Porsche 2004 Annual Report Download

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Annual Report 2004 ⁄ 05

Table of contents

  • Page 1
    Annual Report 2004 ⁄ 05

  • Page 2
    Porsche Group Highlights

  • Page 3
    ... Group Highlights 1995 /96 HGB Sales Domestic Export Vehicle Sales (new cars) Domestic Porsche Export Porsche Other Models Vehicle Sales Porsche 911 928 Boxster Carrera GT Cayenne Production Porsche total 911 Carrera GT 928 Boxster Cayenne Employees Personnel expenses Balance Sheet Total Assets...

  • Page 4
    ... 20,321 41,299 11,878 964.8 Sales Domestic Export Vehicle Sales (new cars) Domestic Porsche Export Porsche Other Models Vehicle Sales Porsche 911 928 Boxster Carrera GT Cayenne Production Porsche total 911 Carrera GT 928 Boxster Cayenne Employees Personnel expenses Balance Sheet 2,891.6 1,053.3 731...

  • Page 5
    Annual Report 2004/05

  • Page 6
    Content Dr. Ing. h.c. F. Porsche Aktiengesellschaft, Stuttgart Report on the Fiscal Year August 1, 2004 to July 31, 2005

  • Page 7
    ...Group and Porsche AG Management Report Declaration of Conformity with the Corporate Governance Code Finances Porsche Stock The Models Sales The Markets Services Communication The new Museum Purchasing Porsche and the Environment Employees Production Research and Development Motor Sport Consolidated...

  • Page 8
    ... also our highly flexible production methods. Many work stages are performed externally, by our suppliers, while we concentrate on our core competences: development, control of the production alliance with suppliers, engine production and the assembly, quality control and sale of our vehicles. Our...

  • Page 9
    ... of highly qualified, motivated employees. Their part in the company's success has once again been acknowledged by the granting of suitable special payments. In addition, the jobs of all members of the Porsche AG workforce have been secured until the year 2010 by a location assurance agreement...

  • Page 10
    ... Officer Wolfgang Dürheimer Diplom-Ingenieur Research and Development Holger P. Härter Diplom-Volkswirt Finance and Controlling Harro Harmel Human Resources/Labor Relations Director Michael Macht Diplom-Ingenieur Production and Logistics Hans Riedel Diplom-Kaufmann Sales and Marketing * Employees...

  • Page 11
    ...fiscal year the Supervisory Board was kept informed in detail of the company's position, business progress and business policy by means of written and verbal reports from the Executive Board and in joint meetings, and on the basis of these has supervised the activities of company management. Members...

  • Page 12
    Management Report for the Group and Dr. Ing. h.c. F. Porsche AG 2004 ⁄ 05 Porsche has grown again: sales, turnover and earnings reached new record levels in the review year. 8

  • Page 13

  • Page 14
    ... cars: the 911 and the Boxster were extremely well received by customers all over the world. The Cayenne too remained in strong demand. This sport utility vehicle exhibited especially dynamic growth in export markets in which Porsche's presence has so far been only small. Porsche's top selling model...

  • Page 15
    ... Cayenne sales were slightly weaker in the reporting year, at 16,691 units (three percent down), the sport utility vehicle remained the top-selling Porsche model. Sales of the 911 and Boxster sports cars went up noticeably to 17,040 cars (21.4 percent more). Carrera GT sales in North America totaled...

  • Page 16
    ... Of the total sales, Porsche AG accounted for 5.38 billion Euro. Production in Zuffenhausen increased In the reporting year there was a steep rise in the number of vehicles manufactured. Including 15,892 Boxster and Boxster S cars assembled in Finland, the Porsche Group produced 90,954 vehicles, an...

  • Page 17
    ... Board and the Works Council during the reporting year is a positive signal for the labor market. Its aim is to secure the future of the company's working locations; unlike the first agreement of this kind, it relates to all employees in Zuffenhausen, Ludwigsburg and Weissach rather than production...

  • Page 18
    ... with selected system suppliers in the course of this project. Total capital expenditures including development work on this new model line will amount to approximately one billion Euro, and the company will create about a thousand new jobs in Germany. Together with the 911, Boxster and Cayenne, it...

  • Page 19
    ... made of Porsche employees in all operating areas both at home and abroad. A further increase in sports car production volume, preparations for new model versions and the worldwide presentation of the new Boxster and the all-wheel-drive versions of the 911 to journalists, dealers and customers all...

  • Page 20
    ...has increased the residual value risk involved in the disposal of vehicles returned to Porsche financial services companies at the end of the relevant leasing agreements. To limit this risk, the residual value of Porsche vehicles in the used car market is continuously monitored, and this information...

  • Page 21
    ... attacks could hamper activity on the sales markets at times, moderate expansion of the world economy is likely to continue in 2006. Favorable financing conditions, high corporate profits in many cases and increasing asset values are propping up demand, the threshold countries remain dynamic and...

  • Page 22
    ...'youngest' in company history, and there is lively demand for all three model lines. Within only a few years, the Cayenne has secured a firm position in the sports off-road vehicle segment. The changeover to the latest 911 model generation is being continued with four new all-wheel-drive versions of...

  • Page 23
    19

  • Page 24
    ...and sales of Porsche preferred stock by members of the Executive or Supervisory Boards are published insofar as this is required by § 15a of the German Stock Trading Act. Publication in any other form of the shares or related financial instruments held by members of these bodies has not taken place...

  • Page 25
    ... Consolidated Financial Statement." The ability to access the expertise of individual members of the families that are stockholders in the company on specific subjects represents a particular advantage for Porsche AG. This cooperation takes place on terms that are customary in this business sector...

  • Page 26
    Finances 2004 ⁄ 05 Porsche again broke existing records with its key financial data in the review year. The accounts were drawn up for the first time according to IFRS rules. 22

  • Page 27

  • Page 28
    ... further increase in liquidity In 2004/05 the Porsche Group once again concluded a fiscal year with record results in key financial areas. Unit sales, sales revenues and earnings all improved yet again in comparison with the previous year. As a consequence, the consolidated balance sheet total rose...

  • Page 29
    ... liabilities in the reporting year totaled 3.092 billion Euro (previous year: 2.947 billion Euro), and thus reflected the expansion in financial services business activity. For the refinancing of this business, asset-backed structures in specific countries were mainly used, their volume amounting to...

  • Page 30
    ... after-tax profit improved from 488 million Euro in the previous year to 528 million Euro. The increase in overall unit sales also had a positive effect on Group sales revenue, which went up by 6.9 percent to 6.574 billion Euro. Despite this marked increase in unit sales, the cost of materials only...

  • Page 31
    ... Situation Financial markets made a worldwide recovery in the review year, though stock exchange indices failed to reach the high levels commonly encountered during the New Economy boom. Nevertheless, prices developed in a positive manner, this being largely due to an improved company earnings...

  • Page 32
    ... during active new-model driving sessions, for example presentation of the new Boxster in Austria, the 911 Carrera Cabriolet in Spain and the Cayman S in Italy. In addition, analysts' conferences were held when the annual accounts were presented in December 2004 and on the occasion of the German...

  • Page 33
    ... now forced Deutsche Börse AG to abandon its takeover plans. Porsche also adopted a clear position on the question of forcing companies listed on the stock exchange by law to publish the salaries paid to members of their boards of management. This decision was taken by the Federal German government...

  • Page 34
    The Models 2004 ⁄ 05 The new-generation 911 and Boxster models and the launch of the Cayman S have further enhanced Porsche's reputation as the world's most successful sports car manufacturer. 30 Modelle

  • Page 35

  • Page 36
    ... sports-car program The Porsche brand stands for convincing, competitive, long-lasting products. Its high reputation was strengthened once again in the review year by the introduction of the new-generation 911 and Boxster models. process matched carefully to the current phase in this model's life...

  • Page 37
    ..., the new 911 Carrera 4 is an impressive combination of outstanding road dynamics and driving safety. The Porsche Stability Management (PSM) system familiar from the models with rear- wheel drive has undergone further development, with two functions added for use on four-wheel-drive cars: If the...

  • Page 38
    ... an optional extra on all Carrera models is the Porsche Ceramic Composite Brake (PCCB) system. In order to enhance road dynamics still further, the Porsche Active Suspension Management (PASM) system is now offered as an optional extra on all basic all-wheel-drive models (it is standard equipment on...

  • Page 39
    ... driving and active road safety areas. As an optional extra, Porsche Active Suspension Management (PASM) can be specified: this uses electronically variable shock absorbers to vary the damping force. The high-performance brake system comes from the Boxster S, but the Porsche Ceramic Composite Brake...

  • Page 40
    ... it "America's Best SUV off-road vehicle", thus drawing further attention to its exceptional qualities. In addition to the 911, Boxster and Cayenne, the decision was taken in July 2005 to add a fourth model line to the sales program by developing a premium-category four-door sports coupe. Planned to...

  • Page 41
    ... (PPN) allows Porsche dealers and workshops all over the world to conduct their business processes by electronic means and enjoy online access to training sessions and information. Incorporating the sales partners into the Porsche AG system forms a basis for new car and service department sales. 37

  • Page 42
    ... training. By means of the "Certified Porsche Service Technician" program, service department employees In the review year, Sales once again devoted its efforts intensively to the development of new systems and processes, with the specific aim of improving after-sales service quality. Spare parts...

  • Page 43
    ... further improving long-term relationships with customers, a new department was established during the review year within Sales to perform tasks relating to Customer Relations. The central inquiry and complaint management department (Customer Commitment) was also enlarged. The associated development...

  • Page 44
    ...the sports exhaust system for the 911. More than half of all the 911s sold are currently supplied with Exclusive options, a sign of the importance of this range of products. In the review year as before, the corresponding items for the Cayenne set new standards in Sport Utility Vehicle customization...

  • Page 45
    ...special series of fifty 911 cars for members of the Porsche Club of America, an example of which was ceremonially unveiled during the parade. During the review year, one of the main areas of activity was once again Club sport. In close cooperation with the German Porsche Club, Porsche's German sales...

  • Page 46
    Markets 2004 ⁄ 05 Demand for the new-generation sports cars was strong all over the world, so that Porsche's sales on international markets increased. 42 Modelle

  • Page 47

  • Page 48
    ... for the Cayenne remained as high as ever. Despite new competitors in the already strongly contended Sport Utility Vehicle segment, the number of Cayenne deliveries in the review year rose by five percent to 42,097. Porsche's sports off-road vehicle thus accounted for 47 percent of the 44 Markets

  • Page 49
    ...the Porsche Cayenne defended its leading position in the gasoline-engined Sport Utility Vehicle market segment without serious opposition; with 5,175 delivered to customers, it made a significant contribution to Porsche Germany's business success. The large-scale launch campaigns for the 911 Carrera...

  • Page 50
    ... of 820 cars, the Boxster achieved an increase of 62 percent. The Cayenne built on its already dominant position in the gasoline-engined Sport Utility Vehicle segment, with 2,379 deliveries (plus 26 percent). Porsche's Italian dealers confirmed their satisfaction with the brand. In the annual survey...

  • Page 51
    ... first Porsche Center in the latter country will be opened in Lahore early in 2006, and two further sales outlets in Islamabad and Karachi are to follow shortly after. Total sales in the off-road vehicle segment went down in Australia during the review year. This also left its mark on Cayenne sales...

  • Page 52
    ... accounting period. The figure of 278 rear-wheel-drive 911 Carrera cars sold, when compared with the previous year's total of 81, is astonishingly high for a country in Despite continuing political uncertainties, the economy in Latin America gained further in stability during the review year...

  • Page 53
    ... planned. The Cayenne, the "Porsche for Latin America", continues to account for the largest proportion of deliveries to customers: in the review year the total was 1,010 units (previous year: 654 units). The new 911 and Boxster models also added strongly to the sales volume. The Boxster registered...

  • Page 54
    ... was the company's best-selling model line in the Asia-Pacific/China region. Thanks to the introduction of the new models, however, sales of the 911 and Boxster sports cars also increased, with deliveries to customers up by 73 percent to 861 in the review year. The "Porsche Infineon Carrera Cup Asia...

  • Page 55
    ... customers making renewed use of what Porsche Financial Services are able to offer them. In North America, Porsche's most important market, the demand for financial services continued to increase in the review year. About 26 percent of all new car sales were financed by Porsche Financial Services...

  • Page 56
    ... extensive practical experience. They work our solutions on the spot with their clients, taking the complete added-value chain from development through purchasing and production to sales and distribution into account. Porsche Consulting has already advised more than 300 companies within Germany and...

  • Page 57
    ... luggage, high-value fashions and a big range of scale-model vehicles - are notable for their quality, function and classic design. Porsche Design Driver's Selection products are available from Porsche Centers and from Porsche AG's online shops. To comply with the Porsche Design Group's new brand...

  • Page 58
    Communication 2004 ⁄ 05 The aim of communication work is to strengthen Porsche's high reputation. Great importance is attached to the company's independent positioning and to its ability to discharge its social responsibilities. 54 Modelle

  • Page 59

  • Page 60
    ...and outstanding customer service, but also on the company's worldwide reputation. For many years now, Porsche has enjoyed a leading position in this respect, as can be seen from its selection in a 'manager magazin' poll covering all business sectors as the company with the best image in Germany. The...

  • Page 61
    ..., held in Weissach. On this occasion the company's engineers describe the cars' fascinating technical features in full detail. In the review year, the emphasis was on suspension and active safety, in other words on decisive areas of key competence for Porsche; the Cayman S was used to demonstrate...

  • Page 62
    ... of road shows held at the world's major financial centers, discussion with market participants is an important contributor to the success of Porsche stock. Incorporation of the Investor Relations department into the Public Relations division of the company guarantees that external communication...

  • Page 63
    ... with Information Effectively Marketing Communication The German Marketing Prize in the Fall of 2004 was the first of a number of national and international prizes that Porsche received in the review year for its marketing work. Porsche's films were especially successful: early in 2005 the company...

  • Page 64
    .... At the end of the review period, twelve subsidiary companies and 21 importers' home pages were accessible by way of the main Porsche website. To make sure that the approach to customers is uniform at all sales levels, further efforts were made to design dealers' home pages in accordance with the...

  • Page 65
    ... reflected in today's models, from Boxster through 911 and Cayenne. Professor Ferdinand Porsche's designs are milestones in the history of the automobile, many of them as up- to- the-minute now as they were then. The complex history from the early designs to current development projects forms the...

  • Page 66
    .... In July 2004 the Executive Board approved the construction of a new museum - one of the most spectacular projects in the Porsche company's history, valued at a total cost of 50 million Euro. Building work began in October 2005, and the new museum is scheduled to open its doors in 2007. Even...

  • Page 67
    ... equally have a close-up view of these vehicles returning home after having taken part in historic race events. These opportunities will be open to museum guests by virtue of a 'showroom workshop', in which the company's own exhibits and historic vehicles owned by customers are serviced or restored...

  • Page 68
    64 Museum

  • Page 69
    ... suggests a sincere desire to establish a dialog with the public. Its design and function embody the company's guiding principles and strengths and those of the Porsche brand. In conjunction with the main plant and the Porsche Center, it will act as the company's architectural calling card. 65

  • Page 70
    66 Museum

  • Page 71
    ...spacious exhibition surface on which fascinating vehicle models can be presented. Product history is narrated with the aid of production cars, intermingled with icons from Porsche's motor sport heritage. In this way, technical and design progress over a period of almost 60 years can be followed. 67

  • Page 72
    A prominently situated information counter in the arrival zone will not only answer visitors' questions but also give access to the classic vehicle workshop. As the place where both the company's own exhibits and customers' historic cars are maintained and restored, this is a fundamental element in...

  • Page 73
    ... selection process for cooperation with future partner-suppliers. The quality mark "Made in Germany" has an important part to play when choosing suppliers. Although the manufacture of industrial goods is being transferred increasingly to other countries, Porsche vehicles were once again developed...

  • Page 74
    Porsche and the Environment 2004 ⁄ 05 All the company's divisions are dedicated to environmental protection. Careful use of available resources begins in the vehicle development phase. 70 Finanzen

  • Page 75

  • Page 76
    .... This situation applies not only to the company's sports cars but also to the Cayenne. Diesel engines are also more expensive to manufacture than gasoline engines, which would increase the car's selling prices and therefore dissuade customers from busying and operating them. Optimizing the Gasoline...

  • Page 77
    ... use less fuel without sacrificing the cost and weight advantages or the power density of this form of power unit. Development activities with this aim in mind are in full swing at other automobile manufacturers as well as at Porsche. Porsche plans Cayenne with Hybrid Driveline engine as their main...

  • Page 78
    ...the Zuffenhausen Plant At Porsche, an Environmental Management System is used to monitor environmental protection in production areas. It is a tool that functions excellently and relies to a great extent on the cooperation of each individual employee. It systematically controls all responsibilities...

  • Page 79
    ... to the vehicle production process, 22.5 million Euro were spent in the 2004/05 fiscal year, distinctly more than in the preceding year. A much higher proportion of the costs incurred for environmental protection are incurred, however, in vehicle development. Increasingly stringent exhaust emission...

  • Page 80
    Employees 2004 ⁄ 05 The new location assurance agreement allows work to be organized more flexibly and productively within the framework of negotiated pay conditions. 76

  • Page 81

  • Page 82
    ... Board and the General Works Council during the review year and were concluded before the year came to an end. The new agreement will remain in force until July 31, 2010 and, for the first time, not only applies to production employees in Zuffenhausen but also secures the jobs of all Porsche AG...

  • Page 83
    .... Positive Experience with Part-time Working for Older Employees reached the zero-hours phase on July 31, 2005. In the current fiscal year, employees who have reached age 55 have the option of signing a part-time work agreement. Career Promotion for Junior Employees Keeps the Company Competitive...

  • Page 84
    ... specific needs of the various company locations are regularly developed and implemented. Awareness of Environmental Topics In a manufacturing company such as Porsche, environmental protection is a joint task shared between the permanent environmental management system and every individual employee...

  • Page 85
    ...8.4 82.2 24.4 47.4 13.5 11.9 7.7 84.9 25.5 Social security contributions Workers' compensation contribution Fringe benefits 79.1 3.1 146.3 43.4 80.4 4.5 141.5 42.5 Christmas and special bonuses Employee capital-forming savings plan Vacation bonus Other expenditures Pensions and other retirement...

  • Page 86
    82 Production

  • Page 87
    ... that production went ahead smoothly. In response to strong demand for the new sports car models and the continued high sales figures recorded by the Cayenne, Porsche produced a total of 90,954 vehicles in the 2004/05 fiscal year, an increase of 11.6 percent. 33,048 vehicles left the assembly lines...

  • Page 88
    ...engines needed for new models are also provided at the new plant, and used for employee training. Strong demand for the Cayenne in markets all around the world led to an increase in the Leipzig plant's production capacity in the review year. A 3,000-square meter extension to the production building...

  • Page 89
    ... additional special shifts per year can be worked. The location guarantee, which is to remain valid until the end of July 2010, also contains an agreement to lengthen the assembly lines in Zuffenhausen, so that more vehicles can be produced than is currently possible. All Porsche engines for current...

  • Page 90
    Research and Development 2004 ⁄ 05 Development of additional versions of the 911 played a major part in the work of the engineers in Weissach. 86

  • Page 91

  • Page 92
    During the review year, the Research and Development Division concentrated its activities on further versions of the 911 model line, in particular the Cabriolet and all-wheel-drive versions of the latest model generation. In parallel with this, a new, individual model concept was developed: the ...

  • Page 93
    ... standard equipment. Active as well as passive safety is becoming an increasingly important factor in occupant protection. Porsche Stability Management (PSM) is now standard on the 911 Carrera Cabriolet. It combines the ABS (anti -lock braking system), ASR (traction control), MSR (engine drag torque...

  • Page 94
    ...and the Carrera models with all- wheel drive are now equipped with PSM Plus and a new design of brake booster - both technical features aimed at ensuring maximum safety. The PSM Plus system now used on the 911 Carrera 4 for the first time has two special functions that support the driver in critical...

  • Page 95
    ... clear Porsche family resemblance and the need to distinguish this model externally from the Boxster and 911. The designers were clearly inspired by earlier Porsche models, especially the 904 competition car from the nineteen-sixties. The 904, in its day, formed a link between the 718 RSK Spyder and...

  • Page 96
    ... to improve resistance to abrasion. The ceramic brake is also used on the Carrera GT high -performance sports car. Its developers received the "Engineering Excellence Award" from the Society of Plastic Engineers, one of the most prestigious materials technology associations, during the review year...

  • Page 97
    ... overall systems and satisfied clients. The engineering services market remains hotly contended all over the world. Porsche Engineering is none the less making positive progress in profitable niche-market areas as a premium service provider with special competences. Close, long-term relationships...

  • Page 98
    Motor Sport 2004 ⁄ 05 Porsche stepped up the pace on the world 's racetracks during the review year. The new RS Spyder sport prototype was developed for racing in the USA. 94 Finanzen

  • Page 99

  • Page 100
    ...for a customer-entered Spyder in the 1997 Le Mans 24 - hour race. The new RS Spyder developed by Porsche is entirely new from its carbon fiber and Kevlar outer skin through the engine, chassis, transmission and suspension. The heart of this new competition car is a 3.4 - liter V8 engine designed for...

  • Page 101
    ... were won; Porsche cooperated with selected customer teams by allowing its factory drivers to take the wheel and by way of further development work on the cars. In 2004, factory driver Timo Bernhard, at the wheel of a 911 GT3 RSR entered with Porsche support by the Alex Job Racing Team (USA), scored...

  • Page 102
    ... The new 911 GT3 Cup, based on the latestgeneration 911 model line, had strong appeal for the visiting public. This 400- hp sports racing car has a number of special features, for example a sequential-shift six-speed gearbox, extensively revised aerodynamics and the Porsche PCCB ceramic brake system...

  • Page 103
    99

  • Page 104

  • Page 105
    Consolidated Financial Statements 2004 ⁄ 05

  • Page 106
    Consolidated Income Statement of the Porsche Group for the Period from August 1, 2004 to July 31, 2005 Note 2004/05 Tâ,¬ 2003/04 Tâ,¬ Sales Changes in inventories and own work capitalized Total operating performance Other operating income Cost of materials Personnel expenses Amortization and ...

  • Page 107
    ... for investments in non-current assets Cash paid for the acquisition of consolidated entities 1) Receivables from financial services Cash flow from investing activities Change in investments in securities Cash flow from investing activities including investments in securities 411,563 - - 914,404...

  • Page 108
    ... Group as of July 31, 2005 Note July 31, 2005 Tâ,¬ July 31, 2004 Tâ,¬ Assets Non-current assets Intangible assets Property, plant and equipment Financial assets Leased assets Current assets Inventories Trade receivables Receivables from financial services Other receivables and assets Securities...

  • Page 109
    ...31, 2003 Dividends paid Currency change Other transactions not affecting income Changes to consolidated group Translation differences Financial instruments pursuant to IAS 39 Net profit As of July 31, 2004 Dividends paid Currency change Other transactions not affecting income Translation differences...

  • Page 110
    ... objective of Porsche AG and its subsidiaries ("Porsche Group") is the production and sale of vehicles and engines of all kinds as well as of parts and components for such and other technical products. The business objective also includes the performance of development and design work, in particular...

  • Page 111
    .... The consolidated financial statements and group management report of Porsche AG were released to the Supervisory Board by the Executive Board by resolution dated October 27, 2005. First-Time Adoption of IFRS Effective August 1, 2003, Porsche adopted IFRS as its basis for group accounting for the...

  • Page 112
    ...- 108,357 - 995 1,275 - 575,327 - 683,404 327,228 1,108,477 21,961 922,433 2,380,099 1) Current assets Inventories Trade receivables Receivables from financial services Other receivables and assets Securities, cash and cash equivalents 567,877 271,084 - 1,401,392 2,791,412 5,031,765 57,665 39,651...

  • Page 113
    ... as receivables from financial services instead of leased assets. The total change in leased assets amounts to Tâ,¬ 575,327. 2) Inventories Inventories are measured at full production-related costs. As a simplified method of measurement, the average method is used. Where the conditions of IAS 11...

  • Page 114
    ... thus increased by Tâ,¬ 392,792 compared to the consolidated balance sheet under German commercial law. 10) Deferred income Those parts of the asset-backed financing which were reported under deferred income in accordance with HGB were reclassified to financial liabilities. 110 Group Notes...

  • Page 115
    ...116 694,116 The main differences are explained below: 1) Sales and total operating performance The main effects of the transition to IFRS on sales result from reclassification of assets from operating leases to finance leases and the changed accounting for development services, which are recognized...

  • Page 116
    ... to HGB 1,754,530 July 31, 2004 Tâ,¬ 2,323,467 Reconciliation to IFRS: Intangible assets Measurement of inventories Long-term construction contracts Leases Measurement of financial instruments at market value Changes to consolidated group Pension provisions Tax provisions and other provisions...

  • Page 117
    ... the German Accounting Standards Board, which is applicable for the last time for fiscal years commencing prior to January 1, 2005, was observed. The following recognition and measurement methods which differ from German law were used in these consolidated financial statements: Development costs are...

  • Page 118
    ..., either directly or indirectly ("control" concept). The group of fully consolidated entities includes Porsche AG and 22 German (previous year: 22) and 57 international (previous year: 52) subsidiaries, including special purpose securities funds and variable interest entities. Porsche Design Great...

  • Page 119
    ... mean rate as of the balance sheet date. Exchange rate gains and losses as of the balance sheet date are recorded in the income statement. The following key exchange rates for the Porsche consolidated financial statements were used for currency translation: Closing rate July 31, 2005 July 31, 2004...

  • Page 120
    ... to ownership remain with the Porsche Group as the lessor. These are vehicles from operating leases. They are measured at cost less systematic straight-line depreciation over their expected useful life or the shorter contract period taking account of calculated residual values. 116 Group Notes...

  • Page 121
    ... a group of assets or the legal entity. The recoverable amount is the higher of an asset's net selling price and its value in use. The net selling price is the amount obtainable from the sale of an asset at customary market conditions less the costs of disposal. Value in use is determined using the...

  • Page 122
    ...are traded on an active market. If there is no active market for a financial instrument, fair value is calculated using appropriate actuarial methods such as recognized option price models or discounting future cash flows with the market interest rate. Amortized cost corresponds to costs of purchase...

  • Page 123
    .... Equity investments disclosed as financial assets also constitute available-for-sale investments and are measured at fair value. If no active market is available and fair value cannot reasonably be expected to be determined, they are measured at cost. Financial assets are regularly subjected to an...

  • Page 124
    ...of completion. Production-related expenses are recognized upon delivery or utilization of the service, while all other expenses are recognized as an expense as incurred. The same applies for non-capitalizable development costs. Provisions for warranty claims are recognized at the time of sale of the...

  • Page 125
    ... in Foreign Exchange Rates Consolidated and Separate Financial Statements Investments in Associates Financial Instruments: Disclosure and Presentation Earnings Per Share Financial Instruments: Recognition and Measurement All other standards issued by the end of the fiscal year 2004/05 and revisions...

  • Page 126
    ... to the Consolidated Income Statement (1) Sales 2004/05 Tâ,¬ Division Vehicles Parts and accessories Other 5,278,254 685,039 610,680 6,573,973 2003/04 Tâ,¬ 4,875,226 661,324 611,181 6,147,731 The breakdown of sales by geographic segment and business division can be seen under segment reporting...

  • Page 127
    ... Other operating expenses include expenses for warranty commitments, administration and sales, IT services as well as insurance policies, rent and expenses for various risks. Exchange losses amount to Tâ,¬ 10,962 (previous year: Tâ,¬ 13,087). (7) Financial result 2004/05 Tâ,¬ Income from equity...

  • Page 128
    ... year: Tâ,¬ 22,712), as these profits are to be used for the expansion of business activities at the different locations. The following reconciliation shows the differences between the theoretical income tax expense expected based on the calculated tax rate and the current income tax expense: 2004...

  • Page 129
    ... (10) Earnings per share 2004/05 Earnings after tax Minority interests Profit allocable to shareholders of Porsche AG Profit allocable to ordinary shares Profit allocable to preference shares Average number of ordinary shares outstanding Average number of preference shares outstanding Earnings per...

  • Page 130
    ... using the direct method. The cash inflows and outflows from investing activities in the current fiscal year include additions to property, plant and equipment and financial assets as well as additions to intangible assets. Changes in leased assets and changes in receivables from financial services...

  • Page 131
    ... to the Consolidated Balance Sheet (12) Non-current assets Intangible assets include development services acquired, tool cost subsidies, capitalized development costs for vehicles, goodwill, licenses and software. Research and development costs of Tâ,¬ 339,269 were recorded in the fiscal year with...

  • Page 132
    ... of intangible assets Franchises, Development industrial and costs similar rights Tâ,¬ Tâ,¬ Goodwill Advance payments made Tâ,¬ Total Tâ,¬ Tâ,¬ Cost As of August 1, 2003 Currency differences Changes to consolidated group Additions Reclassifications Disposals As of July 31, 2004 Amortization and...

  • Page 133
    ...Tâ,¬ Other equipment, furniture and fixtures Tâ,¬ Advance payments and assets under construction Tâ,¬ Total Tâ,¬ Cost As of August 1, 2003 Currency differences Changes to consolidated group Additions Reclassifications Disposals As of July 31, 2004 Amortization and depreciation As of August 1, 2003...

  • Page 134
    Development of financial assets Other equity investments Tâ,¬ Cost As of August 1, 2003 Currency differences Changes to consolidated group Additions Reclassifications Disposals As of July 31, 2004 Amortization and depreciation As of August 1, 2003 Currency differences Additions Disposals As of July ...

  • Page 135
    ... of leased assets and of total non-current assets Leased assets Tâ,¬ Total non-current assets Tâ,¬ Cost As of August 1, 2003 Currency differences Changes to consolidated group Additions Reclassifications Disposals As of July 31, 2004 Amortization and depreciation As of August 1, 2003 Currency...

  • Page 136
    In its financial services division, the Porsche Group acts as lessor, primarily leasing its own products. The remaining terms of the minimum lease payments from non-cancellable operating leases of Tâ,¬ 345,167 (previous year: Tâ,¬ 402,311) are as follows: July 31, 2005 July 31, 2004 Tâ,¬ Due within...

  • Page 137
    ...totals Tâ,¬ 59,908 (previous year: Tâ,¬ 92,814). Contracts and parts of contracts billed to customers are reported under trade receivables. Of the receivables, Tâ,¬ 21,252 is due in more than one year (previous year: Tâ,¬ 3,305). (15) Receivables from financial services July 31, 2005 July 31, 2004...

  • Page 138
    ... minimum lease payments for finance leases that are subject to risk amount to Tâ,¬ 36,814 (previous year: Tâ,¬ 34,018). Receivables from financial services are generally secured by the assignment of collateral, guarantees or land charges. (16) Other receivables and assets Other assets of Tâ,¬ 281...

  • Page 139
    ...from premiums and is unchanged since the previous year. Revenue reserves and other comprehensive income Revenue reserves relate exclusively to other revenue reserves. Revenue reserves include the profits of Porsche AG and its consolidated subsidiaries earned in previous years and the reporting year...

  • Page 140
    .... The financial statements of Porsche AG as of July 31, 2005 report retained earnings of â,¬ 264,000,000. The following appropriation of retained earnings will be proposed at the shareholders' meeting. Payment of a dividend of EUR 4.94 per ordinary share ISIN Nr. DE0006937709 (securities ident. no...

  • Page 141
    ... are recognized at service cost as of the measurement date. The benefit obligation for active employees increases annually by the interest cost plus the present value of the new benefit entitlements earned in the current fiscal year. The majority of the benefits pertain to Porsche AG. In addition...

  • Page 142
    ... and similar obligations developed as follows compared to the previous year: 2004/05 Tâ,¬ Carrying amounts as of August 1 Changes in the consolidated group Retirement benefit costs Benefit payments made Contributions to funds Employee contributions to company pension plan Carrying amounts as...

  • Page 143
    ... for warranty claims, marketing services, bonuses and discounts. Sundry provisions principally comprise provisions for goods and services not yet invoiced, litigation risks and disposal obligations for old vehicles. Other provisions developed as follows: As of Aug.1, 2004 Tâ,¬ Exchange rate...

  • Page 144
    ... banks serve short-term financing purposes. The nominal interest rate varies from 0.25% to 4.5% depending on the currency, maturity and contractual terms and conditions (previous year: 0.25% to 5.25%). They are recognized at amortized cost. 140 Notes to the Consolidated Financial Statements Notes...

  • Page 145
    ... the financial services business which arose in the context of non-recourse financing, sale-and-leaseback and asset-backed securities programs. Collateral of Tâ,¬ 362,950 (previous year: Tâ,¬ 301,918) has been provided for other financial liabilities. The total volume of asset-backed securities...

  • Page 146
    ...financial instruments at market value 81,225 146,470 13,371 14,653 255,719 80,334 144,089 13,371 2,552 240,346 891 2,381 - 12,101 15,373 There are no other liabilities due in more than five years. (26) Deferred income July 31, 2005 July 31, 2004 Tâ,¬ Other deferred income Special lease payments...

  • Page 147
    ... The market value of financial instruments is determined by reference to stock market listings, reference prices or recognized calculation models. The following term structure of interest rates was used were appropriate: EUR Interest rate for six months Interest rate for one year Interest rate for...

  • Page 148
    ...other currencies within three years. In the fiscal year 2004/05 there were also stock price hedging options with a market value of Tâ,¬ 11,093. July 31, 2005 Nominal Total volume market value Tâ,¬ Tâ,¬ July 31, 2004 Nominal Total volume market value Tâ,¬ Tâ,¬ Assets Currency hedge Interest hedge...

  • Page 149
    ...July 31, 2004 Tâ,¬ Guarantees Warrenties Collateral for third-party liabilities 1,300 68,357 1,076 Tâ,¬ 378 68,738 1,535 As a partner of Venture Capital Beteiligung GbR, Porsche AG is liable within the scope of the provisions of law. Other financial obligations in the Group total EUR 250.0 million...

  • Page 150
    ... region is based on the location of the customers. According to the different risk and income structure, the Group is divided into the regions Germany, Europe without Germany, North America, and rest of the world. Segmentation by business division shows the vehicles and financial services divisions...

  • Page 151
    ... Porsche Group's sales revenues. Intersegment sales shows the sales effected between the segments. Earnings before financial income and income tax constitutes the segment result. The segment result includes the result from lease transactions as well as the result from customer and dealer financing...

  • Page 152
    ... 346.1 409.3 2003/04 Mio â,¬ 2,076.6 3,483.5 853.8 5,206.7 2,622.1 505.3 262.5 668.3 Segment information by business division Vehicles 2004/05 Mio â,¬ Third-party sales Intersegment sales Segment assets Capital expenditure 6,220.9 151.2 5,536.1 368.9 2003/04 Mio â,¬ 5,821.8 141.4 5,445.5 632.3 The...

  • Page 153
    .../05 Mio â,¬ 6,574.0 - 9,710.1 919.0 2003/04 Mio â,¬ 6,147.7 - 9,014.3 1,111.1 Financial services 2004/05 2003/04 Mio â,¬ Mio â,¬ 1,013.0 1,868.9 2,881.9 Consolidation 2004/05 2003/04 Mio â,¬ Mio â,¬ - 562.5 12.6 - 549.9 Group 2004/05 2003/04 Mio â,¬ Mio â,¬ 2,428.4 7,281.7 9,710.1 971.1 1,650...

  • Page 154
    ... do not control it, including close family members. In the fiscal year 2004/05 this concerns members of the Supervisory Board and the Executive Board of Porsche AG as well as their close family members. The volume of trade in the course of ordinary operations in the vehicles and parts business with...

  • Page 155
    (33) Declaration on the German Corporate Governance Code The Executive Board and Supervisory Board of Porsche AG have issued the declaration required by § 161 German Stock Corporation Act (AktG) in the annual report 2004/05. It is made permanently accessible to the shareholders on the homepage www...

  • Page 156
    ... Porsche Cars Great Britain Ltd., Reading, United Kingdom Porsche Financial Services Great Britain Ltd., Reading, United Kingdom Porsche Retail Group Ltd., Reading, United Kingdom Porsche Cars North America, Inc., Wilmington / Delaware, USA Porsche Liquidity LLC, Wilmington / Delaware, USA Porsche...

  • Page 157
    ... consolidated financial statements and the combined management report for the fiscal year from August 1, 2004 to July 31, 2005 satisfy the conditions for the Company's exemption from its obligation to prepare consolidated financial statements and the group management report in accordance with German...

  • Page 158
    ...Eterna S.A. 2) Familie Porsche AG Beteiligungsgesellschaft 2) Dr. Wolfgang Porsche Porsche Cars North America, Inc. 2) Porsche Cars Great Britain Ltd. 2) Porsche Italia S.p.A. 2) Porsche Ibérica S.A. 2) Porsche Bank AG 2) Porsche Holding GmbH (Chairman) 2) Porsche Ges.m.b.H. (Chairman) 2) PGA Group...

  • Page 159
    ...Porsche-Information-KommunikationServices GmbH (Chairman) 2) Mieschke Hofmann & Partner Gesellschaft für Management- und IT-Beratung mbH (Chairman) 2) CTS Fahrzeug-Dachsysteme GmbH (Chairman) 2) Hans Riedel Porsche Cars North America, Inc. 2) Porsche Enterprises, Inc. 2) Porsche Financial Services...

  • Page 160
    ... Sheet of Dr. Ing. h.c. F. Porsche AG as of July 31, 2005 in accordance with HGB 1) July 31, 2005 Tâ,¬ Assets July 31, 2004 Tâ,¬ Fixed Assets Intangible assets Property, plant and equipment Financial assets Current Assets Inventories Receivables Other assets Securities Cash and cash equivalents...

  • Page 161
    ... of the Dr. Ing. h.c. F. Porsche AG for the Period August 1, 2004 to July 31, 2005 in accordance with HGB 2004/05 Tâ,¬ Sales Change in inventories and own work capitalized Total operating performance Other operating income Cost of materials Personnel expenses Depreciation/amortization Other...

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  • Page 164
    Imprint Publisher: Dr. Ing. h.c. F. Porsche AG, Stuttgart -Zuffenhausen © 2005 Photographs: Stefan Warter, Berlin Translations: CB Übersetzungen, Munich Design: Atelier Lagally, Stuttgart Blocks: L & N-Litho, Waiblingen Printed by: Druckhaus Münster, Kornwestheim

  • Page 165
    ...10 % 99,8 % Porsche Design GmbH, Zell am See, Austria 0,2% 100 % CTS Technik und Design GmbH, Hamburg 100 % Porsche Classic GmbH, Ludwigsburg 100 % Porsche Financial Services Japan K.K., Tokyo, Japan 100 % Porsche Design Studio North America Inc., Los Angeles ⁄ California, USA 99% CTS...

  • Page 166
    ..., USA 100 % Porsche Funding LLC, Wilmington ⁄ Delaware, USA 100 % Porsche Financial Management Services Ltd., Dublin, Ireland 100 % Porsche Financial Services Inc., Wilmington ⁄ Delaware, USA 100 % Euro Select Quality Parts Inc., Wilmington ⁄ Delaware, USA 100 % Porsche Liquidity...

  • Page 167
    ...Porscheplatz 1 D -70435 Stuttgart Porsche Group worldwide Telephone: +49 (0) 711 911- 0 Fax: +49 (0) 711 911- 257 77 http://www.porsche.com Financial Press and Investor Relations Telephone: +49 (0) 711 911- 25869 Fax: +49 (0) 711 911- 26375 This annual report is available in German and English. In...

  • Page 168
    Dr. Ing. h.c. F. Porsche Aktiengesellschaft D -70432 Stuttgart Telephone +49 (0)711 911- 0