UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
AMENDMENT NO.1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 2004
----------------
LITTELFUSE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-20388 36-3795742
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification Number)
800 EAST NORTHWEST HIGHWAY
DES PLAINES, ILLINOIS 60016
(Address of principal (Zip Code)
executive offices)
(847) 824-1188
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
--------------------------------------------------------------------------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
--------------------------------------------------------------------------------
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Explanatory Note: This Amendment No. 1 to the Current Report on Form 8-K dated
May 5, 2004 is filed by the registrant to present the financial statements of
the acquired company audited in accordance with US Generally Accepted Auditing
Standards. The financial statements previously reported were audited in
accordance with German Generally Accepted Auditing Standards. Below are the
consolidated financial statements of Heinrich Industrie AG as of and for the
year ended December 31, 2003 as so audited.
PWC WESTDEUTSCHLAND AG
WIRTSCHAFTSPRUFUNGSGESELLSCHAFT
REPORT OF INDEPENDENT AUDITORS
TO
THE BOARD OF DIRECTORS
HEINRICH INDUSTRIE AG
ANNENSTRA(BETA)E 113
58453 WITTEN
We have audited the accompanying consolidated balance sheet of HEINRICH
INDUSTRIE AG and its subsidiaries as of December 31, 2003, and the related
consolidated statement of income, for the period from January 1, 2003 to
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HEINRICH INDUSTRIE
AG and its subsidiaries at December 31, 2003, and the results of their
operations for the period from January 1, 2003 to December 31, 2003 in
conformity with accounting principles generally accepted in Germany.
Essen, April 18, 2005
PwC Westdeutschland AG
Wirtschaftsprufungsgesellschaft
/s/ Schwarzhof /s/ Poeppelmeyer
(Wirtschaftspruefer) (Wirtschaftspruefer)
[German Public Auditor] [German Public Auditor]
HEINRICH INDUSTRIE AG
Consolidated Balance Sheet
UNAUDITED
12/31/2003 12/31/2002
ASSETS (EURO) (EURO) K(EURO)
--------------------------------------------------------- ---------- ---------- ----------
FIXED ASSETS
Intangible assets
Concessions, industrial property and similar rights and
assets, and licenses in such rights and assets 3,020,520 1,373
Goodwill 37,339 77
Prepayments 33,282 549
---------- ------
3,091,141 1,999
---------- ------
Tangible assets
Land, similar rights and buildings including
buildings on leasehold land 1,762,953 1,884
Technical equipment and machinery 9,105,241 9,631
Other equipment, factory and office equipment 2,085,690 2,222
Prepayments and constructions in process 688,758 917
---------- ------
13,642,642 14,654
---------- ------
Financial assets
Shares in affiliated companies 13,422 13
Participating interests 5,520,854 5,111
Securities 0 0
Other loans 8,110 10
---------- ------
5,542,386 5,134
---------- ------
22,276,169 21,787
------
CURRENT ASSETS
Inventories
Raw materials and supplies 3,718,340 4,830
Work in process 4,899,157 3,984
Finished goods and merchandise 6,030,550 6,648
The accompanying notes are an integral part of the financial statements
3
Prepayments 4,971 1
---------- ------
14,653,018 15,463
---------- ------
Receivables and other assets
Trade receivables 9,656,807 9,627
Receivables from affiliated companies 423 0
Receivables from companies in which the company
has a participating interest 73,653 29
Other assets 1,642,151 1,981
---------- ------
11,373,034 11,637
---------- ------
Securities
Other securities 632 2
Cash in hand, bank balances 12,449,362 12,511
---------- ------
38,476,046 39,613
------
PREPAID EXPENSES AND DEFERRED CHARGES 36,198 37
---------- ------
60,788,413 61,437
---------- ------
UNAUDITED
12/31/2003 12/31/2002
EQUITY AND LIABILITIES (EURO) (EURO) K(EURO)
---------------------------------------------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY
Subscribed capital 10,400,000 10,400
Capital reserve 10,992,775 10,993
Earning reserves
Other earnings reserves 11,215,948 10,179
Net income shown in balance sheet 1,100,000 1,100
Balancing item for minority interest 330,843 404
---------- ------
34,039,566 33,076
------
SPECIAL RESERVES
The accompanying notes are an integral part of the financial statements
4
Special account with reserve characteristics 0 4,705
Other Special account for investment subsidies 0 417
0 5,122
---------- ------
ACCRUALS
Accruals for pensions and similar obligations 8,033,329 7,954
Accruals for former coal-mining 3,529,684 3,595
Tax accruals 923,544 102
Other accruals 8,912,355 5,338
---------- ------
21,398,912 16,989
------
LIABILITIES
Bank loans and overdrafts 1,139,462 733
Customer advances 16,442 1
Trade payables 1,910,285 2,656
Payables to affiliated companies 15,195 15
Payable to companies in which the company has
a participating interest 724 56
Other liabilities 2,263,890 2,782
---------- ------
5,345,998 6,243
------
DEFERRED INCOME 3,937 7
---------- ------
60,788,413 61,437
---------- ------
The accompanying notes are an integral part of the financial statements
5
HEINRICH INDUSTRIE AG
Consolidated Income statement
UNAUDITED
2003 2002
(EURO) (EURO) K(EURO)
----------- ----------- ---------
Sales 82,839,775 82,362
Increase or decrease in finished goods
and work in process 380,679 -344
Other own work capitalized 303,643 279
Other operating income 7,213,781 4,292
Cost of materials:
Cost of raw materials, supplies and merchandise -28,658,241 -26,604
Cost of purchased services -1,137,408 -1,132
----------- -------
-29,795,649 -27,736
Personnel expenses:
Wages and salaries -31,032,054 -29,699
Social security, pensions and other benefits -6,105,379 -6,076
----------- -------
-37,137,433 -35,775
Amortization and depreciation -5,222,134 -6,720
Other operating expenses -16,857,416 -16,261
Income from participating interests 30,002 124
Income from other long-term securities and
Loans 1,591 2
Other interest and similar income 231,194 286
Interest and similar expenses -51,560 -60
----------- -------
Net operating income 1,936,473 449
Tax on income -292,504 -114
----------- -------
Net income for the year 1,643,969 335
Minority interests in loss/profit 1,482 -17
----------- -------
1,645,451 318
6
Unappropriated retained earnings brought forward 0 7
Transfer from other earnings reserves 0 775
Transfer to other earnings reserves -545,451 0
----------- -------
Net income shown in balance sheet 1,100,000 1,100
----------- ----------- -------
The accompanying notes are an integral part of the financial statements
7
NOTES TO FINANCIAL STATEMENTS OF HEINRICH INDUSTRIE GROUP FOR 2003
The Group financial statements of HEINRICH INDUSTRIE AG are prepared in
accordance with the requirements of the German commercial code relating to
capital companies.
1. CONSOLIDATED GROUP
HEINRICH INDUSTRIE AG is the holding company for the Wickmann Group of circuit
protection products, which has three business units: electronic, automotive and
electrical. Littelfuse operates HEINRICH in such business units subsequent to
the acquisition.
In addition to the financial statements of HEINRICH INDUSTRIE, the group
statements for 2003 contain the individual statements of 6 (previous year 6)
domestic and 7 (previous year 8) foreign companies.
The EFEN-Vertriebs GmbH, Salzburg/Austria, was liquidated in the business year
2003. The deletion from the company register was made on July 4, 2003. The
de-consolidation of the company took place at the start of the year.
The following companies
- Motherson PUDENZ WICKMANN Ltd., New Delhi, India
- Hinnenberg Beteiligungsgesellschaft mbH i.L., Essen
- Switchgear Systems Ltd., Rugby/ Warwickshire, Great Britain
have not been included in the group statement in accordance with Section 296
Para. 2 HGB and Section 311 Para. 2 HGB due to the minor importance of the
companies to the asset, financial and revenue situation of the group.
The companies included in the group statements are listed under Point 7. The
business year of all companies included is the calendar year.
2. CONSOLIDATION PRINCIPLES
The balance sheets of HEINRICH INDUSTRIE and the subsidiary companies included
in the statements are consolidated in the group statements. The asset and
liability items have been used instead of the shareholding book values, at the
values used in the balance sheets of the individual companies as at December 31,
2003.
For capital consolidation the purchase method is applied by eliminating the
purchase price of the participating interests acquired against the company's
share in net assets of these companies. Any resulting goodwill is recognized in
the earning reserves at the time of initial consolidation, any negative goodwill
is added to the earning reserves.
Loans and other receivables, liabilities, revenue as well as income and expenses
incurred on intercompany transactions and any resulting intercompany profit are
eliminated. For consolidation procedures affecting net income, deferred taxes
have been recorded.
3. CURRENCY TRANSLATION
The balance sheets of the subsidiaries that are compiled in a foreign currency
have been translated and included in the group statements as follows:
- The translation of the shareholders' equity and the ASSET AND LIABILITY
ITEMS of the balance sheets has been made uniformly at the exchange rate
prevailing on the balance sheet date.
- Items of the INCOME STATEMENT have been translated at the average exchange
rate over the business year.
- The balance of exchange rate differences has been recognized in the
earning reserves of the group balance sheet, not affecting the result.
Currency translation differences resulting from the consolidation of
intercompany income and expense are included in the income statement.
4. ACCOUNTING AND VALUATION PRINCIPLES
The annual statements of the individual companies have been compiled in
accordance with legal requirements and the applicable balance sheet and
valuation methods of HEINRICH INDUSTRIE.
The INTANGIBLE ASSETS are shown at purchase price, less scheduled linear
amortization and impairments.
The FIXED ASSETS have been valued at purchase price or cost of production, less
scheduled depreciation according to use and impairments. The impairments
8
consist of impairment adjustments to the lower fair value and special tax
depreciation.
Scheduled depreciation has been applied linearly or declining at the maximum
rates permitted by tax regulations. In the case of movable assets, depreciation
is generally applied declining at first, with a transition to linear
depreciation as soon as this leads to higher depreciation amounts. The
depreciation is based on a useful life of up to 50 years for buildings, and 3 to
13 years for technical equipment and machinery, other plant, operating and
business equipment. Low-value goods are written off completely in the year of
acquisition.
The SHARES IN AFFILIATED COMPANIES of HEINRICH INDUSTRIE have been valued at
purchase price, and where applicable less impairments in accordance with Section
3 of the law governing tax measures for the closure of coal mines.
The PARTICIPATING INTERESTS are shown at their purchase price.
Interest-bearing LOANS are shown at the nominal value. Where allowed by tax
regulations, loans granted interest-free up to 1954 have been fully adjusted in
value. Other interest-free loans have been valued at the cash value, taking into
account an interest rate of 5.5% p.a.
In the case of INVENTORIES, raw materials and operating materials and goods have
been valued at their purchase price. Unfinished and finished goods have been
valued at cost of production or the lower fair market value. In addition to
material and individual production costs, the manufacturing costs also include
general material and production costs and depreciation. The lower of cost or
market principle has been applied. Sufficient reductions in value have been
recorded to account for risks resulting from the duration of storage or reduced
realizability. In accordance with applicable tax regulations, the valuation of
stocks has generally been made according to the "LIFO" method.
RECEIVABLES AND OTHER ASSETS have been valued at the nominal value, with
individual adjustments made to take account of discernible risks. The general
credit risk has been taken into account by means of a general reserve.
Receivables in foreign currency are shown at the exchange rate prevailing at the
time of the transaction or on the balance sheet date, whichever is the lower.
The PENSION ACCRUALS have been calculated according to the guideline tables of
Dr. Klaus Heubeck of 1998 on the basis of an interest rate of 6%. The
calculation has been made in accordance with Section 6a EStG.
The ACCRUALS FOR FORMER COAL-MINING have been calculated in accordance with the
agreements made with the financial administration at the cash value of the costs
to be anticipated for the future, or in the case of long-term damage at 20-times
the average annual cost.
The TAX AND OTHER ACCRUALS take into account all discernible risks and uncertain
liabilities.
The LIABILITIES are listed at their repayment amounts. Liabilities in foreign
currency are shown at the exchange rate prevailing at the time of the
transaction or on the balance sheet date, whichever is the higher.
The INCOME STATEMENT has been compiled in graduated form according to the
cost-categories-oriented format.
5. EXPLANATIONS ON THE BALANCE SHEET
FIXED ASSETS
The development of the fixed assets of the group is shown in the statement of
fixed assets.
The INTANGIBLE ASSETS consist of usage rights (EDP software) and a customer base
obtained from EFEN-Polska on its foundation and from PUDENZ in connection with
the acquisition of OSWALD, and the goodwill shown on the balance sheet of
EFEN-Hungaria. EFEN includes a customer base with a book value of (euro) 1.0
Mio. due to the acquisition of the business operations of Peterreins
Schalttechnik GmbH, Schwabach.
The cumulative depreciation shown under property and buildings contains special
depreciation in accordance with Section 6b EStG. The difference between the
normal linear depreciation and this special depreciation as at December 31, 2003
is (euro) 15.3 Mio within the group. In the business year, this produced a
reduction in annual depreciation of (euro) 0.6 Mio within the group.
In the business year 2003, impairments on fixed assets in the amount of K(euro)
195 (previous year K(euro) 776) were recorded in accordance with Section 253
Para. 2 P. 3 HGB, which refers mainly to operating plant in Witten.
9
In the participating interests, the statement of fixed assets show a reduction
resulting from the sale of the participating interests in Ruhrgas AG. HEINRICH
INDUSTRIE sold its shareholding in Ruhrgas AG by means of the contract of July
2, 2002. The 158,200 shares were acquired by E.ON AG, Dusseldorf. The contract
could not however be completed in the business year 2002, since the required
consent of the general meeting of Ruhrgas AG was not given until February 17,
2003 due to the ongoing proceedings before the regional court of Dusseldorf
against the ministerial permission for the Ruhrgas take-over. WICKMANN increased
its participating interests in the POLYTRONICS Technology Corporation Ltd.,
Hsin-Chu, Taiwan, by the acquisition of 906,000 shares at a purchase price of
K(euro) 929. The POLYTRONICS Technology Corporation Ltd., is a strategic partner
of WICKMANN. The participating interests is aimed at the long-term co-operation
in the "Resettables" sector and provides the right of exclusive marketing of the
relevant products in Europe and North America with ongoing distribution revenue.
The long-term value of the participating interests valuation can be seen in the
group statements, despite the weakness of the Taiwanese Dollar.
The PROPERTY OWNED BY THE GROUP is as follows:
IMPROVED PROPERTY in ha
2003 2002
Business property 13.9 13.9
Residential property 0.1 0.1
---- ----
Total 14.0 14.0
UNIMPROVED PROPERTY in ha
2003 2002
Commercial land 2.7 2.7
Agriculture and forestry
land 16.5 16.5
---- ----
Total 19.2 19.2
---- ----
Altogether 33.2 33.2
No property was sold or acquired in the fiscal year 2003.
In addition to adjustments for inventory risk, the INVENTORIES also take into
account additional value adjustments amounting to (euro) 0.7 Mio, resulting from
the sale of erwilo on February 29, 2004 .
The TRADE RECEIVABLES, RECEIVABLES FROM AFFILIATED COMPANIES, AND RECEIVABLES
FROM COMPANIES IN WHICH THE COMPANY HAS A PARTICIPATING INTEREST have a
remaining term of less than one year.
The OTHER ASSETS consist mainly of tax credits of K(euro) 829. The group also
show receivables with a remaining term of more than one year of K(euro) 398
respectively, which result mainly from outstanding claims from re-insurance.
The SUBSCRIBED CAPITAL is (euro) 10,400,000 and is fully paid in. There are
2,000,000 single bearer stocks. Each single stock grants one vote.
In the group statements, (euro) 0.5 Mio has been placed in OTHER EARNINGS
RESERVES.
For group financial statements the earning reserves of HEINRICH INDUSTRIE AG
(K(euro) 10,199) were adjusted as follows to arrive at K(euro) 11,216 as
disclosed in the group financial statements:
- Reallocation of the special account with a reserve characteristics from
individual balance sheets in the amount of (euro) 1.3 Mio in accordance
with the abolition of Section 308 Para. 3 HGB in conjunction with the
transparency and publicity law of July 19, 2002
- Earning reserves of subsidiary companies after initial consolidation of
(euro) 0.7 Mio
- Adjustment items from currency conversion shareholders' equity of
consolidated companies of (euro) - 0.5 Mio
- Adjustment items from consolidations affecting the results of (euro) - 0.5
Mio.
The increase in the earning reserves of the group over the previous year by
(euro) 1.0 Mio results from the reallocation of special account of (euro) 1.3
Mio, an adjustment to the currency adjustment item of (euro) - 0.8 Mio and a
transfer to group reserves of (euro) 0.5 Mio.
The BALANCE SHEET ITEM FOR MINORITY INTERESTS amounts to (euro) 0.3 Mio. This
refers to the interest of other shareholders in the equity of the companies
EFEN-Hungaria with (euro) 0.2 Mio and EFEN-Polska with (euro) 0.1 Mio.
The SPECIAL ACCOUNT WITH RESERVE CHARACTERISTICS in the amount of (euro) 2.2 Mio
has been transferred in the group statements on the balance sheet date into the
profit reserves in the amount of (euro) 1.3 Mio in accordance with the abolition
of Section 308 Para. 3 HGB after deduction of deferred taxes of (euro) 0.9 Mio.
The previously recognized SPECIAL ACCOUNT FOR INVESTMENT SUBSIDIES TO FIXED
ASSETS from WICKMANN has been transferred to other accruals based on the
existing risk of repayment.
10
The ACCRUALS FOR PENSIONS AND SIMILAR OBLIGATIONS include around K(euro) 525 in
mining commitments (pension and payment in kind commitments).
The ACCRUALS FOR FORMER COAL-MINING have been calculated in accordance with the
agreements made with the financial administration at the cash value of the costs
to be anticipated for the future, or in the case of long-term damage at 20-times
the average annual cost.
The TAX ACCRUALS within the group have been recognized mainly for deferred taxes
and withholding taxes.
The OTHER ACCRUALS within the group relate principally to commitments in
connection with personnel costs, warranty obligations, annual financial
statements costs, and outstanding invoices.
The increase of the other accruals within the group as compared to the previous
year of (euro) 3.6 Mio is relating to (euro) 1.6 Mio from social security and
compensation accruals for restructuring measures, accruals for the potential
repayment obligation of an investment subsidy of (euro) 1.0 Mio, and a loss
contingency resulting from the sale of erwilo in the amount of (euro) 0.5 Mio.
The accruals for general personnel costs have been increased by (euro) 0.3 Mio,
and those for outstanding maintenance and process costs by (euro) 0.1 Mio each.
11
LIABILITIES
GROUP
DEC. 31, 2003 DEC. 31, 2002 *)
K(EURO) K(EURO)
------------- ----------------
Bank loans and overdrafts 1,139 733
Customer advances 17 1
Trade payables 1,910 2,656
Payables to affiliated companies 15 15
Payables to companies in which the
company has a participating interest 1 56
Other liabilities 2,264 2,782
Of
which taxes (527) (602)
which social security payables (751) (763)
----- -----
5,346 6,243
----- -----
*) unaudited
With the exception of the liabilities in favour of banks, the liabilities of the
group all have a remaining period of less than one year.
The liabilities in favour of banks within the group relate to loans by Dongguan
WICKMANN and Dongguan EFEN in order to cover exchange rate risks.
CONTINGENCIES AND OTHER FINANCIAL OBLIGATIONS
LIABILITIES FROM EXTENDED CREDIT ORDERS exist for the group in the amount of
K(euro) 1,510, all of which have been granted to the subsidiaries of HEINRICH
INDUSTRIE. OTHER FINANCIAL OBLIGATIONS exist in the form of EDP service
contracts amounting to K(euro) 819, which are due to HEINRICH INDUSTRIE AG.
12
6. EXPLANATIONS ON THE PROFIT AND LOSS ACCOUNT
The GROUP TURNOVER by region is made up as follows:
REST OF OTHER
GERMANY EU-TERRITORY EUROPE ASIA COUNTRIES TOTAL
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
SALES in Mio (euro) *) *) *) *) *) *)
------------------- ---- ---- ---- ---- --- ---- ---- ---- ---- ---- ---- ----
WICKMANN Group 28.3 28.3 13.8 13.8 9.1 8.3 14.8 17.2 6.6 5.0 72.6 72.6
In % of total 39 39 19 19 13 11 20 24 9 7 100 100
Erwilo 9.2 8.9 0.5 0.5 0.1 0 0 0 0 0 9.8 9.4
In % of total 94 94 5 6 1 0 0 0 0 0 100 100
HEINRICH
INDUSTRIE (1) 0.4 0.4 0 0 0 0 0 0 0 0 0.4 0.4
In % of total 100 100 0 0 0 0 0 0 0 0 100 100
---- ---- ---- ---- --- ---- ---- ---- ---- ---- ---- ----
Group 37.9 37.6 14.3 14.3 9.2 8.3 14.8 17.2 6.6 5.0 82.8 82.4
In % of total 46 46 17 17 11 10 18 21 8 6 100 100
*) unaudited
(1) including H.I. BETEILIGUNGEN, H.I. IMMOBILIEN and consolidation
GROUP GROUP
2003 2002 *)
OTHER OPERATING INCOME K(EURO) K(EURO)
----------------------------------------------- ------- -------
Income from the retirement of
Fixed assets 3,491 1,555
Income from release of special account
with reserve characteristics in accordance with
German tax law (Section 6b EStG) 2,499 586
Income from release of other account for
Investment subsidies 0 283
Rest of other operating income 1,224 1,868
----- -----
Sum 7,214 4,292
----- -----
*) unaudited
The income from the sale of fixed assets of (euro) 3.5 Mio results principally
from the sale of the participating interests in Ruhrgas AG.
In the business year 2003, in the SOCIAL SECURITY CONTRIBUTIONS AND COSTS FOR
RETIREMENT PROVISION AND SUPPORT RETIREMENT PROVISION K(euro) 765 (previous year
unaudited: K(euro) 726) relate to pension cost.
13
GROUP GROUP
2003 2002 *)
OTHER OPERATING INCOME K(EURO) K(EURO)
----------------------------------------------------- ------- -------
Expenses from additions to special accounts with
reserve characteristics in accordance with Section 6b
EStG 0 14
Losses from disposal of fixed assets 90 38
Mining damages 40 1,430
Other taxes 152 276
Rest of other operating expenses 16,575 14,503
------ ------
Sum 16,857 16,261
------ ------
*) unaudited
The other operating costs include administration costs, allocations to accruals
and also sales and maintenance costs.
The TAXES ON INCOME include current tax liabilities of K(euro) 31 and
liabilities from previous years of K(euro) 14. The current tax liabilities
appear relatively low in comparison to the result from normal business
activities; this is mainly due to the tax-exempt sale of the participating
interests in Ruhrgas AG and the receipt of dividends from foreign subsidiaries.
In the group income statement, the current taxes on income were increased by
K(euro) 29 of deferred taxes (previous year unaudited: decrease by K(euro) 16).
The following income and expenses of items of the income statement result from
affiliated companies:
GROUP
2003 2002 *)
K(EURO) K(EURO)
------ -------
Income from participating interests 0 0
Other interest and similar income 0 0
Interest and similar expenses 1 1
*) unaudited
14
7. OTHER INFORMATION
CONSOLIDATED AFFILIATED COMPANIES
SHAREHOLDING PROFIT AND
SUBSCRIBED TRANSLATION DEC. 31, 2003 LOSS TRANSFER
CAPITAL IN (EURO) % IN COMPANY AGREEMENT
----------- ----------- --- ------------- --------------
1. Heinrich Industrie AG, Essen, Germany (euro) 10,400,000
2. H.I. BETEILIGUNGEN GmbH,
Essen, Germany (euro) 26,000 100 1. 1.
3. WICKMANN-Werke GmbH, Witten, Germany (euro) 15,000,000 100 2. 2.
4. Wickmann Components (UK) Ltd.,
Redditch/Worcestershire,
Great Britain GBP 30,000 42,475 100 3.
5. Wickmann USA, Inc.,
Atlanta/Georgia, USA USD 1,000,000 793,210 100 3.
6. Wickmann Asia Ltd.,
Hong Kong, China HKD 2,500,000 255,389 100 1.;3.
7. Dongguan Wickmann
Electrical Products Co., Ltd.,
Chang Ping, China HKD 16,800,000 1,748,628 100 3.
8. EFEN GmbH, Eltville, Germany (euro) 4,000,000 100 2. 2.
9. EFEN Kaposvar Hungaria Kft.,
Kaposvar, Hungaria HUF 150,000,000 572,268 80 8.
10. EFEN Polska Sp. z o.o.,
Siemianowice Slaskie, Poland PLN 2,200,000 465,559 75 8.
11. Dongguan EFEN Electrical Products
Co., Ltd., Chang Ping, China USD 489,600 377,302 100 8.
12. Wilhelm PUDENZ GmbH, Dunsen, Germany (euro) 5,300,100 100 2. 2.
13. H.I. IMMOBILIEN MANAGEMENT
GMBH, Essen, Germany DM 800,000 409,033 100 1. 1.
14. erwilo Sonnenschutz GmbH,
Bochum, Germany DM 7,700,000 3,936,947 100 1. 1.
15
NON-CONSOLIDATED AFFILIATED COMPANIES
SHAREHOLDING
SUBSCRIBED TRANSLATION DEC. 31, 2003
CAPITAL IN (EURO) % IN COMPANY
---------- ----------- --- -------------
15. Motherson pudenz Wickmann Ltd.,
New Delhi, India RPS 25,000,000 508,000 43.87 3.;12.
16. Hinnenberg Beteiligungsgesellschaft mbH
i.L., Essen, Germany DM 52,000 26,587 100 14.
PARTICIPATING INTERESTS
SHAREHOLDING
SUBSCRIBED TRANSLATION DEC. 31, 2003
CAPITAL IN (EURO) % IN COMPANY
---------- ----------- ---- --------------
17. POLYTRONICS Technology Corporation Ltd.,
Hsin-Chu, Taiwan TWD 401,542,000 9,419,942 8.94 3.
18. Switchgear Systems Ltd., Rugby/
Warwickshire, Great Britain GBP 27,027 38,266 26 8.
The complete listing of the share ownership of HEINRICH INDUSTRIE and the group
is deposited with the Companies Register of the District Court of Essen under
HRB 1297.
As companies incorporated in the group financial statements of HEINRICH
INDUSTRIE, and in accordance with the elective right of Section 264 Para. 3 HGB,
the companies H.I. BETEILIGUNGEN GmbH, WICKMANN-Werke GmbH, EFEN GmbH, Wilhelm
PUDENZ GmbH, H.I. IMMOBILIEN MANAGEMENT GMBH and erwilo Sonnenschutz GmbH have
foregone the disclosure of their annual financial statements and management
reports.
16
STATEMENT OF CHANGES IN EQUITY
HEINRICH INDUSTRIE GROUP
Subscribed Capital
Capital Contribution Own
------------------- not Equity shares
Prefer- yet earned held for
Ordinary ence called Capital by the redemp-
shares shares up reserves group tion
(euro) (euro) (euro) (euro) (euro) (euro)
---------- ------- ------------ ---------- ---------- --------
Balance at Dec. 31, 2002 10,400,000 0 0 10,992,775 11,030,436 0
---------- -- -- ---------- ---------- --
Proceeds from issue of shares
Acquisitions/redemption of own shares
Dividends paid -1,100,000
Changes in reporting entity
Other changes -47,896
----------
Group net profit or loss for the year 1,645,451
Other gains and losses recognised
directly in equity
----------
Total recognised results for the group 1,645,451
---------- -- -- ---------- ---------- --
Balance at Dec. 31, 2003 10,400,000 0 0 10,992,775 11,527,991 0
========== == == ========== ========== ==
HEINRICH INDUSTRIE GROUP
Accumulated other gains
and losses recognised
directly in equity Equity as
----------------------------------- Disclosed in Own
Translation/ consolidation shares not
exchange Other balance held for
differences items Sheet redemption EQUITY
(euro) (euro) (euro) (euro) (euro)
------------ --------------------- ------------- ---------- ----------
Balance at Dec. 31, 2002 248,653 0 32,671,864 0 32,671,864
-------- ------------------ ---------- -- ----------
Proceeds from issue of shares 0 0
Acquisitions/redemption of own shares 0 0
Dividends paid -1,100,000 -1,100,000
Changes in reporting entity
Other changes -797,176 1,336,480(1) 491,408 491,408
-------- ------------------ ---------- ----------
Group net profit or loss for the year 1,645,451 1,645,451
Other gains and losses recognised
directly in equity 0 0
---------- ----------
Total recognised results for the group 1,645,451 1,645,451
-------- ------------------ ---------- -- ----------
Balance at Dec. 31, 2003 -548,523 1,336,480 33,708,723 0 33,708,723
======== ================== ========== == ==========
SHARES OF OTHER MINORITY SHAREHOLDERS
Minority Accumulated other gains and
interest losses recognised directly
in capital in equity
and -------------------------------
earned Translations Other TOTAL GROUP
results differences items EQUITY EQUITY
(euro) (Euro) (euro) (euro) (euro)
---------- ------------ ------ ------- -----------
Balance at Dec. 31, 2002 403,649 0 0 403,649 33,075,513
------- -- -- ------- ----------
Proceeds from issue of shares 0
Acquisitions/redemption of own shares 0
Dividends paid -9,888 -9,888 -1,109,888
Changes in reporting entity
Other changes -61,436 -61,436 429,972
------- ------- ----------
Group net profit or loss for the year -1,482 -1,482 1,643,969
Other gains and losses recognised
directly in equity 0
------- ----------
Total recognised results for the group -1,482 -1,482 1,643,969
------- -- -- ------- ----------
Balance at Dec. 31, 2003 330,843 0 0 330,843 34,039,566
======= == == ======= ==========
(1) due to derecognition of special account with reserve characteristics as a
result of the lapse of Section 308 (3) HGB
17
SEGMENT INFORMATION
RESULT FROM
ORDERS RECEIVED SALES ORDINARY OPERATIONS
2003 2002 *) 2003 2002 *) 2003 2002 *)
K(EURO) K(EURO) K(EURO) K(EURO) K(EURO) K(EURO)
------- ------- ------- ------- ------- -------
WICKMANN Group 73,809 70,413 72,624 72,576 -49(1) 1,892
Erwilo 9,853 9,317 9,843 9,418 -2,155 -520
HEINRICH INDUSTRIE, H.I.
BETEILIGUNGEN,
H.I. IMMOBILIEN and
Consolidation 373 368 373 368 4,141 -923
------ ------ ------ ------ ----- ----
Group 84,035 80,098 82,840 82,362 1,937 449
------ ------ ------ ------ ----- ----
*) unaudited
(1) including interest and similar income relating to organizational structure
project in 2002
CAPITAL INVESTMENT (2) DEPRECIATION
2003 2002 *) 2003 2002 *) EMPLOYEES
K(EURO) K(EURO) K(EURO) K(EURO) 2003 2002 *)
------- ------- ------- ------- ---- -------
WICKMANN Group 6,494 4,629 5,058 6,509 909 880
erwilo 160 55 120 149 69 79
HEINRICH INDUSTRIE, H.I.
BETEILIGUNGEN,
H.I. IMMOBILIEN and
consolidation 153 68 44 62 17(3) 16(3)
----- ----- ----- ----- --- ---
Group 6,807 4,752 5,222 6,720 995(4) 975(4)
----- ----- ----- ----- --- ---
*) unaudited
(2) inclusive of financial assets
(3) exclusive white-collar worker of HEINRICH INDUSTRIE
(4) blue-collar worker 633 (previous year unaudited: 607), white collar worker
362 (previous year unaudited: 368), domestic 715 (previous year unaudited: 735),
foreign countries 280 (previous year unaudited: 240)
INTEREST INCOME INTEREST EXPENSES GROSS ASSETS (5) GROSS DEBTS (6)
2003 2002 *) 2003 2002*) 2003 2002 *) 2003 2002 *)
K(EURO) K(EURO) K(EURO) K(EURO) K(EURO) K(EURO) K(EURO) K(EURO)
------- ------- ------- ------- ------- ------- ------- -------
WICKMANN Group 1,303(1) 20 816 888 60,463 57,678 22,768 19,321
erwilo 26 97 0 1 5,855 5,566 1,918 1,629
HEINRICH INDUSTRIE,
H.I. BETEILIGUNGEN,
H.I. IMMOBILIEN and
consolidation -1,096 169 -764 -829 -5,530 -1,807 2,063 4,851
------ --- ---- ---- ------ ------ ------ ------
Group 233 286 52 60 60,788 61,437 26,749 25,801
------ --- ---- ---- ------ ------ ------ ------
*) unaudited
(5) Balance sheet total
(6) Balance sheet total less Shareholder's Equity and 50% Special reserves
18
ASSESSMENT OF HEINRICH INDUSTRIE AG ON THE GERMAN CORPORATE GOVERNANCE CODEX
The conformity declarations with restrictions in accordance with Section 161
AktG have been made by the Executive Board and Supervisory Board of HEINRICH
INDUSTRIE, published on its Internet homepage on December 19, 2003, and made
available to the shareholders. The assessment is contained in the management
report.
CASH FLOW STATEMENT FOR THE GROUP
UNAUDITED
2003 2002
K(EURO) K(EURO)
------- -------
Net income for the year 1,644 335
Write downs on non-current
Assets 5,222 6,720
Change of non-current provisions -2 858
Change of special account with
reserve characteristics -2,499 -854
Deferred taxes expenses/-income 29 -16
Other cash income 1,200 -89
------ ------
CASH-FLOWS 5,594 6,954
Adjusted cash income from
special effects -3,356 -1,471
CASH-FLOWS TO DVFA/SG 2,238 5,483
Change of current accruals 2,597 -331
Profit on disposals of property,
plant and equipment -44 -46
Increase of inventories, trade
receiveables, an other assets 376 822
Decrease of accounts payable and
other equity and liabilities -1,307 -298
------ ------
CASH-FLOWS FROM OPERATING
ACTIVITIES 3,860 5,630
Proceeds from disposals of
property, plant, and equipment 171 1,668
Purchase of property, plant, and
equipment -4,182 -4,306
Purchase of intangible assets -1,667 -445
Proceeds on disposals of
non-current financial assets 3,953 37
Acquisition of non-current
financial assets -958 -1
------ ------
CASH-FLOWS FROM INVESTING
ACTIVITIES -2,683 -3,047
Cash payments to shareholders -1,100 -1,500
Cash payments to minority
shareholder -10 -45
Cash proceeds from issuing
loans 535 0
------ ------
CASH-FLOWS FROM FINANCING
ACTIVITIES -575 -1,545
Change in cash funds from cash
relevant transactions 602 1,038
Change in cash funds from
exchange rate movements,
changes in
19
group structure, and in valuation
procedures for cash funds -664 -641
Cash funds at the beginning
of period 12,511 12,114
------ ------
CASH FUNDS AT THE END OF PERIOD 12,449 12,511
====== ======
PARTICIPATING INTERESTS IN HEINRICH INDUSTRIE AG
Wilh. Werhahn KG, Neuss, has a 50.827% participating interests in the subscribed
capital of our company via the Markische Bau-Union GmbH, Potsdam. The firm of
RWE Aktiengesellschaft, Essen, has a 31.553% participating interests via the
Harpen Aktiengesellschaft, Dortmund, the latter via the firm of VEW Umwelt GmbH,
Dortmund.
The group financial statements of HEINRICH INDUSTRIE are incorporated in the
group statements of Wilh. Werhahn KG, Neuss. Our group financial statements are
deposited with the District Court of Essen under HRB 1297.
ORGANS OF THE COMPANY
The members of the Supervisory Board and the Executive Board of HEINRICH
INDUSTRIE are listed on Page 3 of the business report. They carry out the
following tasks of the Supervisory Board and other responsibilities:
SUPERVISORY BOARD
a) Membership of legally required supervisory boards
b) Membership of comparable domestic and foreign control committees
In the event of subsequent stipulations within the reporting period, the
relevant mandate is also listed both for the predecessor and successor.
WILHELM WERHAHN, Neuss
to February 28, 2003
Chairman to February 28, 2003
Member of the Board of Wilh. Werhahn KG, Neuss, to January 31, 2003
a) - Gesellschaft fur Buchdruckerei AG,
Neuss, Chairman
- RWE-DEA Aktiengesellschaft fur Mi-
neraloel and Chemie, Hamburg
- Zwilling J. A. Henckels AG, Solingen,
Vice-chairman to January 31, 2003
- RWE Power AG, Essen,
to February 21, 2003
b) - Administrative Council of Wilh. Werhahn
KG, Neuss
- Neusser Zeitungsverlag GmbH,
Neuss, Chairman
- ISR Internationale Schule am Rhein
in Neuss GmbH, Neuss
20
DR. NORBERT WIEMERS, Dusseldorf
Chairman from March 21, 2003
Board spokesman of Wilh. Werhahn KG, Neuss
a) - RWE Power AG, Essen,
from February 21, 2003
- Basalt-Actien-Gesellschaft, Linz
- Zwilling J. A. Henckels AG,
Solingen, from February 1, 2003
b) - D. A. Stuart Company, Warrenville,
Illinois/USA, Chairman of the Board
PROF. DR.-ING. ROLF WINDMOLLER,
Ennepetal
Vice-chairman
Member of the Board of RWE Net AG, Dortmund, to September 30, 2003
a) - AVU Aktiengesellschaft fur Versor-
gungsunternehmen, Gevelsberg
- E.ON Engineering GmbH, Gelsen-
kirchen
- OSRAM GmbH, Munchen
- SAG Netz- and Energietechnik
GmbH, Langen
- LEW Lechwerke AG, Augsburg,
to September 30, 2003
- Pfalzwerke AG, Ludwigshafen,
to September 30, 2003
- DEW Dortmunder Energie- und
Wasserversorgung GmbH,
Dortmund, to September 30, 2003
DR. HEINZ BLUMMERS, Essen
to May 6, 2003
Board of the Anita-Thyssen-Stiftung,
Managing Director of Thyssen Vermogensverwaltung GmbH, Dusseldorf, former
Chairman of the Board of HEINRICH INDUSTRIE AG, Essen
a) - Wanderer-Werke AG, Augsburg,
to July 9, 2003
JURGEN PEDDINGHAUS, Hamburg
from May 6, 2003
company consultant
a) - Faber-Castell AG, Stein,
Chairman
- Jungheinrich AG, Hamburg
- Kuhlhaus Zentrum AG,
Hamburg, Chairman
- Schwarz Pharma AG, Monheim
- Zwilling J. A. Henckels AG, Solingen
b) - MAY Holding GmbH & Co. KG,
Erftstadt, Chairman
21
- Severin Elektrogerate GmbH,
Sundern, Council Member
- Norddeutsche Private Equity,
Hamburg, Council Member
DR. MICHAEL WERHAHN, Neuss
from May 6, 2003
Member of the Board of Wilh. Werhahn KG, Neuss
a) - Ontos Lebensversicherung AG,
Neuss
- Ontos Versicherung AG, Neuss
- Rheinland Holding AG, Neuss, Vice-
chairman
- Rheinland Versicherungs AG, Neuss,
Vice-chairman
- Rheinland Lebensversicherung AG,
Neuss, Vice-chairman
b) - ABC-Leasing GmbH, Koln
- Stadtwerke Neuss GmbH, Neuss
- Stadtwerke Neuss Energie und
Wasser GmbH, Neuss
- D. A. Stuart Company, Warrenvillle,
Illinois/USA, Chairman to
November 4, 2003
- Dresdner Bank AG, Dusseldorf,
Council Member
- Gothaer Ruckversicherung AG, Koln,
Council Member
- MBU Vermogens- and Beteiligungs-
verwaltung GmbH & Co. KG,
Chairman of the Council
- MBU Vermogens- and Beteiligungs-
verwaltung II GmbH & Co. KG,
Chairman of the Council
- WW Vermogens- and Beteiligungs-
verwaltung GmbH & Co. KG,
Chairman of the Council
- Verbindungsstelle Landwirtschaft-
Industrie e.V., Essen, Council
Member
- Biesterfeld, Scheibler, Linssen GmbH
& Co., Hamburg, Member of
the Shareholders Committee
- Markische Bau-Union GmbH,
Potsdam, to November 14, 2003
Chairman of the Council
22
FRANZ SCHMIDT, Geisenheim (1)
Clerk
EFEN GmbH, Eltville
no further mandates
ELKE MEIER, Witten (1)
to May 6, 2003
Operator
WICKMANN-Werke GmbH, Witten
no further mandates
CLAUDIA HOLTERMANN, Witten (1)
from May 6, 2003
Operator
WICKMANN-Werke GmbH, Witten
no further mandates
(1) Employee members of the Supervisory Board
EXECUTIVE BOARD
DR. ULRICH BLANK, Essen
Chairman
no further mandates
DR. HORST HUBNER, Witten
b) - POLYTRONICS Technology
Corporation Ltd., Hsin-Chu/Taiwan,
Member of the Board
REMUNERATION OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD
The total remuneration of the Executive Board in the reporting year 2003
amounted to (euro) 605.725. A total of (euro) 179.042 was paid out in retirement
and dependent benefits for former members of the Board. (euro) 1,517,236 are
contained in the accruals for pensions and similar obligations for the above
group of people. The remuneration of the Supervisory Board amounted to (euro)
53,944.
23
PROPOSAL ON THE APPROPRIATION OF THE NET PROFIT OF HEINRICH INDUSTRIE AG
The Executive Board and Supervisory Board propose that the net income shown in
the balance sheet of the business year 2003 in the amount of (euro) 1,100,000 be
used to pay a dividend of (euro) 0.55 per share in the company capital of (euRO)
10,400,000, divided into 2,000,000 individual shares.
SUBSEQUENT EVENTS AFTER DECEMBER 31, 2003
On May 6, 2004, Littelfuse Inc., Des Plaines/USA acquired 82,4 % of the common
stock of Heinrich Industrie AG from its former two largest shareholders.
Littelfuse, Inc. initiated a tender offer for the remaining shares of the
publicly held company. Subsequent to May 6, 2004, Littelfuse purchased
additional shares of Heinrich Industrie AG stock - bringing the total ownership
to 97,2 % as of April 15, 2005.
Heinrich Industrie sold its erwilo business in February 2004.
Heinrich Industrie undertook the following reorganization and restructuring
measures in 2004:
- Further parts of the TR5(R)/TE5(R) - production lines of the
WICKMANN business were transferred from WICKMANN Witten, Germany to
Dongguan WICKMANN, China
- the reorganization program "Structure WICKMANN Group", affecting the
product lines electronic and power and the consolidation of the
accounting, controlling, purchasing and human resource functions of
the WICKMANN group was almost finalized
- WICKMANN Components (UK) Ltd. i.L., UK, was liquidated. The sales
activities are now handled via a sales office in Redditch. The
building of WICKMANN Components (UK) Ltd. was sold at a small book
gain.
- Based on a step-by-step plan the Company started to transfer the
production of the EFEN business in Schwabach, Germany to Eltville,
which affected 19 employees.
For these measures, the company incurred expenses for severance payments and
benefits in the amount of (euro) 4,8 million.
The location of the headquarters of Heinrich Industrie AG was transferred from
Essen, Germany to Witten, Germany in July 2004. The building of the headquarters
in Essen was sold at a book gain of (euro) 2.1 million.
SUMMARY OF CERTAIN DIFFERENCES BETWEEN GENERALLY ACCEPTED GERMAN AND UNITED
STATES ACCOUNTING PRINCIPLES
The consolidated financial statements of HEINRICH INDUSTRIE have been prepared
in accordance with the German Commercial Code (HGB), as well as various
additional practices, laws and regulations of the Federal Republic of Germany
(collectively German generally accepted accounting principles, "German GAAP").
German GAAP emphasizes the principle of prudence (Vorsichtsprinzip) in the
presentation of the financial statements to protect the interests of creditors.
As a result, HEINRICH INDUSTRIE's consolidated financial statements may differ
substantially from financial statements prepared in accordance with generally
accepted accounting principles in the United States ("U.S. GAAP"). HEINRICH
INDUSTRIE is not required to prepare or present financial statements in
accordance with U.S. GAAP.
The following is a summary of certain differences between German GAAP and U.S.
GAAP as of the dates of HEINRICH INDUSTRIE consolidated financial statements
that may be material. The Company is responsible for preparing the summary
below. The Company has not prepared a complete reconciliation of its
consolidated financial statements and related footnote disclosures between
German GAAP and US GAAP and has not quantified such differences. The discussion
below should not be taken as exhaustive of all differences. No attempt has been
made to identify all disclosures, presentation or classification differences
24
that would affect the manner in which transactions or events are presented in
the consolidated financial statements of HEINRICH INDUSTRIE or notes thereto.
INVESTMENT SECURITIES
Under German GAAP, Heinrich Industrie generally classifies investments in equity
securities as long term financial assets. Such securities are valued based on
the "modified lower of cost or market principle" according to which the historic
cost (the original purchase price) are subject to impairment charges only if a
permanent decline in value is expected.
Under U.S. GAAP, the investments in equity securities are classified into the
categories trading and available-for-sale. Trading and available-for-sale
securities are recorded at fair value. Changes in the fair value of
available-for-sale securities are recognized in other comprehensive income, a
separate component of equity, while changes in the fair value of trading
securities are recognized in the statement of income.
DERIVATIVE INSTRUMENTS AND HEDGE ACCOUNTING
Under German GAAP, derivative instruments and embedded derivatives are generally
accounted for as off-balance-sheet transactions and are disclosed in the notes
to the financial statements. Unrealized gains of both the derivative financial
instrument and hedged items are not recorded on the balance sheet or in the
income statement. However, any unrealised losses on derivatives are recognized
in current income.
Under U.S. GAAP (SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities"), all derivative instruments and embedded derivatives are recorded
on the balance sheet at fair value as either assets or liabilities, regardless
of any hedge relationship that might exist. Changes in the value of derivative
instruments are recognized in the income statement as they arise, unless they
satisfy criteria for hedge accounting (including designation and high
effectiveness), supported by formal documentation. The accounting treatment of
the hedging instruments as well as the hedged items depends on the type of hedge
designation (fair value hedge or cash flow hedge), the offset being in either
current income or other comprehensive income. Also depending on the hedge
designation, the carrying value of the hedged item may need to be adjusted to
offset the changes in the fair value of the hedging derivative. Any
ineffectiveness resulting from the hedge relationship is recognized in income.
ALLOWANCE FOR ACCOUNTS RECEIVABLE
Under German GAAP, allowances related to accounts receivables are stated to
reflect collection risk on a single account basis. The overall credit risk is
considered in a general lump sum allowance for doubtful accounts by taking a 3%
to 5% allowance on the gross amounts not specifically provided for.
Under U.S. GAAP, loss contingencies relating to the collectibility of accounts
receivable are only recorded when certain criteria are met. In accordance with
SFAS 5, "Accounting for Contingencies," contingencies are only recognized when
(a) information available prior to issuance of the financial statements
indicates that it is probable that an asset has been impaired at the date of the
financial statements and (b) the amount of the loss can be reasonably estimated.
General allowances for accounts receivable would require historical evidence in
order to meet the probable and reasonably estimable criteria.
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Under German GAAP, property, plant and equipment is recognized at acquisition or
manufacturing cost, as applicable, less accumulated depreciation and acquired
intangible fixed assets are recognized at acquisition cost less accumulated
amortisation. In practice, the useful live is based on schedules of asset useful
lives as provided by tax regulations. Moveable tangible assets can also be
depreciated using an accelerated depreciation method (declining balance).
U.S. GAAP requires that property, plant and equipment be carried at cost less
accumulated depreciation in accordance with the estimated economic useful life
of the asset. Accelerated depreciation methods can only be used if the actual
usage of the assets justifies that method. Intangible assets with a definite
useful life are
25
amortized over their expected useful life. Intangible assets with an indefinite
useful life and goodwill are not amortized but reviewed for impairment at least
once a year.
IMPAIRMENTS FOR LONG-LIVED ASSETS
Under German GAAP, based on the modified lower of cost or market principle, any
permanent decline in value of tangible or intangible fixed assets results in an
impairment. An impairment loss recognized in prior years has to be reversed if
the reason for impairment no longer exists.
Under US GAAP a company is required to perform an impairment analysis on its
long-lived assets if certain indicators exist. In this analysis a two-step model
is used. For tangible long-lived assets and definite-lived intangible assets the
first step is a comparison of an asset's carrying amount with the sum of
undiscounted cash flows generated by the asset. An impairment is indicated only
if the undiscounted cash flows are less then the asset's carrying amount. If an
impairment is indicated through the first step, the impairment loss is measured
in the second step as the difference between the asset's carrying value and its
fair value.
The impairment test for goodwill and indefinite-lived intangible assets requires
in step one to compare the fair value and carrying amount of a reporting unit
including goodwill. If the fair value of the reporting unit is less than its
book value, goodwill or the indefinite-lived intangible asset is considered to
be impaired. In step two, the impairment amount is measured as the excess of the
assets carrying amount over its implied fair value (i.e., fair value of the
reporting unit minus fair value of individual identifiable assets and
liabilities). U.S. GAAP does not allow the reversal of previously recorded
impairment losses.
INVENTORIES
German GAAP requires inventories to be valued at lower of cost or market. Market
value is usually defined as net realizable value or replacement cost. Further
write-downs may be made to the extent that they are necessary based on sound
business judgment to avoid valuation to change in the near future.
Under US GAAP inventories are valued at lower of cost or market. Market is
defined as current replacement cost, except that market should not exceed net
realizable value and it should not be less than the net realizable value reduced
by an allowance for an approximately normal profit margin.
MEASUREMENT OF FOREIGN CURRENCY RECEIVABLES AND LIABILITIES
Under German GAAP, unrealised losses with respect to foreign currency
receivables and liabilities are recognised in earnings, while unrealised gains
are deferred until the underlying asset or liability is settled.
Under U.S. GAAP receivables and liabilities denominated in foreign currencies
are translated at the balance sheet date rate and any unrealised gains or losses
are recognised in the income statement.
SCOPE OF CONSOLIDATION
Under German GAAP, consolidation of all significant majority-owned subsidiaries
is required. Entities in which an equity interest is held and where the investor
actually exercises significant influence over the business and financial policy
(associated companies) are valued at equity, unless they are insignificant.
Under U.S. GAAP, the determination when an entity is to be consolidated has
traditionally been determined based on a voting control model. While this model
is still applicable, new FASB Interpretation No. 46, "Consolidation of Variable
Interest Entities" ("FIN 46") has broadened the scope of consolidation to
include a risk and rewards model. Variable interest entities ("VIE's"), which
often are special purposes entities, in which a parent does not have a
controlling voting interest but the parent absorbs the majority of the VIE's
expected losses or residual returns must also be consolidated. The equity method
is generally required for investments where the parent company has more than 20%
of the voting rights or if factors indicate that significant influence exists.
Furthermore, U.S. GAAP does not provide any exemption from consolidation or
equity accounting based on significance of the investment.
26
BUSINESS COMBINATIONS AND GOODWILL
Under German GAAP, business combinations will be generally accounted under the
purchase method. When purchase accounting is applied, goodwill arising on the
acquisition of an entity can be offset directly against reserves or capitalized
and amortized over the estimated economic useful life, generally over a period
of 7 to 15 business years. Any negative goodwill is recorded as part of the
reserves within equity. Business combinations are generally accounted on the
effective date as determined in the acquisition agreement. Consolidation for
acquisitions and de-consolidation for divestures may also be accounted as of the
beginning or ending of the respective period.
Under U.S. GAAP, for all business combinations initiated after July 1, 2001,
business combinations are accounted under the purchase method. Business
combinations are generally accounted for on the date of acquisition, which is
ordinarily the date assets are received and other assets are given, liabilities
are assumed or incurred, or equity interests are issued. Furthermore, all
separately identifiable tangible and intangible assets acquired and liabilities
assumed are recorded at fair value and the excess of the cost of an acquired
entity over the fair value of net assets acquired is allocated to goodwill.
Goodwill is not amortized, but, instead, is tested for impairment annually at
the reporting unit level, or more frequently based upon facts and circumstances.
The excess of fair value of acquired net assets over cost (negative goodwill)
must be allocated on a pro-rata basis to all non-current assets other than
financial assets, prepaid pension assets and deferred taxes. Any remaining
negative goodwill is recognized as an extraordinary gain.
PENSION PROVISIONS AND PROVISIONS FOR OTHER POSTRETIREMENT BENEFITS
Under German GAAP, pension obligations are determined using actuarial
principles, whereby the ongoing and future pension obligations and benefit
obligations to retired beneficiaries are determined using a valuation benchmark
in line with tax regulations. For other postretirement benefits the general
rules for provisions apply. Increases in future salary or pension costs are not
included in the calculation of the provisions.
Under U.S. GAAP, the annual pension cost comprises the estimated cost of
benefits accruing in the period as determined in accordance with SFAS 87,
"Employers' Accounting for Pensions" which requires readjustment of the
significant actuarial assumptions annually to reflect current market and
economic conditions. Under SFAS 87, a pension asset or liability representing
the excess or deficit of plan assets over benefit obligations is recognized in
the balance sheet. The pension benefit obligation is calculated by using a
projected unit credit method, including assumptions for future salary increases.
Actuarial gains or losses outside of a 10% "corridor" have to be amortized over
future periods as a component of net pension cost. Gains and losses inside the
corridor are generally not recognized. Specific guidance exists for other
postretirement benefits.
GUARANTEES
Under German GAAP, a guarantor records an accrual and a corresponding charge to
the income statement when an enterprise has a present obligation as a result of
a past event and it is expected, based on available evidence, that payment would
have to be made to the guaranteed party.
Under U.S. GAAP, a guarantor is required to recognize, at the inception of
certain guarantees, a liability for the fair value of the obligation undertaken
in issuing the guarantee irrespective of the probability of outflows of economic
benefits. Such guarantees generally include contracts that contingently require
the guarantor to make payments to the guaranteed party based on changes in an
underlying that is an asset, a liability or an equity security of the guaranteed
party, certain third party performance guarantees and indemnification clauses in
sale or purchase agreements.
OTHER PROVISIONS
Under German GAAP, provisions are set up for uncertain liabilities and for
potential losses from pending transactions. In addition provisions for
maintenance costs to be incurred within three months after year-end have to be
recorded. For maintenance costs to be incurred later than three months after
year-end and for other internal costs provisions may be set up, if they were
caused in the current or past periods.
27
Under U.S. GAAP, a provision for a contingency is recorded when it is probable
and can be reasonably estimated. SFAS No. 5 uses the term probable to describe a
future event in which the outcome is likely to occur. Accordingly, under U.S.
GAAP, a higher recognition threshold is applied than under German GAAP.
Provisions for maintenance costs to be incurred and internal costs are not
allowed under U.S. GAAP.
ENVIRONMENTAL REMEDIATION LIABILITIES
Under German GAAP for environmental liabilities no specific guidance exists.
Provisions are valued based on best estimates; they may be discounted if the
underlying obligation contains an interest element even if the amount and timing
of the cash flows is not reliably determinable.
Under U.S. GAAP provisions for losses associated with environmental remediation
obligations are recorded when such losses are probable and reasonably estimable.
Specific guidance is available relating to the recognition and measurement of
environmental liabilities. Discounting environmental remediation liabilities is
only allowed if the aggregate amount of the obligation or components thereof and
the amount and timing of the cash payments are fixed or reliably determinable.
RESTRUCTURING COSTS
Under German GAAP, a provision for exit, disposal or other restructuring
activities is established if management decides to undertake restructuring
activities. Provisions are valued based on best estimates.
U.S. GAAP requires a liability for costs associated with an exit or disposal
activity to be recognised when the liability is incurred. This requires that a
detailed plan has been approved and communicated to the employees, significant
changes to the plan are unlikely to occur and the company has little or no
discretion to avoid payment. Under U.S. GAAP, if employees are not required to
render service until they are terminated in order to receive the termination
benefits, a liability for the termination benefits shall be recognized and
measured at its fair value at the communication date. If employees are required
to render service in order to receive the termination benefits the expense is
generally recognized over the future service period.
SPECIAL RESERVES
Under German GAAP gains on the sale of certain assets may be deferred and are
recognized in a special reserve. Such gains are recognized in income in
subsequent years based on the related depreciation expense of newly acquired
assets.
Under US GAAP gains on the sale of all assets are taken to income when they are
realized. Deferral of such gains is not permissible.
REVENUE RECOGNITION
German GAAP focuses on the transfer of economic ownership and the transfer of
the risk of loss when recognizing revenue. Revenue is generally recognized when
the goods are sold.
Under U.S. GAAP there are four key criteria that must be present in order to
recognize revenue under US GAAP. These four criteria are (a) the seller's price
to the buyer is fixed or determinable, (b) collectibility of payment is
reasonably assured, (c) there must be persuasive evidence that an arrangement
exists and (d) delivery must have occurred or services must be rendered.
Furthermore, U.S. GAAP provides specific accounting guidance regarding multiple
element arrangements.
28
DEFERRED TAXES
Under German GAAP, deferred taxes are only recognised for transactions where the
expense or the income is recognised in different periods for tax and book
purposes (timing concept). Under German GAAP, deferred taxes are not recognized
for temporary differences that are not expected to reverse in the foreseeable
future, and for temporary differences that are expected to reverse during future
periods in which net operating losses are expected to be available to offset
income taxes that would otherwise be payable. In accordance with German GAAP,
Heinrich Industrie elected to only recognize deferred tax assets if they arose
during consolidation.
Under U.S. GAAP, deferred taxes are generally recognized for all temporary
differences. In addition, in contrast to German GAAP, U.S. GAAP requires the
recognition of deferred tax assets attributable to net operating loss
carryforwards. A valuation allowance is recorded against deferred tax assets to
the extent that it is more likely than not that the deferred tax asset will not
be realized.
Witten, April 18, 2005
HEINRICH INDUSTRIE AG
The Executive Board
Dr. Ulrich Blank Dr. Horst Hubner
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LITTELFUSE, INC.
Date: April 22, 2005 By: /s/ Philip G. Franklin
-----------------------------------
Name: Philip G. Franklin
Title: Vice President, Operations
Support and Chief Financial Officer
29