Technologies · Systems · Solutions - Dürr

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33. Risks
34. Financial instruments
Use of derivative
financial instruments
The Group operates in countries in which there are political and commercial risks. From a current
perspective, the Group is not aware of the effects of such risks for the Group and they are therefore
not included in the consolidated financial statements.
Dürr may be involved in lawsuits, including product liability, in the normal course of business.
There are no such matters pending that the Board of Management expects to be material in
relation to the Group’s business or financial position. Legal costs are expensed as incurred.
There is litigation pending relating to a tax field audit conducted in 2000. A demand for backtax
of € 900 thousand plus possible interest is currently being negotiated. The Board of Management
estimates the chances of the Group winning the litigation as more likely than not. The legal
counseling and consulting fees associated with the case have been posted against earnings.
Dürr is currently involved in arbitration proceedings against Alstom S.A. regarding the acquisition
of Dürr Systems S.A.S., Courbevoie (France). In the agreement underlying this transaction,
Alstom S.A. on the one hand and Dürr AG and Dürr Systems GmbH on the other agreed to
an equity guarantee for the acquired Dürr Systems S.A.S. and its subsidiaries as well as a gross
margin guarantee for certain projects. The parties to the contract cannot agree on the actual
amount of these guarantees. Since May 2001, the arbitration proceedings have therefore been
pending at the International Chamber of Commerce (ICC), Paris (France). At a hearing on
March 3, 2003, the court of arbitration decided to appoint a preliminary expert. According to the
report of this expert from March 2004, both Alstom S.A. and Dürr have justified claims. At a
hearing before the court of arbitration on April 14, 2004, at which the report was discussed, the
parties were asked to comment on the question of whether Dürr has forfeited the right to have a
final expert appointed to decide finally on the amount of the equity as of February 17, 2000, the
date of the takeover by Dürr.
In a preliminary judgment, the court of arbitration came to the conclusion on November 10, 2004,
that Dürr had not lost this right and that a final expert could be appointed. On December 12, 2004,
the preliminary expert was appointed by both parties as the final expert. Dürr was instructed to
prepare a revised consolidated balance sheet as of the cutoff date for discussion with Alstom S.A.
by mid-March. The parties have to identify the disputed points and comment on them. The next
hearing of the court of arbitration has been scheduled for the end of April 2005.
As of December 31, 2004, and December 31, 2003, Dürr has therefore recorded a receivable based
on its claim against Alstom S.A. Depending on the outcome of the arbitration proceedings,
a deviation from the receivables posted will lead in subsequent reporting periods to a change
in goodwill without effect on income. Dürr considers it to be more probable than not that the
main claims of Dürr will be asserted.
Due to its international operations, Dürr is exposed to currency risks. The Company is also exposed
to interest risks and credit risks. The general regulations for a Group-wide risk policy are laid out
in the Group guidelines.
Derivative financial instruments are used in the Group to minimize the risks concerning changes
in exchange rates and interest rates on cash flows and the change in fair value of receivables
and liabilities. In addition, interest swaps are used to optimize interest payments. Dürr is exposed
to credit loss in the event of non-performance by counterparties (banks) to the financial instruments
described below.