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Efficiency Do it. Right.

A N N U A L R E P O R T

2014

T h e t i t l e o f t h i s y e a r ’s A n n u a l Re p o r t s h o w s t h e a u to m a t i c b l a n k i n g p r e s s M S C-2 0 0 0 , w h ich i s th e w o r l d ’s f i r s t l in e w i th t w o e le c t r i c a l l y co up le d an d f reely pr ogr ammable pre s sure po int s . Together w i th the l ack of gear t r ansmis s ion an d th e u s e o f r o l ler b e ar in g s , th i s c u t s e le c t r i c a l p o w er co n sumpt io n b y m o r e th an 5 0 p er cent .

Output up, energy consumption down. Amazing things can be

achieved by enhancing efficiency (“doing things right”) and effec

tiveness (“doing the right things”). Schuler’s employees in design, en

gineering, production, and service focus on both. They continually

strive for maximum machine availability, the bestpossible pro duct

quality and the highest output levels with the lowestpossible part

costs. Schuler’s sustainability program Ecoform shows that while

output performance is growing strongly, energy consumption is

falling. Economy and ecology in perfect harmony. How? On the

following pages, Schuler employees present selected projects and give

insights into the world of forming technology.

Efficiency Do it. Right.

Conserving resources 04

Optimizing quality 12

Improving performance 20

Raising efficiency 24

Growing together 28

04

12

Good enough simply isn’t good enough.

Knowing how.

Schuler’s contribution to re source eff iciency and sustain ability with its Ecoform program is presented in an interview with Dieter Reisch.

Dr. Dirk Haller knows how the perfect press hardening die can reverse the weight spiral in car manufacturing.

Conser v ing resources

Optimizing qual i t y

Contents

S C H U L E R A N N U A L R E P O R T2014

02

C O N T E N T S

28

20

24

More is more.

Doing things right.

Enhanced product iv it y and in creased output with rel iable processes: Karol ine Kneitz and Markus Bieg present f ive examples of per formance improvements .

CEO Stefan Kleber t looks back on a successfu l year and looks forward to interest ing prospects for fur ther grow th in new and ex ist ing markets.

Growing together

Improv ing per formance

Prevention is better than cure.

There is nothing more expensive than unschedu led press shop downtime. Nicole Buck reports on prompt service, maximum spare part availability, modernization and prevention delivered by our Service team.

Rais ing ef f ic iency


03

C O N T E N T S

A n i n t e r v i e w w i t h D i e t e r R e i s c h

a b o u t r e s o u r c e e f f i c i e n c y

Good enough

simply isn’tgood enough.

Energy efficiency and sustainability are key topics for Schuler – and have been since 2008.

Dieter Reisch, head of control technology for the Schuler Group and responsible for energy

management, discusses the possibilities for saving energy and conserving resources in the

metalforming industry.

05


C O N S E RV I N G R E S O U RC E S

“Re source ef f ic ienc y i s def in i te ly an innov at ion

dr i ver for S chuler.”D ie ter Re is ch

Is the conservation of natural resources more than just a buzz-word, Mr. Reisch?

Definitely. On the one hand, we owe it to the environment and future generations, and on the other hand, our customers are calling for efficient solutions. After all, rising energy prices ultimately affect part costs. Resource efficiency is definitely an innovation driver for Schuler. Our Ecoform sustainability program pools all measures designed to increase the energy efficiency of our products – and generally also raise output.

D.R.D.R.


06


Are you saying that Ecoform can actually save energy in the press shop?

Yes – by up to 60 percent on average. We achieve these impressive sav ings by taking a holistic approach – from the analysis and optimization of existing machines to the development of new methods, subassemblies and system solutions. The aim is to conserve all resources and reduce energy consumption while maintaining or often even raising productivity.

Are there any real-life examples of this? We can point to numerous projects in the field of sheet metal form

ing, forging and automation. Compared to conventional hydraulic presses, for example, EHF technology (Efficient Hydraulic Forming) can achieve energy savings of up to 60 percent. The latest generation of servo press lines onsume up to 50 percent less energy: They have their own DC power supply (Schuler Smart DC Grid), variablespeed and regenerative drive systems, intelligent standby and pause switching, as well as energy efficient components like Schuler’s Energy Saving Cushion. As well as shedding half its former weight, the intelligent energy management system and integrated energy recovery of the new Crossbar Robot 4.0 for automating press lines make it up to 50 percent more energy efficient than its predecessor.

Which current innovation is the most impressive in terms of energy efficiency?

Our MSC2000 is a prime example of how you can achieve significant energy savings. The new automatic blanking press has done away with almost all auxilary equipment. There is no lossy transmission and no circulating oil system, and therefore no lubrication unit. With its direct drive concept, the drive power can be reduced to a minimum with the same forming performance. Compared to previous, similar systems, the energy savings of the MSC2000 are around 50 percent.

Which factors are still left to influence energy consumption?On the one hand, efficient components such as motors and drives.

And on the other hand, intelligent control systems that can shut down a machine in standby mode or actively control the energy needs and supply of linked systems, for example. Above all, however, by taking a holistic approach and optimizing production processes.

D.R.

D.R.D.R.

D.R.

D.R.

07



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Efficiency across the board: potential of ServoDirect Technology

ServoDirect Technology is supporting energy saving in press shops. With their freely programmable timemotion sequences, and higher productivity as a result, and highly precise tryout functionality, servo presses are much more energyefficient in the field of automotive manufacturing than similar flywheel machines (blanking press, tryout press, press line, transfer press).

The ongoing development of ServoDirect Technology has now resulted in a further significant increase in energy efficiency.

ECOFORM–

SUSTAINABLEFORMING

SOLUTIONS

H a l v i n g e l e c t r i c i t y c o s t s – c o r r e s p o n d s t o a n n u a l c o n s u m p t i o n o f 7 5 0 f o u r - p e r s o n h o u s e h o l d s .

million kWh3 –



08

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- 240.000 euros

Reducing energy consumption in production not only helps conserve resources but also raises economic efficiency. In the case of a latestgeneration servo line, for example, energy savings of approx. 0.75 kWh per production stroke can be achieved compared to a firstgeneration servo line. This leads to a reduction in annual operating costs of around 240,000 euros (at 4 million production strokes per year and electricity costs of 0.08 €/kWh).

A n n u a l c o s t s a v i n g s o f a r o u n d 2 4 0 , 0 0 0 e u r o s a t 4 m i l l i o n p r o d u c t i o n s t r o k e s p e r y e a r a n d e l e c t r i c i t y c o s t s o f 0 . 0 8 € / k W h .

– 22 %

– 03 %

– 25 %

by us ing inte l l igent s tand-by and pause s w i tch ing

by using Energy Sav ing Cushion

– 50 %

by us ing ow n DC net wor k

Ener g y C onsumpt ion based on the f i r s t gener at ion of ser vo pr e s s l ine s .



09

“We are capable of improving the energy requirements of all key methods, processes and system solutions in the

field of metalforming technology.”

Dieter Re isch


10


Can the energy consumption of installed equipment also be optimized?

Absolutely. New energyefficient components, improved motion profiles on the lead angle, intelligent control systems and the optimization of all processes can significantly reduce the consumption of installed systems while improving their output. Major savings can be achieved, for example, with the newly developed energysaving concept for die casting equipment. Several major automotive manufacturers and suppliers were able to reduce the energy requirements of their equipment by an average of 30 percent – also by optimizing software. This corresponds to a payback period of just a few months.

D.R.

Legal regulations often require certificates. How does Schuler help its customers in this field?

We were the first press manufacturer to supply an energy performance certificate for many machines. This documents precisely the power consumption at different stroke rates and lifting heights, or at different cycle speeds and transport steps. That is unique to Schuler. However, the new industry standard ISO 14955 will soon determine which criteria are relevant for the measurement of energy consumption. This will provide transparency – and put Schuler in a very strong position.

D.R.

T he new l inear hammer w i th ser vo technolog y c an r educe ener g y consumpt ion by 2 0 percent compar ed to

convent ional for g ing hammer s .

– 20%

11



A s e r i e s o f p h o t o s o n l i g h t w e i g h t c o n s t r u c t i o n

E v e r y t h i n g c a n

a l w a y s b e

d o n e b e t t e r

t h a n i t i s

b e i n g d o n e .

D o n ’ t f i n d

f a u l t , f i n d a

r e m e d y .

Henry Ford

12


O P T I M I Z I N G Q U A L I T Y

The key to utmost quality in metalforming is the perfect die in the press. Schuler serves its customers along

the entire process chain – from component drawing to mass manufacturing. Our press lines and dies, our

process expertise and our services make us the preferred supplier for the automotive industry as well as

many other industries. We ensure utmost part quality and efficient solutions.

“ T he path to the per fec t par t beg ins w i th i t s par t development .”

D r. D i r k Ha l ler

Knowing how.

13



1E n g i n e e r i n g

The path from product idea to finished part begins with component development. Together with our customers, we develop parts and materials in a simultaneous engineering process. At this early stage, feasibility studies show how forming technology can optimize components to ensure subsequent troublefree production. Computerbased simulation of the forming process enables engineers to precisely predict the behavior of materials and dies in the press and what metalforming sequence will lead to the desired part. By simulating the movements of press, automation and die – together with studies of the production sequence in the early design stage – the output performance of the entire press line can be significantly enhanced. Automation components such as feeders and transfer devices, as well as freely programmable slide motions thanks to ServoDirect Technology, can also be included in the simulation. This results in shorter development times and higher output rates.

2D i e c o n s t r u c t i o n

What counts is experience. Whether powertrain or body part, whether highstrength steel or aluminum – Schuler is at home in all, leading topics of lightweight car manufacturing. At its center of excellence in Weingarten, for example, numerous dies are designed and built for the highly complex gear parts of modern dualclutch transmissions. At its Göppingen facility, Schuler’s engineers can meet all requirements of the automotive body shop. Tailored dies enable minimal clearances, razorsharp design contours, and crashsafe structures. New dies are tested and prepared for series production on tryout presses. At the customer’s request, Schuler can also take on the prototyping and preproduction of selected components.

3S e r i e s p r o d u c t i o n

Process consulting and startup support pave the way for series production. Schuler’s experts guarantee extremely high part quality and can also train the customer’s personnel. Whether it’s a new die for an existing machine or a completely new press line – our teams of experts are always on hand to provide answers to everyday questions. Even after series production has started: Schuler Service provides solutions throughout the entire life cycle

– from preventive maintenance to press retrofits. And, of course, dies, transfer devices and automation components can be further optimized while production is running – ensuring maximum output and minimum part costs. Schuler’s experts analyze processes and give tips on how to optimize them.

Creating added value.

Ef fec t

Raise outputReduce development times

14



C ons tant ly opt imiz ing a l l aspec t s o f the

pr oduc t ion pr oce s s to ensur e max imum

output and min imum par t cos t s .

15



Bl ank s ar e heated in a f ur nace and then for med and har dened in a coo led d ie .

16



Ef fec t

Increase rigidityDecrease weight

17



In the “ ta i lor ed temper ing” pr oce s s , only par t o f the component i s har dened .

T h is make s the B-p i l l ar, for example , r ig id in the middle but defor mable at i t s ends .

D em an d fo r p r e s s h ar den e d p ar t s( in mi l l i o n s )

2016e

2010

1997

600 124 8

18

It seemed like a law of nature: In the automotive industry, each successive model generation was longer, wider – and heavier. It was the Golf VII that finally put an end to this “weight spiral.” For the first time, it was actually lighter than its predecessor. Strict adherence to lightweight construction methods and processes such as press harden ing play a decisive role in this reversal.

Press hardening, with Schuler’s own PCH development (Pressure Controlled Hardening) as an example, is a market of the future. Whereas around eight million car parts were produced using the press hardening process in 1997, the number had grown to 124 million by 2010. The University of Kassel expects demand to increase fivefold to 600 million units by 2016. In the Golf VII, for example, the proportion of hotformed steel body parts is already 26 percent, and in the new Volvo XC 90 as much as 40 percent. And this success is hardly surprising: After all, press hardening can achieve the same or often better body part strength than conventional forming methods – but with less material and thus less weight. Schuler has designed, built and supplied numerous press hardening dies for series production – including for Fiat in Italy, Proton in Malaysia and Chinese suppliers such as SSDT and Huaxiang.

In the press hardening process, blanks are heated in a furnace to over 900 °C, then formed, cooled and hardened under pressure in a tempered die. The factors influencing the cooling time include the heat transfer between blank and die, the thermal conductivity of the die and the energy dissipation. In turn, this process is influenced by the size, form

and number of cooling channels, the temperature of the cooling medium and the flow through the channels.

Optimum contact between the active die parts and the sheet metal blank, together with an effective cooling system, is crucial for part quality and output in the press hardening process. This requires sophisticated engineering, as well as precision die making and experienced tryout personnel. In the case of Schuler’s own PCH technology, a consistently high contact pressure is applied to all components. This results in very short cooling and cycle times with excellent part quality and maximum availability.

Schuler is constantly working on the further development of the press hardening process. Together with Audi, Daimler, the Fraunhofer Institute IWU and ThyssenKrupp, Schuler conducts research as part of the group project, “Flexible heat treatment for the targeted promotion of component properties and to increase the energy efficiency of the hot forming process chain.” Partially funded by

the German Federal Ministry for Education and Research, the focus was placed on such components as the Bpillar of cars. These should be as rigid as possible in the middle, but deformable at the ends in order to absorb energy on impact. This is achieved by socalled “tailored tempering.” In this case, only part

of the component is hardened. The die is divided into different temperature zones so that the temperature can be precisely controlled.

Once again, the quality of the overall system is decisive for the functionality and performance of the component.

Reversing the weight spiral.

900°CBl ank s heated to th is

temper atur e ar e for med in a pr e s s dur ing the

pr e s s har dening pr oce s s .

19



More is more.

“Forging hammers were previously driven either hydraulically, pneumatically or by a flat belt. Schuler’s new linear hammer, however, has a linear motor at its heart. The new drive techno logy offers maximum f lexibility in adapting to increasingly specialized application areas and processes in forging.”

Mar kus BiegHead of For g ing Bus ine s s Uni t , S chuler P r e s sen GmbH Weingar ten


I M P RO V I N G P E R FO R M A N C E

A r e p o r t o n o p t i m i z a t i o n i n t h e p r e s s s h o p

b e t t e r5 x

“Together with our customers, we develop parts and materials in a simultaneous engineering process. At this ear ly design stage, we can al ready lay the foundation for maximum output and quality. We pay close attention to the entire press line. Servo Direct Technology may be the key to increased output, but this speed advantage is soon lost if the automation components aren’t adapted.”

K ar ol ine K ne i t zAutomot i ve De s ign , S chuler P r e s sen GmbH Weingar ten

21

1Car manufacturing

The production of a vehicle starts in the press shop, where body parts are manufactured. The performance of press shops has been carefully scrutinized for quite some time. The quest for everhigher productivity in all areas has long been the holy grail of the auto industry. Output over the year and thus cost per part are the standard by which a press is judged.

Speed record. In mid2014, a premium, German car manufacturer launched production on the world’s fastest press line for body parts. With a total press force of 7,600 metric tons, the compact press reaches up to 23 strokes per minute in permanent operation – a good eight more than a conventional press. The record holder is equipped with Schuler’s ServoDirect Technology. This technology not only stands for high output levels, but also flexibility, energy efficiency and low part costs. Schuler’s ServoDirect Technology ensures maximum adaptability to more specialized applications and eversmaller batch sizes and fast product changes. Due to the variety of models in modern car manufacturing, OEMs prefer universal servo press

lines and often have 10 to 12, die changes per day.

Keeping pace. ServoDirect may be the key to higher output, but such high speeds are useless without automation components that can keep pace. This is why the record press line also features a new Crossbar Feeder, which can quickly and reliably transport double, and even four fold parts between the different press stations.

Three times as fast: Automation technology shortens the die change intervals from almost 10 to under three minutes and allows troublefree and reliable changeovers. This is yet another significant contribution toward maximizing the line’s overall productivity.

2White goods

Citing components for washing machines and dryers as an example, these are generally produced on a ServoDirect press with 1,600 metric tons of pressure. In transfer operation, the line reaches 24 or more strokes per minute – for instance, for the manufacture of washing drum shells made of chrome steel. A conventional flywheel press was previously only able to reach about 16 strokes. ServoDirect Technology has thus resulted in an output increase of 50 percent.

3Blanking and forming

The new MSC 2000 automatic blanking press is the first to feature ServoDirect Technology. This raises the speed and therefore increases the output performance in oscillating mode. Together with the lack of gear transmission and the use of roller bearings, this cuts electrical power consumption by more than 50 percent. Users can easily monitor this; press data can be accessed from anywhere, such as via smartphone. The new linear hammer is

Faster, cheaper, better:

Productivity hikes and high performance are at the top of our customers’ wish lists.

In many various industries, working together with the customer,

Schuler’s project teams prove how these targets can be met. Karoline Kneitz and

Markus Bieg show just what’s possible with the aid of five examples.

T he a im – to w in the r ace aga ins t t ime:

le s s t ime per pr oduc t ion c yc le impr ove s ener g y

ef f ic ienc y.

22



equally impressive. Forging hammers were previously driven either hydraulically, pneumatically or by a flat belt. Schuler’s new development, however, features a linear motor. The new drive techno logy offers maximum f lexibility in adapting to increasingly specialized application areas and processes in forging. The elimination of die todie blows means a reduction in the total number of forging blows – thereby reducing cycle times and the energy needed for forming. As a result, energy efficiency can reach up to 70 percent.

4Electrical industry

The analysis tool eCon calculates how laminations for electric motors (rotors and stators) can be manufactured more economically with the aid of controlled dies for notchers. Using a variety of operating parameters, the tool can precisely calculate the breakeven point. The result: Above an annual output of 100,000 rotor and stator laminations, the investment in a controlled die pays off after just half a year. This

is achieved through a reduction in unit costs by up to 10 percent and raising capacity by 15 percent.

5Existing lines

Presses and forming lines have long lifetimes – decades if well maintained. Schuler also has solutions in this field. On the following pages, Nicole Buck explains how the performance of existing lines can be improved.

T he new MS C 2 0 0 0 automat ic b l ank ing pr e s s is the f i r s t to featur e S er voDir ec t Technolog y. I t s l ack of gear

t r ansmis s ion and r o l ler bear ings r educe s e lec tr ic a l power consumpt ion by mor e than 5 0 percent .

– 50%S C H U LE R A NN UA L RE P O RT

2014

23


A b r i e f o v e r v i e w o f

S c h u l e r ’ s s e r v i c e c o m p o n e n t s .

Prevention is better than the

cure.

resourceefficient way, Schuler also offers a wide range of services for optimizing the energy consumption of existing press and automation systems.

Service à la Carte.

Schuler’s individually tailored service contracts meet customer needs for process reliability and part quality, and for availability and performance of equipment. Customers can decide which particular level of support best fits their particular strategy. Basic packages raise operating reliability

and guarantee fast support in the case of any machine malfunction. With the corresponding contract extensions, customers can opt for such useful addons as the 24/7 Hotline & Remote Service. The economic and functional efficiency of machines can be raised significantly by the work of Schuler’s process experts. Following a detailed onsite analysis of the customer’s production processes, they can give valuable advice on how to achieve improvements. Should they identify a need for further staff training, this can be addressed by the services offered of the Schuler Academy.

Remote but very close.

Schuler’s Hotline & Remote Service Center gives it the edge when it comes to response times, remote diagnostics and remote maintenance. Schuler’s experts establish a secure data connection (VPN tunnel) with the machine’s control system and can swiftly remedy any defects in most cases – thus saving customers from the much higher costs generally associated with onsite technicians. The VPN connection can also be used to upload new software releases at the press of a button.

Prevention rather than repair.

When it comes to preventing unscheduled machine downtime, preventive maintenance and regular servicing are indispensible. Schuler’s preventive maintenance and servicing concept involves first assessing all machine components with regard to their theoretical service lives and then classifying them according to their fault potential. Critical components are then replaced during scheduled downtime according to set maintenance intervals. The accompanying condition monitoring of the machine plays an additional, important role in ensuring maximum process reliability.

From old to new.

With the aid of targeted feature enhancements and refits, Schuler Service can significantly increase the manufacturing quality, availability and performance of even aging equipment. Services range from the moderni zation of electrical, mechanical and control systems to the optimization of automation equipment and drawing cushions. In order to ensure that customers can continue to operate their aging equipment in the most economic and

Nothing is more expensive than unscheduled downtime. Whether a stand-alone system or complete

press line, customers expect fast response times and a high level of spare part availability

from Schuler. Teams of experts around the globe are always on hand for repair and maintenance work

– if necessary 24 hours a day, seven days a week. A total of 900 skilled service personnel, globally.

The high availability of spare parts is guaranteed by a sophisticated logistics concept.

“ We ta i lor our ser v ice contracts to the customer’s

indi v idual needs .”

Nico le Buck , S er v ice s a le s eng ine er, S chuler P r e s s en GmbH

G öpp ingen

A r ound 9 0 0 ser v ice s taf f ar e av a i l ab le

ar ound the c lock .

24 7

25

R A I S I N G E F F I C I E N C Y S C H U LE R A NN UA L RE P O RT2014

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S chuler o f fer s a comp el l in g p r e v en - t i v e m a inten ance co ncept fo r Cr o s sb ar Ro b ot s . D ep en d in g o n th e r e sp e c t i v e l i f e c y c le , s er v ice te chn ic an s exch an ge in d i v idua l p ar t s o r co mp o n ent s , co m -p le te m o dule s o r w h o le un i t s . T h is s ig -n i f i c ant l y sh o r ten s th e n e ce s s ar y d o w nt im e s .

C o ntr o l un i t r e f i t s c an qu ick l y b r in g a m ach in e up - to - date – a s w e l l a s a l lo w in g r em ote acce s s an d co n d i t i o n m o n i to r in g .

1985

T he mechanic al e lement s of a pre s s c an a l so be opt imized – the l ate s t gener at ion of mo dular dr aw cushions , for example, ensure greater re l iab i l i t y, and smoother mot ions re sul t ing in le s s wear.


R A I S I N G E F F I C I E N C Y

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RetroFitThe older the press, the less its

potential is used. Schuler effectively addresses this by offering a wide range of retrofit services to optimize both press and production process. Retrofits save costs, raise productivity and resource efficiency, and optimize processes.

2015

RETROFIT– THE SCHULER UPGRADE FOR PRESSES


R A I S I N G E F F I C I E N C Y

27

With sales of around € 1.18 billion and an EBITA margin of 8.8%, we made much stronger progress than expected in fiscal year 2014. Due to this encouraging performance and positive one-off effects from our largely implemented efficiency enhancement program, we were able to raise our guidance for both sales and earnings. At the beginning of the year, we forecast sales of around € 1.1 billion and an EBITA margin of between 6 and 7%.

Whereas new orders in the sector as a whole rose by an average of 1%, we succeeded in raising new orders for our products by 2.6% compared to fiscal year 2012/13. There was significant growth in Asia, including one of largest orders in the company’s 175-year history. We also received our largest-ever service order as well as important orders in new market segments, such as two plants for the manufacture of large pipes. The proportion of sales generated outside the automotive sector is now much higher than five years ago. We are thus steadily reducing our dependency on individual industries.

Energy efficiency and sustainability were a major innovation driver for Schuler in the past year. With our “Ecoform” sustainability program, we have bundled all measures for raising energy efficiency. In certain cases, the energy consumption of our new developments has been reduced by up to 60%.

D o i n g t h i n g s r i g h t .

L E T T E R T O T H E S H A RE H O L D E RS


28

G RO W I N G T O G E T H E R

We also aim to improve our internal processes. As a result, we continued to work hard on implementing our strategic and growth program “Growing Together 2.0.” One major step in 2014 was the introduction of a new production concept and the opening of our Shared Service Centers in Germany. At the same time, we continued to drive the Group’s internationalization and expansion of value added in China.

As of October 30, 2014, the Schuler share is no longer traded on the Regula ted Market. This delisting was sought by us and is in the interests of the company. With our current shareholder structure, we can achieve significant cost savings by avoiding the extensive disclosure obligations of listed corporations.

We are confident about the prospects for fiscal year 2015. Our order backlog is stable at above the € 1 billion-mark. There is a good level of project activity around the world and economic growth is expected to gain slight momentum – albeit not without risks. As the technological leader in forming technology, we want to extend our lead in the premium segment and expand our portfolio in the mid-price product segment. We therefore see good opportunities for further growth in new and existing markets.

With best regards,

S t e f a n K l e b e r tC h i e f E x e c u t i v e O f f i c e r

S C H U LE R A NN UA L RE P O RT2014

29



30


The Board of Manage-ment of the Schuler Group

D i p l . - I n g . , J o a c h i m B e y e r C h i e f Te c h n o l o g y O f f i c e r, M e m b e r o f t h e B o a r d o f M a n a g e m e n t – s i n c e A p r i l 2 0 0 5

D r. P e t e r J o s t C h i e f O p e r a t i n g O f f i c e r, M e m b e r o f t h e B o a r d o f M a n a g e m e n t – s i n c e M a r c h 2 0 1 3

D i p l . - I n g . , M B A , S t e f a n K l e b e r t C h i e f E x e c u t i v e O f f i c e r, C h a i r m a n o f t h e B o a r d o f M a n a g e m e n t – s i n c e O c t o b e r 2 0 1 0

D i p l . - K f m . , N o r b e r t B r o g e r C h i e f F i n a n c i a l O f f i c e r, M e m b e r o f t h e B o a r d o f M a n a g e m e n t – s i n c e J a n u a r y 2 0 1 3

f r o m l e f t t o r i g h t- - -


31


We want to continue our success story and therefore launched the second round of our strategic and growth program “Growing Together 2.0” in March 2013. The program’s aim is to lay the foundations for profitable growth and secure Schuler’s longterm success. We plan to increase sales to around € 2 billion by 2020 – this is the overarching objective of our group project “Growing Together 2.0.”

The strategic program comprises the following 10 work modules:

Growing Together2.0

Growing Together2 . 0

V is ionCommunic at ion

Or ganizat ional s tr uc tureSteer ing & p l anning

Mar ket analy s isShared ser v ices

Management tar get sManuf ac tur ing s tr ateg y

Di v is ion s tr ateg iesTechnolog y s tr ateg y

1

56

10

29

47

38


32


We forecast further growth for the global automotive industry in the coming years and expect

to participate in this growth. At the same time, we continue to drive our diversification strategy by tap

ping new market segments outside the automotive industry, such as railways, packaging and large pipes.

We also offer modified products for highvolume markets (B segments).

Longterm economic forecasts indicate that the growth in our markets will take place mainly out

side of Europe. We must respond to these developments. For this reason, we will localize production more

than before and launch products adapted to the respective country. Successin growth markets such as China

will be secured by our own local production, purchasing and development.

In the past year, we continued to work hard on all modules of our strategic program. The modules

Organizational Structure and Shared Services are inextricably linked and we focused on these areas in

particular during fiscal year 2014 in order to facilitate their swift implementation. The first Shared Service

Center was put into operation in December 2014.

Organizational Structure and Shared Services

By streamlining our organizational structure we aim to achieve a significant increase in efficiency.

Clear responsibilities and fast decisionmaking are the prerequisites for successful work in the future.

In fiscal 2013, we streamlined top management and reduced the number of executives at Board of Manage

ment level and the management level below. Several German subsidiaries have also been merged with

Schuler Pressen GmbH in order to generate further synergies. As of October 1, 2013 there are now just six

Divisions instead of eight Technology Fields.

With the establishment of centralized service units, the socalled Shared Service Centers, we have

pooled our administrative tasks in the field of accounting, controlling, HR, and IT. The benefits of these

Shared Service Centers lie in the realization of economies of scale and synergies, as well as the optimization

and standardization of processes. As a result, the quality and speed of work will increase. The Shared Service

Centers are to be set up in Göppingen, Weingarten and Erfurt. In the fourth quarter of 2014, the Shared

Service Center Accounting and Shared Service Center for HR issues began operations in Erfurt. It will pro

vide the following centralized services: accounts payable, invoice verification, accounts receivable, and receiv

ables management. Services of the Shared Service Center for human resources include payroll and travel

expenses, the company pension plan, time management, certification, and personnel records management.


33


Key Figures of the Schuler Group (IFRS)

2014 2013 (Oct.–Dec.)

2012/13 2011/12 2010/11 1)

Sales € million 1,178.5 258.8 1,185.9 1,226.1 958.5

New orders € million 1,193.7 210.6 1,163.3 1,300.9 1,319.0

Order backlog 2) € million 1,057.9 1,039.8 1,087.9 1,110.6 1,035.7

EBITDA € million 124.0 – 20.8 123.0 118.3 84.8

EBITA € million 104.1 – 27.2 101.1 99.8 57.3

EBIT € million 102.2 – 27.7 98.3 95.8 54.4

EBT € million 100.7 – 28.9 89.7 79.2 22.4

Group profit or loss € million 66.9 – 25.0 61.7 51.8 24.0

EBITDA margin % 10.5 – 8.1 10.4 9.6 8.8

EBITA margin % 8.8 – 10.5 8.5 8.1 6.0

EBIT margin % 8.7 – 10.7 8.3 7.8 5.7

EBT margin % 8.5 – 11.2 7.6 6.5 2.3

Personnel incl. apprentices 2) 5,423 5,571 5,580 5,443 5,168

Cash flow from operating activities € million 152.9 86.7 129.0 12.3 180.7

Cash flow from investing activities € million – 23.1 – 12.6 – 27.7 – 45.3 – 4.4

Cash flow from financing activities € million – 1.8 – 9.6 1.3 – 13.5 – 38.4

Free cash flow € million 129.8 74.0 101.3 – 32.9 176.3

Balance sheet total 2) € million 1,125.8 1,012.6 997.3 902.7 896.5

Shareholders’ equity 2) € million 322.0 274.7 302.0 244.6 205.2

Equity margin 2) % 28.6 27.1 30.3 27.1 22.9

Net financial status 2) € million 403.9 276.7 202.2 100.2 137.8

1) Figures were adjusted according to IAS 8. 2) 09/30 / 12/31 Due to rounding effects, there may be slight deviations in the totals and percentages presented in this annual report.


34

THE INVESTMENT

37 Schuler on the Capital Market

THE STANDARDS

41 Report of the Supervisory Board44 Corporate Governance

THE GROUP MANAGEMENT REPORT

49 Basic Principles of the Group49 Business Model of the Schuler Group51 Research and Development53 Personnel

56 Economic Report56 Economic and Sector Environment57 Business Development62 Earnings Position63 Financial Position65 Assets Position

67 Subsequent Events

68 Forecast, Risk and Opportunity Report68 Forecast Report70 Risk and Opportunity Report

THE RESULTS

86 Consolidated Financial Statements and Notes

---170 Auditor’s Opinion172 Financial Glossary


37

T H E I N V E S T M E N T

Schuler on the Capital Market

The stock exchange in 2014

2014 was another turbulent year for the German stock market index. After reaching new all-time highs, DAX-listed stocks came under pressure from the beginning of March. This trend was caused by the escalating unrest in Ukraine and the worsening situation in the Crimea, which led to a wave of stock selling around the globe. Despite adverse conditions, the DAX already succeeded in reaching a new all-time high in mid-May, thus fully making up ground lost during the Ukraine crisis. Hopes of a continued expansionary monetary policy by the central banks and increasing M&A activity helped boost the stock markets and ensured a positive trend. On June 5, 2014, the DAX even passed the 10,000-point mark during trading for the first time – a reaction to the interest rate cut of the ECB. The passing of this mark, however, did not trigger an upward trend. Weaker economic data and military conflicts in the Middle East and Ukraine once again dampened the mood and led to falling prices. By year-end, however, the DAX was on a more stable path again. In addition to de-escalating tendencies in the Ukraine conflict, the liquidity boost indicated by the central banks served in particular as a catalyst for rising prices. As of December 31, 2014, the DAX stood at 9,806 points – an increase of 4.3% over the beginning of the year.

Delisting of Schuler AG on October 30, 2014

The delisting application submitted by the Board of Management of Schuler AG in spring 2014 was granted. As of the close of business on October 30, 2014, shares of Schuler AG were no longer traded on the Regulated Market in Frankfurt and Stuttgart. The delisting is expected to result in savings in the six- figure euro range. The Schuler share continues to be listed, however, on the regional stock exchanges of Hamburg, Hanover and Munich. SEE CHART 03, 04

Stock development

The Schuler share got off to a successful start in the fiscal year 2014. In the first quarter, it made strong progress and reached a year-high of € 29.50 on March 5, 2014. This corresponded to growth of 9.3% over the beginning of the year. In the subsequent period, how-ever, the share fell in value to a year-low of € 22.89 on April 30, 2014. Following the requested delisting of the Schuler share, it was quoted for the last time in regulated trading at the Frankfurt and Stuttgart stock exchanges on October 30, 2014. The Schuler share was removed from trading at a price of € 25.00. SEE CHART 01, 02

01 / K E Y S C H U L E R S H A R E F I G U R E S2014 2013 Change

Number of shares issued pcs 29,911,250 29,911,250 0.0 %

Share price (as of 10/30 and 12/31) in € 25.00 26.83 – 6.8 %

Market capitalization (as of 10/30 and 12/31) in € million 747.6 802.5 – 6.8 %

Average daily trading volume on Xetra pcs 3,159 10,846 – 70.9 %

Average daily trading volume on Xetra in T€ 79.5 210.9 – 62.3 %


38

T H E I N V E S T M E N T

0 2 / P E R F O R M A N C E O F T H E S C H U L E R S H A R EIndex: Januar y 1, 2014 = 100 Percent

120

115

110

105

100

95

90

85

JAN FEB MAR APR MAY JUN JUL AUG SEP OKT NOV DEC

Schuler AG (Xetra) 100-days’ average

Schuler AG (Hamburg) SDax

04 / S H A R E D A T A

ISIN DE 000A0V9A22

Stock exchange symbol SCUN

Number of shares 29,911,250

Capital stock € 77,769,250

Stock exchanges Regional stock exchanges of Hamburg, Hanover and Munich

Fiscal year ending December 31

03 / S H A R E H O L D E R S T R U C T U R Ein percent

a ANDRITZ Beteiligungs-gesellschaft IV GmbH > 95

b Free Float < 5.0

Status: January 2014

b

a

THE

S TA N D A R D S

41 Report of the Supervisory Board

44 Corporate Governance

THE STANDARDS/ Content:


41

T H E S T A N D A R D S

Report of the Supervisory Board

Dear shareholders,

In the fiscal year 2014, the Supervisory Board of Schuler AG performed with due care the duties assigned to it by law, the company’s articles and its own rules of procedure. It offered support and advice for the Board of Management and permanently monitored its activities. The Board of Management provided the Supervisory Board with prompt and detailed informa-tion, both orally and in writing, on the Group’s current situation and progress, on all business transactions requiring approval, on the risk situation and on relevant questions of corporate strategy and planning. The Supervisory Board was directly involved in all decisions of major importance for the company from an early stage and adopted its resolutions after careful examination and on the basis of the written proposals presented.The Supervisory Board held a total of five ordinary meetings in the reporting period, which were also attended by the members of the Board of Management. No member of the Super-visory Board attended fewer than half the meetings. In addition to these meetings, the Chair-man of the Supervisory Board remained in close contact with the Board of Management in order to gain prompt information about developments and significant events.

Primary areas of the Supervisory Board’s advisory and monitoring activities

A regular feature of all meetings was the Board of Management’s reports on the current busi-ness situation of the Schuler Group, and particularly the latest sales and earnings figures, as well as the financial and asset position.At its meeting on February 26, 2014, the Supervisory Board focused on the auditing of the annual financial statements of Schuler AG and the Schuler Group, as well as the related manage ment reports, the affiliated companies report of the Board of Management accord-ing to § 312 of the German Stock Corporation Law (AktG), and the appropriation of the balance sheet profit for the short fiscal year 2013 (October 1 to December 31, 2013). The Supervisory Board approved the annual financial statements of Schuler AG and the consolidated financial statements. After careful examination, the Supervisory Board accepted the proposal of the Board of Management regarding the appropriation of the balance sheet profit for the short fiscal year ending December 31, 2013. In addition, the resolution proposals for the agenda items of the Annual General Meeting 2014 were adopted. The Supervisory Board had already approved the annual financial statements of Schuler AG and the Schuler Group for the fiscal year 2012/13 ending on September 30, 2013, at its balance sheet meeting on December 4, 2013.At its meeting directly prior to the Annual General Meeting on April 15, 2014, the Supervi-sory Board focused on discussions about including members of the Board of Management of Schuler AG in the stock option program 2014 of ANDRITZ AG, which had been approved by the Annual General Meeting of ANDRITZ AG on March 21, 2014. The terms of the program allow for the issue of stock options to executives of Group companies. The Supervisory Board

1 / 3


42


approved the inclusion of Board of Management members of Schuler AG in the stock option program of ANDRITZ AG and the corresponding amendment of their service contracts.The meeting on May 26, 2014, focused on a presentation of the strategic and growth pro-gram “Growing Together 2.0”, which makes projections for the years up to 2020. Moreover, in line with efforts to streamline the Group’s structure, the Supervisory Board voted in favor of merging Atis GmbH and Schmiedetechnik & Service GmbH with Schuler Pressen GmbH in accordance with § 32 of the German Codetermination Act (MitbestG).At the meeting on August 27, 2014, the Board of Management informed the Supervisory Board about significant R&D projects in the years up to 2017.Key topics at the meeting on December 5, 2014 included budget planning for 2015 and a reso-lution about the investment budget for 2015. The Board of Management also reported on the Schuler Group’s IT concept and the effective revocation of the company’s stock market listing on the Regulated Markets of Frankfurt and Stuttgart in October 2014.

No personnel changes in the Supervisory Board and Board of Management

There were no changes in the composition of the Supervisory Board and Board of Management during the reporting period.

Composition and work of the committees

In keeping with the same operating procedure as before, the Supervisory Board of Schuler AG has four committees: the Permanent Committee acc, to § 27 (3) of the German Codetermi-nation Act (MitbestG), the Personnel Committee, the Audit Committee, and the Nomination Committee.The Personnel Committee was convened once during the reporting period. The meeting involved preparing a resolution to amend the service contracts of Board of Management members in connection with their inclusion in the stock option program 2014 of ANDRITZ AG.The Audit Committee met twice. At its meetings, the main focus was on the interim financial report for the first six months of 2014, as well as the consolidated financial statements for Schuler AG and the Schuler Group for the short fiscal year 2013. In addition, discussions were held regarding questions of accounting, auditing, the internal control and audit system, and risk and compliance management. The Supervisory Board had already dealt in detail with the annual financial statements and reports for the fiscal year 2012/13 ending on September 30, 2013, at its meeting on December 3, 2013.The Nomination Committee and Mediation Committee were not convened during the reporting period.At its full plenary meetings, the Supervisory Board was regularly provided with compre-hensive information on the work of the committees.

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Audit and adoption of the annual and consolidated financial statements 2014

The annual financial statements prepared by the Board of Management as of December 31, 2014, for Schuler AG and the consolidated group, as well as the management reports for Schuler AG and the consolidated group, and the affiliated companies report prepared by the Board of Manage-ment, were audited by the accountancy firm of KPMG AG Wirtschaftsprüfungsgesellschaft, Stutt-gart, Germany, and received unqualified certification.The report concerning relations to affiliated companies, as prepared by the Board of Management pursuant to § 312 AktG, was awarded the following certificate by the chief auditor: “On the basis of our statutory examination and evaluation, we can confirm that:

1. the details made in the report are accurate. 2. the company’s performance resulting from the legal transactions listed in the report was

not inappropriately high.3. there are no circumstances that would suggest an assessment substantially different from

that of the Board of Management with respect to the measures listed in the report.”The audit order to the auditing company was issued by the Supervisory Board according to a res-olution adopted by the Annual General Meeting of April 15, 2014. All members of the Supervisory Board were provided in due time with the annual financial statements and management reports for Schuler AG and the consolidated group, the affiliated companies report prepared by the Board of Management, as well as the auditor’s reports. The financial statements and reports were exam-ined in detail by the Audit Committee at its meeting on March 2, 2015. It gave a detailed report at the full Supervisory Board’s balance sheet meeting on March 3, 2015. The chief auditor was present at the meetings in order to report on the audit and its main findings as well as to answer detailed questions. Following careful inspection of the annual financial statements and management reports of Schuler AG and the Group, the affiliated companies report prepared by the Board of Management, as well as the auditor’s reports, and following the final result of this report, the Supervisory Board raised no objections and concurred with the opinion of the independent auditor. In particular, there were no objections to the declaration of the Board of Management at the end of the report concerning relations to affiliated companies pursuant to § 312 (3) AktG.The Supervisory Board approved the annual and consolidated financial statements at its balance sheet meeting on March 3, 2015; The annual financial statements are thus adopted in accor-dance with § 172 AktG.

Gratitude of the Supervisory Board

The Supervisory Board would like to thank the Board of Management and all employees for their hard work and dedication, as well as the workers’ representatives for their good cooperation, and our shareholders for their trust in the company.

Göppingen, March 3, 2015The Supervisory Board

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Corporate Governance

As a guiding principle for sustained value cre-ation, responsible corporate governance is a key component of the company’s longterm success and strengthens the confidence of investors, employees, customers and suppliers in the com-pany. The Board of Management and Supervisory Board of Schuler AG are committed to responsible corporate governance.

Management and corporate structure

Based in Göppingen, Germany, Schuler AG is the management holding company of the Schuler Group. Business activities are conducted by legally indepen-dent subsidiary companies, which are organized in three business segments.

The business segments “Forming Systems”, “Automa-tion” and “Tools” comprise all products and services of relevance for the metalforming industry. Other activi-ties which cannot be allocated to these business seg-ments, are included under “Other Segments”. These mostly comprise Sales & Service companies.

The Board of Management of Schuler AG is in reg-ular contact with the management teams of these subsidiaries.

Board of Management

In the fiscal year 2014, the Board of Management of Schuler AG was composed of the following members:

• Stefan Klebert (Chief Executive Officer)• Joachim Beyer (Chief Technology Officer)• Norbert Broger (Chief Financial Officer)• Dr. Peter Jost (Chief Operating Officer)

The responsibilities of the various members of the Board of Management are regulated by a document detailing the division of duties. The Board of Manage-ment carefully coordinates its activities and meets at regular intervals. SEE CHART 05

05 / B O A R D O F M A N A G E M E N T D I V I S I O N O F R E S P O N S I B I L I T I E S

Stefan KlebertChief Executive Officer

Joachim BeyerChief Technology Officer

Norbert BrogerChief Financial Officer

Dr. Peter JostChief Operating Officer

• Automotive• Automation• Hydraulic• Industry• Systems• Service• Senior executives• Corporate Communications• Corporate Development• Marketing

• Market and Competition Monitoring

• Patents • Technology Management• Product Development• Standardization

• Finance and Controlling• Investor Relations• HR• IT• Legal Affairs and Compliance• Internal Audit

• Procurement• Production and Logistics• Quality Management


45


Supervisory Board

The Supervisory Board of Schuler AG is composed in accordance with the German Codetermination Act and consists of twelve members: six are voted in by the representatives of the shareholders, and six are elected by the company’s employees for a period of five years. The last election was held in 2013.

In the case of tied votes, the Chairman of the Super-visory Board has two votes. The Supervisory Board monitors and advises the Board of Management in its management of business.

Major business transactions of the Board of Manage-ment require the prior approval of the Supervisory Board. The Board of Management regularly provides the Supervisory Board with detailed and up-to-date information concerning the development of business and current planning.

The Supervisory Board has formed a Personnel Committee, a Committee pursuant to § 27 (3) of the German Codetermination Act (MitbestG), an Audit Committee and a Nomination Committee. The Per-sonnel Committee prepares the personnel deci-sions of the Supervisory Board. The Audit Commit-tee is concerned, in particular, with questions of year-end accounting and risk management; this includes the necessary independence of the exter-nal auditors, deciding which areas they should focus on, agreeing on their remuneration and commis-sioning them to audit the company’s annual finan-cial statements. Additionally, the Audit Committee prepares the respective discussions and decisions of the Supervisory Board. The Nomination Committee consists exclusively of shareholder representatives and proposes suitable candidates to the Supervi-sory Board for its proposals to the Annual General Meeting regarding the election of Supervisory Board members.

Working procedure of Board of Management and Supervisory Board

The Board of Management and Supervisory Board of Schuler AG collaborate closely in a spirit of mutual trust in the interests of the company. The main objec-tive of both bodies is to ensure the company’s contin-ued existence and drive its successful development.

In accordance with legal regulations, there is a strict separation between the composition of the manage-ment and supervision bodies at Schuler. The Board of Management regularly provides the Supervisory Board with prompt and detailed information on the company’s current progress, its strategy, the finan-cial and earnings position, corporate planning, and risk management. The Supervisory Board advises and monitors the Board of Management in its man-agement of the company.

The members of the Board of Management took part in all Supervisory Board meetings in fiscal year 2014. There was also a regular exchange of information outside the Supervisory Board meetings.

Annual General Meeting

The Annual General Meeting is the company’s third executive body, in addition to the Board of Management and Supervisory Board. At the Annual General Meeting, shareholders have the opportunity to direct questions to the Board of Management and Supervisory Board, and to exercise their voting rights. Each share entitles the owner to one vote and is represented by a global certif-icate in bearer form. Only those shareholders who have proven their entitlement and registered are allowed to participate in the Annual General Meeting. Such proof is indicated with a written certificate of shareholding issued in German or English by the depositary institu-tion. This proof must be related to the 21st day prior to the shareholders’ meeting and must be received by the


46


company or any agent identified in the notice convening the shareholders’ meeting no later than on the seventh day prior to the meeting.

Accounting and auditing

The consolidated financial statements are prepared according to IFRS (International Financial Reporting Standards) as mandatory in the EU. The annual finan-cial statements are based on the accounting regu-lations of the German Commercial Code (HGB). The Annual General Meeting elects an independent audi-tor who is responsible for auditing the annual finan-cial statements of Schuler AG and the consolidated group. The accounting firm KPMG AG Wirtschafts-prüfungsgesellschaft, Stuttgart, was appointed to audit the annual financial statements for the Group and Schuler AG.

Internal Controlling System (ICS) and risk management

Schuler AG has an efficient Internal Controlling and Risk Management system. The principles and guide-lines of this system are designed to help detect risks as soon as possible in order to take the required cor-rective action. The system is reviewed regularly and adapted to new circumstances whenever necessary. Further details are provided in the “Opportunity and Risk Report” section of the Management Report.

THE

G RO U P M A N A G E M E N T

R E P O R T

49 Basic Principles of the Group49 Business Model of the Schuler Group51 Research and Development53 Personnel

56 Economic Report56 Economic and Sector Environment57 Business Development62 Earnings Position63 Financial Position65 Assets Position

67 Subsequent Events

68 Forecast, Risk and Opportunity Report

68 Forecast Report70 Risk and Opportunity Report

THE GROUP MANAGEMENT REPORT/ Content:


49

T H E G R O U P M A N A G E M E N T R E P O R T

Basic Principles of the Group

Business Model of the Schuler Group

As the technological and global market leader in metalforming. Schuler supplies presses, automa-tion solutions, dies, process technology and services for the entire metal-working industry and the light-weight construction of vehicles. We supply a wide range of innovative products and solutions in all areas of metalforming technology: from mechani-cal and hydraulic press systems, transfer and tryout presses, automation equipment, dies, high-speed presses, and systems for solid forming, to hydro-forming and hot stamping. In addition, we offer our customers an excellent service program. Schuler’s technologies and services ensure high productiv-ity, improved energy efficiency and reliable mass manufacturing.

Our leading market position is due mainly to our strength for developing products and solutions with a clear customer benefit – in close cooperation with the customers themselves. We have been active in the metalforming sector for 175 years and have great experience in the handling of projects. In addition to our process know-how in metalforming technology, we have the systems expertise to plan and deliver complete automated press lines according to cus-tomer specifications – for numerous metal and light-weight materials.

Our strong international alignment enables us to be on site for our customers around the world. We employ over 5,400 people in over 40 countries and boast a global network of service and sales offices.

The corporate structure

Our business activities are managed by legally- independent subsidiaries and grouped into three segments.

The “Forming Systems”, “Automation” and “Tools” segments comprise the entire spectrum of prod-ucts and services of relevance for metalforming. Other activities which cannot be allocated to these segments are grouped in the “Others” segment, which mainly comprises the Sales & Service companies.

“Forming Systems” comprises all activities in the field of metalforming. This includes large-scale press lines, mechanical and hydraulic press sys-tems, forging lines and high-speed presses. Our work for car manufacturers and their suppliers is the main focus of this business segment. With the aid of technology transfer. Schuler is now increas-ingly targeting new application fields, such as the packaging industry and the aerospace sector.

“Automation” develops and installs solutions for automating machine tools, including control sys-tems for linked production lines and systems for the manufacturing and transporting of blanks, work pieces and tools. These play a major role in enhancing the performance of manufacturing processes.

The “Tools” segment pools complex development tasks in the field of die and process technology and supplies innovative prototypes and dies for complete vehicle subassemblies and transmission components for car manufacturers and their sup-pliers. The segment’s core competencies include the development, planning, production and tryout of models, molds and tools for metalforming technology.

We draw on all three business segments to offer customers turnkey solutions from a single source – from planning and consulting, to devel-oping and designing, to setting up and adjusting before the final production launch. In addition to presses, we supply the complete equipment for


50


stamping plants, including the necessary dies and, in particular, the automation for the entire process chain. SEE CHART 06

06 / S E G M E N T S

SCHULER AG

Forming SystemsMechanical und hydraulic systems

for metalforming technology

AutomationAutomation systems

Laser technology

ToolsDie construction

Car body technology

Services

Our comprehensive range of services provides sup-port for our customers in all business segments. Our Schuler Service concept of “On-site service around the world” offers a wide spectrum of services in over 40 countries based on the three pillars: tech-nical service, know-how transfer and performance enhancement.

In the field of technical service, we ensure product support over the entire life cycle. These services include servicing and maintenance, the provision of spare parts, machine repairs, and the planning and implementation of machine relocations as well as subsequent production relaunch.

With the aid of know-how transfer, we offer custom-ers production support in order to ensure optimum machine operation and avoid downtime. A wide range of training courses helps our customers’ employees to operate Schuler equipment and secure efficient production results.

Our range of services also includes the optimiza-tion and modernization of existing machinery. This enables our customers to enhance the performance of their equipment. In addition, we offer customers the possibility to buy used machines and stamp-ing plant equipment that have been overhauled and modernized.

Legal structure

The consolidated Schuler Group comprises 21 com-panies (prior year: 26). Schuler AG, headquartered in Göppingen, Germany, acts as the holding com-pany. It carries out centralized corporate func-tions, for example, in the fields of strategy, finance, controlling, legal affairs, insurance, marketing and communication.

ANDRITZ Beteiligungsgesellschaft IV GmbH, a wholly- owned subsidiary of the listed company ANDRITZ AG. Graz. Austria, holds over 95% of the capital stock of Schuler AG.


51


The delisting application submitted by the Board of Management of Schuler AG in spring 2014 was granted. As of the close of business on October 30, 2014, shares of Schuler AG were no longer traded on the Regulated Market in Frankfurt and Stuttgart. The delisting is expected to result in savings in the six-figure euro range. The Schuler share continues to be listed, however, on the regional stock exchanges of Hamburg, Hanover and Munich.

Research and Development

Key R&D figures

In fiscal year 2014, a total of € 9.1 million (prior year: € 1.6 million) was invested in ongoing research and development activities (R&D expenses), of which – as in the previous year – none fulfilled the IFRS capital-ization criteria. After consideration of amortization on capitalized development costs of € 1.1 million – of which non-scheduled writedowns of € 0.7 million – (prior year: € 0.1 million), the total expense charged to the income statement amounted to € 10.2 million (prior year: € 1.7 million). The carrying amount of capitalized development costs amounted to € 0.5 mil-lion at the end of the reporting period (prior year: € 1.6 million).

The primary share of the Schuler Group’s develop-ment work involves individual customer projects. The respective costs are charged as project costs and not included in the aforementioned R&D figures. As a consequence, only the smaller part of our actual expenditure is disclosed as “R&D expenses”.

Outstanding innovation projects in fiscal year 2014

New Schuler Crossbar 4.0 robot halves energy consumptionOn April 26, 2014, Schuler Automation unveiled the new Crossbar Robot 4.0 in front of numerous inter-national customers at its facility in Gemmingen.

The latest generation features enhanced performance and energy efficiency, integration into a synchronized press control system and process monitoring of the entire system.

With the aid of the Crossbar Robot 4.0, parts are transported from press to press along the press line. The Crossbar Robot 4.0 boasts a special energy recovery system which enables it to save around 20% energy compared to its predecessor. Dynamic energy is stored during the braking process and released again during acceleration. The weight of the Crossbar Robot 4.0 was also reduced from 2.8 t to 1.4 t com-pared to the previous version – resulting in further significant energy savings. In all, the various mea-sures have led to a 50% energy saving. The maximum load, however, has remained high at 90 kg.

Award for MSC-2000 automatic blanking pressThe MSC-2000 automatic blanking press received the EuroBlech Award from the trade journals MM MaschinenMarkt and Blechnet on its initial presen-tation at the EuroBlech 2014 in Hanover, Germany. Its highly precise and efficient part production opens up new perspectives for blanking and forming busi-nesses. With its two purely electrically coupled, freely programmable drivetrains, it offers a play-free and lubrication-free drive concept with low mainte-nance needs.


52


By linking the drivetrains in the press uprights, the machine’s rigidity has been significantly increased. The reduced mass driven directly and without trans-mission ensures a highly dynamic and energy-effi-cient drive system with a press force of 2,000 kN and energy savings of over 50%.

The new drive concept means that the slide motion can be adapted to the workpiece and the output per-formance increased in oscillating mode. This also leads to longer die service lives and faster set-up times in production. A touchscreen and configurable menus ensure intuitive and simple operation of the new press.

First forging hammer with servo drive technologySchuler wrote a new chapter in forging technology in September 2014 with the unveiling of the first forging hammer with servo drive technology at RUD Schöttler in Hagen, Germany. At a live event, 150 forging ex perts from around the world observed the hammer’s “baptism of fire” – the first forging of red-hot steel.

The new forging hammer boasts an exceptionally high degree of precision and energy efficiency, which make it extremely attractive for the targeted client group as a cost-efficient forming tool. This target was achieved with the aid of a patented linear drive which resembles a coiled segment of the drive system for a maglev train. The prototype is currently being used by the customer in a hard forging environment.

The new development underlines Schuler’s exper-tise in the field of forging, which comprises ham-mers, screw presses and mechanical forging presses and thus covers the entire range of market requirements – from manually operated stand-alone machines to complex, fully automatic forging lines.

ECOFORM program for raising energy efficiencyWith its new ECOFORM program. Schuler develops sustainable and efficient systems solutions. Rising prices and ever stricter legal regulations have made energy a key cost factor of industrial production – also for press shops. With its new ECOFORM sus-tainability program – unveiled at EuroBlech 2014 – Schuler offers sustainable and efficient systems solutions for the metalforming industry.

ECOFORM brings together all Schuler’s efforts for raising energy efficiency: from analyzing and optimiz-ing existing machinery to developing new processes, components and system solutions. The aim is to conserve all resources and reduce energy consump-tion, while at the same time maintaining maximum productivity.

Schuler already boasts numerous successful energy efficiency projects in the field of sheet metal forming, forging and automation. Its EHF (“Efficient Hydrau-lic Forming”) technology, for example, offers energy savings of up to 60% compared to conventional hydraulic presses.

The latest generation of servo press lines consume up to 50% less energy than conventional mechan-ical high-speed press lines. They have their own DC power supply (Schuler Smart DC Grid), vari-able-speed and regenerative drive systems, intelli-gent stand-by and pause switching, as well as ener-gy-efficient components like Schuler’s Energy Saving Cushion. This reduces consumption by three million kilowatt hours per year – the equivalent of 750 to 800 four-person households.

By retrofitting existing equipment. Schuler Service can also quickly tap considerable energy savings potential.


53


The large number of innovation projects in this field underlines Schuler’s commitment to resource effi-ciency as a driver of innovation.

Personnel

Headcount trend dominated by realignment

As of December 31, 2014, the Schuler Group employed 5,423 people around the world. The decrease of 147 employees (– 2.6%) reflects the realignment in Germany and Mexico in particular. While headcount declined in Germany mainly in the field of production and administration, we also raised the number of staff in service, engineering and development. Moreover, we continued to steadily increase staffing levels in Asia.

At the end of the reporting period, those companies affected by closures (Schuler Guß GmbH & Co. KG and Schuler Cartec Engineering GmbH & Co. KG) still employed 79 people whose departure from the Group has already been decided. A further reduction in headcount at the other German facilities has already been determined for fiscal year 2015 by means of vol-untary redundancies, semi-retirement plans and the non-extension of timelimited contracts.

In line with plans to expand Schuler’s business in Asia, headcount here increased by 25 employees (+7.7%). A further strong increase is planned for 2015 with the planned launch of our new UmformCenter in China and the expansion of production at our Dalian facility. SEE TABLE 07, 08

07 / E M P L O Y E E S I N C L . A P P R E N T I C E S B Y R E G I O NDecember 31,

2014December 31,

2013

Schuler Group 5,423 5,570

Germany 4,210 4,318

Europe (excl. Germany) 84 86

Americas 780 842

Asia 349 324


54


08 / E M P L O Y E E S I N C L . A P P R E N T I C E SDecember 31,

2014December 31,

2013

Schuler Group 5,423 5,570

Forming Systems 3,830 3,894

Automation 613 602

Tools 345 347

Others 635 727

Retaining and developing staff know-how

Our company’s success is based on the experience, knowledge and know-how as well as the motiva-tion of our employees. Most of our employees have long-standing and close ties to the company. But we also know that we are subject to constant change in the market and competitive environment and must enable our staff to cope with these changes. To this end, we have established a group-wide center of excellence for personnel development, dedicated to nurturing the skills of our specialists and managers across all companies as part of our long-term staff development program “SCHULER.EINS”. After start-ing with a technical or commercial apprenticeship, a dual degree program or a trainee program with inter-national assignments in different areas of the com-pany, we accompany and support our specialists and managers at various levels. For example, with our new “press start-up specialist” career model with various modules and development stages, a program for young talents and junior managers, and as of 2015 systematic group-wide management programs for our international middle and top management. In addition, we offer a variety of needs-based training programs in all areas. In order to help us compete for the best talent, we have also strengthened our employer branding and are successfully employing both new recruitment and personnel marketing chan-nels via the Internet as well as classic methods, such as apprenticeship and university fairs.

Schuler honored as Top Employer again in 2014

Once again, we have been ranked as one of the best companies to work for in Germany. This was con-firmed by the recent FOCUS survey of “Germany’s Best Employers”. In addition, Schuler again received the independent certificate “Top Employer Germany” and “Top Employer for Engineers” from the CFR Institute.

The newly developed employer branding campaign “Making Tracks”, which communicates our employer values of “Variety, Passion, Free Space, Partner-ship and Reliability”, was successfully implemented in Germany during 2014 and now forms the basis for all of Schuler’s personnel marketing activities in the future. The campaign puts our employees in the foreground: they explain why they enjoying work-ing for Schuler and how Schuler helps them to make their own individual mark on the world. Job ads, image campaigns, brochures, flyers, giveaways and our career fair branding have all been adapted to the “Making Tracks” concept and suitably expanded. The campaign is rounded off by targeted social media communication and an attractive HR portal on Schuler’s website in line with the new concept. Our employer branding is also supported by a new HR image film which is used at various events and fairs to strengthen our image among specific target groups.


55


Focus on vocational training

Schuler has always attached great importance to high-quality apprenticeships. We strive to provide young people with the best possible training and at the same time ensure a high level of skill for our employees. Once again, Schuler apprentices per-formed well in various skills competitions: for the fourth time in a row, our mechatronic engineers won the gold medal in mobile robotics at the EuroSkills 2014 in Lille.

As of December 31, 2014, the number of apprentices amounted to 329 (prior year: 351).

Thanks to our stable order position, we were able to offer full-time employment contracts to those apprentices who successfully completed their train-ing with good results and displayed a high level of motivation in 2014.

Schuler provides apprenticeships for a total of 13 industrial-technical professions and two commercial professions. The eight dual and cooperative degree programs with a technical orientation, and three dual degree programs with a business administration focus, have proved successful and are still in strong demand.

“Healthy at Schuler” – vocational health management

Based on the concept developed in 2013, we contin-ued to drive the expansion of a holistic and strategic health management system in 2014.

Modern health management is based on clear, objective indicators and thus allows evidence-based planning of vocational health promotion. In order to improve planning, we introduced group-wide standards in line with the prevention guidelines of leading associations of the German statutory health insurance companies. In 2014, we appointed health officers at all German facilities with responsibility for the organizational implementation of the measures we developed.

Vocational health care offers

Throughout 2014, we focused in particular on opti-mizing our occupational health care and implement-ing the new prevention regulations at all locations. In addition, a number of specific services are offered in the field of physical and mental health promotion at our facilities. The main topics are in the field of back health, cardiovascular training, relaxation and individual preventive medicine. A first pilot project in high-stress work areas was successfully launched in collaboration with the University of Giessen and the employers’ liability insurance association.


56


Economic Report

Economic and Sector Environment

Global economic growth more stable in 2014

According to the latest assessment of the Interna-tional Monetary Fund (IMF), global gross domestic product (GDP) grew by 3.3% in 2014. This positive trend was helped in particular by the strong decline in oil prices during the second half of the year. The industrialized nations can expect growth of 1.8% (2013: 1.3%). Despite a slowdown in the emerging and developing nations, the IMF expects this group of countries to grow by 4.4%.

The eurozone was able to pull out of recession and posted growth of 0.8% in 2014. Germany contin-ued to make good progress and raised GDP strongly by 1.5%. The USA recorded further stable growth with an increase of 2.4%. Japan, however, can only expect growth of 0.1% following an increase in sales tax and the resulting dampening effect on domes-tic demand. China displayed further strong growth in 2014: experts predict an increase in GDP of 7.4%. With growth of 5.8%. India exceeded its prior-year level in 2014. In Brazil, the economic trend deteri-

orated with slight GDP growth of 0.1%. The impact of the ongoing conflict in Ukraine and declining oil prices led to weaker growth of just 0.6% in Russia.

SEE TABLE 09

Global automotive market remains on growth course in 2014

According to its latest figures, the German Associa-tion of the Automotive Industry (Verband deutscher Automobilindustrie – VDA) expects the number of new car registrations in 2014 to grow by 2.0% to 74.7 million units. Once again, the key growth drivers were the major sales markets of China and the USA.

Western Europe made good progress with an increase in new registrations to 12.1 million (+4.8%) in 2014, following declines in the four preceding years. There was also stronger demand in the New EU States (EU 13) where sales increased by 14.2% to 0.9 million vehicles in 2014.

At around 3.0 million vehicles, new registrations in Germany were 3.0% up on the previous year in 2014. Domestic production rose by 3.0% to 5.6 million units,

09 / G D P D E V E L O P M E N Tin percent 2014 2013

World 3.3 3.3

Eurozone 0.8 – 0.5

Germany 1.5 0.2

USA 2.4 2.2

Japan 0.1 1.6

China 7.4 7.8

India 5.8 5.0

Brazil 0.1 2.5

Russia 0.6 1.3

Source: IMF, January 2015


57


whereby 4.3 million cars were exported (+2.0%). The US market for Light Vehicles (cars and trucks) contin-ued to enjoy strong demand in 2014 with sales growth of 5.8% to 16.4 million units.

In Japan, new registrations grew year on year by 3.0% to 4.7 million units in 2014.

Car sales in the BRIC nations (Brazil, Russia, India and China) were uneven in 2014. In Brazil, sales of light vehicles were down by 6.9% to around 3.3 mil-lion. In Russia, the number of new registrations fell by 10.3% to just over 2.5 million light vehicles. Car sales in India were up slightly by 0.7% to around 2.6 million units. In China, there was strong year-on-year growth in new registrations of 12.7% to 18.4 mil-lion units.

Falling demand for machine tools

The global machine tool market suffered losses in 2014. According to the calculations of the German Machine Tool Builders’ Association (Verein Deutscher Werkzeugmaschinenfabriken – VDW), global output of machine tools fell by 2.0% to € 57.9 billion.

The German machine tool industry also suffered a slight decline in 2014. At € 14.3 billion, output was 2% down on the prior-year period. At the same time,

however, demand improved slightly and new orders rose by around 1.1%. Domestic orders increased by 5.6% while foreign demand (– 1.2%). The average order backlog level for the year stood at 7.3 months and was below the prior-year figure of 7.5 months. Capacities were still well utilized at an average 90.1%, but still 2.7 %-points below the prior-year figure.

Business Development

Positive trend in new orders

As the prior-year reporting period was merely a short fiscal year of three months (October 1 to Decem-ber 31, 2013), it was decided not to make any compar-isons with this three-month period in the discussion of business development.

In the fiscal year 2014, new orders were stable at € 1,193.7 million. SEE TABLE 10, CHART 11

The main growth driver was Asia with new orders of € 406.9 million. Schuler also received one of the biggest orders in its 175-year history in this region: FAW Volkswagen Automotive Co., Ltd. ordered three press lines with ServoDirect Technology and three servo presses for die tryout and set-up for its plants in China. The Asian market accounted for 34.1% of

10 / N E W O R D E R Sin € millions 2014 10–12/2013

Europe 547.7 112.5

Americas 234.1 61.6

Asia 406.9 34.1

Other regions 5.0 2.5

Total 1,193.7 210.6


58


12 / N E W O R D E R S B Y S E G M E N T in percent

a Forming Systems 65.3b Automation 14.1c Tools 5.8d Others 14.9

a

c

d

b

all new orders and was our second-largest sales market after Europe (45.9%). New orders in Europe amounted to € 547.7 million. Orders received from customers in the Americas continued to make good progress and totaled € 234.1 million in fiscal 2014.

The Forming Systems segment received new orders worth € 939.9 million and was once again the stron-gest segment with 65.3% of the total order volume.

The Automation segment received new orders worth € 202.4 million. Tools received new orders of € 82.9 million and while Other Segments generated orders of € 214.6 million. SEE CHART 12

Order backlog remains high

At the end of the fiscal year (December 31, 2014), the order backlog stood at € 1,057.9 million and was thus slightly above the prior-year figure (+1.7%).

SEE TABLE 13, CHART 14

Demand on the Asian market was particularly encour-aging: the order backlog rose by 41.9% to € 360.5 mil-lion. There was also strong growth in the Americas of 20.2% to € 169.5 million.

At € 522.2 million, the order backlog in Europe fell some-what below the high prior-year figure of € 635.1 million.

11 / N E W O R D E R S B Y R E G I O N in percent

a Europe 45.9b Americas 19.6c Asia 34.1d Other regions 0.4

a

c

d

b


59


The order backlog in Other Regions fell from € 9.6 mil-lion in the previous year to € 5.7 million at the end of fiscal year 2014.

With an order backlog of € 900.5 million and a share of total order backlog of 73.3%, Forming Systems was once again the strongest segment.

In the Automation segment, the order backlog rose by 32.1% to € 145.8 million.

Order backlog in the Tools segment also rose strongly over the previous year by 38.4% to € 37.9 million.

The strongest growth was recorded by the Others segment where the order backlog reached € 144.7 mil-lion and exceeded the prior-year figure by 85.7%.

SEE CHART 15

14 / O R D E R B A C K L O G B Y R E G I O N in percent


a

c

d

b

13 / O R D E R B A C K L O G B Y S E G M E N T A S O F D E C E M B E R 3 1 , 2 0 1 4in € millions December 31,

2014December 31,

2013

Europe 522.2 635.1

Americas 169.5 141.1

Asia 360.5 254.0


Total 1,057.9 1,039.8


60


Positive sales trend

Consolidated sales of the Schuler Group in the fiscal year 2014 amounted to € 1,178.5 million. If sales revenues of the short fiscal year 2013 are extrapo-lated in a straight line for a fictitious full fiscal year, there was a year-on-year increase in revenues of 13.8% over the respective fictitious annual amount.

SEE TABLE 16, CHART 17

In the reporting period, sales revenues in Europe reached € 658.0 million. There were sales of € 207.3 million in the Americas and of € 307.7 million in the Asian market.

Over half of total sales (55.8%) were generated in Europe. The second-largest sales market was Asia (26.1%), followed by the Americas (17.6%).

Sales were strongest in the Forming Systems seg-ment, which generated revenues of € 980.1 million and accounted for 72.8% of total sales.

The Automation segment achieved sales of € 167.0 million.

Revenues in the Tools segment amounted to € 72.4 million.

The Others segment generated revenues of € 148.0 million in the reporting period.

SEE CHART 18

15 / S A L E S B Y S E G M E N T in percent

a Forming Systems 73.3b Automation 11.9 c Tools 3.1d Others 11.8a

c

d

b


61


16 / S A L E Sin € millions 2014 10–12/2013

Europe 658.0 154.8

Americas 207.3 47.2

Asia 307.7 55.7


Total 1,178.5 258.8

18 / S A L E S B Y S E G M E N T in percent

a Forming Systems 72.8b Automation 12.4c Tools 5.4d Others 9.5

a

c

d

b

17 / S A L E S B Y R E G I O Nin percent


a

c

d

b


62


Earnings Position

Good progress in key earnings figures

There was a positive development in the Schuler Group’s business in the fiscal year 2014.

New orders of € 1,193.7 million resulted in a book-to-bill ratio (new orders in relation to sales revenues) of 1.0 (prior year: 1.0). Sales revenues amounted to € 1,178.5 million while the total performance reached € 1,153.2 million. If sales revenues of the short fiscal year 2013 are extrapolated in a straight line for a fictitious full fiscal year, a positive trend becomes apparent: the increase in sales and total performance compared to the fictitious annual amount would be 13.8% and 12.0%, respectively. SEE TABLE 19

A wide-ranging package of measures to realign the Group’s structures was introduced in the previous year. The short fiscal year 2013 was thus dominated by special items relating to this realignment which placed a burden on pre-tax earnings of € 45.5 million. By carefully implementing these personnel mea-sures, a total amount of € 10.4 million was expensed

from the change in provisions, of which € 9.5 mil-lion in personnel expenses and € 0.9 million in other operating expenses.

Earnings before taxes amount to € 100.7 million (prior year: € – 28.9 million) with an EBITA result of € 104.1 million (prior year: € – 27.2 million). The EBITA margin is 8.8%. Adjusted for this year’s special item for the Group realignment, earnings before taxes amount to € 90.3 million and EBITA to € 93.7 million. The adjusted EBITA margin is 8.0% (prior year: 7.0%).

Whereas the cost of materials ratio rose from 42.2% in the short fiscal year 2013 to 44.1%, the personnel expense ratio was improved from 35.3% to 33.3% – adjusted in both years for the effect on personnel expenses of streamlining Group structures.

At 14.9% of total performance, other operating expenses were well below the ratio of the previous short fiscal year (16.9%) after adjustment for non-re-curring special items relating to the Group’s realign-ment. Due to a further increase in cash and cash equivalents, there was also a strong improvement in interest income and thus in the interest result com-

19 / C O N D E N S E D I N C O M E S T A T E M E N Tin € millions 2014 10–12/2013

Sales 1,178.5 258.8

EBITDA 124.0 – 20.8

Depreciation/write-ups on non-current assets, and interests in affiliates and participations 19.9 6.4

EBITA 104.1 – 27.2

Amortization 1.8 0.5

EBIT 102.2 – 27.7

Interest result – 1.6 – 1.2

EBT 100.7 – 28.9

Income taxes 33.8 – 4.0

Group profit or loss 66.9 – 25.0


63


pared to a fictitious full fiscal year (2014: € – 1.6 mil-lion, prior year: € – 0.6 million).

Good overall result in the segments

In line with total sales, there was also a positive development in sales revenues of the individual seg-ments. If the short fiscal year is extrapolated in a straight line for a fictitious full fiscal year, non-Group sales show strong growth (with the exception of the Other Segments): Forming Systems +13.6%, Automa-tion +78.0%, Tools +24.0%, Other Segments – 4.4%.

Earnings before interest and taxes of the various segments in fiscal year 2014 were as follows: Form-ing Systems € 104.4 million, adjusted for one-off income € 93.4 million (prior year: € – 9.1 million and € 14.5 million), Automation € 16.3 million, adjusted for one-off in-come € 15.3 million (prior year: € – 2.3 million and € 2.3 million), Tools € – 3.5 mil-lion, adjusted for one-off income € – 4.1 million (prior year: € – 5.1 million and € – 0.3 million) and Other Segments € 5.0 million, adjusted for one-off expenses € 7.4 million (prior year: € – 8.2 million and € 2.1 million).

Financial Position

Long-term funding of future development

Schuler AG plays a major role with regard to financ-ing and securing liquidity within the Group. It is responsible for most debt financing and provides the Group’s subsidiaries with funds as and when they are required. Via the Group’s central cash pooling activities, the Treasury department of Schuler AG takes any surplus funds from the Group’s subsidiar-ies – wherever legally possible – and in turn provides them with liquidity as required. A key element of the Group’s funding is the syndicated loan agreement concluded in November 2011 with a total volume

of € 450.0 million and a term until September 30, 2016. The agreement comprises a guarantee facility tranche of € 300.0 million (prior year: € 300.0 mil-lion), which can be increased if required by an addi-tional € 50.0 million, and a credit facility tranche of € 150.0 million (prior year: € 150.0 million), which may also be used in full as a guarantee facility. The terms of the new syndicated loan agreement are dependent on the Schuler Group’s relationship of net borrowing to EBITDA and are reviewed and adjusted where necessary each quarter. The agreed finan-cial covenants were met at all times during the past reporting period. In addition, the Schuler Group has bilateral credit lines and loans that are mainly denominated in euro. Brazilian real and Chinese yuan (renminbi). The average term of the fixed-interest loans is 1.9 years (prior year: 1.9 years) and that of the variable-interest loans 6.7 months (prior year: 10.4 months). In total, the Schuler Group has credit and guarantee facilities with various credit institutes and credit insurance partners amounting to € 634.3 mil-lion (prior year: € 549.5 million), of which € 184.1 mil-lion (prior year: € 155.0 million) were unused at the end of the reporting period. At the end of the report-ing period, cash and cash equivalents amounted to € 482.5 million (prior year: € 349.6 million). Further-more, we use selected off-balance-sheet finan-cial instruments, such as operating leases. As of December 31, 2014, payment obligations from oper-ating leases amounted to € 91.5 million (prior year: € 98.0 million). Additional details on finance and on the principles and targets of financial management are provided in the notes to the consolidated financial statements.

Further improvement in financial status

The statement of cash flows presents a breakdown of cash proceeds and disbursements from operating, investing and financing activities. After adding cash and cash equivalents at the beginning of the year and non-cash changes in liquid funds from exchange rate


64


fluctuations, this results in the total amount of cash and cash equivalents available at the end of the short fiscal year. SEE TABLE 20

In fiscal year 2014, the Schuler Group generated cash flow from operating activities of € 152.9 million, com-pared to € 86.7 million in the short fiscal year 2013. The increase is mainly due to the strong improvement in Group profit after tax for the year of € 66.9 million. The reduction of net working capital was slightly less than in the previous year. Provisions formed in the short fiscal year 2013 relating to Group restructuring were expensed in the amount of € 9.3 million.

Cash flow from investing activities amounted to € – 23.1 million (prior year: € – 12.6 million) and was dominated in particular by capital expenditures.

In the fiscal year 2014 cash flow from financing activities amounted to € – 1.8 million (prior year:

€ – 9.6 million). The negative balance mainly reflects the dividend paid to Schuler AG shareholders of € 6.6 million, the dividend payment to minority share-holders of € 0.2 million and the net increase in short-term financial liabilities of € 6.2 million to finance customer orders, whereas long-term financial liabili-ties were reduced by a net amount of € 1.3 million.

All in all, the change in cash and cash equivalents amounted to € 133.2 million (prior year: € 61.0 mil-lion). After accounting for changes due to cur-rency fluctuations and changes in the consoli-dated group, cash and cash equivalents increased from € 349.3 million as of December 31, 2013 to € 482.5 million. Over the same period, the net finan-cial status (cash and cash equivalents less finan-cial liabilities) improved from € 276.7 million to € 403.9 million.

20 / C O N C I S E S T A T E M E N T O F C A S H F L O W Sin € millions 2014 10–12/2013

Profit or loss for the year 66.9 – 25.0

Depreciation, amortization and impairments/impairment reversals of non-current assets, interests in affiliates and participations as well as loans 21.7 6.9

Changes

Net working capital 64.4 66.4

Provisions/other – 0.1 38.4

Cash flow from operating activities 152.9 86.7

Capital expenditures – 26.4 – 13.0

Other 3.3 0.3

Cash flow from investing activities – 23.1 – 12.6

Increase/redemption of financial liabilities 5.0 – 9.4

Other – 6.8 – 0.2

Cash flow from financing activities – 1.8 – 9.6

Change in cash and cash equivalents 128.0 64.5

+/– Change in cash and cash equivalents due to exchange rate fluctuations and changes in the consolidated group 5.2 – 3.5

Net change in cash and cash equivalents 133.2 61.0


65


Assets Position

Further improvement in shareholders’ equity

Compared to the beginning of the fiscal year, the total statement of financial positions increased by € 113.2 mil-lion – from € 1,012.6 million to € 1,125.8 million. On the asset side, non-current assets rose by € 5.8 million to € 283.3 million (prior year: € 277.5 million). This figure includes an increase in property, plant and equipment of € 7.6 million, which mainly results from increased Invest-ment in land and buildings, as well as in technical plant and machinery. By contrast, financial assets decreased by € 1.0 million to € 1.6 million (prior year: € 2.6 million). The fall results mainly from mergers of non-consolidated companies. SEE TABLE 21

Current assets rose by € 107.4 million to € 842.5 mil-lion (prior year: € 735.1 million). This was mainly a result of the strong increase in cash and cash equiv-alents of € 133.2 million to € 482.5 million, due in particular to payments on account received from customers. Receivables from long-term construc-tion contracts fell by € 7.9 million to € 101.8 million (prior year: € 109.7 million), while trade receivables decreased by € 14.0 million to € 95.5 million (prior year: € 109.6 million).

As a result of the positive consolidated result, share-holders’ equity increased in total by € 47.3 million to € 322.0 million (prior year: € 274.7 million). The change in other comprehensive income of € – 13.3 million and the dividend payment to shareholders of Schuler AG amounting to € 6.6 million both had a negative impact on equity. Together with an increase in the total state-

21 / C O N C I S E S T A T E M E N T O F F I N A N C I A L P O S I T I O N Sin € millions 31.12.2014 31.12.2013

ASSETS 1,125.8 1,012.6

A. Non-current assets 283.3 277.5

of which intangible assets, property, plant and equipment, interests in affiliates and participations 246.8 241.4

B. Current assets 842.5 735.1

of which inventories 102.3 123.1

of which trade receivables and future receivables from long-term construction contracts 197.3 219.2

of which cash and cash equivalents 482.5 349.3

LIABILITIES 1,125.8 1,012.6

A. Shareholders’ equity 322.0 274.7

B. Non-current liabilities 210.4 167.3

of which financial liabilities 40.2 36.2

of which pension provisions 132.4 100.9

of which other provisions 14.5 20.2

C. Current liabilities 593.4 570.7

of which financial liabilities 38.4 36.5

of which trade payables 71.4 61.0

of which other liabilities 335.5 320.8

of which other provisions 126.0 137.3


66


ment of financial positions, the equity ratio improved from 27.1% to 28.6%.

On the liabilities side, non-current liabilities rose by € 43.1 million, from € 167.3 million to € 210.4 mil-lion, in the reporting period. The increase resulted mainly from the rise in pension provisions due to falling interest rates of € 31.5 million to € 132.4 mil-lion (prior year: € 100.9 million). There was also an increase in deferred tax liabilities of € 10.5 million to € 18.3 million (prior year: € 7.9 million) due to the positive development of earnings. Long-term bank liabilities rose by € 4.0 million to € 40.2 million (prior year: € 36.2 million).

There was an increase in current liabilities of € 22.8 million to € 593.4 million (prior year: € 570.7 million). This rise resulted mainly from an increase of € 18.2 million in non-nettable payments on account received for long-term construction con-tracts. There was also an increase trade payables of € 10.4 million to € 71.4 million and in income tax liabilities of € 7.0 million to € 22.1 million. By con-trast, other provisions declined by € 11.3 million to

€ 126.0 million (prior year: € 137.3 million). The latter comprise the short-term portion of provisions for adapting corporate structures, which was reduced by € 15.9 million to € 16.3 million due in particular to utilization and reversals.

Capital expenditures

In the reporting period, the Schuler Group’s invest-ments in intangible assets and property, plant and equipment amounted to € 26.5 million, compared to € 13.0 million in the short fiscal year 2013. The main focus of investment was property, plant and equipment with an amount of € 23.1 million (prior year: € 12.3 million). Investments in intangible assets amounted to € 3.4 million, compared to € 0.7 million in the previous year, and mainly comprise invest-ments to expand and optimize the IT infrastructure. Compared to the short fiscal year 2013, total depre-ciation and amortization of tangible and intangible assets increased from € 7.0 million to € 21.7 million. The write-downs on non-current assets amounted to € 0.8 million (prior year: € 1.3 million).


67


Subsequent Events

Since January 1, 2015, there have been no significant events with a material impact on the Schuler Group’s net assets, financial position and earnings.


68

Forecast, Risk and Opportunity Report

1. Forecast Report

Slightly firmer growth for global economy in 2015

In its latest forecast, the International Monetary Fund (IMF) expects the global economy to grow by 3.5% in 2015. Compared to its forecast of Octo-ber 2014, however, the IMF has reduced its expec-tations by 0.3 %-points. This was justified by the weaker outlook for China, Russia, Japan and the eurozone, which counteracts the positive impact of low oil prices. As in the previous year, growth in the industrialized countries is expected to reach 2.4% – supported in particular by a robust US economy. The IMF expects a slight increase in GDP of 1.2% for the eurozone with growth of 1.3% in Germany. The US economy is expected to grow strongly by 3.6%. In Japan, however, only a slight recovery and an increase in GDP of 0.6% is forecast for 2015. The growth projections for the emerging and developing countries have been downgraded by 0.6 %-points compared to the October forecast to an increase of 4.3% – and thus slightly down on the prior-year figure. The pace of economic growth in China is expected to slow with growth below the 7%-mark

in 2015. The experts anticipate a healthy economic trend in India with an increase in GDP of 6.3%. In Brazil, however, only a slight recovery (+0.3%) is expected. The expectations for Russia have deterio-rated significantly (– 3.5 %-points compared with the October forecast): the IMF now expects a decline in GDP of 3.0%. SEE TABLE 22

Further growth for global car market in 2015

The global car market is likely to achieve moder-ate growth in 2015. The German Association of the Automotive Industry (Verband deutscher Automo-bilindustrie – VDA) currently expects new registra-tions to rise by 2% to around 76.4 million units. The key growth drivers will once again be the core mar-kets of China and the USA, as well as Europe.

Industry experts predict a continuation of the positive demand trend in Europe (1). The forecasts for Western Europe indicate an increase in sales volume of 1%

(1) Source: Center of Automotive Management (CAM), Center for Automotive Research (CAR), China Association of Automotive Manufacturers (CAAM), PricewaterhouseCoopers (PwC), Schuler market analysis


22 / G D P D E V E L O P M E N Tin percent 2015 2014

World 3.5 3.3

Eurozone 1.2 0.8

Germany 1.3 1.5

USA 3.6 2.4

Japan 0.6 0.1

China 6.8 7.4

India 6.3 5.8

Brazil 0.3 0.1

Russia – 3.0 0.6

Source: IMF, January 2015


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to 12.2 million cars in 2015. Demand in the New EU States (EU 13) is also likely to be firmer with a 10% increase to around 1 million vehicles. In Germany, the number of new vehicle registrations is likely to rise by 1% to 3.0 million.

Expectations for the US market assume further growth of 2% to 16.7 million light vehicles. New regis-trations in Japan will probably fall by 3% to 4.6 mil-lion units in 2015.

The car markets of the BRIC states are likely to con-tinue their uneven development. New registrations in Brazil are expected to fall by 3% to around 3.2 million units. Demand in Russia is also likely to weaken by 8% to almost 2.3 million light vehicles. The Indian car market is expected to grow by 3% to 2.7 million units, while new car registrations in China are anticipated to rise by 8% to 19.9 million units.

Good prospects for the machine tool industry

In its medium-term forecast, the German Machine Tool Builders’ Association (VDW) predicts an increase in demand for 2015. The experts believe that invest-ment volume in the eight most important customer sectors for machine tools will grow more strongly in 2015 – by 8.2% compared to 7.3% in the previous year. Global consumption of machine tools is expected to rise by 7.1%. Increased consumption is forecast across the entire economic triad, whereby growth in Asia will be strongest (+9.0%), followed by America (+5.9%) and Europe (+3.3%).

The sector association sees a growth potential of 4.0% for the German machine tool industry in 2015 – whereby domestic consumption is expected to increase by 4.0% and exports by 5.0%. New orders are forecast to rise by 8%, with growth in domestic and foreign orders of 8%.

Follow-up reporting for the fiscal year 2014

At the end of the short fiscal year 2013, we predicted sales revenues of around € 1.1 billion and an EBITA margin of 6% to 7% for 2014. Due to the encouraging development of business in the first six months, we raised both our sales and EBITA forecasts in August 2014. The Schuler Group now expects sales of between € 1.1 and € 1.2 billion with an EBITA margin of 7% to 8%. On October 30, 2014, we upgraded the EBITA fore-cast once again to around 8.5%. The reason for this renewed increase was the ongoing positive trend in the first nine months and expected positive one-off effects from the reversal of provisions for the efficiency enhancement program in Germany started in 2013 and now largely completed.

With sales of around € 1.2 billion and an EBITA margin of 8.8%, we largely achieved the targets we set our-selves during the year and exceeded the original fore-cast made at the end of the short fiscal year.



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Sales and earnings forecast for 2015

The economy is gaining slight momentum in 2015. Falling oil prices and reduced euro exchange rates have helped offset the negative impact of the Ukraine crisis. China and the USA continue to be of strate-gic importance and will once again set the pace of market growth in 2015.

With an order backlog of around € 1.1 billion as of December 31, 2014, we have a good cushion and a high level of planning security for our fiscal year 2015. The unwavering continuation of our strate-gic program “Growing Together 2.0” for raising the efficiency of our internal processes and optimizing cost structures has prepared us well for the growing market challenges and enabled us to look ahead to the future with confidence.

We expect sales revenues in fiscal year 2015 to be slightly above the prior-year figure. We also expect a slight improvement in our operating result. Due to the positive one-off effect in fiscal year 2014 from the reversal of provisions for Group restruc-turing, however, the EBITA margin is expected to fall slightly short of the corresponding prior-year figure. All in all, the development of our business segments is likely to mirror the Group’s overall development.

Car manufacturers and their suppliers will remain our most important sales market in fiscal year 2015. In the medium to long term, however, other customer groups will grow in importance.

Overall statement of the Board of Management regarding future development in fiscal year 2015We are optimistic about our future prospects. With our high order backlog at the end of fiscal year 2014 and the continuation of our strategic program “Grow-ing Together 2.0”, we believe we are well prepared for the fiscal year 2015.

We currently expect sales in fiscal year 2015 to be slightly above the prior-year figure. We also expect a slight improvement in our operating result compared to the previous year. Due to special items from the reversal of provisions for Group restructuring, how-ever, the EBITA margin will be slightly down on the previous year.

2. Risk and Opportunity Report

2.1 Risk management process

2.1.1 Principles

As an internationally operating company, Schuler is active in a variety of core markets, sectors and regions. This results in numerous opportunities, but also business-specific risks. The objective of our business activities is therefore to exploit the potential opportunities while minimizing risks, thereby systematically and sustainably enhancing the company’s value.

The risk management process is standardized and applies throughout the Group. It ensures that opportunities and risks in all major organizational units are analyzed systematically and measured in the same way. The risk transparency this creates enables us to derive suitable measures to control or counter such risks. Implementing these measures generally results in a reduction of the potential damage or the realization of potential opportunities. The aim of risk management is therefore to create risk and opportunity transparency and to reduce the risk potential or utilize opportunities as part of the management process.

2.1.2 Group risk management

The principles of risk management are set out in the corporate guideline on opportunity and



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risk management. This guideline also includes a description of processes and the respective report-ing tools.

The operating opportunities and risks are assessed in the monthly reports and quarterly forecasts. This gives us an early indication of the development of new orders, capacity utilization and progress of our projects. By using a structured project con-trolling approach, we ensure that project-specific risks are continuously monitored and controlled. The corresponding reports are presented to the Board of Management and Supervisory Board in an aggregated format.

Extraordinary risks that go beyond our operating business are determined on the basis of risk analy-ses conducted by the Risk Officers. The plausibility of these reports is checked by the Risk Coordina-tor of the respective operating unit and summa-rized half-yearly in a Group Risk Report. A further plausibility check is conducted and Central Risk Management consolidates the findings where nec-essary. The half-yearly Group Risk Report is then reported to the Board of Management, which in turn informs the Audit Committee. In the event of risks with a high damage amount and high proba-bility of occurrence, the Risk Officers are required to submit an ad hoc report to Central Risk Manage-ment, which then passes this information on to the Board of Management after examination.

In the risk management system, assessments are made for all risks and issues for which there is a broader range of valuations. A description of the procedure ensures subsequent traceability. Risk control measures are defined for each risk and moni-tored as part of the measures controlling process.

2.1.3 Opportunity management as an integral part of risk management

In addition to the consideration of opportunities in operational risk management, our structured strat-egy process ensures that opportunities are also utilized. We align our company with developments in the market, our customers and technology in order to exploit the identified opportunities as fully as pos-sible. We focus on long-term trends. As part of the annual mid-term planning process, we forecast the impact on our business results of emerging oppor-tunities and their utilization.

2.2 Risk Report

2.2.1 Financial risks

2.2.1.1 Liquidity risksOne of the most important tasks of Schuler AG is to ensure the solvency of the Schuler Group at all times by providing adequate resources when and where they are needed, and ensuring profitability by care-fully managing financial risks. Corporate manage-ment also places particular emphasis on the gener-ation of cash from the Group’s operating activities. In the fiscal year 2014, we were always capable of meet-ing our financial commitments.

The syndicated loan agreement with a total volume of € 450 million signed in November 2011 and expiring on September 30, 2016, provides a sound financial basis for the implementation of our growth strategy.

Standard financial covenants were agreed for the syndicated loan. In the case of infringement, the lenders have the right to serve notice on the agree-ment. Schuler met all the financial covenants during the period under review. Premature termination is only possible, however, if two thirds of the lenders vote in favor of calling in the loan. Schuler met all the



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financial covenants during the past short fiscal year. According to our planning, the financial covenants will all be met during the current fiscal year.

In order to optimize its interest result, Schuler AG has arranged a cash pool (EUR, USD) with various banks – and controlled centrally by the Group Trea-sury. Moreover, the Group’s main subsidiaries have monthly, rolling liquidity planning in order to identify potential bottlenecks at an early stage.

2.2.1.2 Interest and foreign currency risksDue to its international alignment, the Schuler Group is exposed to certain interest and foreign currency risks. These include possible value fluctuations of a financial instrument due to changes in the market interest rate or exchange rate. Coverage against such risks is provided by so-called netting, i.e, the balancing of values or cash flows with regard to time and amount. Any remaining risks are reduced by the use of derivative financial instruments (e.g, forward exchange transactions, swaps and currency options, interest swaps and interest options). Such deriva-tives are generally used as part of so-called micro-hedges, i.e, they serve to secure specific existing or planned underlying transactions. Further details are provided in the Notes to the Consolidated Financial Statements.

Currency and financial risks are continually moni-tored by the central cash and foreign currency man-agement system of the Group’s Treasury department, which carries out the corresponding hedging trans-actions. The responsibilities of all Group companies are clearly and comprehensively regulated. These include, in particular, the definition of the operational framework, a clear functional separation between trading and processing, and the internal financial reporting system. We also regularly check the effi-ciency of the hedging instruments and the reliability of our internal control systems.

As of December 31, 2014, currency risks were cov-ered by forward exchange contracts and foreign currency swaps with a nominal value of € 111.5 mil-lion (December 31, 2013: € 47.7 million). At the end of the reporting period, there was no interest hedge to cover interest rate risks (December 31, 2013: € 1.8 million). Derivatives are negotiated exclusively with banks offering good credit ratings.

2.2.1.3 Default risks In order to limit the risk of default, the creditworthi-ness of customers is already checked during the offer phase. If such checks reveal increased risks, or if prepayment conditions during the offer and contract closure phase differ from group guidelines, approval must be sought from the Board of Management.

Default risks are also limited by active management of accounts receivable, continual monitoring of cred-itworthiness and payment behavior, and in certain cases by collateralizing with letters of credit or bank guarantees. A staggered approval procedure has been established for this purpose.

In addition, we have introduced a group-wide Con-tract Approval Policy which already ensures compli-ance with minimum legal standards during the con-tract negotiation stage in order to minimize risk.

2.2.1.4 Risks from pension plansSchuler has performance-based pension obligations that are only partially covered by plan assets. The bal-ance of these two items equals the financial status of the pension plans. A change in the assumptions and parameters, which are important for valuation, such as a reduction in the discount factor, may lead to an increase in obligations. On the other hand, the market value of plan assets depends mainly on capital market circumstances. Unfavorable developments, especially for fixed-interest securities, may reduce the respec-tive market value. These effects would have a negative impact on the financial status of the pension plans and



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as a consequence may lead to increased net expenses in connection with such pension obligations in sub-sequent periods. Further details are provided in the Notes to the Consolidated Financial Statements.

2.2.1.5 Tax risksThe tax audit for the years to 2009 at Schuler AG and the German companies of the Schuler Group has been completed. Due to the possibility of differ-ing assessments of items in the audit commenced in fiscal year 2014 for the years to 2013, as well as audits of foreign subsidiaries, a burden for the Group may arise from subsequent demands and the respective interest. Due to restructuring processes completed in the previous year, tax loss carryfor-wards were lost. At the same time, however, the use of discretionary measures in the new structure will enable the use of tax loss carryforwards of Schuler AG previously regarded as worthless. This was also considered when measuring the amount of tax loss carryforwards to be capitalized.

The acquisition by ANDRITZ resulted in the loss of domestic tax loss carryforwards and any domes-tic tax losses in the period October 2012 to Febru-ary 2013, insofar as these loss carryforwards or losses exceed domestic taxable hidden reserves, which result from the difference between the fair market value of the shares and the prorated taxable equity on the date of acquisition. There is only a small risk that significantly more tax loss carryforwards or losses are lost due to a differing assessment of hidden reserves by the tax authorities than we have measured, or that the acquisition may lead to other tax burdens.

2.2.2 Business environment and sector risks

2.2.2.1 Competitive environment with regard to customers and competitorsSchuler is the technological leader in the global market. In emerging markets, we often face competi-tion from local, low-cost suppliers.

China is now the world’s largest manufacturer of machines. A large proportion of this volume was pro-duced for China’s domestic market. However, China is now the world’s third largest exporter of machines. In the automotive sector, we have observed increased attempts by Chinese press manufacturers to pene-trate markets outside China.

In order to remain competitive in the future, it is essential that we produce a constant stream of prod-uct innovations. It is equally important that we contin-ually improve our cost structures.

In order to limit the risk of product and trademark piracy, we produce a large amount of our highly technical components in Germany. We protect many of our technical innovations by applying for patents or other industrial property rights. In some cases, however, we deliberately choose not to apply for pro-tection as such applications generate publicity and increase the danger of plagiarism.

In terms of customers, the German OEMs are import-ant business partners for Schuler. In the non-auto-motive segment, we have a wide variety of custom-ers in sectors such white goods, railway, aerospace, packaging and large pipes.

Our global service network also plays an important role in strengthening the long-term loyalty of cus-tomers. By carefully expanding our service activities, we see an opportunity to achieve additional competi-tive advantages.



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2.2.2.2 Market and sectorThe business development of the Schuler Group depends to a large extent on the prevailing macro-economic situation, the economic cycle and the investment climate. Despite our increased activities in the non-automotive sector, the investment behav-ior of car manufacturers and their suppliers plays a significant role.

As is typical for the capital goods industry, there is often a time delay before we notice changes in their propensity to invest.

The order backlog as of December 31, 2014, was still high at € 1.1 billion (prior year: € 1.0 billion) and forms a strong starting point for 2015.

The economic situation in the eurozone improved over the course of 2014. The global economic pros-pects are currently viewed slightly more optimisti-cally on the whole.

German engineering output increased slightly in 2014. The sector association VDMA fore-casts further growth of 2% in 2015. Demand from the USA in par-ticular is likely to provide a fresh impetus for growth.

The investment decisions of OEMs and the ongoing development of the Chinese market will have a strong influence on the progress of Schuler’s future business.

On the basis of sales assessments, we prepare a monthly analysis of promising projects for our new machine business and, where possible, also for our service business. At the same time, we analyze the reasons for projects that have been awarded to com-petitors or canceled by the customer. This gives us a good overview of the changing market conditions and competitive situation. These findings are incorpo-rated into our quarterly forecasts.

2.2.2.3 Country risksIn the emerging markets, cultural and language barri-ers, insufficient information about suppliers, customer and market mechanisms, and specific legal and polit-ical conditions may lead to disadvantages. We try to take such specific characteristics into account by pro-viding special training for staff, by issuing country-spe-cific guidelines, and by using local representatives where necessary.

Political developments and the resulting sanctions may endanger the realization of certain projects. This currently applies in particular to our business relations with Russia due to sanctions imposed in the wake of the Ukraine crisis. Due to restrictions placed on exports to Russia, the establishment of business and implementation of projects with Russian cus-tomers is endangered. As far as possible, we hedge against risks from existing projects.

Furthermore, the collapse of the economy in Russia and the CIS countries has reduced the opportunities for future projects in this region. As our present busi-ness in this region accounts for less than 10% of Group sales, any worsening of the situation would not endan-ger the company’s continued existence.

2.2.3 Operating risks

2.2.3.1 Order creation processOur business is generally dominated by contract manufacturing. During the order acquisition phase, we conduct feasibility studies as part of the project planning process and make extensive cost calcula-tions. Systematic plausibility checks are also con-ducted as part of our internal control systems.

On the sales side, the contractual scope of perfor-mance and commercial terms and conditions are discussed in detail with the customer. Binding group-wide standards must be observed during this process. Any deviations from the regulations require advance



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approval by the respective Division managers or the Board of Management.

2.2.3.2 Development/designSchuler conducts extensive research and develop-ment work in order to improve its existing products and develop new products. By establishing a central research and development unit (CTO), expertise has been pooled within a single division. In this way, we intend to extend our technological lead and perma-nently enhance our innovative strength.

Although we can draw on our core competencies, investments in new products always involve the risk that such products might fail. By closely monitoring innovation projects using a quality gate process and regular reporting, however, these risks are kept to a minimum.

2.2.3.3 ProcurementIn terms of procurement, the Group is exposed to risks mainly from commodity price fluctuations, delays in deliveries, quality defects or the economic situation of our suppliers.

The procurement of metals and metal alloys, espe-cially steel accounts for a significant proportion of our costs. As a result, strategic sourcing closely monitors market price trends for these commodities and includes such developments in the company’s procurement strategy.

Assessments of future commodity prices are based on cyclical factors as well as micro- and macroeco-nomic trends. Our international procurement organi-zation attempts to balance out or exploit any tempo-rary disequilibrium in global commodity prices.

In 2014, the steel price was well below the level of the previous year and steadied at a low level in the last quarter. In general, there was an overall decline in the price of important commodities, such as iron

ore, coking coal and copper throughout 2014. In the event of a significant recovery in the global econ-omy or rising commodity prices, we expect slight increases in the price of steel in 2015 due to the cur-rent low price level. No significant price leaps in the commodities that we mainly procure are currently visible, however. Fluctuations in the prices of com-modities we procure can generally be hedged against by signing longterm supply agreements and placing project-based orders, or passing such price rises on to the market.

As part of our strategic procurement management, and by comparison with the purchasing conditions of the ANDRITZ Group, we continually develop our structures and business processes. With the aid of our international procurement offices in China, Brazil, the US, India and Eastern Europe, and the expansion of our global supply partnerships, we aim to utilize our regional location benefits with regard to procurement.

The general cooling of the procurement markets means that the delivery situation of our suppliers remains relaxed. When awarding new contracts, the feasibility of delivery dates is critically examined. By concluding master agreements and involving sup-pliers in the planning process from an early stage, we have achieved a sustainable improvement in availability. In the case of key components, agree-ments are made with suppliers for individual cases to ensure that orders are processed on schedule. Despite these measures, however, delivery delays cannot be completely eliminated.

In order to minimize the risk of non-delivery by our suppliers, Schuler assesses associated risks, such as their financial stability, with the aid of an exter-nal and independent financial services provider. If a high, default risk is identified for a supplier, steps are taken to ensure uninterrupted supplies.



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2.2.3.4 InfrastructureSecuring stable production conditions is a necessary prerequisite for the efficient execution of work pro-cesses. We regularly calculate the need for modern-ization of our infrastructure (buildings, power supply, heating) and conduct any necessary measures.

2.2.3.5 ProductionAs of December 31, 2014, the order backlog remained high at € 1.1 billion. This gives us a stable basis for the utilization of our facilities in 2015.

The corporate divisions Production and Procurement are pooled together in a separate Board of Manage-ment division. We conducted a review of product allocations and make-or-buy strategies and adapted them to market needs. Against this backdrop, the company’s loss-making foundry in Göppingen was closed. Castings are now procured from several sup-pliers. There have been no negative developments with regard to delivery dates, quality and costs.

We have reached an agreement with the Group Works Council regarding the adjustment of production capacities in Germany. These adjustments will be completed in 2015. The number of domestic factories will remain unchanged. The importance of China as a sales region for Schuler makes it necessary for us to raise our local value added ratio. As a consequence, we have expanded our production facility in Dalian.

In the past fiscal year, there was still a strong focus on the management of production capacities and delivery dates. In the field of mechanical and hydrau-lic presses, the management of production capacities and delivery dates is centrally coordinated as part of the global manufacturing network. Capacities are already checked and projects scheduled on submis-sion of the offer. Once the order has been received, it is constantly monitored by the Project Manager.

A key success factor is the production launch phase of our products. We have increased our manpower in this field. Due to the lack of skilled press start-up specialists on the labor market, we intensified our internal training possibilities to ensure our own supply of suitably skilled staff in the medium to long term. Close coordination between Procurement and Production is thus also essential in this field, in order to secure external capacities in bottleneck areas at the right time.

In order to ensure quality, we have installed local quality assurance departments at all production facilities. Sources of error are systematically ana-lyzed and production processes optimized. A central quality management system ensures standard pro-cesses, methods and regular audits. Uniform stan-dards are also prescribed for the selection of sup-pliers. Provisions are formed to take account of the impact of warranty risks on the income statement.

Almost all Group companies are certified accord-ing to the quality management standard DIN EN ISO 9001. In addition, individual companies are certified according to VDA 6.4/ISO/TS 16949 depending on their function within the Group and on the market.

2.2.3.6 Project managementIn order to optimize order processing, we have pooled all activities involved in supplying the customer, after receipt of the order, in our central Order Fulfill-ment office. In this way, all departments along the value chain are integrated into the process. There is continual project controlling and a claim manage-ment office, which documents changes to the order received from the customer during the order pro-cessing phase.



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2.2.4 Other risks

2.2.4.1 EnvironmentSchuler reduces potential environmental risks by means of its quality assurance and environmental protection systems. In addition to the above men-tioned quality management systems (see also section 2.3.5 “Production”), the environmental management systems of various Group companies are also certi-fied according to the DIN EN ISO 14001 standard.

2.2.4.2 LegalAs an internationally operating group of companies, Schuler must comply with numerous legal, tax, fair trading, and patent regulations. Current and impend-ing legal disputes are continually monitored, ana-lyzed and assessed with regard to their financial and legal implications, and due consideration is given as part of our ongoing risk prevention measures.

2.2.4.3 ComplianceSchuler has to comply with the respective legal reg-ulations of every country in which it operates. The variety and increasing complexity of the relevant regulations at local and international level increases the risk that Schuler may be exposed to significant legal and economic risks through non-compliance, e.g, fines or damage claims. Major compliance risks include the contravention of environmental and tax laws, or health and safety regulations, as well as cor-ruption, cartel or export infringements.

In order to minimize these risks, Schuler has a Com-pliance-Management System (CMS) aligned with market standards and comprising the main compo-nents, e.g, the creation of a central code of conduct with specific guidelines and leaflets, the appoint-ment of Compliance Officers at the Group companies, the definition and implementation of processes for avoiding legal infringements, and the regular training

of staff in face-to-face and online sessions to make them aware of the risks.

In 2014, 191 Schuler employees around the world received online training in matters of compliance; these are persons who had not yet been trained or had only recently joined the Group. A complete round of training is planned for all staff world-wide in 2015 (the second after 2013 and from now on every two years). All Schuler Group employees are to be made aware of the importance of compliance and given more advanced knowledge of the subject.

Finally, a compliance hotline (whistleblowing system) has been set up which is managed by an external law firm and has been available to both Schuler Group employees and all other stakeholders of the Schuler Group since November 2014.

Schuler’s CMS will continue to be developed in 2015 to ensure that the Schuler Group complies with all applicable legal regulations.

2.2.4.4 Information technologyInformation security, IT availability and performance are a vital prerequisite for successful business oper-ations. Despite dedicated packages of measures taken, 100% data security cannot be guaranteed in the current IT environment. Existing systems are continuously optimized.

In addition, tests are carried out by Internal Audit with corresponding controlling of the measures implemented. We continually adapt our IT capacities to current needs. Differentiated back-up and recov-ery strategies help avoid any loss of data. We attach particular importance to harmonizing and standard-izing IT tools and processes as part of our global IT strategy.



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2.2.4.5 PersonnelThe future development of the Schuler Group depends to a great extent on the knowledge and com-mitment of our employees. We take personnel risks seriously and use systematic personnel planning and training in order to utilize staff according to their abilities, as well as to develop and retain them within the company.

In addition to cooperating closely with local and national universities and research institutes, we also use external service providers to source highly skilled personnel.

With the aid of targeted personnel and university marketing activities, we aim to raise the appeal of Schuler’s companies as attractive employers for internal and external candidates. Our personnel development system is an important component of our efforts to reliably ensure future personnel capacities.

Our efforts were honored with the “Top Employer” award in the past year. Schuler once received the independent certificate “Top Employer Germany 2013” from the CRF Institute. In addition, Schuler was included in the list of “Germany’s Best Employers” published by the magazine Focus.

Despite all efforts, the shortage of skilled staff will remain a future challenge due to the demographic development. Internal training opportunities have therefore been stepped up in order to ensure a suit-

able supply of our own skilled staff in the medium to long term and thus counter the shortage.

2.2.4.6 Shared servicesThe process of centralizing functions in the field of accounting, controlling, human resources and IT in order to achieve cost savings was launched in 2014. Several processes, especially in the field of HR, have already been successfully transferred to our Shared Service Center in Erfurt. The implementation of further measures could result in start-up difficul-ties during the transition phase and have a negative impact on processes.

2.2.4.7 Adjustments to the corporate structureCorresponding provisions were formed for the planned corporate restructuring process. These are based on assessments. Negotiations with the Group Works Council regarding the settlement of interests were concluded in fiscal year 2014. During the implementation of the Group’s restructuring, we were mostly able to find amicable solutions with our employees and avoid redundancies by means of internal transfers. As a result, we did not have to pay all the risk provision earmarked for the process and were able to reverse a certain proportion. Most of the risks associated with staff measures thus no longer exist. Provisions have been formed for the remainder of the costs to be incurred in 2015. There is a risk that actual costs may exceed these risk provisions.



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2.3 Opportunity Report

2.3.1 Markets

As the leading systems supplier of cold, warm and hot forming equipment, Schuler supplies machines, production lines, dies, process know-how and ser-vices for the entire metal-working industry and light-weight car construction sector.

Focus on ten strategic target marketsIn order to build on our strong market position, we are focusing on ten strategic markets. This will enable us to align ourselves more closely with cus-tomer requirements and tap further growth potential.

Strong presence in growth marketsOur international presence with manufacturing facil-ities and service offices around the world forms the basis for a strengthening of our competitiveness and the profitable expansion of our business activities. For example, we completed the expansion of our Dalian production facility and strengthened our sales, procurement and development facilities in Shanghai.

Our stronger local presence gives us a better insight into the needs of our Chinese customers. Based on these findings, we can develop products tailored to the local market. This enables us to improve our competitive position with regard to local competitors and to use the developed products for expansion into other emerging markets.

Service as a growth driverSchuler supports its customers around the world by providing a wide range of services. By expanding our network of service locations and increasing the range of services provided, we intend to drive our market penetration and tap additional growth potential.

2.3.2 Technologies

Securing the Schuler Group’s technological lead is vital for its sustainable growth. By pooling our expertise in key technologies within a new Board of Management division headed by the Chief Technol-ogy Officer (CTO), we aim to drive our technologi-cal development and innovative strength. The remit of this central R&D unit includes defining technol-ogy platforms, analyzing the market and developing product strategy in the various Divisions, as well as innovation management, product development and standardization.

2.3.3 Products

In fiscal year 2014, we successfully launched acquired technology for the production of spiral pipe systems. Group Five Pipe Ltd. of Saudi Arabia placed an order with us for a complete pipe plant. In addi-tion, we received a further order for the production of a spiral pipe system. We see the potential for further growth in this area.

Based on our leadership in servo technology, we were able to expand our product portfolio in the non-automotive sector during the reporting period. We launched production of the first linear hammer with servo technology for a customer in the forg-ing industry. In addition, we unveiled a new blanking press with ServoDirect Technology. This innovation received the “EuroBlech Award”. We also offer highly innovative products with significantly reduced energy requirements and expect further growth in this field.

As the leader in forming technology, our products are particularly strong in the premium segment – which we intend to expand. At the same time however, we aim to develop our portfolio in order to address more fully the needs of the mid-price segment. In emerg-ing markets in particular, we see tremendous growth potential in this area with solutions specially tailored



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to local needs. Our local manufacturing facilities in Brazil and China give us the opportunity to produce and offer our products with optimized cost structures for the local markets, as well as other emerging markets.

2.3.4 Order handling

Consistent project reporting enables us to take timely corrective action in the case of negative develop-ments or achieve positive cost unit deviations through optimized processing. In the current reporting period, we see the opportunity for further positive effects on earnings. We are currently conducting a project to make order handling even more efficient.

2.3.5 Increased profitability through further optimization of our management structure and processes

The merger of several German subsidiaries with Schuler Pressen GmbH laid the foundation for a fur-ther pooling of our activities in Germany with result-ing synergy potential.

The establishment of a shared service organization for specific areas at our site in Erfurt was success-

fully initiated. The first processes of our German companies are already being handled by the Shared Service Center. The transfer of additional processes will be continued as planned in fiscal year 2015. We expect cost savings as soon as the processes iden-tified for transfer to the Shared Service Center have been completely transferred.

By optimizing our production strategy, we also see further opportunities to achieve positive effects with regard to the utilization of resources.

2.3.6 Adjustments to corporate structure

Corresponding provisions have been formed for the planned corporate restructuring. As a result of the completed negotiations with the Group Works Coun-cil regarding the settlement of interests, most of the risks associated with staff measures no longer exist. The provisions have been adapted correspondingly to the remainder of the costs to be incurred in 2015. These are based on assessments. There is a possibil-ity that these provisions may not be fully utilized.



81

2.4 Quantification of risks and opportunities

Risk is understood as being the possibility of a nega-tive deviation from the planned result. Opportunities are potential positive deviations from the planned result. Risks and opportunities therefore refer to items or events whose effects are not considered in budget or forecast figures.

In the course of corporate management, the reported forecasts for new orders, sales, earnings and other relevant KPIs are assessed several times a year in group-wide forecasts and adapted where neces-

sary. The main focus is on the operating risks and opportunities.

For the internal controlling of exceptional risks, the Group Risk Report represents a consolidation of all major risks and opportunities (dark blue fields) with a time horizon of less than one year. Schuler’s risk matrix also ranks those reported items as high which have a medium probability of occurring but a damage amount of € 1.0 million or more. SEE CHART 23

As of December 31, 2014, there are no individual risks and opportunities above € 5.0 million.


23 / S C H U L E R R I S K M A T R I X

Prob

abili

ty

(in %

)

high (> 60 %)

medium (40 % < × < 60 %)

low (< 40 %)

up to 200 200 – 500 500 – 1,000 > 1,000

Damage volume (in € thousand)


82

2.5 Summary of risk and opportunity evaluation

Compared to fiscal year 2012/13 and the short fiscal year, there are few changes to the overall risk struc-ture with the exception of risks and opportunities relating to the planned corporate restructuring. The risks associated with corporate restructuring have declined strongly. There are currently no recogniz-able risks that may endanger the continued existence of the Schuler Group. Macroeconomic risks continue to exert a strong influence on business activities. Due to the consistently high level of order backlog, we must continue to make every effort to ensure that orders are processed punctually and with perfect quality. Schuler’s innovations are aimed at securing its technological lead.


THE

R E S U LT S

THE RESULTS/ Content:

86 Consolidated income statement

87 Consolidated statement of comprehensive income

88 Consolidated statement of f inancial position

90 Statement of changes in equity

92 Statement of cash flows

93 Notes

---

170 Auditor’s Opinion172 Financial Glossary

85

93 General

96 Consolidated group

98 Principles of consolidation

99 Foreign currency translation

100 Accounting principles and valuation methods

112 Consolidated income statement disclosures

119 Statement of f inancial position disclosures

150 Other disclosures

168 Additional disclosures acc. to HGB

NOTES/ Content:

86

S C H U L E R AG A N N U A L R E P O R T2014

T H E R E S U L T S

In T€ Notes 2014 SF Y 2013

1. Sales 1 1,178,497 258,771

2. Changes in inventories of finished goods and work in progress – 28,191 – 1,302

3. Internally produced and capitalised assets 2,909 18

4. Other income 2 24,506 4,906

5. Cost of materials 3 508,093 108,566

6. Personnel expenses 4 374,267 124,180

7. Depreciation and amortization of intangible and tangible assets 5 21,718 6,996

8. Other expenses 6 171,455 51,031

9. Operating result 102,186 – 28,380

10. Interest income 8,850 1,364

11. Interest expense 10,437 2,597

12. Other financial result 61 680

13. Financial result 7 – 1,526 – 552

14. Profit or loss before tax 100,661 – 28,933

15. Income taxes 8 33,777 – 3,976

16. Consolidated profit or loss for the year 66,884 – 24,956

of which attributable to shareholders of Schuler AG 66,611 – 24,999

of which attributable to non-controlling interest 273 42

Earnings per share in € 9

Basic earnings per share 2.23 – 0.84

Diluted earnings per share 2.23 – 0.84

Consolidated income statement of the Schuler Groupfor the period from January 1, 2014, to December 31, 2014

87


T H E R E S U L T S

In T€ Notes 2014 SF Y 2013

Consolidated profit or loss for the year 66,884 – 24,956

Items which cannot be recycled in profit or loss

Actuarial gains/losses on defined benefit pensions and similar obligations 23 – 27,018 – 925

Deferred taxes on items which cannot be recycled in profit or loss 8 7,884 147

Items which can be recycled in profit or loss

Exchange differences on translation of foreign operations 9,839 – 1,895

Cash flow hedges:

valuation changes recognized in other comprehensive income – 5,425 707

recognized in gain and loss – 273 38

Deferred taxes on items which can be recycled in profit or loss 8 1,729 – 229

Other comprehensive income for the year, net of tax – 13,264 – 2,158

Total comprehensive income for the year, net of tax 53,620 – 27,115

of which attributable to shareholders of Schuler AG 52,879 – 27,127

of which attributable to non-controlling interest 741 12

The allocation of tax effects to individual components of “Other comprehensive income for the year, net of tax” is presented in note (18).

Consolidated statement of compre-hensive income of the Schuler Groupfor the period from January 1, 2014, to December 31, 2014

88


T H E R E S U L T S

In T€ Notes 12/31/2014 12/31/2013

ASSETS

A. Non-current assets

1. Intangible assets 10 76,341 77,559

2. Property, plant and equipment 11 168,841 161,240

3. Interests in affiliates and participations 12 1,591 2,580

4. Income tax receivables 1,153 1,691

5. Other assets 13 4,514 3,167

6. Deferred tax assets 8 30,905 31,280

283,345 277,516

B. Current assets

1. Inventories 14 102,288 123,054

2. Trade receivables 15 95,541 109,557

3. Future receivables from long-term construction contracts 16 101,766 109,668

4. Income tax receivables 5,076 2,866

5. Other assets 13 55,302 40,657

6. Cash and cash equivalents 17 482,507 349,322

842,480 735,125

1,125,825 1,012,640

Consolidated statement of f inancial position of the Schuler Groupas at December 31, 2014

89


T H E R E S U L T S

In T€ Notes 12/31/2014 12/31/2013

LIABILITIES

A. Equity 18

1. Share capital 77,769 77,769

2. Capital reserves 125,630 125,411

3. Retained earnings 138,658 78,395

4. Accumulated other comprehensive income – 24,799 – 11,067

Equity attributable to shareholders of Schuler AG 317,257 270,508

5. Non-controlling interest 19 4,732 4,187

321,990 274,695

B. Non-current liabilities

1. Financial liabilities 20 40,225 36,208

2. Other liabilities 16, 21 5,022 2,175

3. Pension provisions 23 132,380 100,869

4. Other provisions 24 14,453 20,175

5. Deferred tax liabilities 8 18,319 7,858

210,398 167,284

C. Current liabilities

1. Financial liabilities 20 38,393 36,457

2. Trade payables 25 71,387 60,986

3. Other liabilities 21 335,537 320,757

4. Income tax liabilities 22 22,138 15,130

5. Other provisions 24 125,982 137,331

593,438 570,661

1,125,825 1,012,640

90


T H E R E S U L T S

In T€ Shareholders of Schuler AG Non-controlling interest Total

Share capital Capital reser ves Retained earnings Accumulated other comprehensive income Equity capital Equity capital Consolidated equity capital

Foreign currency translation dif ferences

Unrealized gains and losses from

cash flow hedges

Acturial gains and losses of defined

benefit pension plans and similar obligations

af ter deferred taxes

As at October 1, 2013 77,769 125,411 103,394 6,316 5 – 15,259 297,635 4,366 302,001

Consolidated profit or loss for the year – – – 24,999 – – – – 24,999 42 – 24,956

Other comprehensive income for the year, net of tax – – – – 1,865 515 – 779 – 2,129 – 30 – 2,158

Total comprehensive income for the year – – – 24,999 – 1,865 515 – 779 – 27,127 12 – 27,115

Dividend – – – – – – – – 192 – 192

Share-based payment transactions – – – – – – – – –

Change in consolidated group – – – – – – – – –

As at December 31, 2013 77,769 125,411 78,395 4,451 520 – 16,038 270,508 4,187 274,695

Consolidated profit or loss for the year – – 66,611 – – – 66,611 273 66,884

Other comprehensive income for the year, net of tax – – – 9,369 – 3,969 – 19,132 – 13,732 468 – 13,264

Total comprehensive income for the year – – 66,611 9,369 – 3,969 – 19,132 52,879 741 53,620

Dividend – – – 6,580 – – – – 6,580 – 195 – 6,775

Share-based payment transactions – 219 – – – – 219 – 219

Change in consolidated group – – 232 – – – 232 – 232

As at December 31, 2014 77,769 125,630 138,658 13,820 – 3,449 – 35,170 317,257 4,732 321,990

An explanation of equity is provided in notes (18) and (19).

Statement of changes in equity of the Schuler Groupfor the period from January 1, 2014, to December 31, 2014

91


T H E R E S U L T S

In T€ Shareholders of Schuler AG Non-controlling interest Total

Share capital Capital reser ves Retained earnings Accumulated other comprehensive income Equity capital Equity capital Consolidated equity capital

Foreign currency translation dif ferences

Unrealized gains and losses from

cash flow hedges

Acturial gains and losses of defined

benefit pension plans and similar obligations

af ter deferred taxes

As at October 1, 2013 77,769 125,411 103,394 6,316 5 – 15,259 297,635 4,366 302,001

Consolidated profit or loss for the year – – – 24,999 – – – – 24,999 42 – 24,956

Other comprehensive income for the year, net of tax – – – – 1,865 515 – 779 – 2,129 – 30 – 2,158

Total comprehensive income for the year – – – 24,999 – 1,865 515 – 779 – 27,127 12 – 27,115

Dividend – – – – – – – – 192 – 192

Share-based payment transactions – – – – – – – – –

Change in consolidated group – – – – – – – – –

As at December 31, 2013 77,769 125,411 78,395 4,451 520 – 16,038 270,508 4,187 274,695

Consolidated profit or loss for the year – – 66,611 – – – 66,611 273 66,884

Other comprehensive income for the year, net of tax – – – 9,369 – 3,969 – 19,132 – 13,732 468 – 13,264

Total comprehensive income for the year – – 66,611 9,369 – 3,969 – 19,132 52,879 741 53,620

Dividend – – – 6,580 – – – – 6,580 – 195 – 6,775

Share-based payment transactions – 219 – – – – 219 – 219

Change in consolidated group – – 232 – – – 232 – 232

As at December 31, 2014 77,769 125,630 138,658 13,820 – 3,449 – 35,170 317,257 4,732 321,990

An explanation of equity is provided in notes (18) and (19).

92


T H E R E S U L T S

In T€ 2014 SF Y 2013


+/– Depreciation, amortization and impairments/impairment reversals of non-current assets and interests in affiliates and participations 21,718 6,858

+/– Increase/decrease in pension provisions (less indemnity claims) 12,183 – 56

+ Share-based payment transactions 219 0

–/+ Gain/loss from disposal of non-current assets – 2,111 44

–/+ Increase/decrease in inventories 22,640 3,804

–/+ Increase/decrease in receivables and other assets not relating to investing or financing activities 14,693 41,935

–/+ Decrease/increase in provisions (excluding pension provisions) – 10,441 38,392

–/+ Decrease/increase in liabilities not relating to investing or financing activities 27,117 20,667

Cash flow from operating activities 152,902 86,688

+ Proceeds from sale of tangible and intangible assets 3,480 192

– Purchases of other tangible and intangible assets – 26,413 – 12,979

+ Proceeds from the sale of financial assets 0 138

– Proceeds from events attributable to neither operating nor financial activities – 185 0

Cash flow from investing activities – 23,118 – 12,649

– Dividend payment to shareholders of Schuler AG – 6,580 0

– Dividend payment to non-controlling interest – 195 – 192

+ Proceeds from non-current financial liabilities 45,931 3,017

– Repayment of non-current financial liabilities – 47,190 – 16,667

–/+ Change in current financial liabilities 6,232 4,271

Cash flow from financing activities – 1,803 – 9,571

Change in cash and cash equivalents 127,981 64,469

+/– Change in cash and cash equivalents due to exchange rate fluctuations 4,365 – 3,458

+ Change in cash and cash equivalents due to changes in the consolidated group 839 0

Net change in cash and cash equivalents 133,185 61,011

+ Cash and cash equivalents at beginning of period 349,322 288,311

Cash and cash equivalents at end of period 482,507 349,322

Cash flow from operating activities includes:

Interest received 8,401 1,281

Interest paid 6,176 1,407

Income taxes paid 7,413 3,105

The cash flow statement is explained in note (27).

Statement of cash flows of the Schuler Groupfor the period from January 1, 2014, to December 31, 2014

93


T H E R E S U L T S

Notes to the consolidated financial statements of the Schuler AG Group as at December 31, 2014

General

Schuler Aktiengesellschaft (“Schuler AG”) is the management holding company of the Schuler Group; its registered office is located in Bahn-hofstrasse 41, 73033 Göppingen, Germany. It is registered with the District Court of Ulm, Ger-many, under the number HRB 530210. Schuler is a leading international supplier of metalforming machines, systems, dies and services. Its most important clients include car manufacturers and their suppliers, as well as the railway, aerospace, defense, security and packaging technology, drive and generator construction, general sheet metal production, appliances and large pipes industries and national mints.

The consolidated financial statements of Schuler AG as of December 31, 2014, were prepared in accordance with International Financial Reporting Standards (IFRS), as they are to be applied in the European Union (EU), and according to the supple-mentary regulations of § 315a (1) German Com-mercial Code (HGB) to be observed under German commercial law. All IFRS, including the interpre-tations of the IFRS Interpretations Committee, that were binding for the fiscal year and had been adopted into European law by the European Com-mission were applied.

In the past, the fiscal year of the Schuler Group began on October 1 and ended on September 30 of the following year. In order to adapt the fiscal year to that of the new majority shareholder, ANDRITZ Beteiligungsgesellschaft IV, the Annual General Meeting of Schuler AG of April 18, 2013, adopted a resolution to change the company’s fiscal year to

the calendar year with effect from October 1, 2013. A short fiscal year (“SFY”) was formed for the period October 1, 2013, to December 31, 2013.

In the consolidated financial statements of this report, the comparative period is the SFY 2013 with a duration of 3 months; the current reporting period 2014, however, has a duration of 12 months. Due to the differing durations of the reporting and comparative periods, the figures presented are not completely comparable.

The accounting and valuation principles applied correspond in the main with the methods used in the previous year.

Moreover, all revised standards and interpreta-tions mandatory for fiscal years beginning on January 1, 2014 were observed – insofar as they were relevant for Schuler:

• IFRS 10 “Consolidated Financial Statements”• IFRS 11 “Joint Arrangements”• IFRS 12 “Disclosures of Interests in Other

Entities”• Amendments to IAS 27 “Separate Financial

Statements”• Amendments to IAS 28 “Investments in Associ-

ates and Joint Ventures”• IFRS 10, IFRS 11, IFRS 12 (Transition Guidance)• Amendments to IFRS 10, IFRS 12 and IAS 27:

Investment Entities• Amendments to IAS 32 “Financial Instruments:

Presentation” – “Offsetting Financial Assets and Financial Liabilities”

• Amendments to IAS 36 “Recoverable Amount Disclosures for Non-Financial Assets”

94

T H E R E S U L T SS C H U L E R AG A N N U A L R E P O R T2014

• Amendments to IAS 39 “Financial Instru-ments: Recognition and Measurement”: Nova-tion of Derivatives and Continuation of Hedge Accounting

As a result of IFRS 12, the Group extended its dis-closures on shares held in subsidiaries. The appli-cation of the other new standards had no impact on the consolidated annual financial statements of Schuler AG as of December 31, 2014.

The IASB passed the following amendments in fiscal year 2014 which have already been endorsed by the European Union but whose application was not yet mandatory at the end of the reporting period:

• IFRIC 21 “Levies” (mandatory for fiscal years beginning on or after June 17, 2014)

• Amendments as part of the Annual Improvements 2011–2013 (mandatory for fiscal years beginning on or after January 1, 2015)

The IASB also released the following new or revised standards, which have not yet been endorsed by the European Union:

• IFRS 14 “Regulatory Deferral Accounts” (mandatory for fiscal years beginning after January 1, 2016)

• IFRS 15 “Revenue from Contracts with Custom-ers” (mandatory for fiscal years beginning after January 1, 2017)

• IFRS 9 “Financial Instruments” (2014; final ver-sion) (mandatory for fiscal years beginning after January 1, 2018)

• Amendments to IAS 19 “Employee Benefits” (mandatory for fiscal years beginning after July 1, 2014)

• Amendments as part of the Annual Improve-ments 2010–2012 (mandatory for fiscal years beginning after July 1, 2014)

• Amendments to IAS 27 Equity Method in Sepa-rate Financial Statements (mandatory for fiscal years beginning after January 1, 2016)

• Amendments to IAS 16 and IAS 41 Bearer Plants (mandatory for fiscal years beginning after January 1, 2016)

• Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amorti-zation (mandatory for fiscal years beginning after January 1, 2016)

• Amendments to IFRS 11 Accounting for Acquisi-tions of Interests in Joint Operations (mandatory for fiscal years beginning after January 1, 2016)

• Amendments to IAS 1: Disclosure Initiative (mandatory for fiscal years beginning after January 1, 2016)

The Group is currently examining the possible effects of IFRS 15 on revenue recognition for proj-ects which were previously carried according to IAS 11 Construction Contracts. The other new or revised standards listed above are not expected to have any significant impact on the presentation of the consolidated annual financial statements should they be adopted by the European Union.

95


T H E R E S U L T S

These standards are not likely to be adopted in advance of their effective dates.

The consolidated financial statements present a true and fair view of the net assets, financial posi-tion and earnings of the Schuler Group. They are prepared on the basis of accrual accounting.

For the purposes of clarity, various items of the statement of financial position and income statement have been combined. These items are listed separately and explained in the notes. The income statement was prepared according to the “nature of expense” method. Items in the state-ment of financial position are presented according to maturity. Assets and liabilities are classified as current if they are expected to be recovered or settled either within twelve months of the end of the reporting period or within a longer business cycle. Consequently, inventories, trade receiv-ables and payables, and receivables from long-term construction contracts are disclosed as current items. However, deferred tax assets and liabilities, and pension provisions are always dis-closed as non-current items.

The consolidated financial statements were pre-pared in euro. Unless otherwise indicated, all amounts are stated in thousands of euros (T€). Minor differences in the presentation of individual amounts within the consolidated annual financial statements may occur due to the presentation in T€.

The Group’s affiliated companies and investments as defined by § 313 (2) HGB are listed separately in note (36) to the consolidated financial statements. The consolidated financial statements and Group management report and the annual financial statements and management report of Schuler AG are filed with the Federal Gazette and can be downloaded from the corporate website www.schulergroup.com.

The present consolidated financial statements and Group management report were released by the Board of Management on February 13, 2015 for submission to the Supervisory Board. Fol-lowing the Supervisory Board’s inspection and approval, they are expected to be published on March 3, 2015.

96


Consolidated group

In addition to Schuler AG, the consolidated annual financial statements comprise all major domestic and foreign subsidiaries which are directly or indi-rectly controlled by Schuler AG (control relation-ship), with generally more than 50% of the voting stock. Consolidation begins from the moment at

which control is possible and ends when this possi-bility no longer exists.

In the case of the following companies, the Group holds 100% of equity but less than half the voting rights:

Proportion of voting rights in % 12/31/2014 12/31/2013

NORA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Weingarten, Grünwald 15 15

SUPERA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Weingarten, Schönefeld 15 15

Rena Grundstücksverwaltungsgesellschaft mbH & Co. Vermietungs-KG, Pullach i. Isartal 40 40

The Schuler Group controls these companies as it is regarded as the economic owner of the objects – based on the conditions of the agreements drawn up to found these companies – and controls the activities which materially affect their returns.

Subsidiaries with limited activities (mainly man-agement or smaller sales companies), and com-panies on which a significant influence can be exerted, are not consolidated as their influence on the assets, liabilities, financial position and earnings of the Group is only minor. In accordance with IAS 27, 28 and 39, they are carried at fair value or cost.

Schuler (Tianjin) Metal Forming Technology Center Co. Ltd, Tianjin, PR China was founded and thus initially consolidated in fiscal year 2014.

Following entry in the commercial register, the following companies were merged with Schuler Pressen GmbH, Göppingen, in fiscal year 2014:

previously fully consolidated affiliates

• Schuler SMG GmbH & Co. KG, Waghäusel• Schuler Cartec GmbH & Co. KG, Göppingen• Schuler Modelltechnik GmbH, Weingarten• Schuler Cartec Verwaltungs GmbH, Weingarten• Müller Weingarten Werkezeuge GmbH,

Weingarten• Umformcenter Erfurt GmbH, Erfurt

previously non-consolidated affiliates

• Schuler SMG Geschäftsführungs GmbH, Göppingen

• Schuler Hydrap Geschäftsführungs GmbH, Esslingen

• Schuler Cartec Geschäftsführungs GmbH, Weingarten

• ATIS GmbH, Deggenhausertal• Schmiedetechnik & Service GmbH, Weingarten.

97

T H E R E S U L T S S C H U L E R AG A N N U A L R E P O R T2014

The resulting change to the consolidated group had no material impact on the consolidated finan-cial statements.

The previously non-consolidated Schuler Laster-technik Geschäftsführungs GmbH, Göppingen, was merged with the also previously non-consolidated

Schuler Automation Geschäftsführungs GmbH, Hessdorf. Schuler Systems & Services Geschäfts-führungs GmbH i.L., Göppingen was liquidated in fiscal year 2014.

The Schuler Group now comprises the following number of companies:

In T€ 12/31/2014 12/31/2013

Schuler AG and fully consolidated subsidiaries

Domestic 10 16

Foreign 11 10

Subsidiaries carried at amortized cost

Domestic 3 10

Foreign 9 9

33 45

98


Principles of consolidation

The financial statements of domestic and foreign companies included in the consolidation are all prepared using uniform accounting and valuation methods. These methods and the consolidation principles applied remain unchanged in respect of the previous year. According to IFRS 3 (2004), all business combinations had to be accounted for using the purchase method. Capital consoli-dation of subsidiaries being consolidated for the first time was performed at the date of acquisi-tion by netting the purchase price and ancillary costs with the newly valued proportionate share of net assets of the subsidiary. The assets, liabili-ties and contingent liabilities of the subsidiaries were measured at their full fair value, irrespec-tive of the size of any minority interests. Intangi-ble assets were disclosed separately from good-will if they could be separated from the company or resulted from a contractual or other right.

Restructuring provisions were not allowed to be recognized as part of the purchase price alloca-tion. Any excess of acquisition cost over net assets acquired was recognized as goodwill. Negative goodwill resulting from initial consolidation was booked as income. As of the reporting date, there were no business combinations which would have had to be accounted for in accordance with IFRS 3 (rev. 2008). The changes prescribed by this revised version of the standard (e.g. non-capi-talization of acquisition-related costs, fair value measurement of contingent considerations, reval-uation of previous investments in business com-binations achieved in stages) are therefore of no relevance for Schuler at present.

Income and expenses between consolidated com-panies are eliminated, as are payables and receiv-ables. Intercompany profits from sales and ser-vices are eliminated from non-current assets and inventories, insofar as they are not minor.

99


Foreign currency translation

Transactions in foreign currencies are trans-lated at the corresponding exchange rates valid at the time of transaction in the individual financial statements of the consolidated companies. Mon-etary statement of financial position items, other financial obligations and contingent liabilities in foreign currencies are translated at the average spot foreign currency rates applicable at the end of the reporting period. The resulting exchange rate profits and losses are recognized in the income statement.

Foreign companies belonging to the Schuler Group are generally treated as financially, economically and organizationally independent units. Their annual financial statements are thus translated from the respective local currency into the Group reporting currency (euro) in accordance with the functional currency concept, pursuant to IAS 21. With the exception of equity, statement of financial

position items are thus translated at the average spot exchange rate at the end of the reporting period. Equity, on the other hand, is translated at historical rates. Foreign currency translation differences resulting in the prior-year compari-son are disclosed separately under equity without affecting profit or loss.

Goodwill amounts not carried in the annual financial statements of subsidiaries which were already present as of January 1, 2005, continue to be carried at the end of the reporting period at the historic cost of the acquisition date in line with the transitional regulation IAS 21.59.

Income and expense items in the income state-ment are translated into euros at average annual exchange rates.

The most important exchange rates used for the translation of foreign currencies are as follows:

Closing rate Average rate

Countr y Currency 1 € =

12/31/2014 12/31/2013 12/31/2014 SF Y 2013

UK GBP 0.7789 0.8337 0.8066 0.8370

Switzerland CHF 1.2024 1.2276 1.2148 1.2297

USA USD 1.2141 1.3791 1.3293 1.3667

Mexico MXN 17.8679 18.0731 17.6720 17.8639

Brazil BRL 3.2207 3.2576 3.1268 3.1525

PR China CNY 7.5358 8.3491 8.1726 8.3097

100


Accounting principles and valuation methods

Intangible assets

Intangible assets are capitalized in the amount of their cost of acquisition or conversion. With the exception of goodwill, they have a measurable

useful life and are thus amortized in scheduled amounts using the straight-line method. The fol-lowing amortization periods are used:

Useful lives

Customer-related intangible assets 5 to 20 years

Technology-based intangible assets (1) 5 to 20 years

Contract-based intangible assets 5 to 20 years

1) incl. acquired drawing rights

Intangible assets (excluding goodwill) are impaired if the recoverable amount, i.e. the higher of fair value less costs to sell and its value in use, is less than the carrying amount. If the reasons for the recognition of impairment no longer exist, the asset is written up to a value not exceeding that which would have resulted in former periods without impairment.

Development expenses are capitalized if a newly developed product or process can be clearly identified, can be realized with regard to technol-ogy, economic efficiency and production capac-ity, and is intended for the company’s own use or for sale. Moreover, there must be a reasonable degree of certainty that the assignable expenses of the intangible asset can be reliably assessed during its development period and recovered after

completion by future cash flows. Development expenses which fulfill these criteria are capital-ized at the cost of conversion. The cost of con-version comprises all costs which can be directly allocated to the development process as well as a reasonable proportion of development-related overheads. After completion, capitalized develop-ment costs are amortized in scheduled amounts over the expected life cycle of the products. Research expenses are expensed in the period in which they are incurred.

Due to the indefinite useful lives, goodwill is not amortized in scheduled amounts but reviewed annually or on indication of any impairment by means of an impairment test in accordance with IAS 36.10. This is normally based on the asset’s value in use. Goodwill is assigned to the level of

101


the Group companies as the cash generating units when measuring impairment. The total goodwill of T€ 45,094 (prior year: T€ 45,094) at the end of the reporting period (December 31, 2014) is divided among the main cash generating units – according to the carrying value/value in use of the partici-pating units – as follows: Schuler Pressen GmbH without die construction, Umformcenter Erfurt, and the Waghäusel facility T€ 34,624 (prior year: T€ 34,624) and Schuler Pressen GmbH Waghäusel plant T€ 7,098 (prior year: T€ 7,098). The remaining amount of T€ 3,372 (prior year: T€ 3,372) is attrib-utable to two foreign companies (prior year: two).

The future cash flows of these cash generating units are forecast and discounted on the basis of the three-year plans approved by the Board of Management and valid at the time of the impairment tests. In order to calculate the perpetual annuity, free cash flows after this detailed planning period are extrapolated on the basis of the last planning year, without consideration of any growth rate. Historic values based on experience and man-agement assessment of the long-term relevant economic conditions for the Group companies are also taken into account. The main assumptions for determining fair value are based on the develop-ment of sales and costs, especially in the large-scale machine business, as well as the sector and economic cycles, and the discount rate. The fore-casts are based on past experience and expecta-tions of future market developments. Discounting is based on the weighted average cost of capital (WACC) after tax, taking into account the risk class assigned to the respective cash generating unit and its relevant market. The cost of equity is based on the interest rate for long-term, risk-free securities

(government bonds), calculated using the published figures of the German central bank (Deutsche Bundesbank) by means of the Svensson method, plus a market risk premium of 6.25% (prior year: 6.0%). The cost of debt is calculated on a peer group basis. The cost of capital after tax is the weighted average of these individual required rates of return. In the period under review, these rates ranged from 7.5% to 8.7% (prior year: 4.8% to 10.5%). The cost of capital for the most important cash generating unit Schuler Pressen GmbH amounted to 8.1% (prior year: 8.0%). In the case of impairment, goodwill is subject to non-scheduled amortization. This is the case if the carrying amount of the assets attrib-utable to the cash generating unit, less liabilities, exceeds the calculated value in use. If the required impairment need of a cash generating unit exceeds the amount of goodwill allocated to it, the carrying value of its non-current assets is reduced by the remaining amount. Should the reason for amortiza-tion no longer apply, it is not permissible to revalue goodwill.

In the last impairment test, the values in use were above the carrying values and no impairment need was therefore identified for goodwill. As in the pre-vious reporting period, there were also no write-ups from the reversal of other impairment losses on intangible assets pursuant to IAS 36.104 (b).

In a sensitivity analysis, key parameters of the impairment test were altered to a reasonable degree as part of a possible development. Increas-ing the WACC by 25 base points or reducing relevant cash flow by 5% did not result in any impairment need for goodwill.

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Property, plant and equipment

Property, plant and equipment are carried at acquisition or conversion cost less scheduled and – where necessary – non-scheduled depre-ciation. Investment grants received are generally deducted from the acquisition or conversion cost of the subsidized asset. Current maintenance and repair costs are recognized immediately in profit and loss when incurred. The cost of conversion comprises individual direct costs as well as pro-rated material and production overheads includ-ing depreciation and production-related admin-istrative costs. Borrowing costs for qualifying assets are capitalized as part of the acquisition or conversion cost if the requirements are met.

In the reporting period, capitalization amounted to T€ 118 (prior year: T€ 20). Property, plant and equipment are depreciated using the straight-line method according to the asset’s standard useful life. The assumptions for determining economic benefit, residual value and remaining useful life are reviewed and adjusted where necessary at each end of the reporting period. Profits and losses from the derecognition of property, plant and equipment (difference between the net sales value and the carrying value) are disclosed in other income or other expenses.

Scheduled depreciation amounts are based on the following useful lives:

Useful lives

Buildings 33 to 50 years

Land improvements 10 to 15 years

Machines and technical equipment 10 to 30 years

Other factory and office equipment 5 to 15 years

In accordance with IAS 36, property, plant and equipment are subject to non-scheduled depreci-ation if there is any indication that the recoverable amount (higher amount of net realizable value and the asset’s value in use) of the asset in question has fallen below the carrying amount. Value in use is calculated on the basis of current planning, as approved by the Board of Management and valid at the time of the impairment test. Should the reasons for non-scheduled depreciation carried

out in previous years no longer apply, a reversal of impairment loss for the asset is undertaken in an amount no higher than total non-scheduled impairment recognized so far.

In the case of leased property, plant and equip-ment, the prerequisites of IAS 17 for financial leases are met when all significant risks and rewards incident to economic ownership are transferred to the respective Group company.

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In such cases, the respective property, plant and equipment is capitalized at the lower of acquisi-tion or conversion cost and the present value of future minimum lease payments, and depreci-ated using the straight-line method over economic useful life or the shorter lease term. The useful lives applied correspond to those of comparable acquired assets. Payment obligations resulting from future leasing payments are discounted and carried as a liability.

If the prerequisites for financial leases are not met, leasing or rental payments are expensed directly in the income statement (operating lease conditions). In such cases, the leased object is not capitalized in the Schuler Group.

Government grants

Government grants are only recognized if there is reasonable assurance that the grant will be received and all attached conditions will be com-plied with. When the grant relates to an expense item, it is recognized as income over the period in which the relevant expenses are incurred. Gov-ernment grants for investments are deducted from the carrying value of the subsidized asset.

Financial assets

Interests in non-consolidated subsidiaries and other participations are generally valued at their respective acquisition cost, as there are no active markets for these companies.

Financial instruments

Financial instruments are contracts that result in a financial asset of one enterprise and a financial liability or equity instrument of another enter-prise. In accordance with IAS 39, current and non-current financial assets and liabilities are divided into the following categories:

• Financial assets measured at fair value through profit and loss

• Loans and receivables • Held-to-maturity financial investments• Available-for-sale financial assets• Financial assets measured at amortized cost• Financial liabilities measured at fair value

through profit or loss

Purchases and sales of financial assets are booked on the trading day. Initial recognition of financial instruments is at fair value, and in some cases plus directly attributable transaction costs. Fair value is the amount for which an asset could be exchanged or a liability settled between knowl-edgeable, willing parties in an arm’s length trans-action. For all financial instruments which are not subsequently assessed at fair value with an effect on the income statement, transaction costs directly attributable to the acquisition are accrued in the statement of financial position.

Financial assets measured at fair value through profit or loss include derivative financial instru-ments, all originated financial instruments held for trading (e.g. shares or interest-bearing secu-rities), and all financial instruments which a

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company voluntarily allocates to this category. A financial asset is allocated to this category if it was acquired essentially with the intention of a short-term sale, or if the financial asset is so designated by management. Schuler has so far not made use of the possibility to categorize financial assets on initial recognition as financial assets measured at fair value through profit and loss. The Schuler Group only allocates derivative finan-cial instruments to this category which do not meet the strict criteria of a hedging relationship pursuant to IAS 39. Changes in fair value in this category of financial instruments are recognized in profit and loss. Transaction costs incurred when acquiring financial assets measured at fair value through profit or loss are also charged directly to profit and loss.

Loans and receivables are non-derivative finan-cial instruments not quoted on any active market with fixed or measurable payments. They mainly include trade receivables, future receivables from long-term construction contracts, some of the other receivables, cash and cash equivalents. They are carried at amortized acquisition cost less any impairment.

Held-to-maturity financial investments are non-derivative financial assets with fixed or mea-surable payments and a fixed maturity, whereby it is both intended and can be expected with eco-nomically sufficient reliability that they will be held until maturity. They are measured using the effective interest method at amortized costs. During the period under review, Schuler did not recognize any such financial instruments.

Available-for-sale financial assets are non-de-rivative financial assets, which were either allo-cated to this category or do not fall into one of the other measurement categories presented. They are measured at fair value, whereby changes to fair value – except for allowances – are recog-nized directly in accumulated other equity under consideration of deferred taxes. The reserve is reversed with an effect on income either on dis-posal of the asset or in the case of impairment. The same applies to currency-based changes in the fair value of debt instruments. The size of the allowance is calculated as the difference between the carrying value and the present value of the estimated future cash flows, discounted with the current market return of a comparable financial asset. Reversals of impairment losses are only shown in the income statement, if events occur at a later valuation date after the impairment has been expensed, which lead to an objective increase in fair value. As in the previous year, available-for-sale financial assets only include interests in affiliated companies and participa-tions. There is no active market for these finan-cial instruments. Fair value can only be measured on the basis of concrete sales negotiations, and is therefore always measured at acquisition cost. In the case of these equity instruments, a per-manent or significant decline of fair value below acquisition cost also leads to a loss in value, which is recognized in the income statement of the respective reporting period. In accordance with IAS 39.66, no reversal of impairment losses is made for these shares. Dividends are recog-nized in the income statement upon accrual of payment rights.

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Financial liabilities generally substantiate claims for repayment to another party in cash or another financial asset. Financial liabilities valued at amortized cost mostly comprise financial liabili-ties, trade payables and part of other debts. After initial recognition using the effective interest method, such financial liabilities are carried at amortized cost. Interest income from the com-pounding and discounting of trade payables is dis-closed in the interest result.

Financial liabilities measured at fair value through profit or loss comprise financial liabilities which are held for trading. Derivative financial instru-ments which are not, or no longer, included in an effective hedging relationship pursuant to IAS 39 must be classified as held-for-trading. In subse-quent valuation, the negative fair values are rec-ognized in the income statement. The Group does not make use of the possibility to classify financial liabilities as at-fair-value-through-profit-or-loss on initial recognition.

Derecognition of financial assets takes place when the Group’s claims in respect of cash flows from the financial instrument expire or when the financial instrument is transferred to another party, including control or all major risks and rewards. Financial liabilities are derecognized when the Group’s obligations specified in the con-tract expire, or are lifted or terminated.

Non-derivative financial instruments

The amount of non-derivative financial instru-ments can be seen in the consolidated statement of financial position and the notes to the annual

financial statements. As no general netting agree-ments are made with customers, the total amount disclosed under assets is also the maximum credit risk – irrespective of any collateral. In the case of all underlying performance relations in respect of non-derivative financial instruments, collateral is requested to minimize the credit risk – depending on the type and size of the respective performance. Moreover, credit information/refer-ences are requested or historical data used from past business transactions, especially regarding payment behavior. The credit risk in connection with derivative financial instruments is minimized by only conducting business with contractual part-ners with good credit ratings. The general credit risk resulting from derivative financial instruments is therefore regarded as not material. There is no recognizable concentration of credit risk from relations with individual debtors.

Derivative financial instruments/hedge accounting

The Schuler Group uses derivative financial instruments to hedge statement of financial posi-tion items and future cash flows from operations, as well as financial transactions and investments, against interest and foreign currency risks. Deriv-ative financial instruments are measured at fair value, both on initial recognition and at every sub-sequent end of the reporting period. Measurement is based on the exchange rates (average rates), interest rates and credit ratings of the contract partners at the closing date. The fair value of listed derivatives corresponds to the positive or negative market value at the closing date. If there are no market values, however, fair values are

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calculated using recognized actuarial models (e.g. using the present value method or Black-Scholes option pricing model). Derivatives with positive fair values are disclosed as financial assets and derivatives with negative fair values as financial liabilities. Financial instruments which represent an effective hedging relationship pursuant to IAS 39 (Hedge Accounting) are classified from this moment onward as fair value hedges or as cash flow hedges.

In the case of fair value hedges, the company hedges the risk of changes in the fair value of a firm obligation without effect on the statement of financial position or a statement of financial position item. In this case, both the hedging and underlying transaction are carried at fair value and both value adjustments are recognized in the income statement. As in the previous year, there were no fair value hedges on the reporting date.

Cash flow hedges serve to hedge against future cash flow fluctuations in connection with a recog-nized asset, a recognized liability or a highly prob-able future cash flow. Schuler uses this instru-ment primarily to hedge against future cash flows from expected payments, which are mainly based on existing orders. The hedging instruments are again carried at fair value. However, unrealized profits and losses from hedging transactions as a result of changes in market values are first rec-ognized (less a proportion for tax) in other com-prehensive income and only transferred to the income statement if the respective hedged item influences the period result. That portion of the market value change of a derivative instrument which is not covered by the underlying transaction is recognized directly in profit or loss.

Only those cash flow hedges are recognized which meet the strict requirements of IAS 39 with regard to hedge accounting. To this end, the type of finan-cial instrument used, the underlying transaction, the hedged risk and an assessment of the degree of effectiveness of the hedging instruments are all documented. In order to judge the effectiveness of the hedging relationship with regard to com-pensating for risks from changes in cash flows related to the hedged risk, its effectiveness is examined at the closing date. If the conditions for hedge accounting purposes are no longer met, or Schuler decides not to continue the designation, the hedging relationship is reversed with an effect on the income statement.

Long-term construction contracts

Customer-specific construction contracts are measured pursuant to IAS 11 according to the per-centage-of-completion method (PoC method), i.e. according to the project’s effective state of com-pletion. The development of the project’s prog-ress is determined according to the percentage of completion of a particular order, measured on the basis of the ratio between costs incurred to date and the expected total contract costs (cost-to-cost method). Increases or decreases in income from order amendments and additional claims are considered if these are deemed likely and their amount can be reliably determined. If the profit of a construction contract cannot be reliably estimated, revenue is estimated to be only the amount of the incurred contract costs (zero-profit method). Expected contract losses are recognized as a loss in the period of recognition by means of allowances for the disclosed receivable. Should

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the expected contract loss exceed the capitalized receivable, a provision is also formed. Possible contract losses are calculated on the basis of con-current estimations and under consideration of all recognizable risks.

As the PoC method is based on estimations of the costs incurred until completion of the con-tract, it may be necessary to subsequently adjust the underlying calculations. Such corrections of income and expenses are recognized in the income statement in the period in which the devia-tions are determined.

Construction contracts are disclosed under receivables or payables. As soon as accumulated services (incurred contract costs and prorated profits) exceed payments received on account for a particular contract, the construction contract is disclosed under future receivables from long-term construction contracts. If there is a negative balance after deducting the customer’s payments on account, a liability is disclosed within the payments received on account for construction contracts.

Trade receivables/Other non-derivative financial assets

Receivables and non-derivative financial assets are carried at amortized cost or their lower fair value. Individual valuation allowances are formed to account for risk if there are specific indications that a debtor cannot meet his financial obligations to a sufficient extent. The net assets in ques-tion are written down to the amount which might reasonably be assumed to be collectable. The

impairments are included in allowance accounts. Receivables and non-derivative financial assets are derecognized as soon as they are classified as uncollectible. Expenses from the value adjust-ment and derecognition of receivables are dis-closed under other expenses, while reversals of valuation allowances and incoming payments for derecognized receivables are disclosed as other income.

Valuation adjustments for defaults are formed on a lump-sum basis to cover credit risks from over-due receivables without specific valuation adjust-ments. Receivables with potential devaluation needs are grouped according to similar default risk characteristics and examined jointly for impairment. A decentralized collection manage-ment system is responsible for judging the appro-priateness of valuation adjustments for dubious receivables, based on the maturity structure of net receivables, specific country risks, the risk structure of financial transactions, experience from receivables already derecognized, customer credit ratings and noticeable changes in payment behavior.

Inventories

Inventories are measured at the cost of acquisi-tion or conversion, or at the lower net realizable value. The cost of conversion comprises direct material and production costs as well as all pro-duction-related overheads and depreciation. Administrative and social costs are capitalized insofar as they can be allocated to production. Calculation rates are measured on the basis of normal capacity utilization. Borrowing costs are

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included in the conversion costs of those inventory assets which require a period of more than twelve months to convert into a saleable condition. Risks arising from storage duration, reduced usability or similar occurrences are accounted for by value reductions. Similar inventory objects are valued using the average cost method.

Deferred taxes

Deferred tax assets and liabilities are recognized for temporary differences between the tax-base and the carrying amount of assets and liabilities on the basis of the balance-sheet oriented method in accordance with IAS 12. Temporary differences from goodwill or from initial recognition of other assets and liabilities (provided it is not a business combination) which affect neither taxable profit nor accounting profit at the time of the transaction are not considered. Deferred tax assets also con-sider tax reduction claims from existing tax loss carryforwards and unused tax credits, for exam-ple in Germany from interest charges which are no longer directly tax deductible, providing it is likely that they can be used in the following years.

Deferred tax assets are only recognized if there is sufficient probability that the resulting tax credits can actually be used in future.

Deferred taxes are measured according to the expected size of the tax burden or benefit in future years under consideration of the tax rates valid or expected at the time of realization. They are based

on the tax regulations of the individual coun-tries valid, or virtually adopted, at the end of the reporting period.

Deferred taxes are carried as tax income or expense in the income statement unless they relate to items recorded in other comprehensive income; in this case, the deferred taxes are also carried in other comprehensive income.

Deferred tax assets and deferred tax liabilities are offset wherever deferred taxes refer to the same tax subject and the same tax authority and there is a legally enforceable right to set off current tax assets from current tax liabilities. Current tax receivables and liabilities are offset if the tax authority has granted permission to settle on a net basis.

Pension provisions

Actuarial valuation of pension provisions is based on the projected unit credit method in respect of post-employment benefits. The valuation is not only based on pension payments as known at the end of the reporting period, but also includes future increases in salary and pensions. Actuar-ial gains and losses from the valuation of the DBO and plan assets, which result from changes in actuarial assumptions or from deviations between actuarial assumptions and the actual develop-ment, are recognized directly in other compre-hensive income in the period they are incurred and disclosed separately in the statement of

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comprehensive income. Past service cost is recognized immediately in profit or loss. In the case of indemnity claims, these are offset as plan assets with pension obligations if they meet the criteria of IAS 19. Interest income from plan assets and expenses from the discounting of obligations are disclosed in the interest result. Current service cost is recognized in personnel expenses.

Other provisions

In accordance with IAS 37, provisions are rec-ognized where a present legal or constructive obligation exists in respect of third parties as a result of a past event, where a future outflow of resources is probable and where a reliable esti-mate of that outflow can be made. They represent uncertain liabilities recognized on the basis of a best estimate of the amount needed to settle the obligations. If the amount of the provision can only be determined within a range, the most probable figure is used. If there is no difference in the level of probability, the weighted average is taken.

The corporate restructuring measures intro-duced in the previous year qualify as a fundamen-tal reorganization with significant effects on the company’s operations and are carried in accor-dance with IAS 37.70 ff. A provision for the corre-sponding expected expenses is recognized as soon as the Group has approved a detailed and formal plan and the measures for streamlining the cor-porate structure have either been commenced or

publicly announced. Future operating losses are not considered.

Provisions are reviewed and adjusted at the end of each reporting period. Provisions with a remain-ing term of over one year are discounted using the respective relevant market interest rates, provid-ing the resulting effect is significant.

Liabilities

With the exception of derivative financial instru-ments, non-current liabilities are recorded at amortized cost in the statement of financial posi-tion. Differences between historical cost and the settlement amount are considered using the effective interest method.

Liabilities under finance leases are carried at the present value of the future minimum lease payments.

With the exception of derivative financial instru-ments, current liabilities are recognized at their repayment or settlement value.

Share option program of ANDRITZ AG

The Annual General Meeting of ANDRITZ AG (our ultimate parent company) of March 21, 2014 resolved a share option program for senior exec-utives and members of the executive board, for which members of the Schuler Group’s

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management team are also entitled to subscribe. ANDRITZ AG does not allocate the cost of granting the subscription rights to the Schuler Group.

IFRS 2 distinguishes between cash-settled and equity-settled share-based payment transactions. The present share option program does not pro-vide for any cash settlement. The fair value of the share options is therefore measured at the grant date using a recognized financial model. There is no revaluation on following balance sheet dates. The fair value of the share options is measured as a compensation expense within personnel expenses over the period during which the ben-eficiaries become unconditionally entitled to the awards granted. The opposing position is made directly in equity.

Income and expense recognition

Sales revenues and other income are recognized when the relevant delivery or service has been performed and the risk has thereby passed to the customer (transfer of significant risks and oppor-tunities). The prerequisite for income recognition is that all major contract components are com-pleted by the end of the reporting period. If accep-tance agreements were concluded with the cus-tomers, revenue is not recognized in the income statement until after acceptance. The exception to this principle are customer-based, long-term construction contracts, where the respective rev-enue is measured and disclosed according to the percentage-of-completion method. Revenues are recognized after deduction of sales rebates, sales taxes and other taxes charged by the customer.

Royalties are measured according to the economic content of the relevant agreements and capital-ized pro rata temporis. Income and expenses are capitalized pro rata temporis using the effective interest method; dividend income is recognized at the time it comes into legal existence.

Operating expenses affect profit or loss at the moment the service is utilized or incurred.

Estimates and assumptions by management

Preparation of the consolidated financial state-ments requires management to make certain assumptions and estimates in order to judge and evaluate the effects of uncertain future events. They reflect the current state of available knowl-edge at the time of financial reporting and may have a material impact on the reported amounts of assets and liabilities, and income and expenses, as well as the related disclosure of contingent assets and liabilities of the reporting period.

Such estimates relate primarily to the assess-ment of the recoverability of intangible assets, and especially of goodwill, assumptions concern-ing the technical and economic ability to real-ize development projects, the economic useful lives of intangible assets and property, plant and equipment, the measurement of fair value for non-current assets, the sales and profit recog-nition of long-term construction contracts, the suitability of value adjustments for inventories due to the risks associated with gains and losses, the suitability of value adjustments for dubious

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receivables, the amount of expenses for pension benefits, the future use of deferred tax assets depending on expected taxable income, and the recognition and measurement of provisions, espe-cially in connection with the planned corporate restructuring.

Key individual factors include discount rates, cost increases, salary trends, tax rates, cash flows or biometric assumptions – e.g. life expectancy – cost and revenue estimates for customer projects, assumptions about inventory obsolescence, the size expected redundancy payments, and above all an overall assessment of expected business development and the sector-specific environment

which will impact the development of future cash flows or results of the Schuler Group.

Due to fluctuating market and economic condi-tions, actual amounts may differ from the original estimates. For instance, valuations based on dis-counted cash flows generally fall when inter-est rates are rising. This effect is magnified over longer time horizons. In the case of such diverging developments, the estimates and, where neces-sary, the carrying amounts of the assets and lia-bilities affected are adjusted.

Further explanations are provided where neces-sary in the respective notes.

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Consolidated income statement disclosures

In the consolidated financial statements of this report, the comparative period is the SFY 2013 with a duration of 3 months; the current reporting period 2014, however, has a duration of 12 months. Due to the differing durations of the reporting and comparative periods, the figures presented are not completely comparable.

Sales

For segment reporting purposes (see note (28)), consolidated sales revenue is presented by the Group’s business segments, products/services, and regions. Revenue from long-term construc-tion contracts calculated according to the PoC method amounts to T€ 808.138 in the reporting period (prior year: T€ 171,252).

Other income

In T€ 2014 SF Y 2013

Reversal/usage of provisions 9,851 877

Income from rent and leases 1,757 324

Cost refunds/compensation from third parties (incl. insurance payments) 2,904 1,305

Income from ancillary activities (material and scrap sales etc.) 2,403 802

Income from the disposal of fixed assets 2,255 54

Other income 5,336 1,544

24,506 4,906

Other operating income includes currency gains of T€ 1,802 (prior year: T€ 259).

1

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Cost of materials

In T€ 2014 SF Y 2013

Expenses for raw materials, supplies and goods purchased 437,883 92,699

Expenses for services purchased 70,210 15,867

508,093 108,566

Personnel expenses

In T€ 2014 SF Y 2013

Wages and salaries 314,640 110,271

Social security costs 59,627 13,908

374,267 124,180

Personnel expenses include total income of T€ 9,476 from the adjustment of provisions for corporate restructuring. In the previous year, the item included expenses of T€ 32,907 for provi-sions formed to cover redundancy payments in

the course of measures to streamline the corpo-rate structure.

The annual average number of employees devel-oped as follows:

In T€ 2014 SF Y 2013

Direct employees 3,093 3,144

Indirect employees 2,047 2,075

5,140 5,219

Apprentices 324 351

5,464 5,570

3

4

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Depreciation and amortization of intangible and tangible assets

In T€ 2014 SF Y 2013

Intangible assets 4,708 1,166

Tangible assets 17,011 5,830

21,718 6,996

In the fiscal year 2014, intangible assets were written down by T€ 664 (prior year: T€ 157) and property, plant and equipment by T€ 147 (prior

year: T€ 1,095). Non-scheduled writedowns were made on the basis of the value in use of assets (cost of capital after taxes 6.0%).

Other expenses

In T€ 2014 SF Y 2013

Packaging, outgoing freight costs, duties 18,330 3,808

Travel costs for machine assembly, other travel expenses 26,959 6,553

Advertising, trade fair and exhibition costs, commissions 17,038 4,838

Repairs, servicing, maintenance 22,481 5,282

Rent and leasing 24,899 7,107

Other expenses 61,747 23,443

171,455 51,031

Other expenses include total income of T€ 883 from the adjustment of provisions for corporate restructuring. In the previous year, expenses of T€ 5,209 were included for provisions in

connection with measures to streamline the cor-porate structure. Currency losses included in other expenses amount to T€ 1,555 (prior year: T€ 292).

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6

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Financial result

In T€ 2014 SF Y 2013

Interest income 8,850 1,364

of which from affiliated companies 44 0

Interest expense 10,437 2,597

of which to affiliated companies 3 1

Interest result – 1,587 – 1,232

Income from investments 61 542


Write-downs on financial assets 0 – 138


Other financial result 61 680

Financial result – 1,526 – 552

Income taxes

In T€ 2014 SF Y 2013

Current tax expense, Germany 7,100 – 154

Current tax expense, other countries 5,660 2,715

Current income taxes 12,760 2,561

of which relating to other periods 567 239

Orgination and reversal of temporary differences 24,404 – 6,537

Recognition of previously unrecognized tax losses – 3,387 0

Deferred taxes 21,017 – 6,537

of which relating to other periods 0 0

Total tax expense 33,777 – 3,976

At the end of the reporting period, there were domestic corporate tax loss carryforwards amounting to T€ 190,798 (prior year: T€ 228,069), trade tax loss carryforwards of T€ 101,817 (prior

year: T€ 113,571), and interest carryforwards of T€ 12,841 (prior year: T€ 7,754). Tax loss car-ryforwards of non-German Group companies amount to the equivalent of T€ 6,854 (prior year:

7

8

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T€ 13,395). The total amount includes loss car-ryforwards of T€ 103,225 (prior year: T€ 93,669) deemed non-usable (corporate tax T€ 57,371 (prior year: T€ 70,981), trade tax T€ 31,529 (prior year: T€ 13,710), foreign income taxes T€ 1,485 (prior year: T€ 1,404), interest carryforwards T€ 12,841 (prior year: T€ 7,754). Of this amount, T€ 102,389 (prior year: T€ 92,871) can be carried forward indefinitely, while T€ 0 of foreign Group companies (prior year: T€ 0) can be used to reduce tax within a period of up to five years and T€ 836 (prior year: T€ 798) can be used within the next six (prior year: seven) fiscal years.

At the end of the reporting period, there were temporary differences (outside basis differences) in the individual financial statements in con-nection with shares in affiliated companies and

investments amounting to T€ 210,832 (prior year: T€ 146,824). However, these are only liable to tax to a minor extent.

In order to calculate expected income taxes, profit or loss for the year before taxes is multiplied by a tax rate of 30.0% (prior year: 30.0%). This figure comprises corporation tax (15.0%), the solidarity surcharge (5.5% of corporation tax) and trade tax (14.0%).

As in the previous year, the nominal income tax rates valid at year-end for the Group’s foreign subsidiaries were between 12.8% (prior year: 12.8%) and 34.0% (prior year: 34.0%).

The main causes for deviations between expected and disclosed income taxes are presented in the following reconciliation calculation:

In T€ 2014 SF Y 2013

Profit or loss before taxes 100,661 – 28,933

Statutory income tax rate 30.0% 30.0%

Expected income taxes 30,198 – 8,680

Tax-free income – 194 – 170

Non-deductible expenses, incl. foreign withholding tax 1,168 820

Adjustments in respect of current income tax and deferred taxes of previous year 567 239

Subsequent capitalization of deferred taxes for temporary differences and tax loss carryforwards – 3,387 0

Unrecognized deferred taxes for temporary differences and tax loss carryforwards 5,752 3,710

Different local tax rates 56 – 84

Other – 383 189

Current income taxes 33,777 – 3,976

Effective tax rate 33.6% 13.7%

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The following deferred tax assets and liabilities in the statement of financial position refer to rec-ognition and valuation differences between tax

statements of financial position and the consoli-dated statement of financial position for individual items and to capitalized tax carryforwards:

In T€ Deferred tax assets Deferred tax liabilities

12/31/2014 12/31/2013 12/31/2014 12/31/2013

Non-current assets 2,544 2,679 11,954 12,753

Inventories and receivables 2,940 9,978 72,856 78,996

Tax loss carryforwards 50,753 55,730 – –

Other assets 2,456 2,437 739 956

Pension provisions 18,646 11,082 913 819

Other provisions 10,772 7,310 4,040 1,004

Liabilities 38,324 49,808 4,203 4,563

Gross value 126,435 139,024 94,705 99,091

Valuation allowances – 19,144 – 16,511 – –

Offsetting – 76,386 – 91,233 – 76,386 – 91,233

Recognition in the statement of financial position 30,905 31,280 18,319 7,858

Despite the positive earnings position, deferred tax assets are not expected to be fully utilized in the foreseeable future and were therefore par-tially adjusted. In accordance with IAS 12, unused tax loss carryforwards are only recognized to the extent that there is likely to be a taxable income in future which can be offset against unused tax losses. Account was taken of tax plans based on corporate planning. This covers a period of five years and takes account of the long-term eco-nomic conditions relevant to Schuler.

The above value adjustments are based mainly on tax loss carryforwards at the end of the reporting period.

In the reporting period, an amount of T€ 9,613 (prior year: T€ – 83) was recognized in other com-prehensive income from changes in deferred taxes. At the end of the reporting period, deferred taxes totaling T€ 1,550 (prior year: T€ – 179) were recognized in accumulated other comprehensive income in connection with the market valuation of cash flow hedges and an amount of T€ 14,549 (prior year: T€ 6,668) due to actuarial gains on pension commitments.

Currency translation differences recognized in other comprehensive income in connection with deferred taxes of foreign subsidiaries amounted to T€ 568 (prior year: T€ – 409).

All other changes to deferred taxes were recog-nized in the income statement.

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Earnings per share

Earnings per share are calculated as the ratio of consolidated profit for the year attributable to shareholders of Schuler AG and the weighted average number of no-par value shares outstand-ing during the fiscal year. The ratio may be diluted

by so-called “potential shares” (mainly share options and convertible bonds). In the reporting period and in the previous short fiscal year, there were no dilution effects.

In T€ 2014 SF Y 2013


Profit attributable to non-controlling interest 273 42

Profit attributable to shareholders of Schuler AG 66,611 – 24,999

Weighted average number of common shares outstanding – basic (number of shares in thousands) 29,911 29,911

Earnings per common share (€) – basic and diluted 2.23 – 0.84

9

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Statement of financial position disclosures

Intangible assets

Changes in intangible assets between January 1, 2014, and December 31, 2014

In T€ Note Customer- based

intangible assets and

trademarks

Technology- based

intangible assets

Capitalized development

costs

Contract- based

intangible assets

Goodwill Total

Cost of acquisition/conversion

Balance at January 1, 2014 25,473 18,735 11,144 39,115 58,720 153,187

Foreign exchange differences 20 11 26 271 – 328

Additions – 9 – 3,400 – 3,409

Disposals – – 253 870 – 1,123

Balance at December 31, 2014 25,493 18,754 10,917 41,917 58,720 155,800

Amortization and impairment


Foreign exchange differences 5 1 26 251 – 284

Additions 1,062 850 1,125 1,671 – 4,708

of which non-scheduled 5 – – 664 – – 664

Disposals – – 253 907 – 1,161


Carrying amounts


Balance at December 31, 2014 13,086 10,469 476 7,216 45,094 76,341

10

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Changes in intangible assets between October 1, 2013, and December 31, 2013

In T€ Note Customer- based

intangible assets and

trademarks

Technology- based

intangible assets

Capitalized development

costs

Contract- based

intangible assets

Goodwill Total


Balance at October 1, 2013 25,476 18,736 11,329 38,782 58,720 153,043

Foreign exchange differences – 3 – 1 – 185 – 275 – – 465

Additions – – – 687 – 687

Disposals – – – 78 – 78




Foreign exchange differences – 1 – – 185 – 254 – – 440

Additions 265 211 116 573 – 1,166

of which non-scheduled 5 – – – 157 – 157

Disposals – – – 78 – 78


Carrying amounts



A syndicated loan agreement concluded with a consortium of banks and credit insurers by Schuler AG and its major subsidiaries requires the provision of numerous collaterals. As of December 31, 2014, these include in particular the pledging of shares and accounts, blanket assign-ments, encumbrances, storage security trans-fers and the pledging of industrial property rights.

The explanations below regarding the restricted availability of individual assets reflect the respec-tive values in the statement of financial position of the assets concerned but not the actual amount borrowed at the end of the reporting period. The provision of collateral resulted in restricted right of use amounting to T€ 23,277 (prior year: T€ 26,290).

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The following amounts were recognized in the income statement for research and development activities (R&D) in the period under review:

In T€ 2014 SF Y 2013

Research costs and non-capitalized development costs 9,099 1,593

Amortization of capitalized development costs (1) 461 116

R&D costs recognized in the income statement 9,559 1,709

(1) excluding non-scheduled amortization (T€ 664, prior year: T€ 0)

In addition to the amortization of capitalized devel-opment costs, the research and development costs recognized in the income statement in the report-ing period mainly comprise staff and material costs, as well as depreciation and amortization of tangible and intangible assets used for these activities. As in the previous year, no development costs incurred in the reporting period fulfilled the conditions for capitalization pursuant to IAS 38.

As a technology group, the main proportion of Schuler’s development work is involved with major customer projects. The respective costs do not constitute R&D expenditure in the stricter sense of accounting and are therefore recognized as project costs.

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Property, plant and equipment

Changes in property, plant and equipment between January 1, 2014, and December 31, 2014

In T€ Note Land, land r ights and buildings, including

buildings on third-par ty

land

Technical equipment

and machin-er y

Other equip-ment, factor y

and of fice equipment

Assets under construction

Total


Balance at January 1, 2014 179,504 204,345 99,816 11,010 494,675

Foreign exchange differences 3,304 2,409 708 388 6,810

Additions 2,336 3,644 5,859 11,223 23,062

Transfers 372 7,285 344 – 8,001 0

Disposals 32 7,928 5,266 71 13,296

Balance at December 31, 2014 185,485 209,756 101,460 14,550 511,251


Balance at January 1, 2014 93,962 158,767 80,706 – 333,435

Foreign exchange differences 965 1,751 421 – 3,137

Additions 5,926 6,475 4,610 – 17,011

of which non-scheduled 5 0 144 2 – 147

Transfers – – – – 0

Disposals 6 6,312 4,854 – 11,172

Balance at December 31, 2014 100,847 160,680 80,883 – 342,410

Carrying amounts

Balance at January 1, 2014 85,542 45,578 19,109 11,010 161,240


11

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Changes in property, plant and equipment between October 1, 2013, and December 31, 2013

In T€ Note Land, land r ights and buildings, including

buildings on third-par ty

land

Technical equipment

and machin-er y

Other equip-ment, factor y

and of fice equipment

Assets under construction

Total


Balance at October 1, 2013 177,261 202,085 99,939 9,501 488,786

Foreign exchange differences – 324 – 1,775 – 588 – 18 – 2,705

Additions 2,610 1,347 1,372 6,965 12,293

Transfers 5,343 94 – 5,437 0

Disposals 43 2,655 1,001 – 3,699



Balance at October 1, 2013 92,668 160,282 80,024 – 332,973

Foreign exchange differences – 87 – 1,335 – 484 – – 1,906

Additions 1,408 2,358 2,065 – 5,830

of which non-scheduled 5 26 622 446 – 1,095

Transfers – – – – 0

Disposals 26 2,539 898 – 3,463

Balance at December 31, 2013 93,962 158,767 80,706 – 333,435

Carrying amounts

Balance at October 1, 2013 84,593 41,803 19,916 9,501 155,813


Please refer to the explanations in note (5) regarding non-scheduled depreciation.

In the reporting period, government grants of T€ 701 (prior year: T€ 0) were received for invest-ment in plant and machinery and offset from acquisition costs. Other government grants amounting to T€ 881 (prior year: T€ 346) were carried directly in the income statement.

Restricted right of use regarding property, plant and equipment amounts to T€ 58,606 (prior year: T€ 65,547). As in the previous year, there were no leasing relationships to be classified as financial leases at the end of the reporting period.

Various Group companies have obligations from operating leases, mainly concerning the use of third-party real estate assets at the Göppingen

124


and São Paulo facilities, as well as vehicles and IT hardware and software. Real estate at the Göp-pingen site, including the building and major com-ponents, were sold in 2007 in a sale-and-rent-back transaction and rented back over a period of 20 years. The annual rent payment was initially T€ 4,940. The rent is adjusted to the German retail price index (max. 4%) annually. Real estate at the São Paulo site was sold in 2009 and subsequently

rented back over a period of 10 years. At the end of these lease terms there are no purchase or prolongation options at terms better than the expected market conditions or residual value guarantees.

Future lease payments due are shown at the end of the reporting period in the table below:

In T€ Fälligkeit 12/31/2014

up to 1 year from 1 to 5 years

over 5 years Total

Future minimum payments for operating leases 13,563 38,378 39,546 91,487


up to 1 year

from 1 to 5 years

over 5 years

Total

Future minimum payments for operating leases 13,261 39,270 45,478 98,010

In the period under review, payments recognized in the income statement for operating leases amount to T€ 24,899 (prior year: T€ 7,107). This figure comprises minimum leasing payments of

T€ 24,449 (prior year: T€ 6,906) and contingent rents of T€ 451 (prior year: T€ 201), which are based on contractually agreed annual adjustments of rent payments to consumer price indices.

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The Group leases a minor amount of real estate, machines and equipment to third parties under operating lease agreements. The following

payments are expected to be received from these operating leases with third parties:



over 5 years Total

Future payments received from operating leases 653 1,755 13 2,422



over 5 years Total

Future payments received from operating leases 831 665 103 1,599

Interests in affiliates and participations

The disclosed interests in non-consolidated Group companies and participations are classified as available-for-sale and carried at acquisition cost. As at the closing date, there was neither a market nor stock exchange price for these financial instruments, nor could their fair value be estab-lished with the aid of comparable transactions. Prior to the preparation of the annual financial

statements there was no intention to sell any interests. There has been no derecognition in con-nection with these financial instruments.

Interests in non-consolidated affiliated compa-nies include restricted right of use amounting to T€ 128 (prior year: T€ 158).

12

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Non-current and current other assets

In T€ Remaining term 12/31/2014 Remaining term 12/31/2013

up to 1 year over 1 year Total up to 1 year over 1 year Total

Receivables from other taxes 9,494 2,308 11,802 7,912 600 8,512

Positive fair values of derivatives 900 74 974 606 11 616

Payments on account 28,819 0 28,819 19,575 0 19,575

Other non-financial assets 8,870 630 9,500 6,676 1,312 7,989

Other financial assets 7,219 1,503 8,722 5,888 1,244 7,132

55,302 4,514 59,817 40,657 3,167 43,823

There are no restrictions on title in respect of the disclosed financial and non-financial assets.

Default risks are accounted for by means of valu-ation allowances, which amount to T€ 8,727 at the end of the reporting period (prior year: T€ 7,741).

Valuation allowances for other financial assets developed as follows:

In T€ 2014 SF Y 2013

Valuation allowances as at Jan. 1 (py: Oct. 1) 4,260 4,260

Additions 32 0

Utilization 50 0

Reversals 101 0

Valuation allowances as at Dec. 31 4,141 4,260

13

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The following table shows the extent of the credit risks contained within non-current and current other receivables and financial assets:

In T€ 12/31/2014 12/31/2013

Neither impaired nor past due as at the closing date 9,275 7,408

Not impaired at the closing date and past due in the following time periods:

less than 3 months 340 252

between 3 and 6 months 0 15



over 12 months 0 0

386 321

Valuation allowances to individual other receivables and other financial assets (net) 35 19

Carrying amount (net) 9,696 7,748

Renegotiated contracts which would otherwise be overdue or requiring valuation adjustment are in-significant. With regard to those financial assets included which are neither impaired nor

past due, there were no indications as at the clos-ing date that the debtors would not meet their pay-ment obligations.

Inventories

In T€ 12/31/2014 12/31/2013

Raw materials, consumables and supplies 24,710 19,761

Work in progress 65,632 93,662

Finished goods and purchased merchandise 11,947 9,631

102,288 123,054

In the reporting period, valuation allowances for raw materials, consumables and supplies amounting to T€ 487 (prior year: T€ 3,909), as well as reversals of valuation allowances amount-ing to T€ 1,333 (prior year: T€ 13) as a result of increased fair values, were recognized as material

expenses in the income statement. The devalua-tion of unfinished and finished goods booked as a reduction in inventories amounts to T€ 14,465 (prior year: T€ 16,423). Of the total inventories, a volume of T€ 59,521 (prior year: T€ 77,352) is rec-ognized at net realizable value.

14

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Restricted right of use from the provision of collateral amounts to T€ 69,866 (prior year: T€ 93,730).

Trade receivables

In T€ 12/31/2014 12/31/2013

Trade receivables from

third parties 93,761 107,992

affiliated companies 1,765 946

companies in which an investment is held 16 619

95,541 109,557

Valuation allowances for trade receivables devel-oped as follows:

In T€ 2014 SF Y 2013

Valuation allowances as at Jan. 1 (py: Oct. 1) 4,553 4,507

Change in the consolidated group 0 0

Additions 969 428

Utilization 30 171

Reversals 864 201

Exchange rate effects and other changes 25 – 10

Valuation allowances as at Dec. 31 4,653 4,553

15

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The following table shows the extent of the credit risks contained within trade receivables:

In T€ 12/31/2014 12/31/2013

Neither impaired nor past due as at the closing date 46,531 51,612

Not impaired at the closing date and past due in the following time periods:

less than 3 months 39,116 51,669

between 3 and 6 months 7,268 3,421

between 6 and 9 months 801 1,947

between 9 and 12 months 1,385 312

over 12 months 190 81

48,760 57,430

Valuation allowances to individual trade receivables (net) 251 515

Carrying amount (net) 95,541 109,557

An amount of T€ 1,204 (prior year: T€ 536) was charged to the income statement in the reporting period for impairment and derecognition of trade receivables. As at the closing date there were no trade receivables with renegotiated condi-tions which would otherwise have been past due or impaired. On the basis of experience and often long-standing customer relationships, Schuler

judges those trade receivables which are neither adjusted nor past due to be generally creditworthy and without significant risk of default.

Restricted right of use from the provision of collateral amounts to T€ 55,016 (prior year: T€ 79,661). The parties concerned have no rights to sell or pledge the collateral provided.

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Future receivables from long-term construction contracts

In T€ 12/31/2014 12/31/2013

Contract costs incurred, including partial profits 897,290 730,236

Payments received on account for construction contracts not yet invoiced – 1,007,034 – 813,859

Impending loss provisions – 1,168 – 70

Future receivables from long-term construction contracts, net – 110,912 – 83,694

of which contracts with net receivables 101,766 109,668

of which contracts with net payables 212,677 193,362

Capitalized conversion costs incurred, including profit portions, are netted with payments received on account according to the specific contract. Contracts with a remaining positive balance after deduction of payments received on account are disclosed as future receivables from long-term construction contracts, while all others are car-ried as liabilities under payments received on account.

Future receivables from long-term construction contracts do not have maturity dates; no impair-ment due to default risks has been made. They are classified as current as the receivables are realized within the normal course of Schuler’s business cycle.

Restricted right of use from the provision of collateral amounts to T€ 81,030 (prior year: T€ 82,058). The parties concerned have no rights to sell or pledge the collateral provided.

Cash and cash equivalents

Cash and cash equivalents amounting to T€ 482,507 (prior year: T€ 349,322) include bank balances (T€ 438,398, prior year: T€ 349,170) and money market funds (T€ 44,019), as well as checks and cash in hand (T€ 90, prior year: T€ 152).

Equity

Share capital

As at December 31, 2014, the subscribed capital of Schuler AG amounts to € 77,769,250.00 (prior year: € 77,769,250.00) and consists of 29,911,250 no-par value common shares (prior year: 29,911,250). The common shares in question have no par value and, as such, each share entitles the holder to an imputed share of nominal capital of € 2.60. The shares are made out to the bearer, the capital is fully paid.

16

17

18

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Authorized capital

On the basis of a resolution adopted by the Annual General Meeting on April 13, 2011, the Board of Management is authorized until March 31, 2016, with the approval of the Supervisory Board, to raise the company’s capital stock by up to a total of € 12,675,000.00 for contribution in cash or in kind, either in one or several new issues of new common no-par value shares made out to the bearer (Authorized Capital).

With the approval of the Supervisory Board, the Board of Management can:

aa) exclude the subscription rights of sharehold-ers during capital increases for cash contribu-tion up to a pro rata share of capital stock totaling € 5,915,000.00 (10% limit), in order to issue the new shares at an offering price which is not sig-nificantly lower than the stock market price (§§ 203 (1 and 2), § 186 (3) sentence 4 AktG);

bb) exclude the subscription rights of sharehold-ers up to a further pro rata share of capital stock totaling € 6,760,000.00 for the purpose of acquir-ing companies or interests in companies.

Insofar as the Board of Management does not make use of the above mentioned authorizations to exclude subscription rights, the subscription rights of shareholders can only be excluded for fractional amounts. The Board of Management is authorized, with the approval of the Supervisory Board, to determine the further details of capital increases from authorized capital. The Supervi-sory Board is authorized to adapt the articles if authorized capital is used.

On the basis of this authorization and with the consent of the Supervisory Board, the Board of Management resolved on June 10, 2011 to

increase the capital stock of Schuler AG by par-tially using authorized capital. A total of 6,500,000 new common no-par value shares made out to the bearer with a pro rata share of capital stock of € 2.60 each were to be issued against cash contribution, thus raising capital stock by € 16,900,000 to € 76,050,000. The capital increase was conducted to the full amount of 6,500,000 new common no-par value shares at a subscrip-tion price of € 10.50 and entered into the Com-mercial Register of the District Court of Ulm on June 16, 2011.

The Annual General Meeting of Schuler AG on April 10, 2008, adopted the creation of conditional capital. The company’s share capital has been raised conditionally (conditional capital) by up to € 1,820,000.00 by issuing up to 700,000 no-par value bearer shares (common stock). Conditional capital is used solely to meet subscription rights from share options issued as part of the Share option Program 2008 on the basis of an authori-zation of the Annual General Meeting of Schuler AG on April 10, 2008. A total of 661,250 share options were issued in three tranches at a unit price of € 2.60. Following the issue of 661,250 new common bearer shares with an imputed portion of share capital of € 2.60 per no-par value share, the share capital of Schuler AG increased by € 1,719,250.00 to € 77,769,250.00.

Convertible bonds, bonds with warrants, profit participation rights, income bonds or combinations of such instruments

The Annual General Meeting of Schuler AG on April 15, 2010 resolved to form conditional cap-ital. The company’s capital stock was raised conditionally (Conditional Capital II) by up to € 25,480,000.00 by issuing up to 9,800,000 new no-par value bearer shares (common stock).

132


Issue can also be made for cash contribution. The conditional capital increase will only be conducted to the extent that the bearers of the conversion or option rights from convertible bonds, bonds with warrants, profit participation rights, income bonds or combinations of such instruments (col-lectively referred to as the “bonds”), with or with-out maturity date, with a total nominal value of up to € 98,000,000.00 and issued by the company or a group subsidiary in the period from April 15, 2010 to April 14, 2015, utilize their conversion or option rights, or that the bearers of convertible bonds with a conversion obligation issued by the com-pany or a group subsidiary fulfill their duty to convert and the company does not use treasury shares to satisfy such rights. The new shares used for issuance participate in profits from the begin-ning of the fiscal year in which they were created by exercising conversion rights. The Supervisory Board is authorized to adapt the articles in accor-dance with the scale of the capital increase from Conditional Capital II.

The bond issuance conditions can determine that the company does not grant no-par value shares to the bearers of conversion or option rights, or those obliged to convert, but instead pays their value in cash. Insofar as convertible bonds or bonds with warrants are issued for cash contri-bution, the Board of Management is authorized, subject to the approval of the Supervisory Board, to exclude the subscription rights of sharehold-ers to convertible bonds with a total nominal value of up to € 21,000,000.00, providing the issuance price is not significantly lower than the theoreti-cal market value of the convertible bonds or bonds with warrants as calculated according to recog-nized actuarial methods. This authorization to exclude subscription rights, however, is only valid in analogous application of § 186 (3) sentence 4 AktG insofar as the no-par value shares issued, or to be issued, to settle conversion or option

rights do not exceed ten percent of share capi-tal – neither at the time of effectiveness nor at the time this authorization is exercised. Moreover, the Board of Management is authorized, subject to the approval of the Supervisory Board, to exclude the right of shareholders to subscribe for bonds, insofar as these are issued for cash contribution for the purpose of acquiring companies, parts of companies or investments in companies and the value of the non-cash consideration is reasonably proportionate to the value of the bond. In the case of convertible bonds or bonds with warrants, the theoretical market value as calculated according to recognized actuarial methods is decisive.

The Board of Management is authorized to deter-mine the further details of the issuance and details of the bonds, in particular their interest rate, term and denomination.

No bonds or profit participation rights were issued in the reporting period.

Capital reserves

Capital reserves regularly contain the share premiums from the issue of company shares after deduction of capital increase costs and the opposing items from the expensing of stock-based remuneration. It is subject to the availabil-ity restrictions of § 150 AktG. In the fiscal year 2014, capital reserves increased by T€ 219. This increase results from the pro-rated recognition of the ANDRITZ share option program.

Retained earnings

Retained earnings contain the legal reserve of Schuler AG and the accumulated results of Group companies, providing no dividends were paid. In

133


addition, retained earnings – and to a lesser extent capital reserves – contain the netting of acquired goodwill undertaken according to old HGB accounting procedures, insofar as these could be maintained at the time of the IFRS transition as part of the exempting provisions of IFRS 1.

Accumulated other comprehensive income

Accumulated other comprehensive income com-prises any changes in fair values from cash flow

hedges, actuarial gains and losses from the val-uation of pension commitments – after account-ing for respective deferred taxes – and currency translation differences arising from the calcu-lation of the financial statements of foreign sub-sidiaries not carried in euro are disclosed under “Accumulated other comprehensive income”.

The following table shows changes in the com-ponents of accumulated other comprehensive income with separate disclosure of the respective tax effects:

In T€ 2014 SF Y 2013

Before taxes Tax effect Net Before taxes Tax ef fect Net

Exchange differences on translation on foreign operations 9,839 9,839 – 1,895 – – 1,895

Cash flow hedges:

Valuation changes recognized in other comprehensive income – 5,425 1,647 – 3,778 707 – 214 492

recognized in profit and loss – 273 83 – 191 38 – 15 23

Actuarial gains and losses on defined benefit plans – 27,018 7,884 – 19,134 – 925 147 – 779

Other comprehensive income for the year – 22,877 9,613 – 13,264 – 2,076 – 83 – 2,158

Share option program of ANDRITZ AG

The Annual General Meeting of ANDRITZ AG of March 21, 2014 resolved a share option program for senior executives and members of the exec-utive board, for which members of the Schuler Group’s management team are also entitled to subscribe. The number of shares allocated per eligible manager is 20,000 for executive board members and 10,000 for senior Schuler execu-tives. The options are to be served from the pool of shares bought back by ANDRITZ AG. One share option entitles the holder to subscribe for one

share. In order to exercise a share option, eligible persons must be in permanent active employment of a company belonging to the ANDRITZ Group from May 1, 2015 to the date of exercise A further requirement is that managers must have invested at least € 15,000 in ANDRITZ shares from their own resources.

The exercise price of the share options is the unweighted average of the closing prices of the ANDRITZ share during the four calendar weeks following the Annual General Meeting on March 21, 2014.

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Options can be exercised between May 1, 2017 and April 30, 2019 (= period of exercise), but only if the average unweighted closing price of ANDRITZ shares during 20 successive trading days in the period May 1, 2016 to April 30, 2017 is at least 15% above the exercise price and earnings per share (related to the overall number of listed shares) for the business year 2015 or earnings per share (related to the overall number of listed shares) for the business year 2016 are at least 20% above earnings per share (related to the overall number of listed shares) for the business year 2012, or the average unweighted closing price of ANDRITZ shares during 20 successive trading days in the period May 1, 2017 to April 30, 2018 is at least 20% above the exercise price, and earnings per share (related to the overall number of listed shares) for the business year 2016 or earnings per share (related to the overall number of listed shares) for the business year 2017 are at least 25% above earnings per share (related to the overall number of listed shares) for the business year 2012.

Provided that the terms and conditions of exer-cise are fulfilled, 50% of the options can be exer-cised immediately, 25% of the options after three

months, and the remaining 25% after a further three months. Share options can only be exercised with a written declaration to the company and are non-transferrable. Once the option has been exer-cised, the shares received are not subject to any retention period.

A total of 140,000 options were granted to Schuler executives in 2014, of which 80,000 to members of the Board of Management. The fair value of options on the grant dates amounts to a total of T€ 1,128, of which T€ 219 was expensed pro rata in 2014. Fair value was calculated using a Mon-te-Carlo simulation. The share price at the time of granting the options is the closing price of the ANDRITZ share on June 2, 2014 and amounts to € 43.36. The exercise price was calculated at € 44.41 on the basis of the terms of the option program. The expected dividend yield amounts to 2.5%, using an interpolated value of German benchmark bonds as the risk-free interest rate. Expected volatility was calculated on the basis of the historical performance of the ANDRITZ share.

Details regarding the development of outstanding options can be seen from the following table:

S H A R E O P T I O N P L A N O F A N D R I T Z A G 2 0 1 4 Number of stock options

Units

Max. (remaining) contractual

term

Years

Exercise price/ option

€

Initial ANDRITZ

share price (1)

€

Fair value/option (1)

As of Jan. 1, 2014 – – – – –

Granted on June 1, 2014 140,000 4.8 44.41 43.36 8.06

As of Dec. 31, 2014 140,000 4.2 44.41 43.36 8.06

(1) on the grant date

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As the share option program does not provide a cash settlement, the resulting expense is recog-nized directly in equity.

Disclosures on capital management

The primary aim of capital management is to achieve and maintain a satisfactory equity ratio

for the Group of at least 30% in the medium term in order to secure the continued existence of the company, to raise shareholder value and to utilize growth opportunities. This also involves the creation of sufficient liquidity reserves to ensure financial solvency at all times. The equity ratio is measured on the basis of equity capital disclosed in the statement of financial position.

In T€ 12/31/2014 12/31/2013

Equity capital 321,990 274,695

Total of statement of financial position 1,125,825 1,012,640

Equity ratio in % 28.6 27.1

In the existing syndicated loan agreement, Schuler AG committed itself to meeting certain financial covenants. The capital measures include achieving a minimum level of equity capital. According to our calculations, the terms of the agreement were met at all times throughout the reporting period.

Proposed appropriation of profit

In accordance with § 58 (2) AktG, the dividend avail-able for distribution of Schuler AG is based on its disclosed (HGB) statement of financial position

profit. In fiscal year 2014, Schuler AG distributed a total dividend of € 6,580,475. This dividend was distributed in an amount of € 3,290,237.50 each for the fiscal year 2012/2013 and the short fiscal year 2013 and in each case an amount of € 0.11 per share was paid for the 29,911,250 no-par value shares WKN A0V9A2. The Board of Management and Super-visory Board propose to distribute a dividend of € 3,290,237.50 from the statement of financial posi-tion profit of Schuler AG as of December 31, 2014 amounting to € 46,218,020.54, corresponding to € 0.11 each for the 29,911,250 no-par value shares WKN A0V9A2, and to carry forward the remaining amount of € 46,218,020.54.

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Non-controlling interest

The minority interest in equity is attributable to the companies Shanghai Schuler Presses Co. Ltd. and Beutler Nova AG.

The following table provides information on Shanghai Schuler Presses Co. Ltd. Die Beutler Nova AG is not a significant subsidiary.

S H A N G H A I S C H U L E R P R E S S E S C O . L T D .In T€ 12/31/2014 12/31/2013

Non-current assets 4,672 4,862

Current assets 28,233 30,367

Non-current liabilities – 24 – 29

Current liabilities – 10,012 – 14,966

Net assets 22,869 20,234

Carrying value of non-controlling interest 4,716 4,172

Sales 18,049 6,045

Profit 1,314 199

Other comprehensive income 0 0

Total comprehensive income 1,314 199

Profit attributable to non-controlling interest 271 41

Other comprehensive income attributable to non-controlling interest 0 0

Net increase (net decreas) in cash and cash equivalents – 3,364 6,110

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Non-current and current liabilities


up to 1 year

from 1 to 5 years

over 5 years

Total up to 1 year

from 1 to 5 years

over 5 years

Total

Liabilities to banks 38,393 36,617 3,608 78,618 36,457 31,992 4,216 72,665

In November 2011, Schuler AG and its major sub-sidiaries concluded a syndicated loan agreement with a total volume of T€ 450,000 with a syndi-cate of banks and credit insurance companies in order to cover their financial requirements. The agreement expires on September 30, 2016. It com-prises a guarantee facility tranche of T€ 300,000, which can be increased if required by a fur-ther T€ 50,000, and a credit facility tranche of T€ 150,000, which may also be used as a guaran-tee facility.

The terms of the syndicated loan agreement are dependent on the Schuler Group’s relationship of net borrowing to EBITDA and are reviewed and adjusted where necessary each quarter. The col-lateral for the syndicated loan agreement includes shares in subsidiaries, property, plant and equip-ment, and current assets.

Liabilities to banks include fixed-interest loans with a carrying amount of T€ 71,602 (prior year: T€ 52,570) and variable-interest loans of T€ 7,016 (prior year: T€ 20,095). The weighted aver-age interest rates for fixed-interest liabilities amounted to 4.89% in EUR (prior year: 4.86%) and 5.30% in BRL (prior year: 3.42%). In the case of variable-interest liabilities, the correspond-ing figures amounted to 1.39% in EUR (prior year: 2.26%), and 6.53% in CNY (prior year: 7.02%). The

average remaining term of fixed-interest liabili-ties amounts to 1.9 years as of December 31, 2014 (prior year: 1.9 years), while the average term (interest adjustment dates) of variable-interest liabilities is around 6.7 months (prior year: 10.4 months).

Of the liabilities to banks, a total of T€ 60,520 (prior year: T€ 40,274) is payable in BRL and T€ 5,661 (prior year: T€ 4,802) in CNY. Loans in EUR make up the remaining amount.

In addition to the syndicated loan, there are additional bilateral credit and guarantee lines with various banks. Total credit and guarantee lines of the Schuler Group amount to a volume of T€ 634,318 (prior year: T€ 549,500). Credit/guar-antee lines used at present amount to T€ 450,169 (prior year: T€ 394,515).

Of the financial liabilities, an amount of T€ 11,050 (prior year: T€ 27,184) is secured by encum-brances and other non-current assets. Credit lines with banks amounting to T€ 326,890 (prior year: T€ 311,179) are secured as part of the syndi-cated loan agreement by various non-current and current assets.

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Non-current and current other liabilities


up to 1 year

from 1 to 5 years

over 5 years

Total up to 1 year

from 1 to 5 years

over 5 years

Total

Payments on account received in respect of long-term construction contracts (net) 211,509 0 0 211,509 193,292 0 0 193,292

Other payments on account received from customers 47,469 0 0 47,469 66,150 0 0 66,150

Financial liabilities in respect of staff 38,852 3,242 0 42,094 41,042 1,648 0 42,690

Liabilities relating to social security 4,915 287 0 5,202 4,003 240 0 4,244

Liabilities from other taxes 17,176 0 0 17,176 10,729 0 0 10,729

Negative fair values of derivatives 3,766 1,362 0 5,128 292 101 0 393

Other financial liabilities 10,538 24 0 10,563 5,039 22 0 5,061

Other non-financial liabilities 1,313 107 0 1,419 211 163 0 373

335.537 5.022 0 340.559 320.757 2.175 0 322.931

Liabilities in respect of staff benefits and com-pensation mainly comprise wages, salaries, social security, accrued holiday money, and special

payments not yet due at the end of the reporting period. The respective fair values do not differ significantly from the disclosed carrying amounts.

Income tax liabilities

Income tax liabilities consist of the following:

In T€ 12/31/2014 12/31/2013

Income tax liabilities 1,126 2,425

Provisions for income taxes 21,012 12,705

22,138 15,130

21

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139


Pension provisions

The Schuler Group’s company pension scheme can be divided into defined contribution plans and defined benefit plans. In the case of defined contribution plans, the company has no other legal or construc-tive obligation than the payment of contributions to an external provider. The contributions are recog-nized as expenses in the income statement as of their due date. Total defined contribution plan expenses in the reporting period amount to T€ 22,654 (prior year: T€ 6,129). This total includes employer contributions to the German state pension fund of T€ 22,301 (prior year: T€ 6,050).

Pension provisions are formed for obligations in respect of future entitlements and current payments to entitled active and former employees and their dependants. Pensions vary according to the legal, fiscal and economic circumstances of the respective country and are generally based on the years of ser-vice and remuneration of employees. The main pro-portion of pension provisions formed by the Schuler Group concern domestic subsidiaries. Outside of Germany, there are only defined benefit plans in Switzerland. These are pension schemes according to the Swiss Federal Act on Occupational Retirement, Survivors’ and Disability Pensions (BVG). These plans represent so-called full insurance solutions for which all actuarial risks, including capital market risks, are borne by an insurance company, at least temporarily. These obligations are thus covered to a large extent by plan assets.

In order to reduce the risks associated with pension plans, Schuler adjusted certain major pension plans over the past few years in such a way that their bene-fits are largely based on remuneration conversions.

In the short fiscal year 2014, the pension obliga-tions refer to a total of 9,165 beneficiaries (prior year: 8,975), including 5,215 active employees (prior year: 5,208), 1,527 former employees with vested rights (prior year: 1,333) and 2,423 pensioners and survi-vors (prior year: 2,434).

There are individual defined benefit plans for certain former and active members of the Board of Man-agement and General Managers of Schuler AG and its German subsidiaries. There are also general pension obligations. The size of the obligation gen-erally depends on one or more factors, such as age, service years and income. These obligations are mostly financed internally by Schuler via provisions, which mainly concern the domestic group. A part of these obligations is covered by plan assets in the form of reinsurance policies, which qualify as plan assets and are thus netted with the corresponding obligations.

In addition, certain domestic Group companies have defined contribution plans with a fixed defined benefit base, which is financed by staff remunera-tion conversions and top-ups from the respective company. The plans grant employees the right to a limited monthly pension or a one-off capital payment with a guaranteed annual interest payment on the converted remuneration. The actuarial risk and/or investment risk are mainly borne by the company.

The present value of pension obligations is calcu-lated using the projected unit credit method, which is prescribed by IAS 19.67 for the valuation of pro-visions. Future obligations are measured on the basis of the ratable benefit entitlements earned as of the end of the fiscal year, while also consid-ering assumptions as to future trends. In addition

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140


to assumptions on life expectancy, which for the domestic companies were based on the biometric tables of Prof. Dr. Klaus Heubeck (“RICHTTAFELN

2005 G”), the following assumptions were used to calculate the present value of pension expenses of domestic subsidiaries:

In T€ 2014 SF Y 2013

Germany Switzerland Germany Switzerland

Discount rate 1.8% 1.4% 3.5% 2.4%

Future salary increases 2.0% 1.3% 2.5% 1.3%

Automatic adjustment of vested benefit claims for entitled staff with income-independent benefit arrangements 0.0% 0.0% 0.0% 0.0%

Adjustment of current benefits acc. to § 16 BetrAVG 1.9% n/a 2.0 % n/a

The assumptions used to calculate the present value of pension obligations at the end of the pre-vious reporting period apply for the calculation of interest expense and the current service cost in the following fiscal year.

The changes in the defined benefit obligation (DBO) and the plan asset in the reporting period were as follows:

In T€ 2014 SF Y 2013

Defined benefit obligation (DBO) as of Jan. 1 (py: Oct. 1) 130,864 129,846

Currency translation differences 162 – 20

Current service cost 2,532 256

Interest cost of pension obligations 4,422 1,125

Contributions by plan participants 2,509 20

Remeasurements of the net defined benefit liability

actuarial gains and losses from changes

in financial assumptions 28,609 0

in demographic assumptions 0 0

experience adjustments 210 1,109

Benefits paid – 7,428 – 1,472

Past service cost 0 0

Defined benefit obligation (DBO) as of Dec. 31 161,880 130,864

141


In T€ 2014 SF Y 2013

Fair value of plan assets as of Jan. 1 (py: Oct. 1) 30,648 30,273

Currency translation differences 58 – 8

Expected return on plan assets 1,101 244

Contributions by plan participants 4 20

Contributions by employer 117 24

Remeasurement of plan assets

Income/expenses from plan assets (excl. interest income) 1,240 248

Other 0 0

Benefits paid – 3,557 – 153

Fair value of plan assets as of Dec. 31 29,611 30,648

In order to ascertain the funding status, or the net obligation, the defined benefit obligation of the externally financed obligations is compared with

the present value of plan assets, and the defined benefit obligation of the internally financed obli-gations are added.

In T€ 12/31/2014 12/31/2013

DBO of externally financed obligations 37,464 37,353

Fair value of plan assets 29,611 30,648

Fund assets after consideration of the asset ceiling acc. to IAS 19.64 29,500 29,995

Benefit liability 7,964 7,358

DBO of internally financed obligations 124,416 93,511

Funding status 132,380 100,869

Pension provisions recognized in the statement of financial position 132,380 100,869

The asset ceiling of T€ 111 (prior year: T€ 653) results from the overfunding of individual post-employment benefits.

The amount recognized as income or expense in the income statement resulting from defined ben-efit plans consists of the following items:

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In T€ 2014 SF Y 2013

Current service cost 2,532 256

Interest cost of pension obligations 4,422 1,125

Expected return from plan assets – 1,101 – 244

Interest effect on asset limitation 23 0

Past service cost 0 0

Portion of pension expense recognized in income statement 5,876 1,137

The following amounts were recognized in the statement of comprehensive income:

In T€ 2014 SF Y 2013

Remeasurement of the net pension obligation:

Return on plan assets – 1,240 – 248

Effect from asset ceiling acc. to IAS 19.64 – 561 63

Actuarial gains(–) and losses (+) from changes

in financial assumptions 28,609 0

in demographic assumptions 0

experience adjustments to the defined benefit obligation 210 1,110

Portion of pension expense recognized in other comprehensive income 27,018 925

The service cost and the past service cost are considered in personnel expenses, while the remaining components of that portion of pen-sion expenses which is recognized in the income statement are included in the interest result. The revaluation of net pension obligations is included in the statement of comprehensive income as part of other comprehensive income.

The plan assets relate to domestic Group com-panies and the Swiss subsidiary which cover the acquired pension claims of plan participants in part via reinsurance policies (in Germany and so-called full insurance solutions in Switzer-land). The reinsurance policies invest mainly in

securities with fixed interest rates. The rating and equity ratio of the issuers are also considered during selection. The investment strategy is aimed primarily at consistent interest income and capital preservation with a low level of volatility. There are no quoted prices on any active market for the reinsurance policies.

The main actuarial assumptions for the calcula-tion of the pension obligation are the discount rate and expected salary increases at year-end. The sensitivity analyses below, in the form of scenario analyses, show how the defined benefit obligation would have been influenced by possible changes in the corresponding assumptions.

143


If the discount factor had been 0.25%-points higher (lower), the pension obligation would have declined by T€ 5,157 (prior year: T€ 3,783), (risen by T€ 5,456; prior year: T€ 3,882).

If the expected pension increases had been 0.25%-points higher (lower), the pension obli-gation would have risen by T€ 2,715 (prior year: T€ 2,115) (declined by T€ 2,577; prior year: T€ 2,005).

The Company is exposed to various risks from the defined benefit pension plans. In addition to the general actuarial risks, such as the risk of long life and the risk of interest rate changes, the Company is also exposed to the currency risk and risks associated with the capital market and investments.

The calculations were made in isolation in order to display the effects on the present value of pension obligations as of December 31, 2014 separately. In reality, there are certain dependencies between the actuarial assumptions – especially between the discount factor and the expected salary increases – as both depend to a certain degree on the expected inflation rate. The sensitivity analysis does not con-sider these dependencies and therefore leads to approximate information or trend statements.

The average duration of the defined benefit pen-sion obligations at the end of the reporting period is 12.6 years (prior year: 11.5 years).

Employer contributions to plan assets are expected to reach T€ 109 in the following fiscal year 2015 (prior year: T€ 97).

Non-current and current other provisions

In T€ Other taxes Contract costs

Personnel expenses

Restructuring Other obliga tions

and r isks

Total

Balance at Jan. 1, 2014 2,151 86,795 16,821 38,089 13,650 157,506

of which current 2,151 85,886 6,802 32,184 10,308 137,331

Foreign exchange differences 24 1,039 287 0 167 1,518

Utilization 427 24,133 3,941 9,623 3,343 41,466

Reversals 16 19,332 191 10,360 2,572 32,471

Additions 171 47,874 3,354 0 2,851 54,250

Unwinding of discount 0 51 234 0 223 508

Interest rate changes 0 6 577 0 8 590

Reclassification 0 – 265 0 0 265 0

Balance at Dec. 31, 2014 1,903 92,035 17,141 18,107 11,250 140,435

of which current 1,903 90,926 8,661 16,323 8,169 125,982

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144


Provisions for contract costs comprise provisions for impending losses from pending transactions, subsequent costs from invoiced orders, warran-ties and settlements, commissions and penalties. Provisions for warranties and settlements are measured on the basis of experience from previ-ous damage claim transactions.

Provisions for employee expenses are recognized mainly for the part-time scheme for employees approaching retirement, service anniversaries, severance pay/personnel measures and similar obligations concerning employees.

On October 30, 2013, the Board of Management resolved and communicated extensive measures to adjust the degree of vertical integration in Ger-many and to centralize administration in order to adapt the Schuler Group’s corporate structures to the internationalization of its sales markets. As of December 31, 2013, a provision was formed for expected costs in connection with these mea-sures. It mainly concerns personnel expenses for redundancy payments and costs in connec-tion with the termination of agreements, including termination costs for leases, which are expected to be incurred in the course of the respective

measures. The estimated costs are based on assumptions for the termination of the corre-sponding agreements. A review of the provision on December 31, 2014 revealed a reversal potential of T€ 10,360, which was recognized in person-nel expenses (T€ 9,476) and in other operating expenses (T€ 883) with an effect on income.

Due to delays in contract negotiations during the past fiscal year, the corporate restructuring pro-gram is expected to be completed in 2016.

Other obligations and risks concern identifiable risks and uncertain obligations which are car-ried in consideration of their expected settlement value. These include in particular provisions for annual financial statement costs, environmental risks or litigation.

Other provisions classified as current are expected to be used in the course of the following fiscal year. Non-current other provisions are expected to be used within a period of two to five years.

At the end of the reporting period, expected refunds capitalized as assets amounted to T€ 140 (prior year: T€ 390).

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Trade payables

In T€ 12/31/2014 12/31/2013

Trade payables to

third parties 48,311 36,022

affiliated companies 399 1,022

Liabilities from outstanding invoices 22,677 23,942

71,387 60,986

Trade payables with a remaining term of over one year amount to T€ 16 (prior year: T€ 15).

Reporting on financial instruments

Carrying amount and fair value of financial instruments

The following table presents the carrying amounts and fair values for each individual class of finan-cial instruments, including assets and liabilities not allocated to the categories of IAS 39. The car-rying amount of each class of financial assets also represents the maximum credit risk at the end of the reporting period. In view of varying influential factors, the disclosed fair values can only be seen as an indication for the values which can actually be achieved on the market.

In T€ Amortized cost Fair value Carr ying amount

Carr ying amount

Fair value Recognized in equity

Recognized in profit / loss

12/31/2014

ASSETS

Interests in affiliates and participations 1,591 1,591 – – 1,591

Trade receivables 95,541 95,541 – – 95,541

Future receivables from long-term construction contracts 101,766 101,766 – – 101,766

Other financial assets 8,722 8,722 – – 8,722

Derivatives without hedging relationship – – – 283 283

Derivatives with cash flow hedging relationship – – 691 – 691

Cash and cash equivalents 482,507 482,507 – – 482,507

LIABILITIES

Liabilities due to banks 78,618 76,240 – – 78,618

Trade payables 71,387 71,387 – – 71,387

Other financial liabilities 52,656 52,656 – – 52,656


Derivatives with cash flow hedging relationship – – 5,084 – 5,084

25

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146


Thereof aggregated according to valuation catego-ries pursuant to IAS 39 (excluding derivatives with cash flow hedging relationship):


Carr ying amount



12/31/2014

Financial assets measured at fair value through profit or loss – – – 283 283

Loans and receivables 688,536 688,536 – – 688,536

Available-for-sale financial assets 1,591 1,591 – – 1,591

Financial liabilities measured at fair value through profit or loss – – – 44 44

Financial liabilities measured at amortized cost 202,662 200,283 – – 202,662


Carr ying amount



12/31/2013

ASSETS

Interests in affiliates and participations 2,580 2,580 – – 2,580

Trade receivables 109,557 109,557 – – 109,557

Future receivables from long-term construction contracts 109,668 109,668 – – 109,668

Other financial assets 7,132 7,132 – – 7,132

Derivatives without hedging relationship – – – – –


Cash and cash equivalents 349,322 349,322 – – 349,322

LIABILITIES

Liabilities due to banks 72,665 71,739 – – 72,665

Trade payables 60,986 60,986 – – 60,986

Other financial liabilities 47,751 47,751 – – 47,751



147


Thereof aggregated according to valuation catego-ries pursuant to IAS 39 (excluding derivatives with cash flow hedging relationship):


Carr ying amount



12/31/2013

Financial assets measured at fair value through profit or loss – – – – –

Loans and receivables 575,679 575,679 – – 575,679

Available-for-sale financial assets 2,580 2,580 – – 2,580

Financial liabilities measured at fair value through profit or loss – – – 30 30

Financial liabilities measured at amortized cost 181,402 180,475 – – 181,402

The difference between the individual items of the statement of financial position and the carrying amounts of financial instruments disclosed above corresponds to the Group’s non-financial assets and liabilities at the end of the reporting period.

During the period under review, there were no reclassifications of financial instruments into other valuation categories.

The fair value hierarchy used to categorize the valuation methods for measuring the fair values of assets and liabilities includes the following levels:

Level 1: Valuation is based on quoted and unal-tered prices in active markets for identical assets or liabilities.

Level 2: The valuation process is based on inputs for which either directly or indirectly quoted prices in active markets are available (binding offers or transaction-based prices).

Level 3: The valuation process is based on inputs which have a significant effect on the recorded fair value that are not based on observable market data.

148


Financial instruments repeatedly measured at fair value are allocated to the three levels of the fair value hierarchy as follows:

In T€ Fair value hierarchy 12/31/2014

Level 1 Level 2 Level 3 Carr ying amount

Financial assets measured at fair value – 974 – 974

Derivative financial instruments – 974 – 974

Financial liabilities measured at fair value – 5,128 – 5,128

Derivative financial instruments – 5,128 – 5,128

In T€ Fair value hierarchy 12/31/2013

Level 1 Level 2 Level 3 Carr ying amount

Financial assets measured at fair value – 616 – 616


Financial liabilities measured at fair value – 393 – 393


No financial instruments measured at fair value were transferred between the hierarchy levels displayed during the period under review.

Derivative financial instruments comprise deriv-ative currency and interest hedging instruments. The fair values of forward exchange transactions were calculated using current reference exchange rates under consideration of forward premiums or discounts. Foreign exchange and interest options were valued on the basis of exchange rates quotes or by using recognized option pricing models. The fair values of interest swaps were calculated by using discounted, future expected cash flows,

whereby the remaining terms of market inter-est rates for these financial instruments were considered. Wherever possible, these models use the relevant market prices and interest rates observed at the end of the reporting period as acquired from recognized external sources. Coun-terparty-specific risk adjustments are taken into account.

Financial assets and liabilities not measured at fair value for which fair values are stated have been included in level 2 of the fair value hierarchy; only interests in affiliated companies and partici-pations are allocated to level 3.

149


The fair values of these assets and liabilities were calculated on the basis of market information available at the end of the reporting period using the methods and premises described below and after consideration of counterparty-specific risk adjustments.

There are no liquid markets for loans and receiv-ables. Financial instruments measured at amor-tized cost have mostly short terms, so that it can be assumed that their carrying amounts as at the clos-ing date approximate their respective fair values.

No fair values based on stock exchange or market values could be calculated for equity interests in affiliated companies and participations valued at amortized cost. We assume that the fair values correspond to their carrying amounts, provid-ing there are no signs of impairment in individual cases.

Financial liabilities and trade payables are valued at amortized cost. Differences between historic acquisition costs and the repayment amount are considered according to the effective interest method. Standard market interest rates based on the respective terms are used for discounting. Trade payables generally have short terms, so that it can be assumed that their carrying amounts approximate their respective fair values.

Net gains or losses according to valuation categories (excluding derivatives with cash flow hedging relationship)

The following overview displays the net gains or losses of financial instruments carried in the income statement in accordance with the catego-ries of IAS 39 (excluding derivatives with a cash flow hedging relationship).

In T€ 2014 SF Y 2013

Financial assets measured at fair value through profit or loss 884 1

Loans and receivables 7,531 1,387

Available-for-sale financial assets 17 0

Financial liabilities measured at fair value through profit or loss – 657 15

Financial liabilities measured at amortized cost – 2,413 – 674

The net results from financial instruments result from changes in fair value, impairments and reversals, results from equity instruments valued at cost, derecognitions, exchange rate changes and interest. Results from financial instru-ments measured at fair value through profit and loss which do not qualify for a hedging relation-ship include both interest and currency effects. Net losses from financial liabilities measured at

amortized cost (T€ – 2,413, prior year: T€ – 674) mainly result from interest charges for bank liabilities. Total interest income and expenses for financial instruments not carried at fair value through profit or loss amount to T€ 8,748 (prior year: T€ 1,221) and T€ – 4.308 (prior year: T€ – 822). Interest income from impaired assets was not recognized in the period under review, nor in the previous year.

150


Other disclosures

Statement of cash flows

The cash flow statement shows how cash and cash equivalents of the Schuler Group changed during the reporting period as a result of incoming and outgoing cash flows. In accordance with IAS 7, the statement is divided into cash flows from operat-ing, investing and financing activities.

The statement of cash flows comprises cash, checks and balances with credit institutes. In accordance with IAS 7, cash equivalents also include shares in money market funds which can be converted within one day to certain cash amounts due to their excellent credit rating and investment in extremely short-term money market papers subject to only minor value fluctu-ations. Available funds in the cash flow statement therefore comprise the cash and cash equivalents carried in the statement of financial position.

The statement of cash flows from operating activities is derived indirectly from profit before minority interests. As part of this indirect cal-culation, recognized changes in items of the

statement of financial position items connected with operating activities are adjusted to eliminate effects from currency translation and changes in the consolidated group. As a result, they cannot be directly compared with the corresponding changes compared with previous years on the basis of the published consolidated items of the statement of financial position.

Investing activities mainly include additions to property, plant and equipment, and financial assets.

Financing activities include cash flows with share-holders of Schuler AG and its subsidiaries as well as proceeds from and redemption of financial liabilities.

In summary, the various cash flows and the changes in value caused by exchange rate fluctu-ations and consolidation resulted in an increase in cash and cash equivalents in the fiscal year 2014 of T€ 133,184 to T€ 482,507.

A detailed economic explanation of the cash flow statement is provided in the chapter “Financial Development” in the Management Report.

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Segment reporting

Information by operating segment

Segment reporting is prepared according to IFRS 8 “Operating Segments”.

In accordance with the Schuler Group’s inter-nal reporting and organizational structure, three reportable segments have been specified below the management holding. Segment reporting also includes the summarized division “Other Seg-ments” and the Corporate Center of Schuler AG, as well as a consolidation item to reconcile seg-ment reporting with the disclosed consolidated amounts. The consolidation measures only include those items which do not affect the segments themselves (e.g. debt consolidation between seg-ments and the elimination of intersegment sales).

Reporting is based on areas of activities as defined by the differing products and services supplied by the operating segments Forming Systems, Automation and Tools: the products of

the Forming Systems segment mainly comprise mechanical and hydraulic metalforming systems, while the Automation segment focuses on automa-tion systems and laser technology. All activities in the field of car body technology and the respective services are pooled in the Tools segment.

The “Other Segments” category summarizes all other activities which do not require separate reporting. These include Schuler Guß, Sales & Service companies and structured companies.

Schuler determines segment success on the basis of its operating result, which is defined as earn-ings before interest and taxes (EBIT).

The Schuler Group’s segment reporting figures are based on the same accounting and valuation principles as applied for the statement of financial position. Intercompany transactions are always transacted at standard business prices and thus correspond to those with external third parties (arm’s length principle).

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152


In T€ Forming Systems Automation Tools Other Segments

2014 SF Y 2013 2014 SF Y 2013 2014 SF Y 2013 2014 SF Y 2013

Sales to third parties 922,643 203,097 58,031 8,149 70,505 14,216 127,317 33,310

Intercompany sales 57,418 16,361 108,999 23,026 1,859 593 20,725 7,389

Segment sales 980,061 219,457 167,030 31,175 72,365 14,808 148,042 40,699

EBIT 104,440 – 9,094 16,318 – 2,292 – 3,510 – 5,067 5,032 – 8,187

Depreciation (1) 12,719 3,880 1,693 566 1,466 858 3,466 1,260

of which non-scheduled 811 459 0 0 0 382 0 411

Income (–)/expense (+) from corporate restructuring (2) – 11,010 23,090 – 1,062 4,561 – 634 4,455 2,346 9,883

Capital expenditures (1) 9,799 8,116 1,436 79 7,623 335 2,997 682

Personnel as of 12/31 (incl. apprentices) 3,830 3,894 613 602 345 347 568 664

In T€ Total Segments Schuler AG(Corporate Center)/

Consolidation

Schuler Group

2014 SF Y 2013 2014 SF Y 2013 2014 SF Y 2013

Sales to third parties 1,178,497 258,771 0 0 1,178,497 258,771

Intercompany sales 189,001 47,368 – 189,001 – 47,368 0 0

Segment sales 1,367,498 306,139 – 189,001 – 47,368 1,178,497 258,771

EBIT 122,280 – 24,641 – 20,033 – 3,060 102,247 – 27,700

Depreciation (1) 19,344 6,564 2,375 432 21,718 6,996

of which non-scheduled 811 1,252 0 0 811 1,252

Income (–)/expense (+) from corporate restructuring (2) – 10,360 41,989 0 0 – 10,360 41,989

Capital expenditures (1) 21,856 9,212 4,616 3,768 26,471 12,979

Personnel as of 12/31 (incl. apprentices) 5,356 5,507 67 63 5,423 5,570

(1) without financial assets

(2) in the previous year without the impairment charges described above which are fully attributable to measures to streamline the corporate structure

153


Profit or loss for the year before taxes is recon-ciled with the performance indicator used in seg-ment reporting (EBIT) as follows:

In T€ 2014 SF Y 2013

Total segment results (EBIT) 122,280 – 24,641

Corporate Center – 19,643 – 3,169

Interest result – 1,587 – 1,232

Consolidation – 390 110

Profit or loss for the year before taxes (EBT) 100,661 – 28,933

Additional disclosures at company level

S A L E S B Y P R O D U C T S A N D S E R V I C E SIn T€ 2014 SF Y 2013

Plant and machinery 824,041 175,131

Tools (including stamped parts) 91,903 18,866

Foundry 1,480 1,324

Service (incl. sales of used machines) 256,491 61,664

Other (incl. contract manufacturing) 4,582 1,786

Schuler Group 1,178,497 258,771

154


S E G M E N T I N F O R M A T I O N B Y R E G I O NIn T€ Sales to third parties Intangible assets and

property, plant and equipment

2014 SF Y 2013 12/31/2014 12/31/2013

Germany 483,700 120,801 191,566 193,815

Europe (excluding Germany) 174,325 33,976 1,412 1,522

America 207,303 47,260 21,406 19,912

Asia 307,726 55,699 30,797 23,549

Other 5,443 1,035 0 0

Schuler Group 1,178,497 258,771 245,182 238,798

Segment information by region divides sales according to the location of the customer’s head-quarters. In the reporting period, sales revenues of T€ 126,916 were generated with one customer (prior year: T€ 39,917 and T€ 30,250 with two cus-tomers) in the Forming Systems, Automation and Tools segments as well as the Other Segments category. Non-current assets are allocated to geographical regions according to the location of the Group company’s headquarters.

Financial risk management and derivative financial instruments

Principles of risk management with regard to financial risks

Due to its international alignment and long-term project business, the Schuler Group is exposed in particular to interest, foreign currency, as well as credit and liquidity risks, which may adversely affect the net assets, financial position and earn-ings of the Group. The main task of financial risk management is to eliminate or limit such risks

with its current operative and finance-oriented activities in order to secure the long-term value of the company.

Financial risks are continually monitored by the central cash and foreign currency management system of Schuler AG’s corporate treasury depart-ment and limited with the aid of suitable hedging relationships based on corresponding guidelines adopted by the Board of Management. The hedging of financial transactions and business conducted by Group subsidiaries outside the Euro zone is closely coordinated with the Group’s central trea-sury division. All companies of the Schuler Group are obliged to hedge foreign currency positions at the time of their creation. Providing there are no legal regulations to the contrary, this is done by delivering open foreign exchange positions to the Group’s treasury department, which hedges against the relevant underlying transactions with different terms in accordance with the hedging purpose. In certain cases, future planned transac-tions may also be the object of a hedging rela-tionship. Financial risk management is subject to strict monitoring, which is guaranteed in par-ticular by a clear functional separation between

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trading, processing and control. In addition to financial reporting to the Board of Management and Supervisory Board, the regular monitoring of adherence to guidelines adapted to current market and product developments, the efficiency of hedging instruments and the reliability of our internal control systems via internal and external audits all provide a high degree of transparency and permanent function control. Additional expla-nations on risk management are provided in the Group management report.

Currency and interest risks

These risks consist of possible fluctuations in the fair value or future cash flows of a financial instrument (e.g. receivables or payables) due to changes in the market interest rate or exchange rate.

Currency risks result from the conversion of financial instruments whose values differ from the functional currency of the respective individ-ual company and which are of a monetary nature. They mainly arise from Schuler’s international activities, as a consequence of which the Group’s operative business, financial results and cash flows are subject to exchange rate fluctuations. A related transaction risk results mainly from the operative business process, and in particu-lar with regard to the exchange rate relationships between the US Dollar, the Brazilian Real, the Chi-nese Yuan (Renminbi) and the Euro. In emerging nations, international orders of subsidiaries are generally concluded in USD or EUR. The economic exchange rate risk (competition risk) resulting from the volatility of the key currencies is pri-marily reduced by spreading Schuler’s production facilities among several nations (natural hedging). Coverage against foreign currency orders is still

provided by means of naturally closed positions, or netting, whereby the values or cash flows of originated financial instruments offset each other with regard to time or amount. Any remaining risks are reduced by the use of derivative finan-cial instruments. Wherever possible, underly-ing transactions and hedges are summarized as hedging relationships which mostly compensate for subsequent changes in market values in the designated transactions. At the end of the report-ing period, forward exchange positions referred mainly to the exchange rate parities EUR/USD, USD/BRL, EUR/BRL and EUR/CNY. Such deriva-tives are used solely for hedging purposes, which are tied to the corresponding existing underlying business or planned transactions. Schuler does not enter into trading positions with the aim of speculating. Due to the typically long-term nature of Schuler’s large-machine business, the Group generally hedges against currency risks according to individual orders (micro hedges).

Schuler holds various interest-sensitive, medi-um-term and long-term assets and liabilities in order to meet liquidity requirements. The Group’s interest rate risk results from funding which is not in line with the respective maturities, as well as from various interest elasticities of certain assets and liabilities. Whereas liabilities with variable interest rates expose the Group to a cash flow interest rate risk, liabilities with fixed interest rates result in a fair value interest rate risk (cf. note (20)). Schuler is exposed to interest rate risks mainly in the EUR, BRL and CNY currency regions. In order to minimize both the risks with regard to maturities and fixed interest rates, and its financ-ing costs, the company can use derivate interest instruments in the eurozone. Treasury assesses interest risk positions by comparing the respec-tive financial assets and liabilities with regard to maturities and in connection with the relevant

156


interest derivatives. Wherever possible with rea-sonable effort, assets are refinanced in accor-dance with Group guidelines and in line with their respective maturities. In consideration of its hedg-ing activities, the Schuler Group’s management is of the opinion that the Group is not exposed to any significant interest rate risk with regard to its financing at the end of the reporting period.

In order to limit the above mentioned financial market risks, the Group uses forward exchange contracts and options, interest swaps and

interest caps. All derivative financial instru-ments are recognized as assets or liabilities at those fair values valid at the end of the reporting period. The disclosed notional amount of deriv-ative financial instruments represents the gross totals of all purchase and sale amounts. The size of the notional amount provides an indication of the scope of derivatives used, but not of the risk involved in using such derivatives.

The terms of the derivative financial instruments are based on those of the underlying transactions.

In T€ 12/31/2014 12/31/2013

Notional value

Market value

Notional value

Market value

Forward exchange contracts and swaps 111,506974

47,711616

– 5,128 – 356

Currency derivatives, net 111,506 – 4,154 47,711 260

Interest swaps 00

1,7650

0 – 37

Interest derivatives, net 0 0 1,765 – 37

111,506 – 4,154 49,476 223

When interpreting the positive and negative fair values of derivative financial instruments, it is important to note that there are generally oppos-ing underlying transactions which thus limit the market risk from price changes on the financial markets. Moreover, the fair values do not nec-essarily correspond to those amounts which the Group will achieve in future under current market conditions. In order to reduce the risk of default, hedging transactions are concluded exclusively with primerated credit institutes which are contin-ually monitored. The default risk arising from the

possibility that contractual partners do not meet their obligations from forward exchange contracts amounts to T€ 974 (prior year: T€ 616).

Provided the strict requirements of hedge accounting are met, the disclosed derivative financial instruments are assigned directly to the underlying transactions in the form of cash flow hedges. The market value of these derivatives (cash flow hedges) amounts to T€ – 4,393 (prior year: T€ 253) at the end of the reporting period. The market value of those derivatives which were

157


not classified as cash flow hedges due to strict hedge accounting requirements, or are ineffec-tive, amounts to T€ 239 (prior year: T€ – 30). Nei-ther in the reporting period nor in the previous year were market value changes recognized in the income statement due to the premature termina-tion of cash flow hedging relationships (dedesig-nation). Valuation changes which represent the effective portions of hedging transactions and are recognized in equity (accumulated other compre-hensive income) are disclosed in the consolidated statement of comprehensive income. On realiza-tion of the underlying transaction, the accumu-lated effects in equity are reversed with an effect on profit or loss and recognized in the income statement as sales revenue or cost of materials (foreign currency derivatives) or in other income or other expenses (interest derivatives).

The effectiveness of a hedging relationship for cash flow hedges is determined prospectively using the Critical Terms Match Method according to IAS 39.AG108. An effectiveness test is carried out retrospectively at the end of each report-ing period using the dollar-offset method. For this, the changes in the fair values of the hedged item and the hedging instrument attributable to exchange rate changes are calculated and a ratio is created. For all recognized hedging relation-ships, the ratio of these two cumulative valuation changes is within the range proscribed by IAS 39 of between 80% and 125%.

In the case of non-German Group subsidiaries outside the Euro zone, tied net assets are gener-ally not secured against exchange rate fluctua-tions as exchange rate-related differences from the translation of annual financial statements of non-German Group subsidiaries into the Group’s

reporting currency (translation risk) are not cash flow relevant. Moreover, Schuler does not gen-erally hedge against the translation risk from exchange rate fluctuations for revenues and prof-its of subsidiaries outside the Euro zone. However, there may be significant translation differences which may affect revenues, the segment result (EBIT) and Group profit or loss.

Credit risk (rating or default risks)

Credit risks result when one party of a financial instrument does not, or not fully, meet its contrac-tual payment obligations within the due period, or when the value of collateral provided is dimin-ished. In addition to the arise of concentrations of risk, direct default risks can result in economic losses or impairment of receivables and other financial assets from the deterioration of customer credit ratings. In the case of sluggish economic and sector growth, there may be an increase in customer defaulting with a negative impact on the financial position and financial performance of the Group. The risk of default involved in investments and the use of derivative financial instruments is limited by concluding such financial transactions only with high-rated contractual partners, which are continually monitored. Risk management in the credit process is based on the corresponding corporate guideline which regulates such aspects as rating checks for customer inquiries, checks for any grouping of exposures, the requirement of collateral and guarantees, the granting of title retention, consideration of country-specific collat-eral formats, the use of minimum payment condi-tions, and staggered approval requirements from the finance division. The risk of default involved in trade receivables from exporting is accounted for in

158


certain cases by letters of credit or taking out credit insurance policies. The development of payment behavior is continually monitored and receivables analyzed for any contractual defaulting. Any other default risks identifiable at the end of the reporting period are covered by forming appropriate valuation allowances. The explanations regarding past due or impaired financial assets are presented in notes (13) and (15). In general, there are no agreements with customers to reduce credit risk, such as set-off agreements, so that the maximum default risk of those financial assets exposed to credit risks cor-responds to the carrying amounts disclosed in note (26). As at the closing date, no derivative financial assets are past due or impaired due to default.

Schuler continually analyzes the structure of its receivables in order to ensure the timely identi-fication and assessment of concentration risks. Concentrations of credit risks for Schuler can result from global sales activities of metalform-ing systems and the respective service business, which depend greatly on the investment behavior of the automotive sector. As at the closing date, there is the following distribution of sector risk (gross, without considering valuation adjustments and pay-ments received on account and offset from assets for long-term construction contracts):

In T€ 12/31/2014 12/31/2013

Car manu-facturers

Automotive suppliers

Non- automotive

Car manu-facturers

Automotive suppliers

Non- automotive

Trade receivables 46,781 34,970 18,444 64,545 29,251 20,315

Future receivables from long-term construction contracts 539,896 154,447 203,442 449,025 101,398 180,274

As at the closing date, there is no concentration of default risks from business relations with individ-ual debtors.

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Liquidity risks

Liquidity risk refers to the risk that a company cannot, or only insufficiently, meet its finan-cial obligations which must be settled in cash or cash equivalents or with other financial assets. Amongst other things, payment obligations may result from interest and redemption payments for loans taken out or to serve liabilities due to suppliers. Liquidity risks can occur mainly from changed customer payment behavior, especially with regard to payments to be received on account, as well as from more restrictive bank lending or more restrictive cover behavior of credit insur-ers. Liquidity is safeguarded by a rolling monthly liquidity projection, the use of modern financial instruments and the Group’s provision with suf-ficient credit lines. As part of short- and medi-um-term liquidity management, surplus liquid-ity is netted with the liquidity needs of individual Group companies by means of a central cash pool

in order to reduce and optimize the Group’s refi-nancing costs. Liquidity is mainly held in overnight and time deposit accounts. The Group’s Trea-sury department is responsible for the manage-ment and administration of the cash pool used for internal financing. In addition, there is a liquidity reserve in the form of cash credit lines in order to secure continual liquidity and the financial flexi-bility of the Schuler Group. Further information on this topic can be found under note (20).

The following table shows the remaining matur-ities of non-discounted cash flows from originated financial liabilities and from derivative finan-cial instruments and their effect on the Group’s liquidity situation and compares them with their carrying amounts. Negative values correspond to finance received. Gains and losses from hedging transactions are expected to have an effect in the same reporting periods as the respective cash flows.

In T€ Carr ying amount

12/31/2014

Cash flows Total cash flows

within 1 year

in 1 to 5 years

af ter more than 5 years

Originated financial liabilities

Liabilities due to banks 78,618 41,820 37,456 4,128 83,403

Trade payables 71,387 71,371 16 0 71,388

Other financial liabilities 52,656 49,479 3,177 0 52,656

Derivative financial liabilities

Currency derivatives without hedging relationship 44 14 30 0 44

Currency derivatives with cash flow hedging relationship 5,084 3,752 1,332 0 5,084

Interest derivatives with cash flow hedging relationship 0 0 0 0 0

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In T€ Carr ying amount

12/31/2013

Cash flows Total cash flows

within 1 year

in 1 to 5 years

af ter more than 5 years

Originated financial liabilities

Liabilities due to banks 72,665 40,220 33,409 5,025 78,654

Trade payables 60,986 60,971 15 0 60,986

Other financial liabilities 47,751 46,171 1,580 0 47,751

Derivative financial liabilities

Currency derivatives without hedging relationship 30 30 0 0 30

Currency derivatives with cash flow hedging relationship 326 224 101 0 326

Interest derivatives with cash flow hedging relationship 37 37 0 0 37

The tables above show all financial instruments as at the closing date for which payments were contractually agreed. Financial liabilities which can be paid back at any time are considered at their earliest possible maturity time. Planned figures for new liabilities in future are not con-sidered. In the case of gross disbursements from derivative financial instruments, both derivatives with negative and those with positive fair values are considered providing they constitute a future payment obligation. On the last two balance sheet dates, Schuler had no such derivative financial assets with future payment obligations. Foreign currency amounts are translated at the closing rate at the end of the reporting period. Interest payments from financial instruments with vari-able interest rates are calculated on the basis of the fixed interest rate prior to the end of the reporting period.

In the case of loan liabilities, there were no contractual breaches concerning redemption, interest payments or redemption terms as at the closing date. There were also no other contract

infringements which entitled the lender to demand accelerated repayment and which were not set-tled before the annual financial statements were approved for publication or the terms of the loans were not renegotiated prior to this time.

Sensitivity analyses

Simulation calculations are performed using dif-ferent market scenarios in order to estimate the effects of different market conditions. They enable a suitable and easily comprehensible assess-ment for each market risk regarding the effects on Group profit or loss and equity of a hypothet-ical change in the relevant risk variables (e.g. exchange rates, interest rates) as at the closing date. The hypothetical change in risk variables is based on the amount of financial instruments as at the closing date and assumes that this is representative for the year as a whole. The limits selected for the sensitivity analyses reflect what Schuler believes to be the reasonably possible change in the relevant risk variables, which may

161


occur over a period of one year on the assumption of suitable standards.

In the case of currency risks, a sensitivity analysis is conducted for those foreign currencies which represent a significant risk for the Group. Schuler has identified this risk in particular for the US Dollar, the Brazilian Real and the Chinese Yuan (Renminbi). Currency risks as defined by IFRS 7 are created by financial instruments which are denominated in a different currency than the func-tional currency and are of a monetary nature. Dif-ferences resulting from the translation of annual financial statements of foreign subsidiaries into the Group currency are not considered. Currency sensitivity analyses are based on the following premises:

• The main originated monetary financial instru-ments (cash and cash equivalents, receivables, liabilities) are denominated either directly in the functional currency of Group companies or are hedged against exchange rate risks as under-lying transactions by using derivative financial instruments (e.g. forward exchange and for-eign exchange option transactions) and oppos-ing originated financial instruments. They are thus transferred synthetically into the functional currency. There is generally no effect on Group profit or loss or equity.

• Interest income and expenses from financial instruments are also either recognized directly in the functional currency or transferred into the functional currency by the use of derivatives. As a consequence, there is also no effect on Group profit or loss or equity.

• Schuler is exposed to currency risks from deriv-atives which are tied to a cash flow hedging relationship aimed at hedging against currency fluctuations in cash flows pursuant to IAS 39. Exchange rate fluctuations in the underlying for-

eign currencies influence the unrealized gains from cash flow hedges recognized in other com-prehensive income via the changed fair value of the hedging transactions. This only applies, however, insofar as the fair value changes of the hedging instruments are not compensated for by opposing value developments of the same amount in the underlying transactions. This is regularly the case during the lead time of cus-tomer orders in foreign currencies, which are hedged 100% on order completion: until order acceptance, the fair value change of the deriva-tive does not face any opposing change (= order recognition as unfinished product) or only a per-centage-of-completion change in the underlying transaction (= order recognition as future receiv-able from long-term construction contract), so that for an effective hedging relationship the net value from the exchange rate valuation of the underlying and hedging transactions at the end of the reporting period is disclosed in other com-prehensive income.

• In addition, exchange rate changes have an effect on the income statement and on equity, insofar as the opposing translation differences from the underlying transaction and the hedg-ing instrument do not balance each other due to ineffectiveness. This leads to changed market values of the hedging transactions as well as changed fair values of the transactions; the effects on the size of any ineffectiveness influ-ence Group profit or loss and equity. Exchange rate risks as defined by IFRS 7 can also occur with those foreign currency derivatives which are used to hedge planned positions and are not involved in a hedging relationship pursuant to IAS 39.

• Exchange rate changes of financial instruments which qualify as fair value hedges do not lead to an exchange rate risk, as the value changes caused by currency fluctuations between the

162


underlying and hedging transactions generally balance each other out in the income statement of the period under review.

Based on the exchange rates of the relevant cur-rencies valid at the end of the reporting period, sensitivities were based on a hypothetical change in exchange rate relationships of 10% each:

If at the closing date, the Euro had been reval-ued (devalued) by 10% against the risk-bearing currencies US Dollar, Brazilian Real and Chinese Yuan (Renminbi), consolidated earnings at the end of the range would have decreased (increased) by € 1.0 million or € 1.0 million (prior year: € – 0.8 million or € 0.8 million). In addition, the change in fair values would have led to an adjust-ment of the cash flow hedging reserve in equity of € 3.5 million (€ – 3.5 million) (prior year: € 0.7 mil-lion or € – 0.7 million).

Interest risks can result above all from financial assets and liabilities bearing or owing interest with terms of over one year. Sensitivity analy-ses are used to estimate the effect of a change in market interest rates on interest payments, inter-est income and expenses, and equity capital. In order to assess the risk of interest rate changes, assets and liabilities are compared according to their maturities (natural hedge), together with interest derivatives. Schuler’s significant interest positions are denominated in Euro and Brazilian

Real. The calculated effects of a hypothetical change in the interest level are based on the fol-lowing premises:

• Financial liabilities with fixed interest rates are not exposed to interest risks as defined by IFRS 7, as these financial instruments are always carried at amortized cost and not fair value. In the case of financial instruments with variable interest rates, there is a cash flow risk if their interest payments are not hedged against inter-est risks as underlying transactions as part of cash flow hedges.

• Interest rate changes of financial instruments which qualify as fair value hedge do not lead to interest risks, as the interest-related value changes between the underlying and hedging transactions always balance each other out in the income statement of the period under review.

• Interest risks as defined by IFRS 7 can result from interest derivatives which are involved in an effective cash flow hedging relationship to hedge against interest-related variability in cash flows pursuant to IAS 39. Interest rate adjust-ments for such hedging transactions are recog-nized in other comprehensive income via their market value changes and considered in the equity-based sensitivity calculation. The profit or loss based sensitivity calculation includes both the ineffective portion of cash flow hedging and the interest risk from originated financial instru-ments with variable interest rates, providing its

163


interest payments are not designated as under-lying transactions as part of a cash flow hedge against interest risks.

• Market interest rate changes of interest deriv-atives which are not involved in a hedging rela-tionship pursuant to IAS 39 also impact the inter-est result and are considered in the profit or loss based sensitivity calculation.

Due to the low interest rate level in the Euro cur-rency zone and as in the previous year, the anal-ysis of interest sensitivity in the Euro zone was based on a parallel shift in the interest structure curve of +100/-30 base points in order to avoid negative interest. This results in the following effects on Group profit or loss and equity:

If as at the reporting date, the market inter-est level in the Euro currency zone had been 100 bp higher (30 bp lower), Group profit or loss at the end of the range would have increased (decreased) by € 1.5 million (€ 0.4 million) (prior year: € 1.8 million or € – 0.5 million). There would

have been no change in fair values or in the amount of the hedge reserve in equity.

If as at the reporting date, the market interest level in the Brazilian Real currency zone had been 100 bp higher (lower), Group profit or loss at the end of the range would have changed by € 0.5 mil-lion (€ – 0.5 million) (prior year: € 0.3 million or € – 0.3 million). There would have been no change in fair values and thus no decrease or increase in the hedge reserve in equity.

Other price risks in connection with financial instruments may result from further risk vari-ables – especially stock exchange prices or com-modity indices. As at the closing date, Schuler does not hold any significant available-for-sale assets (e.g. securities) which are dependent on such valuation parameters and which might lead to significant other price risks. Derivative finan-cial instruments are not used for the purchase of commodities.

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Other financial obligations

In T€ Payable 12/31/2014 12/31/2013

up to 1 year

from 1 to 5 years

over 5 years

Total Total

Rent and lease payments (operating leases) 13,563 38,378 39,546 91,487 98,010

Purchase commitments (tangible assets) 6,573 0 0 6,573 2,260

Other obligations 2,591 228 0 2,819 2,079

22,727 38,606 39,546 100,879 102,350

The majority of the other financial obligations con-cerns operating lease liabilities resulting from the sale of real estate assets in previous years in Göp-pingen and São Paulo as part of sale-and-rent-back transactions.

Litigation

In the reporting period, the Schuler Group was not involved in any current legal or arbitration proceedings whose outcome may have a mate-rial effect on the economic position of the Group. Appropriate provisions have been formed by the respective Group company for any poten-tial costs arising from other legal or arbitration proceedings.

Significant events after the balance sheet date

There were no events after the end of the report-ing period which had a material impact on the con-solidated financial statements.

Related party disclosures

Related parties as defined by IAS 24 are compa-nies or persons that the reporting entity has the ability to control or over which it can exercise sig-nificant influence, or parties that have the ability to control or exercise significant influence over the reporting entity.

In addition to the subsidiaries included in the consol-idated financial statements, Schuler AG has direct or indirect relations with non-consolidated subsid-iaries and participations in the course of its normal business operations. Since the majority acquisition of Schuler AG by ANDRITZ Beteiligungsgesellschaft IV GmbH (parent company), ANDRITZ AG (ultimate controlling company) and other companies over which it exerts a significant influence qualify as related parties. There are also business relation-ships with other companies which qualify as related parties. All business relations with such compa-nies are transacted on an arms-length basis. Major related, affiliated companies which are controlled by the Schuler Group or over which it can exercise sig-nificant influence are included in the list of consoli-dated companies under note (36).

30

31

32

33

165


The following table presents the volume of trans-actions between the Schuler Group and these

related companies during the period under review:

In T€ 2014 SF Y 2013

– on Group basis –

Supplies and ser vices

rendered

Interest income


received

Interest expenses


rendered

Interest income


received

Interest expenses

Subsidiaries 6,354 44 1,217 3 1,830 0 271 1

Investments 658 0 194 0 130 0 13 0

Companies with a significant influence 478 0 11,701 0 737 0 4,890 0

Open balances at the end of the reporting period are shown below.

In T€ 12/31/2014 12/31/2013

– on Group basis –Receivables

fromPayables to Receivables

fromPayables to

Subsidiaries 1,680 254 592 974

Investments 16 0 619 0

Companies with a significant influence 85 144 354 48

In the reporting period, adjustments to receiv-ables from subsidiaries of T€ 0 were made (prior year: T€ 0). Receivables from and payables to related parties have a maturity of less than one year.

Beyond regular activities, there were no business relations between members of the Management Board, the Supervisory Board or the managers of Group companies nor members of their families

on the one side and Group companies on the other during the period under review. Some members of the Supervisory Board of Schuler AG are also members of supervisory boards of other com-panies with which Schuler AG or its subsidiaries have relations in the course of normal business operations. All business with such companies is carried out on an arms-length basis. Further details on executive bodies are provided under note (36).

166


Auditors’ fees

The audit fees of the Group’s auditors for the reporting period are broken down as follows:

In T€ 2014 SF Y 2013

Audits of financial statements 420 340

Other auditing services 18 10

Tax advisory services 228 60

Other services 197 21

863 431

Executive bodies

Board of Management

Stefan Klebert (chair) Chief Executive Officer

Joachim Beyer Chief Technology Officer

Norbert Broger Chief Financial Officer

Dr. Peter Jost Chief Operating Officer

The total remuneration granted to members of the Board of Management in fiscal year 2014 amounted to T€ 5,452 (prior year: T€ 432). This amount includes components with a long-term incentive of T€ 1,705 (prior year: T€ 0) which were already granted in previous fiscal years. The current service cost included in pension obli-gations amounted to T€ 194 (prior year: T€ 40). Total remuneration includes € 80,000 (prior year: € 0) in the form of subscription rights granted by the ultimate parent company ANDRITZ AG for subscription of ANDRITZ AG shares with a fair value at the grant date of T€ 645 (prior year: T€ 0). ANDRITZ AG does not allocate the cost of granting the subscription rights to Schuler Aktiengesellschaft.

In the past fiscal year, remuneration components with a long-term incentive were granted which depend on the achievement of specific Group per-formance figures in 2015 and 2016 as well as the fulfillment of the respective Board of Management member’s service agreement.

Total remuneration of former members of the Board of Management or management and their surviving dependants for the fiscal year 2014 amounted to T€ 1,138 (prior year: T€ 283). The provisions formed by the Group for such current and future pensions amount to T€ 17,624 (prior year: T€ 15,838).

34

35

167


Supervisory Board

Dr. Wolfgang Leitner Chairman of the Supervisory Board CEO of ANDRITZ AG, Graz, Austria

Thomas Bohlender *) Deputy Chairman of the Supervisory Board Power supply electrician, Schuler Pressen GmbH,Waghäusel, Chairperson of the Labor Council, Schuler Pressen GmbH, Waghäusel

Prof. Dr. h.c. Roland Berger Honorary Chairman Roland Berger Strategy Consultants GmbH, Munich

Elke Böpple *) Software engineer, Schuler Pressen GmbH, GöppingenChairperson of the Labor Council, Schuler Pressen GmbH, Weingarten

Ralf Dieter CEO of Dürr AG, Stuttgart

Renate Gmoser *) Chief Representative of the Metal Workers’ Union (IG Metall), Göppingen-Geislingen branch

Lothar Gräbener *) Sales Director, Schuler Pressen GmbH, Waghäusel

Prof. Dr. Christian Nowotny Professor at the Vienna University of Economics and Business

Friedrich Papst Executive Board member for Metals and Feed + Biofuel ANDRITZ AG, Graz, Austria

Martin Sambeth *) Chief Representative of the Metal Workers’ Union (IG Metall), Baden-Württemberg region

Hans-Jürgen Thaus Former Deputy CEO of KRONES AG, Neutraubling

Ingrid Wolfframm *) Purchaser, Schuler Pressen GmbH, GöppingenChairperson of the Group Labor Council, Schuler AG, GöppingenLabor Council member, Schuler Pressen GmbH, Göppingen

*) worker representatives

Supervisory Board committees

Permanent Committee acc. to § 27 (3), Codetermination Law

Dr. Wolfgang Leitner (Chairman)

Thomas Bohlender

Renate Gmoser

Prof. Dr. Christian Nowotny

Personnel Committee


Elke Böpple

Renate Gmoser

Hans-Jürgen Thaus

Audit Committee

Prof. Dr. Christian Nowotny (Chairman)

Thomas Bohlender

Hans-Jürgen Thaus

Ingrid Wolfframm

Nomination Committee


Prof. Dr. h.c. Roland Berger

Prof. Dr. Christian Nowotny

Total remuneration of the Supervisory Board for the fiscal year 2014 amounted to T€ 353 (prior year: T€ 103), of which an amount of T€ 263 was carried as a liability at year-end (prior year: T€ 66).

168


Additional disclosures acc. to HGB

List of shareholdings of Schuler AG as of December 31, 2014

Company and location Equity interest %

Fully consolidated affiliated companies

Schuler Pressen GmbH, Göppingen (1) 100.00

Gräbener Pressensysteme GmbH & Co. KG, Netphen (2) 100.00

Schuler Automation GmbH & Co. KG, Hessdorf (2) 100.00

Schuler Cartec Engineering GmbH & Co. KG, Weingarten (2) 100.00

Schuler Guß GmbH & Co. KG, Göppingen (2) 100.00

Vögtle Service GmbH, Eislingen (1) 100.00

Rena Grundstücksverwaltungsgesellschaft mbH & Co. Vermietungs-KG, Pullach i. Isartal (2) 100.00

SUPERA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Weingarten, Schönefeld (2) 100.00

NORA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Weingarten, Grünwald (2) 100.00

Beutler Nova AG, Gettnau, Switzerland 99.70

Schuler France S.A., Strasbourg, France 100.00

Schuler Presses UK Limited, Walsall, UK 100.00

Schuler Incorporated, Columbus/Ohio, USA 100.00

BCN Technical Services Inc., Hastings/Michigan, USA 100.00

Müller Weingarten de México, S.A. de C.V., Puebla, Mexiko 100.00

Prensas Schuler S.A., São Paulo, Brazil 100.00

Shanghai Schuler Presses Co. Ltd., Shanghai, PR China 79.38

Schuler (Dalian) Forming Technologies Co. Ltd. Dalian, PR China 100.00

Schuler Sales & Service Co. Ltd., Shanghai, PR China 100.00

Schuler (Tianjin) Metal Forming Technology Center Co. Ltd, Tianjin, PR China 100.00

(1) Companies making use of the relief afforded by § 264 (3) HGB

(2) Companies making use of the relief afforded by § 264 b HGB

36

169


Company and location Equity interest %

Non-consolidated affiliated companies

Gräbener Pressensysteme-Verwaltungs GmbH, Netphen 100.00

Schuler Automation Geschäftsführungs GmbH, Hessdorf 100.00

Schuler Guß Geschäftsführungs GmbH, Göppingen 100.00

Schuler Ibérica S.A.U., Sant Cugat del Vallès, Spain 100.00

Schuler Italia S.r.l., Turin, Italy 90.00

Schuler Slovakia Services s.r.o., Dubnica nad Váhom, Slovakian Republic 100.00

Graebener Press Systems Inc., Warwick/Rhode Island, USA 100.00

BCN do Brasil Serviços e Comércio Ltda., São Paulo, Brazil 100.00

Tianjin SMG Presses Co. Ltd., Tianjin, PR China 100.00

Schuler Thailand Co. Ltd., Bangkok, Thailand 100.00

Schuler India Private Limited, Mumbai, India 100.00

Schuler Poland Service Sp. Z o.o. 100.00

Other investments

Tianjin GMTSC Machine Tool Service Co. Ltd., Tianjin, PR China 50.00

(1) Companies making use of the relief afforded by § 264 (3) HGB

(2) Companies making use of the relief afforded by § 264 b HGB

Göppingen, February 13, 2015

Schuler AG The Board of Management

Stefan Klebert Joachim Beyer Norbert Broger Dr. Peter Jost

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Auditor’s Opinion

We have audited the consolidated financial statements – comprising the income statement, statement of comprehensive income, statement of finan-cial positions, statement of changes in equity, cash flow statement and notes to the consolidated financial statements – and the Group management report for the fiscal year January 1 to December 31, 2014, as prepared by Schuler Aktiengesellschaft, Göppingen, Germany. The preparation and content of the consolidated financial statements and Group management report according to IFRS, as applied in the EU, and the supplementary commercial law regu-lations of § 315a (1) German Commercial Code (HGB) are the responsibility of the company’s Board of Management. Our responsibility is to express an opinion on these consolidated financial statements and Group management report based on our audits.

We conducted our audits pursuant to § 317 HGB in accordance with generally accepted auditing standards established by the German Institute of Certified Public Accountants (IDW). Those standards require that we plan and perform the audit to obtain reasonable assurance that inaccuracies and violations which significantly affect the presentation of the net assets, financial position and results of operations as conveyed by the financial statements, in compliance with the applicable accounting standards, and by the Group management report are recognized with reasonable assurance. In planning the audit, we also take into consideration knowledge of the business activity, economic and legal environment as well as expectations of possible errors. An audit of the consolidated financial statements includes examining the efficacy of the internal controlling system as well as evidence, on a test basis, supporting the amounts and disclosures in the consolidated financial statements and consolidated management report. The audit also includes re-

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viewing the scope of companies included in consolidation, the definition of the consolidation group, assessing the accounting, valuation and consolidation principles used and significant estimates made by the Board of Management, as well as evaluating the overall presentation of the consolidated financial statements and consolidated management report. We believe that our audits provide a reasonable basis for our opinion.

Our audits did not give rise to objections.

In our opinion, the consolidated financial statements comply with IFRS, as applied in the EU, and the supplementary commercial law regulations of § 315a (1) German Commercial Code (HGB) and give a true and fair view of the Group’s net assets, financial position, results of operations and cash flows for the fiscal year. On the whole, the Group management report corresponds to the consolidated financial statements and provides a suitable understan-ding of the Group’s position and suitably presents the opportunities and risks to future development.

Stuttgart, February 16, 2015

KPMG AGWirtschaftsprüfungsgesellschaft

PhilippAuditor

WirthAuditor

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Financial Glossary

CASH FLOW — Indicator of a company’s financial strength. Cash flow shows the amount of cash gener-ated by a company. Cash flow is calculated by adjusting net profit to account for those items which have no impact on cash, such as depreciation or changes in provisions.

EBIT / EARNINGS BEFORE INTEREST AND TAXES — EBIT is the company’s operating result before interest and taxes. EBIT is often used in international comparisons of companies as it reflects the operating result without any consideration of tax or interest effects.

EBIT MARGIN — The EBIT margin shows the ratio between the absolute EBIT result and sales revenues of the period.

EBITDA / EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION — EBITDA is the operating result before consideration of interest, taxes, depreciation and amortization. It represents the pure operating result without any distortion from tax, depreciation or interest effects and is one of Schuler’s most important key performance indicators.

EBITDA MARGIN — The EBITDA margin is the ratio between EBITDA and sales and expresses the operating profitability of a company.

EBITA EARNINGS BEFORE INTEREST, TAXES AND AM ORTIZATION — EBITA stands for operating earnings before interest, taxes and amortization of intangible assets from company acquisitions.

EBITA MARGIN — The EBITA margin is the ratio between EBITA and sales.

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EBT / EARNINGS BEFORE TAXES — EBT expresses the result before income taxes.

EBT MARGIN — The EBT margin is the ratio of EBT to sales.

EARNINGS PER SHARE — Earnings per share is a ratio used to assess the profitability of a public company and is calculated by dividing net profit by the number of outstanding shares.

FREE CASH FLOW — Free cash flow is a company’s freely available cash flow and refers to the funds which the company can use to pay dividends or reduce debt. It is calculated by adding cash flow from operating activities and cash flow from investing activities.

NET FINANCIAL STATUS — Net financial status is the balance of financial liabilities in the balance sheet and cash and cash equivalents. If liquid funds exceed financial liabilities – shown by a positive net financial status figure – the company is de facto free of debt.

www.schulergroup.com

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Schuler AG Bahnhofstrasse 41 73033 GöppingenGermany

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