Annual Report 2009
Management Report
Consolidated Financial Statements
3
47
Declaration by the legal representatives
of the Company
142
Auditor’s report
143
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Management Report
General
EPCOS Group
Business segments
Industries
Regions
Research and Development
Employees
Assets and financial position
EPCOS AG
Risk report
Outlook
Information required pursuant to Section 289 Para. 2 No. 5
Sentence 1 and Section 315 Para. 2 No. 4 Sentence 1 of the
German Commercial Code (HGB)
Information required pursuant to Section 289 Para. 4 and Section
315 Para. 4 of the German Commercial Code (HGB) and
the explanatory report
Declaration of the Management Board pursuant to Section
312 Para. 3 Sentence 3 AktG
Subsequent events
Consolidated Financial Statements
Consolidated income statements
Consolidated balance sheets
Consolidated changes in equity
Consolidated statement of income and expenses
recognized in equity
Consolidated cash flow statements
Notes to the consolidated financial statements for the fiscal years
ended September 30, 2009, and September 30, 2008
3
3
4
6
12
16
18
20
22
24
26
34
36
39
45
45
47
48
49
50
51
52
54
Declaration by the legal representatives
of the Company
142
Auditor’s report
143
© EPCOS AG 2009
2
CONSOLIDATED FINANCIAL STATEMENTS
Management report on the financial statements of EPCOS
AG, Munich, for the year ending September 30, 2009
GENERAL
EPCOS AG is a leading manufacturer of electronic components, modules and systems headquartered in Munich/ Germany. With its broad portfolio EPCOS offers a
comprehensive range of products from a single source and focuses on fast-growing
and technologically demanding markets in the areas of information and communication technology, automotive electronics, industrial electronics and consumer electronics. The EPCOS Group has design and manufacturing locations and sales offices in
Europe, Asia, and in North and South America.
Electronic components are found in every electrical and electronic device. They are
as vital to mobile phones, TVs and notebooks as they are to automobiles, washing
machines, energy-saving lamps, industrial machine tools, elevators and electric
locomotives. Our products process electrical signals, protect electronic circuits and
ensure a reliable power supply. A single car, for example, can contain as many as
10,000 such components.
History
EPCOS emerged from Siemens Matsushita Components, a joint venture founded in
1989 by Siemens and Matsushita. The company was floated simultaneously on the
Frankfurt and New York Stock Exchanges on October 15, 1999. Trading on the New
York Stock Exchange was discontinued in 2007. Effective October 1, 2009, EPCOS
was combined with the components business of TDK under the roof of the new
Japan-based TDK-EPC Corporation (or “TDK-EPC” for short). Since the end of
October 2009 TDK Corporation and two of its subsidiaries hold all shares in EPCOS
AG. As a result of this combination, EPCOS’ listing on all German stock exchanges
was discontinued at the start of November 2009.
Realignment of the fiscal year
Until September 30, 2009, EPCOS AG’s fiscal year ran from October 1 to September
30 of the following year.
Effective April 1, 2010, EPCOS’ fiscal year will – pursuant to a resolution by the
Annual General Meeting on May 20, 2009 – be aligned with that of TDK Corporation.
The next full fiscal year will thus run from April 1, 2010, through March 31, 2011. All
subsequent fiscal years will then also run from April 1 to March 31 of the following
year.
EPCOS will report on the six months from October 1, 2009, through March 31, 2010,
as a short fiscal year.
© EPCOS AG 2009
3
CONSOLIDATED FINANCIAL STATEMENTS
EPCOS GROUP
Economic crisis leads to drop in sales and earnings;
good progress in combination with TDK’s components
business
EUR million
Sales
EBIT
Net income/loss
Capital expenditure in fixed assets
Depreciation and amortization
2008
1,478
*104
*63
155
122
±
-22%
-34%
+3%
2009
1,147
-79
-121
103
126
*After adjustment of affiliates effective June 30, 2008. For more details, see section 6.9 of the notes to the
consolidated financial statements.
Fiscal 2009 was largely shaped by the worldwide economic crisis. Customers in all
industries served and in all regions responded to the slump in demand by scaling
back production and hugely running down inventories. They then postponed, reduced
or canceled their orders for electronic components, provoking a substantial decline in
sales at EPCOS.
Business development at EPCOS hit bottom in the second quarter of 2009. In the
course of the year, demand then continually revived in all industries served and all
regions, although to varying degrees and from a very low level. Part of this recovery
was simply due to a return to more normal inventory levels for customers.
Sales
In the fiscal year under review, EPCOS’ sales declined 22 percent to EUR 1.15 billion
(EUR 1.48 billion in 2008).
Sales to the automotive electronics industry experienced the sharpest drop, declining
by more than 40 percent. Further double-digit declines were recorded for sales to
distributors and to customers in the industrial electronics and information and communication technology industries. Sales of products for consumer electronics applications declined by a single-digit figure.
© EPCOS AG 2009
4
CONSOLIDATED FINANCIAL STATEMENTS
Earnings
EBIT declined to minus EUR 79 million (EUR 104 million in 2008) as sales dropped
sharply in fiscal 2009. Neither ongoing adjustments to resource planning and input
factors nor further cost reductions were able to offset the impact on earnings of this
decline in sales.
After three consecutive quarters of EBIT losses in the fiscal year under review,
EPCOS returned to profitability with EBIT of plus EUR 6 million in the fourth quarter
of 2009.
Net income was minus EUR 121 million (plus EUR 63 million in 2008). Earnings per
share were minus EUR 1.79 (plus EUR 0.96 in 2008).
Capital expenditure
Slack demand and the resultant adjustments to production capacity caused EPCOS
to reduce its spending on property, plant and equipment by 34 percent to EUR 103
million in the period under review (EUR 155 million in 2008). At EUR 69 million capital expenditure for tangible assets was only somewhat more than half of what was
spent in the previous fiscal year and thus substantially lower than depreciation and
amortization, which totaled EUR 126 million (EUR 122 million in 2008). The remaining EUR 34 million was spent primarily on the Chinese subsidiary EPCOS Feida, the
acquisition of the development activities for MEMS (micro-electro-mechanical systems) microphones from the US company Technitrol, and the capitalization of development costs.
The largest share of capital spending – EUR 52 million – was for the Capacitors and
Inductors segment. EUR 39 million was invested in SAW Components and EUR 12
million in Ceramic Components.
Combination with TDK’s components business
The combination of EPCOS with TDK’s components business is proceeding swiftly
and according to plan.
Important milestones were reached in the course of fiscal 2009. After the major
shareholder TDK Corporation had increased its holdings of EPCOS shares to more
than 95 percent in January 2009, EPCOS’ Annual General Meeting on May 20, 2009,
resolved to transfer the remaining minority interests in the company to TDK in return
for reasonable cash compensation. On June 26, 2009, the Annual General Meeting
of TDK then approved the carve-out of TDK’s components business, thereby removing the final obstacle to the launch of a new combined company. This company was
founded in Japan on October 1, 2009, with the name TDK-EPC Corporation. The
components business of TDK and EPCOS will now be conducted by this company
under the new corporate identity TDK-EPC. The established product brands, EPCOS
and TDK, will continue to be used.
© EPCOS AG 2009
5
CONSOLIDATED FINANCIAL STATEMENTS
On October 22, 2009, the resolution by EPCOS’ Annual General Meeting to transfer
minority interests to the company’s main shareholder, TDK Corporation, was recorded in EPCOS AG’s commercial register entry. TDK Corporation and two of its
subsidiaries thus now hold all shares in EPCOS AG.
Since the beginning of November 2009 EPCOS AG is no longer listed as a public
company.
BUSINESS SEGMENTS
All business segments affected by slump in demand
Note:
EPCOS uses earnings before interest and tax (EBIT) as a control instrument to
assess the operating performance of its business segments.
Sales by business segment EUR million
Capacitors and Inductors
Ceramic Components
SAW Components
Total sales
2008
577
502
398
1,478
±
-13%
-39%
-15%
-22%
2009
500
307
340
1,147
Share of EPCOS’ sales by business segment
Capacitors and Inductors
Ceramic Components
SAW Components
2008
39%
34%
27%
2009
43%
27%
30%
EBIT by business segment EUR million
Capacitors and Inductors
Ceramic Components
SAW Components
2008
*42
39
29
2009
-14
-40
-24
*After adjustment of affiliates effective June 30, 2008. For more details, see section 6.9 of the notes to the
consolidated financial statements.
Sales were down in all three EPCOS business segments in fiscal 2009.
Sales dropped 13 percent for the Capacitors and Inductors segment and 15 percent
for the Surface Acoustic Wave (SAW) Components segment. The largest decline in
sales – a drop of 39 percent – was recorded by Ceramic Components, which was
hardest hit by weak demand for products for automotive electronics applications.
All three business segments posted losses as a result of this significant decline in
sales. EBIT was minus EUR 14 million in the Capacitors and Inductors segment,
© EPCOS AG 2009
6
CONSOLIDATED FINANCIAL STATEMENTS
minus EUR 24 million at SAW Components and minus EUR 40 million at Ceramic
Components.
Business segments
1. Capacitors and Inductors
EUR million
Sales
EBIT
Capital expenditure in fixed assets
2008
±
577
*42
46
2009
-13%
+13%
500
-14
52
*After adjustment of affiliates effective June 30, 2008. For more details, see section 6.9 of the notes to the
consolidated financial statements.
Sales for the Capacitors and Inductors segment were down 13 percent to EUR 500
million in fiscal 2009 (EUR 577 million in 2008). Even so, this segment once again
made the largest contribution to Group sales of any segment, increasing its share
from 39 percent in 2008 to 43 percent in the period under review.
Aluminum electrolytic capacitors
Sales of aluminum electrolytic capacitors declined by around 20 percent overall.
Business with these products was affected primarily by substantially lower demand
from industrial electronics manufacturers. Demand for capacitors for use in automotive electronics applications also declined, as did sales of aluminum electrolytic
capacitors to distributors.
Film capacitors
Sales of film capacitors dropped by around 6 percent in total.
EPCOS achieved a single-digit increase in sales of power capacitors in the period
under review. This growth was due to the fact that Chinese subsidiary EPCOS Feida
commenced operations at the start of 2009. EPCOS Feida develops and produces
power capacitors primarily for use in household appliances. Sales of the capacitors
that are used in power generation and transmission systems, in other industrial
electronics applications and in applications to improve energy efficiency, for example,
were down only slightly compared to fiscal 2008. A year-on-year decline of 20 percent was recorded for sales of other film capacitors. Products for systems and
equipment from manufacturers in all industries served were affected by this decline.
© EPCOS AG 2009
7
CONSOLIDATED FINANCIAL STATEMENTS
Inductors
A double-digit decline in sales of inductors was recorded in fiscal 2009.
This was essentially due to very weak demand among manufacturers of automotive
and industrial electronics products. At the same time, business with information and
communication technology customers, consumer electronics customers and distributors was significantly weaker than in the previous fiscal year.
All inductor product groups saw their sales decline. Examples include the chokes that
ensure data communication between dozens of electronic controllers in vehicles
without interference and the transformers that improve energy efficiency in energysaving lamps and lamp ballasts, for example, thereby ultimately reducing electricity
costs. Demand for EMC filters likewise declined. These products ensure electromagnetic compatibility and thus protect systems against interference and outages.
Earnings
Due to weak business development, EBIT for the Capacitors and Inductors segment
was minus EUR 14 million in the fiscal year under review (plus EUR 42 million in
2008).
Capital expenditure in fixed assets
In fiscal 2009, capital expenditure in fixed assets for Capacitors and Inductors totaled
EUR 52 million (EUR 46 million in 2008). This money was used for projects such as
the Chinese subsidiary EPCOS Feida and construction of a new factory in Iceland. In
the future, the latter facility will enable our subsidiary Becromal to manufacture aluminum foils at lower cost, primarily for use in the production of aluminum electrolytic
capacitors. Other investments in this segment focused mainly on new products in the
period under review.
© EPCOS AG 2009
8
CONSOLIDATED FINANCIAL STATEMENTS
2. Ceramic Components
EUR million
Sales
EBIT
Capital expenditure in fixed assets
2008
±
502
39
32
2009
-39%
-63%
307
-40
12
In the Ceramic Components segment, sales were down 39 percent to EUR 307
million in fiscal 2009 (EUR 502 million in 2008). As a result, the segment’s contribution to total sales declined from 34 percent a year earlier to 27 percent in the period
under review.
Piezo actuators
Weak business with products for automotive electronics applications was the main
reason for this decline in sales. Sales of the piezo actuators used in piezo injection
systems were particularly hard hit, dropping by more than half in the fiscal year under
review. However, EPCOS maintained its position as global market leader for these
key components, which enable diesel and gasoline engines to burn fuel very efficiently and with low emissions.
Multilayer components
Sales of multilayer ceramic components fell by more than 40 percent. Weak demand
from automotive and industrial electronics customers was the main reason for this
decline. At the same time, we continued to adjust our product portfolio in this market
and thus further reduced our business volume.
Sensors and sensor systems
In the period under review, sales of sensors and sensor systems declined by around
25 percent. Business with temperature and pressure sensors for automotive and
industrial electronics applications was worst affected. EPCOS provides a very broad
spectrum of sensors, such as temperature sensors that measure whether operating
fluids in machinery (such as oils and coolants) are getting too hot. High-precision
pressure sensors are another example. These sensors measure pressure in demanding environments such as hot exhaust gases and fuel vapors. Pressure sensors
from EPCOS are key components in systems that can significantly improve the
performance, energy efficiency and environmental impact of combustion engines.
© EPCOS AG 2009
9
CONSOLIDATED FINANCIAL STATEMENTS
Thermistors, varistors, arresters and switching spark gaps
Sales of thermistors and disk varistors were about 25 percent down year on year.
These temperature- and voltage-dependent resistors are used for protection or
heating functions. In the period under review, demand for them was weaker than in
the previous year, especially from automotive and industrial electronics customers.
Sales of surge arresters – another area in which EPCOS is the global market leader
– were significantly lower than in the previous year. These products are used above
all to protect telecommunication systems against voltage surges, such as those that
occur when lightning strikes. Sales of switching spark gaps were also down. These
components are needed to ignite xenon headlamps on cars, for example.
Earnings
The decline in sales at Ceramic Components led to an EBIT loss of EUR 40 million in
the fiscal year under review (plus EUR 39 million in 2008).
Capital expenditure in fixed assets
In light of poor business conditions, capital spending in fixed assets at Ceramic
Components was reduced to EUR 12 million in fiscal 2009 (EUR 32 million in 2008).
Most of this sum was for new products.
3. SAW Components
EUR million
Sales
EBIT
Capital expenditure in fixed assets
2008
398
29
78
±
-15%
-50%
2009
340
-24
39
Sales at SAW Components fell 15 percent year on year to EUR 340 million in fiscal
2009 (EUR 398 million in 2008). However, the segment’s share of total sales still rose
from 27 percent in the previous year to 30 percent in the period under review.
Multimedia and mobile communication filters
With the world’s economy in crisis, consumers have been reluctant to buy consumer
electronics equipment. Demand for components declined accordingly among manufacturers in this industry. EPCOS’ sales of SAW multimedia filters were down by
nearly 20 percent as a result.
The slight increase in sales of SAW mobile communication filters was not enough to
compensate for this negative trend. However, demand for SAW filters for mobile
communication applications revived noticeably, especially toward the end of the
period under review. EPCOS was, for example, able to benefit from the roll-out of
© EPCOS AG 2009
10
CONSOLIDATED FINANCIAL STATEMENTS
new UMTS handsets. In these phones, we are positioned with our mobile communication filters even stronger than in simpler handsets. UMTS phones also require
more SAW filters in total.
Integrated radio-frequency (RF) products
Besides discrete filters, EPCOS’ portfolio of products for high-end mobile phones
also includes a whole series of integrated RF products such as duplexers and frontend modules. EPCOS also supplies ESD/EMI protection modules that allow customers to replace more expensive semiconductor components in their mobile handsets.
While demand for multilayer ceramic modules improved in the second half of fiscal
2009, sales dropped sharply for the year as a whole.
Earnings
EBIT at SAW Components was minus EUR 24 million in the period under review
(plus EUR 29 million in 2008).
Product range broadened
EPCOS is constantly expanding its range of SAW components. In May 2009, the
company purchased the MEMS (micro-electro-mechanical systems) microphone
development activities of Technitrol, a US American firm. This acquisition is enabling
EPCOS to enter the fast-growing market for miniaturized MEMS microphones, which
are used in mobile handsets and Bluetooth headsets in particular. These applications
already have a market volume running into the triple-digit million euro range.
The new MEMS microphones are also increasing EPCOS’ share of value-added in
mobile communication equipment. In the future, EPCOS’ product portfolio will thus
cover both radio-frequency applications and audio-frequency applications for voice
and sound recording. EPCOS has long been the global market leader in RF filters for
mobile communication applications. Moreover, MEMS microphones can also be fitted
in notebook computers and digital cameras.
Capital expenditure in fixed assets
In the period under review, capital expenditure in fixed assets at SAW Components
fell to EUR 39 million (EUR 78 million in 2008). This amount was used primarily to
expand production capacity and ramp up the volume manufacture of new products. It
also included the purchase of Technitrol’s MEMS microphone development activities.
© EPCOS AG 2009
11
CONSOLIDATED FINANCIAL STATEMENTS
INDUSTRIES
Broad, balanced base in our target markets
Share of EPCOS’ sales by industry
Information and communication technology
Industrial electronics
Automotive electronics
Distributors
Consumer electronics
Sales by industry EUR million
Information and communication technology
Industrial electronics
Automotive electronics
Distributors
Consumer electronics
Total sales
2008
333
341
405
240
159
1,478
2008
23%
23%
27%
16%
11%
2009
25%
24%
20%
18%
13%
±
-14%
-19%
-42%
-15%
-9%
-22%
2009
287
278
233
204
145
1,147
Largely driven by the global economic crisis, sales to all industries served by EPCOS
declined in fiscal 2009.
Sales of products for automotive electronics applications were down more than 40
percent – the sharpest drop in any of the industries served. Accordingly, automotive
electronics’ share of total sales declined to 20 percent (27 percent in 2008). Sales to
information and communication technology customers were down 14 percent. At the
same time, this industry’s share of total sales increased to 25 percent (23 percent in
2008), giving it the largest share of total EPCOS sales in the period under review.
Almost level with information and communication technology was industrial electronics, which accounted for 24 percent of total sales (23 percent in 2008). In fiscal 2009,
sales to this industry declined by 19 percent. Sales to distributors who resell our
products dropped 15 percent, while distributors’ share of total sales rose to 18 percent (16 percent in 2008). Sales to consumer electronics manufacturers were down 9
percent. This industry too increased its share of total sales to 13 percent (11 percent
in 2008).
Year on year, the breakdown of EPCOS’ sales by industries shifted significantly in
some areas. However, this did not affect our broad and comparatively balanced base
in the markets we serve.
© EPCOS AG 2009
12
CONSOLIDATED FINANCIAL STATEMENTS
Information and communication technology
Sales focused mostly on mobile solutions
Components and modules that are needed for mobile phones account for about 70
percent of EPCOS’ sales to the information and communication technology industry.
Mobile phones are increasingly evolving into multifunctional devices that, while
supporting more and more applications in addition to telephony, are expected to stay
as small and handy as ever. In the future, this trend will necessitate more and more
electronic components – especially RF filters and modules. Moreover, as a trendsetter in miniaturization, EPCOS is also benefiting from the fact that space to fit all the
necessary component functions on circuit boards is becoming smaller than ever.
EPCOS also sells a broad spectrum of products for traditional fixed network communications, including components for the suppression of interference and the protection of telecommunication systems, as well as products for use in the DSL modems
that enable high-speed access to the Internet.
Industrial electronics
Sustained trend toward greater energy efficiency
The trend toward greater energy efficiency remains a key driver of growth in EPCOS’
sales of products for industrial electronics applications. Our customers want solutions
that help them cut energy consumption by plant and machinery and reduce energy
losses during power generation and distribution.
In its efforts to save energy, industry is increasingly turning to variable-speed drives.
These drives need frequency converters in which our aluminum electrolytic capacitors perform vital functions, storing electrical energy and smoothing voltage.
Around the globe, action is being taken to improve power factor correction (PFC) in
power networks. EPCOS, the global market leader, supplies all key components for
PFC systems and is also able to deliver complete solutions containing capacitors,
thyristor modules and inductors. The renewable energy generated by wind and solar
power plants too is growing in importance. In this context, our capacitors are fitted in
the converters and inverters that transform generated power so that it can be fed into
the grid.
A parallel trend that also remains intact is the increasing automation of production
facilities in the traditional industrialized countries. Further stimulus continues to come
from the modernization and construction of new factories in countries such as China,
India and some of the ASEAN states.
© EPCOS AG 2009
13
CONSOLIDATED FINANCIAL STATEMENTS
Manufacturers of lighting systems need electronic components to make the energysaving lamps that – not least due to legislative changes – are increasingly taking over
from conventional incandescent light bulbs.
Automotive electronics
Substantial electronic content in cars
Although the acute crisis in the automotive industry caused sales of EPCOS products
for use in automotive electronics applications to slump in 2009, this industry remains
a central pillar of our business.
All three EPCOS business segments supply products to automotive electronics
customers, although Ceramic Components accounts for the greater part of these
sales. Many of our components and solutions are indispensable to automotive electronics systems and devices. The market’s ever increasing demand for enhanced
safety, comfort and – above all – fuel efficiency to help ease the burden on the environment is the key driver of our business in this industry.
Accordingly, sales of piezo actuators again accounted for the largest share of our
sales to automotive electronics customers in fiscal 2009. Car makers fit piezo fuel
injection systems in both diesel and gasoline engines to achieve more exact and
finely dosed control of the fuel injection process. This in turn enables engines to burn
fuel very efficiently and with lower emissions.
Sensors and sensor systems from EPCOS likewise help improve cars’ energy consumption. For example, they measure the temperature of intake air, exhaust gases,
oil and cooling agents. Controllers then analyze this data and use it to optimize
engine performance. Our temperature sensors also enable the improved control of
air-conditioning systems. Our pressure sensors too are used by car manufacturers,
for example in exhaust gas recirculation systems that can significantly lower the level
of emissions from combustion engines.
Electronic systems are also called for in car safety applications. Airbags are now
being fitted even in mid-range and compact cars, while ABS and electronic stability
programs help shorten braking distances and keep vehicles safely in their lanes.
The trend toward ever more information and convenience systems in cars likewise
continues. As more and more functions are packed into these systems, it is only
natural for their electronic content to increase too. GPS navigation systems and
digital audio systems, for example, are increasingly becoming standard equipment in
mid-range and compact cars.
© EPCOS AG 2009
14
CONSOLIDATED FINANCIAL STATEMENTS
Consumer electronics
Digitization and low power consumption shaping the market
EPCOS groups entertainment electronics and household appliances together in the
consumer electronics category.
In fiscal 2009, manufacturers of entertainment electronics equipment accounted for
more than half of EPCOS’ sales to consumer electronics customers. Our components
and modules are as essential to flat-screen HDTVs and DVD and Blu-ray
player/recorders as they are to Internet-ready gaming consoles and MP3 players. In
these products, our components and modules filter radio-frequency signals, ensure
electromagnetic compatibility and protect electronic components against electrostatic
discharges.
We also manufacture a broad range of products for household appliances – another
area in which electronic content is growing. Electromechanical control units are
increasingly being replaced by electronic control units, while new technology strategies are being devised to reduce energy consumption.
Distributors
Key sales partners
Our distributors are important partners who play a crucial role in ensuring a regular
supply of standard components to our customers. They also offer our customers a
broad spectrum of services, thereby improving the availability of many of our components.
Using distributors as a further sales channel helps us to focus our own sales force,
deploy it more efficiently and save on sales costs. Our customers also benefit as they
can bundle their purchases of standard components via distributors. This lets them
reduce the number of suppliers and cut their costs too.
© EPCOS AG 2009
15
CONSOLIDATED FINANCIAL STATEMENTS
REGIONS
Asia makes largest single contribution to sales
Share of EPCOS’ sales by region
Asia
Germany
Europe without Germany
NAFTA
Others
Sales by region EUR million
Asia
Germany
Europe without Germany
NAFTA
Others
Total sales
2008
374
508
440
93
63
1,478
2008
25%
35%
30%
6%
4%
2009
35%
27%
27%
7%
4%
±
+8%
-39%
-30%
-9%
-32%
-22%
2009
405
307
307
85
43
1,147
Weak sales of products for automotive and industrial electronics applications in
particular affected the regional breakdown of EPCOS’ sales in fiscal 2009. As a
result, Germany and the rest of Europe experienced the sharpest declines in sales,
although sales were also down in the NAFTA region. By contrast, EPCOS continued
to grow in Asia.
Europe
Weak business with automotive and industrial electronics customers
EPCOS’ sales declined by 39 percent in Germany, the heaviest regional decline in
the period under review. This region’s share of total sales therefore declined from
35 percent in the previous year to 27 percent in fiscal 2009. Sales in Europe without
Germany were down 30 percent, reducing this region’s contribution to total sales
from 30 percent in the previous year to 27 percent.
In spite of weak demand in the automotive and industrial electronics industries,
EPCOS still generated more than half its sales in Europe (including Germany), where
leading customers in both of these industries and a number of large customers in the
telecommunications sector are based.
© EPCOS AG 2009
16
CONSOLIDATED FINANCIAL STATEMENTS
Asia
Growth despite economic crisis
In Asia, EPCOS’ sales were 8 percent higher than in fiscal 2008. This region thus
accounted for 35 percent of total sales in the period under review (25 percent in
2008).
This pleasing development is largely due to the contribution to sales made by Chinese subsidiary EPCOS Feida, which commenced operations at the start of 2009.
EPCOS Feida develops and produces power capacitors primarily for use in household appliances such as washing machines, dryers and refrigerators, but also in
industrial machinery such as drive systems and pumps. These applications need
capacitors to start and run electric motors.
Sales to Asia-based manufacturers of mobile handsets also grew in the fiscal year
under review.
NAFTA
Important design-in market
EPCOS’ sales in the NAFTA region declined by 9 percent in fiscal 2009. This region’s
share of total sales rose slightly from 6 percent in the previous year to 7 percent in
the period under review. In this region too, the drop in sales was largely attributable
to the effects of the economic crisis.
Although the NAFTA region accounts for a relatively small share of EPCOS’ sales, it
remains of vital importance to our business. Many new products and systems are
developed in North America. Decisions about which electronic components from
which suppliers are to be approved for use in new applications are also made here. If
EPCOS is successfully involved in these design-ins, our solutions play a part in the
volume production that follows. Since more and more of our NAFTA-based customers themselves now manufacture in Asia, such decisions increasingly impact our
Asian sales too.
© EPCOS AG 2009
17
CONSOLIDATED FINANCIAL STATEMENTS
RESEARCH AND DEVELOPMENT
Opening promising opportunities with new technologies
EUR million
R&D expenses
2008
±
81
2009
-1%
80
In-depth knowledge, a wealth of experience and efficient processes are imperative if
we are to meet the market’s demands for innovative products and consistently satisfy
the ever-changing requirements of our customers. Our impressive capabilities in
materials research, product development and process technology enable us to manufacture standard components as well as solutions that are tailored to the everchanging needs of individual customers. The outcomes of our innovation give both
our customers and ourselves competitive advantages. They also enable us to open
promising areas of application and new markets.
Investments in research and development (R&D) prepare the ground for the continual
improvement of our processes and products, as well as laying a firm foundation for
future growth. Aware of this, we kept our R&D spending virtually unchanged at
EUR 80 million in fiscal 2009 (EUR 81 million in 2008). This increased R&D spending
as a percentage of sales from 5.5 percent in the previous year to 7.0 percent in the
period under review. In the face of global competition, superior innovation is the
decisive success factor, in addition to flawless quality and competitive costs.
Energy efficiency and miniaturization – powerful drivers of innovation
For the electronic components, modules and systems business, the requirement for
more energy-efficient electrical products and systems is constantly growing in importance. The trend toward lowering energy consumption and reducing losses during
power distribution is clearly visible in all the industries we serve. Many products and
solutions from EPCOS already help protect the environment and cut energy costs for
users. We are thus making good use of the growth opportunities created by increasing environmental awareness around the globe. Products that directly or indirectly
improve energy efficiency already account for around a quarter of EPCOS’ Group
sales.
Miniaturization is a further megatrend in electronics, driven in part by the demand for
ever greater functional density in electrical and electronic devices. People want to
use these devices to perform more and more different tasks. At the same time, they
expect the devices themselves to become ever lighter and more compact. Mobile
phones, for example, increasingly boast an array of applications that go well beyond
telephony. Modern handsets additionally serve as cameras, MP3 players, navigation
systems, TVs and radios, for instance – and also have to incorporate USB, Bluetooth
and wireless LAN interfaces for data transfer. High-end mobile handsets in particular
are expected to work without problems anywhere in the world too. As a result, one
© EPCOS AG 2009
18
CONSOLIDATED FINANCIAL STATEMENTS
and the same device must support several different mobile communication standards
and thus be multiband- and multimode-capable. However, all these extra functions
can only be packed into less and less space if the electronic components used become smaller and smaller, or if more and more functions are integrated.
EPCOS is one of the miniaturization trendsetters in radio-frequency (RF) applications
in particular, manufacturing key components such as RF filter products and modules.
Other industries besides mobile communications are also increasingly demanding
miniaturized components, however. For them too, EPCOS supplies a series of innovative solutions that fulfill key functions in the applications for which they are built.
© EPCOS AG 2009
19
CONSOLIDATED FINANCIAL STATEMENTS
EMPLOYEES
Slump in demand makes headcount adjustment
unavoidable
Employees at September 30
2008
21,195
±
-5%
2009
20,076
Employees by segment at September 30
Capacitors and Inductors
Ceramic Components
SAW Components
Sales/Headquarters
2009
12,237
3,786
3,368
685
2008
60%
22%
15%
3%
2009
61%
19%
17%
3%
Employees by region at September 30
China
Europe without Germany
Asia without China
Germany
Americas
2009
9,749
3,777
3,343
1,757
1,450
2008
46%
21%
16%
9%
8%
2009
49%
19%
16%
9%
7%
As of September 30, 2009, EPCOS employed about 20,100 people worldwide, down
from around 21,200 in the previous fiscal year. This 5 percent decrease in the work
force was due to the fact that EPCOS, like other companies, had to adjust its production capacity in the wake of the global economic crisis and the associated slump in
demand. At our German sites, this was done above all by running down overtime
hours, using up residual vacation entitlements and introducing short-time work.
Beyond this, it was also necessary to reduce the headcount, mainly at sites outside
Germany. Our facilities in Asia and Eastern Europe were hardest hit by these measures.
Almost half of work force in China,
personel costs per employee reduced
A total of 65 percent of our people were employed in Asia in the fiscal year under
review (62 percent in 2008). About two-thirds of these people were based in China,
the world’s fastest growing electronics market, where we currently employ 49 percent
of our work force. EPCOS took on more than 1000 staff from its partner Anhui Feida
when the new Chinese subsidiary EPCOS Feida was launched to produce power
capacitors for alternating current applications.
Our employee base in Europe without Germany shrank by 2 percentage points to 19
percent. The corresponding figure in Germany remained unchanged at 9 percent.
© EPCOS AG 2009
20
CONSOLIDATED FINANCIAL STATEMENTS
The Americas’ share of the total EPCOS work force declined to 7 percent (from 8
percent in 2008).
In absolute terms, the number of employees was reduced by about 980 in countries
with low labor costs and by about 140 in countries with high labor costs in the period
under review. The proportion of our work force employed in low-labor-cost countries
remained as high as in the previous year at 82 percent. As a result, EPCOS was able
to further reduce its average personnel costs per employee from EUR 20,000 a year
earlier to about EUR 19,000 in fiscal 2009.
R&D staff numbers constant
Despite the headcount reduction in fiscal 2009, EPCOS kept the total number of
people employed worldwide in research and development (R&D) constant at about
800 in the period under review.
Our worldwide sales and product marketing network is one of the reasons why
EPCOS stands for competence and customer orientation in application-specific
solutions around the globe. More than 800 employees – more than half of whom are
engineers and technical experts – are deployed to serve our customers worldwide.
EPCOS is thus well prepared to work together with customers and find the best
solutions every time.
© EPCOS AG 2009
21
CONSOLIDATED FINANCIAL STATEMENTS
ASSETS AND FINANCIAL POSITION
Weak business development burdens balance sheet
Balance sheet structure EUR million
Equity
Debt
2008
*681
713
2009
532
758
Equity ration and gearing
Equity ratio
Gearing
2008
*49%
*26%
2009
41%
69%
Net cash flow EUR million
Net income/loss
Depreciation and amortization
Change in net current assets
Change in provisions and other adjustments
2008
*63
122
-14
*7
2009
-121
126
16
10
178
31
-137
-83
-18
20
-20
3
-135
-100
43
-69
Net cash provided by operating activities
Net capital expenditures (on property, plant, equipment and intangible assets)
Payments for the acquisition of businesses and equity investments
Net proceeds from the sale of businesses/other
Net cash used in investing activities
Net cash flow
* After adjustments to affiliated companies effective June 30, 2008. Details are provided in section 6.9 of the
notes to the consolidated financial statements.
Weak business development in fiscal 2009 had a corresponding impact on EPCOS’
balance sheet (see also section 2 in the notes to the consolidated financial statements).
Equity was reduced by EUR 149 million to EUR 532 million (EUR 681 million in
2008). This decline was attributable essentially to the net loss of EUR 121 million and
the dividend payout of about EUR 20 million for fiscal 2008. As a result, the equity
ratio too declined to 41 percent (49 percent in 2008).
Current assets including cash and cash equivalents declined to EUR 588 million in
fiscal 2009, a drop of EUR 150 million. Liquidity decreased by EUR 79 million to
EUR 119 million. The main reasons for this were negative net cash flow (minus
EUR 69 million) and payment of the dividend for fiscal 2008. In past fiscal year 2009,
inventories were adjusted wherever possible in line with lower business volumes and
thus reduced by about EUR 40 million. Both accounts receivable and other short-
© EPCOS AG 2009
22
CONSOLIDATED FINANCIAL STATEMENTS
term financial and non-financial assets decreased as a consequence of lower sales
revenues.
Fixed assets and other long-term assets rose by EUR 47 million to EUR 702 million,
primarily due to the increase in intangible assets and property, plant and equipment.
First-time consolidation of Becromal and EPCOS Feida and capitalized development
expenses were the main reasons for the increase in intangible assets. The same
factors essentially drove the EUR 20 million year-on-year increase in property, plant
and equipment, despite the fact that capital expenditures were significantly lower
than depreciation and amortization.
Total assets thus stood at EUR 1,290 million on September 30, 2009, a decline of
EUR 104 million compared with the figure at September 30, 2008.
On the liabilities side of the balance sheet, EPCOS’ financial debt increased by
EUR 76 million to EUR 288 million in fiscal 2009. This was due mainly to the full
acquisition of Becromal and to a finance lease taken out for a property in Krossanes,
Iceland. In light of the change of control to TDK, the convertible bond in the amount
of EUR 126 million was settled in the fiscal year under review and replaced by financing in the amount of EUR 200 million supplied by TDK. Net financial debt of EUR 367
million at the balance sheet date includes pension liabilities totaling EUR 198 million.
Net borrowings thus rose EUR 191 million in the period under review. Substantially
lower sales and lower capital spending caused accounts payable to decline by
EUR 33 million to EUR 119 million. For volume reasons, other short-term financial
and non-financial liabilities were reduced by EUR 20 million. Pension liabilities rose
by about EUR 36 million, mainly as a result of actuarial effects.
Due to the increase in financial debt and pension liabilities and the concurrent decline
in equity, EPCOS’ gearing ratio worsened to 69 percent in the period under review
(26 percent in 2008). Gearing is defined as the ratio of financial debt plus pension
liabilities (EUR 486 million) less cash and cash equivalents (EUR 119 million) to
shareholders’ equity (EUR 532 million).
In addition to the liquid funds at EPCOS’ disposal, a credit line of EUR 300 million
has been made available by TDK. At the balance sheet date, EUR 200 million had
been drawn on this line. At fiscal year-end, EPCOS also had bilateral borrowing
arrangements totaling EUR 90 million, of which EUR 22 million had been drawn at
September 30, 2009.
Net cash flow
EPCOS’ net cash flow totaled minus EUR 69 million in fiscal 2009. Net cash provided
by operating activities declined by EUR 146 million to EUR 31 million. In particular,
the net loss of EUR 121 million had a negative impact on this figure. By contrast,
depreciation and amortization totaling EUR 126 million had a positive effect, as did
the reduction of about EUR 16 million in net working capital. Net cash used in investing activities came to net EUR 100 million. The main items in the latter figure were
© EPCOS AG 2009
23
CONSOLIDATED FINANCIAL STATEMENTS
net capital expenditures of EUR 79 million for property, plant, equipment and intangible assets.
TDK’s acquisition of a majority interest improves EPCOS’ rating
After TDK successfully acquired a majority interest in EPCOS in October 2008,
Standard & Poor’s raised our rating to »BBB-« in the category »investment grade« on
November 3, 2008. The »credit watch positive« outlook remained unchanged for the
time being. In the course of fiscal 2009, our rating however then improved further to
»BBB« with a »developing« outlook.
Depending on the scope of the business combination, the pace at which it proceeds
and the extent of financial support from TDK, Standard and Poor’s does not rule out
the possibility of a further improvement in EPCOS’ rating in the future.
EPCOS AG
Economic crisis weighs on EPCOS AG too
Balance sheet data for EPCOS AG
Total assets
Shareholders’
equity
EUR million
2008
1,086
±
+2.6%
2009
1,114
EUR million
594
-5.4%
562
55%
559
51%
0%
-
50%
558
50%
Share of total assets
Non-current assets EUR million
Share of total assets
EPCOS AG, Munich, was created on September 2, 1999, by a change in legal form
of Siemens Matsushita Components GmbH, Munich (S+M GmbH). Until August 17,
1999, the latter company had operated under the name Siemens Matsushita Components Verwaltungsgesellschaft mbH, Munich (SMV mbH). Prior to this, the assets of
Siemens Matsushita Components GmbH & Co. KG, Munich (S+M KG) had passed to
SMV mbH effective July 1, 1999.
At fiscal year-end 2009, EPCOS AG employed 1,606 people, compared with 1,687
people a year earlier.
Unlike the consolidated financial statements, which were prepared in accordance
with International Financial Reporting Standards (IFRS) as they are to be applied in
the European Union, the financial statements for EPCOS AG for the fiscal year
© EPCOS AG 2009
24
CONSOLIDATED FINANCIAL STATEMENTS
ending September 30, 2009, were prepared in accordance with the accounting principles prescribed by the German Commercial Code (HGB) and the German Stock
Corporation Law (AktG).
Sales
Faced with an extremely difficult economic climate in the period under review, sales
of EUR 746 million at EPCOS AG were significantly down year on year (EUR 1.09
billion in 2008). EPCOS AG accounts for such a large proportion of the Group’s
consolidated sales of EUR 1.15 billion because all key Group subsidiaries report their
sales for Europe and selected other countries via EPCOS AG.
The business segments made varying contributions to the sales of EPCOS AG:
Sales for Capacitors and Inductors declined by 25 percent, but increased this segment’s share of total EPCOS AG sales to 38 percent (35 percent in 2008). The
Ceramic Components segment was worst affected by the crisis in the automotive
industry. Accordingly, its sales were down 45 percent – the sharpest drop of any of
the segments. Ceramic Components thus saw its share of EPCOS AG’s total sales
decline to 30 percent (38 percent in 2008). Accordingly, this segment was affected
most by the drop in sales. SAW Components saw its sales fall by 20 percent. Due to
the more substantial drop in sales in the other two segments, however, it still raised
its share of total EPCOS AG sales to 32 percent (27 percent in 2008).
The regional breakdown of EPCOS AG’s sales was shaped in particular by weak
sales to the automotive and industrial electronics industries, leading to the largest
regional drop in sales in Germany. Germany’s share of sales thus declined to 40
percent (46 percent in 2008). The share of sales accounted for by other European
countries remained stable at 39 percent (39 percent in 2008). The remaining regions
saw their share increase from 15 percent a year earlier to 21 percent in the period
under review.
Earnings
EPCOS AG recorded a net loss of about EUR 17 million in fiscal 2009 (plus EUR 22
million in 2008). Volume effects resulting from the significant drop in sales were the
main reason. Dividends totaling EUR 15 million paid to EPCOS AG by foreign subsidiaries had a positive impact, however. Other operating income and expenses were
influenced essentially by internal transfer charges and the currency translation result
from operations.
Capital expenditure
EPCOS AG invested a total of EUR 19 million in property, plant and equipment in
fiscal 2009. Most of this money was used by the SAW Components segment primarily to expand production capacity. At EPCOS AG, capital spending for the Capacitors
and Inductors segment and the Ceramic Components segment was minimal, as the
© EPCOS AG 2009
25
CONSOLIDATED FINANCIAL STATEMENTS
lion’s share of the production activities of these two segments is already based
outside EPCOS AG.
RISK REPORT
Reliable risk management
EPCOS is exposed to a variety of risks that are inherent to the nature of its business
activities. The most urgent challenge facing us is to seize opportunities while seeking
to limit our risks.
We align our policy on risk with our business strategy. Within the framework of this
strategy, we continually take steps to avoid inordinate risks wherever possible.
Monitoring and risk management system
We operate a series of defined procedures to record and monitor the risks we face.
Together, these procedures constitute EPCOS’ Group-wide monitoring and risk
management system, of which regular enterprise-wide planning and reporting is only
one aspect. We constantly review the suitability and efficiency of this system, and did
so again in fiscal 2009. Moreover, our monitoring and risk management system is
also regularly examined by the auditors, who test its compliance with the German
Stock Corporation Law. Compliance with the requirements and control mechanisms
prescribed by the Sarbanes-Oxley Act Section 404 (SOX), which are more extensive
than the requirements of German law, was introduced in accordance with US American law when EPCOS’ shares were listed in the USA. EPCOS will remain compliant
under IFRS even after its delisting in the USA.
To ensure compliance with the Sarbanes-Oxley Act, we have in recent years continually improved our processes to guarantee reliable reporting and avoid violations
of laws and regulations in internal practice. EPCOS has also established the function
of Chief Compliance Officer and appointed Regional Compliance Officers to monitor
the compliance of our business processes with the requirements of law. Our internal
monitoring system is designed to ensure that the consolidated financial statements
are consistent with IFRS and therefore provide a fair and accurate picture of the
assets, financial and earnings position of the EPCOS Group. The monitoring system
reflects the principles propagated by the Committee of Sponsoring Organizations of
the Treadway Commission. We reviewed our accounting-related monitoring system
in light of the provisions of SOX. As in the previous year, this did not lead to any
material objections. Nor did the auditor find any substantial weaknesses in our monitoring system in the course of the audit of the financial statements.
© EPCOS AG 2009
26
CONSOLIDATED FINANCIAL STATEMENTS
This system of monitoring and risk management is a vital tool in our business processes and an important basis for the decisions we make. It enables us to contain not
only operating risks, but also risks associated with foreign exchange and interest
rates. The principles formulated in our monitoring and risk management system are
binding for the managers of our operating units and of all corporate departments.
Within the framework of this system, the Management Board and Supervisory Board
are always informed promptly and comprehensively of any risks.
The risks outlined below could impair our business, our financial resources and our
earnings. They are not the only risks to which we are exposed. Additional risks of
which we are currently unaware or which we currently regard as immaterial could
also influence our business.
We use financial derivatives to hedge some of the risks described, especially interest
and foreign exchange risks. The credit facilities that allow us to finance our global
business are denominated in different currencies and have different maturities. Some
of them are exposed to the risk of changes in interest rates. Regular analyses of
interest risks in the currencies relevant to EPCOS ensure that these risks are reduced to a minimum. In accordance with IFRS, all derivative financial instruments are
reported in the consolidated financial statements at their market value. To avert the
risk of default, EPCOS selects banks with first-class credit ratings as contractual
partners for financial derivatives. EPCOS also uses financial derivatives to avoid risks
arising from fluctuations in the market price of precious metals.
Details of the derivative instruments that we currently use and have used in the past
are provided in the section 6.33 of the notes to the consolidated financial statements.
Macroeconomic risks
Volatility and cyclical demand patterns are characteristic features of the market for
electronic components, modules and systems. Demand is dependent on fluctuations
in the global economy.
The first half of fiscal 2009 was shaped by an extremely difficult economic climate.
The crisis on the international financial markets, which had already been developing
in the course of fiscal 2008, spread to become a global economic crisis that also had
a heavy impact on EPCOS’ business. Although the crisis had passed its lowest point
by the second half of fiscal 2009, economic recovery began from a very low level.
The automotive industry in particular, which accounts for a large proportion of
EPCOS’ sales, suffered badly from the economic crisis in the period under review.
Fluctuations in energy and material costs and the still significant volatility of exchange
rates are continuing to fuel considerable uncertainty on the markets.
Persistent uncertainties about the course of the global economy too make it difficult
to forecast future sales volumes and selling prices. Some of our customers themselves operate in cyclical industries. Their demand for electronic components, modules and systems thus hinges on developments in their own markets. This fact can
© EPCOS AG 2009
27
CONSOLIDATED FINANCIAL STATEMENTS
significantly alter the pattern of sales at EPCOS, which in turn may drive up unit
costs. At the same time, adverse conditions make it more difficult to plan production
volumes and material consumption, and to forecast our customers’ future delivery
requirements. We therefore regularly adjust our inventories to accommodate potential
consumption, range of coverage and technical risks. The risk of falling prices is
factored into our inventory valuations – and our accounting principles – on an ongoing basis.
EPCOS primarily operates in markets subject to fast innovation and very rapid technological change. There is therefore always the danger that we might not respond as
quickly as competitors to new market trends and/or technologies, thus losing market
share. To minimize this risk, EPCOS invests, compared to the competition, a relatively high share of sales in research and development.
Competition risks
The electronic components, modules and systems industry in which we operate is
fiercely competitive. As a rule, the prices of our products fall in the course of their life
cycle. In this regard, globalization has made the prevailing conditions in this business
in particular considerably more difficult. Growing numbers of competitors from Asia,
especially China, are penetrating the market with lower prices. For component manufacturers such as EPCOS, it is therefore as vital as ever to quickly develop and
market competitive solutions. In this process, there is the risk that ramping up new
products will cause unexpectedly high costs and thus negatively affect the earnings
situation.
EPCOS is meeting these challenges by continually improving the quality of its processes, products and services and by relocating business processes to countries with
low labor costs. The goal is to cut costs continually while ensuring that our customers
gain maximum benefits from our technological expertise. Accordingly, EPCOS constantly invests in developing and marketing its technologies and products.
In addition, the combination of EPCOS with the components business of TDK Corporation is opening up new possibilities to become more competitive by leveraging both
synergies and the strengths of both partners.
Credit risks
We define credit risk as the risk of financial losses incurred if a contractual partner
fails to meet its payment obligations. Credit risk or default risk exists primarily in
relation to accounts receivable. To reduce this risk, we define a maximum volume of
receivables outstanding for each customer. For this reason and because of our broad
customer base the amount of receivables outstanding per customer does not reach a
level that would pose a threat to the survival of the company should individual customers default.
© EPCOS AG 2009
28
CONSOLIDATED FINANCIAL STATEMENTS
The current amount of receivables outstanding is monitored constantly in the context
of our asset management activities. Reminders are issued swiftly as and when
amounts become overdue. We also examine the creditworthiness of our customers,
obtaining information from the relevant banks as a matter of course. In response to
the increased risk of default due to the financial and economic crisis, we have further
expanded our monitoring methods.
The maximum default risk for operative accounts receivable is generally equal to the
book value.
In the past, EPCOS’ customers have never defaulted on significant receivable
amounts.
Liquidity risks
Liquidity risks refer to the danger that EPCOS might no longer be able to meet its
payment obligations arising, for example, from payment of interest, the repayment of
loans, capital expenditures, taxes, and other payments relating to operating business.
EPCOS currently has a credit facility totaling EUR 300 million supplied by the TDK
parent company. Part of this facility has been used. Our assumption is that continued
availability of both this credit facility and the existing scope of bilateral credit facilities
provided by various banks is assured beyond the current fiscal year. Regarding the
bilateral credit facilities provided by banks, we must in the future continue to satisfy
the terms of credit covenants, some of which contain performance metrics. In addition to these instruments, we constantly monitor the alternative forms of funding
available on the financial markets, including their costs. One primary goal is to maintain EPCOS’ financial flexibility and contain inordinate financing costs and risks.
Should the crisis on the international financial markets persist for a prolonged period,
this could limit the alternative sources of finance available to us in the future. However, in view of the finances made available by TDK, this would pose no immediate
threat to EPCOS.
Our long-term liquidity management is based on a rolling three-year plan which
determines the Group’s financing structure for the years ahead. To manage liquidity
in the short term, regular liquidity forecasts are produced together with rolling estimates of net cash to be provided by and used in operating and investing activities.
These measures enable us to respond quickly to any changes, minimize financing
risks and optimize the short-term investment returns on excess liquidity.
Payment obligations arising from liabilities reported on the balance sheet are presented in section 6.33 of the notes to the consolidated financial statements.1
1
See table „Maturity of financial liabilities“
© EPCOS AG 2009
29
CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risks
To a moderate extent, we are subject to the risk of changes in interest rates, as
floating interest rates have been agreed for isolated loan contracts and our liquidity is
invested on a rolling basis for periods of no more than three months. Details of the
scope of floating-rate loans are provided in the notes on financial liabilities (see
section 6.23 in the notes to the consolidated financial statements).
To reduce our exposure to interest rate risks, Corporate Finance at EPCOS AG
supplies Group companies with funds in the form of internal loans and via cash
pooling systems, insofar as this is possible and reasonable under country-specific
laws. Conversely, Group companies transfer their excess liquidity to Corporate
Finance to the extent permitted by local law.
EPCOS tracks and monitors only those interest rate risks that affect liquidity. The fair
value of fixed-interest loans is determined by their interest rates. However, this risk
has no effect on the balance sheet as borrowings are recognized at amortized cost. If
the interest rate were to rise by 100 basis points, interest payments on our floatingrate credit facilities (as of September 30, 2009) would increase by EUR 2.4 million
per annum.
Foreign exchange risks
The global nature of our business leads to payment flows in various currencies, of
which the euro (EUR), the US dollar (USD), the Japanese yen (JPY) and the Singapore dollar (SGD) remain the most important to the EPCOS Group. Since EPCOS’
companies are exposed to foreign exchange risks, exchange rate hedging is an
essential part of our risk management practice. One further factor is that exchange
rate fluctuations can improve the cost position of other component manufacturers and
thus affect market prices. For example, our Japanese and US American competitors
continued to benefit in fiscal 2009 from the relative weakness of both the US dollar
and the yen. This gave them cost and competitive advantages.
To minimize foreign exchange risks, EPCOS has in recent years transferred more
and more of our value added and sourcing processes from Central Europe to countries with lower labor costs. The currencies in many of these countries are more or
less closely tied to the US dollar. About 40 percent of EPCOS’ value added is now
generated in the extended USD area. This has reduced the company’s net risk
exposure and softened the impact on earnings due to pressure caused by the US
dollar.
Foreign exchange risks arise because of cash flows at Group companies that are not
denominated in those companies’ presentation currencies. Most such cash flows are
in euros, US dollars, Japanese yen or Singapore dollars. To reduce such risks, we
are careful to have as many transactions as possible (sales, purchases and financing
transactions) agreed in the relevant presentation currencies and to break even on
foreign currency items. Residual foreign exchange risks are constantly recorded in
© EPCOS AG 2009
30
CONSOLIDATED FINANCIAL STATEMENTS
our central foreign exchange management system. Appropriate instruments – primarily forward exchange contracts and options – are then used to hedge net amounts
denominated in the various currencies, usually for a period of three months.
On September 30, 2009, and September 30, 2008, the Group was exposed to the
following foreign exchange risks:
Net foreign exchange volume at risk (in EUR million, on September 30)
2009
EUR
Liquid funds and financial
assets
Accounts receivable
USD
2008
JPY
SGD
EUR
USD
JPY
SGD
8.9
16.9
339.8
2.2
3.8
14.3
183.4
2.5
57.6
206.9
447.6
0.1
56.8
216.1
316.4
0.3
-130.4 -2,250.1
-4.9
-35.5
-129.4 -1,793.4
-4.8
0
0
-21.7
59.9 -1,462.7
-2.6
3.4
Accounts payable
-70.7
Foreign currency loans
-21.2
Gross foreign exchange risk
-25.4
-33.4
-8.3
0
0
92.7 -1,293.6
-2.0
Estimated future net risk
23.8
27.0
-525.4
-8.7
5.5
-19.6
-434.3
-15.8
Existing collateral security
-1.0
-75.3
2,248.3
10.3
-12.4
-78.4
2,940.8
16.8
Net foreign exchange risk
-2.6
11.6
260.2
-1.0
-3.5
-5.3
1,212.9
-1.0
The table below reflects EPCOS’ sensitivity to exchange rates. This sensitivity is
indicated by showing the impact on pre-tax profits of a hypothetical 10 percent upward or downward revaluation of the euro against the US dollar, the Japanese yen
and the Singapore dollar on September 30. This analysis also assumes that all other
variables – particularly interest rates and exchange rate pairings than those specified
– will remain unchanged.
Sensitivity to exchange rates (in EUR million, on September 30)
2009
Result of a 10 percent upward revaluation
of the EUR
Result of a 10 percent downward revaluation of
the EUR
© EPCOS AG 2009
2008
USD
JPY
SGD
USD
JPY
SGD
-0.6
0.1
-0.3
-2.4
+2.1
-0.7
0.7
-0.2
0.4
+2.0
-1.5
+0.6
31
CONSOLIDATED FINANCIAL STATEMENTS
Procurement risks
To avoid delivery shortages and dependence on suppliers of our most important raw
materials, EPCOS as a rule maintains alternative procurement sources. In addition,
innovation and the constant improvement of our technologies and processes are
instrumental in reducing our requirements for expensive raw materials. Some of our
products nevertheless need materials that only a limited number of suppliers can
deliver in the required quality, or that are based on raw materials that are traded on
commodity exchanges. In isolated cases, it is therefore possible for supply bottlenecks or fluctuations in prices to occure, over which EPCOS has no control. Examples include silver palladium pastes for production of piezo actuators, for example, as
well as wafers made of lithium niobate, lithium tantalate or quartz for the manufacture
of surface acoustic wave components. Forward contracts, as a rule with maturities of
up to 12 months, protect us from changes in the price of silver palladium pastes.
Product liability and warranty claims
We are liable to our customers and end consumers for the quality of our products.
Despite comprehensive quality assurance measures, which we regularly monitor and
constantly refine and develop, a slight risk remains that individual EPCOS products
might be defective. Such defects could cause damage to our customers’ products.
Defective products supplied by EPCOS could therefore lead to warranty claims
against the company, or to liability claims for damages from customers throughout
the entire supply chain as a result of such defects. Moreover, defective products from
EPCOS could also impair our marketing success.
Personnel risks
EPCOS’ success depends on the knowledge, experience, motivation, performance
and commitment of its employees.
Our human resources policy therefore focuses on nurturing a corporate culture in
which a spirit of entrepreneurship and initiative are promoted, encouraged and allowed to develop on all levels and in every part of the organization. To sharpen our
competitive edge and continually strengthen our position with respect to rivals,
EPCOS must enable its employees – especially its best and most talented ones – to
contribute the full extent of their capabilities and thereby deliver top performance. We
also employ performance- and success-dependent income components and compensation systems in order to increase the motivation of our employees. We are well
aware that it is very difficult to replace high performers at short notice. We therefore
intensively plan the development of human potential and talent to prevent the loss of
such expertise wherever possible, or at least to be able to replace it quickly if necessary. We also recruit experienced and highly qualified experts as required.
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Information technology risks
EPCOS has established a comprehensive system of data lines and networks in order
to safeguard its international data traffic. EPCOS faces the following information
technology risks: networks can fail, data can be corrupted by operating or program
errors, and data can be manipulated or destroyed by external influences. We manage
these risks through our regular investments in hardware and software, through the
use of virus scanners, firewalls, access controls, and regular data backups, as well
as through the use of backup systems. Centralized computer systems are designed
to be highly secure and ensure high availability, so that a total outage of these systems is unlikely.
The staff members responsible for the security of information technology monitor and
manage these measures constantly.
Environmental risks
Our global business activities are subject to local environmental legislation and
regulations on air pollution, pollution of ground water, waste water treatment, waste
disposal, the use and handling of hazardous substances, and soil analysis and
decontamination, and other issues. Liability risks to our past and present business
operations arise from all of these factors.
In the future, additional environmental requirements could make it necessary for us to
adapt our environmental standards, which are already very strict, to new obligations.
This could, for example, drive up production costs and force us to modify our production processes.
Opportunities
The foundation of TDK-EPC Corporation (TDK-EPC) in Japan on October 1, 2009,
has created a global leading manufacturer of electronic components, modules and
systems – a company with a strong position in all key markets. The outlook for the
new company is very promising, given that the components activities of TDK and
EPCOS barely overlap and complement each other very well. That holds true technologically and in terms of products as well as in terms of customers and sales markets.
One benefit is that TDK is well established in Asia, the world’s fastest growing region,
especially in the consumer electronics and information technology markets. For its
part, EPCOS occupies a strong position above all in Europe in the growing automotive and industrial electronics markets, as well as in the global market for mobile
communication applications (see also Management Report, Industries section).
In addition to the general opportunities associated with entrepreneurial activity,
further opportunities for EPCOS derive from the trend toward greater energy efficiency, which is impacting all the industries we serve, although to differing degrees.
The increasingly broad functionality of mobile handsets is one of many other factors
that could further increase demand for our products.
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A permanent standing as the technology and innovation leader gives EPCOS the
chance to sustainably improve its position in the various industries served. Here too,
the combination with TDK’s electronic components business gives us the chance,
drawing on our shared and stronger technological expertise, to develop new products
that can be used to tap new areas of application and thus generate new business
potential.
Superior innovation in and the flawless quality of technologies, processes and products are critical factors of success in global competition. Accordingly, EPCOS’ ongoing moves to improve quality – in the context of the zero-defect quality offensive, for
example – give the company the chance, on the basis of market-leading quality, to
consolidate and improve on its position in increasingly quality-sensitive markets.
OUTLOOK
Better business development expected
Economic forecasts look brighter
Fiscal 2009 was largely shaped by the worst economic crisis since the 1930s. The
sales problems experienced by our customers triggered a huge decline in demand for
electronic components. Since then, however, the crisis on the international finance
markets and its impact on the global economy have eased somewhat. As a result,
demand for electronic components, modules and systems is beginning to rise again –
from a very low level.
Economic research organizations expect the global economy to turn the corner and
return to a pattern of growth in 2010. The International Monetary Fund (IMF) predicts
global growth of 3.1 percent for the next calendar year (against -1.1 % in 2009). In
the industrialized countries, the IMF expects output to increase by 1.3 percent
(against -3.4 % in 2009). Leading German economic institutes anticipate growth of
1.2 percent in Germany (against -5.0 % in 2009).
Increase capital expenditure, cut costs further
For the short fiscal year 2010 (October 1, 2009, through March 31, 2010; see also
Management Report, General section), EPCOS is adjusting its resource planning in
line with improving economic conditions. The company expects the volume of capital
spending to exceed depreciation and amortization. Money will be invested in increasing capacity and in equipment and production facilities as volume production of new
products is ramped up – especially at SAW Components. EPCOS subsidiary Becromal will also continue with the expansion of a factory to produce aluminum foil.
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EPCOS remains as committed as ever to cutting costs and increasing efficiency. In
this context, continually improving the quality of our processes, products and services
is one of the most important things we are doing to cut the cost of defects. Wherever
it is possible and makes sense, we are transferring business processes to countries
with low labor costs, primarily in order to reduce personnel expenses. Improving
productivity is another key focus.
Higher sales, better earnings
At the time when this report was being prepared (mid-November 2009), EPCOS’
customers had increased their order volumes again, although volumes were still
below the level of fiscal 2008. In light of this situation, we expect to see a high singledigit increase in sales compared to the first half of fiscal 2009 and positive earnings
before interest and tax (EBIT) in the short fiscal year 2010.
If expectations of an economic recovery are met and sustained beyond the short
fiscal year ahead, it is reasonable to assume that the business outlook for EPCOS
too will further improve in fiscal 2011 (April 1, 2010, through March 31, 2011).
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Information required pursuant to Section 289 Para. 2 No. 5
Sentence 1 and Section 315 Para. 2 No. 4 Sentence 1 of the
German Commercial Code (HGB)
Compensation of the Supervisory Board
Pursuant to the Articles of Association, the members of the Supervisory Board received fixed compensation plus an attendance fee for every meeting of the Supervisory Board or of a Supervisory Board committee attended during the period under
review. Individual fixed compensation is calculated according to the period of service
as a member, chairman or deputy chairman of the Supervisory Board during the
fiscal year (section 11 paragraph 2 of the Articles of Association).
Compensation of the Management Board
1. Aims of the system
The compensation system seeks to provide members of the Management Board with
appropriate remuneration in accordance with their field of activity, their sphere of
responsibility and their personal performance. A substantial variable component
underscores the special importance attached to business performance and the
economic position of the company. The amount of annual target compensation
reflects the size and global orientation of the company, the comparable context within
which it operates and the compensation of the company's employees.
2. Structure of compensation during active service
Management Board compensation during active service currently comprises the
following three components:
(a) Non-performance-related compensation. This comprises a fixed monthly salary
which normally makes up about 40 percent of annual target compensation, plus other
benefits. The latter consist essentially of a company car that can also be used privately and subsidies toward or the payment of full premiums for insurance policies.
(b) Performance-related compensation. This normally makes up about 60 percent of
annual target compensation. Half of this variable compensation component is calculated by multiplying a contractually stipulated basic amount by a corporate factor
determined annually by the Supervisory Board in light of business development. The
other half is linked to compliance with a target based on earnings before taxes in the
EPCOS Group.
(c) Variable long-term incentive containing risk elements. In the past, members of the
Management Board have received stock options. In fiscal 2008, for one year only,
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CONSOLIDATED FINANCIAL STATEMENTS
they were granted stock appreciation rights (SARs). This component of compensation was not granted in fiscal 2009 (see section 23 of the notes for EPCOS AG and
section 6.1.6 of the notes to the consolidated financial statements, “Compensation of
the Management Board in fiscal 2009,” item 4a). The principles of the stock option
plans and the EPCOS Stock Appreciation Rights Plan 2007 are outlined in section
6.28 in the notes to the consolidated financial statements.
3. Commitments in the event that active service comes to an end
In the event that members’ active service on the Management Board comes to an
end, the employment contracts in existence in fiscal 2009 entitle such members to
the following benefits:
(a) Pension payments
Pension payments are fixed (non-performance-related) amounts that are agreed on
an individual basis. When they leave the company, pensions are paid to members of
the Management Board themselves, who have reached the age of 60, or who are
physically and mentally no longer able to fulfill their contractual obligations, or whose
appointment to the Management Board is not renewed. In the event of a member’s
death, reduced pension amounts are paid to surviving dependents. Widows’ pensions are 60 percent, orphans’ pensions 25 percent and half-orphans’ pensions 15
percent of the pension that would have been paid to the member of the Management
Board. Pensions are not paid in cases where employment contracts are terminated
for a material cause for which the members of the Management Board themselves
are responsible, or in cases where material cause for a revocation of the member’s
appointment exists pursuant to Section 84 Paragraph 3 of the German Stock Corporations Act (Aktiengesetz, AktG). Moreover, any other benefit claims can be offset
against pension payments.
For Joachim Zichlarz, who was appointed as a new member of the Management
Board effective April 1, 2009, the following amendment was made to the pension
agreement: Mr. Zichlarz will not be entitled to claim premature payment of his pension if his appointment to the Management Board is not renewed. All other provisions
of the pension agreement remain unchanged.
(b) Transitional payments
What are known as transitional payments are partly non-performance-related and
partly performance-related. These payments are disbursed as a lump sum when a
member of the Management Board leaves the company, provided that termination of
a member’s contract of employment is not due to a material cause for which the
member himself/herself is responsible, and provided that members do not terminate
their service on the Management Board of their own volition before reaching the age
of 60. In principle, the amount disbursed corresponds to the fixed salary paid over the
last twelve months before the member left prematurely, plus the sum of the target
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CONSOLIDATED FINANCIAL STATEMENTS
bonus amount for and the annual payment effected in the fiscal year before the
member’s departure. If the date of the member’s departure does not coincide with the
end of a fiscal year, the member’s share of the annual payment can, at the member’s
request, also be paid on a pro rata basis for the last twelve months of his or her
period of service.
Contrary to this arrangement, the following provision was agreed for Joachim Zichlarz, who was appointed as a new member of the Management Board effective April
1, 2009. Transitional payments will be made to Mr. Zichlarz only if death is the cause
of his departure from the company or if his contract of employment is not extended
before he reaches the age of 60. However, this entitlement will be void if he is responsible for a material cause that would have given the company reason to terminate his contract without notice, or if he turns down the offer of an extension to his
appointment on the same or better terms before reaching the age of 60. In principle,
the amount to be disbursed corresponds to the sum of the fixed salary, bonus and
annual payment effected for the last full fiscal year of Mr. Zichlarz's appointment.
However, if he leaves the company during the last six months of a fiscal year, this
calculation will be based on the year of his departure.
(c) Severance pay
At the present time, members of the Management Board are entitled to no severance
payments either in general cases of premature departure or in the exceptional case
of a change of control. However, should compensation payments become due or
severance payments be agreed upon in the context of a premature termination of
contract, the amount must be determined from the remaining term of the contract on
the date of termination and may not exceed the annual target income per remaining
year as defined when the contract is terminated. Moreover, transitional payments
may be offset against any such compensation or severance payments.
Contrary to this arrangement, the following provision in accordance with the recommendations of the German Corporate Governance Code was agreed for Joachim
Zichlarz, who was appointed as a new member of the Management Board effective
April 1, 2009. If Mr. Zichlarz's contract of employment is terminated prematurely, he
will receive severance pay unless he is responsible for a material cause that would
have given the company reason to terminate his contract without notice, or if he steps
down from office for material cause, or if he has already reached the age of 60 at the
time when the contract is terminated prematurely. The amount of severance pay will
be determined from the remaining term of the contract on the date of termination and
may not exceed a remaining term of two years. The amount to be paid per full year of
the remaining contractual term is calculated in the same way as transitional payments (see section (b) above). During the period for which severance pay is made,
half of income from other activities and the full amount of any company pension will
be deducted from said severance pay.
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CONSOLIDATED FINANCIAL STATEMENTS
(d) Stock options and SARs
Entitlements arising from stock options and SARs already granted to members of the
Management Board are determined by the terms and conditions of each plan. According to these terms and conditions, subscription and stock appreciation rights
remain valid if a member of the Management Board retires and they are transferred
to the legal heirs if the member dies. The SAR plan also includes a change of control
provision (see section 6.28 of the notes to the consolidated financial statements). If a
member of the Management Board leaves the company under any other circumstances, it is normal for the subscription and stock appreciation rights to be forfeited.
After a member of the Management Board has left the company, he or she is not
entitled to claim any further long-term incentives.
Information required pursuant to Section 289 Para. 4 and
Section 315 Para. 4 of the German Commercial Code (HGB)
and the explanatory notes
1. Composition of share capital
On September 30, 2009, the company had common stock amounting to
EUR 66,682,270, divided into 66,682,270 registered shares of no par value with a
nominal value of EUR 1 per share.
The Company has only issued ordinary shares, all of which bear the same rights and
duties. In particular, each share entitles the bearer to one voting right and to one
share – equivalent to the nominal value of the share – in the Company’s profits.
However, shares issued out of conditional capital as defined in Section 4 Para. 3 and
Para. 6 of the Articles of Association pursuant to the exercise of stock options under
the EPCOS Stock Option Plan 1999 or the EPCOS Stock Option Plan 2004 are
entitled to participate in profits only from the start of the fiscal year in which they were
issued. The same applies to shares issued in the course of fiscal 2009 following the
exercise of conversion privileges granted pursuant to the convertible bond issue on
July 16, 2003, out of conditional capital in accordance with Section 4 Para. 4 of the
Articles of Association. With regard to dividend claims from previous fiscal years, the
rights arising from these shares therefore differ from those associated with the other
shares.
2. Restrictions on voting rights and the transfer of shares
The Management Board has no knowledge of agreements between shareholders
that lead to restrictions on voting rights or restrictions on the transfer of shares. Nor
are any such restrictions prescribed by law or by the Articles of Association, except
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CONSOLIDATED FINANCIAL STATEMENTS
where Section 28 Sentence 1 of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG) applies in isolated cases. This provision states that the voting
rights associated with shares that are attributable to a material interest in the Company as defined in Sections 21 and 22 WpHG are suspended for the period in which
duties of disclosure toward the Company and the German Federal Financial Supervisory Authority (BaFin) are not met pursuant to Section 21 Para. 1 or 1a WpHG.
3. Equity interests of more than 10 percent
(a) Equity interests of more than 10 percent on September 30, 2009
On September 30, 2009, TDK Corporation, Tokyo, Japan (“TDK Corporation”) held a
direct equity interest of 50.47 percent (equivalent to 33,652,163 voting rights) plus an
indirect equity interest of 45.36 percent (equivalent to 30,244,901 voting rights) held
by TDK Germany GmbH, Düsseldorf, Germany. Taken together, TDK Corporation's
direct and indirect equity interests thus totaled 95.82 percent on September 30, 2009
(equivalent to 63,897,064 voting rights).
TDK Germany GmbH, Düsseldorf, Germany, held a direct equity interest of 45.36
percent (equivalent to 30,244,901 voting rights) at September 30, 2009.
(b) Developments relating to equity interests of more than 10 percent since the
end of the fiscal year under review (September 30, 2009)
Since the end of fiscal 2009 (September 30, 2009), the following developments
relating to equity interests of more than 10 percent have occurred:
In its report required pursuant to Section 21 Para. 1 of the German Trading Act
(WpHG) dated October 5, 2009, TDK-EPC Corporation, Tokyo, Japan, stated that, on
October 1, 2009, it held a direct equity interest of 50.47 percent (equivalent to
33,652,163 voting rights) plus an indirect equity interest of 45.36 percent via TDK
Germany GmbH, Düsseldorf, Germany. On October 1, 2009, TDK-EPC Corporation’s
total direct and indirect equity interest in EPCOS AG thus came to 95.82 percent
(equivalent to 63,897,064 voting rights).
The resolution by EPCOS' Annual General Meeting on May 20, 2009, to transfer
minority interests to the company's main shareholder, TDK Corporation, Tokyo,
Japan, in return for reasonable compensation pursuant to Section 327a ff. of the
German Stock Corporations Act (Aktiengesetz, AktG) was recorded in EPCOS AG's
commercial register entry on October 22, 2009.
Now that the transfer resolution has been entered in the commercial register, all
minority interests in EPCOS AG have been legally transferred to the company's main
shareholder, TDK Corporation, Tokyo, Japan, pursuant to Section 327e Para. 3
Sentence 1 AktG.
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CONSOLIDATED FINANCIAL STATEMENTS
4. Special rights that grant controlling authority
None of the company’s shares entitle the bearer to special rights that grant any controlling authority. The rights anchored in the Articles of Association that used to grant
Siemens AG and Matsushita Electronic Components (Europe) GmbH the right to
appoint one member of the Supervisory Board each were limited to a period of five
years following the company’s entry in the Commercial Register on September 2,
1999. These rights have therefore expired. Since the General Meeting elected members to the Supervisory Board on February 14, 2007, no member has been appointed
to the Supervisory Board under this provision. The Supervisory Board subsequently
resolved an amendment to the current version of the Articles of Association whereby
the right to appoint members was deleted from the wording.
5. Control of the voting rights of employees who own shares
Up to and including October 22, 2009, the date on which the squeeze-out described
in section 3 (b) took legal effect, most employees who owned shares in the Company
exercised their voting rights directly, to the best of the Management Board's knowledge. Insofar as employees who owned shares in the company did allow their voting
rights to be exercised by an association of internal shareholders, the Management
Board had no knowledge of any arrangements where said voting rights were controlled by such an association.
6. Appointment and withdrawal of Management Board members and amendments to the Articles of Association
Members of the Management Board are appointed and withdrawn from office pursuant to Section 84 of the German Stock Corporations Act (Aktiengesetz, AktG) in
conjunction with Section 31 of the German Co-Determination Act (Mitbestimmungsgesetz, MitbestG) and Section 5 Para. 1 of the Articles of Association, according to
which the Supervisory Board is responsible. Members are appointed for no more
than a five-year tenure. Tenures may be repeated or extended, but not for more than
a further five years. The decision to repeat or extend a tenure may be taken at the
earliest one year before the member’s current tenure expires. The Supervisory Board
shall determine appointments with a two-thirds majority of its members. If this majority is not reached, the Supervisory Board’s Mediation Committee must propose an
appointee. After said proposal, a simple majority of the members’ votes suffices to
confirm the appointment. Where it is necessary to arrive at a decision, the Chairman
of the Supervisory Board shall have two votes in such circumstances. If the Management Board is short of a member who is required by law or pursuant to the Articles of Association and if the Supervisory Board does not submit a proposal, said
member shall, in urgent cases, be appointed by a court of law pursuant to Section 85
AktG.
In accordance with Section 179 AktG, the General Meeting is responsible for amendments to the Articles of Association. In accordance with Section 10 Paragraph 4 of
the Articles of Association in agreement with Section 179 Paragraph 1 Sentence 2
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CONSOLIDATED FINANCIAL STATEMENTS
AktG, the General Meeting has transferred to the Supervisory Board the authority to
make amendments to those Articles of Association that only affect the current version. Pursuant to Section 17 Paragraph 1 of the Articles of Association, resolutions
by the General Meeting that amend the Articles of Association shall be passed by a
simple majority of the votes cast and, where a majority of equity capital is required,
by a simple majority of the share capital represented at the General Meeting, except
where binding legal stipulations or the Articles of Association require a larger majority. The Articles of Association contain no further provisions that prescribe certain
majorities for resolutions by the General Meeting. However, the law does prescribe a
larger majority for various General Meeting resolutions that amend the Articles of
Association. In particular, a majority of three-quarters of the share capital represented
at the General Meeting at which the resolution is made must be achieved in addition
to a majority of the votes cast in order to pass amendments to the object of the
Company or determine significant capital measures.
7. Authority of the Management Board
The Management Board wields the authority granted it by law and by the Articles of
Association, which is essentially the right to manage the Company on its own responsibility and to represent the Company to the outside world.
(a) Authority to purchase shares in the company
The Management Board is authorized to purchase shares in the company only within
the framework of Section 71 ff. AktG. A resolution by the General Meeting on February 13, 2008, authorized the company, up to August 12, 2009, and within the framework of the law, to purchase shares in the company up to a maximum of 10 percent
of the company’s share capital at the date of the resolution. The Management Board
did not make use of this authority.
(b) Authorized capital
Pursuant to Section 4 Paragraph 2 of the Articles of Association, the Management
Board was, until February 10, 2009, authorized, subject to the consent of the Supervisory Board, to increase the company’s share capital by a total of EUR 13,020,000
(Authorized Capital 2004) by issuing ordinary shares in return for cash or non-cash
contributions. The Management Board did not make use of this authority.
(c) Conditional capital
Pursuant to resolutions by the General Meetings on March 6, 2002, and February 11,
2004, the company had conditional capital totaling EUR 13,000,000 at its disposal to
fulfill obligations arising from the issue of convertible and warrant-linked bonds (Conditional Capital 2002/I totaling EUR 6,500,000 and Conditional Capital 2004/I totaling
EUR 6,500,000).
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CONSOLIDATED FINANCIAL STATEMENTS
The Company served as guarantor for a convertible bond with a total nominal value
of EUR 126,425,000 issued on July 16, 2003, by its subsidiary EPCOS Netherlands
B.V. (formerly EPCOS Finance B.V.) and due to mature in 2010. The bond bore
interest at a rate of 2.5 percent. Holders of this convertible bond could convert it to a
maximum of 6,500,000 shares in the company. In the course of fiscal 2009, holders
exercised conversion privileges granted to them by the issue of the convertible bond
on July 16, 2003. These privileges authorized them to purchase shares. Pursuant to
the exercise of these conversion privileges, 218,270 new ordinary shares with no par
value were issued to these holders. The issue of these new shares increased the
company's share capital by EUR 218,270, while Conditional Capital 2002/I was
reduced by EUR 218,270.
The General Meeting on February 11, 2004, authorized the Management Board, up
to February 10, 2009, and subject to the consent of the Supervisory Board, to issue
convertible and/or warrant-linked bonds with a total nominal value of up to
EUR 500,000,000 and a maturity of no more than 15 years, and to grant the bearers
or creditors of said instruments conversion privileges or option rights to the Company’s shares for a total of up to EUR 6,500,000 of the Company’s share capital.
Pursuant to Section 4 Paragraph 5 of the Articles of Association, conditional capital
totaling EUR 6,500,000 (Conditional Capital 2004/I) is available to fulfill these conversion privileges and option rights. Since the Management Board did not make use
of this authority, Conditional Capital 2004/I remained unchanged.
Resolutions by the General Meetings on September 28, 1999, and February 11,
2004, placed conditional capital totaling EUR 4,960,000 at the Company’s disposal to
fulfill its obligations arising from stock option plans (Conditional Capital 1999/I totaling
EUR 2,480,000 and Conditional Capital 2004/II totaling EUR 2,480,000).
In the course of fiscal 2007, the exercise of stock options led to the issue of 17,000
new registered shares with no par value. The issue of these new shares added EUR
17,000 to the company’s share capital. Conversely, Conditional Capital 1999/I, resolved by the General Meeting on September 28, 1999, was reduced by EUR 5,000
and Conditional Capital 2004/II, resolved by the General Meeting on February 11,
2004, was reduced by EUR 12,000.
In the course of fiscal 2008, the exercise of stock options led to the issue of
1,114,000 new registered shares with no par value. The issue of these new shares
added EUR 1,114,000 to the company’s share capital. Conversely, Conditional
Capital 1999/I was reduced by EUR 496,000 and Conditional Capital 2004/II was
reduced by EUR 618,000.
In the course of fiscal 2009, the exercise of stock options led to the issue of 33,000
new registered shares with no par value. The issue of these new shares added
EUR 33,000 to the company’s share capital. Conversely, Conditional Capital 1999/I
was reduced by EUR 33,000.
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CONSOLIDATED FINANCIAL STATEMENTS
On September 30, 2009, the company’s share capital thus totaled EUR 66,682,270.
On the same date, Conditional Capital 1999/I was EUR 1,946,000, Conditional Capital 2002/I was EUR 6,281,730, Conditional Capital 2004/II was EUR 1,850,000 and
Conditional Capital 2004// was EUR 6,500,000.
The authorizations to issue share subscription rights within the framework of the
EPCOS Stock Option Plan 1999 and the EPCOS Stock Option Plan 2004 have now
expired. The number of options issued under either of these plans and the number of
options that had either expired or been exercised at September 30, 2009, is reported
in section 6.28 of the notes to the consolidated financial statements.
8. Significant agreements in the event of a change of control
The company used to serve as guarantor for a convertible bond with a total nominal
value of EUR 126,425,000 issued by its subsidiary EPCOS Netherlands B.V. (formerly EPCOS Finance B.V.) on July 16, 2003. In the event of a change of corporate
control, the terms of issue grant bond creditors the right to demand that the company
settle some or all of its bonds prematurely. The term, „a change of corporate control,”
is defined in the terms of the bond. After TDK Corporation, TDK Hong Kong Co. Ltd.
and TDK Germany GmbH acquired the majority of EPCOS shares in October 2008, a
few holders of this convertible bond elected to convert their bonds into EPCOS
shares. Far more opted for premature settlement. As a result, 218,270 new registered shares with no par value were issued to those convertible bond holders who
had chosen to exercise their conversion privileges. At the same time, EPCOS paid a
total of EUR 121,003,000 to those convertible bond holders who had demanded
premature settlement. In accordance with the terms of the bond, those conversion
privileges that were still outstanding were then settled prematurely on January 28,
2009. For this reason, there are no more conversion privileges outstanding.
Since November 10, 2004, the company had had a syndicated credit facility totaling
EUR 250,000,000 at its disposal until November 2009. Its contractual terms permitted
the company to merge or engage in a similar transaction with a third party only under
certain conditions that would safeguard the creditworthiness of the resultant corporate entity. Of this credit facility, EUR 180 million was drawn. Since the combination
with TDK enables the company to source funds on significantly more attractive terms,
the company terminated the credit facility on September 18, 2009, and settled the
amount that had been drawn.
On March 24, 2009, TDK Germany GmbH (the controlling company) and EPCOS AG
(the subordinate company) signed a domination agreement. This agreement took
legal effect when it was entered in the Commercial Register on October 29, 2009.
According to the terms of the agreement, the contractual parties have the right to
terminate the domination agreement for material cause without observing any period
of notice if TDK Germany GmbH and companies affiliated with TDK Germany GmbH
as defined in Section 15 of the German Stock Corporations Act (AktG) no longer hold
a majority of the voting rights accruing from shares in the company.
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CONSOLIDATED FINANCIAL STATEMENTS
9. Compensation agreements in the event of a takeover bid
No compensation agreements have been reached between EPCOS AG and either
the members of the Management Board or individual employees to cover the possibility of a takeover bid.
Declaration of the Management Board pursuant to Section
312 Para. 3 Sentence 3 AktG
In accordance with its voting rights information and the publication thereof, TDK Corporation, Tokyo, Japan, and subsidiaries whose votes are attributable to it pursuant
to Section 16 Para. 4 AktG, together held a share of the voting tights in EPCOS AG
entitling TDK Corporation at all times in the period from October 1, 2008, through
September 30, 2009, to class EPCOS AG as a dependent subsidiary of TDK Corporation pursuant to Section 17 Para. 2 AktG. On the last day of this period, i.e. on
September 30, 2009, TDK Corporation and TDK Germany GmbH, whose voting
rights are attributable to the former company pursuant to Section 16 Para. 4 AktG,
together held a total of 95.82 percent of the voting rights in EPCOS AG.
Since no legally effective domination agreement pursuant to Section 294 Para. 2
AktG existed between EPCOS AG and TDK Corporation in the period from October
1, 2008, through September 30, 2009, the Management Board of EPCOS AG is
required, pursuant to Section 312 Para. 1 AktG, to prepare a report on the company’s
dealings with affiliated companies in fiscal 2008/09.
The Management Board duly prepared this report, which states „that EPCOS AG,
Munich, received a reasonable consideration for all legal transactions and activities
undertaken or omitted in respect of affiliated companies, insofar as said transactions
and activities are the object of this dependency report. None of the transactions or
measures taken or omitted pursuant to this report placed the Company at a disadvantage. This analysis is based on circumstances that were known to us at the time
when transactions requiring official disclosure took place.”
Subsequent events
Foundation of TDK-EPC Corporation
TDK-EPC Corporation (“TDK-EPC” for short) was founded in Japan on October 1,
2009. The new company is the outcome of the carve-out of TDK Corporation’s passive electronic components business – one of its core activities. Since the end of
October 2009 TDK Corporation and two of its subsidiaries hold all the shares of
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CONSOLIDATED FINANCIAL STATEMENTS
EPCOS AG. TDK-EPC is responsible for the combined electronic components business of TDK and EPCOS.
Report on voting rights after September 30, 2009
According to its own report pursuant to Section 21 Para. 1 WpHG, dated October 5,
2009, TDK Corporation, Tokyo, Japan, held a direct equity interest of 50.47 percent
(equivalent to 33,652,163 voting rights) plus an indirect equity interest of 45.36 percent held by TDK Germany GmbH, Düsseldorf, Germany, on October 1, 2009.
Transfer of shares in return for cash compensation
The resolution by EPCOS’ Annual General Meeting on May 20, 2009, to transfer
minority interests in EPCOS AG to TDK Corporation in return for reasonable cash
compensation was entered in the commercial register on October 22, 2009. Within
the framework of this squeeze-out, all outstanding EPCOS shares were transferred to
TDK Corporation in return for cash compensation of EUR 18.14 per share.
Delisting on the stock exchange
As a consequence of the entry in the commercial register on October 22, 2009,
recording the transfer of minority interests in EPCOS AG to TDK Corporation in
return for reasonable cash compensation, the EPCOS share was delisted on all
German stock exchanges at the start of November.
Domination agreement with TDK
The domination agreement signed with TDK Germany GmbH on March 24, 2009,
was entered in the commercial register on October 29, 2009. The domination agreement took legal effect as of the date of entry.
This document may contain forward-looking statements with respect to EPCOS’
financial condition, results of operations, business, strategy and plans. In particular, statements using the words “expects,” “anticipates” and similar expressions,
and statements with regard to management goals and objectives, expected or
targeted revenue and expense data, or trends in results of operations or margins
are forward looking in nature. Such statements are based on a number of assumptions that could ultimately prove inaccurate, and are subject to a number of
risk factors, including changes in our customers’ industries, slower growth in significant markets, changes in our relationships with our principal shareholders, the
ability to realize cost reductions and operating efficiencies without unduly disrupting business operations, currency fluctuations, unforeseen environmental obligations, and general economic and business conditions. EPCOS does not assume
any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
© EPCOS AG 2009
46
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements 2009
© EPCOS AG 2009
47
CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated income statements
For the years ending September 30, 2009, and September 30, 2008
(EUR thousand, except per share data)
Note
2009
Net sales
Third parties
Related parties
Total net sales
Cost of sales
Gross profit
Marketing and selling expenses
Research and development expenses
General and administrative expenses
Other expenses and income, including foreign exchange
gains (losses), net
Interest income
Interest expenses
Net (loss) income from investments accounted for using the
equity method 1)
Share of net income from other investments
Net loss from other financial income and financial expenses
Income before income taxes
Current and deferred taxes
Net income
Attributable to
Shareholders of EPCOS AG
Minority interest
Earnings per share (undiluted) (EUR)
Earnings per share (diluted) (EUR)
1)
6.4.5
6.4.6
6.12
6.10
6.10
6.11
6.4.7, 6.29
6.4.16, 6.30
2008
1,134,521 1,475,600
12,564
2,116
1,147,085 1,477,716
(1,048,870) (1,178,840)
98,215
298,876
(98,610) (104,082)
(79,936)
(81,245)
(11,736)
(13,701)
12,938
5,434
6,493
(27,099)
8,211
(33,812)
448
(1,517)
26
(3,883)
(103,144)
(17,744)
(120,888)
143
(92)
78,215
(15,379)
62,836
(119,592)
(1,296)
63,139
(303)
(1.79)
(1.79)
0.96
0.96
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
© EPCOS AG 2009
48
CONSOLIDATED FINANCIAL STATEMENTS
2. Consolidated balance sheets
At September 30, 2009, and September 30, 2008 (EUR thousand, except number per share data)
Note
ASSETS
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method 2)
Other non-current financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Inventories
Trade receivables
Cash and cash equivalents
Other current financial assets
Income tax receivables
Other current assets
Total current assets
Total assets
6.4.8, 6.13
6.4.9, 6.13
6.4.2, 6.14
6.4.12, 6.33
6.4.7, 6.29
6.4.13, 6.15
6.16
6.4.14, 6.17
6.18
6.19
LIABILITIES AND EQUITY
Share capital – 96,280,000 shares authorized and 66,682,270
6.20
(66,431,000) shares issued and outstanding at September 30,
2009 (September 30, 2008)
6.20
Additional paid-in capital
2)
6.20
Retained earnings
6.20
Other components of equity
Total equity without minority interest
6.20
Minority interest
Total equity
6.31
Pensions and similar obligations
6.6.4, 6.22
Other non-current provisions
6.23
Non-current debt
6.24
Other non-current financial liabilities
6.24
Other non-current liabilities
6.4.7, 6.29
Deferred tax liabilities
Non-current liabilities and provisions
6.31
Pensions and similar obligations
6.6.4,
6.22
Other current provisions
Trade liabilities
6.23
Current debt
6.24
Other current financial liabilities
6.24
Other current liabilities
Income tax liabilities
Current liabilities and provisions
Total liabilities and equity
2)
2009
2008
552,828
61,192
3,125
17,588
62,960
4,357
702,050
217,275
213,364
119,475
11,870
2,616
23,404
588,004
1,290,054
531,024
31,438
5,007
15,061
66,289
6,598
655,417
255,046
232,627
198,408
22,883
5,432
24,108
738,504
1,393,921
66,682
66,431
289,746
162,736
(6,012)
513,152
18,586
531,738
187,622
27,025
50,042
15
9,017
6,550
280,271
10,063
29,034
118,647
238,390
20,172
58,601
3,138
478,045
1,290,054
285,332
302,257
19,524
673,544
7,032
680,576
151,774
31,675
44,034
1,723
7,697
4,036
240,939
9,528
38,275
151,563
168,336
35,825
64,039
4,840
472,406
1,393,921
After adjusting investments accounted for using the equity method as of September 30, 2008.
See note 6.9.
© EPCOS AG 2009
49
CONSOLIDATED FINANCIAL STATEMENTS
3. Consolidated changes in equity
For the years ending September 30, 2009, and September 30, 2008 (EUR thousand) 3)
Other components of equity
Share Additional Retained Currency Derivative AvailablePension
capital
paid-in earnings translation financial
for-sale
adjustments
capital
adjustinstru- financial
and similar
ment
ments
assets
obligations
Balances at September 30,
65,317
269,532
258,713
(1,885)
(260)
3,075
7,216
2007
Dividends
(19,595)
Income and expenses
63,139
6,422
(8,599)
(2,377)
15,932
4)
recognized in equity
Issue of share capital
1,114
14,708
Share-based payment
1,092
Minority effects from firsttime consolidation and the
capital increase
Balances at September 30,
66,431
285,332
302,257
4,537
(8,859)
698
23,148
2008
Balances at September 30,
2008
Dividends
Income and expenses
recognized in equity
Issue of share capital
Share-based payment
Minority effects from firsttime consolidation and
the capital increase
Balances at September 30,
2009
3)
4)
Total equity attributable to shareholders
of EPCOS AG
Minority
interest
Total
601,708
1,972
603,680
(19,595)
(494)
(20,089)
74,517
132
74,649
15,822
1,092
-
15,822
1,092
-
5,422
5,422
673,544
7,032
680,576
66,431
285,332
302,257
4,537
(8,859)
698
23,148
673,544
7,032
680,576
-
-
(19,929)
-
-
-
-
(19,929)
(330)
(20,259)
-
-
(119,592)
(6,027)
8,128
87
(27,724)
(145,128)
(2,328)
(147,456)
251
-
4,242
172
-
-
-
-
-
4,493
172
-
4,493
172
-
-
-
-
-
-
-
-
14,212
14,212
66,682
289,746
162,736
(1,490)
(731)
785
(4,576)
513,152
18,586
531,738
The consolidated changes in equity are a component part of the notes.
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
 EPCOS AG 2009 50
CONSOLIDATED FINANCIAL STATEMENTS
4. Consolidated statement of income and expenses recognized in equity
For the years ending September 30, 2009, and September 30, 2008 (EUR thousand)
Note
Net income including minority interest 5)
Currency translation adjustment
Available-for-sale financial assets
Derivative financial instruments
Actuarial gains/losses arising from pensions and similar
obligations
Total income and expenses recognized directly in equity,
after tax 6)
Total income and expenses recognized in equity
Attributable to:
Minority interest
Shareholders of EPCOS AG
5)
6)
6.4.4
6.4.12
6.4.11
2009
2008
(120,888)
(7,059)
87
8,128
62,836
6,857
(2,377)
(8,599)
(27,724)
15,932
(26,568)
11,813
(147,456)
74,649
(2,328)
(145,128)
132
74,517
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
Includes a minority interest of minus EUR 1.0 million (previous period: EUR 0.4 million) due to currency
translation adjustments.
 EPCOS AG 2009 51
CONSOLIDATED FINANCIAL STATEMENTS
5. Consolidated cash flow statements
For the years ending September 30, 2009, and September 30, 2008 (EUR thousand)
Note
2009
Cash flows from operating activities
Net income 7)
Depreciation of property, plant and equipment
Amortization of intangible assets
(Gain)/Loss on sale of property, plant and equipment
Deferred tax
Share of net income of non-consolidated affiliates and at equity
companies 7)
Other non-cash items
Decrease/(Increase) in inventories
Decrease/(Increase) in trade receivables and other assets
(Decrease)/Increase in trade liabilities and other liabilities
Decrease in current and non-current accrued expenses
Increase in pension liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures on tangible and intangible assets, net
Increase in financial assets
Proceeds from sales of tangible and intangible assets
Payment for acquisitions of business and business units, net
Investments in associates and unconsolidated companies
Net cash used in investing activities
Cash flows from financing activities
Net increase/(Decrease) in current borrowings
Proceeds from issuance of non-current debt
Principal payments on non-current debt
Principal payments under finance lease obligations
Repayment of convertible bond
Dividends paid to shareholders
Issue of share capital
Dividends paid to minority shareholders
Repayment/(Funding) the Contractual Trust Arrangements
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of fiscal year
Cash and cash equivalents at end of period
6.13
6.13
6.15
6.16
6.22
6.31
6.13
6.13.3
6.4.2
6.23
6.20
6.20
6.17
6.17
6.17
2008
(120,888)
121,854
4,568
(51)
7,553
62,836
118,243
3,753
36
3,883
(448)
1,517
19,379
44,610
57,331
(86,491)
(22,721)
6,538
31,234
10,790
(34,384)
(2,658)
22,555
(16,934)
8,653
178,290
(83,095)
(1,078)
3,771
(18,081)
(1,436)
(99,919)
(136,744)
(1,659)
18,346
(11,007)
(4,243)
(135,307)
173,002
375
(41,888)
(1,543)
(123,686)
(19,929)
503
(292)
1,920
(11,538)
1,290
(78,933)
198,408
119,475
(30,116)
11,746
(36,652)
(750)
(19,595)
15,822
(494)
(21,194)
(81,233)
2,036
(36,214)
234,622
198,408
 EPCOS AG 2009 52
CONSOLIDATED FINANCIAL STATEMENTS
Additional information on payments received and made
Interest received
Interest paid
Dividends received
Cash flows from income taxes, net
7)
2009
2008
2,783
(11,060)
21
(8,885)
5,727
(11,797)
316
(14,125)
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
 EPCOS AG 2009 53
CONSOLIDATED FINANCIAL STATEMENTS
6.
Notes to the consolidated financial statements for the fiscal years ended
September 30, 2009, and September 30, 2008
6.1
Supplementary information on the notes to the consolidated financial
statements pursuant to section 315a German Commercial Code
(Handelsgesetzbuch, HGB)
6.1.1 Statement in accordance with section 313 (2) HGB
Subsidiaries at September 30, 2009 (data in accordance with IFRS including purchase price allocations)
Affiliates
Germany
Aktiv Sensor GmbH, Stahnsdorf, Berlin
Ernst Herrmann Ingenieur AG & Co. KG, Berlin
Herrmann Beteiligungs GmbH, Berlin
Europe without Germany
Becromal Iceland ehf, Akureyri, Iceland
Becromal S.p.A., Mailand, Italy
Becromal Norway A.S., Notodden, Norway
EPCOS Beteiligungs G.m.b.H.,
Deutschlandsberg, Austria
EPCOS Lagerbetriebsgesellschaft m.b.H.,
Deutschlandsberg, Austria
EPCOS OHG, Deutschlandsberg, Austria
EPCOS Verwaltungsgesellschaft m.b.H,
Deutschlandsberg, Austria
EPCOS SAS, Saint Denis, France
EPCOS Nordic OY, Espoo (Helsinki), Finland
EPCOS UK Ltd., Bracknell, UK
EPCOS Netherlands B.V., Nijmegen, Netherlands
EPCOS Polska Sp.zo.o, Warsaw, Poland **
Equity
interest
in %
Equity
capital
EUR thousand
Earnings
(Losses)
EUR
thousand
2,144
(207)*
100
4,064
(418)
100
36
1
100
3,907
(2,893)
60
12,460
(16,601)
100
10,984
591
100
145,952
(1,086)
100
48
8
100
32,725
(67,994)
100
149,831
13
100
1,912
373
100
252
83
100
1,491
122
100
2,823
(590)
100
180
169
100
 EPCOS AG 2009 54
CONSOLIDATED FINANCIAL STATEMENTS
EPCOS 2 Portugal LDA, Lisbon, Portugal
EPCOS LLC, Moscow, Russia **
EPCOS Nordic AB, Kista, Sweden
EPCOS Schweiz Vertriebs GmbH,
Zurich, Switzerland **
EPCOS Electronic Components S.A., Málaga, Spain
EPCOS s.r.o., Šumperk, Czech Republic
EPCOS Elektronikai Alkatrész Kft.,
Szombathely, Hungary
Asia
EPCOS (Anhui) Feida Electronics Co., Ltd,
Ningguo City, China
EPCOS (China) Investment Ltd., Shanghai, China
EPCOS (Shanghai), Ltd., Shanghai, China
EPCOS (Xiamen) Co., Ltd., Xiamen, China
EPCOS (Xiaogan) Co., Ltd., Xiaogan, China
EPCOS (Zhuhai) Co., Ltd., Zhuhai, China
EPCOS (Zhuhai FTZ) Co., Ltd., Zhuhai, China
EPCOS Limited, Hong Kong, China
EPCOS Technology (Wuxi) Co., Ltd., Wuxi, China
Baoke Electronic (Wuxi) Co., Ltd, Wuxi, China
EPCOS India Private Ltd., Nashik, India
PT. EPCOS Indonesia, Batam, Indonesia
EPCOS KK, Yokohama, Japan
EPCOS RDC SDN. BHD., Johor Bahru, Malaysia
EPCOS SDN. BHD., Johor Bahru, Malaysia
EPCOS PTE LTD, Singapore
EPCOS Korea LLC, Seoul, South Korea
EPCOS Taiwan Co. Ltd, Taipei, Taiwan
354
26
100
(8)
(26)
100
625
156
100
57
18
100
(16,349)
(6,082)
100
15,101
(1,149)
100
36,573
3,221
100
26,630
1,136
60
89,320
16,529
100
1,223
261
100
11,032
(1,798)
60
2,971
1,059
76
8,404
656
100
20,961
4,476
100
2,423
1,068
100
32,126
5,762
100
2,685
200
53.6
12,624
1,758
100
575
(873)
100
2,099
112
100
1,046
(419)
100
13,930
2,461
100
150,697
12,074
100
272
235
100
156
56
75
**
**
 EPCOS AG 2009 55
CONSOLIDATED FINANCIAL STATEMENTS
Americas
Becromal of America, Inc., Clinton, Tennessee, USA
6,290
(5,342)
100
8,673
(707)
100
5,132
371
100
19,769
(9,502)
100
Crystal Technology, Inc., Palo Alto, California, USA
EPCOS Inc., Iselin, New Jersey, USA
EPCOS do Brasil Ltda., Gravataí, Brazil
At equity companies
Becromal Properties ehf, Reykjavik, Iceland
7,813
*
After consideration of profit/loss transfer agreements according to German law
**
Non consolidated companies
1,120
40
6.1.2 Statement in accordance with section 314 (1) No. 4 HGB
Personnel expenses for the EPCOS Group amounted to EUR 378.4 million for fiscal
2009 and EUR 399.8 million for fiscal 2008.
On average, the Company employed 19,502 people in fiscal 2009 and 20,168 people
in fiscal 2008 (part-time employees are calculated on a pro rata basis).
Employees
Average number in fiscal year
Germany
Foreign
Total
2009
2008
1,804
17,698
19,502
1,873
18,295
20,168
 EPCOS AG 2009 56
CONSOLIDATED FINANCIAL STATEMENTS
6.1.3 Statement in accordance with section 314 (1) No. 9 HGB
The following fees for the services of E&Y (worldwide) were recognized as expenses
in fiscal 2009:
Type of fees
For the year ending September 30 (EUR thousand)
2009
(1,819)
(2)
(40)
(105)
(1,966)
Audits
Audit-related fees
Tax fees
Other fees
Total
Expenses concerning E&Y Germany for fiscal 2009 were as follows:
Type of fees
For the year ending September 30 (EUR thousand)
2009
(830)
(2)
(832)
Audit fees
Audit-related fees
Tax fees
Other fees
Total
The following fees for the services of KPMG (worldwide) were recognized as expenses in fiscal 2008:
Type of fees
For the year ending September 30 (EUR thousand)
Audits
Other audit-related services
Tax services
Other services
Total
2008
(1,157)
(158)
(32)
(22)
(1,369)
Expenses concerning KPMG Germany for fiscal 2008 were as follows:
Type of fees
For the year ending September 30 (EUR thousand)
Audit fees
Audit-related fees
Tax fees
Other fees
Total
2008
(477)
(96)
(22)
(595)
 EPCOS AG 2009 57
CONSOLIDATED FINANCIAL STATEMENTS
6.1.4 Statement in accordance with section 160 No. 8 German Stock
Corporation Law (Aktiengesetz, AktG)
AXA S.A. and affiliated companies
On November 3, 2008, AXA S.A., Paris, France, has notified the Company pursuant
to section 21 (1) securities trade act (Wertpapierhandelsgesetz, WpHG) that its
percentage of voting rights in EPCOS AG fell below the threshold of 3 percent on
October 30, 2008, and amounts to 0.01 percent (6,700 voting rights) as per this date.
0.01 percent (6,700 voting rights) are attributable to it according to section 22 (1)
sentence 1 No. 6 WpHG in connection with section 22 (1) sentence 2 WpHG.
On November 3, 2008, AllianceBernstein L.P., New York, USA, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on October 30, 2008, and amounts
to 0.01 percent (6,700 voting rights) as per this date. 0.01 percent (6,700 voting
rights) are attributable to it according to section 22 (1) sentence 1 No. 6 WpHG.
On November 3, 2008, Equitable Holdings LLC, New York, USA, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on October 30, 2008, and amounts
to 0.01 percent (6,700 voting rights) as per this date. 0.01 percent (6,700 voting
rights) are attributable to it according to section 22 (1) sentence 1 No. 6 WpHG in
connection with section 22 (1) sentence 2 WpHG.
On November 3, 2008, AXA Equitable Life Insurance Company, formerly known as
Equitable Life Assurance Society of the United States, New York, USA, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on October 30, 2008, and amounts
to 0.01 percent (6,700 voting rights) as per this date. 0.01 percent (6,700 voting
rights) are attributable to it according to section 22 (1) sentence 1 No. 6 WpHG in
connection with section 22 (1) sentence 2 WpHG.
On November 3, 2008, AXA Financial Services, LLC, New York, USA, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on October 30, 2008, and amounts
to 0.01 percent (6,700 voting rights) as per this date. 0.01 percent (6,700 voting
rights) are attributable to it according to section 22 (1) sentence 1 No. 6 WpHG in
connection with section 22 (1) sentence 2 WpHG.
On November 3, 2008, AXA Financial, Inc., New York, USA, has notified the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in EPCOS
AG fell below the threshold of 3 percent on October 30, 2008, and amounts to 0.01
percent (6,700 voting rights) as per this date. 0.01 percent (6,700 voting rights) are
 EPCOS AG 2009 58
CONSOLIDATED FINANCIAL STATEMENTS
attributable to it according to section 22 (1) sentence 1 No. 6 WpHG in connection
with section 22 (1) sentence 2 WpHG.
Dodge & Cox/ Dodge & Cox International Stock Fund
On October 22, 2008, Dodge & Cox International Stock Fund, San Francisco, USA,
has notified the Company pursuant to section 21 (1) WpHG that its percentage of
voting rights in EPCOS AG fell below the thresholds of 10 percent, 5 percent and 3
percent on October 17, 2008, and amounts to 0.00 percent (0 voting rights) as per
this date.
On October 22, 2008, Dodge & Cox, San Francisco, USA, has notified the Company
pursuant to section 21 (1) WpHG that its percentage of voting rights in EPCOS AG,
fell below the thresholds of 10 percent, 5 percent and 3 percent on October 17, 2008,
and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this date.
Paul E. Singer/ Elliott International Capital Advisors Inc./ Braxton Associates,
Inc./ Elliott Asset Management LLC/ Elliott Capital Advisors, L.P./ Hambledon,
Inc./ Elliott International, L.P./ Elliott International Limited/ Wolverton (Luxembourg) S.à r.l.
On November 11, 2008, Paul E. Singer, USA, has notified the Company pursuant to
section 21 (1) WpHG that his percentage of voting rights in EPCOS AG fell below the
thresholds of 5 percent and 3 percent on November 6, 2008 and amounts to 0.00
percent (this corresponds to 0 voting rights) as per this date.
On November 11, 2008, Elliott Asset Management LLC, New York, USA, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the thresholds of 5 percent and 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
On November 11, 2008, Braxton Associates, Inc., New York, USA, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the thresholds of 5 percent and 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
On November 11, 2008, Elliott Capital Advisors, L.P., New York, USA, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the thresholds of 5 percent and 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
 EPCOS AG 2009 59
CONSOLIDATED FINANCIAL STATEMENTS
On November 11, 2008, Elliott International Capital Advisors Inc., New York, USA,
has notified the Company pursuant to section 21 (1) WpHG that its percentage of
voting rights in EPCOS AG fell below the threshold of 3 percent on November 6,
2008 and amounts to 0.00 percent (0 voting rights) as per this date.
On November 11, 2008, Hambledon, Inc., George Town, Cayman Islands, has
notified the Company pursuant to section 21 (1) WpHG that its percentage of voting
rights in EPCOS AG fell below the threshold of 3 percent on November 6, 2008 and
amounts to 0.00 percent (this corresponds to 0 voting rights) as per this date.
On November 11, 2008, Elliott International, L.P., George Town, Cayman Islands,
has notified the Company pursuant to section 21 (1) WpHG that its percentage of
voting rights in EPCOS AG fell below the threshold of 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
On November 11, 2008, Elliott International Limited, George Town, Cayman Islands,
has notified the Company pursuant to section 21 (1) WpHG that its percentage of
voting rights in EPCOS AG fell below the threshold of 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
On November 11, 2008, Wolverton (Luxembourg) S.à r.l., Luxembourg, Luxembourg,
has notified the Company pursuant to section 21 (1) WpHG that its percentage of
voting rights in EPCOS AG fell below the threshold of 3 percent on November 6,
2008 and amounts to 0.00 percent (this corresponds to 0 voting rights) as per this
date.
Virmont S.à.r.l.
a) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG exceeded the threshold of 3 percent on May 25, 2007, and amounts to
4.033 percent (this corresponds to 2,634,071 voting rights) as per this date. 4.033
percent of the voting rights (corresponding to 2,634,071 voting rights) are attributable
to it pursuant to section 22 (1) sentence 1 No. 6 WpHG. Alken Fund SICAV, whose
share of voting rights amounts to 3 percent or more, holds all of these voting rights.
b) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on July 24, 2007, and amounts to
2.52 percent (this corresponds to 1,648,814 voting rights) as per this date. 2.52
percent of the voting rights (corresponding to 1,648,814 voting rights) are attributable
to it pursuant to section 22 (1) sentence 1 No. 6 WpHG.
 EPCOS AG 2009 60
CONSOLIDATED FINANCIAL STATEMENTS
c) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG exceeded the threshold of 3 percent on August 1, 2007, and amounts to
3.06 percent (this corresponds to 1,998,814 voting rights) as per this date. 3.06
percent of the voting rights (corresponding to 1,998,814 voting rights) are attributable
to it pursuant to section 22 (1) sentence 1 No. 6 WpHG. Alken Fund SICAV, whose
share of voting rights amounts to 3 percent or more, holds all of these voting.
d) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG exceeded the threshold of 5 percent on November 28, 2007, and
amounts to 5.01 percent (this corresponds to 3,271,998 voting rights) as per this
date. 5.01 percent of the voting rights (corresponding to 3,271,998 voting rights) are
attributable to it pursuant to section 22 (1) sentence 1 No. 6 WpHG. Alken Fund
SICAV, whose share of voting rights amounts to 3 percent or more, holds all of these
voting rights.
e) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 5 percent on January 18, 2008, and amounts
to 4.92 percent (this corresponds to 3,215,289 voting rights) as per this date. 4.92
percent of the voting rights (corresponding to 3,215,289 voting rights) are attributable
to it pursuant to section 22 (1) sentence 1 No. 6 WpHG. Alken Fund SICAV, whose
share of voting rights amounts to 3 percent or more, holds all of these voting.
f) On February 17, 2009, Virmont S.à.r.l., Luxembourg, Luxembourg, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG fell below the threshold of 3 percent on April 9, 2008, and amounts to
1.57 percent (this corresponds to 1,022,762 voting rights) as per this date. 1.57
percent of the voting rights (corresponding to 1,022,762 voting rights) are attributable
to it pursuant to section 22 (1) sentence 1 No. 6 WpHG.
TDK Corporation and affiliated companies
a) On August 7, 2008, TDK Corporation, Tokyo, Japan, has notified the Company
pursuant to section 21 (1) WpHG that its percentage of voting rights in EPCOS
AG exceeded the thresholds of 3 percent, 5 percent and 10 percent on August 4,
2008, and amounts to 13.24 percent (8,646,019 voting rights) as per this date.
1,657,000 of these voting rights, corresponding to 2.54 percent of the voting rights
in EPCOS AG, were attributed to TDK Corporation pursuant to section 22 (1) sentence 1 No. 1 WpHG.
b) Correcting its notification of voting rights (released on August 8, 2008) TDK Corporation, Tokyo, Japan, has notified the Company pursuant to section 21 (1)
WpHG on September 2, 2008, that its percentage of voting rights in EPCOS AG
 EPCOS AG 2009 61
CONSOLIDATED FINANCIAL STATEMENTS
exceeded the thresholds of 15 percent and 20 percent on August 5, 2008, and
amounts to 21.09 percent (13,860,409 voting rights) as per this date. 4,257,000 of
these voting rights, corresponding to 6.48 percent of the voting rights in EPCOS
AG, were attached to shares held by TDK Hong Kong Co. Ltd., Kowloon, Hong
Kong, China, which is controlled by TDK Corporation, and attributed to TDK Corporation pursuant to section 22 (1) sentence 1 No.1 WpHG.
c) Correcting its notification of voting rights (released on August 8, 2008) TDK Hong
Kong Co. Ltd., Kowloon, Hong Kong, China, has notified the Company pursuant
to section 21 (1) WpHG on September 2, 2008, that its percentage of voting rights
in EPCOS AG exceeded the thresholds of 3 percent and 5 percent on August 5,
2008, and amounts to 6.48 percent (4,257,000 voting rights) as per this date.
d) Correcting its notification of voting rights (released on August 8, 2008) TDK Corporation, Tokyo, Japan, has notified the Company pursuant to section 21 (1)
WpHG on September 2, 2008, that its percentage of voting rights in EPCOS AG
exceeded the threshold of 25 percent on August 6, 2008, and amounts to 26.76
percent (17,663,950 voting rights) as per this date. 4,257,000 of these voting
rights, corresponding to 6.45 percent of the voting rights in EPCOS AG, were attached to shares held by TDK Hong Kong Co. Ltd., Kowloon, Hong Kong, China
which is controlled by TDK Corporation, and were attributed to TDK Corporation
pursuant to section 22 (1) sentence 1 No.1 WpHG.
e) On September 25, 2008, TDK Corporation, Tokyo/ Japan, has notified the Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG exceeded the threshold of 30 percent on September 24, 2008, and
amounts to 33.75 percent (22,417,429 voting rights) as per this date. 4,257,000 of
these voting rights, corresponding to 6.41 percent of the voting rights in EPCOS
AG, are attached to shares held by TDK Hong Kong Co. Ltd., Kowloon, Hong
Kong/ China, which is controlled by TDK Corporation and attributed to TDK Corporation pursuant to section 22 (1) sentence 1 No.1 WpHG.
f) On October 21, 2008, TDK Corporation, Tokyo, Japan, has notified the Company
pursuant to section 21 (1) WpHG that its percentage of voting rights in EPCOS
AG exceeded the thresholds of 50 percent and 75 percent on October 17, 2008,
and amounts to 84.00 percent (55,800,277 voting rights) as per this date.
28,147,050 of these voting rights, corresponding to 42.37 percent of the voting
rights in EPCOS AG, are attributed to TDK Corporation pursuant to section 22 (1)
sentence 1 No. 1 WpHG. Voting rights that are to be attributed to TDK Corporation are held via the following companies which are controlled by TDK Corporation
and whose holdings of voting rights in EPCOS AG amount to 3 percent or more:
– TDK Hong Kong Co. Ltd.
– TDK Germany GmbH
 EPCOS AG 2009 62
CONSOLIDATED FINANCIAL STATEMENTS
g) On October 21, 2008, TDK Germany GmbH, Duesseldorf, Germany, has notified
the Company pursuant to section 21 (1) WpHG that its percentage of voting rights
in EPCOS AG exceeded the thresholds of 3 percent, 5 percent, 10 percent, 15
percent, 20 percent, 25 percent and 30 percent on October 17, 2008, and
amounts to 35.96 percent (23,890,050 voting rights) as per this date.
h) On September 21, 2009, TDK Hong Kong Co. Ltd., Kowloon, Hong Kong, China,
has notified the Company pursuant to section 21 (1) WpHG, its percentage of voting rights in EPCOS AG fell below the threshold of 5 percent and 3 percent on
September 18, and amounts to 0.00 percent (this corresponds to 0 voting rights)
as per this date.
i) On October 5, 2009, TDK – EPC Corporation, Tokyo, Japan, has notified the
Company pursuant to section 21 (1) WpHG that its percentage of voting rights in
EPCOS AG, exceeded the thresholds of 3 percent, 5 percent, 10 percent, 15 percent, 20 percent, 25 percent, 30 percent, 50 percent and 75 percent on October 1,
2009, and amounts to 95.82 percent (corresponding to 63,897,064 voting rights)
as per this date. 30,244,901 of these voting rights, corresponding to 45.36 percent
of the voting rights in EPCOS AG, are attributed to TDK – EPC Corporation pursuant to section 22 (1) sentence 1 No.1 WpHG. Voting rights that are to be attributed to TDK – EPC Corporation are held via TDK Germany GmbH which is controlled by TDK – EPC Corporation and whose holdings of voting rights in EPCOS
AG amounts to 3 percent or more.
6.1.5 Statement in accordance with section 161 AktG
The updated version of the statement of compliance with the German Corporate
Governance Code in accordance with section 161 AktG was provided by the Management Board and Supervisory Board in December 2008, and made permanently
available to shareholders via the Internet on the EPCOS website.
 EPCOS AG 2009 63
CONSOLIDATED FINANCIAL STATEMENTS
6.1.6 Governing bodies and Compensation report
1. Members of the Supervisory Board. Data at September 30, 2009
Klaus Ziegler
Chairman;
Member of the Advisory Council of EPCOS do Brasil
Ltda., Gravataí/ Brazil.
Dr. Wolf-Dieter Bopst
(until December 12, 2008);
Member of the Supervisory Board of OSRAM GmbH;
Member of the Advisory Council of Fr. Jacob Söhne
GmbH & Co. KG.
Takehiro Kamigama
(since January 7, 2009);
President & Chief Executive Officer of TDK Corporation, Japan;
President & Chief Executive Officer of TDK-EPC
Corporation, Japan;
Director of Toppan TDK Label Co. Ltd., Japan.
Prof. Dr. Anton Kathrein Deputy Chairman;
Managing Director and General Partner, KATHREINWerke KG;
Chairman of the Supervisory Board of Erste Rosenheimer Finanzservice AG.
Dr. Bodo Lüttge
Deputy Chairman of the Supervisory Board of Messer
Group GmbH.
Shiro Nomi
(since January 7, 2009);
Executive Managing Director of TDK Corporation,
Japan;
Director of Tabuchi Electronic Co., Ltd, Japan;
Director of TDK China Co., Ltd., China;
Director of TDK Taiwan Corporation, Taiwan;
Director of TDK (Malaysia) Sdn. Bhd., Malaysia;
Director of TDK Europe S.A., Luxembourg;
Director of TDK Lambda Holdings Inc., USA;
Director of TDK-EPC Corporation, Japan;
Managing Director of TDK Germany GmbH, Germany.
Prof. Dr. Claus Weyrich Member of the Supervisory Board of Heraeus Holding
GmbH.
 EPCOS AG 2009 64
CONSOLIDATED FINANCIAL STATEMENTS
Peter Geschka
Product Technology Manager at the Surface Acoustic
Wave Components Division of EPCOS AG;
Member of EPCOS AG Works Council, Munich
facility.
Peter Hoffmann
Deputy Chairman;
Chairman of EPCOS AG Works Council, Heidenheim
facility.
Michael Leppek
Second Authorized Representative of IG Metall,
Munich;
Member of the Supervisory Board of Nokia Siemens
Networks Management GmbH;
Member of the Supervisory Board of
MTU Aero Engines Holding AG;
Member of the Supervisory Board of
MTU Aero Engines GmbH.
Hans-Jörg Napravnik
(since November 27, 2008);
Second Authorized Representative of IG Metall,
Heidenheim;
Member of the Supervisory Board of Voith Paper
Verwaltungs GmbH.
Claus Ryschawy
Chairman of EPCOS AG Central Works Council;
Deputy Chairman of the EPCOS AG Works Council,
Munich facility;
Chairman of the European Employee Council of the
EPCOS Group.
Andreas Strobel
(until October 31, 2008);
First Authorized Representative and Secretary of IG
Metall, Heidenheim;
Member of the Supervisory Board of Voith AG, Voith
Paper Verwaltungs GmbH and Voith Turbo Beteiligungs GmbH;
Member of the Supervisory Board of
Paul Hartmann AG.
Winfried Wolff
Quality System Manager at EPCOS AG.
 EPCOS AG 2009 65
CONSOLIDATED FINANCIAL STATEMENTS
2. Members of the Management Board. Data at September 30, 2009
Gerhard Pegam
Dr. Werner Faber
Helmut König
Joachim Zichlarz
President and Chief Executive Officer; also responsible
for Sales, Corporate Center, Human Resources, Internal Audits and the Capacitors Division;
President and Member of the Board of Directors of
EPCOS SAS, St. Denis, France;
Chairman of the Board of Directors of Becromal S.p.A.,
Milan, Italy;
Chairman of the Board of Directors of Becromal Iceland
ehf., Akureyri, Iceland;
Chairman of the Board of Directors
of EPCOS (China) Investment Ltd., Shanghai, China,
of EPCOS (Shanghai) Ltd., Shanghai, China,
of EPCOS Limited., Hong Kong, China,
of EPCOS KK, Tokyo, Japan,
of EPCOS Inc., Iselin, New Jersey, USA;
and of EPCOS India Private Ltd., Nashik, India;
Member of the Board of Directors of EPCOS Electronic
Components S.A., Málaga, Spain;
Member of the Advisory Council of EPCOS do Brasil
Ltda., Gravatai, Brazil.
Technology and Quality; Film Capacitors, Inductors,
Surface Acoustic Wave (SAW), Ceramic Components
and Sensors Divisions;
Member of the Shareholders' Committee of EPCOS
OHG, Deutschlandsberg, Austria.
(until March 31, 2009) Chief Financial Officer; Business
Administration (Finance, Accounting); also responsible
for Information Technology and Logistics, Internal
Audits, Investor Relations and the Legal Department;
(until March 31, 2009) Vice Chairman of the Board of
Directors of EPCOS (China) Investment Ltd., Shanghai,
China.
(since April 1, 2009) Chief Financial Officer; Business
Administration (Finance, Accounting); Information
Technology and Logistics, Investor Relations and the
Legal Department;
Vice Chairman of the Board of Directors of EPCOS
(China) Investment Ltd., Shanghai, China;
Member of the Board of Directors (Executive Vice
President) of Becromal S.p.A., Milan, Italy.
 EPCOS AG 2009 66
CONSOLIDATED FINANCIAL STATEMENTS
3. Compensation of the Supervisory Board
Compensation paid to the members of the Supervisory Board totaled EUR 358
thousand in fiscal 2009 (EUR 391 thousand in 2008). An itemized breakdown is given
in the following table.
Compensation of the individual members of the Supervisory Board
2009
2008
Fixed
amounts
Attendance
fees
Fixed
amounts
Attendance
fees
40,000
30,000
40,000
30,000
4,000
2,000
20,000
6,000
Prof. Dr. Anton
Kathrein
30,000
5,500
30,000
11,000
Peter Geschka
20,000
7,000
20,000
6,000
Peter Hoffmann
30,000
12,500
30,000
11,000
-
-
-
-
Michael Leppek
20,000
12,000
20,000
3,000
Dr. Bodo Lüttge
20,000
13,000
20,000
13,000
Hans-Jörg Napravnik
16,877
6,000
-
-
-
-
-
-
Joachim Reinhart
4,000
-
20,000
5,000
Claus Ryschawy
20,000
7,000
20,000
5,000
Andreas Strobel
1,699
2,000
20,000
9,000
Prof. Dr. Claus Weyrich
20,000
7,000
20,000
6,000
Winfried Wolff
20,000
7,000
20,000
6,000
(in EUR)
Klaus Ziegler
Dr. Wolf-Dieter Bopst
Takehiro Kamigama
Shiro Nomi
 EPCOS AG 2009 67
CONSOLIDATED FINANCIAL STATEMENTS
4. Compensation of the Management Board for fiscal 2009
a. Total compensation
Total compensation paid to all four members of the Management Board (three in
2008) amounted to EUR 1,553 thousand in fiscal 2009 (EUR 2,427 thousand in
2008). This amount was composed of non-performance-related components totaling
EUR 893 thousand (EUR 858 thousand in 2008) and performance-related components totaling EUR 660 thousand1) (EUR 1,003 thousand in 2008). No further longterm incentives based on the share price were granted in fiscal 2009. The reason is
that, following the takeover by TDK and associated speculation about a squeeze-out,
EPCOS' share price no longer adequately reflected the Company's business performance and was therefore no longer suitable as a standard by which to set longterm incentives. In the previous fiscal year, 150,000 stock appreciation rights (SARs)
with a total value of EUR 566 thousand were granted. The fair value of these SARs
on the date of issue was EUR 3.77.
1)
The performance-related amounts will be finalized decided in the meeting of the Supervisory Board
on December 11, 2009.
 EPCOS AG 2009 68
CONSOLIDATED FINANCIAL STATEMENTS
b.
Compensation of the individual members of the Management Board
The itemized breakdown of Management Board compensation is shown in the table below (rounded to thousands of euros):
Long-term incentives5)
Cash compensation
Non-performance related
Total
Subtotal
Performancerelated4)
Number
granted
29,000
449,000
360,000
809,000
0
396,000
26,000
422,000
575,000
997,000
60,000
228,000
19,000
247,000
180,000
427,000
0
210,000
17,000
227,000
287,000
514,000
50,000
81,000
24,000
105,000
60,000
165,000
0
162,000
47,000
209,000
141,000
350,000
40,000
2009
81,000
11,000
92,000
60,000
152,000
2008
-
-
-
-
-
Fixed annual
salary
Other
benefits3)
2009
420,000
2008
Value
Total compensation
Gerhard Pegam
226,000
809,000
1,223,000
Dr. Werner Faber
2009
2008
Helmut König
-
427,000
189,000
703,000
-
165,000
151,000
501,000
0
-
152,000
-
-
-
1)
2009
2008
Joachim Zichlarz
2)
1)
Data for Helmut König concern the period to March 31, 2009.
2)
Data for Joachim Zichlarz concern the period from April 1, 2009.
3)
"Other benefits" also include premiums for an occupational disability insurance policy and a term life insurance policy for Gerhard Pegam and Joachim
Zichlarz, plus the commitment – for a limited period – to pay the rent for accommodation for Helmut König.
4)
Amounts are assigned to the fiscal year for which the performance-related compensation component was paid. As a rule, payment is actually made in
January of the following fiscal year. The performance-related amounts will be finalized decided in the meeting of the Supervisory Board on December 11,
2009.
5)
Fiscal 2009 = no share-based components granted; fiscal 2008 = SARs. The figure quoted is the value of the options/ SARs at the time when they were
granted. The principles of the SAR plan and the stock option plans are outlined in section 6.28 of the notes to the consolidated financial statements.
 EPCOS AG 2009 69
CONSOLIDATED FINANCIAL STATEMENTS
c.
Other disclosures regarding share-based compensation
The stock options granted to the individual members of the Management Board up to and including fiscal 2007 developed as
follows in fiscal 2008 and 2009:
Development of the stock options granted in units or in EUR
Gerhard Pegam
No. of
options
Options outstanding at
October 1, 2007
Options granted in
fiscal 2008
Options forfeited in
fiscal 2008
Options exercised in
fiscal 2008
Helmut König1)
Dr. Werner Faber
Weighted average
of exercise prices
No. of
options
Weighted average
of exercise prices
No. of
options
Joachim Zichlarz2)
Weighted average
of exercise prices
No. of
options
Weighted average
of exercise prices
295,000
35.02
119,500
21.55
30,000
16.31
-
-
0
-
0
-
0
-
-
-
0
-
0
-
0
-
-
-
(140,000)
14.23
(58,500)
13.60
0
-
-
-
-
-
-
Weighted average
share price on
17.82
17.85
exercise date
Options that expired in
fiscal 2008
(40,000)
105.04
(5,000)
105.04
0
-
-
-
115,000
35.96
56,000
22.40
30,000
16.31
-
-
65,000
51.08
16,000
37.64
0
-
-
-
Options outstanding at
September 30, 2008
Of which:
exercisable options
 EPCOS AG 2009 70
CONSOLIDATED FINANCIAL STATEMENTS
Options outstanding at
October 1, 2008
Options granted in
fiscal 2009
Options forfeited in
fiscal 2009
Options exercised in
fiscal 2009
115,000
35.96
56,000
22.40
30,000
16.31
26,500
24.66
0
-
0
-
0
-
0
-
0
-
0
-
0
-
0
-
(50,000)
16.31
(40,000)
16.31
(30,000)
16.31
(17,000)
16.31
Weighted average
share price on
20.00
20.00
20.00
20.00
exercise date
Options that expired in
fiscal 2009
(45,000)
64.11
(6,000)
64.11
0
-
(4,000)
64.11
20,000
21.76
10,000
21.76
0
-
5,500
21.76
20,000
21.76
10,000
21.76
0
-
5,500
21.76
Options outstanding at
September 30, 2009
Of which:
exercisable options
1)
Helmut König's tenure as a member of the Management Board of EPCOS AG ended on March 31, 2009.
2)
Until March 31, 2009, Joachim Zichlarz was an executive employee of EPCOS AG. He was appointed as a member of the Management Board effective April 1, 2009.
 EPCOS AG 2009 71
CONSOLIDATED FINANCIAL STATEMENTS
At the end of fiscal 2009 and fiscal 2008, the outstanding stock options for the individual members of the Management Board had
the following ranges and residual maturities:
Stock options outstanding at the end of fiscal year 2009 and 2008 in units or in EUR
September 30, 2009
Number of stock options outstanding
Exercise
price
Weighted average of residual maturities in years
21.76
1.2
Gerhard
Pegam
Dr. Werner
Faber
Helmut
König1)
Joachim
Zichlarz2)
20,000
10,000
0
5,500
September 30, 2008
Number of stock options outstanding
Exercise
price
Weighted average of residual maturities in years
Gerhard
Pegam
Dr. Werner
Faber
Helmut
König1)
Joachim
Zichlarz2)
64.11
0.2
45,000
6,000
0
-
21.76
2.2
20,000
10,000
0
-
16.31
5.2
50,000
40,000
30,000
-
115,000
56,000
30,000
-
TOTAL
1)
Helmut König's tenure as a member of the Management Board of EPCOS AG ended on March 31, 2009.
2)
Until March 31, 2009, Joachim Zichlarz was an executive employee of EPCOS AG. He was appointed as a member of the Management Board effective April 1, 2009.
 EPCOS AG 2009 72
CONSOLIDATED FINANCIAL STATEMENTS
In fiscal 2009 and 2009, the following expenses (rounded to thousands of euros)
were recorded for share-based compensation instruments held by members of the
Management Board:
Total expenses for share-based compensation
in EUR
Gerhard Pegam
Dr. Werner Faber
Helmut König1)
Joachim Zichlarz2)
Total
Fiscal 2009
Fiscal 2008
No sharebased compensation
granted
16,000
12,000
9,000
37,000
Stock
Option
Plan
98,000
80,000
55,000
233,000
Stock
Appreciation Rights
Plan
298,000
248,000
198,000
744,000
Total
396,000
328,000
253,000
977,000
Note: The amounts shown in this table do not constitute payments actually made. They merely
constitute a calculation in compliance with IFRS of expenses incurred for the periods concerned.
1)
Data for Helmut König concern the period to March 31, 2009.
2)
Data for Joachim Zichlarz concern the period from April 1, 2009.
Pension commitments on September 30 made to the four members of the Management Board in fiscal 2009 (three in 2008) totaled EUR 363 thousand (EUR 323
thousand in 2008). The itemized breakdown of this amount is as follows:
d)
Annual pension commitments
September 30, 2009
September 30, 2008
Gerhard Pegam
195,000
180,000
Dr. Werner Faber
120,000
95,000
in EUR
Helmut König1)
Joachim Zichlarz2)
1)
-
48,000
48,000
-
Data for Helmut König concern the period to March 31, 2009. Pension commitments made to Mr. König were
subject to the condition that he would be reappointed as a member of the Management Board of EPCOS AG at
the end of the tenure that ran through March 31, 2009.
2)
Data for Joachim Zichlarz concern the period from April 1, 2009.
 EPCOS AG 2009 73
CONSOLIDATED FINANCIAL STATEMENTS
Pension provisions
Under HGB accounting, about EUR 670 thousand was appropriated to pension
provisions for members of the Management Board in fiscal 2009 (EUR 578 thousand
in 2008). Under IFRS, the present value of defined benefit obligations (DBO) for
members of the Management Board was EUR 5,819 thousand at September 30,
2009 (EUR 4,005 thousand at September 30, 2008).
e)
Former members of the Management Board and their surviving
dependents
In fiscal 2009, the Company paid a total of EUR 288 thousand to former members of
the Management Board (EUR 297 thousand in 2008). Additional entitlements were
either met by Siemens AG or have already been settled. At September 30, 2009,
provisions for pension commitments in respect of this group totaled EUR 2,159,000
under HGB accounting (EUR 2,191 thousand in 2008). Under IFRS, the present
value of defined benefit obligations (DBO) for all pension commitments for former
members of the Management Board and their surviving dependants was EUR 2,921
thousand as of September 30, 2009 (EUR 2,679 thousand at September 30, 2008).
f)
Other issues
The Company provided neither advances nor credit facilities to members of the
Management Board in the period under review, nor did it accept liability for contingencies on their behalf.
6.2
Description of the Company
EPCOS AG (the “Company”) is a leading producer and supplier of electronic components, modules and systems with headquarters in Munich/ Germany. The Company
has research and design centers and manufacturing facilities in Europe, Asia and the
Americas, and a worldwide sales network. Electronic components, modules and
systems are used in all types of electronic circuitry. The Company designs its product
offerings to meet the needs of its principal customer groups, such as the telecommunication, automotive, consumer and industrial electronics industries and the information technology industry. Customers consist of equipment manufacturers and other
companies that make modules or subsystems for equipment and automotive manufacturers, as well as distributors.
TDK Corporation, Tokyo, Japan, owned more than 95 percent of voting rights in
EPCOS AG (direct and indirect) as of September 30, 2009.
The resolution to transfer minority interests in EPCOS AG was recorded on October
22, 2009 in EPCOS AG's commercial register entry. TDK Corporation, Tokyo, Japan,
 EPCOS AG 2009 74
CONSOLIDATED FINANCIAL STATEMENTS
therefore owns 100 percent voting rights in EPCOS AG (direct and indirect). For
further details please see note 6.36.
The fiscal years in this annual report run from October 1 until September 30 of the
following year. The General Meeting (May, 20 2009) agreed to the resolution on the
alteration of the fiscal year. The fiscal year shall run from April 1 in one year to March
31 in the subsequent year. The period from October 1, 2009 to March 31, 2010 will
be a short fiscal year.
Except where explicitly stated otherwise, the presentation currency used in the notes
to the consolidated financial statements is the euro (EUR). Where necessary, figures
have been rounded on the basis of standard commercial principles.
6.3
Summary of significant accounting policies and basis for presentation
EPCOS AG has prepared these consolidated financial statements for the fiscal year
ending September 30, 2009 in accordance with the International Financial Reporting
Standards (IFRSs) issued by the International Accounting Standards Board (IASB),
as adopted by the European Union and the additional requirements of section 315a
(1) German Commercial Code (Handelsgesetzbuch, HGB).
This report was compiled in accordance with German Accounting Standard 5, “Risk
reporting” (GAS 5), German Accounting Standard 15, “Management reporting” (GAS
15), German Accounting Standard 15a, “Group management report disclosures and
narrative explanations required by takeover Law” (GAS 15a) and German Accounting
Standard 17 “Reporting on the remuneration of members of governing bodies” (GAS
17).
The consolidated financial statements for the fiscal ending September 30, 2009, were
released for publication on November 25, 2009, pursuant to a resolution by the
Management Board.
6.4
Summary of significant accounting and measurement policies
6.4.1 Consolidation
Companies where EPCOS AG exercises effective control in accordance with law are
consolidated in line with the regulations of IFRS. Control is deemed to exist if EPCOS
can govern the financial and operating policies of a company in order to obtain benefits from its activities.
Where necessary, the annual financial statements of subsidiaries are adjusted to
adhere to the accounting and valuation principles used in the EPCOS Group.
 EPCOS AG 2009 75
CONSOLIDATED FINANCIAL STATEMENTS
All significant balances and transactions within the Group and all significant intercompany profits arising from such transactions are eliminated from the consolidated
financial statements.
6.4.2 Investments in unconsolidated companies/associates
Companies that EPCOS does not control but over whose operating and financial
policies EPCOS can exercise a significant influence (associates) are stated at equity
in the consolidated financial statements.
The appropriate share of equity of companies accounted for under the equity method
is reported in the consolidated financial statements. Intercompany profits arising from
transactions with these companies are eliminated in the consolidated financial statements.
Significant influence is generally assumed if EPCOS directly or indirectly controls 20
percent to 50 percent of the voting rights in a company.
Indications of impairment lead to an examination of the recognized value. If necessary, this examination is followed by impairment. Where the reasons for an earlier
impairment no longer exist, the impairment is reversed and the write-up is recognized
in profit and loss.
Where fair value cannot be determined reliably or where no market price is available,
investments are recognized at cost in the consolidated financial statements. Where
indication of impairment exists, impairment tests are performed. Any necessary
corrections are recognized in profit and loss.
6.4.3 Consolidated Group
The consolidated financial statements include all material German and foreign subsidiaries which EPCOS AG controls directly or indirectly. At September 30, 2009, and
September 30, 2008, the following number of companies was consolidated alongside
EPCOS AG:
Consolidated
Germany
Foreign
At Equity
2009
2008
3
36
39
1
40
3
31
34
1
35
 EPCOS AG 2009 76
CONSOLIDATED FINANCIAL STATEMENTS
Additions to the consolidated Group in fiscal 2009 consist of the purchase of Becromal group and the newly founded EPCOS (Anhui) Feida Electronics Co., Ltd.
(EPCOS Feida).
The consolidated financial statements are based on the financial statements prepared of each legal entity as of September 30 for each corresponding year.
6.4.4 Foreign currencies
6.4.4.1 Transactions in foreign currencies
Purchases and sales effected in foreign currencies are translated at the exchange
rate valid at the time of the transaction. Assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rate valid on the
balance sheet date. The resulting foreign currency gains and losses are recognized
in consolidated profit and loss.
6.4.4.2 Translation of financial statements into euros (EUR)
EPCOS presents its financial statements in euros. Balance sheet items reported by
subsidiaries for which the euro is not the presentation currency are translated at the
spot rate on the balance sheet date. Items in the income statement are translated at
the weighted average rate for the respective fiscal period. The resulting translation
adjustments are recognized in equity.
 EPCOS AG 2009 77
CONSOLIDATED FINANCIAL STATEMENTS
The major exchange rates used for the currency translation corresponding to one
EUR at September 30, 2009 and September 2008, respectively are as follows:
US Dollar (USD)
Japanese Yen (JPY)
2009
Spot rate
2008
Average rate
2009
2008
1.4643
1.4302
1.3561
1.5103
131.0616
151.5152
128.5512
161.2903
Singapore Dollar (SGD)
2.0653
2.0437
1.9948
2.1160
Chinese Renminbi / Yuan (CNY)
9.9701
10.0000
9.2851
10.6724
6.4.5 Revenue recognition
Sales revenues are recognized when they are realized or become realizable, irrespective of the date of payment. Sales revenues are defined net of discounts, customer incentives, rebates and returns. Interest income and expenses are recognized
in the periods in which they occur. Dividends are recognized at the time when a legal
entitlement to them exists. They are recognized in profit and loss irrespective of the
actual disbursement timing.
6.4.6 Research and development costs
Research costs are distinguished from development costs. Research costs are
recognized in the period in which they are incurred.
Where the criteria for recognition specified by IAS 38 are met, development costs are
capitalized. These capitalized costs are then included in other internally generated
intangible assets, a subset of intangible assets. In subsequent periods, amortization
of capitalized development costs is recognized in profit and loss as cost of sales.
Where capitalized development costs can be assigned to a specific production operation, amortization is spread across the costs of the products concerned.
Where the criteria for capitalization of development costs are not met, development
costs are recorded under “Research and development costs” as an expense in the
appropriate period.
6.4.7 Income taxes
Current taxes are recognized at the time when Group income tax liabilities are incurred. Income taxes are calculated using the asset and liability method in accordance with the provisions of IAS 12 (Income Taxes). All liabilities or claims relating to
taxes on earnings, capital and property arising during the fiscal year are reflected in
the consolidated financial statements pursuant to the relevant tax laws applicable to
the individual companies. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax
 EPCOS AG 2009 78
CONSOLIDATED FINANCIAL STATEMENTS
bases and operating loss and tax credit carryforwards. Deferred tax assets are thus
recognized only insofar as it is probable that they can be utilized in the future with
positive taxable income.
Deferred tax assets and liabilities are computed using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment
date.
6.4.8 Property, plant and equipment
Property, plant and equipment are recognized at historical cost less accumulated
depreciation and accumulated impairment. Cost includes closure and restoration
costs that must be capitalized. Incidental acquisition cost are included as well.
Awarded and taken discounts and rebates are deducted from the purchase price.
It also includes the material cost of improvements that extend the useful life or increase the capacity of the assets concerned. Maintenance and repair costs are
recognized as an expense when they are incurred. Capital expenditure for expansion
is capitalized insofar as it increases the value of an asset.
Government grants reduce the acquisition cost if they can be assigned to individual
assets, i.e. the value of the assets to which they were granted. Interest on borrowings
that is incurred during the purchase or construction of a qualified asset is not capitalized.
When property, plant and equipment are disposed of, the associated historical cost
and accumulated depreciation and impairments are derecognized. The differences
between these amounts and the proceeds from the sale are recognized as income or
expense in the consolidated statements of income.
As a general rule, the following useful lives are estimated for depreciable items of
property, plant and equipment:
Buildings, exterior fixtures and leasehold improvements
5 to 50 years
Machinery and other equipment
5 to 10 years
Other assets, office fixtures and fittings
3 to 5 years
The EPCOS Group depreciates these assets in using the straight-line method, except where other methods more accurately reflect actual patterns of usage.
 EPCOS AG 2009 79
CONSOLIDATED FINANCIAL STATEMENTS
6.4.9 Intangible assets
With the exception of goodwill, intangible assets are recognized at cost less accumulated amortization and impairment. Scheduled amortization is recorded using the
straight-line method over the useful life of an asset.
Goodwill is defined as the difference between the purchase price and the fair value of
the net assets of an acquired separate entity or a business. Beyond that, intangible
assets consist primarily of the acquired customer base, patents, licenses and internally generated intangible assets. Patents are amortized over a maximum of ten
years in accordance with the patent certificate. The same period applies to amortization of the customer base. Licenses are amortized in accordance with the terms of
the relevant agreements. Internally generated intangible assets are amortized over
their probable useful life.
Pursuant to IAS 36 (Impairment of Assets), goodwill is not subject to scheduled
amortization. The goodwill assigned to business units is tested for impairment at least
once a year, or where events indicate an impairment may exist, and written down
accordingly as and when necessary. Goodwill impairments cannot be reversed in
subsequent periods.
6.4.10 Impairment of long-lived assets
The Company tests long-lived assets (including intangible assets) for impairment
whenever certain events or changes in circumstances indicate that an asset's carrying amount may no longer be recoverable.
In accordance with IAS 36 the carrying amount of such assets is compared with their
recoverable amount, which is defined as the higher of their value in use and their fair
value less cost to sell.
Normally, expert reports are prepared or discounted future net cash flows are estimated to determine the recoverable amount of an asset. Estimates of future net cash
flows require management to make assumptions. Actual values may, however,
deviate from the estimated values.
If an asset's carrying amount is higher than its recoverable amount, the asset is
written down by the difference between the carrying amount and the recoverable
amount. If the reasons for an earlier impairment no longer apply, assets impairments
(with the exception of goodwill) are reversed again. However, any such reversal must
not exceed the carrying amount of the asset that would have applied if impairment
had not been effected in previous periods.
 EPCOS AG 2009 80
CONSOLIDATED FINANCIAL STATEMENTS
6.4.11 Financial instruments and hedges
The recording of financial instruments takes place on the transaction date of the
purchase or sale; this means on the day upon which an obligation to purchase or sell
an asset or liability was incurred.
Financial instruments consist of original and derivative financial instruments. These
instruments are assigned to individual classes and categories for the purposes of
internal and external reporting. Since fundamentally different measurement and
accounting policies are prescribed for the individual classes and categories, these
are explained below:
On the assets side, original financial instruments essentially consist of securities,
trade receivables and cash and cash equivalents. On the liabilities side, original
financial instruments mainly include debt and trade liabilities.
Most securities are classified as “available-for-sale (AFS) securities” and are measured at fair value. Fair value is determined from the securities’ market or stock market
valuations, where these are available. If the fair value of securities is higher than their
cost, the difference (less deferred taxes) is recognized in equity. If the fair value of
securities will probably remain lower than their cost on a permanent basis, the difference is recognized in profit and loss in the consolidated statements of income. Receivables resulting from contracts include trade receivables and issued loans (in the
Loans and Receivables (LAR) category), for example. These receivables are recognized at amortized cost less impairments. Cash and cash equivalents are recognized
at nominal amount. Cash and cash equivalents denominated in non-euro currencies
are translated at the exchange rate on the balance sheet date. Debt and trade liabilities (in the Financial Liabilities at amortized Cost, FLAC) are recognized at amortized
cost using the effective interest method.
IAS 39 (Financial Instruments: Recognition and Measurement) contains regulations
governing the accounting and reporting treatment of derivative financial instruments,
including certain derivative financial instruments that are embedded in other contracts
and hedge accounting.
EPCOS uses derivative financial instruments to contain the exchange rate risks,
interest rate risks and risks associated with fluctuations in the market price of precious metals. The Company neither uses nor issues derivative financial instruments
for trading or speculative purposes. However, to minimize certain risks that are
inherent to the nature of its business activities, EPCOS does engage in forward
exchange contracts, forward rate agreements and commodity futures transactions.
Derivative financial instruments are recognized at fair value both when they are
reported for the first time and in subsequent periods. Gains and losses arising from
fluctuations in fair value are recognized immediately in profit and loss.
 EPCOS AG 2009 81
CONSOLIDATED FINANCIAL STATEMENTS
If a derivative financial instrument is used as a cash flow hedge in accordance with
IAS 39, the effective portion of the change in the fair value of the hedge is recognized
in equity. The ineffective portion of the change in the fair value of a cash flow hedge
is recognized immediately in profit and loss. Reclassification to profit and loss takes
place in the period in which the hedged item is recognized in profit and loss. Where a
hedged item ceases to exist, the hedging result is immediately reclassified to profit
and loss.
Changes in the fair value of derivative financial instruments where the hedge is not
designated as such are also recognized in profit and loss (under the category "Financial Liabilities/Assets Held for Trading, FLHfT/FLAHfT”). Market/stock market values
are used to determine the fair value of derivative financial instruments.
For hedging of an underlying operating transaction the results of both the operating
activity and the hedging activity are posted in the operating result, within EBIT. For
hedging of an underlying financial transaction the results from the underlying and the
hedging activities are posted in the financial result, outside EBIT.
6.4.12 Securities
EPCOS classifies most of its securities as available-for-sale securities. These securities are recognized at their market value on the balance sheet date. Cumulative
unrealized gains and losses are recognized in equity. Realized gains or losses and
impairments that are probably of a permanent nature are recognized in consolidated
profit and loss.
The Company did not make use of the option of designating financial assets or
liabilities at fair value through profit and loss upon initial recording.
6.4.13 Inventories
Inventories are measured at the lower of cost or net realizable value. Cost is determined primarily using the weighted average method. Cost includes directly attributable material and labor cost and a share of material and production overheads, plus
depreciation based on the assumption of normal capacity utilization.
6.4.14 Cash and cash equivalents
For the purposes of the consolidated statements of cash flows, EPCOS recognizes
all highly liquid financial instruments with original maturities of up to three months as
cash and cash equivalents. These items include cash, checks, balances in bank
accounts and current investments for periods of less than three months at the time of
initial investment.
 EPCOS AG 2009 82
CONSOLIDATED FINANCIAL STATEMENTS
6.4.15 Financial assets and financial liabilities
When booked for the first time, financial assets such as accounts receivable and
issued loans are recognized at fair value, which normally corresponds to cost. Subsequently, these financial assets are recognized at amortized cost less potential
impairment.
When booked for the first time, financial liabilities such as accounts payable and
received loans are recognized at cost, which corresponds to the fair value of the
consideration received. Subsequently, these liabilities are recognized at amortized
cost.
6.4.16 Earnings per share
Basic (i.e. undiluted) earnings per share are calculated by dividing income attributable to holders of ordinary shares in EPCOS AG by the weighted average number of
shares outstanding in a given period. To calculate diluted earnings per share, the
potential “dilutive” effect that would occur if new shares were issued is also taken into
account.
6.4.17 Share-based payment
Personnel expenses arising from share-based compensation commitments that
EPCOS can fulfill by issuing new shares or purchasing its own shares on the capital
market are offset against additional paid-in capital. Personnel expenses arising from
stock appreciation rights (SARs) are carried in liabilities, whereby the relevant expenses are spread over the contractually agreed blocking period. The amount of
expenses is determined by parameters such as the grant date and the exercise price.
6.4.18 Leasing
In accordance with IAS 17 (Leases), the accounting treatment of leasing transactions
depends on whether a transaction is classified as a finance lease or as an operating
lease. A lease is classified as a finance lease if it transfers to the lessee substantially
all the risks and rewards incidental to ownership. Assets leased under finance lease
arrangements are capitalized in the consolidated financial statements; corresponding
obligations are also carried. Where the Company uses assets under operating lease
arrangements, the lease payments are recognized in the consolidated statement of
operations as expenses on a linear basis over the lease term.
The Company defers income resulting from sale-and-leaseback transactions and
recognizes it in profit and loss over the term of the lease (finance leases). Immediate
recognition of such income is not permissible. Where a sale-and-leaseback transaction results in an operating lease, profit or loss must be recognized immediately if
certain criteria are met.
 EPCOS AG 2009 83
CONSOLIDATED FINANCIAL STATEMENTS
6.4.19 Cash flow statements
The cash flow statements show how cash inflows and outflows during the reporting
periods have changed the Company’s balance of cash and cash equivalents. In
accordance with IAS 7, a distinction is drawn between cash flows from operating,
investing and financing activities. The balances of cash and cash equivalents reported in the cash flow statements include highly liquid funds with original maturities
of up to three months and whose valuation is subject to only insignificant fluctuations.
Cash flows from investing and financing activities are calculated on the basis of
payments. Cash flows within investing activities are calculated using the indirect
method. The calculations used to prepare the cash flow statements correct individual
items on the balance sheet by adjusting them for non-cash effects (such as currency
translation at companies that do not use the euro as their presentation currency, or
the addition/removal of companies to/from the consolidated Group). It is therefore not
possible to reconcile the full amount of such changes to the resultant discrepancies
on the balance sheet. The effect of changes in exchange rates on cash and cash
equivalents is, however, presented as a separate item in the cash flow statements.
Cash flow from investing activities denotes the cash inflows and outflows that arise
from investments in or the divestment of property, plant, equipment, intangible assets
and financial assets. Financing activities cover all cash-settled transactions between
either EPCOS and its shareholders or EPCOS and its creditors in the relevant reporting periods.
6.4.20 Structure of the balance sheet and the income statements
The consolidated balance sheets of EPCOS AG are prepared in accordance with
IAS 1, which requires assets and liabilities to be split into non-current and current
items. Balance sheet items that should normally be realized or settled within twelve
months are to be carried as current items. The consolidated income statements are
prepared in accordance with the cost of sales format.
6.5
Significant changes to individual balance sheet positions
The increase of minority interest in equity results from the extension of the basis of
consolidation and capital contributions at subsidiaries which are not owned by 100
percent of the EPCOS group.
The increase of intangible assets mainly results from newly consolidated companies.
Due to the material change in interest rate and the corresponding change of the
actuarial interest rate on pensions the pension liabilities increased significantly.
 EPCOS AG 2009 84
CONSOLIDATED FINANCIAL STATEMENTS
6.6
Accounting principles that require significant estimates
and assumptions
Some accounting principles require the use of significant estimates and assumptions.
These principles include complex and subjective evaluations and assessments on
the basis of issues that expose them to uncertainty and change. Accounting principles that require significant estimates and assumptions can change over time and
significantly influence the presentation of EPCOS’ financial position and performance.
These principles can also include the use of management assumptions that, for
equally persuasive reasons, could have been different in the same period. The Management Board expressly points out that future events often differ from forecasts,
and that estimates routinely have to be adapted in light of the actual developments.
6.6.1 Trade receivables and other receivables
Allowances for doubtful receivables include estimates and assessments of individual
receivables. These estimates and assessments are based on the creditworthiness of
the individual customer, current economic developments and an analysis of historic
default records within the portfolio. Country-specific ratings are also taken into account.
6.6.2 Goodwill
EPCOS tests goodwill for impairment at least once a year. The Company uses
measurement methods that are based on discounted cash flows. These cash flows
include a period of five years. Cash flow forecasts take account of past experience
and are based on management's best estimates of future developments. Cash flows
after this planning period are extrapolated considering economic growth rates. The
underlying assumptions, especially economic growth rates, weighted average capital
cost (WACC) and tax rate may have a significant influence on the recoverable
amount of the cash generating units.
6.6.3 Pensions and similar obligations
Defined-benefit plans (for which benefits are due after completion of the employment
relationship) are recognized in accordance with IAS 19 “Employee Benefits”. The
projected unit credit method is used to determine the present value of defined-benefit
obligations and, hence, the service cost. The plan assets are measured at fair value
on the balance sheet date and deducted from the present value of the defined-benefit
obligations.
Actuarial methods require the use of significant actuarial assumptions, including the
discount rate, future salary and benefit levels and the expected return on plan assets.
Discount rates are based on market rates of return for high quality corporate bonds
with similar maturities. Estimates of future salary and pension increases take into
 EPCOS AG 2009 85
CONSOLIDATED FINANCIAL STATEMENTS
account factors such as inflation and past experience. The projected returns on plan
assets are calculated subject to due account for historic long-term rates of return, the
expectations of the market and the structure of the portfolio.
Actual developments may differ from the assumed parameter values. This can lead
to actuarial gains or losses, as can changes in the underlying actuarial assumptions.
Using an option admitted by IAS 19, EPCOS recognizes actuarial gains and losses
directly in equity in the period in which they are incurred, i.e. not in profit and loss.
In addition, the Company makes contributions to regular pension funds (state pension plans/pension insurance) in accordance with legal stipulations. Unlike in the
case of defined benefit plans, the Company is obliged only to make specific contributions to these defined contribution plans and therefore does not have to report its
future obligations.
6.6.4 Provisions
The calculation of all provisions – especially provisions for onerous sales contracts,
warranties and legal disputes – necessarily involves estimates and assumptions by
nature.
6.6.5 Inventories
Valuation allowances for inventories are calculated using estimates of market data
that take into account pricing, quantity and technical risks and are based on statistical
methods and past experience and actual estimation by the management. All these
risks are factored into the calculation of impairments. The prices that are later realized on the market may differ from these estimations.
6.6.6 Business combinations
Within the scope of business combinations all acquired identifiable assets and liabilities as well as contingent liabilities are measured with their fair value at the acquisition date. The determination of these values of intangible assets and fixed assets
requires estimation on a high level. EPCOS uses expert opinions or uses general
accepted methods for measurement depending on complexness and kind of assets.
The result of measurement depends on forecasts of cash flows and other relevant
assumptions for valuation as interest rate. Actual developments can differ from these
assumptions.
 EPCOS AG 2009 86
CONSOLIDATED FINANCIAL STATEMENTS
6.6.7 Deferred tax assets
Every closing date, EPCOS evaluates if the future realization of tax benefits is more
likely than not regarding the recognition of deferred tax assets. This requires the
evaluation and consideration of future positive taxable income over the following five
years, tax planning strategies and other positive as negative factors. The recoverability of deferred tax assets as of September 30, 2009 is considerably dependent on the
successful implementation of a projected tax planning strategy. The actual realization
of these tax benefits is not only dependent on the development of these assumptions, but also on future tax regulations.
6.7
Changes in accounting prescriptions; accounting pronouncements
already applied
EPCOS applies IFRS 8 concerning business segments since October 1, 2007. Accordingly, segmentation is based on the management approach. The recipient of the
financial statements gains insight in the characters and the supervision of these
segments. The accounting policies for the segment reporting are the same that are
used for the EPCOS Group financial statements.
IFRIC 14 (The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction) was published in July 2007. This interpretation concerns itself with
the way in which minimum funding requirements and the limit imposed by IAS 19 on
defined-benefit assets or liabilities affect each other. Starting with fiscal 2009 EPCOS
is using this accounting prescription. The impact on EPCOS’ consolidated financial
statements was not material.
6.8
Changes in accounting prescriptions; accounting pronouncements still
to be applied
In September 2007, the International Accounting Standards Board (IASB) published
a new version of IAS 1 (Presentation of Financial Statements). It is compulsory for
fiscal years beginning on or after January 1, 2009. Significant changes primarily
concern the presentation of equity and the statements of income. EPCOS plans to
divide the presentation of the income statement and statement of comprehensive
income into two separate statements (“two statement approach”). Applying the revised version of IAS 1 will have no material impact on the future presentation of
EPCOS’ consolidated financial statements.
In January 2008, the IASB published a revised version of IFRS 2 (Share-Based
Payment). The amendments are concerning the reporting of share-based commitments to make cash payments. In particular, they define terms such as “exercise
terms” and “annulations”, as well as specifying how such items are to be reported.
Application of the revised version of IFRS 2 is compulsory for fiscal years beginning
 EPCOS AG 2009 87
CONSOLIDATED FINANCIAL STATEMENTS
on or after January 1, 2009. Applying the revised version of IFRS 2 will have no
material impact on EPCOS’ consolidated financial statements.
In March 2008, the IASB published a revised version of IAS 23 (Borrowing Costs). In
the future, interest on borrowings must be included in the cost of acquisition or production of qualifying assets. In the past, companies had the option of recognizing
interest on borrowings directly as an expense. EPCOS did not choose the above
mentioned option to capitalize these borrowing costs up to now. The revised version
of IAS 23 is compulsory for fiscal years beginning on or after January 1, 2009.
In January 2008, the IASB published a new version of IFRS 3R (Business Combinations) and of IAS 27 (Consolidated and Separate Financial Statements). These rules
are to be applied for transactions that take place in fiscal years that begin on or after
July 1, 2009. IFRS 3R implements some changes in the accounting of business
combinations that may have impact on EPCOS: The definition of “business” is expended. Therefore more acquisitions could be defined as business combinations.
Contingent considerations are to be accounted with their fair value. Adjustments of
contingent considerations in following periods are to be reported within gains or
losses. Costs of transactions/acquisition-related costs, excluding costs for issuing
shares or bonds, are to be booked as expense when occurred. Investments in this
business before the acquisition are to be accounted at fair value, corresponding
gains or losses are reported within income statement. Non-controlling interest are
valued either at fair value or in relation to the identifiable assets and liabilities of the
acquired business. In addition IAS 27 (revised) requires that changes in the investment in a subsidiary, as long as there is no change in control, are to be reported as
transaction within equity. Therefore transactions with non-controlling interests can no
longer result in goodwill or gain resp. loss. The effects resulting from the reworked
IFRS 3R and IAS 27 (revised) are to be applied prospective and will have impact on
future acquisitions and transactions between shareholders and non-controlling interests.
In October 2008 IFRS 7 (Financial instruments: disclosures) was reworked. Additional disclosures for calculatuion of fair value and liquidity risk are to be reported in
the notes. The revised version had not yet been endorsed by the EU within the
framework of European law. This regulation requires additional disclosures for financial instruments in the notes.
In February 2008 the IASB published amendments concerning IAS 32 and IAS 1
(Puttable financial instruments). The reworked version is compulsory for fiscal years
beginning on or after January 1, 2009. The changes in IAS 32 require to classify
defined puttable financial instruments and obligations resulting from liquidation as
equity in case some specific criteria are met. The reworked IAS 1 requires disclosures in the notes to such puttable financial instruments that are classified as equity.
From current point of view the disclosures will have no impact on accounting.
 EPCOS AG 2009 88
CONSOLIDATED FINANCIAL STATEMENTS
In addition, IFRIC 16 (Hedges of a Net Investment in a Foreign Operation) was
published in July 2008. This interpretation deals with such issues as the reporting of
foreign currency risks when the functional currency of a foreign operation is translated to the functional currency of the parent company, and when hedging effects
must be reclassified from equity to profit and loss. IFRIC 16 is to be applied for fiscal
years beginning on or after July 1, 2009. This interpretation will have no impact on
the consolidated statements of the Company.
The "Improvements to International Financial Reporting Standards 2008" made
multiple amendments to IFRS and IAS, some of which remedy inconsistencies between individual standards. These amendments are to be applied for fiscal years
beginning on or after January 1, 2009, or July 1, 2009, depending on the standard
concerned. In all probability, these amendments will have no impact or no material
impact on EPCOS' financial reporting.
In July 2008 the IASB issued an amendments to IAS 39 (Qualifying items – amendments to IAS 39 Financial instruments recognition and measurement). This rule will
introduce some amendments to IAS 39 to simplify hedge accounting by defining what
risks may be designated for hedging and what part of cash flows may be designated
as underlying transaction. The statement has to be used for fiscal years beginning
after July 1, 2009. These amendments will have no impact or no material impact on
EPCOS' consolidated statements.
The annual improvement project made multiple amendments to IFRS, IAS and interpretations in April 2009. The amendments have to be used for fiscal years beginning
after January 1, 2009, July 1, 2009 or January 1, 2010 depending on the individual
regulation. The amendments had not yet been endorsed by the EU within the framework of European law. EPCOS is currently investigating the possible impact of this
interpretation.
The IASB issued further standards and interpretations. In the meantime some of
them are already endorsed by the EU within the framework of European law whereas
other are not endorsed. These regulations will have no material impact on EPCOS'
consolidated statements.
6.9
Transactions with related parties
In fiscal 2009 EPCOS’ Chinese subsidiary EPCOS (Anhui) Feida Electronics Co.,
Ltd. purchased materials and services from the group of companies of the minority
shareholder Anhui Feida Industry amounting to EUR 10.2 million. Transactions with
other minority shareholders were not material.
In December 2007, EPCOS acquired a 49 percent ownership interest in Becromal
S.p.A., Italy, for EUR 5.0 million. At the same time, EPCOS sold its interest of 25
 EPCOS AG 2009 89
CONSOLIDATED FINANCIAL STATEMENTS
percent in Becromal A.S., Norway to Becromal S.p.A. The proceeds of EUR 2.4
million were subsequently granted as a loan to Becromal S.p.A. Both companies,
Becromal S.p.A. and Becromal A.S., are included in the related party transactions
only for the period up to their sale or as of their acquisition, respectively. EPCOS’
interest in Becromal S.p.A., Italy amounted to EUR 8.1 million (based on IFRS accounting) at the time of the acquisition. In the period ending March 31, 2008, EPCOS
participated in a capital increase according to its interest in the amount of EUR 2.5
million in Becromal S.p.A., Italy. The difference in value compared to the purchase
price (badwill) in the amount of EUR 3.1 million was recorded in the EPCOS Group
income statement as of September 30, 2008 under the position income/loss from
investments accounted for using the equity method. The difference in value compared to the purchase price (badwill) resulted from expected future business developments. In fiscal 2009 EPCOS received further/additional information in the course
of gaining control. Therefore the reporting of badwill accounting (concerning 49
percent interest in fiscal 2008) had to be corrected in amount of EUR 1.5 million. In
the consolidated balance sheet in this annual report both the total equity and the
investments accounted for using the equity method are shown reduced by EUR 1.5
million for September 30, 2008. The consolidated income statements, the consolidated statement of cash flow and the consolidated changes in equity as well as the
consolidated statement of income and expenses recognized in equity for fiscal ending September 30, 2008 were adjusted correspondingly.
By August 5, 2008, TDK had already acquired more than 20 percent of the voting
rights in EPCOS. Effective this date, the Company reports on its relationship with the
TDK Group under the heading of related party transactions. TDK Corporation, Tokyo,
Japan, owned more than 95 percent of voting rights in EPCOS AG (direct and indirect) as of September 30, 2009.
The resolution to transfer minority interests in EPCOS AG to the Company's main
shareholder, TDK Corporation, was recorded on October 22, 2009. Beginning from
this date the company owns 100 percent of voting rights in EPCOS AG (direct and
indirect).
Transactions with related parties were conducted at arm's length at prevailing market
rates.
 EPCOS AG 2009 90
CONSOLIDATED FINANCIAL STATEMENTS
Transactions with related parties were as follows for the fiscal ending September 30:
Transactions with related parties
For the years ending September 30 * (EUR thousand)
2009
2008
2
11,527
11,529
2
96
118
216
(481)
(2,762)
(10,878)
(14,121)
(17)
(33,160)
(4,642)
(37,819)
Net sales to
TDK Group
Associated companies
Others
Purchases of inventories and services
TDK Group
Associated companies
Others
*TDK starting with August 5, 2008
At September 30, trade/other receivables, trade liabilities and debt/loans reported in
the consolidated balance sheets in respect of related parties were as follows:
Amounts due from and to related parties
At September 30 (EUR thousand)
TDK Group
Trade/other receivables
Trade liabilities
Current debt/loans
Associated companies
Trade/other receivables
Trade liabilities
Debt/loans from finance lease
Others
Trade/other receivables
Trade liabilities
2009
2008
3,066
(263)
(200,380)
4
(27)
-
(818)
(19,189)
425
-
5,093
(412)
135
(533)
Transactions with related persons were as follows for the years ended September 30:
Transactions with related persons
For the years ending September 30 (EUR thousand)
2009
2008
Net sales to
Members of the Supervisory Board
1,035
1,900
(49)
(44)
Purchases of inventories and
services
Members of the Supervisory Board
 EPCOS AG 2009 91
CONSOLIDATED FINANCIAL STATEMENTS
Purchases from companies directly or indirectly owned by members of the Supervisory Board are conducted on an arm's length basis. Transactions in fiscal 2009 and
2008 were not considered material for either EPCOS AG or those companies that are
directly or indirectly owned by members of the Supervisory Board.
Amounts due from related persons
At September 30 (EUR thousand)
Members of the Supervisory Board
Trade/other receivables
2009
2008
130
219
Details concerning compensation of members of the management team and people
in key positions are given in the compensation report in note 6.1.6.
6.10
Interest income and interest expenses
Interest income from and interest expenses were as follows:
Interest income and interest expenses
For the years ending September 30 (EUR thousand)
2009
Interest income
Interest expenses
2008
6,493
8,211
(27,099)
(33,812)
No interest income or interest expenses on financial assets or liabilities measured at
fair value were incurred in the years ending September 30, 2009, and September 30,
2008.
6.11
Other financial income and expenses
In particular the results from hedging not directly related to the operating business of
the Company are posted in the financial result.
6.12
Other expenses and income, including foreign exchange gains
and losses
Other expenses totalled EUR 6.4 million in fiscal 2009 and EUR 8.8 million in fiscal
2008. Other income totalled EUR 17.6 million in fiscal 2009 and EUR 10.7 million in
fiscal 2008. The Company received research bonuses in Austria totaling EUR 2.8
million in the year ending September 30, 2009, and EUR 3.6 million in the year
ending September 30, 2008. Other income in fiscal 2009 includes gains from reimbursements of prior years excessive electricity bills and compensation refunds from
TDK. Other expenses in fiscal 2009 include mainly losses from sale or disposals of
assets. The main part of the one-off effect concerning the agreed acquisition of a
majority interest by TDK in EPCOS for fiscal 2008 is included as other expense. Net
gains and losses on foreign exchange totalled EUR 1.8 million in fiscal 2009 and
 EPCOS AG 2009 92
CONSOLIDATED FINANCIAL STATEMENTS
EUR 3.5 million in fiscal 2008 whereby foreign exchange gains amount to EUR 110.0
million in fiscal 2009 and EUR 63.6 million in fiscal 2008.
6.13
Fixed assets and intangible assets
6.13.1 Fixed asset schedule
Information with respect to changes to the Company’s intangible assets, property,
plant and equipment and non-current financial assets is presented in the following
fixed asset schedule:
Acquisition and production costs
At September 30 (EUR thousand)
2007
Additions
from
change
in group
Additions
Reclassifications
Disposals
Translation
adjustment
2008
Goodwill
26,272
3,943
250
-
-
50
30,515
Other intangible assets
Internally generated intangible
assets
Intangible assets
39,918
6,528
2,562
52
(523)
(46)
48,491
2,169
-
2,055
-
(124)
-
4,100
68,359
10,471
4,867
52
(647)
4
83,106
9,462
528
2,699
-
-
291
12,980
104,016
62
5,147
1,361
(2)
2,833
113,417
1,434,697
1,396
87,658
30,248
(21,073)
33,390
572
41,748
(31,661)
-
1,581,565
2,558
137,252
(52)
(21,075)
5,004
3,263
-
7,011
54
-
(6,852)
(2,565)
(156)
(13)
5,007
739
8,129
-
1,404
-
(3,022)
12
6,523
16,396
-
8,469
-
(12,439)
(157)
12,269
Land
Buildings
Technical equipment, machinery and other equipment
Construction in progress
Property, plant and
equipment
At equity investments *)
Shares in affiliates
Other financial assets
Non-current financial assets
*)
1,699 1,534,625
232
44,281
5,055 1,705,303
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
 EPCOS AG 2009 93
CONSOLIDATED FINANCIAL STATEMENTS
Accumulated depreciation and amortization
At September 30 (EUR thousand)
2007
Additions
Reversal
of
impairments
Reclassifications
Disposals
Translation
adjustment
2008
Goodwill
14,890
-
-
-
-
7
14,897
Other intangible assets
Internally generated intangible
assets
Intangible assets
32,498
3,417
-
-
(472)
(72)
35,371
1,144
336
-
-
(80)
-
1,400
48,532
3,753
-
-
(552)
(65)
51,668
363
75
-
-
-
3
441
40,015
4,143
-
-
(2)
452
44,608
1,035,067
114,025
-
-
(19,795)
(67)
1,129,230
-
-
-
-
-
-
-
1,075,445
118,243
-
-
(19,797)
388
1,174,279
-
-
-
-
-
-
-
Shares in affiliates
-
-
-
-
-
-
-
Other financial assets
Non-current financial assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Land
Buildings
Technical equipment, machinery and other equipment
Construction in progress
Property, plant and
equipment
At equity investments
Net book value
At September 30 (EUR thousand)
2008
2007
Goodwill
15,618
11,382
Other intangible assets
13,120
7,420
Internally generated intangible assets
2,700
1,025
Intangible assets
31,438
19,827
Land
12,539
9,099
Buildings
Technical equipment, machinery and
other equipment
Construction in progress
68,809
64,001
405,395
399,630
44,281
33,390
Property, plant and equipment
531,024
506,120
5,007
5,004
739
3,263
6,523
8,129
12,269
16,396
At equity investments *)
Shares in affiliates
Other financial assets
Non-current financial assets
*)
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
 EPCOS AG 2009 94
CONSOLIDATED FINANCIAL STATEMENTS
Acquisition and production costs
At September 30 (EUR thousand)
2008
Additions
from
change
in group
Additions
Reclassifications
Disposals
Translation
adjustment
2009
Goodwill
30,515
2,604
-
-
-
(96)
33,023
Other intangible assets
Internally generated intangible
assets
Intangible assets
48,491
11,779
10,158
5,855
(40)
(542)
75,701
4,100
-
5,033
-
-
(3)
9,130
83,106
14,383
15,191
5,855
(40)
(641)
117,854
Land
12,980
-
(4,061)
-
(212)
8,707
113,417
18,495
9,980
1,523
(158)
(3,889)
139,368
1,534,625
42,251
47,323
39,736
(23,670)
(7,110)
1,633,155
44,281
9,074
35,200
(43,053)
(320)
(1,638)
43,544
Property, plant and equipment 1,705,303
Buildings
Technical equipment, machinery
and other equipment
Construction in progress
At equity investments *)
Shares in affiliates
Other financial assets
Non-current financial assets
*)
69,820
92,503
(5,855)
(24,148)
(12,849)
1,824,773
5,007
1,353
1,884
-
(5,007)
(112)
3,125
739
-
19
-
-
-
758
6,523
-
2,021
-
(816)
(114)
7,614
12,269
1,353
3,924
-
(5,823)
(226)
11,497
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
Accumulated depreciation and amortization
At September 30 (EUR thousand)
2008
Additions
Reversal
of
impairments
Reclassifications
Disposals
Translation
adjustment
2009
Goodwill
14,897
-
-
-
-
1
14,898
Other intangible assets
Internally generated intangible
assets
Intangible assets
35,371
4,263
-
555
(20)
(110)
40,059
1,400
305
-
-
-
-
1,705
51,668
4,568
-
555
(20)
(109)
56,662
Land
Buildings
Technical equipment, machinery and other equipment
Construction in progress
Property, plant and
equipment
At equity investments
441
91
-
(538)
-
23
17
44,608
5,047
-
(2,664)
(61)
(1,039)
45,891
1,129,230
116,716
-
2,647
(20,497)
(2,058)
1,226,038
-
-
-
-
-
-
-
1,174,279
121,854
-
(555)
(20,558)
(3,074)
1,271,946
-
-
-
-
-
-
-
Shares in affiliates
-
-
-
-
-
-
-
Other financial assets
-
-
-
-
-
-
-
Non-current financial assets
-
-
-
-
-
-
-
 EPCOS AG 2009 95
CONSOLIDATED FINANCIAL STATEMENTS
Net book value
At September 30 (EUR thousand)
2009
2008
Goodwill
18,125
15,618
Other intangible assets
Internally generated intangible
assets
Intangible assets
35,642
13,120
7,425
2,700
61,192
31,438
Land
Buildings
Technical equipment, machinery
and other equipment
Construction in progress
Property, plant and equipment
At equity investments
*)
Shares in affiliates
Other financial assets
Non-current financial assets
*)
8,690
12,539
93,477
68,809
407,117
405,395
43,544
44,281
552,828
531,024
3,125
5,007
758
739
7,614
6,523
11,497
12,269
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
The other financial assets mainly consist of shares in funds. These financial assets
are defined as available for sale securities in line with IAS 39. The shares in funds do
not have a specified time to maturity.
6.13.2 Property, plant and equipment
Depreciation on property, plant and equipment
Depreciation on property, plant and equipment was EUR 121.9 million for the year
ending September 30, 2009, and EUR 118.2 million for the year ending September
30, 2008. Where evidences indicate impairment may exist, a test for impairment is
made. Basis for impairment is the recoverable amount that is defined as the higher
amount of an asset’s fair value less costs to sell and its value in use. Value in use is
the present value of the future cash flows expected to be arrived from the corresponding cash generating units (CGU). The CGU at EPCOS are the divisions. In
case the recoverable amount is less than the carrying amount an impairment needs
to be booked.
Reversal of impairment for fixed assets
For the fiscal ending September 30, 2009 and 2008 there had been no reversal of
impairments for technical equipment, machinery and other equipment. In case the
recoverable amount of an already impaired asset increases, the impairment has to
be reversed. The increase of its recoverable amount may not exceed the book value
this asset would have without the prior impairment.
 EPCOS AG 2009 96
CONSOLIDATED FINANCIAL STATEMENTS
Government grants
Cumulated government grants totalled EUR 7.3 million in the year ending September
30, 2009, and EUR 8.0 million in the year ending September 30, 2008. These funds
reduce acquisition and production costs as they can be assigned to specific assets
for which they were granted. Most of these grants consisted of government investment subsidies for technical equipment, machinery and other equipment.
6.13.3 Goodwill
In accordance with IAS 36, goodwill is not subject to scheduled amortization. Instead,
it is tested for impairment at least once a year, or where events indicate that an
impairment may exist.
EPCOS uses measurement methods that are based on discounted cash flows. Cash
flow forecasts and other relevant assumptions for valuation take into account past
experience and are based on management's best estimates of future developments.
Impairment tests are performed at the level of cash-generating units (CGUs) which,
at EPCOS, correspond to the divisions. Basis for the impairment test of the fourth
quarter of fiscal 2009 is the forecast of each division. The discounting of the cash
flows is calculated with the weighted average capital cost before taxes (WACC) of
9.73 percent under consideration of an economic growth rate in a range of 1.75
percent to 2.0 percent (prior fiscal : 2.0%). An impairment would be necessary when
the recoverable amount is lower than the carrying amount of the corresponding
division.
The Company came to the conclusion by testing the goodwill for impairment that
there is no need to record an impairment for the actual reporting period. The recoverable amounts of all cash generating units are higher compared to their carrying
amounts. Also after a sensitivity analysis by using a reduced economic growth rate
and an increased WACC with an adjustment of 25 basis points there would be no
need for an impairment.
At September 30, 2009, and at September 30, 2008, goodwill was reported as
follows:
Goodwill in the business segments
At September 30 (EUR thousand)
Capacitors and Inductors
2009
6,861
2008
4,323
Ceramic Components
6,983
7,021
Surface Acoustic Wave Components
4,281
4,274
18,125
15,618
Total
Effective March 1, 2008, EPCOS acquired the RF-MEMS activities mainly consisting
of intangible assets and tangible assets from the semiconductor company NXP
 EPCOS AG 2009 97
CONSOLIDATED FINANCIAL STATEMENTS
Semiconductors Netherlands B.V. without acquiring an ownership interest in this
company. The purchase price (including acquisition cost) was EUR 10.7 million, in
which no equity instruments of EPCOS shares were issued. The price was paid in
total in fiscal 2008. In the event the company would have been included in consolidated statements beginning October 1, 2007 the impact on balance sheet data,
sales, net income and earnings per share would have been immaterial for this period.
The effect of this transaction is immaterial for fiscal 2008, too.
The purchase price allocation was established in accordance with IFRS 3 on the
basis of the fair value of these assets. The excess of the purchase price over the fair
value of these assets was recorded as goodwill. The goodwill shows the value to
EPCOS of the additional benefit or potential in the mobile communication market.
The increase in goodwill in the SAW business segment is due primarily to this acquisition.
The fair values (in EUR million) of these assets as of the acquisition date are shown
in the following table (before consideration of acquisition cost):
Intangible assets (without goodwill)
EUR million
6.5
Thereof patents
5.4
Thereof development projects
0.7
Goodwill
3.9
Other assets
0.3
It was not possible to calculate the carrying amounts of assets and liabilities ahead of
the acquisition, because the assets listed above were added in the context of the
purchase of a business. The cost was spread across the relative fair values at the
time of the purchase.
In business segment Ceramic Components the purchase price of subsidiary Aktiv
Sensor, that was purchased in fiscal 2007, was adjusted in fiscal 2008. The
additional payment is reported in full amount as goodwill in the consolidated
statements for September 30, 2008.
 EPCOS AG 2009 98
CONSOLIDATED FINANCIAL STATEMENTS
ACQUISITION OF BUSINESSES – Becromal S.p.A. (Becromal)
(EUR million)
at date of purchase (October 2008)
Carrying amount
Fair value
Assets
Intangible assets
Property, plant and equipment
Other non-current assets
Current assets
2.7
3.9
56.3
57.3
6.0
2.9
36.4
39.5
Liabilities
Non-current liabilities and provisions
38.0
38.0
Current liabilities and provisions
52.7
53.0
2.3
2.3
Minority interest
Net assets incl. Minority interest
10.7
12.6
Net assets excl. Minority interest
8.4
10.2
-
5.2
Thereof 51%
Purchase price
-
5.5
Goodwill
-
0.2
In October 2008, EPCOS signed a purchase agreement with Becrolux S.A., Luxembourg, for 51 percent of the shares in Becromal S.p.A. (Becromal). The purchase
price (including acquisition cost in an amount of EUR 0.5 million) was EUR 5.5 million, in which no equity instruments of EPCOS shares were issued. The price was
paid in total in fiscal 2009. The purchase price allocation was prepared according to
IFRS 3 under consideration of the net fair values of the assets and liabilities acquired.
The excess of acquirer’s purchase price over the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities is booked as goodwill
(EUR 0.2 million). This goodwill represents future synergy and economic benefits
from the combination of assets and activities from Becromal with EPCOS Group. For
the twelve month period ended September 30, 2009 Becromal Group shows a net
loss of EUR 21.7 million.
ACQUISITION OF BUSINESSES – EPCOS (Anhui) Feida
(EUR million)
at date of purchase (January 2009)
Assets
Intangible assets (including goodwill in amount of
EUR 2.4 million)
Property, plant and equipment
Current assets
Net assets
Thereof 60%
Purchase price
Carrying amount /
Fair value
10.2
12.5
3.7
26.4
15.8
15.8
 EPCOS AG 2009 99
CONSOLIDATED FINANCIAL STATEMENTS
At the first quarter of fiscal 2009 EPCOS signed a contract with the Chinese company
Anhui Feida Industry Stock Co., Ltd (Anhui Feida) regarding the foundation of
EPCOS (Anhui) Feida Electronics Co., Ltd. (EPCOS Feida). The subsidiary develops
and manufactures power capacitors for AC. EPCOS Feida started its business as of
January 2009 and is included in the group financial statements since January 1,
2009.
EPCOS owns 60 percent share of the company through a cash contribution in the
amount of EUR 15.8 million. The cash contribution was paid in full amount in fiscal
2009. The minority shareholder Anhui Feida put up intangible assets and fixed assets
in amount of EUR 10.6 million. Additionally Anhui Feida assigned further business
operations to EPCOS Feida with a payment of EUR 15.8 million. The goodwill resulting from these transactions amounting to EUR 2.4 million is included in the financial
statements of the subsidiary.
For the fiscal ended September 30, 2009 EPCOS Feida shows a net gain of EUR
1.1 million. Since the company was founded in fiscal 2009 the amount is the same for
the twelve month period.
6.13.4 Other acquired intangible assets
The following categories of other acquired intangible assets are included in the
consolidated financial statements at September 30, 2009, and September 30, 2008:
Other acquired intangible assets (finite lives)
At September 30 (EUR thousand)
Patents, licenses and similar rights
Customer lists
Other
Total other intangible assets
Gross
48,420
4,705
22,576
75,701
2009
Net
13,719
1,546
20,377
35,642
Gross
42,561
3,890
2,040
48,491
2008
Net
11,137
1,239
744
13,120
 EPCOS AG 2009 100
CONSOLIDATED FINANCIAL STATEMENTS
Amortization of other acquired intangible assets
Amortization of other acquired intangible assets (with finite lives) totalled EUR 4.3
million for the year ending September 30, 2009, and EUR 3.4 million for the year
ending September 30, 2008. Of these amounts, EUR 1.5 million (2009) and EUR 1.9
million (2008) were recognized mainly as cost of sales in the statements of income
and EUR 1.6 million (2009) and EUR 1.4 million (2008) as research and development
expenses.
These intangible assets are expected to have no residual value when their scheduled
useful lives expire. In accordance with patent certificates, patents are written off over
a maximum of ten years (like the customer list). Licenses are written off in accordance with contractual terms. There was no need to alter the useful lives. With exception of goodwill there are no intangible assets with indefinite useful lives included
in the consolidated balance sheets.
6.13.5 Internally generated intangible assets
The consolidated financial statements for the fiscal ending September 30, 2009, and
September 30, 2008, include the following internally generated intangible assets:
Internally generated intangible assets (finite lives)
At September 30 (EUR thousand)
Internally generated intangible assets
Gross
9,130
2009
Net
7,425
Gross
4,100
2008
Net
2,700
Amortization on internally generated intangible assets
Scheduled amortization on internally generated intangible assets was EUR 0.3
million for the two years ending September 30, 2009, and September 30, 2008.
These amounts were recognized in profit and loss at cost of sales. Internally generated intangible assets will be written off over their probable useful lives. Impairment
was not necessary for fiscal ending September 30, 2009 and 2008.
EPCOS tests internally generated intangible assets for consideration of impairment
at least once a year. The Company uses measuring methods that are based on
discounted cash flows. The cash flow forecasts take into account past experience
and are based on best management estimates of future developments. These assumptions can have a significant influence. Impairment tests are performed at the
level of individual projects and also take into account related property, plant and
equipment. Future cash flows that correspond to the assets assignable to these
projects form the basis for testing. The planning period is determined by the useful
life of the assets. Assets are impaired if their value in use is less than the carrying
amount of the business unit.
In the period under review, EPCOS came to the conclusion that impairments were
not necessary in fiscal 2009 and 2008.
 EPCOS AG 2009 101
CONSOLIDATED FINANCIAL STATEMENTS
6.14
Investments accounted for using the equity method
Investments accounted for using the equity method that are included in the consolidated statements for September 30, 2009 and 2008 report the following key data
(figures for 100%, not concerning EPCOS group interest):
Key data of investments accounted for using the equity method
(EUR million)
2009
2008
Assets
25.8
94.5
Liabilities
18.0
81.2
Net sales
2.7
58.6
Net (loss)/income
1.1
(8.3)
6.15
Inventories, net
Inventories, net
At September 30 (EUR thousand)
Raw materials and supplies
2009
61,842
2008
63,987
Work in progress
52,012
61,073
Finished products
103,421
129,986
Total inventories, net
217,275
255,046
Inventories were net of valuation allowances of EUR 25.8 million at September 30,
2009, and EUR 21.2 million at September 30, 2008. Of these inventories, consignment stocks located at customers accounted for EUR 26.2 million at September 30,
2009, and EUR 32.0 million at September 30, 2008.
Due to pricing risks, impaired inventories totaling EUR 23.8 million at September 30,
2009, and EUR 32.1 million at September 30, 2008, were carried at their net realizable values.
EUR 7.8 million of the inventories reported at September 30, 2009, and EUR 7.7
million of the inventories reported at September 30, 2008, was pledged as collateral
security.
Cost of materials amounted to EUR 411.0 million and EUR 548.8 million for the fiscal
ending September 30, 2009 and 2009.
The following table presents the development in the inventory valuation allowance for
the fiscal ending September 30, 2009 and 2008:
 EPCOS AG 2009 102
CONSOLIDATED FINANCIAL STATEMENTS
Valuation Allowance for Inventories
(EUR thousand)
2009
2008
Valuation allowance, beginning of year
21,190
21,470
Additions
17,598
11,341
(13,400)
(11,802)
430
181
25,818
21,190
Use/reversals
Currency translation adjustment/other
Valuation allowance, end of year
6.16
Trade receivables
Trade receivables are presented net of an allowance for doubtful accounts. Of the
total amount of accounts receivable, EUR 9.5 million at September 30, 2009, and
EUR 9.6 million at September 30, 2008, were pledged to third parties as collateral
security. The full amount of all trade receivables is classified under current assets.
The table below presents changes to allowances for doubtful accounts for the years
ending September 30, 2009, and September 30, 2008:
Allowances for doubtful accounts
For the years ending September 30 (EUR thousand)
Allowances for doubtful accounts,
beginning of year
Additions charged to the allowances
Write-offs charged against the allowances
Currency translation adjustment/other
Allowances for doubtful accounts, end of year
2009
2008
3,730
3,930
980
133
(229)
(317)
(24)
(16)
4,457
3,730
Specific allowances totalled EUR 3.0 million for the year ending September 30, 2009,
and EUR 2.5 million for the year ending September 30, 2008. In addition, general
allowances of EUR 1.4 million for the year ending September 30, 2009, and EUR 1.2
million for the year ending September 30, 2008, were reported based on a collective
assessment of the portfolio of accounts.
The age structure of trade receivables, net for the years ending September 30, 2009,
and September 30, 2008, was as follows:
 EPCOS AG 2009 103
CONSOLIDATED FINANCIAL STATEMENTS
Age structure of trade receivables, net
For the years ending September 30 (EUR thousand)
2009
2008
196,777
196,013
Past due less than 30 days
6,470
28,255
Past due between 30 and 90 days
4,012
5,311
Past due greater than 90 days
6,105
3,048
213,364
232,627
Not yet due
Total
Factored receivables (under non-notification factoring arrangements) totalled
EUR 43.6 million in the year ending September 30, 2009, and EUR 93.4 million in the
year ending September 30, 2008. Total interest expenses on these transactions
amounted to EUR 0.1 million in the year ending September 30, 2009, and EUR 0.3
million in the year ending September 30, 2008. A similar amount of interest income
was reported.
6.17
Cash and cash equivalents
There are no restricted funds within the Company's cash and cash equivalents as of
September 30, 2009 and 2008, respectively.
6.18
Other current financial assets
Other current financial assets included receivables from suppliers totaling EUR 1.7
million at September 30, 2009, and EUR 7.3 million at September 30, 2008 and
positive market values arising from derivatives totaling EUR 2.6 million at September
30, 2009, and EUR 8.6 million at September 30, 2008. In addition, receivables from
contractual based benefits amounting to EUR 3.0 million are recorded at September
30, 2009.
6.19
Other current assets
Other current assets mainly consist of tax receivables (excluding income taxes)
totaling EUR 14.8 million at September 30, 2009, and EUR 13.1 million at September
30, 2008, and prepaid expenses totaling EUR 4.2 million at September 30, 2009, and
EUR 2.7 million at September 30, 2008.
6.20
Total equity
The consolidated changes in equity, that are a component part of the notes is included in section 3.
 EPCOS AG 2009 104
CONSOLIDATED FINANCIAL STATEMENTS
(1) Share Capital
At September 30, 2009, the Company had share capital (common stock) amounting
to EUR 66,682,270, divided into 66,682,270 registered shares with no par value and
a nominal value of EUR 1 per share.
(2) Conditional Capital 2004
A resolution by the General Meeting on February 11, 2004, authorized the Management Board, until February 10, 2009, and subject to the consent of the Supervisory
Board, to increase the Company’s share capital by part or all of a total of EUR
13,020,000 by issuing new registered shares in return for cash or non-cash contributions (Conditional Capital 2004). The Management Board had not used this authorization.
(3) Conditional capital arrangements
Resolutions by the General Meetings on September 28, 1999, and February 11,
2004, placed conditional capital totaling EUR 4,960,000 at the Company's disposal to
fulfill its obligations arising from stock option plans (Conditional Capital 1999/I totaling
EUR 2,480,000 and Conditional Capital 2004/II totaling EUR 2,480,000).
In addition, resolutions by the General Meetings on March 6, 2002, and February 11,
2004, placed conditional capital totaling EUR 13,000,000 at the Company's disposal
to fulfill its obligations arising from convertible or warrant-linked bonds (Conditional
Capital 2002/I totaling EUR 6,500,000 and Conditional Capital 2004/I totaling
EUR 6,500,000).
The Company (as guarantor) issued on July 16, 2003, a convertible bond with a total
nominal value of EUR 126,425,000 by its subsidiary EPCOS Netherlands B.V. (as
issuer; formerly: EPCOS Finance B.V.). The bond beared interest at a rate of 2.5
percent. Holders of this convertible bond could convert it to a maximum of 6,500,000
shares in the Company.
In fiscal 2008, 1,114,000 new shares with no par value were issued because of
share-based compensation. Therefore, share capital increased by EUR 1,114,000. At
the same time Conditional Capital 1999/I decreased by EUR 496,000 and Conditional
Capital 2004/II decreased by EUR 618,000.
In fiscal 2009 holders of the Convertible Bond (issued July 16, 2003) exercised the
convertible rights and obtained 218,270 shares with no par value. These share
issuance are based on Conditional Capital 2002/I.
In the course of fiscal 2009, the exercise of stock options led to the issue of 33,000
new registered shares with no par value. These 33,000 shares had been taken from
Conditional Capital 1999/I.
 EPCOS AG 2009 105
CONSOLIDATED FINANCIAL STATEMENTS
The issue of these new shares in fiscal 2009 added EUR 251,270 to the Company’s
share capital. Conversely, Conditional Capital 2002/I was reduced by EUR 218.270
and Conditional Capital 1999/I was reduced by EUR 33,000.
The option to issue convertible and warrant-linked bonds of the resolution of the
General Meeting on February 11, 2004 wasn’t exercised. The Conditional Capital
2004/I remain unchanged.
At September 30, 2009 the Company’s share capital totalled EUR 66,682,270, the
Conditional Capital 1999/I was EUR 1,946,000, the Conditional Capital 2002/I was
EUR 6,281,730, the Conditional Capital 2004/II totalled EUR 1,850,000 and the
Conditional Capital 2004/I was EUR 6,500,000.
Within the exercise of the 33,000 stock options in fiscal 2009 and the exercise of
1,114,000 stock options in fiscal year 2008 the share capital was increased by the
exercise price up to the nominal value of the issued shares (EUR 1 per share) to be
paid. The excess amount of EUR 469,590 in fiscal 2009 and of EUR 14,708,000 in
fiscal 2008 were appropriated to additional-paid in capital.
In the course of exercising conversion privileges by the holders of the convertible
bond issued on July 16, 2003, the share capital increased by the nominal capital of
EUR 3,990,000 up to the nominal value per share (EUR 1 per share). The excess
amount of EUR 3,771,730 was appropriated to additional-paid in capital.
The change in shares outstanding is as follows:
Shares outstanding
Shares outstanding at September 30, 2007
New shares issued pursuant to the exercise of stock options
Shares outstanding at September 30, 2008
New shares issued pursuant to the exercise of stock options
New shares issued pursuant to the exercise of conversion privileges from
convertible bond issued July 16, 2003
Shares outstanding at September 30, 2009
65,317,000
1,114,000
66,431,000
33,000
218,270
66,682,270
(4) Additional Paid-In Capital
Additional paid-in capital essentially consists of premiums arising from the issue of
shares in EPCOS AG.
In fiscal 2009 and 2008, the issue of new shares and the requirement to report sharebased compensation systems caused additional paid-in capital to increase.
 EPCOS AG 2009 106
CONSOLIDATED FINANCIAL STATEMENTS
(5) Retained Earnings
Earnings realized but not distributed in recent years by EPCOS AG and earnings
realized by its subsidiaries during their standing as consolidated companies account
for the bulk of retained earnings. In addition, effects arising from the conversion from
US GAAP to IFRS effective October 1, 2006, are also subsumed under this item.
In accordance with the General Meeting’s resolution on February 13, 2008, a dividend payment of EUR 0.30 per eligible share for the fiscal ending September 30,
2007, was distributed on February 14, 2008. The total amount thus distributed was
EUR 19,595,100 (before withholding tax and the solidarity surcharge). The General
Meeting on May 20, 2009, agreed to pay a dividend of EUR 19,929,300 or EUR 0.30
per eligible share (before withholding tax and the solidarity surcharge) for the fiscal
ending September 30, 2008. This dividend was paid out on May 22, 2009.
In accordance with the German Stock Corporation Act, the amount of income available for distribution to shareholders is based upon the Company's declared profit as
reported in its financial statements drawn up on a stand-alone basis in accordance
with the German Commercial Code (HGB). Declared profit was EUR 52,811,366 at
September 30, 2009, and EUR 89,644,300 at September 30, 2008.
The German Stock Corporation Act also defines the rules for acquisition of treasury
shares. The Company does not require authorization or the approval of the General
Meeting to acquire treasury shares for the purpose of transferring them to employees
as part of an employee share purchase plan. In fiscal 2009, the Company neither
purchased shares nor reissued shares to its employees in this context.
(6) Minority Interest
Where EPCOS AG owns less than 100 percent of the shares in a consolidated
subsidiary, the minority interest is presented separately on the consolidated balance
sheet in light of net income attributable to it in the given period.
(7) Capital Management Disclosures
EPCOS AG actively manages its capital in line with the strategy of pursuing profitable
growth to increase the value of the EPCOS Group. The cornerstone of this strategy is
a balanced assets, financial and earnings position. EPCOS AG has no capital requirements anchored in its Articles of Association. The key objectives of capital
management are to safeguard the long-term health of the Company and to generate
an appropriate return on the funds invested by shareholders in light of the associated
risks. Instruments used to manage capital include the focused use of debt and an
appropriate dividend policy.
EPCOS uses Economic Value Added (EVA) and EBIT as a key metric in managing
and allocating its resources. Another key metric is gearing, which is defined as the
ratio of financial debt plus pension liabilities less cash and cash equivalents to equity.
 EPCOS AG 2009 107
CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2009, and at September 30, 2008, EPCOS' gearing was as follows:
Gearing
At September 30 (in %)
2009
69
Gearing
2008
26
The EPCOS Group’s equity ratio was a central component of the covenant on which
the syndicated credit facility is based. This credit facility was terminated in September
2009 before maturity. Capital management activities ensured compliance with the
terms of this credit covenant.
6.21
Paid and proposed dividends
The Supervisory Board and Management Board have decided to propose to the
General Meeting, that the allocation of net profit in the amount of EUR 52,811,366 for
the fiscal ending September 30, 2009 should be carried forward onto new account
and no dividend should be paid. In accordance with the resolution approved by the
General Meeting on February 13, 2008, for the fiscal ending September 30, 2007, a
dividend payment of EUR 0.30 per eligible share for fiscal 2007, was distributed to
shareholders on February 14, 2008. The total amount thus distributed was EUR
19,595,100 (before withholding tax and the solidarity surcharge). In accordance with
the resolution approved by the General Meeting on May 20, 2009, for the fiscal
ending September 30, 2008, a dividend payment (EUR 0.30 per eligible share) for
fiscal 2008, was distributed to shareholders on May 22, 2009. The total amount thus
distributed was EUR 19,929,300 (before withholding tax and the solidarity surcharge).
 EPCOS AG 2009 108
CONSOLIDATED FINANCIAL STATEMENTS
6.22
Provisions
Non-current and current provisions carried on the balance sheet changed as follows
in the period under review:
Provisions
(EUR thousand)
October 1,
2008
Additions
Accretion
expense
Use
Reversal
Other
adjustments/currency
translation
adjustment
September
30, 2009
Personnel-related provisions
42,889
10,116
1,192
(22,750)
(2,558)
(8)
28,881
Provisions for onerous sales
contracts
5,934
4,919
-
(2,218)
(2,144)
(31)
6,460
10,691
5,910
-
(4,163)
(2,657)
(4)
9,777
Provisions for restoration
expenses
5,416
175
159
(136)
(616)
65
5,063
Other provisions
5,020
6,836
2
(5,518)
(2,209)
1,747
5,878
Provisions, total
69,950
27,956
1,353
(34,785)
(10,184)
1,769
56,059
Warranty provisions
Other provisions include effects of changes in the consolidated Group in amount of
EUR 1.8 million.
The terms of the provisions are included in the following table:
Terms of Provisions
(EUR thousand)
September 30, 2009
Total
Due within one
year
September 30, 2008
Total
Due within one
year
Personnel-related provisions
28,881
6,937
42,889
18,768
Provisions for onerous sales
contracts
6,460
6,460
5,934
5,934
Warranty provisions
9,777
9,777
10,691
10,691
Provisions for restoration
expenses
5,063
51
5,416
-
Other provisions
5,878
5,809
5,020
2,882
Provisions, total
56,059
29,034
69,950
38,275
Personnel-related provisions mainly include provisions for partial retirement (Altersteilzeit) and separation allowances (for September 30, 2009 resp. 2008: EUR 18.1
million resp. EUR 28.3 million) as well as anniversary cost (for September 30, 2009
resp. 2008: EUR 6.4 million resp. EUR 6.3 million).
 EPCOS AG 2009 109
CONSOLIDATED FINANCIAL STATEMENTS
6.23
Current and non-current debt
6.23.1 Financing
At September 30, 2009, the Company was able to call on a EUR 300.0 million credit
line granted by TDK Europe S.A., seated in Luxembourg. The line was utilized with
EUR 200.0 million as per September 30, 2009. The syndicated credit facility in the
amount of EUR 250.0 million granted until November 2009 by a syndicate of banks
led by Bayerische Hypo- und Vereinsbank, The Royal Bank of Scotland and HSBC
was cancelled by the Company as per September 18, 2009.
In addition, the Company has entered into a number of bilateral borrowing arrangements with international and national banks totaling EUR 89.8 million. These borrowing arrangements were used in the amount of EUR 22.3 million at September 30,
2009
6.23.2 Current debt
Current debt was EUR 238.4 million at September 30, 2009, and EUR 168.3 million
at September 30, 2008. At September 30, 2009, the current debt include liabilities
against TDK Group in amount of EUR 200.4 million. In addition at September 30,
2009, other current debt partly consisted of secured bank loans. Other current debt
consists of various working capital bank loans with a weighted average interest rate
of 2.39 percent in fiscal 2009 and 5.90 percent in fiscal 2008.
The Company as guarantor for a convertible bond with a total nominal value of EUR
126.4 million issued on July 16, 2003, by its subsidiary EPCOS Netherlands B.V.,
prematurely repaid the bond with an amount of EUR 121.0 million on January 8, 2009
due to a change of control by TDK. The outstanding nominal amount of EUR 1.4
million was fully repaid on January 28, 2009 because it was deemed to be immaterial. In November 2008 a nominal amount of EUR 4.0 million was converted into new
shares based on TDK’s change of control.
 EPCOS AG 2009 110
CONSOLIDATED FINANCIAL STATEMENTS
6.23.3 Non-current debt
Non-current debt breaks down as follows:
Non-current debt
At September 30 (EUR thousand)
2009
2008
Total non-current debt
74,662
55,624
Less current installments
24,620
11,590
Non-current debt excluding current
installments
50,042
44,034
Details of currencies, interest rates, maturities and creditors for non-current debt are
shown in the table below:
Non-current debt including current installments (loans and debentures)
At September 30, 2009 (currencies in millions)
Principal
EUR
equivalent
Interest rate (in %)
Maturity
(calendar year)
Lender
EUR 26.2
26.2
0.071 to 3.95
2009 to 2013
Austrian banking syndicate and
government institutions
BRL 26.4
10.2
7.85
2009
BNDES Âncora
EUR 8.3
8.3
6.0
2009 to 2017
Gewerbepark Heidenheim GmbH
EUR 0.1
0.1
2.85
2009 to 2011
Siemens Finance & Leasing GmbH
EUR 3.8
3.8
0.0
2009 to 2012
SAP - Leasing
EUR 2.2
2.2
0.0
2009 to 2023
Spain – diverse governmental loans
EUR 0.8
0.8
4.98
2009 to 2012
Italy – Ministero del Tesoro LEGGE
46
USD 28.1
19.2
12.50
2009 to 2029
Iceland – Capital Lease Becromal
Properties ehf
USD 5.8
3.9
12.50
2009 to 2029
Iceland – Capital Lease with Norak
ehf
Non-current debt including current installments (loans and debentures)
At September 30, 2008 (currencies in millions)
Principal
EUR
equivalent
Interest rate (in %)
Maturity
(calendar year)
Lender
EUR 36.7
36.7
0.95 to 3.95
2008 to 2013
Austrian banking syndicate and
government institutions
BRL 26.4
9.8
7.85
2009
BNDES Âncora
EUR 9.0
9.0
6.0
2008 to 2017
Gewerbepark Heidenheim GmbH
EUR 0.1
0.1
2.85
2008 to 2011
Siemens Finance & Leasing GmbH
 EPCOS AG 2009 111
CONSOLIDATED FINANCIAL STATEMENTS
At the balance sheet date, non-current debt with third parties includes EUR 26.2
million held by the Company's Austrian subsidiary EPCOS OHG. An amount of EUR
1.5 million of this debt is secured by written guarantee and EUR 10.7 million by
acceptance of a guarantee. Additionally, further EUR 14.0 million is secured by liens
on land. The weighted average interest rates of all the Austrian non-current thirdparty debt at September 30, 2009, and September 30, 2008, were 2.1897 percent
and 2.385 percent respectively. The loan principal is due in semi-annual installments
over a period of up to four years.
The aggregate amounts of non-current debt at September 30, 2009 and September
30, 2008 are, in order of maturity date, as follows:
Non-current debt
At September 30, 2009 (EUR thousand)
(Fiscal year due October 1 till September 30)
2010
24,620
2011
14,354
2012
6,370
2013
3,500
2014
1,860
Subsequent years
23,958
Non-current debt
At September 30, 2008 (EUR thousand)
Fiscal year due
2009
11,590
2010
20,893
2011
11,656
2012
4,169
2013
2,591
Subsequent years
4,725
There were no interruptions to the payment flow or other contractual violations for
either non-current or current debt in the fiscal ending September 30, 2009, and
September 30, 2008.
6.24
Other current/non-current financial liabilities and other current/
non-current liabilities
Other current and non-current liabilities were attributable primarily to personnel
liabilities of EUR 56.4 million, of which EUR 54.9 million were current liabilities (fiscal
2008: EUR 58.4 million, of which current: EUR 57.4 million). Other current and noncurrent financial liabilities include negative market values arising from derivative
instruments, freight costs, outstanding invoices and similar liabilities.
 EPCOS AG 2009 112
CONSOLIDATED FINANCIAL STATEMENTS
6.25
Restructuring
Relentless cost pressure due to international competition makes it necessary for the
Company to restructure by adjusting capacity and accelerating relocations to countries with low labor costs. In fiscal 2009 restructuring expenses mainly occurred in
Germany and Austria.
Restructuring costs in amount of EUR 11.1 million in fiscal 2009 (EUR 0.5 million in
fiscal 2008) include personnel costs in total. The split of restructuring costs by segment was as follows:
Restructuring costs by segment, net
For the years ending September 30 (EUR thousand)
2009
2008
Capacitors and Inductors
2,473
(2,072)
Ceramic Components
5,103
2,003
SAW Components
3,503
556
11,079
487
Total
These restructuring costs mainly impact the cost of sales. EPCOS paid EUR
16.0 million in fiscal 2009 and EUR 8.3 million in fiscal 2008.
The development of provisions and liabilities for personnel restructuring costs during
fiscal 2009 and 2008 was as follows:
Development of provisions and liabilities for restructuring costs
(EUR thousand)
Provisions and
liabilities
At September 30, 2007
Increase in provisions/liabilities, net
Amount netted against the CTA
Used
27,333
487
(4,082)
(11,214)
At September 30, 2008
12,524
Increase in provisions/liabilities, net
11,079
Change of CTA
Used
(16,885)
At September 30, 2009
6.26
536
7,254
Contingent liabilities
The contingent liabilities in amount of EUR 8.4 million as of September 30, 2009, and
EUR 11.3 million as of September 30, 2008 mainly include contingent liabilities
arising from the purchase of real estate, potential burdens arising from notes payable
 EPCOS AG 2009 113
CONSOLIDATED FINANCIAL STATEMENTS
and lawsuit (contingent liabilities arising from the purchase of real estate, potential
burdens arising from notes payable, guarantees and letters of intent in fiscal 2008).
Contingent liabilities reported at September 30, 2008, in the amount of EUR 6.0
million concerns letters of comfort with regard to an associate. This company is now
included within the consolidated Group. The potential cash payment is mainly expected in the next fiscal year.
In addition to these specific contingent liabilities, the Company is exposed to general
risks arising from its general business activities. These risks are briefly explained
below:
The Company and its subsidiaries are party to litigation and proceedings relating to a
variety of issues. In the opinion of the Management Board, based on the advice of
counsel handling such litigation and proceedings, adverse outcomes, if any, will not
result in a material effect on the Company’s consolidated financial situation or earnings.
The Company and its subsidiaries are subject to extensive environmental regulation
in the jurisdictions in which they operate, including requirements governing emissions, effluents and the storage of hazardous materials and waste. These requirements will continue to be significant to the Group’s future operations. In the past, the
Company has occasionally been held liable for the remediation of soil or groundwater
contamination at its facilities. To date, however, significant penalties or fines have
been imposed on neither the Company nor its subsidiaries.
Notwithstanding, the Company or its subsidiaries may in future be constrained to
fulfill requirements, be held liable or be exposed to penalties or fines in relation to
environmental regulation. Because some of the Company’s facilities are located very
close to those of other companies or are even shared with other companies, the
Company may, in isolated cases, also have to answer claims relating to issues for
which neither the Company itself nor its subsidiaries are responsible.
Nor can the possibility be ruled out that future amendments to environmental legislation may compel the Company and its subsidiaries to assume substantial financial
burdens that could have a significant negative impact on the Company’s financial
situation and earnings.
6.27
Leases
a) Operating leases
The Company currently leases several facilities for manufacturing, company management and administration, as well as some production equipment under operating
lease agreements. Future minimum lease payments from operating leases that
cannot be terminated were as follows at September 30, 2009:
 EPCOS AG 2009 114
CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease
payments
Operating leases
At September 30 (EUR thousand)
2009
2008
Less than one year
13,938
15,669
Between one and five years
29,636
39,153
8,374
11,418
51,948
66,240
More than five years
Total
In the year ending September 30, 2009 (2008), expenses of EUR 18.4 million (EUR
21.6 million) arising from operating lease agreements were recognized in profit and
loss.
b) Finance leases
In September 2007, EPCOS concluded a finance lease in the form of a sale-andleaseback agreement for land and buildings at its Heidenheim site. The ten-year
lease is carried as a finance lease in which the present value of the leasing payments
corresponds to the liabilities arising from the finance lease. EPCOS has the option of
extending the lease for two five-year periods. The basic monthly rent will be adjusted
by 3 percent on January 1, 2011, and again on January 1, 2014, and assuming
exercise of the two options, 3 percent every three years during the option periods.
The sum of minimum future payments arising from non-cancelable subletting arrangements was EUR 0.3 million in the fiscal ending September 30, 2009, and
EUR 0.5 million in the fiscal ending September 30, 2008.
Becromal Iceland ehf, which is newly consolidated in EPCOS group in 2009, signed a
rent agreement for commercial properties as a lessee with Becromal Properties ehf.
The twenty year lease is carried as a finance lease in which the present value of the
leasing payments corresponds to the liabilities arising from the finance lease. In
addition the lessee has the option to extend this agreement. The monthly rent is 1
percent of the total construction value. In addition Becromal Iceland ehf signed also a
finance lease agreement concerning fixtures and furniture over a time period of 15
years. The monthly rent is 1.2 percent of total construction cost. In addition, Becromal
Iceland ehf signed a finance lease contract concerning machinery over a time period
of 20 years.
In fiscal 2009, EPCOS concluded a finance lease in the form of a sale-and-leaseback
agreement for licenses sold to third in an amount of EUR 4.5 Million. No gain was
recognized from this transaction. This agreement is recorded as a finance lease
transaction. The minimum term of lease is 36 months. After the minimum term beginning April 1, 2009 EPCOS will receive the ownership.
 EPCOS AG 2009 115
CONSOLIDATED FINANCIAL STATEMENTS
Assets arising from finance leases are written down over the shorter of their estimated useful life or the term of the lease. At the same time, the corresponding liability
is amortized over the same period using the effective interest method.
Minimum lease payments arising from finance leases that cannot be terminated and
the present values of these payments were as follows:
Future minimum lease payments and present values
At September 30 (EUR thousand)
2009
Minimum
Minimum
lease
payments
Less than one year
2008
Interest
Present
lease
values
payments
Present
Interest
values
5,784
2,917
2,867
1,342
79
1,263
Between one and five years
20,242
11,501
8,741
5,347
968
4,379
More than five years
57,820
34,181
23,639
5,455
1,924
3,531
Total
83,846
48,599
35,247
12,144
2,971
9,173
At September 30, 2009, the consolidated balance sheet contained land and buildings
valued at EUR 16.4 million (2008: EUR 8.8 million) and technical equipment, machinery and other equipment valued at EUR 14.6 million (2008: EUR 0.1 million)
resulting from finance lease agreements. Licenses in an amount of EUR 4.5 million
are presented in balance sheet as of September 30, 2009.
6.28
Share-based compensation
Stock option plans
Share-based compensation
EPCOS Stock Appreciation Rights Plan 2007
In December 2007, the Management Board and the Presidential Committee appointed by the Supervisory Board ratified the EPCOS Stock Appreciation Rights Plan
2007 (SARP 2007). Under this plan, the Presidential Committee is authorized to
grant non-transferable stock appreciation rights to the members of the Management
Board, while the Management Board is authorized to grant non-transferable stock
appreciation rights to selected managing directors of subsidiary companies and to
other executives in key positions within the EPCOS Group. The value of these stock
appreciation rights is linked the development of the EPCOS share price. The plan is
a cash-only plan, each tranche of which has a three-year term after which payment is
made automatically if the stock appreciation rights are in the money. The rights may
be cashed in prematurely only if a change of control occurs (e.g. if a third party
acquires a majority of EPCOS AG's shares). The settlement amount is calculated
from the difference between what is known as the closing price (the average of the
EPCOS share's closing prices in Xetra trading on all trading days in the last 30
 EPCOS AG 2009 116
CONSOLIDATED FINANCIAL STATEMENTS
calendar days of the term) and what is known as the issue price (the average of the
EPCOS share's closing prices on the last five trading days prior to issue). A further
precondition of payment is that the share price must have reached 115 percent of the
issue price at least once during the term of the tranche. Finally, the settlement
amount is limited insofar as the closing price may not exceed 250 percent of the
issue price.
621,000 SARs were already issued in the initial and as of now only one tranche on
December 17, 2007. Due to the purchase of the majority of EPCOS AG shares by
TDK Group (Change of Control) the remaining 606,000 SARs were paid out ahead of
schedule in the three months ended in December 31, 2008.
During fiscal 2009, the Group recognized expense of EUR 0.07 million.The SARP
2007 was preceded by two regular stock option plans, the basic principles of which
are explained below.
EPCOS Stock Option Plan 1999
Effective October 13, 1999, an extraordinary shareholders’ meeting adopted a stock
option plan (EPCOS Stock Option Plan 1999). The plan had a term of five years.
Under this plan that was terminated by the shareholders’ meeting on February 11,
2004, members of the Management Board, directors of subsidiaries and other eligible
key employees could be granted non-transferable options to purchase up to
2,480,000 shares at 115 percent of the average closing market price of the Company’s shares during the five day period immediately before the date of grant. For
options granted immediately before the Company’s initial public offering, the exercise
price was 115 percent of the subscription price of EUR 31 per share. The Supervisory Board of the Company decided annually on the number of options to be granted
to the Management Board. In turn, the Management Board and the governing bodies
of the group companies decided annually on the number of shares to be granted to
the other eligible employees. Options granted under the plan can be exercised during
the five-year period starting two years after the options are granted, provided that the
share price has reached or exceeded the exercise price on at least one day since the
grant date. In connection with the EPCOS stock option plan 1999, Conditional Capital
of the Company in the amount of up to EUR 2,480,000 was created for the issuance
of up to 2,480,000 additional shares with no par value and a nominal value of EUR 1
each. The Conditional Capital became effective on October 13, 1999, when it was
recorded in the German Commercial Register.
 EPCOS AG 2009 117
CONSOLIDATED FINANCIAL STATEMENTS
EPCOS Stock Option Plan 2004
In the shareholders’ meeting of February 11, 2004, the shareholders approved the
since terminated EPCOS Stock Option Plan 2004. Under this plan a maximum of
2,480,000 options may be issued to the members of the Management Board of
EPCOS AG, to managing directors of EPCOS affiliates and to other selected executives until February 10, 2007. The Supervisory Board of EPCOS AG decided on the
number of options to be granted to the Management Board, and the Management
Board on the number of options to be granted to the other eligible persons. The
exercise price amounts to 115 percent of the base price, i.e. the average opening
market price of EPCOS AG shares on the five trading days before the grant date.
The exercise price is also the performance hurdle. The options may only be exercised after the expiration of a vesting period. This vesting period begins one week
after the grant date and runs for at least two years. The option rights may be exercised during the five years following the vesting period. Instead of shares issued from
Conditional Capital 2004/II of originally EUR 2,480,000 created for this purpose, the
eligible persons may, at the discretion of the Company, be granted treasury shares
repurchased from the stock market or paid cash settlement. The shares, to be issued
from the Conditional Capital 2004/II, have no par value and their nominal amount is
EUR 1 each. In the event of extraordinary, unforeseen developments, the Supervisory Board and the Management Board are authorized to introduce a cap on possible
gains from stock options.
In fiscal 2009 a total of 653,500 options were exercised. Thereof 33,000 options were
settled by using conditional capital placed for Stock Option Plan 1999 and 620,500
options were settled by cash payment. The settlement amount was calculated as the
difference between the closing price in Xetra trading at the exercise day (reduced by
EUR 0.30 because of the proposed dividend payment) and the respective strike price
of the options. TDK Corporation compensated EPCOS AG for the cost of the cash
settlement in the amount of EUR 2.1 million. Beyond these direct cost EPCOS AG
was also compensated for indirect (opportunity) cost in the amount of EUR 3.0 million. The opportunity cost is to be calculated by an economical comparison of the
effects from the cash settlement and the effects from issuing new shares (from Conditional Capital) on the financial statements.
In fiscal 2009 however no share-based compensation was granted because – as a
result of the takeover by TDK and the associated speculation on a squeeze out – the
share price does not adequately reflect the operative economic business development of the Company and is thus no longer a suitable reference for a long-term
incentive.
 EPCOS AG 2009 118
CONSOLIDATED FINANCIAL STATEMENTS
The table below summarizes stock option activity in the period under review:
Development of the stock options granted
(Figures in units or in EUR)
Options outstanding at October
1, 2007
Options granted in
fiscal 2008
Options forfeited in
fiscal 2008
Options exercised in
fiscal 2008
Options that expired
in fiscal 2008
Options outstanding
at September 30,
2008
Of which:
exercisable options
Options outstanding at October
1, 2008
Options granted in
fiscal 2009
Options forfeited in
fiscal 2009
Options exercised in
fiscal 2009
Options redeemed in
fiscal 2009
Options that expired
in fiscal 2009
Options outstanding
at September 30,
2009
Of which:
exercisable options
No. of
options
Weighted average
of exercise prices
3,010,000
34.83
0
-
(11,000)
53.64
(1,114,000)
14.20
(423,000)
103.03
1,462,000
30.85
903,000
39.85
1,462,000
30.85
0
-
18,500
21.76
33,000
15.23
620,500
16.20
Settlement by cash payment.
401,000
64.11
The exercise period expired.
389,000
21.68
389,000
21.68
Notes and explanations
-
No new stock options were granted
in fiscal 2008. They were replaced by
SARs.
Options were forfeited because the
eligible holders left the Group.
The weighted average share price on
the exercise date was EUR 17.75.
The exercise period expired.
-
-
-
No new stock options were granted
in fiscal 2009.
Options were forfeited because the
eligible holders left the Group.
Settlement by Conditional Capital.
The weighted average share price on
the exercise date was EUR 18.17
-
-
 EPCOS AG 2009 119
CONSOLIDATED FINANCIAL STATEMENTS
The table below provides information about the stock options outstanding at the end
of each fiscal year:
Stock options outstanding at fiscal year-end
(Figures in units
or in EUR)
Exercise price
At September 30, 2009
No.
64.11
Weighted average of residual
option lives
(in years)
At September 30, 2008
No.
Weighted average of residual
option lives
(in years)
-
401,000
0.2
15.23
4,500
0.2
99,000
1.2
21.76
384,500
1.2
403,000
2.2
-
559,000
5.2
16.31
TOTAL
389,000
1,462,000
In fiscal 2009, personnel expenses arising from share-based compensation totalled
EUR 0.24 million (EUR 4.1 million in fiscal 2008). Of this amount, stock options
accounted for EUR 0.17 million (EUR 1.1 million in fiscal 2008). The total cost of
SARs for fiscal 2009 was EUR 0.07 million (EUR 3.0 million in fiscal 2008).
 EPCOS AG 2009 120
CONSOLIDATED FINANCIAL STATEMENTS
6.29
Income taxes
Consolidated income (loss) before income taxes, split according to taxation criteria
into domestic and foreign sources, was as follows:
Income (loss) before income taxes
For the years ending September 30 (EUR thousand)
2009
2008
Germany*
(50,644)
(31,744)*
Foreign
(52,500)
109,959
(103,144)
78,215*
Total*
*)
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
Provisions for/(benefits from) income taxes were as follows:
Provisions for/(benefits from) income taxes
For the years ending September 30 (EUR thousand)
2009
2008
800
692
9,391
10,966
Germany
2,466
4,496
Foreign
5,087
(775)
17,744
15,379
Current taxes
Germany
Foreign
Deferred taxes
Total
A reconciliation of income taxes for the years ending September 30, 2009 and 2008
is shown below. The German corporate tax rate plus the effective trade tax rate was
assumed, i.e. a consolidated statutory rate of 31.7 percent for 2009 and 31.5 percent
for 2008.
 EPCOS AG 2009 121
CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of income taxes
For the years ending September 30 (EUR thousand)
Expected income tax provision (benefit)*
Foreign tax rate differential
Change in realization of deferred tax assets
Non-deductible expenses
Tax-free income
Foreign withholding tax
Tax expense (benefit) from prior years
Change in tax rate
Tax effects according to differences in the
tax assessment basis
Other factors
Actual income tax provision (benefit)
*)
2009
2008
(32,696)
24,638*
1,693
(14,160)
49,875
14,795
100
2,376
(2,040)
(6,285)
799
692
(4)
(4,886)
(252)
(273)
687
(1,206)
(418)
(312)*
17,744
15,379
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
In Germany, a corporate tax rate of 15 percent will apply to the Company as of 2009.
A solidarity surcharge of 5.5 percent will be charged in addition to corporate tax. The
total federal corporate tax rate for 2009 therefore amounts to 15.8 percent. The
effective rate for trade tax will be 15.9 percent beginning in 2009. The total tax rate
will thus be 31.7 percent. Corporate tax for fiscal 2008 is 15 percent - together with
the solidarity surcharge (5.5%) and trade tax (15.7%), added up to a total tax burden
of 31.5 percent in fiscal 2008.
In the normal course of business, the Company is regularly audited by tax authorities
in different countries. In the Company’s opinion, existing tax provisions adequately
cover possible expenses for all open years.
 EPCOS AG 2009 122
CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax assets and liabilities
At September 30 (EUR thousand)
2009
2008
Inventories
4,149
5,466
Fixed assets
5,275
5,721
14,967
19,381
6,545
9,379
39,495
39,313
1,642
1,407
Net operating loss and tax credit carryforwards
Provisions
Pension liabilities
Other liabilities
Other
12,760
9,867
Deferred tax assets
84,833
90,534
Write-downs on receivables
(592)
(131)
Inventories
(800)
(836)
(16,411)
(17,946)
(7,850)
(7,212)
Fixed assets
Provisions
Other
Deferred tax liabilities
Deferred tax assets, net
(2,770)
(2,156)
(28,423)
(28,281)
56,410
62,253
Deferred tax expense due to temporary differences totalled EUR 0.9 million in fiscal
2009. Equity was debited with deferred taxes amounting to EUR 0.4 million in fiscal
2009. This amount included mainly effects from pensions and currency translation.
Within the scope of an acquisition the Company shows additional deferred tax assets
of EUR 1.8 million.
The net operating loss carryforwards relate mainly to the Austrian, French, Brazilian,
Indian and Spanish operations. Evaluation of the deferred tax assets showed a
longer period of recoverability than previously assumed, especially for the net operating losses. Only those loss carryforwards were recognized as deferred tax assets for
which there is reasonable assurance that sufficient positive taxable income will allow
these tax assets to be realized, and for which the management assumes that it will
be possible to recover these loss carryforwards due to activities to improve earnings.
No deferred tax assets were recognized for the following issues:
Items for which no deferred taxes were recognized
At September 30 (EUR thousand)
Tax-deductible temporary differences
Tax loss carryforwards
Total
2009
2008
30,555
97,140
17,918
72,769
127,695
90,687
The pension liabilities on which no deferred tax asset were recognized amounted to
EUR 19.6 million at September 30, 2009 and EUR 13.9 million at September 30,
 EPCOS AG 2009 123
CONSOLIDATED FINANCIAL STATEMENTS
2008. A write-up on tax loss carryforwards was made in fiscal 2009 totaling EUR 0.8
million.
Net deferred tax assets and liabilities are recorded as follows in the consolidated
balance sheets at September 30, 2009, and September 30, 2008:
Deferred income tax assets and liabilities
on the consolidated balance sheets
At September 30 (EUR thousand)
Deferred tax assets
Deferred tax liabilities
Total
2009
2008
62,960
(6,550)
66,289
(4,036)
56,410
62,253
At September 30, 2009, the Company had consolidated net operating loss (NOL)
carryforwards amounting to EUR 419.0 million, of which EUR 38.2 million expire by
change of shareholder in EPCOS AG in October 2009 and EUR 38.3 million expire
until 2014. The remaining net operating losses amounting to EUR 342.5 million
expire later than 2015 or have no expiry date. These figures show the gross amount
of the available NOLs. In addition, the subsidiaries in Spain and the United States
have a tax credit amount of EUR 3.4 million at their disposal, which will expire beginning in 2012. Deferred tax assets on loss carryforwards and tax credits totaling
EUR 97.1 million were not taken into consideration for fiscal 2009. Of tax loss carryforwards for which no deferred tax assets were recognized, EUR 53.3 million will
expire until 2018.
At September 30, 2009, the Company accounted for deferred tax liabilities in the
amount of EUR 1.3 million and at September 30, 2008, EUR 1.7 million on the retained earnings of foreign subsidiaries. No income tax provision was made on the
remaining earnings of foreign subsidiaries of EUR 189.5 million at September 30,
2009, because the Company intends to reinvest these earnings in these operations
indefinitely, or because the calculated amounts can be neglected due to immateriality. It is not economically viable to estimate the amount of unrecognized deferred tax
liabilities for undistributed earnings.
6.30
Earnings per share
Basic earnings per share is defined as the ratio of net income (attributable to the
shareholders of EPCOS AG) to the weighted average shares of shares outstanding
in each period under review. Diluted earnings per share include the potential dilution
resulting from the issuance of potential shares.
The following table sets forth the computation of basic and diluted earnings per share
for the years ended September 30, 2009 and 2008:
 EPCOS AG 2009 124
CONSOLIDATED FINANCIAL STATEMENTS
Earnings per share
For the years ended September 30 (EUR thousand, except per share data)
2009
2008*
(119,592)
63,139
66,656,478
65,475,991
(1.79)
0.96
Net income (basic)
(119,592)
63,139
Net income (diluted)
(119,592)
63,139
66,656,478
65,475,991
-
-
adjusted for dilutive shares
66,656,478
65,475,991
Diluted earnings per share
(1.79)
0.96
Net income (basic)
Denominator for basic earnings per share – weighted average shares
Basis earnings per share
Denominator for basic earnings per share – weighted average shares
Effect of dilutive shares - stock options
Denominator for diluted earnings per share – weighted average shares
*)
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
In fiscal 2009 and 2008, 6,500,000 potential dilutive shares resulting from the convertible bonds were not considered, because the inclusion would be antidilutive.
Since the convertible bond was repurchased in full in the second quarter of fiscal
2009, no further dilutive shares can ensue from it.
Options to purchase 389,000 and 1,462,000 shares of common stock were outstanding in fiscal 2009 and 2008, respectively, were not included in the computation
of diluted earnings per share because the options’ exercise price was greater than
the average market price of common shares.
6.31
Pensions
The Company provides pension benefits principally under several defined benefit
pension plans. September 30 is the measurement date for the leading plans. Pension
benefits provided by EPCOS are currently organized primarily through defined benefit
pension plans which cover virtually all of the Company’s domestic employees and
many of the Company’s foreign employees. These predominantly other postemployment benefit plans qualify as defined benefit plans under IFRS. Furthermore,
the Company provides other post-employment benefits, which primarily consist of
transition payments to German employees after retirement as well as postemployment health care benefits plans to employees in the U.S. and Brazil.
Individual benefits are generally based on eligible compensation levels and/or ranking within the Company hierarchy and years of service. Retirement benefits under
these plans vary depending on legal, fiscal and economic requirements in each
country.
 EPCOS AG 2009 125
CONSOLIDATED FINANCIAL STATEMENTS
Moreover, in Germany, a deferred compensation plan gives German employees the
opportunity to convert part of their compensation to a pension based on amounts
contributed, including the interest earned on these contributions up until retirement
age. The provision for future payments to retired staff is determined on the basis of
actuarial principles. This liability is recorded at the maximum of the market value of
the plan assets and the actuarial present value of the guaranteed financial funds.
In fiscal 2008, the plan assets in the amount of EUR 14.3 million were transferred.
The actual balance as of fiscal 2009 of the assets is EUR 13.8 million. The assets
held in trust by this organization cannot be accessed by the Company and must be
used exclusively to provide specified pension benefits or to satisfy employees’ and
board members’ claims in the event of insolvency. The respective plan assets cover
those requirements not already satisfied by the pension assurance association;
therefore the amount is subject to fluctuations. The plan assets of the Contractual
Trust Arrangement (CTA) are invested in the capital markets in accordance with
guidelines jointly developed by the EPCOS Vermögenstreuhänder e.V. (till September 4, 2009) EPCOS Mitarbeitertreuhänder e.V. (since September 4, 2009) respectively and the Company.
Contributions totaling EUR 2.3 million in fiscal 2009 and EUR 2.2 million in fiscal
2008 were made to defined contribution pension plans. An estimated EUR 1.2 million
will be contributed for short fiscal 2010.
In fiscal 2009 and 2008 the Company made contributions to regular pension funds
(state pension plans/pension insurance) in accordance with legal stipulations in an
amount of EUR 29.4 million and EUR 29.7 million. Unlike in the case of defined
benefit plans, the Company is obliged only to make specific contributions to these
defined contribution plans and therefore does not have to report its future obligations.
Unless explicitly stated otherwise, the data for all defined-benefit plans are presented
in condensed form, as the obligations arise primarily from the plan in Germany. The
tables below provide a summary of the consolidated information in relation to all
pension plans operated by the Company at the specified balance sheet dates.
 EPCOS AG 2009 126
CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the changes in defined benefit obligations (DBO) during the
years indicated:
Changes in defined benefit obligations
At September 30 (EUR thousand)
2009
2008
Defined benefit obligations (DBOs) at
195,174
212,010
Transfer
beginning of year
2,475
-
Current service cost
5,816
5,146
Interest cost
12,223
11,158
Actuarial losses/(gains)
27,306
(25,032)
(949)
(355)
Benefits paid
(8,873)
(7,753)
Plan amendments
(1,145)
-
232,027
195,174
Foreign currency exchange rate changes
Defined benefit obligations (DBOs) at
end of year
The table below presents changes in plan assets during the fiscal years indicated:
Changes in plan assets
At September 30 (EUR thousand)
2009
2008
35,472
23,035
Expected return on plan assets
2,643
1,965
Actuarial (losses)
(685)
(3,625)
Foreign currency exchange rate changes
(240)
(311)
Contributions by the employer
1,155
15,326
(1,134)
(918)
Fair value of plan assets at beginning of year
Benefits paid
Settlements
Fair value of plan assets at end of year
(496)
-
36,715
35,472
The actual return on plan assets was minus EUR 2.0 million in fiscal 2009 and
EUR 0.1 million in fiscal 2008.
 EPCOS AG 2009 127
CONSOLIDATED FINANCIAL STATEMENTS
Plan assets break down as follows:
German plan assets totaling EUR 13.8 million are invested exclusively in eurodenominated instruments on the money market or in bonds with maturities of no
more than three months. Furthermore, such bonds require a minimum rating of at
least A from Standard & Poor’s or A2 from Moody’s or a comparable rating. The
expected return is aligned with the EURIBOR rate.
Breakdown of foreign plan assets
At September 30 (in %)
2009
2008
Investment in stocks
37.2
56.3
Bonds
54.9
40.8
Other
7.9
2.9
Total
100.0
100.0
The investment managers who handle the plan assets seek to reduce volatility by
their investment strategy. Accordingly, no more than 50 percent of those fund assets
that are invested largely in the USA may be held in corporate bonds. Furthermore,
these bonds require a minimum rating of A or better from Standard & Poor’s or
Moody’s at the date of purchase. The expected return is aligned with the market rate
of interest. The expected contribution to the plan assets in fiscal 2010 cannot be
reliably estimated.
The table below presents the funded status, including obligations, assets and provisions:
Obligations, assets and provisions
At September 30 (EUR thousand)
1a. Funded defined benefit obligation
1b. Unfunded defined benefit obligation
1a+b. DBOs
2a. Plan assets
2b. Changes due to the asset ceiling
3. Net obligation in balance sheet
(= DBOs – plan assets+asset ceiling)
2009
2008
225,933
6,094
232,027
187,942
7,232
195,174
36,715
35,472
2,274
-
197,586
159,702
10,063
9,528
187,622
151,774
99
1,600
(29,639)
21,407
The amount reported on the balance sheet splits into the
following items:
Pensions and similar obligations (current)
Pensions and similar obligations (non-current)
Other non-current assets
4. Income and expenses recognized in equity
Actuarial (losses)/gains
 EPCOS AG 2009 128
CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the components of net pension costs for the years ending
September 30, 2009, and September 30, 2008:
Net pension costs
For the years ending September 30 (EUR thousand)
2009
2008
Service cost
5,816
5,146
Interest cost
12,223
11,158
Expected return on plan assets
(2,643)
(1,965)
(650)
-
14,746
14,339
Curtailment/ Settlement
Net pension costs for the
reporting period
In the Consolidated Statements of Income, interest cost and the income from the
expected return on plan assets are reported as part of interest income (expense),
net. All other components of net pension costs are allocated among functional costs,
according to the function of the employee groups accruing benefits.
Assumed discount rates and rates of increase in compensation used in calculating
DBOs together with long-term rates of return on plan assets vary depending on the
economic conditions of the country in which the retirement plans apply. The weighted
average assumptions used in calculating actuarial values for the principal pension
plans were 5.25 percent for the discount rate in fiscal 2009 and 6.25 percent in fiscal
2008. Compensation increases were assumed to be 2.75 percent in fiscal 2009 and
3.00 percent in fiscal 2008. The expected return on plan assets for the USA funded
pension plan in fiscal 2009 was 7.00 percent (previous year: 7.00%). The expected
return on plan assets for the Brazilian subsidiary amounts to 10.50 percent (previous
year: 11.00%).
A cost trend of 7.00 percent for healthcare was assumed for healthcare plans in
Brazil (7.00% in fiscal 2008). A cost trend of 5.50 percent was assumed for healthcare plans in the USA (5.50% in fiscal 2008).
The effects of a one-percentage-point increase or decrease in the assumed health
care cost trend rates are as follows:
As it is on September, 30 (EUR thousand)
Effects
2009
At September, 30 (EUR thousand)
Effect on current service cost/interest cost components in net costs for the period for
37
post-employment medical care
Effect on accumulated obligations with regard to post-employment medical care
355
costs
 EPCOS AG 2009 129
CONSOLIDATED FINANCIAL STATEMENTS
The table below shows the income and expenses recognized in equity:
Income and expenses recognized in equity (SORIE)
At September 30 (EUR thousand)
2009
Income and expenses recognized in equity at October 1
Actuarial losses/(gains)
Foreign currency exchange rate changes
Income taxes
Income and expenses recognized in equity at September 30
2008
(21,388)
(6,577)
29,639
(21,407)
559
3
(3,343)
6,593
5,467
(21,388)
Historical Information
At September 30 (EUR thousand)
DBO
Fair value of plan assets
Changes due to the asset ceiling
Funded Status
2009
2008
2007
232,027
195,174
212,010
36,715
35,472
23,035
(2,274)
-
-
197,586
159,702
188,975
The adjustments based on experience, which are the differences between the earlier
actuarial assumptions applied and actual developments are as shown in the following
table (based on the pension benefit plans and plan assets at September 30):
Adjustments based on experience
At September 30 (EUR thousand)
2009
2008
Arising from plan liabilities
3,969
2,514
Attributable to plan assets
686
2,092
6.32
Non-cash transactions
New issued shares resulting from the convertible bond were removed from liabilities
and converted into equity in amount EUR 4.0 million.
In fiscal 2009 licences amounting to EUR 4.5 million were sold to third parties within
a sale-leaseback transaction. In addition land and building including fixtures and
furniture in amount of EUR 23.1 million are accounted as financial lease transaction.
The present value of the leasing payments corresponds to the liabilities arising from
the finance lease.
The increase in fixed assets was reduced by a not yet received government grant in
an amount of EUR 3.0 million.
 EPCOS AG 2009 130
CONSOLIDATED FINANCIAL STATEMENTS
The adjustment of the actuarial interest rate for the pension provision is resulting in a
cash neutral change at this liability position in amount of EUR 29.6 million.
6.33
Disclosures regarding financial instruments pursuant to IFRS 7
At September 30, 2009, and at September 30, 2008, the carrying amounts and fair
values of the individual financial instruments, grouped according to the categories
defined by IAS 39, were as follows:
Carrying amount and fair value for categories (EUR thousand)
Carrying
amount
at Sept.
30, 2009
Amortized
cost
Fair value
recognized
in equity
Fair value
recognized
in
profit/loss
IAS 17
leases
Fair
value at
Sept. 30,
2009
Valuation
categories
7,449
-
7,449
-
-
7,449
AfS
8,902
8,902
-
-
-
8,902
LaR
758
758*
-
-
-
-
AfS
479
-
-
479
-
479
FAHfT
Trade receivables
213,364
213,364
-
-
-
213,364
LaR
Cash and cash equivalents
119,475
119,475
-
-
-
119,475
LaR
2,471
-
-
2,471
-
2,471
FAHfT
139
-
139
-
-
139
n.a.
8,884
8,884
-
-
-
8,884
LaR
Trade liabilities
118,647
118,647
-
-
-
118,647
FLAC
Non-current and current debt
253,185
253,185
-
-
-
252,472
FLAC
35,247
-
-
-
35,247
34,289
n.a.
15
15
-
-
-
15
FLAC
1,112
-
1,112
-
-
1,112
n.a.
1,899
-
-
1,899
-
1,899
FLHfT
17,161
17,161
-
-
-
17,161
FLAC
ASSETS
Other non-current financial
assets
Investment securities
Other miscellaneous financial
assets
Investments
Derivative instruments without
hedging relationship
Other current financial assets
Derivative instruments without
hedging relationship
Derivative instruments with
hedging relationship
other financial assets
LIABILITIES
Liabilities from lease transactions
Other non-current financial
liabilities
Other current financial liabilities
Derivative instruments with
hedging relationship
Derivative instruments without
hedging relationship
Other financial liabilities
*) Investments can not be measured at fair value if no active market exists. In such cases, they are measured at
amortized cost. Sale of these instruments is not planned.
 EPCOS AG 2009 131
CONSOLIDATED FINANCIAL STATEMENTS
Carrying amount and fair value for categories (EUR thousand)
Carrying
amount
at Sept.
30, 2008
Amortized
cost
Fair value
recognized
in equity
Fair value
recognized
in
profit/loss
IAS
17
leas
es
Fair value
at Sept. 30,
2008
Valuation
categories
6,378
-
6,378
-
-
6,378
AfS
7,944
7,944
-
-
-
7,944
LaR
739
739*
-
-
-
-
AfS
Trade receivables
232,627
232,627
-
-
-
232,627
LaR
Cash and cash equivalents
198,408
198,408
-
-
-
198,408
LaR
6,741
-
-
6,741
-
6,741
FAHfT
1,841
-
1,841
-
-
1,841
n.a.
14,301
14,301
-
-
-
14,301
LaR
Trade liabilities
151,563
151,563
-
-
-
151,563
FLAC
Non-current and current debt
203,197
203,197
-
-
-
199,620
FLAC
9,173
-
-
-
9,173
8,471
n.a.
1,723
1,723
-
-
-
1,723
FLAC
13,652
-
13,652
-
-
13,652
n.a.
3,585
-
-
3,585
-
3,585
FLHfT
18,588
18,588
-
-
-
18,588
FLAC
ASSETS
Other non-current financial
assets
Investment securities (afs)
Other miscellaneous financial
assets
Investments
Other current financial assets
Derivative instruments without
hedging relationship
Derivative instruments with
hedging relationship
Other financial assets
LIABILITIES
Liabilities from lease transactions
Other non-current financial
liabilities
Other current financial liabilities
Derivative instruments with
hedging relationship
Derivative instruments without
hedging relationship
Other financial liabilities
*) Investments can not be measured at fair value if no active market exists. In such cases, they are measured at
amortized cost. Sale of these instruments is not planned.
Cash and cash equivalents denominated in currencies other than EUR are translated
at the spot rate.
Trade receivables and other current financial assets are assigned to current assets.
In light of their short maturities, it is assumed that the stated carrying amounts are
roughly equivalent to the corresponding fair values.
In the case of available-for-sale financial assets, the price on an active market (where
such a market exists) is recognized as the fair value.
 EPCOS AG 2009 132
CONSOLIDATED FINANCIAL STATEMENTS
The fair values of derivative financial instruments are calculated based on their
market values. This can, for example, be done by discounted expected future cash
flows on the basis of current market rates of interest and the term structure of interest
rates, or on financial mathematical models that contain assumptions about volatility
and/or current prices.
In light of their short maturities, the carrying amounts of trade liabilities are roughly
equivalent to their fair values.
Non-current debt (such as liabilities due to banks or liabilities arising from finance
leases) is measured at the present value of payments relating to the debt on the
basis of current market interest rates assuming punctual payment.
In accordance with the categories defined by IAS 39, the carrying amounts at September 30, 2009, and at September 30, 2008, were as follows:
Carrying amounts by valuation categories
For the years ending September 30, 2009, and September 30, 2008 (EUR thousand)
2009
2008
Available-for-sale assets (afs)
8,207
7,117
350,625
453,280
2,950
6,741
(389,008)
(375,071)
(1,899)
(3,585)
Loans and receivables (LaR)
Financial assets held for trading (FAHfT)
Financial liabilities measured at amortized cost (FLAC)
Financial liabilities held for trading (FLHfT)
Liabilities arising from finance leases and balances arising from transactions classed
as hedge accounting are not included in the above table.
Net gains/(losses) by valuation categories
For the years ending September 30, 2009, and September 30, 2008
(EUR thousand)
2009
2008
160
33
Loans and receivables (LaR)
1,151
(816)
Financial liabilities measured at amortized cost (FLAC)
2,367
(1,120)
(6,636)
5,463
Available-for-sale assets (afs)
Financial assets and liabilities held for trading (FAHfT)/ (FLHfT)
Net gains/losses mainly include results from sale or derecognition, foreign exchange
effects, changes in allowances and fair value adjustments.
The table above does not include gains or losses on derivatives with hedges.
In addition to the figures listed above, a net gain of EUR 0.1 million resp. loss of
minus EUR 2.4 million on available-for-sale financial assets was recognized directly
 EPCOS AG 2009 133
CONSOLIDATED FINANCIAL STATEMENTS
in equity in fiscal 2009 resp. 2008. In fiscal 2009 and 2008, no net gains/losses on
available for sale financial assets were reclassified from equity to profit and loss. A
net loss of minus EUR 1.0 million and minus EUR 11.8 million on derivatives with
hedge relationships was appropriated to equity in fiscal 2009 and 2008. In fiscal 2009
and 2008, a net loss of EUR 11.8 million and EUR 0.3 million on derivatives with
hedge relationship was reclassified from equity to profit and loss. These losses are
reported within cost of sales in the consolidated income statements.
At September 30, 2009, and September 30, 2008, the maturities of the Group's debt
were as follows (Interest payments arising from floating-rate liabilities were calculated
based on the terms applicable at September 30, 2009 and 2008):
Debt maturities
For the year ending September 30, 2009 (EUR thousand)
Less than
Between one and
one year
five years
Current and non239,613
37,344
current debt
Trade accounts
118,647
payable
Derivative financial
3,011
instruments
Other debt
17,161
7
More than five
years
Total
58,154
335,111
-
118,647
-
3,011
8
17,176
More than five
years
Total
5,454
218,959
-
151,563
-
17,237
-
20,311
Debt maturities
For the year ending September 30, 2008 (EUR thousand)
Less than
Between one and
one year
five years
Current and non172,376
41,129
current debt
Trade accounts
151,563
payable
Derivative financial
17,237
instruments
Other debt
18,588
1,723
 EPCOS AG 2009 134
CONSOLIDATED FINANCIAL STATEMENTS
The following table includes details to budget and maturities of hedging activities:
Budget and maturities
At September 30 (EUR thousand)
2009
Less
than
one
year
Forward exchange
contracts
Cross-Currency swaps
and interest rate swaps
Commodity contracts
2008
Total
Less than
one year
Between
one and
five
years
Total
214,110
-
214,110
263,763
5,909
269,672
6,274
7,098
13,372
11,686
4,719
16,405
7,215
-
7,215
24,447
5,909
30,356
-
-
-
14,635
-
14,635
Currency options
6.34
Between
one and
five years
Risk management
For details concerning the risk management please see the management report.
6.35
Segment reporting
EPCOS adopts the provisions of IFRS 8 concerning business segments, according to
which segmentation is based on the management approach.
The Company has three reportable operating segments that are regularly evaluated
by the Management Board in deciding how to allocate resources. The segments are
managed separately because of differences in the nature of their respective products. The three reportable operating segments are Capacitors and Inductors, Ceramic Components and Surface Acoustic Wave (SAW) Components.
The business segment Capacitors and Inductors is comprised of products that are
used throughout electrical engineering and electronics. They store electric charges
and filter or regulate current and voltage in electronic circuitry. The product spectrum
of the Company covers aluminum electrolytic capacitors, film capacitors, power
capacitors, and solutions for power factor correction. Inductors fulfill two basic electrical functions at the same time: they filter current and store electromagnetic energy.
The portfolio also includes ferrites, which are the heart of inductors and concentrate
electromagnetic fields to transmit electrical signals and power. Moreover, EPCOS
also manufactures components that ensure electromagnetic compatibility for the
interference-free operations of electrical equipment and devices of all kinds. Becromal Group and EPCOS (Anhui) Feida, that was founded in January 2009 have been
assigned to this business segment.
The business segment Ceramic Components manufactures products that are indispensable in automotive electronics and appliances as well as in telecommunications
 EPCOS AG 2009 135
CONSOLIDATED FINANCIAL STATEMENTS
and entertainment electronics. These products filter electrical signals, measure
physical quantities, such as temperature, and protect electronic circuitry against
overvoltage and overcurrent. The product portfolio covers surge arresters and switching spark gaps, sensors and sensor systems, thermistors, varistors, and a wide range
of multilayer ceramic components, including piezo actuators and capacitors.
Besides surface acoustic wave filters, resonators and duplexers, the business segment SAW Components produces integrated radio frequency modules and microwave ceramic components. All of these are key components for modern information
and communications technologies. They filter frequencies and have a decisive impact
on picture and sound quality in audio and TV equipment as well as in mobile phones.
The subsidiary Crystal Technology, Inc., in Palo Alto, California, is the world market
leader in lithium niobate crystals and wafers, which are the raw materials for many
SAW components.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies, except that the disaggregated financial
results for the reportable segments have been prepared using a management approach which is consistent with how management internally analyzes financial information for the purposes of making operating decisions. Generally, the Company
evaluates performance based on net income (loss) before interest income and expense, taxes and minority interest (EBIT), and accounts for inter-segment sales and
transfers as if the sales and transfers were to third parties, that is, at current market
prices. Net sales are attributed to geographical areas based on the location of the
customer bill-to address. Non-current assets of the business segments are attributed
to the location of the respective asset.
 EPCOS AG 2009 136
CONSOLIDATED FINANCIAL STATEMENTS
Information on the business segments is presented in the table below:
Financial information on business segments
(EUR million)
Capacitors
and Inductors
Ceramic
Components
SAW
Components
Eliminations/una
llocated
costs
Net sales to third parties and related parties
500.4
306.6
340.1
-
EBIT
(14.3)
(40.0)
(24.4)
0.4
-
-
-
-
Consolidated
total
2009
therein net (loss) income from investments
1,147.1
(78.7)
-
0.4
-
-
(20.6)
-
-
-
(3.9)
-
-
-
-
(103.1)
Current and deferred taxes
-
-
-
-
(17.7)
Net income
-
-
-
-
(120.9)
Shareholders of EPCOS AG
-
-
-
-
(119.6)
Minority interest
-
-
-
-
(1.3)
36.9
31.8
57.7
-
126.4
50.4
11.8
38.8
1.6
102.6
576.6
299.4
414.1
-
1,290.1
3.1
-
-
-
3.1
accounted for using the equity method
Interest result (net)
Net loss from other financial income and
financial expenses
Income before income taxes and minority
interest
Attributable to
Depreciation and amortization
Additions to non-current assets (inclusive
financial assets and acquisition of businesses)
Total assets
therein amount of investment accounted for
using the equity method
 EPCOS AG 2009 137
CONSOLIDATED FINANCIAL STATEMENTS
2008*
Net sales to third parties and related parties
577.3
502.2
398.2
-
1,477.7
41.9
39.4
29.0
(6.4)
103.9
(2.5)
-
1.0
-
(1.5)
-
-
-
-
(25.6)
-
-
-
-
(0.1)
-
-
-
-
78.2
Current and deferred taxes
-
-
-
-
(15.4)
Net income
-
-
-
-
62.8
Shareholders of EPCOS AG
-
-
-
-
63.1
Minority interest
-
-
-
-
(0.3)
31.9
37.7
52.4
-
122.0
45.9
31.8
77.5
0.1
155.3
541.5
427.2
425.2
-
1,393.9
5.0
-
-
-
5.0
EBIT
therein net income from investments
accounted for using the equity method
Interest result (net)
Net loss from other financial income and
financial expenses
Income before income taxes and minority
interest
Attributable to
Depreciation and amortization
Additions to non-current assets (inclusive
financial assets and acquisition of businesses)
Total assets
therein amount of investment accounted for
using the equity method
*)
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
 EPCOS AG 2009 138
CONSOLIDATED FINANCIAL STATEMENTS
Information on the principal regions, net sales and identifiable non-current assets at
September 30, 2009, and September 30, 2008, is presented in the table below:
Financial information by region
At September 30 (EUR million)
2009
Net sales
Europe
Germany
Austria
Other
Asia
Thereof China
USA
Other
Total
*)
614.6
307.4
14.1
293.1
405.1
199.9
61.6
65.8
1,147.1
Identifiable
non-current
assets
407.6
160.3
76.6
170.7
180.2
86.8
11.8
18.3
617.9
2008*
Net sales
947.6
508.0
20.1
419.5
374.0
162.6
72.3
83.8
1,477.7
Identifiable
non-current
assets
381.9
189.4
97.3
95.2
156.0
63.6
8.3
22.0
568.2
After adjusting investments accounted for using the equity method as of September 30, 2008. See note 6.9.
In fiscal 2009 and 2008 EPCOS’ largest customers generated approximately EUR
164 million and EUR 165 million in net sales, to which each of the three segments
contributed in varying degrees.
 EPCOS AG 2009 139
CONSOLIDATED FINANCIAL STATEMENTS
6.36
Subsequent events
Having been passed by EPCOS AG's Annual General Meeting on May 20, 2009, the
resolution to transfer minority interests in EPCOS AG to TDK Corporation, Tokyo,
Japan, in return for appropriate cash compensation (squeeze out) was recorded on
October 22, 2009 in EPCOS AG's commercial register entry at the Munich Circuit
Court.
Having been passed by EPCOS AG's Annual General Meeting on May 20, 2009, the
resolution concerning the domination agreement was recorded on October 29, 2009
in EPCOS AG's commercial register entry at the Munich Circuit Court.
TDK-EPC Corporation (TDK-EPC) was founded in Japan on October 1, 2009, as a
result of carving out the passive electronic components business of TDK Corporation.
The shares in EPCOS AG held by TDK Corporation were transferred to TDK-EPC
thereafter. The electronic components business will operate within TDK-EPC group
and the corresponding family brand.
As a consequence of the entry in the commercial register on October 22, 2009,
recording the transfer of minority interests in EPCOS AG to TDK Corporation in
return for reasonable cash compensation, the EPCOS share was delisted on all
German stock exchanges at the start of November.
Munich, November 25, 2009
Pegam
Dr. Faber
Zichlarz
 EPCOS AG 2009 140
CONSOLIDATED FINANCIAL STATEMENTS
Declarations by the legal representatives of the Company
We hereby declare that, to the best of our knowledge, the consolidated financial
statements present a fair and accurate account of the assets, financial and earnings
position of the EPCOS Group in accordance with the applicable accounting principles, that business development, performance and the position of the Group are
presented in the management report in a fair and accurate manner, and that the
material opportunities and risks relating to the future development of the Group are
adequately described.
Munich, November 25, 2009
The Management Board
Pegam
Dr. Faber
Zichlarz
 EPCOS AG 2009 141
CONSOLIDATED FINANCIAL STATEMENTS
Auditor’s Report
We have issued the following opinion on the consolidated financial statements and
the management report on the position of the company and the group:
"We have audited the consolidated financial statements prepared by the EPCOS
AG, Munich, comprising the balance sheet, the income statement, the statement
of income and expense recognized in equity, the cash flow statement and the
notes to the consolidated financial statements, together with the management report on the position of the company and the group for the fiscal year from October
1, 2008 to September 30, 2009. The preparation of the consolidated financial
statements and the management report on the position of the company and the
group in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB ["Handelsgesetzbuch": "German Commercial Code"] are the responsibility of the parent
company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the management report on the position of
the company and the group based on our audit.
We conducted our audit of the consolidated financial statements in accordance
with Sec. 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of
Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the
net assets, financial position and results of operations in the consolidated financial
statements in accordance with the applicable financial reporting framework and in
the management report on the position of the company and the group are detected with reasonable assurance. Knowledge of the business activities and the
economic and legal environment of the Group and expectations as to possible
misstatements are taken into account in the determination of audit procedures.
The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the
management report on the position of the company and the group are examined
primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation,
the determination of entities to be included in consolidation, the accounting and
consolidation principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements
and the management report on the position of the company and the group. We
believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
 EPCOS AG 2009 142
CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, based on the findings of our audit, the consolidated financial
statements comply with IFRSs as adopted by the EU, the additional requirements
of German commercial law pursuant to Sec. 315a (1) HGB and give a true and
fair view of the net assets, financial position and results of operations of the Group
in accordance with these requirements. The management report on the position of
the company and the group is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development."
Munich, November 25, 2009
Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft
Broschulat
Müller
Wirtschaftsprüfer
[German Public Auditor]
Wirtschaftsprüfer
[German Public Auditor]
 EPCOS AG 2009 143