Sennheiser Annual Report

ANNUAL REPORT 2011

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We are all familiar with the phenomenon of having cold chills run up and down our spines or getting goose bumps during a concert - even our skin is not oblivious to the thrill of a musical treat. Canadian scientists are taking this a step further: researchers have found that skin, with its millions of nerve cells, play a vital role in speech comprehension. In this, our 2009 Annual Report, we give you a peek into this exciting research. Under the motto “Feeling sound,” we continue our journey through a trilogy of annual reports - a journey that began last year with “Seeing sound.” German singer Herbert Gronemeyer gives us observations of how sound affects his own body and those of others. In an interview, he describes his fascination with people with seemingly limited sensory perception are to sounds and nuances. Sound and vibration can also have an effect on buildings. Whether it’s the tallest building in the world, which use special vibration-absorbing constructions to prevent them from swaying too much with the wind, or the Giza pyramids representing music turned into stone. Each story takes a look at one aspect of the fascination of sound. As an audio specialist, this fascination influences everything we do, and opens new perspectives.

I hope you enjoy reading these exciting stories.

Prof. Dr. Jorg Sennheiser

PRESIDENT’S LETTER

4 5SENNHEISER ANNUAL REPORT 2011

P A I N T I N Gs o u nd

The Sennheiser Group expects moderate growth for 2012. At the beginning of the year, important product lines were completely renewed to further strengthen consumer business. The sports headphones segment centered into a cooperation project with the sports equipment manufacturer adidas for initially four new headphone models. Around the world, the name Sennheiser stands for first-class audio products, and adidas is one of the leading brands in the sports equipment industry. Sennheiser sports headphones have already been successfully selling in the consumer market for several years. With that being said, together, with adidas, the group aims to expand its pole position and intensify its efforts in the sports market. As the new product generation evolution wireless G3 and the 2000 series are both available throughout the entire year, the group is expecting growth in the wireless microphone segment. Sennheiser also invested in developing new professional products with a wider switching band-width. However, whether or not this area will grow also depends on the global economic recovery and customers’ corresponding ability to create budgets for their projects. The introduction of new products in the areas conference systems and office headsets may also help stabilize the situation.

FINANCIAL HIGHLIGHTS

Turnover by product group in 2010

Turnover by product group in 2009

Personnel LevelsWireless Microphones 34% Headphones 24% Microphones 8% Audiology 7% Other 19%

Wireless Microphones 28% Headphones 26% Microphones 9% Audiology 6% Other 19%

Personnel costs increased 1.6% in comparison with the previous year costs. The modest increase is due to the introduction of short-time work in 2010 and as well as the lower performance-releated salary components.


H E A R I N Gis believing

We create the greatest and most exciting sound experience for people worldwide – whether at home or out and about; on stage or behind the DJ console; in a museum or in a concert hall.

MANAGEMENT’S DISCUSSION AND ANALYSIS

We create the greatest and most exciting sound experience for people worldwide – whether at home or out and about; on stage or behind the DJ console; in a museum or in a concert hall.

The Consolidated Statements of the Group and the Financial Statements of Bang & Olufsen Holding A/S conform with the Annual Accounts Act, accounting guidelines, generally recognized accounting principles, and the requirements of the Copenhagen Stock Exchange concerning the presentation of accounts for listed companies. The accounting principles are unchanged from the previous year. Compared to last year, the inventory of finished goods has been broken down into spare parts and finished goods. The comparative figures for 1998/99 have been adjusted accordingly. The Group accounts comprise the parent company, Bang & Olufsen Holding a/s and the subsidiaries in which the Group retains more than 50 per cent of the voting rights or, in other ways, has a deciding influence. The Group accounts have been prepared on the basis of the audited accounts of the parent company and its subsidiaries and, using the past-equity principle, as an aggregation of similar items from the accounts of the individual companies. In the process of consolidation, intra-group income and expenses, shareholdings, outstandings and unrealised profits have been eliminated. The accounting principles applied in the foreign subsidiaries have been adjusted to the Group’s accounting principles unless these only differ insignificantly from them. Recently acquired subsidiaries are included in the consolidated accounts as from the date of acquisition.

Companies sold are included until the date of sale. The consolidated goodwill is made up at the date of acquisition as the difference between the acquisition price and the intrinsic value of the acquired company established according to the Group’s accounting principles. Consolidated goodwill is depreciated directly over the equity capital. Companies which are not subsidiaries, but in which the Bang & Olufsen Holding group holds 20 per cent or more of the voting rights or in other ways has a significant influence on the operational or financial management, are regarded as associated companies. Associated companies are consolidated as one-line in the Group accounts. Payments outstanding and debts in foreign currency have been booked at the exchange rates prevailing on the balance sheet date or at the applicable forward rate. Unrealised and realised currency gains and losses are included in the Profit and Loss Account under financing income and costs.


In the case of independent foreign subsidiaries, the profit and loss accounts are converted to average foreign exchange rates while balance sheet items are converted at the exchange rates prevailing on the balance sheet date. Differences deriving from conversion of the foreign companies’ initial equity capital to the exchange rates prevailing on the balance sheet date and the differences owing to the conversion of the foreign companies’ Profit and Loss Accounts into average exchange rates are adjusted in the equity capital. Hedging of investments abroad are also adjusted in the equity. Gains and losses on financial transactions entered into in order to secure outstanding debtors and creditors on the balance sheet date, are included in the Profit and Loss Account. Financial transactions designated to secure a future purchase or sale are included in the Profit and Loss Account at such time as the transaction is settled. Product development costs are charged in the year in which they were incurred and comprise those costs which can be attributed to the companies’ development departments, including salaries, wages, materials, services and depreciation on fixtures and fittings and equipment for development activities. Distribution and marketing costs comprise costs relating to sales and distribution of the Group’s products, including salaries for sales personnel, advertising and exhibition costs and depreciation. Costs in subsidiaries which are exclusively responsible for sales of the Group’s products are attributed to distribution and marketing costs.

The share of the subsidiaries’ pre-tax profits is included in the Profit and Loss Account of the parent company under the item “Result of ordinary operations in subsidiaries”, while the subsidiaries’ share of tax is included under “Tax on ordinary result”. In the Group’s and parent company’s Profit and Loss Account, share of profits before tax in associated companies is included in the item “Result of ordinary operations in associated companies”, while the share of the associated companies’ tax liability is included under “Tax on ordinary result.” Development costs have been charged as items of expenditure in the relevant year. Improvements and rights to leasehold property are depreciated on a straight-line basis over the same period as the lease, although a maximum of 10 years. Patents are depreciated on a straight-line basis over the expected lifetime, although a maximum of 10 years.

Tangible fixed assets with a purchase price of less than DKK 25,000 are charged in full in the year of purchase. For computer software the limit is DKK 100,000. Subsidies concerning tangible fixed assets have been deducted in the purchase price. Depreciation is carried out on a straight-line basis over the expected useful life of the asset.

Tax is charged, in part, on the basis of the year’s anticipated tax liability on taxable earnings and, in part, on the change in deferred tax liabilities on current assets for which provision is made in the Balance Sheet. The result for the year includes non-taxable income and non-deductible costs. Tax attributable to the annual result is further influenced by variations in the taxation rates of the individual countries. The parent company is group taxed with some of its subsidiaries. The calculated tax due in Denmark is divided between the companies in proportion to their taxable income. The Group pays tax according to the instalment principle. Any supplementary payments, deductions or refunds related to tax are included in financial items.

Shares in subsidiaries are included in the Balance Sheet of the parent company at the intrinsic value shown in the subsidiaries’ accounts, with additions or deductions of profits or losses as a result of internal trading. Shares in associated companies are valued in the Balance Sheet of the Group and the parent company following the equity method, in accordance with the latest published annual accounts or periodic accounts. The proportion of the results from subsidiaries and associated companies which has not been paid out as divided has been transferred to the reserves for net write-up in accordance with the intrinsic value method.


SEARCHINGf o r t h e b e a u t y

OF SOUND

Sennheiser Telecom achieved a turnover of DKK 306 million. This represents an increase of DKK 38 million, or 14 per cent. The result before tax was DKK 31 million, DKK 9 million less than envisaged in the halfyear report, but nevertheless an increase of 78 per cent compared to last year. The unfulfilled expectations were due to the fact that the very high US sales of BeoCom 6000 in the first half year were not followed up by corresponding growth in the second half year because it has taken longer than expected to grow sales via alternative channels. Sales have also been lower than expected in Germany and Switzerland. Product development costs for Bang & Olufsen Telecom a/s increased from DKK 27 million to DKK 39 million during the year, i.e. 48 percent. The increase is attributable to the ongoing development of the cordless product range, the development of ISDN products and 2 line sets for the US. These products will all be launched during the financial year 2000/01.

W. Douglas CaudellChief Financial Officer

AUDITOR’S LETTER


RECORDINGthe forest

CONSOLIDATED STATEMENTS

2010 IN EURO PREV. YEAR IN THOUSANDS

A. Fixed Assets I. Intangible Assets

1. Concessions, industrial property rights and similar rights 3,153,673.39 2,886

2. Goodwill 2,492,800 173

5,646,473.64 3,059

II. Tangible Assets

1. Real steate, equivalent titles, and buildings 5,083,563.65 5,086

2. Technical equipment and machinery 19,041,660.65 5,086

3. Other plant, furniture and equipment 15,890,265.90 14,482

4. Down payments and plant under construction 2,740,215.52 5,45

42,755,705.41 39,471

III. Financial Assets

1. Shares in associated companies 13,250.00 13

2. Shareholdings 3,350.00 3

3. Other loans 6,873.80 7

4. Indemnity claims 1,652,054.43 1,697

1,675,528.23 1,720

50,077,707.28 44,250

B. Current Assets

I. Stocks

1. Raw materials and supplies 15,723,612.81 20,544

2. Work in process 10,465,096.47 9,784

3. Finished products and merchandise 33,505,775.33 42.713

4. Down payments 1,529.02 143

59,696,013.63 73,184

II. Trade and Other Receivables

1. Trade receivables 70,072,554.14 60,328

2. Other receivables 7,658,445.79 7,373

77,730,999.93 67,70

III. Cash and Cash Equivalents 28,500,217.33 27,155

165,927,230.89 168,041

Total Assets 216,004,939 212,291

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2010

2010 IN EURO PREV. YEAR IN THOUSANDS

A. Equity I. Fixed Capital

1. General partners’ share - -

2. Limited partners’ share 5,200,00.00 5,200

5,200,00.00 5,200

II. Balance sheet profit 35,225,784.87 40,433

III. Balancing item for shares and other shareholders 470,000.00 585

40,895,784.87 46,218

B. Special items

184,548.21 191

C. Provisions

1. Pension provisions 52,190,501.41 50,177

2. Tax provisions 1,234,906.54 1,579

3. Other provisions 22,848,229.14 22,745

76,273,673.09 74,501

D. Liabilities

1. Liabilities to credit institutions 4,883.44 680

2. Advance payments received for orders 54,881.49 176

3. Trade payables 22,838,129.55 21,166

4. Own bills of exchange payable 1,102,376.00 488

5. Liabilities to shareholders 69,332,321.26 67,024

6. Liabilities to associated companies 3,108.34 3

7. Other liabilities 19,462,488.00 17,538

112,738,188.08 107,075

E. Accruals and Defferals

8,341.46 6

Total Assets 230,160,499.71 227,991

LIABILITIES


VOLKER BARTELS President, Manufacturing & Logistics

HEINRICH ESSER President, Research & Development

BOARD OF DIRECTORS

SUSANNE SEIDEL President, Global Marketing

STEFAN JUNKER President, Consulting & Finance

SUSANNE SEIDEL President, Global Marketing

STEFAN JUNKER President, Consulting & Finance

PAULA WHITING President, Global Sales


UPLIFTINGe v e n t s


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Sennheiser Annual Report