2019 Annual Report of Continental Aktiengesellschaft
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TRANS FORMATION 2019 ANNUAL REPORT OF CONTINENTAL AKTIENGESELLSCHAFT The management report of Continental Aktiengesell- schaft is combined with the management report of the Continental Corporation in accordance with Section 315 (5) of the German Commercial Code (Handelsgesetzbuch) and published in Continental’s Annual Report for 2019. The annual financial statements and the summarized management report of Continental Aktiengesellschaft for fiscal 2019 are published in the electronic German Federal Gazette (elektronischer Bundesanzeiger). 2019 Annual Report, Continental Aktiengesellschaft 3 Annual Report of Continental Aktiengesellschaft 4 Income Statement 5 Balance Sheet 6 Statement of Changes in Non-Current Assets 7 Notes to the Annual Financial Statements 8 Accounting Policies 9 Notes to the Balance Sheet, Assets 11 Notes to the Balance Sheet, Equity and Liabilities 14 Notes to the Income Statement 16 Other Disclosures 33 Independent Auditor’s Report 37 Responsibility Statement in Accordance with Sections 264 (2) and 289 (1) of the German Commercial Code (Handelsgesetzbuch – HGB) 38 Members of the Executive Board and Their Directorships 39 Members of the Supervisory Board and Their Directorships 41 Financial Calendar 41 Publication Details 4 2019 Annual Report, Continental Aktiengesellschaft Continental Aktiengesellschaft Income Statement € millions See Note 2019 2018 Sales 13 299.4 260.4 Cost of sales –287.6 –252.9 Gross margin on sales 11.8 7.5 General administrative expenses –177.2 –193.7 Other operating income 14 67.5 25.5 Other operating expenses 15 –73.4 –59.4 Net investment income 16 5,294.0 1,462.7 Income from other securities and long-term loans 16.2 11.6 Amortization of investments and of securities under current assets –0.4 –0.8 Net interest result 17 –31.8 –65.5 Result from activities 5,106.7 1,187.9 Income tax expense 18 –59.2 0.2 Net income 5,047.5 1,188.1 Accumulated profits brought forward from the previous year 808.5 570.4 Retained earnings 5,856.0 1,758.5 2019 Annual Report, Continental Aktiengesellschaft 5 Balance Sheet Assets € millions See Note Dec. 31, 2019 Dec. 31, 2018 Intangible assets 1 27.7 19.1 Property, plant and equipment 1 75.0 22.2 Investments 2 15,481.9 13,454.4 Non-current assets 15,584.6 13,495.7 Inventories 3 — 0.0 Receivables and other assets 4 6,822.5 7,042.3 Cash and cash equivalents 5 952.1 452.3 Current assets 7,774.6 7,494.6 Prepaid expenses and deferred charges 6 67.8 42.8 Total assets 23,427.0 21,033.1 Equity and liabilities € millions See Note Dec. 31, 2019 Dec. 31, 2018 Subscribed capital 8 512.0 512.0 Capital reserves 9 4,179.1 4,179.1 Revenue reserves 10 54.7 54.7 Accumulated profits brought forward from the previous year 808.5 570.4 Net income 5,047.5 1,188.1 Shareholders' equity 10,601.8 6,504.3 Provisions 11 952.9 936.4 Liabilities 12 11,871.5 13,591.9 Deferred income 0.8 0.5 Total equity and liabilities 23,427.0 21,033.1 6 2019 Annual Report, Continental Aktiengesellschaft Statement of Changes in Non-Current Assets Purchase and production costs € millions Jan. 1, 2019 Additions Transfers Disposals Dec. 31, 2019 Acquired concessions, industrial and similar rights and assets, and licenses in such rights and assets 156.1 19.0 — — 175.1 Prepayments — 0.0 — — 0.0 Intangible assets 156.1 19.0 — — 175.1 Land, land rights and buildings including buildings on third-party land 2.6 10.8 1.7 — 15.1 Technical equipment and machinery 5.0 0.1 0.2 0.0 5.3 Other equipment, factory and office equipment 6.1 0.3 0.1 0.5 6.0 Advances to suppliers and assets under construction 17.2 43.9 –2.0 — 59.1 Property, plant and equipment 30.9 55.1 — 0.5 85.5 Shares in affiliated companies 13,239.5 3,496.3 — 383.5 16,352.3 Other long-term equity investments 39.2 — — — 39.2 Assets of Continental Pension Trust e. V. 111.3 — — — 111.3 Long-term securities 72.5 60.2 — 50.4 82.3 Investments 13,462.5 3,556.5 — 433.9 16,585.1 Non-current assets 13,649.5 3,630.6 — 434.4 16,845.7 2019 Annual Report, Continental Aktiengesellschaft 7 Depreciation, amortization and write-downs Book value Jan. 1, 2019 Additions Disposals Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2018 137.0 10.4 — 147.4 27.7 19.1 — — — — 0.0 — 137.0 10.4 — 147.4 27.7 19.1 1.2 0.6 — 1.8 13.3 1.4 2.2 1.3 0.0 3.5 1.8 2.8 5.3 0.4 0.5 5.2 0.8 0.8 — — — — 59.1 17.2 8.7 2.3 0.5 10.5 75.0 22.2 0.1 1,094.9 — 1,095.0 15,257.3 13,239.4 7.2 — — 7.2 32.0 32.0 — — — — 111.3 111.3 0.8 0.4 0.2 1.0 81.3 71.7 8.1 1,095.3 0.2 1,103.2 15,481.9 13,454.4 153.8 1,108.0 0.7 1,261.1 15,584.6 13,495.7 Continental Aktiengesellschaft Notes to the Annual Financial Statements Continental Aktiengesellschaft is entered in the commercial regis- Individual items of the balance sheet and income statement have ter of the Hanover Local Court (Amtsgericht) under HRB 3527. been combined to improve the clarity of presentation. These items are explained separately in the notes. The annual financial statements of Continental Aktiengesellschaft have been prepared in accordance with the provisions of the Ger- The income statement has been prepared using the cost of sales man Commercial Code (Handelsgesetzbuch – HGB) and the sup- method in accordance with standard international practice. plementary provisions of the German Stock Corporation Act (Aktiengesetz – AktG). Please note that differences may arise as a result of the use of rounded amounts and percentages. 8 2019 Annual Report, Continental Aktiengesellschaft Accounting Policies Assets Deferred taxes include expected tax payments and refunds from Purchased intangible assets are carried at acquisition cost and temporary differences between the commercial and tax values of amortized on a straight-line basis in accordance with the expected assets, liabilities, deferred income and prepaid expenses and from useful life. Internally generated intangible assets are not capitalized. the use of loss carryforwards. Deferred tax assets are not recog- nized in the balance sheet. Tangible assets are measured at the cost of acquisition or production less depreciation if applicable. Movable assets that were acquired Equity and liabilities before fiscal 2008 are depreciated using the diminishing balance The amount of provisions for pension-related obligations is deter- method, while all other assets are depreciated on a straight-line basis. mined on the basis of actuarial calculations using the projected Where depreciation is carried out using the diminishing balance unit credit method and the 2018 G Heubeck mortality tables. method, this switches to the straight-line basis when this results in Future increases in compensation and pensions are included in the higher depreciation. Diminishing balance depreciation takes place calculation. The discount rate is based on the average market inter- at the maximum taxably permissible level. Low-value asset items est rate of the past 10 fiscal years published by Deutsche Bundes- with an acquisition cost of less than €1,500 each are fully recog- bank where a remaining term of 15 years is assumed. Assets that nized as an expense in the year of addition. serve to fulfill pension obligations only and that are withdrawn from access by all other creditors are stated at their fair value and offset The expected useful lives of intangible assets and tangible assets against the corresponding obligations from the old-age pension. are based on the tax depreciation tables. Any surplus obligations are recognized in provisions. Shares in affiliated companies, other long-term equity investments, The other provisions have been recognized for all identifiable risks, long-term securities and trust assets transferred to Continental Pen- uncertain obligations and expected losses on the basis of prudent sion Trust e. V., Hanover, that do not represent plan assets are carried business practice at their respective fulfillment amount. Future price at their acquisition costs less the write-down entailed by expected and cost increases are taken into consideration if there are indica- permanent impairment. Write-downs are reversed up to the maxi- tions of their occurrence. Provisions with a remaining term of more mum of historical cost if the reasons for permanent impairment no than one year are discounted according to the average market in- longer apply. terest rate of the past seven fiscal years published by Deutsche Bundesbank in line with their remaining term. Interest-bearing loans are carried at their nominal value while non- interest-bearing and low-interest loans are discounted to their net The liabilities are recognized at their settlement amounts unless present value. they are hedged. Hedged liabilities in foreign currencies are meas- ured at the hedging rate. Raw materials and supplies are measured at the lower of cost or fair value. The inventory risks resulting from decreased marketability Income statement or excessive storage periods are taken into account by means of General administrative expenses relate to function costs for the appropriate value deductions. finance, administration, human resources and holding functions. Receivables and other assets are carried at nominal amount. All Net investment income includes income and expense from profit discernible specific risks are taken into account by means of appro- and loss transfer agreements, income from investments, the result priate discounts.