Annual Report 2006 - Munters

NOTE 3 Business combinationsDuring the fourth quarter of 2006, 100 percent of the Italian company SIAL S.p.A.was acquired. The Company manufactures mobile heaters, evaporative coolingproducts and mobile dehumidifiers with sales in Europe, the US and China.The Company was consolidated as of 1 December 2006. The acquiredoperations contributed revenues of SEK 32 M for the period 1 December 2006to 31 December 2006. If the acquisition had occurred on 1 January 2006, theCompany would have contributed SEK 236 M in revenues to the Group.Information about the acquired net assets and goodwill are listed below:Purchase price- cash purchase price paid 176- fees directly attributable to the acquisition 3Purchase price paid 179Additional purchase price – estimated 14Total acquisition value 193Fair value for assumed net liabilities 7Goodwill (Note 13) 200The size of the additional purchase price is based on SIAL’s results for theperiod ended in March 2007. Goodwill is attributable to estimated futuresynergies through an expanded product offering. In addition to synergy effects,future profitability also represents a component in the goodwill item.The acquired company’s net assets at the time of acquisition:ReportedvalueFair valueadjustmentFair valueTangible fixed assets 23 0 23Intangible assets – brands (Note 12) 0 25 25Non-interest-bearing receivables 147 0 147Cash and cash equivalents 20 0 20Interest-bearing liabilities –94 0 –94Interest-free liabilities (includingdeferred tax liability) –119 –9 –128Net identifiable assetsand liabilities –23 16 –7Cash purchase price paid and feesdirectly attributable to acquisition 179Cash and cash equivalents in theacquired company –20Changes in the Group’s cash andcash equivalents at acquisition 159No acquisitions were made during 2005.NOTE 4 SEGMENT REPORTINGMunters is the world leader in humidity control, offering products and servicesfor water and fire damage restoration as well as dehumidification, humidificationand cooling of air. Munters’ business concept is to be a global service andapplication-oriented niche company for air conditioning from a base indehumidification and humidification.On 1 July 2005, Munters implemented a new organization with globaldivisions. The purpose of the new organization is to improve the profit marginthrough coordination of the product range, increases in series size, moreefficient purchasing routines and better knowledge transfer between plants.The Group was previously organized in the three regions: Europe, theAmericas and Asia.DivisionsThe Group’s operations are managed and reported mainly through the threedivisions: Dehumidification, MCS and HumiCool. The consolidation of thedivisions is presented according to the same principles as for the Group as awhole. Transactions between regions are based on market terms. TheDehumidification Division manufactures and markets products and completesolutions for controlling humidity and indoor climate. The MCS Division providesservice for water and fire damage restoration and temporary climate control.The HumiCool Division manufactures and markets products and systems forevaporative cooling and humidification. No income statement items after EBITare allocated to the divisions.Dehumidification MCS HumiCool Eliminations, etc. Total2006 2005 2006 2005 2006 2005 2006 2005 2006 2005Income statementExternal net sales 1,584 1,458 2,618 2,334 1,510 1,338 – – 5,712 5,130Internal net sales 51 56 0 1 4 5 –55 –62 – –Net sales 1,635 1,514 2,618 2,335 1,514 1,343 –55 –62 5,712 5,130Operating earnings 194 159 159 153 213 135 –2 –1 564 446Amortization of surplus values andimpairment of goodwill – – –3 –6 – – – – –3 –6Undistributed costs – – – – – – –32 –35 –32 –35EBIT 193 159 156 147 213 135 –33 –36 529 405Balance sheetOperating assets 548 575 923 993 675 601 26 14 2,172 2,183Goodwill 2 3 164 173 377 188 – – 543 364Participations in associated companies – – – – 4 6 – – 4 6Other assets – – – – – – 425 381 425 381Total assets 550 578 1,087 1,166 1,056 795 451 395 3,144 2,93452 M U N T E R S A N N U A L R E P O R T 2 0 0 6