We make our customers successful. - Oerlikon Barmag

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Organization and business activity Saurer Ltd. is a corporation organized under the laws of Switzerland with legal domicile in Arbon. The main activities of Saurer Textile Solutions are the development, manufacture and sale of textile systems and of Transmission Systems the development, manufacture and sale of transmission systems. The Surface Technology Division is to be divested in the near future and for that reason is shown as Discontinuing Operations. Saurer operates worldwide. Organizational changes within the scope of consolidation During the year under review the minority shareholders of Barmag AG, Remscheid, Germany were bought out. Subsequently Barmag AG and the following companies were merged into W. Schlafhorst AG & Co, which was renamed to Saurer GmbH & Co KG: Neumag GmbH & Co KG, PARSYS Produktionstechnik GmbH, Saurer-Allma GmbH, Schlafhorst Autocoro GmbH, Schlafhorst Customer Support GmbH, Schlafhorst Winding Systems GmbH, Volkmann GmbH and Zinser Textilmaschinen GmbH. As of August 16, 2003 the New Castle Group, USA, was acquired. S+G Industrieschreinerei GmbH, Germany was sold effective September 30, 2003. The activities of Xaloy Olten, Switzerland, and Xaloy Czech s.r.o., Czech Republic, were sold on November 30, 2003. Principles for the consolidated financial statements General principles and accounting standards The consolidated financial statements are based on the financial statements of the individual group companies which have been drawn up in accordance with standardized accounting principles. The accounts are, in general, based on the historical cost convention. The consolidated financial statements and the individual financial statements of all companies are prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations issued by the International Accounting Standards Board (IASB). Presentation For the first time in 2003 the consolidated financial statements are presented in Euros. This reflects the fact that the Euro is the functional currency of the major part of Saurer’s business. Change in accounting principles In 2003 the carrying value of goodwill has been adjusted in accordance with IAS 21 (revised) which allows goodwill to be translated to the group’s reporting currency at current exchange rates. Previously, goodwill was translated and fixed in the group’s reporting currency at the date of acquisition of foreign subsidiaries. From January 1, 2005 this accounting treatment will no longer be permissible under IAS 21 (revised). This change has been shown as an adjustment to the value of shareholders’ equity as at January 1, 2002, and all comparative figures have been adjusted accordingly. Principles of consolidation Scope of consolidation The consolidated financial statements of Saurer Ltd. include all subsidiaries in which Saurer Ltd. directly Accounting principles or indirectly controls more than 50% of the votes and the share capital. Companies acquired during the year under review are included in the consolidation as from the date of acquisition. Companies which are divested are deconsolidated as of the date when control passes to the acquiror. Investments of between 20% and 50% (associated companies), in which the group exercises a significant influence, are included in the consolidated financial statements in accordance with the equity method. Intercompany receivables, payables, transactions and cash flows are eliminated. Full consolidation In the case of consolidated subsidiaries with minority interests, 100% of all balance sheet and income statement items are included in the consolidated financial statements. The interests of third-party minority shareholders are shown separately in the balance sheet and income statement. Capital consolidation The capital consolidation is based on the Anglo-Saxon purchase method. The assets and liabilities of newly acquired subsidiaries are included at their fair values in the consolidated financial statements as from the date of acquisition. In the case of companies acquired during the year, the income earned prior to the acquisition is not included in the consolidated income statement. Intercompany profits Profits resulting from intercompany sales are eliminated insofar as the products and services concerned were not delivered to third parties on the balance sheet date. Valuation and accounting principles Foreign currency translation Business transactions in foreign currencies are translated into the respective local currency at the exchange rate ruling on the day of transaction, and monetary assets and liabilities at the year-end balance sheet rate. The resulting profits and losses are included in the income statement, with the exception of exchange differences on intercompany loans of an investment nature, which are taken directly to shareholders’ equity. At the year-end the balance sheets of non-Euro subsidiaries are translated into Euros at the year-end exchange rate, whilst the income statements and cash flow statements are translated into Euros at annual average rates. Any difference arising thereon is not included in the income statement, but taken directly to shareholders’ equity. In the event of the divestment of a subsidiary, the relevant cumulative exchange rate differences from the sale are included in the income statement. Financial risk management Saurer’s international activities expose it to a variety of market risks, including currency risks. An overall risk management program coordinated by central corporate treasury staff seeks to minimize the effects of unpredictable financial markets on the financial results of the group. Currency risks, which due to the group’s activities mainly arise in U.S. Dollars, are hedged by using forward contracts. Foreign currency risks which arise from the translation of income statement and balance sheet items of foreign consolidated companies are generally not hedged. 55
Accounting principles Interest risks The group’s liquid assets are invested on a shortterm basis. The group’s income and operating cash flows are substantially independent of changes in market interest, and interest exposures are generally not hedged. Credit risks Liquid assets are placed short-term with first-class banks only. The credit risk pertaining to accounts receivable is limited by the wide spread of customers, both geographically and by business activity. International accounts receivable, mainly in the textile business, are to a large extent secured by letters of credit and government export credit guarantees. Commodity price risks The price risks related to commodities used in Saurer products are low. Composition and valuation of balance sheet items Cash includes cash in hand, balances in postal and bank accounts, as well as short-term money market funds. Marketable securities are shown at year-end market value. Changes in value are included in the income statement. Accounts receivable, trade and other receivables are included at face value, less specific provisions where appropriate. Inventories Raw materials are valued at the lower of cost and market, using the FIFO or weighted average cost method. Finished goods and work in process are valued at production cost, reduced to net realizable value should this be lower than cost. Provisions are made for items of reduced salability and excess stocks. Customer payments on account are deducted from inventories. Financial assets are included at cost less provisions for permanent impairment of value. Financial Instruments Derivative financial instruments are recorded at cost and are subsequently adjusted to fair value. With the exception of financial instruments which hedge a forecasted transaction (cash flow hedges), all adjustments in fair values are included in income. The purpose of hedge accounting is to match the impact of the hedged item and the hedging instrument in the income statement. To qualify for hedge accounting, the hedging relationship must meet several strict conditions concerning documentation, hedge effectiveness and reliability of measurement. If these conditions are not met, the transaction does not qualify as a hedge for accounting purposes. In this event fair value adjustments to the value of the derivative and the hedged item are made through the income statement. Saurer uses hedge accounting exclusively for cash flow hedges. These are used to secure future cash flows which have a high probability of occurring. The hedge instrument is recorded on the balance sheet at fair value (replacement cost) and any subsequent adjustments are booked in the hedging reserve in shareholders’ equity. If the hedge relates to a transaction which will subsequently be recorded on the balance sheet, the adjustments cumulated under shareholders’ equity at that time will be included in the initial book value of the asset or liability. In all other cases the cumulative changes in fair value of the hedging instrument that 56 have been recorded in equity are included as a charge or credit to income when the forecasted transaction is recognized. Property, plant and equipment is carried at purchase or production cost less appropriate depreciation. In the case of an impairment loss the appropriate charge is made to income. Depreciation is charged on a straight-line basis over the following periods: Furniture, fittings and equipment Years 5–12 IT, office equipment 3–7 Vehicles, tools 4–6 Machinery 6–10 Buildings : – exterior constructions 30–60 – interior constructions 12–25 Repair and maintenance costs are expensed directly to the income statement. Costs which give rise to an increase in value are capitalized and depreciated over the remaining useful life of the assets. Financing costs incurred in respect of the construction of property, plant and equipment are taken directly to the income statement. Leased equipment Property, plant and equipment financed through long-term financial leasing contracts, and for which the company bears the major risks (financial leasing), is capitalized and depreciated like other fixed assets. The present value of the corresponding lease obligations is included as a liability under longterm liabilities. Rental costs for short-term operational leases are charged directly to the income statement. Operating leases are not included in the balance sheet; the corresponding obligations are fully reported in the notes. Goodwill is the excess of the acquisition price of investments over the related equity value at the date of acquisition and is amortized to the income statement over a maximum period of 20 years. Amortization periods in excess of 5 years are only used in the case of strategic acquisitions where a sustainable expansion of market share can be expected. In the case of the acquisition of a non-Euro company, any goodwill arising is treated as an asset of that company, held in the related currency and translated into Euros at the closing rate for the year. The amortization of goodwill is included in administration and other expenses. The carrying value of goodwill is reviewed at least annually for all investments and, if a risk of impairment is seen, a detailed valuation is performed using Discounted Cash Flow analysis over a fiveyear period. If required, adjustments are then made to reduce the carrying values of goodwill for the investments affected. Where an acquisition gives rise to negative goodwill this is released to income over a period calculated to match any related costs. The release to income is recorded together with goodwill amortization in administration and other expense. Patents, licenses and trademarks are capitalized at cost and are written off on a straight-line basis over their useful life, not exceeding 10 years.
Page 1 and 2: LIVING SAURER. THE ANNUAL REPORT 20
Page 3 and 4: The business year 2003. 9 Financial
Page 5 and 6: THE BUSINESS YEAR 2003. 9
Page 7 and 8: Asian markets in particular, led by
Page 9 and 10: tion, teams made up of members from
Page 11 and 12: concentrated mainly on Turkey. To a
Page 13 and 14: Saurer generates 70% of its textile
Page 15 and 16: Outlook. This year it is especially
Page 17 and 18: A company is more than its balance
Page 19 and 20: The internationality and the perfor
Page 21 and 22: Our economic strength provides us w
Page 23 and 24: FINANCIAL REPORT 2003.
Page 25 and 26: Management’s discussion of result
Page 34 and 35: Consolidated income statement for t
Page 36 and 37: Consolidated cash flow statement fo
Page 40 and 41: Provisions are set up for current l
Page 42 and 43: By division (continued) Notes to th
Page 44 and 45: Notes to the consolidated financial
Page 54 and 55: 21 Related parties Notes to the con
Page 56 and 57: Share % share Consol- Company Locat
Page 58 and 59: MULTIPLE YEAR COMPARISON.
Page 60 and 61: Balance sheet (EUR 000) 31.12.03 31
Page 62 and 63: Multiple year comparison Balance sh
Page 64 and 65: Saurer Ltd. - Income statement for
Page 66 and 67: Notes (CHF) Saurer Ltd. - Notes to
Page 68 and 69: Report of the statutory auditors to
Page 70 and 71: 88 Saurer Textile Solutions H. Fisc
Page 72 and 73: egarding the number of shares eligi
Page 74 and 75: Group, Tiengen (1975 to 1980). Chie
Page 76 and 77: 3.3 Cross-involvement. There is no
Page 78 and 79: The CEO as Delegated Member regular
Page 80 and 81: 4.2 Education, professional backgro
Page 82 and 83: Saurer does not issue stock to empl
Page 84 and 85: 5) Options held as of December 31,
Page 86 and 87: 6.5 Registrations in the share regi
Page 88 and 89:
ADDRESSES WORLDWIDE.
Page 90 and 91:
Addresses worldwide. Company Addres
Page 92 and 93:
SHARE STATISTICS.
Page 94:
Imprint. Publisher: Saurer Ltd. Con
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