Product Quality Control
Our Group’s target is to have a quality system at all locations that meets or exceeds the quality systems standard TS 16949 (or its equivalent). TS 16949 is a processed based passenger vehicle quality systems standard that is focused on continuous improvement. The implementation of a quality system is considered an integral part of each new location we establish; however, certification of these systems is possible only after the location has been in operation for at least one year.
Within our Group, we also maintain the following certificates: ISO 9001, ISO 14001, QS 9000, VDA 6.1, and EN 9100 (for the aviation industry).
We also have an internal audit system based on a VDA standard. Internal process audits are carried out by our production facilities to ensure that we are in compliance under our own system. Where non-compliance is found, we create action plans with the local management to make their systems more robust. In addition, our Group monitors three control measures in order to ensure product quality: number of customer complaints; the number of initial defects (also known as “zero km defects”) (measured in parts per million); and warranty/field failures. These three measures allow us to track trends and to identify quality concerns, which in turn enables us to take necessary corrective actions.
Environmental Protection
Our Group’s target is to have an environmental management system in all of our locations to fulfill local laws and regulations, as well as our own policies and objectives. We currently use the ISO 14001 as the standard for our Group, applying those aspects of the standard that are relevant to our business activities, products and services and the locations where they take place. To date, ten of our facilities have been certified. We consider the im- plementation of an environmental management system to be an integral part of a plan for any new location. Occupational Health and Safety
NORMA Group’s primary focus is to meet, at a bare minimum, all applicable health and safety regulations under local laws and regulations at each location in which we have operations. We have a recording and reporting system set up in each location to meet these requirements. An additional focus of our Group is to put in place a proactive occupational health and safety system at each location, with the goal of achieving certification under the OHSAS 18001 standard. To date, three of our locations have a certified system under this standard, and our remaining locations aim to implement respective systems and achieve certification by June 2011. We consider the implementation of an occupational health and safety system to be an integral part of establishing a new location. Our Group monitors two measures on a Group-wide basis with respect to occupational health and safety, specifically, the number of lost-time incidents per month and the safety incident rate per 1000 employees. Monitoring these two measures allows us to track trends and to identify where we have issues so that we can take any necessary corrective actions.
For further information on the regulatory environment in which we operate see “Regulatory Environment”. For information on risks relating to the environment that effect our Group, see “Risk Factors—Legal Risks—We are exposed to ongoing litigation and other legal and regulatory actions and risks in the course of our business, and we could incur significant liabilities and substantial legal fees”; “Risk Factors—Legal Risks—Changes in laws and regulations could adversely affect our business and competitive position, and we could incur liabilities and additional costs due to environmental, health and safety laws, as well as other laws and regulations”.
EMPLOYEES
Employees
As of December 31, 2010, we had 3,028 employees worldwide, (excluding temporary workforce). Since then, there has been no material change in the number of our employees until the date of this prospectus.
The following table shows our employees in annual average headcounts by operating segment for the years indicated (as calculated by using the number of employees on the last day of each calendar month divided by twelve):
2010 2009 2008
For the year ended December 31,
EMEA . . . . 2,416 2,146 2,969
of which: Employees on own payroll . . . . 2,025 2,068 2,739 of which: Leased staff . . . . 391 78 230
Americas . . . . 740 399 523
of which: Employees on own payroll . . . . 488 386 499 of which: Leased staff . . . . 252 13 24
Asia Pacific . . . . 326 283 161 of which: Employees on own payroll . . . . 317 240 155 of which: Leased staff . . . . 9 43 6
Not allocated to any segment . . . . 23 23 23
Total . . . . 3,505 2,849 3,676
of which: Employees on own payroll . . . . 2,853 2,717 3,416 of which: Leased staff . . . . 652 132 260
Pension Liabilities
Our companies provide both defined contribution and defined benefit pension plans for our employees. The nature of these pension obligations varies depending on the legal, tax and economic circumstances in the respective countries and the employees’ years of service and remuneration levels. On December 31, 2010, all pension liabilities of our companies amounted toA9.1 million, calculated in accordance with IFRS. The majority of these pension liabilities (A8.0 million) derives from a pension plan in accordance with German law for the employees of the former Rasmussen GmbH (now: NORMA Germany) which was closed in 1994, and three individual pension plans of the same company.
Moreover, some of our companies provide funded occupational pension plans. One of our companies, DNL Sweden, provides for a pension fund for a former managing director of the company with a market value of approximately SEK 18,500,000 (equals to approximatelyA2,100,000) in January 2011. The company has to pay 24.26% taxes on the amount the former managing director takes from the account. For this obligation, the company has build accruals in an amount of approximately SEK 4,480,000 (equals to approximatelyA508,400) which is 24.26% of the market value of the fund. The company will pay the taxes at the time the pension fund pays out the money to the former managing director.
For additional historical information regarding our pension liabilities, see Notes 11 and 26 to our IFRS financial statements for the year ended December 31, 2010 and Note 16 to our IFRS financial statements for the year ended December 31, 2009. See also “Risk Factors—Risks Relating to our Business—Due to our participation in a multi-employer pension plans, we could face exposure that extends beyond our obligations to our own employees”.
Incentive Plans
We provide different incentive programs for our employees; all programs are bonus programs. Members of our Management Board, currently consisting of five individuals, are eligible to receive annual bonuses if certain target criteria—based on the development of the Group’s Adjusted EBITDA (50%) and the Group’s cash flow (50%)—are fulfilled. Members of the senior management, representing approx. 200 individuals, participate in the Group’s annual incentive compensation plan (“AIC”). The bonus under the AIC is calculated on the basis of the Group’s net cash flow (40%), the Group’s Adjusted EBITDA (40%), and the individual business objectives (20%).
Our area sales manager, whose main focus is on the sales role, account manager, (senior) customer coordinators (as far as not covered by collective agreements), or similar positions in sales are eligible to participate
in the annual sales compensation plan (“ASC”). The bonus under the ASC is based on the results of our sales. Currently, approximately 50 individuals participate in this plan. Individuals can only participate in one of the aforementioned incentive/bonus schemes.
Cash Incentive Program
On July 1, 2008, NORMA Group implemented an operational performance incentive cash program (the “Cash
Incentive Program”) which is ultimately funded by the 3i Funds. The Cash Incentive Program includes
17 participants. The purpose of the Cash Incentive Program is to attract and retain selected highly qualified and valued management and key employees by offering them the opportunity to participate in the value creation of NORMA Group towards future growth.
For the purpose of this Cash Incentive Program, NORMA Group Holding GmbH provides to certain employees phantom share units, an economic non-equity participation equaling a virtual economic share in the Company in the total nominal amount of approximately 0.72% of the Company’s share capital prior to the offering. The virtual economic share reserved for the plan may be divided into up to 1,100,000 phantom shares and each participant under the Cash Incentive Program can be granted a maximum possible participation of 10,000 phantom shares. The actual amount ultimately payable by NORMA Group Holding GmbH is equal to such portion of the proceeds the participant would receive if he or she was a shareholder of the Company with a share having a nominal amount equal to the amount of his or her individual phantom unit. As of December 31, 2010, a total of 1,070,000 phantom share participations has been issued under the Cash Incentive Program.
The Cash Incentive Program is expected to expire at the closing of the offering. The payout will be funded by the 3i Funds.
Human Resources and Compliance
We attach great importance to motivating staff and providing our employees with opportunities to improve their qualifications and to take part in additional training programs. Our staff’s high level of competence forms the basis for all the services our companies provide. Our Group’s human resources (“HR”) department works in a decentralized manner. Thus, personnel service, personnel support and personnel development are performed directly by the local HR departments of the national organizations.
However, in order to retain and attract qualified staff, we have in place an institutionalized talent management process which applies to all our global, regional and local activities. We believe that to be a global market and competence leader in both engineered joining technologies and distribution services requires that we continuously increase our employees’ skills, as well as the opportunities resulting in an empowered work force with a culture of continuous improvement.
We have established an institutionalized compliance system with compliance guidelines for NORMA Group Holding GmbH and its worldwide subsidiaries. In 2011, we implemented a code of ethics which sets out the policy and measures of NORMA Group to comply with laws, rules and regulations, in particular with regard to conflicts of interests, confidentiality matters, competition law, anti-corruption, and to require personnel to observe honest and ethical conduct (the “Code of Conduct”). Our chief compliance officer is responsible for the implementation and administration of the Code of Conduct, the appointment of local compliance officers and the implementation of the sub-policies, such as our “conflict of interest review policy” and the “anti-corruption policy and compliance procedures”.
Company Works Agreement dated as of November 24, 2010
On November 24, 2010, management and works council of NORMA Germany and NORMA Group Holding GmbH entered into a company works agreement (Gesamtbetriebsvereinbarung) aiming to increase the compe- titiveness through production improvements in connection with our Global Excellence Program and to ensure the fulfillment of our skilled labor needs (the “Company Works Agreement”). The parties declared their intent to increase annual profitability maintain current working conditions of their employees, including collective bargaining coverage (Tarifbindung), and agreed on certain measures for site and employment protection (Standort- und Bescha¨ftigungssicherung). In addition, NORMA Germany and NORMA Group Holding GmbH agreed to maintain a minimum annual investment level with regards to the Group’s site in Maintal subject to a stable order situation. The Company Works Agreement will expire on June 30, 2015 without after-effects.