Innovative Power Transmission
Annual Report
2010
RENK AG
At a glance
• Operating profit of €52 million (down from €66 million) • ROS: 12.9 percent (down from 13.9) • ROCE: 36.9 percent (down from 38.8) • EpS: €5.54 (down from €6.80) • Proposed dividend: €1.80 (unchanged) • Cash flow from operating activities: €81 million (up from €62 million)
RENK Group
€ million
- 2010)
- 2009)
- Change
in % +79 –15
- Order intake
- 525)
403)
294)
- 474)
- Sales
Order backlog1) Headcount1)
- 522)
- 415)
- +26
- –1
- 1,882)
68)
1,903)
- 35)
- thereof temporary employees1)
- +94
Change in € mill.
- –14
- Operating profit
- 52)
52)
66)
- 65)
- EBT
- –13
- EAT (net income)
- 38)
- 46)
- –8
Earnings per share (EpS) in € Dividend per share in € Return on sales (ROS) in % Return on capital employed (ROCE) in %
5.54) 1.80) 12.9) 36.9)
6.80) 1.80) 13.9) 38.8)
–1.26
–) –) –)
- Capital expenditures
- 23)
13)
4)
20) 11)
4)
+3
- +2
- Amortization and depreciation
Internally funded R&D expenditures Cash earnings
–
53) 81) (23) 58) 99)
217)
59) 62) (20) 42) 53)
192)
–6
Cash flow from operating activities Cash flow from investing activities Free cash flow
+19
–3
+16 +46 +25
Net liquid assets Equity1)
1) as of December 31, 2010 vs. 2009
Financial diary
- Fiscal 2010 annual general meeting
- April 14, 2011
May 3, 2011 July 28, 2011
Q1/2011 interim report Semiannual financial report 2011
- Q3/2011 interim report
- November 2, 2011
February 27, 2012
April 26, 2012
Press release on financial information 2011 Fiscal 2011 annual general meeting
RENK—an MAN Group Company
Contents
04 Supervisory Board 05 Executive Board 06 Report of the Supervisory Board 10 Corporate governance at RENK 16 Board compensation report for fiscal 2010 23 RENK stock
24 RENK Group Management Report for fiscal 2010
25 The RENK Group’s business focus 26 Economic environment 30 Business trend and performance 36 Income statement 37 Reconciliation to net income (EAT) 38 Controlling system and shareholder value management 40 Financial position
41 Asset and capital structure 44 Capital-related disclosures 46 Research and development 50 Capital expenditures 52 Employees 56 The situation at the divisions 70 Risk report 81 Corporate governance statement 84 Outlook
89 RENK consolidated financial statements
for the fiscal year ended December 31, 2010
90 Consolidated income statement 90 Statement of comprehensive income
91 Consolidated balance sheet as of December 31, 2010 92 Statement of changes in equity 93 Consolidated statement of cash flows for fiscal 2010 95 Notes to RENK’s consolidated financial statements 95 Accounting principles
107 Notes to the consolidated income statement
112 Notes to the consolidated balance sheet 123 Other information 138 Supervisory and Executive Board memberships in other statutory boards or equivalent
141 RENK AG’s shareholdings 142 Management representation 143 Independent auditor’s report and opinion
145 Six-year overview
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RENK Annual Report 2010
Supervisory Board
Dipl.-Kfm. Frank H. Lutz
Munich
Dr.-Ing. Hans-O. Jeske
Wesel
Supervisory Board member as from Feb. 16, 2010
Supervisory Board member as from Mar. 11, 2010
Supervisory Board Chairman as from Mar. 11, 2010
Executive Board member of MAN Diesel & Turbo SE
Executive Board member of MAN SE
Dipl.-Ök. Anton Weinmann
Landensberg
Dr.-Ing. Georg Pachta-Reyhofen
- Niederpöcking
- Supervisory Board member up to
Supervisory Board member and Chairman Jan. 25, 2010 up to Mar. 11, 2010
Former Executive Board member of
- MAN SE
- Executive Board Spokesman of MAN SE
Executive Board Spokesman of MAN Truck & Bus AG
Former CEO of MAN Nutzfahrzeuge AG
Klaus Ketterle*)
Dipl.-Wirtsch.-Ing. Klaus Stahlmann
Kempen
Neusäss
Technical clerk, RENK AG
Supervisory Board member from
Feb. 16, 2010, to Feb. 22, 2011 Supervisory Board Vice-Chairman from Mar. 11, 2010, to Feb. 22, 2011
Herbert Köhler*)
Augsburg
Executive Board member of MAN SE
Executive Board Spokesman of MAN Diesel & Turbo SE
Supervisory Board member as from Apr. 1, 2010
Foreman, RENK AG
Prof. Dipl.-Ing. (FH) Gerd Finkbeiner
Neusäss
Robert Strixner*)
Augsburg
CEO of manroland AG
Supervisory Board member up to
Mar. 31, 2010
Foreman, RENK AG
*) elected by the employees As of March 3, 2011
04
Executive Board
- Ulrich Sauter
- Dipl.-Ing. (FH) Florian Hofbauer
- Landsberg
- Wertingen
Spokesman
05
RENK Annual Report 2010
Report of the Supervisory Board
Frank H. Lutz
Ladies and Gentlemen: In fiscal 2010, the Supervisory Board periodically and thoroughly dealt with RENK’s situation and development and throughout performed the tasks and duties incumbent on it under law and the Company’s bylaws. We provided the Executive Board members with advice on the conduct of business and oversaw their activities.
The Supervisory Board convened in 2010 at six scheduled meetings (including two conference calls), attendance averaging 92 percent. Detailed Executive Board reports (oral and written) informed the Supervisory Board on business trends, transactions of relevance, the corporate plan and any variances and their causes, RENK’s performance and financial trends, as well as on the present risk situation and strategic focus. Another key subject: efforts to reduce in the long-term certain warranty risks associated with the manufacture of large gear units.
In August 2010, the Supervisory Board redefined the compensation system for Executive Board members, aligning it with the recommendations of the German Corporate Governance Code.
The Supervisory Board’s Presidential Committee met once in fiscal 2010; no other committees exist within the Supervisory Board.
The Supervisory Board was involved as advisory body in all issues and decisions of import to RENK.
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As part of its management monitoring functions, the Supervisory Board satisfied itself of the installation by the Executive Board of an effective and efficient compliance management system for the RENK Group.
German Corporate Governance Code
In December 2010, RENK AG’s Executive and Supervisory Boards issued the declaration of conformity on the current recommendations of the German Corporate Governance Code Government Commission (as amended up to May 26, 2010). This declaration is published on RENK AG’s website. The Supervisory Board approved the corporate governance report 2010 at its meeting on March 3, 2011.
Annual audits 2010
The separate financial statements and management report of RENK AG, as well as the consolidated financial statements and group management report, for the fiscal year ended December 31, 2010, were all examined by PricewaterhouseCoopers AG, Wirtschaftsprüfungsgesellschaft (“PwC”), Munich, the statutory auditor duly elected by the annual general meeting; PwC issued its unqualified opinion on both sets of financial statements. Besides the focal audit areas defined by the Supervisory Board (revenue recognition, transfer pricing, and enactment of the German Act on the Modernization of Accounting Law—“BilMoG”), PwC also examined the early risk identification system (ERIS) and concluded that the Executive Board took appropriate action and, in particular, set up a monitoring system to ensure that trends jeopardizing the Company’s continued existence as a going concern are identified early on, all as required by Art. 91(2) German Stock Corporation Act (“AktG”).
The statutory auditor attended, and reported on its key audit conclusions at, our annual accounts meeting today. We took approving note of the audit results.
According to the final results of our own review of RENK AG's separate and consolidated financial statements and the management reports, we do not raise any objections either. We approve the separate financial statements as prepared by the Executive Board, which are thus adopted, as well as the consolidated financial statements. After thorough discussion of the RENK Group’s financial budget and capital expenditure plan, we agree with the Executive Board's proposal (also reviewed by us) for the appropriation of net earnings.
After reviewing the final results of our own examination, we found no reasons for objections to the Executive Board's concluding statement in the dependency report on affiliations.
Changed Supervisory Board membership
At the beginning of 2010, the Supervisory Board had only 5 members. In January 2010, Dipl.-Ök. Anton Weinmann stepped down from this Board.
In February 2010, the Augsburg Local Court appointed Dipl.-Wirtsch.-Ing. Klaus Stahlmann and me as further Supervisory Board members. Dr.-Ing. Georg Pachta-Reyhofen stated in February 2010 that he would step down from RENK AG’s Supervisory Board (both as chairman and member) with effect from the opening of the March 11, 2010
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RENK Annual Report 2010
Supervisory Board meeting. MAN SE nominated Dr.-Ing. Hans-O. Jeske to succeed him on RENK AG’s Supervisory Board.
At its March 11, 2010 meeting, the Supervisory Board elected me and Klaus Stahlmann its Chairman and Vice-Chairman, respectively, and appointed Klaus Stahlmann, Dr.-Ing. Hans-O. Jeske and me as members of the Presidential Committee.
After 40 years’ service with RENK, Robert Strixner went as of March 31, 2010, into retirement and thus also stepped down as Supervisory Board member. He was succeeded by Herbert Köhler, a previously nominated alternate.
The annual general meeting of May 6, 2010, endorsed the court appointment and nomination of, by formally electing for the residual term of office, Klaus Stahlmann, Dr.-Ing. Hans-O. Jeske and me as Supervisory Board members. On February 22, 2011, Dipl.-Wirtsch.-Ing. Klaus Stahlmann stepped down from the Supervisory Board; no decision on his successor has yet been made.
Our thanks go to the retired Supervisory Board members, the Executive Board, and the RENK Group’s employees for their efforts and dedicated service. We also thank the employee representatives for the constructive cooperation in RENK’s interests.
Augsburg, March 3, 2011
Frank H. Lutz Supervisory Board Chairman
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Corporate governance at RENK
For RENK, corporate governance and control are designed to ensure, in line with social market economy principles, its continuance as a going concern by adding the necessary sustainable shareholder value.
A prime driver of these efforts is the corporate governance system, which is defined by current legislation, RENK’s articles of incorporation (bylaws) and in-house rules, as well as by nationally and internationally accepted standards of sound and responsible corporate management.
The German Corporate Governance Code (the “Code”) describes the regulations applicable to RENK under stock corporation law and provides recommendations and suggestions on how to practice good corporate governance according to generally accepted standards.
RENK AG’s Executive and Supervisory Boards have thoroughly dealt with corporate governance system details and are aware that sound and transparent corporate governance is essential to responsible and far-sighted corporate management.
Declaration of conformity with the Code
In December 2010, RENK AG’s Executive and Supervisory Boards issued the following declaration of conformity:
“RENK AG adopted the recommendations of the German Corporate Governance Code Government Commission subject to its declaration of conformity of December 11, 2009, and will implement the recommendations of the Code as amended up to May 26, 2010, with the following exceptions:
Besides the existing Presidential Committee (in charge of Executive Board staffing issues), no further Supervisory Board committees are or will be established (§ 5.3.1–3 of the Code). With a membership of only six, neither efficiency nor any other reasons would support the formation of such additional committees from among the Supervisory Board members.
Presidential Committee chairmanship and membership will not be remunerated (§ 5.4.6 of the Code) since committee work has not and will not within the foreseeable future be of any significant extent.”
We consider it highly important to subject RENK’s corporate governance practice to ongoing reviews and update it wherever required.
Certain significant recommendations and suggestions of the Code are commented on in detail below:
Promotion of stockholder rights
On our website at www.renk.eu under Investor Relations, and through published financial reports, we offer our stockholders and other interested parties the opportunity to
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obtain anytime an updated and authentic portrayal of RENK and its corporate governance practices. Also published here are ad-hoc notifications and press releases.
Promptly on disclosure (cf. § 6.3 of the Code), RENK AG publishes on its website annual and interim reports, a financial diary with all upcoming events of financial relevance, as well as the Annual Document whose publication is required by the provisions of Sec. 10 German Securities Prospectus Act (“WpPG”) and where all relevant corporate information of the preceding calendar year is compiled.
In line with applicable legislation, we ensure that all our stockholders have equal access to information.
General meeting
The (annual) general meeting of stockholders is the platform for all RENK stockholders to exercise their voting rights, obtain information, as well as to dialogue with the Executive and Supervisory Boards.
The law confers upon the annual general meeting as corporate body the right to vote and decide on such matters as the appropriation of net earnings, the official approval of the acts and omissions of the Executive and Supervisory Boards, as well as the election of Supervisory Board members and of the statutory auditor. Moreover, the general meeting of stockholders votes on amendments of the articles of incorporation, bylaws and capital moves.
Altogether 210 stockholders attended the annual meeting 2010, representing 83.8 percent of RENK AG’s voting stock. For participation, stockholders are required to prove that they are authorized to vote by (i) substantiating as of the commencement of the 21st day prior to the annual general meeting (record date) that they own RENK stock, as well as (ii) registering within the statutory minimum period. The detailed requirements are specified in the invitation to the general meeting. We offer interested stockholders the option of appointing RENK staff as voting proxies; equally acceptable as voting proxy is any bank or stockholders association to which a due power of attorney has been issued.
As a rule, the Supervisory Board Chairman presides over the general meeting and ensures that all business on the agenda is smoothly transacted.
RENK’s annual report (including the full financial statements) is available at the AGM and the Company will also send a copy on request. In addition, we publish on our website the speech of the Executive Board Spokesman (in German language). The individual depositary bank forwards the invitation to the general meeting along with the agenda to each stockholder. This invitation is also published in the digital version of the German Federal Gazette and on our website, as are any AGM-related reports and documents.
Interaction of Executive and Supervisory Boards
In accordance with German stock corporation legislation, RENK AG has two boards in addition to the general meeting as corporate body: the Executive and Supervisory
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RENK Annual Report 2010
Boards closely collaborate in RENK’s best interests and endeavor to add sustainable shareholder value.
The Executive Board is in charge of RENK’s management and conduct of business while the Supervisory Board has overseeing and advisory functions. Both boards pursue their activities in accordance with applicable statutory regulations and their respective rules of procedure. The Executive Board briefs the Supervisory Board timely and comprehensively on all relevant strategic, planning, business trend and risk position issues. Any business subject to Supervisory Board approval is submitted to the Supervisory Board in due course. Moreover, the Executive Board promptly reports any extraordinary event to the Supervisory Board Chairman.
Executive Board
The Executive Board is RENK AG’s top management body and has two members (as of December 31, 2010) who conduct RENK’s business under their joint responsibility. Executive Board members are appointed by the Supervisory Board. The Executive Board’s work is governed by rules of procedure.
The Executive Board determines the business goals and aims for the entire RENK Group and is accountable not only for compliance with the law, official regulations and in-house policies but also for open, fair and transparent corporate communication. A directors & officers (D&O) insurance policy has been taken out to cover liability claims, the deductible for RENK AG Executive Board members being capped at a reasonable ceiling as required by the law. The risk management system is designed to assist the Executive Board in early identifying any business and financial risks.
The Executive Board duly complies with its reporting obligations to the Supervisory Board. The acceptance by an Executive Board member of any sideline activity (including the membership in another corporation’s supervisory board) is subject to Supervisory Board approval. Moreover, Executive Board members are obligated to report any conflicts of interests promptly to the Supervisory Board and to their peers on the Executive Board. In the year under review, no company of the RENK Group transacted any business with RENK AG’s Executive Board members or parties related to these.
In the year under review, no clashing interests of Executive Board members were reported.
Supervisory Board
As another corporate body, the Supervisory Board performs monitoring and advisory functions at RENK AG and is generally composed of four stockholder and two employee representatives. Stockholder representatives are elected by the general meeting (according to our bylaws MAN SE has the right to appoint one of them), employee representatives by the workforce. Supervisory Board members are elected individually (i.e., not by collective slate). For details of Supervisory Board membership and its changes in 2010, see also the Supervisory Board report and the notes to the consolidated financial statements.
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In the year under review, neither were any clashing interests reported by Supervisory Board members, nor did any consultancy agreement or other contract for work or services exist between a Supervisory Board member and the Company.
Memberships of Supervisory Board members in boards of other enterprises are listed in the notes to the consolidated financial statements. No Supervisory Board member holds any office on a board of, or provides any consultancy services to, major RENK competitors.
Supervisory Board members are answerable for the due and proper performance of their functions. A D&O insurance policy has been taken out to cover liability claims, the deductible for RENK AG Supervisory Board members corresponding to a reasonable amount in accordance with the recommendations of the Code (§ 3.8).
Regulatory compliance/risk management
Law abidance and compliance with in-house guidelines and policies are of paramount importance for management, control and supervision purposes, as recommended by the Code. Accordingly, the Executive Board ensures the continual fine-tuning of the related control system and is also responsible for enforcing corporate compliance.
The Chief Compliance Officer (CCO) and the Compliance Board (consisting of the CCO and the heads of key functional areas of RENK AG) assist the Executive Board. Major efforts in 2010 centered on systematically briefing and training employees in preventing corruption and bribery and in adhering to antitrust regulations. For details, see the management report.
Reportable securities transactions
Sec. 15a German Securities Trading Act (“WpHG”) and the applicable provisions of the Code require any board members and equivalent individuals, as well as parties related to these (whether closely related family members, legal entities or other institutions) to report to the issuer as well as the German Federal Financial Supervisory Authority (“BaFin”) on the purchase and sale of RENK shares and financial instruments based thereon. Such reported related-party transactions (so-called directors’ dealings) are published on our website at www.renk.eu under Investor Relations. In the year under review, no such transactions were reported to RENK AG.
