(in days)
Inventories
Sales revenue
Rate of turnover for receivables(in days)
Trade receivables
Sales revenue
* Annual average
2.9 % 2.1%
5.2 % 5.8%
x 360 53 61
x 360 73 83
Cash Flow Statement
¤ in millions 2002 2001
+ Cash earnings acc. to the DVFA/SG 34.6 28.3
+/– Cash flow from working capital – 1.0 –2.7
= Cash flows 33.7 25.6from operating activities
+/– Cash flows – 33.0 –74.6from investing activities
= Net cash from operating activities 0.6 –49.1
+/– Cash flows – 1.6 49.6from financing activities
Cash and cash equivalents 14.0 18.0
Gross debts owed to banks 147.1 145.2
Net debts owed to banks 133.1 127.2
Cash Flow
After two years of high payments and associatedhighly negative net cash flow of – ¤ 63.1 million in2000 and – ¤ 49.1 million in 2001, we generatedslightly positive net cash flow of ¤ 0.6 million againin fiscal 2002 for the first time. Cash earningsaccording to the DVFA/SG rose from ¤ 28.3 millionto ¤ 34.6 million. As a result of a strong reductionin receivables and increased cash earnings, the cashflows from operating activities increased by 31.7%to ¤ 33.7 million from ¤ 25.6 million in the previ-ous year.
Internal funding power – calculated as the ratioof cash flows from operating activities to cash flowsfrom investing activities – rose considerably from0.3 to 1.0 due in part to lower capital expenditures.As a result of the minimal increase in gross debtsowed to banks in fiscal 2002, the cash flows fromfinancing activities amount to – ¤ 1.6 millionagainst ¤ 49.6 million in 2001.
As a result of the Group being increasingly orient-ed towards profitability, we intend to generategreater cash flow, augment our financial strengthand consequently reduce gross debts owed tobanks in the medium-term.
Financing | Treasury
The financing of the Sartorius Group is managedcentrally by the parent company. Within the Group,Sartorius AG Treasury coordinates the foreign ex-change, cash and interest rate management in closecooperation with the subsidiaries.
As of the balance sheet date, Sartorius AG accountsfor 81% of the Group’s lending liabilities comparedwith 75% in the previous year. This is mainly due tothe funding of the “Plant 2001” and the increas-ingly centralized liquidity management. The creditlines drawn upon by Sartorius companies are largelysecured by means of sureties and guaranties by theparent company within the agreed Group creditlines. The percentage of long- and medium-termliabilities to banks rose from 9 % to 38 %. Theseliabilities are predominantly low-interest develop-ment loans. Long-term loans are subject to finan-cial covenants and the principle of equal treatmentof banks, which we adhere to with respect to allbanks. We also utilize the recent favorable interestrate developments on the money and capital mar-kets in Japan, the USA and Switzerland for thepurpose of financing.
At year-end December 31, 2002, gross debts owedto banks amounted to ¤ 147.1 million and weretherefore almost constant compared with the previ-ous year’s figure of ¤ 145.2 million. Net debts ofthe Sartorius Group totaled ¤ 133.1 million against¤127.2 million in 2001. The net debt-to-cash-earn-ings ratio performed positively, moving from 4.5 to3.8. Gearing, the ratio of net debts to equity, onlyincreased slightly in the reporting period from 0.9to 1.0. However, in the medium-term, we are aim-ing to reduce this ratio by increasing our cash flow.Interest coverage, the ratio from cash flow-relatedearnings before interest, taxes, depreciation andamortization (EBITDA) and interest expenses, re-mained at a relatively constant level of 5.6 in fiscal2002.
The euro zone represents a key sales market forthe Sartorius Group, which fundamentally reducesour currency risk. However, as a result of the grow-ing international nature of our business and theimplementation of a global production network, theGroup also received cash flow in various foreigncurrencies. Offsetting foreign currency paymentflows within the Group thereby reduces our grosscurrency exposure. We hedge the resulting net cur-rency exposure for a period of less than one yearagainst potential exchange rate fluctuations cen-trally by means of the macro-hedge approach viaSartorius AG. For this purpose, we use derivativefinancial instruments, generally based on com-modities and service transactions. Contractual part-ners are German banks whose credit standing andrating are regularly checked.
For the purpose of optimal fund allocation andliquidity management within the Group, we havealso continued to expand our cash pooling in theeuro zone in fiscal 2002. Financial equalizationwithin the Group makes it possible for us to reducegross debts, thereby improving our interest earn-ings. Payment flows between the consolidatedcompanies are generally offset to reduce accountturnover.
We are already increasingly discussing the subjectof Basel II with banks. However, we have not yetapplied for any external rating. In future, we willconsider other financing alternatives such as cum-warrant bonds and Asset Backed Finance.
Liabilities to banks (reporting date on Dec. 31)
¤ in millions 2002 2001 %*
Group 147.1 145.2 1
Sartorius AG 118.4 108.6 9
Subsidiaries 28.7 36.6 – 22
Sartorius AG in % 81 75
Subsidiaries in % 19 25
* Change in %
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: Economic Report | Net Worth and Financial Position
2002 2001
Interest coverage
EBITDA
Interest expenses
Net debt-to-cash-earnings ratio
Net debt (reporting date on Dec. 31)
Cash earnings (acc. to the DVFA/SG)
Liabilities ratio (short-term)
Short-term capital
Total capital
5.6 5.7
3.8 4.5
45 % 54%
EquityNet debt
Net Debt | Equity¤ in millions
2001
2000
1999
1998
2002 133133
138127
14662
145–21
138–46
–50
0 50 100
150
Gearing (net debt ÷ equity)
0.8
1.2
0.4
0
–0.4
1998
–0.
3
1999
–0.
1
2000
0.4
2001
0.9
2002
1.0
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Future Macroeconomic Environment
The majority of the institutes for economic researchis expecting the global economy to recover in 2003.However, we believe there is a danger that therecovery of the global economy could be weakerthan originally expected. The Munich ifo Institute isexpecting a similar improvement in the global eco-nomic environment. The IMF has a cautiously opti-mistic view of the global economic situation and isexpecting a 3.7% improvement in the global econo-my. In its summary report published in March 2003,the IfW assumes that economic momentum in theindustrialized countries will remain restrained in thenext few months and is expecting global economicgrowth of 3.1 % for 2003 as a whole.
The political situation in the Middle East is seen asthe main danger for the global economy. Any in-tensification in the Iraq conflict could trigger anincrease in the price of oil and enhance the threatof further terrorist attacks. This would delay oreven prevent an economic upturn.
The European Commission expects economic growthof 1.6 % for the euro zone in 2003. Here, the ifoInstitute is expecting the economic situation to berestrained at the start of the year and to gathermomentum over the course of the year. As a result,real gross domestic product is expected to rise by1.5 %. The Association of German Banks is also ex-pecting economic growth of 1.5% in the euro zone.However, the IfW is more skeptical with regard tothe macroeconomic development in the euro zonewith an expected rise in GDP of 1%.
In Germany, the start of the year is also expectedto be slow. Over the course the year, an economicrecovery then looks set to materialize. Over theyear as a whole, the ifo Institute is anticipating anincrease in gross domestic product of 1.1% against2002. This forecast corresponds to that made by theAssociation of German Banks of some 1 %. As aresult of the restrained economic development atthe start of the year and the worsening of theconflict in Iraq, we fear that these forecasts willhave to be downgraded. The DIW and the IfW arealso proving to be more pessimistic in relation toeconomic development in Germany: At the startof the year, the DIW cut the economic forecast forGermany from 0.9% to 0.6%, while the IfW is onlyexpecting GDP to rise by 0.4 % in real terms.
In the USA, both the ifo Institute and the DIW areexpecting robust growth of 2.5 %. The economicforecasts by the IfW are predicting a 2.6 % increasein economic output.
Asia is likely to post the highest growth rates againin 2003. The IMF estimates growth in the Asianindustrial countries outside Japan at between 3.5%and 6.0 %. This is mainly underpinned by thesustained growth in China of between 7 % and 8%. The IfW is expecting an increase of 4.0% in EastAsia excluding Japan and China. It anticipatesthat China will grow at a significantly strongerrate of 8.0 % and Japan will report significantlyweaker growth of +1.2 %.
: Forecast Report | Future Macroeconomic Environment
Forecast Report
Sector Situation in Future
Sector Situation for the Biotechnology Division in Future
The biotechnology market will continue to growover the coming years. With the help of biotechno-logical methods, more and more active ingredientsare being discovered and new medicines developed.Demand for new medicines is still high. Many dis-eases cannot be cured with the treatment optionscurrently available and, for other diseases, the sideeffects are unsatisfactorily high. There are cur-rently more than 350 active ingredients pending ap-proval in the USA. Even if it is assumed that by nomeans all of these are approved, this still demon-strates the enormous growth potential. At present,manufacturing capacity in the area of cell culturetechnology and fermentation is still insufficient.However, it is likely to be expanded over the nextfew years. In conjunction with this, demand forfilters in upstream and downstream purificationprocesses will also increase. Experts believe thatthe membrane market will grow between 8 % and10 % over the next few years. Membrane applica-tions are expected to increase strongly in the foodand beverage industry in particular.
In the field of pharmaceuticals, protein researchrepresents a promising growth area. However, ithas not yet been possible to estimate the totalpotential of this area. Additional growth potentialresults from the fact that patents expire and moreand more generic drugs are being produced. How-ever, the majority of medicines based on biotech-nological production stages will remain patent-pro-tected in the next few years.
The weak state of the economy overall is also like-ly to impact the biotechnology sector to a lesserdegree. Many companies are currently cutting theirinvestment budgets. We are also expecting notice-able investment restraint in 2003. However, theglobalization trend within the pharmaceuticals sec-tor will continue. In the short- and medium-term,we are expecting consolidation within the sector.Corporate mergers and acquisitions are likely toincrease. Small start-up companies will have prob-lems surviving on their own.
In the long-term, we are expecting structuralchanges due to the development of “personalizedpharmaceuticals,” tailor-made products for individ-uals. The active ingredients necessary for this wouldbe obtained in very small quantities, probably withsmall, complex systems relating to cell cultivationand obtaining active substances of a disposablenature. Tissue engineering represents another areawith considerable market potential. The objective of tissue engineering is to manufacture compati-ble artificial organs with cell culture technologymethods. However, realization periods for technolo-gies of this nature are currently not foreseeable.
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: Forecast Report | Sector Situation in Future | Business Development
Sector Situation for the Mechatronics Division in Future
As a result of the high level of dependency of themechatronics sector on the overall economic situ-ation, in conjunction with an economic upturn inthe second half of the year, we are expecting thesector environment to improve in 2003. The manu-facturers belonging to the German Association ofthe Optical, Medical and Mechatronical Technologies,Inc. (Industrieverband für optische, medizinischeund mechatronische Technologien e.V.) are forecast-ing moderate growth for the sector in 2003. Forthe first half of the year, we initially anticipate thatsector development will still be restrained. However,in the second half of the year, in particular, we areexpecting a trend towards improvement. We areanticipating that the companies in the pharmaceu-tical, chemical, and food and beverage industrieswill relax their persistent investment restraint andthat they will make up for the deferred invest-ment over the course of fiscal 2003, at least in part.Investment in replacements and renewals are likelyto be necessary in the short-term; as a result,demand is expected to recover slightly in 2003. Weare also expecting that, as in 2002, there will beincreasing demand for services in the form of main-tenance and repair work in future due to limitedinvestment budgets.
The development in the hydrodynamic bearingssector is likely to be similar. We are expecting anupturn in demand in the construction of turbo-machinery in particular. This is because the needto catch up from a technological perspective forinvestment in expansion and renewal will be veryhigh following the two-year investment restraint.There is also huge demand for the construction ofpower-generating plants in Eastern Europe and inmany Asian countries.
Sector Situation for the Environmental TechnologyDivision in Future
Unquestionably, the subject of environmental tech-nology will become more important over the nextfew years as environmental awareness increasesand government environmental requirements growstricter. We believe that this field is one of thehighest growth markets of the future in terms ofgrowth. However, we are expecting the develop-ment to fluctuate to some degree.
Business Development in Future
Business Development of the Group in Future
For fiscal 2003, we are planning on continuing ourgrowth trend. In contrast to fiscal 2002, growth in2003 is likely to be carried by both the Biotechno-logy Division and the Mechatronics Division on thecondition of an economic upturn in the secondhalf of the year. For the Environmental TechnologyDivision, only minimal sales revenue is planned forthe time being. Overall, growth is likely to roughlymatch the level of fiscal 2002. We are expectingearnings to rise overproportionately compared withthe development of sales revenue. In addition tothe positive economies of scale, which will material-ize in the Biotechnology Division in particular,the Mechatronics Division is once more likely tocontribute a considerable share to earnings incontrast to fiscal 2002 and thereby have a positiveimpact on the trend of earnings in the long-term.The Environmental Technology Division will oncemore have a slightly negative impact on Groupearnings. We are expecting to reduce the invest-ment rate at Group-level to less than 5 %.
Business Development of the Biotechnology Divi-sion in Future
We are again planning growth in the Biotechnolo-gy Division in fiscal 2003. However, the growthmomentum is likely to slow down somewhat com-pared with fiscal 2002. Whereas the consolidatedcompany BBI made a quite substantial contributionto growth in fiscal 2002, we are expecting theBioprocess business area to drive growth in 2003.The consolidated company BBI will continue todevelop positively. However, we are expecting salesrevenue here to be at the level of the previousyear, as two major orders were processed in 2002that ensured above-average growth. The Biopro-cess business area is likely to benefit greatly fromthe general sector trend as we manufacture productsin this area that customers must continuouslyreplace during the production process. We also be-lieve that the smaller business areas Vivascience /Biolab and Food & Beverage have excellent develop-ment opportunities due to our positioning. In par-ticular, sales revenue with the proteomic kits fromVivascience launched in 2002 is likely to rise, whichwill simultaneously lead to an improvement in thecost ratios there.
Business Development of the Environmental Tech-nology Division in Future
Over the next few years, the focus of work in theEnvironmental Technology Division will be onresearch and development. For fiscal 2003, salesrevenue is scheduled to be only minimal. Conse-quently, the Environmental Technology Division willpost manageable losses in the next two to threeyears, which we are prepared to accept for the timebeing in view of the enormous potential in future.In the medium-term, we are expecting rising salesrevenue and associated positive earnings contri-butions in the Division. The intention is to launchmarket-ready products in 2005.
Important Events after the End of the FinancialYear
In February 2003, we signed an alliance agreementwith Alfa Laval, a worldwide leader in the fields of separation technology, heat transfer and fluidhandling and based in Lund, Sweden. This agree-ment creates a strong global position for the twocompanies in the field of beer filtration and theprerequisites for the further development of cross-flow filtration technology, an innovative alterna-tive to the traditional kieselguhr filtration of beer.Alfa Laval will participate in the global marketingof Sartorius technology for cold sterilization beerupstream of filling within the context of the allianceagreement. This equipment has already proved tobe a great success in Asia, especially in China andJapan.
On the proviso that no objections are raised bythe German anti-trust authorities, Sartorius AGjoined Diessel GmbH & Co. as an additional limitedpartner. Sartorius AG thereby holds a 38.88 %stake in the process systems manufacturer Diessel.Diessel, a family firm founded in 1924 and basedin Hildesheim, is a company operating globally in the fields of pharmaceuticals and biotechnologyas well as food and beverages.
We are planning on reducing the negative impactson earnings resulting from the structural expansionat Vivascience in fiscal 2003. Overall, we are ex-pecting single-digit percentage growth in the Bio-technology Division in fiscal 2003. The sales revenuegrowth will have a considerable impact on earn-ings. As a result of the high economies of scale, weare once more expecting earnings to rise exception-ally in relation to the development of sales revenue.The Biotechnology Division is thereby also set tomake a significant contribution to Group earningsin 2003.
Business Development of the Mechatronics Divi-sion in Future
In fiscal 2003, we are planning that the overallbusiness development in the Mechatronics Divisionwill show improvement over fiscal 2002. On thecondition that the industry cycle firms up in thesecond half of the year, we are expecting full-yearsales revenue growth for the Mechatronics Division.With corresponding support from the general eco-nomy, we are aiming for sales revenue at the levelof fiscal 2001. In addition, the restructuring mea-sures initiated at the 2002 mid-year point will havea positive impact on business development. In viewof the restructuring successfully concluded in Indus-trial Mechatronics, we are also expecting profitsin this business area. As a result, all business areasare expected to make a positive contribution todivisional earnings in 2003. Therefore, the Mecha-tronics Division is again likely to contribute a sub-stantial share to Group earnings in 2003.
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: Forecast Report | Business Development in Future
Risk Management System
Our Group-wide risk management system, as anintegral component of our business operations andthe shareholder value-oriented consolidated con-trol system, is continuously being improved andfurther developed. Tiered reporting with respect tothe critical values, reporting periods and levels ofhierarchy consciously takes into account the vary-ing strategic importance of the individual com-pany units and their contribution to the Group’soverall risk. In addition to monthly reporting tothe Executive Board, the duty to report risks adhoc guarantees that the Executive Board is alwaysinformed immediately and can act promptly. The system constitutes part of the regular reviewsby the risk management committee, the internalaudit department and the auditors within the frame-work of the annual financial statements.
We aligned the risk management system to the newGroup structure in 2002 and will be publishing a new Risk Management Handbook. In addition, weincorporated training relating to the risk manage-ment system as a standard part of the range oftraining and seminars offered by Sartorius College.
The review of the risk management system in thecourse of work on the annual financial statementsby the independent audit company did not lead toany objections. On the contrary, the system wasdescribed as exemplary for a company of our size.
Macroeconomic Risk Situation and Cyclical SectorRisks
The global business activities of the Sartorius Groupare naturally exposed to a large number of risks.However, from a current perspective we are not ex-pecting any developments that might jeopardizethe further existence of the corporation against thebackdrop of our global sales markets, our hetero-geneous sectoral structure and our diversified prod-uct range. On the contrary, we assume that ourwide-ranging product portfolio, our positioning asa complete provider in all regions of the world,and our multi-brand and triad strategy put us in aposition to largely compensate for negative cyclicaleffects.
Procurement Risks
Supplier cards, early warning systems, annual sup-plier reviews, reserve inventories, the availabilityof alternative suppliers in the case of strategic rawmaterials, sophisticated contractual regulationsand strategic cooperations with suppliers of keycomponents: all these ensure that the risk situationin the area of procurement cannot assume propor-tions that might jeopardize the further existence ofthe corporation. In addition, we continuouslymonitor the global situation with regard to poten-tial areas of crisis for the purpose of minimizingrisk. At present, our attention is focused on thesituation in the Middle East.
R & D Risks
To ensure the success of R & D projects, we employa modern project management system with whichwe estimate economic and technical success.Customers are involved in defining and testingnew products and technologies early on in theprocess.
Active patent management secures our technologyposition: this guarantees that important fields ofinnovation are occupied early on and that patentsare secured. A database-supported innovationforum also enables us to collect ideas and transferthese to patents, whenever possible. In addition,we continuously keep an eye on the technologiesand competitors relevant for us in order to mini-mize risks.
Risk Report
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: Risk Report
Production Risks
As we extended our production capacity in 2002,we are largely able to smoothly bridge any possiblecapacity interruptions and machine failures. Inaddition, our global production facilities are ableto compensate for capacity bottlenecks, such asmachine repairs, amongst themselves for a certainamount of time. The risk of production downtime is also minimized to a large degree by the possibilityof resetting the machines.
As our machines are highly flexible thanks to theirstandardization, we can produce almost any com-ponent on any system. Should a system fail, we areeasily able to produce the same component onanother system.
Moreover, semi-automated individual job unitsmake it possible for a system failure not to have anyknock-on effect on all the rest of the machineryas all the other systems can continue to run with-out any problems.
Temporary work contracts and employer /employees’council agreements for the production areas, whichmake it possible to transfer employees relativelyquickly internally and, if necessary, across divisions,also contribute to production flexibility.
All these measures and facilities mean that we donot expect any considerable production risks in theforeseeable future.
Sales Risks
Even if the economic environment is weak, we donot believe that the future holds any substantialsales risks thanks to our customer base, which isbroadly balanced with different business cycles, andour own worldwide distribution structures.
The consolidated company BBI is, to a certaindegree, dependent on major projects. However, wedo not see any discernable sales risks here thatcould jeopardize the further existence of the cor-poration as we are continuously intensifying ourcustomer loyalty and are present on all the keymarkets throughout the world.
Financial Risks
For us, financial risks are, in particular, currencyrate risks as well as dependency on individual creditinstitutions.
With regard to the currency risk, it is clear thatthe euro zone is our major sales market, whichconsiderably reduces this risk. Appreciable foreigncurrency amounts relate to USD, GBP, CHF andJPY. We have hedged the expected net exposurefor a period of less than one year against poten-tial exchange rate fluctuations with derivative finan-cial instruments. The currency transactions arecarried out by a number of authorized personnelwith a distinction being made between the persontrading, the person settling the transaction and theperson responsible for subsequent control. Webelieve that the currency risk is relatively low as a result of these measures.
The interest rate risk is tied in with the possibilitythat the general interest rate rises considerably.This would mean that the interest charge for theSartorius Group would also increase accordingly.Over the course of fiscal 2002, we significantly in-creased the percentage of long- and medium-termliabilities to banks in relation to total liabilities tobanks from approximately 9% to some 38%. As a result of the fixed-rate agreements contained therein, a large percentage of liabilities would not be affected by a rise in interest rates. Overall,we estimate that the interest rate risk for theGroup is low.
There is no dependency on individual credit insti-tutions or concentration on the loan commitmentof one individual bank. Even if an individual bankwere to reduce or even totally withdraw its loancommitment, the financing of the Sartorius Groupwould sill not be jeopardized. Overall, there arethus no significant discernible risks from financingfor the Sartorius Group from a current perspective.
Organizational and Personnel Risks
The reorganization introduced in 2001 and imple-mented in 2002 has decisively strengthened theperformance capacity of the Group. This has beenachieved by clearly assigning responsibilities, reduc-ing complexity and increasing transparency withinthe business areas. The extensive restructuring andrepositioning of various central support depart-ments also ensures that the requirements of ourglobal Group can be met more quickly and moreeffectively.
We are aware that continued corporate successdepends, to a large extent, on the commitment anddedication, motivation and qualification of ouremployees. The Sartorius Training Center, officiallyopened in November 2002 at the Goettingen site,will therefore also secure training in line with theGroup’s needs and qualified young blood for allareas in future.
At the same time, more employees are given accessto expert knowledge via project work and trainingevents. An analysis of qualification requirementscarried out in 2002 and a qualification plan ensurethat it is always possible to fill key positions with a number of trained employees. As a result, expertknowledge is relatively widely spread.
Incentive systems, such as performance-relatedremuneration in connection with a bonus wagesystem and opportunities for further training anddevelopment, are intended to make the prospect of employment at Sartorius attractive for existingand new employees and encourage long-term loy-alty to the company on the part of our employees.
IT Risks
Our active IT management makes it possible for usto continuously align systems and security strategiesto current requirements and developments; oneexample of this was the rollout of antivirus softwareto all sites linked to our network in 2002. Our ITstrategy stands out due to uniform, standardizedand transparent IT structures throughout the Group.As a result of this strategy and the cooperationwith expert partners and also thanks to the excellentknow-how of our own employees, risks in the ITarea are greatly reduced.
Legal Risks
New legal rulings, such as the German Act toModernize the Law of Obligations that entered intoeffect on January 1, 2002, have naturally also had a decisive influence on the basic legal conditionsat Sartorius. As a result, we have brought all stand-ard agreements used by the Sartorius Group andthe General Terms and Conditions of Business intoline with the changed legal situation. By imple-menting these changes so quickly and by centrallymonitoring legal conflict potential, the legal risksare minimized.
Insurance Management
The Sartorius Group’s international insurance pro-gram continued nearly unchanged in 2002. Webenefit from long-term agreements that cushionthe impact of capacity reductions and increases inpremiums in the insurance market. The program,consisting of global master policies in the main in-surance sectors and national basic agreements,forms the basis for standardized coverage designedto meet potential Group risks.
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: Risk Report
Environmental Risks
The recertification of our environmental manage-ment system in line with DIN EN ISO 14001 at theSartorius AG site, which also covers occupationalsafety, was carried out in 2002 without any devia-tions from the specifications to be met. In parti-cular, the implementation of environmental protec-tion measures in the case of the new constructionof the “Plant 2001” guarantees that the handlingof chemicals is exemplary and state-of-the-art.Among other measures, a new chemical and wastestorage area was built at this plant.
As a result of licenses relating to air pollutionlegislation, it is necessary to introduce BAGAP, analarm system and plan for protection against dangerwithin the company, for certain systems in “Plant2001.” For precautionary reasons, we have extendedthis security concept to the entire “Plant 2001.”Statutory requirements from the German ordinanceon equipment failure incidents were applied as thebasis for this plan.
From a current perspective, we do not believe thatthere are any appreciable environmental risks.
Risks of Future Development and Overall RiskSituation
The activities of the Sartorius Group are naturallyexposed to typical business risks. Like all other com-panies, Sartorius will be affected by the pendingdecisions relating to and the actual implementationof the various proposals by the German FederalGovernment, for example the law aiming to reducetax benefits and exemptions.
In view of the current overall economic situation,we are expecting demand to recover slightly inMechatronics Division markets in 2003. As a resultof the excellent positioning of the BiotechnologyDivision, we are expecting the growth trend to con-tinue here.
For risks, the onset of which could have a sub-stantial influence on the net worth, financial andincome situation, we have adopted countermea-sures wherever possible and sensible and arrangedbalance sheet measures in the form of provisions.
From the present perspective, there are no judicialor arbitration procedures pending which couldcause a substantial negative effect on the consoli-dated result. In actuarial terms, we have takenadequate measures across the Group to round offour risk management.
The review of the present risk situation showedthat there are no substantial risks in the reportingperiod that could have jeopardized the survival of the business. From a current stance, there is nothreat to the continued existence of the Group,either from the perspective of substance or liquid-ity. For the foreseeable future, there are also nodiscernable risks at present that could jeopardizethe further existence of the corporation.
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Financial Statements and Notes
Monolithic Weigh Cells
A highly sensitive measuring sensor checks the
accuracy of the robotically etched single block of
metal. Only perfectly cut monolithic weigh cells
find their way into each of the Sartorius balances
featuring the highest accuracy. As a result, a
measuring process can take up to 30 minutes.
The ruby at the tip of the measuring sensor
ensures that any differences from the tolerances
in the micrometer range are reliably detected.
Balance Sheetfor the Year Ended December 31, 2002
Assets Notes Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
A. Fixed assets
I. Intangible assets (9) 30,001 29,905
II. Property, plant and equipment (10) 144,182 137,688
III. Financial assets (11) 3,374 1,890
177,557 169,483
B. Current assets
I. Inventories (12) 70,093 76,127
II. Trade and other receivables (13) 113,836 123,087
III. Securities (14) 9 12
IV. Cash on hand, deposits in banks 13,983 18,001
197,921 217,227
C. Assets from future tax relief (15) 20,750 17,956
D. Prepaid expenses (16) 1,911 3,910
398,139 408,576
Equity and Liabilities Notes Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
A. Equity
I. Issued capital (17) 17,047 17,047
II. Capital reserves (18) 86,988 86,988
III. Earnings reserves and retained profits (incl. net profit) (19) 28,606 34,008
132,641 138,043
B. Minority interest 1,242 1,432
C. Special item for investment 2,386 149allowance for fixed assets
D. Provisions (20) 56,923 53,661
E. Liabilities (21) 204,947 215,291
398,139 408,576
* K = thousand(s)
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: Balance Sheet | Group Income Statement
Group Income Statement for the Financial Year of 2002
Notes 2002 2001¤ in K* ¤ in K*
1. Sales revenue (25) 476,529 449,256
2. Cost of sales (26) 268,236 236,321
3. Gross profit 208,293 212,935
4. Distribution costs (27) 121,759 126,244
5. Research and development costs (28) 22,998 24,580
6. General administrative expenses (29) 46,836 45,535
7. Other operating income (30) 10,358 10,304
8. Other operating expenses (31) 10,786 10,794
9. Amortization 2,751 2,266
194,772 199,115
10. Earnings before interest and taxes 13,521 13,820
11. Other interest and similar income (32) 442 640
12. Interest and similar expenses (32) 6,446 5,938
13. Financial result – 6,004 – 5,298
14. Profit before taxes 7,517 8,522
15. Income tax expense (33) 2,395 3,600
16. Other taxes 673 1,299
3,068 4,899
17. Net profit for the period 4,449 3,623
18. Minority interest 460 580
19. Net profit after minority interest 3,989 3,043
Earnings per ordinary share (¤) (34) 0.23 0.18
Earnings per preference share (¤) (34) 0.23 0.18
* K = thousand(s)
Group Statement of Changes in Equityfor the Year Ended December 31, 2002
in thousands of ¤ Earnings Differencereserves resulting from
Issued Capital and retained currency Group Minority capital reserves profits translation shares interest Total
Balance at Jan. 1, 2001 17,740 92,565 34,091 1,229 145,625 986 146,611
Repurchase of shares – 693 – 5,577 – 6,270 – 6,270
Retransfer for disposal – 1,141 – 1,141 – 1,141of securities available for sale
Change in minority interest – 140 – 140
Net profit for the period 3,043 3,043 580 3,623
Dividends – 4,262 – 4,262 – 4,262
Currency translation differences 1,048 1,048 6 1,054
Balance at Dec. 31, 2001 | Jan. 1, 2002 17,047 86,988 31,731 2,277 138,043 1,432 139,475
Change in the number of companies consolidated – 469 – 469 – 469
Change in minority interest 24 24
Net profit for the period 3,989 3,989 460 4,449
Dividends – 4,262 – 4,262 – 602 – 4,864
Currency translation differences – 4,660 – 4,660 – 72 – 4,732
Balance at Dec. 31, 2002 17,047 86,988 30,989 – 2,383 132,641 1,242 133,883
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: Group Statement of Changes in Equity | Cash Flow Statement
Cash Flow Statementfor the Year Ended December 31, 2002
2002 2001¤ in K* ¤ in K*
Profit before income taxes (after deferred taxes) 8,255 6,608
Portion of minority interest in the net profit 460 580
Depreciation of fixed assets 22,744 20,098
Change in long-term provisions 3,341 1,012
Other important expenses and income that do not affect cash payments – 156 0
+ Cash earnings acc. to the DVFA | SG** 34,644 28,298
Financial income – 442 – 640
Interest expense 6,446 5,938
Income taxes paid – 4,267 – 3,565
Change in short-term provisions 1,194 2,340
Realized gains | losses on fixed asset disposals – 134 – 512
Change in inventories 2,891 5,882
Change in trade and other receivables including prepaid expenses 4,113 – 19,390
Change in liabilities (excluding liabilities to banks) – 10,788 7,202
+/– Cash flow from working capital – 987 – 2,745
= Cash flows from operating activities 33,657 25,553
Proceeds from fixed asset disposals 2,715 2,964
Payments for intangible assets – 4,394 – 4,965
Payments for property, plant and equipment – 29,408 – 71,665
Payment for financial assets – 2,967 – 961
Effects of changes in the number of companies consolidated 1,042 0
+/– Cash flows from investing activities – 33,012 – 74,627
= Net cash 645 – 49,074
Payments for acquisition of own shares (treasury shares) 0 – 6,270
Dividends paid – 4,262 – 4,262
Proceeds from investment grants 2,556 0
Financial income 442 640
Interest expense – 6,446 – 5,938
Change in minority interest – 248 – 140
Additions to | repayment of financial liabilities (incl. currency fluctuations) 6,328 65,544
+/– Cash flows from financing activities – 1,630 49,574
= Change in cash and cash equivalents – 985 500
Change due to currency translation – 3,036 699
Cash and cash equivalents at beginning of period 18,013 16,814
Cash and cash equivalents 13,992 18,013
Gross debt owed to banks 147,079 145,218
Net debt owed to banks 133,087 127,205
Composition of cash and cash equivalents
Liquid funds 13,983 18,001
Securities as part of current assets 9 12
13,992 18,013
* K = thousand(s)
** DVFA = German Association of Financial Analysts and Investment Consultants
Notes to the Financial Statements
The consolidated financial statements of SartoriusAG were prepared in accordance with the account-ing standards of the International AccountingStandards Board (IASB), the International Account-ing Standards (IAS), observing all IAS Standards to be applied effective December 31, 2002, as wellas the corresponding interpretations of the Stand-ing Interpretations Committee (SIC). The require-ments imposed by those regulations were metwithout exception, so that the consolidated finan-cial statements of Sartorius AG present a true andfair view of the financial, liquidity and earningspositions, as well as the cash flows during the pastfinancial year.
The prerequisites for exemption from preparingconsolidated financial statements in accordancewith German accounting standards pursuant toSection 292a of the Commercial Code have beenfulfilled. The fulfillment of these prerequisites wasreviewed using the German accounting standardDRS 1. The consolidated financial statements ofSartorius AG are in compliance with Council Direc-tive 83/349/EEC. In order to assure equivalencewith consolidated financial statements prepared inaccordance with the provisions of commercial law,all legal disclosure and explanatory duties beyondIASB regulations, particularly the preparation of amanagement report, were performed.
In preparing the consolidated financial statementsof Sartorius AG according to the IAS, the followingmaterial differences in the consolidation, account-ing and measurement methods to be applied areyielded versus those of financial statements drawnup according to the German commercial account-ing standards:
: At variance with the treatment in accordancewith German accounting principles, the goodwillamount from capital consolidation in accordancewith IAS has been affected by the capitalizationof deferred taxes on the loss carry-forwards ofthe subsidiaries which were included for the firsttime. Negative goodwill amounts have been indi-cated together with positive goodwill under theitem “goodwill” on the assets side of the balancesheet.
: In accordance with IAS 22, Business Combinations,there is no option with respect to the initialinclusion of subsidiaries in the consolidated finan-cial statements, at variance with Section 301 (2) of the German Commercial Code. The initialconsolidation must be performed at the time the subsidiary is acquired.
: Research and development costs were capitalized,to the extent the prerequisites of IAS 38, Intan-gible Assets, were fulfilled.
: Scheduled depreciation of fixed assets was ad-justed back to the actual useful economic livesof the assets on a uniform basis throughout theGroup. This was accomplished using the bindingfiscal fixed-asset depreciation tables of the Ger-man Federal Ministry of Finance beginning in the 2001 assessment period corresponding to theactual useful economic lives of the assets.
: Revenue and costs from customer-specific con-struction contracts were recognized in proportionto the stage of completion of the contract activ-ity, in accordance with IAS 11, ConstructionContracts.
1. Accounting Principles
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: In accordance with, IAS 12, Income Taxes, incometaxes were deferred pursuant to the balance sheetliability method, at variance with the Germancommercial law provision. The IAS method recog-nizes deferred tax expenses based on differencesin measurement between the tax and the consoli-dated balance sheets, and not on differences inresult, as in accordance with Section 274 of theGerman Commercial Code. Any assets or debtsresulting from future income tax charges or reliefwere measured based on the tax rates applicableat the time the assets were realized or the liabili-ties were settled. Assets from income tax reliefwere capitalized based on loss carry-forwards, pro-vided it was sufficiently probable that revenueswould be available in the future.
: Treasury shares were deducted from consolidatedequity, pursuant to SIC 16.
: In accordance with IAS 19, Employee Benefits,future wage and pension trends as well as currentbiometrical probabilities are valued in accordancewith the projected unit credit method, an expectedcash value method.
: Pursuant to IAS 37, Provisions, Contingent Liabili-ties, and Contingent Assets, provisions are only tobe recognized based on obligations vis-à-vis thirdparties.
: Expenses in connection with modification of soft-ware for internal use (customizing costs) werecapitalized.
IAS 1, Presentation of Financial Statements, also addsan additional component to the consolidatedfinancial statements: the statement showing changesin equity.
In the cash flow statements, cash flows are presentedin tabular form, according to current operating acti-vities, investment activities, and financing activities.
In this instance, cash flows from operating activi-ties are determined using the indirect method; i.e.,expenses with an effect on payments are added to the net profit, while income with an effect onpayments is subtracted.
The cash flows from financing activities arecomposed primarily of loans and dividend payments.
In addition to marketable securities, the cash andcash equivalents include all liquid assets, i.e. allcash on hand and deposits in banks.
2. Cash Flow Statement
: Notes
3. Segment Reports
Report by Division Biotechnology Mechatronics
¤ in millions Dec. 2002 Dec. 2001 Change Dec. 2002 Dec. 2001 Change
Order intake 233.6 236.3 – 1 % 226.0 244.7 – 8 %
Sales revenue 254.6 210.3 21 % 221.9 239.0 – 7 %
As a total % 53 % 47 % 47 % 53 %
EBITDA 26.6 16.5 61 % 10.5 17.4 – 39 %
As a % of sales revenue 10.5 % 7.8 % 4.7 % 7.3 %
Depreciation 12.5 11.1 13 % 10.2 9.0 14 %
EBIT 14.1 5.4 162 % 0.3 8.4 – 97 %
As a % of sales revenue 5.6 % 2.6 % 0.1 % 3.5 %
Net operating assets 200.0 176.2 13 % 117.0 135.2 – 14 %
– which contain business debt 32.6 38.4 – 15 % 24.9 31.0 – 20 %
Capital expenditures 25.3 63.3 – 60 % 8.5 13.4 – 36 %
As a % of sales revenue 9.9 % 30.1 % 3.8 % 5.6 %
R & D costs 8.6 9.9 – 14 % 13.5 14.6 – 7 %
No. of employees at Dec. 31 1,647 1,577 4 % 2,088 2,167 – 4 %
Report by Region Europe North America
¤ in millions Dec. 2002 Dec. 2001 Change Dec. 2002 Dec. 2001 Change
Sales revenue
– acc. to customers’ location 277.9 240.9 15 % 105.2 110.0 – 4 %
As a total % 58 % 54 % 22 % 24 %
– acc. to company location 327.7 294.4 11 % 103.6 106.3 – 3 %
EBITDA 18.6 19.5 – 4 % 13.4 9.0 50%
As a % of sales revenue 5.7 % 6.6 % 12.9 % 8,4 %
Depreciation 19.2 16.4 17 % 2.8 3.2 – 11 %
EBIT – 0.6 3.1 10.6 5.8 83 %
As a % of sales revenue – 0.2 % 1.1 % 10.2 % 5.5 %
Net operating assets 255.2 – 39.5 –
– which contain business debt 45.2 – 7.2 –
Capital expenditures 29.3 73.8 – 60 % 2.4 1.4 78 %
As a % of sales revenue 8,9 % 25.1 % 2.3 % 1.3 %
R & D costs 21.8 23.3 – 6 % 1.2 1.3 – 11 %
No. of employees at Dec. 31 2,857 2,901 – 2 % 437 436 0 %
: Segment Report by Division
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Environmental Technology Group
Dec. 2002 Dec. 2001 Change Dec. 2002 Dec. 2001 Change
0.0 0.0 459.6 481.0 – 4 %
0.0 0.0 476.5 449.3 6 %
100 % 100 %
– 0.9 0.0 36.3 33.9 7 %
7.6 % 7.5 %
0.0 0.0 22.7 20.1 13 %
– 0.9 0.0 13.5 13.8 – 2 %
2.8 % 3.1 %
0.0 0.0 316.9 311.5 2 %
57.6 69.4 – 17 %
0.0 0.0 33.8 76.6 – 56 %
7.1 % 17.1 %
0.9 0.0 23.0 24.6 – 6 %
6 1 3,741 3,745 0 %
Asia | Pacific Other Markets Group
Dec. 2002 Dec. 2001 Change Dec. 2002 Dec. 2001 Change Dec. 2002 Dec. 2001 Change
77.6 78.0 – 1 % 15.8 20.4 – 23 % 476.5 449.3 6 %
16 % 17 % 3 % 5 % 100 % 100 %
45.2 48.6 – 7 % 0.0 0.0 476.5 449.3 6 %
4.3 5.5 – 22 % 0.0 0.0 36.3 33.9 7 %
9.5 % 11.3 % – – 7.6 % 7.5 %
0.7 0.6 25% 0.0 0.0 22.7 20.1 13 %
3.5 4.9 – 28 % 0.0 13.5 13.8 – 2 %
7.8 % 10.1 % – – 2.8 % 3.1 %
22.1 – 316.9 –
5.1 – 57.6 –
2.1 1.5 41 % 0.0 0.0 33.8 76.6 – 56 %
4.7 % 3.0 % – – 7.1% 17.1 %
0.0 0.0 0.0 0.0 23,0 24.6 – 6 %
447 408 10 % 0 0 3,741 3,745 0 %
Segment Reports
According to IAS 14, Segment Reporting, segmentsare defined according to dominant sources andthe type of risks and returns and according to busi-ness segments or geographical segments. In addi-tion, segment reporting is to be presented eitheraccording to a primary or a secondary reportingformat. At the Sartorius Group, segments are de-fined by the products sold and services renderedby the Biotechnology, Mechatronics and Environ-mental Technology Divisions.
The Mechatronics Division covers the followingbusiness areas defined according to segments:Laboratory Mechatronics, Industrial Mechatronics,Service and Bearing Technology (formerly called“Hydrodynamic Bearings”). The BiotechnologyDivision consists of the following business areas:Bioprocess, BBI, Vivascience / BioLab and Food &Beverage. There are no material intersegmentsales.
The European region includes the markets ofWestern and Eastern Europe. The North Americanregion reflects the U.S. marketplace and Canada.Japan, China, Australia and India were allocated tothe Asia / Pacific region. The other markets prima-rily consist of South America and Africa. The keyfigures of the regional segments refer to the com-pany location, except for the sales revenue, whichis reported according to the customer’s location.The sum of the consolidated key figures for thesegments equals that of the consolidated key figures.
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The consolidated financial statements of SartoriusAG include the annual financial statements of allmaterial companies which are controlled directlyor indirectly by Sartorius AG via its subsidiaries. Interms of IAS 27, Consolidated Financial Statementsand Accounting for Investments in Subsidiaries, acontrolling interest exists if Sartorius AG or itssubsidiaries have the power to govern the financialand operating policies of an enterprise so as toobtain economic benefits from its activities. Suchenterprises are included in the consolidated finan-cial statements from the time when Sartorius AGor its subsidiaries acquired such control. They areno longer included from the time control is aban-doned.
Capital has been consolidated in accordance withthe pro-rata New Valuation Method, under whichthe acquisition costs of the shareholding are offsetagainst their equity share at the time of theacquisition. Any goodwill remaining on the assetside of the balance sheet can be indicated underthe fixed intangible assets as goodwill, unless it canbe allocated to the other assets of the subsidiary.
Goodwill has been amortized on a straight-linebasis over its useful economic life, though over 15 years at maximum.
Negative goodwill from the initial consolidation is indicated on the asset side of the balance sheet,like positive goodwill. The share of the negativegoodwill, which can be allocated to the anticipatedlosses or expenses at the time of the acquisition, isshown in the period in which the losses or expensesarose and affects the balance sheet profit. Residualgoodwill has been treated pursuant to IAS 22.61-63.
Subsidiaries have been included on the basis oftheir annual financial statements, which havebeen adapted to uniform Group recognition andmeasurement methods (Balance Sheets II).
Accounts receivable and debts between the con-solidated companies have been netted out, andinternal Group value adjustments and provisionsreversed. Interim results, revenues, and expensesamong the consolidated companies have been elim-inated. Taxes have been deferred on consolidationprocedures with an effect on the income state-ment.
4. Principles and Methods of Consolidation
: Notes
5. Scope of Consolidation, Major Affiliates and Ownership
Book value Equity at Net profit atDec. 31, 2002 Ownership Dec. 31, 2002 Dec. 31, 2001 Consolidated
¤ in K* % ¤ in K* ¤ in K*
Europe
Sartorius A|S, Roskilde, Denmark *) **) 72 100.0 75 8
B. Braun Biotech International GmbH, Melsungen, Germany, 12,290 90.0 7,057 3,367 •along with its subsidiaries:
B. Braun Biotech Inc., Allentown, USA 1,263 100.0 3,489 1,696 •
BBITECH@MEDIT S.r.l., Milan, Italy 632 70.0 199 102 •
Sartorius India Pvt. Ltd., Bangalore, India 2,042 39.0 2,118 793 •
Denver Instrument GmbH, Goettingen, Germany 1,026 100.0 690 139 •
Dr. Hans Boekels GmbH & Co., Aachen, Germany, 5,881 100.0 – 373 – 1,807 •including Boekels Verwaltungs-GmbH
GWT Global Weighing Technologies GmbH, Hamburg, Germany, 795 100.0 – 3,680 320 •along with its subsidiaries:
Global Weighing Technologies (Belgium) BVBA | CVA, Vilvoorde, Belgium 227 100.0 165 32 •
GWT Global Weighing Technologies B.V., 256 100.0 – 286 – 199 •Nieuwegein, Netherlands
GWT Global Weighing Technologies (UK) Limited, 0 100.0 0 0Cambridge, UK**)
Sartorius Mechatronics India Pvt. Ltd., Pune, India 265 100.0 1,516 323 •
Sartorius Systems Engineering GmbH, Goettingen, Germany, 2,068 100.0 – 817 – 1,633 •along with its subsidiary**):
Sartorius India Pvt. Ltd., Bangalore, India 75 26.0 2,118 793 •
Spezialpapier Filtrak GmbH, Baerenstein, Germany**) 1,611 49.0 1,598 41
Vivascience AG, Hannover, Germany, 8,568 100.0 6,306 161 •along with its subsidiaries:
Vivascience Ltd., Lincoln, UK 8,518 100.0 2,982 60 •
along with its subsidiaries:
– Vivascience Deutschland GmbH, Goettingen, Germany**) 25 100.0 26 0
– Vivascience France S.A.R.L., Palaiseau, France 8 100.0 – 26 – 30 •
– Vivascience Inc., New York, USA 2 100.0 – 2,456 – 1,919 •
Sartorius S.A., Palaiseau, France 1,803 99.9 3,523 1,202 •
Sartorius Ltd., Epsom, UK 329 100.0 2,282 638 •
Sartorius S.p.A., Florence, Italy 1,155 100.0 2,729 325 •
Verkoopcombinatie Sartorius Instrumenten B.V., 2,431 100.0 – 1 7 •Nieuwegein, Netherlands,along with its subsidiary:
Sartorius Instruments N.V., Vilvoorde, Belgium 488 100.0 567 329 •
Verkoopcombinatie Sartorius Filtratie B.V., Nieuwegein, Netherlands 283 100.0 48 114 •
Sartorius Ges. m.b.H., Vienna, Austria 513 100.0 794 140 •
Sartogosm ZAO, St. Petersburg, Russia*) **) 148 51.0 541 76
Sartorius Schweiz AG, Dietikon, Switzerland 723 100.0 – 23 75 •
Sartorius S.A., Madrid, Spain, 1,308 100.0 567 – 223 •along with its subsidiary:
Sartorius Balancas Lda., Lisbon, Portugal**) 15 100.0
The financial statements of Sartorius AG and of the following susidiaries have been includedin the consolidated financial statements.
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Sartorius Argentina S.A., Munro, Argentina*) **) 386 99.0 499 243
Sartorius do Brasil Ltda., Jabaquara, Brazil*) **) 132 100.0 – 493 – 531
Sartorius de Mexico S.A. de C.V., Ciudad Satélite, Mexico*) **) 122 99.0 121 38
Sartorius North America Inc., New York, USA, 22,235 100.0 19,617 10,218 •along with its subsidiaries:
Sartorius Corporation, New York, USA 2,335 100.0 – 3,959 4,842 •
Sartorius Inc., Yauco, Puerto Rico 591 100.0 2,826 2,226 •
Sartorius Environmental Technology Inc., Dubuque, USA 2 100.0 – 2,953 – 665 •
Denver Instrument Company, Arvada, Colorado, USA 11,313 100.0 9,411 1,627 •
Sartorius Canada Inc., Mississauga, Canada 0 100.0 371 179 •
Asia | Pacific
Sartorius Australia Pty. Ltd., East Oakleigh, Australia 66 100.0 527 127 •
Beijing Sartorius Instrument & System 2,028 100.0 4,266 1,116 •Engineering Co. Ltd., Beijing, China
Sartorius Ltd., Kowloon, Hong Kong, China, 2,029 100.0 2,660 592 •along with its subsidiaries:
Sartorius Korea Ltd., Seoul, South Korea 348 100.0 679 164 •
Global Weighing Technologies Ltd., Hong Kong, China 0 100.0 – 478 – 3 •
Sartorius India Pvt. Ltd., Bangalore, India 187 25.0 2,118 793 •
Sartorius K.K., Tokyo, Japan 3,500 100.0 1,099 – 559 •
Sartorius (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia*) **) 114 100.0 168 14
Sartronic Inc., Makati City, Philippines*) **) 234 100.0 44 – 35
Sartorius Singapore Pte. Ltd., Singapore 386 100.0 90 30 •
As the financial statements of the subsidiariesidentified by an *) were not available at the timeour consolidated financial statements were pre-pared, the information from the annual financialstatements from 2001 was considered.
The companies identified by **) were not includedin the consolidated Group financial statementsbecause they have minor importance for assess-ment of the actual net worth, financial situationand profitability of the Sartorius Group.
Book value Equity at Net profit atDec. 31, 2002 Ownership Dec. 31, 2002 Dec. 31, 2001 Consolidated
¤ in K* % ¤ in K* ¤ in K*
America
: Notes
The subsidiaries Sartorius Schweiz AG, Switzerland,and BBITECH@MEDIT S.r.l., Italy, were consolidatedfor the first time in the Group financial statements.In the previous year, these subsidiaries were notincluded in the consolidated financial statementsbecause of their minor importance for assessingthe actual net worth, financial situation and prof-itability of the Sartorius Group. Capital was con-solidated according to the IAS by taking the owner-ship into account at the time of acquisition.
Effective December 31, 2002, capital was raised atSpezialpapier Filtrak GmbH, Germany, in whichSartorius AG as the sole shareholder to that datedid not participate. Following this capital increase,Sartorius AG’s ownership of equity in this company isonly 49 %. As the prerequisites for including Spe-zialpapier Filtrak GmbH in the consolidated finan-cial statements of Sartorius AG are no longer metpursuant to IAS 22, Spezialpapier Filtrak GmbHwas not included in the scope of consolidation asof December 31, 2002.
In addition, in fiscal 2002, various internal Grouprestructuring measures were carried out. These in-volved, in particular, merging and renaming varioussubsidiaries.
The ownership shares of the companies not in-cluded in the consolidated financial statements werenot accounted for at fair value because no activemarket exists for them, and an appraisal report wasnot obtained due to minor importance.
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: Notes
To enhance the clarity of the presentation, indivi-dual balance sheet and income statement itemshave been combined and reported separately inthe Notes. To better account for the particularitiesof the consolidation, other earnings reserves andretained profits have been combined into a singleitem in the consolidated financial statements.
In fiscal 2002, the consolidated income statementwas structured for the first time according to themethod of classification of expenses by function.The figures of the previous year were adjustedaccordingly. We elected to convert to this methodof classification of expenses to align our reportingwith the internationally common accountingmethods.
The consolidated financial statements of SartoriusAG have been prepared in accordance with theregulations of the IASB.
In the course of the transition to the InternationalAccounting Standards, methods of recognition andmeasurement have been employed which divergefrom the provisions of German commercial law.The methods of accounting and measurement em-ployed in the previous year were kept unchanged.
When the consolidated financial statements areprepared, estimates must be made that affect, to acertain extent, the totals of the assets, liabilities,income, and expenses of the reporting period. Theactual values yielded may differ from these esti-mates.
6. Accounting and Measurement Principles
7. Structure of the Balance Sheet and the Income Statement
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The consolidated financial statements of SartoriusAG have been prepared in thousands of euros. Inthe annual financial statements of the individualcompanies, foreign currency transactions havebeen translated at the exchange rates applicableat the time of the transaction. Monetary assetsand debts whose value is given in a foreign cur-rency have been translated at the exchange rateon the balance sheet date. Rate gains and losseshave been offset in the item “Other operatingincome” or “Other operating expenses” in a man-ner affecting the income statement.
The Group concludes futures and option transac-tions for periods of less than one year to hedgeagainst currency risks. The Group’s recognitionand measurement methods with respect to thesederivative financial instruments are presentedunder section 24. At year-end December 31, 2002,we had no derivative financial instruments in ourasset portfolio.
The annual financial statements of subsidiaries thathave been prepared in foreign currencies havebeen translated pursuant to IAS 21, The Effects ofChanges in Foreign Exchange Rates, in accordancewith the concept of a functional currency. Foreignsubsidiaries have been regarded as independentsubdivisions of the Sartorius Group.
Balance sheet items have been translated at theexchange rates on the balance sheet date, with the exception of the equity of consolidated sub-sidiaries, which has been translated at historicalexchange rates. Income and expense items havebeen converted at the average annual rates, withthe exception of depreciation. Depreciation hasbeen translated at the exchange rate on the bal-ance sheet date (year-end date), except for de-preciation of goodwill, which has been translatedat historical rates. Any translation differencesresulting from the use of different exchange ratesfor balance sheet items and the income statementhave been offset against shareholders’ equity in a manner not affecting the income statement.
The following exchange rates were used for cur-rency translation:
Year-end exchange rates Average annual exchange rates
2002 2001 2002 2001
USD 1.04750 0.88190 0.94540 0.89609
GBP 0.65350 0.60880 0.62872 0.62217
AUD 1.84980 1.73450 1.73819 1.73204
HKD 8.16910 6.87640 7.37380 6.98977
JPY 124.13000 115.70000 118.04232 108.66547
INR 50.18330 42.56900 45.93122 42.26897
CNY 8.62080 7.30010 7.86616 7.38466
KRW 1,247.51 1,158.07 1,174.358 1,151.34
CHF 1.45390 1.47990 1.46740 1.51094
SGD 1.81500 1.63260 1.69086 1.60416
8. Currency Translation
: Notes
Intangible assets acquired are stated at cost less theaccumulated, scheduled depreciation that is calcu-lated according to the straight-line method.
The item reported as goodwill in the amount of ¤ 24,531 K* under “Intangible assets” is a capitaliz-ed difference in assets resulting from capital con-solidation. Goodwill is generally amortized over aperiod of useful life between 4 and 15 years. BBI-TECH@MEDIT S.r.L., Milan, Italy, was consolidatedat January 1, 2002, for the first time. The goodwillof ¤ 564 K* yielded by the capital consolidation isamortized over a 15-year-period of useful life.
Costs incurred during the development of new pro-ducts and processes in the Biotechnology, Environ-mental Technology and Mechatronics Divisions are capitalized as internally generated intangibleassets only if the following conditions are met
: The internally generated asset is identifiable(e.g., software and new processes);
: It is probable that the asset will generate futureeconomic benefits; and
: The development costs of the asset can be mea-sured reliably.
In fiscal 2002, the development costs of ¤ 2,100thousand (previous year: ¤ 613 K*) were recognizedas assets. The capitalized development costs essen-tially covered the costs that were allocated to thestaff involved in the R & D effort, raw material and consumables used, outside services and directlyattributable overhead. Internally generated intan-gible assets are depreciated according to thestraight-line method over their useful life, whichusually does not exceed four years.
If an internally generated intangible asset may notbe recognized, the development costs are includedin the period in which they were incurred. Costsfor research activities are reported as expenses inthe period in which they were incurred.
Notes to the Individual Balance Sheet Items
9. Intangible Assets
Concessions, industrial property rights
and similar rightsas well as Capitalized
licenses for such development Paymentsrights and assets costs Goodwill on account Total
¤ in K* ¤ in K* ¤ in K* ¤ in K* ¤ in K*
Gross book values at Jan. 1, 2002 9,151 1,426 33,591 93 44,261
Currency translation – 167 0 0 0 – 167
Change in the number of companies consolidated 9 0 564 0 573
Additions 608 2,100 1,441 245 4,394
Disposals 444 0 0 0 444
Transfers 86 0 0 – 83 3
Gross book values at Dec. 31, 2002 9,243 3,526 35,596 255 48,620
Depreciation | amortization at Jan. 1, 2002 5,853 189 8,314 0 14,356
Currency translation – 135 0 0 0 – 135
Change in the number of companies consolidated 3 0 38 41
Depreciation | amortization in 2002 1,583 442 2,713 0 4,738
Disposals 362 0 0 0 362
Transfers – 19 0 0 0 – 19
Depreciation | amortization at Dec. 31, 2002 6,923 631 11,065 0 18,619
Net book values at Dec. 31, 2002 2,320 2,895 24,531 255 30,001
Net book values at Dec. 31, 2001 3,298 1,237 25,277 93 29,905
* K = thousand(s)
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The item property, plant and equipment is report-ed at cost or at cost of conversion, and if subjectto depreciation, is depreciated as scheduled. Thestraight-line method is used to standardize thedepreciation reported in the consolidated financialstatements. The cost of conversion covers fullcosts. Interest on borrowings are not capitalized.
The Sartorius Group leases its filtration systemsand equipment to third parties within the scopeof operating leases pursuant to IAS 17, Leases. Wehave two basic types of leasing contracts, whichcan be adapted to meet the individual require-ments of the lessee.
Here, we distinguish between a regular leasingcontract that merely covers a specific number offiltration modules as the initial consumables sup-plied. This means that replacement modules areordered through our spare part business. In addi-tion, we offer a "global filtration policy” in whichreplacement modules are also an integral part of the contract. Our leasing business essentiallycovers Italy, France, Spain and Germany. In theyear under review, we received lease payments of¤ 2,385 K*, compared with ¤ 1,966 K* the previousyear. For 2003, the expected leasing payments for existing leasing contracts are ¤ 2,341 K*, andfor 2003 to 2007, a total of ¤ 4,386 K*.
10. Property, Plant and Equipment
Land and Payments onleasehold rights Other account relating
and improvements, equipment, to plant andincluding Technical factory and equipment and
buildings on third equipment and Leasing of office constructionparty land machinery equipment equipment in progress Total
¤ in K* ¤ in K* ¤ in K* ¤ in K* ¤ in K* ¤ in K*
Gross book values at Jan. 1, 2002 90,910 51,319 5,070 84,356 10,033 241,688
Currency translation – 1,066 – 1,680 0 – 1,707 – 23 – 4,476
Change in the number of companies consolidated – 2,119 – 1,473 0 – 16 – 37 – 3,645
Additions 9,484 11,956 20 6,889 1,059 29,408
Disposals 714 1,891 68 10,020 265 12,958
Transfers 439 10,784 0 – 1,355 – 9,871 – 3
Gross book values at Dec. 31, 2002 96,934 69,015 5,022 78,147 896 250,014
Depreciation | amortization at Jan. 1, 2002 17,783 32,480 789 52,948 0 104,000
Currency translation – 358 – 1,124 0 – 1,185 0 – 2,667
Change in the number of companies consolidated – 1,073 – 620 0 – 37 0 – 1,730
Depreciation | amortization in 2002 3,086 4,994 349 9,577 0 18,006
Disposals 498 1,791 29 9,478 0 11,796
Transfers 125 1,087 0 – 1,193 0 19
Depreciation | amortization at Dec. 31, 2002 19,065 35,026 1,109 50,632 0 105,832
Net book values at Dec. 31, 2002 77,869 33,989 3,913 27,515 896 144,182
Net book values at Dec. 31, 2001 73,127 18,839 4,281 31,408 10,033 137,688
: Notes
* K = thousand(s)
Depreciation of fixed assets is based on thefollowing periods of useful life:
Software 2 – 5 years
Goodwill 4 – 15 years
Buildings 15 – 50 years
Machinery 5 – 15 years
Factory and office equipment 3 – 13 years
During the current business year, depreciation ofintangible assets and property, plant and equip-ment was ¤ 22,744 K* (previous year: ¤ 20,098 K*).The rise in scheduled depreciation is a consequenceof the increased investing activities of the pastyears.
We elected to apply the option for presentinggovernment grants related to assets under IAS 20.Therefore, government grants are reported as in-come under the “Special item for investment allow-ance for fixed assets.” This special item is recog-nized over the useful lives of the subsidized assets.
In fiscal 2002 we entered an item of ¤ 2,556 K* tothe liabilities according to the IAS 20.24 forgovernment grants received from the German sup-port program for improvement of the regionaleconomic structure (“Verbesserung der regionalenWirtschaftsstruktur“). This item was retransferred inthe amount of ¤170 K with an effect on the incomestatement.
Impairment of Assets
The book values (carrying of amounts) of property,plant, and equipment, as well as intangible assetsare examined at each balance sheet date for indi-cations that an asset might be impaired, pursuantto IAS 36, Impairment of Assets. If an asset is im-paired, the recoverable amount of the asset isestimated, in order to determine the amount ofthe potential depreciation.
In the event the individual asset’s recoverableamount cannot be estimated, the recoverableamount of the asset’s cash-generating unit (CGU)is estimated.
If the estimated recoverable amount of an asset (ora cash-generating unit) goes below its book value(carrying amount), unscheduled depreciation ismade on the recoverable amount. If the causes ofthe asset impairment are removed, the book valueof the asset (the CGU) is credited to the newlyestimated recoverable amount in a manner recog-nized in net profit. However, the book value in-crease is limited to the value that the asset (orCGU) would have had if no asset impairment losswould have been assessed in previous years.
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Investments in affiliated companies, participatinginterests, and securities as fixed assets are mea-sured at cost because no active market exists forthese shares and securities. It is not practical toestimate the fair value of these shares and couldonly be done so at an unreasonably high cost. The other financial assets are accounted for at cost,unless they have to be reported at a lower valueon the balance sheet date.
The other financial assets are accounted for atcost, unless they have to be reported at a lowervalue on the balance sheet date. For a list of thecompanies consolidated and ownership percentages,please refer to “Scope of Consolidation, MajorAffiliates and Ownership.”
11. Financial Assets
Investments Securitiesin affiliated Participating as fixed assets
companies interests and other loans Total¤ in K* ¤ in K* ¤ in K* ¤ in K*
Gross book values at Jan. 1, 2002 1,845 58 306 2,209
Currency translation 0 0 – 3 – 3
Change in the number of companies consolidated 0 1,611 – 128 1,483
Investments 1,048 70 238 1,356
Disposals 1,323 0 14 1,337
Transfers 0 0 0 0
Gross book values at Dec. 31, 2002 1,570 1,739 399 3,708
Depreciation | amortization at Jan. 1, 2002 308 0 12 320
Depreciation | amortization in 2002 14 0 0 14
Disposals 0 0 0 0
Depreciation | amortization at Dec. 31, 2002 322 0 12 334
Net book values at Dec. 31, 2002 1,248 1,739 387 3,374
Net book values at Dec. 31, 2001 1,537 58 294 1,890
: Notes
* K = thousand(s)
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Raw material and 18,091 20,534consumables used
Work in progress 22,920 25,812
Finished goods and 34,452 39,088merchandise
Payments on account 3,091 10,032
Payments received – 8,461 – 19,339on account of orders
70,093 76,127
Raw material and consumables used, includingmerchandise, are reported under “Inventories” ataverage cost. For raw material and consumablesused, the fixed valuation method is applied tosome extent.
Finished goods and work in progress, except for thepart attributable to customer-specific constructioncontracts, are reported at cost of conversion. Thiscost includes direct costs, which can be allocatedto these materials, and the appropriate portion of production and materials handling overhead atnormal depreciation, provided that this impair-ment of value is caused by production. Interest onborrowings is not offset.
Lower net realizable values are recognized by de-preciation. The net realizable value represents theestimated selling price in the ordinary course ofbusiness less the estimated costs of completion andthe estimated costs necessary to make the sale.Where inventory risks exist, such as the risk of re-duced shelf life as a result of storage periods orlimited usability, inventories are marked down ac-cordingly. At year-end December 31, 2002, inven-tories that were recognized at net realizable valuesare reported in the amount of ¤ 5,807 K.
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Trade receivables 97,120 103,749
Receivables from 2,506 3,611affiliated companies
Receivables from companies 898 0in which investments are held
Other assets 13,312 15,727
113,836 123,087
Of which due in more than one year:
Trade receivables 197 155
Other assets 1,390 733
1,587 888
Trade and other receivables are reported so thatall discernable risks are covered. Any value adjust-ments are oriented toward the actual credit risk.
Customer-specific construction contracts are rec-ognized using IAS 11, Construction Contracts,based on the percentage of completion method, ina manner affecting the income statement. Theamount requiring capitalization is reported underthe liabilities, while an equal amount is recordedas “sales revenue.“ The stage of completion corre-sponds to the partial performance rendered by theGroup as of the balance sheet date, and is equalto the ratio of expenses accrued prior to thebalance sheet date to the expected total expense(Cost to Cost Method). Expected contracts lossesare to be taken into account through valueadjustments. Revenues fixed by contract are definedas contract revenues. As of December 31, 2002,trade receivables include receivables of ¤10,688 K*(previous year: ¤4,720 K) from the application ofthe percentage of completion method.
13. Trade and Other Receivables
12. Inventories
* K = thousand(s)
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Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Other securities 9 12
In accordance with IAS 12, Income Taxes, deferredtaxes are measured using the balance sheet liabili-ty method with respect to temporary differences,which result from differences between the Germancommercial law book value of assets and debt inthe annual financial statements and the correspond-ing value used for assessing taxable profits. Deferredtaxes on the level of the individual companies as well as those resulting from consolidation arerecognized in this manner.
Tax liabilities are recognized for all taxable tem-porary differences and are reported separately asdeferred taxes on the liabilities side of the balancesheet. Deferred tax assets are recognized if it is probable that taxable profits will be available infuture, against which the deductible temporarydifference can be used. Deferred taxes are not rec-ognized in particular if the temporary differenceresults from goodwill or negative goodwill result-ing from capital consolidation.
Deferred taxes are not recognized in particular ifthe temporary difference results from goodwill or negative goodwill yielded by capital consol-idation.
Deferred taxes are measured based on the taxrates expected when the temporary differences arerealized or expected. In Germany, the Tax ReductionAct took effect in October 2000, with the conse-quence that the corporation tax rate for retainedand distributed profits was uniformly reduced to25 %. Taking into account the 5.5 % solidarity sur-charge as well as the average Group trade incometax rate, the tax rate used to calculate deferreddomestic taxes is thus approx. 40.0 %.
The assets resulting from future tax relief developedas follows during fiscal 2002:
Deferred taxeson losses
carried forward Pension benefits Other Total¤ in K* ¤ in K* ¤ in K* ¤ in K*
Balance at Jan. 1, 2002 7,118 1,622 9,216 17,956
Affecting the income statement in the fiscal year 2,589 292 251 3,132
Currency translation differences – 308 0 – 30 – 338
Balance at Dec. 31, 2002 9,399 1,914 9,437 20,750
14. Securities
15. Deferred Taxes
: Notes
* K = thousand(s)
On the balance sheet date, the Group had unusedtax loss amounts carried forward of ¤ 51 million(2001: approx. ¤ 47 million) to be deducted fromfuture profits. A deferred tax amount of approx. ¤ 27 million (2001: approx. ¤ 18 million) was re-ported to cover these losses.
The increase in deferred taxes can be partly attrib-uted to the fact that the business development inthe current fiscal year and restructurings resultedin a different assessment concerning the realiza-bility of tax loss amounts carried forward and intemporary differences from accounting approachesfor tax balance sheet purposes (cf. Section 33).Concerning the remaining losses to be carried for-ward, no deferred tax amounts were realizedbecause of the lack of foreseeability of future prof-its.
16. Prepaid Expenses
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Other prepaid expenses 1,911 3,910
Equity
The development of the Sartorius Group’s equityin 2001 and 2002 is presented in the Group State-ment of Changes in Equity.
Sartorius AG’s capital stock is divided into 9,360,000bearer-type ordinary shares and 9,360,000 non-voting preference shares, each having a calculatedpar value of ¤ 1. The non-voting preference sharesyield a 2 % higher dividend than do the ordinaryshares.
The development of the issued capital is presentedin the Group Statement of Changes in Equity.
Sartorius AG exercised the authority granted atthe Annual Shareholders’ Meeting of June 21, 2000,to repurchase treasury shares in the amount of ¤ 16,082 K* pursuant to Section 71, Subsection 1,No. 8, of the German Stock Corporation Law.According to Interpretation SIC 16, treasury sharesmust be deducted from equity.
These shares are held in particular as currency forfuture acquisitions of companies.
From October 27, 2000, to the reporting date,831,944 ordinary shares were repurchased at anaverage price of ¤ 11.27 and 840,983 preferenceshares at an average price of ¤ 7.98. This corre-sponds to ¤ 1,673 K* or 8.9 %, of the company’sissued capital. In fiscal 2002, no treasury shareswere purchased.
These shares were deducted from the issued capitaland capital reserves.
The prepaid expenses reported for the previousinclude capitalized stock market launch expensesof approx. ¤ 0.9 million, which were completelywritten off.
17. Issued Capital
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116117
18. Capital Reserves
The development of capital reserves is shown in the ”Group Statement of Changes in Equity.”
19. Earnings Reserves and Retained Profits
The development of the earnings reserves and net profit is described in the ”Group Statement of Changes in Equity.”
20. Provisions
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Pension provisions 25,685 23,985and similar obligations
Tax provisions 5,194 7,703
Provisions for deferred taxes 13,066 11,533
Other provisions 12,978 10,440
56,923 53,661
Pension provisions and similar obligations havebeen recognized in the consolidated financial state-ments of Sartorius AG in accordance with actu-arial principles. IAS 19, Employee Benefits, stipu-lates the Projected Unit Credit Method as themethod of measurement. In addition to knownpensions and expectancies, this expected cashvalue method takes into account future wage andpension increases. Actuarial gains and losses mustbe recognized as affecting net income.
* K = thousand(s)
In addition to the General Pension Plan, the pen-sion provisions of Sartorius AG include individualcommitments to active and former managementboard members and executives. Since the conclu-sion of the General Pension Plan in 1983, suchpension provisions exclusively affect employeeswhose employment commenced prior to January1, 1983.
The amount reported on the balance sheet forGroup obligations with respect to pension plans iscomposed as follows:
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Present value of the obligations 25,725 23,975
Unrecognized 40 – 10actuarial losses | gains (–)
Present value of the pension 25,685 23,985obligations
These obligations are based on the following actu-arial assumptions:
2002 2001¤ in K* ¤ in K*
Discount rate 6.0 % 6.0 %
Future salary increases 3.0 % 3.0 %
Future pension increases 2.0 % 2.0 %
: Notes
The amounts reported in the income statementunder the items “cost of sales, distribution costs,research and development costs and general ad-ministrative expenses“ consist of the following:
2002 2001¤ in K* ¤ in K*
Current service cost 452 464
Interest cost 1,448 1,362
Amortization of actuarial – 158 – 158losses | gains (–)
1,742 1,668
According to IAS 19.92, actuarial gains and lossesare recognized in full as affecting net income.
Provisions for deferred taxes developed as follows:
¤ in K*
Balance at Jan. 1, 2002 7,703
Currency translation – 252
Consumption 2,767
Release 770
Addition 1,280
Balance at Dec. 31, 2002 5,194
Development of deferred tax liabilities:
¤ in K* Application of the percentage of
Differences in Capitalized completion method useful lives in development for construction
the fixed assets costs contracts Other Total
Balance at Jan. 1, 2002 8,410 504 291 2,328 11,533
Affecting net income in the fiscal year 283 654 223 404 1,564
Effect of currency differences – 31 – 31
Balance at Dec. 31, 2002 8,662 1,158 514 2,732 13,066
Other provisions developed as follows during the financial year:
¤ in K* Payments toelder employees
to offset reducedWarranties work hours Other Total
Balance at Jan. 1, 2002 5,080 2,754 2,606 10,440
Currency translation – 358 – 3 – 66 – 427
Change in the number of companies consolidated – 10 – 110 – 120
Consumption 2,773 1,470 4,243
Release 708 35 356 1,099
Addition 3,210 1,266 2,298 6,774
Transfers 184 97 1,372 1,653
Balance at Dec. 31, 2002 4,625 4,079 4,274 12,978
In measuring the other provisions, all recognizableliabilities that are based on past business transla-tions or past events and are of uncertain timing oramount are recognized. Provisions are consideredonly if they result from a legal or constructiveobligation with respect to third parties. Long-termprovisions are recognized at their present value onthe balance sheet date. The long-term provisionsreported include, in particular, provisions for
employee anniversaries and for payments to elderemployees to offset reduced work hours. The pro-visions for the latter have a term of up to five years.
Transfers result from reclassifications of liabilitiesinto “Other provisions.”
Other provisions include staff costs of ¤ 3,246 K*.
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The following amounts are apportionable to theother liabilities:
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
– Taxes 6,323 4,864
– Liabilities relating to 4,373 6,327social security
Sartorius AG has committed itself to an affiliatedcompany to provide capital resources in the amountof ¤ 0.5 million.
* K = thousand(s)
Liabilities are reported as the amounts repayable.
Because of the general development of interestrates in Germany, Sartorius AG reduced its short-term liabilities to banks and has incurred liabilitieswith longer terms.
21. Liabilities
This item consists of the following:
Remaining Remaining Remaining RemainingBalance at term of more term of up to Balance at term of more term of up to
Dec. 31, 2002 than five years one year Dec. 31, 2001 than five years one year¤ in K* ¤ in K* ¤ in K* ¤ in K* ¤ in K* ¤ in K*
Loans 309 309 0 599 365 87
Liabilities to banks 147,079 25,659 91,088 145,218 6,239 132,070
Payments received on account of orders 862 0 862 767 0 767
Trade payables 24,021 0 24,021 27,189 0 27,189
Payables to companies in which 62 0 62 0 0 0investments are held
Liabilities on bills accepted and drawn 0 0 0 72 0 72
Payables to affiliated companies 219 0 219 271 0 271
Other liabilities 32,395 0 32,395 41,175 0 41,175
204,947 25,968 148,647 215,291 6,604 201,631
22. Contingent Liabilities
: Notes
Financial instruments include assets and liabilitiesas well as contractual claims and liabilities concern-ing the exchange and / or transfer of such assets.They are divided into non-derivative and derivativefinancial instruments.
Non-derivative financial instruments includeaccounts receivable and liquid assets on the assetside of the balance sheet, and, for the most part,liabilities on the liabilities side. The portfolio ofnon-derivative financial instruments is disclosedon the balance sheet. The credit risk for the Groupresults primarily from trade receivables. Recogni-zable credit risks are accounted for by value adjust-ments. We otherwise refer to our comments onfinancial risks in the Group Management Report.This also applies to the management of existingrisks concerning changes in interest.
In the course of its business operations, the SartoriusGroup is exposed to currency risks, which are hedgedusing derivative financial instruments. These in-struments are not used for speculative purposes.The contractors of such financial transactions areexclusively banks with prime credit ratings. The transactions are conducted centrally through Sartorius AG within defined limits, with strictseparation of transactions, processing and review.
Derivative financial instruments are initially mea-sured at acquisition cost and at fair value on sub-sequent balance sheet dates. The changes in valueof the derivative financial instruments are to berecognized in the income statement on the balancesheet date. If the derivative financial instrumentsserve to hedge against cash flow risk and a quali-fied hedging relationship exists based on the cri-teria of IAS 39, the value changes are recordeddirectly in the shareholders’ equity. The amountsrecorded in the shareholders’ equity are includedin the income statement in the same period as the hedged transactions affect this result.
Besides provisions, debts and contingent liabili-ties, our other financial obligations consist of thefollowing:
Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K*
Rental and leasing contracts
– due in the financial year 2003 6,903
(Previous year: due in the 7,837financial year 2002)
– due in any one financial year 10,215from 2004 to 2007
(Previous year: due in any one 14,069financial year from 2003 to 2006)
Future exchange transactions 0 8,558for hedging of commodity trade
23. Other Financial Obligations
24. Financial Instruments
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Although the derivative financial instruments existing on the balance sheet date served to hedge against currency risk, no qualified hedgingrelationship based on the criteria of IAS 39 wascreated.
Notes to the Income Statement
25. Sales Revenue
Sales revenue is recognized at the time the riskhas passed to the purchaser. An exception is con-tract revenue from customer-specific constructioncontracts, which are accounted for according tothe percentage of completion method.
In 2002, the Sartorius Group increased revenue 6 %to the ¤ 476,529 K* (previous year: ¤ 449,256 K*) Adjusted for the effects of changes in the foreignexchange rates, consolidated growth was 8 %.
Of this revenue, ¤ 6,060 K* (previous year: ¤ 3,187K*) accounts for customer-specific constructioncontracts, the revenue and expenses of which arerecognized under the percentage of completionmethod.
Sales revenue, which is broken down by businessand geographical segments, consists of the follow-ing:
No derivative financial instruments existed as ofthe balance sheet date of the current fiscal year:
At cost Fair value
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001¤ in K* ¤ in K* ¤ in K* ¤ in K*
Future exchange transactions
JPY 0 0 0 33
0 0 0 33
Biotechnology Mechatronics Total¤ in K* ¤ in K* ¤ in K*
Germany 38,650 51,089 89,739
All other countries 215,951 170,839 386,790
254,601 221,928 476,529
: Notes
This item reports the costs of products sold andthe acquisition costs of merchandise sold.
Distribution costs pertain, in particular, to thecosts of the sales and marketing organization,distribution, advertising and market research.
Besides the directly allocatable expenses, such asraw material and consumables used, staff costsand energy expenses, the cost of sales also includesoverhead that can be allocated to the manufac-turing area and the depreciation that can be allo-cated.
This item reports the costs for research and pro-duct and process development. Research anddevelopment costs are recognized as assets, pro-vided that they fully meet the prerequisites of IAS38 for recognition of intangible assets.
Above all, this item includes staff costs and thecost of materials of the general administrativearea.
Depreciation on research and development costsrecognized as assets is also indicated in this item.
26. Cost of Sales
27. Distribution Costs
28. Research and Development Costs
29. General Administrative Costs
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2002 2001¤ in K* ¤ in K*
Income from currency translation 3,651 4,420
Income from write-down 2,810 216of lump-sum valuation adjust- ments on receivables
Income from writing back 1,423 667provisions
Income from valuation of derivative 0 1,175financial instruments
Other income 2,474 3,826
10,358 10,304
2002 2001¤ in K* ¤ in K*
Expenses due to currency translation 4,544 3,240
Restructuring costs 2,364 0
Itemized allowance for bad debts 2,350 2,784and lump-sum valuation adjustmenton receivables
Legal and consulting fees 1,522 0
Other expenses 6 4,770
10,786 10,794
For further details concerning the non-periodicincome contained in the amounts listed on the left,please refer to Section 35.
The restructuring costs are essentially expenses incurred from restructuring measures at GlobalWeighing Technologies GmbH, Hamburg, and Dr.Hans Boekels GmbH & Co., Aachen, Germany.
The legal and consulting fees refer to the retransferof Hanover-based Vivascience AG’s IPO expensesthat were initially reported as assets.
30. Other Operating Income
31. Other Operating Expenses
2002 2001¤ in K* ¤ in K*
Income from securities, other 442 640interest and similar income
– of which from affiliated companies 31 50
Interest and similar expenses 6,446 5,938
– of which from affiliated companies 0 0
– 6,004 – 5,298
The increase in interest and similar expenses is inconnection with financing of the “Plant 2001.”
32. Interest
: Notes* K = thousand(s)
2002 2001¤ in K* ¤ in K*
Expected tax expense (40 %) 2,737 2,889
Difference from the Group average – 1,600 – 1,504income tax rate
Expenses not deductible for 828 1,896tax purposes
Amortization of goodwill 967 822
Losses for which no deferred 225 607taxes were accrued
Adjustments concerning the – 1,145 0usability of tax loss carryforwardsand temporary differences fortax purposes
Tax-free income – 595 – 1,235
Income tax for previous years – 438 0
Withholding tax 1,072 277
Other 344 – 152
2,395 3,600
Effective tax rate 34,98 % 49,84 %
The item “Adjustments concerning the usability oftax loss carryforwards and temporary differencesfor tax purposes” are the tax effects that resultfrom revaluation of these components of deferredtaxes because of newer information.
2002 2001¤ in K* ¤ in K*
Current income taxes 4,267 3,565
Deferred taxes – 1,872 35
2,395 3,600
As a matter of principle, domestic income taxes arecalculated at 40 % of the estimated taxable profitfor the fiscal year. Income generated outside Ger-many is taxed at the particular rates that are validin the corresponding country.
If we assume an average income tax rate of 40%,which is used for accruing deferred taxes in princi-ple, the following describes the difference betweenthe tax expense to be expected from this and theincome tax expenses reported for the particularbusiness year:
33. Income Tax Expense
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According to IAS 33, Earnings per Share, the earn-ings per share for each class must be determinedseparately. The basic earnings per share (basic EPS)are calculated on the basis of the number of sharesoutstanding during the period. Net profit afterminority interest was divided according to the ratioof the weighted number of ordinary shares topreference shares. The diluted earnings per share(diluted EPS) were not calculated because thereare no option or conversion rights to be exercisedon Sartorius shares.
The consolidated financial statements were pre-pared under the assumption of the continuedexistence of the company.
Up to the conclusion of the preparation of theconsolidated financial statements, there were nofurther events other than the ones listed below:
: In February 2003, an alliance agreement was signed with Alfa Laval, a worldwide leader in thefields of separation technology, heat transferand fluid handling and based in Lund, Sweden.This agreement creates a strong global positionfor the two companies in the field of beer filtra-tion and the prerequisites for the further devel-opment of crossflow filtration technology, aninnovative alternative to the traditional kiesel-guhr filtration of beer.
Alfa Laval will participate in the global market-ing of Sartorius technology for cold sterilizationbeer upstream of filling within the context ofthe alliance agreement. This equipment has alreadyproved to be a great success in Asia, especially in China and Japan.
: On the proviso that no objections are raised bythe German anti-trust authorities, Sartorius AGjoined Diessel GmbH & Co. as an additional limitedpartner. Sartorius AG thereby holds a 38.88 %stake in the process systems manufacturer Dies-sel GmbH & Co.
Declaration According to Section 314, Subsec-tion 1, Sentence No. 8 of the German Commer-cial Code (HGB)The declaration prescribed by Section161 of theGerman Stock Corporation Law was submitted onDecember 12, 2002, and made available to theshareholders of Sartorius AG on the company’shome page at the website “www.sartorius.com.”
2002 2001¤ in K* ¤ in K*
Ordinary shares
Basis for calculating basic earnings 1,995,057 1,530,688per ordinary share (net profit after minority interest)
Weighted average number 8,528,056 8,700,757of shares outstanding
Earnings per ordinary share 0.23 0.18
Preference shares
Basis for calculating basic earnings 1,992,943 1,513,312per preference share (net profit after minority interst)
Weighted average number 8,519,017 8,601,988of shares outstanding
Earnings per preference share 0.23 0.18
Treasury shares (own shares) are not to be allowedfor in calculating the average number of sharesoutstanding.
34. Earnings per Share
35. Other Information
: Notes
Raw Material and Consumables UsedThis item consists of the following:
2002 2001¤ in K* ¤ in K*
Expenses for raw materials 148,869 138,595and consumables used, and of purchased merchandise
Cost of purchased services 9,061 5,602
157,930 144,197
Staff CostsThis item can be broken down into the following:
2002 2001¤ in K* ¤ in K*
Wages and salaries 147,064 146,200
Social security 27,714 23,782
Expenses for retirement benefits 4,554 3,487and pensions
179,332 173,469
Number of EmployeesAverage workforce employed during the fiscal year:
2002 2001
Biotechnology | 1,646 1,560Environmental Technology
Mechatronics 2,132 2,159
3,778 3,719
Proposal for Appropriation of Profits The Executive Board will suggest to the sharehold-ers at the Annual Meeting that the annual netprofit of ¤ 4,430,610.73 reported for Sartorius AGbe appropriated as follows:
¤ in K*
Payment of a dividend of ¤ 0.24 2,046,733.44per ordinary share
Payment of a dividend of ¤ 0.26 2,214,944.42per preference share
Unappropriated profit carried forward 168,932.87
4,430,610.73
Goettingen, March 2003
Sartorius AktiengesellschaftThe Executive Board
Members of the Supervisory and Executive BoardsThe members of the Supervisory and ExecutiveBoards are listed on pages 128|129.
Total Remuneration of the Supervisory Board and the Executive Board Members
2002 2001¤ in K* ¤ in K*
Remuneration of the members 169 117of the Supervisory Board
Remuneration of the members 1,780 1,435of the Executive Board
Of which variable 942 802
Of which fixed 838 671
Remuneration of former managing 357 323directors, Executive Board membersand their surviving dependents
Retirement benefits and pension 3,833 3,816provisions for former Sartorius AG managing directors and Executive Board members, including their surviving dependents
Non-Periodic Income and ExpensesNon-periodic income and expenses are items thatdo influence current results, but concern changesin transactions of the past years. Essentially, these are reported in other operating income andexpenses.
During the financial year, other income that canbe allocated to other periods was ¤ 4,233 K *.Expenses attributable to other periods amounted to¤5,300 K* and included, among others, restructuringcosts of ¤ 2,364 K* and the retransfer of Hanover-based Vivascience AG’s IPO expenses that werereported as assets in the previous year. Essentially,non-periodic income includes income from retrans-fer of provisions (¤ 1,423 K*) and income fromvalue adjustments of ¤ 1,340 K* for certain foreignreceivables. Because of estimates of the value adjustment requirement, which were wrong in re-trospect from today’s perspective, the value adjust-ments made during the previous years could beretransferred in fiscal 2002.
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: Auditor’s Report
We have audited the consolidated year-endfinancial statements, which consist of the consoli-dated balance sheet, income statement, Groupstatement of changes in equity, cash flow state-ment and notes to the financial statements andwhich Sartorius Aktiengesellschaft (AG) prepared,for the business year from January 1 throughDecember 31, 2002. These statements and theircontent are the responsibility of the ExecutiveBoard of the parent corporation, Sartorius AG. Ourresponsibility is to express an opinion on the con-solidated financial statements based on our auditto determine whether these conform to the Inter-national Accounting Standards (IAS).
We conducted our audit in accordance with theGerman accounting regulations, taking into accountthe principles of proper auditing established bythe German Institute of Independent Auditors,“Institut der Wirtschaftsprüfer.” Those principlesrequire that we plan and perform the audit toobtain reasonable assurance about whether theconsolidated financial statements are free ofmaterial misstatement. An audit includes examining,on a test basis, evidence supporting the amountsand disclosures in the consolidated financial state-ments. An audit also includes assessing the ac-counting principles used and significant estimatesmade by the Executive Board as well as evaluatingthe overall presentation of the consolidated year-end financial statements. We believe that ouraudit provides a reasonable basis for our opinion.
In our opinion, the consolidated year-end financialstatements present fairly, an all material respects,the net worth, financial position, earnings andcash flows of the Sartorius Group in conformitywith the IAS.
Our audit that covered the management reportprepared by the Executive Board on the situationof the company and the Group for the financialyear from January 1 to December 31, 2002, didnot result in any objections. In our opinion, themanagement report on the economic situation ofthe company and of the Group provides an overalltrue and fair view of the Group’s situation, andaccurately presents the risks of future development.In addition, we confirm that the consolidatedfinancial statements and the management reporton the situation of the parent corporation and the Group for the financial year from January 1 toDecember 31, 2002, fulfill the prerequisites forexempting Sartorius AG from preparing consoli-dated financial statements and a Group manage-ment report under German law.
Hanover, March 7, 2003
Deloitte & Touche GmbHWirtschaftsprüfungsgesellschaft,independent auditing company
Plath, Auditor
Overbeck, Auditor
Independent Auditors’ Report
Executive Board
Prof. Dr. Utz ClaassenGraduate Economist (Dipl.-Ökonom)Chairman and Group CEO since April 1, 1997Born May 7, 1963Hanover, GermanyAppointed until Dec. 31, 2004Will remain in this position until April 30, 2003
Olaf GrotheyFormer Employees’ Council ChairmanMember and Executive for Labor Relations sinceJune 19, 2002Born Jan. 22, 1960 Goettingen, GermanyAppointed until June 19, 2005
Dr. Eric JanssensGraduate Chemical Engineer (Dipl.-Chemiker)Member since Dec. 7, 2001Born Sept. 21, 1955Melsungen, GermanyAppointed until Dec. 7, 2004
Dr. Joachim KreuzburgGraduate Engineer (Dipl.-Ingenieur)Member since Nov. 11, 2002Spokesman since May 1, 2003 Born April 22, 1965Hanover, GermanyAppointed until Nov. 11, 2005
Dr. Guenther MaazGraduate Physicist (Dipl.-Physiker)Member since Nov. 11, 2002Born Sept. 13, 1949Uslar, GermanyAppointed until Nov. 11, 2005
Supervisory Board
Prof. Dr. Dres. h.c. Arnold PicotGraduate in Business Economics (Dipl.-Kaufmann)Chairman until Sept. 3, 2002, and since Sept. 12, 2002Member from Sept. 4 to 11, 2002Executive Director of the Institute of OrganizationFaculty of Economics at the Ludwig-MaximilianUniversity in MunichGauting, Germany
Gerd-Uwe BoguslawskiGraduate Social Manager (Dipl.-Sozialwirt)Vice Chairman since Sept. 12, 2002Member since Sept. 4, 2002Executive Director of the German Metalworkers’Union, IG-MetallGoettingen, Germany
Dr. Dirk BastingGraduate Chemical Engineer (Dipl.-Chemiker)President of the Executive Board of Lambda Physik AGGoettingen, Germany
Annette BeckerBusiness Administrator (Kauffrau)Member since Sept. 4, 2002Exempted member of the Employees’ Council, Sartorius AG Goettingen, Germany
Christiane BennerGraduate Sociologist (Dipl.-Soziologin)Member since Sept. 4, 2002Specialist for Information TechnologyRegional Management of the German Metalworkers’ Union IG-MetallHanover, Germany
Uwe BretthauerGraduate Engineer (Dipl.-Ingenieur)Employees’ Council Chairman at Sartorius AG since Jan. 14, 2002 Former Employees’ Council Vice Chairman Goettingen, Germany
Olaf GrotheyFormer Employees’ Council Chairman Member until June 18, 2002Goettingen, Germany
Dr. Erwin HardtGraduate in Business Economics (Dipl.-Kaufmann)Vice Chairman until Sept. 3, 2002Member since Sept. 3, 2002Feldafing, Germany
Executive and Supervisory Boards | MandatesRegular Members during Fiscal 2002 *
Michel WarterMember until April 30, 2002 Born Nov. 11, 1945E.S.C.P.CPA, ParisParis, France
: Executive and Supervisory Boards
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Prof. Dr. Gerd KriegerLawyerMember since Sept. 4, 2002Duesseldorf, Germany
Rolf MichaelisGraduate Engineer (Dipl.-Ingenieur)Member since Sept. 4, 2002Vice Chairman of the Employees’ Council at Sartorius AG since Jan. 14, 2002Goettingen, Germany
Prof. Dr. rer. nat. Dr.-Ing. E.h. Heribert OffermannsGraduate Chemical Engineer (Dipl.-Chemiker)Honorary Professor at the Johann-Wolfgang-Goethe University of Frankfurt am MainHanau, Germany
Hermann SchierwaterGraduate Political Economist (Dipl.-Volkswirt)Member from Sept. 5, 2002 to March 31, 2003Senior Vice President of Group Strategy, Market-ing and Corporate Communications, Sartorius AGGoettingen, Germany
Dr. Michael SchulenburgGraduate Engineer (Dipl.-Ingenieur)Member since Sept. 4, 2002Member of management at Cognis DeutschlandGmbH & Co. KG, DuesseldorfMettmann, Germany
Committees of the Supervisory Board
Personnel Committee(until Sept. 3, 2002)Prof. Dr. Dres. h.c. Arnold Picot (Chairman)Uwe Bretthauer (since March 12, 2002)Olaf Grothey (until March 11, 2002)Dr. Erwin Hardt
Executive Task Committee(since Sept. 12, 2002)Prof. Dr. Dres. h.c. Arnold Picot (Chairman)Gerd-Uwe BoguslawskiUwe BretthauerDr. Erwin Hardt
Audit Committee(since Sept. 12, 2002)Dr. Erwin Hardt (Chairman)Gerd-Uwe BoguslawskiUwe BretthauerProf. Dr. Dres. h.c. Arnold Picot
Conciliation Committee(since Sept. 12, 2002)Prof. Dr. Dres. h.c. Arnold Picot (Chairman)Gerd-Uwe BoguslawskiUwe BretthauerDr. Erwin Hardt
* information required according to Section 285,No. 10, of the German Commercial Code (HGB)
Mandates of the Executive Board Members*
Prof. Dr. Utz ClaassenChairman of the Supervisory Board of:– Vivascience AG, Hanover, Germany **On the Board of Directors of:– Sartorius North America, Inc., USA, Chairman **– Sartorius Ltd., Hong Kong, China **– Sartorius K.K., Japan **Member of the Beirat (Advisory Board) of:– Sartorius Systems Engineering GmbH,
Goettingen, Germany **Member of the Beirat (Advisory Board) of:– Otto Bock Holding GmbH & Co. KG, Duderstadt,
Germany ***– Gerling-Konzern, Cologne, Germany ***Member of the Bezirksbeirat (District AdvisoryBoard) of:– Deutsche Bank AG, Hanover, Germany ***
Olaf GrotheyMember of the Beirat (Advisory Board) of:– Sartorius Systems Engineering GmbH,
Goettingen, Germany **
Dr. Eric JanssensOn the Supervisory Board of:– Vivascience AG, Hanover, Germany **On the Board of Directors of:– Sartorius North America, Inc., USA **– Sartorius Corp., USA **– Sartorius Environmental Technology, Inc., USA**– B. Braun Biotech Inc., USA **– Sartorius India Pvt. Ltd., India **– Sartorius Malaysia Sdn. Bhd., Malaysia **Managing Director of:– Sartorius Systems Engineering GmbH,
Goettingen, Germany **On the Conseil de Surveillance (Supervisory Board) of:– Sartorius S.A., France
(President since Jan. 21, 2002) **On the Consiglio di Amministrazione (Board ofManagement) of:– BBITECH@MEDIT S.r.l., Italy, President **– Sartorius S.p.A., Italy **Gedelegeerd Bestuurder (Board of Management) of:– Sartorius Instruments, N.V., Belgium, Voorzitter **
Dr. Joachim KreuzburgMember of the Verwaltungsrat (AdministrativeBoard) of:– Sartorius Schweiz AG, Switzerland, President **
Dr. Guenther MaazOn the Board of Directors of:– Sartorius North America, Inc., USA **– Denver Instrument Company, USA **– Sartorius K.K., Japan **– Beijing Sartorius Instrument & System
Engineering Co. Ltd., China **Member of the Beirat (Advisory Board) of:– Denver Instrument GmbH, Goettingen,
Germany **– GWT Global Weighing Technologies GmbH,
Hamburg, Germany **– Dr. Hans Boekels GmbH & Co., Aachen,
Germany **
Michel WarterOn the Board of Directors of:– Sartorius K.K., Japan (until March 29, 2002) **
: Executive and Supervisory Boards
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Mandates of the Supervisory Board Members*
Prof. Dr. Dres. h.c. Arnold PicotMember of the Supervisory Board of:– Datango AG, Berlin, Germany, Chairman ***– Takkt AG, Stuttgart, Germany ***– Wunder Media GmbH, Munich, Germany,
Vice Chairman ***
Gerd-Uwe BoguslawskiMember of the Supervisory Board of:– Alcan Deutschland GmbH, Goettingen, Germany– Demag Cranes & Components GmbH, Wetter,
Germany
Dr. Dirk BastingNone
Annette BeckerNone
Christiane BennerNone
Uwe BretthauerNone
Dr. Erwin HardtNone
Prof. Dr. Gerd KriegerMember of the Supervisory Board of:– ARAG Lebensversicherungs-AG, Munich,
Germany ***– ARAG Krankenversicherungs-AG, Munich,
Germany ***
Rolf MichaelisNone
Prof. Dr. rer. nat. Dr.-Ing. E.h. Heribert OffermannsMember of the Supervisory Board of:– Innovectis (Innovative Technologies and R&D
Services) GmbH, Frankfurt am Main, Germany,Chairman ***
Hermann SchierwaterNone
Dr. Michael SchulenburgMember of the Supervisory Board of:– TÜV Rheinland Holding AG, Cologne, Germany ***Member of the Verwaltungsrat (AdministrativeBoard) of:– TÜV Rheinland Berlin Brandenburg e.V., Cologne,
Germany ***
* information required according to Section 285,No. 10, of the German Commercial Code (HGB)
** intragroup mandates*** external mandates
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Supplementary Information
Sartorius Microbalances
High-precision weighing of expensive ingredients
to an accuracy down to the seventh decimal
place: this is one of the outstanding performance
capabilities of Sartorius microbalances. They reg-
ister the weight of the smallest quantities
10,000 times more accurately than an individual
grain of sand weighs. Sartorius microbalances
are not only indispensable weighing instruments
for the pharmaceutical and biotechnology in-
dustries to ensure ultraprecise weighing; they
also help save costs.
April 29, 2003Annual press conferencein Goettingen, Germany
April 30, 2003DVFA investment analysts’ meetingin Frankfurt am Main, Germany
May 14, 2003Participation in the “International Prime MarketsConference-IPMC”in Frankfurt am Main, Germany
Mid-May 2003Three-month report 2003 to be published
June 18, 2003Annual Shareholders’ Meetingin Goettingen, Germany
Mid-August 2003Six-month report 2003 to be published
Mid-November 2003Nine-month report 2003 to be published
Financial Schedule
: Financial Schedule | Contacts
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Chief Financial Officer
Thomas HartwigPhone +49.551.308.3871Fax [email protected]
Treasury, Investor Relations & Management Accounting
Rainer LehmannVice PresidentPhone +49.551.308.4034Fax [email protected]
Andreas WiederholdPhone +49.551.308.1668Fax [email protected]
Corporate Communications
Petra KirchhoffVice PresidentPhone +49.551.308.1686Fax [email protected]
Sabine NiebchPhone +49.551.308.3702Fax [email protected]
Annual Report Coordination
Ursula MeisterPhone +49.551.308.1662Fax [email protected]
E-Mail Addresses for Information on Specific Topics
Biotechnology Division:[email protected] and Industrial Mechatronics: [email protected] Division / Bearing Technology:[email protected] Technology Division: [email protected]
External Contacts
The German business newspaper “Handelsblatt”offers you a free service: you can request the current Annual Report and the current InterimReports for Sartorius AG at:Phone +49.00.1814140Fax +49.800.8195570
Internet
News on the InternetOur Internet website will inform you at any timeabout the most recent topics and developments atSartorius AG and the Sartorius Group.
Home Pageswww.sartorius.comwww.acculab.comwww.bioscipro.comwww.boekels.comwww.denverinstrument.comwww.global-weighing.comwww.vivascience.com
Contacts
Biotechnology
AdsorptionThe reversible surface retention of solid, liquid or gas mole-cules, atoms or ions by a solid or liquid, as opposed toabsorption, the penetration of substances into the bulk ofthe solid or liquid.
BiomolecularUse of biomolecules.
BioprocessingA series of interlinked process steps for production of bio-logical products, above all in biotechnology. A typical pro-duction process is fermentation with a preliminary step forpretreatment of media, called “upstream processing”; thesteps after fermentation for obtaining a target substanceare referred to as “downstream processing”. Typical steps indownstream processing are cell harvesting, concentration,purification, and sterilization.
BiotechnologyA field of science that uses microbiological, biochemical and genetic engineering methods to alter cell cultures andenzymes, reengineers their metabolic physiology, thusmaking them available for use.
CapsulesReady-to-use filter units consisting of a filter housing with hose connectors and an incorporated filter cartridgefor connection to piping.
Casting machineSystem for manufacturing porous membranes. It usuallyconsists of an applicator for applying a casting solution(polymer) to a carrier belt (evaporation process) or to a drumthat is immersed in a bath containing specific substances(precipitation bath process), and of a dryer with a device forwinding the membrane material on rolls.
Cell cultureCulture media with various growth factors that optimallystimulate the growth of cells; these media are used to culturecells.
cGMPCurrent Good Manufacturing Practice. Principles for manu-facturing pharmaceuticals; they govern the quality standardsin the pharmaceutical industry.
Chemical compatibilityIn separation technology, the properties of materials that,when in contact with a product under operating conditions,do not result in any negative effects on a process.
Clean room productionProduction under defined ambient conditions. Parameters thatconceivably determine the manufacturing environmentinclude the particle concentration and the number of microbes,organic and inorganic contaminants, static electricity or aninert gas atmosphere.
Clinical phaseIn the clinical phase, new active ingredients are studied withrespect to their tolerance and effect. This phase serves toestimate the benefits versus the risks; in addition, it is alsoused to statistically validate the active ingredients’ effective-ness and to test their safety.
ConcentrationIn solutions, the mass, volume, or number of moles of solutepresent in proportion to the amount of solvent or totalsolution. This is accomplished by partially volatilizing a sol-vent or allowing it to partially evaporate.
CrossflowTerm taken from filtration technology. Instead of directlyflowing through a filter (static filtration), a liquid flows perpendicularly to the filter surface; this prevents filter block-age, resulting in a longer in-service life of the filter. Cross-flow is used primarily for purification and concentration.
DisposableA product for a single use.
ElutionThe process of removing adsorbed substances (called species)from solid adsorbents.
In membrane chromatography, solvents are used in whichthe eluting substances (eluants) have a sufficient solubility.The run-off from the chromatographic columns is called“eluate.”
FDAThe Food and Drug Administration of the USA is the U.S.governmental agency responsible for the areas of foods andbiotechnological, medical, veterinary, and pharmaceuticalproducts. The FDA is subdivided into various units, such as the CDER (Center for Drug Evaluation and Research) and the CBER (Center for Biologics Evaluation and Research).
FermentationTechnical process used to produce or transform intra- orextracellular substances with the help of microorganisms.
Filter cartridgesDesign of filter elements, primarily for process filtration, in which a very large filter area is made available in a smallspace by the pleated arrangement of the filter medium.
Filter porosity / Pore sizeIn membrane technology, the measure of the retention limitof a filter membrane.
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FluidA substance that flows, especially liquids and gases, in thefield of separation technology. Here, the particular proper-ties of the fluid product must be considered in the treat-ment of pharmaceutical products or beverages.
Generic drugs (also called “generics”)Medication that contains an active ingredient whose patenthas expired. The medication has the same composition as the preparation that is already available on the market, butis usually sold at a lower price. This medication usually isidentified by its short chemical name. Generics undergo thesame extensive testing and approval procedures as do theiroriginal counterparts.
GenomicsThe study of genes (genome = all the genetic material in the chromosomes) of a particular organism, with the goal ofhelping us to better understand diseases and to find newactive ingredients for diagnostics and therapy.
Integrity testTesting a membrane filter to ensure that it is intact. The mostcommonly used integrity tests are the diffision, pressurehold, bubble point and water intrusion tests (the latter isused only for gas filters).
ISO 9001/ DIN EN ISO 9001:2000Internationally recognized standard that contains require-ments and definitions for introducing and maintaining aquality (management) system.
Kieselguhr filtration = diatomaceous earth filtrationFiltering beer or mineral water using kieselguhr. Also knownas diatomaceous earth, this substance is made of diatomsconsisting of a skeleton of single-celled plant organisms –algae. The shape and portion of contiguous or disruptedcells determine the filtration effect.
KitReady-to-use set of utensils and / or working substances and a handbook or literature to perform specific tests.
Membrane AdsorbersSpecifically surface-modified, microporous membranes forchromatographic purification (see “Membrane chromatogra-phy”) of the active ingredients of pharmaceuticals, such asproteins and viruses, and for use in protein analysis.
Membrane chromatographySelective separation of mixtures of substances by adsorptionto specifically modified membranes (Membrane Adsorbers) ina flowing system.
Membrane (filter)Thin film or foil made of polymers; because of the porousstructure, this film can be used for filtration applications.
Membrane modificationEssentially, chemical treatment of membranes to give them application-specific properties (Membrane Adsorbertechnology).
MicrobialCaused or produced by microbes.
Molecular biologyOriginally the study of genetic structures and functions on a molecular basis. See “Genomics” and “Proteomics.”
Monoclonal antibodiesAntibodies (immune bodies) that are obtained from a singlecell line by cloning.
Pore spectrumNumber of available, standardized filter membranes ofvarious retention limits or cut-offs within a product family.
Preclinical phasePhase in which researchers focus on finding new active ingre-dients (screening). The search for a suitable active ingredientat the beginning of the development of a new medication.In the process, research laboratories test substances, syntheticcompounds and materials made of plants, bacteria and othernatural sources for their possible pharmacological effects.
ProteinsBiomolecules that consist of more than 100 amino acids and make up cells, organs and tissue. They can also act ashormones, enzymes and antibodies used to defend the body against infections.
ProteomicsThe study of the formation, function and effect of proteinsin cells and organisms, particularly with respect to theireffectiveness in the diagnosis and therapy of diseases.
PurificationPurification using mixtures of substances.
Scale-upTransfer of scale or increase in size. This term is used todenote the progressive increase of a process ranging fromlab scale to pilot scale to process scale, while retaining the basic technology of this process.
Separation technologyTechnology for removal or isolation of solids, liquids andgases.
Sterile filter, sterilizing-grade filterMembrane filter whose pore size is so small that, dependingon the application, number of organisms and type, all bacte-ria are held back by the membrane. Sterilizing grade filtersare subject to strict process validation because various poresizes of these filters can be used in different applications.The ASTM F 838-83 has become the prevalent bacteria chal-lenge test for validating the 0.2-micron pore size consideredthe standard for a sterilizing-grade filter.
Sterility testProof of the absence of living or viable materials in a sample.
VaccinesPreparations made of living or dead pathogens.
ValidationSystematic checking of essential steps and facilities in re-search and development and in production, including testingpharamceuticals to ensure that the products manufacturedcan be made reliably and reproducibly in the desired quality.
Mechatronics
Analytica 2002Trade show for analytical instrumention, laboratory technologyand biotechnology.
Analytical balanceA weighing instrument with a readability of 0.1 mg minimumand a weighing capacity up to 600 g maximum.
Batching (filling or dispensing)Filling products according to a given formula or recipe inindustrial production processes.
BeltweighersDynamic scales built into conveyor systems for 100 % weigh-ing (filling, batching) of bulk material.
CheckweighersDynamic scales used in a production process for 100 %checking of products (completeness check).
Double-lever systemSpecial design adapted to deliver the weighing resolution ofthe monolithic weigh cell. This weighing system that isrobotically cut from a single solid block of metal has a load-ing capacity ranging up to 8 kg.
EcoMixIndustrial terminal for computerized mixing of paint inautomotive refinishing plants. This terminal is designed foruse with a paint-mixing scale in tough industrial environ-ments and in hazardous areas.
Gravimetric moisture analysisDetermination of the moisture content of a substance byweighing before and after a drying process.
Hazardous areaLocation classified into various zones in Europe according tothe time during which a potentially explosive atmosphere is present. In Canada and the U.S., hazardous locations arecategorized into classes, divisions and groups.
ISOInternational Organization for Standardization, responsiblefor standardizing terms, measurement methods, tolerances,etc., in industry on an international level.
Laboratory automationEquipment or groups of equipment for handling routine stepsthat occur in large numbers. These steps entail weighing of laboratory vessels or the simple dispensing of liquids andsolids, for example.
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Mass comparatorSpecial weighing instrument for high-precision comparisonof weights in verification offices (weights and measuresoffices) and calibration laboratories.
MechatronicsThe interdisciplinary field and interaction of mechanical,electrical and electronics engineering, intelligent controltechnology and computer science. This enables the effects of material properties and ambient conditions on measuredresults to be largely compensated for. As a result, it allowsproduct solutions with increasing levels of integration andcomplexity to be attained.
Metal detectorsSystems integrated into a manufacturing process to searchand sort out metal contaminants in products. These metaldetectors are used in the food-processing industry to protectconsumers or as auxiliary equipment on machines to preventmetal particles from ruining post-connected machinery, thuspreventing costly repairs and machine down times.
MicrobalanceA weighing instrument with a readability of 0.1 µg or 1 µgand a weighing capacity of up to 20 g maximum.
Monolithic weigh cellWeighing cell completely cut from a block of material by milling, thereby replacing up to 100 individual parts of aconventionally manufactured system. The problem of var-iations between the models is thus minimized.
Multi-lobe bearingHydrodynamic bearing consisting of a supportive steel corewith fixed bearing surfaces, lobes, on the core’s inner dia-meter or on its end surfaces. A defined profile is incorporatedinto these lobes. This type of bearing is preferably used inmachines with a lower rotational speed, but with a higherload than that of high-speed machines. Multi-lobe bearingscan be combined with tilting pad bearings.
OEM (Original Equipment Manufacturer)Producer who manufactures and delivers a specialized component as part of a complex unit. Thus, for example,Sartorius microbalance systems are integrated into equip-ment for determination of the surface tension of liquids.
Offset-half bearingVariant of a multi-lobe bearing in which two bearing surfacesare offset. This type of bearing is used in turbogears becauseit can cover a specific rpm range and retain its stability evenunder partial loads. However, an offset-half bearing is suit-able for unidirectional rotation only.
OIMLInternational Organization for Legal Metrology (OrganisationInternational de Métrologie Legal).
Platform scaleConsists of two components: a display and control unit, anda weighbridge platform. The platform is a rugged and flatsteel construction that is equipped with a weighing system:a load cell (strain-gauge measuring principle) or an EMCweighing cell (electromagnetic force compensation principle).Platform scales are available in various versions (painted,galvanized, or made of stainless steel) and in various sizes.
Precision balanceA weighing instrument with a readability of 1 mg and aweighing capacity of up to approx. 50 kg.
RepeatabilityAbility of a weighing instrument to display correspondingresults under constant testing conditions, when the sameload is repeatedly placed onto the weighing pan in the samemanner. Also called “reproducibility.”
Test equipmentMeasuring equipment used to check quality-relevant para-meters and subject to control and verification of its accuracy.
Tilting pad bearingHydrodynamic bearing consisting of a steel core that supportsa number of tiltable pads made of steel and antifrictionmetal or steel bronze. These pads are arranged either withinthe core’s inner diameter (radially) or on the core’s thrustfaces (axially). This kind of bearing is preferred for use in high-speed machines, and has excellent stabilizing properties. It can be combined with multi-lobe bearings.
Weighbridges (platform-type scales)A drive-on scale for weighing vehicles and/or transportablegoods of any kind.
Weighing modules, WMWM dynamic weighing modules allow checkweighing andsorting out of under- or overweight packages from conveyorsin packaging lines. The greatly reduced requirements on WM compared with those for checkweighers (Boekels) allowWM to be used in standard Sartorius scales, which are sup-plemented by a motor-driven conveyor belt.
Environmental Technology
DIN EN ISO 14001German version of the internationally recognized standardadopted without any modifications by the European Com-mittee for Standardization. This standard provides require-ments and definitions for establishing and maintaining an environmental management system. If a company hassuccessfully (and voluntarily) implemented and audited this system, a certificate will be issued.
Environmental management systemThe part of the overall management system that guaranteesa documented and systematic introduction, implementationand further development of environmental policy. The ap-proach described by DIN EN ISO 14001 or the EC CouncilResolution No. 183/93 “Eco-management and Audit Scheme”(EMAS) can be used as the basis for an environmentalmanagement system.
Environmental technologyBuildings, equipment, process technologies, operating mate-rial, know-how and services for environmental protection(waste removal, protection of water resources, fighting noisepollution, maintaining clean air).
Fuel cellThis cell converts chemical energy directly into electric ener-gy in a controlled electrochemical process (unlike combustionor explosion). In the process, electric power and heat aredirectly generated. Hydrogen for the fuel cell is not necessa-rily produced by renewable energy sources. However, fuelcells do generate energy and heat decentrally and more effi-ciently than do engines that operate using fossil fuels.
Business | Economic Terms
Asset Backed FinanceFinancing by bundling, securitization and placement of certain financial assets of a company.
Basel IISafe and sound banking rules and supervisory review of an institution’s capital adequacy and internal assessmentprocess for granting credit.
Break evenThe point at which cost and income are equal and there isneither profit nor loss.
Cash flowThe flow of funds or financial resources that are earnedduring an accounting period through day-to-day businessactivities and that are adjusted for expenses and income ofconsiderable significance, which do not affect payments.
Cash poolingAn arrangement between entities within the same businessorganization. It presents their short-term credit and deficitcash balance positions as a net number.
CreditworthinessFinancially sound enough to justify the extension of credit.
Cum-warrant bondsBonds that have additional rights.
Currency exposureFlow of payments in a foreign currency whose value maychange as a result of fluctuations in its exchange rate.
DAX, MDAX, SDAX, TecDAX, Nemax50Stock indexes of the German Stock Exchange Organization,the Deutsche Börse AG.
Derivative financial instrumentsInstruments for hedging against the risks of changes in market prices.
DVFA / SG resultNet income acc. to the DVFA / SGThe result of a computational formula jointly developed by the Methods Commission of the German Association forFinancial Analysis and Asset Management (DVFA e.V.) andthe Work Group for “External Corporate Accounting” of theSchmalenbach Association (German Association for Eco-nomics [Schmalenbach-Gesellschaft – Deutsche Gesellschaftfür Betriebswirtschaft e.V.] [SG]).
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EBIT marginEBIT (earnings before interest and taxes) as a ratio of theoperating income without depreciation (without allowingfor debt service) to sales revenue.
Economies of scaleA reduction in unit costs brought about especially by in-creased size of production facilities.
Equity ratioThe ratio of equity to the balance sheet total.
Financial covenantsAgreements between companies and credit-lending banks onmeeting specific financial key figures.
Free floatShares of a public company that are freely available to theinvesting public (according to the definition, at least 5 %).
Gross domestic product (GDP)The total value of the goods and services produced by theresidents of a nation during a specified period.
IAS International Accounting StandardsThe International Accounting Standards (IAS) are publishedby the IASC (International Accounting Standards Committee),an international organization of accounting specialists. Thisorganization is supported by professional associations thatdeal with accounting issues.
Investment rateThe ratio of capital expenditures to sales revenue.
Key Account ManagementSystematic analysis, selection and support of the mostimportant customers of a company
KonTraG LawGerman Law on “Control and Transparency in the CorporateSector.”
Parent companyA company that owns enough voting stock in another firmto control management and operations either directly orindirectly by influencing or electing its board of directors.
Percentage of completionA method by which contract revenue per fiscal year is matchedwith the contract costs incurred during each fiscal year inreaching the stage of completion of a total, long-term con-tract. This revenue may be reported as such only if it alongwith expenses and profit can be reliably attributed to theproportion of work completed.
Prime StandardNew market segment of the Frankurt Stock Exchange validas of January 1, 2003, with high, internationally acceptedtransparency requirements. It is intended to meet the needsof companies seeking to attract the attention of internationalinvestors.
RatingClassification of a company into a certain category of creditworthiness.
Return on equityThe ratio between net profit and average equity.
ROAReturn on assets measures the operating success gauged bythe company assets employed, and is calculated as the quo-tient resulting from the earnings before interest, taxes anddepreciation of goodwill divided by the correspondingassets.
SMAX, Neuer MarktThe German stock exchange organization, the DeutscheBörse AG, based in Frankfurt am Main, introduced the “Small Cap Exchange” in April 1999 as a new quality segment.The par-ticipants in this exchange are usually established,medium-sized joint stock companies that are voluntarilycommitted to upholding superior Investor Relations standards(with respect to transparency and liquidity).
SubsidiariesAll companies that are directly or indirectly controlled by a parent corporation because of a majority interest and/orcommon management.
TreasuryShort-term liquidity management.
U.S. GAAPU.S “Generally Accepted Accounting Principles.“
Value-added rateThe ratio of the net value added to the corporate per-formance.
Europe
Germany
Sartorius AGAddress for letters: 37070 GoettingenAddress for packages: Weender Landstrasse 94–10837075 GoettingenPhone +49.551.308.0Fax +49.551.308.3289www.sartorius.com
B. Braun Biotech International GmbHAddress for letters: Postfach 13 63, 34203 MelsungenAddress for packages: Schwarzenberger Weg 73–7934212 MelsungenPhone +49.5661.71.3400Fax [email protected]
Denver Instrument GmbHRobert-Bosch-Breite 10, 37079 GoettingenPhone +49.551.209773.0Fax [email protected]
Dr. Hans Boekels GmbH & Co.Am Gut Wolf 11, 52070 AachenPhone +49.241.1827.0Fax [email protected]
GWT Global Weighing Technologies GmbHAddress for letters: Postfach 730370, 22123 HamburgAddress for packages: Meiendorfer Strasse 20522145 HamburgPhone +49.40.67960.303Fax [email protected]
Sartorius Systems Engineering GmbHWeender Landstrasse 94 –108, 37075 GoettingenPhone +49.551.308.0Fax +49.551.308.3754
Spezialpapier Filtrak GmbHNiederschlag 1, 09471 BaerensteinPhone +49.37347.83.0Fax [email protected]
Vivascience AGFeodor-Lynen-Strasse 2130625 HanoverPhone +49.511.5248.750Fax [email protected]
Vivascience Deutschland GmbHWeender Landstrasse 94 -10837075 Goettingen
Austria
Sartorius Ges. m.b.H.Franzosengraben 12, 1030 ViennaPhone +43.1.7965760.0Fax [email protected]
Belgium
Sartorius Instruments N.V.Luchthavenlaan 1– 31800 VilvoordePhone [email protected]
GWT Global Weighing Technologies(Belgium) BVBA | CVACOCOONLuchthavenlaan1800 VilvoordePhone +32.2.481.8413Fax [email protected]
Denmark
Sartorius A|SHimmelev Bygade 494000 RoskildePhone +45.70.23.4400Fax [email protected]
France
Sartorius S.A.4, rue Emile Baudot, 91127 Palaiseau CedexPhone +33.1.6919.2100Fax [email protected]@[email protected]
Vivascience France S.A.R.L.4, rue Emile Baudot, 91127 Palaiseau CedexPhone +33.1.6919.93.20Fax [email protected]
Italy
Sartorius S.p.A.Via dell’Antella, 76 / A; 50011 Antella (Florence)Phone +39.055.63.40.41Fax [email protected]
BBITECH@MEDIT S.r.l.Viale Onorato Vigliani, 1320148 MilanPhone +39.02.4.81.73.27Fax [email protected]
Addresses
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Netherlands
VerkoopcombinatieSartorius Instrumenten B.V.Postbus 1265, 3430 BG NieuwegeinEdisonbaan 24, 3439 MN NieuwegeinPhone +31.30.6053001Fax [email protected]
VerkoopcombinatieSartorius Filtratie B.V.Postbus 1265, 3430 BG NieuwegeinEdisonbaan 24, 3439 MN NieuwegeinPhone +31.30.6025080Fax [email protected]
GWT Global Weighing Technologies B.V.Postbus 1265, 3430 BG NieuwegeinEdisonbaan 24, 3439 MN NieuwegeinPhone +31.30.6025033Fax [email protected]
Portugal
Sartorius Balanças Lda.Queluz Park-Est.Consiglieri Pedroso, 80Queluz Baixo, 2745-553 Barcarena, [email protected]
Russia
Sartogosm ZAOul. Kurskaia 28/32192007 St. PetersburgPhone +7.812.380.2569 or 166.1922Fax +7.812.380.2562 or [email protected]
Spain
Sartorius, S.A.C/Isabel Colbrand 10 –12, Planta 4, Oficina 121Polígono Industrial de Fuencarral, 28050 MadridPhone +34.91.3586091Fax [email protected]
Switzerland
Sartorius Schweiz AGPostfach 672, Lerzenstrasse 10; 8953 Dietikon Phone +41.1.746.50.00 Fax +41.1.746.50.50biotechnology.switzerland@[email protected]
U.K.
Sartorius Ltd.Longmead Business ParkBlenheim Road, Epsom Surrey, KT19 9QQPhone +44.1372.737100Fax [email protected]
Vivascience Ltd.Binbrook Hill, Binbrook, Lincoln LN8 6BLPhone +44.1472.398888Fax [email protected]
Vivascience Ltd.Unit 6, Oldends Lane Industrial Estate Stonedale Road, StonehouseGloucestershire GL10 3RQPhone +44.1453.821972Fax [email protected]
Denver Instrument CompanyDenver House, Sovereign WayTrafalgar Business ParkDownham Market, Norfolk PE38 9SWPhone +44.1366.386.242Fax +44.1366.386.204
GWT Global Weighing Technologies (U.K.) Ltd.Longmead Business ParkBlenheim Road, Epsom Surrey, KT18 5JHPhone +44.1372.737100Fax +44.1372.720799
America
Argentina
Sartorius Argentina, S.A.Sargento Cabral 2381B-1605-EEG MunroBuenos AiresPhone +54.11.4721.0506Fax [email protected]
Brazil
Sartorius do Brasil Ltda.Av. Jabaquara No. 2940, cjtos. 46, 47CEP.04046-500 Jabaquara / MirandópolisSão Paulo, SP.Phone +55.11.5078.7580Fax [email protected]
Canada
Sartorius Canada Inc.2179 Dunwin Drive, Units 4+5Mississauga, Ontario L5L 1X2Phone +1.905.569.7977Fax [email protected]
Mexico
Sartorius de México S.A. de C.V.Circuito Arquitectos No. 11 Despacho 201Ciudad Satélite53100 Naucalpan, Estado de MéxicoPhone +52.55.62.1102Fax [email protected]@sartomex.com.mx
Puerto Rico
Sartorius, Inc.Carretera 128 Int.376, Barriada Arturo LluverasP.O. Box 6, Yauco, Puerto Rico 00698Phone +1.787.856.5020Fax +1.787.856.7945 / [email protected]
USA
Sartorius North America Inc.131 Heartland Blvd., Edgewood, New York 11717Phone +1.631.254.4249Fax [email protected]
Sartorius Corporation131 Heartland Blvd., Edgewood, New York 11717Phone +1.631.254.4249Fax [email protected]
B. Braun Biotech Inc.999 Postal Road, Allentown, PA 18109Phone +1.610.2666262Toll Free +1.1.800.258.9000Fax [email protected]
Denver Instrument Company6542 Fig Street, Arvada, Colorado 80004Phone +1.303.431.7255Fax [email protected]
Sartorius Environmental Technology Inc.765 Cedar Cross Road, Dubuque, Iowa 52003Phone +1.319.584.2934Fax [email protected]
Vivascience Inc.131 Heartland BoulevardEdgewood, New York 11717Phone +1.631.254.4249Fax [email protected]
Vivascience Inc.2720 Loker Avenue West, Suite CCarlsbad, CA 92008Phone +1.760.918.8280Fax [email protected]
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Asia | Pacific
China
Beijing Sartorius Instrument & System Engineering Co., Ltd.Dong Hu Qu, Wang Jing Industrial ZoneChao Yang District, 100102 BeijingP.O. Box 8516Phone +86.10.6439.2552Fax [email protected]
Sartorius Ltd.Unit 1110-12, Lu Plaza, 2 Wing Yip StreetKwun Tong, Kowloon, Hong KongPhone +85.2.2774.2678Fax [email protected]
India
Sartorius India Private Ltd.10, 6th Main, 3rd Phase PeenyaKIADB Industrial AreaBangalore – 560 068Phone +91.80.839.1963/0461Fax [email protected]
Sartorius Mechatronics India Pvt. Ltd.10, 6th Main, 3rd Phase PeenyaKIADB Industrial AreaBangalore – 560.068Phone: +91.80.837.7728Fax: [email protected]
Japan
Sartorius K.K.No. 3, Hoya Building 1-chome 8-17 KamitakaidoSuginami-ku, Tokyo 168-0074Phone +81.3.3329.3119Fax +81.3.3329.5543tsuyoshi.Yamaguchi@sartorius.comwww.sartorius.co.jp
Korea
Sartorius Korea Ltd.2nd Floor, Yangjae B/D 209-3Yangjae-DongSeocho-Ku,137-893 Seoul, South KoreaPhone +82.2.575.6945Fax [email protected]
Malaysia
Sartorius (Malaysia) Sdn. Bhd.Lot L3-E-3B, Enterprise 4Technology Park MalaysiaBukit Jalil57000 Kuala LumpurPhone +60.3.8996.0622Fax [email protected]
Philippines
Sartronic, Inc.Unit 505 Peninsula Court8735 Paseo de Roxas cor. Makati AvenueMakati CityPhilippines 1226Phone +63.2.750.0492Fax [email protected]
Singapore
Sartorius Singapore Pte. Ltd.Blk. 4010, Ang Mo Kio Ave 10#04-01B, Techplace 1Singapore 569626Phone +65.6456.5700Fax [email protected]
Australia
Sartorius Australia Pty. Ltd.Unit 17/104 Ferntree Gully RoadWaverley Business ParkEast Oakleigh, Victoria 3166Phone +61.3.9590.8800Fax [email protected]
All figures are given in millions of ¤ 2002 2001 2000 1999 1998Accounting Method IAS IAS IAS HGB HGB
Assets
Intangible assets 30.0 29.9 29.0 14.3 7.0
Property, plant and equipment 144.2 137.7 84.0 50.2 38.9
Financial assets 3.4 1.9 0.9 2.5 1.5
Fixed assets 177.6 169.5 113.9 67.0 47.3
45 % 41 % 34 % 27 % 22 %
Inventories 70.1 76.1 81.2 58.6 42.1
Trade and other receivables 136.5 145.0 126.4 77.0 54.6
Cash on hand, deposits in banks 14.0 18.0 16.8 47.7 70.8
Current assets incl. prepaid expenses 220.6 239.1 224.4 183.3 167.6
55 % 59 % 66 % 73 % 78 %
Balance sheet total 398.1 408.6 338.4 250.3 214.9
Equity and liabilities
Equity 132.6 138.0 145.6 145.1 138.4
33 % 34 % 43 % 58 % 64 %
Provisions, minority interest 60.6 55.2 51.3 54.5 35.8and special items
Liabilities to banks 147.1 145.2 78.9 26.6 25.2
Other liabilities 57.8 70.1 62.6 24.0 15.4
Liabilities 265.5 270.5 192.8 105.1 76.5
67 % 66 % 57 % 42 % 36 %
Summary of the Consolidated Balance Sheet
Throughout the Annual Report, differences may be apparent as a result of rounding during addition.
: Summary of the Consolidated Balance Sheet
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Published and Sartorius AGtranslated by Weender Landstrasse 94–108
37075 Goettingen, GermanyPhone +49.551.308.0Fax +49.551.308.3289www.sartorius.com
Concept by Lindinger + FranckHanover | DuesseldorfGermany
Design Büro Bernd Franckand artwork für visuelle Kommunikation
Nana FranckStephanie WestmeyerDuesseldorf, Germany
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Date published April 28, 2003
About This Publication
Biotechnology
Business Areas
– Vivascience | Biolab– Bioprocess– BBI– Food & Beverage
Products per Business Area(Examples)
Vivascience | Biolab– Vivapure protein purification kits– Ultrafiltration products (Vivaspin,
Vivapore)– Syringe filter holders (Minisart)– Cell culture vessels and bioreac-
tors | fermenters
Bioprocess– Filter systems, housings and
systems for use of filter cartridgesand cassettes
– Membrane filters as cartridgesand capsules (Sartopore 2, Sartolon, Sartobran, Sartoclean,Sartofine, Sartopure)
– Crossflow filtration units– Integrity testers (Sartocheck 3)
BBI– Lab-, pilot- and process-scale
fermenters and bioreactors– Crossflow filtration systems– Process automation including
software for laboratories andproduction
– Bioprocess accessories, such asexternal spin filters and steriliz-ing grade technical components
– Planning and engineering, vali-dation, commissioning and train-ing
Food & Beverage– Crossflow filtration cassettes– Complete filtration systems for
beer (Sartocool PS), wine(Sartoflow 2000, Vinosart PS)and mineral water (Aquasart)
Mechatronics
Business Areas
– Laboratory Mechatronics– Industrial Mechatronics– Service– Bearing Technology
Products per Business Area(Examples)
Laboratory Mechatronics– Micro, analytical and precision
balances– Moisture analyzers– Mass comparators– Gold and carat scales
Industrial Mechatronics– Load cells for the high-capacity
range– Checkweighers– Belt weighers– Metal detectors– Paint-mixing scales
Service– Maintenance, calibration, verifi-
cation and repair of weighinginstruments
– System integration and qualifi-cation of weighing instrumentsin automated and validated pro-duction processes
Bearing Technology– Tilting pad journal bearings with
line contact and spherical seat– Tilting pad thrust bearings, self-
equalizing and non-self-equaliz-ing
– Journal and thrust multi-lobehydrodynamic bearings
Markets per Business Area
Vivascience | Biolab– Laboratories at public research
institutes, universities, and in thebiotechnology and pharmaceuti-cal industries
– Original equipment manufacturers– Laboratory equipment dealers
Bioprocess– Chemical, pharmaceutical and
biotech industries: manufacturersof infusion solutions, injectables,vaccines and blood products
– Quality management laboratories
BBI– Laboratories and R&D labs at
universities– Biotech startups– Manufacturers of generic drugs– Pharmaceutical industry– Food industry
Food & Beverage– Breweries– Wineries and sparkling wine
production facilities– Manufacturers and bottlers of
fruit juices and soft drinks– Dairies– Original equipment manufac-
turers
Products and Markets
Markets per Business Area
Laboratory Mechatronics– Laboratories and research facilities
in the chemical, pharmaceuticaland food industries
– Private and public educationaland research institutes
– Schools and universities– Pharmacies- Laboratory dealers
Industrial Mechatronics– Logistics, process control and
quality assurance in the chemical,pharmaceutical, food and poly-technical industries
– Dealers for original equipmentmanufacturers
Service– Laboratories and research facilities
in the chemical, pharmaceuticaland food industries
– Private and public educationaland research institutes
– Schools and universities– Pharmacies– Laboratory dealers
Bearing Technology– Energy production (steam, gas,
expansion and cooling turbines,turbochargers)
– Process engineering (turbocom-pressors, turbopumps)
– Gear engineering and construction– Electrical engineering industry– Machine tool manufacture
Environmental Technology
Uses the areas of core expertise of the Biotechnology and Mecha-tronics Divisions
Products (Examples)
– Products for monitoring pollu-tants in air and water
– Recycling plants for protectionof resources
– Membranes for fuel cells– Environmental analysis (microbio-
logical tests, sterility tests)– Protection against emissions
from source sites and hazardousemissions (filtration of exhaustair, avoidance of special waste byusing filter materials)
Markets
– Environmental analysis (microbio-logical tests, sterility tests)
– Protection against emissionsfrom source sites and hazaradousemissions (filtration of exhaustair, avoidance of special waste byusing filter materials)
EEarnings | pp. 44 ff. | pp. 58 ff. |pp. 64 ff. | pp. 72 ff.
Earnings per share | 125
Earnings reserves | 117
EBIT | 44 | pp. 58 ff. | pp. 64 ff. |76 | 140
EBITA | pp. 44 ff. | pp. 72 ff.
EBITDA | pp. 44 ff. | pp. 72 ff. | 81
Economic climate, activity, cycle |8 | 39 | pp. 64 ff. | 86
Economic report | 39
Environmental management | 91
Environmental risks | 91
Environmental Technology Division,envir. tech. | 70 | 85 |140
Employee benefits | 99
Employees | 5 | 9 | 19 | pp. 56 ff.
Equity | 78 | 81 | 116 | 140
Executive Board | 8 ff. | 12 | pp. 20ff. | pp. 128 ff.
FFinancial instruments | pp. 120 ff. |140
Financial schedule | 134
Financial assets | 113
Financial risks | 89 | 120
Financing | 80
Fixed assets | 78 | 94 | pp. 111 ff.
Forecast report | 82
Foreign currencies | 109
GGearing | 81
Glossary | pp. 136 ff.
Goodwill | 98 | 103 | 110
Group companies | pp. 104 ff.
Group income statement | 95 | 108| pp. 121 ff.
Group management report | pp. 37ff.
Group sales revenue development |pp. 42 ff. | 58 | 64
Group statement of changes inequity | 96
HHighlights | Front fold-out
IImpairment of assets | 112
Independent auditors’ report | 18 |127
Innovation | 10
Insurance management | 90
Intangible assets | 110
Interest | 123
International Accounting Stan-dards (IAS) | 16 | 18 | 78 | 98 |108 | 127 | 141
Inventories | 94 | 114
Investor relations | 30 | 135
Issued capital | 116
IT risks | 90
K
Key figures | 146
Key figures for Sartorius shares | 33
Knowledge management | 5
KonTraG Law | 141
LLegal risks | 90
Liabilities | 94 | 119
MMacroeconomic environment | 38| 83
Mandates | 130 | 131
Marketing | 61 | 68
Market capitalization | 29
Markets | 8 | 40 | 76
Mechatronics | pp. 64 ff.
Membrane Adsorbers | 137
Mission | 5
Monolithic | 69 | 93 | 139
NNet debt | 81
Net profit | 8 | 99 | 125
NISAX20 | 30
North America | pp. 74 ff.| 102
Number of employees | 126
OOrganization and administration |51
Organizational structure | 50
Organizational risks | 90
Overall risk situation | 88
Ownership | pp. 104 ff.
PParticipating interests | 52 | 113
Perspectives | 8
Prepaid expenses | 116
Presence, global | 5
Principles and methods of consolidation | 103
Procurement | 60 | 67
Procurement risks | 88
Products | 60 | 67 | 69
Production | 59 | 65 | 74
Production risks | 89
Profit before taxes | 44
Property, plant and equipment |111
Provisions | pp. 117 ff.
RR&D risks | 88
Raw material and consumablesused | 126
Receivables | 114
Regions pp. 70 ff. | 102
Report of the Supervisory Board |14
Resegmentation of the Germanstock market | 29
Return on assets | 34 | 79 | 141
Return on equity | 79 | 140
Research and development | 63 |69 | 122
Risk report | pp. 88 ff.
Risk management system | 88
SSales revenue | 95 | 121
Sales risks | 89
Schedule (calendar dates) | 134
Scope of consolidation | pp. 104 ff.
Securities | 30 | 115
Securities identification number |30
Sector risks | 88
Sector situation | pp. 40 ff. | pp. 84 ff.
Segment reports | 100 | 102
Shareholder value | 5 | 18
Share price development | 26 | 27
Shares | pp. 25 ff.
Staff costs | 47 | 126
Subsidiaries | pp. 104 ff.
Supervisory Board | 12 | pp. 14 ff. |pp. 128 ff.
TTaxes | 99 | 115 | 124
Trade shows | Front fold-out
Trading volume | 29
Treasury | 80 | 135 | 141
VValue contributed per employee |47
Valued added | 55 | 141
AAbout this publication | 148
Accounting andmeasurement principles | 107
Accounting principles | 98
Addresses | pp. 142 ff.
Administrative costs (general) | 122
Analysts | 30
Annual financial statements | 18 |52 | 93
Annual net profit | 32 | 55 | 126
Annual Shareholders’ Meeting | 32| 116 | 126 | 134
Appropriation of profits | 55
Asia | Pacific | 75 | 76
Auditors | 15 | 18 | 127
BBalance sheet | 94 | 149
Balance sheet ratios | 78
Balance sheet total | 78
Biotechnology (Division) | 40 | pp. 58 ff. | 136
Business areas | 50 | 102
Business development | 42 | 58 |pp. 64 ff. | 70 | 72 | 74| 76 | pp. 85 ff.
CCapital expenditures, investment(s)| 9 | 48 | 63 | 68 | 141
Capital increase | 106
Capital, issued | 116
Capital reserves | 117
Capital resources | 119
Capsules | 24
Cash flow | 79 | 99 | 140
Cash flow statement | 79 | 97 | 99| 127
Commitment, social responsibility |5 | 56
Committees | 15 | 17 | 129
Contacts | 135
Contingent liabilities | 119
Consolidated balance sheet (summary) | 149
Core areas of expertise | 5
Corporate culture | 5
Corporate governance | 17 | pp. 20 ff.
Corporate profile | 5
Crossflow | 37 | 136
Current assets | 78 | 94
Currency translation | 109
DDepreciation | 110 | 111 | 112
Distribution costs | 122
Dividends | 32 | 55 | 126
Index
Sartorius AGWeender Landstrasse 94 –10837075 Goettingen, Germany
Phone +49.551.308.0Fax +49.551.308.3289www.sartorius.com
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