annual report 2010 AERO Vodochody a.s.
ANNUAL REPORT annual report 2010 AERO Vodochody a.s. | contents
Contents
04 Foreword by the company 18 Organisational structure 24 Company’s 38 Opinion 44 Financial statement 54 Notes to the financial president business report of the supervisory board statement Technological Development 19 Company bodies Aerostructures Division Organisational Changes and management Divize Defence&MRO 40 Auditor’s statement 74 Report on relations Results 25 Sikorsky S-76 of the annual report between the related 20 Key events of 2010 26 Sikorsky UH-60M Black Hawk entities 08 Company profile 27 Alenia C-27J Spartan Corporate Profile 28 Bombardier CSeries Aerostructures Division 29 Further Programs Defence & MRO Division 30 Investments, Development Programs, Strategic Objective Research and Development Corporate Portfolio of AERO Vodochody a.s. Company Income 12 History Aero 31 Revenues Early Years 32 Income Expansion Asset structure War Production 33 Financial Situation Jet Age 34 Human resources In-house Jet Trainers Quality Policy - Quality Management System 14 Aero’s History by Dates 35 Environment Major Events after the Balance Date
02 | | 03 annual report 2010 AERO Vodochody a.s. | foreword by the company president
Foreword by the company president
2010 was a year of major changes and significant commercial and economic success for AERO Vodochody a.s. The global market of aviation Organisational Changes products was marked in 2010 by positive development which was also displayed by an increase in customers’ interest in AERO Vodochody a.s. In view of the fact that Aero operates on two significantly different markets with a different products, with the exception of the S-76 helicopter where the transition continues to the latest version, the S-76D and a fall in deliveries. customer portfolio and different nature of provided products, it was decided to split 2 divisions The key subject for all of 2010 continued to be the increase in the efficiency of production and non-production activities, nevertheless the recovery • Aerostructures – combines activities associated with the cooperation programs of the market demanded an increase in the company’s capacities. In 2010 AERO Vodochody a.s. created 71 new job positions and recruited 159 • Defence&MRO – focuses on in the manufacture and support of the company’s in-house products new employees. The company achieved marked commercial success. In January 2010 a contract was signed for the manufacture of cockpits for (L-39, L-59, L-159, Ae-270) and commercial provision of MRO services to aircraft of other „ Sikorsky UH-60M Black Hawk helicopters with the first delivery planned for August 2011. manufacturers, civil and military customers
During 2010 the AERO Vodochody a.s. team worked on other business cases of which the most important successfully culminated in April 2011 The split came about at the start of January 2010. The objective of the split is to strengthen with the signing of a contract for the development, industrialisation and production of 4 structural units for the KC-390 aircraft. In terms of size customer focus and specialisation and optimisation of processes in both divisions. The first steps and once production starts, this will be one of the company’s biggest programs with added value equal to the S-76 Program. AERO Vodochody a.s. were also taken to detach the development worksite and make it a separate division planned was successful in talks in Algeria for deliveries as part of the L-39 Program and in Tunisia for repairs of DV-2 engines and co ntinued support for July 2011. The abovementioned need for intensive cooperation with other companies in the of the operation of L-59 aircraft. Aero is also working intensively on the development of the leading wing for the Bombardier CSeries aircraft, Czech Republic and the region of Central and Eastern Europe resulted in creating an independent and the project successfully completed the Joint Definition Phase in August 2010 and entered the Detailed Design Phase. As regards existing programs Strategic Sourcing Division in July 2010, which is engaged in systematically building a supply Aero worked with Sikorsky on the introducing the production of the latest version of the S-76 – variant D helicopter. In 2010 AERO Vodochody a.s. chain and the application of the WING System at selected business partners. AERO IS SUCCESSFULLY supplied the first two series aircraft together with 16 versions of the S-76 C++ aircraft, but has seen a significant fall in total deliveries against 26 S-76C++ aircraft supplied in 2009. Despite this Aero achieved a record pre-tax income of 431 mil. CZK. FULFILLING ITS Results LONG-TERM VISION OF The commercial success confirmed the leading position of Aero Vodochody a.s. among aviation technology manufacturers in the Czech Republic. The most important criterion of the accuracy of the company’s strategy is the continuing A KEY DEVELOPMENT Aero is successfully meeting its long-term vision of being a key development and production partner for leading global aircraft manufacturers success among customers. Further proof of the success of this strategy is also the awards and an integrator of important aviation projects. In addition, commercial success means that Aero is bringing more contracts to the Czech Republic the company received in 2010. Thanks to the long-term emphasis of the entire company AND MANUFACTURING than its present production capacities can handle and in view of the fact that the company’s objective is to invest in development and expansion efficiency and first-class processes, AERO Vodochody a.s. achieved important awards by being PARTNER OF LEADING of new technologies in the next few years and not into extensive growth of existing capacities cooperation is becoming crucial for Aero and other presented with the UTC Gold Supplier Award for 2009 (presented in January 2010). Being companies in the sector in the Czech Republic and neighbouring countries. presented with this award confirms the position of AERO Vodochody a.s. among the top WORLD AIRCRAFT companies in the global aviation business. Aero confirmed its position of top aviation product MANUFACTURERS supplier by again being presented with the UTC Gold Supplier Award for 2010. AERO Vodochody a.s. AND INTEGRATOR Technological Development was also made the Best Supplier of the Helicopter Industry (Supplier Excellence Award) Composites are irreplaceable technology in aircraft construction and their importance will continue to grow in the forthcoming years. In the interest by the American Helicopter Society. OF SIGNIFICANT of strengthening its position on the market AERO Vodochody a.s. has decided to expand and intensify its capabilities in the manufacture of composite AIRCRAFT PROJECTS. structures and also for providing higher efficiency, to transfer the focal point of these activities from the subsidiary Rotortech in Great Britain AERO Vodochody a.s. has unquestionably become a highly attractive business partner to the Czech Republic. In September the first phase was launched of the expansion of composite production at the small composite worksite and employer for all who want to develop and contribute to the successes of the Czech which will become the development and prototype plant in future. In addition, the second phase of composite expansion was launched in the aviation industry on an international scale. form of construction of a large series production site with an area of 5600 m2. The launch of series production at this site is planned in April 2012. In order to secure support for the operation of L-59 aircraft operated by the Tunisian Air Force, Aero purchased equipment and recruited personnel essential for the overhaul of DV-2 engines from the manufacturer, the company HTC. These activities are concentrated at the com pany Clarex a.s., based in Povážská Bystrice, Slovakia. Clarex, a 100% subsidiary of AERO Vodochody a.s., successfully took over the first engine for overhaul at the end of 2010. As of June the transfer was completed of activities of the subsidiary Technometra to the AERO Vodochody a.s. site, where Ladislav Šimek all the activities of AERO Vodochody a.s. are now concentrated, with the exception of the repair of aircraft engines. President and Chairman of the Board of Directors
04 | | 05 UH-60M Black Hawk
IN JANUARY 2010, AERO VODOCHODY AND ITS LONG-TERM PARTNER SIKORSKY AIRCRAFT CORPORATION SIGNED A CONTRACT FOR MANUFACTURING OF A COCKPIT FOR THE UH-60M BLACK HAWK HELICOPTER. THE FIRST COCKPITS SHALL BE SUPPLIED BY AERO TO ITS CUSTOMER IN 2011. annual report 2010 AERO Vodochody a.s. | company profile
Company profile
Corporate Profile Defence & MRO Division AERO Vodochody a.s. (hereinafter “Aero”) based in Odolena Voda, Dolínek, ul. U Letiště no. 374, PCN 250 70 is a joint stock company registered The Defence&MRO Division (Maintenance, Repair and Overhaul) of AERO Vodochody a.s. on 2 January 1991 in the Commercial Register at the Municipal Court in Prague, Section B, File No. 449, company ID No: 00010545, Tax ID No: CZ00010545. specialised in the support and expansion of its final products – the L-159, L-39 and L-59 aircraft and for providing various services in aircraft repair, modernisation, modification By the end of 2006 the Czech Consolidation Agency owned almost 100 % of Aero’s shares. On 4 January 2007 the Penta Group become Aero’s and aviation technology tests. sole shareholder and successfully completed the restructuring project in the company in the same year and from 2007 to 2009 Aero achieved „ a profit of 917 mil. CZK. In 2010 the profit was 431 mil. CZK. Aero’s registered capital is 1,884 mil. CZK and has been repaid in full. In 2009 losses The L-159 system, which involves integrated logistic support, ground training system, of previous years were settled amounting to 4,081 mil. CZK with a reduction in the registered capital and issue of shares worth 950 mil. CZK. means for planning and evaluation of flights and other equipment, has been successfully established in the Air Force of the Army of the Czech Republic. The single-seat L-159 ALCA Aero is the biggest manufacturer of aviation technology in the Czech Republic. It is engaged in the development, production, sale and servicing light combat aircraft were included in the weapons of the Army of the Czech Republic of military and civil aviation technology. It focuses above all on cooperation with leading aircraft manufacturers in international cooperation in 2000, the two-seater L-159T1 trainers in 2007. L-159 aircraft fulfil many tasks from projects and in the military program is a long-term partner of several armies, especially the Army of the Czech Republic. It has an established advanced and operation training, support for ground armed forces to reconnaissance quality management system according to AS 9100 / ISO 9001 and is the holder of all the relevant company attestations and certificates as a whole missions and air defence. They regularly participate in NATO international training and partial processes in line with national and international standards. exercises (Tactical Leadership Program, NATO Air Meet, Clean Hunter or Flying Rhino). SIKORSKY BLACKHAWK Aero continues to provide support for users of L-39 and L-59 aircraft. For customers Aerostructures Division of L-39 / L-59 aircraft the Defence&MRO Division offers an extensive portfolio of services HELICOPTER IS ONE The Aerostructure Division is involved in cooperation in important air programs globally. Aero’s main capabilities are to manufacture ranging from the extension of service life and overhauls to the modernisation of all OF THE MOST comprehensive aircraft assemblies with a high degree of production finalisation, including systems integration and testing, supply management their systems. Besides programs associated with in-house aircraft production, IMPORTANT AND MOST and final inspection. Furthermore, in the last year aircraft undercarriages, production and development of composites have been included the Defence&MRO Division also offers customers services connected with the modification in production. The Aerostructures Division is involved in the complete life cycle of commercial and military projects and thereby combines and testing of their aircraft. NUMEROUS MILITARY the company’s extensive experience in the aviation industry acquired since it was established in 1919 with the present introduction TECHNOLOGY of the latest technologies, test methods and principles of lean production. Aero continuously expands its portfolio of customers among the world In order to secure its activities, the Defence&MRO Division has capacities for aircraft leaders in aviation production. Since 2009 it has been striving to achieve a balance between production programs and risk-sharing production and aviation product construction designs, for logistics, flight test centre, as well as OF THE US ARMY. programs in an aim to ensure long-term, highly prospective contracts. premises and preparation and testing equipment for aircraft production and maintenance. PRESENTLY, AROUND Its subsidiary Clarex also provides support and maintenance of DV-2 jet engines. 2,500 HELICOPTERS Currently Aero is the risk-sharing partner of the Belgian company Sonaca for the development and production of leading edge of the CSeries The Defence&MRO Division is the holder of authorisations DOA Part-21/23/25, POA Part-21, aircraft of the company Bombardier. In addition, Aero has become the risk-sharing partner of the company Embraer for the KC-390 military EASA Part-145 MRO and EASA Part-147 Civil Aircraft Training. OF THE H-60 FAMILY transport aircraft responsible for the industrialisation and series production of the loading ramp, all the doors, back part of the fuselage ARE IN SERVICE and the development of the leading edge. This contract marks an important milestone in Aero’s strategy to become a global first-class supplier recognised for its development capabilities and experience in international programs. AT THE MILITARY FORCES OF THE USA The Aerostructures Division is also continuing in the production and assembly of the S-76 helicopter (with the exception of the dynamic parts), for the American company Sikorsky Aircraft Corporation. The first S-76D, a brand new version of the successful S-76C++ helicopter, was put AND OTHER STATES. on the Aero production line in 2010. Aero also began the production of undercarriages for the A-320 for the French customer Messier-Dowty. It is also continuing with the production of the C-27J Spartan centre wing box for the Italian customer Alenia Aeronautica, production of gun bay doors for the F/A-18E/F/G for the American company, door subassemblies for the French company Latecoere and subassemblies and parts for the Airbus A-320/A-330 for the subsidiary EADS, Premium Aerotec.
08 | | 09 annual report 2010 AERO Vodochody a.s. | company profile
Company profile
Strategic Objective Corporate Portfolio The success of Aero during the global economic recession confirms the success of the strategy followed by our company. The company’s Aero is a 100% owner of Technometra Radotín, a.s. at which the project of the transfer strategic plan for the next period is: of production capacities was carried out successfully in 2010 from the Prague-Radotín Continuing to focus on the internal efficiency, lean and quality processes in an aim to be confirmed the UTC Supplier Gold also for 2011 location to the main production plant in Odolena Voda. The objective of this project was and obtain certification of ISO 14001, ISO 18001, AS 9100 rev. C and the Business Continuity Management System. to increase the synergy in production and administration, and achieve higher profitability in the Aero Group. „ Objectives of the Aerostructures Division: • Development of relations above all with existing customers The Aero Group consists of the company Letiště Vodochody a.s., as of 2009 the company • Development of three key product groups Rotortech Aero Composites Ltd. based in Cambridge, Great Britain and in 2010 Aero - integration of important aircraft structural parts – above all wings, door and body parts – and entire aircraft became the owner of the company Clester Trading a.s. based in the Slovak Republic - equipment – undercarriage and engine parts which sold its 100% share in the company Clarex Investments a.s. - composite parts and structures – either as part of bigger structural parts or separately Letov, a.s., in which the company held a 42.6% share as of 31.12.2009, was dissolved Objectives of the Defence&MRO Division: in 2010 after the fulfilment of the decree of distribution. • The key customer continues to be the Army of the Czech Republic and the objective of AERO Vodochody a.s. is to become the main partner THE F/A-18 SUPER HORNET of the Army of the Czech Republic in aviation technology The companies are consolidated in the Penta Investments Limited group. • Global support for users of existing products IS A COMBAT-PROVEN • Seeking new products and further implementation of technology and experience with L-39/59/159 aircraft and the Ae -270 aircraft MULTI-ROLE AIRCRAFT INCORPORATING Technology & processes • Development of composites and technology for processing titanium and heat resistant steel alloys TOMORROW'S CUTTING- • Development of internal processes EDGE TECHNOLOGY, • Expansion of the level of cooperation with selected suppliers ON-BOARD AND IN USE It is also our intention to develop cooperation with other aviation technology manufacturers, schools and public institutions for the purpose TODAY. IT IS PRODUCED of the support and promotion of education for the aviation industry, regulation of the conditions for business and grants and other forms BY BOEING INTEGRATED of support in order to increase the competitiveness of the Czech aviation industry and acquire new projects with industrial application. DEFENSE SYSTEMS, A UNIT OF THE BOEING COMPANY, THE WORLD'S LEADING AEROSPACE COMPANY AND THE LARGEST MANUFACTURER OF COMMERCIAL JET- LINERS AND MILITARY AIRCRAFT COMBINED.
10 | | 11 annual report 2010 AERO Vodochody a.s. | History Aero
History Aero „
Early Years Jet Age Aero was founded on 25 February 1919 and was based in Prague’s Old Town while its production plant was located in Prague-Bubeneč. In 2009 In 1953 new facilities designed entirely for jet aircraft production were built in Vodochody it celebrated its 90th anniversary and is therefore ranked as one of the oldest aviation technology manufacturers in the world. From the very and operation began in the same year. The production, in which several Czechoslovak start Aero focused on the development and production of aircraft, aircraft parts and repair and as early as 1919 flew its first in-house type aviation plants were involved, focused on large-scale series production of the licensed-built of aircraft - the Aero A-1. This was soon followed by an order from the Ministry of Defence for series production of this type of aircraft designed Soviet MiG-15 aircraft and its derivatives. The supersonic MiG-19 and MiG-21 aircraft were AS EARLY AS 1919 for training army pilots – a typical product of a far more distant future! manufactured in Aero in the 1960s and 1970s, paving the way in production capabilities AERO FLEW ITS FIRST to the domestic programs of the L-29 Delfín and L-39 Albatros jet trainers. Expansion IN-HOUSE TYPE Higher-performance trainers followed and after production was moved to the new plant in Prague in the city district of Vysočany (1923), this In-house Jet Trainers OF AIRCRAFT laid the foundation for a new family of Aero A-11 and A-12 reconnaissance, bomber and trainer biplanes. Army pilots soon became famous for In the second half of the 1950s the need for jet trainer aircraft became more and more urgent. breaking records and winning races in Aero aircraft. Aero – at this time a private enterprise owned by Dr. Vladimír Kabeš – became the main The result of concentrated efforts in developing an optimised airframe and domestic jet - THE AERO A-1. THIS supplier for the Ministry of Defence and for the Ministry of Public Works (civil aviation). engine was the maiden flight of the L-29 aircraft in 1959. The final step on Aero’s road WAS SOON FOLLOWED to mass production of jet trainers came in 1961 near Moscow: the L-29 Delfín won in the BY AN ORDER FROM This was soon followed by the first foreign customers staring with Finland. The period of the first Czechoslovak Republic brought Aero many comparative testing of three different prototypes and was declared the most suitable Czechoslovak firsts: it constructed the prototype of the first domestic fighter plane, designed the first single-role cabin transport aircraft, trainer in the Eastern Block countries. Production and deliveries continued smoothly for THE MINISTRY OF the first twin-engine aircraft, first seaplane with locally constructed floats, introduced a braced high-wing monoplane and also pioneered the next decade during which the second generation of more powerful and more efficient DEFENCE FOR SERIES a practical design for a wooden cantilever wing structure. L-39 aircraft was developed. Aero’s production and assembly halls were occupied with the production of the L-39 during the 1970s and 1980s. A number of air forces throughout PRODUCTION OF THIS War Production the world still use the excellent training quality of this affordable aircraft. TYPE OF AIRCRAFT The company’s expanded capabilities were fully utilised and later developed during the German occupation when Aero produced stressed-skin DESIGNED FOR semi-monocoque structures with full jigging for reconnaissance and training missions – the Focke-Wulf Fw 189 and Siebel Si 204. Immediately The family of L-39 Albatros aircraft expanded considerably in the course of time and created after the war ended, the nationalised Aero continued to manufacture and repair aircraft. Modified German types of aircraft were manufactured a perfect basis for further development. The advent of the 1990s saw the incorporation TRAINING ARMY PILOTS for the Czechoslovak Air Force and civil aviation. Shortly after the war a new remarkable domestic type had been introduced – the high-performance, of Western avionics and standards, and the use of more powerful American engines twin-engine all-metal Aero 45 four-seater. and global equipment, thereby opening a new chapter in the life of the company. The L-159 aircraft was developed.
12 | | 13 annual report 2010 AERO Vodochody a.s. | aero’s history by dates
Aero’s History by Dates
1919 1921 1923 1925 1929 1932 1937 1938 1939 1943 1947 1953 1954 1958 1959
továrna létadel A-10, A-11, family De Havilland A-34 A-100, family MB-200, A-A-304, C4/C-104 C-3 Ae-45, Aero moved Maiden flight Maiden flight Maiden flight (Aero – Aircraft first in-house of successful DH-50, “Blackbird”, of military all-metal twin-engine (Bucker Bu-131 (Siebel Si-204D), twin-engine from Prague of the MiG-15 of the MiG-19 of the L-29 factory) founded designed civil military biplanes a passenger first of biplanes bomber low-wing Jungmann) twin-engine civil aircraft to new facilities jet fighter built Farmer Delfín (/Dolphin), in Prague passenger (bomber and aircraft built the family (bomber and manufactured military aircraft training military aircraft in Vodochody under Soviet supersonic the first jet trainer aircraft reconnaissance under British of sport reconnaissance under French and aerobatic licence fighter built designed in A-1, aircraft) licence and training aircraft) licence A-300, biplane (3 405 aircraft under Soviet Czechoslovakia first in-house light biplanes (Marcel Bloch) twin-engine delivered licence (103 (3 500 aircraft designed low-wing in 1954-1962) aircraft delive- in 1963-1974) military training bomber red in 1958- aircraft 1962)
1962 1968 1986 1997 1998 2000 2001 2002 2004 2005 2006 2007 2008 2009 2010
Maiden flight Maiden flight 1986 Maiden Maiden flight of Boeing’s Delivery of the first Production Maiden flight Completion of Ae 270 aircraft Ae 270 aircraft Penta, the private Production Aero increases Signed of the MiG-21 of the L-39 flight of L-39MS the L-159 ALCA arrival at Aero L-159 aircraft to of the gun bay of the L-159B the delivery of awarded the awarded an FAA equity group, of the Embraer the registered contract for the Fishbed Albatros jet trainer, single-seater (owns 35 % the Czech Air Force doors of the two-seater L-159 aircraft EASA Type Type certificate becomes the 170/190 door capital in Letiště production of light combat F-18 Super Certificate owner of Aero Vodochody, a.s. by the cockpit for supersonic in-house for export of shares) advanced trainer to the Czech subassemblies aircraft (72 aircraft Production of Hornet for a non-monetary the Black Hawk L-159T1 advanced fighter built designed jet designated as delivered to the passenger door Boeing St. Louis Air Force Privatisation of for Latecoere investment UH-60 military trainers delivered under Soviet trainer L-59 Super Czech Air Force) polished skins for launched Aero announced launched contribution helicopter with to the Czech Air Force licence (more than Albatros the Boeing 757 Boeing’s by the Czech Sikorsky Aero purchases Joint venture aircraft launched Production of government Joint venture (194 aircraft 2900 aircraft (60 aircraft departure Contract Rotortech Aero established the Boeing 767 with AIDC ends Completion of delivered delivered units delivered from Aero signed for Composites Limited with Taiwanese Maiden flight of sets of parts and Aero signs the transfer of Penta acquires in 1962-1972) in 1971-1999) in 1992-1996) company the first prototype subassemblies a long-term the production Aero purchases production from British company AIDC for the of the Ae 270 for BAE SYSTEMS general contract of suspensions Clarex Technometra Rotortech Com- development aircraft (today Spirit for the for the JAS-39 Investments, a.s. Radotín posites Ltd. and production AeroSystems) post-guarantee Gripen with First contract of the Ae 270 Production of the support of the Production of the SAAB signed for an civil aircraft S-76 helicopter Czech Air Force C-27J Spartan international risk- for the Sikorsky L-159 squadron centre wing box for sharing project Aircraft Corpo- Alenia Aeronautica with Belgium ration launched launched company SONACA
14 | | 15 L-159
L-159 IS A FAMILY OF ADVANCED TRAINING AND LIGHT COMBAT AIRCRAFT, WHICH MATES AERO’S LONG-TERM EXPERIENCE IN DEVELOPMENT AND PRODUCTION OF MILITARY JET AIRCRAFT, IN THE CATEGORY OF WHICH AERO REPRESENTS HISTORICALLY THE LARGEST PRODUCER IN THE WORLD, WITH LATEST ADVANCES IN AVIONIC, ENGINE AND AIRCRAFT SYSTEMS TECHNOLOGY. annual report 2010 AERO Vodochody a.s. | oragnisational structure
Oragnisational structure Company bodies and management
PRESIDENT (CEO) Board of directors as of 31 December 2010: Supervisory board as of 31 December 2010: Ladislav Šimek chairman: chairman: Ing. Ladislav Šimek, MBA Mgr. Václav Štajner members: members: SECRETARY Ing. Petr Brychta Ing. Zdeněk Sýkora Ondřej Benáček Jan Borýsek
FINANCE (FIN) HUMAN STRATEGIC QUALITY HEAD OF DESIGN RESOURCES (HR) PROJECTS (STR) SECURITY (SEC) ASSURANCE (QA) Michal Flídr ORGANISATION Milana Hrubá Petr Řehoř Jan Svoboda Zdeněk Mlejnek VP VP Director ředitel Miloš Trnobranský
Top management as of 31 December 2010: Ing. Ladislav Šimek, MBA, President Philippe Michel, Executive Vicepresident Aerostructures AERO- DEFENCE STRUCTURES & MRO Ing. Ladislav Šimek, MBA, Deputy Executive Vicepresident Defence&MRO Philippe Michel (D&MRO) Executive VP Executive VP Monika Vajnerová, Vicepresident Aerostructures Programs Ing. Josef Kadlec, Vicepresident for the Technical-Operation Section
AERO- BUSINESS Ing. Michal Flídr, Vicepresident for Finance BUSINESS SUPPLY STRATEGIC ENGINEERING STRUCTURES OPERATIONS DEVELOPMENT QUALITY DEVELOPMENT CHAIN SOURCING PROCUREMENT (R&D MRO) PRODUCTION PhDr. Milana Hrubá, Vicepresident for Human Resources PROGRAM (AS) (OPS) & SALES CONTROL & SALES (BD&S) (SCH) (STRS) (PROC) Miloš (PROD MRO) Monika Josef Kadlec (BD&S MRO)) (QC MRO) Ing. Branislav Takáč, Director for Purchase Dale Free Branislav Takáč Karel Klíma Vajnerová VP Petr Kalaš Petr Falta Trnobranský Martin Cerha Stanislav Raška VP Director Director VP Acting Head Director Bc. Zdeněk Mlejnek, Director for Quality Ing. Petr Raška – authorised with management, Director for Development
ROTORTECH CLAREX
updated as of 31.12.2010
18 | | 19 annual report 2010 AERO Vodochody a.s. | key events of 2010
Key events of 2010
January February March April May June signature of the contract ratification American Helicopter completion of the transfer for the production of the contract Society (AHS) presents of manufacture from of the cockpit for for GO in Algeria Aero Vodochody a.s Technometra Radotín the Black Hawk UH-60 with the Supplier helicopter Excellence Award, an award for major contribution to the vertical aviation industry. „
AERO Vodochody a.s. presented for the second time in succession with the “UTC Gold Supplier Award of the Year”. THE SINGLE-SEAT L-159 IS A LIGHT MULTI-ROLE COMBAT AIRCRAFT DESIGNED FOR A VARIETY OF AIR-TO-AIR, AIR-TO-GROUND AND RECONNAISSANCE MISSIONS. July August September October November December THE AIRCRAFT IS EQUIPPED delivery of the first Aero launches completion of the first launch of series Aero Vodochody a.s. and the Army WITH A STATE-OF-THE-ART L159 T1 aircraft the composite phase of the composite deliveries of the S-76D of the Czech Republic celebrate MULTI-MODE RADAR to the Army manufacture project, opening to Sikorsky the 10th anniversary of the start of the Czech Republic expansion project of the development of the operation of L-159 aircraft. FOR ALL-WEATHER, DAY -manufacturing worksite AND NIGHT OPERATIONS with an area of 1600m2 start of the manufacture of bodies of the undercarriages AND CAN CARRY A WIDE for the Airbus A-320 RANGE OF NATO STANDARDS STORES INCLUDING AIR-TO-AIR AND AIR- TO-GROUND MISSILES AND LASER GUIDED BOMBS
20 | | 21 JAS-39
IN OCTOBER 2008, AERO AND ITS SWEDISH Gripen CUSTOMER, SAAB, SIGNED A CONTRACT ON DELIVERIES OF THREE TYPES OF PYLONS FOR JAS-39 GRIPEN AIRCRAFT. WITHIN TWELVE MONTHS HAS AERO RAISED ITS PRODUCTION, QUALIFIED ALL SPECIAL PROCEDURES AND PRODUCED FIRST PARTS. annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Business Activities Sikorsky S-76 Program Description Aerostructures Division • Sikorsky S-76 is a successful twin-engine civil medium category helicopter with a maximum The business activities of the Aerostructures Division in 2010, in accordance with the company’s strategy, focused on 3 key areas which are takeoff weight of 6 tons, designed for carrying 12 passengers. Since production began aircraft structural units with high-level of assembly, undercarriages and composite structures. in 1976 Sikorsky has delivered more than 700 helicopters to customers especially in Europe and the United States. „ In customer terms one of the main directions of business activity was the development of cooperation with existing customers, above all the • Aero has been manufacturing the S-76 since 2000 and so far has delivered more than Sikorsky Aircraft Corporation, resulting in the successful conclusion of a contract for the production of cockpits for UH-60M helicopters 300 helicopters (reached in mid 2011) in January 2010. Subsequently, Aero began talks on expanding production cooperation for UH-60/S-70 helicopters, and the result is expected in 2011. • In 2010 Aero delivered the first series plane of the S-76D version which gradually The second key direction for the development of business relations in 2010 was the establishment of direct cooperation with the Brazilian replaced the existing S-76C++ company Embraer, which was crowned in 2011 with the extraordinary success in the form of the signing of a contract for deliveries of 4 key structures of the new KC-390 military transport aircraft. Aero Vodochody a.s. Product and Role • Fully assembled and equipped helicopter ready for the installation of the dynamic parts In total the Aero Vodochody business team prepared 31 bids in 2010 as part of the existing and new programs. (engines, gearbox, rotor blades) • Fully responsible for the production and supply chain THE S-76 IS A LOWER • Production of about 45% out of 8,000 various types of parts and components including Divize Defence&MRO tubes and bunched cable. MIDDLE-CLASS The division’s business activities in 2010 focused on: • Installation of avionic, hydraulic, electrical and fuel systems HELICOPTER. • sale of unoperated L-159 aircraft especially to Iraq and Hungary • Assembly of the helicopter body including the installation of composite parts IT IS OPERATED • sale of new L-159 aircraft to Poland • Responsibility for final inspection • modernisation of the avionics system and software of the Czech Army’s L-159 aircraft fleet • Responsibility for guarantee and post-guarantee servicing and deliveries of spare parts IN 37 COUNTRIES • extension of the service life, maintenance and modernisation of L-39 aircraft especially to Vietnam and Bulgaria ALL OVER THE WORLD. • repairs and maintenance of L-410 undercarriages Program Outlook • expansion of the division’s activities to different aircraft technology (modifications to transport aircraft and helicopters) • In 2010 Aero manufactured 16 S-76C++ helicopters and in 2011 the last 9 SIKORSKY AIRCRAFT • Aero is expecting deliveries of 36 S-76D helicopters in the long-term CORPORATION HAS DELIVERED MORE Programy THAN 700 AIRCRAFT Aerostructures Division 56 50 TO ITS CUSTOMERS. In 2010 the Aerostructures Division supplied products for a total of 8 aircraft families. Besides this, the Aero team worked intensively S-76 C Shipsets on the development of the leading wing for the CSeries aircraft of Canadian manufacturer Bombardier. S-76 D Shipsets 42 36 36 36 34 35 30 25 26 17 21 2 15 16 9 9
1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f
24 | | 25 annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Sikorsky UH-60M Black Hawk Alenia C-27J Spartan Program Description Program Description • Type series Sikorsky S-70/UH-60 helicopters are currently • Alenia C-27J is a military tactical transport aircraft with a maximum utility weight of 11.5 tons the most widespread type of military transport helicopter and also • Main users of the aircraft are the United States Air Force and the countries of Central the main type of helicopter of the United States Armed Forces. and Eastern Europe. The latest version is the UH-60M • Aero has been the sole supplier of the centre wing box since 2007 which is a critical structural „ • Contract between Aero and Sikorsky was concluded in at the start and system unit for the aircraft. Aero manufactures centre wing boxes for all versions of 2010, the first cockpit was successfully delivered in June 2011 of the C-27J aircraft • Aero is one of two suppliers of the cockpits (long-term 50% share) • The C-27 Program is a stable source of income for Aero Vodochody a.s. • Program is highly stable and with long-term prospects Aero Vodochody a.s. Product and Role Aero Vodochody a.s. Product and Role • Fully assembled, equipped and tested centre wing box ready for installing in the aircraft • Aero supplies a fully equipped cockpit for the UH-60M helicopter • Aero is fully responsible for the program’s production and supply chain • Production of the parts including the application of special processes • 63% of the 3,200 components are manufactured directly at Aero • Installation of composite parts • Assembly of the centre wing box involves an integral tank, suspension for installing engines THE C-27J SPARTAN • Installation of electric harnesses and control systems and mechanisation of the wing, fuel, hydraulic lines and electric harnesses • Responsibility for guarantee and post-guarantee service and deliveries of spare parts • Aero is responsible for testing all the systems and complete outgoing inspection – the centre IS TACTICAL MILITARY wing box is supplied directly on the production line without inspection by the customer CARGO AIRCRAFT, Program Outlook • Responsible for the guarantee and post-guarantee service and delivery of spare parts FEATURING GREAT • Aero plans to supply 8 cockpits in 2011 and 30 cockpits in 2012 • Production program of the UH-60 series of helicopters has a highly stable outlook Program Outlook OPERATION FLEXIBILITY • Production program of the UH-60M helicopters expects the production of a total of 1200 helicopters up to 2025 for the requirements of the • It is estimated that in the next 10 years 350 C-27J category aircraft will be sold globally AND LOW OPERATION Unites States Armed Forces (without including export), so far about 300 UH-60M helicopters have been delivered • Aero has registered 15 fixed orders at July 2011 • Aero expects an annual cycle of deliveries of between 9 – 11 centre wing boxes annually COSTS. THE AIRCRAFT IS USED FOR A WIDE RANGE OF MISSIONS 45 45 45 45 11 11 11 11 11 UH-60M cocpit Shipsets C-27J CWB Shipsets 10 FROM CARGO TRANS- 99 PORTATION TO LOGISTIC 30 7 SUPPORT OF MILITARY UNITS AND AIRBORNE UNIT TRANSPORTATION AS WELL AS FOR 4 1 SPECIAL SERVICES.
2011f 2012f 2013f 2014f 2015f 2016f 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f
26 | | 27 annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Bombardier CSeries Further Programs Program Description Boeing 767 • Bombardier CSeries is a new single-aisle aircraft for commercial • Aero supplies a set of parts for the leading wing for the Boeing 767 series of aircraft transport on short and medium hauls, two versions of the aircraft • Direct partner of Aero Vodochody a.s. is the company Spirit AeroSystems (C100 and C300) can carry between 100 and 150 passengers • Thanks to the modern construction of the airframe and engines SAAB JAS-39 Gripen „ the CSeries will have the lowest operating costs of its class • Fully equipped weapons pylon of NATO standard; • Aircraft prototype is expected in 2012, to go into service in 2014 • Deliveries as part of the program’s first phase completed in • Aero is the development and risk sharing partner of the Belgium January 2011; deliveries as part of the second phase will begin company Sonaca at the end of 2011 • Aero is the exclusive supplier Embraer 170 / 190 Aera Vodochody a.s. Product and Role • Deliveries of hinges and internal structure for all doors • Fully assembled and equipped with a fixed leading wing ready for installation for Embraer E-170/175/190/195 aircraft • Each assembly (left and right wing) contains more than 2,000 components • Aero’s partner is Latecoere THE BOEING 767 • Aero is fully responsible for the design, industrialisation, certification and production F/A-18 Super Hornet IS A MIDDLE-SIZED Program Outlook • JSole supplier of assembled doors for the gun bay shaft WIDE-BODY TWINJET • Aero expects the start of series deliveries in 2013 and production of 50 assemblies in 2015 and 100 assemblies as of 2016 onwards of the F/A-18 Super Hornet aircraft; start of deliveries in 2001; AIRLINER PRODUCED • In mid 2011 Bombardier was registered for fixed orders for 123 aircraft and option of 119 so far more than 360 doors have been delivered • Program involves production of parts, special processes, BY BOEING COMMERCIAL assemblies AIRPLANES. PASSENGER
Airbus A320 / A340 VERSIONS OF THE B767 • Since 2005 Aero has been delivering smaller assemblies CAN CARRY FROM 100 of structural parts for the tail section of the A320 and A340 181 UP TO 375 CSeries FLE Shipsets Airbus including more than 250 assemblies • In 2010 Aero began delivery of components (side-stay assemblies) for the undercarriages PASSENGERS, of A320 (318 / 319 / 320) series of aircraft; a direct partner of Aero Vodochody a.s. AND HAVE A RANGE is the company Messier-Dowty 50 OF 9,400 TO 12,200 KM, DEPENDING 26 ON THE VERSION
7 AND SEATING CONFIGURATION. 2013f 2014f 2015f 2016f
28 | | 29 annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Defence & MRO Division Revenues The division’s main programs in 2010 were as follows: Aero’s revenues amounted to 2.7 bil. CZK. Of this revenues for in-house products and • production and delivery of two L-159T1 jet trainers for the Air Force of the Army of the Czech Republic services accounted for 91%, revenues from goods 8% and revenues from the sale of • third level of maintenance for the eight year operation of L-159 aircraft owned by the Army of the Czech Republic (i.e. PP2000) associated material and assets 1%. The Aerostructures Division accounted for 65% of revenues, with modernisation features especially from the production and sale of the Sikorsky S-76 civil helicopters (76% • providing post-guarantee support for the L-159 aircraft fleet owned by the Army of the Czech Republic (FOSS) of revenues of the Aerostructures Division) despite the customer temporarily reducing „ • long-term storage of unoperated L-150 aircraft owned by the Army of the Czech Republic the number of deliveries in reaction to the development of the economic situation on the • modernisation of communication and identification equipment for parts of the L-159 aircraft fleet owned by the Army of the Czech Republic market and a delay in the development of the S-76D model. In 2010 Aero delivered to • support for the L-39ZA aircraft fleet of the Algerian Air Force Sikorsky 16 S-76C++ helicopters and 2 prototypes of the S-76D version. Of the other • support for the L-59 aircraft fleet of the Tunisian Air Force (post-guarantee support for aircraft and overhauls of DV-2 engin es) cooperation programs that contributed more significantly was the Alenia C-27J Program when the entire centre wing box is being manufactured for the C-27J Spartan military transport aircraft (9% of the revenues of the Aerostructures Division), as well as the F/A-18 Investments, Development Programs, Research and Development of AERO Vodochody a.s. Program – gun bay door for Boeing, subassemblies for EADS, pylons for the JAS-39 The company’s investment and development activities are in compliance with the development strategy directed at two key areas. One of then Gripen and Embraer 170/190 aircraft door subassemblies for Latecoere. is the development of new manufacturing and non-manufactruing capabilities. In 2010 investments were approved of 188.5 mil. CZK, of which THE AIRBUS A340 the biggest part is directed at the construction of the series composite production worksite and at the technological equipment and renewal Production is planned for 2011 and further years of the new type of Sikorsky helicopters, of existing operations (such as the quick-hardening furnace, wirecutter). production of the cockpit for the UH-60M Black Hawk helicopter and production of the IS A COMMERCIAL leading wing for the new CSeries type of aircraft. PASSENGER AIRLINER The second key area are investments in new products. In 2010 the company invested 90.1 mil. CZK in development projects, mostly in programs FOR SHORT- TO for the development of the leading wing for CSeries aircraft and production of the cockpit for the Black Hawk UH 60 helicopter. The Defence & MRO Division accounted for 35% of revenues particularly with the fulfilment of contracts with the Ministry of Defence of the Czech Republic, flight hours in Hungary and MEDIUM-RANGE DIS- overhauls for foreign countries above all for the Ministry of Defence of Algeria and Tunisia. TANCE MANUFACTURED Company Income In 2010 Aero achieved an economic profit of 431.4 mil. CZK despite the unfavourable economic situation on global markets. Aero continues to Export accounted for 1.8 bil. CZK and 69% of total revenues. The high contribution BY AIRBUS. THE A320 make a profit since the successful completion of restructuring the company in 2007 when the company was taken over by the Penta Group. of export to total revenues consists particularly of the high share of cooperation in total WAS THE FIRST CIVIL production. This particularly concerns the production of S-76C helicopters for Sikorsky AIRCRAFT WITH FLY-BY- Revenues (mil. CZK) Profit (mil. CZK) Number of employees 4826 The production and sale of Sikorsky helicopters and deliveries of centre wing box for C-27J aircraft for Alenia Aeronautica. In the case 4284 4350 significantly contributed to the 2010 income as did of the Defence & MRO Division export consisted of overhauls of the L-39 in Algeria. WIRE DIGITAL CONTROL 4118 4273 4153 3999 the fulfilment of the contracts for the Ministry of SYSTEM. MEASURED Defence of the Czech Republic to a considerable 2911 2851 2874 extent. Cooperation is intensively developing in other BY THE VOLUME OF 1478 1460 1452 1452 cooperation programs. In 2010 the company CURRENT ORDERS, 1349 1354 1355 significantly contributed to the CSeries Program when 1261 THE AIRCRAFT RANK 1157 it worked throughout the year on the development 1075 of the leading wing. The equity as of 31 December AMONG THE MOST 638 402 431 411 467 428 531 2010 amounted to 2.88 billion CZK (2009: 3.04 bil. 236 279 246 FAVORITE IN ITS CZK; 2008: 1.8 bil. CZK). The reduction in equity 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f was caused by the payment of dividends to CATEGORY. shareholders in September 2010 of 0.6 bil. CZK.
30 | | 31 annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Income Financial Situation Aero showed a total income for 2010 of 431.4 mil. CZK consisting of the operating income of 410 mil. CZK, financial result of 21 mil. CZK and extraordinary The share of equity in the company’s total capital at the end of 2010 was 57 %. The entities income of 0.8 mil. CZK. Operating income in 2010 was lower than planned and above all for the reason that the licence for the repair of the L-39 who contributed to the registered capital are TULAROSA a.s. (51%) and Salori Holding B.V. was not sold to RALAS (-58 mil. CZK) and also because of a delay in the development and sale of the S-76D. Aero flexibly responded to this new (49%). The parent company is TULAROSA which is part of the consolidation unit situation and took steps resulting in lower overhead costs in an attempt to reduce the impact on regular employees as much as possible. of the group Penta Investments Limited. Equity fell by 159 mil. CZK (5%) to 2,878 mil. CZK The company’s management attempted to find the most viable alternative and at the end of the year there was even a response to increasing compared with 2009. The fall was due above all to the payment of dividends of 600 mil. „ demands for deliveries in 2011 for the gradual increase in employees which will continue in 2011. CZK. This impact was compensated by achieving a positive economic profit (431 mil. CZK) and there was an increase in June 2010 of the legal reserve fund in line with the rules The fall in deliveries compared with those planned was particularly noticeable in cooperation with the biggest impact on the level of revenues of Czech accounting standards. in the production of S-76 C and D helicopters and in wings for Alenia. Part of the deliveries of pylons for JAS-39 Gripen aircraft for SAAB was moved to 2011. Deliveries were also not made of undercarriage parts for Messier-Dowty due to a delay in the transfer of the project from Technometra Liabilities increased by 5% to 2,186 mil. CZK. In July 2010 a loan from the Česká exportní Radotín. The Defence & MRO Division achieved a higher than planned operating income. The operating income was positively affected above all banka was refinanced when the Sikorsky Program was newly financed through a consortium by achieving savings in periodical works (PP2000) and overhauls in Algeria. The exchange rate of the crown against the dollar and Euro also had of banks (Česká spořitelna, Komerční banka, Česká exportní banka). This transaction also a positive effect on income. involved the financing of the CWB production program for Alenia Aeronautica. However this has not been managed so far because of the customer’s rejection. THE EMBRAER 170/190 In Aero had losses from derivative operations of 48 mil. CZK. The interest received from loans provided exceeded interest from loans received by 80 mil. CZK. Interest paid compared with previous years was affected by a development in interest rates on world markets when Aero makes Financing was also concluded for future receivables for the PP2000 Project with Komerční FAMILY OF E-JETS use of financing by foreign capital with interest including a fluctuating component such as 3M USD Libor or the discount rate announced by the CNB, banka and Česká spořitelna of 350 mil. CZK. In total there was an increase in loans CONSISTS OF FOUR whereas providing the Penta Group with free funds at a fixed interest. Foreign exchange gains from the revaluation of loans were higher than by 349 mil. CZK (32 %) to 1,449 mil. CZK COMMERCIAL JETS losses by 6.2 mil. CZK. On the contrary, there was a reduction in trade payables by 224 mil. CZK (52%) to 209 mil. WITH 70 TO 122 SEATS, CZK above all due to a fall in the production volume of the Sikorsky Program. The company’s FEATURING ADVANCED Asset structure indebtedness is 43 % of the total value of the venture. Our company continues to cover the Aero’s total assets fell in 2010 compared with 2009 by 1.2% to a total (in net value) of 5,081 mil. CZK. Current assets, as of 31.12.2010 were payables to its suppliers by the due date. ENGINEERING DESIGN, 3,530 mil. CZK (i.e. 69 % of total company assets), consisting of stock (1,210 mil. CZK), short-term receivables (774 mil. CZK) and short-term EFFICIENT PERFORMANCE, financial assets (283 mil. CZK). Current assets fell by 5.5% compared with 2009. The company manages the risk of fluctuation in the exchange rate and regularly ensures security OUTSTANDING through hedging products (usually forwards, options, currency and interest swaps). The fall in material stock by 34% was particularly due to a reduction in deliveries of S-76C helicopters arising from Sikorsky’s decision in mid OPERATING ECONOMICS, 2009, when the material for this program is planned for several months in advance and significantly increased the end status in 2009. Aero adopted LOW EMISSIONS LEVELS measures to reduce the volume of new orders to the necessary level and exerted long-term pressure on reducing the volume of stock. Advances for stock fell by 94% to 2 mil. CZK. AND A SPACIOUS CABIN.
Trade receivables rose by 34% to 622 mil. CZK, above all for reasons of completing deliveries (S-76, GO Algeria, Alenia) at the end of the year. Short-term financial assets were increased by 34% to 283 mil. CZK. Long-term assets rose by 6% to 1,470 mil. CZK and account for 29% of Aero’s assets. The significant increase in long-term assets was caused by the evaluation and capitalisation of costs for development, introduction of the CSeries and Black Hawk Programs and evaluating rights acquired when procuring know how from Technometra evaluated by an expert at 25 mil. CZK.
32 | | 33 annual report 2010 AERO Vodochody a.s. | company’s business report
Company’s business report
Human resources Environment In human resources Aero focused in 2010 on stabilising its employees’ situation in terms of creating comparative market conditions and projects In 2010 Aero produced a total of 12.5 tons of dangerous materials (of which 5.7 tons relating to the company’s direct development support which is associated with business success. Aero became an active link to the labour market of volatile organic materials, 5.25 tons of nitrogen oxide and 0.62 tons of solid particles). and a driving force of cooperation of the aviation industry with educational institutions. The great challenge which was met was maintaining the constant The main emitters were the boiler room, chemical plants and paint shops. increase in the qualifications and professionalism employees which goes hand in hand with ensuring their sufficient number as one of the main In 2010 Aero paid 24,300 CZK in air protection charges. The measurement of all sources priorities for the years to follow. In 2010 the average converted number of employees was 1,122 and the total number of employees was 1,157 as of 31.12.2010. showed that emission limits were also met in 2010. „ At this time more than 150 employees were recruited, mostly for manual jobs to ensure and implement the existing and new production programs, In 2010 Aero produced 955.42 tons of waste (of which 323.57 tons of dangerous waste). and 93 employees left the company. The total fluctuation in 2010 came to 1.86 %, which was a 0.26% fall compared with 2009. The average wage amounted to 32,544 CZK. The company laid great stress in 2010 on education and training employees due to the increasing demands of customers. In 2010 Aero consumed 87,100 m3 of ground water (of which 75,600 m3 for industrial Among the important pillars of education and training are language courses and intensive training of lean production tools which will be technology) and produced 67,700 m3 of waste water. Water consumption charges totalled supported in 2011 with the implementation of the training centre project and the WING operating system training. Total training costs 249,652 CZK. Total charges for discharging waste water in 2010 amounted to 614 CZK, in 2010 amounted to 2,906,178 CZK, which comes to 2,590 CZK per employee. of which charges for discharging pollution amounted to 614 CZK and for discharged volumes of water 0 CZK. Quality Policy - Quality Management System The optimisation was completed in 2010 of the existing quality management system. The main steps were the complete review of corporate processes AERO VODOCHODY A.S. and their adjustment in line with the company’s objectives. The resulting setting of outputs from processes now directly corresponds to the requirements Major Events after the Balance Date and information essential for company’s management. Adjustment of management documentation is closely related to the review of processes. HAS COMMITTED ITSELF The simplification and transparency of the setting of processes led to a reduction in the number of organisational guidelines by more than 50% and reduce January 2011 split of the separate Engineering Division (to strengthen the position TO THE CONTINUOUS administration. The conformity of the quality management system was verified in 2010 by independent audits conducted by certification bodies (LRQA) of the development partner) REDUCTION OF WASTE and inspections by state administration supervisory bodies (in the civil area by the ÚCL, in the military by the OVL). These audits did not find any serious inconsistencies with legislative requirements. The audits conducted by Aero Vodochody a.s. customers came up with similar results. In 2010 February 2011 development of the manufacture of composites (start of construction of the series PRODUCTION 43 of these audits were conducted at the company. As regards the further development of company activities and requirements for continuous production site with an area of 5 627 m2 scheduled for completion in 4/2012) AND TO LIMIT NEGATIVE improvement of performance processes, the WING operating system was created in 2010 which is a summary of all the tried and tested practices and procedures used in the company in relation to process management and streamlining of processes. The requirements of the WING operating March 2011 supplier conference at AV in cooperation with Sikorsky (to strengthen the position EFFECTS ON system will be required over the next few years by Aero Vodochody a.s. suppliers in order to achieve maximum harmonisation and follow-up of activities of the aircraft projects integrator and building of the supply chain THE ENVIRONMENT. in joint activities. The Aero Vodochody a.s. quality policy was reassessed with regard to meeting the quality objectives set for 2010 and planned changes in the company. In view of the ongoing implementation of ISO 14001 environmental protection and OHSAS 18001 occupational health and safety standard, April 2011 description of the risk-sharing project with EMBRAER (historical turning-point, and new review of the AS9100 professional aviation standard a requirement was defined for the explicit opinion of the new settings of the quality advancement to the position of 1st tier partner for the development, management systems. The existing quality policy will be transformed into the integrated management system policy during the first half of 2011. industrialisation and manufacture in an international military aircraft project)
The company’s management decided as part of the review of the quality / integrate management system policy for a stronger standpoint with June 2011 acquisition of certification for the environmental management system regard to customer orientation and clearer focus according to ISO 14001:2004 • on customer requirements acquisition of the certification for the occupational health and safety • on constant and sustained development system according to 18001:2007 • on environmental management and increased in occupational safety delivery of the first cockpit for the Black Hawk UH-60 helicopter • on dealing with problems with narrow seats • on quicker implementation of the WING operating system July 2011 start of deliveries as part of the CSeries Program • on the certification of WING requirements for specific suppliers according to the plan presented within the WING Project start of development work on the KC-390 Project (sending a team to Brazil) 12 out of the 14 defined tasks were met concerning planned quality objectives for 2010. The reason why 2 objectives were not met was a complete change in the requirements for the area being resolved.
34 | | 35 Sikorsky S-76
WE HAVE BEEN MANUFACTURING THE COMPLETE S-76 HELICOPTER READY FOR THE INSTALLATION OF DYNAMIC PARTS FOR THE AMERICAN CUSTOMER SIKORSKY AIRCRAFT CORPORATION SINCE 2000. IN MAY 2011 THE 300TH VERSION C HELICOPTER WAS DELIVERED. annual report 2010 AERO Vodochody a.s. | opinion of the supervisory board
Opinion of the supervisory board
According to the § 198 Commercial Code supervisory board has reviewed regular 2010 final accounts of AERO Vodochody a.s.
After regular final accounts discussion and auditor standpoint identification supervisory board recommended the submitted regular 2010 final accounts for regular company general meeting approval on its sitting on 28th June 2011.
Supervisory board has further commanded regular general meeting to approve the board of directors proposal on 2010 profit allocation of CZK 431,377 mil. as follows: - CZK 21,569 mil. to the company reserve fund, - The rest of CZK 409,808 mil. to transfer from the 431 Economy result in approval procedure account to the 428 Retained income from the past years.
In Odolena Voda 28th June 2011
Vaclav Stajner Chairman of the supervisory board
38 | | 09 annual report 2010 AERO Vodochody a.s. | auditor’s statement of the annual report
Auditor’s statement of the annual report
To the Shareholders of AERO Vodochody a.s.: I.We have also audited the consistency of the annual report with the financial statements described above. The management of AERO Vodochody We have audited the financial statements of AERO Vodchody a.s. (“the Company”) as at 31 December 2010 presented in the annual report a. s. is responsible for the accuracy of the annual report. Our responsibility is to express, based on our audit, an opinion on the consistency of the Company on pages 44 – 75 and our audit report dated 13 June 2011 stated the following: of the annual report with the financial statements.
To the Board of Directors of AERO Vodochody a.s.: We conducted our audit in accordance with International Standards on Auditing and the related implementation guidance issued by the Chamber We have audited the accompanying financial statements of AERO Vodochody a.s., which comprise the balance sheet as at 31 December 2010, of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether and the income statement and cash flow statement for the year then ended, and a summary of significant accounting policies and other the information presented in the annual report that describes the facts reflected in the financial statements is consistent, in all material respects, explanatory notes. For details of AERO Vodochody a.s. see Note 1 to the financial statements. with the financial statements. We have checked that the accounting information presented in the annual report is consistent with that contained in the audited financial statements as at 31 December 2010. Our work as auditors was confined to checking the annual report with the aforementio- Management's Responsibility for the Financial Statements ned scope and did not include a review of any information other than that drawn from the audited accounting records of the Company. We believe that Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles our audit provides a reasonable basis for our opinion. Based on our audit, the accounting information presented in the annual report is consistent, generally accepted in the Czech Republic, and for such internal control as management determines is necessary to enable the preparation of in all material respects, with the financial statements described above. financial statements that are free from material misstatement, whether due to fraud or error. I.In addition, we have reviewed the accuracy of the information contained in the report on related parties of AERO Vodochody a. s. for the year ended Auditor's Responsibility 31 December 2010 presented in the annual report of the Company on pages 76 – 77. The management of AERO Vodochody a.s. is responsible for Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Act on the preparation and accuracy of the report on related parties. Our responsibility is to issue a report based on our review. Auditors and International Standards on Auditing as amended by implementation guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial We conducted our review in accordance with the applicable International Standard on Review Engagements and the related Czech standard No. 56 issued statements are free from material misstatement. by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the review to obtain moderate assurance as to whe- ther the report on related parties is free from material misstatement. The review is limited primarily to enquiries of company personnel, to analytical pro- An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures cedures applied to financial data and to examining, on a test basis, the accuracy of information, and thus provides less assurance than an audit. We have not selected depend on the auditor's judgment, including an assessment of the risks of material misstatement of the financial statements, whether performed an audit and, accordingly, we do not express an audit opinion. due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose Based on our review, nothing has come to our attention that causes us to believe that the report on related parties of AERO Vodochody a. s. for the year ended of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting 31 December 2010 is materially misstated. policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Ernst & Young Audit, s.r.o. Opinion License No. 401 In our opinion, the financial statements present fairly, in all material respects, the financial position of AERO Vodochody a.s. as at 31 December 2010, Represented by Partner and its financial performance and its cash flows for the year then ended in accordance with accounting principles generally accepted in the Czech Republic.
Emphasis of Matter Radek Pav We draw attention to the facts disclosed in Note 4c to the financial statements, which describes that the recoverability of the cost of Auditor, License No. 2042 the investment in Rotortech Aero Composites Limited amounting CZK 225,530 thousand is dependent on successful conclusion of a compensation agreement for cost recovery with PENTA INVESTMENTS LIMITED. Our opinion is not qualified in respect of this matter. 30 August 2011 Prague, Czech Republic
40 | | 41 Alenia C-27J
WE PARTICIPATE ON THE PRODUCTION OF THE C-27J SPARTAN MILITARY TRANSPORT AIRCRAFT SINCE 2006. FOR ITS ITALIAN CUSTOMER, ALENIA AERONAUTICA, AERO PRODUCES THE COMPLETE CENTER WING BOX READY FOR INSTALLATION ON THE AIRCRAFT. annual report 2010 AERO Vodochody a.s. | financial statement
Financial statement
Current year Prior year 2009 Current year Prior year 2009 BALANCE SHEET - LONG FORM (in thousands of Czech crowns) Net Net Net Net
TOTAL ASSETS 5,080,939 5,142,115 C. CURRENT ASSETS 3,529,946 3,734,720 A. PSTOCK SUBSCRIPTION RECEIVABLE 0 0 C. I. Inventory 1,210,407 1,572,901 B. FIXED ASSETS 1,470,095 1,392,336 C. I. 1 Materials 676,671 1,019,190 2 Work in progress and semi-finished production 530,567 505,491 B. I. Intangible assets 151,587 94,473 3 Finished products 0 0 B. I. 1 Foundation and organization expenses 0 0 4 Livestock 0 0 2 Research and development 0 0 5 Goods 467 3,789 3 Software 2,663 2,104 6 Advances granted for inventory 2,702 44,431 4 Patents, royalties and similar rights 25,823 0 5 Goodwill 0 0 C. II. Long-term receivables 1,262,885 7,940 6 Other intangible assets 1,054 614 C. II. 1 Trade receivables 0 0 7 Intangible assets in progress 122,047 91,755 2 Receivables from group companies with majority control 1,262,885 7,940 8 Advances granted for intangible assets 0 0 3 Receivables from group companies with control of 20% - 50% 0 0 4 Receivables from partners, co-operative members and participants in association 0 0 B. II. Tangible assets 757,035 771,416 5 Long-term advances granted 0 0 B. II. 1 Land 24,897 24,897 6 Unbilled revenue 0 0 2 Constructions 421,685 423,833 7 Other receivables 0 0 3 Separate movable items and groups of movable items 264,152 218,577 8 Deferred tax asset 0 0 4 Perennial crops 0 0 5 Livestock 0 0 C. III. Short-term receivables 773,716 1,963,601 6 Other tangible assets 3,454 119 C. III. 1 Trade receivables 621,846 464,075 7 Tangible assets in progress 42,743 95,803 2 Receivables from group companies with majority control 120,592 1,427,260 8 Advances granted for tangible assets 104 8,187 3 Receivables from group companies with control of 20% - 50% 0 0 9 Gain or loss on revaluation of acquired property 0 0 4 Receivables from partners, co-operative members and participants in association 0 0 5 Social security and health insurance 0 0 B. III. Financial investments 561,473 526,447 6 Due from government - tax receivables 122 36,592 B. III. 1 Subsidiaries 561,473 526,447 7 Short-term advances granted 14,873 33,372 2 Associates 0 0 8 Unbilled revenue 14,720 605 3 Other long-term securities and interests 0 0 9 Other receivables 1,563 1,697 4 Loans to subsidiaries and associates 0 0 5 Other long-term investments 0 0 C. IV. Short-term financial assets 282,938 190,278 6 Long-term investments in progress 0 0 C. IV. 1 Cash 4,756 4,702 7 Advances granted for long-term investments 0 0 2 Bank accounts 278,182 185,576 3 Short-term securities and interests 0 0 4 Short-term financial assets in progress 0 0
D. OTHER ASSETS - TEMPORARY ACCOUNTS OF ASSETS 80,898 15,059
D. I. Accrued assets and deferred liabilities 80,898 15,059 D. I. 1 Prepaid expenses 68,328 13,717 2 Prepaid expenses (specific-purpose expenses) 0 0 3 Unbilled revenue 12,570 1,342
44 | | 45 annual report 2010 AERO Vodochody a.s. | financial statement
Financial statement
BALANCE SHEET - LONG FORM (in thousands of Czech crowns) Current year Prior year 2009 Current year Prior year 2009
TOTAL EQUITY & LIABILITIES 5,080,939 5,142,115 B. LIABILITIES 2,186,330 2,078,423 A. EQUITY 2,878,084 3,037,427 B. I. Provisions 191,613 191,025 A. I. Basic capital 1,883,589 1,883,589 B. I. 1 Provisions created under special legislation 0 0 A. I. 1 Registered capital 1,883,589 1,883,589 2 Provision for pensions and similar obligations 0 0 2 Own shares and own ownership interests (-) 0 0 3 Provision for corporate income tax 0 0 3 Changes in basic capital 0 0 4 Other provisions 191,613 191,025
A. II. Capital funds 30,400 21,119 B. II. Long-term liabilities 195,884 198,408 A II. 1 Share premium (agio) 0 0 B. II. 1 Trade payables 0 0 2 Other capital funds 28,720 28,720 2 Liabilities to group companies with majority control 195,884 198,408 3 Gain or loss on revaluation of assets and liabilities 1,680 (7,601) 3 Liabilities to group companies with control of 20% - 50% 0 0 4 Gain or loss on revaluation of company transformations 0 0 4 Liabilities to partners, co-operative members and participants in association 0 0 5 Advances received 0 0 A III. Reserve funds and other funds created from profit 249,871 247,622 6 Bonds payable 0 0 A III. 1 Legal reserve fund 245,575 231,611 7 Notes payable 0 0 2 Statutory and other funds 4,296 16,011 8 Unbilled deliveries 0 0 9 Other liabilities 0 0 A. IV. Profit (loss) for the previous years 282,847 605,793 10 Deferred tax liability 0 0 IV. 1 Retained earnings for the previous years 282,905 605,851 2 Accumulated loss of previous years (58) (58) B. III. Current liabilities 350,189 588,986 B. III. 1 Trade payables 208,978 432,866 A. V. Profit (loss) for the year (+ / -) 431,377 279,304 2 Liabilities to group companies with majority control 0 0 3 Liabilities to group companies with control of 20% - 50% 0 0 4 Liabilities to partners, co-operative members and participants in association 0 0 5 Liabilities to employees 27,459 28,187 6 Liabilities arising from social security and health insurance 14,783 12,931 7 Due to government – taxes and subsidies 12,764 5,616 8 Advances received 35,282 41,134 9 Bonds payable 0 0 10 Unbilled deliveries 34,393 58,129 11 Other liabilities 16,530 10,123
B. IV. Bank loans and borrowings 1,448,644 1,100,004 B. IV. 1 Long-term bank loans 1,348,644 0 2 Short-term bank loans 100,000 1,100,004 3 Borrowings 0 0
C. OTHER LIABILITIES - TEMPORARY ACCOUNTS OF LIABILITIES 16,525 26,265
C. I. Accrued liabilities and deferred assets 16,525 26,265 C. I. 1 Accruals 905 11,669 2 Deferred income 15,620 14,596
46 | | 47 annual report 2010 AERO Vodochody a.s. | financial statement
Financial statement
INCOME STATEMENT - LONG FORM (in thousands of Czech crowns) Current year Prior year 2009 Current year Prior year 2009
I. 1 Revenue from sale of goods 220,686 247,068 * PROFIT OR LOSS ON OPERATING ACTIVITIES 409,689 255,524 A. 2 Cost of goods sold 175,187 267,977 VI. 1 Revenue from sale of securities and interests 4,291 0 + GROSS MARGIN 45,499 (20,909) J. 1 Securities and interests sold 4,508 0 VII. Income from financial investments 0 0 II. Production 2,630,595 2,664,256 VII.1 Income from subsidiaries and associates 0 0 II. 1 Revenue from sale of finished products and services 2,511,216 2,601,112 2 Income from other long-term securities and interests 0 0 2 Change in inventory produced internally 41,468 40,905 3 Income from other financial investments 0 0 3 Own work capitalized 77,911 22,239 VIII.1 Income from short-term financial assets 22 0 K. 2 Expenses related to financial assets 1,100 0 B. Production related consumption 1,546,133 1,731,612 IX. 1 Gain on revaluation of securities and derivatives 0 0 B. 1 Consumption of material and energy 1,161,304 1,421,334 L. 2 Loss on revaluation of securities and derivatives 0 0 B. 2 Services 384,829 310,278 M. 1 Change in provisions and allowances relating to financial activities (1,100) 0 X. 1 Interest income 106,379 69,838 + VALUE ADDED 1,129,961 911,735 N. 2 Interest expense 26,206 26,716 XI. 1 Other finance income 266,842 304,808 C. Personnel expenses 586,695 622,383 O. 2 Other finance cost 325,985 331,472 C. 1 Wages and salaries 432,064 469,642 XII.1 Transfer of finance income 0 0 C. 2 Bonuses to members of company or cooperation bodies 350 360 P. 2 Transfer of finance cost 0 0 C. 3 Social security and health insurance 144,503 141,791 C. 4 Other social costs 9,778 10,590 * PROFIT OR LOSS ON FINANCIAL ACTIVITIES 20,835 16,458
D. Taxes and charges 5,349 3,791 Q. Tax on profit or loss on ordinary activities 0 0 E. Amortization and depreciation of intangible and tangible fixed assets 90,132 83,911 Q. 1 - due 0 0 III. Revenue from sale of intangible and tangible fixed assets and materials 27,963 33,871 Q. 2 - deferred 0 0 III. 1 Revenues from sale of intangible and tangible fixed assets 5,298 26,025 2 Revenue from sale of materials 22,665 7,846 ** PROFIT OR LOSS ON ORDINARY ACTIVIES AFTER TAXATION 430,524 271,982 F. Net book value of intangible and tangible fixed assets and materials sold 23,908 30,888 F. 1 Net book value of intangible and tangible fixed assets sold 4,678 23,378 XIII.1 Extraordinary gains 3,334 9,241 F. 2 Materials sold 19,230 7,510 R. 2 Extraordinary losses 2,481 1,919 G. 1 Change in provisions and allowances relating to operations and in prepaid expenses (specific-purpose expenses) (19,234) (158,228) S. 1 Tax on extraordinary profit or loss 0 0 IV. 2 Other operating revenues 1,116,310 1,934,613 S. 1 - due 0 0 H. 1 Other operating expenses 1,177,695 2,041,950 S. 2 - deferred 0 0 V. 2 Transfer of operating revenues 0 0 I. 1 Transfer of operating expenses 0 0 * EXTRAORDINARY PROFIT OR LOSS 853 7,322
1 Transfer of share of profit or loss to partners (+/-) 0 0
*** PROFIT OR LOSS FOR THE YEAR (+/-) 431,377 279,304
**** PROFIT OR LOSS BEFORE TAXATION 431,377 279,304
48 | | 49 annual report 2010 AERO Vodochody a.s. | financial statement
Financial statement
CASH FLOW STATEMENT (in thousands of Czech crowns) Current year Prior year 2009 Current year Prior year 2009
CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES
Z. PROFIT OR LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (+/-) 430,524 271,982 B. 1. 1. Purchase of fixed assets (186,624) (281,592) B. 2. 1. Proceeds from sale of fixed assets 9,589 26,025 A. 1. Adjustments to reconcile profit or loss to net cash provided by or used in operating activities 42,830 100,101 B. 3. 1. Loans granted 51,723 (529,937) A. 1. 1. Depreciation and amortization of fixed assets and write-off of receivables 90,132 83,911 B. 4. 1. Interest received 98,914 74,764 A. 1. 2. Change in allowances (20,922) 91,458 B. 5. 1. Dividends received 0 0 A. 1. 3. Change in provisions 588 (66,769) A. 1. 4. Foreign exchange differences (19,061) 37,270 B *** NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (26,398) (710,740) A. 1. 5. (Gain)/Loss on disposal of fixed assets (403) (2,647) A. 1. 6. Interest expense and interest income (80,173) (43,122) CASH FLOWS FROM FINANCING ACTIVITIES A. 1. 7. Other non-cash movements (e.g. revaluation at fair value to profit or loss, dividends received) 72,669 0 C. 1. Change in long-term liabilities and long-term, resp. short-tem, loans 346,116 (398,586) A * NET CASH FROM OPERATING ACTIVITIES BEFORE TAXATION, CHANGES IN WORKING CAPITAL AND EXTRAORDINARY ITEMS 473,354 372,083 C. 2. 1. Effect of changes in basic capital on cash 0 0 C. 2. 2. Dividends or profit sharing paid (600,000) 0 A. 2. Change in non-cash components of working capital (72,131) (222,784) C. 2. 3. Effect of other changes in basic capital on cash 0 950,000 A. 2. 1. Change in inventory 330,132 (292,325) A. 2. 2. Change in trade receivables (148,548) 126,349 C *** NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (253,884) 551,414 A. 2. 3. Change in other receivables and in prepaid expenses and unbilled revenue (17,386) 160,534 A. 2. 4. Change in trade payables (223,888) (131,933) F. NET INCREASE (DECREASE) IN CASH 92,660 (33,814) A. 2. 5. Change in other payables, short-term loans and in accruals and deferred income (12,441) (85,408) P. CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 190,278 224,092 R. CASH AND CASH EQUIVALENTS AT END OF YEAR 282,938 190,278 A ** NET CASH FROM OPERATING ACTIVITIES BEFORE TAXATION, INTEREST PAID AND EXTRAORDINARY ITEMS 401,223 149,300
A. 3. 1. Interest paid (29,134) (23,788) A. 4. 1. Tax paid 0 0 A. 5. 1. Gains and losses on extraordinary items 853 0
A *** NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 372,942 125,512
50 | | 51 AERO SIGNED AT THE AIR-SHOW IN PARIS IN JUNE 2009 ITS HISTORICALLY FIRST CONTRACT ON INTER- NATIONAL RISK-SHARE PROJECT WITH BELGIUM COMPANY SONACA. THE SUBJECT CSeries OF COOPERATION BETWEEN SONACA AND AERO IS TO DESIGN, DEVELOP AND MANUFACTURE C100/C130 THE WING FIXED LEADING EDGES FOR A NEW AND INNOVATIVE CSERIES AIRCRAFT FOR THE CANADIAN AEROSPACE MANUFACTURER BOMBARDIER. annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
1. 1.DESCRIPTION OF THE COMPANY B) TANGIBLE FIXED ASSETS
AERO Vodochody a.s. ("the Company") is a joint stock company incorporated on 2 January 1991 in the Czech Republic. The Company's registered office is located at Odolena Voda, Tangible fixed assets with a cost exceeding CZK 40 thousand are recorded at their acquisition cost, which consists of purchase price, freight, customs duties and other related costs. Dolínek, U Letiště 374, 250 70, Czech Republic and the business registration number (IČ) is 00010545. The Company is involved in cooperation in production of helicopters and Internally-developed tangible fixed assets are recorded at their accumulated cost, which consist of direct material, labor costs and production overheads. Interest and other aircraft parts, foreign trade of military products, development, production, repairs and modernization of military training and combat jets, and other aircraft related work. financial expenses incurred in the construction of tangible fixed assets are also capitalized. Tangible fixed assets acquired free of charge are valued at their replacement cost and are recorded with a corresponding credit to the 'Other capital funds account' on the date of acquisition. The replacement cost of these assets is set on the basis of the cost Shareholders holding a 10% or greater interest in the Company's basic capital are as follows: known at the moment of the respective asset acquisition. The costs of technical improvements are capitalized. Repairs and maintenance expenses are expensed as incurred. TULAROSA a.s. 51,50 % Salori Holding B.V. 48,50 % Depreciation Depreciation is calculated based on the acquisition cost and the estimated useful life of the related asset. The useful economic lives are as follows: The parent company is TULAROSA a.s. with its registered office located at Na Příkopě 583/15, Praha 1, Czech Republic. The Company is included in the consolidated group of PENTA INVESTMENTS HOLDING with the registered office in Agias Fylaxeos & Pollygnostou, 212, Years C&I CENTER, P.C. 3803, Limassol, Cyprus. Constructions 30 - 45 Machinery and equipment 10 - 30 The Company is the parent company of the AERO Vodochody Group and the accompanying financial statements have been prepared as separate financial statements. Vehicles 8 - 20 Consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) have been prepared by the parent company. In accordance Furniture and fixtures 4 - 15 with the valid Czech accounting legislation, the Company is exempt from the obligation to prepare consolidated financial statements in accordance with Czech GAAP. Other tangibles 5 - 20
Members of the statutory bodies as at 31 December 2010 were as follows: An allowance is created against tangible fixed assets if their value as identified by the stocktaking is significantly lower than their carrying amount. Board of Directors Supervisory Board Chair: Ing. Ladislav Šimek, MBA Chair: Mgr. Václav Štajner C) FINANCIAL ASSETS Member: Ing. Petr Brychta Member: Ing. Zdeněk Sýkora Member: Ondřej Benáček Member: Jan Borýsek Short-term financial assets consist of liquid valuables, cash in hand and at bank. Long-term financial assets consist in particular of ownership interests and shareholdings. Interests and securities are valued at their acquisition cost, which includes the purchase price and direct costs related to the acquisition, e.g. fees 2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS and commissions paid to agents and stock exchanges. As at 31 December, ownership interests constituting dominant or significant influence are valued at acquisition cost. If there is a decrease in the carrying value of long-term financial assets that are not revalued at the balance sheet date, the difference is The accompanying financial statements were prepared in accordance with the Czech Act on Accounting and the related guidelines as applicable for 2010 and 2009. considered a temporary diminution in value and is recorded as an allowance.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D) INVENTORY
The accounting policies applied by the Company in preparing the 2010 and 2009 financial statements are as follows: Purchased inventory is stated at actual cost being determined using the weighted average method. Costs of purchased inventory include acquisition-related costs (freight, customs, commission, etc.). Work-in-progress and semi-finished products are recorded at standard cost, which approximates actual. The cost of inventory A) INTANGIBLE FIXED ASSETS produced internally includes direct material and labor costs and production overhead costs. Production overhead costs include energy, repairs and maintenance, Intangible fixed assets are recorded at their acquisition cost and related expenses. telecommunication and IT costs, depreciation and other production services and materials and are allocated based on direct labor hours. Intangible fixed assets with a cost exceeding CZK 60 thousand are amortized over their useful economic lives. Small intangible fixed assets (with a cost of less than CZK 60 thousand) are expensed upon acquisition and carried only in off balance sheet. E) RECEIVABLES
Internally-developed intangible fixed assets are recorded at their accumulated cost, which consist of direct material, labor costs and production overheads. Both long- and short-term receivables are carried at their realizable value after allowance for doubtful accounts. Additions to the allowance account are charged to income.
Amortization F) DERIVATIVES Amortization is calculated based on the acquisition cost and the estimated useful life of the related asset. The useful economic lives are as follows: Derivatives are initially measured at cost. Derivatives are recorded in other short-term receivables or payables, as appropriate, in the accompanying balance Years sheet. Derivatives are classified as derivatives held for trading or hedging derivatives. The latter are designated as either fair value hedges or cash flow hedges. Software 3 In order to qualify for hedge accounting, the change in the fair value of a derivative or of its estimated cash flow must offset, in whole or in part, the change in the Patents, royalties and similar rights 15 fair value or cash flow arising from the hedged item. In addition, there must be formal documentation of the hedging relationship at inception and the Company must prove that the hedging relationship is highly effective. In all other cases, derivatives are recognized as held-for-trading. An allowance is created against intangible fixed assets if their value as identified by the stocktaking is significantly lower than their carrying amount. Derivatives are revalued to fair value as at the balance sheet date. Changes in the fair value of derivatives held for trading are reported in income. Changes in the fair value of derivatives designated as fair value hedges are also recognized in income, together with the change in the fair value of the hedged item attributable to the risk being hedged. Changes in the fair value of derivatives designated as cash flow hedges are taken to equity and reflected in the balance sheet through gain or loss on revaluation of assets and liabilities. Any ineffective portion of the hedge is reported in income.
54 | | 55 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
G) EQUITY 4. FIXED ASSETS
The basic capital of the Company is stated at the amount recorded in the Commercial Register maintained in the Municipal Court. Any increase or decrease in A) INTANGIBLE FIXED ASSETS (in CZK thousands) the basic capital made pursuant to the decision of the General Meeting which was not entered in the Commercial Register as at the financial statements date is recorded through changes in basic capital. Contributions in excess of basic capital are recorded as share premium. Other capital funds are created pursuant to COST At beginning of year Additions Disposals Transfers At end of year the Company's Articles of Incorporation. In accordance with the Commercial Code, the Company creates a legal reserve fund from profit. In the first year in which Software 188,723 - (1,788) 4,861 191,796 profit is generated, a joint-stock company should allocate 20% of profit after tax (however, not more than 10% of basic capital) to the legal reserve fund. In subsequent Patents, royalties and similar rights 49,955 - - 25,902 75,857 years, the legal reserve fund is allocated 5% of profit after tax until the fund reaches 20% of basic capital. These funds can only be used to offset losses. Other intangibles 614 2,055 (1,615) - 1,054 Intangibles in progress 91,755 61,055 - (30,763) 122,047 H) PROVISIONS AND LIABILITIES 2010 Total 331,047 63,110 (3,403) - 390,754 2009 Total 237,294 95,947 (2,194) - 331,047 Long-term liabilities and current liabilities are carried at their nominal values. Amounts resulting from the revaluation of financial derivatives at fair value are shown in other payables. Short-term and long-term loans are recorded at their nominal values. Any portion of long-term debt which is due within one year of the ACCUMULATED AMORTIZATION At beginning of year Additions Disposals At end of year Net book value balance sheet date is classified as short-term debt. Contingent liabilities that are not recorded in the balance sheet because significant uncertainties exist with Software (186,619) (4,302) 1,788 (189,133) 2,663 respect to the amount, title or timing of the expected outflow of benefits are described in Note 19. Patents, royalties and similar rights (49,955) (79) - (50,034) 25,823 Other intangibles - - - - 1,054 I) FINANCIAL LEASES Intangibles in progress - - - - 122,047 2010 Total (236,574) (4,381) 1,788 (239,167) 151,587 The Company records leased assets by expensing the lease payments and capitalizing the residual value of the leased assets when the lease contract expires 2009 Total (230,576) (5,997) - (236,574) 94,473 and the purchase option is exercised. Lease payments paid in advance are recorded as prepaid expenses and amortized over the lease term. As at 31 December 2010 intangibles in progress include, in particular, assets purchased from Sonaca S.A. and assets internally developed within the development J) FOREIGN CURRENCY TRANSACTIONS of a part of the wing for the C-Series aircraft for the Canadian producer Bombardier. Patents, royalties and similar rights are amortized over their useful lives as specified in the relevant contracts. As at 31 December 2010 and 2009, the total value of small intangible fixed assets, which are not reflected in the accompanying Assets and liabilities whose acquisition or production costs were denominated in foreign currencies are translated into Czech crowns at the exchange rate prevailing balance sheet, was CZK 5,342 thousand and CZK 5,294 thousand at acquisition cost, respectively. Intangible fixed assets at a cost of CZK 203,949 thousand are as at the transaction date. On the balance sheet date monetary items are adjusted to the exchange rates as published by the Czech National Bank as at 31 December. fully amortized as at 31 December 2010. In 2010, the Company received subsidies for intangible fixed assets of CZK 28,551 thousand. Other intangible fixed assets Realized and unrealized exchange rate gains and losses were charged or credited, as appropriate, to income for the year. represent carbon emission allowances ("allowances"). The Company was issued free of charge allowances constituting the right to emit 6,288 tones of gas emissions in 2010. These emission allowances were valued at their replacement cost totaling CZK 2,055 thousand. K) RECOGNITION OF REVENUES AND EXPENSES See below for the movements in the emission allowance account during 2010. In connection with the movements of the allowance account, the following amounts Revenues and expenses are recognized on an accrual basis, that is, they are recognized in the periods in which the actual flow of the related goods or services were charged against or recognized into income (in CZK thousands): occurs, regardless of when the related monetary flow arises. The Company recognizes as an expense any additions to provisions or allowances against risks, los- Value of Other Other Revenues from ses or physical damage that are known as at the financial statements' date. Long-term contracts are accounted for according to the completed contract method emission operating operating sale of emission Other (or as specified in the contract). allowances revenues expenses allowances liabilities At beginning of year 614 - - - (614) L) INCOME TAX Free of charge allocation of allowances 2,055 - - - (2,055) Emission allowances required to cover the level (1,613) 1,613 (1,613) - 1,613 The corporate income tax expense is calculated based on the statutory tax rate and book income before taxes, increased or decreased by the appropriate of carbon dioxide emissions determined in 2010 permanent and temporary differences (e.g. non-deductible provisions and allowances, entertainment expenses, differences between book and tax depreciation, Emission allowances required to cover the level of carbon (2) 2 (2) - 2 etc.). The deferred tax position reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting dioxide emissions determined in 2009 – additional charge purposes and the amounts used for corporate income tax purposes, taking into consideration the period of realization. Total as at 31 December 2010 1,054 1,615 (1,615) - (1,054)
M) SUBSIDIES a) See below for the movements in the emission allowance account during 2009. In connection with the movements of the allowance account, the following amounts were charged against or recognized into income (in CZK thousands): In 2010 and 2009, the Company received subsidies from the government of CZK 14,263 thousand and CZK 7,197 thousand, respectively which were accounted Value of Other Other Revenues from for as other operating revenues. In 2010 and 2009, the Company received subsidies for the acquisition of intangible fixed assets of CZK 28,551 and CZK 9,480 emission operating operating sale of emission Other respectively. Received subsidies are recorded in separate accounts. This treatment enables the Company to closely monitor subsidies' receipt and utilization. allowances revenues expenses allowances liabilities At beginning of year 1,044 - - - (1,044) N) EMISSION ALLOWANCES Free of charge allocation of allowances 1,764 - - - (1,764) Emission allowances required to cover the level (1,380) 1,380 (1,380) - 1,380 Carbon emission allowances are recorded as intangible fixed assets, which are not amortized and are valued at cost or replacement cost when acquired free-of-charge. of carbon dioxide emissions determined in 2009 The "use of emission allowances" is recorded as at the financial statements' date corresponding to the volume of accounting unit's emissions in the calendar year. The first Sale of allowances (814) - - 1,069 814 free-of-charge acquisition is recorded as other liabilities, which are recognized into income at the time and in the amount corresponding to the usage of allowances. Total as at 31 December 2009 614 1,380 (1,380) 1,069 (614)
56 | | 57 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
B) TANGIBLE FIXED ASSETS (IN CZK THOUSANDS) As at 31 December 2010 tangibles in progress include, in particular, assets internally developed within the preparation of production of the Black Hawk helicopters for the Sikorsky Aircraft Corporation. As at 31 December 2010 and 2009, the total value of small tangible fixed assets, which are not reflected COST At beginning of year Additions Disposals Transfers At end of year in the accompanying balance sheet, was CZK 714,172 thousand and CZK 597,482 thousand at acquisition cost, respectively. Land 24,897 - - - 24,897 Constructions 896,311 - - 20,847 917,158 Tangible fixed assets at a cost of CZK 734,772 thousand are fully depreciated as at 31 December 2010. The Company has adjusted the carrying amount of certain Machinery and equipment 1,160,119 6,377 (15,464) 120,302 1,271,334 tangible assets for a diminution in value through an allowance charged against income (see Note 7). Allowances relating to buildings were established Vehicles 241,300 - (2,386) 318 239,232 in the amount of 100% of their net book value as the Company does not expect to use these assets in the future. Allowances relating to Ae270 aircraft were Furniture and fixtures 3,897 - (55) - 3,842 initially established in the amount of 100% of its net book value. In 2009 they were reduced by the value arising from the concluded agreement on the aircraft Other tangibles 5,875 - - 3,455 9,330 sale, which was planned for 2010. However, as a result of the contract failure, the allowances relating to Ae270 aircraft were again increased to the net book value Tangibles in progress 95,803 94,775 (2,913) (144,922) 42,743 level in 2010. Advances for tangibles 8,367 3,502 (11,585) - 284 2010 Total 2,436,569 104,654 (32,403) - 2,508,820 As at 31 December 2010 and 2009, a part of the buildings with a cost of CZK 19,653 thousand and CZK 16,401 thousand respectively, and with a net book value 2009 Total 2,628,391 198,675 (390,497) - 2,436,569 of CZK 10,010 thousand and CZK 7,184 thousand, respectively, were located outside the Company's production plant (flats, accommodation facilities). On 8 December 2005, the Company signed a general agreement for post-warranty support of L-159 and L-39 aircraft (see Note 19) with the Ministry of Defence At beginning Depreciation Cost of sales At end Net book of the Czech Republic pursuant to which the Company committed itself to hold with limited disposal rights a significant portion of fixed assets (particularly land, ACCUMULATED DEPRECIATION of year during year or liquidation Disposals Transfers of year Allowances value production halls, airport and other assets necessary for maintaining the ability to provide service repairs for the Army of the Czech Republic). The acquisition cost Land ------24,897 of assets with limited disposal rights was CZK 435,841 thousand and CZK 424,899 thousand and their net book value was CZK 214,961 thousand and CZK 218,383 Constructions (462,627) (23,772) - - - (486,399) (9,074) 421,685 thousand as at 31 December 2010 and 2009, respectively. This commitment is not entered in the Cadastral Register. Machinery and equipment (980,344) (49,470) (97) 15,464 (6,377) (1,020,824) - 250,510 Vehicles (37,912) (12,387) (1,662) 2,386 - (49,575) (176,063) 13,594 On 23 September 2010, AERO Vodochody a.s. and Česká spořitelna, a.s., Komerční banka, a.s. and Česká exportní banka, a.s. entered into a contract for Furniture and fixtures (3,844) (6) - 56 - (3,794) - 48 the establishment of the right of pledge securing the Company's immovable assets (buildings and land) with respect to the provided pre-export loan (see Note Other tangibles (5,756) (116) (4) - - (5,876) - 3,454 14). As at 31 December 2010, the acquisition cost of assets pledged amounted to CZK 149,030 thousand and the net book value amounted to CZK 72,414 Tangibles in progress ------42,743 thousand. The acquisition cost of land was CZK 13,341 thousand, the acquisition cost of buildings was CZK 135,689 thousand whereas their net book value amounted Advances for tangibles ------(180) 104 to CZK 59,073 thousand. As at 31 December 2010, certain tangible fixed assets (office building, maintenance storage, waste storage, junction exchange station, 2010 Total (1,490,483) (85,751) (1,763) 17,906 (6,377) (1,566,468) (185,317) 757,035 assembly hall 4 etc.) were no longer in service. These assets had an original cost of CZK 29,995 thousand and net book value of CZK 9,075 thousand. 2009 Total (1,510,583) (77,914) (49,689) 147,745 (42) (1,490,483) (174,670) 771,416 As at 1 January 2009, assets with an original cost of CZK 276,601 thousand and net book value of CZK 222,571 thousand were used as a non-monetary contribution in Letiště Vodochody a.s. (see Note 4c). The acquisition cost of land was CZK 179,759 thousand, the acquisition cost of buildings was CZK 96,842 thousand whereas their net book value amounted to CZK 42,812 thousand.
C) LONG-TERM FINANCIAL INVESTMENTS (IN CZK THOUSANDS)
Summary of changes in long-term financial investments:
Balance as at Balance as at Balance as at 31/ 12/ 2008 Additions Revaluation 31/ 12/ 2009 Additions Disposals Revaluation 31/ 12/ 2010 Subsidiaries 112,220 414,218 9 526,447 37,078 (1,056) (996) 561,473 Associates 1,100 - - 1,100 - (1,100) - - Allowances (1,100) - - (1,100) 1,100 - - -
58 | | 59 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010: SUBSIDIARIES AND ASSOCIATES AS AT 31 DECEMBER 2009 WERE AS FOLLOWS (IN CZK THOUSANDS):
Technometra Letiště Rotortech Aero Clester Technometra Letiště Rotortech Aero Clarex Name Radotín, a.s. Vodochody a.s. Composites Limited Trading a.s. Name Radotín, a.s. Letov, a.s. Vodochody a.s. Composites Limited Investments a.s. Percentage of ownership Odolena Voda Odolena Voda Velká Británie Slovak Republic Registered office Prague 5 Prague 9 Odolena Voda United Kingdom Slovak Republic Total net assets 100 100 100 100 Percentage of ownership 100 42,6 100 100 100 Equity 173,176 1,917,842 9 627 900 Total net assets 296,641 - 1,923,471 43,420 9,982 Vlastní kapitál 170,308 1,493,981 8 230 (3,510) Equity 178,449 - 1,524,602 20,584 (1,480) Basic capital and capital funds 119,287 1,859,817 75 710 832 Basic capital and capital funds 219,426 - 1,859,800 41,747 878 Funds created from profit 8,869 - - 83 Funds created from profit 5,862 - 17 - 88 Accumulated loss / retained earnings 50,295 (335,215) (67 480) - Accumulated loss (106,974) - (311,528) (8,825) - Profit / (loss) for the current year (8,143) (30,621) (42 968) (241) Profit / (loss) for the current year 60,135 - (23,687) (12,339) (2,446) Acquisition cost of share / interest 110,220 224,571 225 530 1,153 Acquisition cost of share / interest 110,220 1 100 224,571 190,600 1,047 Revaluation - - 1,144 (129) Revaluation ----9 Nominal value of share / interest 119,287 1,859,817 - - Nominal value of share / interest 219,426 - 1,859,800 41,747 878 Intrinsic value of share / interest 170,308 1,493,981 8,230 - Intrinsic value of share / interest 178,449 - 1,524,602 20,584 -
Financial information about Technometra Radotín, a.s., and Letiště Vodochody a.s. was obtained from the companies' standalone audited financial statements Financial information about Technometra Radotín, a.s. and Letiště Vodochody a.s. was obtained from the companies' standalone audited financial statements as at 31 December 2010. Financial information about Rotortech Aero Composites Limited and Clester Trading a.s. was obtained from the companies' standalone as at 31 December 2009. Financial information about Rotortech Aero Composites Limited and Clarex Investments a.s. was obtained from the companies' financial statements as at 31 December 2010 which have yet not been audited. standalone financial statements as at 31 December 2009 which have not yet been audited.
In 2010 Technometra Radotín, a.s. changed its registered office to Odolena Voda, Dolínek, U Letiště 374, PSČ 250 70 and ceased its manufacturing activity. In 2009, the Company made financial investments in the form of the acquisition of Rotortech Aero Composites Limited, with its registered office in the United Kingdom and the basic capital totaling GBP 1,401 thousand, and the acquisition of Clarex Investments a.s., with its registered office in the Slovak Republic In 2010, the Company made financial investment in the form of the acquisition of Clester Trading a.s., with its registered office in the Slovak Republic and the basic and the basic capital totaling EUR 33 thousand. Acquisition cost of Rotortech Aero Composites Limited and Clarex Investments a.s. was CZK 190,600 thousand capital totaling EUR 33 thousand (CZK 832 thousand). Acquisition cost of this investment was EUR 37 thousand (CZK 1,063 thousand) and CZK 90 thousand. and CZK 1,047 thousand, respectively. Rotortech Aero Composites Limited was acquired within the Penta Group from Penta Investments Limited. Acquisition The Company sold its 100% interest in Clarex Investments a.s. to Clester Trading a.s. cost was determined based on a certified expert’s opinion.
In 2010 the Company made a monetary contribution of GBP 1,200 thousand (CZK 34 930 thousand) in Rotortech Aero Composites Limited. As at 1 January 2009, the Company increased the basic capital of Letiště Vodochody a.s. in the form of a non-monetary contribution by CZK 1,857,800 thousand to a total of CZK 1,859,800 thousand and owns 9,299 ordinary shares with a nominal value of CZK 200 thousand per share. The Company is the sole shareholder As at 31 December 2009, the Company held a 42.6% interest (corresponding to a contribution of CZK 1,100 thousand) in Letov, a.s. As a result of the compliance of the above company. The contribution was comprised of the selected land and buildings with a net book value of CZK 222,571 thousand (see Note 4b). with the resolution to distribute the estate, Letov, a.s. was terminated and deleted from the Commercial Register in 2010. The Company provided loans to and received loans from subsidiaries and associates (see Note 22).
In 2009, AERO Vodochody acquired a 100% stake in British company Rotortech Aero Composites Limited from its related party PENTA INVESTMENTS LIMITED. The acquisition price was stated by a valuation expert nominated by the court and amounted to CZK 190,600 thousand. In 2010, AERO Vodochody made additional cash contribution to the basic capital of Rotortech Aero Composites Limited of CZK 34,930 thousand and increased the value of its financial investment to CZK 225,530 thousand. After this, in 2011 Rotortech Aero Composites Limited terminated its business activities and currently is considering various options of Rotortech’s liquidation. In relation with that AERO Vodochody a.s. concluded with the seller addendum to the contract, which includes the option of AERO Vodochody a.s. to sell the company Rotortech Aero Composites Limited back to the seller until 31 July 2011. Due to the risk of impossibility to use the option AERO Vododchody a.s. has entered into negotiations with the seller, PENTA INVESTMENTS LIMITED, about the compensation of losses incurred by AERO Vodo- chody in relation to Rotortech Aero Composites Limited. The management of AERO Vodochody believes that the negotiations will lead to a full compensation of the losses and did not record any impairment provision against this investment as at 31 December 2010.
60 | | 61 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
5. INVENTORY 7. ALLOWANCES
Excess, obsolete and slow-moving inventory has been written down to its estimated net realizable value by an allowance account. The allowance is determined Allowances reflect a temporary diminution in the value of assets (see Notes 4, 5 and 6). by management based on an inventory aging analysis and the analysis of its future usability (see Note 7). Changes in the allowance accounts (in CZK thousands): Allowances as at 31/ 12/ 2010 against (in CZK thousands): Materials Work-in-progress, semi-finished products and goods Advances granted for inventory Ae270 291,146 117,495 4,785 L-159 334,645 71,079 3,154 Balance as at Balance as at Balance as at L-39, L-59 382,507 10,071 - Allowances against: 31/ 12/ 2008 Additions Deductions 31/ 12/ 2009 Additions Deductions 31/ 12/ 2010 Sikorsky Program 31,913 11,926 1,905 Tangible fixed assets 207,977 131 (33,438) 174,670 22,106 (11,459) 185,317 SAAB Project - - 312 Long-term financial investments 1,100 - - 1,100 - (1,100) - Not-assigned material 19,483 566 - Inventory 1,388,489 63,828 (117,191) 1,335,126 12,164 (52,471) 1,294,819 Other inventory 19,723 4,265 104 Advances granted for inventory 15,842 8,487 (14,173) 10,156 1,018 (914) 10,260 Total 1,079,417 215,402 10,260 Receivables - legal 2,128 145 - 2,273 - (2,074) 199 Receivables - other 5,189 4,634 (3,882) 5,941 19,426 (7,618) 17,749 6. RECEIVABLES Total 1,620,725 77,225 ( 168,684) 1,529,266 54,714 (75,636) 1,508,344
Allowances against outstanding receivables that are considered doubtful were charged to income based on the analysis in 2010 and 2009, respectively (see Note 7). As at 31 December 2010 and 2009, receivables overdue for more than 180 days totaled CZK 7,502 thousand and CZK 7,952 thousand, respectively.
In 2010 and 2009, the Company sold receivables of CZK 1,074,294 thousand and CZK 1,902,974 thousand, respectively. The income from the sale of the receivables was CZK 1,071,109 thousand and CZK 1,897,538 thousand in 2010 and 2009, respectively. Nominal values of these receivables along with the income from the sale of the receivables were included in other operating expenses or other operating revenues, as appropriate, in the income statement.
As at 31 December 2010 and 2009, unbilled revenue represents, in particular, accrued interest on the loans to related parties.
As at 31 December 2010 other receivables include mainly positive actual value of financial derivatives.
Long- and short-term receivables from related parties (see Note 22).
62 | | 63 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
8. SHORT-TERM FINANCIAL ASSETS 10. EQUITY
As at 31 December, the Company had the following restricted cash balances (in CZK thousands): The basic capital of the Company comprises 968,356 ordinary registered shares in materialized form, with a nominal value of CZK 1,000; 913,458 priority registered shares in materialized form, with a nominal value of CZK 1,000; 887,366 registered shares in materialized form, with a nominal value of CZK 2010 2009 2 and 1 priority registered share in materialized form, with a nominal value of CZK 2. Bank Currency Amount in foreign currency Amount Amount in foreign currency Amount (in thousands) in CZK thousands (in thousands) in CZK thousands Other capital funds are primarily comprised of the remaining balance of financial restructuralization from previous years. Other funds from profit represent Česká spořitelna, a.s. USD- - 87 a social fund. 1,606 Komerční banka, a.s. USD- - - - Komerční banka, a.s. EUR 575 14,422 50 1,320 The movements in the capital accounts during 2010 and 2009 were as follows (in CZK thousands): Total - 14,422 - 2,926 Balance as at Balance as at Balance as at Financial assets deposited in restricted accounts represent a security for guarantees granted by the banks (see Note 14). 31/ 12/ 2008 Increase Decrease 31/ 12/ 2009 Increase Decrease 31/ 12/ 2010 Number of shares 5,899,681 - (3,130,500) 2,769,181 - - 2,769,181 On 23 September 2009, the Company concluded an agreement on the overdraft facility of CZK 70,000 thousand with Komerční banka a.s. (see Note 14). As at 31 Basic capital 5,014,089 950,000 (4,080,500) 1,883,589 - - 1,883,589 December 2009 the loan was not drawn. In 2010 the loan was drawn on an ongoing basis and its balance was zero as at 31 December 2010. The maturity Other capital funds 28,720 - - 28,720 - - 28,720 of the loan is set on 23 June 2011. Differences arising from revaluation of assets and liabilities (50,361) 50,651 (7,891) (7,601) 9,281 - 1,680 Legal reserve fund 211,531 20,080 - 231,611 13,964 - 245,575 9. OTHER ASSETS Other funds 16,508 - (497) 16,011 - (11,715) 4,296 Retained earnings 224,342 381,509 - 605,851 277,054 (600,000) 282,905 As at 31 December 2010 and 2009, prepaid expenses include in particular prepaid insurance fees, interest expenses and overhead costs, which are charged Accumulated loss (4,080,558) 4,080,500 - (58) - - (58) to income for the year in which they were incurred. The Annual General Meeting held on 29 June 2010 decided on the transfer of CZK 11,715 thousand from other capital funds to retained earnings and agreed upon As at 31 December 2010, accrued revenues include in particular commision from an offset program from 2010. a dividend payout in the total amount of CZK 600,000 thousand. The Annual General Meeting decided on the basic capital increase by CZK 950,000 thousand on 18 September 2009. The basic capital was paid up, and was entered in the amount of CZK 5,964,089 thousand in the Commercial Register on 13 November 2009.
The Annual General Meeting held on 27 November 2009 decided to reduce the basic capital by CZK 4,080,500 thousand in order to settle accumulated losses. The basic capital decrease was made through withdrawal of shares without charge. The whole amount representing the decrease was used to settle accumulated losses. The basic capital amount following the decrease, i.e. CZK 1,883,589 thousand, was entered in the Commercial Register on 22 December 2009.
In 2010 gain or loss on revaluation of assets and liabilities arose due to the revaluation of derivative transactions (see Note 16) and the revaluation of contributions (see Note 4c) in Clester Trading a.s. and Rotortech Aero Composites Limited. In 2009 gain or loss on revaluation of assets and liabilities arose due to the revaluation of the financial investment in Clarex Investments a.s. (see Note 4c) and the revaluation of derivatives (see Note 16).
The Annual General Meetings held on 29 June 2010, 13 August 2009 and 27 November 2009, respectively approved the following profit distribution for 2009 and 2008 and compensation of the accumulated loss of previous years (in CZK thousands):
Profit for 2008 401,589 Profit for 2009 279,304 Compensation of accumulated loss from basic capital decrease 4,080,500 Compensation of accumulated loss from basic capital decrease - Allocation to legal reserve fund (20,080) Allocation to legal reserve fund (13,965) Dividend payout - Dividend payout (600,000) Transfer from other capital fund - Transfer from other capital fund 11,715 Undistributed profits added to retained earnings 381,509 Undistributed profits added to retained earnings (322,946) Retained earnings as at 31/ 12/ 2009 605,851 Retained earnings as at 31/ 12/ 2010 282,905 Accumulated loss as at 31/ 12/ 2009 (58) Accumulated loss as at 31/ 12/ 2010 (58)
64 | | 65 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
11. PROVISIONS 12. LONG-TERM LIABILITIES
The movements in the provision accounts were as follows (in CZK thousands): As at 31 December, the Company had the following other long-term payables (in CZK thousands):
Balance as at Balance as at Balance as at Terms/ Conditions 2010 2009 31/ 12/ 2008 Additions Deductions 31/ 12/ 2009 Additions Deductions 31/ 12/ 2010 Payables to Salori Holding B.V. Maturity: 2059; floating interest rate, up to 140% of the CNB discount rate 195,884 198,408 Contractual charges and penalties 5,200 - (5,200) - 9,972 - 9,972 Guarantee repairs L-159 and L-159T1 9,951 1,448 (2,893) 8,506 3,094 - 11,600 On 7 January 2008, the Company and Salori Holding B.V. concluded an agreement on the change in provisions on loan repayment. Accordingly, the companies Overhaul Tunis 1,102 - (200) 902 - - 902 agreed to replace the existing fixed interest rate by a fee based on the financial result of the Company before taxes and interest (EBIT). However, the maximum Ae270 contract 5,435 - (2,040) 3,395 - (3,395) - fee shall not exceed the amount corresponding to 140% of the Czech National Bank discount rate times the unpaid loan principal. In addition, the maturity Staff bonuses 35,887 47,343 (49,116) 34,114 43,727 (34,114) 43,727 of the loan was postponed to 31 January 2059. Accrued vacation 12,415 61,102 (65,871) 7,646 13,153 (7,646) 13,153 Guarantee repairs Sikorsky 163,554 3,541 (31,612) 135,483 6,975 (39,891) 102,567 In 2010 and 2009, the changes related to a long-term payable to Salori Holding B.V. were as follows (in CZK thousands): Contractual charges and penalties Latecoere - - - - 4,100 - 4,100 Guarantee repairs CASA - - - - 2,058 - 2,058 Balance as at Waiving of Loan Balance as at Payment of Loan Balance as at Contractual charges and penalties SAAB - - - - 6,000 (3,600) 2,400 31/ 12/ 2008 principal and interest interest 31/ 12/ 2009 principal and interest interest 31/ 12/ 2010 Guarantee repairs Alenia - 979 - 979 155 - 1,134 Loan 409,479 (350,000) - 59,479 - - 59,479 Bank guarantee Egypt 24,250 - (24,250) - - - - Interest 155,403 (20,451) 3,977 138,929 (3,977) 1,453 136,405 Business transaction Sikorsky - 2,000 (2,000) - - - - Total 564,882 (370,451) 3,977 198,408 (3,977) 1,453 195,884 Total 257,794 116,413 (183,182) 191,025 89,234 (88,646) 191,613 In 2009 the loan balance owed to Salori Holding B.V. was reduced due to a partial repayment of the principal and the interest in the amount of CZK 350,000 thousand Sikorsky guarantee repairs and CZK 20,451 thousand, respectively. This extraordinary repayment was approved by Česká exportní banka, a.s. The Company established a provision in the amount of estimated costs for expected guarantee repairs related to the Sikorsky helicopter deliveries. As at 31 December 2010 and 2009, the provision totaled CZK 41,088 thousand and CZK 52,408 thousand, respectively. The interest expense relating to the loan from Salori Holding B.V. for 2010 and 2009 was CZK 1,453 thousand and CZK 3,977 thousand, respectively.
In 2008 a constructional defect affecting 193 Sikorsky helicopters was detected, which was caused by a failure in the implementation of the helicopter design On 4 September 2007, the Company and Salori Holding B.V. concluded a payable subordination agreement concerning the payable that the Company has on the part of the Company. For the sake of prudence, the Company established a provision for the elimination of the constructional defect in the amount to Salori Holding B.V. Pursuant to the agreement, the payable to Salori shall be subordinated to the payable recorded by AERO Vodochody a.s. with respect of CZK 88,893 thousand in 2008. The provision decreased to CZK 83,075 thousand and CZK 61,479 thousand in 2009 and 2010, respectively. to the loans granted to AERO Vodochody a.s. by the bank (Česká exportní banka, a.s.). AERO Vodochody a.s. may redeem the subordinated payable only after it has settled the liability arising from the loan or with a prior bank's consent in writing.
13. CURRENT LIABILITIES
As at 31 December 2010 and 2009, the Company had overdue current payables totaling CZK 11,004 thousand and CZK 51,454 thousand, respectively.
Unbilled deliveries include, in particular, supplies of material and services, which are charged to income for the year in which they were incurred.
Advance payments received as at 31 December 2010 include in particular advance payments from Alenia Aeronautica S.p.A. for the production of aerospace components.
As at 31 December 2010 and 2009 other liabilities comprise in particular negative fair values of outstanding hedging derivatives (see Note 16). Payables to related parties (see Note 22).
66 | | 67 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
14. BANK LOANS As at 31 December 2010, the Company was provided with the following bank guarantees (in CZK thousands):
On 30 July 2010 the Company repaid a loan drawn at Česká exportní banka, a.s. in the amount of USD 54,272 thousand. The loan was repaid from a new loan provided Bank Guarantee Terms Amount by Česká spořitelna a.s., Komerční banka a.s. and Česká exportní banka, a.s. on 23 July 2010 for financing of the Sikorsky program. The limit of agreed revolving Česká spořitelna, a.s. - performance bond non-specified 897 loan is USD 60,000 thousand (CZK 1,125,060 thousand) and the credit limit for purchase of receivables is USD 42,000 thousand (CZK 787,542 thousand). At any time - performance bond non-specified 742 the sum of these two loans may not exceed the limit of USD 92,000 thousand (CZK 1,725,092 thousand). The loans bear a floating interest rate of 1M LIBOR + Komerční banka, a.s. - performance bond non-specified 1,250 margin. Their maturity is set on 22 March 2013. As at 31 December 2010, the drawn down element of the loan was USD 59,125 thousand (CZK 1,108,644 thousand). - performance bond non-specified 1,895 The loans are secured by pledged receivables and rights resulting from the general agreement with Sikorsky Aircraft Corporation; the receivables and rights were - performance bond 08/12 11,277 pledged in favor of Česká spořitelna, a.s. on 23 July 2010. - bid bond 05/11 112,506 Total 128,567 On 23 September 2010 the Company concluded a loan agreement with Česká spořitelna, a.s. and Komerční banka, a.s. for CZK 350,000 thousand. These funds are restricted for financing of a liability arising from a contract for work done (PP-2000 project) effected with the Ministry of Defence of the Czech Republic. A full amount As at 31 December 2009, the Company was provided with the following bank guarantees (in CZK thousands): of the loan (CZK 350,000 thousand) was drawn on 1 October 2010. As at 31 December 2010 the Company repaid CZK 10,000 thousand in compliance with a payment schedule and the remaining balance of the drawn loan was CZK 340,000 thousand. The loan bears a floating interest rate of 1M Pribor + margin. The outstanding Bank Guarantee Terms Amount balance of this loan is CZK 100,000 thousand in 2011 and the maturity of the whole loan is set on 30 June 2013. On 23 September 2010, the Company and Česká Česká spořitelna, a.s. - performance bond non-specified 879 spořitelna, a.s., Komerční banka, a.s. and Česká exportní banka, a.s. entered into a loan agreement on pre-export financing of production of the wing centre section - performance bond non-specified 727 for Alenia Aeronautica SpA. up to EUR 3,000 thousand (CZK 75,180 thousand) and a loan agreement on purchase of receivables up to EUR 2,500 thousand (CZK 62,650 Komerční banka, a.s. - performance bond 09/09 547 thousand). At any time the sum of these two loans may not exceed the limit of EUR 4,500 thousand (CZK 112,770 thousand). The loans bear a floating interest rate of - performance bond 06/10 2,223 1M EURIBOR + margin. Their maturity is set on 23 May 2013 and 23 September 2013. As at 31 December 2010, the Company did not draw the loans. - performance bond non-specified 1,320 - bid bond 06/10 92 On 23 September 2010, AERO Vodochody a.s. and Česká spořitelna, a.s., Komerční banka, a.s. and Česká exportní banka, a.s. entered into a contract for Total 5,788 the establishment of the right of pledge securing the Company's immovable assets with respect to the provided loans (see Note 4b). Pursuant to a general agreement on the provision of financial services and pertinent addenda entered into by and between the Company and Komerční banka, a.s., on 23 September 2009, As at 31 December 2010 and 2009, the Company secured received bank guarantees by cash of CZK 14,422 thousand and CZK 2,926 thousand, respectively the Company was granted an overdraft facility of CZK 70,000 thousand (until 23 June 2011) to temporarily compensate for insufficient funds. The loan interest rate deposited in restricted bank accounts (see Note 8). is O/N PRIBOR actual + margin. The loan was drawn and repaid on an ongoing basis in 2010. The Company did not draw this loan as at 31 December 2010. 15. OTHER LIABILITIES The total interest expense on all received bank loans for 2010 and 2009 was CZK 24,138 thousand and CZK 22,630 thousand in 2010 and 2009, respectively. Based on the loan agreements, the Company is obliged to fulfill the following financial covenants: As at 31 December 2010 and 2009, accruals include in particular outstanding interest to Česká exportní banka a.s., which is charged to income for the year in which it was incurred.
Covenant Calculation Required value As at 31 December 2010 and 2009, deferred income includes in particular revenue from sales related to the Sikorsky contract, which is recognized into income for the year Net debt (Bank loans – current assets) / EBITDA < 3:1 in which it was earned. (Annual net income + amortization/depreciation + change in reserves –change in inventories – change in current Debt coverage ratio >= 120% receivables + change in current payables – CAPEX + interest payments)/(interest payments + bank loan payments) 16. DERIVATIVES Financial leverage (Total assets – loans to related parties)/ Total assets < 50% The Company has concluded several hedging derivative contracts as at 31 December 2010 and 2009. The derivatives were revalued at fair value, with positive As at 31 December 2010, the Company met all the above financial indicators. and negative fair values of the hedging derivatives being included in other receivables and other payables, respectively, and in differences arising from the revaluation of assets and liabilities in the accompanying balance sheet. The following table summarizes face values and positive or negative values of outstanding hedging derivatives as at 31 December (in CZK thousands):
2010 2009 Contractual/ Fair value Contractual/ Fair value (in CZK thousands) Face Positive Negative Face Positive Negative Interest rate contracts Swaps - - - 734,720 - (7,891) Foreign exchange contracts Forwards 171,603 2,695 - 179,790 281 - Total derivatives held for hedging 171,603 2,695 - 914,510 281 (7,891)
Hedging derivatives include derivatives that are designated as hedging instruments of assets and liabilities in a hedge of a foreign currency or interest rate risks and that meet the criteria for hedge accounting.
68 | | 69 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
17. INCOME TAXES 18. LEASES
2010 (in CZK thousands) 2009 (in CZK thousands) The Company leases fixed assets, which are not recorded on the balance sheet (see Note 3i). Profit before taxes 431,377 279,304 Non-taxable revenues (6,651) (3,335) As at 31 December 2010 and 2009, assets which are being used by the Company under operating leases consist of the following (in CZK thousands): Difference between book and tax depreciation (65,747) 75,945 Non-deductible expenses Description Terms Expense in 2010 Expense in 2009 Cost Change in allowances (18,848) (91,604) Information technologies Until 2012 720 660 2,760 Change in provisions 588 (66,769) Shortages and losses 29,819 47,589 Assets which are being used by the Company under finance leases (i.e. the assets are transferred to the Company when the lease term expires) as at 31 December Other (e.g. entertainment expenses) 64,595 51,839 2010 and 2009 consist of the following (in CZK thousands): Taxable profit 435,133 292,969 Tax loss carry-forward (435,133) (292,969) Payments Payments Remaining payments as at 31. 12. 2010 Current income tax rate 19% 20 % Terms/ Total made as at made as at Due within Due over Current tax expense --Description Conditions lease 31. 12. 2010 31. 12. 2009 one year one year Machinery Until 2014 116,628 42,616 14,962 27,014 46,998 In accordance with the Income Taxes Act, the Company can carry forward tax losses generated since 2005 for up to five years. The remaining tax loss carry-forward from the years 2005 through 2006, the benefit of which has not been recognized in the financial statements for the year ended 31 December 2010, 19. COMMITMENTS AND CONTINGENCIES amounted to CZK 59,515 thousand as at 31 December 2010. The Company quantified deferred taxes as follows (in CZK thousands): The Company has a contractual relationship with mediators and records liabilities to them upon the completion of sales contracts. Pursuant to the sale contract, 2010 2009 the Company undertakes to pay the mediator a part of the income realized. It is not possible to determine the amount until contract completion. Deferred tax Deferred tax Deferred tax Deferred tax Deferred tax items asset liability asset liability Under the standard terms of its sales contracts, the Company has a responsibility to make spare parts available for a period between 10-15 years after the date Difference between net book value of fixed assets for accounting and tax purposes 17,132 - 23,226 - of sale. Other temporary differences: Allowance against receivables and advances for inventory 5,322 - 3,490 - As at 8 December 2005, the Company concluded with the Ministry of Defence of the Czech Republic a general agreement for after warranty support for L-159 Allowance against inventory 246,016 - 253,674 - and L-39 aircraft. The contract was signed for a definite period until January 2029. According to this agreement, in the period until January 2029, the Company Allowance against fixed assets 35,210 - 33,396 - is obliged to provide services, maintenance and spare parts for planes already owned by the Army of the Czech Republic, and to assist during their modernization. Provisions 36,406 - 36,295 - In cases of significant breaches of the contractual terms or in case of withdrawal from the contract, the Ministry of Defence of the Czech Republic is entitled to Tax loss carryforward 11,308 - 96,346 - claim a penalty and potential additional compensation from the Company. Under the terms of this agreement, a significant portion of its fixed assets may not be Total 351,394 - 446,427 - freely disposed of (see Note 4b). Net 351,394 446,427 The main production orders are realized on the basis of long-term contracts with suppliers. As at 31 December 2010 and 2009, the commitments arising from The Company has not recorded a deferred tax asset on the basis that its future recovery is uncertain. contracts concluded with suppliers amounted to CZK 568,288 thousand and CZK 849,645 thousand, respectively; of that the supplies for the project Sikorsky totaled CZK 371,907 thousand and CZK 617,722 thousand, respectively. These contracts, as a rule, include a provision stipulating the amount of compensation that the Company is obliged to pay if it fails to fulfill contractual obligations or if it withdraws from the contract. In addition, the suppliers do not accept responsibility for possible subsequent damage caused by an accident.
The Company has concluded liability insurance for its own aviation activity, an accident insurance of aircraft and insurance for damage caused by faulty products. The Company has concluded a combined insurance limit in the amount of USD 250,000 thousand regarding the liability for product within the Sikorsky Program and of USD 75,000 thousand regarding other liability emerging from aeronautical operations for one and all insured accidents arising during the insurance period worldwide. The insurance covers the major risks emerging from the Company's aeronautical operations.
In 1998, the Company together with GEO s.r.o. conducted an environmental audit, the result of which was, inter alia, a quantification of investments required for making the production ecofriendly and for remedy of environmental damage. The cost estimate totaled CZK 248,375 thousand. Based on the Contract for repayment of costs incurred in the settlement of environmental liabilities concluded between the Company and the National Property Fund of the Czech Republic on 12 August 1998, the National Property Fund (currently the Ministry of Finance of the Czech Republic) should cover those costs of the Company which are reasonably incurred up to CZK 2,691,926 thousand, which exceeds the estimate.
70 | | 71 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
20. REVENUES Long-term receivables from related parties as at 31 December were as follows (in CZK thousands): Related party Due dates / Interest rates Amount in original currency (in thousands) 2010 2009 The breakdown of revenues on ordinary activities is as follows (in CZK thousands): Clarex Investments a.s. - loan in EUR 2015/6.10 % 300 7 518 7,940 2010 2009 Penta Investments Limited - loan in USD2013/7.58 % 29,650 555,967 - Domestic Foreign Domestic Foreign Penta Investments Limited - loan in CZK 2013/7.58 % 699,400 699,400 - Aviation production 864,221 1,845,309 386,191 2,433,908 Total 1,262,885 7,940 Non-aviation production 22,372 - 28,081 - The loans provided to Penta Investments Limited were classified as short-term in 2009. Total revenues 886,593 1,845,309 414,272 2,433,908 Short-term receivables from related parties as at 31 December were as follows (in CZK thousands): Převážná část výnosů společnosti za rok 2010 je soustředěna na čtyři hlavní zákazníky v leteckém odvětví (Sikorsky Aircraft Corporation, Ministerstvo obrany Related party Amount in original currency (in thousands) Due dates 2010 2009 České republiky, Alenia Aeronautica S.p.A. a Saab Aeronautics). V ostatních provozních výnosech dále společnost eviduje dotace na provozní účely přijaté ze státního Clarex Investments a.s. - interest in EUR 64 2011 1,601 - rozpočtu ve výši 14 263 tis. Kč v roce 2010 a ve výši 7 197 tis. Kč v roce 2009. Clarex Investments a.s. - advance payment in EUR 328 2011 8,227 - Clester a.s. – interest in EUR 3 2011 81 - 21. PERSONNEL AND RELATED EXPENSES Fortuna Entertainment – trade receivables in EUR 6 2011 146 - Privatbanka, a.s. – accrued interest in CZK 1 2011 1 - The breakdown of personnel expenses is as follows (in CZK thousands): Rotortech Aero Composites Limited – interest in GBP 30 2010 882 - 2010 2009 Letiště Vodochody a.s. - trade receivables in CZK 2,366 2011 2,366 23,061 Total Of which: members of Total Of which: members of Letiště Vodochody a.s. - interest in CZK 5,505 2011 5,505 - personnel managerial bodies personnel managerial bodies Žabka, a.s. - trade receivables in CZK 6 2011 6 - Average number of employees 1,122 13 1,186 13 Total 18,815 23,061 Wages and salaries 432,064 31,204 469,642 35,304 Social security and health insurance 144,503 6,995 139,641 4,718 Short-term loans provided to related parties as at 31 December were as follows (in CZK thousands): Social cost 9,778 328 10,590 326 Related party Amount in original currency (in thousands) Due dates 2010 2009 Other social security - - 2,150 - Clarex Investments a.s. – loan in EUR 655 2011 16,408 2,249 Bonuses to statutory representatives 350 60 360 360 Clester a.s. – loan in EUR 167 2011 4,184 - Total personnel expenses 586,695 38,587 622,383 40,708 Letiště Vodochody a.s. – loan in CZK 100,000 2011 100,000 41,000 Penta Investments Limited – loan in USD29,650 2010 - 544,611 The members and former members of statutory and supervisory bodies received total bonuses and other remuneration of CZK 350 thousand and CZK 360 Penta Investments Limited – loan in CZK 85 2010 - 789,400 thousand in 2010 and 2009, respectively. Technometra Radotín, a.s. – loan - 2010 - 50,000 Total 120,592 1,427,260 22. RELATED PARTY INFORMATION In 2010 and 2009, the Company received interest on receivables from related parties totaling CZK 106,231 thousand and CZK 69,937 thousand, respectively. As at The majority shareholder of AERO Vodochody a.s. is TULAROSA a.s. TULAROSA a.s. is owned by Penta Investments Limited, Cyprus, which owns shares in other 31 December 2010 and 2009, the Company recorded a deposit in related party Privatbanka, a.s. of CZK 231,663 thousand and CZK 68,153 thousand, respectively. companies both in the Czech Republic and abroad, and with which AERO Vodochody a.s. has no significant trading and other activities, except for Privatbanka, a.s., The Company purchases products and receives services from related parties in the ordinary course of business. Purchases were CZK 81,521 thousand and CZK Salori Holding B.V. and Penta Investments Limited. The members of statutory and supervisory bodies, directors and executive officers were granted no loans, 127,191 thousand in 2010 and 2009, respectively. guarantees, advances or other benefits in 2010 and 2009 and they do not hold any shares of the Company. Benefits of certain members of the Company's statutory bodies and management consist of the use of automobiles for private purposes. The Company sells products, goods and provides services to related parties in the Short-term payables to related parties as at 31 December were as follows (in CZK thousands): ordinary course of business. Sales including interest income were CZK 136,457 thousand and CZK 107,457 thousand in 2010 and 2009, respectively. Related party Due dates 2010 2009 Technometra Radotín, a.s. 2010 2,933 197,182 Summary of changes in receivables from related parties: Rotortech Aero Composites Limited 2011 2,233 943 Fortuna Game, a.s. 2011 15 14 Balance as at Balance as at Balance as at Penta Investments Limited o.z. 2011 204 283 31. 12. 2008 Increase Decrease Revaluation 31. 12. 2009 Increase Decrease Revaluation 31. 12. 2010 Letiště Vodochody a.s. 2011 335 58 Long- and short-term Clarex Investments a.s. 2011 1 - receivables from group 905,263 1,243,419 (686,349) (27,133) 1,435,200 623,727 (686,073) 10,623 1,383,477 Total 5,721 198,480 companies with majority control A liability to the subsidiary Technometra Radotín, a.s. as at 31 December 2009 arose from the transfer of fixed assets and inventory in December 2009.
Long-term payables to related parties as at 31 December were as follows (in CZK thousands): Related party Terms/Due dates 2010 2009 Salori Holding B.V. 2059 195,884 198,408 Long-term payables to Salori Holding B.V. relate to the payable from loan and interest (see Note 12).
72 | | 73 annual report 2010 AERO Vodochody a.s. | notes to the financial statement
Notes to the financial statement
23. RESEARCH AND DEVELOPMENT COSTS 25. GOING CONCERN
Research and development costs amounted to CZK 43,541 thousand and CZK 39,266 thousand in 2010 and 2009, respectively, and were expensed as incurred. The Company's production portfolio consists of two main production programs. The Military Program comprises the project L-159 and overhauls of earlier types of aircraft. The Program of the Aerospace Cooperation includes mainly the production of the S-76C+ and S-76D helicopters and the UH-60M Black Hawk 24. SIGNIFICANT ITEMS OF INCOME STATEMENT helicopter cabin for the American company Sikorsky Aircraft Corporation, production of the wing centre section of the C-27J Spartan aircraft for Alenia Aeronautica S.p.A., production of carriers for JAS-39 Gripen aircraft for Saab Aeronautics as well as other cooperation with leading global aerospace producers (Latecoere, In 2010 and 2009, other operating revenues comprise in particular revenues from sale of receivables (see Note 6). Sonaca, Spirit Aerosystems, EADS and others).
In 2010 and 2009, other operating expenses include in particular the nominal value of sold receivables (see Note 6), shortages and damages and insurance fees. The only one contractual partner of the production program L-159 is the Ministry of Defence of the Czech Republic. As at 8 December 2005, the Company has concluded with the Ministry of Defence of the Czech Republic a general agreement for after warranty support for the aircraft within which the Company would In 2010 and 2009, other finance income and expense consist mainly of foreign currency gains and losses. provide services, maintenance and assist in the modernization of the fleet and deliveries of spare parts. The contract was signed for a definite period until January 2029. Since the beginning of the production of the L-159 aircraft, the Company sold a total of 72 planes to the one and only customer (i.e. to the Ministry Statutory auditor's fees as at 31 December were as follows: of Defence of the Czech Republic). The Company has been concentrating on possible sales of the unused L-159 aircraft of the Army of the Czech Republic and on upgrading of the specified number of aircraft to the L-159T1 advanced training aircraft for the Army of the Czech Republic. Services 2010 2009 Statutory audit 2,138 2,250 Until 2008, the production of helicopters for the Sikorsky Aircraft Corporation had a growing trend. Based on placed orders, the number of produced helicopters Total 2,138 2,250 decreased in 2009 and 2010. In 2011, the Company will continue to produce the S-76C+ and S-76D versions of helicopters; a planned number of produced helicopters is 6 and 19 pieces. Based on the cooperation agreement with the Italian aircraft producer Alenia Aeronautica S.p.A., the Company will supply 9 pieces of the centre section of the wing for the C-27J Spartan transportation aircraft in 2011. The production will continue of 18 carriers for JAS-39 Gripen aircraft for Saab Aeronautics, 10 sets of leading edge of wing for Boeing 767 and 46 pieces of cannon doors for Boeing. The Company will continue to supply hinges and inner construction of doors for regional transportation jet planes Embraer 170 and Embraer 190, in the volume of 94 shipsets based on the contract with Latecoere Toulouse. In addition, the Company sees perspectives in the cooperation with the Belgian company SONACA on the development of a part of the wing for the C-Series aircraft for the Canadian producer Bombardier, and prepares to deliver the planned 9 cabins for the UH-60M Black Hawk helicopter for the Sikorsky Aircraft Corporation.
26. STATEMENT OF CASH FLOWS (SEE APPENDIX 1)
The cash flow statement was prepared under the indirect method.
27. STATEMENT OF CHANGES IN EQUITY (SEE NOTE 10)
74 | | 75 annual report 2010 AERO Vodochody a.s. | report on relations between the related entities
Report on relations between the related entities
Report on related parties Report of the Board of Directors of AERO Vodochody a.s. according to provision of Section 66a of the Act No. 513/199, Coll. the Commercial Code SECTION V. OTHER LEGAL ACTS BETWEEN RELATED PARTIES
SECTION I. CONTROLLED AND CONTROLLING PARTY No other legal acts are known to the Company carried out in the interest of the related parties.
CONTROLLED PARTY SECTION VI. OTHER MEASURES BETWEEN RELATED PARTIES AERO Vodochody a.s., Seat at Odolena Voda, Dolínek, U Letiště 374, Postcode 250 70, Identification No.: 00010545 Registered in the Companies Register maintained by the Municipal Court in Prague, Section B, File 449, (further referred to as “Company”) No other measures were carried out in the interest of the related parties to the knowledge of the Company.
CONTROLLING PARTY SECTION VII. CONCLUSION Penta Holding Limited Seat at Agias Fylaxeos & Polygnostou 212, C&I Center, 2nd floor; Limassol, Cyprus Republic, Registration No.: HE 101 570 The Board of Directors of AERO Vodochody a.s. states that it proceeded with all due diligence of a manager to establish the circle of related parties for the purpose of this report: by consulting the controlling parties, both in the period before and after the change in the owner of the Company, regarding the circle SECTION II. RELATED PARTIES of parties, which were controlled by these parties in the given period.
Related parties are represented by the Company and parties directly and indirectly controlling, and companies controlled by the controlling party, i.e. from The Board of Directors of AERO Vodochody a.s. proclaims that all fulfillments, considerations respectively, which were provided on the basis of the relations January 4, 2007 parties controlled by Penta Holding Limited. mentioned in Sections IV. – VI. of this report, were in a customary amount. This report was presented for review to the Supervisory Board and to the auditor, who will perform the audit of the financial statements as required by a special law. SECTION III. DECISIVE PERIOD
This report was elaborated for the period from January 1, 2010 to December 31, 2010. In Odolena Voda, March 14, 2011 SECTION IV. CONTRACTS AND AGREEMENTS CONCLUDED BY RELATED PARTIES Ing. Ladislav Šimek, MBA Petr Brychta In the decisive period, the following contracts between related parties were signed: Chairman of the Board Member of the Board Contract Date of Provided Gained AERO Vodochody a. s. AERO Vodochody a.s. Party Name Signature Performance Performance Duration Detriment Penta Investments Limited Amendment no. 5 to Loan Facility Agreement signed on 26.6.2007 27.1.2010 Prolongation of loan Prolongation of loan 30.7.2010 None Penta Investments Limited Amendment no. 6 to Loan Facility Agreement signed on 26.6.2007 30.7.2010 Prolongation of loan Prolongation of loan 22.3.2013 None Penta Investments Limited Amendment no. 6 to Loan Facility Agreement signed on 26.6.2008 27.1.2010 Prolongation of loan Prolongation of loan 30.7.2010 None Penta Investments Limited Amendment no. 7 to Loan Facility Agreement signed on 27.6.2009 30.7.2010 Prolongation of loan Prolongation of loan 22.3.2013 None Penta Investments Limited, Amendment no. 3 to Loan Facility Agreement no . 21559 28.1.2010 Prolongation of loan Prolongation of loan 31.7.2010 None Tularosa a.s., Salori Holding B.V. Penta Investments Limited, Preexport loan Project Support Agreement 23.7.2010 31.3.2013 None Tularosa a.s., Salori Holding B.V. funding for SAC Agreement on foundation Foundation of rights of Penta Investments Limited of rights of lien regarding receivables 2.8.2010 lien regarding receivables 23.9.2010 None of intercompany loan contracts – intercompany loans Penta Investments Limited, Expiration of Agreement on expiration of rights of lien 23.9.2010 None Tularosa a.s., Salori Holding B.V. rights of lien Agreement on foundation Foundation of rights of Penta Investments Limited of rights of lien regarding receivables 23.9.2010lien regarding receivables 31.3.2013 None of intercompany loan contracts – intercompany loans Insurance contract „F“ Preexport loan Penta Investments Limited, No. 125007536 23.10.2010 insurance 31.3.2013 None Tularosa a.s., Salori Holding B.V. for insurance of preexport loan from EGAP Penta Investments Limited, Preexport loan Project Support Agreement 23.9.2010 None Tularosa a.s., Salori Holding B.V. funding for Alenia Penta Investments Limited, Subordination of liabi- Subordination Agreement 23.9.2010 31.3.2013 None Tularosa a.s., Salori Holding B.V. lity to comp. Salori Penta Investments Limited, Agreement between Intercreditor Agreement 23.9.2010 31.3.2013 None Tularosa a.s., Salori Holding B.V. creditors Amendment No. 1 to the Share Purchase Option for S-B Penta Investments Limited 16.12.2010 30.7.2011 None Agreement dated July 31, 2009 of company
76 | | 77 F/A-18 Super Hornet
AERO HAS PARTICIPATED IN THE PRODUCTION OF THE F/A-18 SUPER HORNET SINCE 2001. FOR ITS AMERICAN CUSTOMER, BOEING INTEGRATED DEFENSE SYSTEMS LOCATED IN ST. LOUIS, AERO DELIVERS GUN BAY DOORS. IN AUGUST 2008, AERO DELIVERED ITS 300TH UNIT. THE PROGRAM COMPRISES DETAILED PARTS FABRICATION, SURFACE TREATMENT AND FINAL ASSEMBLY OF GUN BAY DOORS - READY FOR INSTALLATION ON THE AIRCRAFT. AERO Vodochody a.s. U Letiště 374 250 70 Odolena Voda www.aero.cz
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