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Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

This acquisition does

This acquisition does not qualify for purchase accounting since operational assets were acquired rather than an existing business. Therefore, this purchase is being accounted for using government grant accounting to allocate the income of the government grant over the term of the expected personnel expenses that will be incurred. As of December 31, 2008, 156 (2007: 84) permanent jobs have been created at the site and ALD IMP has recognized $3,708 (2007: $649) of government grant income to offset the costs of those employees. An additional $4,288 was released from the government grant liability in the year ended December 31, 2008 due to a change in the estimate of liability remaining. The initial accounting for purchase and government grant created a release of $5,100 during 2007 that was recognized in connection with this acquisition (see note 5). See note 29 for further disclosure of government grants. Acquisition of FNE On December 3, 2007, GfE completed the acquisition of 100% of the shares of FNE Forschung-sinstitut für Nichteisen-Metalle Freiberg GmbH (“FNE”) from its current family ownership. FNE has state-of-the-art production capabilities for rotatable targets, a key to large area coating requirements. GfE will strengthen its position in the growing large area coating materials market using the technological competence of FNE regarding research and development and production. The acquisition was completed in two steps in 2006 and 2007. On June 7, 2006, GfE made a payment, valued at approximately $2,700, to purchase a 24.9% share of ownership in FNE. The purchase agreement included a call option under which GfE was entitled to purchase the remaining shares for a defined purchase price within the timeframe from January 1, 2007 through January 1, 2008. The initial payment in 2006 was recorded as an investment in associates of $1,650 and an option value of $1,078. Due to the inclusion of the call option, FNE was consolidated in the statements of the Company with a 75.1% minority interest starting on January 1, 2007. This call option was exercised on December 3, 2007 when GfE made a payment valued at approximately $4,031. The total purchase price for 100% of FNE was approximately $6,731 and a purchase price allocation was completed for the acquisition. Negative goodwill in the amount of $164 and $2,162 was recognized on this transaction in the years ended December 31, 2006 and 2007, respectively (note 7). The fair value of identifiable assets and liabilities at the date of acquisition were as follows: Recognized Previous on acquisition carrying value Property, plant and equipment 11,685 11,685 Intangible assets 342 – Other long-term assets 1,060 – Cash 759 759 Prepayments 1,630 1,630 Trade receivables 1,646 1,646 Inventories 2,826 2,558 19,948 18,278 Trade payables 6,315 6,316 Income tax payable 3 3 Debt 4,049 4,049 Deferred tax liability 103 11 Pension liability 437 437 10,907 10,816 Net assets 7,462 Fair value of net assets acquired 9,041 Total acquisition cost (6,731) Excess fair value over consideration 2,310 Currency impact due to timing of consolidation and payment (148) Negative goodwill arising on acquisition 2,162 The total acquisition cost comprised two cash payments, one each in 2006 and 2007, totalling $6,731. Net cash acquired with the subsidiary 759 Cash paid 6,731 Net cash outflow 5,972 FNE contributed $2,962 from the date of consolidation to December 31, 2007 to the profit for the year of the Company. Acquisition of ABS On October 9, 2006, ALD GmbH made an investment of approximately $1,420 to purchase 19.9% ownership in ABS Apparaté und Behälterbau Staßfurt GmbH (“ABS”) from its current ownership. ABS is a high performance apparatus engineering enterprise with experience building apparatuses, heat-transfer agents and pressure and storage vessels. In 2007, the Company increased its ownership in this Company by 5% to 24.9% with a payment of $766. As of December 31, 2008 and 2007, this has been accounted for as an equity investment. Acquisition of Fundo Wheels Fundo Wheels AS (“Fundo”), located in Høyanger, Norway, is an original equipment manufacturer of cast aluminum wheels for high end European car manufacturers. On March 22, 2004, Timminco, through its subsidiary Nor-Wheels, indirectly acquired a 24.4% interest in Fundo Wheels AS (“Fundo”), for $4,706 from its controlling 100 Notes to the Consolidated Financial Statements

shareholder which is the Community of Høyanger (the “Community”). Under the agreements from the purchase, Nor-Wheels holds a call option to purchase the Community’s Fundo shares no sooner than January 1, 2008, on the satisfaction of certain conditions. Beginning January 1, 2008, the Community may exercise a put option requiring Nor-Wheels to purchase the Community’s shares, at book value determined on the date of exercise. Timminco accounts for the Fundo investment under the equity method as it does not have control over Fundo and neither Nor-Wheels nor the Community can exercise the call or the put option until January 1, 2008. The acquisition of the equity interest did not create any purchase discrepancy. In 2005, Timminco acquired an additional 726 shares of Fundo increasing its ownership from 24.4% to 47.1%. In December 2006, Timminco acquired an additional 264 shares of Fundo from treasury for $933. The Community also invested in Fundo such that Timminco’s ownership interest remained at 47.1%. In March 2007, the Company acquired an additional 453 shares of Fundo from Treasury for $1,561. The Community again invested at an equivalent level to maintain the ownership levels. These acquisitions did not create any purchase discrepancy. As at December 31, 2007, Timminco has a 47.1% share in Fundo and the Community owns approximately 52.9%. On March 14, 2008, Timminco converted into shares the full principal amount of two loans provided during 2007 to fund working capital. After the conversion of this debt, the Company’s ownership percentage of Fundo decreased from 47.1% to 45.3%. In September 2008, it became evident that there may not be sufficient capital within Fundo to secure its long-term viability. Accordingly, the investment in Fundo and all related notes receivable from Fundo were written down to nil, which is management’s best estimate of their fair value. 6. Revenue 2008 2007 Sales of goods 1,517,903 1,155,623 Rendering of services (commissions) 41 36 Total revenues 1,517,944 1,155,659 For construction contracts, the following has been recognized using the percentage of completion revenue recognition method: 2008 2007 Contract revenue recognized 312,454 264,392 Contract expenses recognized 212,057 178,099 Recognized profits 100,397 86,293 Contract costs incurred and recognized profits 375,049 281,940 Progress billings and advances received 436,331 302,663 Net amount due to customers (61,282) (20,723) Gross amount due from customers for contract work 32,767 54,008 Gross amount due to customers for contract work (shown as advance payments in consolidated balance sheet) (94,049) (74,731) Net amount due to customers (61,282) (20,723) 7. Other income Note 2008 2007 Grant income i 4,413 5,569 Income from cancelled order ii 1,806 – Gains from asset sales iii 896 – Release of unused provisions iv 690 865 Rental income vi 195 401 Other miscellaneous income vi 588 876 Negative goodwill vii – 2,162 8,588 9,873 In 2008, Other income of $8,588 consisted of: (i) government grant income of $4,413 associated with our Berlin operation (see note 5) and at Graphit-Kropfmühl; (ii) income from a cancelled furnace contract in the amount of $1,806; (iii) income from asset sales of $896; (iv) release of unused provisions of $690; (v) rental income of $195 at two subsidiaries which rent out unused space and (vi) other miscellaneous income of $588. In 2007, Other income of $9,873 consisted of: (i) government grant income $5,569 associated with the acquisition of Berlin (see note 5); (vii) negative goodwill of $2,162 associated with the acquisition of FNE (see note 5); (iv) release of unused provisions of $865; (v) rental income of $401 at two subsidiaries which rent out unused space in their facilities and (vi) other miscellaneous income of $876. Notes to the Consolidated Financial Statements 101

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