Q1 Report

Interim Report First Three Months of Fiscal 2013

High-high-end.Loewe Reference ID.

ContentsLetter to Shareholders 5

Interim Group Management Report 7

Key Performance Indicators 8

Opportunities and Risks 13

Report on Restructuring 15

Outlook for 2013 as a Whole 16

Condensed Consolidated Interim Financial Statements 17

Consolidated Income Statement 18

Consolidated Statement of Comprehensive Income 18

Consolidated Balance Sheet 19

Consolidated Cash Flow Statement 20

Consolidated Statement of Changes in Equity 21

Selected Explanatory Notes 22

Further Information 27

Financial Calendar 27

Contacts 27

Publication Credits 27

Matthias HarschCEO

Dr. Detlef TeichnerCTO

Rolf RickmeyerCFO / CRO

As was seen across the entire industry, Loewe’s business in the first three months of the current year was also severely strained by the negative market trend. Our very important commer-cial partners, the qualified retailers, in particular had to absorb an almost 40 % decline in sales in Germany in the first quarter. Overall the comparable first quarter of 2012 was favored by the shutdown of analog satellite TV. Moreover, the difficult economic environment in Europe as a whole is having a negative impact on the buying habits of consumers. Unfortunately, this weak market trend persists at the present time.

Against this backdrop, sales of the Loewe Group in the first quar-ter of 2013, at EUR 43.5 million, were 35 % lower than the 2012 figure of EUR 66.6 million. The low sales and production volume and the resulting under-utilization of production capacity as well as a changed product mix caused the company to generate an EBIT loss of EUR 9.9 million in the first quarter of 2013, compared to an EBIT loss of 0.9 million the the first quarter of 2012.

We expect a further consumption of capital in Loewe AG which, if the trend does not change, will result in a loss of 50 % of the share capital by the end of May. To improve our company’s capi-tal resources, we have just initiated a process for the review and implementation of various strategic options, including carrying out a capital increase by involving existing shareholders and new investors.

In parallel, we are primarily investing in new products. For ex-ample, the new wireless audio system 3D Orchestra is currently being brought onto the market as a global innovation. No mat-ter where the speakers are positioned in the room, 3D Orchestra makes a perfect 3D sound experience possible. In the area of Au-diodesign, before the end of May, we will introduce the portable speaker system Loewe Speaker 2go which enables connection with mobile devices. Outstanding sound from such a small size makes the system convincing. The performance of the Loewe

teams in China and Germany has made an initial positive impres-sion. In summer, Loewe will launch a new television family on the market. Its revolutionary user interface will make the fascinating world of smart home entertainment even more perfectly acces-sible.

The planned product startups will be accompanied by targeted communication activities, such as a far-reaching TV campaign, which will be broadcast on ARD, RTL, ProSieben, Sat1 and Kabel eins during prime viewing time starting in mid-May. This will be accompanied by online advertising via the Internet pages of the major daily newspapers.

We have already done our homework on the cost side. The financ-ing banks, which are continuing to support Loewe’s restructuring, provide confirmation of this. However, the implemented cost re-ductions will be delayed in taking effect until the second quarter of 2013. Our product and communication activities are designed for sustainability and strengthening Loewe as a premium brand and will have a medium-term impact with a view to the second half of the year.

Based on the trend in the first quarter of 2013 and the current market weakness, the Executive Board of Loewe AG expects a decline in sales and an EBIT loss for the current 2013 fiscal year.

Sincerely yours,

Matthias HarschChief Executive Officer of Loewe AG

Letter to Shareholders 5

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6 Loewe AG Interim Report First Three Months of Fiscal 2013

Interim Group Management Report First Three Months of Fiscal 2013 7

First Three Months of 2013 Interim Group Management Report


First Three Months of 2013Interim Group Management Report

Key Performance Indicators*

The Loewe Group

EUR million

1st quarter

2013

1st quarter

2012

+– in %

Sales 43.5 66.6 – 35

EBIT – 9.9 – 0.9

Restructuring expenses included therein – 1.4 – 0.3

Net income for the period – 11.6 – 1.0

Earnings per share in euros** – 0.88 – 0.08

Free cash flow –1.6 9.2

Number of employees (average) 988 1,004 – 2

* The percentage amounts are based on the unrounded quarterly figures.

** Relating to a total of 13,009,229 shares (previous year: 13,009,229 shares).

Loewe sales and earnings significantly lower than in previous year

In the first three months of 2013, sales of the Loewe Group declined by 35 % year-on-year from EUR 66.6 million to EUR 43.5 million. Loewe’s business was primarily influenced by a very negative market trend in the first quarter of 2013. Accordingly, the value of the market for LCD TV in Germany alone declined by 19 % in the first three months. Among Loewe’s key commercial partners, the qualified retailers, the decline was even more significant at 37 %. Overall the comparable first quarter of 2012 in Germany was favored by the shutdown of analog satellite TV. Certain export markets showed even sharper declines.

Due to the significant reduction in sales and production volume, Loewe posted an EBIT loss of EUR – 9.9 million in the first quarter of 2013, compared to an EBIT loss of EUR – 0.9 million in the first quarter of 2012. Net income after taxes came to a loss of EUR – 11.6 million in the period from January to March 2013.

Negative free cash flow

In the first three months of 2013, Loewe AG generated negative free cash flow of EUR – 1.6 million. The reduction compared to the previous year’s figure of EUR 9.2 million resulted primarily from the reduc-tion in EBIT by EUR 9.0 million and severance payments in connection with the restructuring.


Number of employees lower

Compared to March 31, 2012, the average number of employees decreased from 1,004 to 988 persons. As part of the announced restructuring measures, a total of 180 positions were eliminated as of April 1, 2013 across all areas of the company. The greatest impact was felt in production with a decrease of approximately 130 employees. In conjunction with other measures such as consensual contract termi-nations and part-time work agreements, the company has managed to keep the number of redundan-cies within bounds.

Market for LCD TVs significantly below previous year’s level

In the first three months of 2013, the European market for consumer electronics decreased in terms of value by 15 %1 year-on-year. As the most important product group, LCD TVs were also impacted by the negative trend, with a 13 % decline in sales. The severe decline is primarily attributable to the persistently difficult market environment in large parts of Europe, which has a negative impact on the buying habits of consumers. This negative trend had a particular impact on Germany, since the market trend in the first three months of 2012 was favored by the shutdown of analog satellite TV at the end of April.

The sharpest declines in sales of LCD TVs were recorded in Belgium (– 19 %), Germany (– 19 %), Swit-zerland (– 13 %), Italy (– 11 %) and Spain (– 11 %). Despite the significant market decline, 30 % of Euro-pean LCD TV sales were still realized in Germany in the period under review. In a European comparison, the propensity for purchases of durable goods in Germany continues to be at an above-average level; it is rising in the UK and stabilizing in Spain. Italy and France are recording declines.

Overall, the LCD TV market has performed weakly in the first quarter of 2013; however, there are also positive trends. For many years, the average price per LCD set has been declining and it was no higher than EUR 486 in the first three months of 2012. This downward trend appears to have been interrupted in the first quarter of 2013, as the price rose by 2 % to EUR 497 in the period under review. In particular, improved features and the trend toward large-screen TV sets led to higher average prices.

At 3.3 %, Loewe’s value-based market share for LCD TVs among European retailers in the period under review was below the 2012 figure of 4.4 %. The cause of this negative market share trend in Europe was primarily Germany, Loewe’s most important market. In its home market, the company was unable to maintain its 9.7 % market share of the first three months of 2012 and fell to 6.3 % in the first quarter of 2013.

Loewe sales significantly lower than in previous year

In the first quarter of 2013, Loewe’s sales declined by EUR 23.1 million or 35 % to EUR 43.5 million compared to the first three months of 2012. In the LCD TV segment, sales decreased by EUR 18.9 mil-lion or 36 %. The cause for this was the absence of buying incentives compared to the previous year. For example, the first three months of 2012 were still favored in Germany by the shutdown of analog satellite TV.

1) Source of market data: GfK


In Audio/DVD, Loewe recorded a decline of EUR 3.3 million to EUR 4.1 million. The first three months of the comparable period of the previous year had benefited from initial stocking volumes primarily in the area of Audiodesign. In the case of traditional speakers, the reasons for the lost sales were related to the low volume of LCD TV. Furthermore, it was necessary to delay the market launch of the global inno-vation 3D Orchestra until the second quarter of 2013. Other sales, which primarily include the business with accessories and individual placement solutions, were lower than the level of the previous year by EUR 0.9 million or 15 %.

Sales structure by product area

EUR million

1st quarter

2013

1st quarter

2012

+– in %

TV 34.1 53.0 – 36

Audio/DVD 4.1 7.4 – 45

Other 5.3 6.2 – 15

Total sales 43.5 66.6 – 35

In its most important market, Germany, Loewe recorded a 44 % decline in sales to EUR 24.6 million in the first quarter of 2013. This figure fell short of sales in the first three months of 2012 at EUR 44.2 million by EUR 19.6 million. Sales in the export markets also declined year-on-year by 16 % to EUR 18.9 million, thus falling short of the previous year‘s figure of EUR 22.4 million by EUR 3.5 million.

In addition to the elimination of the strong purchasing stimuli brought by the shutdown of analog satel-lite TV in the first three months of 2012, the significant declines in Germany (44 %) and Austria (36 %) are due to a general buying restraint for TV sets.

In addition to Austria, sales and service in Belgium, France, Italy and the UK are performed by subsidiar-ies. The sales trend in these countries was disparate in the period under review. While significantly lower sales were recorded in Belgium (21 %) and the UK (18 %), the declines in France and Italy were compara-tively modest at 6 % year-on-year.

In the other countries, sales were reduced by 9 % compared to the same period last year. The trend in Spain was positive, where sales increased by 29 % year-on-year. This was, however, at a low level.


EBIT loss

The significant decrease in sales volume caused the Loewe Group‘s EBIT to show a loss of EUR – 9.9 million in the first quarter of 2013 compared to a loss of EUR – 0.9 million in the first quarter of 2012.

In addition to the significant decline in sales, this reduction in earnings is primarily attributable to the lower gross margin. The low sales and the resulting under-utilization of production capacity as well as a changed product mix are the major reasons for this. Furthermore, the disposal of inventory units had a negative impact on the gross margin.

Selling expenses decreased year-on-year by EUR – 3.2 million to EUR 12.0 million. Sales-dependent direct costs and the reductions in personnel costs negotiated in the collective restructuring agreement contributed positively to this result.

At EUR 2.7 million, administrative expenses exceeded the previous year’s level by EUR 0.4 million. At EUR 0.2 million, the other operating result was EUR 0.1 million higher than in the first three months of 2012.

The interest result amounted to a net interest expense of EUR – 1.7 million in the period under review and was thus significantly lower than in the first three months of the previous year. This was primarily caused by the expenses for the syndicate loan agreement concluded as of July 1, 2012.

Capital expenditure

At EUR 3.9 million, capital expenditure in the period under review was EUR 0.3 million higher than in the first three months of 2012. The increase is explained by higher investments in tools and development services for new products subject to capitalization. Furthermore, investments were made in shop-in-shop systems for retailers within and outside of Germany.

Capital expenditure/depreciation and amortization

EUR million

1st quarter 2013 1st quarter 2012

Capital

expenditure

Depreciation/

amortization

Capital

expenditure

Depreciation/

amortization

Intangible assets 2.7 3.0 1.7 2.1

Property, plant and equipment 1.1 2.5 1.8 2.7

Financial assets 0.1 0.0 0.1 0.0

Total 3.9 5.5 3.6 4.8


Net current assets

Net current assets increased only slightly by EUR 0.4 million compared to March 31, 2012. A significant decline of EUR 8.6 million was recorded compared to December 31, 2012. This resulted primarily from measures for optimizing the working capital.

Net current assets

EUR million

March 31,

2013

Dec. 31,

2012

March 31,

2012

Inventories 41.5 48.8 38.4

Trade accounts receivable and other assets * 41.5 64.3 51.1

Other current provisions – 33.7 – 46.2 – 34.5

Trade accounts payable and other liabilities * – 20.0 – 29.0 – 26.1

Total 29.3 37.9 28.9

* excluding income taxes and derivatives

Development and production

During the first quarter of 2013, the development work on the new chassis generations continued without interruption. The new premium TV lines Individual Slim Frame and Reference ID introduced in November 2012 benefited from this targeted development through regular software updates. These include improvements already desired by the market as well as function and feature enhancements. At the same time, employees of the Loewe design department and development are also working on the introduction of the New Art line of sets and the facelift version of Connect ID. Both of these are also based on this modular software architecture and include the new operating concept.

As a complement to the Reference ID, the Reference speaker system was completed and launched in the market in January. The flat Reference ID speakers have the same shape, design and engineering as the Reference ID television, and, together with the subwoofer form an ideal extension of the Loewe masterpiece.

Work on the surround sound system 3D Orchestra, which was already introduced as a prototype at IFA 2012, is well advanced. Top priority was given to designing the system tests of all acoustic and wire-less functions so as to take into account in every way the many possible uses and the high flexibility of the placement solutions. 3D Orchestra will be launched in the second quarter of 2013 and has already received high praise in the first reviews in the trade press.

In close cooperation with the new Loewe team in Shenzhen, China, the development work on the Au-diodesign solutions has been advanced substantially. The first innovation, the portable speaker system Speaker2go, will also be launched in the second quarter of 2013. Its new features such as NFC (Near Field Communication) simplify the connections and pairing with mobile devices. The system’s appeal is based on a perfectly tuned sound from the smallest size and gives a first impression of the perfor-mance of the participating teams in China and Germany.

Within the context of the restructuring work, the production at Kronach was adapted to the new condi-tions in the first quarter of the year. The first prerequisites for a compact factory were established. This new factory layout is intended to optimize processes and reduce logistics costs even further.


Marketing and sales

The first quarter of 2013 was marked by the introduction of the product lines Loewe Individual Slim Frame and Loewe Reference ID, both of which are equipped with the latest chassis generation SL 220. With this technical platform, Loewe sets standards in the intuitive use of home entertainment systems. The biggest innovation is the introduction of a completely new operating system, which makes all the available sources for TV, music, pictures, videos and Internet easily and quickly accessible.

In addition to the TV segment, Loewe is significantly expanding its audio expertise. The world’s first in-tegrated wireless 3D home theater speaker system Loewe 3D Orchestra will be launched in the second quarter of 2013. The extraordinary thing about 3D Loewe Orchestra is the intelligent combination of innovative technologies such as wireless active speakers, point sound generation and automatic trian-gular calibration. This opens up complete freedom and flexibility regarding the number of speakers, as well as in relation to the positioning of both speakers and audience within the room.

Loewe presented its new products at various international fairs in the first quarter of 2013, such as the “Integrated Systems Europe” in Amsterdam, the “Hospitality Technology Expo” in London and the “Ho-tel Expo” in Berlin. The cooperation trade fairs Expert Hanover, Euronics Stuttgart and EP Düsseldorf offered an important point of contact for German retailers at the beginning of the year. In these trade fairs, Loewe made a convincing case for its audio expertise with the world premiere presentation of Loewe 3D Orchestra.

In the targeted expansion of distribution, Loewe concentrated on closer cooperation with national and international retail partnerships. Accordingly, additional international framework agreements were signed with the European confederations of retailers Expert and E-Square in the first three months of 2013. This will consolidate and expand Loewe’s position of as one of the leading suppliers to cooperating retailers throughout Europe.

Opportunities and risks of future development

As of the balance sheet date of March 31, 2013, the following opportunities and risks exist that can have a substantial influence on the development of the Loewe Group.

Market and resulting earnings and liquidity risks

Due to the declining overall European market in LCD TV, which also has a particular impact on the quali-fied retailers in Germany, the risk exists for Loewe of not achieving the planned sales volume. The con-sequence of lower sales performance in a year-on-year comparison is exemplified in the first quarter of 2013 in the form of significantly lower earnings and negative liquidity development in a budget compari-son, which can be only partly offset by proactive working capital management. Should the current sales trend continue, this will have a negative impact on future earnings and liquidity.

Financing

The inadequate availability of cash funds as a result of the above-named market risks or a funding framework not granted in an adequate scope would jeopardize the continued existence of Loewe. Due to the deteriorating liquidity situation in a year-on-year comparison, the company continues to be in close collaboration with its financing partners. The financing partners made a binding commitment for the maintenance of the credit lines in a reduced but sufficient scope until March 31, 2014 under the condi-tion of compliance with predefined obligations (covenants). This financing approach makes it possible to finance the restructuring measures defined in the previous year and implemented as of the balance sheet date and at the same time provide funds for investments in new products.


The Executive Board currently assumes that the solvency of the company is assured during the term of the syndicated loan. Appropriate countermeasures were taken in response to the significantly lower sales volume on a year-on-year comparison and the resulting adverse effects on liquidity planning.

Shareholders’ equity

Loewe’s business was primarily influenced by a very negative market trend in the first quarter of 2013. The possible result of a continued market decline and a deteriorating sales and earnings situation would be the decline of the existing consolidated shareholders’ equity and the shareholders’ equity of the hold-ing company Loewe AG, so that a loss of 50 % of the share capital of Loewe AG may be expected to occur at the end of May. Currently the company has initiated a process for the review and implementation of various strategic options, including carrying out a capital increase by involving existing shareholders and new investors.

Restructuring

The best opportunities for the Loewe Group in fiscal 2013 result from the ongoing restructuring of the company. The already initiated, comprehensive cost-cutting measures and the adaptation of human resource capacities in combination with far-reaching changes of the operating processes, the organiza-tion and control systems will contribute to an improvement in earnings in the current fiscal year over the previous year. Against the backdrop of declining business volume, the risk for the company exists, how-ever, in the possibility that the initiated measures might not go far enough or do not take effect until later.

Competitive intensity in the home entertainment market

The market entry of new competitors and the development of new business models in the TV segment keeps the competitive intensity in the consumer electronics environment at a consistently high level. A price decline and displacement competition have persisted in the consumer electronics industry for years, especially in the TV segment.

It is therefore important for Loewe to set itself apart from the competition through technological dif-ferentiating features as well as high quality standards and tailored services for its customers. It is also important to further reduce the price gap with competitors’ products and focus even more strongly than ever before on differentiation criteria in communication and performance to ensure the necessary sales volume.

As sales prices can be expected to recover only to a limited degree in the foreseeable future, signifi-cant sales and earnings declines are possible if sales volume does not change. The business model was therefore subjected to a thorough examination and extensive cost reductions were adopted.

Thus, for example, the conclusion of international trading agreements with the international companies of large retail cooperatives based in Germany (Expert, Euronics, EP) has increased the company’s in-vestments in foreign large consumer electronic retailers.

With the expansion of business into international markets, it is important to optimize the quality of plan-ning and accordingly the working capital on a sustained basis and realistically plan for planned market entry scenarios. The internal structures were adapted in this respect by creating a new division Supply Chain Management.

Technology and development risks

Because of digitization and the dominance of the Internet, the CE industry is characterized by strong pressure to innovate and ever shorter product development cycles. Technical complexity, especially in the area of software, is constantly growing. Increased networking opportunities and an increasingly higher amount of media content that are represented in the latest device generations represent a poten-tial risk in terms of function and runtime stability.


To minimize the risks of future technical platforms and to increase the performance of new device gen-erations, constant evaluation of high-performance semiconductor devices and the use of the latest methods and processes in terms of high quality software development are required. Dependence on external development and cooperation partners can impact the scheduling of product startups and ac-cordingly sales development.

Production and purchasing

Our lower purchasing volume compared with the competition makes it more difficult to achieve attrac-tive purchasing conditions. Only development of strategic partnerships and intensified purchasing will enable the company to permanently reduce production costs on a sustained basis and offer its products at competitive prices.

Loewe attempts to have a positive impact on purchasing conditions through systematic bundling of purchasing volume to key suppliers, reducing component diversity, the systematic use of platform con-cepts and qualifying alternative components and suppliers. Improved utilization of potentials in Asian procurement markets will lower the cost of purchased materials wherever possible.

Increasing consolidation has been seen in recent years, especially in the semiconductor market. This could cause project startups to be delayed, or the technical support of electrical components could be stopped or limited. Loewe cooperates closely with its relevant suppliers. At the same time, alterna-tive scenarios were reviewed on the development side and closing inventory concepts are developed as necessary.

Overall estimation of the risk situation

In the estimation of the Executive Board, the described risks are manageable and the continued existence of the Loewe Group is not endangered as of the date of the present reporting, provided that the planned sales volume for fiscal 2013 is achieved. The continued successful implementation of the operating and financial restructuring concepts as well as the implementation of the planned capital measures are vital for the continued existence of the company.

With respect to the principal opportunities and risks associated with future development, please also refer to the 2012 Annual Report.

Report on Restructuring

In early 2013, Loewe further sharpened and expanded the restructuring plan which was initiated in fiscal 2012. These measures affect both the performance and the cost side.

The negotiations for a reconciliation of interests and a social plan as well as a collective restructuring agreement were successfully concluded after constructive discussions with the Works Council and IG Metall labor union. Additionally, the consortium of banks working with Loewe agreed to support Loewe’s restructuring. The financing partners made a firm commitment to extend the credit lines until March 31, 2014, subject to compliance with predefined terms.

Furthermore, a total of 180 positions will be eliminated across all of Loewe’s divisions effective April 1, 2013 in line with the announced restructuring measures. The largest group affected by the cuts is production, where a total of 130 employees will be let go. In conjunction with other measures such as consensual contract terminations and part-time work agreements, the company has managed to keep the number of redundancies within bounds.


Loewe founded a transfer company in order to make the staff cuts socially acceptable. The objective of this company is to ensure prompt placement in new jobs, among other things by offering programs for skill development and candidate training. The transfer company started operation as early as April 1, 2013, to ensure a seamless transition.

In addition to a reduction of monthly salaries by up to 10 percent, the restructuring agreement calls for a postponement of collective pay increases until 2014. Furthermore, vacation and Christmas bonuses will be settled with a lump sum. The collective restructuring agreement remains in effect until the end of 2014 and also includes provisions for profit sharing if the business situation improves. At the same time, Loewe is retaining a needs-based training quota.

The implemented cost reductions will be delayed in taking effect until the second quarter of 2013. Our product and communication activities are designed for sustainability and strengthening Loewe as a pre-mium brand and will have a medium-term impact with a view to the second half of the year.

Outlook for the year 2013 as a whole

Loewe’s business was primarily influenced by a very negative market trend in the first quarter of 2013. This trend is expected to persist in the subsequent months.

Associated with this will be a further consumption of capital in the Loewe Group and Loewe AG, result-ing in a loss of 50 % of the share capital as defined in Section 92 (1) of the German Stock Corporation Act anticipated by the end of May 2013, should the trend continue as before. Against this backdrop, the Executive Board of Loewe AG has decided to move the Annual Shareholders’ Meeting of Loewe AG, initially scheduled for June 11, 2013, to a later date in order to be able to include the notification on the agenda – as required under the German Stock Corporation Act – at the Annual Shareholders’ Meeting in the event of the loss of 50 % of the share capital. Should the loss of 50 % of the share capital occur at the end of May, it is currently expected that the Annual Shareholders’ Meeting will be held in late July. Loewe will announce the exact date of the Annual Shareholders’ Meeting as soon as it is known.

Currently the company has initiated a process for the review and implementation of various strategic options, including carrying out a capital increase by involving existing shareholders and new investors.

In light of the trend in the first quarter of 2013 and the current market weakness, the Executive Board of Loewe AG expects a decline in sales and an EBIT loss for the current 2013 fiscal year.

Kronach, April 26, 2013

The Executive Board

Matthias Harsch Rolf Rickmeyer Dr. Detlef Teichner


Condensed Consolidated Interim Financial Statements


Consolidated Income Statement

January – March 2013 January – March 2012

EUR million % EUR million %

Sales 43.5 100.0 66.6 100.0Cost of sales – 38.9 – 89.4 – 50.1 – 75.2Gross margin 4.6 10.6 16.5 24.8

Selling expenses – 12.0 – 27.6 – 15.2 – 22.8General and administrative expenses – 2.7 – 6.2 – 2.3 – 3.5Other operating income 0.2 0.4 0.1 0.1EBIT – 9.9 – 22.8 – 0.9 – 1.4

Restructuring expenses included therein [– 1.4] [– 3.2] [– 0.3] [– 0.5]

EBIT developed therefrom [– 8.5] [– 19.5] [– 0.6] [– 0.9]

Interest income 0.0 0.0 0.1 0.1Interest expenses – 1.7 – 3.9 – 0.5 – 0.7Earnings before taxes – 11.6 – 26.7 – 1.3 – 2.0

Income taxes 0.0 0.0 0.3 0.5Profit after tax – 11.6 – 26.7 – 1.0 – 1.5

thereof:attributable to shareholders of Loewe AG – 11.5 – 0.9Minority interests – 0.1 – 0.1

– 11.6 – 1.0

Basic earnings per share (in EUR) – 0.88 – 0.08Diluted earnings per share (in EUR) – 0.88 – 0.08

Statement of comprehensive income January – March 2013 January – March 2012*

EUR million

Profit after tax – 11.6 – 1.0

Other income which could be reclassified into the income statement

Fair value measurement of hedging instruments 2.6 – 3.8

Tax effects 0.0 1.1

Other income which could not be reclassified

into the income statement

Actuarial gains and losses* – 0.5 0.0

Gains and losses recognized directly in equity 2.1 – 2.7

Comprehensive income – 9.5 – 3.7

thereof:

attributable to shareholders of Loewe AG – 9.4 – 3.6

Minority interests – 0.1 – 0.1

– 9.5 – 3.7

* The 2012 figures were adjusted. Impact of the first-time application of amended IAS 19.


Consolidated Balance SheetEUR million

March 31,

2013

Dec. 31,

2012*

March 31,

2012*

Assets

Non-current assets

Intangible assets 10.2 10.5 8.3

Property, plant and equipment 28.8 30.2 30.4

Financial assets 2.8 2.7 2.5

Income tax assets 0.1 0.2 0.1

Miscellaneous non-current financial assets 0.2 0.2 0.2

Deferred taxes 0.0 0.0 12.8

42.1 43.8 54.3

Current assets

Inventories 41.5 48.8 38.4

Trade accounts receivable 32.9 55.3 49.1

Income tax assets 0.2 0.4 0.4

Miscellaneous current financial assets 10.1 5.0 4.9

Cash and cash equivalents 3.8 8.2 36.2

88.5 117.7 129.0

Total assets 130.6 161.5 183.3

Liabilities and shareholders’ equity

Shareholders’ equity

Equity attributable to equity holders of the parent

Subscribed capital 13.0 13.0 13.0

Capital reserve 47.0 47.0 47.0

Retained earnings 16.2 16.2 16.2

Other reserve* 8.0 5.9 6.3

Accumulated profit/loss* – 69.1 – 57.6 – 14.2

15.1 24.5 68.3

Minority interests 0.2 0.3 0.4

15.3 24.8 68.7

Non-current liabilities

Provisions for pensions and similar obligations 36.9 36.1 36.3

Other non-current liabilities 9.7 10.0 15.2

46.6 46.1 51.5

Current liabilities

Income tax provisions 1.9 1.9 2.3

Other current provisions 33.7 46.2 34.5

Current financial liabilities 12.8 12.5 0.0

Trade accounts payable 12.9 20.2 18.9

Miscellaneous current financial liabilities 7.4 9.8 7.4

68.7 90.6 63.1

Total liabilities and shareholders’ equity 130.6 161.5 183.3

* The 2012 figures were adjusted. Impact of the first-time application of amended IAS 19.


Consolidated Cash Flow StatementEUR million

January – March 2013 January – March 2012

Operating activities

EBIT – 9.9 – 0.9

Interest paid – 1.1 – 0.1

Interest payments received 0.0 0.1

Depreciation and amortization of non-current assets 5.5 4.8

Other non-cash items – 1.5 – 0.5

Increase (+) in pension provisions 0.8 0.0

Decrease (–) in other non-current provisions – 0.3 – 0.2

Income taxes paid 0.2 0.0

Cash flow before changes in net current assets – 6.3 3.2

Change in net current assets

Decrease (+) in inventory 7.3 5.0

Decrease (+) in trade receivables and other assets 22.8 21.3

Decrease (–) in other current provisions – 12.5 – 7.3

Decrease (–) in trade receivables and other liabilities – 9.0 – 9.4

Change in net current assets 8.6 9.6

Net cash from operating activities 2.3 12.8

Investing activities

Payments for purchases of intangible assets

and property, plant and equipment – 3.8 – 3.5

Payments for purchases of financial assets – 0.1 – 0.1

Net cash from investing activities – 3.9 – 3.6

Free cash flow, total – 1.6 9.2

Financing activities

Borrowings (+) 0.3 0.0

Net cash from financing activities 0.3 0.0

Cash effective change in liquidity – 1.3 9.2

Composition of liquidity March 31,

2013

Dec. 31,

2012

Changes

Cash and cash equivalents 3.8 8.2 – 4.4

Use of factoring – 3.5 – 6.6 3.1

Liquidity 0.3 1.6 – 1.3


Consolidated Statement of Changes in Equity

Number of

shares

Sub-

scribed

capital

Capital

reserve

Retained

earnings

Other

reserve*

Accu-

mulated

profit/

loss*

Equity at-

tributable

to equity

holders of

the parent

Minority

interests

Total

equity

units EUR

million

EUR

million

EUR

million

EUR

million

EUR

million

EUR

million

EUR

million

EUR

million

Balance as of

Dec. 31, 2011 13,009,229 13.0 47.0 16.2 9.0 – 13.2 72.0 0.5 72.5

Market valuation of hedges – 2.7 – 2.7 – 2.7

Actuarial gains and losses* 0.0 0.0 0.0

Net profit/loss as

of March 31, 2012 – 1.0 – 1.0 – 0.1 – 1.1

Balance as of

March 31, 2012 13,009,229 13.0 47.0 16.2 6.3 – 14.2 68.3 0.4 68.7

Market valuation of hedges – 0.2 – 0.2 – 0.2

Actuarial gains and losses* – 0.2 – 0.2 – 0.2

Net profit/loss

for the period

April 1 to Dec. 31, 2012 – 43.4 – 43.4 – 0.1 – 43.5

Allocation to

retained earnings 0.0 0.0

Balance as of

Dec. 31, 2012 13,009,229 13.0 47.0 16.2 5.9 – 57.6 24.5 0.3 24.8

Market valuation of hedges 2.6 2.6 2.6

Actuarial gains and losses* – 0.5 – 0.5 – 0.5

Net profit/loss as of

March 31, 2013 – 11.5 – 11.5 – 0.1 – 11.6

Balance as of

March 31, 2013 13,009,229 13.0 47.0 16.2 8.0 – 69.1 15.1 0.2 15.3

* The 2012 figures were adjusted. Impact of the first-time application of amended IAS 19


Selected Explanatory Notes

About Loewe

The Loewe Group develops, produces and distributes electronic, electrotechnical and mechanical products and systems of every type as well as parts of the same, in particular in the field of consumer electronics and communications technology (home entertainment systems). The Company’s main products are TV sets, home cinema solutions and standalone audio equipment. The parent company is recorded under the name of Loewe AG in the Commercial Register (HRB 3004) of the Local Court in Coburg, Germany. The Company’s registered offices are located at Industriestrasse 11, 96317 Kronach, Germany.

The condensed consolidated interim financial statements for the first three months of 2013 were released for publication by a management decision on April 26, 2013.

Basis of presentation and accounting policies

The condensed consolidated interim financial statements of Loewe AG as of March 31, 2013 were pre-pared in accordance with the International Financial Reporting Standards (IFRS) for interim reporting as adopted in the European Union (EU) and in accordance with the provisions of the German Securities Trading Act (WpHG) applicable to consolidated interim financial reports. These interim financial state-ments refer only to the Group and contain all information and disclosures in the Notes that are required by IFRS and WpHG for interim financial statements.

Basically the same basis of presentation used for the consolidated financial statements for fiscal year 2012 was applied to the interim consolidated financial statements.

The discount rate for pension provisions was reduced from 4.25 % to 3.75 % as of December 31, 2012. The actuarial losses of EUR 0.5 million resulting from this were recognized in other income.

Revised IAS 19 “Employee Benefits” was applied retrospectively starting in fiscal 2013. In departure from the practice of previous years, actuarial gains and losses are now recognized within other reserves with no effect on income. Accordingly, the relevant figures from previous years had to be adjusted in the pres-ent interim financial statements (identified in each case by “*”). The adjustments for the first quarter of 2012 within the income statement were in each case less than EUR 0.1 million.

The amendments to IAS 1 “Presentation of Financial Statements” made in June 2011 had an impact on the presentation of other comprehensive income to the effect that the components of the other com-prehensive income must be presented as a function of whether they can possibly be reclassified into the income statement in the future. Loewe AG already applied this change early as of December 31, 2012.

The following changes of the IFRSs had no impact on the Group’s accounting methods or financial posi-tion and financial performance.

– IAS 32 and IFRS 7 – Offsetting financial assets and financial liabilities– IFRS 13 – Fair Value Measurement– IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine – The Group did not opt for early application of other new or amended published standards

and interpretations not requiring mandatory application.


These interim consolidated financial statements contain all necessary information for a true and fair view of the financial position and financial performance as of March 31, 2013.

However, they do not include all the information and disclosures required in the consolidated annual financial statements and should therefore be read in conjunction with the consolidated annual financial statements for the year ended December 31, 2012 and the additional information contained in them.

In preparing the interim consolidated financial statements, management must make estimates and as-sumptions. These influence the level of the amounts indicated for the assets and liabilities as of the balance sheet date as well as the amount of reported income and expenses. The actual amounts can deviate from these estimations.

Scope of consolidation

The scope of consolidation has not changed in relation to the consolidated financial statements as of December 31, 2012.

Currency translation

The currency translation for the subsidiary in London (United Kingdom) and Hong Kong (China) was based on the reference rate of the European Central Bank (ECB) as of March 31, 2013; currency transla-tion in the income statement was based on the average rate of the first three months of 2013 and 2012 respectively. All other consolidated companies are in the eurozone.

Financial position

EUR million

March 31,

2013

Dec. 31,

2012

March 31,

2012

Non-current assets 42.1 43.8 54.3

Current assets 88.5 117.7 129.0

Total assets 130.6 161.5 183.3

Shareholders’ equity including minority interests 15.3 24.8 68.7

Non-current liabilities 46.6 46.1 51.5

Current liabilities 68.7 90.6 63.1

Total liabilities and shareholders’ equity 130.6 161.5 183.3

The slight decline in non-current assets compared to the end of the year by EUR 1.7 million is largely attributable to the reduction in property, plant and equipment (by EUR – 1.4 million) due to depreciation.

Deferred tax assets from loss carryforwards are not recognized in accordance with IAS 12 with no change from December 31, 2012.

The decline in current assets compared to the end of the year resulted primarily from the reduction of inventories (down EUR – 7.3 million) as well as the reduction in trade accounts receivable (down EUR – 22.4 million).


The reduction of shareholders’ equity of EUR 9.5 million is almost exclusively the result of the Group’s net loss in the amount of EUR – 11.6 million which occurred in the first quarter. The reporting of the increase in the intrinsic value of concluded currency hedging transactions of EUR 2.6 million had the opposite effect.

The equity-to-assets ratio was 11.7 % and thus 3.6 percentage points lower than the figure at year-end 2012.

The positive value of other income of EUR 2.1 million shown for the reporting period reflects the change in the market value of forward exchange transactions concluded by Loewe to hedge future purchases of merchandise less the recognition with no effect on income of the actuarial losses in accordance with the revision of IAS 19. Deferred tax liabilities are not recognized due to the presence of tax assets from loss carryforwards.

The forward exchange transactions were concluded in conformity with the underlying contractual purchase obligations. Every forward transaction is subject to a corresponding underlying transaction (hedged item). The relationship between the hedging transaction and the hedged item is continuously reviewed for effectiveness.

In the first quarter of 2013, basic earnings per share were EUR – 0.88. The number of shares is un-changed at 13,009,229. Diluted earnings per share are not calculated as no rights have been associated with the available 2010 authorized capital and the conditional capital.

Compared to year-end 2012, current liabilities were down by EUR 21.9 million. This decline is largely attributable to the decrease in other current provisions (down EUR – 12.5 million) as a result of the pay-ments of contractually fixed bonus entitlements to our contract dealers. In addition, trade accounts payable decreased by EUR 7.3 million to EUR 12.9 million due to the lower purchasing volume, down from EUR 20.2 million at year-end.

Cash flow and financing

Cash flow

EUR million

January –

March 2013

January –

March 2012

Net cash from operating activities 2.3 12.8

Investing activities – 3.9 – 3.6

Free cash flow – 1.6 9.2

Net cash from financing activities 0.3 0.0

Cash-effective change in liquidity – 1.3 9.2

In the first three months of 2013, Loewe AG recorded negative free cash flow of EUR – 1.6 million. The year-on-year reduction is primarily due to the reduced earnings and the severance payments made in connection with the restructuring at the end of March 2013 (EUR – 4.5 million).

Further details related to the change in liquidity can be seen in the cash flow statement.


Financing

EUR million

March 31,

2013

Dec. 31,

2012

March 31,

2012

Cash and cash equivalents 3.8 8.2 36.2

Current financial liabilities – 12.8 – 12.5 0.0

Factoring – 3.5 – 6.6 0.0

Subtotal – 12.5 – 10.9 36.2

The year-on-year decline in cash and cash equivalents is primarily attributable to the negative cash flow in the second half of 2012 and the outflows of liquidity incurred in the first three months in connection with the restructuring.

The financing partners made a legally binding commitment on March 8, 2013 for an extension of the standstill agreement until March 31, 2014 to ensure the implementation of the planned restructuring measures. The extension is subject to qualitative and quantitative obligations which Loewe must fulfill over the course of time. Loewe must also rely on the support of stakeholders in connection with the financing process.

Income statement

Revenue by region is broken down as follows:

EUR million

1st quarter

2013

1st quarter

2012

Germany 24.6 44.2

Europe (excluding Germany) 17.0 20.7

Rest of world 1.9 1.7

Total 43.5 66.6

The significant items of the income statement for the first quarter of 2013 are explained in the interim group management report.

Contingent liabilities

The contingencies and other financial obligations have not changed substantially as compared with dis-closures as of December 31, 2012

Related party transactions

The business relations with companies of the Sharp Group in 2013 are currently exclusively limited to the delivery of spare parts to Loewe. Furthermore, Loewe intends to further intensify the development cooperation with Sharp.


All agreements are concluded on an arm’s length basis. As a shareholder, Sharp has no influence over Loewe management, is not represented on the Loewe Supervisory Board and does not participate in any decision-making processes at Loewe. It should therefore not be classified as a related party.

Other disclosures

Number of employees

Compared to March 31, 2012, the average number of employees decreased from 1,004 to 988 persons. In connection with the announced restructuring measures, a total of 180 positions were eliminated as of April 1, 2013 across all areas of the company. The greatest impact was felt in production with a decrease of approximately 130 employees. In conjunction with other measures such as consensual contract ter-minations and part-time work agreements, the company has managed to keep the number of redun-dancies within bounds.

Acquisition of treasury shares

At the Annual Shareholders’ Meeting on May 20, 2010, the Company was authorized to acquire treasury shares in an amount of up to 10 % of the share capital. The authorization is valid until May 19, 2015 and no such activities have been undertaken to date.

Shares held by the Executive Board and Supervisory Board on March 31, 2013

As of March 31, 2013, the Executive Board no longer held any shares (December 31, 2012: 6,600) in Loewe AG. The members of the Supervisory Board as well no longer hold any Loewe shares directly (as of December 31, 2012: 550,000 shares / indirectly: 1,264,420 shares).

Events after the balance sheet date of March 31, 2013

In the ad hoc announcement of April 25, 2013, Loewe AG provided information that in light of the nega-tive market trend, a decline in sales and an EBIT loss are expected for the current 2013 fiscal year. It was furthermore pointed out that the current market weakness will lead to a further consumption of capital in the Loewe Group and in Loewe AG, resulting in an anticipated loss of 50 % of the share capital of Loewe AG as defined in Section 92 (1) of the German Stock Corporation Act by the end of May 2013. It was also indicated that the Annual Shareholders’ Meeting may be postponed until the end of July 2013.

Kronach, April 26, 2013

The Executive Board

Matthias Harsch Rolf Rickmeyer Dr. Detlef Teichner

Further Information 27

Financial Calendar

Publication of the Q2 Report(01/01 – 6/30/2013)Conference call on Thursday, August 1, 2013, 10:00 a.m.

Annual Shareholders’ Meeting of Loewe AGExpected to be held in late July 2013

Publication of the Q3 Report(01/01 – 9/30/2013)Conference call on Tuesday, November 5, 2013, 10:00 a.m.

Loewe AGIndustriestrasse 11D-96317 KronachGermany

PO Box 1554D-96305 KronachGermany

Ticker symbol: LOEWKN: 649410ISIN: DE0006494107

Loewe shares are traded in the Prime Standard segment of the German Stock Exchange.Classic All share® Prime All shareCDAX®

Investor Relations: +49 (0) 9261 / 99-984Email: [email protected]: +49 (0) 9261 / 99-994

Public Relations: +49 (0) 9261 / 99-477Email: [email protected]: +49 (0) 9261 / 99-444

Customer Care Center: +49 (0) 1801 / 22256393Email: [email protected]: +49 (0) 1801 / 222500

Telephone switchboard: +49 (0) 9261 / 99-0Internet: www.loewe.tv/intfollow: https://twitter.com/#!/Loewelike: http://www.youtube.com/loewe

Published by: Loewe AG Industriestrasse 11 D-96317 Kronach Germany

Contacts / Publication Credits

Loewe AGIndustriestrasse 1196317 KronachGermanywww.loewe.tv/int

Loewe Stock: Ticker symbol: LOEISIN Code: DE 0006494107

Phone: +49 (0) 9261 99-984Email: [email protected]

Q1 Report

Documents

Transcript of Q1 Report