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97
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Book value
in million euros Dec. 31, 2008 Dec. 31, 2009
Cash-generating units
Trademark rights
and other rights with
indefinite useful lives
Goodwill Trademark rights
and other rights with
indefinite useful lives
Goodwill
Detergents
338 661 336 637
Household cleaners
240 732 224 717
Total Laundry & Home Care 578 1,393 560 1,354
Retail products
466 1,006 450 982
Hair salon products 13 48 13 49
Total Cosmetics/Toiletries 479 1,054 463 1,031
Adhesives for Craftsmen,
Consumers and Building
2)
44 389 44 390
Packaging, Consumer Goods and
Construction Adhesives
53
1,726 39 1,745
Transport, Metal, General Industry and Electronics
43 1,660 41 1,617
Total Adhesive Technologies 140 3,775
1) 124 3,752
1)
Adjusted following finalization of purchase price allocation relating to the acquisition of the National Starch businesses
2) The cash-generating units Building Adhesives and Adhesives for Craftsmen and Consumers were combined in 2009 to facilitate more effective business management
The assessment for goodwill impairment according to
the fair-value-less-cost-to-sell approach is based on future
estimated cash flows which are obtained from corporate
budgets with a three-year financial forecasting horizon.
For the period after that, a growth rate in a bandwidth
between 1 and 2 percent in the cash flows is assumed for
the purpose of impairment testing. The US dollar to euro
exchange rate applied is 1.33. Taking into account specific
tax effects, the cash flows in all cash-generating units are
discounted at different rates for the cost of capital (WACC)
in each business sector: 7 percent after tax for Laundry &
Home Care and Cosmetics/Toiletries, and 8 percent after
tax for Adhesive Technologies.
In the Laundry & Home Care business sector, we have as-
sumed an average annual increase in sales during the three-
year forecasting horizon of approximately 4 percent with a
slight increase in share of world market.
Sales growth in the Cosmetics/Toiletries business sector over
the three-year forecasting horizon is budgeted at around
2 percent per year. With the cosmetics market relevant to
Henkel expected to grow at an annual rate of less than 1 per-
cent, this would mean an increase in market share.
The anticipated average sales growth during the three-
year forecasting horizon in the Adhesive Technologies business
sector is approximately 5 percent.
In all the business sectors, we have assumed that a future
increase in the price of raw materials can be largely offset
by economies in purchasing. In conjunction with further
measures to improve efficiency and pro-active management
of the portfolio, we anticipate achieving higher gross mar-
gins in all the business sectors.
We have not recognized any goodwill impairment losses
as a result of the impairment test.
Goodwill impairment losses of 35 million euros were
recorded in conjunction with the reclassification of assets to
the category “Assets held for sale.” Likewise, the discontinu-
ation of product lines led to impairment losses of 11 million
euros. Goodwill impairment losses totaling 46 million euros
are reported under other operating charges (see Note 7,
page 92).
The trademark rights and other rights with an indefinite
useful life are established in their markets and will continue
to be intensively promoted in the future.
In the annual impairment tests for trademark rights
and other rights with indefinite useful lives valued at
1,147 million euros, an impairment loss of 5 million euros
was identified.
Impairment charges on trademark rights and other rights
with definite useful lives relate primarily to assets acquired
in previous years attributable to the Adhesive Technologies
business sector.
98 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
(12) Property, plant and equipment
Cost
in million euros
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
At January 1, 2008 1,624 2,653 885 175 5,337
Changes in the Group /Acquisitions 161 157 12 12
342
Additions 64 123 85 201
473
Disposals1) – 40 – 233 –105 –11
– 389
Reclassifications 134 72 23 – 235
– 6
Translation differences – 5 – 20 –13 – 6
– 44
At December 31, 2008 /January 1, 2009 1,938 2,752 887 136 5,713
Changes in the Group /Acquisitions – 2 1 –
3
Additions 60 134 62 88
344
1) of which assets held for sale 2008 – 31 –147 – 8 – 2
–188
Accumulated depreciation
in million euros
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
At January 1, 2008 762 1,876 622 – 3,260
Changes in the Group /Acquisitions –1 – 2 –1 –
– 4
Write-ups – – – –
–
Scheduled depreciation 50 160 88 –
298
Impairment losses 32 110 6 1
149
Disposals1) – 25 – 223 – 82 –
– 330
Reclassifications – – – –
–
Translation differences 4 – 22 – 3 –
– 21
At December 31, 2008 /January 1, 2009 822 1,899 630 1 3,352
Impairment losses 19 46 3 1
69
Disposals1) – 67 – 217 – 63 –
– 347
Reclassifications 3 – 4 1 –
–
Translation differences – 5 –7 –1 –1
–14
At December 31, 2009 828 1,873 664 – 3,365
1) of which assets held for sale 2009 –16 –14 – 2 –
– 32
1) of which assets held for sale 2008 –18 –144 –7 –
–169
99
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Net book value
in million euros
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
Additions are stated at purchase or manufacturing cost.
The latter includes direct costs and appropriate propor-
tions of overheads. Interest charges on borrowings are not
included, as Henkel does not currently have at its disposal
any qualifying assets in accordance with IAS 23 “Borrowing
Costs.” An asset is deemed to qualify where it necessarily
takes a substantial period of time to be made ready for its
intended use or sale. Cost figures are shown net of invest-
ment grants and allowances. There were liabilities secured
by mortgages at December 31, 2009 of 21 million euros
(2008: 25 million euros). The periods over which the assets
are depreciated are based on their estimated useful lives as
set out on page 95. Scheduled depreciation and impair-
ment losses recognized are disclosed in the consolidated
statement of income accord ing to the functions in which
the assets are used.
Impairment losses amounting to 21 million euros were in-
curred in relation to the integration of the National Starch
businesses.
(13) Financial assets
Shares in affiliated companies and other investments dis-
closed in financial assets are measured initially at cost
and subsequently at their fair values. Shares in affiliated
companies and other investments for which the fair value
cannot be reliably determined are measured subsequently
at amortized cost.
The shares in associated companies are accounted for
using the at-equity method at the appropriate proportion
of their net assets.
Cost
in million euros Affiliated
companies
Investments in
associates
Other
investments
Total
At January 1, 2008 19 495 32 546
Changes in the Group /Acquisitions 2 1 –
3
Translation differences – 78 –
78
At December 31, 2008 /Januar 1, 2009 21 1 9 31
Changes in the Group /Acquisitions – 4 – –
– 4
At December 31, 2009 17 1 8 26
1) of which assets held for sale 2008 – – –12 –12
100 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Accumulated write-downs
in million euros Affiliated
companies
Investments in
associates
Other
investments
Total
At January 1, 2008 2 – 16 18
Reclassifications – – –
–
Translation differences – – –
–
At December 31, 2008/January 1, 2009 3 – 4 7
Changes in the Group/Acquisitions –1 – –
–1
Write-ups – – –
–
Write-downs – – –
–
Disposals – – –
–
Reclassifications – – –
–
Net book value
in million euros Affiliated
companies
Investments in
associates
Other
investments
Total
(14) Other non-current financial assets
Other non-current financial assets
in million euros Dec. 31, 2008 Dec. 31, 2009
Financial receivables from
Total 172 340
With the exception of derivatives, other financial assets
are stated at amortized cost. As soon as risks are identified,
valuation allowances are set up. All derivative financial in-
struments are measured initially at cost and subsequently
at their fair values on the balance sheet date.
Miscellaneous financial assets include receivables from
a trustee arising from deferred compensation of 70 million
euros (2008: 50 million euros) together with receivables
from employees and from insurance policies.
(15) Other non-current assets
Other non-current assets comprise miscellaneous tax re-
ceivables and, in particular, sundry prepaid expenses and
deferred charges.
of an asset or liability and its tax base
» Unused tax losses which are expected to be utilized
» Consolidation procedures at Group level
The allocation of deferred tax assets to the various bal-
ance sheet headings is shown in Note 9 (Taxes on income,
pages 92 to 94).
101
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
(17) Inventories
Inventories are stated at purchase or manufacturing cost.
Inventories are measured using the FIFO (“first in, first
out”) method or the weighted average cost formula as
appropriate.
other costs prior to the finished products store), as well as
production-related administrative expenses and pension
costs for employees engaged in the production process, and
production-related depreciation charges. Interest charges
incurred during the period of manufacture are, however,
not included.
Inventories are written down to their net realizable value
if, on the basis of the lower of quoted or market prices,
this is lower than cost at the balance sheet date. The write-
down, based on the gross value, was 113 million euros (2008:
87 million euros).
Analysis of inventories
in million euros Dec. 31, 2008 Dec. 31, 2009
Raw materials and supplies
472 368
Work in process
65 50
Total 1,482 1,218
(18) Trade accounts receivable
Trade accounts receivable are due within one year. Valua-
tion allowances are recognized in respect of specific risks as
appropriate. Total valuation allowances of 32 million euros
(2008: 36 million euros) have been recognized. As in 2008,
there are no trade accounts receivable relating to goods and
services which have been sold to a factoring company but are
still included as assets in the balance sheet because the risk
of default has not been fully transferred to the factor.
(19) Other current financial assets
Other current financial assets
in million euros Dec. 31, 2008 Dec. 31, 2009
Amounts receivable from non-
consolidated affiliated companies
3–
third parties
166 38
Derivatives with positive fair values
241 70
Miscellaneous current
financial assets
156 104
Total 575 214
With the exception of derivatives, other current financial
assets are stated at amortized cost approximating to their
fair values. Valuation allowances are recognized if any risks
associated with them are identified. All derivative financial
instruments are measured initially at cost and subsequently
at their fair values on the balance sheet date.
Miscellaneous current financial assets include the
following:
» Amounts due from employees of 10 million euros (2008:
8 million euros)
27 million euros (2008: 20 million euros)
(20) Other current assets
Other current assets comprise other tax receivables of
157 million euros (2008: 165 million euros), payments on
account of 18 million euros (2008: 18 million euros) and
various prepaid expenses and deferred charges.
(21) Liquid funds/Marketable securities
Liquid funds/Marketable securities
Total 338 1,110
102 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Marketable securities are stated at their fair values at the
balance sheet date. Value changes are recognized in equity
(explained in Note 42 on pages 112 to 118).
(22) Assets held for sale
The remeasurement of the assets held for sale at the lower
of their carrying amount and fair value less costs to sell
resulted in an impairment charge of 37 million euros. This
relates chiefly to assets of the Adhesive Technologies busi-
ness sector that are no longer part of the company’s core
business.
(23) Subscribed capital
Subscribed capital
in million euros Dec. 31, 2008 Dec. 31, 2009
Ordinary bearer shares
260 260
Preferred bearer shares
178 178
Capital stock 438 438
Comprising 259,795,875 ordinary shares and 178,162,875 non-voting
preferred shares
According to Art. 6 (5) of the Articles of Association, the
personally liable partner is authorized – subject to the ap-
proval of the Shareholders’ Committee and of the Supervi-
sory Board – to increase the capital of the corporation in
one or more installments at any time up to April 9, 2011, up
to a total of 25.6 million euros by issuing new non-voting
preferred shares to be paid up in cash (authorized capital).
The personally liable partner is authorized – subject to the
approval of the Shareholders’ Committee and of the Super-
visory Board – to exclude the statutory pre-emptive rights
of existing shareholders. Pre-emptive rights may only be ex-
cluded, however, for fractional entitlements or on condition
that the issue price for the new shares is not significantly
less than the quoted market price of shares of the same
category at the time the issue price is finally fixed.
At the Annual General Meeting of Henkel AG & Co. KGaA
on April 20, 2009, the personally liable partner was, with
the simultaneous withdrawal of the authorization granted
in the previous year, authorized to purchase at any time
up to October 19, 2010, ordinary or preferred shares in the
corporation not exceeding 10 percent of the capital stock.
The personally liable partner was authorized – subject
to the approval of the Shareholders’ Committee and of the
Supervisory Board – to dispose of treasury shares acquired,
without first offering them to existing shareholders, by:
» selling them to third parties or transferring them in other
ways for the purpose of acquiring businesses, parts of busi-
nesses or investments in businesses or forming business
combinations, or
» selling them for cash in a way other than on the stock
market or via an offer addressed to all the shareholders,
provided that the selling price of the shares is not signifi-
cantly lower than the quoted market price at the time of
the sale; in this case, the number of shares sold, together
with the new shares issued out of authorized capital, to
the exclusion of the pre-emptive rights of existing share-
holders, must not exceed 10 percent of the existing capital
stock when the shares are issued or sold.
The personally liable partner was also authorized – subject
to the approval of the Shareholders’ Committee and of the
Supervisory Board – to cancel treasury stock without further
resolution in General Meeting being required.
Treasury stock held by the corporation on December 31,
2009 amounted to 4,541,870 preferred shares. This represents
1.04 percent of the capital stock and a proportional nominal
value of 4.5 million euros. Originally, 992,680 shares were
purchased in the year 2000, an amount of 808,120 shares was
purchased in 2001 and 694,900 shares were purchased in
2002. This corresponds to a total of 2,495,700 shares or, fol-
lowing the share split implemented in 2007 (at a ratio of 1:3),
7,487,100 shares. Options were exercised for the first time
under the Stock Incentive Plan in 2004. Since 2004, taking
the share split into account, the exercise of options has led
to a reduction of 2,945,230 in treasury stock held, with a pro-
portional nominal value of 2.9 million euros (0.67 percent
of the capital stock). In 2009, the exercise of options led to
103
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
a reduction of 292,900 shares from treasury stock held. The
proportional nominal value of the capital stock amounted
to 0.3 million euros (0.07 percent). The selling prices were
based on the stock market prices prevailing at the time of
disposal. Total proceeds on disposal were 9.9 million euros
and this was recognized directly in equity.
(24) Capital reserve
The capital reserve comprises the amounts received in previ-
ous years in excess of the nominal value of preferred shares
and convertible warrant bonds issued by Henkel AG & Co.
KGaA.
(25) Retained earnings
Included in retained earnings are the following:
» Amounts allocated in the financial statements of Henkel
AG & Co. KGaA in previous financial years
» Amounts allocated from consolidated net earnings less
minority interests
» Buy-back of treasury stock by Henkel AG & Co. KGaA at
cost and the gain on their disposal
» The recognition in equity of actuarial gains and losses
(26) Gains and losses recognized in equity
The items under this heading represent the differences on
translation of the financial statements of foreign subsidiary
companies and the effects of the revaluation of derivative
financial instruments and available-for-sale financial assets
recognized in equity. The derivative financial instruments
take the form of either cash flow hedges or hedges of a net
investment in a foreign entity.
Mainly as a result of the decrease in the value of the US
dollar against the euro, the negative translation difference
at December 31, 2009 was increased by 104 million euros
compared to December 31, 2008 (2008: negative translation
difference decreased by 103 million euros).
(27) Minority interests
The minority interests comprise the shares of third parties
in the equity of a number of companies included in the
consolidation.
(28) Pensions and similar obligations
Employees in companies included in the consolidated finan-
cial statements have entitlements under company pension
plans which are either defined contribution or defined
benefit plans. These take different forms depending on the
legal, financial and tax regime in each country. The level of
benefits provided is based, as a rule, on the length of service
and earnings of the person entitled.
The defined contribution plans are structured in such
a way that the corporation pays contributions to public or
private sector institutions on the basis of statutory or con-
tractual terms or on a voluntary basis and has no further
obligations regarding the payment of benefits to employees.
The contributions for defined contribution plans for the
year under review amounted to 111 million euros (2008:
98 million euros). In 2009, payments to public sector institu-
tions totaled 57 million euros (2008: 58 million euros) and
payments to private sector institutions totaled 54 million
euros (2008: 40 million euros).
In defined benefit plans, the liability for pensions and
other post-employment benefits is calculated at the pres-
ent value of the future obligations (projected unit credit
method). This actuarial method of calculation takes fu-
ture trends in wages, salaries and retirement benefits into
account.
To provide protection under civil law of the pension
entitlements of future and current pensioners against in-
solvency, we have allocated the proceeds of the bond issued
in 2005 and certain other assets to Henkel Trust e.V. The
trustee invests the cash with which it has been entrusted in
the capital market in accordance with investment policies
laid down in the trust agreement.
104 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Trends in wages, salaries and retirement benefits
in percent Germany USA Rest of world
1)
2008 2009 2008 2009 2008 2009
Discount factor
5.9 4.95 6.4 5.25 5.6 5.1
1) Weighted average
Present value of pensions and
similar obligations at December 31, 2008
in million euros Germany USA Rest of world Total
At January 1, 2008 1,937 685 496 3,118
Changes in the Group 7 178 163 348
Translation differences – 47 – 37 10
Actuarial gains/losses –130 – 50 – 67 – 247
Current service cost 36 28 26
90
of which funded obligations 1,706 641 484
2,831
Fair value of plan assets at December 31, 2008
in million euros Germany USA Rest of world Total
At January 1, 2008 1,613 463 385 2,461
Changes in the Group – 95 144
239
Translation differences – 27 – 38
–11
Employer’s contributions to pension funds 15 79 63
157
Employees’ contributions to pension funds 2 – 1
3
105
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Net pension cost in 2008
in million euros Germany USA Rest of world Total
Current service cost 36 28 26
90
Expected return on plan assets –102 – 35 – 29
–166
Net pension cost 34 16 28 78
Present value of pensions and
similar obligations at December 31, 2009
in million euros Germany USA Rest of world Total
At January 1, 2009 1,826 857 565 3,248
Changes in the Group
– – 1 1
Translation differences
– – 30 10 – 20
Actuarial gains/losses
216 95 97 408
Current service cost 53 17 24
94
Gains/losses arising from the termination and curtailment of plans – –4 –1
– 5
Interest expense 107 52 33
192
Retirement benefits paid out of plan assets – 5 – 42 – 30
– 77
Employer’s payments for pensions and similar obligations –127 – 21 –11
–159
Past service cost
– – 2 2
At December 31, 2009 2,070 924 690 3,684
of which unfunded obligations 113 223 86
422
of which funded obligations 1,957 701 604
3,262
Fair value of plan assets at December 31, 2009
in million euros Germany USA Rest of world Total
At January 1, 2009 1,511 490 444 2,445
Changes in the Group – – –
–
Translation differences – – 20 13
– 7
106 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Net pension cost in 2009
in million euros Germany USA Rest of world Total
Current service cost 53 17 24
94
Amortization of past service costs – 1 –1
–
Reconciliation of overfunding/underfunding and reported provisions
for pensions and similar obligations as of December 31, 2009
in million euros Germany USA Rest of world Total
Overfunding/underfunding of obligations – 340 – 357 –147
– 844
Plan assets reported as net assets – – –7
–7
Amount not recognized due to asset ceiling – – –12
–12
Actuarial gains and losses are recognized in the year in
which they arise as part of the pension provision and in-
cluded in the statement of comprehensive income in accor-
dance with IAS 19.93B “Employee Benefits.” As of December
31, 2009, accumulated actuarial losses of 1,159 million euros
(2008: 820 million euros) had been offset against retained
earnings.
We have derived the expected return on total plan as-
sets from the weighted expected long-term return on the
various categories of assets.
Of the amounts added to the provision in 2009, an amount
of 94 million euros (2008: 90 million euros) is included
in operating profit (pension costs as part of payroll costs,
page 119) and an expense of –45 million euros (2008: ex-
pense of –13 million euros) in financial result ( page 92).
The expenses shown in operating profit and all the releases
from provisions are allocated by function, depending on the
sphere of activity of the employees. The employer’s contribu-
tions in respect of state pension provisions are included as
“Social security contributions and staff welfare costs” under
Note 43. In 2009, payments into the plan assets amounted
to 278 million euros (2008: 157 million euros).
Analysis of plan assets
in million euros Dec. 31, 2008 Dec. 31, 2009
Fair value in % Fair value in %
Investment funds
Invested in shares
441 18.1 508 17.9
Invested in bonds
939 38.4 1,256 44.2
Invested in investment funds
125 5.1 521 18.4
Invested in cash
616 25.2 262 9.2
107
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
At December 31, 2009, other assets making up the plan assets
included the present value of a non-current receivable of
43 million euros (2008: 43 million euros) relating to claims
pertaining to a hereditary building lease assigned by Henkel
AG & Co. KGaA to Henkel Trust e.V. Also shown here is a
claim of 102 million euros (2008: 107 million euros) against
Cognis for indemnification of pension obligations.
In 2009, Henkel AG & Co. KGaA waived indemnification
out of the assets held by Henkel Trust e.V. with respect to
payments made to pensioners. If the amounts had been
indemnified, a total of around 111 million euros would have
been paid out of the assets held by Henkel Trust e.V. (2008:
105 million euros). This waiver had a positive effect on the
funding ratio with respect to pension obligations.
Effects of a trend change in medical costs
in million euros Dec. 31, 2008 Dec. 31, 2009
Service cost Interest
expense
Present value of
obligations
Service cost Interest
expense
Present value of
obligations
Increase in medical costs
Additional information
in million euros 2005 2006 2007 2008 2009
Present value of obligations 3,354 3,352 3,118
1) 3,248
3)
3,684
5)
1) Of which obligations with respect to post-retirement health care: 189 million euros
2) Of which plan assets funding obligations with respect to post-retirement health care: 4 million euros
3) Of which obligations with respect to post-retirement health care: 212 million euros
4) Of which plan assets funding obligations with respect to post-retirement health care: 8 million euros
5) Of which obligations with respect to post-retirement health care: 199 million euros
6) Of which plan assets funding obligations with respect to post-retirement health care: 7 million euros
(29) Long-term provisions
Changes in 2008
in million euros
Balance
Jan. 1,
2008
Other
changes
Utilized
Released
Added
Balance
Dec. 31, 2008
Income tax provisions 100 3 53 – 127
177
Sundry long-term provisions 119 25 53 7 43
127
“Global Excellence” – – – – 161
161
Combination of the Adhesive Technologies businesses – – – – 48
48
Total 219 28 106 7 379 513
Changes in 2009
in million euros
Balance
Jan. 1,
2009
Other
changes
Utilized
Released
Added
Balance
Dec. 31, 2009
Income tax provisions 177 – 22 – 4 1
152
Sundry long-term provisions 127 –13 3 4 73
180
“Global Excellence” 161 –106 17 – –
38
Combination of the Adhesive Technologies businesses 48 –16 8 6 5
23
Total 513 –157 28 14 79 393
108 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
The amounts recognized as long-term provisions are the
best estimates of the expenditures required to settle the
present obligations at the balance sheet date. Provisions
which include significant interest elements are discounted
to the balance sheet date.
“Global Excellence” is the name given to our worldwide
efficiency enhancement program. This initiative involves
implementation of a number of individual measures affect-
ing all our business sectors, regions and functions aimed at
achieving a sustainable improvement in our profitability
and enhancing our long-term competitiveness.
The provisions allocated for the combination of the Adhe-
sive Technologies businesses relate to restructuring charges
incurred during the process of integrating the acquired Na-
tional Starch businesses within the Henkel organization.
Other changes include changes in the Group/acquisi-
tions, movements in exchange rates, and adjustments to
reflect changes in maturity as time passes.
The income tax provisions comprise accrued tax liabili-
ties and amounts set aside for the outcome of external tax
audits.
The sundry long-term provisions include identifiable
obligations toward third parties, which are costed in full.
Analysis of sundry long-term provisions by function
in million euros Dec. 31, 2008 Dec. 31, 2009
Sales
10 8
Analysis
in million euros Residual term
More than
5 years
Between 1
and 5 years
Dec. 31, 2008
Total
Bonds
(of which amounts secured)
1,3
39
1
,024
2,363
(1)
Bank loans and overdrafts
1)
(of which amounts secured)
6 27 33
(29)
Other financial liabilities
(of which amounts secured)
–
6 6
(6)
Total 1,345 1,057 2,402
1) Obligations with variable rates of interest or interest rates pegged for less than one year
Composition of bonds as of December 31, 2008:
Bonds
in million euros
Issued by Type Nominal Book value Market1) Interest rate
2) Interest fixed
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +0.405 %)
Bond
Receiver swap
1,000
1,000
1,024
26
1,007
26
4.2500
3.8931
until 2013
3)
3 months
1) Market value of the bonds derived from the stock market price at December 30, 2008
2) Interest rate on December 31, 2008
3) Fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 10, 2009
(fair value hedge)
4) Fixed-rate interest of bond coupon: 5.375 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on February 25, 2009
(fair value hedge)
(30) Long-term borrowings
Age analysis as of December 31, 2008:
109
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
The ten-year bond issued by Henkel AG & Co. KGaA for 1 bil-
lion euros in 2003 with a coupon of 4.25 percent matures
in June 2013.
The five-year bond issued by Henkel AG & Co. KGaA for
1 billion euros in 2009 with a coupon of 4.625 percent ma-
tures in March 2014.
The 1.3 billion euro subordinated hybrid bond issued
by Henkel AG & Co. KGaA in November 2005 to finance a
large part of the pension obligations in Germany matures
after 99 years in 2104. Under the terms of the bond, the
coupon for the first ten years is 5.375 percent. The earliest
bond redemption date is November 25, 2015. If it is not
redeemed, the bond interest will be based on the 3-month
Euribor interest rate plus a premium of 2.85 percent. The
bond terms also stipulate that if there is a “cash flow event,”
Age analysis as of December 31, 2009:
Analysis
in million euros Residual term
More than
5 years
Between 1
and 5 years
Dec. 31, 2009
Total
Bonds
1,368 2,040 3,408
Composition of bonds as of December 31, 2009:
Bonds
in million euros
Issued by Type Nominal Book value Market1) Interest rate
2) Interest fixed
Henkel AG & Co. KGaA
Interest rate swap
(3-month Euribor +0.405 %)
Bond
Receiver swap
1,000
1,000
1,045
46
1,052
46
4.2500
1.1211
until 2013
3)
3 months
Henkel AG & Co. KGaA
Interest rate swap
Bond
1,000
994
1,066
4.6250
until 2014
4)
2) Interest rate on December 31, 2009
3) Fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 10, 2010
(fair value hedge)
4)
Fixed-rate interest of bond coupon: 4.625 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 19, 2010
(fair value hedge)
5) Fixed-rate interest of bond coupon: 5.375 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on February 25, 2010
(fair value hedge)
Henkel AG & Co. KGaA has the option or the obligation to
defer the interest payments. A cash flow event is deemed
to have occurred if the adjusted cash flow from operating
activities is below a certain percentage of the net liabilities
(20 percent for optional interest deferral, 15 percent for
mandatory interest deferral); see Clause 3 (4) of the bond
terms and conditions for definitions. On the basis of the
cash flow calculated at December 31, 2009, the percentage
was 43.06 percent (2008: 22.54 percent).
The US dollar liabilities of Henkel of America, Inc. are
set off against sureties of Henkel AG & Co. KGaA, as the
deposit and the loan are with the same lender and of the
same maturity. Bank loans and overdrafts amounted to
1,388 million euros.
110 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
(31) Non-current financial liabilities
Non-current financial liabilities comprise amounts due to
employees of 54 million euros (2008: 77 million euros) and
derivatives at fair values of 19 million euros (2008: 0 mil-
lion euros).
(32) Other non-current liabilities
Other non-current liabilities comprise in particular various
deferrals and accruals.
The amounts recognized as short-term provisions are the
best estimates of the expenditures required to settle the
present obligations at the balance sheet date.
Changes in 2008
in million euros At Jan. 1,
2008
Other
changes
Utilized Released Added
1) At Dec. 31,
2008
1)
Income tax provisions 152 48 86 1 230
343
Sundry current provisions 755 27 616 53 670
783
“Advanced Restructuring” 8 – 8 – –
–
Total 915 75 710 54 1,081 1,307
1)
Adjusted following finalization of purchase price allocation relating to the acquisition of the National Starch businesses
Changes in 2009
in million euros At Jan. 1,
2009
1)
Other
changes
Utilized Released Added At Dec. 31,
2009
Income tax provisions 343 29 269 26 147
224
Sundry current provisions 783 21 519 39 559
805
“Global Excellence” 129 106 141 – –
94
Combination of the
Adhesive Technologies businesses 52 15 42 – 14
39
Total 1,307 171 971 65 720 1,162
1)
Adjusted following finalization of purchase price allocation relating to the acquisition of the National Starch businesses
(33) Deferred taxes
The provisions for deferred taxes relate to differences be-
tween the carrying amount in the consolidated balance
sheet and the tax base used by the individual companies
included in the consolidation to calculate their taxable
profits (Note 9).
Analysis of sundry current provisions by function
in million euros Dec. 31, 2008
1) Dec. 31, 2009
Sales
212 177
Personnel
323 324
Production and engineering
2 56
Various other obligations
246 248
Total 783 805
1)
Adjusted following finalization of purchase price allocation relating to the
acquisition of the National Starch businesses
(34) Short-term provisions
111
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
(35) Short-term borrowings
Analysis
in million euros Dec. 31, 2008
Total
Dec. 31, 2009
Total
Liabilities from bonds
31 300
Commercial papers
1)
(of which secured)
175
(175)
71
(35)
Bank loans and overdrafts
(of which secured)
1,099
(617)
288
(125)
Other financial liabilities
512 1
Total 1,817 660
1) From the euro and US dollar commercial paper program
(total amount 2.1 billion euros)
The increase in current liabilities from bonds is due to the
issuance of a floating rate note.
The market value of short-term borrowings is the same
as their book value, due to their short-term nature.
(36) Trade accounts payable
Trade accounts payable include purchase invoices and accru-
als for invoices outstanding in respect of goods and services
received.
(37) Current financial liabilities
Analysis
in million euros Dec. 31, 2008
Total
Dec. 31, 2009
Total
Amounts due to non-consolidated
affiliated companies
20 15
Derivatives with negative fair values
186 60
Sundry current financial liabilities
(of which secured)
66
(–)
70
(–)
Total 272 145
Sundry current financial liabilities include the following:
» Amounts due to customers of 23 million euros (2008:
16 million euros)
» Commission payable of 3 million euros (2008: 3 million
euros)
» Amounts due to employees of 26 million euros (2008:
36 million euros)
(38) Other current liabilities
Other current liabilities include sundry deferred income
and the following:
» Liabilities in respect of social security of 22 million euros
(2008: 26 million euros)
» Advance payments received of 4 million euros (2008: 4 mil-
lion euros)
» Liabilities relating to employees’ deductions of 41 million
euros (2008: 41 million euros)
» Other tax liabilities of 130 million euros (2008: 117 mil-
lion euros)
(39) Contingent liabilities
Analysis
in million euros Dec. 31, 2008 Dec. 31, 2009
Liabilities under guarantee
and warranty agreements
10 11
(40) Other financial commitments
Payment obligations under rent, leasehold and lease agree-
ments are shown at the total amounts payable up to the
earliest date when they can be terminated. The amounts
shown are the nominal values. At December 31, 2009, they
were due for payment as follows:
Rent, leasehold and lease commitments
in million euros Dec. 31, 2008 Dec. 31, 2009
Due in the following year
49 44
Due within 1 to 5 years
88 89
Due after 5 years
16 37
Total 153 170
In the course of the 2009 financial year, 51 million euros
became due for payment under operating leases (2008:
37 million euros).
The order commitments for property, plant and equip-
ment amounted to 23 million euros at the end of 2009 (2008:
51 million euros) and the purchase commitments from
toll manufacturing contracts amounted to 0 million euros
(2008: 3 million euros).
Payment commitments under the terms of agreements
for capital increases and share purchases signed prior to
December 31, 2009 amounted to 18 million euros (2008:
19 million euros).
112 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
(41) Capital management
The aims of capital management are derived from the finan-
cial strategy of the Group. These include ensuring liquidity
and access to the capital market at all times.
To achieve the capital management targets, the Group
seeks to optimize its capital structure, manage its dividend
policy, take equity measures, make acquisitions and divest-
ments, and reduce debt.
In the past financial year, the dividend for ordinary and
preferred shares was unchanged compared with the previ-
ous year. The cash flow not required for investment and
dividend payments was used to reduce net debt. Short-term
financing requirements were met by commercial papers and
bank loans. The bonds outstanding serve to cover long-term
financing requirements.
Our financial management is based on the key perfor-
mance indicators set out in our financial strategy. In 2009
the interest coverage factor was 8.7 (2008: 4.8), while oper-
ating debt coverage was 41.8 percent (2008: 45.1 percent).
The equity ratio was 41.4 percent (2008: 40.3 percent). For
further details, see the financial ratios section in the Group
management report ( page 48).
Due to the international nature of its business, the Group
is required to comply with different legal and regulatory
provisions in different regions. The status of these regula-
tions and any developments are monitored at the local level
as well as centrally, with changes being taken into account
for the purpose of capital management.
(42) Derivatives and other financial instruments
Treasury guidelines and systems
The Corporate Treasury department manages currency
exposure and interest rates centrally for the Group and
is therefore responsible for all transactions with financial
derivatives and other financial instruments. Trading, trea-
sury control and settlement (front, middle and back offices)
are separated both physically and in terms of organization.
The parties to the contracts are German and international
banks which Henkel monitors regularly, in accordance with
Corporate Treasury guidelines, for creditworthiness and the
quality of their quotations. Financial derivatives are used
to manage currency exposure and interest rate risks in con-
nection with operating activities and the resultant financ-
ing requirements, again in accordance with the Treasury
guidelines. Financial derivatives are entered into exclusively
for hedging purposes.
The currency and interest rate risk management of the
Group is supported by an integrated treasury system which is
used to identify, measure and analyze the Group’s currency
exposure and interest rate risks. In this context, “integrated”
means that the entire process from the initial recording of fi-
nancial transactions to their entry in the accounts is covered.
Much of the currency trading takes place on internet-based,
multi-bank dealing platforms. These foreign currency transac-
tions are automatically transferred into the treasury system.
The currency exposure and interest rate risks reported by
all subsidiaries under standardized reporting procedures
are integrated into the treasury system by data transfer. As
a result, it is possible to retrieve and measure at any time
all currency and interest rate risks across the Group and all
derivatives entered into to hedge the exposure to these risks.
The treasury system supports the use of various risk concepts
so that, for example, the risk positions and the success of the
risk management in each company, country and group of
countries can at any time be determined on a mark-to-market
basis and compared to a benchmark.
Recognition and measurement
of financial instruments
Financial instruments are measured initially at cost on
the trade day. Portfolios of marketable securities and other
investments quoted on the stock exchange which are man-
aged on a fair value basis are categorized and recognized
as at fair value through profit or loss in accordance with
IAS 39 “Financial Instruments.” Changes in fair value are
recognized in financial items in the consolidated state-
ment of income. Other marketable securities and other
investments held as non-current assets are classified as
available for sale and also recognized at fair value where
this can be reliably determined. Changes in fair value
are recognized directly in equity unless the asset is per-
manently impaired, in which case the impairment loss
is recognized in profit or loss. If the fair values of other
marketable securities and other investments cannot be
reliably determined, these instruments are subsequently
113
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
measured at amortized cost. Shares in affiliated companies
are measured at amortized cost as their fair value cannot be
reliably determined. We have no financial assets categorized
as held to maturity. Like all other financial assets, long-term
loans are accounted for in loans and receivables, and stated
at amortized cost.
Specific financial instruments by category
in million euros Dec. 31, 2008 Dec. 31, 2009
Marketable securities 19 22
– at fair value through profit
or loss
– –
– at fair value recognized
in equity
19 22
The fair values of marketable securities are based exclusively
on quoted market prices (level 1 of the fair value hierarchy).
No fair values are assigned to levels 2 and 3 of the fair value
hierarchy.
Financial liabilities with a fixed maturity are measured
at amortized cost using the effective interest method. Finan-
cial liabilities in respect of which a hedging transaction has
been entered into and which meet the conditions set out
in IAS 39 regarding a hedging relationship, are measured
under hedge accounting rules.
All derivative financial instruments entered into by the
Group are measured initially at cost and subsequently at
their fair values on the balance sheet date. The accounting
treatment of gains and losses on remeasurement to fair
value depends on whether the conditions set out in IAS 39
with respect to hedge accounting have been met.
Hedge accounting is not used for the majority of deriva-
tive financial instruments. The changes in the fair value of
those derivatives which, from an economic point of view,
represent effective hedges in line with the corporate stra-
tegy, are recognized in profit or loss. These are virtually
matched by changes in the fair value of the hedged under-
lying transactions.
Under hedge accounting, a derivative financial instru-
ment is identified as a hedge of the exposure to changes
in the fair value of an asset or a liability (fair value hedge),
a hedge of the exposure to variability in future cash flows
(cash flow hedge) or a hedge of a net investment in a foreign
entity.
Fair value hedges: The gain or loss from remeasuring
derivatives used to hedge the exposure to changes in fair
value is recognized in profit or loss together with the gain
or loss on the hedged item. The interest rate derivatives used
to hedge the exposure to interest rate risks arising from the
bonds issued by Henkel AG & Co. KGaA qualify as fair value
hedges. To determine the change in fair value of the bonds
(see Note 30 starting on page 108), only that portion of
the bond which relates to the hedged interest rate risk is
interest. The gain or loss on remeasuring the derivatives at
fair value based on market interest rate risk (2009: gain of
48 million euros, 2008: gain of 148 million euros) and the
gain or loss on the hedged bonds (2009: loss of –47 million
euros, 2008: loss of –142 million euros) have both been in-
cluded under financial result in the consolidated statement
of income.
Cash flow hedges: Changes in the fair value of deriva-
tives used to hedge the exposure to variability in cash flows
are recognized directly in equity. The portion of the gain or
loss on the derivative that is determined to be ineffec tive in
respect of the risk being hedged is reported directly through
profit or loss. If a firm commitment or an expected and
highly probable future transaction results in the recognition
of an asset or a liability, the accumulated gains or losses on
the hedging instrument that were recognized directly in
equity are included in the initial measurement of the asset
or liability. Otherwise, the amounts recognized directly in
equity are recycled through profit or loss in those report ing
periods in which the hedged transaction impacts the sta-
tement of income. In the past financial year, one cash flow
hedge was entered into; the appertaining changes in fair
value were recognized directly in equity after income tax.
There were no ineffective portions of hedges; no amounts
were transferred in the course of the year from equity to
the statement of income.
114 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
The hedge relates to interest rate hedging of the US dollar
liabilities of Henkel of America, Inc. The fair values of the
interest rate hedging instruments amount to –19 million
euros. The changes in fair value after income tax amount-
ing to –11 million euros were recognized in equity. The cash
flows from the transactions hedged at December 31, 2009
are expected in June 2013 and March 2014.
Hedges of net investments in foreign entities: These
relate to forward exchange contracts that are used to hedge
exposure to currency translation risks in foreign entities.
The accounting treatment is similar to that applied to cash
flow hedges.
Fair values of derivative financial instruments
The fair values of forward exchange contracts are calculated
on the basis of current European Central Bank reference
prices, taking account of forward premiums and discounts.
Currency options are measured using market quotations or
recognized option pricing models. The fair values of interest
rate hedging instruments are determined on the basis of
discounted future expected cash flows, using the market
interest rates ruling over the remaining terms of the deriva-
tives. These are shown in the table below for the four most
important currencies. In each case, these are the interest
rates quoted on the inter-bank market at December 31.
In the past financial year, no hedges of a net investment in
a foreign entity were entered into. No amounts were trans-
ferred in the course of the year from equity to income and
no ineffective portions were included in the consolidated
statement of income.
The hedges relate to translation risks arising from net
investments in Swiss francs (CHF) and US dollars (USD).
At the balance sheet date there were no open forward ex-
change contracts relating to hedges of a net investment in
a foreign entity.
Hedges of a net investment in a foreign entity
(after tax)
in million euros At January 1 Additions
(taken to equity)
Disposals
(taken to profit or loss)
At December 31
2009 53 – – 53
2008 –17 70 – 53
Interest rates in percent per annum
At December 31 EUR USD JPY GBP
Maturities 2008 2009 2008 2009 2008 2009 2008 2009
Cash flow hedges
2008 – 95 –170 – – 265
115
Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Risks arising from financial instruments
Credit risk
In the course of its business activities with third parties,
the Henkel Group is exposed to global credit risk in various
lines of business. The risk arises if a contracting party fails to
meet its obligations. The maximum credit risk is represented
by the book value of the financial assets recognized in the
balance sheet. In principle, Henkel is confronted by progress-
ive concentration and consolidation on the customer side,
reflected in the receivables from individual customers.
A credit risk management system implemented on the
basis of a globally applied credit policy ensures that credit
risks are constantly monitored and bad debts minimized.
This policy, which applies to both new and existing custom-
ers, governs the allocation of credit limits and compliance
with those limits, individual analyses of customers’ credit-
worthiness employing both internal and external financial
information, risk classification and continuous monitoring
of the risk of bad debts at the local level. Our key customer
relationships are also monitored at the regional and global
level. In addition, hedging measures, for instance payment
default insurance policies, are implemented on a selective
basis for particular countries and customers.
In financial investments and derivatives trading activities in-
volving German and international banks, we only enter into
transactions with counterparties of the highest financial
standing. Financial investments are generally undertaken
for periods of less than one year. To minimize the credit risk,
netting arrangements are agreed with counterparties and
investment limits set. These limits are based on the credit
rating of the counterparty and are regularly monitored and
adjusted. Besides relevant ratings, certain other indicators
such as the pricing of credit default swaps (CDS) by the
banks are applied in determining the limits. We addition-
ally entered into collateral agreements with selected banks
in 2009. Reciprocal sureties are implemented to hedge the
fair values of the derivatives transacted.
Collateral and other safeguards include country-specific
and customer-specific protection afforded by credit insur-
ance, confirmed and unconfirmed letters of credit in the
export business, as well as warranties, guarantees and cover
notes.
As in 2008, the book value of receivables and loans which
were potentially overdue or impaired and for which new due
dates have been negotiated was less than 1 million euros.
In measuring derivative financial instruments, the credit
default risk of the counterparty is taken into account in the
form of a lump-sum adjustment to the fair values, deter-
mined on the basis of credit risk premiums. This resulted in
a charge to income in fiscal 2009 of 2.5 million euros.
Derivative financial instruments with a positive fair
value at the balance sheet date are included in other finan-
cial assets, and those with a negative fair value are included
in financial liabilities (current or non-current depending
on maturity).
Most of the forward exchange contracts and currency
options hedge risks arising from trade accounts receivable
and Group financing in US dollars.
The following positions were held at the balance sheet
date:
Derivative financial instruments
At December 31 Nominal value Positive fair value
3) Negative fair value
3)
in million euros 2008 2009 2008 2009 2008 2009
Forward exchange contracts
1)
5,457 2,450 240 70 –186 – 60
(of which for hedging
1) Maturity period < 1 year
2) Maturity period > 1 year
3) Fair values including accrued interest
116 Annual Report 2009
Notes to the consolidated financial statements » Notes to the consolidated balance sheet
Age analysis of non-impaired loans and receivables
Analysis
in million euros Less than 30 days 30 to 60 days 61 to 90 days 91 to 180 days Total
In 2009, we made specific allowances for bad debts of 36 mil-
lion euros (2008: 41 million euros) and general allowances
for bad debts of 7 million euros (2008: 6 million euros) in
respect of loans and receivables.
Liquidity risk
Because of the use of long-term financing instruments and
the availability of additional liquidity reserves, the liquid-
ity risk of the Henkel Group can be regarded as very low.
The Henkel Group has at its disposal pledged credit lines of
2.1 billion euros to ensure its liquidity and financial flex-
ibility at all times. These credit lines were opened to secure
the commercial paper program. The individual subsidiar-
ies of the Henkel Group additionally have at their disposal
committed bilateral loans of 0.5 billion euros.
Our credit rating is regularly assessed by independent
rating agencies.
Cash flows from financial liabilities
in million euros Residual term
Dec. 31, 2008
Book value
Up to
1 year
Between 1
and 5 years
More than
5 years
Dec. 31, 2008
Total
cash flow
Bonds1)
2,394
112 1,450 1,448
3,010
Commercial papers
2)
175
175 – –
175
Total 6,246 4,936 1,532 1,492 7,960
1) The cash flows from the hybrid bond issued in 2005 are disclosed for the period until the first possible redemption date by Henkel on November 25, 2015
2) From the euro and US dollar commercial paper program (total amount: 2.1 billion euros)
3) Bank loans from the bridge loan facility are offset against liquid funds; cash flows are stated with no offset
4) Sundry financial instruments include amounts due from employees, and finance bills
