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Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

The table below

The table below summarizes the maturity profile of the Company’s financial liabilities at December 31, 2008 based on contractual undiscounted payments. Contractual < 3 3–12 2008 Cash Flows months months 2010 2011 2012 2013 > 2013 Term Loan 108,289 – – – – 108,289 – – Cash interest on term loan 13,312 – 4,418 3,040 2,986 2,868 – – Fixed rate loans and borrowings 27,242 187 921 1,214 1,507 15,438 1,342 6,633 Floating rate loans and borrowings 8,232 534 1,353 1,711 1,711 1,712 1,211 – Cash interest on loans and borrowings 11,011 769 2,072 2,568 2,419 1,624 397 1,162 Related party debt 5,748 – – 5,748 – – – – Interest on related party debt 819 – – 819 – – – – Foreign exchange forward contracts 5,248 3,416 1,832 – – – – – Commodity forward contracts 3,971 2,057 1,912 2 – – – – Other derivative financial instruments 2,963 18 509 1,840 221 187 124 64 Financial lease liabilities 480 63 197 135 59 25 1 – Pension plan obligations 137,959 1,497 5,236 6,835 7,312 7,426 7,246 102,407 Environmental remediation liabilities 14,312 334 1,001 1,033 3,448 3,191 1,292 4,013 Trade and payables 156,697 138,036 18,661 – – – – – Short term bank debt 83,566 29,671 11,870 42,025 – – – – Deferred revenue 35,624 2,846 18,043 14,735 – – – – Other 39,805 25,010 8,120 1,950 1,339 1,387 1,116 883 Total Payments 655,278 204,438 76,145 83,655 21,002 142,147 12,729 115,162 The table below summarizes the maturity profile of the Company’s financial liabilities at December 31, 2007 based on contractual undiscounted payments. Contractual < 3 3–12 2007 Cash Flows months months 2009 2010 2011 2012 > 2012 Term Loan 103,685 – – – – – 103,685 – Cash interest on term loan 30,468 – 6,094 6,094 6,095 6,095 6,090 – Fixed rate loans and borrowings 21,824 32 751 790 712 651 15,253 3,635 Floating rate loans and borrowings 134 – 134 – – – – – Cash interest on loans and borrowings 7,160 21 1,378 1,363 1,322 1,301 850 925 Related party debt 7,752 7,752 – – – – – – Interest on related party debt 636 636 – – – – – – Foreign exchange forward contracts 3,238 1,049 2,189 – – – – – Commodity forward contracts 1,415 599 783 33 – – – – Financial lease liabilities 671 55 195 263 115 43 – – Pension plan obligations 144,094 2,939 7,282 8,949 8,983 8,980 8,975 97,986 Environmental remediation liabilities 9,911 311 144 303 2,140 2,076 1,076 3,861 Trade and payables 126,827 126,384 443 – – – – – Short term bank debt 16,265 5,704 10,561 – – – – – Other 37,032 13,379 13,802 2,265 2,648 2,080 1,231 1,627 Total Payments 511,112 158,861 43,756 20,060 22,015 21,226 137,160 108,034 Interest on financial instruments classified as floating rate is generally repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument. The financial instruments of the Company that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. The difference between the contractual cash flows and the carrying amount of the term loan noted above is attributable to issuance costs in the amount of $7,540 and $9,023 as of December 31, 2008 and 2007, respectively, which are offset against the carrying amount of the debt. 132 Notes to the Consolidated Financial Statements

Interest rate risk Interest rate risk is the risk that changes in interest rates will affect the Company’s income or the value of its holdings of financial instruments. The Company’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Company’s floating rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not exposed to interest rate risk. The Company’s current policy is to maintain approximately 60% of its borrowings as fixed rate borrowings. The Company either enters into fixed rate debt or strives to limit the variability of certain floating rate instruments through the use of interest rate caps or interest rate swaps. These are designed to hedge underlying debt obligations. At December 31, 2008, after taking into account the effect of interest rate swaps, approximately 59% of the Company’s borrowings are at a fixed rate of interest (2007: 85%) The following table demonstrates the sensitivity to a reasonably possible change in interest rates adjusting for multiple interest rate swaps effective as at December 31, 2008 (2007: one swap), with all other variables held constant, of the Company’s profit before tax (through the impact on floating rate borrowings). Changes in sensitivity rates reflect various changes in the economy year-overyear. There is no impact on the Company’s equity. Increase/decrease Effect on profit 2008 in basis points before tax USD *** (130) Euro +5 (2) CAD +5 (3) USD *** 137 Euro -10 4 CAD -20 13 Increase/decrease Effect on profit 2007 in basis points before tax USD +20 (31) Euro +10 (1) CAD +20 (9) USD -20 31 Euro -10 1 CAD -20 9 *** Historic volatility on certain USD short term debt varies across a wide range from +100 basis points to -25 basis points. Sensitivities are calculated on the actual volatility for each debt instrument. See note 23 for loans and borrowings explanations. At December 31, 2008, the Company’s interest rate swaps had a fair value of ($3,565) (2007: $126). Per the agreements, the Company pays a fixed rate and receives a floating rate based on the 6 month, 3 month or 1 month USD EURIBOR. The following table demonstrates the sensitivity to a reasonably possible change in interest rates using the EURIBOR swap curve with all other variables held constant, on the Company’s equity and profit before tax. There is impact on the Company’s profit before tax for one ineffective interest rate swap at December 31, 2008. Changes in sensitivity rates reflect various changes in the economy year-over-year. Increase/decrease Effect on Effect on profit 2008 in basis points equity before tax USD +5 (155) 10 USD -10 (487) (19) Increase/decrease Effect on Effect on profit 2007 in basis points equity before tax USD +10 463 – USD -10 (121) – Currency risk Currency risk is the risk that changes in foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Many of the Company’s subsidiaries are located outside the US. Individual subsidiaries execute their operating activities in their respective functional currencies which are comprised of the US Dollar, Euro and Canadian Dollar. Since the financial reporting currency of the Company is US Dollar, the financial statements of those non US Dollar operating subsidiaries are translated so that the financial results can be presented in the Company’s consolidated financial statements. Each subsidiary conducting business with third parties that leads to future cash flows denominated in a currency other than its functional currency is exposed to the risk from changes in foreign exchange rates. It is the Company’s policy to use forward currency contracts to minimize the currency exposures on net cash flows. For certain subsidiaries, this includes managing balance sheet positions in addition to forecast and committed transactions. For these contracts, maturity dates are established at the end of each month matching the net cash flows expected for that month. For another subsidiary, all sales transactions in excess of 120 are hedged specifically. For this subsidiary, the contracts mature at the anticipated cash requirement date. Generally, all forward exchange contracts mature within twelve months and are predominantly denominated in US Dollars, British Pound Sterling and Euros. When established, the forward currency contract must be in the same currency as the hedged item. It is the Company’s policy to negotiate the terms of the hedge derivatives to closely match the terms of the hedged item to maximise hedge effectiveness. The Company seeks to mitigate this risk by hedging at least 70% of transactions that occur in a currency other than the functional currency. Notes to the Consolidated Financial Statements 133

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