DATACOLOR AG ANNUAL REPORT 2009

Transcription

1 DATACOLOR AG ANNUAL REPORT 2009

2 Analogues translation of the original German version of Geschäftsbericht In case of differences of interpretation arising in comparison to the German version, the wording of the original German version is valid.

3 DATACOLOR AG ANNUAL REPORT 2009 Financial year from October 1, 2008, through September 30, 2009 Board of Directors Datacolor AG Report of the Board of Directors 3 Datacolor Share Information 4 Key Figures Group 5 Corporate Governance Group Structure 6 Management Structure 7 Information for investors 12 Commentary to the Business Year 2008 / Financial Reporting Datacolor Group 17 Datacolor AG 42 Addresses 48

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5 Board of Directors Report of the Board of Directors With the sale of Eichhof Beverage and Eichhof Immobilien AG, in fiscal 2008 / 09 the Eichhof Group focused systematically on the continuing operations of the globally active color management company Datacolor. Eichhof Holding AG was renamed Datacolor AG at the 2009 General Meeting. The measures introduced by the Board of Directors to streamline and reorganize Datacolor to meet the standards required of a company listed on the Swiss Exchange have largely been completed. The holding company s management was integrated into the Datacolor organization. The management team surrounding CEO Albert Busch, who was appointed on January 1, 2009, has been considerably rejuvenated and enhanced by new industry-savvy members. The company s resources have been bundled and development efficiency significantly increased. Datacolor concentrated manufacturing on the new operations and production site in the Suzhou Industrial Park (China) and reduced headcount substantially. The measures introduced by the Board of Directors have been consistently implemented, appreciably strengthening Datacolor s earning power already in the second half of the year under review. Under the impact of the economic crisis, in fiscal 2008 / 09 Datacolor posted a decline in net sales to CHF 51.2 million in line with market development for color management solutions. Thanks to the substantial sum of CHF 5.5 million that the sale of the Eichhof real estate portfolio contributed to earnings, consolidated net profit came to CHF 2.6 million. Datacolor has a strong, debt-free balance sheet, an attractive product range geared to the needs of its customers and a well-filled development pipeline with highly innovative color measurement technologies, ensuring a steady flow of new product launches in the coming year. Datacolor is therefore well prepared for the expected economic recovery and over the medium term will be able with the aid of targeted acquisitions to achieve the Board of Directors ambitious sales and return targets. Thanks to Datacolor s sustainable growth potential and the initial positive market trends seen towards the end of the fiscal year, the Board of Directors of Datacolor AG has decided to propose to the AGM a dividend of CHF 3 per registered share for fiscal 2008 / 09. I would like to thank the Board of Directors and all staff for their support during the successful reorganization of Datacolor and for their great commitment in what has been an extremely challenging fiscal 2008 / 09. Werner Dubach Chairman of the Board of Directors 3

6 Datacolor Share Information DATACOLOR SHARE INFORMATION Stock exchange information Expected dividend date 2010 (Subject to approval by AGM) Listing SIX Swiss Exchange (Zurich) Security ID ISIN CH Reuters DCN.S Bloomberg DCN Investdata DCN Capital structure Share capital in CHF Conditional share capital in CHF Number of registered shares Nominal value per share in CHF 1 1 Registration restrictions none none Voting restrictions none none Opting out / opting up none none Major shareholders (in %) Dubach family 33,2 33,2 Keller family 10,5 8,8 Shareholders by category (in %) Major shareholders 43,7 42,0 Private investors 71,9 70,9 Corporate investors 28,1 29,1 Non-registered shareholders 9,7 10,6 Share distribution Number of registered shares No. of shareholders No. of shareholders > * 3* Total *including own shares of Datacolor AG Share price data in CHF 2008 / / 2008 First trading day ( ) ( ) Ex Eichhof Beverage ( ) n / a ( ) Low ( ) ( ) High ( ) ( ) Last trading day ( ) ( ) Average Market capitalization in million as of ,8 69,2 4

7 Key Figures Group KEY FIGURES GROUP in CHF million Restated Net sales 51,2 72,2 Change relative to previous year in % -29,2% n / a EBIT -2,0 2,7 Change relative to previous year in % -175,1% n / a as a % of net sales -4,0% 3,8% Result (continued operations) -2,9-1,7 Change relative to previous year in % -73,8% n / a as a % of net sales -5,7% -2,3% as a % of average shareholders equity -10,9% n / a Cash flow from operating activities (continued operations) 10,1 8,8 Change relative to previous year in % 14,5% n / a as a % of net sales 19,7% 12,2% Cash flow from investing activities (continued operations) -0,3-5,6 Change relative to previous year in % -92,8% n / a as a % of cash flow from operating activities 3,0% 63,8% Free Cash Flow 9,7 3,2 Change relative to previous year in % 205,2% n / a as a % of net sales 19,0% 4,4% Average number of employees Personnel expenses 21,4 29,1 Total assets 41,6 173,4 Shareholders equity 24,8 28,7 as a % of assets 59,6% 16,6% Net liquidity / Net debt 11,9-73,8 Per share data (continued operations) 1) Average number of shares Earnings per share in CHF (non diluted) Free Cash Flow in CHF Shareholders equity in CHF Dividend in CHF ) Share price data as per in CHF Yield in % 3) 0,9% 7,3% 1) Calculated by the weighted average number of shares outstanding (issued shares less own shares). 2) According to the proposal of the Board of Directors on November 12, ) Distribution in percentage of the share price as per September 30,

8 Corporate Governance GROUP STRUCTURE Functions and duties of Datacolor AG Datacolor AG s role, following the disposal of Eichhof Real Estate AG in December 2008, is that of a pure play on the color measurement market. It manages its business by means of objectives, is involved in the planning process and monitors compliance with the budget. Once the three-year plan and the budget have been approved by the Board of Directors, the Executive Committee acts on its own authority within the limits of the budget and the rules of competence. It is responsible for consolidation, financing, controlling, asset management and investor relations. Datacolor AG is a Swiss public limited company with its head office in Lucerne. Refer to page 40 for a summary of shareholdings; details about the market capitalization are given on page 4. Strategy Datacolor provides worldwide products and services for industrial as well as professional and hobby applications for color measurement, management, communication and calibration. Datacolor s largely debtfree balance sheet structure will put it in a position to achieve its long-term growth targets through an aggressive acquisitions policy, allied with organic growth. It aims to achieve dynamic growth by providing innovative hardware and software products, increasing market penetration, expansion of service and support developing new markets, alliances and acquisitions. Its range comprises products and systems solutions that are competitive in terms of quality and performance, tailored to customer requirements and able to offer a large potential for generating added value. The provision of services for hardware and software products constitutes a core activity. It aims for market leadership in defined customer segments as well as geographical markets. Its corporate performance is achieved by a flexible, lean and customer-oriented organization. The production depth is restricted to what is strategically necessary. In addition to maintain a stable shareholder base to pursue long-term goals, Datacolor also aims to have Data color shares held by a broad public. 6

9 Corporate Governance MANAGEMENT STRUCTURE Board of Directors Werner Dubach, 1943, CH Chairman, Member of the Board since 1981, elected until AGM 2010 Dipl. Ing. Chem. ETH Zurich, MBA from the Wharton School of the University of Pennsylvania Until January 2009, CEO and Chairman of Eichhof Holding AG Until 1981, Director of the Eichhof Group s Beverages division Technical Director of the Eichhof Brewery Management Assistant Conzzeta AG, Zurich, Member of the Board Peter Beglinger,1945, CH Board member since 1992, elected until AGM 2011 Dr. iur. University of Zurich Until 2007 law office in Zurich, Counsel From 1979 to 2006 own law office in Zurich legal adviser to the executive management of Jacobs AG law office Wenger & Vieli, Zurich 1974 admitted to the bar Altin AG, Baar, Chairman of the Board Hans Peter Wehrli, 1952, CH Board member since 2001, elected until AGM 2012 Dr. oec. publ. University of Zurich Prof., Faculty of Business Administration, University of Zurich Belimo Holding AG, Wetzikon, Chairman of the Board Swiss Prime Site AG, Olten, Chairman of the Board Fritz Gantert, 1958, CH Board member since 2004, elected until AGM 2010 Dr. sc. techn., Dipl. Masch.Ing. ETH Zurich Since 2007 General Manager Security Solutions Division Ascom Holding AG CEO of Schaffner Group Sarna Kunststoff Holding AG, Ascom Fritz Gantert, Peter Beglinger, Werner Dubach, Hans Peter Wehrli 7

10 Corporate Governance Elections and term of office Members of the Board of Directors are elected by the Annual General Meeting of Shareholders for an individual term of office of three years. Newly elected members complete the terms of their predecessors. There are no limitations on terms of office. Internal organization The Board of Directors is self-constituting. It appoints committee members and the secretariat. Duties The Board of Directors is the supreme executive body of the holding company. It adopts resolutions which determine the company s fundamental direction and oversees the work of senior management. Committees The Board of Directors has established committees to support its work. The primary role of these committees is to prepare certain issues and oversee the implementation of Board resolutions. Furthermore, the Board of Directors may delegate the final handling of certain issues to the committees, provided that delegation of such tasks is not prohibited by law. The Board of Directors has established two committees: the Finance Committee and the Human Resources and Compensation Committee, as well as the steering committee used as a supervisory and control instrument, (see page 13). The Finance Committee prepares the financial plan, the budgets and the statements for submission to the Board of Directors. Among other things, it issues instructions and monitors the appropriation of liquidity and the execution of asset management operations. The Human Resources and Compensation Committee drafts proposals for the remuneration of the Board of Directors. It also submits proposals to the Board for appointments to the position of CEO and CFO. The Committee sets the fixed and variable components of remuneration for the top levels of management, taking account of the situation on the labour market, performance and achievement of the targets that have been set. If the Committee deliberates on the remuneration of a member of the Human Resources and Compensation Committee, this member shall abstain from the proceedings.. Finance Committee: Werner Dubach, Albert Busch, Stefan Dobler Human Resources and Compensation Committee: Dr. Peter Beglinger Operating principle of the Board of Directors and its Committees The Board of Directors meets as often as business requires, but at least four times a year. Committee meetings are held in addition to Board meetings. Board meetings usually last for between half a day and a day. In 2009, the following number of meetings were held: Board of Directors 8 Finance Committee 10 Human Resources and Compensation Committee 6 8

11 Corporate Governance Areas of responsibility Board of Directors The Board of Directors represents the company externally and manages all company activities unless responsibility for these has been transferred to another company body in accordance with the law, the Articles of Association or regulations. In particular, the Board of Directors has the following non-transferable and indefeasible duties: a) acting as the company s most senior management body and issuing the necessary directives; b) establishing the organizational framework; c) designing accounting, financial controls and financial planning; d) appointing and dismissing persons entrusted with senior management roles; e) ultimate oversight of persons entrusted with senior management roles, specifically with regard to compliance with the law, the Articles of Association, regulations and directives; f) producing the annual report, preparing for the Annual General Meeting, executing the resolutions passed by the AGM; g) informing the judge in the event of excessive indebtedness. Unless the law, the Articles of Association or the directives issued by the Board of Directors provide otherwise, the Board of Directors delegates the operational management of the company to the CEO, together with the authority to delegate this task. The company s Organization Regulations govern the division of responsibility between the Board of Directors and the Executive Committee. Executive Committee Executive Committee members are appointed by the Board of Directors, the Human Resources and Compensation Committee and the CEO. Information and control instruments vis-à-vis the Executive Committee The Executive Committee informs the Board of Directors about the current status of the business, the balance sheet and the income statement on a monthly basis. The following also contribute to the regular decision- making process: External auditor KPMG AG, Root / Lucerne (auditor for Datacolor AG), which conducts its audit in accordance with Swiss law and Swiss auditing standards Internal Audit and Risk Management, which monitor the internal control system and the risks and also the measures to improve the controls or reduce the risks. 9

12 Corporate Governance Executive Committee Albert Busch, 1967, NL CEO BS / MS in Electrical Engineering MS in Industrial Management Joined Datacolor in February 2008, since January 2009 CEO , management roles at NV Bekaert SA Gary Brennan, 1962, USA Human Resources BS in Business Administration Since 2001 at Datacolor Director HR Global Metro Networks Manager HR Teleglobe Communications Inc. Brian Levey, 1957, USA Business Unit Industrial BS in Chemistry Since 1996 management roles, Datacolor management roles, Beckmann Instruments Doris Brown, 1958, USA Global Marketing BS in Technology Joined Datacolor in May Global Marketing Pantone Inc CEO Indocs Online Senior Manager Agfa Graphics Bayer Corporation Christoph Gamper, 1970, IT Business Unit Consumer MCI Innsbruck, Austria Since 2002 management roles Datacolor management roles Koch Media AG management roles kdg mediatech ag Rico Sauerborn, 1970, DE / IT Global Operations Business Administration & Engineering (Dipl. Wirtschafts-Ingenieur) Joined Datacolor in January Rieter Textile Instruments (Changzhou) Co., Ltd., China Spindelfabrik Suessen GmbH, Germany (Rieter Group) ebm Werke GmbH & Co. KG, Germany Stefan Dobler, 1972, CH CFO Certified accountant Since December 2008 to November 2009 CFO Since May 2008, interim Group CFO , Head of Group Controlling and Internal Audit PricewaterhouseCoopers, Zurich Brian Levey, Christoph Gamper, Doris Brown, Rico Sauerborn, Gary Brennan, Stefan Dobler, Albert Busch 10

13 Corporate Governance Executive Committee Other activities and functions The Executive Committee members have no permanent management and consulting functions for significant interest groups and hold neither administrative nor political offices. Management contracts There are no management contracts. Compensation, shareholdings and loans Content and method of determining the compensation and the shareholding programs The Board of Directors sets the compensation of the Board members based on the suggestion of the Human Resources and Compensation Committee. The Human Resources and Compensation Committee also sets the compensation paid to the Executive Committee members. The principles governing the compensation and shareholdings of members of the Board of Directors and the Executive Committee are as follows: Compensation for acting members of governing bodies Board of Directors The non-executive members of the Board of Directors receive a fixed fee plus a variable bonus depending on the company s performance. Board members may receive a portion of the compensation set by the Board in the form of options on registered shares of Datacolor AG. The compensation paid to members of the Board of Directors is shown in Note 22, on page 36. Executive Committee Executive Committee members receive a variable bonus in addition to their fixed salaries. The amount of the variable bonus depends on attainment of company objectives and personal performance targets. The amount of cash bonus payments and options for Executive Committee members is determined by the Human Resources and Compensation Committee. The compensation paid to the members of the Executive Committee is shown in Note 22, on page 36. Share allotment in the year under review No shares were allotted during the year under review. Shareholdings and options The holdings of shares and options as at September 30, 2009, are shown in Note 22, on page 36. The purpose of the option plan is to promote investment by Executive Committee members in Datacolor AG in order to achieve greater identification with company goals and to align the interests of management with those of shareholders. The share options are locked for three years and entitle the holder to purchase registered shares at a ratio of 1:1. Refer Financial Report, page 34, note 20 for details. Loans granted to governing bodies There are no outstanding loans granted to members of the governing bodies. Compensation for former members of governing bodies No compensation was paid to former members of governing bodies. Additional fees and remunerations No additional fees and remunerations are paid to members of the Board of Directors, Executive Committee members or related parties in an amount equal to or greater than the regular compensation for the given member. 11

14 Information for investors INFORMATION FOR INVESTORS Share capital The share capital amounts to CHF consisting of registered shares with a nominal value of CHF 1 each. The registered shares entitle the holder to one vote at the General Meeting, provided that the shareholder is entered with voting rights in Datacolor AG s share register. Authorized and conditional capital There is no authorized capital. The share capital was increased at the 2003 Annual General Meeting by a maximum amount of CHF by issuing registered shares with a nominal value of CHF 1 each. This conditional capital increase was implemented to enable the exercise of option rights by the members of the Board of Directors and the Executive Committee. As of September 30, 2009, the conditional capital amounts to CHF Changes in capital Capital changes caused by exercised options are shown in note 20 on page 34 and statement of changes in equity on page 21. Jouissance shares ( Genussscheine ) and participation certificates There are no jouissance shares or participation certificates. Limitations on transferability and nominee registrations There are no limitations with regard to transferability and nominee registrations. Convertible bonds and options Datacolor AG has no outstanding convertible bonds. Regarding options, refer to Compensation above and note 20 on page 34 of the Financial Report. Share listing Datacolor AG s shares are listed on SIX Swiss Exchange Zurich under security number See Information about Datacolor Share on page 4 for an overview of the stock market listing and details of the market capitalization. Legal status of shareholders Shareholders in Swiss public limited companies are granted extensive statutory participation and protection rights. The shareholding provisions of these participation rights are further supplemented by the company Articles of Association. These ensure that, pursuant to the Code of Obligations, the Annual General Meeting of Shareholders is convened by placing a one-time announcement in the Swiss Commercial Gazette (Schwei- zerisches Handelsamtsblatt) and by sending a written invitation to the registered shareholders; that an item may be added to the agenda of the Annual General Meeting of Shareholders no later than 40 days before the date of the meeting; and that every shareholder may, besides the independent proxy provided for by law, allow his or her shares to be represented at the Annual General Meeting by a shareholder with a written proxy form. Voting rights limitations Every shareholder entered with voting rights in the share register is entitled to vote. No new entries in the share register are made during the 20 days before the Annual General Meeting of Shareholders. There are no limitations on voting rights. Entry in the share register Entry of purchasers in Datacolor AG s share register is not subject to any conditions. Cross-shareholdings There are no cross-shareholdings. 12

15 Information for investors Shareholdings in companies There are no shareholdings in listed companies. Percentage shareholdings in unlisted companies are given on page 40. Significant shareholders Refer to Datacolor share information on page 4. Duty to make an offer The company s Articles contain no provisions regarding a duty to make an offer. Clauses on changes of control There are no clauses on changes of control. Auditors Duration of the engagement and term of office of the lead auditor Datacolor AG has appointed KPMG AG, Root / Lucerne as auditor. In each case, the mandate is granted by Datacolor AG s Annual General Meeting of Shareholders for a period of one year. The mandate was first given to KPMG in Thomas Studhalter has been auditor in charge since financial year 2007 / 08. Auditing fee KPMG received an audit fee of TCHF 345 for the 2008 / 09 reporting year. Additional fees In addition to the audit fee, KPMG provided other services for TCHF 164. Supervisory and control instruments vis-à-vis the auditors The Board of Directors holds at least two meetings a year with the auditor in charge of the mandate. The matters dealt with at these meetings include the planning and conduct of audits, the focus points of the audits and the findings thereof, the main points arising from management letters, the reports on special audits and the reports of the auditor and the group auditor. The Board of Directors has appointed a Steering Committee to manage the audits and to monitor implementation of the auditors proposals. This committee is made up of the Chairman of the Board, the CEO and the CFO of Datacolor AG and the auditor in charge of the mandate and meets regularly while audit work is being carried out. Information policy Publications Datacolor AG publishes a semi-annual report and an annual report in accordance with Swiss GAAP FER. Additionally, shareholders and the capital market are kept informed of current changes and developments through press releases. As a company listed on SIX Swiss Exchange, Datacolor AG is cognizant of its duty to disclose events relevant to its share price (ad hoc disclosure of price-sensitive information). The website is available for further information on Datacolor Goup. Key dates Shareholders meeting: January 14, 2010 Semi-annual report: May 4, 2010 Press release: November 5, 2010 Press conference: November 30, 2010 Shareholders meeting: January 13,

16 Commentary 2008 / 2009 DATACOLOR IN FISCAL 2008 / 09 Positive operating result before one-off restructuring costs In fiscal 2008 / 09, Datacolor s sales declined by 29.2 percent (CHF 28.9 percent in local currencies) in line with the international color management industry as a whole. On its continuing operations Datacolor posted net sales of CHF 51.2 million, an EBITDA of CHF 1.7 million, as well as an EBIT of CHF 0.3 million corresponding to an EBITDA margin of 3.3 percent and an EBIT margin of 0.5%. After deduction of the extraor - dinary charge of CHF 2.3 million for the reorganization of Datacolor, EBIT came to CHF -2.0 million. Thanks to the substantial sum of CHF 5.5 million that the sale of the Eichhof real estate portfolio contributed to profits, consolidated net profit for fiscal 2008 / 09 came to CHF 2.6 million. With the sale of Eichhof Beverage and the real estate portfolio, the Eichhof Group focused on the continuing operations of the globally active color management company Datacolor. The measures introduced by the Board of Directors to streamline and realign Datacolor s organizational and staffing structures to meet the standards required of a company listed on SIX Swiss Exchange are proving a success. As part of the process of reorganization, the average headcount has been reduced by 72 to 254 full-time equivalents. Thanks to the measures systematically implemented in all areas, Datacolor succeeded in significantly increasing its operating margins already in the second half of the year. Adjusted for extraordinary costs, the EBITDA margin came to 8.7% and the EBIT margin 5.9% in the second half of the fiscal year. Datacolor is debt-free,has a substantial net cash position of CHF 11.9 million at the balance sheet date and a high equity ratio of around 60%. In view of the company s very good financial situation, the positive sustainable direction that earning power is taking and the initial encouraging market trends seen towards the end of fiscal 2008 / 09, the Board of Directors proposes to the AGM that a dividend of CHF 3 per registered share be paid. After a difficult start, trend turned positive in second half Datacolor s Industrial Business Unit reported a 31.7% decline in sales of instruments and software packages to CHF 39.5 million in fiscal 2008 / 09 as customers investment programs were abruptly halted in response to the onset of the economic crisis in fall By contrast, the Service and Support arm increased the previous year s solid sales figure by 2.6% to CHF 13.1 million. With this range of offerings, the Industrial Business Unit helps customers keep their Datacolor instruments and software packages up-to-date with the latest developments over the long term. The Consumer Business Unit, comprising the innovative Datacolor Spyder products for color calibration of cameras, monitors, printers and projectors, posted an 18.8% decrease in sales to CHF 11.7 million, mainly because of cautious ordering and inventory reductions on the part of major retail chains specializing in photographic products and electronics. Having slumped considerably at the beginning of the fiscal year, sales stabilized during the course of the year and signs of a recovery in demand began to emerge in the second half. This positive trend was witnessed in all business units. Despite a slight decline in share to 43% (previous year 46%), Region Europe once again made the largest contribution to Datacolor s sales during the year under review. The USA increased its share to 29% (28%) and Asia / Pacific to 28% (26%). Substantial investment in long-term corporate development During the challenging financial year 2008 / 09, Datacolor made countercyclical investments in the development of new products and software solutions, as well as in innovative sensor technology and the expansion of its service and support offering. Six new products were launched during the year under review. The Industrial Business Unit s product range was expanded to include a completely new release of the software package for color management in the supply chains of customers in the paint, plastics and cosmetics industries. The next generation of the user-friendly spectrophotometer DatacolorCheck II, an innovative spectrophotometer for mobile use, was also unveiled. A number of attractive, easy-to-use instruments and software solutions was added to the Consumer Business Unit s successful Datacolor Spyder product family with the launch of the SpyderCube for keen amateur and professional photographers, the Spyder 3 Express for simple color calibration of monitors and the Spyder 3 - Studio SR, a solution for precise color matching of cameras, monitors and printers. The relocation of manufacturing to Datacolor s efficient operations and production site in the Suzhou Industrial Park in China was largely completed during the year under review. Only the development and production of 14

17 Commentary 2008 / 2009 the strategically important color sensors remains based at Datacolor s operational headquarters in Lawrence - ville, USA. Manufacturing the instruments centrally in China brought about a decisive reduction in production costs. Gratifying consolidated net profit The consolidated net profit of CHF 2.6 million for 2008 / 09 consisted mainly of the contribution to profits of CHF 5.5 million from the sale of the real estate portfolio, less extraordinary costs of CHF 2.3 million for the reorganization of Datacolor. The financial result of CHF -0.7 million was impacted by foreign currency positions and the valuation of securities on the balance sheet date. At CHF 0.2 million, the tax burden was low in line with revenue trends. At the end of the year under review, total assets amounted to CHF 41.6 million. At CHF 14.0 million, cash and cash equivalents, together with financial assets, accounted for a high 33.7 percent of total assets. Even after the repayment of all financial borrowings, Datacolor had a very good net cash position of CHF 11.9 million. Shareholders equity stood at CHF 24.8 million and the high equity ratio corresponded to around 60 percent of the balance sheet total. New Swiss GAAP FER accounting standard As part of the simplification of workflows and processes, the Board of Directors decided to switch from the highly labor-intensive IFRS (International Financial Reporting Standards) accounting standard to Swiss GAAP FER, which is appropriate for a company of Datacolor s size. In the course of the changeover with retroactive effect to October 1, 2007, goodwill and intangible assets from acquisitions amounting to CHF 10.3 million were offset against shareholders equity and pension obligations in the amount of CHF 0.8 million, and deferred taxes amounting to CHF 0.2 million were dissolved. The change of accounting standard necessitated a move to a different segment on the Swiss Exchange. Since September 15, 2009, the registered shares of Datacolor AG have been traded according to the Domestic Standard of SIX Swiss Exchange. Detailed information on the impact of the change of accounting standard can be found in the financial report on page 21. Datacolor AG (Holding) In fiscal 2008 / 09, Datacolor AG (holding company for Datacolor investments in subsidiaries) posted a profit of CHF 21.4 million on the sale of Eichhof Immobilien AG. Net profit at the level of the separate statutory financial statements amounted to CHF 19.4 million. As a result of the contribution that the sale of Eichhof Immobilien AG made to profit, the shareholders equity of Datacolor AG increased significantly to CHF 28.1 million (previous year: CHF 13.4 million). Ready for the upturn With a rejuvenated, industry-savvy management team, a strong, debt-free balance sheet, a successful product range and an attractive development pipeline featuring innovative technological solutions ensuring a steady flow of new product launches, Datacolor is well prepared for a global economic recovery. By concentrating on fast-growing market segments and with the benefit of its very good financial position, Datacolor will over the medium term and in conjunction with targeted acquisitions be able to achieve its ambitious targets for growth and returns. 15

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19 FINANCIAL REPORT Financial year from October 1, 2008, through September 30, 2009 Datacolor Group Consolidated Income Statement 18 Consolidated Balance Sheet 19 Consolidated Cash Flow Statement 20 Consolidated Statement of Changes in Equity 21 Notes to the Consolidated Financial Statements 22 Notes 26 Report of the Statutory Auditors on the Consolidated Financial Statements 41 Datacolor AG Income Statement 42 Balance Sheet 42 Statement of Changes in Equity 43 Notes 44 Proposed Appropriation of the Available Earnings 46 Report of the Statutory Auditors on the Financial Statements 47 17

20 Datacolor Group CONSOLIDATED INCOME STATEMENT in TCHF 2008 / / 2008 Restated 1) Gross sales Sales deductions Net sales ,0% ,0% Cost of goods sold Gross profit ,7% ,2% Sales and marketing expenses Administrative expenses Research and development expenses Other operating income 84 0 Special charges EBIT ,0% ,8% Financial income Financial expenses Profit before income taxes ,4% 8 0,0% Income taxes Result from continuing operations ,7% ,3% Profit from discontinued operations Profit for the year CHF CHF Earnings per share non-diluted diluted Earnings per share (continuing operations) non-diluted diluted ) Prior year financial information has been restated in the context of the change of the accounting standards from IFRS to Swiss GAAP FER. Further information to this fact have been disclosed in the consolidated statement of changes in equity and in note 1 general policies for consolidated accounting. 18

21 Datacolor Group CONSOLIDATED BALANCE SHEET in TCHF Restated 1) Assets Cash and cash equivalents Financial assets Trade receivables Other receivables Inventories Tax credits Prepaid expenses Assets classified as held for sale Current assets ,8% ,4% Property, plant and equipment Intangible assets Financial assets Deferred tax assets Non-current assets ,2% ,6% Assets ,0% ,0% Liabilities and shareholders equity Financial liabilities Trade payables Current tax liabilities Other liabilities Accrued liabilities Liabilities classified as held for sale Current liabilities ,1% ,0% Other liabilities Non-current provisions Deferred tax liabilities Non-current liabilities ,2% 725 0,4% Liabilities ,3% ,4% Share capital Own shares Capital reserves Retained earnings Shareholders equity ,7% ,6% Liabilities and shareholders equity ,0% ,0% 1) Prior year financial information has been restated in the context of the change of the accounting standards from IFRS to Swiss GAAP FER. Further information to this fact have been disclosed in the consolidated statement of changes in equity and in note 1 general policies for consolidated accounting. 19

22 Datacolor Group CONSOLIDATED CASH FLOW STATEMENT in TCHF 2008 / / 2008 Restated 1) Profit before income taxes Depreciation of property, plant and equipment Depreciation of investment properties Amortization of intangible assets Non-cash sales deductions Gain on disposal of Eichhof real estate business Gain on disposal of Eichhof Beverage Gain on disposal of non-current assets Changes in provisions Other non-cash positions Interest expense, net Dividends and income from securities, net Interest paid Income taxes paid Cash flow before working capital changes Changes in trade receivables Changes in other receivables Changes in inventories Changes in trade payables Changes in other liabilities Cash flow from operating activities Investments in property, plant and equipment Investments in investment properties Investments in intangible assets Investments in financial assets Acquisitions Disposal of Eichhof real estate Disposal of cash and cash equivalents, Eichhof Beverage Divestments of property, plant and equipment Divestments of financial assets Interest and dividends received Cash flow from investing activities Proceeds from financial liabilities Repayment of financial liabilities Sale of own shares Exercise of management share options Dividends paid Cash flow from financing activities Decrease / Increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign currency translation on cash and cash equivalents Cash and cash equivalents at end of the year Cash and cash equivalents, discontinued operations Cash and cash equivalents, continuing operations ) Prior year financial information has been restated in the context of the change of the accounting standards from IFRS to Swiss GAAP FER. The restatement had not impact on the cash flows from operations, cash flows from investing activities and cash flows from financing activities. Further information to this fact have been disclosed in the consolidated statement of changes in equity and in note 1 general policies for consolidated accounting. 20

23 Datacolor Group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in TCHF Share capital Treasury Capital shares 2) reserves 3) Retained earnings Accumulated translation differences Hedge Accounting Total retained earnings Total shareholders equity Balance as of IFRS Effect on adoption of Swiss GAAP FER: Offset intangible assets Release IAS 19 liability pension obligation Release deferred tax assets Balance as of Swiss GAAP FER Adjustment of financial instruments to fair value 5) Dividends 4) Distribution to shareholders 4) Sale of own shares Management share option plan 6) Elimination of tax income from management share option plan 6) Exercise of management share options Translation differences Profit for the year (Restated) Balance as of Swiss GAAP FER 168 1) Balance as of Swiss GAAP FER Deferred profits transferred to income statement Dividends 4) Translation differences Profit for the year Balance as of Swiss GAAP FER 168 1) ) The share capital as of September 30, 2009 consists of (previous year: ) registered shares with a nominal value of CHF 1 each. 2) Nominal value: total value deducted from consolidated shareholders' equity for treasury share holdings of TCHF (previous year: TCHF 3 757) at historical acquisition costs. 3) The capital reserves contain legal reserves that are subject to certain legal restrictions with regard to their distributions. 4) A dividend of CHF 30 (previous year: CHF 90) has been paid out in the reporting period. Further, shareholders received a cash payment of CHF in the context of the carve out and subsequent disposal of the Eichhof Beverage business in prior year. 5) The adjustment of financial instruments to fair value concerns the valuation of an interest rate swap. 6) In the context of the disposal of the Eichhof Beverage business in financial year 2007 / 2008 management share options for the purchase of Eichhof registered shares have been repurchased and the existing share option programme was terminated. Datacolor Group has effected the change of financial accounting standards from International Financial Reporting Standards (IFRS) to Swiss GAAP FER (FER) in the reporting period. With regard to comparison purposes with prior year published financial statements, financial information disclosed for financial year 2007 / 2008 has been restated for the continued business. Prior year information relating to discontinued business can not be reconciled. With the retrospective introduction of FER, acquisitions undertaken in the past have been assessed in the light of the accounting principles of FER (refer to note 2). The retrospective adoption of these accounting principles showed, that the theoretical amortization period ended prior to October 1, Consequently, intangible assets (trademarks, licences, patents and goodwill) amounting to TCHF have been directly offset with shareholders equity as per October 1, As a further consequence of the change of the financial accounting standards, the IAS 19 pension liability amounting to TCHF 594 net of deferred tax assets as per October 1, 2007 has been released directly into shareholders equity. While the pension liability of Datacolor Group in Switzerland represents under IFRS a defined benefit plan for which a pension liability is recorded in the balance sheet, no such liability is accounted for under FER given the existing contractual agreements. Based on actual circumstances neither an economic benefit nor an economic liability exists. Therefore, the IAS 19 pension liability has been released directly into shareholders equity. The profit for financial year 2007 / 2008 initially amounting to TCHF has been increased to TCHF for adjusting the IFRS based amortization of intangible assets (TCHF 890) that have been offset with shareholders equity under FER and for the change of the IAS 19 pension liability (TCHF 72 net of deferred tax income) initially recorded under the IFRS accounting regime. 21

24 Datacolor Group NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 General policies for consolidated accounting General Datacolor AG (previously Eichhof Holding AG) is a Swiss limited company, domiciled in Lucerne (Waldstätterstrasse 12). It is the parent company of the Datacolor Group, a worldwide leading provider of color measurement solutions. The Datacolor Group is active in Europe, North America and Asia. As per end of August 2008 Eichhof Beverages and as per December 2008 Eichhof Real Estate business was disposed off. Both business units are disclosed as discontinued activities in the financial statements. Basis of preparation The consolidated financial statements were prepared in accordance with Swiss GAAP FER (FER) and comply with Swiss law. The Board of Directors decided to adopt FER for the preparation of the consolidated financial statements in August In this context, prior year financial statements have been restated as per October 1, The effects of the restatement are disclosed in the consolidated statement of changes in equity on page 21. The consolidated financial statements have been prepared in Swiss Francs (CHF) and were rounded on thousand units. The consolidated financial statements are prepared on a historical cost basis, except for financial current assets and derivative financial instruments which are recorded at market value. The preparation of consolidated financial statements in accordance with FER requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. In case that such estimates and assumptions, which are based on management s best judgment at the date of the financial statements, deviate in the future from the actual circumstances, the original estimates and assumptions will be modified as appropriate for the year in which the circumstances change. Scope of consolidation General The consolidated financial statements include the financial statements of Datacolor AG and its subsidiaries that are controlled by Datacolor AG. Control is presumed to exist when Datacolor AG owns, directly or indirectly through subsidiaries, more than one half of the voting power of an enterprise or otherwise exercises management control. The closing date for the financial statements of Datacolor AG and all its subsidiaries is September 30, with the exception of Datacolor Technology (Suzhou) Co., Ltd. China, having year end closing as per December 31. Changes in the scope of consolidation: In the context of the disposal of the Eichhof Beverage Business all subsidiaries forming part of the Eichhof Beverage Business have been deconsolidated in previous year. Based on the sales agreement, the disposed Eichhof Immobilien AG (the Real Estate Business) was deconsolidated as per October 1, Refer to note 27 for further disclosure. The overview of subsidiaries is disclosed in note 29. Principles of consolidation The assets and liabilities included in the consolidated financial statements are measured according to uniform principles. Intragroup balances, intragroup transactions and material unrealized profits resulting from intragroup transactions are eliminated in the course of consolidation. Acquired (disposed) subsidiaries are consolidated (deconsolidated) upon the date of change of control. Foreign currency translation The financial statements of foreign subsidiaries are prepared in their respective local currency (functional currency) and translated into Swiss francs (reporting currency) for consolidation purposes. 22

25 Datacolor Group Assets and liabilities of subsidiaries denominated in foreign currency are translated at the exchange rate in effect at the balance sheet date. Transactions in foreign currency are translated at the actual exchange rate into the functional currency. Foreign currency differences deriving from the translation of equity and results of subsidiaries, are recorded directly in retained earnings. In the financial statements of the local subsidiaries transactions in foreign currencies are recorded at the exchange rate in effect at the date of transaction. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All resulting differences are recognized as exchange gains or losses in the income statement of the local subsidiary. Segment reporting Segment information is based on two segment formats: the primary format reflects the business segments whereas the secondary format presents the geographical segments. Segment reporting based on business segments represents the management structure of Datacolor Group. 2 Accounting principles The following accounting principles state the material accounting principles for the continued activities. Net sales and revenue recognition Net sales include all invoiced sales and services to third parties. Sales are recognized in the income statement when the economic benefits associated with the transaction will flow to the company and the amount of economic benefits can be measured reliably. Management share option plan As part of the performance oriented, variable salary for certain members of senior Management and members of the Board of Directors, options for the purchase of Datacolor registered shares are granted. The amount and strike price are determined by the Human Resources and Compensation Committee, whereby the option premium is fixed at CHF 125 or CHF 50 respectively depending on the place of residence of the beneficiary. The granted options carry the right to purchase one registered share of Datacolor AG per option. The options expire after ten years, have a blocking period of three years and can be sold back to Datacolor AG up to six years after the granting date at the option premium of CHF 125 or CHF 50 respectively. The strike price is determined in advance, respectively at the grant date, in accordance with the Black-Scholes-formula. The main parameters of the calculation are the following: a discount of 6% per blocking year on the share price, volatility (standard deviation), dividend yield, term of ten years and the risk free interest rate. The vesting period equals the year of service (financial year). The number of the granted options depends on the individual performance of the entitled persons and on the performance of their business unit. The option premium of the expected number to be granted is recorded on an accrual basis as personnel expense in line with the vesting period. Income taxes Deferred income taxes are provided following the comprehensive balance sheet liability-method and reflect in general all future temporary differences. The measurement of the deferred taxes is based on current tax rates applicable for the respective taxable entity. Deferred tax assets deriving from tax losses carried forward are only capitalized when the likelihood of recoverability is high and future taxable profits are sufficient to recover tax benefits stemming from the tax losses. Research and development Development expenses incurred are only capitalized on the basis of certain evidence that the present value of future economic benefits exceed the respective costs. Research costs are expensed as incurred. Capitalized development expenditures include material and personnel expenses, depreciation of equipment and machinery and the overhead costs directly attributable to development undertakings. 23