S.p.A.
2010 Financial Statements
2010 Financial Statements
Giving shape to design FIDIA S.p.A. Corso Lombardia, 11 10099 San Mauro Torinese (TO) - ITALY www.fidia.com
Financial Statement issued by the Meeting of the Board of Directors on March 8, 2011 for approval by the General Shareholders’ Meeting
2
TABLE OF CONTENTS
Administrative and Supervisory Bodies
4
Organization of the Fidia Group
6
Report on Operations
10
Overview of results
12
Shareholders
16
Main risks and uncertainties which Fidia S.p.A. and Group are exposed to
20
R&D
24
Economic and financial status of the Group
26
Disclosure by line of business
59
Corporate Governance
64
Intra-group relations and relations with related parties
66
Economic and financial status of the Parent Company Fidia S.p.A.
67
Financial position
76
Trends in Group Companies
81
Noteworthy facts after year end and business outlook
83
Proposal for approval of Financial Statements and allocation of operating result
84
Fidia Group – Consolidated Financial Statements as at 31 December 2010
85
Consolidated Income Statement
85
Consolidated Comprehensive Income Statement
87
Consolidated Balance Sheet
88
Statement of Cash Flows
90
Overview of changes in consolidated shareholders' equity
92
3
Consolidated Income Statement as per Consob Resolution n° 15519 of 27 July 2006
93
Consolidated Balance Sheet as per Consob Resolution n° 15519 of 27 July 2006
94
Consolidated Statement of Cash Flows as per Consob Resolution n° 15519 of 27 July 2006
95
Notes to the Consolidated Financial Statements
96
Report of the Board of Statutory Auditors
Report of Audit Firm
Fidia S.p.A. – Financial Statements as at 31 December 2010 Income Statement
171
Fidia Comprehensive Income Statement
172
Balance Sheet
173
Statement of Cash Flows
174
Statement of Changes in Shareholders’ Equity
175
Income Statement as per Consob Resolution n° 15519 of 27 July 2006
176
Balance Sheet as per Consob Resolution n° 15519 of 27 July 2006
177
Statement of Cash Flows as per Consob Resolution n° 15519 of 27 July 2006
178
Notes to the Financial Statements
179
Annexes
239
Report of the Board of Statutory Auditors
Report of Audit Firm
4
171
Administrative and Supervisory Bodies FIDIA S.p.A.
Issued and paid-in share capital €5,123,000.00 Entered under n° 05787820017 in the Turin Register of Companies Turin Business Code R.E.A. n° 735673 Registered office in San Mauro Torinese (Turin) Corso Lombardia n° 11 Website: http://www.fidia.it - http://www.fidia.com e-mail:
[email protected]
Board of Directors Chairman and Managing Director Deputy Chairman Managing Director Directors
Giuseppe Morfino (a) Luigino Azzolin (c) (1) (2) Paolo Morfino (b) Guido Giovando (d) (1) (2) Francesco Profumo (d) (1) (2)
(a) Appointed by the General Shareholders’ Meeting on 29 April 2008 up to the approval Statements; appointed Chairman and Managing Director by the Board of Directors on 29 April 2008. (b) Appointed by the General Shareholders’ Meeting on 29 April 2009 up to the approval Statements; appointed Managing Director by the Board of Directors on 29 April 2009. (c) Appointed by the General Shareholders’ Meeting on 29 April 2008 up to the approval Statements; appointed Deputy Chairman by the Board of Directors on 24 July 2008. (d) Appointed by the General Shareholders’ Meeting on 29 April 2008 up to the approval Statements.
of the FY2010 Financial
of the FY2010 Financial
of the FY2010 Financial
of the FY2010 Financial
(1) Member of the Remuneration Board. (2) Member of the Internal Control Board.
Board of Statutory Auditors (*) Statutory Auditors
Riccardo Formica - Chairman Giovanni Rayneri Michela Rayneri (**)
Alternate Auditors
Marcello Rabbia Roberto Panero (**)
(*) Appointed by the General Shareholders’ Meeting on 29 April 2008 up to the approval of the FY2010 Financial Statements. (**) Appointed by the General Shareholders’ Meeting on 29 April 2009 up to the approval of the FY2010 Financial Statements.
Audit Firm (***)
Mazars S.p.A.
(***) Appointed by the General Shareholders’ Meeting on April 28, 2006 for the 2006-2011 period.
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POWERS OF THE CHAIRMAN AND DEPUTY CHAIRMAN OF THE BOARD OF DIRECTORS AND OF THE MANAGING DIRECTORS Chairman of the Board of Directors and Managing Director: Giuseppe Morfino He is the legal representative of the company with regard to third parties and courts of law, with separate signature, to exercise any and all, and the amplest powers of ordinary and extraordinary administration; he is entitled to appoint and revoke special attorneys for specific transactions, with the sole exclusion of the powers and rights expressly reserved to the Board of Directors, under the law or the company By-laws. The Board of the Directors retains the following powers: •
Purchase, sale, and conferment of equity interests;
•
Assignment, conferment, and/or hire of the company or any branches thereof;
•
Purchase of companies or branches of a company;
•
Purchase and/or transfer of real estate and/or tangible rights and/or related easements;
•
Registration of mortgages on corporate real estate;
•
Definition of company strategies relating to the purchase and sale of equity interests, company branches and real estate.
In his position of Managing Director, the Chairman is vested with the capacity of "employer" as well as holder of the plants, emissions and wastes.
Deputy Chairman of the Board of Directors: Mr. Luigino Azzolin He is the legal representative of the company in case of absence of or impediment to the Chairman of the Board of Directors.
Managing Director: Mr. Paolo Morfino He is the legal representative of the company with regard to third parties and courts of law, with separate signature, to exercise any and all, and the amplest powers of ordinary and extraordinary administration; he is entitled to appoint and revoke special attorneys for specific transactions, with the sole exclusion of the powers and rights expressly reserved to the Board of Directors, under the law or the company By-laws. The Board of the Directors retains the following powers:
6
•
Purchase, sale, and conferment of equity interests;
•
Assignment, conferment, and/or hire of the company or any branches thereof;
•
Purchase of companies or branches of a company;
•
Purchase and/or transfer of real estate and/or tangible rights and/or related easements;
•
Registration of mortgages on corporate real estate;
•
Definition of company strategies relating to the purchase and sale of equity interests, company branches and real estate.
Fidia Group: Structure
7
8
2010 Consolidated Financial Statements of Fidia Group
9
10
Report on Operations
11
12
Overview of results Year 2010 was another difficult year marked by great uncertainty in the markets in which the Group operates. These difficulties were reflected in the absence of growth in turnover compared to the previous year. Nonetheless, the Fidia Group succeeded in achieving good performance both in economic terms with a return to profitability and in terms of sales in the electronics sector (orders up by +14.8% compared to 2009) and in the mechanical sector (+22.4%). In this regard, a key role was played by the distribution network, which succeeded in winning new large orders starting especially in the second half of the year, and by the consolidated presence in China, the only market that has continued to grow at a sustained rate over the last two years. Turnover registered instead another slight decrease compared to the previous year (-4.1%) and the Company's two lines of business showed differing rates of growth. While, on the one hand, the electronics division managed to quickly catch the train of growth at the first signs of recovery and translate these into turnover, the mechanical division, on the other, was affected by greater inertia due to the longer time needed for the transition. Therefore, the start of the year was characterized by a situation of substantial stagnation in the investment goods sector. In both product lines, servicing registered good results that were better than last year's. The lack of growth in terms of turnover had no negative effects on income indicators; on the contrary, 2010 clearly showed an improvement in terms of profitability with a sharp increase in EBIT and EBITDA and a return to profit. The reorganization measures implemented in 2009 and 2010 that saw the merger of all the Italian companies with the parent company Fidia S.p.A. yielded the expected results, thus allowing for great technical and operating synergies. Moreover, there was an extensive review of the internal structure that involved, among other things, the reorganization of the production plants and allowed for a streamlining of management. These savings were also translated into a substantial financial benefit. In fact, the increased profitability, combined with the rationalization policies for working capital, allowed the Group to operate in 2010 always with a positive net financial standing, thus reducing liquidity risks to a minimum, reducing borrowing costs posted in the income statement and, above all, ensuring compliance with investment plans and, particularly, R&D projects, which are essential to maintaining competitiveness on international markets. In short, the trends in the 2010 results are as follows: •
revenues in the amount of €35,046 thousand as opposed to €36,543 thousand in 2009 (-4.1%);
•
EBITDA in the amount of €2,312 thousand (6.6% of turnover) as opposed to €1,184 thousand in 2009 (3.2% of turnover);
•
value of production in the amount of €40,947 thousand as opposed to €42,340 thousand in 2009 (-3.3%);
•
consolidated net profit in the amount of €921 thousand (€690 thousand posted by the Group and €231 thousand posted by third parties) as opposed to a net loss of €79 thousand in 2009 (€55 thousand posted by the Group and €24 thousand posted by third parties);
•
positive net financial standing in the amount of €7,069 thousand as opposed to a negative amount of €53 thousand as at 31 December 2009;
•
inbound orders in the amount of €35,700 thousand as opposed to €29,600 thousand in 2009 (+20.3%);
•
outstanding orders in the amount of €16,100 thousand as opposed to €15,500 thousand in 2009 (+3.9%);
The trends in turnover and gross operating spread in the 2007 - 2010 period are illustrated in the charts below:
13
14
Other main economic and financial data: (€thousand)
2010
2009
Result before taxes
1,498
409
Net operating result
921
(79)
- Group
690
(55)
- Other interests
231
(24)
Basic earnings per ordinary share
0.13
(0.01)
Diluted earnings per ordinary share
0.13
(0.01)
4.0
3.6
39,109
36,905
Attributable to:
R&D expenditure (€mil) Total assets Net financial position - (payables)/receivables
7,069
(53)
Net equity of Group and other interests
13,583
11,944
Net equity of Group
11,371
10,096
353
365
Number of employees at year-end
15
Shareholders Fidia constantly informs its Shareholders and Investors through the Investor Relations function and the Company website at www.fidia.it - www.fidia.com under Investor Relations where you can find economic and financial data, company presentations and periodic reports and updates on Company shares. The following contacts are also available for shareholders: Telephone number: E-mail:
+390112227111;
[email protected];
[email protected]
Trend of Fidia stock vs. Star Index FIDIA S.p.A. is listed at the Italian Stock Exchange under the STAR - High Requirement Securities Segment - Index.
Stock trend (closing prices) from 4 March 2010 to 4 March 2011 versus the FTSE Italia STAR Index.
16
Stock trend (closing prices) in the early months of 2011 (as at 4 March 2011) versus the FTSE Italia STAR Index.
Trend in stock quotes over the last 5 years (closing prices)
17
Main shareholders No variation of the share capital was registered during 2010. Therefore, the number of ordinary shares, equal to 5,123,000, was unchanged compared to 31 December 2009. The holders of ordinary shares as at 4 March 2011 are: Giuseppe Morfino Market Own shares
2,950,166 2,162,834 10,000
equal to 57.59%; equal to 42.22%; equal to 0.20%;
No categories of stock other than ordinary shares or bonds were issued.
Main data per share (Euro)
2010
2009
5,113,000
5,113,000
1.00
1.00
0.135
(0.011)
Diluted earnings per ordinary share (2)
0.135
(0.011)
Net equity of Group per share
2.224
1.975
Mean number of shares on date of reference Face value per share Basic earnings per ordinary share (1)
(1) and (2): calculated by dividing the earnings to the Parent Company shareholders by the weighted mean of the ordinary shares in circulation during the period.
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Closing price per share as at: Ordinary shares
30.12.2010 (Euro) 3.698
30.12.2009 (Euro) 4.625
30.12.2008 (Euro) 2.820
28.12.2007 (Euro) 7.60
29.12.2006 (Euro) 5.61
As of 19 June 2002 Fidia S.p.A. started the purchase of its own shares in compliance with the relevant authorisations granted by the General Shareholders’ Meetings on 13 November 2001, 29 April 2003, 27 July 2005 and 28 April 2006. In 2010 no purchases of own shares were made; on 11 March 2011 own shares held in the portfolio amounted to 10,000 (equal to 0.20% of share capital), thus totalling €46 thousand.
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Main risks and uncertainties which Fidia S.p.A. and Group are exposed to The main types of risk which the Group is exposed to are listed below. The analysis of said risks is also illustrated in the notes in which the hypothetical quantitative effects linked to fluctuations in market indicators are examined and a more detailed description of the main policies adopted to face market risks is provided. The considerations regarding the Group also apply to Fidia S.p.A., which, in its capacity of Parent Company, is basically exposed to the same risks and uncertainties.
Risks related to the general economic outlook The Group economic and financial position is affected by various factors that constitute the macro-economic scenario, among which the trend in the GDP of the countries where the Group conducts business, the trend in interest and exchange rates, the cost of commodities, the unemployment rate, etc. The instability that had already characterized 2008 and 2009 continued, though to a lesser extent, in 2010 and financial markets were marked by major volatility, which had relevant repercussions on the entire business cycle and on real economy. Continuing market troubles and the widespread difficulty to access credit due also to the worse rating of a number of industrial companies led to a shortage of cash, which affected growth in many sectors, among which those in which the Group conducts business, thus contributing to continued weak demand. In particular, in the durables sector, the current strict limits set by financial brokers also on now well-established instruments such as leasing contracts are a serious obstacle to new investment projects. Despite recent signs of recovery that call for cautious optimism, there is no certainty on whether the current recession can be weathered and, above all, there is still widespread perplexity on the strength of the recovery in progress. Similarly, it is still uncertain how long it will take to return to what can be defined “normal” market conditions. If this situation of uncertainty were to last any longer, the Group's business and outlook could be negatively affected with strategic implications and negative consequences on its economic and financial position.
Risks linked to Group results The Fidia Group operates in sectors that are historically marked by cyclical behaviour, such as the automotive sector, and in other sectors characterized by greater inertia in reacting to economic trends (aerospace and power generation). It is difficult to forecast the scope and duration of business cycles. Clearly, like any exogenous event, such as a significant drop in one of the main markets of reference, the volatility of financial markets and the resulting worsening of the situation in capital markets, an increase in the cost of commodities, negative fluctuations in interest rates and exchange rates, government policies, etc., could negatively impact the sectors in which the Group is active and prejudice the outlook and business, thus affecting its economic and financial results. The profitability of the Group's business is also linked to the risk of fluctuation in interest rates and to the solvency and ability of commercial partners to raise funds as well as to the general economic situation of the countries in which the Group is active.
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Risks linked to the need for financial means The trend in the Group's financial standing depends on several variables, among which the trend in the general economy, financial markets and sectors in which the Group is active. The Fidia Group intends to cover the needs resulting from financial payables falling due, planned investments and other current assets that imply an effect on the working capital through the flows deriving from operations, cash on hand and the renewal or refinancing of bank loans. The measures adopted to curb fixed overheads and production costs and the synergies resulting from the reorganization in progress have made it possible to keep the demand for working capital in check, thus avoiding situations of financial stress. However, the failure to return to normal volumes of sales or any further reduction could negatively impact the ability to generate cash flow. It is the Group policy to keep the cash on hand in sight deposits by allocating it among an adequate number of leading banks. However, considering also tensions in financial markets, it cannot be ruled out that situations in the banking and money markets can be an obstacle to normal operations in financial transactions. Finally, despite the Group has hitherto continued to receive the support of banking partners and has reached a good degree of financial independence, it could find itself in a situation of having to resort to further loans in an unfavourable market situation, with a limited availability of some sources and a possible worsening in borrowing costs. Please refer to the notes for a more detailed account of the policies adopted by the Group to tackle liquidity risk and for an analysis of financial payables by maturity.
Risks linked to fluctuations in exchange and interest rates The Fidia Group, which operates in a number of world markets, is naturally exposed to market risks linked to fluctuations in exchange rates and interest rates. The exposure to exchange rate risks is mainly related to the different geographical distribution of its commercial activities by which a significant part of its turnover is realized in currencies other than the Euro. In particular, the Group is exposed for exports to other currency zones (mainly the US dollar) and, given the strong presence in China, the Group is also exposed to variations in the local currency whose trend is closely linked to the dollar's. The Fidia Group uses various forms of financing to cover the needs of its industrial operations. Variations in interest rates can lead to an increase or decrease in the cost of loans and hence have financial repercussions and general consequences on the Group's profitability. Consistently with its risk hedging policies, the Fidia Group is engaged in tackling exchange rate fluctuations by resorting to hedging instruments. Despite these financial transactions, sudden changes in exchange rates could negatively affect the Group's economic and financial results. The notes comprise a dedicated section in which said risks are further analysed and the potential impact of hypothetical fluctuations in interest rates and exchange rates is examined based on simplified scenarios.
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Risks linked to relations with employees and suppliers In the various countries in which the Group is present, employees are protected by laws and/or collective labour agreements that grant them, through trade unions, the right to be consulted on specific issues, among which reorganization and lay-offs. Said laws and/or collective labour agreements applicable to the Group could affect its ability to strategically redefine and/or reposition its operations in a flexible manner. Fidia's ability to cut staff or adopt other measures to interrupt employer-employee relationships also on a temporary basis is hence contingent on restraints set by the law and agreements with trade unions. In 2010 the Fidia Group was engaged in a reorganization effort that involved the renegotiation of some labour agreements, the cutting of some positions (including executives) and extensive recourse to social "shock absorbers" envisaged by current regulations. Said operations were carried out to reduce the risk of possible litigation to a minimum and the possible scenarios were carefully assessed by the management, which worked with the constant support of experts in labour law. Moreover, the Group purchases raw materials and components from a large number of suppliers and is dependent on outsourced services and processing. Close cooperation between the Group and some strategic suppliers is now common practice and, while on the one hand this brings major benefits in economic and quality terms, on the other, the Group heavily relies on said suppliers. Therefore, any difficulties they may experience (due either to endogenous factors or macro-economic variables) can negatively impact the Group.
Management-related risks The performance of the Group heavily depends on the ability of its executives and other managers to effectively run the Group and its single companies. The loss of the services of some key resources without being duly replaced or the inability to draw and retain new and qualified resources could hence have negative effects on the outlook, production and commercial operations and economic and financial results of the Group.
Risks linked to the high degree of competition in the Group's business sectors The markets in which the Group operates are extremely competitive in terms of product quality, technological innovation, economic terms, reliability, safety and after-sales technical servicing. The Group is competing in all the markets in which it is active with other leading international companies and various local players. The success of the Fidia Group's operations depends on its ability to maintain and increase its shares in the markets in which it is currently active and/or to expand into new markets with innovative products with high technological and quality standards and to ensure adequate levels of profitability. In particular, if the Fidia Group were not able to develop and offer new and competitive products compared to the competition in terms of price, performance, quality and technology, the Group's market shares could shrink, thus having a negative impact on the Group's economic and financial results.
Risks linked to sales on international markets and to exposure to uncertain local conditions A substantial part of the Group's turnover is realised on international markets and most of the sales are made outside of the European Union. Therefore, the Group is exposed to risks linked to worldwide operations, including the risks associated with: •
exposure to local economic situations and policies;
•
implementation of restrictive or penalizing policies on imports or exports;
•
multiple tax regimens and particularly transfer pricing and the application of withholding tax or other taxes on remittances and other payments of or by subsidiaries;
•
enactment of limiting or restrictive policies on foreign investments and/or trade as well as policies on exchange rates and restrictions on the repatriation of capital.
In particular, Fidia operates in several emerging countries, among which India, Brazil and China where it has a direct presence through two companies and some major technical and production cooperation agreements are in force. The exposure of the Group to trends in these countries has increasingly grown and, in particular, China is currently the main
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market outlet for the Group's products. Unfavourable political or economic events in these regions could have consequences on the Group outlook and business as well as on its economic results and financial standing.
Risks linked to manufacturer's liability Being a manufacturer of highly automated machinery, the Group is exposed to the risk of various types of malfunction, which can cause damage to users and, more in general, to third parties. The Group protects itself against such cases during the planning and design of its machinery and by adopting appropriate manufacturing procedures that also comprise strict quality control tests. Moreover, it is a well-established practice to cover this risk with product liability policies taken out with leading insurance companies. Nonetheless, it is not possible to exclude that the Group can be exposed to liabilities resulting from issues of this nature despite the procedures adopted.
Risks linked to environmental policy The Group's operations comply with the local, national and supranational rules and regulations on environmental protection with regard both to its products and its production cycles. Please be noted that the type of business conducted has limited consequences in environmental terms and in terms of emissions into the atmosphere, waste disposal and water treatment. However, this requires that the Group incur costs to keep the situation as it is.
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R&D The R&D activities that are carried out mainly by the parent company Fidia S.p.A. have always been one of the strengths of the Group and received substantial investments over the years. A team of 48 people supported by specialized consultants is currently dedicated to R&D activities. The costs incurred by the Group in 2010 amounted to approx. €4 million (over 11% of revenues). The R&D activities were carried out mainly by in-house resources and a substantial part of the expenses incurred consisted of costs for personnel (about €2 million). All costs incurred were posted directly to the income statement. R&D allows the Group to pursue the goal of constantly adapting its products to customer needs and to always be at the forefront thanks to technological innovation in its commodity sector. Research covers both lines of business of the Group. In the numerical controls sector, 2010 saw the launch of major hardware and software products. The low-end numerical controls C0 and C1 for low-cost machinery with limited performance were replaced by the new product called “nC12R”. This numerical control, which made its debut at the BIMU 2010 Trade Fair in Milan, is a “low cost” variant of the “nC” range currently available on models nC12 and nC15 and it meets the growing demand for high performance at low costs in this product segment. During the year, the development of the software called “ViMill (Virtual Milling)” continued. Patent is currently pending. This application, the first of its kind in the world, will allow operators to check in advance the tool route, thus detecting any programming errors, which, if not fixed, could seriously damage the piece being machined or even the milling machine. The tests on this innovative product are now at an advanced stage and the market launch is expected in the second half of 2011. The feedback received and the interest shown on the occasion of presentations lead us to reasonably believe that this application will meet with good success. Development of the new user interface started in 2009. It has continued according schedule and thanks to the modular and “cross-platform” architecture, it will provide the long-term basis for a new CNC range, based also on multiple operating systems. The launch of the first version of user interface, which will allow for an aesthetic restyling of the CNC products, combined with a functional and qualitative improvement, is due in the second half of 2011. There was a new release of the HMS (Head Measuring System) software, which is more adaptable to the calibration needs of the workstations it is installed on, from their commissioning to use by end users. Following the launch of the new GTF gantry milling machines, appropriate I/O modules for remote data transmission were developed and put into production. The data can be transmitted up to 100 meters also in environments with major electromagnetic interferences, as are industrial plants. Finally, please be noted that following requests by some customers in the grinding sector, an extension software was developed for the well-known Fidia “ISOGRAPH” to allow for the creation of specific grinding processing cycles. The activity in the Milling Systems sector followed the same course started the year before and led to the completion of the development of the modular Gantry (GTF) line for workstations with mobile traverse for the processing of dies, templates and equipment for the car industry and aeronautical mechanical constructions sector. The working ranges can vary from 5 to 20 meters in length thanks to a modular design approach. The line is marked by a high degree of sturdiness and dynamics of the axes. These features allow for excellent performance in terms of speed, precision and power.
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This line also comes in lighter versions, with vacuum system fit for the processing of materials, such as carbon fibre composites, to perfectly fit applications in car design centres, and heavier versions for the machining of titanium or processing involving a high degree of material removal.
In addition, in the second half of the year, an agreement was signed with a leading international aerospace industry for the development of an innovative finishing process for aeronautic components. The results obtained with a workstation expressly designed for this activity have been extremely promising and it is expected that this can be the prelude to major commercial developments. Finally, in 2010 the Group continued its activities in the financed research field. Fidia participated in: •
thirteen projects sponsored by the European Community (ADAMOD, Production 4µ, Hydromel, IntegMicro, COMETA, SOMMACT, InTIME, ESTOMAD, HARCO, AIMACS, DYNXPERTS, FOFdation, Transparency), the latter six of which were launched during the year;
•
two projects funded by the Italian Ministry for Economic Development (Michelangelo, SIGI-X), both launched during the year;
•
two projects funded by the Piedmont Region (MagDamp, AMICO), the latter of which was started during the year.
The results of these projects have significantly contributed to the definition of the Group's main lines of product development in the medium and long term. The Group allocates a substantial part of its investments budget in said R&D activities. The investments in capital assets were made to the extent deemed necessary to keep the production and commercial structure at a level appropriate to the business targets and needs of single markets.
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Economic and financial status of the Group INTRODUCTION Alternative performance indicators In this Report on Operations, in the consolidated income statement of the Fidia Group and in the income statement of the parent company Fidia S.p.A. for the years closed on 31 December 2010 and 31 December 2009, in addition to the conventional IFRS financial indicators, a number of alternative performance indicators have been provided in order to allow for a better assessment of the economic and financial trends. Said indicators, which are also found in the Report on Operations of other periodic reports, do not replace in any way whatsoever mandatory IFRS indicators. The Group uses alternative performance indicators, such as: •
EBIT,
•
EBITDA (“Earnings Before Interest, Taxes, Depreciation and Amortization”), which is the sum of the “Operating Income” as per the income statement, the item “Amortization” and the item “Impairment and Depreciation”.
Other parameters mentioned:
26
•
“Value of production”, which is given by the algebraic addition of the items “Net revenue from sales and services”, “Other operating revenue”, “Changes in inventories of finished goods and work in progress” and “Increases for internal work” and
•
"Value added", which is the result of the algebraic addition of the items “Value of production”, “Raw materials and consumables used”, “Commissions, shipping and outsourced work” and "Other services and overheads”.
Consolidation area The companies comprised in the consolidation area are listed below:
Registered office
Percentage held by the Parent Company on 31.12.2010
San Mauro Torinese (Turin, Italy)
-
Troy (USA)
100%
Dreiech (Germany)
100%
Zamudio (Spain)
99.993%
Emerainville (France)
93.19%
Pune (India)
99.99%
Beijing (China)
92%
Fidia do Brasil Ltda.
São Paulo (Brazil)
99.75%
Shenyang Fidia NC&M Co., Ltd
Shenyang (China)
51%
Moscow (Russia)
100%
Warszawa (Poland)
80%
Name Fidia S.p.A. (Parent Company)
Fidia Co.
Fidia GmbH
Fidia Iberica S.A.
Fidia S.a.r.l.
Fidia India Private Ltd.
Beijing Fidia Machinery & Electronics Co.,Ltd
OOO Fidia
Fidia Spolka z o.o.
There was no change in the consolidation area compared to the consolidated income statement as at 31 December 2009.
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Group financial performance Reclassified consolidated income statement (€ thousand)
2010
%
2009
%
Net sales
35,046
100%
36,543
100%
Changes in inventories of finished goods and work in progress
(1,256)
-3.6%
(2,673)
-7.3%
7,157
20.4%
8,470
23.2%
40,947
116.8%
42,340
115.9%
(12,635)
-36.1%
(14,096)
-38.6%
Commissions, shipping and outsourced work
(3,315)
-9.5%
(2,857)
-7.8%
Other services and overheads
(9,714)
-27.7%
(9,425)
-25.8%
Value added
15,283
43.6%
15,962
43.7%
(12,971)
-37.0%
(14,778)
-40.4%
EBITDA
2,312
6.6%
1,184
3.2%
Bad debts provision
(186)
-0.5%
(361)
-1.0%
Depreciation
(687)
-2.0%
(709)
-1.9%
Operating income from ordinary business
1,439
4.1%
114
0.3%
967
2.6%
Other operating revenue Value of production
Raw materials and consumables
Personnel expenses
(Provision)/issue for penalties
-
EBIT
1,439
4.1%
1,081
3.0%
Net finance income and costs
(298)
-0.9%
(700)
-1.9%
357
1.0%
28
0.1%
EBT
1,498
4.3%
409
1.1%
Income taxes (current, paid and deferred)
(577)
-1.6%
(488)
-1.3%
921
2.6%
(79)
-0.2%
(231)
-0.7%
24
0.1%
690
2.0%
(55)
-0.2%
Profit/(Loss) on exchange rates
Net operating result
- (Profit)/Loss of other interests - (Profit)/Loss of Group
FY2010 was marked by net sales slightly below 2009, which led to a reduction in value of production. Nonetheless, higher margins on sales, combined with the curbing of personnel expenses, allowed for better EBITDA compared to 2009 (€2,312 thousand in 2010 compared to €1,184 thousand in 2009, i.e., 6.6% and 3.2% of turnover respectively). In addition, the operating income from ordinary business registered a sharp increase compared to the previous year (€1,439 thousand in 2010 compared to €114 thousand in 2009, i.e., 4.1% and 0.3% of turnover respectively). The detailed description of said trends is provided below.
28
NET SALES FY2010 registered a slight reduction in turnover compared to FY2009 (-4.1%). Therefore, the Fidia Group closed the year with revenues in the amount of €35,046 thousand as opposed to €36,543 thousand of the previous year. The two lines of business registered different trends. The electronics sector registered an overall increase (products and aftersales servicing) of 25.1% and the mechanical sector a 12.3% decrease. The trend in revenues by line of business is illustrated more in detail in the following table: Revenues by line of business (€ thousand)
2010
%
2009
%
Change in %
Numerical controls, drives and software
5,616
16.0%
3,760
10.3%
49.3%
After-sales servicing
4,387
12.5%
4,235
11.6%
3.6%
Total numerical controls line (CNC)
10,003
28.5%
7,995
21.9%
25.1%
High-speed milling systems
20,584
58.7%
24,689
67.9%
-16.6%
4,459
12.7%
3,859
10.6%
15.6%
Total milling systems line (HSM)
25,043
71.5%
28,548
78.1%
-12.3%
Grand total
35,046
100%
36,543
100%
-4.1%
After-sales servicing
29
Trend in revenues by geographical area is illustrated in the following tables: Numerical controls and software (€ thousand)
2010
%
2009
%
Change in %
ITALY
1,827
18.3%
1,968
24.6%
-7.2%
GERMANY
1,823
18.2%
2,062
25.8%
-11.6%
SPAIN/PORTUGAL
656
6.6%
914
11.4%
-28.2%
FRANCE/BELGIUM
323
3.2%
440
5.5%
-26.5%
2,905
29.0%
1,014
12.7%
186.5%
390
3.9%
298
3.7%
30.9%
1,590
15.9%
937
11.7%
69.7%
INDIA
105
1.1%
67
0.8%
56.7%
REST OF THE WORLD
383
3.8%
294
3.7%
30.3%
10,003
100%
7,995
100%
25.1%
CHINA
BRAZIL
USA/CANADA
TOTAL
30
High-speed milling systems (€ thousand)
2010
%
2009
%
Change in %
ITALY
2,260
9.0%
1,769
6.2%
27.8%
GERMANY
2,922
11.7%
2,549
8.9%
14.6%
SPAIN/PORTUGAL
257
1.0%
1,069
3.7%
-75.9%
FRANCE/BELGIUM
468
1.9%
867
3.0%
-46.0%
15,858
63.3%
7,808
27.3%
103.1%
930
3.7%
1,042
3.6%
-10.7%
1,248
5.0%
7,228
25.3%
-82.7%
INDIA
652
2.6%
1,039
3.6%
-37.2%
REST OF THE WORLD
448
1.8%
5,178
18.1%
-91.4%
25,043
100%
28,548
100%
-12.3%
CHINA
BRAZIL
USA/CANADA
TOTAL
31
Net total revenues (€ thousand)
2010
%
2009
%
Change in %
ITALY
4,087
11.7%
3,737
10.2%
9.4%
GERMANY
4,745
13.5%
4,611
12.6%
2.9%
SPAIN/PORTUGAL
914
2.6%
1,983
5.4%
-53.9%
FRANCE/BELGIUM
791
2.3%
1,307
3.6%
-39.5%
CHINA
18,762
53.5%
8,822
24.1%
112.7%
BRAZIL
1,320
3.8%
1,340
3.7%
-1.5%
USA/CANADA
2,838
8.1%
8,165
22.3%
-65.2%
INDIA
758
2.2%
1,106
3.0%
-31.5%
REST OF THE WORLD
831
2.4%
5,472
15.0%
-84.8%
35,046
100%
36,543
100%
-4.1%
TOTAL
Numerical controls and software Revenues in the electronics sector registered a strong recovery compared to the previous year, rising from €7,995 thousand in 2009 to €10,003 thousand in 2010, equal to a 25.1% increase in product sales and after-sales services. Growth was stronger for products (CN, CAM software and drives), which registered a 49.3% increase, equal to €1,856 thousand, while servicing (which comprises technical servicing, maintenance contracts, repairs and sale of spare parts), though higher, showed a more stable trend compared to the year before, as is inherent to this type of activity. It registered a 3.6% increase, equal to €152 thousand. From a geographical point of view, aside from European markets, which all registered decreases, even quite sharp in some cases, all other regions grew. Besides the excellent performance in China, with an almost three-fold increase in turnover compared to the previous year (from €1,014 thousand in 2009 to €2,905 thousand in 2010), good results were also registered in North America (+69.7%) and, though still marginal in terms of overall turnover, in India (+56.7%) and Brazil (+30.3%).
32
High-speed milling systems At year-end the revenues for high-speed milling systems (including servicing and after-sales servicing) reached a total of €25,043 thousand, i.e., -€3,505 thousand compared to the year before (-12.3%). This sector showed a good performance of servicing activities (+15.6% compared to FY2009), while the revenues from sales of machinery dropped by 16.6% Please be noted that the latter revenues are posted in the income statement according to IAS 18 at the moment of acceptance of the system by customers. On 31 December 2010, 61 machines had received final acceptance by customers, as opposed to the 56 of FY2009, matched by a drop in mean unit value of the machines sold, due mainly to a different mix. From a geographical point of view, the drop in turnover hit all the markets in which the Group has operations, except for the Italian and German markets in Europe. Both grew by 27.8% and 14.6% respectively. The Chinese market also grew and its turnover doubled compared to the year before (€7,808 thousand in 2009; €15,858 thousand in 2010)
33
COMMERCIAL ACTIVITY The following tables show the trends in the portfolio and in new orders in the two periods under consideration. Numerical controls and software (€ thousand)
2010
2009
Change in %
Order portfolio as at January 1
1,510
1,290
17.1%
New orders
9,434
8,215
14.8%
(10,003)
(7,995)
25.1%
942
1,510
-37.7%
2010
2009
Change in %
Order portfolio as at January 1
13,948
21,073
-33.8%
New orders
26,216
21,423
22.4%
(25,043)
(28,548)
-12.3%
15,121
13,948
8.4%
2010
2009
Change in %
Order portfolio as at January 1
15,459
22,363
-30.9%
New orders
35,650
29,638
20.3%
(35,046)
(36,543)
-4.1%
16,063
15,459
3.9%
st
Net income st
Order portfolio as at December 31
High-speed milling systems (€ thousand) st
Net income st
Order portfolio as at December 31
Total (€thousand) st
Net income st
Order portfolio as at December 31
34
New orders by geographical area:
Numerical controls and software (€ thousand)
2010
%
2009
%
Change in %
ITALY
1,852
19.6%
2,009
24.5%
-7.8%
GERMANY
1,635
17.3%
1,928
23.5%
-15.2%
SPAIN/PORTUGAL
626
6.6%
757
9.2%
-17.4%
FRANCE/BELGIUM
323
3.4%
405
4.9%
-20.1%
2,801
29.7%
1,620
19.7%
72.9%
415
4.4%
298
3.6%
39.1%
1,276
13.5%
863
10.5%
47.9%
INDIA
124
1.3%
75
0.9%
65.3%
REST OF THE WORLD
383
4.1%
260
3.2%
47.1%
9,434
100%
8,215
100%
14.8%
CHINA
BRAZIL
USA/CANADA
TOTAL
35
High-speed milling systems (€ thousand)
2010
%
2009
%
Change in %
ITALY
2,011
7.7%
1,551
7.2%
29.7%
GERMANY
2,449
9.3%
2,770
12.9%
-11.6%
SPAIN/PORTUGAL
220
0.8%
343
1.6%
-35.8%
FRANCE/BELGIUM
468
1.8%
149
0.7%
214.1%
17,059
65.1%
12,069
56.3%
41.3%
815
3.1%
654
3.1%
24.7%
2,114
8.1%
2,860
13.3%
-26.1%
INDIA
132
0.5%
-
-
-
REST OF THE WORLD
947
3.6%
1,027
4.8%
-7.8%
26,216
100%
21,423
100%
22.4%
CHINA
BRAZIL
USA/CANADA
TOTAL
36
Total new orders (€thousand)
2010
%
2009
%
Change in %
ITALY
3,863
10.8%
3,560
12.0%
8.5%
GERMANY
4,084
11.5%
4,698
15.9%
-13.1%
SPAIN/PORTUGAL
846
2.4%
1,100
3.7%
-23.1%
FRANCE/BELGIUM
791
2.2%
554
1.9%
42.8%
CHINA
19,860
55.7%
13,689
46.2%
45.1%
BRAZIL
1,230
3.5%
952
3.2%
29.2%
USA/CANADA
3,390
9.5%
3,723
12.5%
-8.9%
257
0.7%
75
0.3%
242.7%
1,330
3.7%
1,287
4.3%
3.3%
35,650
100%
29,638
100%
20.3%
INDIA
REST OF THE WORLD
TOTAL
Numerical controls and software New orders in the electronics sector registered substantial growth compared to FY2009 (+14.8%). The analysis by geographical area basically shows the same trend as the one registered for revenues, with a certain degree of sluggishness in Europe, which registered a drop in new orders in all markets, and much better results in all other geographical areas.
High-speed milling systems The number of new orders in the high-speed milling sector also grew by +22.4% compared to 2009. Among the areas that did best, suffice it to mention China with a +41.3% increase compared to 2009, equal to €17,059 thousand, that is to say over 65% of all Group orders. Brazil also did well with a +24.7%, equal to €815 thousand, and Italy with a +29.7%, equal to €2,011 thousand. In Europe, France too registered a sharp increase (+214.1%), even though this market is still negligible in terms of value. All other European markets, North America and the Rest of the World did not fare very well.
37
The distribution of the order portfolio by geographical area was as follows on 31 December 2010: Numerical controls and software (€ thousand)
2010
%
2009
%
Change in %
183
19.5%
159
10.5%
15.5%
GERMANY
2
0.2%
191
12.6%
-98.8%
SPAIN/PORTUGAL
-
-
31
2.0%
-100.0%
FRANCE/BELGIUM
-
-
-
-
-
CHINA
704
74.8%
808
53.5%
-12.9%
BRAZIL
25
2.7%
-
-
-
-
-
314
20.8%
-100.0%
27
2.9%
7
0.5%
285.7%
-
-
-
-
-
942
100%
1,510
100%
-37.7%
ITALY
USA/CANADA
INDIA
REST OF THE WORLD
TOTAL
38
High-speed milling systems (€ thousand)
2010
%
2009
%
Change in %
ITALY
680
4.5%
928
6.7%
-26.8%
GERMANY
863
5.7%
1,336
9.6%
-35.4%
SPAIN/PORTUGAL
-
-
37
0.3%
-100.0%
FRANCE/BELGIUM
-
-
-
-
-
12,213
80.8%
11,012
78.9%
10.9%
-
-
115
0.8%
-100.0%
866
5.7%
-
-
-
-
-
520
3.7%
-100.0%
499
3.3%
-
-
-
15,121
100%
13,948
100%
8.4%
CHINA
BRAZIL
USA/CANADA
INDIA
REST OF THE WORLD
TOTAL
39
Total portfolio (€thousand)
2010
%
2009
%
Change in %
ITALY
863
5.4%
1,087
7.0%
-20.6%
GERMANY
866
5.4%
1,527
9.9%
-43.3%
SPAIN/PORTUGAL
-
-
68
0.4%
-100.0%
FRANCE/BELGIUM
-
-
0
0.0%
-
12,918
80.4%
11,820
76.5%
9.3%
25
0.2%
115
0.7%
-78.3%
866
5.4%
314
2.0%
175.8%
27
0.2%
527
3.4%
-94.9
499
3.1%
-
-
-
16,063
100%
15,459
100%
3.9%
CHINA
BRAZIL
USA/CANADA
INDIA
REST OF THE WORLD
TOTAL
Other operating revenue Other operating revenue in 2010 amounted to €7,157 thousand as opposed to €8,470 thousand in FY2009. Said item comprises revenues from ordinary business activities, but which are not sales of goods and services. This item includes:
40
•
Contribution of the Shenyang local government (China) to the subsidiary Shenyang Fidia NC&M Co. Ltd. to the project in partnership with the Chinese partner Shenyang Machine Tool Co. Ltd. -SMTCL- (€4,845 thousand as at 31 December 2010; €4,888 thousand as at 31 December 2009); the project will last up to 2011 and envisions that the local government allocate funds in the amount of RMB 50 million a year;
•
contributions for operating expenses granted to Fidia S.p.A. for research projects funded by the Italian University and Research Ministry or the European Community (€1,115 thousand as at 31 December 2010; €1,077 thousand as at 31 December 2009 including tax credit);
•
increases in tangible assets built within the Group and devoted solely to demonstrations for customers (€418 thousand as at 31 December 2010; €453 thousand as at 31 December 2009);
•
conversion of warranty provision and bad debts provision for the part released or in excess of the risks covered (€280 thousand as at 31 December 2010; €207 thousand as at 31 December 2009);
•
contingent assets, damages from insurance companies, capital gains from transfers, recovery of costs incurred and others (€499 thousand as at 31 December 2010; €1,845 thousand as at 31 December 2009).
Value of production The value of production reached €40,947 thousand at year-end and registered a slight decrease compared to FY2009 (€42,340 thousand, i.e., -3.3%) due mainly to lower sales revenue (-€1,497 thousand compared to 2009); the slight decrease in inventories of finished goods and work in progress (from -€2,673 thousand in 2009 to -€1,256 thousand in 2010) was offset by a drop in other operating revenue (€7,157 thousand in 2010 as opposed to €8,470 thousand in 2009).
Sales margin Said margins, calculated after raw materials used, change in inventories and variable services, amounted to €17,840 thousand (50.9% of sales revenues) as opposed to €16,917 thousand (46.3% of sales revenues). The improvement, which was obtained despite the drop in revenue, was due above all to the different composition of the turnover, which saw an increase in the share of the electronics and servicing sectors of both business units, compared to the high-speed milling systems. This affected, in particular, the incidence of production materials, which dropped from 45.9% in 2009 to 39.6% in 2010. However, there was an increase in the costs of the variable services (outsourced work and expenses for product distribution) whose incidence increased from 7.8% of 2009 to 9.5% of 2010. With regard to the margins by sector, please refer to the paragraph “Disclosure by sector”.
Other services and overheads Said item, equal to €9,714 thousand, increased as a whole by €289 thousand compared to FY2009. The difference can be analysed in detail as follows: •
production costs and expenses for miscellaneous technical servicing (+€184 thousand);
•
expenses incurred for trade fairs, entertainment expenses, travel expenses and commercial services (+€213 thousand);
•
contingent liabilities (-€596 thousand);
•
R&D costs and related travel expenses (+€904 thousand);
•
administration costs, utilities, upkeep, rent, legal expenses and other overheads (-€416 thousand).
Value added At year-end it amounted to €15,283 thousand as opposed to €15,962 thousand of FY2009. The percentage compared to the sales revenues was basically unchanged compared to the FY2009 (43.7% in 2009, 43.6% in 2010).
41
Personnel The following tables illustrate the trends in staffing and labour costs. Staffing
2010
2009
Abs. change
Change in %
12
14
-2
-14.3%
305
308
-3
-1.0%
36
43
-7
-16.3%
353
365
-12
-3.3%
Total mean n° of employees
359.0
366.5
-7.5
-2.0%
Labour cost (thousand)
2010
2009
Abs. change
Change in %
12,971
14,778
-1,807
-12.2%
Executives
Clerks and cadres
Workers
Total employees
Personnel costs decreased by €1,807 thousand compared to FY2009 (-12.2%) with a mean reduction in staffing equal to 7.5 units (-2%). This was the result of the fact that measures taken to curb personnel costs were based mainly on recourse to social "shock absorbers" (extraordinary redundancy pay in Italy and similar instrument in France and Germany). Therefore, the drop in costs was not matched by a commensurate reduction in employees on payroll of the Group's companies. Personnel costs comprised €253 thousand for voluntary redundancy payments, paid out in part in 2010 and allocated in part for specific cases. However, these will be implemented in the first half of 2011.
EBITDA EBITDA was positive and amounted to €2,312 thousand, thus registering a substantial increase compared to FY2009 (€1,184 thousand). Therefore, the incidence on turnover was also greater, i.e., 6.6% as opposed to 3.2% in 2009.
EBIT EBIT was also positive and amounted to €1,439 thousand (4.1% of turnover). The improvement compared to FY2009 when EBIT amounted to €1,081 thousand (3.0% of turnover) is all the more clearer if it is considered that 2009 had benefited from the release of provisions (€967 thousand) for risks, which had a positive outcome.
EBT EBT resulted in profits equal to €1,498 thousand compared to €409 thousand in 2009.
42
Income taxes The net operating result is due to current, deferred and paid taxes totalling €577 thousand, which can be summarized as follows: •
IRAP (Italian Regional Production Tax) €239 thousand;
•
Income tax of foreign subsidiaries €361 thousand;
•
Paid and deferred taxes €23 thousand.
Net operating result Net operating result amounted to a profit of €921 thousand, €690 thousand of which pertaining to the Group, as opposed to a loss of €79 thousand, €55 thousand of which pertaining to the Group, in FY2009.
43
GROUP BALANCE SHEET On 31 December 31 2010 reclassified consolidated balance sheet was as follows: Group Balance Sheet (€ thousand)
31/12/2010
31/12/2009
2,309
2,579
Intangible assets
186
177
Financial assets
25
25
475
455
Fixed assets – (A)
2,995
3,236
Net trade receivables from customers
8,906
9,652
13,970
15,650
1,932
2,278
Short-term (current) assets – (B)
24,808
27,580
Trade payables to suppliers
(8,256)
(7,792)
Other current payables
(9,759)
(7,849)
(18,015)
(15,641)
6,793
11,939
(2,493)
(2,527)
Other long-term liabilities (F)
(781)
(651)
Net invested capital (G) = (A+D+E+F)
6,514
11,997
-
-
(11,306)
(6,089)
2,482
5,204
(8,824)
(885)
1,755
938
(7,069)
53
Share capital
5,123
5,123
Reserves
5,558
5,028
690
(55)
11,371
10,096
2,212
1,848
13,583
11,944
6,514
11,997
Net tangible assets
Other financial assets
Closing inventories Other current assets
Short-term (current) liabilities – (C) Net working capital (D) = (B+C) Termination benefits (E)
Financial position Available-for-sale financial assets Cash on hand, bank deposits Short-term loans Short-term financial position Long-term loans, net of current portion Net financial position (H)
Net operating result of Group Total net equity of Group Net equity pertaining to other interests Total net equity (I) Shareholders' equity and net financial position (L) = (H+I)
44
Compared to 31 December 2010 the Group balance sheet registered the following changes: •
a slight drop in fixed assets (from €3,236 thousand to €2,995 thousand), due mainly to less investments in tangible assets;
•
a drop in trade receivables from customers (from €9,652 thousand to €8,906 thousand) due to the reduction in turnover; there was a further improvement in the mean collection time, thus confirming the Group's efforts to monitor customer solvency. Trade receivables were posted net of depreciation provision in the amount of €1,056 thousand;
•
a reduction in the level of inventories (from €15,650 thousand to €13,970 thousand) for raw materials and finished products. Inventories were posted net of depreciation provision in the amount of €1,469 thousand;
•
a reduction in other current assets (from €2,278 thousand to €1,932 thousand) due above all to less VAT receivables and less advances to suppliers;
•
an increase in trade payables to suppliers (from €7,792 thousand to €8,256 thousand) due to larger volume of purchases and to the renegotiation of payment terms with some suppliers;
•
an increase in other current liabilities (from €7,849 thousand to €9,759 thousand), due above all to the increase in payables for contributions received by the subsidiary Shenyang Fidia NC&Machine Co Ltd for receipts from the government fund not yet utilized at year-end and to the increase in advances from customers in part for advances received and in part for machines already delivered but not accepted yet (according to IAS 18, revenue recognition in the income statement occurs at the moment of acceptance by the end customer);
•
no change in Termination Benefits;
•
no change in other long-term liabilities.
With regard to financial items, there was a substantial improvement compared to 31 December 2009, with the net financial position that passed from a rather stable situation (debt in the amount of €53 thousand at the end of 2009) to a positive of €7,069 thousand, thanks to better profitability and policies adopted to optimise working capital. The trend in the net financial position is illustrated below.
45
Trend in net financial position Financial position (€ thousand)
31/12/2010
31/12/2009
-
-
Cash on hand, bank deposits
11,306
6,089
Short-term loans
(2,482)
(5,204)
8,824
885
(1,755)
(938)
7,069
(53)
Available-for-sale financial assets
Short-term financial position
Long-term loans, net of current portion
Net financial position
46
The detailed credit items of the net financial position are illustrated below. Cash on hand, bank deposits (thousand)
31/12/2010
31/12/2009
2,928
1,991
406
309
1,070
620
Fidia Iberica S.A.
371
317
Fidia S.a.r.l.
124
157
3,354
1,394
243
93
2,795
1,192
-
2
11
8
4
6
11,306
6,089
Fidia S.p.A.
Fidia Co.
Fidia GmbH
Beijing Fidia Machinery & Electronics Co.,Ltd
Fidia do Brasil Ltda.
Shenyang Fidia NC & M Co., Ltd
OOO Fidia
Fidia Sp.z o.o.
Fidia India Private Ltd.
TOTAL CASH ON HAND
47
Loans (€ thousand)
31/12/2010
31/12/2009
Fidia S.p.A.
(2,306)
(4,957)
Fidia GmbH
(134)
(184)
(11)
(30)
(4)
(6)
(27)
(27)
(2,482)
(5,204)
Fidia S.p.A.
(1,447)
(400)
Fidia GmbH
(269)
(462)
(15)
(24)
-
(1)
(23)
(51)
Total
(1,755)
(938)
TOTAL LOANS
(4,237)
(6,142)
Short-term loans
Fidia Co.
Fidia do Brasil Ltda.
Fidia Iberica S.A.
Total
Long-term loans, net of current portion
Fidia Co.
Fidia do Brasil Ltda.
Fidia Iberica S.A.
48
A brief statement of cash flows is provided below to illustrate the flows that generated the net financial position. The exhaustive statement is provided among the Consolidated Financial Statements. Short consolidated statement of cash flows (€ thousand)
2010
2009
A) Cash and cash equivalents at the beginning of the period
2,151
(2,208)
B) Cash from/(used in) operating activities during the period
6,639
5,626
C) Cash from/(used in) investing activities
(216)
(544)
D) Cash from/(used in) financing activities
653
(628)
Differences in exchange rates
578
(95)
E) Net change in cash and cash equivalents
7,654
4,359
F) Cash and cash equivalents at year end
9,805
2,151
Cash and cash equivalents
11,306
6,089
Overdrawn bank accounts
(1,501)
(3,938)
9,805
2,151
Breakdown of cash and cash equivalents:
In addition to the foregoing, the table below illustrates the main economic and financial indicators.
49
FINANCIAL RATIOS INVESTMENT MIX RATIOS
RATIOS
2010
2009
1) Weight of fixed assets
Capital assets
2,995
3,236 =
Total assets
7.7%
39,109
36,905
36,114
33,669
=
8.8%
=
91.2%
2) Weight of working capital
Current assets
= Total assets
50
39,109
92.3% 36,905
LOAN MIX RATIOS
RATIOS
2010
2009
1) Weight of current liabilities
Current liabilities
20,497
20,845 =
Total liabilities (except net equity)
80.3%
25,526
24,961
5,029
4,116
=
83.5%
=
16.5%
=
99.6%
2) Weight of non-current liabilities
Non-current liabilities
= Total liabilities (except net equity)
19.7%
25,526
24,961
13,583
11,944
3) Weight of shareholders' equity
Shareholders' equity
= Net invested capital
6,514
208.5% 11,997
The analysis of the invested capital mix indicators shows a prevalence of short-term net assets in the total assets. This result is basically consistent with that of FY2009. The loans mix indicator shows: •
a prevalence of short-term loans, which is consistent with the level of investing activities;
•
the presence of shareholders' equity equal to double the net invested capital resulting from the fact that the Group's financial position is positive.
51
FINANCIAL POSITION RATIOS LIQUIDITY RATIOS
RATIO
Current assets
2010
36,114
33,669 =
Current liabilities
2009
=
1.76
20,497
1.62
20,845
CAPITAL ASSETS COVERAGE RATIO
RATIO
Shareholders' equity
2010
13,583
11,944 =
Capital assets
2009
=
4.54
2,995
3.69
3,236
CASH RATIO
RATIO
Short-term assets
2010
24,808
27,580 =
Short-term liabilities
2009
18,015
=
1.38 15,641
The analysis of the financial ratios shows a substantial balance between sources and releases. In particular, the liquidity ratio shows the Group's ability to easily meet short-term financial obligations. The capital assets coverage ratio shows strong coverage of capital assets with shareholders' equity. Finally, the cash ratio shows a prevalence of current assets over current liabilities of the fiscal year.
52
1.76
ECONOMIC POSITION RATIOS ROE
2010
Net income pertaining to Group
690
-55 =
Net equity of Group
2009
=
6.1%
11,371
-0.5%
10,096
ROI
2010
Operating income from ordinary business
1,439
114 =
Invested capital
2009
=
5.2%
27,803
0.4%
30,816
ROS
2010
Operating income from ordinary business
1,439
114 =
Sales
2009
35,046
=
4.1%
0.3%
36,543
The improvement of the Group's economic performance was reflected in an appreciable improvement of the profitability ratios. ROE, which measures the profitability of equity, was positive as a result of the net profits in the year. ROI, which measures trading profitability, showed a major improvement in the Group's ability to reap earnings from ordinary production factors. ROS is the mean earned income per unit of earnings. In this case as well, there was an improvement in this ratio compared to FY2009.
53
Disclosure by line of business Economic and financial trend by line of business The breakdown of the consolidated economic and financial results by sector is illustrated below. The sectors correspond to the two traditional lines of business, i.e., CNC (numerical controls, CAM software and drives) and HSM (high-speed milling), including the respective after-sales servicing. The last columns of the income statement show the items that can be allocated only according to arbitrary parameters. These are "administration costs and overheads" and "costs for advertising, promotion and trade fairs" of the companies active in both lines of business. Cross-sector revenues consist of numerical controls, switchboards and components and electromechanical systems transferred by the electronics sector to the milling systems sector and of the milling heads manufactured by the milling systems sector and transferred to the electronics sector for sale.
Consolidated income statement by sector N/A Data by year (€ thousand) Revenue
CNC 2010
CNC 2009
HSM 2010
HSM 2009
2010
10,003
85.6%
7,995
86.6%
25,043
97.9%
28,548
98.7%
1,684
14.4%
1,234
13.4%
537
2.1%
366
1.3%
11,687
100%
9,229
100%
25,580
100%
28,914
100%
(671)
-5.7%
(88)
-1.0%
(585)
-2.3%
(2,585)
-8.9%
(2,147)
-18.4%
(1,663)
-18.0%
(10,339)
-40.4%
(12,294)
-42.5%
Cross-sector expenses
(537)
-4.6%
(366)
-4.0%
(1,684)
-6.6%
(1,234)
-4.3%
Commissions, shipping and outsourced work
(714)
-6.1%
(549)
-5.9%
(2,598)
-10.2%
(2,304)
Sales margin
7,618
65.2%
6,563
71.1%
10,374
40.6%
Other operating revenue
6,031
51.6%
5,904
64.0%
862
Other operating expenses
(2,957)
-25.3%
(2,164)
-23.4%
Personnel expenses
(4,721)
-40.4%
(5,883)
Depreciation and amortization
(134)
-1.1%
Income from ordinary business
5,837
49.9%
Cross-sector revenues Total revenues Changes in inventories of finished goods and work in progress Raw materials and consumables
(149)
(139)
-8.0%
(3)
(3)
10,497
36.3%
(152)
(142)
3.4%
990
3.4%
264
1,577
(2,467)
-9.6%
(2,494)
-8.6%
(4,290)
(4,768)
-63.7%
(5,474)
-21.4%
(6,033)
-20.9%
(2,776)
(2,862)
(274)
-3.0%
(299)
-1.2%
(310)
-1.1%
(440)
(486)
4,146
44.9%
2,996
11.7%
2,650
9.2%
(7,394)
(6,681)
(Accrual)/release risk provision for penalty Operating result
2009
966 5,837
49.9%
4,146
44.9%
2,996
11.7%
2,650
9.2%
(7,394)
(5,715)
The electronics sector (CNC), as already explained in the first part of the Report, closed 2010 with a strong increase in earnings. This had a positive effect both on the sales margin (€7,618 thousand, as opposed to €6,563 thousand in 2009), despite a drop in the return on sales (from 71.1% in 2009 to 65.2% in 2010) due to the greater weight of product sales
54
compared to servicing and to the operating result (€5,837 thousand as opposed to €4,146 thousand in 2009) whose margin grew instead (from 44.9% in 2009 to 49.9% in 2010) especially as a result of the savings obtained in personnel expenses. Milling systems (HSM) registered a worsening of the sales margin, which decreased from €10,497 thousand in 2009 to €10,374 thousand in 2010 due to the lower turnover. Among other things, there was an improvement in the margin (from 36.3% in 2009 to 40.6% in 2010) due especially to the greater weight of the servicing segment compared to product sales. In terms of operating margin, there was an increase both in absolute terms from €2,650 thousand to €2,996 thousand and hence in terms of profit (from 9.2% in 2009 to 11.7% in 2010). As in the case of CNCs, the improvement was the result of the lower personnel expenses, as there were no changes in the other cost and earnings items.
55
Consolidated Balance Sheet by sector 31.12.2010 (€thousand) Property, plant and equipment
CNC
HSM
31.12.2009
N/A
Total
CNC
HSM
N/A
Total
92
975
1,242
2,309
141
917
1,521
2,579
Intangible assets
-
74
112
186
-
138
39
177
Investments
-
-
25
25
-
-
25
25
51
22
77
150
1
10
98
109
Other non-current financial receivables
-
-
23
23
-
-
54
54
Pre-paid tax assets
-
-
301
301
-
-
292
292
143
1,071
1,780
2,994
142
1,065
2,029
3,236
Inventories
3,808
10,162
-
13,970
4,269
11,381
-
15,650
Trade receivables and other current receivables
3,974
4,798
975
9,747
4,794
5,524
386
10,704
Current tax receivables
-
-
1,068
1,068
-
-
1,188
1,188
Other current financial receivables
-
-
24
24
-
-
38
38
Cash and cash equivalents
-
-
11,306
11,306
-
-
6,089
6,089
Total current assets
7,782
14,960
13,373
36,115
9,063
16,905
7,701
33,669
TOTAL ASSETS
7,925
16,031
15,153
39,109
9,205
17,970
9,730
36,905
Other non-current payables and liabilities
673
-
-
673
540
-
Termination benefits
808
1,376
309
2,493
785
1,391
351
2,527
Deferred tax liabilities
-
-
105
105
-
-
111
111
Other non-current financial liabilities
-
-
3
3
-
-
-
-
Non-current financial liabilities
-
-
1,755
1,755
-
-
938
938
1,481
1,376
2,172
5,029
1,325
1,391
1,400
4,116
Current financial liabilities
-
-
2,482
2,482
-
-
5,204
5,204
Other current financial liabilities
-
-
7
7
-
-
-
-
2,356
11,330
2,966
16,652
1,482
10,306
2,580
14,368
Current tax payables
-
-
831
831
-
-
614
614
Short-term provisions
127
359
39
525
169
489
1
659
Total current liabilities
2,483
11,689
6,325
20,497
1,651
10,795
8,399
20,845
Total liabilities
3,964
13,065
8,497
25,526
2,976
12,186
9,799
24,961
-
-
13,583
13,583
-
-
11,944
11,944
3,964
13,065
22,080
39,109
2,976
12,186
21,743
36,905
Other non-current receivables and
Total non-current assets
Total non-current liabilities
Trade payables and other current liabilities
Net equity TOTAL LIABILITIES
56
540
Corporate Governance The Fidia Group complies with and applies the Self-Discipline Code for Italian listed companies issued in March 2006. In compliance with the regulations of the Italian Stock Exchange, the Report on Corporate Governance is issued every year and published with the budget. According to article 89b of Consob Regulation n° 11971 concerning the discipline of issuers, please be informed that this report is available at the Internet website: www.fidia.it - www.fidia.com, under section Investor Relations, subsection corporate governance For the purpose of this Report on Operation, please be noted:
Management and Coordination Fidia S.p.A. is not managed or coordinated by other companies or entities. Subsidiaries conduct their business with complete management and operating autonomy.
Internal control system The internal control system consists of various components of the organization chart and procedures, among which the Board of Directors, the Internal Control Board, the controller, the director in charge as per article 154b of the TUF (Consolidated Finance Act) and the Organization Model as per Italian Legislative Decree n° 231/2001 and works thanks to a set of processes aimed to monitor, for instance, the efficiency of company operations, reliability of financial information, compliance with laws and regulations and the safeguard of company assets. Alongside of the implementation of the Organization Model as per Italian Legislative Decree n° 231/2001, a Supervisory Board was appointed in order to ensure information flows. The Supervisory Board informs the Board of Directors of its activities through the Internal Control Board and Board of Statutory Auditors. On the date of these financial statements, the Supervisory Board was composed of a Company executive, an independent non-executive Director and an external professional.
57
Personal Data Processing Code Fidia S.p.A., in the capacity of data controller, hereby informs, according to item 26 of the Technical Provisions on Minimum Safety Requirements (Annex B - Italian Legislative Decree n° 196 of 30 June 2003 "Personal Data Processing Code") that the 2010 Data Security Plan is currently being updated and that said update will be completed by the Data Processor by 31 March 2011. *** Shares held by members of administration and control bodies, general managers and executives with strategic responsibilities (Article 79 of Consob Resolution n° 11971 of 14 March 1999)
Name and last name
Company
N° of shares held as at 31 December 2009
N° shares purchased in 2010
N° shares sold in 2010
N° of shares held as at 31 December 2010
Giuseppe Morfino
Fidia ordinary shares
2,950,166
-
-
2,950,166
Paolo Morfino
Fidia ordinary shares
6,877
-
-
6,877
58
Intra-group relations and relations with related parties Relations among the Group's companies are governed by competitive conditions compared to those of the market, considering the nature of the goods and services provided. These relations are basically of a commercial nature. The Meeting of the Board of Directors on 11 November 2010 drew up and approved specific internal procedures called “Guidelines and rules of conduct on "extremely significant, atypical or unusual" transactions and with "related parties”. These procedures implement both the criteria of the Self-Discipline Code and the Regulation on related parties adopted by Consob Resolution n° 17221 of 12 March 2010 as amended by the following Consob Resolution n° 17389 of 23 June 2010. These procedures can be found at the company website www.fidia.com, under section Investor Relations, subsection corporate governance. The manufacturing of milling systems, mechanical components and electrical systems is carried out entirely by Fidia S.p.A. following the mergers in previous fiscal years. The foreign subsidiaries of Fidia deal with the sale and servicing of the Group's products in the relevant markets and for this purpose they purchase directly from the Parent Company. Intra-group sales relations are carried out based on transfer pricing applied in a continuous and uniform manner between companies. Supply relations are carried out based on normal market prices. With regard to the joint-venture Shenyang Fidia NC & M Co. Ltd., it manufactures and sells numerical controls and milling systems designed by Fidia for the Chinese market. The strategic components are purchased from the parent company Fidia S.p.A. at normal market conditions and the remaining parts from local suppliers. The economic and financial relations in the fiscal year between the parent company Fidia S.p.A. and its subsidiaries are illustrated in Note 30 of the Notes to the Financial Statements. Information on relations with related parties whose definition was extended according to Accounting Standard IAS 24, as required by Consob Resolution of 28 July 2006, is illustrated in Note 33 to the Consolidated Financial Statements and Note 30 of the Financial Statements respectively. Based on the information received from the Group companies, there were no atypical or unusual transactions as defined by Consob.
59
Economic and financial status of the Parent Company Fidia S.p.A. ECONOMIC TRENDS The reclassified Income Statement is illustrated below: Economic trends (€ thousand)
2010
%
2009
%
24,481
100%
24,688
100%
Work in progress
(748)
-3.1%
(796)
-3.2%
Other operating revenue
4,378
17.9%
4,794
19.4%
28,111
114.8%
28,686
116.2%
(10,231)
-41.8%
(11,505)
-46.6%
Commissions, shipping and outsourced work
(3,280)
-13.4%
(2,420)
-9.8%
Other services and overheads
(5,569)
-22.7%
(6,294)
-25.5%
9,031
36.9%
8,467
34.3%
(8,632)
-35.3%
(9,407)
-38.1%
EBITDA
399
1.6%
(940)
-3.8%
Bad debts provision
(78)
-0.3%
(230)
-0.9%
(246)
-1.0%
(231)
-0.9%
75
0.3%
(1,401)
-5.7%
967
3.9%
Net sales Changes in inventories of finished goods and
Value of production
Raw materials and consumables
Value added
Personnel expenses
Depreciation Operating income from ordinary business
(Accrual)/release risk provision for penalty Impairment (losses)/reversals
(113)
-0.5%
646
2.6%
EBIT
(38)
-0.2%
212
0.9%
Net finance income and costs
428
1.7%
(35)
-0.1%
EBT
390
1.6%
177
0.7%
(230)
-0.9%
(189)
-0.8%
160
0.7%
(12)
-0.0%
Income taxes (current, paid and deferred) Net operating result
FY2010 closed with substantially stable revenues compared to FY2009 (€24,481 thousand compared to €24,688 thousand of 2009, equal to a 0.8% decrease). At a line of business level, the electronics division grew (+3.1%), while there was a slight drop in the mechanics division (-1.7%). In both product lines, servicing registered major growth (+9.6% and +14.0% in CNC servicing and HSM servicing).
60
The following tables illustrate the trends in revenues by line of business and geographical area. Line of business (€ thousand)
2010
%
2009
%
Change in %
Numerical controls, drives and software
2,655
10.8%
2,689
10.9%
-1.3%
After-sales servicing
1,996
8.2%
1,821
7.4%
9.6%
Total numerical controls line (CNC)
4,651
19.0%
4,510
18.3%
3.1%
17,141
70.0%
17,819
72.2%
-3.8%
2,689
11.0%
2,359
9.6%
14.0%
Total milling systems line (HSM)
19,830
81.0%
20,178
81.7%
-1.7%
GRAND TOTAL
24,481
100.0%
24,688
100.0%
-0.8%
Numerical controls and software (€ thousand)
2010
%
2009
%
Change in %
ITALY
1,837
39.5%
1,968
43.6%
-6.7%
579
12.4%
616
13.7%
-6.0%
SPAIN/PORTUGAL
92
2.0%
156
3.5%
-41.0%
FRANCE/BELGIUM
93
2.0%
92
2.0%
1.1%
1,360
29.2%
962
21.3%
41.3%
BRAZIL
116
2.5%
76
1.7%
52.6%
USA/CANADA
128
2.8%
81
1.8%
58.0%
INDIA
105
2.3%
71
1.6%
47.9%
REST OF THE WORLD
342
7.4%
488
10.8%
-29.9%
4,651
100.0%
4,510
100.0%
3.1%
High-speed milling systems After-sales servicing
GERMANY
CHINA
TOTAL
61
High-speed milling systems (€ thousand)
2010
%
2009
%
Change in %
ITALY
2,250
11.3%
1,769
8.8%
27.2%
GERMANY
2,446
12.3%
1,795
8.9%
36.3%
SPAIN/PORTUGAL
111
0.6%
778
3.9%
-85.7%
FRANCE/BELGIUM
282
1.4%
672
3.3%
-58.1%
12,186
61.5%
4,557
22.6%
167.4%
BRAZIL
858
4.3%
988
4.9%
-13.1%
USA/CANADA
586
3.0%
3,602
17.9%
-83.7%
INDIA
652
3.3%
1,095
5.4%
-40.4%
REST OF THE WORLD
459
2.3%
4,922
24.4%
-90.7%
19,830
100.0%
20,178
100.0%
-1.7%
CHINA
TOTAL
Total revenues (€ thousand)
2010
ITALY
4,087
16.7%
3,737
15.1%
9.4%
GERMANY
3,025
12.4%
2,411
9.8%
25.5%
SPAIN/PORTUGAL
203
0.8%
934
3.8%
-78.2%
FRANCE/BELGIUM
374
1.5%
764
3.1%
-51.0%
13,545
55.3%
5,519
22.4%
145.4%
BRAZIL
974
4.0%
1,064
4.3%
-8.5%
USA/CANADA
714
2.9%
3,683
14.9%
-80.6%
INDIA
758
3.1%
1,166
4.7%
-35.0%
REST OF THE WORLD
801
3.3%
5,410
21.9%
-85.2%
24,481
100.0%
24,688
100.0%
-0.8%
CHINA
TOTAL
2009
Change in %
As for the first line of business (numerical controls, drives, software and after-sales servicing), the turnover grew compared to FY2009 by 3.1% (€4.651 thousand as opposed to €4,510 thousand of FY2009). This positive change was the result of a slight drop in product sales (-1.3%), which was more than compensated the strong growth in after-sales servicing (+9.6%). In geographical terms, there was a rather widespread drop in European markets and growth in all other markets (except for the “Rest of the world"). As for high-speed milling systems, the drop in turnover compared to FY2009 amounted to 1.7% (€19,830 thousand in 2010 as opposed to €20,178 thousand in 2009). As in the CNC sector, the milling systems sector also recorded differing trends between the product sales and after-sales servicing. The latter grew by 14%, while machine and accessory sales dropped by 3.8%.
62
As regards the geographical distribution of revenues, Europe was marked by a two-tier trend, namely sustained growth in Italy (+27.2%) and in Germany (+36.3%) and a drop in other countries. In all the other markets in which the company has operations, turnovers were worse compared to FY2009, except for China, which, on the contrary, recorded strong growth in the amount of +167.4%, thus reaching a turnover of €12,186 thousand. The following tables show the trend in the portfolio and new orders by line of business. Numerical controls and software (€ thousand)
2010
2009
Change in %
518
482
7.5%
4,554
4,546
0.2%
(4,651)
(4,510)
3.1%
421
518
-18.8%
2010
2009
Change in %
Order portfolio as at January 1
11,952
16,360
-26.9%
New orders
17,150
15,769
8.8%
(19,830)
(20,178)
-1.7%
Order portfolio as at December 31
9,272
11,952
-22.4%
Total portfolio (€thousand)
2010
2009
Change in %
Order portfolio as at January 1
12,470
16,842
-26.0%
New orders
21,704
20,316
6.8%
(24,481)
(24,688)
-0.8%
9,693
12,470
-22.3%
st
Order portfolio as at January 1 New orders Net income
st
Order portfolio as at December 31
High-speed milling systems (€ thousand) st
Net income st
st
Net income st
Order portfolio as at December 31
New orders in 2010 increased compared to FY2009 both in the electronics sector and especially in the mechanics sector. However, considering that the portfolio at the beginning of 2010 was much smaller than in 2009 and that the turnover was basically unchanged in the two fiscal years, the portfolio at the beginning of 2011 is smaller compared to the one at the start of 2010. EBITDA was positive and amounted to €399 thousand, as opposed to -€940 thousand in 2009. The improvement was due both to a better sales margin (€10,222 thousand, i.e., 41.8% of turnover, as opposed to €9,967 thousand, i.e., 40.4% of turnover in 2009) and to the savings in “Other services and overheads” and personnel expenses.
63
With regard to personnel, the following table illustrates the trends in staffing and labour costs. Staffing by category and cost of labour (€ thousand)
Executives
Clerks and cadres
Workers
Total employees
Total average n° of employees
Labour cost (thousand)
31.12.2010
31.12.2009
Abs. change
Change in %
10
12
-2
-16.7%
134
138
-4
-2.9%
36
43
-7
-16.3%
180
193
-13
-6.7%
186.5
177
9.5
-5.4%
31.12.2010
31.12.2009
Abs. change
Change in %
8,632
9,407
-775
-8.2%
Personnel expenses dropped by €775 thousand compared to FY2009 (-8.2%); the measures taken to curb these expenses were based mainly on recourse to social "shock absorbers" and hence the cuts to costs were not matched by a commensurate reduction in employees on the company payroll. Personnel costs comprised €253 thousand for voluntary redundancy payments, paid out in part in 2010 and allocated in part for specific cases. However, these will be implemented in the first half of 2011. Operating income from ordinary business was positive and amounted to €75 thousand, as opposed to the heavily negative result of -€1,400 thousand in FY2009. EBIT registered losses in the amount of €38 thousand and was negatively affected by the total investment write-down and provisions to cover losses of the Polish subsidiary Fidia Spolka Z.o.o. (€2 thousand and €73 thousand respectively) and the total write-down of the investment in the Russian subsidiary OOO Fidia (€39 thousand), which was necessary considering issues arising from the commercial reorganization currently under way in this branch. FY2009 registered a positive EBIT of €212 thousand, but it had benefited from the release of provision for risks that were positively settled (€967 thousand) and the reversal of investment value in the amount of €691 thousand. Thanks to the positive contribution of the financial management, which benefited from dividends distributed by subsidiaries, and to a drastic reduction in borrowing costs, EBT posted earnings in the amount of €390 thousand, as opposed to €177 thousand in 2009. The appropriation to taxes gave net earnings in the amount of €160 thousand, as opposed to a net loss of €12 thousand in 2009.
64
Balance Sheet The reclassified balance sheet was as follows: 31.12.2010
31.12.2009
877
744
21
27
6,957
6,997
230
207
Fixed assets – (A)
8,085
7,975
Net trade receivables from customers
8,946
9,451
Closing inventories
8,550
10,109
Other current assets
1,288
1,288
Short-term current assets – (B)
18,784
20,848
Trade liabilities to suppliers
(9,509)
(8,404)
Other current payables
(4,399)
(5,144)
(13,908)
(13,548)
4,876
7,300
(2,493)
(2,527)
Other long-term liabilities (F)
(700)
(567)
Net invested capital (G) = (A+D+E+F)
9,768
12,181
-
-
(2,958)
(1,991)
Short-term loans
2,457
5,109
Short-term financial position
(501)
3,118
Long-term loans, net of current portion
1,447
400
946
3,518
Share capital
5,123
5,123
Reserves
3,539
3,553
Net operating result
160
(12)
Total net equity (I)
8,822
8,664
Shareholders' equity and net financial position (L) = (H+I)
9,768
12,181
Balance Sheet (€ thousand) Net tangible assets Intangible assets Financial assets Other financial assets
Short-term current liabilities – (C) Net working capital (D) = (B+C) Termination benefits (E)
Financial position Available-for-sale financial assets Cash, bank deposits and short-term loans made
Net financial position (H)
Compared to 31 December 2009, fixed assets showed no major change as a whole. By contrast, net working capital dropped further as a result of a reduction in trade receivables from customers due to shorter collection time, a reduction in inventories resulting from more efficient warehouse management and to an increase in trade payables due to increased purchasing volumes and to the renegotiation of payment terms with some suppliers.
65
As for the medium and long-term liabilities, there was a slight increase in “Other long-term liabilities” due to greater advances collected for funded research projects. The foregoing had positive effects on the net financial position, which passed from a negative balance of €3,518 thousand as at 31 December 2009 to a lower negative balance of €946 thousand as at 31 December 2010.
Trend in net financial position Financial position (€ thousand) Available-for-sale financial assets Cash, bank deposits and short-term loans made Short-term loans Short-term financial position Long-term loans, net of current portion Net financial position
31.12.2010
31.12.2009
-
-
2,958
1,991
(2,457)
(5,109)
501
(3,118)
(1,447)
(400)
(946)
(3,518)
On 31 December 2010 the balance of the item “Cash, bank accounts and short-term loans made” comprised an amount of €30 thousand for an interest-yielding loan to the subsidiary Fidia Spolka Z.o.o. The complete statement of cash flows is illustrated below in the Accounting Schedules of the Notes. A short version is provided here. Short statement of cash flows (€ thousand)
2010
2009
(1,947)
(5,447)
B) Cash from/(used in) operating activities during the period
2,937
6,521
C) Cash from/(used in) investing activities
(374)
(322)
D) Cash from/(used in) financing activities
811
(1,253)
-
(1,447)
F) Net change in cash and cash equivalents
3,374
3,500
G) Cash and cash equivalents at year end
1,427
(1,947)
2,928
1,991
(1,501)
(3,938)
1,427
(1,947)
A) Cash and cash equivalents at beginning of the period
E) Cash of the merged company at date of merger
Breakdown of cash and cash equivalents: Cash and cash equivalents Overdrawn bank accounts
66
COMPARISON OF OPERATING RESULT AND NET EQUITY OF THE PARENT COMPANY AND EQUIVALENT VALUES OF THE GROUP According to Consob Notice of 28 July 2006, the comparison between the operating result of FY2010 and the net equity as at 31 December 2010 of the Group (share pertaining to the Group) with the equivalent values of the parent company Fidia S.p.A. is provided.
Net equity as at 31.12. 2009
Changes in 2010 Net Equity
Result as at 31.12. 2010
Net equity as at 31.12.2010
8,664
(1)
160
8,823
* Elimination of balance-sheet value of investments
5,742
(63)
1,154
6,833
* Conversion difference
(397)
650
Comparison of operating result and net equity of the parent company and Group (€ thousand)
Financial Statements of Fidia S.p.A. Consolidation adjustments
* Dividends collected by Fidia Spa
(6,448)
253 (756)
(7,204)
* Write-down of investments (2005, 2006 and 2008)
3,752
3,752
* Write-down (reversal) of investments (2009)
(666)
(666)
* Write-down of investments (2010) * Reversal of gain on transfer and amortization
(296)
* Reversal of intra-group profit 2010 * Reversal of intra-group profit 2009
(169)
* Pre-paid taxes on intra-group profit
7
* Reversal of gains on intra-group transfer of assets and amortization * Other adjustments * Exchange rate differences on intra-group transactions Consolidated financial statements of Group (share pertaining to Group)
41
41
49
(247)
(169)
(169)
169
7
(143)
(25)
(168)
50
67
117
-
(1)
10,096
585
(1)
690
11,371
67
Trends in Group Companies A brief overview of the performance of the Group companies during the fiscal year is provided below. For the sake of clarity of the general overview of the companies, the amounts are expressed in thousands of Euros. The mean exchange rates of the currency of origin in the fiscal years of reference were applied for the non-European subsidiaries. Data refers to the financial statements drawn up according to the international accounting standards (“IFRS”).
Fidia GmbH The turnover of FY2010 was equal to €5,039 thousand, higher compared to the €4,893 thousand of FY2009 (+3%). FY2010 closed with a net loss of €11 thousand, as opposed to a net loss in 2009 of €26 thousand. Staff decreased by six units, going from the 32 units as at 31 December 2009 to 26 units as at 31 December 2010.
Fidia Iberica S.A. The turnover of FY2010 amounted to €1,038 thousand as opposed to €2,082 thousand of FY2009 (-50.1%), thus confirming the tough moment being experienced by Spain's economy. Thanks to the cost curbing measures taken, FY2010 closed to balance (net result of –€1 thousand), as opposed to net profits of €57 thousand in 2009. There was no change in staffing.
Fidia S.a.r.l. The turnover of FY2010 was equal to €822 thousand, as opposed to the €1,313 thousand of FY2009 (-37.4%). FY2010 closed with a net loss of €45 thousand, as opposed to profits in the amount of €25 thousand in 2009. Staff increased from 5 units as at 31 December 2009 to 7 units as at 31 December 2010.
OOO Fidia The FY2010 turnover amounted to about €5 thousand (183 thousand roubles), as opposed to the €18 thousand (773 thousand roubles) of 2009. This year too closed with a breakeven.
Fidia Spolka z o.o. The Polish company recorded a turnover of about €60 thousand (241 thousand zloty) as opposed to €105 thousand (454 thousand zloty) in 2009 and closed with a net loss of €90 thousand, as opposed to a net loss of €53 thousand in 2009. There was no change in staffing (3 units).
Fidia Co. The FY2010 turnover amounted to €3,044 thousand (USD 4,039 thousand) as opposed to €8,364 thousand (USD 11,666 thousand) in FY2009. Despite the sharp drop in turnover, FY2010 closed with net profits in the amount of €93 thousand as opposed to net profits of €25 thousand in 2009. After major lay-offs between 2008 and 2009, the staff was basically stable in FY2010. Personnel as at 31 December 2010 amounted to 15 units, as opposed to 16 units as at 31 December 2009.
68
Beijing Fidia Machinery & Electronics Co. Ltd. The FY2010 turnover was equal to €6,339 thousand (56.9 million RMB) compared to €3,873 thousand (36.9 million RMB) in FY2009. FY2010 closed with net profits of €1,172 thousand as opposed to net profits in FY2009 of €1,007 thousand. Staffing grew by 2 units, thus reaching 28 units.
Shenyang Fidia NC&M Co. Ltd. The turnover of FY2010 was equal to €3,922 thousand (35.2 million RMB), as opposed to the €1,643 thousand (15.7 million RMB) in FY2009. FY2010 closed with a net profit of €275 thousand, as opposed to a net loss of € 240 thousand in 2009. Staff increased from 72 units as at 31 December 2009 to 77 units as at 31 December 2010.
Fidia do Brasil Ltda The FY2010 turnover was equal to €584 thousand (1,364 million real) compared to €499 thousand (1,380 million real) in FY2009. FY2010 closed with net profits of €13 thousand as opposed to net profits in FY2009 of €32 thousand. Staffing was unchanged at 7 units.
Fidia India Private Ltd. In FY2010 the company did not record any revenues from sales and mainly provided intercompany services linked to promotion and marketing in the Indian market. The result as at 31 December 2010 was a net profit of 2 thousand (€ 1 thousand as at 31 December 2009). The company closes the fiscal year on March 31st of every year.
AFFILIATED COMPANIES Prometec Consortium Net equity as at 31 December 2010 amounted to € 10 thousand (interest of Fidia S.p.A.: 40%); FY2010 closed with a breakeven.
69
Noteworthy facts after year end and business outlook The early months of 2011 are confirming the good commercial performance already recorded in the second half of FY2010. In particular, new orders in the mechanical sector in the first two months were very robust, amounting to over € 7.3 million, three quarters of which in China. This confirms the favourable economic trend and the strong position gained by the Group in this market. Interesting signs were also registered in Europe and the United States where, among other things, a major contract was recently signed with a leading supplier in the aerospace sector. These prospects are promising in terms of potential for these historical markets for the Fidia Group, thus leading to a rebalancing of the Group's presence in the various geographical areas. In organizational and industrial terms, some of the measures implemented in 2010 will start to fully show their benefits in 2011, which is expected to yield a consolidation in industrial and operating margins. The consolidation in equity achieved, along with an active financial position with over €7 million, will allow for a reduction in borrowing costs in the near future and ensure the resources needed for investments and new production and commercial projects.
70
Proposal for approval of Financial Statements and allocation of operating result Dear Shareholders, We invite you to approve the Financial Statements as at 31 December 2010. We also propose that the net operating profit in the amount of € 160,064.85 be allocated as follows: •
5% to the legal reserve
€
8,003.24
•
to the extraordinary reserve
€
152,061.61
€
160,064.85
San Mauro Torinese, 8 March 2011 On behalf of the Board of Directors The Chairman and Managing Director Mr. Giuseppe Morfino
71
72
Fidia Group Consolidated Financial Statements as at 31 December 2010
73
74
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated Income Statement (*) € thousand
Notes
FY2010
FY2009
- Net sales
1
35,046
36,543
- Other operating revenue
2
7,157
8,470
- Total revenues
42,203
45,013
- Changes in inventories of finished goods and work
(1,256)
(2,673)
- Raw materials and consumables
3
(12,635)
(14,096)
- Personnel expenses
4
(12,971)
(14,778)
- Other operating costs
5
(13,029)
(12,282)
- Depreciation and amortization
6
(873)
(1,070)
- Profit/(loss) of ordinary business
1,439
114
- Release risk provision for penalty
-
967
1,439
1,081
59
(672)
1,498
409
(577)
(488)
921
(79)
-
-
921
(79)
- Shareholders of parent company
690
(55)
- Other minority interests
231
(24)
Notes
FY2010
FY2009
Basic earnings per ordinary share
9
0.13
(0.01)
Diluted earnings per ordinary share
9
0.13
(0.01)
- Operating profit/(loss) - Financial revenue (expenses)
7
- Profit/(loss) before tax - Income tax
8
- Profit/(loss) for continuing operations - Profit/(loss) for discontinued operations - Profit/(loss) - Profit/(loss) attributable to:
Euro
(*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Consolidated Income Statement are posted in the relevant Income Statement Schedule illustrated below and are further defined in Note n° 33.
75
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated Comprehensive Income Statement € thousand
Notes
- Profit/(loss) (A)
FY2010
FY2009
921
(79)
Profit/(loss) on cash flow hedge
20
-
62
Profit(loss) on translation of financial statements of foreign companies
20
852
(167)
Actuarial gains/(losses) on defined benefit plans
20
(2)
68
Tax effect of Other profit/(loss)
20
1
2
851
(35)
1,772
(114)
1,339
(1,438)
433
62
Total other profit/(loss), net of tax effect (B)
Total comprehensive profit/(loss) (A)+(B)
Total comprehensive profit/(loss) attributable to:
Partners of parent company Other minority interests
76
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated balance sheet (*) € thousand
Notes
31/12/2010
31/12/2009
- Property, plant and equipment
10
2,309
2,579
- Intangible assets
11
186
177
- Investments
12
25
25
- Other non-current financial assets
13
23
54
- Other non-current receivables and assets
14
151
109
8
301
292
2,995
3,236
ASSETS
- Pre-paid tax assets TOTAL NON-CURRENT ASSETS - Inventories
15
13,970
15,650
- Trade receivables
16
8,906
9,652
- Current tax receivables
17
1,068
1,188
- Other current receivables and assets
17
840
1,052
- Other current financial assets
18
24
38
- Cash and cash equivalents
19
11,306
6,089
TOTAL CURRENT ASSETS
36,114
33,669
TOTAL ASSETS
39,109
36,905
77
LIABILITIES NET EQUITY - Share capital and reserves attributable to shareholders of parent company - Other minority interests
11,371
10,096
2,212
1,848
TOTAL CONSOLIDATED NET EQUITY
20
13,583
11,944
- Other non-current payables and liabilities
21
673
540
- Termination benefits
22
2,493
2,527
- Deferred tax liabilities
8
105
111
- Other non-current financial liabilities
23
3
-
- Non-current financial liabilities
24
1,755
938
5,029
4,116
TOTAL NON-CURRENT LIABILITIES - Current financial liabilities
24
2,482
5,204
- Other current financial liabilities
25
7
-
- Trade payables
26
8,256
7,792
- Current tax payables
27
831
614
- Other current payables and liabilities
27
8,396
6,576
- Short-term provisions
28
525
659
TOTAL CURRENT LIABILITIES
20,497
20,845
TOTAL LIABILITIES
39,109
36,905
(*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Consolidated Balance Sheet are posted in the relevant Balance Sheet Schedule illustrated below and are further defined in Note n° 33.
78
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated Statement of Cash Flows (*) thousand
2010
2009
2,151
(2,208)
- Profit/(loss)
921
(79)
- Amortization
687
709
(138)
(3)
- Net change in provision for termination benefits
(34)
(1)
- Net change in provision for risks and expenses
(134)
(1,045)
(15)
18
- receivables
1,036
8,331
- inventories
1,680
5,965
- payables
2,636
(8,269)
Total
6,639
5,626
(570)
(659)
(10)
(3)
364
118
(216)
(544)
A) Cash and cash equivalents at beginning of period B) Cash from/(used in) operating activities during the period
- Net losses (gains) on transfers of tangible assets
- Net change (assets) liabilities for (pre-paid) deferred taxes Net change in working capital:
C) Cash from/(used in) investing activities - Investments in: tangible assets intangible assets - Profit on sale of: tangible assets Total
79
D) Cash from/(used in) financing activities - New loans
2,000
396
- Loans paid
(1,469)
(1,736)
- Change in capital and reserves
(65)
73
- Net change in amounts due by other interests
133
515
54
124
Total
653
(628)
Differences in exchange rates
578
(95)
E) Net change in cash and cash equivalents
7,654
4,359
F) Cash and cash equivalents at year end
9,805
2,151
Cash and cash equivalents
11,306
6,089
Overdrawn bank accounts
(1,501)
(3,938)
9,805
2,151
- Net change in current and non-current financial assets and liabilities
Breakdown of cash and cash equivalents:
(*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Consolidated Statement of Cash Flows are posted in the relevant Statement of Cash Flows Schedule illustrated below.
80
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Overview of changes in consolidated shareholders' equity
(€thousand)
Balance as at 31 December 2008
Share Capital
5,123
Own shares
(45)
Hedging for loss of FY2008
Capital reserve
Retained earnings
4,578
590
(3,080)
3,080
Total comprehensive profit/(loss)
(55)
Other changes
(59)
Balance as at 31 December 2009
5,123
(45)
Hedging for loss of FY2009
1,498
3,556
(12)
12
Total comprehensive profit/(loss)
690
Other changes
(64)
Balance as at 31 December 2010
5,123
(45)
1,486
4,194
Cash flow hedge reserve
Translation
(83)
(222)
Reserve for actuarial profit/loss
Other reserves
Other minority interests
Total Net equity
39
213
1,357
11,550
reserve
-
83
-
(115)
(337)
49
88
213
(76)
(114)
567
508
1,848
11,944
-
650
-
313
(1)
87
213
433
1,772
(69)
(133)
2,212
13,583
81
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated Income Statement as per Consob Resolution n° 15519 of 27 July 2006 € thousand
Notes
FY2010
of which
FY2009
- Net sales
1
35,046
36,543
- Other operating revenue
2
7,157
8,470
- Total revenues
42,203
45,013
- Changes in inventories of finished goods
(1,256)
(2,673)
of which
- Raw materials and consumables
3
(12,635)
(4)
(14,096)
(5)
- Personnel expenses
4
(12,971)
(575)
(14,778)
(597)
- Other operating costs
5
(13,029)
(114)
(12,282)
(122)
- Depreciation and amortization
6
(873)
(1,070)
1,439
114
-
967
1,439
1,081
59
(672)
1,498
409
(577)
(488)
921
(79)
-
-
921
(79)
Shareholders of parent company
690
(55)
Other minority interests
231
(24)
- Profit/(loss) of ordinary business
- Release of provisions for penalties
- Operating profit/(loss)
- Financial revenue (expenses)
7
- Profit/(loss) before tax
- Income tax
- Profit/(loss) of continuing operations
- Profit/(loss) of discontinued operations
- Profit/(loss)
8
Profit/(loss) attributable to:
82
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Consolidated Balance Sheet as per Consob Resolution n° 15519 of 27 July 2006 € thousand
Notes
31/12/2010
31/12/2009
- Property, plant and equipment
10
2,309
2,579
- Intangible assets
11
186
177
- Investments
12
25
25
- Other non-current financial assets
13
23
54
- Other non-current receivables and assets
14
151
109
8
301
292
2,995
3,236
Assets
- Pre-paid tax assets Total non-current assets - Inventories
15
13,970
15,650
- Trade receivables
16
8,906
9,652
- Current tax receivables
17
1,068
1,188
- Other current receivables and assets
17
840
1,052
- Other current financial assets
18
24
38
- Cash and cash equivalents
19
11,306
6,089
Total current assets
36,114
33,669
TOTAL ASSETS
39,109
36,905
11,371
10,096
2,212
1,848
Liabilities Net equity: - Share capital and reserves attributable to - Other minority interests Total consolidated net equity
20
13,583
11,944
- Other non-current payables and liabilities
21
673
540
- Termination benefits
22
2,493
2,527
- Deferred tax liabilities
8
105
111
- Other non-current financial liabilities
23
3
-
- Non-current financial liabilities
24
1,755
938
5,029
4,116
Total non-current liabilities - Current financial liabilities
24
2,482
5,204
- Other current financial liabilities
25
7
-
- Trade payables
26
8,256
7,792
- Current tax payables
27
831
614
- Other current payables and liabilities
27
8,396
6,576
- Short-term provisions
28
525
659
Total current liabilities
20,497
20,845
TOTAL LIABILITIES
39,109
36,905
83
Fidia Group – Consolidated Financial Statements as at 31 December 2010 Statement of Cash Flows as per Consob Resolution n° 15519 of 27 July 2006 € thousand
2010
of which
2009
A) Cash and cash equivalents at beginning of period
2,151
(2,208)
- Profit/(loss)
921
(79)
- Amortization
687
709
(138)
(3)
- Net change in provisions for termination benefits
(34)
(1)
- Net change in provisions for risks and expenses
(134)
(1,045)
(15)
18
of which
B) Cash from/(used in) operating activities during the period
- Net losses (gains) on transfers of
- Net change (assets) liabilities for (pre-paid) deferred taxes Net change in working capital: - receivables
1,036
1
8,331
- inventories
1,680
- payables
2,636
TOTAL
6,639
5,626
(570)
(659)
(10)
(3)
364
118
(216)
(544)
- New loans
2,000
396
- Loans paid
(1,469)
(1,736)
- Change in capital and reserves
(65)
73
- Net change in amounts due by other interests
133
515
54
124
TOTAL
653
(628)
Differences in exchange rates
578
(95)
E) Net change in cash and cash equivalents
7,654
4,359
F) Cash and cash equivalents at year end
9,805
2,151
Cash and cash equivalents
11,306
6,089
Overdrawn bank accounts
(1,501)
(3,938)
9,805
2,151
5,965 (10)
(8,269)
C) Cash from/(used in) investing activities - Investing activities in: tangible assets intangible assets - Profit on sale of: tangible assets TOTAL D) Cash from/(used in) financing activities
- Net change in current and non-current financial assets and liabilities
Breakdown of cash and cash equivalents:
84
(1)
16
Notes to the Consolidated Financial Statements MAIN BUSINESS Fidia S.p.A. is a company under Italian law. Fidia S.p.A. and its subsidiaries (“Group”) are active in over 20 countries. The Group is engaged in the manufacturing and sale of numerical controls and software, high-speed milling systems and after-sales servicing. The Group headquarters are located in San Mauro Torinese (Turin), Italy. The Consolidated Financial Statements of the Fidia Group are expressed in euro, i.e., the accounting currency of the Parent Company and main economies in which the Group has operations. Unless otherwise specified, the amounts are expressed in thousand.
SIGNIFICANT ACCOUNTING STANDARDS Principles for the presentation of the financial statements The 2010 consolidated financial statements were drawn up in compliance with the International Financial Reporting Standards (“IFRSs") issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union and with the provisions implementing article 9 of Italian Legislative Decree n° 38/2005. IFRSs also include all the reviewed international accounting standards (“IAS”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), previously called Standing Interpretations Committee (“SIC”). The Financial Statements were drawn up based on the historical cost principle, amended as requested for the evaluation of some financial instruments and a building as well as on the assumption of going concern. In fact, the Group concluded that, despite the difficult economic and financial situation, there are no significant uncertainties (as set forth by par. 25 of IAS 1) on going concern, also in light of the measures already taken to adapt to the change in levels of demand.
Accounts The Group presents the income statement by nature of expense, which is deemed more representative compared to the so-called presentation by function. The form chosen complies with the internal reporting and business management methods. Within said income statement by nature, under the profit/(loss), a distinction has been made between ordinary business and those charges and earnings that are the result of non-recurrent transaction in ordinary business management and, in particular, the accruals and releases of risk provision for penalty. It is deemed that this allows for a better measurement of the actual performance of the normal business management, it being understood that any atypical expenses and earnings are specified in detail. The definition of atypical adopted by the Group differs from the one set by Consob Notice of 28 July 2006, by which atypical and/or unusual transactions are all those transactions whose significance/relevance, nature of the counterparts, subject-matter of the transaction, transfer pricing method and timing of the event (near year end) can give rise to doubts on: correctness/completeness of information posted, conflict of interests, safeguard of company equity, safeguard of minority interests. With reference to the balance sheet, the "non-current/current" format of presentation according to the provisions of IAS 1. The statement of cash flows was drawn up by applying the indirect method. Finally, please be noted that with reference to Consob Resolution n° 15519 of 27 July 2006 on financial statements, supplementary schedules for the income statement, balance sheet and statement of cash flows were added in order to underscore significant relations with related parties and not to impair the overall readability of the financial statements.
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CONSOLIDATION PRINCIPLES Subsidiaries These are companies that are under the control of the Group as defined by IAS 27 – Consolidated and Separate Financial Statements. Said control exists when the Group has the direct or indirect power to govern the financial and operating policies of a company so as to obtain benefits from its activities. The accounts of the subsidiaries are included in the consolidated financial statements starting from the date on which control is gained and up to the date on which said control ceases. Equity shares and shares in the profit and loss attributable to minority interests are presented in the consolidated balance sheet and income statement respectively.
Associates There is a consortium over which the Group has significant influence but not joint or several control on the financial and operating policies, as defined by IAS 28 – Investments in Associates. Among other things, it is a modest investment. In detail: Size of investment Name / Place of business
Currency
Share Capital
31/12/2010
31/12/2009
Euro
10,329
40.00%
40.00%
Investments in associates: Consorzio Prometec - Bruzolo di Susa (Turin)
Investments in others entities Investments in other minor entities for which fair value is not available are reported at the impaired cost due to loss of value.
Transactions eliminated during consolidation During the preparation of the consolidated financial statements, all balances and signification transactions between Group companies were eliminated as well as any unrealized profit and loss on intra-group transactions.
Transactions in foreign currency Transactions in foreign currency were reported at the exchange rate at the date of the transaction. Assets and liabilities in foreign currency on the date of the financial statements were converted at the exchange rate on said date. Exchange rate differences generated by monetary items or by their conversion at rate other than those at which these were converted at the time of the initial reporting in the fiscal year or previous financial statements were posted in the income statement.
Consolidation of foreign entities All assets and liabilities of foreign entities in currencies other than EUR that fall under the consolidation area were converted using the exchange rates in force on the date of reference of the financial statements. Revenues and costs were converted at the mean exchange rate of the fiscal year. Differences in conversion exchange rate due to the application of this method were classified as net equity item up to the transfer of the investment. At the first application of the IFRSs, cumulative translation differences generated by the consolidation of foreign entities outside the Eurozone were written off, as allowed for by IFRS 1; gains or losses from the subsequent transfer of said entities must comprise only the cumulative translation differences generated after 1 January 2004.
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Property, plant and equipment Cost Property consisting basically of the headquarters of the subsidiary Fidia Iberica were evaluated at fair market value based on the periodic appraisal done by an independent expert. The greater value resulting from the reappraisal of the property was posted directly to “Other reserves of the Net Equity”. The reappraised values of the property were then amortized. The accrued amortization on the date of reappraisal was reversed from gross value of asset and the resulting net value was then adjusted to carry it over at the reappraised value. Plant and machinery were evaluated at purchase or production cost minus accrued amortization and any value impairment and these were not revalued. The cost comprises ancillary expenses and direct costs needed to make the asset available for use and indirect costs in the amount reasonably attributable to these. Costs incurred following purchase were posted only if these increase the future economic benefits inherent to the asset concerned. All other costs were posted in the income statement when incurred. Assets held through leasing contracts by which all the risks and benefits associated to the property thereof were transferred to the Group were posted as assets of the Group at fair value or, if lower, at the current value of the minimum payments due for leasing. The corresponding liabilities with the lessor were posted under the financial payables. Assets were amortized by applying the criterion and rates specified below. Leases by which the lessor retains all risks and benefits deriving from ownership of the assets were classified as operating leases. Costs referred to operating leases are posted on a straight-line basis in the income statement over the lease term.
Depreciation Depreciation was calculated based on constant shares of the estimated economic life of the assets as follows: Description
Depreciation rates
Property
5.00%
Lightweight constructions
5.00%
Generic and specific plants
12.50%
Machinery
6.67 % / 15.00%
Industrial and commercial equipment
20.00% / 25.00%
Electronic office equipment Office furnishing Motor vehicles
20.00% 6.67% 25.00%
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Borrowing costs Borrowing costs were posted in the income statement in the fiscal year in which these were incurred.
Intangible assets Intangible assets were posted in the assets according to the provisions of IAS 38 – Intangible Assets, when it is probable that the future economic benefits attributable to the asset will flow to the company and when the cost of the asset can be measured reliably. Said assets were evaluated at purchase cost and amortized in constant shares over their estimated life if these have a finite life and net of any losses in value. The main categories of intangible assets held by the Group are the rights to use know-how, software and licenses.
Impairment losses At least once a year, the Group assesses whether the carrying amount of Intangible Assets and Property, Plant and Equipment can be recovered in order to determine whether the value of these assets has been impaired. If this is the case, the balance-sheet value is reduced to the relevant recoverable value. When it is not possible to estimate the recoverable amount of a single asset, the Group estimates the recoverable amount of the unit generating the cash flows that owns the asset. The recoverable amount of an asset is the higher of an asset's fair value less costs to sell and its value in use. In order to determine an asset's value in use, the Group calculates the current value of estimated future cash flows before tax, by applying an interest rate before tax that reflects the current market values of the time value of money and the price for bearing the uncertainty inherent in the asset. Impairment is posted of the recoverable amount is lower than the carrying amount. Should there no longer be impairment concerning an asset or should the impairment reduce, the carrying amount of the asset or the unit generating the cash flows is increased until the recoverable amount is estimated again and it cannot exceed the amount that would have been determined if there had been no impairment loss. Impairment loss is immediately reversed to the income statement.
Financial instruments Presentation Financial instruments held by the Group were included in the balance-sheet items described below. Investments comprises interests held in other companies. Other Receivables and Other Non-Current Financial Assets do not comprise medium/long-term trade receivables and caution money. Current financial assets as defined by IAS 39 comprise trade receivables, other receivables and current assets and other current financial assets as well as cash and cash equivalents. In particular, Cash and Cash Equivalents comprises bank accounts and securities held for trading that can be readily cashed in and are subject to a non-significant risk of change. Financial liabilities refer to financial payables as well as to other financial liabilities (including the negative fair value of derivatives), trade payables and other payables.
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Valuation Investments in other entities included among non-current financial assets were recorded as described above under Consolidation Principles. Receivables and loans included among current and non-current financial assets were recorded at first recognition in the financial statements at fair value, which normally corresponds to the amount paid out including transaction expenses and commissions directly attributable to the purchase cost. Loans and receivables originating during ordinary business and all financial assets for which an active market quotation is available and whose fair value cannot be determined reliably, were evaluated at amortized cost using the effective interest method, if these have a fixed maturity. When financial assets have no fixed maturity, these are evaluated at cost. Receivables with a maturity over 1 year that do not yield interest or yield interest below market rates are actualized using market rates. Evaluations are regularly carried to determine whether there is objective proof that a financial asset or a group of assets may have suffered impairment. If there is objective proof, the impairment loss is measured as a cost in the income statement of the year. Loans and liabilities for leasing included among current and non-current financial liabilities are recorded at first recognition in the financial statements at fair value, which normally corresponds to the amount received including transaction expenses and commissions directly attributable to the purchase cost. After first recognition, an entity must measure all financial liabilities that are evaluated at amortized cost using the effective interest method, except for derivatives. Financial instruments held for trading included among other current and non-current assets and liabilities are evaluated at fair value. Profit and loss generated from changes in fair value of financial instruments classified as held for trading are recorded in the income statement of the year. Hedging instruments included among other current and non-current assets and liabilities are evaluated at fair value. Profit and loss generated from changes in the fair value of said financial instruments are recorded in the income statement of the year in case of fair value hedging and in specific provisions of net equity in case of cash flow hedging.
Derivatives Derivatives are used by the Parent Company solely for hedging in order to reduce exchange rate (currency forward contracts to hedge the USD risk on sales and option contracts on exchange rates) and interest rate risk (Interest Rate Swap). Consistently with the provisions of IAS 39, derivatives can be recorded according to the procedures set forth for hedge accounting only when, at initial recognition, there is formal designation and documentation of the hedging relationship; it is assumed that hedging is highly effective; effectiveness can be reliably measured and hedging is highly effective during the various accounting periods for which it is designated. All financial instruments are measured at fair value as set forth by IAS 39.
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When financial instruments meet the requirements to be recorded in hedge accounting, the defined accounting method is applied: •
fair value hedge: if a derivative is designated as a hedge of the exposure of changes in the fair value of a balance-sheet asset attributable to a given risk that can have effects on the income statement, the profit or loss resulting from following evaluations of the fair value of the hedging instrument are posted to the income statement. Profit or loss on the hedged item attributable to the hedged risk change the carrying amount of said item and are recorded in the income statement;
•
cash flow hedge: if a derivative is designated as a hedge of the exposure to variability in the future cash flows of an asset or liability posted in the income statement or of a transaction deemed highly probable that could have effects on the income statement, the effective portion of the profit or loss on the derivative is recorded in the net equity. Accumulated profit or loss are reversed from the net equity and recorded in the income statement in the period in which the correlated economic effect of the hedged transaction occurs. Profit or loss of a hedge (or part of a hedge), which has become ineffective, are immediately recorded in the income statement. If a hedging instrument or hedging relationship is closed, but the hedged transaction has not been realized yet, accumulated profit and loss up to that moment posted to the net equity are recorded in the income statement when the relevant transaction is realized. If the hedged transaction is deemed no longer probable, profit or loss not yet realized and still retained in the equity is immediately recorded in the income statement.
If hedge accounting cannot be applied, profit or loss resulting from fair value evaluation of the derivative is immediately recorded in the income statement.
Fair value Fair value is the amount at which an asset could be traded or a liability paid off in a free transaction among cognizant and independent parties. Fair value of a financial instrument at initial recognition is normally the price of the transaction, i.e., the amount paid or received. However, if part of the amount given or received pertains to something other than the financial instrument, fair value of the instrument is estimated using an evaluation method. The existence of official quotations in an active market is best proof of fair value and, when these exist, they are used to evaluate the financial asset or liability. If the market of a financial instrument is not active, fair value is determined using an evaluation method that relies more on market factor and as less as possible on specific internal factors.
Criteria for determining fair value The Fidia Group avails itself of evaluation methods established in market practice for the determination of the fair value of financial instruments for which there is no active market of reference. If evaluation methods are adopted, recourse to market factors allows for a reasonable estimate of the market value of said financial instruments. The market factors considered for the calculation of the fair value and measured at the date of evaluation of 31 December 2010 were: time value of money, i.e., base interest rate without risk, credit risk, exchange rates of foreign currencies, size of the future changes in price of a financial instrument, i.e., the latter's volatility, the costs to service an asset or financial liability. The evaluation of financial instruments using evaluation methods is entrusted by the Fidia Group to external consultants who have the necessary specialized know-how and are capable of providing the market values at the various dates of evaluation. Said market values are periodically compared with marks to market given by banking counterparts.
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In order to provide information on the methods and main assumptions used to determine fair value, financial assets and liabilities were divided into two classes, both of which homogeneous by nature of information provided and for the characteristics of the financial instruments. In particular, financial assets and liabilities were divided into: •
financial instruments evaluated at amortized cost;
•
financial instruments evaluated at fair value.
Financial assets and liabilities evaluated at amortized cost The class under examination comprises: trade receivables and payables, loans payable, mortgages and other liabilities and assets evaluated at amortized cost. The fair value of the items under consideration is determined by calculating the current value of the expected contractual flows, capital and interests, based on the yield curve of treasury bonds on the date of evaluation. In particular, the fair value of medium/long-term financial liabilities is determined using the risk-free curve on the balance-sheet date increased by an adequate credit spread. Said spread is determined by taking the premium for credit risk applied on the last loan granted to the Group by banks as reference.
Financial assets and liabilities evaluated at fair value The class under consideration comprises hedging instruments and those for trade. The fair value of the exchange rate forward contracts is estimated by actualizing the difference between forward price set by the contract and the current forward price for the residual contractual term, using the yield curves of treasury bonds. The fair value of the exchange rate options is calculated using the Black&Scholes formula based on the market data existing on the date of evaluation and on the volatility factor of the underlying. The fair value of the interest rate swaps is calculated based on the market data available on the date of evaluation by discounting the contract flows of estimated future cash with the yield curves of treasury bonds.
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Interest rates The interest rates used to actualize the estimated financial flows are based on the yield curve of treasury bonds on the balance-sheet date and are illustrated in the table below: EUR Curve
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USD Curve
2010
2009
2010
2009
1W
0.612%
0.377%
1W
0.254%
0.214%
1M
0.782%
0.453%
1M
0.261%
0.231%
2M
0.885%
0.556%
2M
0.283%
0.240%
3M
1.006%
0.700%
3M
0.303%
0.251%
6M
1.227%
0.994%
6M
0.456%
0.430%
9M
1.372%
1.127%
9M
0.613%
0.713%
12M
1.507%
1.248%
12M
0.781%
0.984%
2 years
1.557%
1.878%
2 years
0.804%
1.418%
3 years
1.891%
2.248%
3 years
1.279%
2.056%
4 years
2.204%
2.556%
4 years
1.748%
2.575%
5 years
2.491%
2.810%
5 years
2.174%
2.981%
7 years
2.928%
3.216%
7 years
2.820%
3.537%
10 years
3.324%
3.583%
10 years
3.377%
3.971%
15 years
3.640%
3.963%
15 years
3.844%
4.360%
20 years
3.699%
4.062%
20 years
4.000%
4.467%
30 years
3.497%
3.944%
30 years
4.105%
4.537%
Inventories Inventories of raw materials, finished goods and work in progress are stated at the lower of cost and net realizable value by determining the cost with the weighted average cost formula. The evaluation of inventories includes the direct costs of materials and labour and the indirect costs (both variable and fixed). Provisions are calculated for the write-down of materials, finished goods, spare parts and other supplies deemed obsolete or slow-moving, considering their future expected use and realizable value. The realizable value is the estimated sales price net of all estimated costs for the completion of the good and of the sales and distribution expenses to be incurred.
Short-term provisions The Group states provisions for risks and expenses when it has a legal or implicit obligation with third parties and it is probable that the Group will have to utilize resources to meet the obligation; moreover, it must be possible to make a reliable estimate of the amount resulting from fulfilling the obligation. The estimate changes are stated in the income statement of the period in which the change occurred.
Termination benefits The employees of the parent company benefit from post-employment pension schemes. The pension schemes that the company is called to share in by Italian law are of the defined contribution type. The payment for the defined contribution schemes made by the company are stated in the income statement as a cost when incurred, while the defined benefit schemes are based on the work life of employees and on the salary received by employees over a set period of service. Up to 31 December 2006 the termination benefits fund (TFR) was considered a defined benefit scheme. The rules of this fund were amended by Italian Law n° 296 of 27 December 2006 (“2007 Budget Law”) and following Decrees and Regulations issued in early 2007. In light of said changes and in particular with reference to companies with at least 50 employees, said fund can now be considered a defined benefit scheme solely for the amounts accrued before 1 January 2007 (and not yet paid on the balance-sheet date), while the amounts accrued after that date can be considered as a defined contribution scheme. The company's obligation to pay into funds for defined benefit schemes and the annual cost stated in the income statement are determined based on actuarial evaluations using the projected unit credit method. Actuarial profit and loss are accounted for in a specific equity item. With reference to defined benefit schemes, the costs for the increase in the current value of the obligation resulting from the approaching time of payment of the benefits are included in the borrowing costs. Liabilities for benefits to be recognized at the end of employment posted in the balance sheet for defined benefit schemes represent the current value of the obligation for defined benefits adjusted by retained actuarial profit and loss and costs for prior employment services to be stated in future fiscal years.
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Own shares Own shares are written down from the equity. The original cost of the own shares and the revenues resulting from subsequent sales are stated directly as changes in equity.
Revenue recognition Revenues are recognized to the extent in which it is probable that the Group will reap economic benefits and their amount can be reliably determined. Revenues are stated net of returns, discounts and allowances. Revenues for the sale of goods are stated when risks and rewards of ownership of the goods are transferred to the buyer, the price of sale is agreed on or determinable and whether collection is expected: as a rule, said time is for milling systems the date of formal acceptance by the customer and for numerical controls the date of delivery (in compliance with IAS 18 – Revenues). Revenues for rendering of services are stated at the time of completion of the service.
Contributions to research Government and Community contributions received for research projects are stated in the income when it is reasonably certain that said contributions will be received and as a rule in the fiscal year in which the resolution to allocate the contribution is made.
Public funds Public funds are stated in the balance sheet when there is reasonable certainty that the company will meet all the conditions for the receipt of said funds and that the funds will be received. Funds are posted in the income statement over the period in which the correlated costs are recorded.
Cost recognition Costs for the purchase of goods are posted when the risks and benefits related to the ownership of the goods are acquired. Costs for rendering of services are stated at the time of completion of the service. Advertising and research costs, in compliance with IAS 38, are posted to the income statement in the fiscal year in which these are incurred.
Finance income and costs Finance income and costs are stated by period based on the interest accrued on the net value of the relevant financial assets and liabilities, using the effective interest rate.
Taxes Income tax comprise all taxes calculated on the taxable income of the single companies of the Group. Income taxes are stated in the income statement, except for those items debited or credited in Other Comprehensive Profit/(Loss). In these cases the tax effect is stated directly in the Other Comprehensive Profit/(Loss). Other taxes not related to income such as property taxes are included among the other overheads.
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Deferred taxes are stated according to the balance sheet liability method. These are calculated on all temporary differences arising between the taxable base of an asset or liability and its carrying amount in the consolidated balance sheet. The deferred tax assets on tax losses and on temporary differences are stated to the extent in which it is probable that there is a future taxable income on which these can be recovered. Deferred tax assets and liabilities are determined with the tax rates that are expected to be applicable in the relevant tax systems of the countries in which the Group has operations, in the periods in which temporary differences will be realized or written off.
Earnings per share The base earnings per share is calculated by dividing the Profit/(Loss) attributable to shareholders of the parent company by the weighted average of ordinary shares in circulation during the period, minus own shares. The Fidia Group has no financial instruments in circulation that require the calculation of the diluted earnings per share.
Use of estimates The presentation of the financial statements and related notes according to the IFRSs requires that the management make estimates and assumptions that impact the values of assets and liabilities stated in the balance sheet and the disclosure on the potential assets and liabilities on the balance-sheet date. The estimates and assumptions used are based on experience and other factors deemed relevant. The results that will be stated in the Closing balance could hence differ from said estimates. The estimates and assumptions are periodically revised and effects of each change are stated in the income statement in the period in which the estimate is revised if the revision has effects on said period or in following periods if the revisions has effects both on the current period and on future periods. In this context please be noted that the situation caused by the current economic and financial crisis has given rise to the need to make assumptions on the future outlook marked by a significant uncertainty. Therefore, it cannot be ruled out that in the next period there will be results other than those estimated and that adjustments may be needed in the carrying amount of the relevant items. Of course, to date, these cannot be estimated and foreseen. The balance-sheet items mainly affected by said situations of uncertainty are provisions for credit and inventory impairment, non-current assets (tangible and intangible assets), termination benefits, product warranty and deferred tax assets. A summary follows of the critical evaluation processes and key assumptions used in managing the application of the accounting standards to future quantities and which can have significant effects on the amounts stated in the consolidated balance sheet or for which there is the risk that significant value adjustments need to be made to the carrying amount of the assets and liabilities in the period following the one of reference of the balance sheet.
Bad debts provision Bad debts provision reflect the management's estimate on the possible loss in the portfolio of receivables from customers. The estimate of the bad debts provision is based on the loss expected by the Group, determined in light of its past experience in similar receivables, of current and historical delinquent accounts, of losses and revenues, of the careful monitoring of credit quality and forecasts on economic and market conditions. If economic situations like those experienced over the last two years should continue, there can be a further worsening in the financial conditions of the Company's debtors compared to the worsening already considered in quantifying the provisions stated in the balance sheet.
Inventories impairment provisions Inventories impairment provisions reflect the management's estimation of impairment loss expected by the Group, determined based on past experience and on a critical analysis of rotation indices.
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Recoverable amount of non-current assets Non-current assets include property, plant and equipment, intangible assets, investments and other financial assets. The management periodically revises the carrying amount of the non-current assets held and used and of the assets that must be divested when facts or circumstances call for said revision. Said activity is carried out using the estimates of cash flows expected from the use or sale of the asset and adequate discount rates for the calculation of the current value. When the carrying amount of a non-current asset registers a loss in value, the Group states a write-down for the excess amount between the carrying amount of the asset and the recoverable value through its use or sale.
Product warranty When a product is sold, the Group allocates provisions for the estimated product warranty costs. The management determines the value of said provisions based on historical information on the nature, frequency and mean cost of warranty works. The Group is committed to constantly improve the quality of its products in order to maximize customer satisfaction and reduce to the impact of expenses due to warranty work to a minimum.
Termination benefits For the evaluation of termination benefits, the management uses various statistical assumptions and evaluation factors in order to anticipate future events for the calculation of expenses and liabilities for said provisions. The assumptions regard the discount rate and future inflation rate. Moreover, the Group's actuaries use subjective factors such as mortality and resignation rates.
Realisability of deferred tax assets and tax losses carried forward On 31 December 2010, the Group has gross deferred tax assets resulting from tax losses that can be carried forward in the amount of €2 million, €1.9 million of which not recognized in the balance sheet. The corresponding values as at 31 December 2009 amounted to €2.7 million and €2.6 million respectively. The management stated these adjusted items in order to reduce the amount of the deferred tax assets up to the amount that it deems as recoverable.
Potential liabilities The Group is potentially subject to legal and tax disputes on the vast body of issues that fall under the jurisdiction of various countries. Considering the uncertainties relating to said issues, it is difficult to accurately foresee the outlay resulting from said disputes. In the normal course of business, the management consults its legal and tax experts. The Group states a liability for said disputes when it deems that it is probable that there will be a financial outlay and when the resulting amount of loss can be reasonably estimated. If the financial outlay becomes possible, but it is not possible yet to determine the amount, said fact is reported in the Notes to the Financial Statements
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Accounting standards, amendments and interpretations applicable as of 1 January 2010 that are not relevant for the Group The following accounting standards, amendments, improvements and interpretations effective as of 1 January 2010, govern matters and cases not present within the Group on the date of these Financial Statements, but which could have accounting effects on future transactions or agreements: •
IFRS 3 (2008) – Business Combinations;
•
Amendments to IAS 27 - Consolidated and separate financial statements;
•
Improvement 2008 to IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations;
•
Amendments to IAS 28 – Investments in Associates and IAS 31 – Interests in joint ventures, following changes to IAS 27;
•
Improvement to IAS/IFRSs (2009);
•
Amendment to IFRS 2 – Share-based payment: group cash-settled share-based payment transactions.
•
IFRIC 17 – Distributions of Non-cash Assets to Owners;
•
IFRIC 18 – Transfers of Assets from Customers;
•
Amendment to IAS 39 – Financial Instruments: Recognition and Measurement – Exposures qualifying for hedge accounting.
Accounting standards, amendments and interpretations not applicable yet and not adopted in advance by the Group On 8 October 2009, the IASB issued an amendment to IAS 32 – Financial Instruments: Presentation: classification of rights issues for the purpose of governing the accounting of rights issue (rights, options or warrants) in a currency other than that of the issuer. These rights were previously accounted as liabilities for derivatives. The amendment requires instead that in certain conditions said rights are to be stated in the equity regardless of the currency in which the price is denominated. The amendment under consideration must be applied retrospectively as of 1 January 2011. It is deemed that the adoption of the amendment will not have significant effects on the Group's financial statements. On 4 November 2009 the IASB issued a revised version of IAS 24 – Related Party Disclosures. It simplifies the type of information required in case of transactions with government-controlled related parties and provides a definition of related party. The standard must be applied as of 1 January 2011. The adoption of said revision will not have any effect in terms of the evaluation of the balance-sheet items. On 12 November 2009, the IASB published standard IFRS 9 – Financial Instruments. Said standard was then amended on 28 October 2010. The standard is applicable as of 1 January 2013 and it is the first part of a process in stages that aims to fully replace IAS 39 and adopts the new criteria for the classification and measurement of financial assets and liabilities and for the derecognition of financial assets. In particular, with regard to financial assets, the new standard uses a single approach based on the procedures to manage financial instruments and on the characteristics of the contractual cash flows of said financial assets in order to determine the evaluation criterion. It replaces the various rules set forth in IAS 39. As for financial liabilities, the main change regards the accounting of changes in fair value of a financial liability designated as financial asset at fair value stated in the income statement if these are due to the change in the credit rating of the liability. According to the new principle, these changes must be stated in the Other comprehensive profit and loss and no longer in the income statement. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of the new standard. On 26 November 2009 the IASB issued a minor amendment to IFRIC 14 – Minimum Funding Requirements and their Interaction, thus allowing entities that pay minimum funding in advance to state it as an asset. The amendment must be applied as of 1 January 2011. It is deemed that the adoption of the amendment will not have significant effects on the Group's financial statements.
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On 26 November 2009 the IFRIC issued interpretation IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments, which sets forth the guidelines on the recognition of the extinguishing of financial liabilities through issue the equity instruments. The interpretation sets forth that if an entity renegotiates the conditions to extinguish a financial liability and the creditor accepts to extinguish it through the issue of equity instruments, the equity instruments issued by the entity become a part of the consideration paid to extinguish the financial liability and must be measured at fair value. The difference between the carrying amount of the financial liability extinguished and the measurement of the equity instruments issued must be posted in the income statement of the period. The interpretation must be applied as of 1 January 2011. It is deemed that the adoption of the interpretation will not have significant effects on the Group's financial statements. On 6 May 2010 the IASB issued a set of changes to the IFRSs (“Improvements”) to be applied as of 1 January 2011. Those involving a change in the presentation, recognition and measurement of the items of the financial statements are listed below, while those involving only changes in terminology or editorial layout with minimum accounting effects or those affecting standards or interpretations not applicable to the Fidia Group are discarded: •
IFRS 3 (2008) – Business combinations: the amendment explains that the shares pertaining to noncontrolling interests that do not entitle the owners to receive a proportionate share of the net assets of the subsidiary must be measured at fair value or according to the applicable accounting standards. For instance, a stock option plan granted to employees must be measured, in case of business combination, in compliance with the rules of IFRS 2 and the equity share of a convertible bond security must be measured according to IAS 32. The Board has also expanded on the issue of security-based payment plans that are replaced within the framework of a business combination by adding a specific guide to explain accounting.
•
IFRS 7 – Financial Instruments: Disclosures: the change underscores the interaction between additional qualitative disclosures and those of a quantitative nature required by the standard on the nature and scope of the risks relating to financial instruments. This should help the users of financial statements to link the information presented and to obtain a general description of the nature and scope and risks resulting from financial instruments. Moreover, the requirement for disclosure on financial assets that are due but have been renegotiated or written down and for disclosure on the fair value of collaterals has been cancelled.
•
IAS 1 – Presentation of Financial Statements: the change requires that the reconciliation of changes in equity be presented in the Notes or in the financial statements.
•
IAS 34 – Interim Financial Reporting: thanks to some examples, explanations have been provided on the additional disclosures that must be present in interim financial reports.
It is deemed that the adoption of said Improvements will not have significant effects on the Group's financial statements. On 7 October 2010 the IASB published some amendments to standard IFRS 7 – Financial Instruments: enhancing disclosures, applicable to accounting periods starting on or after 1 July 2011. The amendments were issued in order to improve the understanding of transfers of financial assets, including the understanding of the possible effects resulting from any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of the amendments. On 20 December 2010 the IASB issued a minor amendment to IFRS 1 – First-time Adoption of International Financial Reporting Standards (IFRS) to eliminate any reference to the date of 1 January 2004 therein contained and set as the date of transition to the IFRS and to provide guidance for entities emerging from severe hyperinflation to present IFRS financial statements. These amendment will be applied starting as of 1 July 2011. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of said amendment. On 20 December 2010 the IASB issued a minor amendment to IAS 12 – Income Taxes, which requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. Following said amendment, SIC-21 – Income Taxes – Recovery of Revalued NonDepreciable Assets will no longer be applicable. The amendment is applicable as of 1 January 2012. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of said amendment.
98
Risk management The Group is exposed to financial risks related to its operations and in particular to those relating to: •
Credit risk;
•
Liquidity risk;
•
Market risk.
The Group specifically monitors each of said financial risks and takes action to timely reduce these to a minimum also by resorting to hedging derivatives relating to market risks. The Board of Directors sets forth the risk management policy and provides for the creation of a Group risk management system; the responsibility for implementing and monitoring said policy lies with the Financial Director. For more details, see Note 31.
99
Consolidation area The Group Consolidated Financial Statements as at 31 December 2010 include Fidia S.p.A. and 10 consolidated subsidiaries, of which Fidia S.p.A. directly holds the majority of votes and over which it has control. The total number of consolidated companies is unchanged compared to 31 December 2009. Size of investment
Name / Place of business
Currency
Share capital
Fidia Gmbh, Dreiech - Germany
Euro
520,000
100%
100%
Fidia Co, Troy - U.S.A.
USD
400,000
100%
100%
Fidia Sarl, Emerainville – France
Euro
300,000
100%
100%
Fidia Iberica S.A., Zamudio - Spain
Euro
180,300
99.993%
99.993%
Reals
400,843
99.75%
99.75%
Beijing Fidia M&E Co Ltd, Beijing - China
USD
1,500,000
92.00%
92.00%
Shenyang Fidia NC & Machine Company Ltd, Shenyang – China
Rmb
42,517,648
51.00%
51.00%
Rouble
3,599,790
100%
100%
Zloty
515,000.68
80%
80%
Rupee
100,000
99.99%
99.99%
Fidia do Brasil Ltda, Sao Paulo - Brazil
OOO Fidia, Moscow - Russian Federation
Fidia Spolka Z.o.o – Warsaw - Poland
Fidia India Private Ltd – Pune - India
100
2010
2009
CONTENT AND MAIN CHANGES INCOME STATEMENT 1. NET SALES The breakdown of turnover by geographical area is provided in the table below. Please be noted that sales abroad account for 88.3% of total sales. Turnover by geographical area (€ thousand)
FY2010
%
FY2009
%
Italy
4,087
11.7%
3,737
10.2%
Germany
4,745
13.5%
4,611
12.6%
Spain/Portugal
914
2.6%
1,983
5.4%
France/Belgium
791
2.3%
1,307
3.6%
China
18,762
53.6%
8,822
24.1%
Brazil
1,320
3.8%
1,340
3.7%
USA/Canada
2,838
8.1%
8,165
22.4%
India
758
2.2%
1,106
3.0%
Rest of the World
831
2.4%
5,472
15.0%
35,046
100%
36,543
100%
TOTAL TURNOVER
The trend in turnover by line of business is illustrated more in detail in the following table:
Turnover by line of business (€ thousand)
FY2010
%
FY2009
%
Numerical controls, drives and software
5,616
16.0%
3,760
10.3%
After-sales servicing
4,387
12.5%
4,235
11.6%
Total numerical controls line
10,003
28.5%
7,995
21.9%
High-speed milling systems
20,584
58.7%
24,689
67.9%
4,459
12.7%
3,859
10.6%
Total milling systems line
25,043
71.5%
28,548
78.1%
TOTAL TURNOVER
35,046
100.0%
36,543
100.0%
After-sales servicing
101
2. OTHER OPERATING REVENUE This item comprises: € thousand
FY2010
FY2009
Contributions to research
1,115
828
Public funds
4,845
4,888
Increase in fixed assets for internal work
418
453
Contingent assets
156
391
Gain from tangible assets
138
31
Recovery of costs incurred
92
43
3
219
280
207
-
1,091
110
319
7,157
8,470
Insurance refunds
Recovery provisions for risks
Damages for litigation
Other miscellaneous revenues and earnings
TOTAL
The other operating revenue amounted to €7,157 thousand (€8,470 thousand in FY2009). The most significant amount is the share of government funds granted by the Shenyang local government (China) to the subsidiary Shenyang Fidia NC&M Co. to cover investments, start-up costs, marketing and technological development of the business conducted jointly by the Group and the Chinese partner Shenyang Machine Tool Co Ltd., in the numerical controls line. The share of funds utilized during the period to cover costs and expenses of the period amounted to €4,845 thousand (€4,888 thousand in FY2009). The overall project, which involved integration in the course of 2008 in order to consolidate the agreements signed around mid-2007, will last up to 2011 and envisions an allocation of total funds by the Chinese local government in the amount of RMB 50 million a year for every of project life. The item "Other revenues and earnings" also comprises €1,115 thousand (€828 thousand as at 31 December 2009) relating to contributions for operating expenses of research projects from the European Union and the Italian University and Research Ministry as a part of applied research and development, which are an integral and ongoing activity of Fidia S.p.A.
102
3. RAW MATERIALS AND CONSUMABLES These are: € thousand
FY2010
FY2009
9,688
8,940
Servicing materials
742
1,114
Consumables
106
89
24
26
Packaging
122
137
Other
861
857
1,092
2,933
12,635
14,096
Production materials
Equipment and software
Change in inventory raw materials and consumables
TOTAL
The change in purchases of production materials is to be assessed together with the change in inventory and correlated with the lower turnover realized in the period and greater weight on turnover of the sales in the electronics sector compared to the mechanical sector.
103
4. PERSONNEL EXPENSES Personnel expenses amounted to €12,971 thousand as opposed to €14,778 thousand of FY2009 and consist of: € thousand
FY2010
FY2009
Wages and salaries
9,468
11,205
Social security charges
2,694
2,944
Termination benefits
459
452
Other personnel expenses
350
177
12,971
14,778
TOTAL
Personnel costs decreased by €1,807 thousand compared to FY2009 (-12.2%) with a mean reduction in staffing equal to 7.5 units (-2%). This was the result of the fact that measures taken to curb personnel costs were based mainly on recourse to social "shock absorbers" (extraordinary redundancy pay in Italy and similar instrument in France and Germany). Therefore, the drop in costs was not matched by a commensurate reduction in employees on payroll of the Group's companies. Personnel costs comprised €253 thousand for voluntary redundancy payments, paid out in part in 2010 and allocated in part for specific cases. However, these will be implemented in the first half of 2011. The change recorded in FY2009 in the number of employees, broken down by category, is illustrated below:
31/12/2009
Inbound
Outboun d
Change
31/12/2010
Period average
14
-
2
-
12
13.0
308
13
17
1
305
306.5
Workers
43
-
6
-1
36
39.5
TOTAL
365
13
25
-
353
359
Executives
Clerks and cadres
104
5. OTHER OPERATING EXPENSES Other operating expenses in the amount of €13,029 thousand (€12,282 thousand as at 31 December 2009) are illustrated in detail in the table below: € thousand
FY2010
FY2009
Outsourced work
1,388
1,027
Travel expenses
1,234
1,154
Transportation and customs
1,261
1,404
Rent paid for offices and plants
1,007
971
Technical, legal and administrative consulting
1,269
1,322
Utilities
630
558
Commissions
667
426
Car rental expenses
328
352
Warranty provisions
61
113
Other provisions
39
-
Auditors' emoluments
44
57
Insurance
393
391
Advertising, trade fairs and other commercial costs
323
313
Non-income taxes
258
178
Maintenance and housekeeping
148
160
Personnel-related expenses
230
238
Bank services
132
140
96
78
Stock exchange listing fees
124
145
Costs for repairs and interventions
960
921
1,704
800
Entertainment expenses
90
66
Patent costs
20
11
Contributions and payments
47
48
234
830
8
4
12
253
322
322
13,029
12,282
Motor vehicle management expenses
Research project costs
Contingent liabilities Bad debts Fines and penalties Other TOTAL Said item increased compared to FY2009 by €747 thousand.
The increase compared to FY2009 is due mainly to higher costs for turnover-related services (outsourced work, transportation and customs, commissions), which rose despite the fact that proceeds were basically unchanged. Other structural costs are mostly decreasing and hence in line with the optimization policy implemented by the company, except for research expenses, which increased by €904 thousand.
105
6. DEPRECIATION AND AMORTIZATION € thousand
FY2010
FY2009
51
56
Depreciation of property, plant and equipment
636
653
Impairment of receivables
186
361
TOTAL
873
1,070
FY2010
FY2009
44
89
(332)
(622)
Net profit (loss) on derivatives
(10)
(167)
Profit (loss) from foreign currency transactions
357
28
59
(672)
Amortization intangible assets
7. FINANCE REVENUE (EXPENSES) Financial revenue (expenses) consisted of: € thousand Finance revenue Borrowing costs
TOTAL
In FY2010 the balance of finance profit (loss) was positive, amounting to €59 thousand, thus significantly better than the negative balance of €672 thousand of FY2009. This change is due to the lesser interests paid to banks, as a result of the sharp improvement of the net financial position of the Group, and to the decrease registered in interest rates and the revaluation of the USD, which generated profit both from the measurement and amounts actually realized.
Finance revenue consisted of: € thousand
FY2010
FY2009
27
28
Interests and commercial discounts
8
45
Other interests received
9
16
44
89
Interests received from banks
TOTAL
106
Finance expenses consisted of: € thousand
FY2010
FY2009
(164)
(388)
Interests paid on medium/long-term payables
(36)
(61)
Borrowing costs on termination benefits
(81)
(92)
Interest paid on leasing
(39)
(45)
Other borrowing costs
(12)
(36)
(332)
(622)
FY2010
FY2009
Loss on derivatives
(10)
(177)
Profit on derivatives
-
10
(10)
(167)
FY2010
FY2009
Positive difference in exchange rate
269
550
Revenue from exchange rate adjustment
346
158
3
94
(90)
(318)
Expenses from exchange rate adjustment
(171)
(364)
Loss on exchange rates for term contracts
-
(92)
357
28
Interests paid on borrowings from banks
TOTAL
Net profit (loss) on derivatives: € thousand
TOTAL Profit (loss) on foreign currency transactions consisted of: € thousand
Profit on exchange rates for term contracts Negative difference in exchange rate
TOTAL
107
8. INCOME TAXES Taxes stated in the consolidated income statement were:
€ thousand
FY2010
FY2009
Income tax: IRAP (Italian Regional Tax on Production Activities)
239
211
Income tax of foreign subsidiaries
361
310
Pre-paid taxes
(18)
21
(5)
(54)
577
488
Deferred tax liabilities TOTAL
The increase in current taxes in the course of 2010 compared to FY2009 was the result of the increase in taxable income of both the foreign companies and parent company (with reference to IRAP). The amount of pre-paid and deferred tax payables, equal to proceeds in the amount of €18 thousand and €5 thousand, was the result of the difference between deferred tax assets and liabilities stated in the period and the utilization of those of previous periods. It is deemed that it is not necessary to provide a reconciliation schedule between the theoretical tax expense and the tax expense stated in the consolidated financial statements, as IRAP accounts for the largest tax amount in the income statement. It is a tax with a taxable base other than EBT and hence generates distortions from one period to another. As at 31 December 2010 the balance of the pre-paid tax assets and deferred tax liabilities amounts to: € thousand Pre-paid tax assets Deferred tax liabilities TOTAL
108
31/12/2010
31/12/2009
301
292
(105)
(111)
196
181
In all, pre-paid tax assets and deferred tax liabilities, divided by type, are as follows: € thousand
As at
Posted
Stated to
Exchange rate
As at
Application of IAS 19 - Termination
69
4
-
-
73
Application of IAS 16- Property,
49
5
(13)
2
43
101
-
-
-
101
Impairment provisions
53
10
-
2
65
Miscellaneous
20
(1)
-
-
19
292
18
(13)
4
301
Application of IAS 19 - Termination
21
-
(1)
-
20
Application of IAS 16- Property,
6
(1)
-
-
5
84
(4)
-
-
80
111
(5)
(1)
-
105
Pre-paid taxes for:
Loss from previous periods
TOTAL PRE-PAID TAXES Deferred tax liabilities for:
Fair value measurement TOTAL DEFERRED TAXES
Assets for pre-paid taxes were allocated by every Group company by critically evaluating the subsistence of the prerequisites for future recoverability of said assets based on updated plans. Therefore, no assets for pre-paid taxes were posted for the tax benefit due to the loss carried forward of some Group companies. In particular, the value of tax loss as at 31 December 2010 of the Group for which no assets for pre-paid taxes were stated amounted to €5.9 million, €1.8 million of which pertaining to the parent company and €4 million of the subsidiary Fidia Co. The comprehensive value of tax loss as at 31 December 2010 and the relevant amounts for which no assets for pre-paid taxes, divided by year due, were stated, amounted to: Year due
€ thousand Tax loss
As at 31 December 2010
2011
2012
2013
2014
Beyond 2015
5,891
787
-
30
977
4,097
109
9. EARNINGS PER SHARE The calculation of the earnings per share was based on the following data: 2010
2009
Net earnings pertaining to Group
€ thousand
690
(55)
Earnings attributable to ordinary shares
€ thousand
690
(55)
Number
5,113,000
5,113,000
Earnings per ordinary share
Euro
0.13
(0.01)
Diluted earnings per ordinary share
Euro
0.13
(0.01)
Mean number of ordinary shares in circulation in the period
There was no difference between the earnings per share and diluted earnings per share, as Fidia S.p.A. does not have circulating financial instruments that can affect the earnings by share.
110
BALANCE SHEET 10. PROPERTY, PLANT AND EQUIPMENT In 2010 and 2009 the changes in original cost of Property, Plant and Equipment were as follows: Opening balanc as at 1 January 2010
€ thousand
Changes in period
Exchange rate differences
Total
Balance 31.12.2010
Purchase price
Revaluation
Total
Additions
Disposals
Other changes
480
380
860
-
-
-
-
-
860
9
-
9
-
-
-
-
-
9
489
380
869
-
-
-
-
-
869
Plant and equipment
2,188
-
2,188
416
(309)
-
7
114
2,302
Industrial equipment
1,572
-
1,572
64
-
-
10
74
1,644
Electrical tools
1,274
-
1,274
3
(43)
-
28
(12)
1,262
Total plant, machinery and equipment
5,034
-
5,034
483
(352)
-
45
176
5,210
Furnishing
1,088
-
1,088
27
(1)
-
11
37
1,125
Electronic equipment
1,819
-
1,819
43
(104)
-
31
(30)
1,789
Means of transportation
1,361
-
1,361
17
(129)
-
38
(74)
1,287
Total other goods
4,268
-
4,268
87
(234)
-
80
(67)
4,201
TOTAL ORIGINAL COST OF PROPERTY, PLANT AND EQUIPMENT
9,791
380
10,171
570
(586)
-
125
109
10,280
Property
Lightweight constructions
Total property
111
Opening balanc as at 1 January 2009
Changes in period
Purchase price
Revaluation
Total
Additions
Disposals
Other changes
Exchange rate differences
Total
Balance 31.12.2009
480
380
860
-
-
-
-
-
860
9
-
9
-
-
-
-
-
9
489
380
869
-
-
-
-
-
869
Plant and equipment
2,197
-
2,197
396
(400)
(2)
(3)
(9)
2,188
Industrial equipment
1,579
-
1,579
87
(107)
15
(2)
(7)
1,572
Electrical tools
1,238
-
1,238
40
-
(4)
36
1,274
Total plant, machinery and equipment
5,014
-
5,014
523
(507)
13
(9)
20
5,034
Furnishing
1,099
-
1,099
-
(10)
-
(1)
(11)
1,088
Electronic equipment
1,932
-
1,932
27
(139)
-
(1)
(113)
1,819
Means of transportation
1,452
-
1,452
109
(191)
-
(9)
(91)
1,361
Total other goods
4,483
-
4,483
136
(340)
-
(11)
(215)
4,268
TOTAL ORIGINAL COST OF PROPERTY, PLANT AND EQUIPMENT
9,986
380
10,366
659
(847)
13
(20)
(195)
10,171
€ thousand
Property
Lightweight constructions
Total property
112
In 2010 and 2009, the changes in the relevant cumulated depreciation were the following: Changes in period
Exchange rate differences
Total
Closing balance 31.12.2010
-
-
43
255
-
-
-
1
5
44
-
-
-
44
260
1,365
155
(99)
-
20
76
1,441
Industrial equipment
1,370
77
-
-
7
84
1,454
Electrical tools
1,205
28
(43)
-
27
12
1,217
Total plant, machinery and equipment
3,940
260
(142)
-
54
172
4,112
913
25
(1)
-
6
30
943
1,634
72
(104)
-
21
(11)
1,623
889
235
(113)
-
22
144
1,033
Total other goods
3,436
332
(218)
-
49
163
3,599
TOTAL CUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
7,592
636
(360)
-
103
379
7,971
Opening balance 1.1.2010
Depreciation
Divestitures
Other changes
212
43
-
4
1
216
Plant and equipment
€ thousand
Property
Lightweight constructions
Total property
Furnishing
Electronic equipment
Means of transportation
113
Changes in period
Opening balance 1.1.2009
Depreciation
Divestitures
Other changes
Exchange rate differences
Total
Closing balance 31.12.2009
169
43
-
-
-
43
212
3
1
-
-
-
1
4
172
44
-
-
-
44
216
Plant and equipment
1,560
136
(327)
(2)
(2)
(195)
1,365
Industrial equipment
1,396
66
(106)
15
(1)
(26)
1,370
Electrical tools
1,184
27
-
-
(6)
21
1,205
Total plant, machinery and equipment
4,140
229
(433)
13
(9)
(200)
3,940
895
28
(10)
-
-
18
913
1,693
78
(138)
-
1
(59)
1,634
773
274
(151)
-
(7)
116
889
Total other goods
3,361
380
(299)
-
(6)
75
3,436
TOTAL CUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
7,673
653
(732)
13
(15)
(81)
7,592
€ thousand
Property
Lightweight constructions
Total property
Furnishing
Electronic equipment
Means of transportation
114
The net carrying amount of Property, Plant and Equipment as at 31 December 2010 and 31 December 2009 can be broken down as follows: Changes in period
Opening balance 1.1.2010
Additions
Disposals
Other changes
Depreciation
Exchange rate differences
Total
Closing balance 31.12.2010
648
-
-
-
(43)
-
(43)
605
Lightweight constructions
5
-
-
-
(1)
-
(1)
4
Total property
653
-
-
-
(44)
-
(44)
609
Plant and equipment
823
416
(210)
-
(155)
(13)
38
861
Industrial equipment
202
64
-
-
(77)
3
(10)
192
Electrical tools
69
3
-
-
(28)
1
(24)
45
Total plant, machinery and equipment
1,094
483
(210)
-
(260)
(9)
4
1,098
Furnishing
175
27
-
-
(25)
5
7
182
Electronic equipment
185
43
-
-
(72)
10
(19)
166
Means of transportation
472
17
(16)
-
(235)
16
(218)
254
Total other goods
832
87
(16)
-
(332)
31
(230)
602
2,579
570
(226)
-
(636)
22
(270)
2,309
€ thousand
Property
TOTAL NET VALUE OF PROPERTY, PLANT AND EQUIPMENT
115
Changes in period
Opening balance 1.1.2009
Additions
Disposals
Other changes
Depreciation
Exchange rate differences
Total
Closing balance 31.12.2009
691
-
-
-
(43)
-
(43)
648
Lightweight constructions
6
-
-
-
(1)
-
(1)
5
Total property
697
-
-
-
(44)
-
(44)
653
Plant and equipment
637
396
(73)
-
(136)
(1)
186
823
Industrial equipment
183
87
(1)
-
(66)
(1)
19
202
Electrical tools
54
40
-
-
(27)
2
15
69
Total plant, machinery and equipment
874
523
(74)
-
(229)
-
220
1,094
Furnishing
204
-
-
-
(28)
(1)
(29)
175
Electronic equipment
239
27
(1)
-
(78)
(2)
(52)
185
Means of transportation
679
109
(40)
-
(274)
(2)
(207)
472
Total other goods
1,122
136
(41)
-
(380)
(5)
(288)
832
TOTAL NET VALUE OF PROPERTY, PLANT AND EQUIPMENT
2,693
659
(115)
.
(653)
(5)
(114)
2,579
€ thousand
Property
Additions made in FY2010 mainly regarded the purchase or in-house construction of plants and equipment in the amount of about €458 thousand, for production and demonstrations to customers. The residual part of the increases consisted of physiological investments for the upkeep of the production structure. Investments do not include capitalized borrowing costs. The item Property consisted mainly of the headquarters of Fidia Iberica, whose historical cost when drawing up the financial statements as at 31 December 2005, was adjusted at fair value based on an appraisal by an independent expert. The greater amount was stated in equity.
116
If the building had not been revalued, as at 31 December 2010 the net carrying amount would amount to €312 thousand. As at 31 December 2010 the Group had property pledged as collateral in the amount of €606 thousand (€649 thousand as at 31 December2009) for loans received and equipment in the amount of €399 thousand (€554 thousand as at 31 December2009) posted as finance payables for leasing.
11. INTANGIBLE ASSETS In 2010 and 2009 the changes in net carrying amount of Intangible Assets were as follows:
€ thousand
Utilization rights f k h Licenses Software NET TOTAL VALUE INTANGIBLE
€ thousand Utilization rights f k h Licenses Software Others NET TOTAL VALUE INTANGIBLE
Changes in period
Opening balance 1.1.2010
acquisitions
139
-
(32)
2
-
36
10
177
Total
-
Exchange t 49
Closing balance 31.12.2010
17
156
(1)
-
-
(1)
1
(18)
-
1
(7)
29
Amortization
10
(51)
Opening balance 1.1.2009
acquisitions
Amortization
186
-
(32)
4
-
55 1 246
Other h
-
50
9
186
Total
-
Exchange t (15)
Closing balance 31.12.2009
(47)
139
(1)
(1)
-
(2)
2
3
(23)
1
-
(19)
36
-
-
(1)
-
(1)
-
(15)
(69)
177
Changes in period
3
(56)
Other h
(1)
In FY2010 the positive differences in exchange rate in the amount of €50 thousand (negative for €15 thousand in 2009) mainly reflected the performance of the Chinese renminbi against the Euro. There were no intangible assets generated internally.
117
12. INVESTMENTS The item Investments did not register any changes in the last 2 periods and consisted of: Balance as at 31 December 2010
Balance as at 31 December 2009
4
4
Investments measured at cost
21
21
TOTALE INVESTMENTS
25
25
€ thousand Investments measured with the equity method
Investments measured at cost were: Balance as at 31 December 2010
€ thousand Probest Service S.p.A. - Milan
10
C.S.E.A. Consorzio per lo sviluppo dell’elettronica e dell’automazione ScpA - Turin
7
Elkargi (Fidia Iberica)
4
TOTAL INVESTMENTS MEASURED AT COST
21
13. OTHER NON-CURRENT FINANCIAL LIABILITIES Said items in the amount of €23 thousand (€54 thousand as at 31 December2009) mainly consisted of financial pre-paid expenses on leasing contracts entered into by the subsidiary Fidia GmbH.
14. OTHER NON-CURRENT RECEIVABLES AND ASSETS Other non-current receivables and assets comprised the following items: € thousand
Balance as at 31 December 2010
Balance as at 31 December 2009
Receivables for EU grants
51
-
Caution money
78
30
Receivables for foreign VAT
18
79
Multi-year pre-paid expenses
4
-
151
109
TOTAL
It is deemed that the carrying amount of other non-current receivables and assets is near the fair value. Said receivables are all due within 5 years.
118
15. INVENTORIES The breakdown of the item is illustrated in the following table: Balance as at 31 December 2010
Balance as at 31 December 2009
7,285
8,145
(1,085)
(1,044)
6,200
7,101
Semi-finished products and work in progress
3,696
3,335
Finished products and goods
4,269
5,410
Provision for impairment of finished products
(384)
(252)
3,885
5,158
Advances
189
56
Net value
13,970
15,650
€ thousand Raw materials Provision for raw materials impairment
Warehouse inventories showed compared to FY2009 a reduction in the amount of €1,680 thousand; said reduction is the result of the optimization of the level of raw materials and other purchased items and a reduction in the stocks of finished products. The latter also comprised high-speed milling systems already delivered to final customers but whose installation was not completed yet at year-end.
119
Hereinafter is the detail of the changes in the provisions for raw materials and finished products impairment during the period:
€ thousand
Balance as at 31/12/2009
Accrual
Release
Exchange rate effect
Balance as at 31/12/2010
1,041
28
-
-
1,069
3
13
-
-
16
1,044
41
-
-
1,085
Provisions for raw materials impairment - Fidia S.p.A. - Beijing Fidia M&E Co. Ltd.
Provisions for impairment of finished products - Fidia S.p.A.
29
90
-
-
119
- Fidia Sarl
40
1
-
-
41
- Fidia Gmbh
50
7
-
-
57
- Fidia Co
20
-
-
1
21
- Fidia Iberica S.A.
47
8
-
-
55
- Fidia do Brasil Ltda
51
25
8
84
- Beijing Fidia M&E Co. Ltd.
15
-
(10)
2
7
252
131
(10)
11
384
Please be noted that the company warehouses do not have significant issues of obsolescence for the finished products and raw materials warehouses. Slow-movement phenomena are attributable to the need to ensure the availability of spare parts for servicing to customers also beyond the period of ordinary saleability of said components.
120
16. TRADE RECEIVABLES € thousand
Balance as at 31 December 2010 Balance as at 31 December 2009
Trade receivables from customers Bad debts provision Net value
9,962
10,753
(1,056)
(1,101)
8,906
9,652
31/12/2010
31/12/2009
Gross receivables
Bad debts provision
Net receivables
Gross receivables
Bad debts provision
Net receivables
Non-impaired assets
2,548
111
2,437
1,685
94
1,591
Derecognized financial assets
5,737
5,737
7,536
-
7,536
Impaired financial assets
1,677
945
732
1,532
1,007
525
TOTAL RECEIVABLES
9,962
(1,056)
8,906
10,753
1,101
9,652
€ thousand
Receivables from customers recorded a reduction equal to €746 thousand, due mainly to the drop in turnover. Receivables were aligned at the expected realisable value by means of allocations to the bad debts provision equal to €186 thousand. Said provision in the amount of €1,056 thousand (€1,101 thousand as at 31 December2009) was made for estimated loss on receivables. Receivables include €1,251 thousand in bank receipts submitted for collection or under reserve, which were not due yet at year-end. It is deemed that the net carrying amount of trade receivables is near the fair value.
121
The changes in the bad debts provision broken down by company are illustrated below. Balance 31/12/2009
Accrual
Release
Exchange rate differences
Balance 31/12/2010
693
78
(121)
-
650
22
11
(1)
-
32
151
10
(53)
-
108
- Fidia GmbH
64
15
(13)
-
66
- Fidia Co
74
26
(60)
5
45
- Fidia do Brasil Ltda
17
-
-
2
19
- Beijing Fidia M&E Co Ltd
76
25
-
10
111
4
21
-
-
25
1,101
186
(248)
17
1,056
€ thousand - Fidia S.p.A. - Fidia Sarl - Fidia Iberica S.A.
- Shenyang Fidia NC&M Co Ltd
An overview of the maturity for trade receivables due but not impaired is also provided: € thousand
31/12/2010
31/12/2009
up to 1 month
1,754
3,045
1 to 3 months
942
1,314
3 to 6 months
360
71
6 months to 1 year
793
264
Over 1 year
1,888
2,842
TOTAL
5,737
7,536
122
17. TAX RECEIVABLES AND OTHER RECEIVABLES AND CURRENT ASSETS € thousand
Balance as at 31 December 2010 Balance as at 31 December 2009
Current tax receivables: VAT receivables
484
633
38
73
436
279
Receivables for short-term foreign VAT
89
87
Other receivables
21
116
Income tax receivables Receivables from Chinese tax authorities
TOTAL CURRENT TAX RECEIVABLES
1,068
1,188
Other current receivables: Research grants
77
132
Receivables from INPS for redundancy pay
270
35
Other pre-paid expenses
120
172
Pre-paid expenses
47
46
Receivables from employees
33
65
Advances from suppliers
83
184
Other
210
418
TOTAL OTHER CURRENT RECEIVABLES
840
1,052
There are no receivables due beyond five years. It is deemed that the carrying amount of “Other current receivables and assets” is near the fair value.
18. OTHER CURRENT FINANCIAL ASSETS Said items in the amount of €24 thousand (€38 thousand as at 31 December 2009) mainly consisted of financial pre-paid expenses on leasing contracts entered into by the subsidiary Fidia GmbH.
19. CASH AND CASH EQUIVALENTS The overall amount of cash of the Group amounted to €11,306 thousand (€6,089 thousand as at 31 December2009) and consisted mostly of temporary cash in bank deposits pending future use and shares of liquidity funds, which can be immediately converted into cash. These amounts are subject to a non-significant risk of change in value. It is deemed that the carrying amount of the cash and cash equivalents is aligned to the fair value at year-end. Credit risk correlated with cash and cash equivalents is limited because the counterparts are leading Italian and international banks.
123
20. NET EQUITY Consolidated net equity as at 31 December 2010 amounted to €13,583 thousand, higher by €1,639 thousand compared to 31 December 2009 mainly as a result of the profit (€921 thousand), changes in exchange rates for translation of financial statements of subsidiaries in currencies other than the Euro (€852 thousand) and posting of actuarial loss on termination benefits net of tax effect (€1 thousand).
Capital The share capital of Fidia S.p.A. as at 31 December 2010, fully subscribed and paid in, was unchanged and numbered 5,123,000 ordinary shares with a face value of €1 each. The following table illustrates reconciliation between the number of circulating shares as at 31 December 2008 and the number of circulating shares as at 31 December 2010: As at 31 December 2008 Ordinary shares issued
5,123,000
Minus: Own shares Circulating ordinary shares
Increase in (Purchase)/Sal share e capital own shares -
10,000 5,113,000
-
As at 31 December 2009
Increase in share capital
5,123,000
-
-
10,000
-
5,113,000
(Purchase)/Sal e own shares
As at 31 December 2010 5,123,000 10,000
-
5,113,000
Own shares Own shares consisted of 10,000 ordinary shares issued by Fidia S.p.A. for a value of €45 thousand. During the period the own shares held by the parent company Fidia S.p.A. registered no change as illustrated in the following table:
€ thousand
N° of shares
Face value
Share in % share capital
Carrying amount
Mean unit value
Balance as at January 01, 2010
10,000
10.00
0.20%
45.52
4.55
Purchases
-
-
-
-
-
Sales
-
-
-
-
-
Write-downs
-
-
-
-
-
Recovery in value
-
-
-
-
-
10,000
10.00
0.20%
45.52
4.55
Balance as at 31 December 2010
Capital reserves As at 31 December 2010 capital reserves included the share premium reserve of the Parent Company, which was generated by the premium on the issue of 1,200,000 new shares at the face value of €1 each, placed on the market at €14 during listing on 27 November 2000 and by the premium on the issue of 423,000 new shares at the face value of €1 each, placed on the market at €5.3 on the increase in the capital issued in the month of July 2008. The premium was stated net of expenses incurred for the transaction (€118 thousand). In FY2010 the provisions for share premium was used to cover the loss of FY2009 in the amount of €12 thousand as per the resolution of the General Shareholders’ Meeting on 29 April 2010. Said provisions were also used in FY2007 and
124
FY2008 to cover loss of the period in the amount of €1,765 thousand and €3,080 thousand respectively.
Retained Earnings Retained Earnings mainly comprised: •
Legal reserves of Fidia S.p.A. in the amount of €496 thousand as at 31 December 2010 was unchanged compared to FY2009;
•
Earnings carried forward in the amount of €3,008 thousand as at 31 December 2010 (€3,115 thousand as at 31 December2009);
•
Profit/(loss) attributable to shareholders of the parent company in the amount €690 thousand (-€55 thousand as at 31 December 2009).
Other profit/(loss) The value of other profit/(loss) consisted of: € thousand
31/12/2010
31/12/2009
Profit/(loss) on cash flow hedge instruments generated in the period
-
(76)
Profit/(loss) on cash flow hedge instruments reclassified in the income statement
-
138
Profit/(loss) on cash flow hedging instruments (cash flow hedge)
-
62
Profit(loss) on translation of financial statements of foreign companies generated in the period
852
(167)
Profit(loss) on translation of financial statements of foreign companies reclassified in the income statement
-
-
852
(167)
Actuarial profit/(loss) resulting from defined benefit plans (termination benefits) generated in the period
(2)
68
Actuarial profit/(loss) resulting from defined benefit plans (termination benefits) reclassified in the income statement
-
-
(2)
68
1
2
Profit(loss) on translation of financial statements of foreign companies
Actuarial profit/(loss) resulting from defined benefit plans (termination benefits)
Tax effect for other components of comprehensive income statement TOTAL OTHER PROFIT/(LOSS), NET OF TAX EFFECT
851
(35)
125
Tax effect pertaining to Other profit/(loss) consisted of: 31/12/2010
€ thousand Profit/(loss) on cash flow hedge instruments Profit(loss) due to translation of financial statements of foreign companies Actuarial gains/(losses) on defined benefit plans TOTAL OTHER PROFIT/(LOSS)
31/12/2009
Gross value
Tax (expense)/benefit
Net value
Gross value
Tax (expense)/benefit
Net value
-
-
-
62
21
83
852
-
852
(167)
-
(167)
(2)
1
(1)
68
(19)
49
851
1
851
(37)
2
(35)
OTHER MINORITY INTERESTS Other minority interests in the amount of €2,212 thousand (€1,848 thousand as at 31 December 2009) refer to the following consolidated companies with the line-by-line method:
€ thousand Fidia Beijing M&E Co. Ltd. Fidia do Brasil Ltda Shenyang Fidia NC&M Co Ltd Fidia Iberica S.A. Fidia Spolka z o.o Fidia India Private Ltd. TOTAL
126
% other minority interests2010
% other minority interests 2009
Balance 31/12/2010
Balance 31/12/2009
8%
8%
273
225
0.25%
0.25%
1
1
49%
49%
1,961
1,627
0.01%
0.01%
-
-
20%
20%
(23)
(5)
0.01%
0.01%
-
-
2,212
1,848
21. OTHER NON-CURRENT PAYABLES AND LIABILITIES € thousand
Balance as at 31 December 2010
Balance as at 31 December 2009
Advances for research projects
673
540
TOTAL
673
540
These are advance payments received from the EU and Italian University and Research Ministry for research project and refer to the soft loans granted. It is deemed that the carrying amount of other non-current payables and liabilities is near the fair value.
22. TERMINATION BENEFITS This item reflects the benefits envisaged by Italian law (amended by Italian Law n° 296/06) accrued by employees as at 31 December 2006 and which will be paid out when the employee leaves the company. Under specific conditions, a part of it can be paid in advance to the employee during his working life. It is a non-funded defined benefits plan, considering the benefits almost entirely accrued, with the sole exception of revaluation. Changes in the termination benefits are illustrated in the table below: € thousand Value as at January 01, 2010 Amount accrued and allocated in year
2,527 459
Benefits paid out in year
(118)
Amount transferred to State Fund and complementary pension scheme
(450)
Borrowing costs on termination benefits Accounting of actuarial losses Substitute tax BALANCE AS AT 31 DECEMBER 2010
81 2 (8) 2,493
Actuarial profit and loss are stated off the income statement and directly carried over to equity (see Note n° 20). Please be noted that the Group decided to state the interests on the charges relating to the defined benefits plans for employees under borrowings costs, hence leading to an increase of €81 thousand.
127
Termination benefits are calculated based on the following actuarial assumptions: in %
As at 31 December 2010
As at 31 December 2009
Discount rate (*)
3.10%
3.30%
Future inflation rate
1.90%
2.00%
Frequency of request for advances
4.50%
7.00%
Frequency of resignations/dismissals
4.00%
4.00%
(*) The discount rate on future benefits is determined, according to the provisions of IAS 19, at market yields. In particular, the Euroswap rate as at the end of December 2010 was applied with a mean financial duration of benefits envisaged by the groups under consideration.
23. OTHER NON-CURRENT FINANCIAL LIABILITIES The item comprises the fair value of an Interest rate swap hedging the risk of oscillations in interest payables flows of the hedged medium/long-term loan (cash flow hedge). 31/12/2010 Cash flow hedge (€ thousand) Interest Rate Swap
31/12/2009
Notional
Fair value
Notional
Fair value
1,895
3
-
-
Cash flow hedges impact the income statement of the Company consistently with the timing with which the hedged cash flows occur.
128
24. CURRENT AND NON-CURRENT FINANCIAL LIABILITIES Financial liabilities amounted to €4,237 thousand as per the schedule. Balance as at 31 December 2010
Balance as at 31 December 2009
Overdrawn bank accounts
1,501
3,938
Accrued liabilities on loans
1
1
1,851
-
Intesa San Paolo loan (1) (former San Paolo IMI)
-
308
Intesa San Paolo loan (2) (former San Paolo IMI)
-
308
400
800
Cassa Risparmio Forlì loan
-
3
Leasing contract Fidia do Brasil
3
7
Treasury Ministry - Spain
26
36
BBK mortgage
25
42
Deutsche Leasing fur Sparkassen 1
182
324
Deutsche Leasing fur Sparkassen 2
222
293
26
53
4,237
6,142
€ thousand
BNL loan
Unicredit loan
Instalment loan Fidia Co TOTAL
€ thousand
By 1 year
By 5 years
Over 5 years
Total
1,501
-
-
1,501
Bank loans
805
1,447
-
2,252
Leasing
137
270
-
407
Treasury Ministry - Spain
10
16
-
26
BBK mortgage
18
7
-
25
Instalment loan Fidia Co
11
15
-
26
2,482
1,755
-
4,237
Overdrawn bank accounts
129
The current loans have the following characteristics: Unicredit loan Original amount Residual amount Date of loan Term Interest-only period Repayment Interest rate
€2,000 thousand €400 thousand 05/05/2007 Loan due date 31/05/2011 2 quarterly instalments (31/08/2007 and 30/11/2007) 10 quarterly instalments (29/02/2008 to 31/05/2011) 3-month Euribor, base 360 + 1% spread
As collateral for said loan, Fidia S.p.A. must meet some consolidated equity, economic and financial parameters: •
Equity must not drop below €10 million;
•
Net financial borrowing must not exceed equity;
•
The ratio between net financial borrowing and EBITDA must not exceed 3
In FY2010 all parameters were met Banca Nazionale del Lavoro Loan Original amount Residual amount Date of loan Term Repayment Interest rate
€2,000 thousand €1,851 thousand 31 August 2010 Loan due date 30/06/2015 19 quarterly instalments (31/12/2010 to 30/06/2015) 3-month Euribor, base 360 + 1.8% spread
The loan granted by BNL is secured in the amount of €1 million by Sace.
Leasing contract with Deutsche Leasing fur Sparkassen 1 Original amount Residual amount Term Date of loan Repayment Interest rate
€413 thousand €182 thousand 5 years 01/12/2008 60 monthly instalments (01/01/2009 to 21/12/2013) 7.56 %
Leasing contract with Deutsche Leasing fur Sparkassen 2 Original amount Residual amount Term Date of loan Repayment Interest rate
€359 thousand €222 thousand 5 years 2/1/2009 60 monthly instalments (01/02/2009 to 17/02/2014) 7.56 %
130
Borrowings from Treasury Ministry (Spain): 10-year, no-interest loan granted in 2003 to the subsidiary Fidia Iberica, with repayment starting from the third year, in the amount of €77,000, residual value as at 31 December 2010 equal to €26 thousand. On 31 December 2010 a calculation was made for the fair value of the following fixed rate loans/leasings with due date beyond 1 year of the subsidiaries Fidia Co, Fidia Iberica, Fidia GmbH and Fidia do Brasil. € thousand
Carrying amount
Fair value
Loans from banks:
26
27
Loan Fidia Co
26
27
Other loans:
26
25
Treasury Ministry
26
25
Liabilities for leasings:
407
437
Gmbh Leasing
404
433
3
4
459
489
Fidia do Brasil leasing TOTAL Loss (Profit) not stated € thousand
30 Carrying amount
Fair value
Loans from banks:
84
86
Loan Fidia Co
55
56
Loan Fidia Gmbh 2
29
30
Other loans:
36
34
Treasury Ministry
36
34
Liabilities for leasings:
623
676
Gmbh Leasing
617
669
6
7
743
796
Fidia do Brasil leasing TOTAL Loss (Profit) not stated
53
As at 31 December 2010 the Group had 3 fixed rate leasing contracts entered into by the subsidiary Fida GmbH, two of which due in November 2013 and one in January 2014 for milling systems. The comprehensive net carrying amount of €399 thousand (comprehensive €544 thousand as at 31 December 2009) was comprised under Property, Plant and Equipment (Note 10). The fair value of the leasings under consideration amount to €436 thousand.
131
€ thousand
By end of year
Between 1 and 5 years
Over 5 years
Total
136
253
-
389
26
21
-
47
162
274
-
436
Minimum payments on financial leasing contracts Amount of interest Current value for minimum payments on financial leasings
It is deemed that the carrying amount of variable rate financial liabilities as at the balance-sheet date is a reasonable estimate of their fair value. For more information on the management of interest and exchange rate risk on loans, please refer to the section Risk Management above and Note n° 31.
25. OTHER CURRENT FINANCIAL LIABILITIES The item under consideration provides the measurement of the fair value of a USD forward contract entered into by the parent company to mitigate the risk of exchange rate oscillations. The item comprises the negative fair value of said USD forward contract in the amount of €7 thousand and it was measured, as for the derivative posted under Other non-current payables and liabilities, considering the market parameters as at the balance-sheet date, as specified under the section on “Criteria for measurement of fair value”. 31/12/2010
Derivatives for trading (Amounts in thousands)
Forward contract
31/12/2009
Notional USD
Fair value Euro
Notional USD
Fair value Euro
225
7
-
-
26. TRADE PAYABLES As at 31 December 2010
As at 31 December 2009
by end of year
Between 1 and 5 years
Beyond 5 years
Total
by end of year
Between 1 and 5 years
Beyond 5 years
Total
8,248
-
-
8,248
7,786
-
-
7,786
Payables to subsidiaries
8
-
-
8
7
-
-
6
Total trade payables
8,256
-
-
8,256
7,792
€ thousand Payables to other supplies
It is deemed that the carrying amount of trade payables is near the fair value.
132
7,792
27. TAX PAYABLES AND OTHER CURRENT PAYABLES AND LIABILITIES Balance as at 31 December 2010
Balance as at 31 December 2009
308
343
52
108
- VAT
285
118
- others
186
45
TOTAL CURRENT TAX PAYABLES
831
614
Payables to employees
638
523
Social security payables
580
537
5,596
4,638
588
240
Contributions to be reallocated
43
41
Advances for EU contributions
154
115
Payables for compensation
55
70
Payables to State Fund and other funds
98
93
Payables for dividends to be paid
66
-
4
38
Sundry accruals and deferrals
173
152
Miscellaneous payables
401
129
8,396
6,576
€ thousand Current tax payables: - withholding taxes - income taxes
Other current payables and liabilities:
Advances from customers Payables to public administrations
Accrued trade payables
TOTAL OTHER CURRENT PAYABLES AND LIABILITIES
Payables to employees regard wages accrued for the month of December as well as benefits accrued at year-end (instalments on bonus, overtime) and amounts for holidays accrued not yet taken. Social security payables refer to accrued payables for amounts due by the Company and by employees on wages and salaries for the month of December and deferred compensation. Advances from customers include advance payments from customers for orders yet to be processed and for sales of milling systems already delivered yet still in course of installation, which according to IAS 18 – Revenue, cannot be stated in the revenue, as inspection and formal acceptance by the final customer is pending.
133
Payables to public administrations in the amount of €588 thousand are attributable to the accounting of the contribution received by the subsidiary Shenyang Fidia NC & M Co. Ltd. for the part, which was not used yet as at 31 December 2010. For more details, see Note n° 2 Other operating revenue. Finally, Current tax payables and Other current payables and liabilities are payable by the next fiscal year and it is deemed that their carrying amount is near their fair value.
28. SHORT-TERM PROVISIONS Short-term provisions amounted to €525 thousand as per the relevant table.
Balance 31/12/2009
Accrual
Release
Exchange rate effect
Balance 31/12/2010
-
39
-
-
39
Warranty provision
659
61
(249)
15
486
TOTAL OTHER PROVISIONS FOR RISKS AND EXPENSES
659
100
(249)
15
525
€ thousand
Provision for tax disputes
Provision for tax disputes comprised the estimated liabilities for a tax assessment notice to the parent company in the course of the fiscal year in the amount of €27 thousand and the subsidiary Fidia do Brasil for the remaining amount. Product warranty provision comprised the best possible estimate of the obligation undertaken by the Group by contract, law or custom with regard to expenses related to warranty on its products for a certain period effective as of sale to the final customer. This estimated is calculated based on the experience of the Group and the specific contract terms.
134
29. COLLATERAL GUARANTEES, OBLIGATIONS AND OTHER CONTINGENT LIABILITIES Sureties issued on behalf of others As at 31 December 2010 these amounted to €1,370 thousand, namely €564 thousand higher compared to 31 December 2009. This item consists of €1,188 thousand for sureties on business transactions with foreign customers, €124 thousand for sureties on advances received for European research projects and €58 thousand for sureties issued for building leases.
Contingent liabilities Though subject to risks of diverse nature (product, legal and tax liability), on 31 December 2010 the Company was not aware of any facts liable of generating foreseeable potential liabilities and hence it deemed that there was no need to make provisions. If it is probable that an outlay is due to meet obligations and said amount can be reliably estimated, the Group has made specific provisions for risks and expenses.
30. DISCLOSURE BY LINE OF BUSINESS The sectors in which the Group has operations were measured based on the reports used by the Board of Directors of Fidia S.p.A. in making strategic decisions. The reports used for this Note are based on the various products and services provided and have been issued using the same accounting principles described under Principles for the presentation of the financial statements. The Group's lines of business generate revenues from their typical production and sale activities through: •
high-speed milling systems and related after-sales servicing (HSM);
•
numerical controls, drives, software and related after-sales servicing (CNC).
The Group measures the performance of its lines of business based on Profit/(loss) of ordinary business, and Operating profit/(loss). The revenues of the lines of business are those directly realized or attributable to the line of business and resulting from its ordinary activities. These include the revenues from transactions with others and from transactions with other lines of business measured at market prices. Cross-sector revenues consist of numerical controls, switchboards and components and electromechanical systems transferred by the electronics sector to the milling systems sector and of the milling heads transferred by the milling systems sector to the electronics sector for sale. The costs of the lines of business are the expenses resulting from the ordinary business of the line of business incurred with other and with the other lines of business or those directly attributable to each. Costs incurred with other lines of business are measured at market prices. The economic measurement of the result realized by each line of business is the Operating Profit/(Loss) and, within this result, the Profit/(Loss) of ordinary business was determined by separating those non-recurrent revenues and costs of ordinary business from the result of the lines of business. In the Group's management finance income and costs and taxes are at the expense of the “corporate” body because these do not pertain to operations and stated in the “non allocable” column. All income components stated were measured using the same accounting criteria adopted for the presentation of the Group Consolidated Financial Statements.
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The economic data by line of business in 2010 and 2009 are as follows: Sector
FY2010 (€ thousand)
Total
CNC
%
HSM
%
Non allocable
10,003
85.6%
25,043
97.9%
-
35,046
94.0%
1,684
14.4%
537
2.1%
-
2,221
6.0%
11,687
100.0%
25,580
100.0%
-
37,267
100.0%
Changes in inventories of finished goods and work in progress
(671)
-5.7%
(585)
-2.3%
-
(1,256)
-3.4%
Other operating revenue
6,031
51.6%
862
3.4%
264
7,157
19.2%
(2,147)
-18.4%
(10,339)
-40.4%
(149)
(12,635)
-33.9%
(537)
-4.6%
(1,684)
-6.6%
-
(2,221)
-6.0%
Other operating expenses
(3,671)
-31.4%
(5,065)
-19.8%
(4,293)
(13,029)
-35.0%
Personnel expenses
(4,721)
-40.4%
(5,474)
-21.4%
(2,776)
(12,971)
-34.8%
Depreciation and amortization
(134)
-1.1%
(299)
-1.2%
(440)
(873)
-2.3%
Income from ordinary business
5,837
49.9%
2,996
11.7%
(7,394)
1,439
3.9%
OPERATING RESULT
5,837
49.9%
2,996
11.7%
(7,394)
1,439
3.9%
Revenues
Cross-sector revenues
Total revenues
Raw materials and consumables
Cross-sector expenses
136
%
Sector
Total
CNC
%
HSM
%
Non allocable
Revenues
7,995
86.6%
28,548
98.7%
-
36,543
95.8%
Cross-sector revenues
1,234
15.4%
366
1.3%
-
1,600
4.4%
Total revenues
9,229
100.0%
28,914
100.0%
38,143
100.0%
(88)
-1.0%
(2,585)
-8.9%
-
(2,673)
-7.0%
5,904
64.0%
990
3.4%
1,576
8,470
22.2%
(1,663)
-18.0%
(12,294)
-42.5%
(139)
(14,096)
-37.0%
(366)
-4.0%
(1,234)
-4.3%
-
(1,600)
-4.2%
Other operating expenses
(2,713)
-29.4%
(4,798)
-16.6%
(4,771)
(12,282)
-32.2%
Personnel expenses
(5,883)
-63.7%
(6,033)
-20.9%
(2,862)
(14,778)
-38.7%
Depreciation and amortization
(274)
-3.0%
(310)
-1.1%
(486)
(1,070)
-2.8%
Income from ordinary business
4,146
44.9%
2,650
9.2%
(6,681)
114
0.3%
Provisions for penalties
-
-
-
967
967
2.5%
OPERATING RESULT
4,146
44.9%
2,650
(5,714)
1,081
2.8%
FY2009 (€ thousand)
Changes in inventories of finished goods and work in progress
Other operating revenue
Raw materials and consumables
Cross-sector expenses
9.2%
%
Assets of the line of business are those used by the line of business in the course of its typical activities or which can be reasonably attributed to it based on its typical activities. Liabilities of the line of business are those directly resulting from the conduct of the typical activities of the line of business or which can be reasonably attributed to it based on its typical activities. In the management of the Group the treasury and tax assets are not attributed to the lines of business because these do not pertain to their operations. Therefore, these assets and liabilities are not included in the assets and liabilities of the line of business and are stated in the column "Non allocable”. In particular, the treasury assets include investments in other entities, other non-current and current financial assets, and cash and cash equivalent. Treasury liabilities include financial payables and other current and non-current financial liabilities. Assets and liabilities by line of business were measured using the same accounting standards adopted for the presentation of the Group Consolidated Financial Statements.
137
As at 31 December 2010 (€ thousand) Property, plant and equipment Intangible assets Investments Other non-current financial assets Other non-current receivables and assets Pre-paid tax assets Total non-current assets Inventories Trade receivables and other current receivables Current tax receivables Other current financial assets Cash and cash equivalents Total current assets TOTAL ASSETS
CNC
HSM
Non allocable
Total
92 51 143 3,808 3,974 7,782 7,925
975 74 22 1,071 10,162 4,798 14,960 16,031
1,242 112 25 23 77 301 1,780 975 1,068 24 11,306 13,373 15,153
2,309 186 25 23 150 301 2,994 13,970 9,747 1,068 24 11,306 36,115 39,109
Other non-current payables and liabilities Termination benefits Deferred tax liabilities Liabilities and other non-current financial liabilities Total non-current liabilities Liabilities and other current financial liabilities Trade payables and other current payables Current tax payables Short-term provisions Total current liabilities
673 808 -
1,376 -
309 105 1,758
673 2,493 105 1,758
1,481 2,356 127 2,483
1,376 11,330 359 11,689
2,172 2,489 2,966 831 39 6,325
5,029 2,489 16,652 831 525 20,497
Total liabilities Net equity TOTAL LIABILITIES
3,964 3,964
13,065 13,065
8,497 13,583 22,080
25,526 13,583 39,109
138
As at 31 December 2009 (€ thousand) Property, plant and equipment Intangible assets Investments Other non-current financial assets Other non-current receivables and assets Pre-paid tax assets Total non-current assets Inventories Trade receivables and other current receivables Current tax receivables Other current financial assets Cash and cash equivalents Total current assets TOTAL ASSETS
CNC
HSM
Non allocable
Total
141 1 142 4,269 4,794 9,063 9,205
917 138 10 1,065 11,381 5,524 16,905 17,970
1,521 39 25 54 98 292 2,029 386 1,188 38 6,089 7,701 9,730
2,579 177 25 54 109 292 3,236 15,650 10,704 1,188 38 6,089 33,669 36,905
Other non-current payables and liabilities Termination benefits Deferred tax liabilities Liabilities and other non-current financial liabilities Total non-current liabilities Liabilities and other current financial liabilities Trade payables and other current payables Current tax payables Short-term provisions Total current liabilities
540 785 -
1,391 -
351 111 938
540 2,527 111 938
1,325 1,482 169 1,651
1,391 10,306 489 10,795
1,400 5,204 2,580 614 1 8,399
4,116 5,204 14,368 614 659 20,845
Total liabilities Net equity TOTAL LIABILITIES
2,976 2,976
12,186 12,186
9,799 11,944 21,743
24,961 11,944 36,905
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Disclosure by geographical area The Group head offices are located in Italy. Revenues from others are allocated as follows: € thousand
FY2010
FY2009
Italy
4,087
3,737
Germany
4,745
4,611
Spain/Portugal
914
1,983
France/Belgium
791
1,307
China
18,762
8,822
Brazil
1,320
1,340
USA/Canada
2,838
8,165
India
758
1,106
Rest of the World
831
5,472
35,046
36,543
TOTAL TURNOVER
The comprehensive value of Non-current assets (except financial assets and deferred tax assets) allocated to Italy amounted to €1,031 thousand as at 31 December 2010 (€889 thousand as at 31 December 2009). The breakdown of the non-current assets allocated to the Rest of the World is as follows: € thousand
FY2010
FY2009
Germany
404
689
Spain
701
771
France
14
-
China
351
306
Brazil
22
31
USA
147
208
2
-
1,641
2,005
Rest of the World TOTAL NON-CURRENT ASSETS IN REST OF THE WORLD
Finally, in FY2010 and FY2009 there were no revenues from a single other customer having a value of over 10% of the Group revenues.
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31. INFORMATION ON FINANCIAL RISKS The Group is exposed to financial risks pertaining to its operations: •
market risks (mainly due to exchange and interest rates), as the Group operates internationally in different currency areas and uses interest-yielding financial instruments;
•
liquidity risk, with specific reference to the availability of financial resources and access to the credit and financial instruments market;
•
credit risk pertaining to normal business relations with customers.
As described in the chapter Risk Management, the Fidia Group constantly monitors the financial risks which it is exposed to so that it can anticipate potential negative effects and take appropriate measure to mitigate them. The following section provides qualitative and quantitative information on the incidence of said risks on the Fidia Group. The following paragraphs illustrate the sensitivity analysis carried out on the potential impact on the final results resulting from hypothetical oscillations in the benchmarks on the aforementioned risks. These analyses are based, as set forth by IFRS7, on simplified scenarios applied to the final data of the fiscal years considered and, by their own nature, cannot be considered indicators of the real effects of future changes in benchmarks due to a different equity and financial structure and different market conditions. These cannot reflect either the interrelations and complexities of the reference markets.
MARKET RISKS In general, market risks are the result of the effects of changes in prices or other market risk factors, such as interest and exchange rates, both on the value of the positions held in the trading and hedging portfolio and the positions resulting from commercial operations. The management of market risks in the Group comprises all the assets related to treasury and equity management transactions. The objective of market risk management is to manage and keep the Group's exposure to this risk within acceptable levels, while optimizing, at the same time, the yield of its own investments. The market risks include exchange rate and interest rate risk.
Exchange rate risk: definition, sources and management policies Exchange rate risk can be defined, in general, as the set of effects resulting from changes in the exchange rate relations between foreign currencies on the performance of the company in terms of operating results, market shares and cash flows. The Group is exposed to the risk of the oscillation of the exchange rates of currencies, as it operates in an international context in which transactions are conducted at different exchange and interest rates. The exposure to exchange rate risk results from the geographical location of the business units compared to the geographical distribution of the markets where it sells its products and from the use of external borrowing sources in foreign currencies. In particular, the Group is exposed to three types of exchange rate risk: •
economic/competitive: comprises all effects that a change in market exchange rates can have on the Company income and may hence impact strategic decisions (products, markets and investments) and Group competitiveness on the reference market;
•
transaction: consists in the possibility that changes in exchange rate relations occur between the date on which a financial obligation between the counterparts becomes highly probably and/or certain and the date of transaction settlement. These changes cause a difference between the expected and effective financial flows;
•
translation: this type of risk regards differences in exchange rates that can result from changes in the carrying amount of the equity expressed in the presentation currency. The consolidated financial statements include transactions made by the company in currencies other than the functional currency. These changes are not the cause of an immediate difference between expected and real cash flows, but will only have accounting effects on the Group consolidated financial statements. The effects of said changes are measured directly in the equity,
141
under Provisions for translation differences (see Note 20). The Group manages risks of changes in exchange rates by using derivatives whose use is reserved to the management of exposure to exchange rate oscillations pertaining to money flows and assets and liabilities. The Group implements a hedging policy for transaction risk only, hence resulting from existing business transactions and from future contractual obligations. Hedging for exposure to exchange rate risk is envisaged solely for the USD. The hedging instruments for said risk are solely used by the Parent Company and hedge cash flows with the goal to set the exchange rate at which the envisaged transactions in foreign currency will be measured. The instruments used are forward contracts and options on exchange rates correlated by amount, due date and reference parameters with the hedged position. The Group constantly monitors exposure to the risk of exchange rate translation; on the balance-sheet date there were no hedges for these types of exposure.
Exchange rate risk: quantitative information and sensitivity analysis As stated above, the Group is exposed to risks resulting from changes in exchange rates that can affect both the profit and loss result and the equity. In particular, when the Group's companies incur costs in currencies other than the presentation currency of the relevant revenues, the change in exchange rates can affect the earnings of said companies. With regard to the business operations, the Group's companies can have trade receivables or payables in currencies other than the presentation currency of the entity holding these. The change in exchange rates can lead to the realization or measurement of positive or negative exchange rate differences. As at 31 December 2010 the Group had no hedging transactions on exchange rates, but had stipulated derivatives (foreign currency forward contracts) in order to protect future currency flows from changes, even though the relevant hedging relationship was not established according to IAS criteria. As at 31 December 2010 the main currency to which the Group is exposed is the USD. For the purpose of sensitivity analysis, the potential effects of oscillation of the reference exchange rates were analyzed for the aforementioned currency. The analysis was carried out by applying to the exchange rate exposure reasonable positive and negative change of the EUR against the USD equal to 5%. Hypotheses were defined in which the local currency gains or losses value compared to the USD. The currency changes applied to the exchange rate have equity effects in case of cash flow hedge transactions or economic effects in case of non-hedging financial instruments. The results of the sensitivity analysis on exchange rate risk are summarized in the tables below, which show the impacts on the income statement and equity as at 31 December 2010 and 31 December 2009. The impacts on the income statement are before tax.
142
SENSITIVITY ANALYSIS ON EXCHANGE RATE RISK +5% change
FINANCIAL ASSETS AND LIABILITIES
Exchange rate risk as at 31 December 2010 (€ thousand)
P&L
-5% change
Other changes in equity
Other changes in equity
Cash and cash equivalent
54
(2)
3
-
Receivables
34
(2)
2
-
(4)
5
-
7
8
(9)
45
2
(2)
335
16
(18)
-
26
(29)
-
Effect Derivatives for trading Trade payables Overdrawn bank accounts Effect
TOTAL EFFECT
22
-
+5% change
Cash and cash equivalent Receivables
Effect
TOTAL EFFECT
-5% change
Other changes in equity
P&L
Other changes in equity
44
(2)
-
2
-
138
(7)
-
7
-
(9)
-
9
-
6
-
(6)
-
6
-
(6)
-
(3)
-
3
Effect Trade payables
(24)
P&L
Exchange rate risk as at 31 December 2009 (thousand)
FINANCIAL ASSETS AND LIABILITIES
P&L
123
Interest rate risk: definition, sources and management policies The interest rate risk consists in changes in interest rates that affect both the margin and hence the profit of the Group and on the current value of future cash flows. The Group is exposed to interest rate oscillations on its own variable rate loans attributable to the Eurozone, which the Group avails itself of to fund its operations. Changes in the structure of market interest rates affect the Group's capital and its economic value, thus influencing the level of net borrowing costs and the Group's margins. Interest rate risk management is considered with the well-established practice to reduce the risks of interest rate volatility, to reach an optimal mix of variable and fixed interest rates in the make-up of loans and to offset market interest rate oscillations, while pursuing the objective of reducing finance costs on deposits to a minimum. The Group manages risks of changes in interest rates by using derivatives whose use is reserved to the management of
143
exposure to interest rate oscillations pertaining to money flows and assets and liabilities. Speculative transactions are not allowed. Exposures to the interest rate risk are hedged using Interest Rate Swaps. These instruments are used to set in advance the interest paid on the various types of borrowing. The counterparts of said financial instruments are primary credit institutions.
Interest rate risk: quantitative information and sensitivity analysis The Parent Company avails itself of loans to fund its own and Group transactions. Changes in interest rates could have a negative or positive impact on Group earnings. In order to tackle said risks, the Parent Company uses interest rate derivatives and mainly interest rate swaps. As at 31 December 2010 there were no fixed rate financial instruments measured at fair value. As at 31 December 2010 the Parent Company had an interest rate risk hedging derivative with a negative fair value of €3 thousand. In particular, the Parent Company stipulated an interest rate swap to neutralize the risk in the variability of interests paid flows on the medium/long-term loan hedged, by transforming it into a fixed rate loan. The inefficacy of the cash flow hedge transaction in FY2010 is not significant. In measuring the potential impacts of changes in the interest rates applied, the Group separately analyzed the fixed rate financial instruments (for which the impact was determined in terms of fair value) and those at variable rate (for which the impact was determined in terms of cash flow) expressed in the various currencies to which the Group has significant exposure, as specified in the section on exchange rate risk. The variable rate financial instruments as at 31 December 2010 included cash and loans. As at 31 December 2010 a hypothetical change in interest rates for variable rate instruments equal to +50 bps, with the other variables constant, would have had the before-tax effects shown in the table below.
INTEREST RATE SENSITIVITY ANALYSIS
Interest Rate Risk as at 31 December 2010 (€ thousand)
FINANCIAL LIABILITIES
Loans from banks
144
IRS hedging derivative Impact
+ 50-bps change
- 50-bps change
Balancesheet amount
P&L
Other changes in equity
P&L
Other changes in equity
2,277
(12)
-
12
-
3
3
16
-
(19)
(9)
16
12
(19)
Interest Rate Risk as at 31 December 2009 (€ thousand)
FINANCIAL LIABILITIES
Loans from banks
+ 50-bps change
- 50-bps change
Balancesheet amount
P&L
Other changes in equity
P&L
Other changes in equity
1,457
(7)
-
7
-
(7)
-
7
-
Effect
Liquidity risk: definition, sources and management policies The liquidity risk consists of the possibility that a company of the Group or the Group itself can find itself in the conditions of not being able to meet its payment obligations in cash or delivery, either foreseen or unexpected, due to a lack of financial resources, thus prejudicing day-to-day operations or the financial position of the company or Group. The liquidity risk that the Group is exposed to can arise out of difficulties to timely obtain financing for its operations and can take the form of the inability to find the necessary financial resources at a reasonable conditions. Cash flows, financing needs and any liquidity are under the control of the parent company Fidia S.p.A., in order to ensure effective management of financial resources. The short and medium/long-term demand for liquidity is constantly monitored by the central offices in order to timely obtain financial resources or an adequate investment of cash. The Group has adopted a series of financial policies to reduce liquidity risk: •
plurality of financing entities and diversification of financing sources;
•
adequate lines of credit;
•
perspective liquidity plans relating to the company planning process.
Liquidity risk: quantitative information The two main factors that determine the Group's liquidity position are, on the one hand, the resources generated or absorbed by operations and investments and, on the other, the characteristics of the terms and renewal of loans or liquidity of the financial investments and market conditions. The policies implemented by the Group to reduce liquidity risk consisted as at 31 December 2010 of: •
recourse to credit institutions to find financial resources;
•
lines of credit (revolving and stand-by, with monthly or quarterly terms), mostly automatically renewed and used at the Group's discretion depending on needs.
The management deems that the available resources, in addition to those that will be generated by operations and loans, will allow the Group to meet its needs resulting from activities relating to investments, management of working capital and the repayment of payables at their due date.
145
An analysis of financial liabilities as envisaged by IFRS7 is provided below. MATURITY Carrying amount ANALYSIS (€ as at 31 thousand) December 2010 FINANCIAL LIABILITIES Loans from banks Other loans Overdrawn bank accounts Trade payables Liabilities for leasings Derivative liabilities TOTAL
Contractual cash flows
within 1 month
1 to 3 months
3 to 12 months
1 to 5 years
Over 5 years
2,302 26 1,501
2,599 26 1,501
3 1,501
445 -
575 10 -
1,576 16 -
-
8,256 407 10 12,502
8,256 455 9 12,846
5,821 14 7,339
1,795 28 4 2,272
640 122 15 1,362
291 (10) 1,873
-
MATURITY ANALYSIS (€ thousand)
Carrying amount as at 31 December 2009
Contractual cash flows
within 1 month
1 to 3 months
3 to 12 months
1 to 5 years
Over 5 years
1,544 36
1,567 36
8 -
174 -
931 10
454 26
-
3,938
4,154
4,154
-
-
-
-
7,792 624 13,934
7,792 720 14,269
6,016 17 10,195
1,446 34 1,654
330 149 1,420
520 1,000
-
FINANCIAL LIABILITIES Loans from banks Other loans Overdrawn bank accounts Trade payables Liabilities for leasings TOTAL
Credit risk: definition, sources and management policies Credit risk is the exposure of the Group to potential losses that may result from the failure to meet obligations with counterparts. The main causes of non-performance can relate to the inability to autonomously repay counterparts and to a possible worsening in credit standing. In particular, the Group is exposed to credit risk due to: •
sale of high-speed milling systems, numerical controls and related servicing;
•
subscription of derivatives;
•
deployment of liquidity in banks or other financial institutions.
The Group has different concentrations of credit risk depending on the nature of the activities and the various reference markets. Said credit exposure is mitigated by the fact that it is divided over a large number of counterparts. The concentration of credit risk is present in the markets of the EU, North America and China. Trade receivables are subject to individual impairments if there is an objective condition in which these position cannot be recovered either in part or in full. The extent of impairment takes into account an estimate of the recoverable flows and relevant date of collection. The Group controls and manages credit standing including the risk of the counterpart; these same transactions for the
146
deployment of liquidity and hedging of derivatives have been concluded with leading national and international banks. These are regularly reviewed also in terms of concentration and the rating of the counterparts.
Credit risk: quantitative information The maximum theoretical exposure to credit risk for the Fidia Group as at 31 December 2010 is the carrying amount of the financial assets stated in the balance sheet, plus the face value of collateral provided as indicated in Note n° 29. The measurement of credit risk is carried out by means of a process to assess credit standing differentiated by type of customer. Monitoring of credit risk is carried out periodically through the analysis by due date of overdue positions. The credit exposures of the Group widely regard trade receivables; the credit risk resulting from said transactions is mitigated by means of the following instruments: •
letters of credit;
•
insurance policies.
Moreover, in order to effectively and efficiently manage credit risk, the Group adopts further risk mitigation instruments pursuant to and in compliance with legislation in force in the various markets of the countries where it conducts business. Positions, if individually significant, are subject to specific impairment; these are either partially or totally non recoverable. The extent of impairment takes into account an estimate of the recoverable flows and relevant date of collection as well as of charges and expenses for future recovery. In case of receivables not subject to specific impairment, provisions are allocated on a collective basis, considering experience and statistical data. Hereinafter follows an analysis of the concentration of receivables by nature of counterpart: Concentration of receivables by sector (€thousand)
31/12/2010
%
31/12/2009
%
Die construction
649
10%
502
8%
Construction of injection moulds for the car industry
414
7%
119
2%
-
-
358
6%
452
7%
233
4%
Aeronautics industry
1,285
20%
1,849
29%
Machine tools production
3,563
56%
3,346
52%
Total
6,363
6,407
Net total receivables
8,906
9,652
71%
66.38%
Milling systems production Car industry
%
32. FAIR VALUE HIERARCHIES According to the provisions of the amendment to IFRS 7 which requires that the Group classify financial instruments stated in the balance sheet at fair value, based on a hierarchy that reflects the significance of the inputs used in determining the fair value, a distinction is made between:
147
•
Level 1 – quoted prices in active markets for identical assets or liabilities;
•
Level 2 – inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived from prices);
•
Level 3 – inputs that are not based on observable market data.
As at 31 December 2010 the Group stated in the balance sheet only financial liabilities measured at fair value consisting of derivatives totalling €10 thousand, classified at a fair value measurement of level 2.
33. RELATIONS WITH RELATED PARTIES The Group has relations with associates and other related parties at market condition deemed normal in the relevant reference markets, considering the characteristics of the goods and services provided. In particular, these relations regarded: •
professional services for consulting in research projects carried out by the associate Consorzio Prometec;
•
salaries to Mr. Paolo Morfino and Mr. Luca Morfino, both employees of Fidia S.p.A.;
•
compensation to the Board of Directors and Board of Statutory Auditors.
The impact of said transactions on the single items of the FY2010 financial sheets was stated in the relevant supplementary schedules of the income statement, balance sheet and statement of cash flows.
Compensation to Directors, Auditors and Executives with covering strategic company positions Compensation to the Directors and Auditors of Fidia S.p.A. for their services included in the consolidated statements was as follows: € thousand
31/12/2010
31/12/2009
Directors
400
428
Auditors
44
57
444
485
TOTAL COMPENSATION
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34. NET FINANCIAL POSITION According to the provisions of Consob Notice of 28 July 2006 and in compliance with the CESR Recommendation of 10 February 2005 “Recommendations for standard implementation of the Regulation of the European Commission on Disclosures”, the financial position of the Fidia Group as at 31 December 2010 was:
€ thousand
31/12/2010
31/12/2009
74
30
11,232
6,059
-
-
11,306
6,089
-
-
1,501
3,938
A
Cash
B
Bank deposits
C
Other cash
D
Liquidity (A+B+C)
E
Current financial receivables
F
Current bank payables
G
Current part of the non-current debt
823
1,066
H
Other current financial payables
158
200
I
Current financial debt (F+G+H)
2,482
5,204
J
Net current financial debt (I-E-D)
(8,824)
(885)
K
Non-current bank payables
1,454
425
L
Bonds issued
-
-
M
Other non-current payables
301
513
N
Non-current financial debt (K+L+M)
1,755
938
O
Net financial debt (J+N)
(7,069)
53
35. NOTES TO THE STATEMENT OF CASH FLOWS The Statement of Cash Flows shows the impact of changes in the item "Cash and Cash Equivalents" during the fiscal year. According to IAS 7 – Statement of Cash Flows, cash flows are classified into operating, investing and financing activities. The effects of the change in exchange rates on cash and cash equivalents are indicated separately under the item Differences in exchange rate translation. The cash generated (absorbed) by the transactions of the period result mainly from the Group's primary production activities. The cash generated (absorbed) by the investing activities indicates how the investments needed to obtain the resources necessary to generate future income and cash flows were made. Only investments that give rise to an asset in the statement of cash flows were classified under this item.
149
36. NON-RECURRENT SIGNIFICANT EVENTS AND TRANSACTIONS According to Consob Notice of 28 July 2006, in FY2010 the company did not have any non-recurrent significant transactions.
37. POSITIONS OR TRANSACTIONS RESULTING FROM ATYPICAL AND/OR UNUSUAL TRANSACTIONS According to Consob Notice of 28 July 2006, in FY2010 there were no atypical and/or unusual transactions as defined by said Notice, by which atypical and/or unusual transactions are all those transactions whose significance/relevance, nature of the counterparts, subject-matter of the transaction, transfer pricing method and timing of the event (near year end) can give rise to doubts on: correctness/completeness of information posted, conflict of interests, safeguard of company equity, safeguard of minority interests.
38. TRANSLATION OF FINANCIAL STATEMENT OF FOREIGN COMPANIES The exchange rates used for the translation into euro of the 2010 and 2009 financial statements of the foreign companies are illustrated in the following table: Average exchange rate of fiscal year Currency
Current exchange rate at year-end
2010
2009
2010
2009
USD
1.32680
1.39478
1.336200
1.44060
Reals
2.33445
2.76742
2.21770
2.51130
Chinese RMB
8.98051
9.52771
8.82200
9.83500
Rouble
40.2780
44.1376
40.8200
43.1540
Zloty
3.99496
4.32762
3.97500
4.10450
Rupee
60.6318
67.3611
59.7580
67.0400
39. SUBSEQUENT EVENTS With regard to event following the closing of the fiscal year, please refer to the Report on Operations.
San Mauro Torinese, March 8, 2011 On behalf of the Board of Directors The Chairman and Managing Director Mr. Giuseppe Morfino
150
151
152
Relazione del Collegio sindacale
153
154
155
156
157
158
Auditors’ Report on the Financial Statements
159
160
161
162
Fidia S.p.A. Financial Statements as at 31 December 2010
163
164
FIDIA S.p.A. - Financial Statements as at 31 December 2010 Income Statement (*) (Euro) - Net sales - Other operating revenue Total revenues - Changes in inventories of finished goods and work in progress - Raw materials and consumables - Personnel expenses - Other operating costs - Depreciation and amortization - Profit/(loss) of ordinary business
Note
FY2010
FY2009
1 2
24,481,143 4,378,460 28,859,603
24,688,073 4,794,422 29,482,495
(747,688)
(795,827)
3
(10,231,015)
(11,505,293)
4 5 6
(8,632,026) (8,848,869) (323,823) 76,182
(9,407,498) (8,713,992) (461,111) (1,401,226)
-
966,877
- (Accrual)/release risk provision for penalty - Write-down of investments - Reversal of investment value - Reserve for loss of subsidiaries - Operating profit/(loss)
7 7 7
(41,145) (72,735) (37,698)
(24,711) 690,726 (20,025) 211,641
- Finance revenue (expenses)
8
428,249
(35,019)
390,551
176,622
(230,486)
(188,189)
160,065
(11,567)
-
-
160,065
(11,567)
- Profit/(loss) before tax - Income taxes - Profit/(loss) for continuing operations - Profit/(loss) of discontinued operations - Profit/(loss)
9
(*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Income Statement of Fidia S.p.A. are posted in the relevant Income Statement Schedule illustrated below and are further defined in Note n° 31.
165
FIDIA S.p.A. - Financial Statements as at 31 December 2010 COMPREHENSIVE INCOME STATEMENT (€thousand)
- Profit/(loss) (A)
Profit/(loss) on cash flow hedges
Actuarial gains/(losses) on defined benefit plans
Tax effect of Other profit/(loss)
Total other profit/(loss), net of tax effect (B)
TOTAL COMPREHENSIVE PROFIT/(LOSS) (A)+(B)
166
FY2010
FY2009
160
(11)
0
62
(2)
68
1
2
(1)
132
159
121
FIDIA S.p.A. - Financial Statements as at 31 December 2010 BALANCE SHEET (*) (Euro) ASSETS NON-CURRENT ASSETS - Plant and equipment - Intangible assets - Investments - Other non-current receivables and assets - Pre-paid tax assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS - Inventories - Trade receivables - Current tax receivables - Other current receivables and assets - Other current financial assets - Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS LIABILITIES NET EQUITY - Share capital - Provisions for share premium - Legal reserve - Reserve for own shares in portfolio - Extraordinary reserve - Cash flow hedge reserve - Profit (loss) carried forward - Own shares - Profit (loss) stated directly in equity - Profit/(loss) TOTAL NET EQUITY NON-CURRENT LIABILITIES - Other non-current payables and liabilities - Termination benefits - Deferred tax liabilities - Other non-current financial liabilities - Non-current financial liabilities TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES - Current financial liabilities - Other current financial liabilities - Trade payables - Current tax payables - Other current payables and liabilities - Short-term provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES
Note s
31/12/2010
31/12/2009
10 11 12 13 9
876,967 20,678 6,957,647 111,909 118,072 8,085,273
744,019 26,767 6,996,957 97,402 110,008 7,975,153
14 15 16 16 17 18
8,550,269 8,946,382 764,165 523,308 30,000 2,927,812 21,741,936 29,827,209
10,109,103 9,450,572 714,061 574,276 1,990,977 22,838,989 30,814,142
5,123,000 1,486,118 496,143 45,523 724,781 370 767,455 (45,523) 64,634 160,065 8,822,566
5,123,000 1,497,684 496,142 45,523 724,781 767,455 (45,523) 66,180 (11,567) 8,663,675
20 21 9 22 23
672,533 2,492,888 25,078 2,823 1,446,605 4,639,927
539,993 2,526,710 26,973 400,000 3,493,676
23 24 25 26 26 27
2,457,396 6,848 9,508,836 304,174 3,750,601 336,861 16,364,716 29,827,209
5,108,896 8,404,242 325,384 4,463,447 354,822 18,656,791 30,814,142
19
(*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Balance Sheet of Fidia S.p.A. are posted in the relevant Balance Sheet Schedule illustrated below and are further defined in Note n° 31.
167
FIDIA S.p.A. - Financial Statements as at 31 December 2010 STATEMENT OF CASH FLOWS (*) (€thousand)
2010
2009
(1,947)
(5,447)
- Net operating result
160
(12)
- Depreciation and amortization
245
231
-
14
41
(631)
A) Cash on hand and cash equivalents at beginning of year B) Cash from/(used in) operating activities during the period
- Net losses (gains) on disposal of tangible assets - Write-down (recovery of value) of investments - Net change in provisions for termination benefits
(34)
(2)
- Net change in provisions for risks and expenses
(18)
(1,055)
- Net change (assets) liabilities for (pre-paid) deferred taxes
(10)
32
- receivables
491
7,328
- inventories
1,559
3,208
Net change in working capital:
- payables
503
(2,592)
2,937
6,521
(364)
(322)
intangible assets
(8)
-
Investments
(2)
(61)
-
62
C) Cash from/(used in) investing activities - Investing activities: tangible assets
- Profit on sale of: tangible assets investments
-
-
(374)
(321)
D) Cash from/(used in) financing activities - Net change in current and non-current financial assets and liabilities
(20)
139
- New loans
2,000
150
- Loans paid
(1,168)
(1,775)
(1)
233
- Change in reserves - Increase in share capital E) Cash on hand of the merged company on the date of merger
811
(1,253)
-
(1,447)
F) Net change in cash and cash equivalents
3,374
3,500
G) Cash and cash equivalents at year end
1,427
(1,947)
2,928
1,991
(1,501)
(3,938)
Breakdown of cash and cash equivalents: Cash and cash equivalents Overdrawn bank accounts
1,427 (1,947) (*) According to Consob Resolution n° 15519 of 27 July 2006, the effects of relations with related parties on the Statement of Cash Flows of Fidia S.p.A. are posted in the relevant Statement of Cash Flows Schedule illustrated below.
168
FIDIA S.p.A. - Financial Statements as at 31 December 2010 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (€thousand) Balance as at 31 December 2008
Share capital
Own shares
share premium reserve
Legal reserve
Reserve for own shares in portfolio
Extraordinary reserve
Cash flow hedge reserve
Profit (loss) carried
Profit (loss) stated directly in
5,123
(45)
4,578
497
45
725
(83)
766
17
Coverage of loss of previous fiscal year
Total net equity
(3,080)
8,543
3,080
-
49
(11)
121
66
(11)
8,664
12
-
160
159
(3,080)
Total comprehensive profit/(loss)
Balance as at 31 December 2009
Net result
Rounding
83
5,123
(45)
Coverage of loss of previous fiscal year
1,498
497
45
725
0
766
(12)
Total comprehensive profit/(loss)
(1) (1)
Balance as at 31 December 2010
5,123
(45)
1,486
497
45
725
-
766
65
(1)
(1)
161
8,822
Own shares as at 31 December 2009 (unchanged compared to 31 December 2008) consisted of 10,000 ordinary shares with a comprehensive face value of €10 thousand.
169
FIDIA S.p.A. - Financial Statements as at 31 December 2010 INCOME STATEMENT as per Consob Resolution n° 15519 of July 27, 2006 (€thousand) - Net sales - Other operating revenue
Note s 1
FY2010 24,481
of which related parties 7,084
FY2009 24,688
of which related parties 8,680
2
4,378
2,646
4,794
2,725
Total revenues
28,860
29,482
(748)
(796)
- Changes in inventories of finished goods and work in progress - Raw materials and consumables
3
(10,231)
(329)
(11,505)
(38)
- Personnel expenses
4
(8,632)
(575)
(9,407)
(597)
- Other operating costs
5
(8,849)
(2,254)
(8,714)
(2,227)
- Depreciation and amortization
6
(324)
(461)
76
(1,401)
-
967
- Profit/(loss) of ordinary business - (Accrual)/release risk provision for penalty - Write-down of investments
7
(41)
(25)
- Reversal of investment value
7
-
691
- Provisions for loss of subsidiaries
7
(73)
(20)
(38)
212
- Operating profit/(loss) - Finance revenue (expenses)
8
- Profit/(loss) before tax - Income taxes - Profit/(loss) for continuing operations - Profit/(loss) of discontinued operations - Profit/(loss)
170
9
428
714
(35)
390
177
(230)
(188)
160
(12)
-
-
160
(12)
635
-
FIDIA S.p.A. - Financial Statements as at 31 December 2010 BALANCE SHEET as per Consob Resolution n° 15519 of 27 July 2006 Note s
31/12/2010
- Plant and equipment
10
877
- Intangible assets
11
21
27
- Investments
12
6,957
6,997
- Other non-current receivables and assets
13
112
97
9
118
110
8,085
7,975 10,109
(€thousand) ASSETS
of which related parties
31/12/2009
of which related parties
NON-CURRENT ASSETS
- Pre-paid tax assets TOTAL NON-CURRENT ASSETS
744
CURRENT ASSETS - Inventories
14
8,550
- Trade receivables
15
8,946
- Current tax receivables
16
764
- Other current receivables and assets
16
524
2
574
- Other current financial assets
17
30
30
-
- Cash and cash equivalents
18
6,040
9,451
6,360
714
2,928
1,991
TOTAL CURRENT ASSETS
21,742
22,839
TOTAL ASSETS
29,827
30,814
120
LIABILITIES NET EQUITY - Share capital
5,123
5,123
- Share premium reserve
1,486
1,498
496
496
- Legal reserve - Reserve for own shares in portfolio - Extraordinary reserve - Cash flow hedge reserve
46
46
725
725
-
-
- Profit (loss) carried forward
767
767
- Own shares
(46)
(46)
- Profit (loss) stated directly in equity
65
66
160
(12)
19
8,822
8,664
- Other non-current payables and liabilities
20
672
540
- Termination benefits
21
2,493
2,527
- Deferred tax liabilities
9
25
27
- Other non-current financial liabilities
22
3
-
- Non-current financial liabilities
23
1,447
400
4,640
3,494
- Profit/(loss) TOTAL NET EQUITY NON-CURRENT LIABILITIES
TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES - Current financial liabilities
23
2,457
- Other current financial liabilities
24
7
- Trade payables
25
9,509
- Current tax payables
26
304
- Other current payables and liabilities
26
3,751
- Short-term provisions
27
337
152
5,109
152
2,531
8,404
1,579
325 458
4,464
457
355
TOTAL CURRENT LIABILITIES
16,365
18,657
TOTAL LIABILITIES
29,827
30,814
171
FIDIA S.p.A. - Financial Statements as at 31 December 2010 STATEMENT OF CASH FLOWS as per Consob Resolution n° 15519 of 27 July 2006 (€thousand) A) Cash on hand and cash equivalents at beginning of year B) Cash from/(used in) operating activities during the period - Net operating result - Depreciation and amortization - Net losses (gains) on disposal of tangible assets - Write-downs (recovery in value) of investments - Net change in provisions for termination benefits - Net change in provisions for risks and expenses - Net change (assets) liabilities for (pre-paid) deferred taxes Net change in working capital: - receivables - inventories - payables C) Cash from/(used in) investing activities - Investing activities in: tangible assets intangible assets Investments - Profit on sale of: tangible assets Investments D) Cash from/(used in) financing activities - Net change in current and non-current financial assets and liabilities - New loans - Loans paid - Change in reserves - Increase in share capital E) Cash on hand of the merged company on the date of merger F) Net change in cash and cash equivalents G) Cash and cash equivalents at year end Breakdown of cash and cash equivalents: Cash and cash equivalents Overdrawn bank accounts
172
2010
of which related parties
2009
(1,947)
(5,447)
160 245 41 (34) (18)
(12) 231 14 (631) (2) (1,055)
(10)
32
491 1,559 503 2,937
438 953
7,328 3,208 (2,592) 6,521
(364) (8) (2)
(322) (61)
(374)
62 (321)
(20) 2,000 (1,168) (1)
(30)
of which related parties
2,790 1,110
139
811
150 (1,775) 233 (1,253)
-
(1,447)
3,374 1,427
3,500 (1,947)
2,928 (1,501) 1,427
1,991 (3,938) (1,947)
(153)
Notes to the Financial Statements
173
Notes to the Financial Statements COMPANY INFORMATION Fidia S.p.A. is an entity organized according to the law of the Italian Republic and is the Parent Company that directly holds the interests in the companies of the Fidia Group. The company is based in San Mauro Torinese (Turin), Italy. The Financial Statements as at 31 December 2010 consist of the Income Statement, Comprehensive Income Statement, Balance Sheet, Statement of Cash Flows, Statement of Changes in Equity and the Notes to the Financial Statements. Its publication was authorized by the Board of Directors on March 8, 2011. The Financial Statements of Fidia S.p.A. are drawn up in EUR, which is the currency of the economy in which the company operates. The Income Statement and Balance Sheet are presented in units of Euro, while the Comprehensive Income Statement, the Statement of Cash Flows, Statement of Changes in Equity and the values stated in the Notes are presented in € thousand. Fidia S.p.A., in the capacity of parent company, has also drafted the Consolidated Financial Statements of the Fidia Group as at 31 December 2010.
SIGNIFICANT ACCOUNTING STANDARDS Principles for the presentation of the financial statements The 2010 financial statements are the financial statements of the parent company Fidia S.p.A. and were drawn up in compliance with the International Financial Reporting Standards (“IFRSs") issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union and with the provisions implementing article 9 of Italian Legislative Decree n° 38/2005. IFRSs also include all the reviewed international accounting standards (“IAS”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), previously called Standing Interpretations Committee (“SIC”). Pursuant to European Regulation n° 1606 of 19 July 2002, since 2005, the Fidia Group has applied the International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”) in the presentation of the consolidated financial statements. Based on the national provisions implementing said Regulation, the Financial Statements of the parent company Fidia S.p.A. was drawn up according to the aforementioned principles as of 2006. The Disclosure required by IFRS 1 – First-time Application of IFRSs, relating to the effects ensuing from transition to the IFRSs was provided in the relevant Annex to the Financial Statements as at 31 December 2006. The Financial Statements were drawn up based on the historical cost principle, amended as requested for the evaluation of some financial instruments as well as on the assumption of going concern. In fact, the Company concluded that, despite the difficult economic and financial situation, there are no significant uncertainties (as set forth by par. 25 of IAS 1) on going concern, also in light of the measures already taken to adapt to the change in levels of demand.
174
Financial Statements The Company presents the income statement by nature of expense, which is deemed more representative compared to the so-called presentation by function. The form chosen complies with the internal reporting and business management methods. Within said income statement by nature, under the profit/(loss), a distinction has been made between ordinary business and those charges and earnings that are the result of non-recurrent transaction in ordinary business management and, in particular, the provisions and conversions for risks of penalties. It is deemed that this allows for a better measurement of the actual performance of the normal business management, it being understood that any atypical expenses and earnings are specified in detail. The definition of atypical adopted by the Company differs from the one set by Consob Notice of 28 July 2006, by which atypical and/or unusual transactions are all those transactions whose significance/relevance, nature of the counterparts, subject-matter of the transaction, transfer pricing method and timing of the event (near year end) can give rise to doubts on: correctness/completeness of information posted, conflict of interests, safeguard of company equity, safeguard of minority interests. With reference to the balance sheet, the "non-current/current" format of presentation according to the provisions of IAS 1. The statement of cash flows was drawn up by applying the indirect method. Finally, please be noted that with reference to Consob Resolution n° 15519 of 27 July 2006 on financial statements, supplementary schedules for the income statement, balance sheet and statement of cash flows have been added in order to underscore significant relations with related parties and not to impair the overall readability of the financial statements.
Plant and equipment Plant and machinery were evaluated at purchase or production cost minus accrued amortization and any value impairment and these were not revalued. The cost comprises ancillary expenses and direct costs needed to make the asset available for use and indirect costs in the amount reasonably attributable to these. Costs incurred following purchase were posted only if these increase the future economic benefits inherent to the asset concerned. All other costs were posted in the income statement when incurred.
175
Depreciation Depreciation was calculated based on constant portions of the estimated economic life of the assets as follows: Description
Depreciation rates
Lightweight constructions
5.00%
Generic and specific plants
12.50%
Machinery Industrial and commercial equipment
6.67% / 15.00% 20.00% / 25.00%
Electronic office equipment Office furnishing Motor vehicles
20.00% 6.67% 25.00%
Borrowing costs Borrowing costs were posted in the income statement in the fiscal year in which these were incurred.
Intangible assets Intangible assets purchased or produced internally were posted in the assets according to the provisions of IAS 38 – Intangible Assets, when it is probable that the future economic benefits attributable to the asset will flow to the company and when the cost of the asset can be measured reliably. Said assets were evaluated at purchase cost and amortized in constant shares over their estimated life if these have a finite life and net of any losses in value. The main categories of intangible assets held by the company are software and licenses and these are amortized over 5 years.
Impairment losses At least once a year, the Company assesses whether the carrying amount of Intangible Assets and Property, Plant and Equipment can be recovered in order to determine whether the value of these assets has been impaired. If this is the case, the balance-sheet value is reduced to the relevant recoverable value. When it is not possible to estimate the recoverable amount of a single asset, the Company estimates the recoverable amount of the unit generating the cash flows that owns the asset. The recoverable amount of an asset is the higher of an asset's fair value less costs to sell and its value in use. In order to determine an asset's value in use, the Company calculates the current value of estimated future cash flows before tax, by applying an interest rate before tax that reflects the current market values of the time value of money and the price for bearing the uncertainty inherent in the asset. Impairment is posted of the recoverable amount is lower than the carrying amount. Should there no longer be impairment concerning an asset or should the impairment reduce, the carrying amount of the asset or the unit generating the cash flows is increased until the recoverable amount is estimated again and it cannot exceed the amount that would have been determined if there had been no impairment. Impairment loss is immediately reversed to the income statement.
176
FINANCIAL INSTRUMENTS Presentation Financial instruments held by the Company were included in the balance-sheet items described below. The item Investments comprises both interests in subsidiaries and associates governed according to IAS 27 and IAS 28 respectively and minority interests in other companies governed according to IAS 39 (assets available for sale). These are companies that are under the control of Fidia S.p.A. as defined by IAS 27 – Consolidated and Separate Financial Statements. Said control exists when the Company has the direct or indirect power to govern the financial and operating policies of a company so as to obtain benefits from its activities. Associates consist of consortia over which the Company has significant influence but not joint or several control on the financial and operating policies, as defined by IAS 28 – Investments in Associates. Among other things, it is a modest investment. Investments in other smaller entities refer to investments in consortia in which the Company cannot exercise significant influence in light of the interest held. Other Receivables and Other Non-Current Financial Assets do not comprise medium/long-term trade receivables and caution money. Current financial assets as defined by IAS 39 comprise trade receivables, other receivables and current assets and other current financial assets as well as cash and cash equivalents. In particular, Cash and Cash Equivalents comprises bank account and securities held for trading that can be readily cashed in and are subject to a non-significant risk of change. Financial liabilities refer to financial payables as well as to other financial liabilities (including the negative fair value of derivatives), trade payables and other payables.
Valuation Investments in subsidiaries and associates are stated at adjusted cost in case of impairment loss. The positive difference, arising at the time of purchase between the acquisition cost and the equity share at current values of the Company's subsidiary, is hence stated in the carrying amount of the investment. The investments in subsidiaries and associates are assessed at least once a year to determine any impairment loss. If there is evidence that said investments have been impaired, said amount is stated in the income statement as a writedown. If the Company's share of the impairment loss exceeds the carrying amount of the investment and the Company must stand in, the value of the investment is written off and any further losses are stated as provisions in the liabilities. If the impairment loss should no longer subsist subsequently or register a reduction, a recovery of value is stated in the income statement within the limits of the cost. Investments in other minor entities, including non-current financial assets for which a market quotation is not available and the fair value cannot be reliably measured, are stated at cost, possibly written down for impairment losses. Receivables and loans included among current and non-current financial assets were recorded at first recognition in the financial statements at fair value, which normally corresponds to the amount paid out including transaction expenses and commissions directly attributable to the purchase cost. Loans and receivables originating during ordinary business and all financial assets for which an active market quotation is available and whose fair value cannot be determined reliably, were evaluated at amortized cost using the effective interest method, if these have a fixed maturity.
177
When financial assets have no fixed maturity, these are evaluated at purchase cost. Receivables with a maturity over 1 year that do not yield interest or yield interest below market rates are actualized using market rates. Evaluations are regularly carried to determine whether there is objective proof that a financial asset or a group of assets may have suffered impairment. If there is objective proof, the impairment loss is measured as a cost in the income statement of the year. Loans included among current and non-current financial liabilities were recorded at first recognition in the financial statements at fair value, which normally corresponds to the amount received including transaction expenses and commissions directly attributable to the purchase cost. After first recognition, an entity must measure all financial liabilities that are evaluated at amortized cost using the effective interest method, except for derivatives. Financial instruments held for trading included among other current and non-current assets and liabilities are evaluated at fair value. Profit and loss generated from changes in fair value of financial instruments classified as held for trading are recorded in the income statement of the year. Hedging instruments included among other current and non-current assets and liabilities are evaluated at fair value. Profit and loss generated from changes in the fair value of said financial instruments are recorded in the income statement of the year in case of fair value hedging and in specific provisions of net equity in case of cash flow hedging.
Derivatives Derivatives are used by the Company solely for hedging in order to reduce exchange rate (currency forward contracts to hedge the USD risk on sales and option contracts on exchange rates) and interest rate risk (Interest Rate Swap). Consistently with the provisions of IAS 39, derivatives can be recorded according to the procedures set forth for hedge accounting only when, at initial recognition, there is formal designation and documentation of the hedging relationship; it is assumed that hedging is highly effective; effectiveness can be reliably measured and hedging is highly effective during the various accounting periods for which it is designated. All financial instruments are measured at fair value as set forth by IAS 39. When financial instruments meet the requirements to be recorded in hedge accounting, the defined accounting method is applied:
178
•
fair value hedge: if a derivative is designated as a hedge of the exposure of changes in the fair value of a balance-sheet asset attributable to a given risk that can have effects on the income statement, the profit or loss resulting from following evaluations of the fair value of the hedging instrument are posted to the income statement. Profit or loss on the hedged item attributable to the hedged risk change the carrying amount of said item and are recorded in the income statement;
•
cash flow hedge: if a derivative is designated as a hedge of the exposure to variability in the future cash flows of an asset or liability posted in the income statement or of a transaction deemed highly probable that could have effects on the income statement, the effective portion of the profit or loss on the derivative is recorded in the net equity. Accumulated profit or loss are reversed from the net equity and recorded in the income statement in the period in which the correlated economic effect of the hedged transaction occurs. Profit or loss of a hedge (or part of a hedge), which has become ineffective, are immediately recorded in the income statement. If a hedging instrument or hedging relationship is closed, but the hedged transaction has not been realized yet, accumulated profit and loss up to that moment posted to the net equity are recorded in the income statement when the relevant transaction is realized. If the hedged transaction is deemed no longer probable, profit or loss not yet realized and still retained in the equity is immediately recorded in the income statement.
If hedge accounting cannot be applied, profit or loss resulting from fair value evaluation of the derivative is immediately recorded in the income statement.
Fair value Fair value is the amount at which an asset could be traded or a liability paid off in a free transaction among cognizant and independent parties. Fair value of a financial instrument at initial recognition is normally the price of the transaction, i.e., the amount paid or received. However, if part of the amount given or received pertains to something other than the financial instrument, fair value of the instrument is estimated using an evaluation method. The existence of official quotations in an active market is best proof of fair value and, when these exist, they are used to evaluate the financial asset or liability. If the market of a financial instrument is not active, fair value is determined using an evaluation method that relies more on market factor and as less as possible on specific internal factors.
Criteria for determining fair value The Company avails itself of evaluation methods established in market practice for the determination of the fair value of financial instruments for which there is no active market of reference. If evaluation methods are adopted, recourse to market factors allows for a reasonable estimate of the market value of said financial instruments. The market factors considered for the calculation of the fair value and measured at the date of evaluation of 31 December 2010 were: time value of money, i.e., base interest rate without risk, credit risk, exchange rates of foreign currencies, size of the future changes in price of a financial instrument, i.e., the latter's volatility, the costs to service an asset or financial liability. The evaluation of financial instruments using evaluation methods is entrusted by the Company to external consultants who have the necessary specialized know-how and are capable of providing the market values at the various dates of evaluation. Said market values are periodically compared with marks to market given by banking counterparts. In order to provide information on the methods and main assumptions used to determine fair value, financial assets and liabilities were divided into two classes, both of which homogeneous by nature of information provided and for the characteristics of the financial instruments. In particular, financial assets and liabilities were divided into: •
financial instruments evaluated at amortized cost;
•
financial instruments evaluated at fair value.
Financial assets and liabilities evaluated at amortized cost The class under examination comprises: trade receivables and payables, financial receivables, loans payable, mortgages and other liabilities and assets evaluated at amortized cost. The fair value of the items under consideration is determined by calculating the current value of the expected contractual flows, capital and interests, based on the yield curve of treasury bonds on the date of evaluation. In particular, the fair value of medium/long-term financial liabilities is determined using the risk-free curve on the balance-sheet date increased by an adequate credit spread.
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Said spread was determined by taking the premium for credit risk applied on the last loan granted to the Company by banks as reference.
Financial assets and liabilities evaluated at fair value The class under consideration comprises hedging instruments and those for trade. The fair value of the exchange rate forward contracts is estimated by actualizing the difference between forward price set by the contract and the current forward price for the residual contractual term, using the yield curves of treasury bonds. The fair value of the exchange rate options is calculated using the Black&Scholes formula based on the market data existing on the date of evaluation and on the volatility factor of the underlying. The fair value of the interest rate swaps is calculated based on the market data available on the date of evaluation by discounting the contract flows of estimated future cash with the yield curves of treasury bonds.
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Interest rates The interest rates used to actualize the estimated financial flows are based on the yield curve of treasury bonds on the balance-sheet date and are illustrated in the table below: EUR Curve
USD Curve
2010
2009
2010
2009
1W
0.612%
0.377%
1W
0.254%
0.214%
1M
0.782%
2M
0.885%
0.453%
1M
0.261%
0.231%
0.556%
2M
0.283%
0.240%
3M
1.006%
0.700%
3M
0.303%
0.251%
6M
1.227%
0.994%
6M
0.456%
0.430%
9M
1.372%
1.127%
9M
0.613%
0.713%
12M
1.507%
1.248%
12M
0.781%
0.984%
2 years
1.557%
1.878%
2 years
0.804%
1.418%
3 years
1.891%
2.248%
3 years
1.279%
2.056%
4 years
2.204%
2.556%
4 years
1.748%
2.575%
5 years
2.491%
2.810%
5 years
2.174%
2.981%
7 years
2.928%
3.216%
7 years
2.820%
3.537%
10 years
3.324%
3.583%
10 years
3.377%
3.971%
15 years
3.640%
3.963%
15 years
3.844%
4.360%
20 years
3.699%
4.062%
20 years
4.000%
4.467%
30 years
3.497%
3.944%
30 years
4.105%
4.537%
Inventories Inventories of raw materials, finished goods and work in progress are stated at the lower of cost and net realizable value by determining the cost with the weighted average cost formula. The evaluation of inventories includes the direct costs of materials and labour and the indirect costs (both variable and fixed). Provisions are calculated for the write-down of materials, finished goods, spare parts and other supplies deemed obsolete or slow-moving, considering their future expected use and realizable value. The realizable value is the estimated sales price net of all estimated costs for the completion of the good and of the sales and distribution expenses to be incurred.
Short-term provisions The Company states provisions for risks and expenses when it has a legal or implicit obligation with third parties and it is probable that the Company will have to utilize resources to meet the obligation; moreover, it must be possible to make a reliable estimate of the amount resulting from fulfilling the obligation. The estimate changes are stated in the income statement of the period in which the change occurred.
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Termination benefits The employees of the company benefit from post-employment pension schemes. The pension schemes that the company is called to share in by Italian law are of the defined contribution type. The payment for the defined contribution schemes made by the company are stated in the income statement as a cost when incurred, while the defined benefit schemes are based on the work life of employees and on the salary received by employees over a set period of service. Up to 31 December 2006 the termination benefits fund (TFR) was considered a defined benefit scheme. The rules of this fund were amended by Italian Law n° 296 of 27 December 2006 (“2007 Budget Law”) and following Decrees and Regulations issued in early 2007. In light of said changes and in particular with reference to companies with at least 50 employees, said fund can now be considered a defined benefit scheme solely for the amounts accrued before January 1, 2007 (and not yet paid on the balance-sheet date), while the amounts accrued after that date can be considered as a defined contribution scheme. The company's obligation to pay into funds for defined benefit schemes and the annual cost stated in the income statement are determined based on actuarial evaluations using the projected unit credit method. Actuarial profit and loss are accounted for in a specific equity item. With reference to defined benefit schemes, the costs for the increase in the current value of the obligation resulting from the approaching time of payment of the benefits are included in the borrowing costs. Liabilities for benefits to be recognized at the end of employment posted in the balance sheet for defined benefit schemes represent the current value of the obligation for defined benefits adjusted by retained actuarial profit and loss and costs for prior employment services to be stated in future fiscal years.
Own shares Own shares are written down from the equity. The original cost of the own shares and the revenues resulting from subsequent sales are stated directly as changes in equity.
Dividends received Dividends received from subsidiaries are stated in the income statement when the right to receive payment is ascertained.
Revenue recognition Revenues are recognized to the extent in which it is probable that the Company will reap economic benefits and their amount can be reliably determined. Revenues are stated net of returns, discounts and allowances. Revenues for the sale of goods are stated when risks and rewards of ownership of the goods are transferred to the buyer, the price of sale is agreed on or determinable and whether collection is expected: as a rule, said time is for milling systems the date of formal acceptance by the customer and for numerical controls the date of delivery (in compliance with IAS 18 – Revenues). Revenues for rendering of services are stated at the time of completion of the service.
182
Contributions to research Government and Community contributions received for research projects are stated in the income when it is reasonably certain that said contributions will be received and as a rule in the fiscal year in which the resolution to allocate the contribution is made.
Cost recognition Costs for the purchase of goods are posted when the risks and benefits related to the ownership of the goods are acquired. Costs for rendering of services are stated at the time of completion of the service. Advertising and research costs, in compliance with IAS 38, are posted to the income statement in the fiscal year in which these are incurred.
Finance income and costs Finance income and costs are posted in the income statement in the fiscal year in which these are incurred.
Taxes Income tax of the year is determined based on existing regulations. Income taxes are stated in the income statement, except for those items debited or credited in Other Comprehensive Profit/(Loss). In these cases the tax effect is stated directly in the Other Comprehensive Profit/(Loss). Other taxes not related to income are included among the other overheads. Deferred taxes are stated according to the balance sheet liability method. These are calculated on all temporary differences arising between the taxable base of an asset or liability and its carrying amount. The active deferred taxes on tax losses and on temporary differences are stated to the extent in which it is probable that there is a future taxable income on which these can be recovered. Deferred tax assets and liabilities are determined with the tax rates that are expected to be applicable in the periods in which temporary differences will be realized or written off.
Use of estimates The presentation of the financial statements and related notes according to the IFRSs requires that the management make estimates and assumptions that impact the values of assets and liabilities stated in the balance sheet and the information on the potential assets and liabilities on the balance-sheet date. The estimates and assumptions used are based on experience and other factors deemed relevant. The results that will be stated in the Closing balance could hence differ from said estimates. The estimates and assumptions are periodically revised and effects of each change are stated in the income statement in the period in which the estimate is revised if the revision has effects on said period or in following periods if the revisions has effects both on the current period and on future periods. In this context please be noted that the situation caused by the current economic and financial crisis has given rise to the need to make assumptions on the future outlook marked by a significant uncertainty. Therefore, it cannot be ruled out that in the next period there will be results other than those estimated and that adjustments may be needed in the carrying amount of the relevant items. Of course, to date, these cannot be estimated and foreseen. The balance sheet items mainly affected by uncertainty are Investments in subsidiaries included among non-current assets, in which the estimates are used to determine any impairments and recovery of value, Bad debts provision and inventory depreciation, non-current assets (tangible and intangible assets), termination benefits, product warranty and deferred tax receivables. A summary follows of the critical evaluation processes and key assumptions used in managing the application of the accounting standards to future quantities and which can have significant effects on the amounts stated in the balance
183
sheet or for which there is the risk that significant value adjustments need to be made to the carrying amount of the assets and liabilities in the period following the one of reference of the balance sheet.
Investments in subsidiaries The evaluation process of investments held by the management (impairment test) has taken into account the expected trends in 2011. Moreover, for following years, changes have been made to the original schemes to take into account, in a precautionary manner, the transformed economic, financial and market scenario. Based on the schedule data thus modified, the need to perform impairment arose for two subsidiaries. The recoverable amount significantly depends on the discount rate used in the actualized cash flows model, the expected future cash flows and the growth rate used for the purpose of the extrapolation.
Bad Debts provision Bad debt provision reflects the management's estimate on the possible loss in the portfolio of receivables from customers. The estimate of the bad debts provision is based on the loss expected by the Company, determined in light of its past experience in similar receivables, of current and historical overdue accounts, of losses and revenues, of the careful monitoring of credit quality and forecasts on economic and market conditions. If economic situations like those experienced over the last two years should continue, there can be a further worsening in the financial conditions of the Company's debtors compared to the worsening already considered in quantifying the provisions stated in the balance sheet.
Inventories impairment provision Inventories impairment provision reflects the management's estimation of impairment loss expected by the Company, determined based on past experience and on a critical analysis of rotation indices.
Recoverable amount of non-current assets Non-current assets include plant and equipment, intangible assets, and investments. The management periodically revises the carrying amount of the non-current assets held and used and of the assets that must be divested when facts or circumstances call for said revision. Said activity is carried out using the estimates of cash flows expected from the use or sale of the asset and adequate discount rates for the calculation of the current value. When the carrying amount of a non-current asset registers a loss in value, the Company states a write-down for the excess amount between the carrying amount of the asset and the recoverable value through its use or sale.
Product warranty When a product is sold, the Company allocates provisions for the estimated product warranty costs. The management determines the value of said provisions based on historical information on the nature, frequency and mean cost of warranty works. The Company is committed to constantly improve the quality of its products in order to maximize customer satisfaction and reduce to the impact of expenses due to warranty work to a minimum.
Termination benefits For the evaluation of termination benefits, the management uses various statistical assumptions and evaluation factors in order to anticipate future events for the calculation of expenses and liabilities for said provisions. The assumptions regard the discount rate and future inflation rate. Moreover, the Company's actuaries use subjective factors such as mortality and resignation rates.
Realisability of active deferred taxes and tax losses carried over On 31 December 2010, the Company had gross deferred tax assets resulting from tax losses that could be carried forward in the amount of €0.5 million not stated in the balance sheet; the corresponding value as at 31 December 2009
184
amounted to €1.3 million. The management measured the amount of deferred tax assets limited to the amount deemed recoverable.
Contingent liabilities The Company is potentially subject to legal and tax disputes regarding a vast range of issues. Considering the uncertainties relating to said issues, it is difficult to accurately foresee the outlay resulting from said disputes. In the normal course of business, the management consults its legal and tax experts. The Company states a liability for said disputes when it deems that it is probable that there will be a financial outlay and when the resulting amount of loss can be reasonably estimated. If the financial outlay becomes possible, but it is not possible yet to determine the amount, said fact is reported in the Notes to the Financial Statements
Accounting standards, amendments and interpretations applicable as of 1 January 2010 that are not relevant for the Company The following accounting standards, amendments, improvements and interpretations effective as of 1 January 2010, govern matters and cases not present in the Company on the date of these Financial Statements, but which could have accounting effects on future transactions or agreements: •
IFRS 3 (2008) – Business Combinations;
•
Amendments to IAS 27 - Consolidated and separate financial statements;
•
Improvement 2008 to IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations;
•
Amendments to IAS 28 – Investments in Associates and IAS 31 – Interests in joint ventures, following changes to IAS 27;
•
Improvement to IAS/IFRSs (2009);
•
Amendment to IFRS 2 – Share-based payment: group cash-settled share-based payment transactions;
•
IFRIC 17 – Distributions of Non-cash Assets to Owners;
•
IFRIC 18 – Transfers of Assets from Customers;
•
Amendment to IAS 39 – Financial Instruments: Recognition and Measurement – Exposures qualifying for hedge accounting.
Accounting standards, amendments and interpretations not applicable yet and not adopted in advance by the Company On 8 October 2009, the IASB issued an amendment to IAS 32 – Financial Instruments: Presentation: classification of rights issues for the purpose of governing the accounting of rights issue (rights, options or warrants) in a currency other than that of the issuer. These rights were previously accounted as liabilities for derivatives. The amendment requires instead that in certain conditions said rights are to be stated in the equity regardless of the currency in which the price is denominated. The amendment under consideration must be applied retrospectively as of 1 January 2011. It is deemed that the adoption of the amendment will not have significant effects on the Company's financial statements. On 4 November 2009 the IASB issued a revised version of IAS 24 – Related Party Disclosures. It streamlines the type of information required in case of transactions with government-controlled related parties and provides a definition of related party. The standard must be applied as of January 1, 2011. The adoption of said revision will not have any effect in terms of the evaluation of the balance-sheet items. On 12 November 2009, the IASB published standard IFRS 9 – Financial Instruments. Said standard was then amended on 28 October 2010. The standard is applicable as of 1 January 2013 and it is the first part of a process in stages that aims to fully replace IAS 39 and adopts the new criteria for the classification and evaluation of financial assets and liabilities and for the derecognition of financial assets. In particular, for financial assets the new standard uses a single approach based on the procedures to manage financial instruments and on the characteristics of the contractual cash flows of said financial assets in order to determine the evaluation criterion. It replaces the various rules set forth in IAS
185
39. As for financial liabilities, the main change regards the accounting of changes in fair value of a financial liability designated as financial asset at fair value stated in the income statement if these are due to the change in the credit rating of the liability. According to the new principle, these changes must be stated in the Other comprehensive profit and loss and no longer in the income statement. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of the new standard. On 26 November 2009 the IASB issued a minor amendment to IFRIC 14 – Minimum Funding Requirements and their Interaction, thus allowing entities that pay minimum funding in advance to state it as an asset. The amendment must be applied as of 1 January 2011. It is deemed that the adoption of the amendment will not have significant effects on the Company's financial statements. On 26 November 2009 the IFRIC issued interpretation IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments, which sets forth the guidelines on the recognition of the extinguishing of financial liabilities through issue the equity instruments. The interpretation sets forth that if an entity renegotiates the conditions to extinguish a financial liability and the creditor accepts to extinguish it through the issue of equity instruments, the equity instruments issued by the entity become a part of the consideration paid to extinguish the financial liability and must be measured at fair value. The difference between the carrying amount of the financial liability extinguished and the measurement of the equity instruments issued must be posted in the income statement of the period. The interpretation must be applied as of 1 January 2011. It is deemed that the adoption of the interpretation will not have significant effects on the Company's financial statements. On 6 May 2010 the IASB issued a set of changes to the IFRSs (“Improvements”) to be applied as of 1 January 2011. Those involving a change in the presentation, recognition and measurement of the items of the financial statements are listed below, while those involving only changes in terminology or editorial layout with minimum accounting effects or those affecting standards or interpretations not applicable to the Fidia are discarded: •
IFRS 3 (2008) – Business combinations: the amendment explains that the shares pertaining to noncontrolling interests that do not entitle the owners to receive a proportionate share of the net assets of the subsidiary must be measured at fair value or according to the applicable accounting standards. For instance, a stock option plan granted to employees must be measured, in case of business combination, in compliance with the rules of IFRS 2 and the equity share of a convertible bond security must be measured according to IAS 32. The Board has also expanded on the issue of security-based payment plans that are replaced within the framework of a business combination by adding a specific guide to explain accounting.
•
IFRS 7 – Financial Instruments: Disclosures: the change underscores the interaction between additional qualitative disclosures and those of a quantitative nature required by the standard on the nature and scope of the risks relating to financial instruments. This should help the users of financial statements to link the information presented and to obtain a general description of the nature and scope and risks resulting from financial instruments. Moreover, the requirement for disclosure on financial assets that are due but have been renegotiated or written down and for disclosure on the fair value of collaterals has been cancelled.
•
IAS 1 – Presentation of Financial Statements: the change requires that the reconciliation of changes in equity be presented in the Notes or in the financial statements.
•
IAS 34 – Interim Financial Reporting: thanks to some examples, explanations have been provided on the additional disclosures that must be present in interim financial reports.
It is deemed that the adoption of said Improvement will not have significant effects on the Company's financial statements. On 7 October 2010 the IASB published some amendments to standard IFRS 7 – Financial Instruments: enhancing disclosures, applicable to accounting periods starting on or after 1 July 2011. The amendments were issued in order to improve the understanding of transfers of financial assets, including the understanding of the possible effects resulting from any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of the amendments.
186
On 20 December 2010 the IASB issued a minor amendment to IFRS 1 – First-time Adoption of International Financial Reporting Standards (IFRS) to eliminate any reference to the date of 1 January 2004 therein contained and set as the date of transition to the IFRS and to provide guidance for entities emerging from severe hyperinflation to present IFRS financial statements. These amendment will be applied starting as of 1 July 2011. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of said amendments. On 20 December 2010 the IASB issued a minor amendment to IAS 12 – Income Taxes, which requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. Following said amendment, SIC-21 – Income Taxes – Recovery of Revalued NonDepreciable Assets will no longer be applicable. The amendment is applicable as of 1 January 2012. On the date of these Financial Statements the competent bodies of the European Union had not completed yet the approval process for the application of said amendment.
Risk management The risks to which Fidia S.p.A. is subject directly or indirectly through its subsidiaries are the same as those of the companies which it is the parent company of. In addition to Note n° 29, please refer to the note on risk management found in the Additional Notes to the Consolidated Financial Statements of the Fidia Group.
187
CONTENT AND MAIN CHANGES INCOME STATEMENT 1. NET SALES Revenues for the sale of goods and services amounted to €24,481 thousand, which were more or less stable compared to the €24,688 thousand of FY2009. Hereinafter follows the details by geographical area and line of business for sales. Turnover by geographical area (€ thousand)
FY2010
%
FY2009
%
Italy
4,087
16.7%
3,737
15.1%
Germany
3,025
12.4%
2,411
9.8%
Spain/Portugal
203
0.8%
934
3.8%
France/Belgium
374
1.5%
764
3.1%
China
13,545
55.3%
5,519
22.4%
Brazil
974
4.0%
1,064
4.3%
USA/Canada
714
2.9%
3,683
14.9%
India
758
3.1%
1,166
4.7%
Rest of the World
801
3.3%
5,410
21.9%
24,481
100%
24,688
100.0%
TOTAL TURNOVER
188
The trend in turnover by line of business is illustrated more in detail in the following table: Turnover by line of business (€ thousand)
FY2010
%
FY2009
%
Numerical controls, drives and software
2,655
10.8%
2,689
10.9%
After-sales servicing
1,996
8.2%
1,821
7.4%
Total numerical controls line
4,651
19.0%
4,510
18.3%
High-speed milling systems
17,141
70.0%
17,819
72.2%
2,689
11.0%
2,359
9.6%
Total milling systems line
19,830
81.0%
20,178
81.7%
TOTAL TURNOVER
24,481
100.0%
24,688
100.0%
After-sales servicing
2. OTHER OPERATING REVENUE This item comprises: € thousand
FY2010
FY2009
1,115
828
Increase in fixed assets for internal work
286
279
Contingent assets
125
375
Recovery of costs incurred
290
85
2
215
Other miscellaneous revenues and earnings
2,560
3,012
TOTAL
4,378
4,794
Contributions for operating expenses
Insurance refunds
Contributions for operating expenses basically consisted of funds for research projects stated by year of accrual in the income statement as at 31 December 2010 and allocated by the European Union and Italian University and Research
189
Ministry. Applied research and development are a structural component and are carried out on an ongoing basis by Fidia S.p.A. Other miscellaneous revenues and earnings are attributable in the amount of €2,441 thousand (€2,678 thousand in 2009) to training and technical consulting services to the Chinese subsidiary Shenyang Fidia NC&M Co. Ltd. These services are linked to programs funded by the Shenyang local government already commented in the Report on Operations and Notes to the Financial Statements.
3. RAW MATERIALS AND CONSUMABLES These are: € thousand
FY2010
FY2009
8,441
7,907
735
802
Consumables
61
64
Equipment and software
23
21
Packaging
89
120
Other
75
80
807
2,511
10,231
11,505
Production materials
Servicing materials
Change in inventory raw materials and consumables used
TOTAL
The change in purchases of production materials is to be assessed together with the change in inventory and correlated with the lower turnover realized in the period and greater weight on turnover of the sales in the electronics sector compared to the mechanical sector.
190
4. PERSONNEL EXPENSES Personnel expenses amounted to €8,632 thousand as opposed to €9,407 thousand of FY2009 and are composed as follows: € thousand
FY2010
FY2009
Wages and salaries
6,079
6,858
Social security charges
1,841
2,091
Termination benefits
459
452
Other personnel expenses
253
6
8,632
9,407
TOTAL
Personnel expenses dropped by €775 thousand compared to FY2009 (-8.2%); the measures taken to curb these expenses were based mainly on recourse to social "shock absorbers" and hence the cuts to costs was not matched by a commensurate reduction in employees on the company payroll. Personnel costs comprised €253 thousand for voluntary redundancy payments, paid out in part in 2010 and allocated in part for specific cases. However, these will be implemented in the first half of 2011. The change recorded in FY2010 in the number of employees, broken down by category, is illustrated below:
31/12/2009
Inbound
Outbound
Change
31/12/2010
Period average
12
-
-2
-
10
11.0
138
-
-5
1
134
136.0
Workers
43
-
-6
-1
36
39.5
TOTAL
193
-
-13
-
180
186.5
Executives
Clerks and cadres
191
5. OTHER OPERATING EXPENSES Other operating expenses are as follows: € thousand
FY2010
FY2009
Outsourced work
1,165
906
Travel expenses
411
464
Transportation and customs
643
597
Rent due
545
536
Technical, legal and administrative consulting
852
984
Utilities
430
345
1,472
917
276
300
44
57
Insurance
271
271
Advertising, trade fairs and other commercial costs
137
371
85
72
Maintenance and housekeeping
116
118
Personnel-related expenses
173
187
First-supply services
856
1,019
Bank services
121
121
Stock exchange listing fees
124
145
Costs for repairs and interventions
559
494
Research project costs
42
42
Entertainment expenses
52
30
Patent costs
20
11
Contributions and payments
42
43
Contingent liabilities
206
172
Other
207
512
8,849
8,714
Commissions Car rental expenses Auditors' emoluments
Non-income taxes
TOTAL
The other operating revenue amounted to €8,849 thousand (€8,714 thousand in FY2009). The increase compared to FY2009 was due mainly to higher costs for turnover-related services (outsourced work, transportation and customs, commissions), which rose despite the fact that proceeds were basically unchanged. Other structural costs have mainly registered a decreasing trend, in line with the optimization policy adopted by the Company.
192
6. DEPRECIATION AND AMORTIZATION € thousand
FY2010
FY2009
Amortization of intangible assets
15
18
Depreciation plant and equipment
231
213
78
230
324
461
Bad debts
TOTAL
Depreciation of tangible and intangible assets was carried out according to the rates already described above. Receivables impairment consist of the estimate of possible outstanding credits. Said provisions along with the existing reserves are considered commensurate to possible cases of insolvency.
7. WRITE-DOWN/RECOVERY OF VALUE OF INVESTMENTS AND RESERVE FOR COVERAGE OF LOSSES € thousand
Write-down of investments
Recovery of value of investments
Reserve to cover losses of Fidia Spolka z o.o. TOTAL
FY2010
FY2009
(41)
(25)
-
691
(73)
(20)
(114)
646
The outcome of the impairment test carried out on the investments of Fidia S.p.A and stated under the non-current assets was: •
impairment of the value of the investment in the Polish subsidiary Fidia Spolka Z.o.o.: the prospects are still uncertain for the Polish market and have called for a cautious attitude that led to the write-down of the residual amount of the investment (€2 thousand) and provisions in the amount of €73 thousand to cover losses;
•
write-down of value of investment in the Russian subsidiary OOO Fidia: in this case as well, the limited commercial operations of this subsidiary has led the company to adopt an extremely cautious attitude.
193
8. FINANCE INCOME AND COSTS Finance income and costs consist of: € thousand
FY2010
FY2009
730
694
(290)
(576)
(10)
(166)
(2)
13
428
(35)
FY2010
FY2009
719
644
Interests received from banks
3
6
Other interests received
8
44
730
694
FY2010
FY2009
-
274
Beijing Fidia Machinery & Electronics Co. Ltd.
719
370
TOTAL
719
644
FY2010
FY2009
(163)
(394)
Interests paid on medium/long-term payables
(35)
(58)
Borrowing costs on termination benefits
(81)
(92)
Other borrowing costs
(11)
(32)
(290)
(576)
Finance revenue Borrowing costs Net profit (loss) on derivatives Profit (loss) from foreign currency transactions TOTAL
Finance revenue consisted of: € thousand Dividends from subsidiaries
TOTAL Dividends from subsidiaries consisted of: € thousand Fidia GmbH
Finance expenses consisted of: € thousand Interests paid on borrowings from banks
TOTAL
194
Net profit and loss on derivatives: € thousand
FY2010
FY2009
Loss on derivatives due to fair value adjustment
(10)
(176)
Profit on derivatives due to fair value adjustment
-
10
(10)
(166)
TOTAL
The item Finance income/costs on derivatives includes the value of the inefficacy component resulting from cash flow hedge transactions in the amount of €3 thousand; in this specific case, the company entered into a interest rate swap contract to reduce the interest rate risk on a medium/long-term variable rate loan from the BNL bank. This item also comprised the amount of €7 thousand as adjustment in fair value resulting from hedging transactions (forward) to limit the EUR/USD exchange rate risk. For these transactions, it was not possible to determine such a correlation to include these among the cash flow hedge transactions. Profit (loss) on foreign currency transactions consisted of: € thousand
FY2010
FY2009
Positive difference in exchange rate
26
210
Profit from exchange rate adjustment
10
4
Profit on exchange rates for term contracts
3
94
Loss on exchange rates for term contracts
-
(92)
Negative difference in exchange rate
(15)
(174)
Expenses from exchange rate adjustment
(26)
(29)
(2)
13
TOTAL
195
9. INCOME TAXES Taxes stated in the income statement were: € thousand
FY2010
FY2009
239
211
-
51
Deferred tax liabilities absorbed
(1)
(47)
Pre-paid taxes
(8)
(27)
230
188
Income taxes: IRAP (Italian Regional Tax on Production Activities)
Deferred tax assets absorbed
TOTAL
It is deemed that it is not necessary to provide a reconciliation schedule between the theoretical tax expense and the tax expense stated in the financial statements, as IRAP accounts for the largest tax amount in the income statement. It is a tax with a taxable base other than EBT and hence generates distortions from one period to another. As at 31 December 2010 the balance of the pre-paid tax assets and deferred tax liabilities amounted to: € thousand
31/12/2010
31/12/2009
Pre-paid tax assets
118
110
Deferred tax liabilities
(25)
(27)
93
83
TOTAL
196
In all, pre-paid tax assets and deferred tax liabilities are as follows: As at 31 December 2009
Posted in income statement
Stated in equity
As at 31 December 2010
Application of IAS 19 - Termination Benefits
69
4
-
73
Inventories impairment provisions
41
4
-
45
110
8
-
118
6
(1)
-
5
Application of IAS 19 - Termination Benefits
21
-
(1)
20
TOTAL DEFERRED TAXES
27
(1)
(1)
25
€ thousand
Pre-paid taxes for:
TOTAL PRE-PAID TAXES
Deferred tax liabilities for:
Application of IAS 16- Plant and equipment
Assets for pre-paid taxes were allocated by critically evaluating the subsistence of the prerequisites for future recoverability of said assets based on updated plans. For the sake of extreme caution, pre-paid tax assets pertaining to the tax benefit on previous tax losses amounting to about €1.8 million were not stated. The comprehensive value of tax loss as at 31 December 2010 and the relevant amounts for which no assets for pre-paid taxes, divided by year due, were stated, amounted to: Year due
€ thousand
Tax loss
As at 31 December 2010
2011
2012
2013
2014
Beyond 2015
1,794
787
-
30
977
-
197
BALANCE SHEET 10. PLANT AND EQUIPMENT In 2010 and 2009 the changes in original cost of Plant and Equipment were as follows: Prior changes
Changes in period
Purchase price
Cumulated depreciation
Opening balance 1.1.2010
Additions
Disposals
Total
Decrease in cumul. depreciation
Depreciation of year
Plant and equipment
1,340
(998)
342
284
-
284
-
92
534
Industrial equipment
1,429
(1,268)
161
34
-
34
-
62
133
Electrical tools
820
(765)
55
3
-
3
-
20
38
Furnishing
719
(621)
98
27
2
25
2
16
109
Electronic equipment
1,357
(1,301)
56
16
95
(79)
95
22
50
Means of transportation
306
(274)
32
-
-
-
-
19
13
TOTAL PLANT AND EQUIPMENT
5,971
(5,227)
744
364
97
267
97
231
877
€ thousand
Prior changes
€ thousand
Changes in period
Purchase cost
Cumulate d depreciaiation
Opening balance as at Jan 1, 2009
1,119
(882)
237
242
(229)
217
238
(21)
165
52
342
1,282
(1,129)
153
178
(174)
61
107
(46)
107
57
161
781
(747)
34
-
-
39
-
-
-
18
55
672
(567)
105
56
(47)
-
10
-
10
16
98
1,304
(1,232)
72
185
(178)
5
137
137
28
56
264
(233)
31
89
(44)
-
48
46
42
32
Plant and equipment Industrial equipment Electrical
tools Furnishing Electronic
equipment Means of transportatio n TOTAL PLANT AND EQUIPMENT
Changes due to merger
Closing balance
5,422
(4,790)
632
Historic al cost
Cumulated deprecia-tion
Additions
Disposal s
Tot
Decrease cumul. Deprecia-tion.
Deprecia-tion. in period
750
(672)
322
540
(48) (115)
465
213
Clo-sing balance
744
Increases in the amount of €364 thousand in 2010 consisted of physiological investments in the Company production structure. Investments do not include capitalized borrowing costs. As at 31 December 2010 there were no significant current assets or contractual obligations for the purchase of property, plant and equipment. There was no property burdened by lien or whose use is subject to restraints. Depreciation of tangible assets is stated in the income statement under “Depreciation and amortization” (Note n° 6).
198
11. INTANGIBLE ASSETS Intangible assets were fully purchased externally and there are no intangible assets with an indefinite useful life. R&D expenses too and those for the design of new product families are directly stated in the income statement in the year in which the costs are incurred. The following tables show the breakdown by category and the changes over the past two fiscal years: Prior changes
Changes in period
Closing balance
€ thousand
Purchase price
Accumulate d amortization
Opening balance 1.1.2010
acquisitions
Decreases
Total
Decrease in Accumulate amortization
Amortization of year
Licenses
301
(301)
-
-
-
-
-
-
-
Software
571
(544)
27
9
-
9
-
15
21
-
9
-
15
21
TOTAL INTANGIBLE ASSETS
872
(845)
27
Prior changes
€ thousand
Purchase price
9
Changes in period
Changes due to merger
Accumu lated Opening amortiz balance ation 1.1.2009
Histori cal cost
Accumu lated amortiz ation
acquisitions
Decreases
Total
Decrease in accumul. amortization
Closin g Amortization balan of year ce
Licenses
301
(300)
1
-
-
-
-
-
-
1
0
Software
568
(525)
43
3
(2)
-
-
-
-
17
27
(2)
-
-
-
-
18
27
TOTAL INTANGIBLE ASSETS
869
(825)
44
3
The item Software comprises the costs incurred for the purchase and use of software applications that are amortized at constant rates in 5 years. Amortization of intangible assets is stated in the income statement under “Depreciation and amortization” (Note n° 6).
199
12. INVESTMENTS As at 31 December 2010 these amounted to €6,957 thousand. The following changes were registered: Balance as at 31 December 2009
Increases
Decreases
Writedowns
Recovery of value
Balance as at 31 December 2010
Investments in subsidiaries
6,976
2
-
42
-
6,936
Investments in associates
4
-
-
-
4
Investments in others
17
-
-
-
17
2
-
-
6,957
€ thousand
TOTAL INVESTMENTS
6,997
42
Balance as at 31 December 2008
Increases
Decreases
Writedowns
Recovery of value
Balance as at 31 December 2009
Investments in subsidiaries
7,488
62
1,205
60
691
6,976
Investments in associates
2
2
-
-
-
4
Investments in others
17
-
-
-
-
17
691
6,997
€ thousand
TOTAL INVESTMENTS
200
7,507
64
1,205
60
Detailed information of the investments in subsidiaries, associates and others and their changes is provided in the table below:
€ thousand Subsidiaries Fidia GmbH Historical cost Impairment reserve Fidia Co. Historical cost Impairment reserve Fidia Iberica S.A. Historical cost Impairment reserve Fidia Sarl Historical cost Impairment reserve Beijing Fidia M&E Co. Ltd. Historical cost Impairment reserve Fidia Do Brasil Ltda Historical cost Impairment reserve Shenyang Fidia NC & Machine Co. Ltd. Historical cost Impairment reserve OOO Fidia Historical cost Impairment reserve Fidia Spolka z o.o Historical cost Impairment reserve Fidia India Private Ltd. Historical cost Impairment reserve Total investments in subsidiaries Historical cost Impairment reserve
Balance as at 31 December 2009 1,208 1,208 1,522 7,078 (5,556) 171 171 221 221 1,185 1,185 184 350 (166)
Increases
Decreases
(Impairment)/R ecovery of value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,443 2,443 40 100 (60) 103 (103) 2 2 6,976 12,861 (5,885)
Balance as at 31 December 2010 1,208 1,208 1,522 7,078 (5,556) 171 171 221 221 1,185 1,185 184 350 (166) 2,443
-
-
-
-
-
(40)
2 -
-
(2)
-
-
-
2
-
(42)
2,443 100 (100) 105 (105) 2 2 6,936 12,863 (5,927)
201
€ thousand Associates Prometec Consortium Total investments in associates Others Probest Service S.p.A. Consorzio C.S.E.A. Total investments in others Total investments
Balance as at 31 December 2009
Increases
Decreases
(Writedowns)/Recov ery of value
Balance as at 31 December 2010
4 4
-
-
-
4 4
10 7 17 6,997
2
-
(42)
10 7 17 6,957
With reference to the Fidia Spolka Z.o.o. Company, the historical cost of the investment increased by €2 thousand following a residual increase in the capital subscribed in 2010; at the same time, it was deemed, considering the current outlook for growth in its area of operation, that the entire investment be written down in full. The equity of this company also required reserves in the amount of €73 thousand to cover losses. The write-off of the investment in the subsidiary OOO Fidia was also due to the current trend in the market in which the company operates and to the cost estimates required for the commercial overhaul of the branch. The item (Impairment) recovery of value comprises write-downs and recovery resulting from the application of the cost method, as previously illustrated under Accounting Principles. The list of investments with further information required by CONSOB (Notice n° DEM/6064293 of 28 July 2006) is hereto attached. There are no investments in other companies involving unlimited liability for the obligations thereof (article 2361, par. 2, of the Italian Civil Code). Finally, as at 31 December 2009 and 2010 there were no investments provided as collateral for financial liabilities and potential liabilities.
13. OTHER NON-CURRENT RECEIVABLES AND ASSETS Other non-current receivables and assets comprised the following items: Balance as at 31 December 2010
Balance as at 31 December 2009
Caution money
39
18
Receivables for foreign VAT
18
79
Receivables for EU contributions to R&D
51
-
4
-
€ thousand
Other receivables TOTAL OTHER NON-CURRENT RECEIVABLES AND ASSETS
112
It is deemed that the carrying amount of other non-current receivables and assets is near the fair value. There are no receivables having a term of over 5 years.
202
97
14. INVENTORIES The breakdown of the item is illustrated in the following table: Balance as at 31 December 2010
Balance as at 31 December 2009
5,653
6,431
(1,069)
(1,041)
Net value of raw materials, subsidiary materials and consumables
4,584
5,390
Semi-finished products and work in progress
2,607
2,470
Finished products and goods
1,478
2,273
Finished products and goods depreciation provision
(119)
(29)
Net value finished products and goods
1,359
2,244
-
5
8,550
10,109
€ thousand
Raw materials, subsidiary materials and consumables
Provision for raw materials depreciation
Advances
TOTAL INVENTORIES
Warehouse inventories showed compared to FY2009 a reduction in the amount of €1,559 thousand; said reduction is the result of the optimization of the level of raw materials and other purchased items and a reduction in the stocks of finished products. The latter also comprised high-speed milling systems already delivered to final customers but whose installation was not completed yet at year-end. The depreciation provision in the amount of €1,188 thousand were stated to hedge some slow-moving components; these phenomena result, in particular, from the need to ensure customers that spare parts are available for servicing even beyond the period of ordinary marketability of the components.
203
15. TRADE RECEIVABLES As at 31 December 2010 these amounted to €8,946 thousand, namely €505 thousand lower compared to 31 December 2009. In detail: Balance as at 31 December 2010
Balance as at 31 December 2009
Trade receivables from customers
3,556
3,784
Bad debts provision
(650)
(693)
2,906
3,091
Receivables from subsidiaries
6,040
6,360
TOTAL TRADE RECEIVABLES
8,946
9,451
€ thousand
Total trade receivables from others
31/12/2010
€ thousand
31/12/2009
Gross Gross Gross receivab receivab receivab les Bad debts provision les les
Gross receivab Bad debts provision les
Non-impaired assets
2,962
2,962
2,324
2,324
Overdue financial assets
5,651
5,651
6,629
6,629
Impaired financial assets
983
650
333
1,191
693
498
TOTAL RECEIVABLES
9,596
650
8,946
10,144
693
9,451
204
Trade receivables will be due within the next fiscal year. The breakdown by due date of those due are: € thousand
31/12/2010
31/12/2009
up to 1 month
681
1,143
1 to 3 months
1,113
2,072
938
439
6 months to 1 year
1,544
942
Over 1 year
1,375
2,033
TOTAL
5,651
6,629
3 months to 6 months
The changes in the Bad debts provision were: € thousand
Balance as at 31 December 2009
Accrual of period
Amounts used
BALANCE AS AT 31 DECEMBER 2010
693
78
(121)
650
205
Trade receivables from others broken down by geographical area were the following: Balance as at 31 December 2010
Balance as at 31 December 2009
1,701
1,932
Other EU countries
277
287
Rest of Europe
211
217
85
85
1,191
1,048
-
24
India
46
152
Rest of the World
45
39
3,556
3,784
Balance as at 31 December 2010
Balance as at 31 December 2009
Fidia Co.
535
1,219
Fidia Sarl
38
284
-
54
554
272
51
5
108
61
-
163
Shenyang Fidia NC & Machine Co. Ltd.
4,754
4,302
TOTAL RECEIVABLES
6,040
6,360
€ thousand Italy
Canada China Taiwan
TOTAL
Receivables from subsidiaries were the following:
€ thousand
Fidia Iberica S.A. Fidia GmbH Fidia do Brasil Ltda Fidia Sp.z o.o Beijing Fidia M&E Co Ltd
206
Trade receivables from subsidiaries broken down by geographical area were the following: € thousand
Balance as at 31 December 2010
Balance as at 31 December 2009
EU
700
671
U.S.A.
535
1,219
China
4,754
4,465
Brazil
51
5
6,040
6,360
TOTAL
At year-end there were no receivables from associates. It is deemed that the carrying amount of trade receivables is near the fair value.
16. TAX RECEIVABLES AND OTHER RECEIVABLES AND CURRENT ASSETS Balance as at 31 December 2010
Balance as at 31 December 2009
229
175
Receivables from tax authorities for income tax
10
63
Receivables for short-term foreign VAT
89
86
Other tax receivables:
436
390
TOTAL CURRENT TAX RECEIVABLES
764
714
77
132
270
35
Pre-paid expenses
52
102
Receivables from employees
10
27
-
7
Advances from suppliers
74
228
Other current receivables
41
43
524
574
€ thousand Current tax receivables: Receivables from tax authorities for VAT
Grants for research projects Receivables from INPS for redundancy pay
Advances to INAIL
TOTAL OTHER CURRENT RECEIVABLES AND ASSETS
Receivables for research projects equal to €77 thousand consisted of soft loans granted by the European Union and the University and Research Ministry for projects aimed at developing new products and technologies. It is deemed that the carrying amount of Other current receivables and assets is near the fair value. Other current receivables will be due almost entirely within the next fiscal year.
17. OTHER CURRENT FINANCIAL ASSETS This item that amounts to €30 thousand consists of an interest-yielding loan granted to the Polish subsidiary Fidia Spolka Z.o.o.
207
18. CASH AND CASH EQUIVALENTS The overall total of cash amounts to €2,928 thousand (€1,991 thousand as at 31 December 2009). This item is composed of temporary cash on bank accounts pending future use amounting to €2,871 thousand and cash on hand and cheques in the amount of €57 thousand. It is deemed that the carrying amount of the cash and cash equivalents is aligned to the fair value at balance-sheet date. Credit risk correlated with cash and cash equivalents is limited because the counterparts are leading Italian and international banks.
19. NET EQUITY Equity as at 31 December 2010 amounted to €8,822 thousand, €158 thousand higher compared to 31 December 2009 following the realization of profit (€160 thousand) and the posting of actuarial losses on termination benefits net of tax effect (€1 thousand). The main classes composing the Equity and related changes are the following.
Share Capital Share capital issued amounted to €5,123,000 and was unchanged compared to 31 December 2009. The share capital, fully subscribed and paid in, is unchanged and numbered 5,123,000 ordinary shares with a face value of €1 each. The following table illustrates reconciliation between the number of circulating shares as at 31 December 2008 and the number of circulating shares as at 31 December 2010: As at December 2008
(Purchase)/Sale own shares; new subscriptions
As at 31 December 2009
(Purchase)/Sale own shares; new subscriptions
As at December 2010
5,123,000
-
5,123,000
-
5,123,000
Minus: Own shares
10,000
-
10,000
-
10,000
Circulating ordinary shares
5,113,000
-
5,113,000
-
5,113,000
Ordinary shares issued
Share premium reserve This reserve amounting to €1,486 thousand (€1,498 thousand as at 31 December 2009) decreased by about €12 thousand due to the hedging of the loss of the FY2009, as per the resolution of the General Shareholders’ Meeting of 29 April 2010.
Legal reserve Legal reserve in the amount of €496 thousand was unchanged compared to FY2009.
208
Reserve for own shares in portfolio As at 31 December 2010 these amounted to €46 thousand and were unchanged compared to FY2009. These reserves are not available until own shares are held.
Extraordinary reserve As at 31 December 2010 it amounted to €725 thousand and was unchanged compared to FY2009.
Profit (loss) carried forward As at 31 December 2010 profit carried forward amounted to €767 thousand and was unchanged compared to FY2009.
Own shares Own shares consisted of 10,000 ordinary shares issued by Fidia S.p.A. for a value of €46 thousand. There were no changes in FY2010, as illustrated in the following table. € thousand
N° of shares
Face value
Share in % Share capital
Face amount
Mean unit value
10,000
10.00
0.20%
45.51
4.55
Purchases
-
-
-
-
-
Sales
-
-
-
-
-
Write-downs
-
-
-
-
-
Recovery in value
-
-
-
-
-
10,000
10.00
0.20%
45.51
4.55
Balance as at January 01, 2010
Balance as at 31 December 2010
Profit (loss) stated directly in equity As at 31 December 2010 it amounted to €65 thousand as opposed to €66 thousand as at 31 December 2009; the change was due to the accounting of actuarial losses in 2010, net of tax effect.
Cash flow hedge reserve Cash flow hedge reserve comprised the fair value of the derivative (interest rate swap) stipulated by the Company to hedge risk on oscillations in interest rates on a variable-rate loan. Reserve comprised an amount of €370 euro net of tax effect.
209
In FY2010 the cash flow hedge reserve registered the following changes: Cash Flow Hedge reserve (EUR)
Nature of hedged risk
Opening holdings as at 31/12/200 9
Increases
Interest rate risk
-
Type of financial instrument - Interest rate swap Total
Decreases
CFH reserve stated in income statement
Closing holdings as at 31/12/201 0
4,474
(4,104)
-
370
4,474
(4,104)
-
370
According to article 2427, n° 7b, of the Italian Civil Code, as amended by Italian Legislative Decree n° 6/03, the following schedule of the Equity items is provided below and it specifies the utilization of provisions: Releases in previous 3 fiscal years € thousand
Amount
Availability
Distributability
To cover losses
Other reasons
1,486
A,B,C
1,486
3,093
118
46
----
----
-
-
496
B
----
-
-
-
----
----
-
-
65
----
65
-
-
Extraordinary reserve
725
A,B,C
725
-
-
Profit (loss) carried forward
767
A,B,C
767
-
-
3,043
3,092
118
Share capital:
5,123
Capital reserves: Share premium reserve(1) Profit reserves: Reserve for own shares Legal reserve Cash Flow Hedge reserve Profit (loss) stated directly in equity
TOTAL DISTRIBUTABLE PORTION
(1) Fully available for increase of share capital and coverage of loss. For other releases, it is necessary to adjust in advance the legal reserve to 20% of the Share capital (also through transfer from the share premium reserve). As at 31 December 2010 this adjustment would amount to €528 thousand. Legend:
210
A: B: C:
For increase in share capital To cover losses For distribution to shareholders
20. OTHER NON-CURRENT PAYABLES AND LIABILITIES Balance as at 31 December 2010
Balance as at 31 December 2009
Advances for research projects
672
540
TOTAL
672
540
€ thousand
Advances for research projects consisted of advance payments from the European Union and the Italian University and Research University for funds granted for funded projects whose completion is expected after the end of the next fiscal year. It is deemed that the carrying amount of other non-current payables and liabilities is near the fair value.
21. TERMINATION BENEFITS This item reflects the benefits envisaged by Italian law (amended by Italian Law n° 296/06) accrued by employees as at 31 December 2006 and which will be paid out when the employee leaves the company. Under specific conditions, a part of it can be paid in advance to the employee during his working life. It is a non-funded defined benefits plan, considering the benefits almost entirely accrued, with the sole exception of revaluation. Changes in the termination benefits are illustrated in the table below: € thousand Value as at 1 January 2010 Amount accrued and allocated during year
2,527 459
Benefits paid out in year
(118)
Amount transferred to State Fund and complementary pension scheme
(450)
Borrowing costs on termination benefits Accounting of actuarial losses Substitute tax BALANCE AS AT 31 DECEMBER 2010
81 2 (8) 2,493
Actuarial profit and loss are stated off the income statement and directly carried over to equity (see Note n° 19). Please be noted that the interests on the charges relating to the defined benefits plans for employees were stated under borrowings costs, hence leading to an increase of €81 thousand in borrowing costs.
211
Termination benefits are calculated based on the following actuarial assumptions: As at 31 December 2010
As at 31 December 2009
Discount rate (*)
3.10%
3.30%
Future inflation rate
1.90%
2.00%
Frequency of request for advances
4.5%
7.00%
Frequency of resignations/dismissals
4.0%
4.00%
(*) The discount rate on future benefits is determined, according to the provisions of IAS 19, at market yields. In particular, the Euroswap rate as at the end of December 2010 was applied with a mean financial duration of benefits envisaged by the groups under consideration.
22. OTHER NON-CURRENT FINANCIAL LIABILITIES The item comprises the fair value of an Interest rate swap hedging the risk of oscillations in interest payables flows of the hedged medium/long-term loan (cash flow hedge). € thousand
Cash Flow Hedge
Interest Rate Swap
31/12/2010
31/12/2009
Notional
Fair value
Notional
Fair value
1,895
3
-
-
Cash flow hedges impact the income statement of the Company consistently with the timing with which the hedged cash flows occur.
212
23. CURRENT AND NON-CURRENT FINANCIAL LIABILITIES Financial liabilities amounted to €3,904 thousand and are specified in detail in the following table: Balance as at 31 December 2010
Balance as at 31 December 2009
1,501
3,938
2
2
150
150
Intesa San Paolo loan (former San Paolo IMI)
-
308
Intesa San Paolo loan (3) (former San Paolo IMI)
-
308
400
800
1,851
-
-
3
3,904
5,509
€ thousand
Overdrawn bank accounts
Financial accruals and deferrals
Intra-group loans
Unicredit loan
Banca Nazionale del Lavoro Loan
Cassa Risparmio Forlì loan
TOTAL
The allocation of the financial liabilities by due date was as follows: € thousand
By 1 year
By 5 years
Over 5 years
Total
1,501
-
-
1,501
Intra-group loans
151
-
-
151
Bank loans
805
1,447
-
2,252
2,457
1,447
-
3,904
Overdrawn bank accounts
TOTAL
Intra-group loans consisted of an interest-yielding loan in the amount of €150,000 from the French subsidiary Fidia Sarl. The contract envisages 4.0% interest a year and its terms is on March 30, 2011.
213
Bank loans have the following main characteristics: Unicredit loan Original amount Residual amount Date of loan Term Interest-only period Repayment Interest rate
€2,000 thousand €400 thousand May 5, 2007 Loan due date 31 May 2011 2 quarterly instalments (31/08/2007 and 30/11/2007) 10 quarterly instalments (29/02/2008 to 31/05/2011) 3-month Euribor, base 360 + 1% spread
As collateral for said loan, the company must meet some consolidated equity, economic and financial parameters. In particular: •
Equity must not drop below €10 million;
•
Net financial borrowing must not exceed equity;
•
The ratio between net financial borrowing and EBITDA must not exceed 3
In FY2010 all parameters were met.
Banca Nazionale del Lavoro Loan Original amount Residual amount Date of loan Term Repayment Interest rate
€2,000 thousand €1,851 thousand 31/08/2010 Loan due date 30/06/2015 19 quarterly instalments (31/12/2010 to 30/06/2015) 3-month Euribor, base 360 + 1.8% spread
The loan granted by BNL is secured in the amount of €1 million by Sace. It is deemed that the carrying amount of variable rate financial liabilities as at the balance-sheet date is a reasonable estimate of their fair value. For more information on the management of interest and exchange rate risk on loans, please refer to Note n° 29.
24. OTHER CURRENT FINANCIAL LIABILITIES The item under consideration provides the measurement of the fair value of a USD forward contract entered into to mitigate the risk of exchange rate oscillations. The item comprises the negative fair value of said USD forward contract in the amount of €7 thousand and it was measured, as for the derivative posted under Other non-current payables and liabilities, considering the market parameters as at the balance-sheet date, as specified under the section on “Criteria for measurement of fair value”. Amounts in thousands Derivatives for trading
Forward contract
214
31/12/2010
31/12/2009
Notional USD
Fair value Euro
Notional USD
Fair value Euro
225
7
-
-
25. TRADE PAYABLES Balance as at 31 December 2010
Balance as at 31 December 2009
Payables to other suppliers
6,978
6,825
Payables to subsidiaries
2,523
1,574
8
5
9,509
8,404
€ thousand
Payables to associates
TOTAL TRADE PAYABLES
The allocation of the trade payables by due date was as follows: Due date within 1 month
Due date between 1 and 3 months
Due date between 3 and 12 months
Total
Payables to other suppliers
4,864
1,579
535
6,978
Payables to subsidiaries
1,769
754
-
2,523
8
-
-
8
6,641
2,333
535
9,509
€ thousand
Payables to associates TOTAL TRADE PAYABLES
The geographical breakdown of the trade payables to suppliers was as follows: Balance as at 31 December 2010
Balance as at 31 December 2009
5,039
4,727
423
407
74
103
1,336
1,487
India
69
79
Rest of the World
37
22
6,978
6,825
€ thousand Italy Other EU countries Rest of Europe China
TOTAL
215
Payables to subsidiaries, which refer to trade items due within the next fiscal year, are divided as follows: Balance as at 31 December 2010
Balance as at 31 December 2009
22
43
4
1
357
227
OOO Fidia
-
1
Fidia Sp. Z o.o
2
2
94
209
1,942
929
Shenyang Fidia NC&M Co. Ltd.
32
19
Fidia do Brasil Ltda
65
143
Fidia India Pvt. Ltd.
5
€ thousand Fidia Co. Fidia S.a.r.l. Fidia Iberica S.A.
Fidia GmbH Beijing Fidia M&E Co. Ltd.
TOTAL PAYABLES TO SUBSIDIARIES
2,523
1,574
Trade payables to subsidiaries broken down by geographical area were the following:
Balance as at 31 December 2010
Balance as at 31 December 2009
457
439
China
1,974
948
U.S.A.
22
43
Rest of the World
70
144
2,523
1,574
€ thousand EU
TOTAL
The geographical breakdown of the trade payables to subsidiaries was as follows: € thousand
Balance as at 31 December 2010
Balance as at 31 December 2009
Prometec Consortium
8
5
TOTAL
8
5
Trade payables are due within the next fiscal year and it is deemed that their carrying amount at the balance-sheet date is near their fair value.
216
26. TAX PAYABLES, OTHER CURRENT PAYABLES AND LIABILITIES Balance as at 31 December 2010
Balance as at 31 December 2009
272
310
32
-
- Payables to tax authorities for VAT
-
12
- Other tax payables
-
3
304
325
Payables to employees
313
295
Social security payables
421
415
2,599
3,320
154
116
56
70
4
17
96
88
108
142
€ thousand Current tax payables: - withholding taxes - Payables to tax authorities for IRAP
Total current tax payables Other current payables and liabilities:
Advances from customers Advances for EU grants Payables for compensation Accruals and deferrals Sundry accruals and deferrals Miscellaneous payables TOTAL OTHER CURRENT PAYABLES AND LIABILITIES
3,751
4,463
th
Payables to employees pertain to benefits accrued at year-end (accrual for 13 monthly pay, accrual of bonuses, overtime, etc.) as well as to the amounts due for holidays accrued and not yet taken. Social security payables refer to accrued payables for amounts due by the Company and by employees on wages and salaries for the month of December and deferred compensation. Advances from customers include advance payments from customers for orders yet to be processed and for sales of milling system already delivered yet still in course of installation, which according to IAS 18 – Revenue, cannot be stated in the revenue, as inspection and formal acceptance by the final customer is pending. This item comprises also advances received from subsidiaries in the amount of €400 thousand. Advances for EU contributions refer to advances received for research projects not yet completed by 31 December 2010 Finally, Current tax payables and Other current payables and liabilities are payable by the next fiscal year and it is deemed that their carrying amount is near their fair value.
217
27. SHORT-TERM PROVISIONS Short-term provisions amounted to €337 thousand as per the relevant table. € thousand
Balance 01/01/2010
Provisions
Utilization
Balance 31/12/2010
335
-
118
217
20
73
-
93
-
27
-
27
355
100
118
337
Warranty provisions
Provisions for losses of Fidia Sp. z o.o
Provisions for tax disputes
TOTAL OTHER PROVISIONS FOR RISKS AND EXPENSES
Product warranty provisions comprise the best possible estimate of the obligation undertaken by the Company by contract, law or custom with regard to expenses related to warranty on its products for a certain period effective as of sale to the final customer. This estimated is calculated based on the experience of the Company and the specific contract terms. Provisions for losses were allocated to cover the losses of the Polish subsidiary Fidia Spolka z o.o, as already illustrated in Note n° 12 of these Notes. The provision for tax disputes comprises the estimate of liabilities resulting from a tax assessment notice to the company during the fiscal year.
28. COLLATERAL GUARANTEES, OBLIGATIONS AND OTHER CONTINGENT LIABILITIES Sureties issued on behalf of third parties As at 31 December 2010 these amounted to €1,370 thousand, namely €564 thousand higher compared to 31 December 2009. This item consists of €1,188 thousand for sureties on business transactions with foreign customers, €124 thousand for collateral on advances received for European research projects and €58 thousand for sureties issued for building leases.
Contingent liabilities Though subject to risks of diverse nature (product, legal and tax liability), on 31 December 2010 the Company was not aware of any facts liable of generating foreseeable potential liabilities and hence it deemed that there was no need to make provisions. If it is probable that an outlay is due to meet obligations and said amount can be reliably estimated, the Company has made specific provisions for risks and expenses.
218
29. INFORMATION ON FINANCIAL RISKS The measurement and management of exposure to financial risks of Fidia S.p.A. are consistent with the provisions of the Group policies. In particular, the main categories of risk that the company is exposed to are illustrated below.
MARKET RISKS In general, market risks are the result of the effects of changes in prices or other market risk factors (such as interest and exchange rates) both on the value of the positions held in the trading and hedging portfolio and the positions resulting from commercial operations. The management of market risks comprises all the assets related to treasury and equity management transactions. The objective of market risk management is to manage and keep the Company's exposure to this risk within acceptable levels, while optimizing, at the same time, the yield of its own investments. The market risks include exchange and interest rate risk.
Exchange rate risk: definition, sources and management policies Exchange rate risk can be defined, in general, as the set of effects resulting from changes in the exchange rate relations between foreign currencies on the performance of the company in terms of operating results, market shares and cash flows. The Company is exposed to the risk of the oscillation of the exchange rates of currencies, as it operates in an international context in which transactions are conducted at different exchange and interest rates. The exposure to exchange rate risk results from the geographical location of the business units compared to the geographical distribution of the markets where it sells its products and from the use of external borrowing sources in foreign currencies. In particular, the Company is exposed to three types of exchange rate risk: •
economic/competitive: comprises all effects that a change in market exchange rates can have on the Company income and may hence impact strategic decisions (products, markets and investments) and Company competitiveness on the reference market;
•
transaction: consists in the possibility that changes in exchange rate relations occur between the date on which a financial obligation between the counterparts becomes highly probably and/or certain and the date of transaction settlement. These changes cause a difference between the expected and effective financial flows.
The Company manages risks of changes in exchange rates by using derivatives whose use is reserved to the management of exposure to exchange rate oscillations pertaining to money flows and assets and liabilities. The Company implements a hedging policy only for transaction risk resulting from existing business transactions and from future contractual obligations to hedge cash flows. The goal is to set in advance the exchange rate at which the relevant transactions in foreign currency will be measured. Hedging for exposure to exchange rate risk is envisaged solely for the USD.
219
The instruments used are forward contracts and options on exchange rates correlated by amount, due date and reference parameters with the hedged position. The Company constantly monitors exposure to the risk of exchange rate translation; on the balance-sheet date there were no hedges for these types of exposure.
Exchange rate risk: quantitative information and sensitivity analysis As stated above, the Company is exposed to risks resulting from changes in exchange rates that can affect both the profit and loss result and the equity. In particular, when the Company incurs costs in currencies other than the presentation currency of the relevant revenues, the change in exchange rates can affect the earnings. With regard to the business operations, the Company can have trade receivables or payables in currencies other than the presentation currency. The change in exchange rates can lead to the realization or measurement of positive or negative exchange rate differences. As at 31 December 2010 the Company had no hedging transactions on exchange rates, but had stipulated derivatives (foreign currency forward contracts) in order to protect future currency flows from changes, even though the relevant hedging relationship was not established according to IAS criteria. As at 31 December 2010 the main currency to which the Company is exposed is the USD. For the purpose of sensitivity analysis, the potential effects of oscillation of the reference exchange rates were analyzed for the aforementioned currency. The analysis was carried out by applying to the exchange rate exposure reasonable positive and negative change of the EUR against the USD equal to 5%. Hypotheses were defined in which the local currency gains or losses value compared to the USD. The changes applied to the exchange rate have equity effects in case of cash flow hedge transactions or economic effects in case of non-hedging financial instruments. The results of the sensitivity analysis on exchange rate risk are summarized in the tables below, which show the impacts on the income statement and equity as at 31 December 2010 and 31 December 2009. The impacts on the income statement are before tax.
220
Sensitivity analysis to exchange rate risk +5% change
-5% change
P&L
Other changes in equity
P&L
51
(3)
-
3
491
(23)
-
26
-
(26)
-
29
-
7
8
-
(9)
335
16
-
(18)
-
45
2
-
(2)
-
26
-
(29)
-
-
-
-
-
Exchange rate risk as at 31 December 2010 (€ thousand)
Other changes in equity
FINANCIAL ASSETS Cash and cash equivalent Receivables Effect FINANCIAL LIABILITIES Derivatives for trading Overdrawn bank accounts Trade payables Effect TOTAL EFFECT
+5% change
-5% change
P&L
Other changes in equity
P&L
Other changes in equity
44
(2)
-
2
-
176
(8)
-
9
-
(10)
-
11
-
5
-
(6)
-
5
-
(6)
-
(5)
-
5
-
Exchange rate risk as at 31 December 2009 (€ thousand) FINANCIAL ASSETS Cash and cash equivalent Receivables Effect FINANCIAL LIABILITIES Trade payables Effect TOTAL EFFECT
(115)
Interest rate risk: definition, sources and management policies The interest rate risk consists in changes in interest rates that affect both the margin and hence the profit of the Company and on the current value of future cash flows. The Company is exposed to interest rate oscillations on its own variable rate loans attributable to the Eurozone, which the Company avails itself of to fund its operations.
221
Changes in the structure of market interest rates affect the Company's capital and its economic value, thus influencing the level of net borrowing costs and the margins. Interest rate risk management is considered with the well-established practice to reduce the risks of interest rate volatility, to reach an optimal mix of variable and fixed interest rates in the make-up of loans, thus offsetting market interest rate oscillations, while pursuing the objective of reducing finance costs on deposits to a minimum. The Company manages risks of changes in interest rates by using derivatives whose use is reserved to the management of exposure to interest rate oscillations pertaining to money flows and assets and liabilities. Speculative transactions are not allowed. Exposures to the interest rate risk are hedged using Interest Rate Swaps. These instruments are used to set in advance the interest paid on the various types of borrowing. The counterparts of said financial instruments are primary credit institutions.
Exchange rate risk: quantitative information and sensitivity analysis The Company avails itself of loans to fund its own and subsidiary transactions. Changes in interest rates could have a negative or positive impact on Company earnings. In order to tackle said risks, the Company uses interest rate derivatives and mainly interest rate swaps. As at 31 December 2010 the Company had no fixed rate financial instruments at fair value. As at 31 December 2010 the Company had an interest rate risk hedging derivative with a negative fair value of €3 thousand. In particular, the Company stipulated an interest rate swap to neutralize the risk in the variability of interests paid flows on the medium/long-term loan hedged, by transforming it into a fixed rate loan. The inefficacy of the cash flow hedge transaction in FY2010 is not significant. In measuring the potential impacts of changes in the interest rates applied, the Company separately analyzed the fixed rate financial instruments (for which the impact was determined in terms of fair value) and those at variable rate (for which the impact was determined in terms of cash flow) expressed in the various currencies to which the Company has significant exposure, as specified in the section on exchange rate risk. The variable rate financial instruments as at 31 December 2010 included cash and loans. As at 31 December 2010 a hypothetical change in interest rates for variable rate instruments equal to +50 bps, with the other variables constant, would have had the before-tax effects shown in the table below.
222
Sensitivity analysis on interest rate risk
Interest Rate Risk as at 31 December 2010 (€ thousand)
Balancesheet amount
+ +50-bps change
+ -50-bps change
P&L
Other changes in equity
P&L
Other changes in equity
2,251
(12)
-
12
-
3
3
16
-
(19)
(9)
16
12
(19)
FINANCIAL LIABILITIES Loans from banks IRS hedging derivative TOTAL EFFECT
Interest Rate Risk as at 31 December 2009 (€ thousand)
+ +50-bps change
+ -50-bps change
Balancesheet amount
P&L
Other changes in equity
P&L
Other changes in equity
1,419
(7)
-
7
-
(7)
-
7
-
FINANCIAL LIABILITIES Loans from banks TOTAL EFFECT
Liquidity risk: definition, sources and management policies The liquidity risk consists of the possibility that the Company can find itself in the conditions of not being able to meet its payment obligations in cash or delivery, either foreseen or unexpected, due to a lack of financial resources, thus prejudicing day-to-day operations or its financial position. The liquidity risk that the Company is exposed to can arise out of difficulties to timely obtain financing for its operations and can take the form of the inability to find the necessary financial resources at a reasonable conditions. The short and medium/long-term demand for liquidity is constantly monitored by the Company management in order to timely obtain financial resources or an adequate investment of cash. The Company has adopted a series of financial policies to reduce liquidity risk: •
plurality of financing entities and diversification of financing sources;
•
adequate lines of credit;
•
perspective liquidity plans relating to the company planning process.
223
Liquidity risk: quantitative information The two main factors that determine the Company's liquidity are, on the one hand, the resources generated or absorbed by operating and investing activities and, on the other, the characteristics of the due date and renewal of the debt or liquidity of the financial obligations and market conditions. The policies implemented to reduce liquidity risk consisted as at 31 December 2010 of: •
recourse to credit institutions to find financial resources;
•
lines of credit (revolving and stand-by, with monthly or quarterly terms), mostly automatically renewed and used at the Company's discretion depending on needs.
The management deems that the available resources, in addition to those that will be generated by operations and loans, will allow the Company to meet its needs resulting from activities relating to investments, management of working capital and the repayment of payables at their due date. An analysis of financial liabilities as envisaged by IFRS7 is provided below. MATURITY ANALYSIS (€ thousand)
Carrying amount as at 31 December 2010
Contractual cash flows
within 1 month
1 to 3 months
3 to 12 months
1 to 5 years
Over 5 years
2,251
2,545
-
440
553
1,552
-
150
152
-
152
-
-
-
Overdrawn bank accounts
1,501
1,501
1,501
-
-
-
-
Trade payables
9,509
9,509
6,641
2,332
536
-
-
9
9
-
4
15
(10)
-
13,420
13,716
8,142
2,928
1,104
1,542
-
Carrying amount as at 31 December 2009
Contractual financial flows
within 1 month
1 to 3 months
3 to 12 months
1 to 5 years
Over 5 years
1,419
1,437
1
160
873
403
-
150
152
-
152
-
-
-
3,938
4,154
4,154
-
-
-
-
8,404
8,404
6,380
1,803
221
-
-
13,911
14,147
10,535
2,115
1,094
403
-
FINANCIAL LIABILITIES Loans from banks Other loans
Derivative liabilities TOTAL
MATURITY ANALYSIS (€ thousand) FINANCIAL LIABILITIES Loans from banks Other loans Overdrawn accounts Trade payables TOTAL
224
bank
Credit risk: definition, sources and management policies Credit risk is the exposure of the Company to potential losses that may result from the failure to meet obligations with counterparts. The main causes of non-performance can relate to the inability to autonomously repay counterparts and to a possible worsening in credit standing. In particular, the Company is exposed to credit risk due to: •
sale of high-speed milling systems, numerical controls and related servicing;
•
subscription of derivatives;
•
deployment of liquidity in banks or other financial institutions.
The Company has different concentrations of credit risk depending on the nature of the activities and the various reference markets. Said credit exposure is mitigated by the fact that it is divided over a large number of counterparts. The concentration of credit risk is present in the markets of the EU, North America and China. Trade receivables are subject to individual impairments if there is an objective condition in which these positions cannot be recovered either in part or in full. The extent of impairment takes into account an estimate of the recoverable flows and relevant date of collection. The Company controls and manages credit standing including the risk of the counterpart; these same transactions for the deployment of liquidity and hedging of derivatives have been concluded with leading national and international banks. These are regularly reviewed also in terms of concentration and the rating of the counterparts.
Credit risk: quantitative information The maximum theoretical exposure to credit risk for Fidia S.p.A. as at 31 December 2010 is the carrying amount of the financial assets stated in the balance sheet, plus the face value of collateral provided as indicated in Note n° 28. The measurement of credit risk is carried out by means of a process to assess credit standing differentiated by type of customer. Monitoring of credit risk is carried out frequently through the analysis by due date of overdue positions. The credit exposures of the Company widely regard trade receivables; the credit risk resulting from said transactions is mitigated by means of the following instruments: •
letters of credit;
•
insurance policies.
Moreover, in order to effectively and efficiently manage credit risk, the Company adopts further risk mitigation instruments pursuant to and in compliance with legislation in force in the various markets where it conducts business. Positions, if individually significant, are subject to specific impairment; these are either partially or totally non recoverable. The extent of impairment takes into account an estimate of the recoverable flows and relevant date of collection as well as of charges and expenses for future recovery. In case of receivables not subject to specific impairment, provisions are allocated on a collective basis, considering experience and statistical data.
225
30. FAIR VALUE HIERARCHIES According to the provisions of the amendment to IFRS 7 which requires that the Company classify financial instruments stated in the balance sheet at fair value, based on a hierarchy that reflects the significance of the inputs used in determining the fair value, a distinction is made between: •
Level 1 – quoted prices in active markets for identical assets or liabilities;
•
Level 2 – inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived from prices);
•
Level 3 – inputs that are not based on observable market data.
As at 31 December 2010 the Company stated in the balance sheet only financial liabilities measured at fair value consisting of derivatives totalling €10 thousand, classified at a fair value measurement of level 2.
226
31. INTRA-GROUP RELATIONS AND RELATIONS WITH RELATED PARTIES With regard to Fidia S.p.A., relations with related parties mostly consist of transactions with directly controlled companies governed at market conditions deemed normal in the relevant reference markets, considering the characteristics of the goods and services provided. The impact of said transactions on the single items of the FY2010 financial sheets was stated in the relevant supplementary schedules of the income statement, balance sheet and statement of cash flows. These are summarized in the following tables: Counterpart (€ thousand)
Fidia GmbH Fidia Sarl Fidia Iberica S.A. Fidia Co. Fidia do Brasil Ltda Beijing Fidia Machinery & E. Co. Ltd. Shenyang Fidia NC&M Co. Ltd. OOO Fidia Fidia Sp. Z o.o. Fidia India Total Group companies Other related parties (associates) Other related parties (Giuseppe, Paolo and Luca Morfino) Other related parties (Payables to BoD of Fidia SpA) Other related parties (Payables to Board of Statutory Auditors of Fidia SpA) Total other related parties Total Group companies and other related parties TOTAL ITEM Incidence in % on item
Trade receivables
Other current receivables
Trade payables
Other current payables
Current financial liabilities
1 -
Other current financial assets -
554 38 535 51 -
94 4 357 22 65 1,942
-
152 -
4,754
-
-
32
400
-
108 6,040 -
1 -
30 30 -
2 5 2,523 8
400 -
152 -
-
1
-
-
1
-
-
-
-
-
-
-
-
-
-
-
55
-
-
1
-
8
56
-
6,040
2
30
2,531
456
152
8,946 67%
524 0.4%
30 100%
9,509 27%
3,751 12%
2,457 6%
227
expenses
Finance costs
Revenu es
Other operat-ing revenue
Finance revenue (dividends)
254
-
-
2,817
25
-
-
30
-
6
374
7
-
Fidia Iberica S.A.
115
117
-
-
203
4
-
Fidia Co.
108
82
-
-
714
152
-
Fidia do Brasil Ltda
-
118
-
-
132
-
-
Beijing Fidia Machinery & E. Co. Ltd.
3
1,473
-
-
1,518
2
720
Shenyang Fidia NC&M Co. Ltd.
1
40
-
-
1,295
2,441
-
OOO Fidia
-
5
-
-
-
Fidia Sp. z o.o.
-
1
-
-
31
15
-
Fidia India
-
20
-
-
-
-
-
325
2,140
-
6
7,084
2,646
720
Other related parties (associates)
-
2
-
-
-
-
-
Other related parties (Giuseppe, Paolo and Luca Morfino)
4
68
167
-
-
-
-
Compensation Board of Directors
-
-
408
-
-
-
-
Compensation Board of Statutory Auditors
-
44
-
-
-
-
Total other related parties
4
114
575
-
-
-
-
329
2,254
575
6
7,084
2,646
720
300 24,481
4,378
731
60%
98%
Counterpart (€ thousand)
Fidia GmbH Fidia Sarl
Total Group companies
Total Group companies and other related parties TOTAL ITEM Incidence in % on item
Raw materials and consumables
Other operat-ing expenses
98
10,231 3%
8,849 25%
Personnel
8,632 6%
2%
28%
-
The most significant relations in the fiscal year between Fidia S.p.A. and the Group companies were mainly of a commercial nature. The foreign subsidiaries of Fidia deal mostly with the sales and servicing of the Group's products in the relevant markets and for this purpose they purchase from the Parent Company.
228
The joint-venture Shenyang Fidia NC & M Co. Ltd. manufactures and sells numerical controls and milling systems designed by Fidia for the Chinese market. The strategic components are purchased mainly from the Parent Company at normal market conditions and the remaining parts from local suppliers. In FY2010 intra-group relations also regarded financial management, which envisaged: •
distribution of dividends from subsidiaries (see Note n° 8);
•
interest-yielding loan relations (see Note n° 23).
Relations with related parties, as defined by IAS 24, not regarding directly controlled companies concerned: •
professional services for consulting in research projects carried out by the associate Consorzio Prometec;
•
salary to Mr. Paolo Morfino;
•
salary to Mr. Luca Morfino;
•
compensation to the Board of Directors and Board of Statutory Auditors.
31. NET FINANCIAL POSITION According to the provisions of Consob Notice of 28 July 2006 and in compliance with the CESR Recommendation of February 10, 2005 “Recommendations for standard implementation of the Regulation of the European Commission on Disclosures”, the financial position of the Fidia S.p.A. as at 31 December 2010 was: € thousand
31/12/2010
31/12/2009
57
14
2,871
1,977
-
-
2,928
1,991
30
-
1,501
3,938
A
Cash
B
Bank deposits
C
Other cash
D
Liquidity (A+B+C)
E
Current financial receivables from Group companies
F
Current bank payables
G
Current part of the non-current indebtedness
804
1,019
H
Current financial payables from Group companies
152
152
I
Current financial debt (F+G+H)
2,457
5,109
J
Net current financial debt (I-E-D)
(501)
3,118
K
Non-current bank payables
1,447
400
L
Bonds issued
-
-
M
Other non-current payables
-
-
N
Non-current financial debt (K+L+M)
1,447
400
O
Net financial debt (J+N)
946
3,518
229
32. NON-RECURRENT SIGNIFICANT EVENTS AND TRANSACTIONS According to Consob Notice of 28 July 2006, in FY2010 the company did not have any non-recurrent significant transactions.
33. POSITIONS OR TRANSACTIONS RESULTING FROM ATYPICAL AND/OR UNUSUAL TRANSACTIONS According to Consob Notice of 28 July 2006, in FY2010 there were no atypical and/or unusual transactions as defined by said Notice, by which atypical and/or unusual transactions are all those transactions whose significance/relevance, nature of the counterparts, subject-matter of the transaction, transfer pricing method and timing of the event (near year end) can give rise to doubts on: correctness/completeness of information posted, conflict of interests, safeguard of company equity, safeguard of minority interests.
34. SUBSEQUENT EVENTS With regard to event following the closing of the fiscal year, please refer to the Report on Operations.
230
Annexes The annexes comprise additional information compared to the Notes, which these are an integral part of. This information is comprised in the following annexes: •
The list of investments with further information required by CONSOB (Notice n° DEM/6064293 of 28 July 2006);
•
summary of main data of the last balance sheet of the subsidiaries and associates (article 2429 of the Italian Civil Code) as at 31 December 2010;
•
compensation to directors, auditors, general directors and executives with strategic responsibilities (article 78 of Consob reg. n° 11971/99);
•
information as per article 149/XII of the Consob Regulation on Issuers.
San Mauro Torinese, March 8, 2011 On behalf of the Board of Directors The Chairman and Managing Director Mr. Giuseppe Morfino
231
232
FIDIA S.p.A. - Financial Statements as at 31 December 2010 List of investments with further information required by CONSOB (Notice n° DEM/6064293 of 28 July 2006) Portion of net equity book value of year
Net balancesheet amount
Difference between net equity of year and balancesheet amount
Share capital
Net equity book value
Profit (loss) as at 31.12.2010
Profit (loss) as at 31.12.2009
Fidia Gmbh – Germany
520,000
1,262,831
(10,684)
(25,813)
100.00 %
1,262,831
1,207,754
55,077
Robert-Bosch-Strasse, 18 63303 Dreieich (Germany) Fidia Co. (*) - United States
299,356
1,703,068
91,911
24,020
100.00 %
1,703,068
1,522,027
181,041
1397 Piedmont Dr., Suite 800 48083 Troy (Michigan, USA) Fidia Iberica S.A. – Spain
180,300
1,329,540
(536)
56,632
99.993 %
1,329,447
171,440
1,158,007
Parque Tecnologico de Zamudio - Edificio 208 - 48170 Zamudio (Bilbao) Fidia S.a.r.l. – France
300,000
416,044
(44,853)
25,096
93.19%
387,711
221,434
166,277
1,452,559
3,409,539
1,193,043
975,107
92.00%
3,136,776
1,185,046
1,951,730
180,747
346,369
13,853
34,825
99.75%
345,503
184,485
161,018
4,819,502
3,706,161
280,385
(232,510)
51.00%
1,890,142
2,442,592
(552,450)
88,187
7,541
(17)
(18)
100.00 %
7,541
-
7,541
129,560
(115,950)
(90,103)
(56,234)
80.00%
(92,760)
-
(92,760)
1,673
5,359
1,996
1,506
99.99%
5,358
1,431
3,927
10,329
10,329
-
-
40.00%
4,132
4,132
-
Name and place of business (EUR)
% held
SUBSIDIARIES
47 bis, Avenue de l'Europe 77184 Emerainville (France) Beijing Fidia Machinery & Electronics Co. Ltd. (*) - China Room 106, Building C, No. 18 South Xihuan Road - Beijing Development Area - 100176 Beijing (PRC) Fidia Do Brasil Ltda (*) – Brazil Av. Salim Farah Maluf, 4236 - 3° andar Mooca - Sao Paulo - CEP 03194-010 (Brazil) Shenyang Fidia NC & Machine Company Limited (*) - China n.1,17A Kaifa Road - Shenyang Economic & Technological Development Zone - 110142 Shenyang (PRC) OOO Fidia (*) - Russia ul. Prospekt Mira 52, building 3, 129110 Moscow (Russia Russian Federation) Fidia Sp. z o.o. (*) - Poland ul. Pradzynskiego 12/14 - 01222 Warsaw (Poland) Fidia India Private Limited (*) India Auto Cluster Development and Research Institute Limited - H Block, Plot n. C-181, MIDC Chinchwad, Pune - 411 019 ASSOCIATES Consorzio Prometec (**) – Italy Strada Statale del Moncenisio, 25 Km 42,2 - Bruzolo di Susa (Turin)
(*) The amounts were translated into EUR at the exchange rates in force on 31 December 2009 and 31 December 2010 (**) The amounts refer to the balance sheet closed as at 31 December 2010.
233
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Subsidiaries Accounting currency Period of reference for balance-sheet information Inclusion in consolidation area (line by line)
Fidia GmbH
Fidia Co
Fidia Sarl
Fidia Iberica S.A.
Fidia do Brasil Ltda
EUR
USD
EUR
EUR
REALS
31.12.2010
31.12.2010
31.12.2010
31.12.2010
31.12.2010
YES
YES
YES
YES
YES
ASSETS Non-current assets
572,001
180,743
5,852
697,846
45,211
- Intangible assets
-
9,086
1,420
-
3,401
- Investments
-
-
-
3,366
-
18,969
2,891
-
1,798
-
- Property, plant and equipment
- Other non-current financial assets
-
6,562
6,400
-
-
41,894
-
-
-
54,851
632,864
199,282
13,672
703,010
103,463
- Inventories
169,072
1,888,552
80,047
106,490
283,450
- Trade receivables and other current receivables
859,371
713,370
223,621
516,926
229,728
23,143
1,504
151,500
-
-
- Cash and cash equivalents
1,069,527
542,254
124,235
371,041
540,345
Total current assets
2,121,113
3,145,680
579,403
994,457
1,053,523
TOTAL ASSETS
2,753,977
3,344,962
593,075
1,697,467
1,156,986
- Other non-current receivables and assets - Pre-paid tax assets Total non-current assets
Current assets
- Other current financial assets
LIABILITIES Net equity - Share capital
520,000
400,000
300,000
180,300
400,843
- Other reserves
753,515
1,752,827
160,897
1,149,776
336,578
(10,684)
122,812
(44,853)
(536)
30,722
1,262,831
2,275,639
416,044
1,329,540
768,143
- Termination benefits
-
-
-
-
-
- Deferred tax liabilities
-
-
-
79,773
-
- Non-current financial liabilities
269,365
20,421
-
23,372
-
Total non-current liabilities
269,365
20,421
-
103,145
-
- Net operating result Total net equity
Non-current liabilities
Current liabilities - Current financial liabilities - Trade payables and other current payables
134,289
14,437
-
27,407
8,409
1,020,022
999,435
141,021
212,130
332,845
67,470
35,030
36,010
25,245
47,589
Total current liabilities
1,221,781
1,048,902
177,031
264,782
388,843
TOTAL LIABILITIES
2,753,977
3,344,962
593,075
1,697,467
1,156,986
- Short-term provisions
234
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Subsidiaries Accounting currency Period of reference of balance-sheet information Inclusion in consolidation area (line by line)
Fidia GmbH
Fidia Co
Fidia Sarl
Fidia Iberica S.A.
EUR
USD
EUR
EUR
Fidia do Brasil Ltda REALS
31.12.2010
31.12.2010
31.12.2010
31.12.2010
31.12.2010
YES
YES
YES
YES
YES
5,039,562
4,039,347
821,767
1,038,279
1,363,811
191,889
93,759
599
209,699
29,256
5,231,451
4,133,106
822,366
1,247,978
1,393,067
INCOME STATEMENT
- Net sales - Other operating revenue Total revenues - Changes in inventories of finished goods and work in progress
30,438
(392,826)
1,838
(122,783)
(34,115)
- Raw materials and consumables
(2,897,687)
(780,424)
(366,476)
(222,202)
(326,882)
- Personnel expenses
(1,308,450)
(1,038,623)
(285,131)
(479,196)
(397,512)
- Other operating costs
(830,216)
(1,788,729)
(210,724)
(328,240)
(558,758)
- Depreciation and amortization
(198,085)
(137,780)
(12,726)
(97,656)
(31,462)
27,450
(5,276)
(50,853)
(2,100)
44,339
- Finance revenue (expenses)
(37,742)
128,088
6,000
366
18,880
EBT
(10,292)
122,812
(44,853)
(1,734)
63,219
Operating result
Income taxes Net operating result
(392)
-
-
1,198
(32,497)
(10,684)
122,812
(44,853)
(536)
30,722
235
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Beijing Fidia M&E.Co Ltd
Shenyang Fidia NC&M Company Ltd
OOO Fidia
Fidia Sp.zo.o.
Fidia India Private Ltd
RMB 31.12.2010 YES
RMB 31.12.2010 YES
RUR 31.12.2010 YES
ZLOTY 31.12.2010 YES
RUPEES 31.12.2010 YES
- Pre-paid tax assets
487,294 240,000 12,299
989,897 3,549,219 70,720
-
7,171 -
2,500 -
Total non-current assets
739,593
4,609,836
-
7,171
2,500
- Cash and cash equivalents
5,350,922 31,706,624 29,590,253
34,423,700 30,246,304 24,657,777
291,668 16,099 43
14,229 206,482 42,216
298,000 222,291
Total current assets
66,647,799
89,327,781
307,810
262,927
520,291
TOTAL ASSETS
67,387,392
93,937,617
307,810
270,098
522,791
- Net operating result
12,814,480 6,739,451 10,525,025
42,517,648 (12,295,455) 2,473,556
3,599,790 (3,291,296) (684)
515,000 (617,742) (358,161)
100,000 100,957 119,280
Total net equity
30,078,956
32,695,749
307,810
(460,903)
320,237
- Non-current financial liabilities
-
-
-
-
-
Total non-current liabilities
-
-
-
-
-
- Short-term provisions
36,313,399 995,038
61,135,007 106,861
-
118,809 597,141 15,051
202,554 -
Total current liabilities
37,308,436
61,241,868
-
731,001
202,554
TOTAL LIABILITIES
67,387,392
93,937,617
307,810
270,098
522,791
Subsidiaries Accounting currency Period of reference for balance-sheet information Inclusion in consolidation area (line by line)
ASSETS Non-current assets - Property, plant and equipment - Intangible assets - Investments - Other non-current financial assets - Other non-current receivables and assets
Current assets - Inventories - Trade receivables and other current receivables - Other current financial assets
LIABILITIES Net equity - Share capital - Other reserves
Non-current liabilities - Termination benefits - Deferred tax liabilities
Current liabilities - Current financial liabilities - Trade payables and other current payables
236
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Subsidiaries Accounting currency Period of reference for balance-sheet information Inclusion in consolidation area (line by line)
Beijing Fidia M&E.Co Ltd
Shenyang Fidia NC&M Company Ltd
OOO Fidia
Fidia Sp.zo.o.
Fidia India Private Ltd
RMB 31.12.2010 YES
RMB 31.12.2010 YES
RUR 31.12.2010 YES
ZLOTY 31.12.2010 YES
RUPEES 31.12.2010 YES
56,926,249 657,300 57,583,549
35,224,243 44,140,514 79,364,757
182,737 319,794 502,531
241,302 81,307 322,609
1,202,926 1,202,926
INCOME STATEMENT - Net sales - Other operating revenue Total revenues - Changes in inventories of finished goods and work in progress - Raw materials and consumables
(2,303,381)
1,352,402
-
-
-
(25,105,207) (4,996,627) (10,434,707) (483,401) 14,260,226
(27,625,668) (6,074,819) (47,094,549) (1,255,663) (1,333,540)
(278,271) (178,893) 45,367
(151,972) (276,197) (254,531) (2,725) (362,816)
(285,579) (778,687) 138,660
(767,478)
3,826,720
(6,985)
4,655
(19,380)
EBT
13,492,747
2,493,180
38,382
(358,161)
119,280
Income taxes
(2,967,722) 10,525,025
(19,624) 2,473,556
(39,067) (685)
(358,161)
119,280
- Personnel expenses - Other operating costs - Depreciation and amortization Operating result - Finance revenue (expenses)
Net operating result
237
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Associates Accounting currency Period of reference for balance-sheet information Inclusion in consolidation area (line by line)
Prometec Consortium EUR 31.12.2010 NO
ASSETS Non-current assets - Property, plant and equipment
-
- Intangible assets
-
- Investments
-
- Other non-current financial assets
-
- Other non-current receivables and assets
-
- Pre-paid tax assets
-
Total non-current assets
-
Current assets - Inventories - Trade receivables and other current receivables - Other current financial assets - Cash and cash equivalents
18,896 5,123
Total current assets
24,019
TOTAL ASSETS
24,019
LIABILITIES Net equity - Share capital
10,329
- Other reserves - Net operating result Total net equity
10,329
Non-current liabilities - Termination benefits
-
- Deferred tax liabilities
-
- Non-current financial liabilities
-
Total non-current liabilities
-
Current liabilities - Current financial liabilities - Trade payables and other current payables - Short-term provisions
13,690 -
Total current liabilities
13,690
TOTAL LIABILITIES
24,019
238
FIDIA S.p.A. - Financial Statements as at 31 December 2010 SUMMARY OF MAIN DATA OF THE LAST BALANCE SHEET OF THE SUBSIDIARIES AND ASSOCIATES (ARTICLE 2429 OF THE ITALIAN CIVIL CODE) - contd. Associates Accounting currency Period of reference for balance-sheet information Inclusion in consolidation area (line by line)
Prometec Consortium EUR 31.12.2010 NO
INCOME STATEMENT
- Net sales - Other operating revenue Total revenues
3,935 8 3,943
- Changes in inventories of finished goods and work in progress
-
- Raw materials and consumables used
-
- Personnel expenses - Other operating costs - Depreciation and amortization Operating result
- Financial revenue (expenses)
(3,970) (27)
27
EBT
-
Income taxes
-
Net operating result
-
239
FIDIA S.p.A. - Financial Statements as at 31 December 2010 COMPENSATION TO DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS AND EXECUTIVES WITH STRATEGIC RESPONSIBILITIES As required by article 78 of Consob Regulation n° 11971 of 14 May 1999 and following amendments, hereinafter follows the overview of the compensation for Directors, Auditors, General Directors and Executives with strategic responsibilities of Fidia S.p.A., paid to the persons who covered said positions in FY2010 (amounts expressed in EUR). ENTITY
Name and last name
DESCRIPTION OF POSITION
Position held in 2010
Term
COMPENSATION PAID IN 2010 (*)
End of term
Compensati on for position
Chairman of the Board of Directors and Managing Director Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
248,000
Paolo Morfino
Managing Director Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
128,000
Lugino Azzolin
Director Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
8,000
Guido Giovando
Director Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
8,000
Francesco Profumo
Director Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
8,000
Riccardo Formica
Chairman Board of Statutory Auditors Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
17,657
Giovanni Rayneri
Statutory Auditor Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
12,998
Michela Rayneri
Statutory Auditor Fidia S.p.A.
01/01/2010 31/12/2010
2011 (1)
13,537
Giuseppe Morfino
Non-money benefits
2,349
Bonuses and other incentives
Other compensat ion (wages)
71,929
(*) Determined based on the accrual principle. (1) Year in which the General Assembly meets to approve the financial statements on the occasion of which the term ends.
240
FIDIA S.p.A. - Financial Statements as at 31 December 2010 Information as per article 149/XII of the Consob Regulation on Issuers This overview drawn up according to article 149/XII of the Consob Regulation on Issuers shows the compensation accrued in FY2010 for auditing services and for those other than auditing provided by the Chief Auditor, the entities belonging to his network and by other auditing firms Entity providing the service
Auditing
Certification services
Other services
Recipient
Compensation accrued in FY2010 (€ thousand)
Mazars S.p.A.
Parent company - Fidia S.p.A.
54
Mazars Network
Subsidiaries
55
Clayton &Mc Kervey
Subsidiary: Fidia Co
14
Beijing Xinghua Certified Public Accountants
Subsidiary: Fidia Beijing
4
Mazars S.p.A.
1
Parent company - Fidia S.p.A.
6
Mazars Network
2
Subsidiaries
33
Total
166
1. Signing of VAT Statement and periodic reports on funded projects 2. Tax and administrative support in the personnel area
241
242
Relazioni del Collegio sindacale
243
244
245
246
247
248
249
250
Auditors' Report on the Financial Statements
251
252
253
254
255
Fidia S.p.A. Corso Lombardia,11 10099 San Mauro Torinese (TO) - ITALY www.fidia.com Aprile 2011
200
257
S.p.A.
2010 Financial Statements
2010 Financial Statements
Giving shape to design FIDIA S.p.A. Corso Lombardia, 11 10099 San Mauro Torinese (TO) - ITALY www.fidia.com