Notes to the consolidated statement of income
04 Net sales
Net sales include revenues resulting from the rendering of services of €9,130 million (2007/2008: €11,145 million) as well as sales from construction contracts of €7,276 million (2007/2008: €6,721 million).
05 Other operating income
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Gains on the disposal of intangible assets, property, plant and equipment and investment property | 61 | 37 | ||
| Currency exchange differences | 8 | 1 | ||
| Insurance compensation | 41 | 22 | ||
| Miscellaneous | 232 | 322 | ||
| Total | 342 | 382 |
Miscellaneous other operating income includes a multitude of minor single items resulting from the 744 (2007/2008: 751) consolidated entities.
06 Other operating expenses
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Losses on the disposal of intangible assets, property, plant and equipment and investment property | 58 | 28 | ||
| Additions to other provisions | 55 | 99 | ||
| Expenses in connection with non-customer related research and development activities | 224 | 200 | ||
| Other taxes | 34 | 54 | ||
| Miscellaneous | 232 | 137 | ||
| Total | 603 | 518 |
Miscellaneous other operating income includes a multitude of minor single items resulting from the 744 (2007/2008: 751) consolidated entities.
07 Government grants
Especially in connection with the construction of a new steel mill in the USA government grants related to assets led to a €124 million reduction of cost in fiscal year 2008/2009 (2007/2008: €98 million). In addition, government grants to compensate expenses of the Group were recognized in the amount of €15 million (2007/2008: €13 million).
Payment of the above-mentioned government grants is subject to certain conditions which are currently assumed to be met.
08 Financial income / (expense), net
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Income from companies accounted for using the equity method | 100 | (29) | ||
| Interest income from financial receivables | 143 | 150 | ||
| Expected return on plan assets | 138 | 113 | ||
| Interest income | 281 | 263 | ||
| Interest expense from financial debt | (266) | (454) | ||
| Interest cost of pensions and health care obligations | (459) | (510) | ||
| Interest expense | (725) | (964) | ||
| Income from investments | 9 | 8 | ||
| Write-down of financial assets | 0 | (30) | ||
| Gain/(loss) from disposals of financial assets | (7) | 0 | ||
| Accretion of other provisions | (3) | (8) | ||
| Miscellaneous, net | 95 | 242 | ||
| Other financial income/(expense), net | 94 | 212 | ||
| Financial income/(expense), net | (250) | (518) |
In addition to interest income from financial receivables, financial income/(expense), net, includes additional interest income from financial assets that are not measured at fair value through profit or loss of €44 million (2007/2008: €56 million) and in addition to interest expense from financial debt, financial income/(expense), net includes additional interest expense from financial liabilities that are not measured at fair value through profit or loss of €92 million (2007/2008: €42 million).
Borrowing costs in the amount of €235 million (2007/2008: €122 million) were capitalized during the period which reduced the line item "miscellaneous, net" as part of other financial income/ (expense), net. If financing is directly allocable to a certain investment, the actual borrowing costs are capitalized. If no direct allocation is possible, the Group's average borrowing interest rate of the current period is taken into account to calculate the borrowing costs.
09 Income taxes
Income tax expense/(benefit) for the year ended September 30, 2009 and the previous year consists of the following:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Current income tax expense for the reporting period | 958 | 244 | ||
| Deferred income tax benefit for the reporting period | (43) | (696) | ||
| Current income tax benefit for prior periods | (60) | (16) | ||
| Deferred income tax benefit for prior periods | (3) | (23) | ||
| Total | 852 | (491) | ||
| This total breaks down to: | ||||
| Current income tax expense Germany | 510 | 25 | ||
| Current income tax expense foreign | 388 | 203 | ||
| Deferred income tax expense/(benefit) Germany | 10 | (495) | ||
| Deferred income tax benefit foreign | (56) | (224) |
The new German corporate income tax law applicable for 2008/2009 sets a statutory income tax rate of 15% (2007/2008: 15%) plus a solidarity surcharge of 5.5%. On average, the Group's German companies are subject to a trade tax rate of 15.1% (2007/2008: 15.1%). Therefore, at year-end September 30, 2009, deferred taxes of German companies are calculated with a combined income tax rate (including solidarity surcharge) of 30.9% (2007/2008: 30.9%). The applicable tax rates for companies outside Germany range from 5.7% to 40.4% (2007/2008: 5.7% to 40.4%). In fiscal year 2008/2009, changes in foreign tax rates resulted in deferred tax benefit in the amount of €5 million (2007/2008: €16 million). For domestic Group companies the dividend-dependent subsequent taxation of previously untaxed income components was replaced by a flat-rate tax payment under a tax law amendment in 2008. Therefore, a current tax liability of €6 million was recognized as a tax expense as of September 30, 2008.
The components of income taxes recognized in equity are as follows:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Income tax expense/(benefit) as presented on the income statement | 852 | (491) | ||
| Income tax expense/(benefit) on cumulative income and expense directly recognized in equity | 133 | (284) | ||
| Tax effect resulting from the write-down of treasury stock | (156) | 0 | ||
| Total | 829 | (775) |
As of September 30, 2009, domestic corporate tax loss carryforwards amount to €1,026 million (2008: €427 million) and domestic trade tax loss carryforwards amount to €608 million (2008: €63 million), and interest carryforwards amount to €297 million (2008: none). In addition, foreign tax loss carryforwards amount to €1,119 million (2008: €730 million), in particular €280 million (2008: €288 million) in Canada, €239 million (2008: €66 million) in Italy, and €152 million (2008: €74 million) in the People's Republic of China, and foreign interest carryforwards amount to €13 million (2008: none). In fiscal year 2008/2009, deferred tax benefit in the amount of €244 million (2007/2008: €32 million deferred tax expense) is attributable to tax loss carryforwards, interest carryforwards and tax credits.
Deferred tax assets are recognized only to the extent that the realization of such tax benefits is probable. In determining the related valuation allowance, all positive and negative factors, including prospective results, are taken into consideration in estimating whether sufficient taxable income will be generated to realize deferred tax assets. These estimates can change depending on the future course of events. As of September 30, 2009, tax loss carryforwards for which no deferred tax asset is recognized amount to €956 million (2008: €818 million). According to tax legislation as of September 30, 2009, an amount of €391 million (2008: €381 million) of these tax losses may be carried forward indefinitely and in unlimited amounts whereas an amount of €565 million (2008: €437 million) of these tax loss carryforwards will expire over the next 20 years if not utilized. Unrecognized deferred tax assets relating to tax loss carryforwards amount to €239 million as of September 30, 2009 (2008: €218 million). In addition, as of September 30, 2009, no deferred tax asset is recognized for the interest carryforwards in the amount of €310 million (2008: none) and deductible temporary differences in the amount of €624 million (2008: €452 million). In fiscal year 2008/2009, the benefit arising from previously unrecognized tax losses, tax credits and temporary differences that are used to reduce the Group's tax expense amounts to €6 million (2007/2008: €36 million). No deferred tax liabilities were recorded on undistributed profits of foreign subsidiaries, as such profits are not to be distributed in the foreseeable future.
Significant components of the deferred tax assets and liabilities are as follows:
| Deferred tax assets | Deferred tax liabilities | |||||||
|---|---|---|---|---|---|---|---|---|
| Sept. 30, 2008 | Sept. 30, 2009 | Sept. 30, 2008 | Sept. 30, 2009 | |||||
| Intangible assets | 126 | 195 | 356 | 347 | ||||
| Property, plant and equipment | 86 | 120 | 818 | 852 | ||||
| Financial assets | 76 | 153 | 39 | 7 | ||||
| Inventories | 1,705 | 1,984 | 386 | 191 | ||||
| Other assets | 333 | 384 | 497 | 368 | ||||
| Accrued pension and similar obligations | 553 | 864 | 123 | 76 | ||||
| Other provisions | 222 | 332 | 63 | 130 | ||||
| Other liabilities | 448 | 276 | 1,867 | 2,181 | ||||
| Tax loss carryforwards | 290 | 555 | — | — | ||||
| Interest carryforwards | — | 84 | — | — | ||||
| Gross value | 3,839 | 4,947 | 4,149 | 4,152 | ||||
| Valuation allowance | (351) | (489) | — | — | ||||
| Offset | (3,021) | (3,817) | (3,021) | (3,817) | ||||
| Balance sheet amount | 467 | 641 | 1,128 | 335 | ||||
Deferred tax assets and liabilities are offset if they pertain to future tax effects for the same taxable entity towards the same taxation authority. Deferred tax assets of €75 million relate to consolidation items as of September 30, 2009 (2008: €50 million).
For fiscal year 2008/2009, the income tax benefit of €491 million presented in the financial statements is €240 million lower than the expected income tax benefit of €731 million which would result if the German combined income tax rate of 30.9% were applied to the Group's income/(loss) before income taxes. For fiscal year 2007/2008, the income tax expense of €852 million was €114 million lower than the expected income tax expense of €966 million with a German combined income tax rate of 30.9%. The following table reconciles the expected income tax expense/(benefit) to the income tax expense/(benefit) presented in the income statement.
| Year ended Sept. 30. 2008 |
in % | Year ended Sept. 30. 2009 |
in % | |||||
|---|---|---|---|---|---|---|---|---|
| Expected income tax expense/(benefit) | 966 | 30.9 | (731) | 30.9 | ||||
| Foreign tax rate differential | (3) | (0.1) | 9 | (0.4) | ||||
| Changes in tax rates or laws | (10) | (0.4) | (5) | 0.2 | ||||
| Tax consequences of disposal of businesses | (38) | (1.2) | (6) | 0.3 | ||||
| Permanent items | 47 | 1.5 | 72 | (3.0) | ||||
| Change in valuation allowance | (13) | (0.4) | 191 | (8.1) | ||||
| Tax benefit not related to the reporting period | (63) | (2.0) | (39) | 1.7 | ||||
| Other, net | (34) | (1.1) | 18 | (0.8) | ||||
| Income tax expense/(benefit) as presented on the income statement | 852 | 27.2 | (491) | 20.8 |
10 Earnings per share
Basic earnings per share are computed as follows:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| Total amount in million € | Earnings per share in € | Total amount in million € | Earnings per share in € | |||||
| Numerator: | ||||||||
| Net income/(loss) (attributable to ThyssenKrupp AG's stockholders) | 2,195 | 4.59 | (1,857) | (4.01) | ||||
| Denominator: | ||||||||
| Weighted average shares | 477,750,223 | 463,473,492 | ||||||
Relevant number of common shares for the determination of earnings per share
Earnings per share have been computed by dividing income/ (loss) attributable to common stockholders of ThyssenKrupp AG (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Shares issued during the period and shares reacquired during the period have been weighted for the portion of the period that they were outstanding.
In 2008/2009, the weighted average number of outstanding shares was reduced by the acquisition of treasury stock in February/March 2008 and in July/August 2008.
There were no dilutive securities in the periods presented.
11 Additional disclosures to the consolidated statement of income
Personnel expenses included in the consolidated statement of income are comprised of:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Wages and salaries | 7,450 | 6,948 | ||
| Social security taxes | 1,304 | 1,229 | ||
| Net periodic pension costs - defined benefit* | 130 | 116 | ||
| Net periodic pension costs - defined contribution | 140 | 140 | ||
| Net periodic postretirement benefit cost other than pensions* | 9 | (43) | ||
| Other expenses for pensions and retirements** | 198 | 835 | ||
| Related fringe benefits | 406 | 429 | ||
| Total | 9,637 | 9,654 |
The annual average number of employees is as follows:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||
|---|---|---|---|---|
| Steel | 40,480 | 39,885 | ||
| Stainless | 12,102 | 12,018 | ||
| Technologies | 54,260 | 51,127 | ||
| Elevator | 41,226 | 43,186 | ||
| Services | 45,436 | 44,636 | ||
| Corporate | 2,322 | 1,767 | ||
| Total | 195,826 | 192,619 | ||
| This total breaks down to: | ||||
| Wage earners | 121,517 | 116,384 | ||
| Salaried employees | 69,930 | 71,700 | ||
| Trainees | 4,379 | 4,535 |
Auditors' fees and services
For the services performed by the Group auditors KPMG AG Wirtschaftsprüfungsgesellschaft and the companies of the worldwide KPMG association in fiscal years 2007/2008 and 2008/2009 the following fees (including expenses) were recognized as expenses:
| Year ended Sept. 30, 2008 | Year ended Sept. 30, 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| Total | thereof Germany | Total | thereof Germany | |||||
| Audit fees | 23 | 12 | 18 | 9 | ||||
| Audit-related fees | 1 | 1 | 4 | 3 | ||||
| Tax fees | 1 | 0 | 1 | 0 | ||||
| Fees for other services | 1 | 1 | 1 | 1 | ||||
| Total | 26 | 14 | 24 | 13 | ||||
The audit fees include mainly fees for the year-end audit of the consolidated financial statements, the auditors' review of the interim consolidated financial statements, and the statutory auditing of ThyssenKrupp AG and the subsidiaries included in the consolidated financial statements. The audit-related fees essentially comprise the fees for due diligence services in connection with acquisitions and disposals. The tax fees include in particular fees for tax consulting services for current and planned transactions, for the preparation of tax returns, for tax due diligence services, for tax advice in connection with projects and Group-internal reorganizations as well as tax advice for employees sent to work abroad. The fees for other services are mainly fees for project-related consulting services.
Furthermore, the audit of entities that are included in the Group's consolidated financial statement resulted in expenses of €14 million (2007/2008: €11 million) paid to other audit firms in addition to the audit fees paid to the Group auditors.