OFFERING MEMORANDUM Global Offering of up to ... - Nordex

was due primarily to the Company initially paying very low entry-level wages in the German state of
Mecklenburg-Vorpommern, but these were adjusted when market conditions changed. The average
number of employees increased by approximately 134% from 145 in fiscal year 1997/1998 to 340 in
fiscal year 1998/1999, and by approximately 53% to 523 in the following year.
Depreciation/amortization expense
Depreciation/amortization expense constituted an insignificant percentage of the Group’s sales during
the period under review due to the low level of components manufactured within the Group. The
establishment of industrial rotor blade manufacturing facilities had not yet had a significant effect on
depreciation/amortization expense as of September 30, 2000.
Depreciation/amortization expense increased by approximately 144% from EUR 0.86 million in fiscal
year 1997/1998 to EUR 2.10 million in fiscal year 1998/1999, and by approximately 78% to EUR 3.73
million in the following fiscal year. Amortization of intangible assets accounted for EUR 0.21 million of
total depreciation/amortization expense in fiscal year 1997/1998 and EUR 0.64 million in fiscal year
1998/1999, representing an increase of approximately 205%, and increased again by approximately
116% in fiscal year 1999/2000 to EUR 1.38 million. Amortization of intangible assets relates to
development costs capitalized pursuant to IAS and to purchases of licenses, software and similar rights.
Increased depreciation during the period under review was primarily caused by the Nordex Group’s
overall increase in investments during the period (see ‘‘—Comparison of Fiscal Years 1999/2000, 1998/
1999 and 1997/1998—Financial Conditions’’).
Other operating expenses
Other operating expenses increased by approximately 113% from EUR 9.9 million in fiscal year 1997/
1998 to EUR 20.1 million in fiscal year 1998/1999, and by approximately 60% to EUR 32.2 million in
fiscal year 1999/2000. There are several reasons for the changes:
Outside and support services decreased by approximately 16% from EUR 0.44 million in fiscal year
1997/1998 to 0.37 million in fiscal year 1998/1999, and then increased by approximately 1060% to
EUR 4.29 million in fiscal year 1999/2000. This increase was primarily due to the Nordex Group’s
substantially increased outsourcing of services both in general administration expenses and in research
and development. Expenses for maintenance, legal and consultancy and advertising costs and costs for
equipment leases increased at similarly high rates.
The Group’s establishment of production facilities in Rostock and the expansion of its vehicle fleet also
caused an increase in maintenance costs. The increased legal and consulting costs were due to the
Group’s increased activities overseas, increased use of local advisors and increased purchases of
planning services. The increase in costs for equipment leases reflected the increase in the vehicle fleet
for exhibitions and servicing activities.
Leasing rights expenses amounting to EUR 0.74 million were incurred for the first time in fiscal year
1999/2000 because the Company leased land in Denmark. These long-term leases are expected to be
invoiced to the customer when the relevant wind turbine is transferred to the customer.
Non capitalized commissions expenses increased by approximately 65% from EUR 3.23 million in fiscal
year 1997/1998 to EUR 5.33 million in fiscal year 1998/1999, and decreased by approximately 45% to
EUR 2.90 million in 1999/2000. Commissions primarily depend on the Group’s progress in the
construction of wind turbines. In the case of larger projects in particular, commissions can increase
rapidly and unevenly as a result. This effect influenced the Group’s domestic business substantially in
fiscal year 1998/1999. Outside of Germany, commissions have been increasingly paid to third parties
and are accounted for as consulting services.
Advertising expenses increased similarly by approximately 335% from EUR 0.55 million in fiscal year
1997/1998 to EUR 2.39 million in fiscal year 1998/1999, but decreased by approximately 62% to EUR
0.91 million in fiscal year 1999/2000. These changes were primarily due to the fact that the key trade
fairs for the Nordex Group, the Hannover Fair (energy sector) and the Husum Fair, are both held every
two years only or the Group participates in such fairs only every other year. Accordingly, the Group
91