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Annual Report
2011
A passion for solutions
Letter to Shareholders 4
Report of the Executive Board 6
Group Management Structure 15
Reporting Regions 16
Product Divisions 18
CEO Statement 30
Success Factors
Global Network 34
Industry Verticals 36
Employees 38
Compliance and Corporate Culture 40
Information Technology 42
Procurement 43
Quality, Security and HSE 44
Responsibilities
Social Commitment 49
Corporate Governance 50
Global Reporting Initiative 61
Consolidated and
Annual Financial Statements 2011
Consolidated Financial Statement 64
Annual Financial Statement 134
Appendix
Information for Investors 142
Pictures 144
Imprint 145
Contents
Twenty-foot Equivalent Unit (TEU)
Unit of measurement based on a 20-foot ISO container
(6.10 meters long)
Full Container Load (FCL)
This refers to containers that are fully loaded by the consignor and
unloaded by the recipient at the destination.
Less than Container Load (LCL)
This refers to part-loads or small loads that are grouped together and
transported in containers throughout the transport chain.
2007 2008 2009 2010 2011
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
Net forwarding revenue
7,1
64
6,5
00
8,8
78
5,9
58
8,6
41
2007 2008 2009 2010 2011
1,000
875
750
625
500
375
250
125
0
Shareholders’ equity
871
86
4
812
9151,
02
6
2007 2008 2009 2010 2011
Gross profit
2,050
1,900
1,750
1,600
1,450
1,300
1,150
1,000
1,4
80
1,4
77
1,8
03
1,7
42
1,3
77
Consolidated profit
245
210
175
140
105
70
35
0
–35
2007 2008 2009 2010 2011
114 12
7
10
–2
6
211
320
280
240
200
160
120
80
40
0
EBIT
2007 2008 2009 2010 2011
19
3
29
9
30
174
15
The containers are unloaded when they reach the various recipients
at different destinations. The term LCL is used mainly for containers
shipped as ocean freight.
Ocean freight and air freight: a comparison of capacity
The capacity of a 12,000-TEU container ship is equivalent to that of
1,000 Boeing 747 cargo planes.
The English version takes precedence over the German version.
Glossary
Five-year developmentin million CHF
Core Services
Standard
Warehousing
Overland
Value-Added Logistics Services
Supply Chain Services
Air and
Ocean Freight
Panalpina at a glance
The Panalpina Group is one of the world’s leading providers
of supply chain solutions, combining intercontinental air
and ocean freight with comprehensive Value-Added Logis-
tics Services and Supply Chain Services.
Thanks to its in-depth industry know-how and customized
IT systems, Panalpina provides globally integrated end-to-
end solutions tailored to its customers’ supply chain manage-
ment needs. Panalpina operates a global network with
some 500 branches in more than 80 countries. In a further
80 countries, it cooperates closely with partner companies.
Panalpina employs approximately 15,500 people worldwide.
Vision
We deliver reliable supply chain solutions that provide value
to our customers – every time.
Core values
Performance – is our continuous commitment to long-term
sustainable development and financial success: We aspire
to out-play competition.
Integrity – is the compass which drives our behavior and
attitude towards each other and our customers: We keep
our promises and comply with the rules.
Professionalism – is how we create value for our custom-
ers through our solutions and by anticipating their business
needs: We know our business and create value for our
stakeholders.
Panalpina’s business model: focussed to deliver end-to-end supply chain solutions
Panalpina Annual Report 2011
Key figures 2011
Net forwarding revenue per product division
in % 2011 2010
Return on equity (ROE) 14.9 – 3.1
Return on capital employed (ROCE) 43.2 – 5.4
Air Freight
Ocean Freight
Logistics
50%
36%
14%
Europe, Middle East, Africa and CIS
North America
Central and South America
Asia Pacific 19%
19%
13%
49%
Share price development in comparison to SPIReturns
Net forwarding revenue per region
Net forwarding revenue of CHF 6,500 million
Currency adjusted gross profit increase by 12 % year-on-year, supported
by organic growth across all regions and product divisions
Consolidated profit of CHF 127 million
Net working capital intensity at all-time low of 1.1 %
Forwarding volumes: 848,000 tons in Air Freight (– 5 % year-on-year) and
1,310,000 TEUs in Ocean Freight (+ 6 % year-on-year)
Swiss Performance Index (SPI)
Panalpina World Transport110%
100%
90%
80%
70%
60%
Jul 1Dec 31,
2010
Mar 1 May 1 Sep 1 Nov 1 Dec 31,
2011
4
Panalpina Annual Report 2011
Letter to Shareholders
Sustainably profitable
Panalpina closed the year under review with a solid business
result. It recorded a gross profit of CHF 1,477 million and
consolidated earnings of CHF 127 million. In comparison to
2010, Panalpina’s ocean freight volumes grew by 6 % to
a new record of 1,310,000 TEUs transported. Air freight
forwarding volumes sank by 5 % to 848,000 million tons,
but an increase in gross profit per ton of air freight compen-
sated the decline in volumes. The Company acquired new
business and expanded existing mandates in all customer
segments.
Clear growth strategy
In its corporate strategy, Panalpina confirmed its role as
one of the leading providers of global supply chain solutions
and dedicated itself to sustainable, profitable growth. The
focus on profitability with a product-oriented organization
targeted towards strategic customer segments has already
proven itself in the reporting year. The ten centers of exper-
tise are targeted entirely toward the needs of customers,
which enables to recognize and develop market niches and
future markets. The asset-light business model has again
proved its flexibility. It enables Panalpina to rapidly and effi-
ciently react to uncertain market situations in order to take
advantage of growth opportunities.
To implement the corporate strategy with its ambitious
growth objectives in the regions, Panalpina will introduce
three regional CEOs in 2012. This places the decision
makers closer to the customers, which enhances Panalpina’s
clout in the markets. The three regional CEOs will belong
to the Executive Committee, the operative management
body. The regional management structure will be kept lean.
Another route for generating growth is through acquisitions.
Panalpina consistently reviews potential acquisitions for
their value-generating and strategic potential. Panalpina
found such a candidate in early 2011 with Grieg Logistics.
Panalpina can expand its global presence with this Nor-
wegian logistics service provider, particularly in the oil and
gas industry, and integrate the know-how. Despite the
constant investments in organic growth, Panalpina remains
practically without debt. The Company is financially solid,
with adequate cash reserves and remains open to oppor-
tunities for acquisitions that make a good fit.
Board of Directors and Executive Board
With Lars Förberg and Knud Elmholdt Stubkjær, the Annual
General Meeting elected two new proven experts to the
Board of Directors on May 10, 2011. The Swedish citizen
Lars Förberg, is Managing Partner and co-founder of
Cevian Capital. The Dane Knud Elmholdt Stubkjær, looks
back on a long and successful career in the shipping in-
dustry, including as CEO of the Mærsk Line, which belongs
to the Danish A.P. Møller-Mærsk Group. Board member
Günter Rohrmann stood down from the Board at the Annual
General Meeting. The composition of the Executive Board
remained unchanged in 2011.
Dividend payout
Based on the solid results of the 2011 business year, the
Board of Directors of Panalpina World Transport (Holding)
Ltd. proposes to the Annual General Meeting a dividend
payout of CHF 2.00 and a nominal value payback of
CHF 1.90 per share.
Appreciation
Panalpina thanks the high motivation and excellent commit-
ment of its employees for the success and positive devel-
opment in 2011. They deserve the highest recognition from
the entire Board of Directors and the Executive Board. We
extend our thanks to our customers and suppliers for the
partnership and the trust placed in the Company, as well as
our valued shareholders for their loyalty and constant con-
fidence. We look forward to a successful future together.
Monika Ribar Rudolf W. Hug
Chief Executive Officer Chairman of the Board
of Directors
With a consolidated profit of CHF 127 million, Panalpina left an economically volatile
year behind and entered a new year strengthened for the future. Concentration on
the strategic orientation and the consistent focus on profitability are already paying off.
Stakeholders can be paid a dividend.
Panalpina Annual Report 2011
5
Letter to Shareholders
6
Panalpina Annual Report 2011
Report of the Executive Board
Market development
After a period of strong growth in 2010, world trade and
global freight markets were characterized by the uncer-
tainty of economic prospects around the world in 2011.
The International Monetary Fund estimates that global trade
volumes rose approximately 7 % in 2011 – only about half
of the 13 % growth rate posted the year before, which had
been boosted by the restocking of inventories. In addition,
and in contrast to 2010, growth in 2011 was relatively
unevenly distributed across geographical trade lanes and
transport modes. The amount of international cargo moved
by air freight in 2011 slightly declined compared to the year
before and thus once again fell short of the record volumes
reached in 2007. In contrast, the global ocean freight
market developed more robustly, growing by more than
5 %, making 2011 a new record year with some 160 million
TEUs transported on the ocean globally.
Freight moved on two of Panalpina’s major trade lanes,
the far east westbound and transpacific eastbound routes –
jointly comprising around one quarter (Air) and one third
(Ocean) of the Group’s volumes – developed under-propor-
tionately in 2011 in comparison with cargo moved on other
trade lanes due to relatively lackluster imports into Europe
and North America. In Japan, the world’s fourth largest
economy, the devastating earthquake and tsunami in March
led to a major disruption of economic activity for several
weeks, although, fortunately, with no major adverse conse-
quences for either Panalpina employees or for the Group’s
business.
At the same time, above-average growth was recorded for
trade lanes connecting some of the largest emerging
markets, such as China, India and Brazil – markets in which
Panalpina continued to invest and further expanded its
presence during the year under review. As such, in 2011,
three new offices were opened in India (Ahmedabad,
Jaipur and Ludhiana). In China, Panalpina complemented
its increasing footprint in the central part of the country
through the opening of an office in Chongqing at the begin-
ning of the year, adding to the two branches in Wuhan
and Chengdu, bringing the total number of offices in the
Greater China region to 20. In addition, Panalpina also
opened a logistics center in Tianjin, which marked an impor-
tant milestone in the Group’s forward strategy to extend
its Value-Added Logistics Services capabilities.
Strengthening of the corporate platform
Throughout the year, notwithstanding an increasingly
cloudy economic environment, Panalpina kept its focus on
further strengthening its corporate platform and setting the
ground for leveraging future growth. During the first half
of the year, the Group also reviewed, clarified and refined
its strategy for the years to come and, in this context, in
June, the Group announced a mid-term target of raising the
EBITDA-to-gross profit conversion ratio to 20 % by 2014.
Panalpina’s ambition is to offer comprehensive end-to-end
supply chain solutions to its customers, with the core
service offering in Air and Ocean Freight complemented
by Supply Chain Services and Value-Added Logistics
Services.
The year 2011 was characterized by widespread uncertainty of economic prospects,
resulting in nervous market behavior and high volatility. Growth slowed, particularly in
the debt-burdened economies of the eurozone and the United States, where consumer
confidence slid to very low levels. However, robust growth continued in many emerging
markets, led in size by China, India and Brazil. Furthermore, the Company’s reporting
currency, the Swiss franc, appreciated significantly against all major currencies during
the reporting year and impacted the Group’s financial results materially. In this chal-
lenging environment, Panalpina achieved solid organic gross profit growth and further
solidified its position within the industry. Sticking to its focused strategy of going for
sustainable and profitable growth, the Group managed to increase its profitability, further
expanded its profit margins and generated a substantial amount of free cash flow.
Focused execution leads to solid financial results
Panalpina Annual Report 2011
7
Report of the Executive Board
Executive Board (clockwise): Monika Ribar (President and CEO), Marco Gadola (Chief Financial Officer),
Karl Weyeneth (Chief Operating Officer), Christoph Hess (Chief Legal Officer and Corporate Secretary) and
Alastair Robertson (Chief Human Resources Officer)
8
Panalpina Annual Report 2011
Report of the Executive Board
On a product level, all three product divisions (Air Freight,
Ocean Freight, Logistics) were strengthened by a number
of key divisional management hires during the reporting
year. Moreover, Panalpina also continued its strict focus on
restoring unit profitability, particularly gross profit per ton
of air freight, which rose 9 % year-on-year (+ 21 % in local
currencies). As a consequence, a number of larger, yet un-
profitable customer contracts were not renewed, leading
to an adverse effect on the Group’s transported air freight
volumes, because, in a declining market, the volumes
represented by these contracts could not be immediately
replaced with new business. In terms of product innova-
tion, Panalpina signed a new ACMI (aircraft, crew, mainte-
nance and insurance) contract for two Boeing 747-8Fs with
one of its long-term business partners. The aircraft will enter
service in the first half of 2012 and operate in Panalpina’s
unique own-controlled air freight network, replacing two
Boeing 747-400Fs. Compared to the 747-400F, the indus-
try’s newest freighter has 16 % additional cargo volume,
but is expected to have the lowest carbon dioxide emissions
in its class. With the new aircraft, Panalpina is optimally set
up to meet industry specific requirements and the increas-
ing demand for large-freighter capacity, especially in the
Healthcare, Hi-tech, Automotive and Oil and Gas verticals.
In Ocean Freight, in line with the corporate strategy to
aggressively expand its Less than Container Load (LCL)
business and to focus on emerging markets, Panalpina
launched more than 50 new LCL point-to-point services
in 2011. Most of the new regular services run out of Asia
and meet increased customer demand for reliable LCL
solutions on the Intra Asia and Asia-Europe trades.
In the third product division, Logistics, the Group extended
its product line with a range of new services which all sup-
port the strategic focus of offering value-added services to
customers. In addition to launching regional centers of
expertise on three continents, Panalpina also opened sev-
eral new logistics centers, including a facility in Huntsville
(USA). The 3,700 square-meter Huntsville Logistics Center
is situated in close proximity to the Panalpina Huntsville
hub and provides complete kitting and parts assembly as
well as temperature-controlled storage areas.
Out of its nine existing industry verticals where Panalpina
has a dedicated setup in place to effectively serve its cus-
tomers with industry-specific solutions, four focus industry
verticals were defined, which are particularly well aligned
with the product strategies: Consumer and Retail, Health-
care, Hi-tech, and Oil and Gas. In terms of gross profit
growth, the largest advances during the reporting year
came from Automotive, Healthcare, Hi-tech, Telecom and
Fashion. In Oil and Gas, the signing of a strategic services
master agreement with one of the world’s largest oil and
gas companies marked a major milestone in the execution
of the Group’s growth strategy. The scope of the multi-year
agreement comprises transportation services for air, ocean,
road and rail, industrial projects, freight management and
other logistics services connected with the exploration and
production of oil and gas.
While Panalpina aims for predominantly organic growth, it
also looks selectively into acquisition opportunities to sup-
port and accelerate the execution of the corporate strategy.
One company which the Group identified as an optimal
strategic fit and acquired in 2011 is Grieg Logistics, a lead-
ing logistics provider to the Norwegian oil and gas indus-
try with approximately 100 staff and an annual turnover of
roughly NOK 400 million (CHF 67 million). Through this ac-
quisition, Panalpina added seven new locations in Norway
and thus significantly expanded its presence in the country.
Through the set of initiatives embarked on during the year,
complemented by a new volume record in Ocean Freight,
Panalpina achieved a solid organic (ie, expressed in local
currencies) gross profit growth of 12 % and thus managed
to further solidify its position within the industry. Further-
more, through effective cost management, profitability was
significantly increased and profit margins further expanded
in 2011.
Outlook
The economic situation in many of the developed nations –
a majority of which are struggling with critical levels of debt
and continuously high levels of unemployment – is set to
remain challenging in the years ahead, while the stability of
the financial sector yet needs to be restored. On the other
hand, growth prospects for many of the emerging econo-
mies remain promising. Regardless of the short-term eco-
nomic environment and in line with its sustainable, profitable
growth strategy, Panalpina remains committed to further
improving productivity while continuing to invest selectively
and specifically in Marketing and Sales, IT and Value-Added
Logistics Services competence and maintaining a strong
focus on cost control – all with the aim of delivering reliable
solutions to our customers and ensuring above-market
growth. To facilitate implementation of the corporate strat-
egy, to drive growth and increase profitability, the Panalpina
Group will put in place (effective July 1, 2012) three regional
CEOs (with respective respon sibility for Asia Pacific, Europe
and Middle East, and the Americas), each supported by a
small team of dedicated regional resources. With this lean
regional setup, the decision-making power will shift from
Panalpina Annual Report 2011
9
Report of the Executive Board
Panalpina’s headquarters closer to where decisions are
made by its customer base, facilitating exploitation of
regional and local growth opportunities in the various mar-
kets where Panalpina operates.
Overall, Group management expects world trade and
global outsourcing to expand further in the years to come,
albeit with a bias towards the emerging economies –
particularly in Asia, Latin America and Africa, which will
continue to gain in relative importance. With its global and
asset-light network, coupled with the ability to react swiftly
and offer its customers first-class, tailor-made, end-to-
end supply chain solutions, Panalpina is well prepared to
take advantage of the growth opportunities ahead and
to further enlarge its footprint in the global logistics market.
Net forwarding revenue (NFR)
With the Swiss franc as its reporting currency, Panalpina’s
financial results in 2011 were massively distorted by the
strength of the Swiss franc versus all foreign currencies
relevant to the Company. On average, the euro and the
US dollar lost approximately 11 % and 15 %, respectively, in
value against the Swiss franc during the reporting year.
Net forwarding revenue amounted to CHF 6,500 million,
a reduction of 9 % compared to the CHF 7,164 million the
year before, yet in local currencies, NFR advanced 2 %
versus the prior year. This slight increase can be attributed
to a variety of factors, including a balanced volume effect
(more shipments handled in Ocean Freight and Logistics,
fewer shipments handled in Air Freight) as well as factors
over which Panalpina has limited influence, such as a signifi-
cant increase in oil prices, resulting in higher fuel surcharges,
which were counterbalanced by sharply lower average
freight rates prevailing in the market caused by significant
overcapacities.
At regional level, net forwarding revenue declined in all
four reporting regions due to a variety of factors. In Europe,
Middle East, Africa and CIS (EMEA), NFR decreased 13 %
to CHF 3,171 million. This region recorded a material adverse
translation impact from the weak euro, and was also
affected by the import weakness of many European econ-
omies and falling freight rates. EMEA remains Panalpina’s
largest region in revenue terms, contributing to almost half
of the Group’s turnover.
In North America, NFR fell by 10 % to CHF 1,270 million, a
large part of which can be attributed to the depreciating
US dollar. Moreover, persistently low consumer confidence
resulted in lower import volumes.
Compared to 2010, Panalpina’s NFR in 2011 in Central and
South America declined 1 % to CHF 834 million. The Group
recorded strong double-digit volume growth in this region
on the import side, while the currency translation effect
and falling freight rates both acted as a drag on turnover.
The Asia Pacific region saw a decline in NFR of 4 % to
CHF 1,225 million. Also here, the translation of locally gen-
erated turnover into Swiss francs along with severely
depressed freight rates, particularly on the Asia-Europe
route, overshadowed double-digit volume growth rates on
lanes such as Asia to Latin America and Intra Asia.
In 2011, the Panalpina Group generated 49 % of its net for-
warding revenue in Europe, Middle East, Africa and CIS,
19 % each in North America and Asia Pacific and 13 % in
Central and South America.
Net forwarding revenue per region
4,000
3,000
2,000
1,000
0
Asia PacificNorthAmerica
Central andSouth America
Europe, Middle East,Africa and CIS
3,1
71
1,2
70
83
4
1,2
25
3,6
40
1,4
09
84
5
1,2
70
2011 2010
in million CHF
Net forwarding revenue per region (2011)
Europe, Middle East, Africa and CIS
North America
Central and South America
Asia Pacific 19%
19%
13%
49%
On a divisional level, the oversupply of carrier capacity,
which was prevalent for a large part of the year, led to
a substantial drop of carrier freight rates, which – together
with the strength of the Swiss franc – adversely impacted
the Group’s NFR in Air Freight and Ocean Freight, due to
the pass-through character of freight rates for an asset-light
service provider like Panalpina. These impacts were only
partially mitigated by increasing oil prices, which in 2011 on
average rose more than 40 % above 2010 levels, resulting
10
Panalpina Annual Report 2011
Report of the Executive Board
in distinctly higher fuel and bunker surcharges (essentially
also items with a pass-through character) which the Group
invoiced to its customers.
Influenced by these developments and coupled with lower
volumes, but improved pricing discipline per file handled,
as described in the preceding paragraph, the Group’s NFR
generated with Air Freight decreased by 6 % to CHF 3,281
million. In the Ocean Freight division, NFR saw the biggest
impact from falling freight rates and decreased by 17 % to
CHF 2,313 million, despite an expansion of volumes. In the
third product division, Logistics, NFR saw an increase of
2 % to CHF 906 million, which was driven by an expansion
of business activities particularly in distribution, value-
added logistics services as well as overland.
In 2011, the Panalpina Group generated 50 % of its net for-
warding revenue with Air Freight, 36 % with Ocean Freight
and 14 % with Logistics.
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Air Freight Ocean Freight Logistics
3,5
03
3,2
81
2,3
13
90
6
2,7
71
89
0
Net forwarding revenue per product division
in million CHF
2011 2010
Air Freight
Ocean Freight
Logistics
Net forwarding revenue per product division (2011)
50%
36%
14%
Gross profit (GP)
Gross profit, a better measure of actual sales performance
than net forwarding revenue in the forwarding industry,
remained essentially flat at CHF 1,477 million in 2011 (2010:
CHF 1,480 million). Organically (ie, in local currencies),
however, GP increased by 12 %.
With respect to regional performance, Europe, Middle
East, Africa and CIS is also the most important region for
Panalpina in terms of gross profit generation, representing
approximately half of the Group’s gross profit. In 2011,
gross profit generated in the region increased 6 % in local
currencies, supported by higher freight volumes on all
major export trade lanes. Translated into Swiss francs, GP
in this region decreased by 4 % to CHF 731 million.
In North America, gross profit translated into Swiss francs
took a major hit due to the weak US dollar, but nevertheless
grew by 2 % to CHF 271 million. In local currencies, gross
profit even grew by 19 %, which is a reflection of new busi-
ness generated in various industry verticals, higher volumes
handled on transatlantic routes and strong growth in
exports to Central and South America.
Asia Pacific and Central and South America recorded
similarly strong increases in GP, which management attri-
butes to the relatively better economic development of
these regions in 2011, which manifested itself in strong
intraregional and import-related trade flows in and between
these parts of the world. In Asia Pacific, gross profit rose
5 % (+ 18 % in local currencies) to a record CHF 313 million,
making this region the Group’s second largest in terms of
GP, while gross profit in Central and South America
increased 4 % (+ 19 % in local currencies) to a total of CHF
162 million.
In 2011, the Panalpina Group generated 50 % of its gross
profit in Europe, Middle East, Africa and CIS, 21 % in Asia
Pacific, 18 % in North America and 11 % in Central and
South America.
Gross profit per region
800
600
400
200
0
Asia PacificNorthAmerica
Central andSouth America
Europe, Middle East,Africa and CIS
76
0
731
271
16
2
313
266
156 2
98
in million CHF
2011 2010
Panalpina Annual Report 2011
11
Report of the Executive Board
Gross profit per region (2011)
21%
18%
11%
50%Europe, Middle East, Africa and CIS
North America
Central and South America
Asia Pacific
In Air Freight, a number of larger, yet unprofitable, customer
contracts were not renewed due to the Group’s focus on
restoring unit profitability. This led to an adverse effect on
the Group’s transported volumes, which declined by 5 %
compared to the year before. In addition to an improved
pricing discipline, the Air Freight division also benefited for
the first time from a centrally managed volume tender ini-
tiative, which led to a reduction in the cost of goods sold.
These efforts combined led to an increase of 9 % (+ 21 %
in local currencies) in gross profit per ton of Air Freight,
which more than compensated for the declining volumes.
As a result, the Group’s gross profit realized through Air
Freight forwarding services increased by 3 % in 2011
(+ 15 % in local currencies), reaching CHF 688 million ver-
sus CHF 667 million the year before.
In the Ocean Freight division, GP saw a slight contraction
of 3 % to CHF 439 million, but posted growth of 9 % in local
currencies. Panalpina’s volume growth rate amounted to
6 % and grew approximately in line with the market, with
market share gains in the year’s second half as the strength-
ening of divisional structures started to unfold. Gross profit
per 20-foot equivalent unit fell 8 % (+ 3 % in local curren-
cies) compared to the prior year, because the low level of
freight rates prevailing for most of the year and the highly
competitive environment made it difficult to maintain the
same mark-up to customers.
Gross profit generated through the Logistics division con-
tracted by 3 % to reach a total of CHF 350 million. In local
currencies, this product division recorded a growth of 9 %,
which was mainly driven by an expansion in the Group’s
Distribution, Value-Added Logistics Services and Overland
activities.
In 2011, the Panalpina Group generated 46 % of its gross
profit with Air Freight, 30 % with Ocean Freight and 24 %
with Logistics.
700
600
500
400
300
200
100
0
Air Freight Ocean Freight Logistics
66
7
68
8
43
9
35
0
45
3
36
0
Gross profit per product division
in million CHF
2011 2010
Air Freight
Ocean Freight
Logistics
46%
30%
24%
Gross profit per product division (2011)
Earnings before interest, taxes,
depreciation and amortization (EBITDA)
Panalpina achieved an EBITDA of CHF 212 million in the
reporting year (2010: CHF 62 million*), which was nega-
tively impacted by CHF 27 million through currency trans-
lation. The EBITDA-to-gross profit margin in 2011 improved
to 14.4 % (2010: 4.2 %*).
The two main items included in operating expenses –
personnel expenses and other operating expenses –
developed as follows:
(+ 12 % currency adjusted) at CHF 892 million in 2011
(2010: CHF 891 million). Panalpina increased its head-
count during the reporting period by 6 % to 15,700 full-time
equivalents (FTEs). This number includes approximately
100 FTEs which joined Panalpina from Grieg Logistics.
of the Group’s total operating expenses, amounted to
CHF 372 million in 2011 (2010: CHF 527 million*), equiva-
lent to a decrease of 29 % (– 20 % currency adjusted).
12
Panalpina Annual Report 2011
Report of the Executive Board
2011
2010*
EBITDA Operating expenses
in million CHF
62
1,418
1,265
212
Overall development
* Other operating expenses in 2010 included a charge of CHF 128 million which the Company recognized to cover all costs arising from the settlement of two legal claims in the United States and associated compliance consulting costs as well as from an internal reorganization project.
Regional development
Panalpina assesses segmental operating performance
primarily from a geographical perspective, as the Group’s
operations are predominantly managed by geography.
A useful measure for assessing the operating performance
by region is EBITDA. The segmental EBITDA provided in
the financial accounts developed as follows in the report-
ing period:
declined from CHF 78 million in 2010 to CHF 39 million
in 2011. The main reasons for the decrease are the depre-
ciation of the euro versus the Swiss franc, a reconditioned
compensation scheme introduced at the beginning of
the reporting year (reflecting compensation on a door-to-
door shipment between the exporting and importing
station), along with a general slowdown of business in
Europe and Africa.
US dollar, this region recorded a substantial improve-
ment in EBITDA, from a negative result of CHF 17 million
in 2010 to a gain of CHF 8 million in 2011, helped by the
elimination of certain unprofitable contracts as well as
the acquisition of new businesses with a variety of cus-
tomers across different sectors, including oil and gas.
Moreover, this region was also positively impacted by the
above mentioned compensation scheme.
decreased from CHF 19 million in 2010 to CHF 17 million
in 2011. While the operating result also suffered from an
adverse currency translation effect, this region made var-
ious investments in logistics facilities during the reporting
period in order to appropriately position the Company to
take advantage of future business opportunities.
CHF 92 million in 2010 to CHF 88 million in 2011, which
was mainly related to an adverse currency translation
effect as well as the already mentioned compensation
scheme.
to CHF 60 million in 2011. The improvement was sup-
ported by higher royalties from Group companies and an
adjusted renumeration model of centralized functions.
EBITDA per region
100
80
60
40
20
0
–20
78
39
8 17
88
60
–17
19
92
18
2011 2010*
in million CHF
* Figures adjusted by non-recurring charges as already mentioned.
Asia Pacific CorporateNorthAmerica
Centraland SouthAmerica
Europe,Middle East,
Africa and CIS
Balance sheet
Current assets
Panalpina’s cash and cash equivalents amounted to
CHF 573 million on December 31, 2011 and thus
increased by CHF 45 million from the year before, which
can be mainly attributed to the substantial amount of
free cash flow generated during the reporting period.
Trade receivables and unbilled forwarding services
increased by CHF 29 million, from CHF 1,033 million at
the end of 2010 (equivalent to 52 % of total assets) to
CHF 1,062 million at the end of 2011 (equivalent to 50 %
of total assets). The increase in trade receivables was
more than compensated by an increase in trade payables.
In total, the net working capital intensity (defined as net
working capital as a percentage of gross forwarding reve-
nue) at the end of 2011 was at a record low level of 1.1 %.
Panalpina Annual Report 2011
13
Report of the Executive Board
Non-current assets
Panalpina’s non-current assets increased from
CHF 303 million on December 31, 2010 to CHF 390 million
on December 31, 2011. The increase is primarily a result
of an increase in intangibles due to the acquisition of
Grieg Logistics, a Norway-based logistics company that
Panalpina acquired effective April 1, 2011, as well as
various investments in money market instruments classi-
fied as financial assets.
Total assets
Trade receivables and unbilled forwarding services
Other current assets
Non-current assets
Cash and cash equivalents
1,989
573 1,062 390 2,135110
529 1,033 303124
2011
2010
in million CHF
Trade payables and accrued cost of services
Panalpina’s trade payables and accrued cost of services,
which jointly comprised 63 % of total liabilities on Decem-
ber 31, 2011, increased to CHF 773 million, compared to
CHF 696 million on December 31, 2010. This favorable
development is primarily attributable to a further improved
payment discipline and renegotiation of payment terms
with various vendors.
Borrowings (short-/ long-term)
Total borrowings were further reduced from CHF 10 million
at year-end 2010 to CHF 7 million at year-end 2011.
Other liabilities
Panalpina’s other liabilities declined from CHF 471 million
at year-end 2010 to CHF 440 million at year-end 2011.
The key reason for this decline is a decrease of provisions
due to the payment of fines in connection with the settle-
ment of the two legal claims in the United States.
Total equity
The increase in shareholders’ equity is almost entirely
attributable to the change in reserves which – as a result
of the significant improvement of the net result for the
reporting year – rose from CHF 950 million on Decem-
ber 31, 2010, to CHF 1,053 million on December 31, 2011.
Total equity increased by CHF 103 million during the
reporting period, from CHF 812 million on December 31,
2010, to CHF 915 million on December 31, 2011.
Total liability and equity
Short- and long-term borrowings
Other liabilities
Equity
Trade payables and accrued cost of services
773
7
915 2,135440
696
10
812 1,989471
2011
2010
in million CHF
Cash flow
Net cash from operating activities
Panalpina’s net cash from operating activities in the report-
ing period amounted to CHF 193 million, CHF 156 million
above the prior year’s figure (2010: CHF 37 million). Major
contributors to the positive development were the substan-
tial expansion of net profit for the period and the simulta-
neous decrease of the net working capital. In addition, net
cash from operating activities includes an outflow of
approximately CHF 30 million during the reporting year due
to the payment of fines to US authorities for which provi-
sions were taken in the prior year and which the Group is
paying in several installments over a period of three years
(in 2010, corresponding outflows amounted to CHF 27 mil-
lion). The remaining payable amount totalling CHF 33 million
will be paid in two equal installments, which are due in
2012 and 2013.
Cash flow from investing activities
Expenditures on property, plant and equipment (mainly
IT equipment) increased slightly during the reporting year
to CHF 31 million (2010: CHF 28 million). Net investments
into acquired subsidiaries increased from CHF 2 million in
2010 to CHF 60 million in 2011, mainly as a result of the
purchase of Grieg Logistics. Moreover, the Group invested,
compared to 2010, an additional CHF 51 million of its cash
holdings in money market instruments with a maturity of
more than three months. Overall, the net cash outflow from
investing activities rose substantially from CHF 31 million
in 2010 to CHF 152 million in 2011.
Capital expenditures in 2011 amounted to 0.8 % of net for-
warding revenue (2010: 0.6 %). The slight increase over
the prior year was mainly related to higher investments into
software.
14
Panalpina Annual Report 2011
Report of the Executive Board
Free cash flow
The free cash flow, calculated as net cash from operating
activities minus net cash flow from investing activities,
increased from CHF 6 million in 2010, to CHF 42 million in
2011. Adjusted for the above-mentioned increase of invest-
ments in acquired companies and money market instru-
ments, free cash flow even increased to CHF 153 million in
2011 (2010: CHF 12 million).
Free cash flow Net cash generatedfrom operating activities
42
6
193
37
Cash flow development
2011
2010
in million CHF
Cash flow from financing activities
The net cash used in financing activities decreased by
CHF 4 million in 2011 compared to the year before. A large
portion of this improvement came from lower investments
for the (Management Incentive Plan-related) purchase
of treasury shares due to a lower average share price.
Net cash
in million CHF Dec 312011
Dec 312010
% change
Cash and cash equivalents 573.6 528.9 8
Other current financial assets 20.0 6.1 228
Short-term debt – 7.3 – 9.3 – 22
Long-term debt – 0.2 – 0.4 – 50
Net cash 586.1 525.3 12
Net cash increased by CHF 61 million during the year
under review to CHF 586 million on December 31, 2011.
Employees
full-time equivalents (FTEs)as at December 31
Region 2011 2010 %
change
Europe, Middle East, Africa and CIS 6,746 6,485 4
North America 2,418 2,423 0
Central and South America 2,474 2,294 8
Asia Pacific 3,601 3,259 10
Corporate 461 415 11
Total 15,700 14,876 6
In 2011, Panalpina continued to selectively invest and
increased the number of FTEs by 6 %, from 14,876 on
December 31, 2010, to 15,700 on December 31, 2011.
An increase took place in various reporting regions in
order to accommodate the volume growth in Ocean
Freight and Logistics and to complement organizational
structure.
Panalpina Annual Report 2011
15
Report of the Executive Board
Group Management StructureAs at December 31, 2011
Audit Committee
Legal and Compliance Committee
Board of Directors
Chairman Rudolf W. Hug
Vice Chairman Beat Walti
Lars Förberg, Chris E. Muntwyler, Roger Schmid, Hans-Peter Strodel,
Knud Elmholdt Stubkjær
Chief Executive OfficerMonika Ribar
Air Freight
Ocean Freight
Logistics
Marketing and Sales
Business Processes and Quality
AreasPanprojects
Corporate Accounting
Corporate Taxes
Corporate Controlling
Investor Relations
Indirect Purchasing
Strategic Finance and Projects
Group Treasury
Corporate Information Technology
HR Processes and Projects
International Compensation and Benefits
HR Operations
Capability Development and PanAcademy
Corporate Legal Services
Corporate Insurance Management
Chief Legal Officer / Corporate SecretaryChristoph Hess
Chief Operating OfficerKarl Weyeneth
Chief Financial OfficerMarco Gadola
Chief Human Resources OfficerAlastair Robertson
Corporate Audit Compensation and Nomination Committee
Corporate and Regional Development, Agent Relations
Corporate Communications
Corporate Compliance
www.panalpina.com / organization
16
Panalpina Annual Report 2011
Report of the Executive Board
Promising achievements in each of the four regions
Asia PacificEurope, Middle East,
Africa and CIS
Reporting Regions
Key data
Areas: 11
BeNe, Central Europe, Eastern Europe, France, Iberia,
Northern Europe, Northwest Europe, Southwest Europe,
Sub-Saharan, Black and Caspian Sea, Arabian Belt
Net forwarding revenue: CHF 3,171 million
Employees in full-time equivalents: 6,746
Market conditions
A clear deterioration occurred in this heterogeneous
economy. A decline in cargo to move has led to a highly
competitive environment. Customers tried to obtain
financing from forwarders. The Arabian Spring and the
high oil price hurt Middle East market conditions.
Highlights
Central Europe strengthened its partnerships and
gained new logistics businesses of customers in the
Hi-tech and Fashion verticals.
Panalpina was awarded with more overland trans-
ports in Continental Europe.
Norway-based Grieg Logistics was acquired and
successfully integrated.
In booming Turkey, two offices (Ankara /Bursa) and
a new warehouse in Istanbul opened.
A new standalone logistics facility was launched in
Didcot, Southeast England.
The first Panalpina Saudi Arabia office opened in
Dammam.
Dubai’s role as a distribution hub for Africa grew.
An office in Murmansk was opened and a state-of-
the-art warehouse began operations in Moscow. The
area became a front runner in e-customs clearance.
Panalpina expanded to East Africa and pursued
opportunities in the mining industry along the West
African coast.
Key data
Areas: 5
India, East Asia, Southeast Asia, Greater China, Oceania
Net forwarding revenue: CHF 1,225 million
Employees in full-time equivalents: 3,601
Market conditions
Asia Pacific faced stagnating EU and US demand
but remains a growth market. The airline industry
experienced turbulence, with soft demand and capacity
oversupply. Ocean freight rates were deteriorating to
unsustainable levels for the carriers. Very competitive
market conditions are forcing continued cost reductions.
Highlights
The new Intra Asia trucking service began operations,
connecting China with Vietnam, Laos, Thailand,
Malaysia and Singapore.
Rail-air transport from Urumqi to Europe and sea-air
moves via Los Angeles to Brazil were relaunched.
New business units were launched in Suzhou,
Wuhan and Chongqing, China. Two regional distribu-
tion centers opened, one in Tianjin and another
in Shanghai. 5,000 square meters of warehouse
capacity came into service in Singapore.
Three consol services from Shanghai, Ningbo and
Hong Kong to the Jebel Ali hub serving the Middle
East region kicked off.
Expansion continued in India as three offices opened
and the local sales organization was strengthened.
Long-time partner Apollo was integrated in Perth,
Australia.
A stringent subcontractor management concept,
designed to maintain overall margins in all trades and
products, was implemented.
Panalpina Annual Report 2011
17
Report of the Executive Board
North America Central and South America
Key data
Areas: 2
Canada, USA
Net forwarding revenue: CHF 1,270 million
Employees in full-time equivalents: 2,418
Market conditions
The growth of US economy slowed down considerably.
High unemployment and sluggish housing markets
remained the principal concerns. US companies focused
more and more on growth in emerging markets. Canada
as an import market felt a slowdown in volumes.
Highlights
Both Areas began a major realignment and upgrading
of their key organizational structures.
The Canada division, dedicated to the needs of the
helicopter industry, continued to grow.
New, direct Less than Container Load (LCL) services
from major ports in China to Montreal augmented the
existing services to Vancouver and Toronto.
Two new business units opened: Malta (New York)
and Indianapolis (Indiana).
The Healthcare vertical of Panalpina in the US flour-
ished. Additional significant investments in cold-chain
capabilities have been made.
In the US, Panalpina was able to strengthen major
accounts in all vertical markets.
The Huntsville Logistics Center enlarged its offering of
end-to-end solutions and value-added services along
with Panalpina’s own-controlled network.
Two new Panalpina-controlled flights between Hong
Kong and Huntsville have been filled continuously.
Key data
Areas: 3
Andina, Mercosur, Middle America
Net forwarding revenue: CHF 834 million
Employees in full-time equivalents: 2,474
Market conditions
Consistent economic growth has greatly enlarged a
middle class hungry for durable goods and consumer
products. In Brazil, future international events such as
the 2016 Olympic Games and the FIFA World Cup in 2014
require greater logistics capabilities and infra structure
investments. In Middle America, rising insecurity due to
drug-related crime affected foreign investments.
Highlights
All areas strengthened customer relationships and
gained new businesses. For example: A Brazilian
blue chip company contracted Panalpina to distribute
its products throughout Latin America and France.
Panalpina became Mercosur’s number one LCL
provider and the leading exporter of containerized
sugar.
Mercosur Area was leading in telecom distribution.
Warehousing activities increased as Panalpina
added space in Mexico City and a newly finished
20,000 square meter depot in Panama, where a
12,000 square meter warehousing and distribution
business in the Hi-tech vertical covering end-to-end
supply chain needs was launched.
New logistics operations opened in Peru and
Colombia.
The warehouse in Santiago, Chile, reached profit-
ability and a new multi-customer warehouse in
Cajamar, Brazil, opened.
18
Panalpina Annual Report 2011
Report of the Executive Board
Panalpina expands its product range in all divisions
Air Freight Ocean Freight
Product Divisions
Key figures
1,310,000 TEUs transported
Generated 36 % of Panalpina’s net forwarding revenue
Market conditions
The business faced substantial overcapacity in major
east-west trade lines. Ocean freight rates deteriorated
to unsustainable levels, resulting in massive losses
for carriers, very much like in the 2009 shipping season.
Highlights
Panalpina increased its worldwide footprint, recorded
volume growth and therefore gained market share.
In fact, 2011 marked the highest volumes ever in
Panalpina’s Ocean Freight.
Ocean Freight further focused on its profitability per
cargo unit.
Panalpina’s Ocean Freight business aligned its global
strategies and established a strong focus on trade
lane growth, niche verticals, and managed solutions.
Integrated systems, processes and data quality are
an essential part of the growth strategy.
Panalpina adjusted its global Less than Container
Load (LCL) hub setup and launched in excess of
50 new LCL services. Operated by the in-house car-
rier Pantainer Express Line, they support customer
needs for simplicity and global reach through a single
integrated LCL network. The new services reduce
transit times and CO2 emissions.
Outlook
Overcapacity on the main east-west routes is expected
to decrease in 2012 while rates will increase. Panalpina
Ocean Freight will concentrate on five stra tegic trade
lanes (Asia–Europe, Asia–North America, Asia–Latin
America, Asia–Middle East and Intra Asia).
Key figures
848,000 tons of freight moved
Generated 50 % of Panalpina’s net forwarding revenue
Market conditions
2011 started out fairly strongly but dropped off in the
second half of the year. The air freight market stayed
very soft in most major trade lanes until year-end.
Highlights
Panalpina has become one of the world’s biggest
Qualified Envirotainer Providers for active cooling
solutions. In 2011 the Company offered a total of
43 accredited locations in 27 countries.
Air Freight improved successfully its profitability
per cargo unit.
Panalpina launched a second twice-weekly transpa-
cific service between Hong Kong and Huntsville and
between Huntsville and São Paulo (Viracopos).
Air Freight implemented a new centralized global pro-
curement process and system.
The Cargo 2000 Certification and the Global Air
Sourcing Initiative were successfully introduced to
Panalpina’s global carriers. These credentials ensure
efficient air cargo transport.
Panalpina signed contracts for the upgrade of two
B747-8F aircraft, the latest environmentally friendly
freighter technology from Boeing. Operated with Atlas
Air, they will replace the two existing B747-400F by
2012.
Outlook
The soft market conditions will persist into 2012, though
with an expectation for growth in the second half.
Panalpina’s Air Freight business will focus on growth in
the five strategic trade lanes (Asia–Europe, Asia–North
America, Asia–Latin America, Asia–Middle East and
Intra Asia).
Panalpina Annual Report 2011
19
Report of the Executive Board
Logistics
Key figures
Generated 14 % of Panalpina’s net forwarding revenue
Market conditions
A large number of customers continued to outsource their
logistics activities; market growth trends are continuing,
but the competition in contract logistics remains strong.
Highlights
A global Logistics strategy focusing on value-added
services for customers was developed and the
product line extended with inbound to manufacturing,
aftermarket spare parts and service logistics, techni-
cal distribution, and postponement services.
Newly developed logistics tools allow optimization of
warehousing by simulation, what-if modelling, and
accurate activity-based cost calculation.
Regional centers of expertise opened in Asia Pacific,
Europe and the Americas along with strengthened
services.
Panalpina provided additional logistics space in
Brazil, Canada, China, Colombia, France, Germany,
Japan, Korea, Luxembourg, Mexico, Panama, Peru,
Russia, Singapore, Sweden, Turkey, the United
Kingdom, and the USA.
With its European road project, Logistics launched
a new procurement process and a standardized
IT platform, leading to higher utilization factors.
Outlook
Panalpina expects this market to grow. Logistics further
emphasizes continuous improvements to existing
operations while maintaining the development of strate-
gic geographies, industry verticals, and corresponding
service offerings.
20
Panalpina Annual Report 2011
Panalpina Annual Report 2011
21
Tim Bauer
Lane Manager for Air Freight from Europe to
the Americas and for own-controlled flight
operations, has the capacity overview on all
lanes out of Luxembourg
Panalpina Annual Report 2011
Panalpina Annual Report 2011
Samia Guerroumi
Procurement and Capacity Management
Clerk for Air Freight from Europe to Central
and South America
Panalpina Annual Report 2011
Panalpina Annual Report 2011
Jasmine Medhora
of Panalpina’s Pantainer Express Line
based in Hamburg checks operational
queries of Ocean Freight on correct
procedures and guidelines
Panalpina Annual Report 2011
Panalpina Annual Report 2011
Marco Parnitzke
Booking Agent for Less than Container Load
Ocean Freight from Hamburg to South America,
handled 3175 shipments in 2011
Panalpina Annual Report 2011
Andrea Ribaudo
Logistic Platform Manager at Milan
warehouse from where approximately
15 million units have been shipped in 2011
Panalpina Annual Report 2011
30
Panalpina Annual Report 2011
CEO Statement
Profitability built on sustainable business model
Despite the economic gloom and uncertainty, the Panalpina Group emerged from 2011
with its market position strengthened. Our strategic orientation towards profitability,
underpinned by our business model, has already proved its worth. But it is nonetheless
set to encounter fresh challenges in the future.
All aspects of Panalpina’s operations are guided by the
principle of sustainable development. To progressively
strengthen the welfare of our company, the environment
and the population at large, equal weight is given to social,
economic and ecological criteria in the evaluation of strat-
egies, projects and innovations. Overall, this offers the
best means for Panalpina to honor its obligations towards
shareholders, employees, suppliers, customers and the
general public.
Sound business operations
The foundation for accepting broader responsibility is laid by
entrepreneurial success. Solid business performance and
the efficient deployment of corporate resources are crucial
to unlocking creative freedoms and meeting the varying
demands of the Company’s different stakeholders. In today’s
global logistics and forwarding markets, simply delivering
the right goods to the right place at the right time no longer
suffices for long-term success.
Panalpina Annual Report 2011
31
CEO Statement
Success factors as growth drivers
2011 saw Panalpina put in place a carefully crafted corpo-
rate strategy – initially for the period up to 2014 – which is
built on the principles of performance, integrity and profes-
sionalism. While striving to continuously provide our cus-
tomers with absolutely reliable logistics services that are
tailored to their needs, our strategy targets sustainable and
profitable growth. Our most crucial assets in the current
business environment include our in-depth know-how in key
industry verticals and the associated client focus, an
extensive global network, a highly qualified and committed
workforce, process-optimized information technology,
outstanding compliance standards, and efficient and trans-
parent procurement.
Value-added services
Panalpina is far more than a freight forwarding company.
Our core air and ocean freight business is backed up
by supply chain services and value-added logistics. The
former includes, for instance, the optimization of supply
chains and management of orders. The latter generally
entails the acceptance of consignments for production or
as part of postponement or customer service solutions.
By expertly combining these services, we can offer our
customers door-to-door products closely geared to their
supply chains. Thanks to our world-spanning network
embracing some 500 offices on six continents, these solu-
tions can be implemented in all corners of the globe.
Standard
Warehousing
Overland
Value-Added Logistics Services
Supply Chain Services
Global Network
Quality and Procurement
Employees
Information Technology
Industry Verticals
Compliance and
Corporate Culture
Air and
Ocean Freight
Core Services
Success Factors
Delivering end-to-end supply chain solutions: Panalpina’s business model with success factors
32
Panalpina Annual Report 2011
CEO Statement
We are planning a further expansion of our own logistical
capacities in the years ahead. The focus here will be
on value-added services rather than mere warehousing
provision.
Focus on specific sectors
Crucial for the provision of tailored solutions for our cus-
tomers’ supply chains is an intimate knowledge of the
forwarding sector’s key target industries. Panalpina has
pooled this expertise in nine vertical centers of expertise
known as “customer groups” or “industry verticals.” These
are additionally supported by the Panprojects unit, which
is charged with handling large industrial projects. Being
conversant with the extremely diverse needs of customers
in the different industrial sectors, the centers’ employees
are able to deliver the appropriate solutions. While the auto-
motive trade, for instance, gives high priority to just-in-time
delivery directly to the production line, the pharmaceutical
industry requires temperature-controlled door-to-door ship-
ments in order to safeguard the quality of active ingredients.
All industries in which Panalpina operates contribute to the
Group’s sustainable growth. In our bid to achieve above-
average growth in our air freight, ocean freight and logistics
business, we will concentrate in particular on the consumer
and retail, healthcare, hi-tech, and oil and gas sectors over
the next few years. By 2014, we are looking to earn a place
among the top five in all the industries served by our cen-
ters of expertise.
Own-controlled air freight network
The Panalpina’s own-controlled air freight network, widely
acknowledged in the market as a powerful unique selling
point, will be a major asset for future growth. It creates a
wealth of options for the Group to deliver customized solu-
tions without any reliance on airline flight schedules. Our air
freight network is due for a further upgrade in 2012 through
replacement of the previously deployed cargo planes by
two new Boeing 747-8F freighters. The new aircraft consume
less fuel, are far quieter than their predecessors, and offer
greater freight capacity. They are also equipped with wide-
ranging facilities for the transportation of temperature-sen-
sitive cargo.
Maximum flexibility thanks to asset-light business model
The two new aircraft epitomize two of Panalpina’s key cor-
porate principles: its asset-light strategy and its PanGreen
initiative. Asset-light means that the Group does not own
vehicles and warehousing facilities itself, but purchases
capacity as needed from its suppliers. Accordingly, even
the new planes will remain in the ownership of our long-
time partner Atlas Air, while Panalpina concentrates on mar-
keting and flight scheduling. This policy enables us to
adapt more easily to fluctuations in demand than many of
our competitors with their own vehicle fleets or ware-
houses. It also helps to minimize debt while boosting flexi-
bility. Moreover, the asset-light approach is sustainable in
that our procurement processes are highly transparent and
help to cultivate trusting relationships with our suppliers.
Ecological transport logistics
The PanGreen program helps to sharpen both our own
environmental profile and that of our customers and sup-
pliers. The program makes it possible to obtain detailed
information on the environmental impact of customers’ con-
signments as well as the options available for lower-carbon
ocean shipments. In addition, as of mid-2012 the new air-
craft will allow us to offer air shipments with a much smaller
carbon footprint. The PanGreen program also benefits
from our flexibility in that customers are able at all times to
switch to a more ecological transport mode.
Employee development as the path to excellence
Our business is a people business. In other words, our
service quality reflects the skills of our workforce. Hence
the high priority which – in line with our corporate values –
we attach to further training, talent management, and pro-
active succession planning. All forms of personnel devel-
opment implemented by us worldwide are closely geared
to promoting the organizational skills, individual competen-
cies and commitment of our staff.
Leverage through information technology
To work efficiently and raise productivity, our highly quali-
fied staff members rely on standardized processes and
modern information technology. Greater speed, quality and
transparency are required in the provision of data to both
Panalpina and its customers. The immense importance
attached to the continuous refinement of our IT platforms
is reflected by the substantial annual investment in this
field. One key IT project is the worldwide introduction of
the SAP Transportation Management (SAP TM) system.
This platform is currently being phased in, with completion
scheduled for 2015.
Panalpina Annual Report 2011
33
CEO Statement
Highest compliance standard
Our corporate values, Code of Conduct and compliance
processes govern all our actions. The principles behind
Panalpina’s Code of Conduct are derived from the United
Nations’ Universal Declaration of Human Rights and from
internationally recognized environmental standards and
labor laws. Our compliance processes are implemented
company-wide, undergo continuous revision, and are
deemed exemplary within our industry. As customers place
increasing demands on the compliance procedures of
their suppliers, Panalpina’s existing standards are steadily
sharpening its competitive edge.
External growth drivers
The key drivers in our market include continuing globaliza-
tion, the trend towards services outsourcing, the rising
demand for value-added logistics services, and the ever
greater market penetration of freight forwarders. In both air
freight and ocean freight, routes between Asia and the
Western World, between Asia and other emerging markets,
and especially the intra-Asian lanes, are growing rapidly.
Thanks to our business model, strategy and the commit-
ment of our workforce, we are excellently equipped to
achieve sustainable development in this environment – for
the good of all our stakeholders.
Monika Ribar
Chief Executive Officer
34
Panalpina Annual Report 2011
Success Factors
Global Network
Worldwide presence – local knowledge
North America
Net forwarding revenue: CHF 1,270 million
Employees in full-time equivalents: 2,418
Central and South America
Net forwarding revenue: CHF 834 million
Employees in full-time equivalents: 2,474
Across time zones and borders, Panalpina operates a world-spanning network
embracing some 500 branches. With detailed knowledge of local markets
and characteristics Panalpina’s professionals deliver every time comprehensive
door-to-door solutions.
As at December 31, 2011
Panalpina Annual Report 2011
35
Success Factors
Asia Pacific
Net forwarding revenue: CHF 1,225 million
Employees in full-time equivalents: 3,601
Europe, Middle East, Africa and CIS
Net forwarding revenue: CHF 3,171 million
Employees in full-time equivalents: 6,746
Panalpina branches in over 80 countries
Partner companies in further 80 countries
www.panalpina.com / addresses
36
Panalpina Annual Report 2011
Success Factors
Industry Verticals
Sharpening the focus on customer needs
Panalpina concentrated on the special division Panprojects and nine core industry
verticals in which it provides industry-leading expertise and tailor-made customer-
specific solutions. In 2011 these ten centers of expertise further strengthened their
know-how and gained new businesses.
HealthcareThe healthcare industry saw increasing demand for
end-to-end supply chain solutions. In developed coun-
tries, there was continuing pressure on costs as well
as on regulatory aspects and quality control. Not only
did Panalpina become one of the world’s biggest Quali-
fied Envirotainer Providers in 2011, but it is now recog-
nized as one of the leading companies in terms of end-
to-end cold chain solutions.
Customer needs:
Temperature-controlled services
Direct delivery to pharmacy, patient or hospital
Warehousing, distribution and packaging services
Zero defects in supply chain
Telecom2011 saw a significant investment in telecom infrastruc-
ture, which resulted in positive volume growth. Orders
from new telecom operators in emerging markets (Latin
America, Africa, Middle East) came atop higher volumes
in existing accounts. The outlook for 2012 remains stable
in terms of volume but price erosion is to be expected.
Customer needs:
Aftermarket and repair services
Enhanced and innovative last mile solutions
Warehousing and distribution services
Order management with IT integration
Consumer and RetailGrowth was fueled by fast-moving global consumer
brands and by large and medium-size retailers. Asia
remained an important market not only from a sourcing
point of view but also in terms of consumer demand.
In addition, though, established markets such as North
America or Europe will remain important, particularly
with regard to purchase order management and end-to-
end milestone tracking.
Customer needs:
Purchase order management with IT integration
Vendor management and integration
Sophisticated buyer consolidation services
End-to-end milestone tracking
PanprojectsThe project business for the petrochemical and process
sector was flat, but previously awarded contracts con-
tinued from prior years. The upturn in the global mining
industry provided the bulk of the work. In a difficult
market Panalpina achieved operational excellence while
meeting high health, security, environmental and com-
pliance standards. The goal is to expand investments,
including into Sub-Saharan Africa.
Customer needs:
Worldwide coverage
Integrated turn-key solutions
Fast and secure shipments for bulky and oversized
goods
www.panalpina.com / iv
Panalpina Annual Report 2011
37
Success Factors
ChemicalsIn the International Year of Chemistry all buyers in the
value chain reduced their stock, decreasing further the
volumes traded. Industry mergers and acquisitions gave
Panalpina a stronger foothold within the top account
landscape as cost-saving and efficiency efforts reached
a new peak. New products on the market create numer-
ous opportunities for Panalpina.
Customer needs:
Product know-how and technical support
Key partnership programs with global coverage
Supply chain excellence and visibility
Compliance program and health, safety and
environment (HSE) competence
AutomotiveContinued growth of volume with major automotive
manufacturers and suppliers was strongly based on
their need for air freight services. The latest natural
disasters have triggered alternative supply chain design
discussions in which just-in-time is being weighed care-
fully against just-in-case inventories. As a consequence,
effective crisis management became an integral part of
the service portfolio.
Customer needs:
Flexible and reliable supply chains with zero defects
Purchase order management and warning systems
Buyer consolidation
Oil and GasFor more than five decades, Panalpina has proven its
commitment to the industry with a focus on servicing
the highly demanding upstream part of the business
(exploration and production). The vertical expanded its
lead position with operators and oilfield service compa-
nies, demonstrating excellence in processes, compliance,
HSE standards, and service innovation.
Customer needs:
End-to-end supply of on- and offshore locations
Integrated project management for on- and offshore
facilities, including rig moves
Pick and pack of hazardous material, bulk and heavy
shipments
ManufacturingThanks to full order books at most manufacturing com-
panies across all segments, Panalpina was able to
grow in its newest industry vertical (established 2010).
In addition, Panalpina developed specific industry value
propositions such as non-containerized cargo or
smart air freight solutions related to the aftermarket of
Panalpina’s client base.
Customer needs:
End-to-end transport and logistics solutions
Special equipment management
Buyer and shipper consolidations
Aftermarket logistics
Packaging
FashionThe fashion industry performed well. This was due to
customer growth in emerging markets. Panalpina’s
performance was underpinned by growth in Asia and in
the Americas. Fashion companies faced cost pressure
but also had to address increased consumer demands.
Panalpina will continue to support them in their con-
tinued trend to globalization and with its multi-channel
solution offer.
Customer needs:
High supply chain reliability and predictability
High security and cost focus
Multimodal solutions
Hi-techMeeting the needs of a dynamic and volatile market
whose products exhibit a short lifecycle requires a highly
flexible supply chain design. Panalpina leverages its
global reach as more companies move their production
sites to Asia and other emerging markets. This vertical
already has a sophisticated mix of transport and logistics
services in place to meet customer demand.
Customer needs:
Lead-time reductions at low cost
Last-mile delivery services
Postponement
High security
Reverse logistics with repair services
38
Panalpina Annual Report 2011
Success Factors
Employees
Empowering staff for service excellence
Panalpina’s future success depends on the investment it makes now in the
development of its employees. Attracting, screening, and selecting the right people
for the right jobs, and retaining them through value-added training and employee
development are central to this investment, which will pay dividends into the future.
At the end of 2011, Panalpina had 15,051 employees in over
80 countries. Its global human resources (HR) function is
responsible for enabling organizational development so as
to secure the ongoing engagement and effectiveness of
Panalpina’s employees. The systems, processes and train-
ing programs that form a strong foundation for such a cul-
ture for these efforts are based on Panalpina’s core values
and a pragmatic leadership competency model. These are
continually evaluated and refined to ensure that Panalpina
managers have a robust framework that will sustain a
high-performance culture within the Company.
Human Resources transformation continues
In its fourth year, the HR transformation process remains
focused on building on the foundation of its strategic
priorities, namely, (1) identifying, attracting, managing, and
deploying the talent required to perform; (2) propagating
a sustainable high-performance organization and work-
force; (3) developing leadership and other capability require-
ments; and (4) designing, implementing, and optimizing
HR processes, policies and service delivery so that they
efficiently meet the needs of our global business units and
workforce.
System support for talent management
PanLink, a web-based Human Resources management
system, was launched in late 2010 to support the imple-
mentation and institutionalization of the automation and
global centralization of objective and performance manage-
ment, talent management, succession planning, and com-
pensation for Panalpina’s senior management. In 2012, the
system will be introduced for all employees in India and
at the head office in Basel. The scope of PanLink has also
been expanded to include a Recruitment Module, which
is expected to be a key tool for all hiring managers in the
coming years.
Organizational commitment to employee development
The global Human Resources team continually monitors
various indicators of training, development and engage-
ment in the workforce. In 2011, Panalpina launched its
second Employee Engagement Survey to identify areas
where enhanced programming would be beneficial. In
total, 84 % of employees responded, and improvement was
noted in the following areas: Panalpina’s management
has improved in terms of its ability to state objectives clearly,
establish priorities, make decisions promptly, provide
leadership, and communicate with people. Panalpina’s
employees felt they are better informed about the Com-
pany’s strategy and performance, and they reported that
greater efforts are being made to obtain their views. More
employees noted satisfaction with the training opportunities
available to them and stated that Panalpina is doing a good
job in employee development and in providing deserving
employees with opportunities for advancement.
Nevertheless, opportunities for helping Panalpina to con-
tinue its development were identified. For example, the
survey showed scope for improvement in relation to oper-
ating conditions and efficiency, to the integration of
Panalpina’s core values into the corporate culture, and to
performance review processes.
The virtual campus: PanAcademy
In response to the results of the 2009 survey, Panalpina
continued to strengthen its commitment to providing
learning opportunities for all its employees. PanAcademy,
Panalpina’s e-learning platform, grew to include 33 learn-
ing units covering the Company’s strategic environmental
PanGreen initiative as well as operations, product com-
petence, and compliance. E-learning also expanded the
coordinated launch of multi-language units – highlighted
by the unit covering a Panalpina “core values journey” that
includes refresher courses on anti-corruption.
Panalpina Annual Report 2011
39
Success Factors
Discovering and developing leadership talent
Panalpina’s commitment to employee development and tal-
ent management extend to all levels of the organization.
In 2011, the CEO personally led learning workshops focused
on enhancing strategy execution. 44 senior managers
spent four days in an offsite program to create a common
understanding and alignment of the challenges linked to
strategy execution, supply chain management from a cus-
tomer’s perspective and high-performance leadership.
During these four days, they participated in an intuitive tai-
lor-made business simulation called Mexus that challenged
each Panalpina manager to deliver value to customers
consistently, collaborate across the organization, and drive
strong financial performance.
Tailor-made learning programs
In 2011, the Company’s global program on collaborative
strategic leadership skills, Navigating our Future, enrolled
an additional 35 candidates. The program is offered to
high-potential employees in mid-senior positions who are
willing to pursue an international career. In its third year,
it is augmented by the re-launched global leadership and
managerial skills program Steering Success. In 2012, this
includes over 609 department heads, team leaders and
supervisors who will participate in three modules offered in
Mandarin, German, French, Portuguese, Spanish, Italian,
and English. Panalpina continually seeks the best possible
candidates, either internal or external, for management
and line roles, and thus does not have a policy to preferen-
tially hire people who are living locally.
In 2012, four new training initiatives will begin to help em-
ployees deal with the challenges faced in the work envi-
ronment – namely: securing success for new and first time
leaders, performance management, empowerment and
coaching, and effective communications.
In parallel, Panalpina continued to build upon its internal
assessment capabilities. Over the last two years more than
150 assessments have been run internally with a strategic
partner; these assessments are now well established as a
source of sound information regarding an individual’s capa-
bilities and as a means of identifying development needs.
Benchmarking for fair, transparent, and motivational
compensation
Global, regional and local compensation benchmarking
again played an important role in ensuring best competi-
tive practices and maintaining a competitive edge by retain-
ing and motivating employees. In 2011 the practice was
enhanced to include reviews of global job levels and com-
pensation structures against industry norms.
Building further on the foundations for annual global cost
transparency in relation to cross-border transfers, another
internally developed enhancement to a global compen-
sation and benefit reporting process was established in
2012. This introduces extra transparency into comparisons
of actual costs versus budgeted costs, thus enabling
Panalpina to accurately track the return on investment.
The Company expects that the continued evolution of this
cutting-edge tool will facilitate strategic decisions that
include cost factors. It will then be better equipped to deploy
these high-value, high-cost resources strategically around
the globe.
www.panalpina.com / jobs
Employeesas at December 31, 2011
Full-time equivalents*
Europe, Middle East, Africa and CIS 6,746
North America 2,418
Central and South America 2,474
Asia Pacific 3,601
Corporate 461
Total 15,700
* Full-time equivalents include also part-time assignments and employees provided by labor agencies.
Number of employees 15,051
40
Panalpina Annual Report 2011
Success Factors
Compliance and Corporate Culture
Ethics, values and compliance
As a global organization with operations on six continents, Panalpina is integrated into
the cultures of many different countries. This makes cross-cultural understanding
crucial. Furthermore, Panalpina’s strong corporate culture is based on shared values
and ethical behavior that encompass fairness, respect and responsibility.
A key aspect of Panalpina’s commitment to outstanding
service is its culture of ethical behavior, rigorous compliance
with all applicable laws, and the global experience con-
tributed by its employees. Panalpina realizes that its ultimate
success depends on its employees’ awareness of the
Company’s long term values, and an understanding of how
their individual work contributes to the Company’s success.
Cultivating strong values and a healthy corporate culture
is a long process that calls for commitment and investment
on the part of all stakeholders.
Global experience supports performance
With approximately 500 of its own representative offices in
over 80 countries and close collaboration with partner
companies in 80 more countries, Panalpina has the global
footprint and experience base to help its customers suc-
ceed and prosper in the international marketplace. To sup-
port this, Panalpina offers its employees an extensive
internal exchange program through which they have the
opportunity to spend an average of three months abroad
within the Company. This popular program remains a prior-
ity for 2012 as it provides employees with multi-cultural
and international experiences that strengthen cross-border
understanding and collaboration.
Panalpina’s Code of Conduct
The Panalpina Code of Conduct encompasses binding rules
on health, safety, and environment; on employee relations
(including protection from discrimination and harassment);
on ethical business conduct (including fair competition and
antitrust and trade regulations); on the strict prohibition on
bribery and corruption (including a ban on political contribu-
tions by the Company); and on responsibility for Company
assets as well as financial integrity. Derived from the United
Nations’ Universal Declaration of Human Rights and from
internationally recognized environmental standards and
labor laws, Panalpina’s Code of Conduct continues to reflect
its commitment to integrity and responsibility across all
operations and divisions.
The Code of Conduct is available in 30 languages and is
readily accessible by all employees via the intranet and on
the Corporate website, see www.panalpina.com/culture.
Since 2008, it is applied consistently and rigorously through-
out the Company regardless of an employee’s status or
tenure; all Panalpina employees are required to sign the
Code of Conduct, indicating their commitment to adhere
to the standards therein. Staff members are encouraged to
report breaches of the Code of Conduct to their line or HR
managers, or directly to the Corporate Compliance Office.
However, if employees are unwilling or unable to do so,
they can also contact a neutral, external hotline or file a
confidential report via the internet.
Resources and training for compliance
Panalpina’s Corporate Compliance Officer reports directly
to the CEO and to the Legal and Compliance Committee
of the Board of Directors, and is assisted by a team of
eight full-time Corporate Compliance Managers. In 2011,
Panalpina expanded its corporate compliance team by
adding a position dedicated to focusing on trade compli-
ance, which includes oversight of export regulations and
issues regarding sanctioned and embargoed countries.
Furthermore, in the year under review, the compliance
team visited Panalpina operations in 27 countries for one
to two weeks each in order to ensure that Code of Con-
duct and Compliance programs were implemented fully
and correctly. The selection of the countries was based in
part on the Corruption Perceptions Index of Transparency
International, a global civil society organization focused on
the fight against corruption.
Training has remained a focal point in Panalpina’s overall
Compliance Program. Since 2008 it has been supported
by an interactive e-learning platform which enables em-
ployees to familiarize themselves with the Code of Conduct
and various aspects of compliance. This program was
enhanced in 2011 by the launch of modules that focus on
the topics of anti-trust and anti-corruption. These modules
Panalpina Annual Report 2011
41
Success Factors
are specifically designed for employees who may confront
these issues in their work.
In 2011, Panalpina conducted over 90 on-site compliance
training sessions, with over 1000 employees participating
worldwide.
Sharing compliance initiatives with suppliers and
customers
Panalpina initiates regular face-to-face discussions, semi-
nars and workshops on various aspects of compliance
with its suppliers and customers. This is seen as a key ele-
ment to building long-term, trusted collaboration among
the Company’s different stakeholders. In 2011, Panalpina
continued to engage with key suppliers, particularly those
in countries where compliance has been seen as particu-
larly important, regarding performance, necessary
improvements, and compliance certification standards.
Panalpina was admitted as a signatory member to the
World Economic Forum Partnering Against Corruption
Initiative (PACI) in 2009, and continued its support for this
important initiative in 2011. The PACI requires CEO level
commitment to zero tolerance for bribery as well as a com-
mitment to implement a practical and effective anti-cor-
ruption program within the Company, benchmarked against
the PACI Principles.
www.panalpina.com / culture
42
Panalpina Annual Report 2011
Success Factors
Information Technology
Drivers for efficiency excellence
Continuous investment in the most advanced information technology (IT) systems is
an essential part of Panalpina’s mission to offer state-of-the-art solutions to customers
with complex transport and logistical needs. To guide this effort, Panalpina has a
focused three-year strategic plan dedicated to streamlining data management processes
and improving efficiency.
The global logistics industry is becoming increasingly reli-
ant on the secure and efficient processing of information.
Therefore, having a robust, effective, and scalable IT infra-
structure is critically important to future growth and suc-
cess. In this era of rapid technological progress, identifying
the latest technologies and realizing their value requires
careful analysis of company operations as well as a clear
understanding of customers’ needs.
Ongoing IT advancements
Following the worldwide rollout of a Documentation Man-
agement System in 2010, Panalpina began the implementa-
tion of a new collaboration platform in 2011 to provide a
highly secure portal that is accessible to customers. The
objective is to improve efficiency and quality assurance
within the Company while providing a more streamlined
approach to communication and documentation exchange
between Panalpina and its customers and partners. Com-
mitted to providing reliable information in a timely manner,
the collaboration platform is part of an Integrated Standard
Business Platform which will be rolled out in its entirety by
the end of 2012. In addition, the Event Management System
will increase the transparency, the quality of data and the
supply chain visibility for customers.
Also introduced in 2011 was the SAP Transportation Man-
agement (TM) platform, which will be rolled out globally
step by step. Following the 2011 implementation of the sea
freight SAP TM application, air freight pilot installations
will be deployed toward the end of 2012. Beginning in 2013,
both the air and ocean freight systems will be rolled out
on a corporate-wide basis. This comprehensive project will
be completed by 2015.
Outlook for 2012
Part of Panalpina’s three-year strategic plan is an ongoing
effort to renew legacy applications. Existing systems are
being adapted to improve real-time automation capabilities
and assure data quality. These advancements will simplify
processes and positively influence internal IT organization
and quality targets. Innovation is also a key aspect of the
strategic plan, with an emphasis on the adoption of more
sophisticated technologies that promise to enhance com-
munication, speed, efficiency and, ultimately, productivity.
Various platforms based on mobile communication and
information technologies will be explored with the goal of
improving communication between Panalpina and its
customers and partners. Panalpina recognizes the poten-
tial value in emerging technologies such as tablets, smart-
phones and other mobile solutions, and is prepared to
incorporate these devices when deemed valuable to cus-
tomers, business partners, and employees.
In addition to the three-year IT strategy, Panalpina will
implement standardized procedures and templates where
possible to streamline processes and meet the demands
of its fast-paced market, while also ensuring efficient and
reliable service. This will include directing its attention to its
supply chain to meet customers’ high expectations in
areas such as package tracking and other real-time data
monitoring capabilities.
In 2012, Panalpina will launch an information security
campaign. As part of this project, Panalpina will ensure
that the Corporate Information Security Policy is signed
and adhered to by all employees. Security awareness will
be reinforced through training and refresher sessions.
Lastly, as a final step in Panalpina’s long-term effort to unify
data centers, security levels and disaster recovery precau-
tions will be strengthened by a consolidation across the IT
infrastructure throughout 2012 and into 2013. This process
sustains the Company’s business intelligence and mitigates
the risk of business disruption in the event of unforeseeable
emergencies.
Panalpina Annual Report 2011
43
Success Factors
Procurement
Strong subcontractor relations as a key asset
One of Panalpina’s ongoing strategic goals is to build long-term partnerships with
world-class vendors. In order to effectively maintain this network, Panalpina’s
procurement of each product division has streamlined its purchasing processes to
ensure fair, equitable, and efficient treatment of its current and potential partners.
Procurement is a fundamental driver for Panalpina’s
success. The Company depends on its network of subcon-
tractors to continuously improve efficiency and uphold
Panalpina’s reputation in order to maintain a competitive
position in the global market. This network is one of
Panalpina’s most valuable assets, and results in signifi-
cant dividends that are passed along to its customers.
Therefore Panalpina is thorough and diligent in selecting
the best possible partners with whom to do business.
Finding and keeping the best partners
In order to choose the most qualified subcontractors for
ocean, air and logistics operations, Panalpina imple-
mented clear criteria for assessing potential subcontrac-
tors: compliance, credibility, pricing, quality of service,
consistency and performance. In addition to excelling in
terms of these criteria, candidates must be willing to
engage in a cooperative partnership, adhere to the Com-
pany’s rules and policies, and remain compliant with appli-
cable laws and regulations. Panalpina is also committed
to practicing fair selection procedures, which include
conducting a consistent evaluation process, allowing for
negotiations, disregarding nationality as a criterion, and
utilizing standard contracts. Because Panalpina is a global
company that applies high standards for its vendors, it
does not have a policy to preferentially hire suppliers that
are local to its operations.
Improvements on both sides
In its fast-paced industry, Panalpina must work with its
partners to strengthen relationships and recognize areas
for improvement. Panalpina’s suppliers have the opportu-
nity to leverage its considerable experience in the industry to
improve their own operations. Since 2010, the PanGreen
program assesses the energy and environmental impacts
of subcontractors and calculates the carbon footprint of
cargo shipments. Results from this program provided a data
baseline for the network of subcontractors against which
they can measure their own environmental performance.
It is not uncommon for Panalpina’s sub contractors to also
be a source of innovative ideas that improve service offer-
ings. By monitoring each step along the supply chain, and
by actively engaging with its sup pliers, Panalpina can im-
prove overall performance and offer its customers higher-
quality services.
Ensuring compliance
Panalpina must also carefully manage its exposure to
liability from the actions of its subcontractors. There are
numerous national and international anti-corruption laws
and regulations, environmental regulations, and other legal
requirements with which the Company must comply.
Therefore, as a means of averting risk, regular audits are
conducted to ensure subcontractor compliance with
Panalpina’s Anti-Corruption Policies and Code of Conduct,
as well as all applicable laws and regulations.
Continued partnership
Ultimately, both Panalpina and its subcontractors have
the opportunity to benefit from these relationship-building
and compliance assurance procedures. In support of
Panalpina’s asset-light strategy, the Company attaches
great importance to its growing network of trusted and
reliable partners. As this will remain a key priority in future
too, Panalpina intends to continue improving and secur-
ing its position in the market by developing new partner-
ships that meet the Company’s business demand.
44
Panalpina Annual Report 2011
Success Factors
Quality, Security and HSE
A strong commitment to sustainable values
To exceed its customers’ expectations, Panalpina is focused on applying outstanding
quality and strong environmental performance. Consequently, it is steadily optimizing
its processes and improving its services to secure long-term success.
Panalpina’s robust business and quality control processes
greatly increase the value of its services and ultimately
the satisfaction of its customers. The responsibilities of the
Business Processes and Quality team extend throughout
the organization and are central to maintaining its culture
of responsibility and accountability and its close coopera-
tion with subcontractors. Key aspects of their efforts include
employee training and development programs, and facili-
tating and monitoring the implementation of global standards
for measuring and ensuring the quality of the operational
service delivered to customers.
Employee training for quality improvement
In the past year, Panalpina continued its focus on quality
services by implementing Six Sigma methodologies
around the world. This was highlighted by the successful
completion of the first Lean Six Sigma Green Belt Training
at the facility in Basel, Switzerland. Fourteen Panalpina
employees participated in the training program, which is
based upon the PanCIP framework – the continuous im-
provement methodology designed to actively drive process
improvement for Panalpina and its customers. In 2012,
the Green Belt Training participants will focus on a series
of quality improvement initiatives to address key elements
of Panalpina’s business processes or the specific needs of
certain customers.
In 2011, the Panalpina Project Management program,
PanPM, was expanded to include worldwide class room
trainings. PanPM started in 2010 as a common, standard-
ized project management methodology intended to stream-
line project management across the organization. Over
the past year, almost 1000 Panalpina employees have par-
ticipated in the classroom, e-learning or introductory train-
ing sessions on the PanPM methodology.
Customer engagement
Engaging with customers and obtaining feedback on
Panalpina’s performance continued as an important
goal in 2011. The results from previous surveys show that
quality and speed of service are the two most important
factors for Panalpina’s customers. Surveys such as these
play a critical role in informing process improvement and
customer relationship management efforts.
Streamlining information flows
In early 2011, the GlobaI Invoicing Speed and Quality ini-
tiative began at Panalpina in selected business units
and departments. The expected benefits of this effort are
to eliminate defects, to issue and process invoices more
quickly and thereby to improve cash flow. Ultimately the
lessons learned can be passed on to customers as best
practices. This initiative is also built upon the PanCIP
framework and utilizes the principles of the Lean Six Sigma.
Panalpina Cargo 2000 Phase 1 certified
In 2011, Panalpina announced that the Group is now Cargo
2000 certified for Phase 1. Cargo 2000 is a three-phase,
multiple stakeholder industry initiative aimed at implement-
ing a quality management system for the worldwide air
cargo industry in order to improve efficiency. Phase 1 man-
ages airport-to-airport processes, and Phase 2 tackles
door-to-door shipments. Phase 2 certification is expected
to follow in 2013, in line with the roll-out of a strategic IT
initiative at Panalpina.
Recognition for outstanding performance
In 2011, a number of different units were recognized with
awards. During the eyefortransport’s 9th Annual 3PL
Summit held at Antwerp, Panalpina received awards in two
categories: Best European 3PL for Pharmaceutical, Health-
care and Life Sciences, and Best European 3PL for Indus-
trial Supply Chain. Panalpina Greater China was named
the Molex 2010 Supplier of the Year. This is the first logistics
service award from Molex Chengdu and acknowledges
Panalpina’s continuous improvement in supply chain man-
agement services, quality, delivery, cost control, and infor-
mation technology. In early 2011 Panalpina Poland received
the Market Leader in Sea and Air Freight Forwarding in
Panalpina Annual Report 2011
45
Success Factors
Poland award in the 9th Logistics Provider of the Year 2010
competition. Panalpina’s agent in South Africa, Safcor
Panalpina – in 2011 renamed Bidvest Panalpina Logistics –
has achieved the diamond award in the latest PMR sur-
vey on freight forwarders. The Company reached the high-
est rating amongst 150 respondents. Panalpina Northwest
Europe received the Best Logistics Partner 2010 award
from Huawei and was acclaimed by Tesco for its outstand-
ing customer service. In Switzerland, Panalpina ranked
28 out of 250 of the largest Swiss companies assessed
for their sustainability reporting (with special emphasis
on transparency) and garnered first place in the logistics
sector.
Dedication to security
In 2011, Panalpina continued to enhance its ability to pro-
vide solid security solutions, such as secure shipment and
storage of valuable goods in line with its customers’ ever-
changing needs and demands. Led by the addition of a new
Head of Security for Corporate Key Accounts, supplement-
ing the existing Corporate Regional Heads of Security and
Area Security Managers, the Panalpina team has vast expe-
rience accrued from years of work in the applicable fields
of supply chain and logistics, law enforcement, military, and
government (Department of Homeland Security).
The tailored supply chain security measures that Panalpina
offers its customers include Authorized Economic Opera-
tors (AEO), US Customs (CBP) Trade Partnership Against
Terrorism (C-TPAT), US Transportation Security Adminis-
tration (TSA), and the Transported Asset Protection Associ-
ation (TAPA) security guidelines and protocols. In the past
year, Panalpina also continued its solid compliance with
its international regulatory responsibilities, which included
additional AEO certifications, re-certification and valida-
tion in the C-TPAT program, and its record of 100 % screen-
ing of cargo shipped via passenger aircraft from the
US in accordance with the TSA requirements through its
expanding network of ten Certified Cargo Screening
Facilities (CCSF).
Panalpina’s Corporate Security team provides subject
matter expertise to the supply chain security field by creat-
ing, reviewing, and updating industry-accepted publica-
tions and guidelines, participating in workshops and high-
level industry and government meetings, and developing
“best practices” for supply chain security. In the past year,
representatives from Panalpina’s Corporate Security team
have been asked to present at the United Nations in
Europe and to participate in working groups with CBP’s
and TSA’s Air Cargo Advanced Screening pilot program
in the US, as well as assisting with standards and programs
in conjunction with the Business Alliance for Secure
Commerce in South America.
Moving forward, Panalpina’s Corporate Supply Chain
Security team will remain flexible and adapt to the ever-
evolving security environment: it will remain dedicated
and committed to the needs of its customers. In 2012, some
planned improvements include:
Panalpina functions in supporting the integration of secu-
rity considerations in the development of new facilities.
technology solution, which will increase Panalpina’s
ability to monitor and manage risk in the Company’s (and
its industry partners’) supply chain network; it will also
provide actual trend and statistical analysis of vulnerabili-
ties in order to reduce future risk.
to Panalpina employees through e-learning modules and
updates to the Company’s intranet; this will highlight the
importance of security and emphasize why all employees
should make security a priority in their daily work functions.
Commitment to health, safety, and the environment
The health and safety of Panalpina’s employees is of para-
mount importance to all of Panalpina’s stakeholders. The
Company’s efforts in this area include ensuring a safe and
hygienic workplace, instilling a culture of responsibility and
risk mitigation, and communicating with employees and
contractors on issues of health risks, preventive measures,
hygiene, and proper medical care. Employees at all levels
of the Panalpina Group working on any client project are
responsible for upholding the health, safety, and environ-
mental policies, principles, and objectives of both the client
and Panalpina.
The Corporate Business Sustainability and Improvement
Manager – Panalpina’s global Health, Safety and Environ-
ment (HSE) representative – ensures the implementation
and maintenance of all processes needed for the HSE sys-
tem globally and reports the performance of the system
to the Executive Board. Panalpina Management defines the
overall goals of the HSE plan, appoints responsibilities,
provides the authority and necessary resources for imple-
mentation, assesses performance against the goals, and
takes corrective actions as appropriate.
46
Panalpina Annual Report 2011
Success Factors
In 2011, Panalpina reported zero fatal accidents and
305 nonfatal accidents which included onsite subcontrac-
tors. As part of the Behavioral Safety Program, employees
are also encouraged to report events with 73 “near misses”
reported compared to 82 in the previous year. 35 lost work
day cases resulted in 17.1 days lost per 200,000 total work-
ing hours. Globally, there are more than 40 health, safety
and environment representatives in place at Panalpina, who
provide guidance and assistance to the senior manage-
ment on HSE issues. Internal audits are performed by more
than 100 trained auditors and 645 on-site inspections
were carried out in 2011. All areas passed the ongoing sur-
veillance audits completed by an external certification firm.
Environmental initiatives
Panalpina’s global environmental program, PanGreen, is
organized into four key areas: ISO certification, internal data
collection and monitoring, supplier outreach, and green-
house gas calculations. These initiatives, which originate
from the Panalpina Executive Board and include all busi-
ness units and departments, form the basis for Panalpina’s
ongoing commitment to reducing its environmental
impacts worldwide.
ISO certification
Comprehensive and systematic environmental manage-
ment is a key component of PanGreen. To support this,
Panalpina has achieved certification for all offices worldwide
according to the Environmental Management Standard
ISO 14001: 2004. This required integrating the Environmen-
tal Global Standards in compliance with ISO 14001: 2004
into the Panalpina Integrated Management System and
subsequently applying this framework to all facilities world-
wide. In addition, all countries had to identify all relevant
local environmental legislation and ensure these laws were
implemented and checked for compliance. On completion
of the rollout and training, very rigorous internal audits
were carried out, supplemented by external audits by third-
party firms that specialize in such processes.
Internal data collection
Comprehensive and timely data collection from across the
organization is critical in order to continually monitor and
manage Panalpina’s environmental and sustainability related
performance. Over the past years, a number of key perfor-
mance indicators have been developed that form the core
of this data collection process. By using an enterprise data
collection tool to measure and monitor key environmental
data, the HSE and Quality team is able to monitor a range
of data on an annual, quarterly and monthly basis. Such
data includes:
This data set is continuously being assessed and
expanded upon as new data becomes available or is seen
as material to Panalpina’s ongoing performance.
Calculating CO2 emissions for suppliers and customers
With its Eco-Consumption and Eco-Transport programs,
Panalpina emphasizes its commitment to minimizing its
own environmental footprint and to helping its customers
find ways to reduce the impact of their shipments. In the
coming years, these programs will be extended to include
Panalpina’s primary subcontractors in order to understand
more fully the various environmental impacts across its
supply chain.
By using a tool that calculates CO2 emissions from transpor-
tation via air, sea, and road, Panalpina helps its customers
and suppliers understand their greenhouse gas emissions.
The tool is linked to Panalpina’s operational data ware-
house, where information regarding each shipment’s origin,
destination, weight, and mode of transport is consolidated
and centrally stored. The output is a concise report that
gives Panalpina’s customers a quarterly summary of their
total CO2 emissions by mode of transport, KPIs for the
overall CO2 efficiency, statistics on total tonnage and trans-
port performance, and analyses of the top ten lanes utilized.
Customers may use this tool for their own carbon report-
ing requirements and to identify opportunities for reducing
carbon emissions.
Environmental performance in 2011
In 2011, Panalpina continued its efforts to collect, compile,
and monitor progress against key environmental impact
indicators in a harmonized manner across all countries
where it operates.
With this commitment came the realization that in order to
establish robust and credible goals for environmental
performance improvements, it is necessary to have clear
baseline data from which to measure and monitor impacts.
Panalpina Annual Report 2011
47
Success Factors
Previous goals included 5 % reductions in electricity, vehi-
cle fuel and water usage, and – through the roll-out of paper-
less processes – a 10 % reduction in paper usage by the
end of 2011. With the recent fluctuations in the global econ-
omy, and the continued improvement in the coverage and
quality of the data collection efforts, the baseline data has
continually shifted in the past several years. Therefore
new goals will be established at the end of 2012 in order
to accurately reflect the true scope of Panalpina’s envi-
ronmental impacts.
Compared to the previous year, total electricity consump-
tion increased by 18 %, heating energy rose by 84 %
and vehicle fuel consumption fell by 22 %. Similarly, direct
(Scope 1) CO2 emissions increased by 15 % while indirect
(Scope 2) emissions were up by 30 %. Scope 3 data rele-
vant to business travel by air has been collected and
showed a 31 % increase over 2010 figures. In 2011, there
were 4.5 tons of CO2 equivalent emissions per full-time
equivalent. As discussed above, these changes can be pri-
marily attributed to fluctuations in business due to the
global economic situation and the improved data collection
efforts. Panalpina is committed to improving even further
on its environmental monitoring and will continue to improve
the coverage and quality of its data collection efforts
in 2012.
The table on the next page gives an overview of the envi-
ronmental performance figures collected in 2011 across
Panalpina’s global internal operations.
48
Panalpina Annual Report 2011
Success Factors
www.panalpina.com / quality
www.panalpina.com / security
www.panalpina.com / hse
in Gigajoule
240,000
200,000
160,000
120,000
80,000
40,000
0
Electricity Heating Owned
vehicles
Indirect
renewable energy
Indirect
energy
Direct energy
Energy balance by energy category
Activities 1 Performance indicator Unit 2011
Energy and CO2
Electricity Consumption Terajoule 226
Heating Overall consumption Terajoule 169
– District heat Terajoule 10
Vehicle fuel Consumption (Panalpina-owned and lease vehicles only) Terajoule 208
CO2 emissions 2 Total emissions Tons 67,779
– Direct (Scope 1) Tons 27,352
– Indirect (Scope 2) Tons 29,795
– Indirect (Scope 3, business air travel) Tons 10,631
Relative emissions per FTE 2 Tons / FTE 4.5
Materials
Paper Consumption Tons 1,113
Water Consumption m3 /1000 257
Spillages 3 Incident Number 14
Notes:1 For each number, data accuracy from many contributing countries was improved compared to the previous year. There are some
locations for which no data was available. For more details, see the GRI content index.2 CO2 emissions were calculated according to the guidelines of the Greenhouse Gas Protocol. Emission factors for direct emissions
were taken from IPCC, 2006. Emission factors for indirect emissions were taken from the International Energy Agency (IEA) and the UK Department for Environment, Food and Rural Affairs (DEFRA). For more details please refer to the GRI content index.
3 There were no cases causing significant damage.
CO2 emission by scope and activity
Scope 2Scope 1
in tons of CO2 equivalent
30,000
25,000
20,000
15,000
10,000
5,000
0
Electricity Heating Owned
vehicles
Panalpina Annual Report 2011
49
Responsibilities
Social Commitment
Responsibility to society
The Panalpina Group honors its social responsibility at different levels. Since 2003,
through its support for the Vision First program in Ghana, it has helped combat
avoidable blindness. On top of this, Panalpina’s regional business units are involved
in many local projects.
Engagement at regional level
The ways in which Panalpina and its workforce underscore
their social commitment are manifold: Examples include
the collection of over USD 10,000 by employees who took
part in a sponsored run for the American Heart Associa-
tion, free-of-charge container deliveries to Haiti, the partic-
ipation of 1500 staff members in the 2011 Earth Hour of
the Worldwide Fund for Nature (WWF), and Greater China’s
own “One Shipment, One Dollar” fundraising campaign,
whose proceeds were used to reconstruct a Chinese
school.
Vision First: the fight against avoidable blindness
Apart from its regional sponsorships, Panalpina has since
2003 been involved in the Vision First program in Ghana.
In this program, the Swiss and local Red Cross societies
work in partnership with the Ghana Ministry of Health.
Through the wider provision of access to eye care treat-
ment, these organizations are able in many cases to pre-
vent patients from becoming blind.
It is estimated that around 1 % of Ghana’s approximately
24 million-strong population, or about 230,000 people, are
blind. Some 80 % of blindness cases have preventable and
treatable causes, such as cataract, trachoma or malnutri-
tion. Poverty, coupled with a shortage of eye care profes-
sionals, makes it difficult for sufferers to find suitable treat-
ment. In Africa, there is only about one ophthalmologist
per million inhabitants.
Local resources as key to sustainable progress
The Vision First program adopts a three-pronged approach:
treating eye disorders, training specialized medical pers-
onnel, and expanding the infrastructure and technology
base. This is made possible by a combination of external
funding and local resources. To provide eye care in remote
village communities, the program maintains a network of
volunteers. These carry out sight checks, assist sufferers
in obtaining glasses or treatment at the nearest clinic,
and offer vital information on eye care that helps many to
avoid visual impairment in the first place.
Transition to independent framework
Panalpina’s annual contribution to the Vision First program
runs to CHF 200,000, equivalent to a quarter of the proj-
ect costs. Having been sponsored by the Group through-
out its pilot and on-the-ground implementation phases, the
project has now entered the completion stage, which will
see the various institutions gain autonomy. To date, over
1.3 million people have been treated at clinics and advice
surgeries and more than 31,000 operations performed.
www.panalpina.com / society
2011 results of Vision First program
Patients treated 166,051
Operations performed 2,144
Patients issued vision aids 2,142
Clinics/hospitals in operation 16
Persons provided with health education 507,860
Number of project participants
Opticians and ophthalmologists 5
Nurses (trained to treat minor eye disorders) 28
Schoolteachers (with special training in healthcare issues)
325
Active Red Cross volunteers 1,000
50
Panalpina Annual Report 2011
Responsibilities
1 Group structure and shareholders
1.1 Group structure
1.1.1 Operational group structure
Panalpina’s business activities are primarily regionally ori-
ented. The operating structure is divided into the following
four regional units:
In 2009, Panalpina integrated the regional management
layer into its Head Office structure.
Secondary, the business activities are subdivided into the
following business segments:
Supplementary information can be taken from the
segmental reporting section of the Consolidated Financial
Statements (pages 84 – 86).
1.1.2 Listed companies within the scope of
consolidation
Panalpina World Transport (Holding) Ltd. (PWT), the ultimate
holding company of the Panalpina Group, is the only listed
company within the scope of consolidation. PWT has its
registered office in Basel, Switzerland. The PWT shares are
exclusively listed on the SIX Swiss Exchange. The market
capitalization on the closing date amounted to CHF 2.4 bil-
lion (25,000,000 registered shares at CHF 96.20 per share).
The PWT shares are traded under Valor no. 216808,
ISIN CH0002168083, symbol PWTN.
1.1.3 Non-listed companies within the scope of
consolidation
The main subsidiaries and associated companies are
disclosed in the Consolidated Financial Statements
(pages 122–125) itemized by registered office, nominal
capital, equity interest in percent, investment and method
of consolidation.
1.2 Significant shareholders
The Ernst Göhner Foundation, Zug, Switzerland, is the main
shareholder of PWT, with an equity participation of 43.58 %.
Cevian Capital II Master Fund LP held 11.37 % and Panalpina
World Transport (Holding) Ltd., held a share capital of 5.47 %
on closing date. The respective treasury shares were pur-
chased as a result of PWT’s share buyback program (refer-
enced in section 2.3) and its share and option programs
(referenced in section 5). Other significant shareholders are
Artisan Partners Limited Partnership (5.01 %) and Bestinver
Gestión, S.G. SGIIC (5.05 %).
With regard to other significant shareholders, during the
reporting year disclosures were made on the SIX online
publication platform. The notifications (listed by shareholder
and transaction date) are summarized as follows:
Bestinver Gestión, S.G. SGIIC, Spain
15. 07. 2011 increase of share capital to 3.04 %
17. 10. 2011 increase of share capital to 5.05 %
1.3 Cross-shareholdings
No cross-shareholdings exist between PWT and any other
company.
Corporate Governance and Remuneration Report:
committed to a transparent management structure
Panalpina is committed to a transparent management structure that is governed
by international corporate governance principles. This Corporate Governance Report
complies with the revised Directive of the SIX Swiss Exchange and therefore serves
to provide investors with key information regarding corporate governance in an
accessible format. Section 5 of this report also serves as a Compensation Report as
recommended by economiesuisse in its Swiss Code of Best Practice for Corporate
Governance guidelines.
Corporate Governance
Panalpina Annual Report 2011
51
Responsibilities
2 Capital structure
2.1 Capital
On the closing date, the ordinary share capital of PWT
amounted to CHF 50,000,000 and is divided into
25,000,000 registered shares, with a nominal value of
CHF 2.00 each.
2.2 Authorized and conditional share capital
The extraordinary Shareholders’ Meeting of PWT held on
August 23, 2005 agreed with the Board of Directors’ pro-
posal to create an authorized share capital up to a maximum
aggregate amount of CHF 6,000,000 by issuing a maxi-
mum of 3,000,000 registered shares with a nominal value of
CHF 2.00 each. At the Shareholders’ Meeting of May 10,
2011 the authorized share capital was renewed at the same
value until May 2013.
The Board of Directors is authorized to exclude the pre-
emptive rights of shareholders and to convey them to third
parties, provided that such new shares are to be used for
the takeover of entire enterprises, divisions or assets of
enterprises or participations or for the financing of such
transactions. The Board of Directors has not yet made use
of this authorization.
No decision has been made regarding the creation of
conditional capital.
2.3 Change in capital over the past three years
With the exception of the share split introduced at the IPO
in August 2005, there has been no change in the share
capital structure during the years through 2011.
In August 2007, the Board of Directors initiated a share
buyback program. Under this program, shares amounting
to 5 % of the share capital (1,250,000 shares) have been
repurchased. The buyback program was concluded on
September 2, 2008. The proposal of the Board of Directors
to the Annual General Meeting to reduce the share capital
and cancel the repurchased shares has been postponed
with the explicit consent of the Swiss Takeover Board.
2.4 Shares and participation certificates
On the closing date, 25,000,000 fully paid-in PWT regis-
tered shares with a nominal value of CHF 2.00 each were
issued. On this date, no participation certificates were
issued.
2.5 Dividend-right certificates
On the closing date, no dividend-right certificates had
been issued.
2.6 Limitations on transferability and nominee
registrations
2.6.1 Limitations on transferability for each share
category; indication of statutory group clauses and rules
for granting exceptions
Acquirers of PWT shares are entered into the share regis-
ter as shareholders with voting rights upon provision of
proof of the acquisition of the shares and provided that they
expressly declare that they hold the shares in their own
name and for their own account.
The Articles of PWT specify that any shareholder may
exercise voting rights to a maximum of 5 % of the total
number of shares recorded in the commercial register.
This limitation for registration in the share register shall also
apply to persons who hold shares fully or in part through
nominees within the meaning of the Articles. Furthermore,
this limitation for registration in the share register also
applies to registered shares that are acquired through the
exercising of pre-emptive rights, warrants and conversion
rights. The Board of Directors is empowered to allow
exemptions from the limitation for registration in the share
register in particular cases.
The Articles make provision for group clauses.
The limitations on transferability do not apply to the shares
held by the Ernst Göhner Foundation because it held
PWT shares prior to the implementation of the limitations
(so-called grandfathering).
2.6.2 Reasons for granting exceptions in the year
under review
No exceptions were granted during the reporting year.
2.6.3 Admissibility of nominee registrations; indication
of any percent clauses and registration conditions
The Articles of PWT specify that the Board of Directors
may register nominees with voting rights in the share regis-
ter up to a maximum of 2 % of the share capital recorded
in the commercial register. Nominees are persons who do
not expressly declare in their application that they hold the
shares for their own account and with whom the Company
has entered into an agreement to this effect.
The Board of Directors is empowered to register nominees
with voting rights exceeding 2 % of the share capital re-
corded in the commercial register as long as the respective
52
Panalpina Annual Report 2011
Responsibilities
nominees inform PWT of the names, addresses, nationali-
ties (registered office in the case of legal entities) and the
shareholdings of those persons for whose account they
hold 2 % or more of the share capital recorded in the com-
mercial register.
The Articles make provision for group clauses.
2.6.4 Procedure and conditions for cancelling statutory
privileges and limitations on transferability
A resolution of the General Shareholders Meeting of PWT
on which at least two-thirds of the voting shares repre-
sented agree is required for any abolition or change of the
provisions relating to transfer limitations.
2.7 Convertible bonds, warrants and options
There were no convertible bonds outstanding on the
closing date.
The only issued options relate to the share and option
participation program (Management Incentive Plan, MIP)
are for currently approximately 480 senior managers
of Panalpina. As of 2009, the Board of Directors and the
Executive Board have been excluded from participation
in this program. As of 2011, the options under the MIP pro-
gram have been replaced by a free share ratio scheme.
For further details please refer to section 5.1.
3 Board of Directors
3.1 Members of the Board of Directors
At the Annual General Meeting of May 10, 2011, Lars
Förberg and Knud Elmholdt Stubkjær were elected
to the Board of Directors whereas Rudolf W. Hug, Beat
Walti, Chris E. Muntwyler, Roger Schmid and Hans-Peter
Strodel were re-elected to the Board of Directors for a
one-year term.
On the closing date, the Board was composed of
seven persons.
Three members of the Board of Directors (Rudolf W. Hug,
Roger Schmid and Beat Walti) are also members of the
Board of Trustees (Stiftungsrat) of PWT’s main shareholder,
the Ernst Göhner Foundation.
Lars Förberg is a member of the Board of Directors of
Cevian Capital, the second largest PWT shareholder.
The biographies of the members are as follows:
Rudolf W. Hug, Chairman. Swiss citizen. Born in 1944.
Re-elected in 2011 (until 2012).
Rudolf W. Hug holds a PhD in law from the University of
Zurich and a MBA from INSEAD, Fontainebleau (France).
In 1985, he participated in the Executive Program of the
Graduate School of Business at Stanford University.
From 1977 to 1997, he worked in several positions for
Schweize rische Kreditanstalt (today Credit Suisse). During
the period from 1987 to 1997, he ran the international
division and served as a member of the Executive Board
of Credit Suisse and Credit Suisse First Boston. Since
1998, Rudolf W. Hug has been active as an independent
management consultant.
Rudolf W. Hug has been a member of the Board of Direc-
tors since 2005 and was appointed Chairman of the Board
of Directors on May 15, 2007 following the retirement of
his predecessor.
Beat Walti, Vice Chairman. Swiss citizen. Born in 1968.
Re-elected in 2011, (until 2012).
Beat Walti holds a PhD in law from the University of Zurich.
In 1998, he became a consultant with McKinsey & Company
in Zurich. In 2001, he was a project manager, shareholder
and board member for the start-up ETOILE Medical. Since
2002, Beat Walti is a lawyer with Wenger & Vieli in Zurich
specializing in corporate, commercial, contract, competition
and antitrust law. He became partner with Wenger & Vieli
in 2007.
Lars Förberg, Member of the Board of Directors. Swedish
citizen. Born in 1965. Elected 2011 (until 2012).
Lars Förberg studied economics in Stockholm and Michi-
gan and holds a M. Sc. in Economics and Business Admin-
istration from the Stockholm School of Economics. He
started his career as an investment manager and partner
at the private equity company Nordic Capital in Sweden.
At the end of 1997 he moved to the former AB Custos, one
of Sweden’s largest public limited investment companies,
where he worked until September 2001, most recently as
Chief Investment Officer. Since October 2001, Lars Förberg
has been managing partner in Cevian Capital, an invest-
ment company specializing in public limited companies,
which he co-founded.
Chris E. Muntwyler, Member of the Board of Directors.
Swiss citizen. Born in 1952. Re-elected in 2011 (until 2012).
Chris E. Muntwyler attended the School of Commerce
in Zürich and completed various executive programs at
Harvard University, IMD in Lausanne and at the Wharton
University. From 1972 to 1999 he held several positions at
Swissair, until 1981 in various leadership functions in the
Marketing Division, in 1982 as General Manager Marketing
Panalpina Annual Report 2011
53
Responsibilities
and Sales Scandinavia and from 1986 for North America.
In 1990, he took over the responsibility for the global Price-
and Distribution Policy and was then leading the develop-
ment and introduction of the new group IT strategy. Before
leaving Swissair at the beginning of 1999, he was Vice
President Global Distribution. From 1999 to 2008, Chris
E. Muntwyler held several executive positions at DHL
Express, in 1999 as Managing Director Switzerland, in
2002 as Managing Director Germany, in 2003 as Chief
Executive Central Europe, and in 2005 as Chief Executive
United Kingdom.
Today Chris E. Muntwyler is President and CEO of the
management consulting company Conlogic AG.
Roger Schmid, Member of the Board of Directors.
Swiss citizen. Born in 1959. Re-elected in 2011 (until 2012).
Roger Schmid holds a university degree in law as well as
a PhD in law from the University of Zurich. From 1991
to 1995, he was Legal Counsel and Director at Bank Leu,
a subsidiary of Credit Suisse. Roger Schmid works as
an Executive Director of the Ernst Göhner Foundation.
Roger Schmid has been a member of the Board of Direc-
tors since 2003.
Hans-Peter Strodel, Member of the Board of Directors.
Swiss citizen. Born in 1943. Re-elected in 2011 (until 2012).
Hans-Peter Strodel holds a PhD in economics from the
University of St. Gallen. From 1969 until 1974 he was an
executive assistant at Maschinenfabrik Benninger und
Heberlein AG. From 1975 until 1994, he held several posi-
tions at the Oerlikon-Bührle Group, in 1975 as Head of
Planning and Marketing in Italy, and from 1980 as Head of
Finance at Werkzeugmaschinenfabrik Oerlikon-Bührle AG
and Oerlikon-Contraves. From 1995 until 2008, Hans-Peter
Strodel was CFO at Schweizerische Post.
Knud Elmholdt Stubkjær, Member of the Board of
Directors, Danish citizen. Born in 1956. Elected in 2011
(until 2012).
Knud Elmholdt Stubkjær holds a shipping degree from the
Mærsk International Shipping Academy, supplemented with
various executive programmes, a.o. from IMD and INSEAD.
From 1977 through 2007, he held various positions within
the A.P. Møller-Mærsk Group, including a number of post-
ings in various Asian and European countries. This included
positions as Head of Mærsk Line United Kingdom, Presi-
dent of Mærsk K.K. Japan, CEO A.P. Møller-Mærsk Singa-
pore and at the same time Regional Manager A.P. Møller
Group Asia / Oceania / Middle East. In 1999, he became
Head of Mærsk container business worldwide, based in
Copenhagen, and the same year became partner in the
A.P. Møller-Mærsk Group. In 2008, he became partner in
the E.R. Capital Holding Group in Hamburg, serving as
CEO of one of its subsidiaries, E.R. Schiffahrt GmbH,
a leading maritime service provider within container, bulk
and offshore shipping.
All the members of the Board are non-executive members
and do not actively perform any managerial functions at
PWT or any of the Group companies. Nor have they held
any executive positions within the past three years prior to
this reporting year. None of the members of the Board of
Directors has a substantial business relationship with PWT
or any of its group companies.
3.2 Other activities and vested interests
Rudolf W. Hug, Member of the Board of Trustees
(Stiftungsrat) of the Ernst Göhner Foundation, Zug
(Switzerland), and Member of the Board of Directors of
the following companies: Deutsche Bank (Schweiz) AG,
Geneva (Switzerland), Allreal Holding AG, Baar (Switzer-
land); Ionbond AG, Olten (Switzerland).
Beat Walti, Chairman of the Board of Trustees of the
Ernst Göhner Foundation, Zug (Switzerland).
Lars Förberg, Chairman of the Board of Directors of Cevian
Capital AG, Pfäffikon (Switzerland), a member of the
Board of Directors of Cevian Capital Ltd., Jersey (Channel
Islands), member of the Nomination Committees of Metso,
Helsinki (Finland), Tieto, Helsinki (Finland), and Volvo,
Gothenburg (Sweden).
Chris E. Muntwyler, Member of the Board of Directors of
Austrian Post in Vienna (Austria) and of National Express
Group PLC, London (England).
Roger Schmid, Member of the Board of Trustees and
Executive Director of the Ernst Göhner Foundation, Zug
(Switzerland).
Hans-Peter Strodel, Member of the Board of Directors of
Skyguide, Meyrin (Switzerland).
Knud Elmholdt Stubkjær, Vice Chairman of E.R. Capital
Holding, Hamburg (Germany) and member of the
Board of Directors of Unifeeder A/S, Aarhus (Denmark)
and FR8 Holdings Pty Ltd., Singapore.
Other than these, the members of the Board of Directors
do not hold other material offices, nor do they carry out any
other principal activities that affect the Group.
54
Panalpina Annual Report 2011
Responsibilities
3.4 Elections and terms of office
3.4.1 Principles of the election procedure and limitations
on the terms of office
The Articles of PWT do not make provision for the general
renewal of office for the Board of Directors. The members
of the Board of Directors are elected at each General
Meeting of Shareholders with a one-year period of office.
They may be re-elected at any time. The Organizational
Regulations of PWT specify an age limit of 72 years for the
members of the Board of Directors.
3.4.2 The first election and remaining term of office
for each member of the Board of Directors
The timing of the first election and the remaining term of
office for each member of the Board of Directors is speci-
fied under section 3.1.
3.5 Internal organizational structure
The Board of Directors is responsible for the ultimate man-
agement of the Company and monitoring of the Executive
Board. It represents the Company externally and is respon-
sible for all matters which have not been transferred to
another executive body of the Company by the Swiss Code
of Obligations or the Articles. In line with the Articles, the
Board of Directors has established Organizational Regula-
tions that transfer certain management responsibilities to
the Executive Board.
3.5.1 Allocation of tasks within the Board of Directors
The Board of Directors self-constitutes and appoints its
Chairman and Vice Chairman. The Chairman (in his
absence the Vice Chairman) directly supervises the busi-
ness affairs and activities of the Executive Board and is
entitled to regularly attend Executive Board meetings. The
Corporate Auditor as well as the Corporate Secretary, in his
capacity as secretary to the Board of Directors, are directly
subordinated to the Chairman of the Board of Directors.
3.5.2 Member list, tasks and areas of responsibility
for each committee of the Board of Directors
Three committees exist under the Board of Directors.
The Audit Committee consists of the following members
of the Board of Directors: Hans-Peter Strodel (Chairman),
Lars Förberg (since May 2011) and Roger Schmid. The
Audit Committee supports the Board of Directors with the
review of the Company’s financial statements, the super-
vision of the financial accounting standards and reporting,
the review of the effectiveness of the Internal Control Sys-
tem and with the efficiency of external and internal audit
procedures, including risk management. The Audit Com-
mittee reviews the consolidated annual financial statements
as well as the published interim financial statements and
submits an application to the Board of Directors for approval.
It regularly maintains contact with the Group Auditors and
the Corporate Auditor. On this basis, it adopts the detailed
reports of the Group Auditors and semi-annual reports of
Corporate Audit. It is therefore in the position to audit the
quality, effectiveness and interaction between the control
systems, to determine the audit priorities, to introduce pro-
posed measures and to monitor their implementation. The
Audit Committee determines the organization of Corporate
Audit, adopts the internal audit charter and approves the
annual planning and scope of internal audit.
In the field of risk management, the Audit Committee
approves the detailed and weighted risk map of the Exec-
utive Board, adopts the necessary measures for risk con-
trol and risk mitigation and reports the respective outcome
to the Board of Directors on a yearly basis. The risk map
itself covers any strategic, financial, operational, legal and
compliance risks that could significantly impact the Com-
pany’s ability to achieve its business goals and financial
targets. Identified risks are weighted and prioritized by the
Executive Board according to their significance and likeli-
hood of occurrence. For each risk, specific risk mitigation
measures – including their current status – are defined and
responsibilities are allocated. The risk map, which is com-
piled by the Risk Review Committee, chaired by the Corpo-
rate Secretary, for review by the Executive Board and sub-
sequent approval by the Audit Committee, contains risks
identified and assessed by the respective corporate func-
tions, selected country management, Corporate Audit and
the Group Auditors. The group’s key risks are annually
reported to the Board of Directors.
During the reporting year the Audit Committee held five
half day meetings. During Audit Committee meetings, direct
discussions took place with representatives of the Group
Auditors and Corporate Audit. Representatives from the
Group Auditors were present at three of these meetings and
the Corporate Auditor (being a permanent participant of
the Audit Committee since August 2010) attended all of the
above-mentioned meetings. At these meetings, the Execu-
tive Board was regularly represented by the CEO, the CFO
and the Corporate Secretary.
The Compensation and Nomination Committee consists of
the following members of the Board of Directors: Rudolf
W. Hug (Chairman), Chris E. Muntwyler and Knud Elmholdt
Stubkjær (since May 2011). It monitors the selection process
for members of the Board of Directors, the Executive Board
Panalpina Annual Report 2011
55
Responsibilities
and other selected senior management positions, deter-
mines the overall remuneration and terms of employment
for members of the Board of Directors and the Executive
Board as well as remuneration bands for highly com-
pensated employees. Regarding the compensation of the
members of the Executive Board (overall remuneration,
including target bonus), the Committee makes a decision
subject to the final approval of the Board of Directors;
applications for the compensation of the Board members
are decided by the Committee and shared with the Board
of Directors. Each year the Committee decides on the
bonus compensation for the CEO and the other members
of the Executive Board for the previous year, based on
recommendations of the Chairman (for the CEO) and the
CEO (for other Executive Board members). Furthermore,
the Committee regularly reviews the Board Stock Award
Plan, the Executive Board Mid-term and Long-Term Incen-
tive plans and the Group’s Management Incentive Plan
and submits proposals for final approval to the Board of
Directors. Moreover, it approves concepts and policies
for the Group’s management performance assessment,
succession planning and expat programs.
During the reporting year, the Compensation and Nomina-
tion Committee held three meetings of approximately two
hours each. The Executive Board was regularly represented
at these meetings by the CEO, the Chief HR Officer and
the Corporate Secretary.
The Legal and Compliance Committee consists of the fol-
lowing members of the Board of Directors: Rudolf W. Hug
(Chairman), Roger Schmid and Beat Walti. It oversees the
Company’s handling of major legal matters, including the
pending anti-trust investigations and related proceedings
as well as the development of the Company’s compliance
policies and procedures. Furthermore the Committee over-
sees the compliance undertakings to which the Company
has agreed with the US Department of Justice under
a Deferred Prosecution Agreement in November 2010.
During the reporting year, the Committee has held four
meetings. The Executive Board was represented at these
meetings by the CEO and the Corporate Secretary.
The Committees generally meet prior to Board of Directors
meetings. The chairmen of the committees inform and
update the Board of Directors on the topics discussed and
decisions made during such meetings. They submit pro-
posals for approval related to decisions that fall within the
scope of the Board of Directors.
Objectives, organization, duties and the cooperation with
the Board of Directors are defined in the Terms of Refer-
ence of the respective committees which are reviewed and
adopted by the Board of Directors.
The overall responsibility of the Board of Directors is not
affected by these committees.
3.5.3 Working methods of the Board of Directors and its
committees
During the reporting year, the Board of Directors held three
full-day meetings, one two-day meeting and one telephone
conference. The Executive Board was represented by all
its members at these meetings. In urgent cases, telephone
conferences or decisions by circular may be organized in
order for decisions to be taken.
At every meeting, the Executive Board updates the Board
of Directors on business and key financial developments and
main regional and segment development. On a quarterly
basis, detailed consolidated financial statements on the
group, regional and business segment levels are reported
to the Board of Directors in accordance with International
Financial Reporting Standards (IFRS). The Board of Direc-
tors is furnished in time with an agenda, detailed meeting
documentation related to topics on the agenda and minutes.
3.6 Definition of areas of responsibility
In line with the law and the Articles, the Board of Directors
has transferred the responsibility to develop and implement
the group strategy, as well as the responsibility to super-
vise business and financial development of the Group’s
subsidiaries, to the Executive Board.
The Organizational Regulations adopted by the Board of
Directors govern the cooperation between the Board of
Directors, the Chairman and the Executive Board. It con-
tains a detailed catalogue of duties and competencies
which determine the financial thresholds within which the
Board of Directors and the Executive Board can efficiently
execute their daily business. The Organizational Regula-
tions, which are accessible on Panalpina’s website, also
outline the reporting duties of the Executive Board on
Group and Holding level.
The main responsibilities of the Board of Directors on Group
level include the determination of the business strategy
on the basis of the proposals of the Executive Board, the
approval of major Group policies and organizational struc-
tures, including topics related to Corporate Governance
and Compliance, the approval of the annual operational and
investment budgets, the approval of any extraordinary
additional investment applications as well as financial plan-
ning. Further responsibilities include decisions regarding
56
Panalpina Annual Report 2011
Responsibilities
mergers and acquisitions and major human resources and
remuneration decisions following recommendations and
preparatory work of its Compensation and Nomination
Committee.
3.7 Information and control instruments
vis-à-vis the senior management
The Executive Board informs the Board of Directors of
business developments in a written format on a monthly
basis and a detailed update is provided at each Board of
Directors meeting. Elements of this reporting include
monthly financial reports, consolidated quarterly regional
and business segment results according to IFRS (with
actual figures, previous years’ figures, quarter results and
budget figures as well as a comparison with the financial
guidance), the reporting of business development in all
regions and business segments (including focus on prob-
lematic organizations), the development of shipments,
volumes and tonnages, the debtors’ and creditors’ reports
(including DSO and DPO) as well as the net working capital.
Further information regarding personnel and organizational
changes, extraordinary events and the activities of analysts,
investors and competitors form part of the regular report-
ing. Moreover, the Board of Directors annually reviews and
approves the Group’s targets for the individual regions and
business segments and adopts the respective report of
the Executive Board.
During the reporting year, the Chairman of the Board of
Directors partly attended two Executive Board meetings
and regularly receives the minutes of the Executive Board
meetings. The members of the Executive Board regularly
join meetings of the Board of Directors. In addition, individ-
ual senior executives attend specific topic discussions per-
taining to their particular field of expertise when required.
Furthermore, specific meetings of the Board of Directors
are dedicated to a detailed review of major markets, busi-
ness segments and the Group’s strategy according to pre-
defined schedule. For further details please refer to sec-
tions 3.5.2 and 3.5.3.
The Audit Committee of the Board of Directors monitors
and assesses the activities of the Corporate Auditor as
well as his cooperation with the Group Auditors.
The Audit Committee receives the Corporate Auditor’s
half-year reports and also adopts the comprehensive
annual risk map of the Executive Board. The Audit Com-
mittee approves the proposed risk control and risk miti-
gation measures as well as the annual planning and scope
of the internal audit, which is also based on the Risk Map.
For further details please refer to section 3.5.2.
4 Executive Board
4.1 Members of the Executive Board
On the closing date, the Executive Board was composed
of five persons.
Monika Ribar, Chief Executive Officer, Swiss citizen. Born
in 1959. Member of the Executive Board since 2000 and
CEO since October 2006. Apart from her CEO function,
Monika Ribar has special responsibilities for Corporate and
Regional Development, Corporate Compliance, Corporate
Communications and Panprojects.
Monika Ribar joined the Group in 1991. She held several
positions within the Group’s controlling, IT and global
project management departments. From 2000 to 2005,
she held the position of the CIO (Chief Information Officer)
of the Group and was member of the Executive Board.
In 2005, Monika Ribar was appointed as CFO of the Group
and her appointment as CEO was announced in June
2006. She officially took office as CEO in October 2006.
She holds a university degree in Finance and Controlling
from the University of St. Gallen. She participated in the
Executive Program of the Graduate School of Business at
Stanford University, Palo Alto, California in 1999.
Marco Gadola, Chief Financial Officer, Swiss citizen.
Born in 1963. Joined Panalpina as a member of the Exec-
utive Board in September 2008. Responsible for Cor-
porate Finance, Controlling, Investor Relations, Strategic
Finance and Projects, Indirect Purchasing and Information
Technology.
Marco Gadola is a finance and economics expert with
many years’ experience in international companies. Before
joining Panalpina he was Group CFO and Executive Vice
President Operations of Straumann Holding, a world-lead-
ing Swiss-based dental and oral technology company;
prior to that he was Group CFO of the Swiss-based inter-
national consumer foods company Hero. He also held
leading management positions at the Hilti Group, which
manufactures and sells products for the construction
and building industries. Furthermore, both at Straumann
and at Hero Marco Gadola oversaw production, logistics,
investor relations and information technology worldwide,
and played a leading part in the acquisition and integration
of companies. Marco Gadola has a Masters Degree in
Business Administration and Economics from the University
of Basel (Switzerland). He also completed the Accelerated
Management Development Program at the London School
of Economics.
Christoph Hess, Chief Legal Officer and Corporate Secre-
tary, Swiss citizen. Born in 1955. Member of the Executive
Panalpina Annual Report 2011
57
Responsibilities
Board since October 2006. Responsible for Corporate
Legal Services and Insurance.
Christoph Hess joined the Group’s head office in 1994 as
Secretary of the Board of Directors and the Executive
Board. In this capacity he also manages both the Group’s
Legal and Insurance departments. He also managed
Corporate Communications until August 2008. Christoph
Hess holds a degree in law from the University of Basel
and has been admitted to the bar in Switzerland.
Alastair Robertson, Chief Human Resources Officer,
British citizen. Born in 1960. Member of the Executive
Board since April 2008. Responsible for Human Resources.
Alastair Robertson joined the Group in 2007 as Head of
Global Human Resources. Before joining Panalpina, he
had been a Vice President at Tetra Pak since 1996, where
he held various positions in the field of Human Resources:
between 1999 and 2001 as Vice President Human
Resources Americas and from 2002 to 2004 as Vice Presi-
dent Human Resources Europe and Africa. From 1992
to 1996, he worked for W. H. Smith in the field of Person-
nel, Development and Training and between 1989 and
1992 he was with Graham Builders Merchants as Manager
Human Resources Management, Training and Development.
He previously served in the military, where he attained the
rank of Major and served in numerous countries. Alastair
Robertson holds an MBA in Strategy and Marketing from
the University of Huddersfield, Bradford (United Kingdom).
He also attended the Royal School of Military Engineering
and the Royal Military Academy in the United Kingdom.
Karl Weyeneth, Chief Operating Officer, Swiss citizen.
Born in 1964. Member of the Executive Board since April
2008. Responsible for Air Freight, Ocean Freight, Logis-
tics, Marketing and Sales and Business Processes and
Quality.
Karl Weyeneth joined the Group in 2007 as Regional CEO
for North America, where he was responsible for the
development and results of the subsidiaries in USA and
Canada. He is a professional with profound leadership
and management experience in logistics, including freight
management, 3PL and contract logistics. Before joining
Panalpina, he was President and CEO Americas of Hell-
mann Worldwide Logistics, Inc. (USA) and prior to this he
was Executive Vice President and CFO of Danzas Manage-
ment Latin America (USA), where he attained profound
experience in all finance matters. He holds a Bachelor in
Economics and Business Administration from the Univer-
sity of Berne, Switzerland.
4.2 Other activities and vested interests
Monika Ribar: Member of the Board of Directors of Logi-
tech International SA, Romanel / Morges (Switzerland) and
Sika AG, Baar (Switzerland).
Marco Gadola: Member of the Board of Directors of
Calida Holding AG, Sursee (Switzerland) and Luxair SA,
Luxembourg.
4.3 Management contracts
No management contracts exist with any third party
outside the Group.
5 Compensation, shareholdings and loans
5.1 Content and method of determining
the compensation and the share-ownership
programs
The compensation and principles governing the Board of
Directors Stock Award Plan, the Executive Board mid- and
long-term incentive plans and the Management Incentive
Plan for other senior management (excluding the Executive
Board) are determined and approved by the Board of
Directors based on the proposal of the Compensation and
Nomination Committee. Further, the Committee regularly
updates the Board of Directors during the Board of Direc-
tors meetings, applies for changes in the remuneration
system as required and annually reports the bonus alloca-
tion of individual Executive Board members. Members of
the Executive Board do not attend respective discussions
regarding decisions related to their own remuneration.
Remuneration of Executive Board members is bench-
marked against regular market data surveys compiled
through leading Executive Compensation consultants.
The benchmark custom peer group is consisting of some
of Panalpina's main competitors completed with some
Swiss multinational companies with comparable size and
geographical network reach in order to make the sample
substantial enough.
The members of the Board of Directors receive a fixed
annual compensation. Moreover and introduced in 2009,
part of each Board member’s remuneration is in free
shares of the Company to the value of CHF 50,000. The
corresponding number of shares is based on the share’s
closing price on April 30, and has a one-year restriction
period.
The salary package for the members of the Executive
Board consists of a fixed basic salary, lump sum vehicle
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Panalpina Annual Report 2011
Responsibilities
and general expense allowances, additional pension con-
tributions and a target bonus. 50 % of the target bonus
depends on budgeted Group EBITDA and the achievement
of the external financial guidance for the respective busi-
ness year, whereas 50 % depends on the achievement of
measurable individual performance targets. Individual per-
formance targets are defined for the CEO by the Chair-
man and for other Executive Board members by the CEO.
Each Executive Board member is subject to a formal
performance appraisal process. For each reporting year,
performance targets are jointly determined and a year-end
performance assessment is carried out. The maximum
target bonus of the CEO equals 100 % of the annual basic
salary, whereas maximum target bonuses of other Execu-
tive Board members equal between 67 % and 80 % of their
respective annual basic salaries depending on their func-
tion. All bonus payments are cut if the respective group or
individual performance targets have not been reached.
The Compensation and Nomination Committee annually
reports to the Board of Directors on bonus payments to
the members of the Executive Board.
In 2009, the bonus scheme for Executive Board members
was adjusted to focus on the Company’s sustainable mid-
and long-term success. Only 60 % of the bonuses – which
continue to be set by the achievement of annually reviewed
Group KPIs and individual performance targets as out-
lined above – are paid out in cash, whereas the remainder
is converted into PWTN shares with a one-year restriction
period. The applicable share price for such deferred bonus
shares is the PWTN closing price on April 30, in the first year
of a three-year cycle (2009 to 2011) which was CHF 62.50.
The deferred bonus share price will thus be redefined on
April 30, 2012. In addition, the number of such allocated
deferred bonus shares is matched by the Company after
twelve months (qualifying period during which the Execu-
tive Board member must remain with the Company) with a
free PWTN share award which also has a one-year restric-
tion period.
Furthermore, each Executive Board member is partici-
pating in a Long-Term Incentive Plan Pool which rewards
long-term value creation measured by economic profit.
Under this plan, each year (as of 2009) 5 % of the year-on-
year change in economic profit is added to the pool,
whereas negative economic profit is deducted from the
pool. At the end of a five-year plan cycle (2013) each Exec-
utive Board member is entitled to be paid out in cash an
equal share of such pool. Vesting of this plan occurs after
three years at 25 % (2011), after four years at 50 % and
100 % after five years.
Due to the introduction of a new share program for the
members of the Board of Directors and the Executive Board
in 2009, neither the members of the Board of Directors
nor the members of the Executive Board are eligible to par-
ticipate in the Company’s Management Incentive Plan.
Employment agreements with Executive Board members
stipulate a notice period of twelve months. They do not
contain “golden parachutes” in case of a change of control
nor severance payments after termination of employment.
Further information related to both overall and individual
remuneration of the Board of Directors and Executive
Board members as well as shares and options held by
these persons at the closing date including a comparison
with the previous year are reflected in the audited Notes
to the Consolidated Financial Statements (pages 89 – 93
and 115 – 118) according to article 663bbis of the Swiss
Code of Obligations.
Compared to the previous year, the annual compensation
of the Board of Directors remained unchanged. The Board
Stock Award Plan, which was introduced in 2009, has
been applied for the business year 2011.
Overall compensation for the CEO increased in the report-
ing year due to a salary increase resulting in higher bonus
potential and other related benefits.
Compensation to other Executive Board members also
increased due to salary increase for certain Executive Board
functions and due to an increase of the maximum bonus
payments to a new range of 67 % – 80 % depending on
their function (2010: 50 % – 67 %).
6 Shareholders’ participation
6.1 Voting rights and representation restrictions
Each share carries one vote at the General Meeting of
Shareholders. The Articles state that when exercising voting
rights, no shareholder may directly or indirectly represent
more than 5 % of the total shares issued by the Company
for own and represented shares.
The Articles provide for group clauses.
The voting right restrictions are not applicable to represen-
tatives of the corporate body (Organvertreter) as well as
the independent proxy holder of voting rights (unabhängiger
Stimmrechtsvertreter). In order to facilitate the exercise of
voting rights of deposited shares, the Board of Directors is
entitled to enter into agreements with banks which deviate
from the voting restrictions.
Panalpina Annual Report 2011
59
Responsibilities
The voting restrictions do not apply to the shares held by
the Ernst Göhner Foundation, because it held PWT
shares prior to the introduction of the voting restrictions
(grandfathering).
Any abolition or change of the provisions relating to the
restrictions on voting rights requires a resolution of the
General Meeting of Shareholders on which at least two-
thirds of the voting shares represented agree.
A written proxy entitles a shareholder to be represented at
the General Meeting of Shareholders by his or her legal
representative, or by another shareholder with the right to
vote, or by the representative of the corporate body
(Organvertreter), or by the independent proxy holder of
voting rights (unabhängiger Stimmrechtsvertreter) or by the
proxy holder of deposited shares (Depotvertreter).
6.2 Statutory quorums
In principle, the legal rules on quorums apply. Supplemen-
tary to the quorums legally listed, a two-thirds majority
of the shares represented at the General Meeting of Share-
holders is required for the following resolutions:
transfer restrictions;
restriction of voting rights;
shares;
Directors;
well as the repeal or relief of the stated quorum. A reso-
lution to increase the quorum as set forth in the Articles
must be based on the consent of the increased quorum.
6.3 Convocation of the General Meeting
of Shareholders
There are no provisions deviating from the law.
6.4 Agenda
Shareholders who individually or together with other
shareholders represent shares in the nominal value of
CHF 1 million may request that an item be placed on
the agenda. Such a request must be made in writing to
PWT at least 60 days prior to the General Meeting of
Shareholders.
6.5 Inscriptions into the share register
Registered shares can only be represented by shareholders
(or nominees) who have been entered into the PWT share
register. Shareholders (or registered nominees) who cannot
personally attend the General Meeting of Shareholders are
entitled to nominate a representative according to the pro-
visions in the Articles, who represents them by written proxy.
For the purpose of determining voting rights, the share
register is closed for registration from the date upon which
the General Meeting of Shareholders has been called
(date of invitation) until the day after the General Meeting
of Shareholders has taken place.
7 Changes of control and defense measures
7.1 Duty to make an offer
No opting-out or opting-up provisions exist.
7.2 Clauses on changes of control
Neither the contracts of the members of the Board of
Directors nor of the Executive Board have a change-of-
control clause.
8 Auditors
8.1 Duration of the mandate and term of office
of the lead auditor
The mandate to act as statutory and Group Auditors is
assumed by KPMG, Zurich. The lead auditor, Regula
Wallimann, took up office on May 6, 2008 for a seven-year
term.
8.2 Auditing fees
According to financial accounting, invoices for auditing
fees for the financial year amounted to CHF 2,999,000.
Further KPMG invoiced CHF 49,000 for audit-related
services.
8.3 Additional fees
The auditors KPMG were compensated an additional
amount of CHF 1,204,000 for further services rendered in
the financial year. KPMG was mandated in the reporting
year in particular for tax consulting (CHF 1,129,000) and
other non-audit related work (CHF 75,000).
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Panalpina Annual Report 2011
Responsibilities
8.4 Informational instruments pertaining to
the external audit
The Group Auditors are supervised and controlled by the
Audit Committee. The Group Auditors report to the Audit
Committee and periodically the lead auditor participates in
the meetings. During these meetings, the Group Auditors
present a detailed audit plan for the current year including
risk-based audit priorities, the audit scope, proposals regard-
ing audit fees, organization and timing as well as updates
and status of the results of the Internal Control System. In
subsequent meetings they present interim audit findings
with respective statements and recommendations later fol-
lowed by a detailed audit report. Presentations also con-
tain references to upcoming changes in legislation and IFRS.
The main criteria for the selection of Group Auditors include
independence, network capabilities, industry and IT expe-
rience of the audit team, a risk-based audit approach,
a central process management as well as the integration
of Corporate Audit and risk management functions. The
Audit Committee annually assesses the performance of the
Group Auditors and determines the audit fees (refer to
section 3.5).
9 Information policy
Panalpina regularly updates its website at
www.panalpina.com, informing the public of any major
events, organizational changes and (quarterly) financial
results. Press releases are accessible to all visitors to the
website; alternatively, subscriptions can be made so that
the latest press releases are automatically forwarded via
e-mail. Furthermore, all publications such as the Annual
Report (including the Corporate Governance and Compen-
sation Report), customer magazine and sales brochures
are available online. The dates of the General Meeting of
Shareholders as well as dates of publication of the quar-
terly financial results are printed in the Annual Report and
appear in the Financial Calendar on the web site (under
Investor Relations). The minutes of shareholder meetings
are available online.
www.panalpina.com / corpgov
Panalpina Annual Report 2011
61
Responsibilities
www.panalpina.com / gri
Global Reporting Initiative
Consolidated and Annual
Financial Statements 2011
62
Panalpina Annual Report 2011
Contents
Consolidated Financial Statements 2011
Consolidated Income Statement 64
Consolidated Statement of Comprehensive Income 65
Consolidated Statement of Financial Position 66
Consolidated Statement of Changes in Equity 67
Consolidated Statement of Cash Flows 69
Notes to the Consolidated Financial Statements 70
Principal Group Companies and Participations 122
Report of the Group Auditors 127
Key Figures in CHF (five-year review) 128
Consolidated Statement of Financial Position in CHF (five-year review) 130
Key Figures in EUR (five-year review) 131
Consolidated Statement of Financial Position in EUR 133
Annual Financial Statements 2011 of Panalpina World Transport (Holding) Ltd.
Income Statement 134
Balance Sheet as of December 31 (before profit appropriation) 135
Notes to the Financial Statements 136
Appropriation of Available Earnings 140
Report of the Statutory Auditors 141
63
Panalpina Annual Report 2011
64
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
in thousand CHF Notes 2011 2010
Forwarding services 7,925,993 8,675,826
Customs, duties and taxes (1,426,345) (1,511,665)
Net forwarding revenue 5 6,499,648 7,164,161
Forwarding services from third parties 5 (5,022,599) (5,684,084)
Gross profit 5 1,477,049 1,480,077
Personnel expenses 6 (892,421) (890,937)
Other operating expenses 9 (372,438) (527,051)
(Losses)/gains on sales of non-current assets 10 (106) 277
EBITDA 212,084 62,366
Depreciation of property, plant and equipment 14 (28,484) (38,891)
Amortization of intangible assets 15 (9,383) (8,113)
Operating result (EBIT) 174,217 15,362
Finance income 11 6,268 6,248
Finance costs 11 (11,903) (15,488)
Profit before income tax (EBT) 168,582 6,122
Income tax expenses 12 (41,169) (32,119)
Consolidated profit 127,413 (25,997)
Consolidated profit attributable to:
Owners of the parent 126,294 (27,350)
Non-controlling interests 24 1,119 1,353
Earnings per share (in CHF per share)
Basic 13 5.34 (1.16)
Diluted 13 5.33 (1.16)
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
Consolidated Income Statement for the years ended December 31, 2011 and 2010
65
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Consolidated Statement of Comprehensive Income for the years ended December 31, 2011 and 2010
in thousand CHF Notes 2011 2010
Consolidated profit 127,413 (25,997)
Other comprehensive income
Available-for-sale financial assets 16 3,994 (1,828)
Amounts recognized in equity for defined benefit post-employment plans
– Actuarial gains (losses) 7 (23,297) (11,347)
– Exchange difference 7 1,163 751
Exchange difference on translations of foreign operations (11,238) (15,027)
Income tax on components of other comprehensive income 12 5,296 5,289
Other comprehensive income for the period, net of tax (24,082) (22,162)
Total comprehensive income for the period 103,331 (48,159)
Attributable to owners of the parent 102,416 (49,082)
Attributable to non-controlling interests 24 915 923
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
66
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Consolidated Statement of Financial Positionas at December 31, 2011 and 2010
Assetsin thousand CHF Notes 2011 2010
Non-current assets
Property, plant and equipment 14 113,180 113,833
Intangible assets 15 141,743 78,091
Investments 16 72,256 34,843
Derivative financial instruments 21 459 0
Post-employment benefit assets 7 0 10,312
Deferred income tax assets 27 62,313 65,871
Total non-current assets 389,951 302,950
Current assets
Other receivables and other current assets 19 84,997 97,957
Unbilled forwarding services 77,346 74,742
Trade receivables 20 984,404 958,114
Derivative financial instruments 21 5,045 20,454
Other current financial assets 22 20,000 6,089
Cash and cash equivalents 22 573,579 528,936
Total current assets 1,745,371 1,686,292
Total assets 2,135,322 1,989,242
Liabilities and equityin thousand CHF Notes 2011 2010
Equity
Share capital 23 50,000 50,000
Treasury shares 23 (197,278) (196,003)
Reserves 1,053,086 950,282
Total equity attributable to owners of the parent 905,808 804,279
Non-controlling interests 24 9,082 7,890
Total equity 914,890 812,169
Non-current liabilities
Borrowings 25 231 403
Provisions 26 85,032 112,579
Post-employment benefit liabilities 7 47,151 40,671
Derivative financial instruments 21 0 539
Deferred income tax liabilities 27 14,492 20,745
Total non-current liabilities 146,906 174,937
Current liabilities
Trade payables 588,104 521,207
Other payables and accruals 144,354 134,264
Accrued cost of services 184,519 174,840
Borrowings 25 7,296 9,335
Derivative financial instruments 21 4,648 4,993
Provisions and other liabilities 28 125,420 141,053
Current income tax liabilities 19,185 16,444
Total current liabilities 1,073,526 1,002,136
Total liabilities 1,220,432 1,177,073
Total equity and liabilities 2,135,322 1,989,242
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
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Consolidated Financial Statements 2011
Consolidated Statement of Changes in Equityfor the year ended December 31, 2011
Attributable to the owners of the parent
Non- controlling
interests
Total equity
in thousand CHF
Notes
Share capital
Treasury shares
Other reserves
Transla-tion
reserveRetained earnings
Total
Balance on January 1, 2011 50,000 (196,003) (108,862) (151,070) 1,210,214 804,279 7,890 812,169
Consolidated profit 126,294 126,294 1,119 127,413
Available-for-sale financial assets 16 3,994 3,994 3,994
Amounts recognized in equity for defined benefit post-employment plans
– Actuarial gains (losses) 7 (23,297) (23,297) (23,297)
– Exchange difference 7 1,163 1,163 1,163
Exchange difference on translations of foreign operations (11,034) (11,034) (204) (11,238)
Income tax on components of other comprehensive income 12 5,296 5,296 5,296
Total comprehensive income for the period 0 0 (12,844) (11,034) 126,294 102,416 915 103,331
Dividends paid 24 0 0 (46) (46)
Share-based payments employee share plan 8 1,255 1,255 1,255
Share-based payments option plan 8 662 662 662
Changes in treasury shares, net (1,274) (1,530) (2,804) (2,804)
Acquired non-controlling interests 24 0 0 323 323
Balance on December 31, 2011 50,000 (197,277) (121,706) (162,104) 1,336,895 905,808 9,082 914,890
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
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Consolidated Financial Statements 2011
Consolidated Statement of Changes in Equityfor the year ended December 31, 2010
Attributable to the owners of the parent
Non- controlling
interests
Total equity
in thousand CHF
Notes
Share capital
Treasury shares
Other reserves
Transla-tion
reserveRetained earnings
Total
Balance on January 1, 2010 50,000 (192,567) (101,723) (136,473) 1,237,327 856,564 7,015 863,579
Consolidated profit (27,350) (27,350) 1,353 (25,997)
Available-for-sale financial assets 16 (1,828) (1,828) (1,828)
Amounts recognized in equity for defined benefit post-employment plans
– Actuarial gains (losses) 7 (11,347) (11,347) (11,347)
– Exchange difference 7 751 751 751
Exchange difference on translations of foreign operations (14,597) (14,597) (430) (15,027)
Income tax on components of other comprehensive income 12 5,289 5,289 5,289
Total comprehensive income for the period 0 0 (7,135) (14,597) (27,350) (49,082) 923 (48,159)
Dividends paid 24 0 0 (52) (52)
Share-based payments employee share plan 8 676 676 676
Share-based payments option plan 8 1,540 1,540 1,540
Changes in treasury shares, net (3,436) (1,979) (5,415) (5,415)
Reclassification non-controlling interests 24 (4) (4) 4 0
Balance on December 31, 2010 50,000 (196,003) (108,862) (151,070) 1,210,214 804,279 7,890 812,169
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
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in thousand CHF Notes 2011 2010
Profit for the period 127,413 (25,997)
Income tax expenses 12 41,169 32,119
Depreciation of property, plant and equipment 14 28,484 38,891
Amortization of intangible assets 15 9,383 8,113
Finance income and dividend on available-for-sale financial assets 11 (6,268) (6,078)
Interest expenses 11 5,932 5,516
Exchange differences 11 2,840 609
(Losses)/gains on sales of property, plant and equipment 10 106 (277)
Equity-settled share-based payment transactions 8 2,936 2,281
Other non-cash expenses (869) 9,791
211,126 64,968
Working capital adjustments:
(Increase)/decrease receivables and other current assets (21,893) (208,859)
Increase/(decrease) payables, accruals and deferred income 89,262 133,890
(Decrease)/increase long-term provisions (15,508) 48,980
(Decrease)/increase short-term provisions and other liabilities (33,915) 36,287
Cash generated from operations 229,072 75,266
Interest paid (2,577) (5,198)
Income taxes paid (32,996) (33,031)
Net cash from operating activities 193,499 37,037
Interest received 4,695 5,206
Dividends received 11 172 99
Proceeds from sales of PPE 1,633 3,009
Proceeds from investments held for trading 12 0
Proceeds from sales of securities 0 150
Loan and receivables repayments 1,148 7,586
Repayment of other financial assets 1,927 1,345
Purchase of property, plant and equipment (30,715) (28,173)
Acquisition of subsidiary, net of cash acquired 30 (59,986) (2,384)
Purchase of intangible assets and other assets (19,648) (13,967)
Purchase of investments held for trading (13,840) 0
Purchase of other financial assets (36,954) (3,663)
Net cash used in investing activities (151,556) (30,792)
Free cash flow 41,943 6,245
Proceeds of short- and long-term borrowings 142 2,831
Repayment of short- and long-term borrowings 0 (5,228)
Dividends paid to non-controlling interests 24 (46) (52)
Purchase of treasury shares (8,617) (10,540)
Sale of treasury shares 4,685 4,865
Net cash used in financing activities (3,836) (8,124)
Effect of exchange rate changes on cash and cash equivalents 6,536 (988)
Net increase (decrease) in cash and cash equivalents 44,643 (2,867)
Cash and cash equivalents at the beginning of the year 22 528,936 531,803
Cash and cash equivalents at the end of the year 22 573,579 528,936
The notes on pages 70 to 125 are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows for the years ended December 31, 2011 and 2010
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General information
Panalpina World Transport (Holding) Ltd. (referred to hereafter as the Company) and its subsidiaries is one of the world’s leading providers of supply chain solutions, combining intercontinental Air and Ocean Freight with comprehensive Value-Added Logistic Services and Supply Chain Services. Thanks to its in-depth industry know-how and customized IT systems, Panalpina provides globally integrated end-to-end solutions tailored to its customers’ supply chain management needs.
Panalpina World Transport (Holding) Ltd. is a limited company incorporated and domiciled in Basel. The registered address is Viadukt-strasse 42, 4002 Basel, Switzerland. The Company shares are publicly traded and are listed on the SIX Swiss Exchange in Zurich.
The consolidated financial statements for the year ending December 31, 2011 were authorized for issuance in accordance with a resolu-tion by the Board of Directors on March 2, 2012.
Summary of significant accounting policies
Basis of preparation of the consolidated financial statements
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The consolidated financial statements of the Company as at and for the year ended December 31, 2011 comprise the Company and its affiliates (together referred to as the Group and individually as Group entities).
Statement of compliance
The consolidated financial statements are based on the accounts of the individual subsidiaries on December 31, which have been drawn up according to uniform Group accounting principles. The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost basis, except for available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss and liabilities for cash-settled share-based payment arrangements which have been measured at fair value. Defined benefit assets are recognized at the net total of the plan assets plus unrecognized past-service costs and unrecognized actuarial losses and the present value of the defined benefit obligation.
The methods used to measure fair values are discussed further in note 3.
Presentation currency
The consolidated financial statements are presented in Swiss francs (CHF) which is the functional currency of the Company and all values are rounded to the nearest thousand except where otherwise indicated.
Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. It requires management to exercise its judgments and assumptions in the process of applying the Group’s accounting policies. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Deviations from estimates and judgments are recognized in the period in which the estimates are revised and in any future periods affected.
The areas involving a higher degree of judgment or complexity, or areas in which assumptions and estimates are significant to the consoli-dated financial statements, are disclosed in note 4.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, unless otherwise stated. If necessary, comparative amounts have been reclassified to conform with the current year’s presentation.
Effective from January 1, 2011, the Group adopted the revised standard IAS 24 “Related Party Disclosures” as well as the amendments to IAS 32 “Financial Instruments: Presentation – Classification of Rights Issues” and IFRIC 14 “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – Prepayments of a Minimum Funding Requirement.”
1
2
3
Notes to the Consolidated Financial Statements
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IAS 24 (revised) “Related Party Disclosures” The revised standard supersedes IAS 24 “Related Party Disclosures”, issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2011. The revised standard provides a simplified definition of related parties by clarifying its intended meaning and eliminating inconsistencies from the definition. The adoption of the revised standard did not impact on the financial statements of the Group.
IAS 32 (amendment) “Financial Instruments: Presentation – Classification of Rights Issues”The amendment applies to annual periods beginning on or after February 1, 2010. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors.” As Panalpina has no rights issues, the adoption of this amendment did not have any impact on the consolidated financial statement.
IFRIC 14 (amendment) “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction – Prepay-ment of a Minimum Funding Requirements”The amendment corrects an unintended consequence of IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction.” Without the amendment, entities are not permitted to recognize some voluntary prepayments for minimum funding contributions as an asset. With this amendment this has been revoked and should be applied retrospectively to the earliest comparative period presented. The adoption of this amendment did not impact on the financial statements of the Group.
In addition, the IASB issued amendments to its standards in May 2010, primarily with a view to remove inconsistencies and clarifying the wording. There are separate transitional provisions for each standard. The adoption of the amendments resulted in changes to the accounting policies but did not have any significant impact on the financial position or performance of the Group.
The following new or revised standards, amendments to standards and interpretations that have been published are mandatory for the Group’s accounting periods beginning on or after January 1, 2012 or for later periods, but the Group has not yet adopted them:
IFRS 7 (amended) “Disclosures – Transfers of Financial Assets”In October 2010 the IAS issued “Disclosures – Transfers of Financial Assets” (amendments to IFRS 7) with an effective date of July 1, 2011. Panalpina is in the process of analyzing the impact of the amendments to IFRS 7.
IFRS 9 “Financial instruments” Addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after January 1, 2015.
IFRS 10 “Consolidated Financial statements” The new standard creates a uniform definition regarding the concept of control thus setting a uniform basis for the existence of a parent-subsidiary relationship and the related definition of the scope of consolidation. The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning January 1, 2013.
IFRS 11 “Joint Arrangements” IFRS 11 addresses joint arrangements distinguishing between arrangements where an entity exercises joint control over a joint venture or joint operation and the accounting of such. The new Standard supersedes IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Monetary Contributions by Venturers” as the henceforth relevant provisions addressing issues of accounting for jointly held entities. The Group is yet to assess IFRS 11’s full impact and intends to adopt IFRS 11 no later than the accounting period beginning January1, 2013.
IFRS 12 “Disclosure of interests in other entities” Includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after January 1, 2013.
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IFRS 13 “Fair value measurement” The aim of the standard is to improve consistency and to reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements across all IFRS standards. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or US GAAP. The Group is yet to assess IFRS 13’s full impact and to adopt IFRS 13 no later than the accounting period beginning on or after January 1, 2013.
Amendments to IAS 1 “Presentation of Financial Statements”In June 2011 the IASB issued Presentation of items of Other Comprehensive Income (amendments to IAS 1) “Presentation of Financial Statements” with an effective date of July 1, 2012. The Group is yet to assess the amendments impact.
Amendments to IAS 12 “Deferred Tax – Recovery of Underlying Assets”In December 2010 the IASB issued Deferred Tax: “Recovery of Underlying Assets” - Amendments to IAS 12. The Amendment offers a partial clarification of the treatment of timing differences arising in connection with the application of the fair-value model of IAS 40. In the case of real estate held for investment purposes, it is often difficult to assess whether existing differences will reverse through continued use or as a result of a sale. The amendment to IAS 12 provides that reversal in principle occurs as a result of a sale. As a consequence of the amendment, SIC 21 “Income Taxes – Recovery of Revalued Depreciable Assets” shall no longer be effective for real estate held for investment purposes measured at fair value. The Group anticipates no impact on its financial statements in applying this amendment, which will become effective for accounting periods on or after January 1, 2012.
IAS 19 “Employee benefits” The standard was amended in June 2011. As the Group already eliminated the corridor approach and recognized all actuarial gains and losses in Other Comprehensive Income (OCI) as they occurred and already recognized all past service costs the impact on Group l evel will only be the replacement of interest costs, and the expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). In addition the amendments require additional disclosures. The Group is yet to assess the full impact of the amendments. The amendments are mandatory for periods beginning on or after January 1, 2012.
IAS 27 “Consolidated and Separate Financial Statements”
IAS 27 will be renamed from “Consolidated and Separate Financial Statements” to “Separate Financial Statements” and henceforth shall apply only to entities preparing stand-alone financial statements in accordance with IFRS. The new standard has no impact on the Group as it does not prepare stand-alone financial statements in accordance with IFRS.
IAS 28 “Investments in Associates”In the amendments to IAS 28, the content of the provisions governing the accounting for shares in associates and joint ventures is expanded. The Group is yet to assess full impact of this amendment and intends to adopt the amendment no later than the accounting period beginning January 1, 2013.
Amendments to IAS 32 “Financial Instruments: Presentation” and IFRS 7 “Financial Instruments: Disclosures – Offsetting of Financial Assets and Financial Liabilities”The preconditions set out in IAS 32 regarding the set-off are set out in additional application guidelines. The Amendments to IFRS 7 concern new disclosure requirements in connection with certain netting agreements. The Group is yet to assess full impact of these amendments and intends to adopt the amendments no later than the accounting period beginning January 1, 2014.
There are no other IFRS or IFRIC interpretations that are not yet effective and would be expected to have a material impact on the Group.
Basis of consolidation
Consolidation policyThe subsidiaries are those companies controlled directly or indirectly, by Panalpina World Transport (Holding) Ltd., where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is normally evidenced when the Group owns, either directly or indirectly, more than one half of the voting rights or currently exercisable potential voting rights of a company’s share capital. Inter-company balances, transactions and resulting unrealized income are eliminated in full. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and if they do not result in a loss of control.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisi-tion of a subsidiary is determined by the fair values of the assets transferred, the liabilities incurred to previous owners and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at acquisition date. On an acquisition by acquisition basis, the Group recog-nizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Investments are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.
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The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired are recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of bargain purchase, the difference is recognized directly in the statement of comprehensive income.
The Group treats transactions with non-controlling interests as transactions with equity owner of the Group. For purchases from-non- controlling interest, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint venture or financial asset. Any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. The amounts previously recognized in other comprehensive income are reclassified to profit or loss.
Associates are all entities over which the Group has significant influence, but where it does not have control, generally accompanying a shareholding of business between 20 % and 50 % of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment losses.
The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisi-tion movements is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associ-ates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Dilution gains and losses arising in investments in associates are recognized in the income statement.
Operating segment informationThe determination of the Group’s operating segments is based on the organization units for which information is reported to the Group’s management. The Group is primarily organized by regions and has four reportable segments: Europe, Middle East, Africa and CIS, North America, Central and South America and Asia Pacific. Each reportable segment offers the same products and services. The Executive Board reviews monthly the Group’s internal reporting in order to assess performance and allocate resources. Performance is measured based on gross profit and operating result (EBIT). Income tax expenses, finance income and costs as well as special items are not assessed by segment. Certain headquarter activities are reported as Corporate. These consist of corporate headquarters, including the Corporate Executive Committee, Corporate Communications, Corporate Operations, Corporate Human Resources, Corporate Finance, including Treasury, Taxes and Pension Fund Management.
Transfer prices between operating segments are set out at arm’s-length basis. Operating assets and liabilities consist of property, plant and equipment, goodwill and intangible assets, trade receivables/payables, other assets and liabilities such as provisions and current income taxes, which can be reasonably attributed to the reported operating segments. Non-operating assets and liabilities mainly include deferred income tax balances, post-employment benefit assets/liabilities and financial assets/liabilities such as marketable securities and investments.
Foreign currency
Functional currencyMost Group companies use their local currency as their functional currency. Certain Group companies use other currencies (such as US dollars or euros) as their functional currency where this is the currency of the primary economic environment in which the entity or branch operates.
Transactions and balancesLocal transactions in other currencies are initially reported using the exchange rate at the date of the transaction or reporting date. Gains and losses from the settlement of such transactions and gains and losses on transactions of monetary assets and liabilities denominated in other currencies are included in the income statement, except when they arise on monetary items that, in substance, form part of the Group’s net investment in a foreign entity. In such cases the gains and losses are deferred into other comprehensive income.
Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rate as of the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates on the date on which the fair value is determined.
Changes in fair value of securities denominated in foreign currency classified as available-for-sale are split into components resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Foreign exchange remeasurement differences related to changes in amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized in equity.
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Presentation currencyUpon consolidation, assets and liabilities of Group companies using functional currency other than Swiss francs are translated into Swiss francs using a year-end rate of exchange. Income, expenses and net income and cash flows are translated at the average rates of exchange for the year. Translation differences due to the changes in exchange rates between the beginning and the end of the year and the difference between net incomes translated at the average and year-end exchange rates are recognized as a separate component of other comprehensive income.
The income and expenses of foreign operations in hyperinflationary economies are translated to Swiss francs at the exchange rate on the reporting date. Prior to translating the financial statement of foreign operations in hyperinflationary economies, their financial statements are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices on the reporting date. Foreign currency differences are recognized directly in comprehensive income in the foreign currency translation reserve.
On disposal of a foreign entity, the identified cumulative currency translation differences within equity relating to that foreign entity are recognized in the income statement as part of the gain or loss on divestment.
Any goodwill arising on the acquisition is treated as assets and liabilities of the foreign operation and translated at the closing rate.
The most important exchange rates used in the reported financial statements are:
2011 2010
Statement of Financial Position
Income Statement
Statement of Financial Position
Income
Statement
EUR 1.21628 1.23080 EUR 1.25134 1.37870
USD 0.94082 0.88478 USD 0.93670 1.04137
HKD 0.12114 0.11366 HKD 0.12049 0.13403
CNY 0.14950 0.13690 CNY 0.14177 0.15385
CAD 0.92165 0.89488 CAD 0.93820 1.01107
GBP 1.45278 1.41844 GBP 1.45170 1.60781
Revenue recognition
Net forwarding revenue includes amounts received, receivables and unbilled forwarding services for forwarding performed for customers after deducting trade discounts and volume rebates and excluding sales taxes and value-added taxes less charges for customs and duty.
Trade discounts and volume rebates are recorded on an accrual basis consistent with recognition of the related revenue recorded as a deduction for accounts receivable or as accrued liabilities. Such estimates are based on analyses of existing contractual obligations, historical trends and the Group’s experience.
Net forwarding revenue is recognized at the time the services are performed. Logistics projects with a longer period of delivery are recognized at the stage of completion of the services on the reporting date. The stage of completion is assessed in reference to comple-tion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Where necessary, single transactions are split into separately identifiable components to reflect the substance of the transaction. Conversely, two or more transactions may be considered together for revenue recognition purposes, where the commercial effect cannot be under-stood without reference to the series of transactions as a whole.
Gross profit includes net forwarding revenue from services rendered less related expenses for services provided by third parties net of customs, duty and taxes.
Interest income is recognized as interest accrued using the effective interest method. Interest income is included in finance income in the income statement.
Dividends are recognized when the Group’s right to receive the payment is established.
Forwarding services from third parties
Forwarding services from third parties includes the corresponding direct services costs and related services costs rendered by a third party. Trade discounts and volume rebates are recorded on an accrual basis consistent with the recognition of the related services.
Employee benefits
Wages, salaries, social security contributions, paid annual leave, sick leave and other benefits are paid or accrued undiscounted in the year in which the associated services are rendered by employees of the Group. Legal or constructive obligations such as bonus or profit-sharing plans are recognized for the amount expected to be paid in the year in which the services are provided.
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Termination benefits are recognized as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to voluntary redundancy. Termination benefits for voluntary redundancies are recognized as expenses if the Group has made an offer of voluntary redundancy and it is probable that the offer will be accepted. If benefits are payable more than twelve months after the reporting date, then they are discounted to their present value.
Pension obligationMost employees are covered by defined benefit and defined contribution post-employment plans sponsored by the Group companies. The schemes are generally funded through payments to insurance companies or trustee-administrated funds. The Group’s contributions to defined contribution plans are recognized in the income statement within the operating results when they are due. The Group has no legal or constructive obligation to pay further contributions.
The asset and liability recognized in the statement of financial position in regard to defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecog-nized past-services costs. The accounting and reporting of defined benefit plans are based on recent actuarial valuations. The defined benefit obligations and service costs are calculated using the projected unit credit method. This reflects services rendered by employees to the date of valuation and incorporates actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth and long-term expected rates of return for plan assets using the interest rates of high- quality corporate bonds that are denominated in the currency in which the benefits will be paid and which have maturity dates approximat-ing the terms of the related pension liability. Past services costs are recognized immediately in the income statement, unless the changes to the pension plans are conditional on the employees remaining in service for a specified period of time. In this case post service costs are amortized on a straight-line basis over the vesting period.
Actuarial gains and losses, which consist of differences between assumptions and actual experiences and the effects of changes in actuarial assumptions, are recorded in equity in other comprehensive income in the period in which they arise.
Pension assets and liabilities in different defined benefit plans are not offset against each other unless the Group has a legally enforceable right to use the surplus in one plan to settle obligations in the other plan. The recognition of pension assets is limited to the present value of any future refunds from the plans or reductions in future contributions to the plans and any cumulative unrecognized past service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are charged in equity in other comprehensive income.
Other long-term employee benefitsNet obligation in regard to long-term employee benefits other than pension plans is the amount of future benefits that employees have earned in return for their service in the current and/or prior periods. Benefits are discounted to determine their present value and the fair value of any related asset is deducted. The expected costs of these benefits are accrued over the period of employment using the same method of valuation that is used for defined benefit pension plans. Any actuarial gains or losses which consist of differences between assumptions and actual experiences and the effects of changes in actuarial assumptions are recognized in the income statement in the period in which they arise.
Share-based compensationCertain employees of the Group participate in share-based compensation plans. The fair value of the employee services received in exchange for the granting of the options and the discount on the shares granted is estimated at the grant date and recorded as an expense over the vesting period. The expense is recognized as other employee benefits in the income statement within the operating result of Corpo-rate. For equity-settled plans, an increase in equity is recorded for this expense and any subsequent cash flows from exercises of vested awards are recorded as changes in equity. For cash-settled plans, a liability is recorded, which is measured at fair value at each reporting date with any movements in fair value being recorded in the income statement. Any subsequent cash flows from exercise of vested awards are recorded as a reduction of the liability.
Other operating expenses
Other operating expenses primarily include administrative expenses, communication expenses, rent and utilities expenses, travel and promotion expenses, insurance expenses and claims, changes in provisions from impairments of trade receivables and collection expenses and other operating expenses necessary to render forwarding revenue to third parties. The expenses are recognized when the expenses recorded on an accrual basis have been incurred.
Finance income and costs
Finance income comprises interest income on funds invested, dividend income, cash discounts, gains on disposals of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on derivatives that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, cash discounts, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognized on financial assets, losses on hedging instru-ments that are recog nized in profit or loss, bank charges and bank guarantee fees. All borrowing costs are recognized in profit or loss using the effective interest method.
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Income tax expenses
Income taxes include all taxes based on the taxable profits of the Group, including withholding taxes payable on the distribution of retained earnings within the Group. Other taxes not based on income, such as capital taxes, are included within other operating expenses. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or sub-stantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income tax assets and liabilities are recognized on temporary differences between the carrying amounts and the tax bases of assets and liabilities for financial statement. Deferred income tax assets relating to the carry-forward of unused tax losses are recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilized.
Deferred income tax is not recognized for the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred income tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.
Deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a legally enforceable right to offset them. Deferred income tax is measured based on the currently enacted tax rates applicable in each tax jurisdiction where the Group operates.
Current income tax and deferred income tax are recognized in profit or loss except to the extent that they relate to a business combination, or items recognized directly in equity or in other comprehensive income.
Property, plant and equipment
Property, plant and equipment are measured at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Initially property, plant and equipment are recorded at cost of purchase or construction and include all cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Interest and other borrowing costs for long-term construction projects are capitalized and included in the carrying value of the assets. All other repair and maintenance costs of the day-to-day servicing are recognized in the income statement as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Gains and losses on a disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within gains or losses on sales of non-current assets in the income statement.
Land and buildings are carried at cost less depreciation and/or accumulated impairment losses.
Depreciation is recognized in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reason-ably certain that the Group will obtain ownership by the end of the lease term. Land and construction in progress are not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Years
Warehouse and office buildings 25 – 40
Warehouse and transportation equipment 3 – 10
Office furnishings and equipment 5 – 10
EDP hardware 3
Trucks, trailers and special vehicles 3 – 10
Automobiles 3 – 5
The assets’ residual value and estimated useful lives are regularly reviewed and adjusted. If appropriate, the future depreciation charge is accelerated.
Leases
Where the Group is the lessee, leases of property, plant and equipment where the Group has substantially all of the risks and rewards of ownership are classified as finance leases. Financial leases are capitalized at the start of the lease at fair value, or the present value of the minimum lease payments, if lower. Assets acquired under finance leases are depreciated in accordance with the Group’s policy on property, plant and equipment. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the lease term based on the effective interest rate method. Leases where substantially all of the risk and rewards of ownership are not transferred to the Group are classified as operating leases. Payments made under operating leases are charged against the income statement on a straight-line basis over the period of the lease.
The corresponding leasing obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
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Intangible assets
Business combination and goodwillBusiness combinations are accounted for using the acquisition method of accounting. The consideration transferred in a business combi-nation is measured at fair value at the date of acquisition and includes the cash paid plus the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group. The fair value of the consideration transferred also includes contingent consideration arrangements at fair value. Directly attributable acquisition-related costs are expensed in the income statement. At the date of acquisition the Group recognizes the identifiable assets acquired and the liabilities assumed at fair value. Where the Group does not acquire 100 % ownership of the acquired business, non-controlling interests are recorded as the proportion of the fair value of the acquired net assets attributable to non-controlling interest. Goodwill is recorded as the surplus of the consideration transferred over the Group’s interest in the fair value of acquired net assets. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired business in the functional currency of that business. When the initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are used. During the measurement period, the provisional amounts are retrospec -tively adjusted and additional assets and liabilities may be recognized, to reflect new information obtained about the amounts recognized at that date, had they been known. Goodwill is not amortized but assessed for possible impairment at each reporting date and is addition-ally tested annually for impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Changes in ownership interest in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and if they do not result in a loss of control.
Trademarks and licensesSeparately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumu-lated amortization and/or accumulated impairment losses. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives of five to ten years.
Customer relationshipsCustomer relationships acquired in a business combination are recognized at fair value at the acquisition date. Customer relations have a finite useful life and are carried at cost less accumulated amortization and / or accumulated impairment losses. Amortization is calculated using the straight-line method over the expected life of the customer relationship of three to five years.
Computer softwareDevelopment costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:
• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalized as part of the software product include software development costs, employee costs and an appropriate portion of relevant overhead costs. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Costs associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development costs recognized as assets are amortized over their estimated useful life, which does not exceed three to five years.
Other intangible assetsOther intangible assets that are acquired by the Group that have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.
Impairment of property, plant and equipment and intangible assets
An impairment assessment is carried out when there is evidence that an asset may be impaired. In addition, intangible assets that are not yet available for use are tested for impairment annually. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell, and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or asset groups. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assess-
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ments of the time value of money and the risks specific to the asset. An appropriate valuation model is used to determine fair value less costs to sell. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses are recognized in the income statement. When an impairment loss arises, the useful life of the asset in question is reviewed and, if necessary, the future depreciation/amortization charge is accelerated.
Impairment of goodwill
Goodwill is assessed for possible impairment at each reporting date and is additionally tested annually for impairment. When the recover-able amount of the cash-generating units, being the higher of its fair value less costs to sell or its value in use, is less, then the carrying value of the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss. The methodology used in the impairment testing is further described in note 15.
Financial assets
Financial assets, including cash and marketable securities, short- and long-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments, are classified either as fair value through profit or loss, loans and receivables, available-for-sale, or in exceptional cases, as held to maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. All financial assets are initially recognized at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. All purchases and sales are recognized on the settlement date.
Subsequent measurementFinancial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria. Derivatives, including separately embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit or loss are carried on the statement of financial position at fair value with gains or losses recognized in the income statement.
Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are normally carried at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.
Trade receivables originated by the Group are financial assets that are created by providing money or services directly to the debtor. Such receivables are not quoted and are not originated with the intention to be sold immediately or in the near term. Receivables are presented in current assets for maturities up to twelve months (accounting treatment of trade receivables is outlined in more detail in the section: Trade receivables).
Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the positive intention and ability to hold them until maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognized in the income statement when the investments are derecognized or impaired, as well as through the amortization process. The Group did not have any held-to-maturity investments during the periods under review.
Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealized gains or losses recognized in comprehensive income until the investment is derecognized, at which time the cumulative gain or loss recorded in comprehensive income is recognized in the income statement, or determined to be impaired, at which time the cumulative loss recorded in comprehensive income is recognized in the income statement.
Fair value of financial instruments
Fair value is the amount for which a financial asset, liability or instrument could be exchanged between knowledgeable and willing parties in an arm’s-length transaction. It is determined by reference to quoted market prices or by the use of established valuation techniques such as option pricing models and the discounted cash flow method if quoted prices in an active market are not available. Valuation tech niques will incorporate observable market data about market conditions and other factors that are likely to affect the fair value of a financial instrument. Valuation techniques are typically used for derivative financial instruments. The fair values of financial assets and liabilities at the reporting date are not materially different to their reported carrying value unless specifically mentioned in the notes to the consolidated financial statements. Information on fair value hierarchy is included in note 18 on risk management.
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Amortized cost of financial instruments
Amortized cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs that are an integral part of the effective interest rate.
Impairment of financial assets
Financial assets are individually assessed for possible impairment at each reporting date. An impairment charge is recorded where there is objective evidence of impairment, such as where the issuer is in bankruptcy, default or other significant financial difficulty. In addition, any available-for-sale equity securities that have a market value of more than 25 % below their original cost, net of any previous impairment, will be considered as impaired. Any available-for-sale equity securities that have a market value below their original cost, net of any previous impairment, for a sustained six-month period will also be considered as impaired. Any decreases in the market price of less than 25 % of original cost, net of any previous impairment, which are also for less than a sustained six-month period are not by themselves considered as objective evidence of impairment. Such movements in fair value are recorded in equity until there is objective evidence of impairment or until the asset is sold or otherwise disposed of. For financial assets carried at amortized cost, any impairment charge is the difference between the carrying value and the recoverable amount, calculated using estimated future cash flows discounted using the original effective interest rate. For available-for-sale financial assets the original cost, net of any previous impairment charge, is the amount currently carried in equity for the difference between the original cost, net of any previous impairment, and at fair value. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For debt securities measured at amor-tized cost that are available-for-sale, the reversal is recognized in income. For equity held available-for-sale, the reversal is recognized directly in equity.
Derecognition of financial assets
A financial asset is derecognized when:
• the Group’s rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substan-tially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Derivatives
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivative financial instru-ments are initially recognized and subsequently carried at fair value on the date a derivative contract is entered into. Apart from those derivatives designated as qualifying cash flow hedging instruments in the “hedging” policy below, all changes in fair value are recorded as financial income in the period in which they arise. Embedded derivatives are recognized separately if not closely related to the host contract and where the host contract is carried at amortized cost. Attributable transaction costs are recognized in the income statement when incurred.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The fair value of forward currency contracts is the difference between the forward exchange rate and the contract rate. The forward exchange rate is referenced to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest swap contracts is determined by reference to market value for similar instruments.
Hedge accounting
For the purpose of hedge accounting, hedging relationships may be of three types. A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability, or an unrecognized commitment, or an identified portion of such an asset, liability or com-mitment that is attributable to a particular risk and could affect profit or loss. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss. A “hedge of a net investment in a foreign operation” is a hedge of the foreign currency exposure on a net investment in a foreign operation.
To qualify for hedge accounting, the hedging relationship must meet several strict conditions on documentation, probability of occurrence (for cash flow hedges), hedge effectiveness and reliability of measurement. If these conditions are not met, then the derivative instrument does not qualify for hedge accounting. In this case, the hedging instrument and the hedged item are valued independently of one another. The derivative hedging instrument is reported at fair value with the changes in fair value included in income or expenses. Where the Group will hold a derivative as an economic hedge for a period beyond twelve months after the statement of financial position date, the derivative is classified as non-current consistent with the classification of the underlying item.
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At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flow attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Fair value hedgesThe change in the fair value of hedging derivatives is recognized in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the income statement.
For fair value hedges relating to items carried to amortized cost, the adjustment to carrying value is amortized through the income statement over the remaining term to maturity. Amortization may begin as soon as an adjustment exists and shall begin no later than when the hedge item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedge item is derecognized, the unamor-tized fair value is recognized immediately in the income statement.
When an unrecognized firm commitment is designated as a hedged item, subsequent cumulative change in the fair value of the firm commit-ment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the income statement.
Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked amounts previously recognized in equity remain in equity until the forecast transaction or firm commitment occurs.
Hedges of a net investmentHedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a manner similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in equity while any gains or losses relating to the ineffective portion are recognized in the income state-ment. Upon disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in equity is transferred to the income statement.
Hedging activities and derivative financial instrumentsThe Group uses foreign-currency-denominated borrowings and forward contracts to manage its transaction exposures. These currency forward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposure (generally one to six months). Such derivatives do not qualify for hedge accounting.
At year-end, the contract value is calculated on the total volume of individual contracts using the fair value at this time. The positive replacement value represents the theoretical profit if the open currency contracts were closed out as of December 31. Correspondingly, the negative replacement value represents the theoretical loss on closing the currency transactions open as of December 31.
Trade receivables
Trade receivable are carried at the original invoice amount less valuation adjustments for impairment, trade discounts, volume rebates and similar allowances. Subsequently, accounts receivable are measured at amortized cost using the effective interest method. An allowance for doubtful accounts trade receivables is recorded when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bank-ruptcy or financial reorganization, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement within other operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off or 100 % impaired are credited against operating expenses in the income statement. Trade discounts, volume rebates and similar allowances are recorded on an accrual basis consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical trends and the Group’s experience. Long-term accounts receivable are discounted to take into account the time value of money.
Unbilled forwarding services
Unbilled forwarding services represent the gross unbilled amount expected to be collected from customers for forwarding services in progress for which costs are incurred but not yet invoiced. For logistics projects and other services with a longer period of delivery, recognized profits are included.
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Cash and cash equivalents and other current financial assets
Cash and cash equivalents included in the statement of financial position and statement of cash flows represent cash on hand, bank and postal checks, bills of exchange net, current balance with banks and similar institutions less bank overdraft as well as time deposits and highly liquid money market papers with a maturity period of less than three months from the date of acquisition. Such balances are only reported as cash if they are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.
Other current financial assets include time deposits and highly liquid money market papers with a maturity period between three months and one year.
Non-current assets held for sale
Non-current assets or disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sales transaction and a sale is considered highly probable. Before classification as held for sale, the assets or components of a dis-posal group are remeasured in accordance with the Group’s accounting policies. Thereafter, generally the assets or disposal groups are measured at the lower of their carrying amount and fair value less costs. Any impairment loss on a disposal group is allocated first to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets, deferred tax assets and employee benefit assets, which continue to be measured. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognized in the income statement. Gains are not recognized in excess of any cumu-lative impairment loss.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognized in equity as a deduction, net of tax effects, from the proceeds.
Treasury shares
When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, the resulting surplus or deficit on the transaction is trans-ferred to retained earnings.
Retained earnings and other reserves
Retained earnings and other reserves contain legal reserves which are not distributable to the shareholders pursuant to Swiss law, cumula-tive translation adjustments of all foreign currency differences arising from the translation of the financial statements of foreign operations as well as cumulative actuarial gains and losses from defined benefit post-employment plans net of taxes and accumulated difference in available-for-sales assets.
Financial liabilities
Financial liabilities are either classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost or as derivatives designated as hedging instruments in an effective hedge as appropriate. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.
Subsequent measurementFinancial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria. Gains or losses on liabilities at fair value through profit or loss are recognized in the income statement.
Loans and borrowingsAfter initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost. Any discount between the net proceeds received and the principal value due on redemption is amortized over the duration of the debt instruments and is recognized as part of financing costs using the effective interest rate method.
Derecognition of financial liabilitiesFinancial liabilities are derecognized when the obligation under the liability is discharged or cancelled or expired. Where a financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. The recognition of a new liability and the difference in the respective carrying amounts is recognized in the income statement.
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Provisions
Provisions are recognized where a legal or constructive obligation has been incurred and if an outflow of resources that can be estimated reliably. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account foreign currency effects arising from their translation from their functional currency into Swiss francs and the time value of money where material, determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Provisions are established in particular for accrued costs of services, freight forwarding claims, short-term employee benefits, termination and other long-term employee benefits, post-employment benefit liabilities and decommissioning provisions. Provisions for restructuring are recognized only when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.
Critical accounting estimates and judgments
The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make estimates and judg-ments that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. Estimates and the underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate is revised.
The estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Impairment of goodwillThe Group tests periodically whether goodwill has suffered any impairment in accordance with the Group’s accounting policy and details disclosed in note 15 – Intangible assets, section: Impairment test for goodwill. The recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use calculations. The underlying calculations require the use of estimates.
Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from future markets, it is determined using the valuation technique including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required to establish fair value. The judg-ments include considerations of inputs such as credit risk, liquidity risk and volatility. Changes in assumptions concerning these factors could affect the reported fair value of financial instruments.
Pension and other post-employment benefitsThe cost of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obliga-tion are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. When determining the appropriate discount rate, management considers the interest rates on high-quality corporate bonds (with an AAA or AA rating) in the respective country and appropriate duration. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific coun-try. Such differences are recognized in full directly in equity in the period in which they occur without affecting the income statement. At December 31, 2011 the Group had a deficit of the fair value of plan assets below the present value of funded obligations of CHF 9.5 million (2010: surplus CHF 7.6 million) for funded plans and a negative present value of unfunded plans of CHF 37.7 million (2010: CHF 37.9 million) for unfunded plans (see note 7). The actuarial assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and other changes in the factors assessed. These differences could impact the assets or liabilities recognized in the statement of financial position in future periods.
4
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ProvisionsA number of subsidiaries are subject to litigation arising from the normal conduct of their businesses, as a result of which claims could be raised against them.
The Group has established a captive reinsurance company that insures a dedicated risk portion of its errors and omissions, transporter operator and commercial general liability programs. The exposure of its captive reinsurance company is limited by a third-party insurer that covers losses exceeding an amount of CHF 1 million on a single-case basis and a total aggregate limit of CHF 9 million annually for claims exceeding CHF 50,000 per incident. In a consolidated view, the Group, through its captive reinsurance company, bears the risks insured with its captive reinsurance company up to the limit as if such risks were not insured at all. Furthermore, as third-party coverage is subject to a considerable deductible and a total aggregated limit per year, the Group, in effect, bears the risk of damages, losses and claims that are above such aggregated limits as well. The Group used for the above-mentioned provision an actuarial calculation method, which requires for the calculation of the “incurred but not reported reserves” (IBNR), among other estimations, the overall circum-stances which may impact the future losses, such as the growth of business. At December 31, 2011 the recognized liability for claims amounts to CHF 33.0 million (2010: CHF 52.5 million). If the management decided to use the optimal actuarial calculation method, which only takes into consideration the linear loss development according to historical figures, the carrying amount of claim provisions would be approximately CHF 2.3 million lower (2010: CHF 0.8 million). Using a more conservative percentile, the carrying amount of claim provi-sions would be approximately CHF 1.7 million higher (2010: CHF 1.3 million).
The Group is also subject to legal and regulatory proceedings and government investigations in various jurisdictions. These proceedings are related to the area of competition law. Such proceedings may result in criminal or civil sanctions, penalties or damages against the Company. Regulatory and legal proceedings, as well as government investigations, involve complex legal issues, the outcome of which is difficult to predict. Accordingly, management’s judgment is affected in determining whether it is more likely or not that such a proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. These judgments are subject to change as new information becomes available. Upon resolution of any legal or regulatory proceeding or government investigation, the Group may incur a provision for such matters. It cannot be ruled out that the financial condition or results of operations of the Group will be materially affected. For additional information see note 31 – Pending legal claims. Related legal costs are recognized when incurred.
Deferred income tax assetsDeferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based on the likely timing and level of future taxable profits.
The carrying value of recognized tax loss carry-forwards amounts to CHF 98.0 million (2010: CHF 96.0 million) and unrecognized tax loss carry-forwards to CHF 100.1 million (2010: CHF 80.3 million). Further details are provided in note 27.
If the Group were able to recognize all unrecognized deferred tax assets, consolidated profit would increase by CHF 31.6 million (2010: CHF 25.2 million). If the Group failed to achieve the expected future taxable profits, the consolidated profit would decrease by CHF 31.9 million (2010 CHF 31.3 million) but the management believes that the full amount of the recognized deferred tax assets are recoverable in the foreseeable future.
Income taxesAt December 31, 2011, the net liability for current income taxes amounts to CHF 19.2 million (2010: CHF 16.4 million). As the Group is subject to income taxes in numerous jurisdictions, significant judgments are required in determining worldwide provisions for income taxes.
Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are reasonable and that the recognized liabilities for income-tax-related uncertainties are adequate. Various external factors may have favor-able or unfavorable effects on income taxes. These factors include, but are not limited to, changes in tax law regulations and/or rates, changing interpretation of existing tax laws or regulations and changes in management estimations. Such changes that arise could affect the assets and liabilities recognized in the statement of financial position in future periods.
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Operating segment information
Management has determined the operating segments based on the reports reviewed by the Executive Board that are used to make stra-tegic decisions. The Executive Board considers the business from a geographic perspective, as the Group’s operations are predominantly managed by the geographical location. The Executive Board assesses performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes the effects on non-recurring expenditure from the operating segments such as restruc-turing costs, legal expenses, reorganization costs as well as fines recognized and related expenses. The measurement also excludes the unrealized gains / losses on financial instruments as well as interest income and expenditure, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. Income and deferred income taxes are not assessed by segment.
2011 (in million CHF)
Europe, Middle
East, Africa,
CIS
North America
Central
and South
America
Asia Pacific
Total operating segment
Elimi- nations
Cor- porate
Total Group
External forwarding services 3,171 1,270 834 1,225 6,500 0 6,500
Intra-group forwarding services 1,574 469 177 1,547 3,767 (3,767) 0
Net forwarding revenue 4,745 1,739 1,011 2,772 10,267 (3,767) 0 6,500
Forwarding services from third parties (4,014) (1,468) (849) (2,459) (8,790) 3,767 (5,023)
Gross profit 731 271 162 313 1,477 0 0 1,477
Personnel expenses (445) (169) (77) (125) (816) (76) (892)
Other operating expenses (247) (94) (68) (100) (509) 136 (373)
Segment EBITDA 39 8 17 88 152 0 60 212
Depreciation and amortization (17) (5) (4) (6) (32) (6) (38)
Segment operating result (Segment EBIT) 22 3 13 82 120 0 54 174
Financial result
– Finance income 6
– Finance costs (12)
Profit before income tax (EBT) 168
Income tax expenses (41)
Consolidated profit 127
Information about segment assets and liabilities:
2011 (in million CHF)
Europe, Middle
East, Africa,
CIS
North America
Central
and South
America
Asia Pacific
Total operating segment
Non- segment
assets
Non- segment liabilities
Total Group
Segment assets 755 247 209 372 1,583 552 2,135
Segment liabilities 542 170 94 234 1,040 180 1,220
Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within above-mentioned segments:
2011 (in million CHF) Switzerland
Germany
United States of America
Brazil
Republic of
China
Net forwarding revenue 905 1,376 1,445 412 1,182
Segment assets 69 189 195 86 131
The Group does not have sales in excess of 10 % of the total net forwarding revenues to any single external customer.
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2010 (in million CHF)
Europe, Middle
East, Africa,
CIS
North America
Central
and South
America
Asia Pacific
Total operating segment
Elimi- nations
Cor- porate
Total Group
External forwarding services 3,640 1,409 845 1,270 7,164 0 0 7,164
Intra-group forwarding services 1,432 421 147 1,954 3,954 (3,954) 0 0
Net forwarding revenue 5,072 1,830 992 3,224 11,118 (3,954) 0 7,164
Forwarding services from third parties (4,312) (1,564) (836) (2,926) (9,638) 3,954 0 (5,684)
Gross profit 760 266 156 298 1,480 0 0 1,480
Personnel expenses (432) (181) (76) (121) (810) 0 (81) (891)
Other operating expenses (250) (102) (61) (85) (498) 0 99 (399)
Segment EBITDA 78 (17) 19 92 172 0 18 190
Depreciation and amortization (25) (6) (4) (7) (42) 0 (5) (47)
Segment operating result (Segment EBIT) 53 (23) 15 85 130 0 13 143
Fines and related costs (112)
Reorganisation costs (14) (2) (16)
Financial result
– Finance income 6
– Finance costs (15)
Profit before income tax (EBT) 6
Income tax expenses (32)
Consolidated profit (26)
Information about segment assets and liabilities:
2010 (in million CHF)
Europe, Middle
East, Africa,
CIS
North America
Central
and South
America
Asia Pacific
Total operating segment
Non- segment
assets
Non- segment liabilities
Total Group
Segment assets 728 219 168 311 1,426 563 1,989
Segment liabilities 517 144 75 233 969 208 1,177
Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within above-mentioned segments:
2011 (in million CHF) Switzerland
Germany
United States of America
Brazil
Republic of
China
Net forwarding revenue 931 1,425 1,495 358 1,653
Segment assets 70 176 170 58 124
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Information by business
The Group’s business can be divided into three divisions: Air Freight, Ocean Freight and Logistics.
2011 (in million CHF)
Air Freight
Ocean Freight
Logistics
Total Group
Net forwarding revenue 3,281 2,313 906 6,500
Forwarding services from third parties (2,593) (1,874) (556) (5,023)
Gross profit 688 439 350 1,477
2010 (in million CHF)
Air Freight
Ocean Freight
Logistics
Total Group
Net forwarding revenue 3,503 2,771 890 7,164
Forwarding services from third parties (2,836) (2,318) (530) (5,684)
Gross profit 667 453 360 1,480
Personnel expenses
in thousand CHF 2011 2010
Wages and salaries 695,473 694,834
Compulsory social security contributions 84,421 85,304
Contributions to defined contribution plans 49,166 47,649
Expenses related to defined benefit plans (note 7) 987 4,946
Staff training 8,823 7,561
Share-based compensation (note 8)
Equity-settled compensation plan 1,917 2,216
Cash-settled compensation plan 1,019 65
Other personnel-related expenses 50,615 48,362
Total personnel expenses 892,421 890,937
Number of employees 15,051 14,136
thereof in Switzerland 775 749
Post-employment benefit obligations
Panalpina’s objective is to provide attractive post-employment benefits to employees, while at the same time ensuring that the various plans are appropriately financed, while managing any potential impacts on the Group’s long-term financial position. The nature of such plans varies according to legal regulations and fiscal requirements in the countries in which the employees are employed. Other post-employment benefits consist mostly of post-retirement schemes. Post-employment benefit plans are classified for IFRS as “defined contribution plans” if the Group pays fixed contributions in a separate fund or to a third-party financial institution and will have no further legal or constructive obligation to pay further contributions. All other plans are classified as defined benefit plans. The Group’s major defined benefit plans are located in Switzerland, Germany, Japan, Taiwan and France. Plans are usually established as trusts independent of the Group and are funded by payments from the Group and by employees. In some cases, notably for the major defined benefit plans in Germany and Japan, the plans are unfunded and the Group pays pensions to retired employees directly from its own financial resources.
Current and past services as well as expected returns on plan assets and interest costs are charged to the income statement as personnel expenses. Actuarial gains and losses are recorded directly in equity. The recognition of pension assets is limited to the total of the present value of any future refunds from the plans or reduction in future contributions to the plans and any cumulative unrecognized past service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are recorded directly in equity.
Qualified independent actuaries carry out valuations on a regular basis and for major plans annually as at the reporting date. For funded plans, which are usually trusts independent of the Group’s finances, the net asset / liability recognized on the Group’s statement of
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financial position corresponds to the over-/underfunding of the plan, adjusted for unrecognized past service costs. For unfunded plans, where the Group meets the pension obligations directly from its own financial resources, a liability for the defined benefit obligation is recorded in the Group’s statement of financial position. Pension assets and liabilities in different defined benefit plans are not offset.
The amounts recognized in the statement of financial position are determined as follows:
in thousand CHF 2011 2010
Fair value of plan assets 211,525 217,656
Present value of funded obligation (221,002) (210,094)
Surplus (deficit) (9,477) 7,562
Present value of unfunded obligations (37,674) (37,921)
(Net liability) net asset recognized in statement of financial position (47,151) (30,359)
thereof recognized as asset 0 10,312
thereof recognized as liability (47,151) (40,671)
The following amounts relating to defined benefit pension plans were recorded in the income statement:
in thousand CHF 2011 2010
Net pension cost for year ending
Current service cost (13,488) (12,259)
Recognized past service cost 3,448 0
Interest cost (7,232) (8,046)
Expected return on plan assets 10,226 9,842
Employee contribution 4,960 4,369
Settlements 922 950
Curtailments 177 198
Expenses for defined benefit plans (987) (4,946)
The movement in the defined benefit obligation over the year is as follows:
in thousand CHF 2011 2010
Changes in defined benefit obligation (DBO)
DBO at beginning of year (248,015) (232,899)
Current service cost (13,488) (12,259)
Recognized past service cost 3,448 0
Interest cost (7,232) (8,046)
Actuarial (losses) gains recognized in OCI (10,777) (12,297)
Benefits paid 16,196 11,786
Curtailments 177 198
Liabilities extinguished on settlement 29 0
Currency impact 986 5,502
DBO at end of year (258,676) (248,015)
The movement in the fair value of plan assets of the year is as follows:
in thousand CHF 2011 2010
Changes in fair value of plan assets
Fair value at beginning of year 217,656 208,217
Employer contributions 6,167 5,060
Employee contributions 4,960 4,369
Expected return on plan assets 10,226 9,842
Actuarial gains (losses) recognized in OCI (12,520) 950
Benefits paid (14,943) (10,733)
Currency impact (21) (49)
Fair value at end of year of plan assets 211,525 217,656
The fair value of the plan assets includes none of the Group’s shares for either 2011 or 2010.
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An analysis of the amounts recognized in equity is shown in the table below:
in thousand CHF 2011 2010
Analysis of amounts recognized in other comprehensive income
Recognized in other comprehensive income on January 1 104,601 94,005
Actuarial (gains) losses plan assets 12,520 (950)
Actuarial losses (gains) DBO 10,777 12,297
Currency impact (1,163) (751)
Recognized in other comprehensive income on December 31 126,735 104,601
Plan assets are comprised as follows:
in thousand CHF 2011 2010
in CHF in % in CHF in %
Major categories of plan assets
Cash and cash equivalents 3 0.0088 % 1,016 0.47 %
Equity investments 61,021 28.85 % 66,922 30.75 %
Bonds 117,765 55.68 % 115,128 52.89 %
Hedge funds and private equity 6,500 3.07 % 3,130 1.44 %
Real estate funds 22,893 10.82 % 24,042 11.04 %
Others 3,343 1.58 % 7,418 3.41 %
Actuarial assumptionsActuarial assumptions are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing past employment benefits. They are set on an annual basis by local management and actuaries and are subject to approval by corporate man-agement. Actuarial assumptions consist of demographic assumptions on matters such as mortality and employee turnover, and financial assumptions on matters such as salary and benefit level, interest rates and return on investments. The Group operates defined benefit plans in many countries and the actuarial assumptions vary based upon local economic and social conditions.
Demographic assumptionsThe most significant demographic assumptions relate to mortality rates. The Group’s actuaries use mortality tables which take into account historic patterns and expected changes, such as further increases in longevity. The mortality tables used for the major schemes are:
Switzerland: BVG 2010 and adjustment Germany: tables 2005G from Klaus Heubeck France: table INSEE TV / TD 2004 / 2006
Rates of employee turnover, disability and early retirement are based on historical behavior within the Group companies.
Financial assumptionsThese are based on market expectations for the period over which the obligations are to be settled. The assumptions used in the actuarial valuations with stable currencies and interest are shown below:
2011 2010
Discount rate 2.57 % 2.99 %
Expected return on pension plan assets 3.99 % 4.74 %
Future salary increase 1.75 % 2.97 %
Future pension increase 1.25 % 1.24 %
Discount rates, which are used to calculate the discounted present value of the defined benefit obligation, are determined with reference to market yields on high-quality corporate bonds.
Expected returns on plan assets are based on market expectations of expected returns on the assets in funded plans over the duration of the related obligation. This takes into account the split of the plan assets between equities, bonds, properties and other investments. The calculation includes assumptions concerning expected dividend and interest income and realized and unrealized gains on plan assets. Due to the long-term nature of the obligations, the assumptions used for matters such as returns on investments may not necessarily be consistent with recent historical patterns. The expected return on plan assets included in the income statement is calculated by multiplying the expected rate of return by the fair value of plan assets. The difference between the expected return and the actual return in any twelve–month period is an actuarial gain/loss and recorded directly to equity. In 2011, the actual return on plan assets was CHF – 2.3 mil-lion (2010: CHF 10.8 million).
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Expected rates of salary increases, which are used to calculate the defined benefit obligation and the current service cost included in the income statement, are based on the latest expectation and historical behavior within Group entities.
A five-year summary of the Group’s defined benefit plans is shown in the table below:
in thousand CHF 2011 2010 2009 2008 2007
DBO 258,676 248,015 232,899 256,441 268,675
Plan assets (211,525) (217,656) (208,217) (213,520) (255,989)
Deficit (surplus) 47,151 30,359 24,682 42,920 12,686
Experience adjustments arising on:
plan liability 8,974 (2,858) 3,149 (7,692) 9,290
plan asset (12,510) 1,042 20,539 (40,859) (8,668)
Share and option ownership program
The Group operates several share and option ownership programs. The members of the Board of Directors, the members of the Executive Board as well as selected preferential employees had the option of voluntarily participating in the share and option ownership program introduced in 2005 and continued in a modified program in the following years.
Management Incentive Program II (MIP II)
In June 2006, the Group introduced the Management Incentive Program II. Participants in this program had the right to purchase shares with a discount of 25 % based on the share price corresponding to the average closing price of one share at the SIX Swiss Exchange dur-ing the months January to May in the respective year of purchase. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted one option free of charge to the par-ticipant. The options have a contractual term of six years and a vesting period of one to three years. Each option entitles the participant to obtain one share of Panalpina World Transport (Holding) Ltd. at a predetermined strike price which equals the average closing price of one share at the SIX Swiss Exchange during the months January to May in 2006. The share options cannot be settled in cash. In May 2007, the Board of Directors decided to divide the Management Incentive Program II into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” Beneficiaries of the “United States Management Incentive Plan” are selected preferential employ-ees of the subsidiary in the United States of America and members of the Board of Directors with residence in the United States of America. The conditions of this plan do not differ from those of the “International Management Incentive Plan” except for the strike price, which equals the closing price of one share at the SIX Swiss Exchange on the date of disbursement. Under this changed program, beneficiaries of the “United States Management Incentive Plan” holding options to purchase shares of the Group’s capital stock were given the opportu-nity to exchange their existing options for new options to purchase an equal number of shares. 3,550 options with a strike price of CHF 111.30 were tendered pursuant to the “United States Management Incentive Plan.” In May 2007, those options were accepted and cancelled by the Group. The Group undertook to grant new options on a one-for-one basis, in lieu of the tendered options, to the affected employees. The new options, which totaled 5,350, were granted with a strike price of CHF 114.00.
The following table lists the parameters based on which the option valuation of both plans was performed:
in CHF
International Management
Incentive Plan II
United States Management
Incentive Plan II
Market price of share 114.00 114.00
Exercise price of option 111.30 114.00
Expected volatility (in %) 30.00 30.00
Option life (in years) 5 5
Dividend yield (in %) 1.78 1.78
Risk-free interest rate based on Swiss government bonds (in %) 2.670 2.670
Management Incentive Program III (MIP III)
The third share and option program was introduced in June 2007, which conceptually completely mirrors the modified program of 2006. Par-ticipants of the “International Management Incentive Plan III” subscribed for 38,921 options with a strike price of CHF 201.10. Participants in the “United States Management Incentive Plan III” subscribed for 4,096 options with a strike price of CHF 251.00. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares.
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The following table lists the parameters based on which the option valuation of both plans was performed:
in CHF
International Management
Incentive Plan III
United States Management
Incentive Plan III
Market price of share 251.00 251.00
Exercise price of option 201.10 251.00
Expected volatility (in %) 22.74 22.74
Option life (in years) 5 5
Dividend yield (in %) 1.20 1.20
Risk-free interest rate based on Swiss government bonds (in %) 4.250 4.250
Management Incentive Program IV (MIP IV)
A fourth share and option program was introduced in June 2008. The conditions of this share and option program are identical to the Man-agement Incentive Program II of the Group except for the purchase price of the shares, which equals 75 % of the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The plan is also divided into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” The exercise price of options of the “Interna-tional Management Incentive Plan” is equal to the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The exercise price of options of the “United States Management Incentive Plan” is equal to the share price at the SIX Swiss Exchange on the grant date. Participants in the “International Management Incentive Plan IV” subscribed for 32,436 options with a strike price of CHF 132.00. Partici - pants in the “United States Management Incentive Plan IV” subscribed for 4,689 options with a strike price of CHF 122.40.
The following table lists the parameters based on which the option valuation of both plans was performed:
in CHF
International Management
Incentive Plan IV
United States Management
Incentive Plan IV
Market price of share 122.40 122.40
Exercise price of option 132.00 122.40
Expected volatility (in %) 50.28 50.28
Option life (in years) 5 5
Dividend yield (in %) 2.39 2.39
Risk-free interest rate based on Swiss government bonds (in %) 3.408 3.408
Management Incentive Plan 08 / 09 (MIP 08 / 09)
In 2009, the management introduced a new plan. The terms of this share and option program are identical to the Management Incentive Program IV as described above apart from the strike price of the “International Management Incentive Plan,” which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange. Under this program participants of the “International Management Incen-tive Plan” received 65,921 options with a strike price of CHF 62.50 and participants of the “United States Management Incentive Plan” received 5,132 options with a strike price of CHF 83.05.
The following table lists the parameters based on which the option valuation of both plans was performed:
in CHF
International Management
Incentive Plan 08/09
United States Management
Incentive Plan 08/09
Market price of share 83.05 83.05
Exercise price of option 62.50 83.05
Expected volatility (in %) 56.91 56.91
Option life (in years) 5 5
Dividend yield (in %) 2.84 2.84
Risk-free interest rate based on Swiss government bonds (in %) 2.360 2.360
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Management Incentive Plan 09 / 10 (MIP 09 / 10)
In 2010 an additional management incentive plan was set up. Apart from the strike price of the “International Management Incentive Plan”, which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange, the terms of this share and option program are identical to the Management Incentive Program 08/09. Under this program participants of the “International Manage-ment Incentive Plan” received 12,099 options with a strike price of CHF 97.60 and participants of the “United States Management Plan” received 1,354 options with a strike price of CHF 89.55.
The weighted average fair value of the share options granted during the reporting period is determined using the binominal valuation model, applying the following significant inputs into the model:
in CHF
International Management
Incentive Plan 09/10
United States Management
Incentive Plan 09/10
Market price of share 89.55 89.55
Exercise price of option 97.60 89.55
Expected volatility (in %) 45.32 45.32
Option life (in years) 5 5
Dividend yield (in %) 1.63 1.63
Risk-free interest rate based on Swiss government bonds (in %) 1.552 1.552
The following table summarizes the movements in the number of share options outstanding and their related average exercise prices:
2011 2010
Average ex-ercise price
per share (in CHF)
Options
(number)
Average ex-ercise price
per share (in CHF)
Options
(number)
Options outstanding on January 1 115.72 173,692 114.79 179,369
Granted 0.00 0 96.79 13,453
Exercised 74.52 (16,065) 72.09 (11,196)
Forfeited 71.62 (3,367) 92.70 (3,993)
Expired 150.92 (5,808) 155.97 (3,941)
Options outstanding on December 31 119.80 148,452 115.72 173,692
Options exercisable on December 31 132.57 115,799 140.20 99,454
During the reporting year the following numbers of options were exercised with the respective exercise prices:
2011 2010
Exercise price
of option (in CHF)
Number of exercised
options
Exercise price
of option (in CHF)
Number of exercised
options
International Management Incentive Plan II 111.30 3,435 111.30 2,152
International Management Incentive Plan 08 / 09 62.50 11,781 62.50 8,930
United States Management Incentive Plan 08 / 09 83.05 226 83.05 114
International Management Incentive Plan 09 /10 97.60 501 0.00 0
United States Management Incentive Plan 09 /10 89.55 122 0.00 0
Weighted average exercise price of options exercised
during the year 74.52 72.09
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The average exercise prices and the expiry date of the outstanding options at period-end are as follows:
2011
Average exercise price
per share (in CHF)
Number of options
expiring at year-end
2012 111.68 29,635
2013 206.45 30,061
2014 130.70 32,439
2015 64.55 44,095
2016 96.79 12,222
Total 119.80 148,452
Management Incentive Plan 10 / 11 (MIP 10 / 11)
In 2011 a new management incentive plan was set up. Participants in this program had the right to purchase shares with a discount of 10 % based on the share price equal to the closing price on the SIX Swiss Stock Exchange at the cut-off day. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted a number of free shares according to a “Free Share Ratio” which is annually set by the Compensation and Nomination Committee. For the current year the ratio was set to 1:4 (one free share per four shares bought). The free shares have a vesting period of one to three years. On non-vested free shares, no dividends are paid and there is no entitlement for dividends. The shares cannot be settled in cash. The fair value of the free shares corresponds to the market price of the shares at the grant date.
2011 Management
Incentive Plan 10/11
Fair value of free share (in CHF) 119.30
Granted free shares 7,124
Vested free shares (138)
Forfeited free shares (25)
Free shares outstanding on December 31 6,961
The Group holds its own shares in order to meet its obligations under the Management Incentive Programs. These own shares are deducted from equity (note 23).
The members of the Executive Board and the Boards of Directors did not participate in the above-mentioned incentive plans.
Executive Board Mid-Term Incentive Plan
The Mid-Term Incentive Plan has been set up such that only 60 % of the bonuses, which continue to be set by the achievement of annually reviewed Group key performance indicators (KPIs) and individual performance targets, are paid out in cash, whereas the remainder is paid out in shares with a restriction period of one year. This number of shares will be matched by the Company after this restriction period. In addition, the members of the Executive Board will receive the corresponding number of shares, based on the share’s closing price on April 30, 2009 of CHF 62.50. These shares will thereafter be subject to a further one-year restriction period. In the reporting period under review Executive Board members received 40 % of the bonus in company shares totaling 13,528 shares (previous year: 4,155 shares) with a restriction period of one year. This number of shares will, additionally, be matched by the company after this restriction period. These additional shares are also subject to a further one-year restriction period.
During the period under review the management received matched shares totaling 4,155 shares reflecting the 40 % bonus paid in the previous year.
Executive Board Long-Term Incentive Plan
The Long-Term Incentive Plan rewards long-term value creation measured by economic profit. Under this plan, which has a five-year cycle, the individual Executive Board member is entitled to an equal share of the respective pool after the expiry of the five-year plan period. This plan can be cash-settled. The carrying amount of the liability at December 31, 2011 amounts to CHF 2,527 thousand, which is also the intrinsic value.
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Consolidated Financial Statements 2011
Board of Directors Restricted Stock Award Plan
The Restricted Stock Award Plan for the Board of Directors was introduced in 2009. Part of the remuneration of each Board member is settled in free shares of the company. The corresponding number of shares per member will be based on the share’s closing price at the assignment date. The shares have a one-year restriction period. During the period under review the board of directors received 2,562 shares (2010: 0 shares)
Costs of share-based compensation
Recognized costs of share-based compensation were as follows:
in CHF 2011 2010
Employee share plan 2,273,801 740,818
Option plan 662,587 1,540,175
Total cost of share-based payments 2,936,388 2,280,993
Share-based compensation costs are not reported in operating segments. They are reported under Corporate.
Other operating expenses
in thousand CHF 2011 2010
Administrative expenses 37,905 61,786
Communications expenses 64,949 65,346
Rent and utilities expenses 183,294 185,815
Travel and promotion expenses 42,717 38,222
Insurance expenses and claims 6,352 131,632
Bad debt and collection expenses 6,558 10,353
Other 30,663 33,897
Total other operating expenses 372,438 527,051
Rent and utilities expenses include rentals amounting to CHF 103.6 million (2010: CHF 100.0 million) and lease of machinery, equipment and vehicles of CHF 20.2 million (2010: CHF 23.9 million). Bad debt and collection expenses include CHF 1.4 million (2010: CHF 2.2 million) of credit insurance premiums. In last year’s period, the Group recognized fines amounting to CHF 104.0 million as claim expenses (2011: none).
Gains and losses on sales of non-current assets
in thousand CHF 2011 2010
Gains on sales of property, plant and equipment 618 1,103
Losses on sales of property, plant and equipment (724) (826)
Total net (losses)/gains on sales of non-current assets (106) 277
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Finance income and costs
in thousand CHF 2011 2010
Interest income
Interest income on current bank accounts 3,986 3,795
Interest income on financial assets at fair value through profit or loss 11 13
Interest differential on forwards and swaps 1,741 1,750
Interest income on loans 7 5
Cash discount income 351 416
Subtotal interest income 6,096 5,979
Guarantee fees income 0 16
Dividend on available-for-sale financial assets 172 99
Fair value adjustments on financial assets 0 154
Total finance income 6,268 6,248
Interest expenses
Interest expenses on loans (242) (642)
Interest expenses on current bank accounts (760) (1,041)
Interest differential on forwards and swaps (4,345) (3,493)
Interest expenses on financial leasing (71) (86)
Cash discount expenses (514) (254)
Subtotal interest expenses (5,932) (5,516)
Bank charges (2,277) (2,958)
Exchange differences (2,840) (609)
Guarantee fees expenses (529) (760)
Other financial expenses (303) (886)
Impairment on financial assets 0 (4,759)
Fair value adjustments on financial assets (22) 0
Total finance costs (11,903) (15,488)
Net finance costs (5,635) (9,240)
Income tax expenses
in thousand CHF 2011 2010
Current income taxes
Current period 37,064 43,457
Adjustments for prior periods 1,566 883
Total income taxes 38,630 44,340
Deferred income taxes (note 27)
Origination and reversal of taxes on temporary differences and on tax loss carry forwards 1,931 (12,384)
Effect of changes in the tax rate on temporary differences 980 305
Utilization of non-recognized tax loss carry-forwards (372) (142)
Total deferred income taxes 2,539 (12,221)
Total income tax expenses 41,169 32,119
Management decided to calculate the applicable standard tax rate as in the previous year based on the standard tax rate in its Basel headquarters domicile.
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The Group’s effective tax rate can be reconciled to the Group’s average expected tax rate as follows:
in thousand CHF 2011 2010
Profit before income tax 168,582 6,122
Tax at the applicable tax rate of 23.37 % (2010: 23.37 %) 39,398 1,431
Effect of differing national tax rates (17,375) (6,479)
Utilization of not yet recognized tax loss carry-forwards (372) (142)
Recognition of deferred tax assets from previous periods (2,835) (259)
Not yet recognized tax loss carry-forwards 13,510 13,434
Adjustment of previous year tax provision 1,566 883
Effect of changes in the tax rate on temporary differences 980 305
Withholding tax on dividends received 3,339 4,907
Expenses not deductible for tax purposes and non-taxable income 1,840 17,298
Miscellaneous 1,118 741
Actual tax charge 41,169 32,119
The following table shows the reconciliation for 2011 in percent:
2011
Tax at the applicable tax rate of 23.37 % 23.37 %
Effect of differing national tax rates (10.31 %)
Utilization of not yet recognized tax loss carry-forwards (0.22 %)
Recognition of deferred tax assets from previous periods (1.68 %)
Not yet recognized tax loss carry-forwards 8.01 %
Adjustment of previous year tax provision 0.93 %
Effect of changes in the tax rate on temporary differences 0.58 %
Withholding tax on dividends received 1.98 %
Expenses not deductible for tax purposes and non-taxable income 1.09 %
Miscellaneous 0.66 %
Actual tax charge 24.42 %
Income tax recognized in the consolidated statement of comprehensive income:
2011 2010
in thousand CHF
Before tax
Tax benefit (expense)
Net of tax
Before tax
Tax benefit (expense)
Net of tax
Translation and exchange differences (11,238) 0 (11,238) (15,027) 0 (15,027)
Available-for-sale financial assets 3,994 0 3,994 (1,828) 0 (1,828)
Other taxes directly recognized in equity 0 (123) (123) 0 (123) (123)
Actuarial gains (losses) on defined benefit plans (22,134) 5,419 (16,715) (10,596) 5,412 (5,184)
Total (29,378) 5,296 (24,082) (27,451) 5,289 (22,162)
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Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding (total shares less treasury shares) during the period.
in thousand CHF 2011 2010
Consolidated profit attributable to owners of the parent 126,294 (27,350)
Weighted average number of ordinary shares outstanding 23,639 23,668
Basic earnings per share (in CHF) 5.34 (1.16)
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group only has share options outstanding that can be categorized as dilutive potential ordinary shares. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is com-pared with the number of shares that would have been issued assuming the exercise of the share options.
in thousand CHF 2011 2010
Consolidated profit attributable to owners of the parent 126,294 (27,350)
Weighted average number of ordinary shares outstanding 23,639 23,668
Adjustments for share options 17 7
Adjustments for share ownership program 20 4
Weighted average number of ordinary shares for diluted earnings per share 23,676 23,679
Diluted earnings per share (in CHF) 5.33 (1.16)
At December 31, 2011, 103,125 options (2010: 66,946 options) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.
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Property, plant and equipment
During the period under review, the Group acquired mainly machinery and equipment. The reclassification of CHF 14.3 million in 2010 from construction in progress mainly to buildings refers to the commissioning of a new warehouse in Dubai. In 2010, the net assets of two barges were revalued. As the recoverable amount of these assets did not exceed the carrying amount, an impairment of CHF 4.7 million was recognized in 2010 (2011: CHF 0.0).
2011 (in thousand CHF)
Land and buildings
Machinery and
equipment
Vehicles
Construc- tion in
progress
Total
Acquisition costs
Balance on January 1 130,222 215,619 39,669 5 385,515
Translation differences (1,962) (4,008) (326) 0 (6,296)
Acquisition of subsidiaries, net of cash acquired 39 258 147 0 444
Additions 8,874 20,902 1,512 37 31,325
Disposals (2,518) (2,485) (4,693) 0 (9,696)
Reclassifications 5 0 0 (5) 0
Balance on December 31 134,660 230,286 36,309 37 401,292
Accumulated depreciation
Balance on January 1 70,694 170,418 30,570 0 271,682
Translation differences (894) (2,926) (277) 0 (4,097)
Additions 6,344 19,280 2,860 0 28,484
Disposals (1,552) (1,805) (4,600) 0 (7,957)
Balance on December 31 74,592 184,967 28,553 0 288,112
Net book value on January 1 59,528 45,201 9,099 5 113,833
Net book value on December 31 60,068 45,319 7,756 37 113,180
Of which net book value of assets acquired under finance leases 245 51 1,138 0 1,434
2010 (in thousand CHF)
Land and buildings
Machinery and
equipment
Vehicles
Construc- tion in
progress
Total
Acquisition costs
Balance on January 1 133,833 239,225 41,401 15,749 430,208
Translation differences (16,261) (20,515) (3,740) (1,418) (41,934)
Acquisition of subsidiaries, net of cash acquired 1 68 65 0 134
Additions 5,169 18,062 3,109 2 26,342
Disposals (4,310) (23,068) (1,857) 0 (29,235)
Reclassifications 11,790 1,847 691 (14,328) 0
Balance on December 31 130,222 215,619 39,669 5 385,515
Accumulated depreciation
Balance on January 1 76,401 189,162 23,372 0 288,935
Translation differences (9,248) (17,260) (3,133) 0 (29,641)
Additions 6,756 20,757 11,378 0 38,891
Disposals (3,215) (22,240) (1,048) 0 (26,503)
Reclassifications 0 (1) 1 0 0
Balance on December 31 70,694 170,418 30,570 0 271,682
Net book value on January 1 57,432 50,063 18,029 15,749 141,273
Net book value on December 31 59,528 45,201 9,099 5 113,833
Of which net book value of assets acquired under finance leases 304 44 1,236 0 1,584
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Intangible assets
2011 (in thousand CHF)
Goodwill
Software
Brands/ Customer
lists
Other intangible
assets
Total
Acquisition costs
Balance on January 1 44,549 72,724 22,763 656 140,692
Translation differences (2,701) (901) (1,172) (54) (4,828)
Acquisition of subsidiaries, net of cash acquired 40,869 0 15,927 0 56,796
Additions 0 19,731 0 106 19,837
Disposals 0 (2,635) 0 0 (2,635)
Balance on December 31 82,717 88,919 37,518 708 209,862
Accumulated depreciation or impairment losses
Balance on January 1 1,598 41,499 18,891 613 62,601
Translation differences (260) (670) (250) (50) (1,230)
Additions 0 6,684 2,649 50 9,383
Disposals 0 (2,635) 0 0 (2,635)
Balance on December 31 1,338 44,878 21,290 613 68,119
Net book value on January 1 42,951 31,225 3,872 43 78,091
Net book value on December 31 81,379 44,041 16,228 95 141,743
2010 (in thousand CHF)
Goodwill
Software
Brands/ Customer
lists
Other intangible
assets
Total
Acquisition costs
Balance on January 1 44,315 63,879 23,651 688 132,533
Translation differences (1,170) (3,831) (1,732) (44) (6,777)
Acquisition of subsidiaries, net of cash acquired 1,404 2 844 0 2,250
Additions 0 13,677 0 21 13,698
Disposals 0 (1,003) 0 (9) (1,012)
Balance on December 31 44,549 72,724 22,763 656 140,692
Accumulated depreciation or impairment losses
Balance on January 1 1,823 39,570 18,755 508 60,656
Translation differences (225) (3,453) (1,433) (45) (5,156)
Additions 0 6,385 1,569 159 8,113
Disposals 0 (1,003) 0 (9) (1,012)
Balance on December 31 1,598 41,499 18,891 613 62,601
Net book value on January 1 42,492 24,309 4,896 180 71,877
Net book value on December 31 42,951 31,225 3,872 43 78,091
The net book value of software is comprised of accumulated, internally generated, capitalized software development costs of CHF 33.4 mil-lion (2010: CHF 22.6 million). All intangible assets with estimable useful lives are amortized over the period of their respective estimated useful lives to their estimated residual values, and reviewed for impairment. Neither in 2011 nor 2010 there were any impairment charges on these intangible assets.
Impairment test for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets ap proved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
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A summary of the goodwill allocation per CGU is presented below:
in thousand CHF 2011 2010
Air freight division (CGU Airfreight) 31,151 31,151
Grampian International Freight Aberdeen & Beverwijk (CGU Grampian) 6,393 6,388
Panalpina World Transport (Singapore) Pte. Ltd. (CGU Janco) 3,981 4,008
Panalpina World Transport (Pty) Ltd. (CGU Australia) 3,606 1,404
Grieg Logistics AS (CGU Norway) 36,248 0
Total goodwill 81,379 42,951
The following key assumptions have been used for the value-in-use calculations of each CGU:
2011
CGU Norway
CGU Australia
CGU Airfreight
CGU Grampian
CGU Janco
Growth rate1 9.25 % 6.75 % 3.50 % 7.25 % 4.50 %
Operating expenses in % of forwarding revenues2 97.62 % 98.73 % 98.19 % 99.83 % 98.73 %
WACC3 7.57 % 11.18 % 6.65 % 8.08 % 6.85 %
2010
CGU Australia
CGU Airfreight
CGU Grampian
CGU Janco
Growth rate1 4.50 % 2.25 % 4.63 % 3.13 %
Operating expenses in % of forwarding revenues2 96.87 % 98.37 % 98.62 % 97.74 %
WACC3 15.53 % 10.44 % 12.60 % 10.51 %
1 Weighted average growth rate used to extrapolate cash flows beyond the budget period2 Budgeted operating expenses in % of forwarding revenues3 Pre-tax discount rate applied to the cash flow projections
The management determined budgeted growth rates based on past performance and its expectations of market development. The oper-ating expenses, as a percentage of forwarding revenues, are consistent with the forecasts and past experience. The weighted average cost of capital (WACC) used are pre-tax and reflect specific risks relating to the relevant CGUs. For the impairment testing procedure the planning assumptions of prior years were critically reviewed. The impairment testing procedure assumes that the CGU would achieve sales growth at market growth for the planning period. It was also assumed that the percentage of operating expenses as a percentage of forwarding revenue, will remain stable.
For CGU Grampian a change in the assumptions of the growth rate of the gross profit (2.6 percentage points) or the WACC (1.8 percent-age points) would cause the carrying value of goodwill to exceed the recoverable amount. The same applies for CGU Norway for which a change in the assumptions of the growth rate of the gross profit (2.9 percentage points) or the WACC (2.7 percentage points) would also cause the carrying value of goodwill to exceed the recoverable amount.
For other CGUs the carrying value of goodwill would only exceed the recoverable amount if following changes in the key assumptions gross profit growth or WACC would occur:
CGU Airfreight Gross profit growth rate – 54.5 percentage points WACC + 34.6 percentage pointsCGU Janco Gross profit growth rate – 30.3 percentage points WACC + 8.6 percentage pointsCGU Grampian Gross profit growth rate – 2.6 percentage points WACC + 1.8 percentage pointsCGU Australia Gross profit growth rate – 58.5 percentage points WACC + 34.6 percentage pointsCGU Norway Gross profit growth rate – 2.9 percentage points WACC + 2.7 percentage points
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Investments
in thousand CHF 2011 2010
Available-for-sale investments 19,670 15,625
Fair value through profit or loss investments 775 816
Loans receivable 311 208
Long-term receivables 47,975 14,061
Other 3,525 4,133
Total investments 72,256 34,843
Long-term receivables primarily include rental and guarantee deposits of CHF 13.7 million (2010: CHF 12.8 million) and investments in money market and time deposits with a maturity longer than 360 days of CHF 34.3 million (2010: CHF 0.0 million).
Available-for-sale investments – unquoted equity shares
in thousand CHF 2011 2010
Balance on January 1 15,625 17,794
Translation differences (13) (78)
Additions 69 5
Disposals (5) (142)
Fair value adjustments recognized in statement of comprehensive income 3,994 (1,702)
Reclassifications 0 (252)
Balance on December 31 19,670 15,625
Less: non-current portion 19,670 15,625
Current portion 0 0
In 2011, no shares (2010: shares of CHF 252 thousand) were transferred from available-for-sale investments to fair value through profit or loss. Fair value adjustments amounting to CHF 126 thousand previously recorded in comprehensive income are recognized in the income statement (2011: CHF 0).
Fair value through profit or loss investments
in thousand CHF 2011 2010
Balance on January 1 816 618
Translation differences (12) (85)
Disposals (7) (8)
Fair value adjustments recognized in profit or loss (22) 39
Reclassifications 0 252
Balance on December 31 775 816
Less: non-current portion 775 816
Current portion 0 0
Group risk management
In the field of risk management, the Audit Committee approves the detailed and weighted risk map of the Executive Board. It adopts the necessary measures for risk control and risk mitigation and reports the respective outcome to the Board of Directors on an annual basis. The risk map itself covers any strategic, financial, operational, legal and compliance risks that could significantly impact the Company’s ability to achieve its business goals and financial targets. Identified risks are weighted and prioritized by the Executive Board according to their significance and likelihood of occurrence. For each risk, specific risk-mitigation measures – including their current status – are defined and responsibilities are allocated. The risk map, which is compiled by the Risk Review Committee, chaired by the Corporate Secretary, for
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review by the Executive Board and the Audit Committee and subsequently approved by the Audit Committee, contains risks iden tified and assessed by the respective corporate functions, selected country management, Corporate Audit and the Group auditors. The annual risk map also features risks which have increased or decreased in the course of the reporting year. Financial risk management specifically is described in further detail below.
Financial risk management
The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main pur-pose of these financial liabilities is to raise funds for Group operations. The Group has trade and other receivables, loans, cash, short and long-term deposits that arise directly from its operations. The Group also holds available-for-sale investments and enters into deriva-tive transactions.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. It is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial risk committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accor dance with Group policies and Group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.
The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.
Financial risk factors
Carrying amount and fair value of financial assets by asset classes
2011 (in thousand CHF)
Cash
Available- for-sale
Fair value through profit or
loss held for trading
Loans and receivables
Carrying amount
Total (fair value)
Trade receivables and other receivables 1,002,163 1,002,163 1,002,163
Unbilled forwarding services 77,346 77,346 77,346
Accrued interest income 757 757 757
Cash and cash equivalents 1,693 571,886 573,579 573,579
Other current financial assets 20,000 20,000 20,000
Derivative financial instruments 5,504 5,504 5,504
Investments:
Bonds and debentures 171 171 171
Shares 19,670 379 20,049 20,049
Other investments 225 225 225
Third-party loans 373 373 373
Rental and guarantee deposits 47,975 47,975 47,975
Other 3,525 3,525 3,525
Total on December 31, 2011 1,693 19,670 6,279 1,724,025 1,751,667 1,751,667
2011 (in thousand CHF)
Financial liabilities at
fair value through
profit or loss
Financial liabilities
measured at amortized
cost
Carrying amount
Total (fair value)
Payables and accruals 915,529 915,529 915,529
Borrowings 6,921 6,921 6,921
Finance lease liabilities 606 606 606
Derivative financial instruments 4,648 4,648 4,648
Provisions and other liabilities 50,852 50,852 50,852
Total on December 31, 2011 4,648 973,908 978,556 978,556
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2010 (in thousand CHF)
Cash
Available- for-sale
Fair value through profit or
loss held for trading
Loans and receivables
Carrying amount
Total (fair value)
Trade receivables and other receivables 1,055,438 1,055,438 1,055,438
Unbilled forwarding services 74,742 74,742 74,742
Accrued interest income 340 340 340
Cash and cash equivalents 1,423 527,513 528,936 528,936
Other current financial assets 6,089 6,089 6,089
Derivative financial instruments 20,454 20,454 20,454
Investments:
Bonds and debentures 181 181 181
Shares 15,625 394 16,019 16,019
Other investments 241 241 241
Third-party loans 354 354 354
Rental and guarantee deposits 12,849 12,849 12,849
Total on December 31, 2010 1,423 15,625 21,270 1,677,325 1,715,643 1,715,643
2010 (in thousand CHF)
Financial liabilities at
fair value through
profit or loss
Financial liabilities
measured at amortized
cost
Carrying amount
Total (fair value)
Payables and accruals 830,310 830,310 830,310
Borrowings 8,858 8,858 8,858
Finance lease liabilities 879 879 992
Derivative financial instruments 5,532 5,532 5,532
Provisions and other liabilities 120,451 120,451 120,451
Total on December 31, 2010 5,532 960,498 966,030 966,143
Fair value hierarchy The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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2011 (in thousand CHF) Level 1 Level 2 Level 3 Total
Available-for-sale financial assets 0 1,715 17,640 19,355
Financial assets at fair value through profit or loss held for trading 663 112 0 775
Derivative financial assets 0 5,504 0 5,504
Available-for-sale financial assets at cost 315
Total 25,949
Derivative financial liabilities 0 4,648 0 4,648
Total 4,648
2010 (in thousand CHF) Level 1 Level 2 Level 3 Total
Available-for-sale financial assets 0 1,074 14,228 15,302
Financial assets at fair value through profit or loss held for trading 691 125 0 816
Derivative financial assets 0 20,454 0 20,454
Available-for-sale financial assets at cost 323
Total 36,895
Derivative financial liabilities 0 5,532 0 5,532
Total 5,532
The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely, as little as possible, on entity-specific estimates. If all significant inputs required to fair-value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Neither in 2010 nor in 2011 investments have been sold.
The Group used the discounted cash flow method to determine the fair value of level 3 financial instruments.
The following table presents the changes in level 3 instruments for the year ended December 31, 2011:
in thousand CHF
Available-for-sale financial assets
Total
Balance on January 1 14,228 14,228
Fair-value adjustments in statement of comprehensive income 3,412 3,412
Balance on December 31 17,640 17,640
Total gains or losses for the period included in the statement of comprehensive income for assets held at the end of the reporting period 3,412 3,412
Neither in 2011 nor in 2010 did the Group transfer financial instruments into another level.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market price. Market prices entail three types of risk: foreign currency risk, interest rate risk and other price risk such as equity risk.
The Group’s activities expose it primarily to financial risk due to changes in foreign currency exchange rates.
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Foreign currency riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as net investments in foreign operations.
Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative contracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External foreign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a gross basis.
At December 31, 2011, the Group’s net foreign currency risk exposure amounted to CHF 9.4 million (2010: CHF 31.6 million). The following table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities).
Profit before income tax
Effect in thousand CHF 2011 2010
Euro (1,648) 371
US dollar (105) (2,286)
Hong Kong dollar (947) (896)
Total effect (2,700) (2,811)
The movement in the pre-tax effect results from the change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in USD, EUR and HKD, in which the functional currency of the entity is a cur-rency other than USD, EUR or HKD. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions should they occur. If the exchange rates of all currencies changed by 10 %, the total maximum net effect would amount to CHF 0.9 million (2010: CHF 3.2 million).
Interest rate riskThe Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products. Derivative instruments are used to manage the duration of financial instruments in a prudent manner.
As the Group generally has no significant interest-bearing liabilities, and given their short-term nature, the Group has a limited exposure to inter-est rate risk. Consequently the Group’s expense and operating cash flows are substantially independent of changes in market interest rates.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a finan cial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activi-ties, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments.
Credit risk related to trade receivablesCustomer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to cus-tomer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according to internal rating criteria. The customer’s credit quality is assessed based on an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty credit risk due to the Group’s large number of customers and their wide geographical spread. Risk limits and exposures are continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables.
Credit risk related to financial instruments and cash deposit Credit risk from balances with banks and financial institutions is managed by the Group Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a mini-mum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentra tion of risks and therefore mitigate financial loss through potential counterparty failure.
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Consolidated Financial Statements 2011
The table below shows the Group’s maximum exposure to credit risk:
in thousand CHF 2011 2010
Cash and cash equivalents (without cash in hand) 571,886 527,513
Derivative financial instruments 5,504 20,454
Trade receivables and other receivables 1,106,317 1,057,090
Loans and other financial assets 49,123 18,547
Total financial assets shown in statement of financial position subject to credit risk 1,732,830 1,623,604
Guarantees 242,045 134,169
Total credit risk 1,974,875 1,757,773
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, de bentures, finance leases and hire purchase contracts. The Group’s liquidity is reported to the Management on a monthly basis.
To secure liquidity, the Group holds a net cash position of CHF 586.1 million (2010: CHF 525.3 million) and credit lines with various finan cial institutions totaling CHF 515.9 million (2010: CHF 520.9 million). Of this total, CHF 179.8 million (2010: CHF 190.9 million) is allocated to bank guarantees and foreign exchange lines.
The table below summarizes the maturity profile of the Group’s financial liabilities on December 31, 2011/2010 based on contractual un discounted payments.
2011 (in thousand CHF)
between
1 and 3 months
between 3 months and
1 year
between
1 and 5 years
Total remaining contractual
payments
Borrowings (note 25) 2,838 4,457 232 7,527
Trade and other payables 633,436 29,545 0 662,981
Accruals 223,462 29,086 0 252,548
Other liabilities 21,193 8,051 0 29,244
Foreign exchange contracts
Cash inflow (800,997) (15,204) (6,115) (822,316)
Cash outflow 765,705 15,558 5,723 786,986
Total 845,637 71,493 (160) 916,970
2010 (in thousand CHF)
between
1 and 3 months
between 3 months and
1 year
between
1 and 5 years
Total remaining contractual
payments
Borrowings (note 25) 2,884 6,451 403 9,738
Trade and other payables 557,671 24,372 9,971 592,014
Accruals 217,396 14,821 6,080 238,297
Provisions and other liabilities 80,311 40,142 0 120,453
Foreign exchange contracts
Cash inflow (750,894) (65,039) (7,025) (822,958)
Cash outflow 737,807 63,495 7,541 808,843
Total 845,175 84,242 16,970 946,387
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Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as an ongoing concern so as to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.
Capital is monitored on the basis of the equity ratio, which is calculated as equity (including non-controlling interests) as a percentage of total assets. This is reported to the management as part of the Group’s regular internal management reporting.
The Group’s capital and equity ratio is shown in the table below:
in thousand CHF 2011 2010
Capital and reserves attributable to Panalpina shareholders 905,808 804,279
Equity attributable to non-controlling interests 9,082 7,890
Total equity 914,890 812,169
Total assets 2,135,322 1,989,242
Equity ratio 42.8% 40.8%
The Group is not subject to regulatory capital adequacy requirements.
Other receivables and other current assets
in thousand CHF 2011 2010
Office supplies 0 1,721
Taxes (VAT, withholding tax) 41,949 42,660
Accrued income 6,092 1,391
Accrued interest income 757 340
Personnel advances 1,405 2,559
Prepaid rent expenses 5,371 6,829
Prepaid communication and IT expenses 3,325 3,039
Supplier rebates 16,912 21,535
Short-term loans 847 146
Others 8,339 17,737
Total other receivables and other current assets 84,997 97,957
19
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Trade receivables
in thousand CHF 2011 2010
Commercial clients 990,839 962,919
Agents 17,684 22,508
Total trade receivables (gross values) 1,008,523 985,427
Individual allowance (282) (1,864)
Overall allowance (23,837) (25,449)
Total trade receivables (net) 984,404 958,114
Europe, Middle East , Africa, CIS 479,358 518,859
thereof European Union 380,646 419,529
thereof Switzerland 42,185 38,370
North America 201,398 179,090
Central and South America 133,770 102,248
Asia Pacific 169,878 157,917
Total trade receivables (net) 984,404 958,114
There is no concentration of credit risk with regard to trade receivables as the Group has a large number of customers that are dispersed internationally.
Provisions for impaired trade receivables are collectively assessed and represent the impairment that has been incurred but not indentified. Panalpina establishes its provisions for doubtful trade receivables based on its historical loss experiences. Significant financial difficulties of the debtor are individually impaired. The maximum exposure to credit risk on the reporting date is the carrying amount of net trade receiv-ables mentioned above. Based on past experience, the Group does not anticipate writing off not-past-due nor unprovided trade receiv-ables. The creation and usage of provisions for impaired trade receivables have been included in other operating expenses in the income statement.
The following table summarizes the movement in the provision for impairment of trade receivables:
in thousand CHF 2011 2010
Balance as of January 1 27,313 34,848
Receivables written off during the year as uncollectible (7,470) (9,684)
Changes in provision for doubtful accounts 4,276 2,149
Balance as of December 31 24,119 27,313
20
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
The following table provides details about the age of trade receivables that are not overdue as the payment terms specified in the terms and conditions established with Panalpina customers have not been exceeded, as well as an analysis of overdue amounts and related provi-sions for doubtful trade receivables:
in thousand CHF 2011 2010
Commercial clients 990,839 962,919
Agents 17,684 22,508
Total trade receivables (gross values) 1,008,523 985,427
Allowance for bad debt (24,119) (27,313)
Total trade receivables (net) 984,404 958,114
of which:
Not overdue 734,894 708,293
Past due not more than 30 days 182,956 189,671
Past due more than 30 days up to 180 days 83,667 82,139
Past due more than 180 days up to 360 days 12,932 8,052
Past due more than 360 days 10,137 10,153
Prepayment (16,063) (12,881)
Total trade receivables (gross) 1,008,523 985,427
Allowance for bad debt (24,119) (27,313)
Total trade receivables (net) 984,404 958,114
Derivative financial instruments
Contract value
Positive replacement value
Negative replacement value
in thousand CHF 2011 2010 2011 2010 2011 2010
Forward foreign exchange contracts 728,316 805,302 5,504 20,454 (4,648) (5,532)
Forward trading hedges 728,316 805,302 5,504 20,454 (4,648) (5,532)
Contract value
Positive replacement value
Negative replacement value
in thousand CHF 2011 2010 2011 2010 2011 2010
Terms of the forward foreign exchange contracts 728,316 805,302 5,504 20,454 (4,648) (5,532)
0 – 3 months 675,587 734,333 4,540 18,579 (3,945) (4,890)
4 – 12 months 46,614 63,428 505 1,875 (703) (103)
13 – 18 months 6,115 7,541 459 0 0 (539)
21
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Derivative financial instruments are spread over the following currencies:
Forward foreign exchange contracts
in thousand CHF 2011 2010
USD 443,673 399,245
EUR 214,650 278,063
SGD 24,222 2,001
GBP 10,618 11,178
HKD 7,511 17,074
CZK 6,456 998
CAD 6,452 25,097
NZD 4,725 1,452
MXN 2,353 2,211
NOK 2,342 1,361
SEK 2,261 8,154
CHF 520 4,100
AUD 0 15,002
COP 0 11,228
Other 2,533 28,138
Total 728,316 805,302
Cash and cash equivalents
in thousand CHF 2011 2010
Cash on hand 1,693 1,423
Cash at bank 569,983 531,658
Checks and bills of exchange in transit 1,903 (4,145)
Total cash and cash equivalents 573,579 528,936
Net cash (debt) is comprised as follows:
in thousand CHF 2011 2010
Cash and cash equivalents 573,579 528,936
Other current financial assets 20,000 6,089
Short-term borrowings (7,296) (9,335)
Long-term borrowings (231) (403)
Net cash (debt) 586,052 525,287
22
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Share capital and treasury shares
in thousand CHF
Outstanding number of shares
(numbers)
Ordinary
shares
Treasury
shares
Total
Balance on January 1, 2011 23,642,458 50,000 (196,003) (146,003)
Treasury shares
Sold 20,245 0 2,190 2,190
Purchased (79,042) 0 (8,617) (8,617)
Sold under employee share plan 32,182 0 3,462 3,462
Sold under employee option plan 16,065 0 1,690 1,690
Balance on December 31, 2011 23,631,908 50,000 (197,278) (147,278)
The share capital is presented by 25 million issued shares (2010: 25 million) of CHF 2.00 par value, fully paid in.
On December 31, 2011, the number of outstanding shares amounted to 23,631,908 shares (2010: 23,642,458) and the number of treas-ury shares to 1,368,092 (2010: 1,357,542). Treasury shares have been deducted from equity attributable to owners of the parent. All shares issued by the Company were fully paid in.
The extraordinary Shareholders’ Meeting held on August 23, 2005, authorized the Board of Directors to create authorized capital to the maximum amount of CHF 6 million by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 2.00 each at any time until August 22, 2007. At the Annual General Meeting held on May 15, 2007, the shareholders approved the proposal of the Board of Directors to extend the authorized share capital until May 2009 with an unchanged amount. The extension of the authorized capital for another two years was approved at the Annual General Meeting held on May 5, 2009. On May 10, 2011, the General Meeting extended the resolution, with unchanged conditions until May 10, 2013. The Board of Directors has not made use of this au thorization. The Company has no conditional share capital.
In 2007, the Board of Directors decided to return excess capital to the shareholders by launching a share buyback program via a second trading line on the SIX Swiss Exchange. Between August 13, 2007 and September 2, 2008, the Group repurchased 1,250,000 registered shares, totaling a value of CHF 185.0 million and representing 5 % of share capital.
The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina World Transport (Holding) Ltd. determined in accordance with the legal provisions of the Swiss Code of Obligations. On May 10, 2011, the shareholders approved that no dividends will be distributed in respect of the 2010 business year.
The Board of Directors has proposed dividends for the fiscal year 2011 of CHF 2.00 per share. In addition to the dividend payment the Board of Directors has proposed to cancel the 1,250,000 repurchased shares. This would result in a total remaining share capital of CHF 47.5 million (23,750,000 shares). Furthermore, the Board of Directors requests a reduction of the nominal value of the remaining 23,750,000 shares by CHF 1.90 per share. If the shareholders would approve the proposal of the Board of Directors to reduce the nominal value per share from currently CHF 2.00 to CHF 0.10, the share capital would further decrease by CHF 45.125 million to CHF 2.375 million. The proposal of the dividend payment, the cancelation of the repurchased shares and the reduction of share nominal value are subject to approval at the Annual Meeting of Shareholders on May 8, 2012.
Non-controlling interests
in thousand CHF 2011 2010
Balance on January 1, (net) 7,890 7,015
Reclassification of parent’s ownership interest 0 9
Translation differences (204) (430)
Reclassification of translation difference to parent shareholders’ equity 0 (5)
Interest in profit 1,119 1,298
Reclassification of interest in profit to parent shareholders’ equity 0 55
Dividend paid (46) (52)
Acquisition Grieg 279 0
Capital increase Panalpina Vietnam 44 0
Total net non-controlling interests 9,082 7,890
During the year under review, non-controlling interest increased by TCHF 44 due to the capital increase of Panalpina World Transport (Vietnam) Company Ltd. In addition, the Grieg acquisition included non-controlling interests of TCHF 279 for the participation in Grieg Triangle Logistics B.V., Netherlands. In 2010, the negative non-controlling interests of Panalpina Kuwait were reclassified to parent shareholders’ equity.
23
24
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Consolidated Financial Statements 2011
Borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortized cost. For more information about the Group’s exposure to foreign currency and liquidity risk, see note 18.
in thousand CHF 2011 2010
Current liabilities
Overdraft 2,681 0
Current portion of secured bank loans 4,233 8,855
Unsecured bank facility 4 0
Current portion of finance lease liabilities 378 480
Total current liabilities 7,296 9,335
Non-current liabilities
Non-current portion of finance lease liabilities 228 399
Other loans 3 4
Total non-current liabilities 231 403
Terms and repayment schedule
2011 2010
in thousand CHF
Currency
Nominal interest rate
Year of maturity
Carrying amount Fair value
Carrying amount Fair value
Current liabilities
Secured bank loan USD 5.85 % 2011 0 0 6,020 6,020
Secured bank loan COPDTF
+3.00 % 2011 0 0 4 4
Secured bank loan COP 4.91 % 2011 0 0 2,831 2,831
Secured bank loan USD 2.74 % 2012 4,233 4,233
Unsecured bank facility COP 8.48 % 2012 4 4
Total current liabilities 4,237 4,237 8,855 8,855
Non-current liabilities
Other loans SGD n/a 2013 3 3 4 4
Total interest-bearing liabilities 4,240 4,240 8,859 8,859
Finance lease liabilities
2011 2010
in thousand CHF
Future minimum
lease payments
Interest
Present value of minimum
lease payments
Future minimum
lease payments
Interest
Present value of minimum
lease payments
Less than 1 year 429 51 378 542 62 480
Between 1 and 5 years 255 27 228 450 51 399
Total interest-bearing liabilities 684 78 606 992 113 879
The weighted average interest rate of bank borrowings and other financing liabilities is 3.90 % (2010: 5.78 %). The carrying amounts of short-term bank borrowings approximate their fair value.
25
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
The maturity of the Group’s long-term financial debts (excluding lease liabilities) is shown in the following table:
2011 2010
in thousand CHF
2011 0 4
2013 3 0
Total 3 4
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
in thousand CHF 2011 2010
USD 4,179 6,020
EUR 2,741 18
GBP 296 654
PLN 250 165
COP 4 2,835
AUD 0 0
Others 57 46
Total 7,527 9,738
Long-term provisions
2011 (in thousand CHF)
Employee
benefits
Claims and other provisions
Total provisions
Balance on January 1 34,450 78,129 112,579
Translation differences (587) 14 (573)
Change in scope of consolidation 267 414 681
Addition 8,904 5,086 13,990
Reversal of unused amount (1,948) (14,778) (16,726)
Charged in income statement 6,956 (9,692) (2,736)
Utilization (3,217) (5,106) (8,323)
Transfers 0 (16,596) (16,596)
Balance on December 31 37,869 47,163 85,032
2010 (in thousand CHF)
Employee
benefits
Claims and other provisions
Total provisions
Balance on January 1 28,756 37,902 66,658
Translation differences (2,513) (3,725) (6,238)
Addition 9,492 70,923 80,415
Reversal of unused amount (2,939) (35,449) (38,388)
Charged in income statement 6,553 35,474 42,027
Utilization (5,092) (514) (5,606)
Transfers 6,746 8,992 15,738
Balance on December 31 34,450 78,129 112,579
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Consolidated Financial Statements 2011
Employee provisions mostly relate to certain employee benefit obligations, such as “anniversary” benefits, termination payments and long service benefits, mainly in Switzerland, Germany, Austria, Italy, France and the USA. The timings of these cash outflows can be reasonably estimated based on past performance. In addition, employee provisions include the liability of CHF 2,527 thousand for the cash-settled compensation plan. Significant provisions are discounted by using the corresponding discount rate applicable in the respective countries where the obligation occurs.
The balance for claims represents a provision for certain claims brought forward against the Group by customers and forwarding agents. The balance as of December 31, 2011 is expected to be utilized within the next two to five years. Long-term claims include an additional provision for probable potential future payments in connection with transport damages. Furthermore, in 2010, a long-term provision in the amount of CHF 38.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Practices Act (FCPA). In the period under review the current portion of CHF 16.6 million has been reclassified to provisions and other liabilities as it is expected to be utilized within one year. The management determined the provision based on past performance and its expectation of the funds needed for the future settlement of the claims which are not yet reported (see also note 4 Critical accounting estimates and judgments).
The current portion of employee provisions and claim provisions are disclosed in note 28.
Deferred income taxes
Deferred taxes are related to the following statement of financial position items:
in thousand CHF
Balance January 1
2010
Recog- nized
translation differ- ences
Recog-
nized in income statement
Recog- nized
in OCI
Balance Decem-
ber 31 2010
Recog- nized
translation differ- ences
Recog-
nized in income statement
Recog- nized
in OCI
Balance Decem-
ber 31 2011
Deferred tax assets
Receivables 2,928 (307) (1,358) 0 1,263 (4) 1,278 0 2,537
Fixed assets 4,060 (425) (440) 0 3,195 (10) 180 0 3,365
Provisions 15,710 (1,645) 6,402 (1,794) 18,673 (56) 1,195 (410) 19,402
Other statement of financial position captions 8,763 (917) 3,610 0 11,456 (35) (6,305) 0 5,116
Deductible loss carry-forwards 23,878 (2,500) 9,906 0 31,284 (94) 703 0 31,893
Total deferred tax assets 55,339 (5,794) 18,120 (1,794) 65,871 (199) (2,949) (410) 62,313
Deferred tax liabilities
Receivables (640) (4) 135 0 (509) 0 104 0 (405)
Fixed assets (9,171) (57) (510) 0 (9,738) 7 (2,152) 0 (11,883)
Provisions (8,591) (54) (668) 7,206 (2,107) 1 (5,563) 5,829 (1,840)
Other statement of financial position captions (4,801) (30) (3,560) 0 (8,391) 6 8,021 0 (364)
Deductible loss carry-forwards 1,288 8 (1,296) 0 0 0 0 0 0
Total deferred tax liabilities (21,915) (137) (5,899) 7,206 (20,745) 14 410 5,829 (14,492)
Net deferred tax assets
(liabilities) 33,424 (5,931) 12,221 5,412 45,126 (185) (2,539) 5,419 47,821
27
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
The gross movement in the deferred income tax account is as follows:
in thousand CHF 2011 2010
Balance January 1 45,126 33,424
Translation differences (185) (5,931)
Income statement charge (2,539) 12,221
Tax charged to equity due to IAS 19 5,419 5,412
Balance December 31 47,821 45,126
In 2011, temporary differences in the amount of CHF 3.6 million (2010: CHF 4.9 million) were not capitalized because it was not probable that they could be offset against future profits.
Year of expiry of unrecognized tax loss carry-forwards (in thousand CHF) 2011 2010
2011 – 2,360
2012 16,702 18,321
2013 15,399 15,544
2014 7,884 2,677
2015 768 723
2016 674 –
Later 58,672 40,698
Total unrecognized tax loss carry-forwards 100,099 80,323
The total increase of CHF 19.8 million (2010: increase of CHF 25.3 million) derived mainly from unrecognized tax loss carry-forwards in Angola, Belgium, Brazil and Luxembourg. During the period under review, tax loss carry-forwards expired mainly in Finland, Denmark and Angola. Tax loss carry-forwards of CHF 13.4 million (2010: CHF 21.9 million) were utilized mainly in Switzerland, USA and Australia.
Provisions and other liabilities
2011 (in thousand CHF)
Employee benefits and
others
Outstanding vacation
entitlement
Claims
Restruc-
turing
Total
Balance on January 1 64,737 19,449 56,028 839 141,053
Translation differences (1,001) (571) (177) (20) (1,769)
Change in scope of consolidation 259 1,004 0 0 1,263
Addition 66,003 6,348 11,917 0 84,268
Reversal of unused amounts (15,043) (3,075) (23,399) 0 (41,517)
Charged in income statement 50,960 3,273 (11,482) 0 42,751
Utilization (41,848) (735) (31,721) (170) (74,474)
Transfers 0 0 16,596 0 16,596
Balance on December 31 73,107 22,420 29,244 649 125,420
28
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Panalpina Annual Report 2011
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2010 (in thousand CHF)
Employee benefits and
others
Outstanding vacation
entitlement
Claims
Restruc-
turing
Total
Balance on January 1 45,285 21,077 32,983 4,026 103,371
Translation differences (3,073) (2,168) (1,247) (1,144) (7,632)
Addition 122,915 4,113 90,338 265 217,631
Reversal of unused amounts (11,502) (1,253) (16,440) (584) (29,779)
Charged in income statement 111,413 2,860 73,898 (319) 187,852
Utilization (88,888) (2,320) (33,868) (1,724) (126,800)
Transfers 0 0 (15,738) 0 (15,738)
Balance on December 31 64,737 19,449 56,028 839 141,053
Apart from outstanding vacation entitlement and the current portions of provisions as disclosed in note 26, provisions and other liabilities include personnel profit participation and related social security costs and payroll taxes as well as compliance consultancy fees. During the period under review, CHF 30.8 million of personnel profit participation (2010: CHF 30.7 million) was paid out. For the current year additional personnel profit participation of CHF 51.2 million (2010: CHF 51.2 million) including related social security costs and payroll taxes was recognized.
As disclosed in notes 3 and 26, claim provisions include the current portion of certain claims brought forward against the Group by cus-tomers and forwarding agents. In addition, in 2010 short-term provision in the amount of CHF 31.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Practices Act (FCPA) and the US as well as the New Zealand antitrust investigations. During the period under review the previous year recognized provision was paid out.
In 2010, the management reassessed the cash outflow of claims and came to the conclusion that, based on past utilization, the duration until claims can be settled increased substantially. The reclassification to long-term claim provisions of CHF 15.7 million reflects this change. The balance as of December 31, is expected to be utilized within one year.
Restructuring provisions arise from planned programs that materially change the scope of business undertaken by the Group or the manner in which business is conducted. Such provisions include only the costs necessarily entailed by the restructuring which are not associated with the recurring activities of the Group. In 2010, additionally recognized restructuring provisions related to adjustments of the previous year estimations. Neither in 2011 nor in 2010, an additional restructuring plan was approved. The timings of these cash outflows are expected to occur within one year.
Related parties
Key management personnel compensation
Key management personnel consists of the Board of Directors and the Executive Board. The members of the Board of Directors receive a fixed annual compensation and participate in certain equity compensation plans (see note 8). In 2011, there were 7 (2010: 6) members of the Board of Directors.
The compensation of the Executive Board consists of a fixed portion and a variable portion, which depends on the course of business and the individual manager’s performance. In addition, members of the Executive Board receive indirect benefits and are able to participate in certain equity compensation plans (see note 8). In 2011, there were 5 (2010: 5) members of the Executive Board.
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Panalpina Annual Report 2011
Consolidated Financial Statements 2011
The following table shows the compensation of key management personnel:
2011 (in thousand CHF)
Annual salary1
Bonus
Termi- nation
benefits
Other
benefits2
Share- based
payment3
Social security
contribution
Total compen-
sation
Option
granted
Board of Directors
Rudolf W. Hug, Chairman 453 50 63 566
Beat Walti, Vice Chairman 153 50 22 225
Lars Förberg, Member 79 50 11 140
Chris E. Muntwyler, Member 153 50 22 225
Roger Schmid, Member* 155 50 205
Hans-Peter Strodel, Member 155 50 17 222
Knud Elmholdt Stubkjær, Member 77 50 12 139
Board of Directors leaving
Günter Rohrmann 102 102
Total remuneration of Board of Directors 1,327 0 0 0 350 147 1,824 0
Executive Board
Monika Ribar, Chief Executive Officer 913 570 125 380 145 2,133
Members of the Executive Board 2,246 1,014 144 1,157 555 5,116
Executive Management leaving 113 9 16 138
Total remuneration of Executive Board 3,272 1,584 0 278 1,537 716 7,387 0
Total remuneration of key manage-
ment personnel 4,599 1,584 0 278 1,887 863 9,211 0
1 Salaries incl. fixed remuneration, salary and discount on shares granted2 Other benefits incl. expense allowance and fringe benefits3 According to the Executive Board Mid-term Incentive Plan (see Note 8) the members of the Executive Board received matched shares
totaling 4,155 shares reflecting the 40 % bonus paid in the previous year* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)
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Consolidated Financial Statements 2011
2010 (in thousand CHF)
Annual salary1
Bonus
Termi- nation
benefits
Other
benefits2
Share- based
payment3
Social security
contribution
Total compen-
sation
Option
granted
Board of Directors
Rudolf W. Hug, Chairman 454 50 46 550
Günter Rohrmann, Vice Chairman 154 50 0 204
Roger Schmid, Member * 155 50 0 205
Chris E. Muntwyler, Member 77 50 8 135
Hans-Peter Strodel, Member 77 50 7 134
Beat Walti, Member 77 50 8 135
Board of Directors leaving
Günther Casjens, Member 154 0 154
Wilfried Rutz, Vice Chairman 127 12 139
Yuichi Ishimaru, Member 77 7 84
Glen R. Pringle, Member 51 0 51
Total remuneration of Board of Directors 1,403 0 0 0 300 88 1,791 0
Executive Board
Monika Ribar, Chief Executive Officer 800 730 27 633 110 2,300
Members of the Executive Board 2,220 1,141 149 1,017 420 4,947
Executive Management leaving 850 33 73 206 134 1,296
Total remuneration of Executive Board 3,870 1,871 33 249 1,856 664 8,543 0
Total remuneration of key manage-
ment personnel 5,273 1,871 33 249 2,156 752 10,334 0
1 Salaries incl. fixed remuneration, salary and discount on shares granted2 Other benefits incl. expense allowance and fringe benefits3 According to the Executive Board Mid-term Incentive Plan (see Note 8) the members of the Executive Board received matched shares
totaling 4,155 shares reflecting the 40% bonus paid in the previous year* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)
There were no contributions or donations to close members of the families of the key management.
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The following table shows the equity holdings in Panalpina World Transport (Holding) Ltd. (PWT) of key management personnel and their related parties in line with article 663bbis and 663c of the Swiss Code of Obligations.
Number of PWT nominal shares
Number of options (End of vesting period)
2012 2013 2014
Board of Directors
Rudolf W. Hug, Chairman 8,362 1,200 1,325 2,020
Beat Walti, Vice Chairman 427 0 0 0
Lars Förberg, Member 0 0 0 0
Chris E. Muntwyler, Member 427 0 0 0
Roger Schmid, Member* 9,375 1,800 1,325 0
Hans-Peter Strodel, Member 427 0 0 0
Knud Elmholdt Stubkjær, Member 0 0 0 0
Total on December 31, 2011 19,018 3,000 2,650 2,020
Executive Board
Monika Ribar, Chief Executive Officer 26,183 1,800 1,325 2,020
Christoph Hess, General Counsel and Corporate Secretary 4,208 600 600 1,000
Karl Weyeneth, Chief Operating Officer 9,044 0 497 303
Marco Gadola, Chief Financial Officer 3,858 1,800 1,325 2,020
Alastair Robertson, Chief Human Resources Officer 4,050 0 0 200
Total on December 31, 2011 47,343 4,200 3,747 5,543
Total on December 31, 2011 66,361 7,200 6,397 7,563
Number of PWT nominal shares
Number of options (End of vesting period)
2012 2013 2014
Board of Directors
Rudolf W. Hug, Chairman 7,935 1,200 1,325 2,020
Günter Rohrmann, Vice Chairman 2,820 2,020
Roger Schmid, Member 9,375 1,800 1,325
Total on December 31, 2010 20,130 3,000 2,650 4,040
Executive Board
Monika Ribar, Chief Executive Officer 21,063 1,800 1,325 2,020
Christoph Hess, General Counsel and Corporate Secretary 3,000 600 600 1,000
Karl Weyeneth, Chief Operating Officer 5,315 0 497 303
Marco Gadola, Chief Financial Officer 2,572 1,800 1,325 2,020
Alastair Robertson, Chief Human Resources Officer 2,200 0 0 200
Total on December 31, 2010 34,150 4,200 3,747 5,543
Total on December 31, 2010 54,280 7,200 6,397 9,583
* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)
Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apart from the trans-actions with related parties mentioned above, we refer to notes 7 and 8.
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Business combinations/disinvestments
On February 1, 2011, Panalpina World Transport (Pty) Ltd. in Sydney announced the purchase of defined tangible and intangible assets and the business of Apollo Forwarding in Perth. Apollo and Panalpina have been close partners for more than ten years. During that time, Apollo Perth has acted as an agent of Panalpina. The purchase enables Panalpina to further enlarge the geographical office coverage in Oceania and widen the customer base. In addition to being a well-established customs broker, Apollo Perth also provides interna- tional freight forwarding services to its Australia-based customers who now gain access to Panalpina’s global network. The acquisition has been settled for a final cash consideration of CHF 2.9 million.
As per April 1, 2011 the Group acquired 100 percent of the issued share capital of Grieg Logistics AS, a company today encompassing freight forwarding, domestic transportation, warehousing, distribution and customs clearance with operations in fourteen locations. Grieg Logistics, established in 1969, is a leading logistics provider to the Norwegian oil and gas, shipping and maritime industries. It has a broad product portfolio including logistics, freight forwarding and project development. In Norway, Grieg Logistics serves the national market with offices throughout the country. Businesses will add approximately NOK 400 million (CHF 67.0 million) to the Panalpina Group’s annual turnover. Grieg Logistics, with its strategic locations throughout Norway, has built up a strong reputation for providing custom- ers with tailor-made services to meet their needs. The acquisition was settled for a final cash consideration of CHF 60.3 million. The acquired business contributed net forwarding revenue of CHF 49.4 million and net profit of CHF 0.2 million to the Group for the period from April 1 to December 31, 2011.
Tangible assets acquired in 2011 include mainly office equipment and vehicles. Intangible assets include customer relationships.
Details of net assets acquired and goodwill are as follows:
in thousand CHF 2011 2010
Purchase consideration
– Cash paid 63,160 2,384
Total purchase consideration 63,160 2,384
Fair value of net assets acquired (22,570) (980)
Non-controlling interest 279 0
Goodwill 40,869 1,404
The goodwill is attributable to market knowledge and experience of the acquired employees, the profitability of the acquired business and the synergies expected to arise after the Group’s acquisition.
The assets and liabilities arising from the acquisition are the following:
in thousand CHF
Acquiree’s
carrying amount
Revaluation due to purchase
accounting
Fair value
2011
Fair value
2010
Cash and cash equivalents 3,174 0 3,174 0
Property, plant and equipment 444 0 444 134
Intangible assets 0 15,927 15,927 846
Other non-current assets 351 (72) 279 0
Trade receivables 10,322 0 10,322 0
Other current assets 357 0 357 0
Total acquired assets 14,648 15,855 30,503 980
Payables (2,501) 0 (2,501) 0
Provisions (681) 348 (333) 0
Other current liabilities (5,099) 0 (5,099) 0
Total acquired liabilities (8,281) 348 (7,933) 0
Net assets acquired 6,367 16,203 22,570 980
Non-controlling interests (279) 0
Less acquired liquidity (3,174) 0
Goodwill 40,869 1,404
Total cash used in acquisition of businesses 59,986 2,384
30
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Additional information
Contractual commitments on non-cancellable operating lease contracts 2011 2010
in thousand CHF
Less than one year 139,128 137,768
Between one and five years 261,044 283,793
More than five years 99,459 116,535
Total residual commitments 499,631 538,096
Included in the residual lease commitments is an operating lease contract for aircrafts of CHF 33.8 million (2010: CHF 76.8 million), leased by Panalpina Air & Ocean Ltd. The contract, with a one-year notice period, was renewed in 2010 for the first aircraft until August 31, 2012. In 2010, a second aircraft was leased with a period at least until September 30, 2012.
Pledged assets
As of the statement of financial position date 2011 and 2010, the Group does not have any pledged assets.
Pending legal claims
IntroductionIn addition to the matters discussed in note 4 – Provisions, from time to time the Group is involved in legal proceedings in the ordinary course of its business. Other than as noted below, the Group is not a party to any legal, administrative or arbitration proceedings which could significantly harm the Group’s business, financial condition and results of operations taken as a whole, and it does not know of any such proceedings which may currently be contemplated by governmental or third parties.
Claim against Pantainer Ltd.In a case which originated in 2004, it is alleged that a fire occurred on a container vessel due to containers shipped under Pantainer bills of lading containing chemicals that were not declared as hazardous cargo. As a consequence the vessel has declared general average. Claimants may seek compensation of general average contributions, damage and loss of cargo and potential damages to the vessel. For-mal legal proceedings were launched in Tokyo in 2005 against the shipper which, in turn, commenced third-party proceedings against Pantainer Ltd. and other companies of the Group. Neither Pantainer nor any other Panalpina Group companies are named defendants in the Tokyo litigation. In July 2010, the court dismissed all claims of the plaintiffs and plaintiffs have appealed the judgment. The value in dispute amounts to approximately CHF 25 million.
Business practices investigationIn November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina has accepted certain obligations under the DPA, such as further strengthening its compliance policies and procedures and providing regular reports to the DOJ on the company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release the company from criminal liability at the end of the three-year term.
Freight forwarding antitrust investigationIn October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.
In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry. In December 2011, Panalpina’s local subsidiary received a letter from the Competition Commission Singapore to detail whether it has engaged in similar anti-competitive conduct.
31
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These activities were part of an investigation of several competition authorities against various major freight forwarding companies for alleged anti-competitive behavior.
Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct conse-quence of these investigations, alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dismiss the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in January 2010. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate the potential loss, if any.
In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substanti-ating an undue lessening of competition.
In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.
In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behavior in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision is not expected prior to early 2012.
In October 2010, Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of international air freight forwarding services. Under the terms of the settlement, which has been approved by the competent court, Panalpina has agreed to pay a fine of approximately USD twelve million.
In the reporting year Panalpina completed settlement negotiations with the New Zealand Commerce Commission and the agreed penalty has been approved by the competent court.
It is not possible to predict the outcome of the pending anti-trust proceedings at this stage. They may, however, result in material penalties being imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these proceedings, no related provisions have been made as of December 31, 2011.
Subsequent events
Since the statement of financial position date, no events have become known for which a disclosure is required.
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Principal Group companies and participations
Company
Registered
Currency
Nominal capital
in 1,000
Equity interest
in %
Invest-
ment
Method of con-
solidation
Europe
Panalpina World Transport (Holding) Ltd. Basel CHF 50,000 K
Panalpina Management Ltd. Basel CHF 2,500 100 1 K
Panalpina Ltd. Basel CHF 600 100 1 K
Pantainer Ltd. Basel CHF 100 100 1 K
Panalpina Insurance Broker Ltd. Basel CHF 100 100 1 K
Panalpina International Ltd. Basel CHF 100 100 1 K
Hausmann Transport Ltd. Basel CHF 100 100 1 K
Panalpina Air & Ocean Ltd. Basel CHF 2,700 100 1 K
Jacky Maeder international forwarding Ltd. Basel CHF 300 100 1 K
Panalpina Global Employment Services Ltd. Basel CHF 100 100 1 K
Panalpina Welttransport (Deutschland) GmbH Mörfelden EUR 10,226 100 1 K
Panalpina Welttransport GmbH Vienna EUR 36 100 1 K
Panalpina Welttransport GmbH Höchst EUR 36 100 1 K
Panalpina France Transports Internationaux S.A.S. Paris-Roissy EUR 2,000 100 1 K
Panalpina Trasporti Mondiali S.p.A. Milan EUR 2,000 100 1 K
Panalpina Transportes Mundiales S.A. Madrid EUR 451 100 1 K
Panalpina Transportes Mundiais Lda Lisbon EUR 50 100 1 K
Panalpina World Transport Ltd. London GBP 12,350 100 1 K
Panalpina World Transport (Ireland) Ltd. Dublin EUR 25 100 1 K
Panalpina World Transport N.V. Antwerp EUR 13,050 100 1 K
Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 K
Panalpina World Transport B.V. Amsterdam EUR 4,091 100 1 K
Grieg Triangle Logistics B.V. Spijkenisse EUR 50 51 1 K
Grampian International Freight B.V. Beverwijk EUR 18 100 1 K
Panalpina Czech Sro. Prague CZK 1,000 100 1 K
Panalpina Croatia d.o.o. Rijeka HRK 400 100 1 K
Panalpina Slovakia S.R.O. Bratislava EUR 23 100 1 K
Panalpina Magyarorszag Kft. Budapest HUF 528,000 100 1 K
Panalpina Romania S.R.L. Oradea RON 72 100 1 K
Panalpina Polska Sp. z o.o. Wroclaw PLN 1,500 100 1 K
Panalpina AB Gothenburg SEK 1,000 100 1 K
Panalpina A/S Oslo NOK 75,060 100 1 K
Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRY 808 100 1 K
Panalpina World Transport ZAO Moscow RUB 2,100 100 1 K
Panalpina CIS Helsinki OY Vantaa EUR 8 100 1 K
Panalpina Logistics LLC Moscow RUB 240 100 1 K
Panalpina World Transport Ltd. Kiev UAH 376 100 1 K
Luxair S.A. Luxembourg EUR 13,750 12 3 N
32
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Company
Registered
Currency
Nominal capital
in 1,000
Equity interest
in %
Invest-
ment
Method of con-
solidation
North, Central and South America
Panalpina Inc. Jersey USD 83,000 100 1 K
Panalpina FMS, Inc. (Washington) Jersey City USD 1 100 1 K
International Claims Handling Services Inc. Miami USD 1 100 1 K
Panalpina Inc. Toronto CAD 100 100 1 K
Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 35,834 100 1 K
Panalpina S.A. Panama City USD 1,250 100 1 K
Almacenadora Mercantil S.A. Panama City USD 25 100 1 K
Panalpina S.A. de C.V. San Salvador SVC 100 100 1 K
Panalpina Transportes Mundiales S.A. San José CRC 2,500 100 1 K
Las Fronteras S.A. San José CRC 1,590 100 1 K
Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,093 100 1 K
Panalpina S.A. Santa Fé de Bogotá COP 7,450,838 100 1 K
DAPSA Depositos Aduaneros Panalpina S.A. Santa Fé de Bogotá COP 2,815,208 100 1 K
Panalpina C.A. Caracas VEF 7,299,297 100 1 K
Panalpina Ecuador S.A. Quito USD 1 100 1 K
Panalpina Aduanas S.A. Lima PEN 732 100 1 K
Panalpina Transportes Mundiales S.A. Lima PEN 4,008 100 1 K
Panalpina Ltda São Paulo BRL 127,317 100 1 K
Panalpina Chile Transportes Mundiales Ltd.a Santiago CLP 1,593,521 100 1 K
Panalpina Transportes Mundiales S.A. Buenos Aires ARS 800 100 1 K
Panalpina Logistics S.R.L. Buenos Aires ARS 12 100 1 K
Panalpina Transportes Mundiales S.A. de C.V. Santo Domingo DOP 1,000 100 1 K
Mondi Reinsurance Ltd. Hamilton CHF 1,000 100 1 K
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Company
Registered
Currency
Nominal capital
in 1,000
Equity interest
in %
Invest-
ment
Method of con-
solidation
Asia and Australia
Panalpina World Transport (Singapore) Pte. Ltd. Singapore SGD 2,500 100 1 K
PT Panalpina Nusajaya Transport Jakarta IDR 1,500,000 100 1 K
Panalpina China Ltd. Hong Kong HKD 1,000 100 1 K
Panalpina World Transport (PRC) Ltd. Shanghai CNY 13,500 100 1 K
Panalpina Logistics (Shanghai) Ltd. Shanghai CNY 5,000 100 1 K
Panalpina Logistics (Wuhan) Ltd. Wuhan CNY 10,000 100 1 K
Panalpina Asia-Pacific Services Ltd. Hong Kong HKD 500 100 1 K
Panalpina World Transport Ltd. Hong Kong HKD 500 100 1 K
Pantainer (H. K.) Limited Hong Kong HKD 100 100 1 K
International Claims Handling Services Ltd. Hong Kong HKD 10 100 1 K
Panalpina Taiwan Ltd. Taipei TWD 15,500 100 1 K
Panalpina IAF (Korea) Ltd. Seoul KRW 500,000 100 1 K
Panalpina World Transport (Thailand) Ltd. Bangkok THB 27,000 100 1 K
Panalpina Asia-Pacific Services (Thailand) Ltd. Bangkok THB 10,000 100 1 K
Panalpina Macao Ltd. Macao HKD 1,000 100 1 K
Panalpina World Transport (Vietnam) Company Ltd. Ho Chi Minh City VND 6,360,145 49 2 K
Panalpina Transport (Malaysia) Sdn. Bhd. Kuala Lumpur MYR 4,215 100 1 K
Panalpina World Transport (Japan) Ltd. Tokyo JPY 50,000 100 1 K
ASB Air Japan Ltd. Tokyo JPY 10,000 100 1 K
Panalpina World Transport (India) Pvt. Ltd. Delhi INR 100,050 100 1 K
Panindia Cargo Private Ltd., Delhi Delhi INR 100 100 1 K
Panalpina World Transport (Philippines) Inc. Manila PHP 10,000 100 1 K
Panalpina World Transport (Pty) Ltd. Sydney AUD 15,000 100 1 K
Panalpina World Transport LLP Almaty KZT 1,252,395 100 1 K
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Company
Registered
Currency
Nominal capital
in 1,000
Equity interest
in %
Invest-
ment
Method of con-
solidation
Middle East and Africa
Panalpina Gulf LLC Dubai AED 1,000 49 2 K
Panalpina Jebel Ali Ltd. Jebel Ali AED 100 100 1 K
Panalpina World Transport (Dubai) DWC-LLC Dubai AED 300 100 1 K
Panalpina World Transport (Kuwait) WLL Kuwait KWD 20 49 2 K
Panalpina (Bahrain) WLL Manama BHD 20 100 1 K
Panalpina Central Asia EC Manama USD 17,020 100 1 K
Panalpina Georgia LLC Tbilisi GEL 11 100 1 K
Panalpina Azerbaijan LLC Baku AZN 1 100 1 K
Panalpina Turkmenistan LLC Turkmenbashi TMT 62 100 1 K
Qatar Shipping Company (Panalpina Qatar) WLL Doha QAR 200 49 2 K
Panalpina World Transport (Saudi Arabia) Ltd. Al Khobar SAR 500 100 1 K
Panalpina Transports Mondiaux Cameroun S.A.R.L. Douala XAF 150,000 100 1 K
Panalpina Transports Mondiaux Algérie EURL Hassi Messaoud DZD 128,039 100 1 K
Panalpina Transports Mondiaux Congo S.A.R.L. Pointe-Noire XAF 70,000 100 1 K
Panalpina Transports Mondiaux Gabon S.A. Port-Gentil XAF 50,000 90 1 K
Panalpina (Ghana) Ltd. Accra GHS 10 100 1 K
Panalpina Transportes Mundiais Navegãçao e Trânsitos S.A.R.L. Luanda AOA 18,000 92 1 K
K = fully consolidatedN = not consolidated
1 = capital participation 50 – 100 %2 = controlling influence over management3 = capital participation less than 50 %
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127
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Panalpina World Transport (Holding) Ltd., Basel
As statutory auditor, we have audited the accompanying consolidated financial statements of Panalpina World Transport (Holding) Ltd., which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and notes on pages 64 to 125 for the year ended December 31, 2011.
Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial state-ments. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2011 give a true and fair view of the financial posi-tion, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the board of directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge
Zurich, March 2, 2012
Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Shareholders of
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in million CHF 2011 2010 2009 2008 2007
Forwarding services 7,926 8,676 7,340 10,597 10,548
Change in % (8.64) 18.19 (30.73) 0.47 13.41
Net forwarding revenue 6,500 7,164 5,958 8,878 8,641
Change in % (9.27) 20.25 (32.89) 2.74 11.71
Gross profit 1,477 1,480 1,377 1,742 1,803
Change in % (0.21) 7.49 (20.94) (3.43) 13.35
in % of net revenue 22.72 20.66 23.11 19.62 20.87
Consolidated profit 127.4 (26.0) 10.4 113.8 210.6
Change in % 590.06 (348.94) (90.82) (45.98) 14.77
in % of gross profit 8.63 (1.76) 0.76 6.53 11.68
EBITDA 212.1 62.4 79.7 240.7 360.8
Change in % 240.09 (21.78) (66.88) (33.29) 15.39
in % of gross profit 14.36 4.21 5.79 13.82 20.01
EBITA 183.6 23.5 42.5 204.7 310.7
Change in % 682.11 (44.77) (79.23) (34.13) 11.80
in % of gross profit 12.43 1.59 3.09 11.75 17.23
EBIT 174.2 15.4 29.9 193.0 299.4
Change in % 1,033.97 (48.64) (84.50) (35.54) 14.70
in % of gross profit 11.79 1.04 2.17 11.08 16.60
Cash generated from operations 229.1 75.3 311.8 274.5 278.9
Change in % 204.35 (75.86) 13.58 (1.58) (13.20)
in % of gross profit 15.51 5.09 22.64 15.76 15.47
Net cash from operating activities 193.5 37.0 259.8 193.2 209.5
Change in % 422.45 (85.74) 34.45 (7.78) (13.03)
in % of gross profit 13.10 2.50 18.87 11.09 11.62
Free cash flow 41.9 6.2 225.9 170.2 138.1
Change in % 570.94 (97.24) 32.73 (23.20) (25.74)
in % of gross profit 2.84 0.42 16.41 9.77 7.66
Net working capital 85.2 143.0 132.2 351.6 487.8
Change in % (40.42) 8.20 (62.42) (27.92) 17.72
Capital expenditure on fixed assets 51.2 40.0 41.8 58.4 50.8
Change in % 27.87 (4.31) (28.34) 14.90 (10.84)
in % of gross profit 3.47 2.71 3.04 3.35 2.82
Net capital expenditure on fixed assets 108.7 28.5 29.4 25.6 45.4
Change in % 281.81 (3.24) 14.81 (43.56) (15.90)
in % of gross profit 7.36 1.92 2.14 1.47 2.52
Key Figures in CHF Five-year review
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in million CHF 2011 2010 2009 2008 2007
Depreciation and amortization 37.9 47.0 49.8 47.8 61.5
Change in % (19.37) (5.65) 4.33 (22.33) 18.91
in % of gross profit 2.57 3.18 3.62 2.74 3.53
Personnel expenses 892.4 890.9 879.1 992.5 1,002.5
Personnel
Number of employees at year-end (world) 15,051 14,136 13,570 14,804 15,301
Number of employees at year-end (Switzerland) 775 749 737 778 769
Productivity ratios (CHF)
Net sales per average employee 425,226 503,703 429,864 582,867 587,344
Gross profit per average employee 96,624 104,062 99,343 114,356 122,581
Personnel expenses per average employee 58,380 62,641 63,430 65,163 68,138
Personnel cost in % of gross profit 60.42 60.20 63.85 56.99 55.59
Leverage (liabilities/equity) 1.35 1.46 1.24 1.27 1.23
Net interest-bearing liabilities (591) (546) (535) (381) (325)
Gross gearing (interest-bearing liabilities/equity) 0.01 0.01 0.02 0.02 0.03
Net gearing (net interest-bearing liabilities/equity) (0.65) (0.68) (0.63) (0.44) (0.32)
ROCE (EBIT less tax/capital employed) in % 43.22 (5.40) 6.14 23.03 34.84
Current cash debt coverage ratio (net operating cash flow/average current liability) 0.19 0.04 0.27 0.19 0.20
Cash debt coverage ratio (net operating cash flow/average total liability) 0.16 0.03 0.24 0.16 0.18
Return on equity in % 14.9 (3.1) 1.2 12.1 21.2
Change in % (575.95) (360.88) (89.97) (42.92) 4.83
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in million CHF 2011 2010 2009 2008 2007
ASSETS 2,135 1,989 1,925 1,971 2,278
Change in % 7.34 3.36 (2.35) (13.48) 8.08
Current assets 1,745 1,686 1,599 1,679 1,922
Change in % 3.50 5.48 (4.78) (12.64) 8.40
Liquid funds 599 555 548 401 358
Change in % 7.77 1.30 36.69 12.00 (4.73)
Receivables and other current assets 1,147 1,131 1,050 1,278 1,564
Change in % 1.41 7.66 (17.80) (18.28) 11.94
Non-current assets 390 303 326 292 356
Change in % 28.72 (7.04) 11.66 (18.00) 6.06
Property, plant and equipment 113 114 141 148 168
Change in % (0.57) (19.42) (4.35) (11.89) 3.47
Financial assets 135 111 113 70 103
Change in % 21.62 (1.53) 60.07 (31.29) 42.59
Intangible assets 142 78 72 74 86
Change in % 81.51 8.65 (2.52) (14.06) (15.63)
LIABILITIES AND EQUITY 2,135 1,989 1,925 1,971 2,278
Change in % 7.34 3.36 (2.35) (13.48) 8.07
Liabilities 1,220 1,177 1,061 1,100 1,252
Change in % 3.68 10.93 (3.50) (12.18) 10.73
Payables, accruals and deferred income 1,002 914 878 912 1,056
Change in % 9.71 4.05 (3.69) (13.65) 5.33
Borrowings 8 10 13 20 33
Change in % (22.70) (24.43) (36.49) (39.38) 22.60
Provisions 210 254 170 167 163
Change in % (17.02) 49.17 1.54 2.91 61.10
Non-controlling interests 9 8 7 8 7
Equity 906 804 857 864 1,019
Change in % 12.62 (6.10) (0.83) (15.25) 5.07
Share capital 50 50 50 50 50
Change in % 0.00 0.00 0.00 0.00 0.00
Treasury shares (197) (196) (193) (198) (101)
Change in % 0.65 1.78 (2.62) 95.03 575.98
Translation reserves (162) (151) (136) (146) (74)
Change in % 7.30 10.70 (6.51) 96.03 13.50
Retained earnings and other reserves 1,215 1,101 1,136 1,157 1,145
Change in % 10.34 (3.02) (1.89) 1.09 14.50
Consolidated Statement of Financial Position in CHF Five-year review
131
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
Key Figures in EUR Five-year review
in million EUR 2011 2010 2009 2008 2007
Forwarding services 6,440 6,293 4,861 6,677 6,421
Change in % 2.34 29.46 (27.20) 3.99 8.92
Net forwarding revenue 5,281 5,196 3,945 5,594 5,260
Change in % 1.64 31.71 (29.48) 6.35 7.28
Gross profit 1,200 1,074 912 1,097 1,098
Change in % 11.73 17.76 (16.86) (0.09) 8.91
in % of net revenue 22.72 20.67 23.12 19.61 20.87
Consolidated profit 103.5 (18.9) 6.9 71.7 128.2
Change in % 647.62 (373.91) (90.38) (44.07) 10.23
in % of gross profit 8.63 (1.76) 0.76 6.54 11.68
EBITDA 172.3 45.2 52.8 151.7 219.7
Change in % 281.19 (14.39) (65.19) (30.95) 10.83
in % of gross profit 14.36 4.21 5.79 13.83 20.01
EBITA 149.2 17.0 28.1 129.0 189.1
Change in % 777.65 (39.50) (78.22) (31.78) 7.40
in % of gross profit 12.43 1.58 3.08 11.76 17.23
EBIT 141.5 11.1 19.8 121.6 182.2
Change in % 1,174.77 (43.94) (83.72) (33.26) 10.18
in % of gross profit 11.79 1.03 2.17 11.08 16.60
Cash generated from operations 186.1 54.6 206.5 172.9 232.1
Change in % 240.84 (73.56) 19.43 (25.51) 13.98
in % of gross profit 15.51 5.08 22.64 15.76 21.14
Net cash from operating activities 157.2 26.9 172.0 121.7 127.5
Change in % 484.39 (84.36) 41.33 (4.55) (16.48)
in % of gross profit 13.10 2.50 18.86 11.09 11.62
Free cash flow 34.0 4.5 149.6 107.2 84.1
Change in % 655.56 (96.99) 39.55 27.47 (28.68)
in % of gross profit 2.83 0.42 16.40 9.77 7.66
Net working capital 70.0 114.3 89.0 236.1 293.1
Change in % (38.76) 28.43 (62.30) (19.45) 14.09
Capital expenditure on fixed assets 42.1 32.0 28.2 39.2 30.5
Change in % 31.56 13.48 (28.06) 28.52 (13.75)
in % of gross profit 3.51 2.98 3.09 3.57 2.78
Net capital expenditure on fixed assets 89.4 22.8 19.8 17.2 27.3
Change in % 292.11 15.15 15.12 (37.00) (18.79)
in % of gross profit 7.45 2.12 2.17 1.57 2.49
132
Panalpina Annual Report 2011
Consolidated Financial Statements 2011
in million EUR 2011 2010 2009 2008 2007
Depreciation and amortization 30.8 34.1 33.0 30.1 37.4
Change in % (9.68) 3.33 9.63 (19.52) 14.44
in % of gross profit 2.57 3.18 3.62 2.74 3.41
Personnel expenses 725.1 646.2 582.2 625.4 610.2
Personnel
Number of employees at year-end (world) 15,051 14,136 13,570 14,804 15,301
Number of employees at year-end (Switzerland) 775 749 737 778 769
Productivity ratios (in EUR)
Net sales per average employee 345,480 365,324 284,632 367,277 357,539
Gross profit per average employee 78,503 75,511 65,801 72,024 74,620
Personnel expenses per average employee 47,436 45,433 42,006 41,061 41,478
Personnel cost in % of gross profit 60.43 60.17 63.84 57.01 55.59
Leverage (liabilities/equity) 1.35 1.46 1.24 1.27 1.23
Net interest-bearing liabilities (486) (436) (361) (256) (195)
Gross gearing (interest-bearing liabilities/equity) 0.01 0.01 0.02 0.02 0.03
Net gearing (net interest-bearing liabilities/equity) (0.65) (0.68) (0.63) (0.44) (0.32)
ROCE (EBIT less tax / capital employed) in % 43.22 (5.40) 6.14 23.03 34.84
Current cash debt coverage ratio (net operating cash flow/average current liability) 0.19 0.04 0.27 0.19 0.20
Cash debt coverage ratio (net operating cash flow/average total liability) 0.16 0.03 0.24 0.16 0.16
Return on equity in % 14.9 (3.1) 1.2 12.1 12.1
Change in % (575.95) (360.88) (89.97) (42.92) (42.92)
133
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Consolidated Financial Statements 2011
Consolidated Statement of Financial Position in EUR Five-year review
in million EUR 2011 2010 2009 2008 2007
ASSETS 1,756 1,590 1,297 1,323 1,369
Change in % 10.44 22.59 (1.97) (3.36) 14.56
Current assets 1,435 1,348 1,077 1,127 1,155
Change in % 6.45 25.16 (4.44) (2.42) 15.54
Liquid funds 492 444 369 269 215
Change in % 10.81 20.33 37.17 25.12 (7.73)
Receivables and other current assets 943 904 708 858 940
Change in % 4.31 27.68 (17.48) (8.72) 8.05
Non-current assets 321 242 220 196 214
Change in % 32.64 10.00 12.24 (8.41) 2.33
Property, plant and equipment 93 91 95 99 101
Change in % 2.20 (4.21) (4.04) (1.98) 0.71
Financial assets 111 89 76 47 62
Change in % 24.72 17.11 61.70 (24.19) 36.89
Intangible assets 117 62 48 49 52
Change in % 88.71 29.17 (2.04) (5.77) (19.45)
LIABILITIES AND EQUITY 1,756 1,590 1,297 1,323 1,369
Change in % 10.44 22.59 (1.97) (3.36) 4.39
Liabilities 1,003 941 715 738 752
Change in % 6.59 31.61 (3.12) (1.86) 7.01
Payables, accruals and deferred income 824 730 592 612 634
Change in % 12.88 23.31 (3.27) (3.47) 1.83
Borrowings 6 8 9 14 20
Change in % (25.00) (11.11) (35.71) (30.00) 18.30
Provisions 173 203 115 112 98
Change in % (14.78) 76.52 2.68 14.29 55.18
Non-controlling interests 7 6 5 5 4
Equity 745 643 577 580 612
Change in % 15.86 11.44 (0.52) (5.23) 1.55
Share capital 41 40 34 34 30
Change in % 2.50 17.65 0.00 13.33 (6.12)
Treasury shares (162) (157) (130) (133) (61)
Change in % 3.18 20.77 (2.26) 118.03 5,992.36
Translation reserves (133) (121) (92) (98) (45)
Change in % 9.92 31.52 (6.12) 117.78 9.12
Retained earnings and other reserves 999 880 765 777 688
Change in % 13.52 15.03 (1.54) 12.94 10.61
134
Panalpina Annual Report 2011
Annual Financial Statements 2011
Financial Statements 2011 Panalpina World Transport (Holding) Ltd.
in thousand CHF 2011 2010
Income
Income from participations 87,737 142,904
Financial income 41,728 55,670
Royalties income 49,577 34,741
Release of valuation allowance on loans to Group companies 47,268 3,520
Total income 226,310 236,835
Expenses
Personnel expenses 13,357 11,939
Other administrative expenses 12,973 35,034
Financial expenses 10,357 12,820
Depreciation and value adjustments 168,740 36,336
Total expenses 205,427 96,129
Taxes 1,817 2,159
Profit for the year 19,066 138,547
Income Statementfor the years ended December 31, 2011 and 2010
135
Panalpina Annual Report 2011
Annual Financial Statements 2011
Balance Sheetas of December 31 (before profit appropriation)
Assets
in thousand CHF 2011 2010
Current assets
Cash 303,247 353,736
Cash pool receivables from Group companies 101,647 82,140
Receivables:
– from Group companies 3,340 3,371
– from third parties 242 194
Financial receivables from Group companies 167,895 103,667
Marketable securities 20,000 6,089
Prepaid expenses and deferred charges 53,176 51,075
Total current assets 649,547 600,272
Long-term assets
Participations 161,361 162,069
Loans to Group companies1 161,378 241,515
Financial assets 34,234 0
Own shares 84,128 82,853
Total long-term assets 441,101 486,437
Total assets 1,090,648 1,086,709
1 Thereof subordinated CHF 68.0 million (2010: CHF 68.0 million)
Liabilities and Equity
in thousand CHF 2011 2010
Short-term liabilities
Cash pool payables to Group companies 105,152 122,601
Payables:
– due to Group companies 2,528 5,945
– due to third parties 1,424 1,589
Financial liabilities to Group companies 79,702 74,469
Accrued expenses 11,977 10,178
Total short-term liabilities 200,783 214,782
Long-term liabilities
Provisions 4,306 5,434
Total long-term liabilities 4,306 5,434
Total liabilities 205,089 220,216
Equity
Share capital 50,000 50,000
General legal reserve 10,000 10,000
Reserve for own shares 197,277 196,003
Special reserve 130,573 131,847
Accumulated earnings:
– balance brought forward from previous year 478,643 340,096
– profit for the year 19,066 138,547
Total equity 885,559 866,493
Total liabilities and equity 1,090,648 1,086,709
136
Panalpina Annual Report 2011
Annual Financial Statements 2011
General
The Group’s consolidated financial statements must be considered for an appropriate financial and economic assessment of the Group. The presented statutory financial statements of Panalpina World Transport (Holding) Ltd. were prepared in accordance with the requirements of the Swiss Code of Obligations (SCO).
Valuation methods and translation of foreign currencies
Treasury shares are valued at the lower of cost and market value. All other assets, including participations, are reported at cost less appropriate write-downs. Assets and liabilities denominated in foreign currencies are translated into Swiss francs (CHF), using year-end rates of exchange, except participations which are translated at historical rates. Marketable securities are reported at market value. Transactions during the year which are denominated in foreign currencies are translated at exchange rates effective at the relevant transaction dates. Resulting exchange gains and losses are recognized in the income statement with the exception of unrealized gains which are deferred.
Income from participations
The decrease of CHF 55.2 million is due to the fact that Panalpina Welttransport (Holding) Ltd. received fewer dividends from subsidiaries.
Financial income
The drop of CHF 13.9 million compared to the prior year is predominantly attributable to lower foreign exchange gains of CHF 10.3 million and less interest income of CHF 3.4 million from subsidiaries.
Royalty income
In 2009, Panalpina World Transport (Holding) Ltd. received for the first time a fee from its subsidiaries for usage of the Panalpina network and trademark. This fee increased in 2011 by CHF 14.8 million.
Release of valuation allowance on loans to Group companies
As a result of Debt/Equity Swaps, the Company was able to release a valuation allowance amounting to CHF 47.3 million.
Personnel expenses
In accordance with the Transparency Act, the compensation of the key management personnel is disclosed in note 29 in the Group’s financial statements.
Other administrative expenses
The reduction of CHF 22.1 million in other administrative expenses is mostly attributable to less legal and consulting expenses in connection with the FCPA investigation (CHF 19.0 million) and a decline in claims expenses (CHF 4.9 million).
Financial expenses
The drop in financial expenses of CHF 2.5 million is mainly due to the fact that in 2011 CHF 1.0 million less losses of subsidiaries had to be covered and CHF 1.0 million less interest had to be paid.
Depreciation and value adjustments
In 2011, value adjustments to participations amounting to CHF 168.7 million were booked to the income statement in accordance with the Company’s practice to directly write off capital contributions to cover losses or undercapitalization in subsidiaries.
Cash pool receivables and payables
The cash pool receivables augmented for CHF 19.5 million and the cash pool payables declined for CHF 17.4 million, thus the net receiv-ables increased for CHF 37.0 million.
Financial receivables and loans to Group companies
Financial receivables and loans to Group companies increased by CHF 64.2 million compared to 2010 mainly due to swap of financing struc-ture of subsidiaries from long-term loans to short-term loans.
Marketable securities
In the year under review, investments of CHF 20.0 million were made in fixed-term deposits.
Notes to the Financial Statements
137
Panalpina Annual Report 2011
Annual Financial Statements 2011
Participations
The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd. are listed under the heading “Principal Group companies and participations” on pages 122 to 125.
Financial assets
In 2011, for the first time investments into fix term deposits were done, the investments amount to CHF 34.2 million.
Own shares
In the year under review, treasury shares purchased totaled 79,042 shares (2010: 94,142 shares) with an average purchase price per share of CHF 109.02 (2010: CHF 111.96) and treasury share sales totaled 68,492 shares (2010: 69,123 shares) with an average sale price of CHF 68.40 (2010: CHF 74.14). Of these shares a total of 118,092 (2010: 107,542) are held for serving the employee option plan. The other 1,250,000 shares (2010: 1,250,000) are held for the share buyback program. This program was launched in 2007 by the Board of Directors to return excess capital to the shareholders. The share buyback program includes up to 5 % of the total share capital, which represents a maximum of 1,250,000 registered shares. The number of treasury shares held by Panalpina World Transport (Holding) Ltd. meets the definitions and requirements of art. 659, 659a, 663b para 10 and 671a SCO.
Number of shares
31.12.2011
Movement in year
31.12.2010
Movement in year
31.12.2009
Total Panalpina World Transport (Holding) Ltd. shares issued 25,000,000 0 25,000,000 0 25,000,000
Total treasury shares held by Panalpina World Transport (Holding) Ltd. 1,368,092 10,550 1,357,542 25,019 1,332,523
in % 5.47 5.43 5.33
Provisions
An amount of CHF 1.8 million is related to the obligations Panalpina has accepted under the DPA as mentioned in note 31.
Share capital
As in the previous year, the fully paid-in share capital on December 31, 2011 amounts to CHF 50 million consisting of 25 million registered shares at a par value of CHF 2.00 each. With regard to the authorized capital increase and share buyback program we refer to note 23 in the Group’s financial statements.
in % 2011 2010
Shareholders
Ernst Göhner Stiftung, Switzerland 43.58 43.58
Cevian Capital II Master Fund L.P. 11.37 10.31
Bestinver Gestión, S.G. SGIIC, Spain 5.05 –
Artisan Partners Limited Partnership, USA 5.01 5.01
Portfolio investment (according to the share register, there are no more shareholders with holdings of more than 3 % or 5 %) 29.52 35.67*
Panalpina World Transport (Holding) Ltd. 5.47 5.43*
Nominees
Chase Nominees Ltd., UK 5.23 6.02
* restated considering own shares of Panalpina
138
Panalpina Annual Report 2011
Annual Financial Statements 2011
General legal reserves
The legal reserve must be at least 20 % of the share capital of Panalpina World Transport (Holding) Ltd. in order to comply with the SCO. Panalpina World Transport (Holding) Ltd. has met the legal requirements for legal reserves under art. 671 SCO.
Guarantees
in thousand CHF 2011 2010
Guarantees in favor of third parties
Guarantees and indemnity liabilities, SCO, art. 663b para 1 198,780 199,076
Additionally, Panalpina World Transport (Holding) Ltd., Basel, has issued letters of awareness in favor of various banks concerning liabilities due from subsidiaries amounting to CHF 2.7 million (previous year: CHF 0.2 million).
Contingent liabilities
In 2008, Panalpina World Transport (Holding) Ltd. signed a letter of indemnity as a security for the intraday cash pool overdraft limits over a maximum amount of CHF 60 million.
Panalpina World Transport (Holding) Ltd. carries joint liability to the federal tax authorities for value-added tax of all Swiss subsidiaries.
Pending legal claims
Business practices investigationIn November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina has accepted certain obligations under the DPA, such as further strengthening its compliance policies and procedures and providing regular reports to the DOJ on the company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release the company from criminal liability at the end of the three-year term.
Freight forwarding antitrust investigationIn October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.
In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry. In December 2011 Panalpina’s local subsidiary received a letter from the Competition Commission Singapore to detail whether it has engaged in similar anti-competitive conduct.
These activities were part of an investigation of several competition authorities against various major freight forwarding companies for alleged anti-competitive behavior.
139
Panalpina Annual Report 2011
Annual Financial Statements 2011
Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct conse-quence of these investigations alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dis-miss the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in January 2010. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate the potential loss, if any.
In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substanti-ating an undue lessening of competition.
In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.
In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behavior in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision is not expected prior to early 2012.
In October 2010, Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of inter-national air freight forwarding services. Under the terms of the settlement, which has been approved by the competent court, Panalpina has agreed to pay a fine of approximately USD twelve million.
In the reporting year Panalpina completed settlement negotiations with the New Zealand Commerce Commission and the agreed penalty has been approved by the competent court.
It is not possible to predict the outcome of the pending anti-trust proceedings at this stage. They may, however, result in material penalties being imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these proceedings, no related provisions have been made as of December 31, 2011.
Risk management
The detailed disclosures regarding risk management/assessment that are required by Swiss law are included in the Panalpina Group’s consolidated financial statements on pages 100 – 106.
140
Panalpina Annual Report 2011
Annual Financial Statements 2011
Appropriation of Available Earnings
The Board of Directors proposes the following appropriation of available earnings of total CHF 497,709,723 at the Annual General Meeting:
in CHF 2011
Distribution of an ordinary dividend of CHF 2.00 gross per share* 47,263,816
To be carried forward 450,445,907
Total 497,709,723
* It is not planned to pay dividends on own shares held by the Group.
141
Panalpina Annual Report 2011
Annual Financial Statements 2011
Panalpina World Transport (Holding) Ltd., Basel
As statutory auditor, we have audited the accompanying financial statements of Panalpina World Transport (Holding) Ltd., which comprise balance sheet, income statement and notes on pages 134 to 140 for the year ended December 31, 2011.
Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The pro-cedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial state-ments, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended December 31, 2011 comply with Swiss law and the company’s articles of incorporation.
Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the board of directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorpora-tion. We recommend that the financial statements submitted to you be approved.
KPMG AG
Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge
Zurich, March 2, 2012
Report of the Statutory Auditor on the Financial Statements to the General Meeting of Shareholders of
142
Panalpina Annual Report 2011
Appendix
2007 2008 2009 2010 2011
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
7,1
64
6,5
00
8,8
78
5,9
58
8,6
41
2007 2008 2009 2010 2011
1,000
875
750
625
500
375
250
125
0
871
86
4
812
9151,
02
6
2007 2008 2009 2010 2011
2,050
1,900
1,750
1,600
1,450
1,300
1,150
1,000
1,4
80
1,4
77
1,8
03
1,7
42
1,3
77
245
210
175
140
105
70
35
0
–35
2007 2008 2009 2010 2011
114 12
7
10
–2
6
211
320
280
240
200
160
120
80
40
0
2007 2008 2009 2010 2011
19
3
29
9
30
174
15
Information for Investors
Key figures
in million CHF 2011 2010 * Change in %
Net forwarding revenue 6,500 7,164 – 9.3
Gross profit 1,477 1,480 – 0.2
EBITDA 212 62 240.1
EBIT 174 15 1,034.0
Consolidated profit 127 – 26 590.1
Cash generated from operations 229 75 204.4
* Certain comparatives have been restated to conform to the current period’s presentation.
Share information
Share symbol PWTN
Reuters PWTN.S
Bloomberg PWTN SW
Trading exchange SIX
Fiscal year ends December 31
Valoren 000216808
ISIN CH0002168083
Share register SIS Aktienregister AG, Olten, Switzerland
Five-year development
in million CHF
Net forwarding revenue
EBIT
Shareholders’ equity
Consolidated profit
Gross profit
Panalpina Annual Report 2011
143
Appendix
Swiss Performance Index (SPI)
Panalpina World Transport110%
100%
90%
80%
70%
60%
Jul 1Dec 31,
2010
Mar 1 May 1 Sep 1 Nov 1 Dec 31,
2011
Ordinary gross dividend payments
Financial year
Amount
(in million CHF)
Per share
(in CHF)
2011 47 2.00 **
2010 0 0.00
2009 0 0.00
2008 45 1.90
2007 80 3.20
2006 75 3.00
2005 50 * 2.00
* Included a special one-time jubilee dividend of CHF 20 million
** In addition, CHF 1.90 per share are paid to shareholders through a reduction of the nominal value per share from
CHF 2.00 to CHF 0.10. Ordinary dividend and payback are subjects to vote by the Annual General Meeting of May 8, 2012.
Earnings per share
Weighted average of oustanding shares 2011 2010
Basic EPS 23,639 CHF 5.34 CHF – 1.16
Diluted EPS 23,676 CHF 5.33 CHF – 1.16
Share price development
in CHF 2011 2010
Last day of trading previous year 120.50 65.80
High 132.00 128.50
Low 70.90 64.65
Last day of trading current year 96.20 120.50
Average trading volume 51,764 77,922
Total shareholder return (in %) – 16.9 83.1
Market capitalization as per December 31, 2011 (in CHF million) 2,405 3,013
Financial calendar
January 1 to December 31 Financial year
May 4, 2012 First quarter results
May 8, 2012 Annual General Meeting
July 31, 2012 Half-year results
November 2, 2012 Third quarter results
March 6, 2013 2012 full-year results
May 8, 2013 Annual General Meeting
Share price development in comparison to SPI
December 31, 2010 to December 31, 2011
144
Panalpina Annual Report 2011
Appendix
Pictures
Cover A Boeing 747-400F aircraft of Panalpina’s
own-controlled air freight network while
loaded in Luxembourg
Page 5 Monika Ribar (CEO) and Rudolf W. Hug
(Chairman of the Board of Directors)
Page 7 Executive Board
Page 20/21 Panalpina employee Tim Bauer in front of
a Boeing 747-400F operated by Atlas Air
and part of Panalpina’s own-controlled
network in Luxembourg
Page 22/23 Panalpina employee Samia Guerroumi
inside a Boeing 747-400F while loaded
Page 24/25 Jasmine Medhora of Panalpina’s
Pantainer Express Line at the port
of Hamburg
Page 26/27 Marco Parnitzke of Panalpina’s Ocean
Freight division at the port of Hamburg
Page 28/29 Andrea Ribaudo in Panalpina’s Milan
warehouse
Page 30 Monika Ribar (CEO)
Appendix
Panalpina Annual Report 2011
145Imprint
Panalpina World Transport
(Holding) Ltd.
Viaduktstrasse 42
P. O. Box
CH-4002 Basel
Switzerland
Phone +41 61 226 11 11
Fax +41 61 226 11 01
info@panalpina.com
www.panalpina.com
The Panalpina Annual Report is published in German and English.
For additional copies please refer to the above addresses.
An electronic version is available at: www.panalpina.com /ar
Editorial body
Corporate Communications, Corporate Finance and Investor Relations
Project management
Heidi Stöckli, Corporate Communications
Concept and design
Wirz Corporate AG, Zurich
Photography
Scanderbeg Sauer Photography, Zurich
Portraits
Julian Salinas, Basel
Translations and editing
Text Control, Zurich
BMP Translations AG, Basel
Word + Image, Zufikon
Lithography
Wirz Medienrealisation
Printed by
Neidhart + Schön AG, Zurich
Consultant on sustainability
sustainserv, Zurich and Boston
Disclaimer
Certain sections of this Annual Report may contain forward-looking statements that are based on management’s expectations,
estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain
risks and uncertainties, which are difficult to predict. Therefore, future developments and trends may differ materially from what
is forecast in forward-looking statements.
All forward-looking statements speak only as of the date of their publication or, in the case of any document incorporated by
reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company
or any person acting on the Company’s behalf are qualified by the cautionary statements. The Company does not undertake
any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or
changes in expectations after the date of this report.
Panalpina World Transport
(Holding) Ltd.
Viaduktstrasse 42
P. O. Box
CH-4002 Basel
Phone +41 61 226 11 11
Fax +41 61 226 11 01
info@panalpina.com
www.panalpina.com
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