Assets

As per December 31, 2010, WACKER’s total assets rose by €959.3 million year over year to €5.50 billion. Currency conversion effects of €111.1 million were one of the contributing factors here.

Financial-Position Trends: Assets

Current and Noncurrent Assets

Noncurrent assets rose to €3.55 billion (2009: €3.12 billion), a gain of €427.4 million or 14 percent. The share of noncurrent assets within total assets fell to 64 percent compared to the prior year (2009: 69 percent). At €1.95 billion, current assets also rose year over year (2009: €1.42 billion) – up 37 percent. Their share of total assets equals 35 percent, 4 percent higher than a year earlier.

Intangible Assets, Property, Plant and Equipment, and Investment Property

Intangible assets, property, plant and equipment, and investment property totaled €3.06 billion as per the closing date (2009: €2.80 billion). Depreciation reduced fixed assets by €417.2 million (2009: €397.8 million). Investments, in contrast, increased them by €613.9 million (2009: €740.1 million). Funds were mainly earmarked for expanding WACKER POLYSILICON’s production capacities. The acquisition of a silicon-metal plant in Holla (Norway) and of Lucky-Silicone in South Korea raised fixed assets by €52.6 million. Exchange-rate effects of €44.1 million positively influenced fixed assets.

Investments in Associates Accounted for Using the Equity Method

The carrying amount of investments in associates accounted for using the equity method dropped to €111.7 million (2009: €140.2 million). This was mainly due to net losses at joint ventures. Exchange-rate effects had a positive impact on the carrying amount of €20.6 million.

Noncurrent Financial Assets and Securities

In the fourth quarter of 2010, WACKER invested part of its surplus liquidity in securities (of various bond issuers) with terms of over 12 months. The value of these noncurrent securities was €210.8 million as per the reporting date. The remaining other noncurrent assets amounted to €164.7 million (2009: €177.8 million). They included loans to associated companies totaling €101.4 million (2009: €75.1 million), noncurrent derivative financial instruments (€16.9 million), and tax receivables and deferred tax assets of €26.2 million (2009: €21.5 million).

Current Assets

Current assets increased due to higher working capital and current liquidity compared to 2009. Stronger business and production volumes lifted inventories
to €530.7 million (2009: €441.2 million), a 20-percent rise. Increased demand resulted in higher year-over-year trade receivables, up €129.2 million to €596.0 million (2009: €466.8 million). Other current assets rose €826.9 million (2009: €513.7 million). They included current liquidity (cash and cash equivalents, and current securities) of €586.6 million (2009: €363.6 million), tax assets of €87.1 million (2009: €52.2 million), and investment-grant receivables of €68.9 million (2009: €28.7 million). The Group recognized derivative financial instruments of €22.6 million (2009: €13.6 million).

Financial-Position Trends: Liabilities

Group Equity Increased

Equity amounted to €2.45 billion as per December 31, 2010 (2009: €1.94 billion). The equity ratio rose to 44.5 percent year over year (2009: 42.8 percent), mainly due to Group net income of €497.0 million. In contrast, the payout of dividends totaling €59.6 million reduced equity. Other equity items included uncapitalized currency-conversion effects from international subsidiaries’ net assets and from derivative financial instruments. These effects had a positive impact of €67.7 million.

Liabilities

WACKER also posted an increase in liabilities, up 17 percent to €3.05 billion (2009: €2.60 billion). At 55 percent, their share of total assets remained virtually at the prior-year level (2009: 57 percent). The share of borrowed funds relative to equity dropped significantly.

Noncurrent Liabilities Rise Due to Higher Advance Payments from Customers

Noncurrent liabilities rose 10 percent to €2.06 billion (2009: €1.87 billion). Nevertheless, their share of total assets dropped to 37 percent (2009: 41 percent). Noncurrent provisions edged up €18.8 million to €745.8 million (2009: €727.0 million). As expected, pension provisions increased to €475.4 million (2009: €445.1 million), a gain of €30.3 million against a year earlier. Other noncurrent provisions included a provision for contingent losses of €53.1 million from future purchase obligations relating to our joint venture with Dow Corning. At the same time, pension provisions fell.

Noncurrent financial liabilities increased slightly, rising to €407.1 million (2009: €363.8 million). Beside exchange-rate effects, three other items had an influence. In December 2010, we accessed the first €200.0 million installment of a long-term investment loan from the European Investment Bank. Moreover, WACKER converted long-term loans into short-term ones and prematurely repaid €151.0 million in promissory notes (Schuldscheine). During 2010, we took out long-term loans for investment projects in China.

There were changes in other noncurrent financial liabilities, which rose to €909.0 million (2009: €776.6 million). The gain was primarily due to the newly signed long-term, polysilicon-supply agreements with customers. WACKER received advance payments that had an influence on other noncurrent liabilities. The value of long-term advance payments received rose by €108.1 million in 2010 to €869.9 million (2009: €761.8 million).

Current Liabilities Rise amid Higher Business Volumes

WACKER posted an increase in current liabilities of 35 percent to €992.5 million (2009: €732.1 million). Their share of total assets is 18 percent (2009: 16 percent). Current financial liabilities rose by €50.4 million to €126.3 million (2009: €75.9 million). There were two main reasons for this. WACKER reclassified noncurrent financial liabilities as current because the term was due within one year, and posted positive currency-translation effects totaling €27.8 million.

High production-capacity utilization in the fourth quarter and substantial investment activities contributed greatly to higher year-over-year trade payables. The latter climbed €117.3 million to €335.2 million (2009: €217.9 million), a 54-percent rise.

Other current provisions and liabilities rose to €531.0 million (2009: €438.3 million), up €92.7 million on a year earlier. The increase was due to higher obligations stemming from profit-sharing compensation and higher customer advance payments (offsettable within a year) for polysilicon shipments.

Unrecognized Assets and Off-Balance-Sheet Financial Instruments

An important asset that does not appear on our statement of financial position is the value of the WACKER brand and other Group trademarks. We consider the high profile and reputation of our trademarks to be a key factor influencing customer acceptance of our products and solutions. However, there are other intangible assets that are vital for success and positively impact our business – for example, long-standing customer relationships and customer trust in our product and solution-related expertise. Just as important are our employees’ in-depth skills and experience, and our many years of expertise not only in R&D and project management, but also in the design of production and business-process structures. In particular, our integrated production system gives us a competitive edge over our rivals.

Another key success factor is WACKER’s sales network, which has evolved over many years and enables the Group to market and sell its range of products and services locally to customers.

The statement of financial position also does not include various German legal forms of rented and leased goods reported on in the Notes. Additionally, other self-constructed assets are not included. See Note 17

WACKER does not use any off-balance-sheet financing instruments.