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Say.Do. Barco Company Report 2017


Say.Do. Barco Company Report 2017

Section A. Company Report 2017

Say.Do.Care.

Say.Do.Perform.

Barco Sustainability Report 2017

Financial Statements 2017

Section B. Non Financial Information Sustainability Report 2017

Section C. Financial Statements 2017

This is section A of Barco’s 2017 annual report. Other sections are available via the download center at ar.barco.com/2017.

Table of contents Letter from the CEO . . . . . . . . . . . . . . . . . . . . A/4

Governance . . . . . . . . . . . . . . . . . . . . . . . . A/52

Key figures . . . . . . . . . . . . . . . . . . . . . . . . . A/8 Financial highlights . . . . . . . . . . . . . . . . . . . . A/10

Risk management and control processes . . . . . . A/80 Management discussion . . . . . . . . . . . . . . . . A/90

Our company . . . . . . . . . . . . . . . . . . . . . . . A/12 Our activities . . . . . . . . . . . . . . . . . . . . . . . A/18 Our strategy . . . . . . . . . . . . . . . . . . . . . . . A/34

Shareholder information . . . . . . . . . . . . . . . A/104


Say.Do. At Barco, we strive to combine our zeal for innovation with a strong focus on execution and a clear commitment to outcome-based solutions. That is the new DNA we are now embracing. The cornerstone of this ambition is to instill a say-do mentality in our company culture; inspiring our people to ‘do what they say’ and ‘say what they do’. We aim to make this continual focus on transparency, problem-solving and execution a key element of our collaboration, and of our growth as a company. This will complement the Barco DNA with a powerful capability to translate innovative ideas into bright outcomes for every Barco stakeholder.


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Barco annual report 2017

Letter from the CEO Dear customers, business partners, employees and shareholders, We introduced and started to execute our renewed strategy, which includes an increased focus on our performance. The new strategy will help us keep pace with the market and changing customer needs. As we advanced on that strategy, we achieved consistent results: a +20% EBITDA increase and an EBITDA margin growth of 1.9 percentage points on flat organic sales. At the same time, we launched new exciting solutions in our core markets. Let me share some highlights with you in this letter; you can find the details further on in this report.


Letter of the CEO

Barco annual report 2017

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2017: building our capabilities Strengthened global leadership team In 2017, we further strengthened our leadership team. With new, experienced members, the team became more global and diversified. By blending the insights that the new members bring with the strong potential and competences available at Barco, we created a new dynamism – which is essential for us to drive our business forward.

To ensure that we achieve our objectives, we continuously strive to narrow the ‘say – do’ gap, turning PowerPoint ‘plans’ into executed ‘proofpoints’.

2017: Stakeholder outcomes From entitlement to empowerment To get a clear view of our identity, our market position and the strategic initiatives needed to boost value in our markets, we launched an active dialogue on Barco’s entitlement in 2017. The result is a new ambition statement – ‘enabling bright outcomes’ – and a revamped strategy.

Improving margins, solid cash performance Our focus on performance resulted in measurable impacts on our financial results, with EBITDA growing by more than 20%. This is a solid first step towards sustained profitable growth. Our ambition is to further amplify our efforts to improve the margin year after year, while reducing the dependency of profit growth on topline growth. In addition to improving our profitability performance, we generated solid free cash flow results in 2017.

Our strengthened leadership team creates the dynamism needed to drive our business forward.

To achieve these, we did have to make choices across the organization, including divesting our lighting business and redeploying investments from non-priority to core strategic business opportunities. While sometimes difficult, these decisions were a must to ensure a healthier basis for continued organic growth.

Stepping up our focus on execution: "Say.Do." One of the key vectors in our revamped strategy is a focus on performance. As we advanced into 2017, we saw the first positive results of this quest: Barco is becoming a more effective, leaner, more agile company. That helps us to remain competitive in and stay ahead of changing markets, while delivering healthy returns on our shareholders’ investments.


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Barco annual report 2017

2018: Executing our strategy Innovation delivered Of course, we retained the zeal for innovation so typical of Barco. 2017 saw the introduction of a series of exciting new products – all developed with the aim to enable bright outcomes. Our Entertainment division, for example, launched the unbelievable UDX projector and added new projectors to the F-range. In Enterprise, we added new models to our popular ClickShare range and launched UniSeeTM – a new-generation LCD video wall that raises the bar in many different fields. In Healthcare, we expanded our range of productivity tools for radiologists and we are working on the next generation of our Nexxis operating room solution.

New collaboration models Innovation at Barco, however, is also about exploring new business and collaboration models: we team up with experts, academic institutions, research centers, and ecosystem partners to better understand the market and co-create solutions. In addition, we increasingly communicate with customers to gauge their needs and strive to strengthen our bonds with our business partners.

Strong foundations in place We are striding into 2018 with confidence. We’ve taken some important steps forward in 2017, and Barco has every resource that it needs to create superior value for its customers, shareholders and employees. All of our businesses are leaders in their industries, where they deliver mission-critical solutions. The strategy update that we disclosed in 2017 will help us stay on track in today’s rapidly changing markets.

The strategy update that we disclosed in 2017 will help us stay on track in today’s rapidly changing markets.

Blending innovation with performance As a technology leader, we will keep our focus on innovation. More than 10% of our revenue will be reinvested in R&D. As I mentioned earlier, we will also be innovating business and collaboration models. We will continue to redefine the Gold Standard in every market where we operate, in order to fulfill the brand promise that Barco stands for. At the same time, we will strengthen our focus on execution through value engineering, driving commercial excellence and investing in local capabilities in emerging markets.


Letter of the CEO

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Thank you! Achieving superior customer outcomes Last but not least, we are advancing our capabilities to achieve superior customer outcomes, by combining hardware, software and services. Across every Barco business, we try to fully understand customer needs and explore new business models to learn how we can deliver and capture value throughout the solution lifecycle. The New Cinema Joint Venture that we announced in late 2017 is sure to become a key proof point in this exercise. It will foster the delivery of cinema hardware, software and services.

In closing, let me highlight how honored I am to lead this company, which has an extraordinary heritage and promising future. In 2017, we made progress on many fronts. We couldn’t have done it without the continued dedication and creative engagement of all our Barco people around the world. In addition, our Board of Directors, our clients and our shareholders have all embraced our new strategy.

We will combine our passion for innovation with a focus on performance and a quest for delivering superior customer outcomes.

Jan De Witte CEO

Sustainable impact: we care! Barco is convinced that sustainable business is the only way forward, as it offers value to every possible stakeholder. That is why we have fully integrated sustainability into our strategy. Sustainability is, of course, a continuous journey of learning and improving, yet 2017 was a pivotal year: we accelerated progress on our carbon footprint projects and put solid foundations in place to achieve meaningful objectives for our Planet, People and Communities.

Thank you all very much for your commitment and support. I look forward to enabling bright outcomes for the entire Barco ecosystem, together with all of you.


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Barco annual report 2017

Key figures

(in euro)

200

20

100

10

% of sales

(*) See 'Comments on the results'

2017

30

0.91

300

2016

40

1.45

400

1

2015

50

2017

500

9.9%

60

88.0

600

2016

70

8.0%

700

2

74.1

80

2015

800

7.2%

90

2017

900

2016

100

2015

1,000

2.01

107.1

1,085

Earnings per share

1,102

Ebitda (in millions of euro) *

1,029

1,100

Sales (in millions of euro)


Key figures

Barco annual report 2017

3,590

3,524

Carbon footprint Efficiency Barco operations (tCO2e /mio â‚Ź)

100

94.4

3,500

Employees Number of full-time equivalents (FTEs) Excluding temporary workforce

3,361

2.10

1.9

3,000 80 2,500

70

67.7

90

75.4

2

1.75

Dividend

60 2,000 1

50 1,500

40 30

1,000

2017

2016

10

2015

2017

2017 111%

2016

2016 225%

Pay-out ratio

2015

2015 131%

20 500

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Barco annual report 2017

Financial highlights IN MILLIONS OF EURO

2017

2016

2015

Income statement Orders Orderbook Sales

1,105.2

1,081.2

318.8

320.8

1,043.7 333.2

1,084.7

1,102.3

1,028.9

Gross profit

404.2

378.8

337.8

Gross profit margin

37.3%

34.4%

32.8%

EBITDA

107.1

88.0

74.1

EBITDA margin

9.9%

8.0%

7.2%

Adjusted EBIT

73.2

36.6

1.7

Adjusted EBIT margin

6.8%

3.3%

0.2%

Net income attributable to the equity holder of the parent

24.8

11.0

17.5

Net income margin

2.3%

1.0%

1.7%

EPS (in euro)

2.01

0.91

1.45

Balance sheet & Cash flow Equity Balance sheet total

593.5

615.5

611.7

1.065.0

1.159.2

1.140.3

Free cash flow

40.0

57.4

110.3

Net financial cash/(debt)

210.7

286.6

265.1

Operating capital employed

202.4

203.6

220.6

Net working capital

-41,6

-56.4

-21.0

IN THOUSANDS OF EURO

2017

2016

2015

Ratios DSO

55

55

58

Inventory turns

3.6

3.6

3.6

DPO ROCE (a)

(a) ROCE, excluding impact of amortizations related to capitalized product development costs (b) G ross dividend / share price at year-end closing date (c) Increase or decrease share price + gross dividend paid out in the year, divided by closing share price of previous year (d) Gross dividend*number of shares on 31 December / net income attributable to the equity holder of the parent (e) Share price 31 December / earnings per share

58

63

69

19%

15%

11%


Key figures

Barco annual report 2017

IN THOUSANDS OF EURO

2017

2016

A/11

2015

Share data Gross dividend

2.10

1.90

1.75

Gross dividend yield (b)

2.4%

2.4%

2.8%

Yearly return (c)

13.9%

33.0%

8.5%

Pay-out ratio (d)

110.7%

225.1%

130.9%

44.4

88.0

42.5

Price/earnings ratio (e)

Share price (in euro) Average closing price

86.90

65.90

58.37

Closing price on 31 December

89.25

80.04

61.60 22,189

Average number of shares traded daily

16,862

21,921

Stock market capitalization on 31 December (in millions)

1,166.0

1,045.1

801.6

Number of shares on 31 December (in thousands)

13,064

13,057

13,016

Extra-financial highlights IN MILLIONS OF EURO

2017

2016

2015

2014

Planet * Carbon footprint efficiency Barco operations (tCO2 /mio €)**

67.7

75.4

Carbon footprint efficiency Barco products (tCO2 /mio €)***

726.5

727.1

94.4

3,524

3,361

3,245

People Employees (FTE) on 31 December

3,590

Employee engagement (employee NPS score) Diversity: Gender equality (% women) Average hours of learning & development/employee

17 28.4%

28.2%

28%

28.8%

14.7

17.2

20.7

19.5

100% core

100% core

100% core

100% core

Communities Customer loyalty index Supplier compliance with RBA (EICC) Code of Conduct Community investment (financial support in community engagement) € Community involvement (# employees)

* The reporting period for carbon figures in this report is 2016 ** Scope 1,2,3 emissions (excl. end-user emissions) ** Scope 3 emissions (end-user emissions)

83 125,000 +600

87


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Barco annual report 2017

Our company Company profile

Our technology

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Our company

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Barco annual report 2017

Company profile Barco designs technology to enable bright outcomes around the world. Seeing beyond the image, we develop visualization and sharing solutions to help you work together, share insights, and wow audiences. Our focus is on three core markets: Enterprise (from meeting and control rooms to corporate spaces), Healthcare (from the radiology department to the operating room), and Entertainment (from movie theaters to live events and attractions).

Sales per division

Geographical breakdown of sales

2017

2017

Entertainment 49% Enterprise 28% Healthcare 22%

The Americas 36% EMEA** 32% Asia-Pacific 32%

Number of employees* 2015

Geographical breakdown of employees 3,361

The Americas

2016

3,524

EMEA**

51%

2017

3,590

Asia-Pacific

34%

* Number of full-time equivalents (FTEs) on 31/12/2017 excluding temporary workforce

** EMEA: Europe & Middle East & Africa

15%


Our company

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Geographical footprint Sites

Americas • Brazil • Canada • Colombia • Mexico • United States Asia-Pacific • Australia • China • Hong Kong • India • Japan • Malaysia • Singapore • South Korea • Taiwan

R&D and/or manufacturing facilities

Europe & Middle East • Belgium • France • Germany • Italy • Netherlands • Norway • Poland • Russia • Saudi Arabia • Spain • Sweden • Turkey • United Arab Emirates • United Kingdom

• Belgium • Canada (X2O) • China • Germany • India • Italy • South Korea (Advan) • Norway • Taiwan (Awind) • United States


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Barco annual report 2017

Our technology For over 85 years, technological innovation and agility have been the cornerstones of growth at Barco. Yet in today’s fast-paced, pressurepacked business climate, it may even be more crucial to embrace innovation than in the early Barco years. Building on years of experience and expertise in imaging, Barco invests generously in R&D in order to fuel the innovation pipeline and consolidate its market position.

Display technology We meet the highest requirements in visualization and bring a wide display portfolio to a variety of markets – from highresolution medical displays and rear-projection video walls to tiled LCD and LED solutions.

Connectivity platforms We bring to market a suite of software-enabled systems, including networking and cloud-based capabilities. Result? All-round connectivity for uninterrupted, shared, and mobile access to data, anytime, anywhere.

Projection technology Featuring one-chip or three-chip DLPÂŽ technology and brightness levels of up to 60,000 lumens, in 2D and 3D, our high-end and mid-segment projector models can be used for meeting rooms, digital cinema, post-production, virtual reality, simulation and events.

Image processing Our portfolio also includes a full range of image processing tools, media servers, and controllers. Format converters, matrix and presentation switchers, etc. guarantee the perfect image playback and management.


Our company

Display technology

Barco annual report 2017

Projection technology

Image processing

Collaboration technology

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Barco annual report 2017

Our activities Entertainment

Enterprise

Healthcare

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Barco annual report 2017

Entertainment Creating moments, enriching lives

Outcomes

10 YEARS

60,000 Our award-winning UDX 4K largevenue laser phosphor projectors work faultlessly for up to 60,000 hours. They help rental companies and AV integrators provide stunning experiences while saving both time and money.

10 YEARS

10

F series

Our SmartCare warranty program for smart laser cinema projectors guarantees 10 worry-free years of operation. In this way, it provides exhibitors with absolute peace of mind and low TCO.

In 2017, we extended our F series of 4K laser phosphor projectors with the rugged F70 and silent F80 projectors. Managers of fixed installations are now sure to find the right projector to meet their specific needs.


Our activities

Barco annual report 2017

Cinema 63% Venues & Hospitality 37%

2017

2016

A/21

Whether in cinemas, concert halls or museums; at theme parks, music festivals or in retail and advertising: Barco’s entertainment solutions are designed to turn heads and create compelling moments. By providing our customers with the most advanced projectors, LED displays and image processing solutions, we help them win fans, rather than audiences. Our increasing focus on providing convenience and services further helps them keep that fan base and grow their businesses.

Approximate distribution based on sales 2017

Highlights

100

300

4K

In 2017, we achieved the milestone of 100 all-laser cinema multiplexes installed worldwide. By going all-laser – i.e. combining flagship laser and smart laser series projectors – exhibitors are sure to realize substantial cost savings and operational efficiencies.

With an installed base of over 300 screens, our flagship laser series now is the most widely-deployed premium large format system in the world.

In 2017, we again extended our leading Event Master™ series – the most comprehensive and flexible 4K60p screen management solution available on the market today.


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Barco annual report 2017

Working hard to remain ahead of the curve

Wim Buyens has headed our Entertainment division for nine years. On 1 January 2018, he passed on the torch to Nicolas Vanden Abeele and became CEO of our New Cinema Joint Venture. How was his last year leading our Entertainment team? 2017 was a tough year for global cinema. Did Barco feel the heat of trends like on-demand video? Well, our business in the US was indeed impacted by a fickle box office which was mainly attributable to a poor film slate. Yet, we retained steady sales in Europe, grew 17% in China, and sales in India and Latin America were up, too. In the Middle East, our flagship laser projectors did particularly well. With a 50+% capture rate, we managed to retain our leadership position. Laser projection has become the new normal for cinemas. Do you see an equal take-up of flagship laser and laser phosphor projectors? Barco now has 16 models of DCI-compliant laser cinema projectors, each with its own mix of image quality and TCO benefits. That’s unique, and it’s why so many cinemas go all-Barco laser. Cinemas choose our smart laser series for smaller theaters and the flagship laser projector to provide an outstanding movie experience in premium theaters.

The combination of front-running hardware and software is our trump card in the Venues & Hospitality market. Wim Buyens CEO New Cinema Joint Venture


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Whatever model they choose, the projector eliminates all lamp-related hassles and costs throughout the entire multiplex, while ensuring excellent image quality. Did the premium cinema experience accelerate further in 2017? It definitely did. Today’s moviegoers want more than a good story; they want to be entertained, like they are in a theme park. More than being a supplier of digital cinema projectors, we want to help our customers meet that need, while being profitable too. That’s no easy feat, hence the idea of the new joint venture. It will enable us to strengthen the bonds with our customers and help them face the challenges of cinema today and tomorrow. How about the rest of Barco’s entertainment business? We’ve laid some excellent foundations for further growth in 2017. Over the past few years, the entertainment industry – i.e. music shows and theme parks, but also museums and corporate events – is always looking for technology that offers more pixels and higher brightness. Our new UDX projector and the ever-growing F series of single-chip projectors are up to that job. What’s more, our image processing solutions have leapfrogged those of our competitors. That combination of front-running hardware and software is our trump card – it helped us turn profitability around in the venues and hospitality market. So, is the Entertainment business ready to stand on its own two feet without the cinema business? I’m sure it is. 2018 will be a very different year of course, but I am confident that the Entertainment division will fare well. And I trust Nicolas to be the perfect person to gear it toward success.


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Barco annual report 2017

New Cinema Joint Venture:

Joining forces to create the cinema of the future Since January 2018, Barco’s cinema-related sales, marketing and services activities are no longer part of our Entertainment division. They will become part of a dedicated joint venture which we will establish during 2018 with China Film Group (CFG), Appotronics and investor group CITICPE. Together, we will offer next-generation products and services to the global cinema market (excluding mainland China). Barco does, however, retain full ownership of the assets and capabilities related to product management, R&D and manufacturing,

Meeting the needs of a shifting market Now that most of the world’s exhibitors have converted from 35mm to digital projection, it’s time for the cinema industry to start writing a new chapter. We’re entering the second wave of digitization: exhibitors are looking for ways to renew their digital equipment, with a focus on improving its operational efficiency and total cost of ownership. At

the same time, they understand the need to deliver exceptional movie experiences. The New Cinema Joint Venture will strengthen us. By enriching our expertise, solutions and experience with that of other experts, we'll be able to win in the shifting market.

55%

-9%

+80,000

The partners will fund the joint venture by contributing a total of USD 100 million. Once all partners have entered the joint venture, Barco will own 55%, Appotronics and CFG will each own 20% and CITICPE will have a 5% share.

We intend to sell 9% of our shares in BarcoCFG, thereby reducing our stake from 58% to 49%. As sales in the Chinese cinema market begins to shift to smaller cities, CFG is better positioned to lead this phase of development.

Barco currently has an installed base of over 80,000 projectors, illuminating more than 50% of screens worldwide. That leads to a huge potential for upgrades.


Our activities

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Clients want outcomes, not just specs. The new joint venture will help them shape the cinema of the future. We have earned our stripes in the market; it's time for the next step. Wim Buyens CEO of the cinema joint venture from 01/01/2018

A winning combination of products, technology and services In the New Cinema Joint Venture, we will combine our visualization and image processing technology with the best-in-class technology and solutions of experts CFG, Appotronics and CITICPE. Together, we’ll also develop innovative business models to help exhibitors upgrade to new technology, like flexible financing options, uptime insurance, operational partnerships, etc.

An all-in-one offering • Barco’s visualization and image processing technology • Appotronics laser technology and light source retrofit modules • China Film Group: premium cinema solutions and content • CITICPE’s financial consulting services • New services


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Barco annual report 2017

Enterprise Engaging you to unleash the power of shared knowledge

Outcomes

1 2

3

2

3

4 4

91%

1 +40%

3

of IT decision-makers see presentation technology problems as a high or moderate priority. Quick and easy to set up and use, ClickShare helps overcome technology issues in large as well as small meeting rooms.

of control room operators use more than 4 screens on the job. With OpSpace, they need only one keyb oard, m ouse an d audio set to control every screen and application. Result: less stress and better decisionmaking.

Our brand-new UniSeeTM platform bundles three elements – View, Mount and Connect – to revolutionize the LCD video wall. Ensuring a uniform view, fast installation, easy servicing, and high reliability, UniSeeTM is bound to enable bright outcomes.


Our activities

Barco annual report 2017

Corporate 57% Control rooms 43%

2017

2016

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Every Barco Enterprise solution is designed to help people collaborate better together by ensuring engaging experiences. From our large video walls, which provide operators with a crystal-clear overview, our ClickShare presentation system, which enables meeting participants to easily share ideas, and our classroom solutions, all the way to our new, flexible SaaS business models: they all help people unleash the power of shared knowledge – for brighter ideas and, ultimately, better results.

Approximate distribution based on sales 2017

Highlights

1st

80%

350,000

weConnect, our cloud-based collaborative learning solution, is the first Barco solution to now be offered as a service through a subscription-based model – for ultimate peace of mind.

of new car designs see their first light on a Barco screen. With our virtual reality systems, designers can immediately experience their creations up close and personal.

By the end of 2017, over 350,000 ClickShare units were sold. 40% of global Fortune 1000 companies use ClickShare – including the CSE-800 for corporate boardrooms that we launched in 2017 – to enhance meeting productivity.


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Barco annual report 2017

Delivering exceptional experiences throughout the customer journey In 2016, George Stromeyer took the helm of Barco’s Enterprise division. In last year’s annual report, he talked about the company’s strategy for the future, including some exciting new solutions and services. We put his words to the test. Could you briefly recap the strategy of the Enterprise division? Well, it’s all about ‘delivering experiences’: we want to help organizations fully exploit the opportunities of today’s digital world by providing experiences that enable, engage and inspire. More than that, we want to deliver exceptional experiences at every customer touchpoint: from acquisition to new services. Meeting that need requires a combination of hardware, software and services – which is what we’re increasingly offering. We are really evolving from a visualization company into an enabler of experiences. Could you illustrate that with examples? The brand-new UniSeeTM LCD video wall is a perfect example of that. More than designing a great product that ensures an outstanding viewing experience, we rethought the entire customer journey. That’s how we simplified the ordering, mounting and configuring processes. We even included registration upon activating the wall to make sure we’d stay

UniSeeTM illustrates how we are evolving from a visualization company into an enabler of experiences. George Stromeyer General Manager Enterprise


Our activities

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in touch with the customer. In addition, UniSeeTM is our first enterprise-wide product: it’s perfect for control rooms as well as lobbies, experience centers, meeting rooms, etc. The great thing about UniSeeTM is that everyone who discovers it is just as enthusiastic as we are. Last year, you also announced a cloud-enabled platform to offer Barco solutions as a service. Can you tell us more? The Digital Engagement Platform, as it is called, was indeed launched. The weConnect learning solution is the first Barco software to be available as a subscription-based service through the platform. We'll be introducing Overture AV control as SaaS very soon and there's much more to follow. Returning to the business bestseller: is ClickShare still on a roll? There are over 350,000 ClickShare units in meeting rooms around the world now, so ClickShare remains a star. The high-level CSE-800 model that we introduced in 2017 has further boosted its success. We’re now expanding our sales network to include more and more IT providers – in line with the shift from AV to IT. Moreover, we’re looking for opportunities to combine ClickShare and wePresent, our other wireless presentation solution, with our AV control tools, like Overture – another 2017 newcomer. Besides maximizing your market share in wireless presentation, what will 2018 bring? We want to make the operator experience profitable again, thanks to new solutions, further investments in value engineering and expansion of our sales network. In addition, we want to get to the point that we can scale Overture, our AV control offering, and weConnect for learning experiences. We’ve definitely got a solid strategy, a strong leadership team and the right global talent to make that happen!

Barco launched the ‘enabling bright outcomes’ baseline in 2017. How does the Enterprise division work to achieve that goal? More than offering amazing product experiences, we want to provide exceptional experiences throughout the customer journey – from acquisition to renewals and new services. That implies that we offer software and services, on top of hardware, and explore new business models. In this way, we’re the perfect partner to help our customers truly unleash the power of shared knowledge.


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Barco annual report 2017

Healthcare Enable better healthcare outcomes for more people

Outcomes

+10%

96%

95%

Radiologists that use a display with a calibrated luminance of 1000 cd/m2, like UnitiÂŽ, have a 10% greater chance of detecting microcalcifications.

of OR staff believe video integration could help save time and resources. With Nex xis, they can smoothly exchange high - res (4K) medical images.

of health IT managers say compliance of medical displays is a major hurdle. MediCal QAWeb automates compliance and reduces QA and service costs by more than 10%.


Our activities

Barco annual report 2017

Barco co-creates technology solutions for integrated care. From the imaging room and radiology department to specialist consultations and the surgical suite: we connect healthcare professionals at every patient touchpoint. They rely on our medical imaging solutions to deliver the complete picture they need to make life-critical decisions and provide the best possible treatment – all in order to ensure the best healthcare outcomes. It’s these outcomes that matter most to us: our solutions are designed to meet hospitals’ clinical, operational and financial needs.

Diagnostic imaging 77% Surgical 23%

2017

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2016 Approximate distribution based on sales 2017

Highlights

11

#1

+15%

Our toolset for a more intuitive workflow now includes 11 tools – 4 of which were launched in 2017 – all supporting radiologists with their increasingly busy and demanding workloads.

Our Coronis Uniti ® is the world's No. 1 preferred monitor for reading mammograms. Radiologists and breast cancer experts praise it for providing the very best diagnostic outcomes while easing radiologists’ workflows.

Sales in Asia Pacific and Latin America grew by 15% in 2017.


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Barco annual report 2017

Combining high quality, unique features, education and cost control keeps paying off When Filip Pintelon took the helm of Barco’s Healthcare division in 2015, he clearly defined the essence of the business: to co-create technology solutions that ensure the best possible healthcare outcomes for as many people as possible. Did Filip and his team get closer to achieving that mission in 2017? What do you consider the highlights of 2017 for the healthcare division? The growth of our diagnostics business in the US was really great news. In spite of budget constraints in every hospital, we did very well thanks to three different factors. Our market-leading portfolio is one of them. Coronis Uniti®, for example, remains a unique solution, putting Barco at the top, as does our growing range of productivity tools. Secondly, we made big investments in education – webinars, workshops, our website – in 2017 to explain how we help hospitals deliver better healthcare outcomes. That, too, helped us expand our reach. Last but not least, we also optimized sales: we appointed key accounts to visit big hospital groups and are now covering new regions like the West Coast. What about the results on other continents? While sales in Europe remained steady, we noticed strong growth in Asia Pacific (+20%) and Latin America (+15%). I’m

By sticking to state-of-the-art technology, we can really help hospitals deliver better healthcare outcomes. Filip Pintelon General Manager Healthcare


Our activities

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very happy about this, as it brings us a step closer to my dream of facilitating excellent healthcare everywhere on the globe. Unfortunately, however, we haven’t been able to boost sales in China: after achieving a 15% growth there in 2016, we achieved status quo figures this year. The good news is that we understand the reason why: our go-to-market strategy needs a makeover. We’re working on that now, together with Chang Tet Jong, the new country manager. Price must be an important argument there, as it is everywhere in today’s competitive market? It is, and I must say that we’re coping well. For several years now, we’ve managed to make our products more competitive without compromising on quality thanks to severe cost-cutting measures. Value engineering – smart design, production and procurement – has become a routine and is indeed a must, as competition is fierce. In 2016, you saw the first competitors in the surgical business. Did competition get tougher? It did. For years, we’ve had a first-mover advantage with Nexxis and then our 4K surgical displays. By now, every new – or refurbished – operating room is a digital OR, so surgical has become big business. It implies that competitors are claiming their piece of the pie, too. That led to a status quo figure for us in 2017. Still, our strategy is good and we continue to make substantial investments in our Nexxis platform. We are determined to maintain our leadership position in this growing market. What are the other focus points for 2018? Getting back to growth in China is one, as is a continued focus on value engineering. In addition, we want to bring our diagnostics expertise to niche markets, like we did with dental in 2017. Last but not least, we plan to deliver more and more services to enable ever-brighter health outcomes.

Barco launched the ‘enabling bright outcomes’ baseline in 2017. How does the Healthcare division work to achieve that goal? By sustaining our focus on delivering integrated, high-quality medical solutions. Barco solutions ensure the most accurate images, while raising productivity in reading rooms as well as operating theaters. In the coming years, we’ll increasingly add services to deliver added value and help hospitals achieve bright outcomes.


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Our strategy Ambition and strategy

Enabling bright outcomes

Lead by innovation

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Our strategy

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Focus to perform

Outcome-based solutions

Go for sustainable impact

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Our ambition

Our strategy

Barco’s mission is to enable bright outcomes by transforming content into insight and emotion.

We have worked hard over the past few years to drive our growth and strengthen our global leadership position in three key markets: Entertainment, Enterprise and Healthcare. Today, we have every asset we need to win in our respective markets. Based on our strong foundations, we updated the Barco strategy in 2017: we will combine our innovation efforts with a clear focus on performance and a commitment to deliver outcomes. We are confident that this approach will help us advance our growth while improving outcomes for all stakeholders.

Our core assets

People

Operational excellence

Global presence

Strong brand

Technology leadership

Solid financials

Market leadership in core markets


Our strategy

Barco annual report 2017

We enable bright outcomes by transforming content into insight and emotion.

2017 - 2020 Focus on innovation, performance and outcomes

2015 - 2017 Strengthen global leadership in three target markets

2013 - 2014 Gear up for growth in networked visualization global leadership

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Lead by

INNOVATION

Focus to

Planet

PERFORM

Offer

OUTCOME-BASED SOLUTIONS

People

Communities Go for

SUSTAINABLE IMPACT


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Enabling bright outcomes In February 2017, Barco changed its mission statement. Since then, everyone at Barco lives and breathes the new baseline: we are committed to ‘enabling bright outcomes’. To help us achieve that mission, we also upgraded our existing strategy.

New ways to live, play and work Our mission statement and strategy are inspired by our rapidly changing world, in which technology introduces new ways to live, play and work. This brings new opportunities, as well as new business models. In line with these trends, our customers are more and more demanding outcomes instead of pure products. To serve our customers even better with 'peace of mind' solutions we plan to enable bright outcomes by transforming data into insight and emotions. This will help us move beyond hardware solutions to include software and to step up in service solutions. It will also enable us to capture the entire lifecycle opportunity of our solutions.

Fusing innovation, performance and outcomes To cater to these expectations, Barco must evolve from being a tech ‘specs’ vendor into a partner that delivers outcomes, by combining hardware, software and services. This is why we included the outcome commitment in our updated strategy. That commitment is intertwined with a zeal for innovation, a characteristic that has continued to shape Barco since its earliest days. To unlock the full potential of Barco as a company, we also unceasingly focus on performance.

Going for sustainable impact When discussing how we will execute on that renewed strategy, everyone at Barco was unanimous: we want to work with respect – for our colleagues, the community we operate in and our planet. In other words: we want to go for sustainable impact. This is the Barco DNA, which will guide us on our path toward continuing success and delivering on our promise to enable bright outcomes.


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Lead by innovation Innovation has been the lifeblood of Barco for over 85 years. We’ve always been a technology company. Conceive, design and develop new technology: that’s what we do. Our solutions are often revolutionary and set the tone in their respective markets. Innovation at Barco, however, should be, and increasingly is, customer-oriented. In addition, innovation is about more than launching innovative products.

To ensure true innovation, we have Design thinking to start from the customers’ point of Engineers typically strive view. to challenge themselves; to evolve and come up with always better, brighter, stronger technologies and pro duct s , packed with impressive features. However, technology for technology’s Rethinking processes and business models sake does not add any value. To ensure true innovation, we That, too, is innovation: thinking outside the box about the have to start from the customers’ points of view. That’s way we work and do business. Manufacturing becomes lean why we introduced the concept of ‘design thinking’. When and agile. Development is transformed into co-creation with developing new solutions, we talk to customers and business customers, suppliers, peers and the academic world. In addipartners and put ourselves in their shoes to really understand tion, we review our sales channels and look for new ways their needs, realities and contexts. We then combine these to market our technology, for example, by selling outcomes insights with the possibilities offered by our technology and instead of products. the requirements for business success.


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UDX: the unbelievable projector In the spring of 2017, our Entertainment division launched the 4K UDX large venue projector. It is a fine example of customer-centric development: before designing the projector, Barco talked to customers and distilled their wants and needs into the new laser phosphor projector.

Barco has taken a big step forward. The UDX is a game-changer in laser projection technology. Niclas Ljung, CTO, Mediatec

This is how the UDX enables bright outcomes: Excellent images • unbelievable colors • powerful 4K processing without image quality loss and lower latency Peace of mind • easy to ship and set up, thanks to compact, rugged design • modular design ensures easy servicing


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UniSee™: a revolution in the LCD video wall market The UniSee™ LCD video wall that we launched in October 2017 is a perfect example of innovation in all its aspects. When developing UniSee™, our R&D colleagues took a step back, evaluated the pain points of existing solutions and reinvented the concept from the ground up. The result is a truly revolutionary concept that enables bright outcomes in many ways.

This is the most revolutionary technology improvement I’ve seen in video wall design since Barco’s inception. Sam Taylor ALMO Pro AV

An outstanding viewing experience • barely noticeable inter-tile gaps • panels are automatically calibrated and aligned Peace of mind • patented video wall mounting structure • modular design for easy servicing • long lifetime


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Workflow tools: helping radiologists work smarter, not harder Over the years, our researchers have built up extensive know-how on helping radiologists deal with the mounting challenges they face. Based on these insights, we develop groundbreaking solutions, like our Coronis Uniti® diagnostic display system, or our ever-growing set of software tools – 11 in total – to support radiologists as they tackle their increasingly busy and complex workloads.

Our intuitive workflow toolset, including popular tools like SpotView™, DimView™ and VIrtualView™ help radiologists work smarter, not harder, by: • increasing the visibility of subtle details • improving focus during reading sessions • accelerating the workflow

x2 Our SpotView™ Mag productivity tool zooms in on a small area and makes it twice as large – helping radiologists spot the tiniest details, faster.


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Focus on performance Bold innovation is no longer enough to remain a market leader in today’s changing world. Achieving a culture of execution will define our future success. This means we have to raise the bar in everything we do. We must work more effectively and in a more agile way so that we can innovate quicker, strengthen our commercial capabilities, control costs, etc. This focus on performance requires running the company in a different way and making high-impact choices.

We want to install a SAY.DO. mentality in our company culture and turn 'PowerPoint plans' into 'proofpoints'

Making choices In 2017, we identified four strategic areas to focus on: driving commercial excelJan De Witte CEO lence, value engineering, investing in local capabilities and working smarter. More than that, we have made – and will continue to make – explicit choices and More effective and more agile pivot if needed, based on our progress and the opportunities As we advanced into 2017, we saw the first positive results on the horizon. This means that we challenge procedures of our efforts. By stepping up our passion for execution, we and are not afraid to adapt them when they don’t make are becoming a more effective, leaner, more agile comsense. It also means letting go of certain businesses, like our pany. That means we are able to speedily respond to market lighting activities in Entertainment or our bedside solutions in changes and strengthen our competitiveness. In 2018, we Healthcare, and moving on to new ones. While sometimes will further boost these efforts by focusing on the four focal difficult, these decisions are a must to ensure a healthier basis areas we identified in 2017. We will work on these until they’ve for continued organic growth. become second nature.


Our strategy

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01.

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Driving commercial excellence To meet the needs of the world’s rapidly changing markets, we embarked upon a journey to professionalize sales about three years ago. Here’s how we want to drive a culture of commercial excellence:

02.

01. Think first, then act Before we start selling, we articulate and align our go-to-market strategy: we decide what markets we want to cover and map the market size, the cost of sales, the margins and the channels.

02. Trusting metrics

03.

As we increasingly rely on metrics, we are professionalizing our tools and training our sales teams on how to use them.

03. Value selling Rather than selling products, we want to deliver solutions and services that solve our customers’ business pains. In 2017, we trained +300 sales reps on how to embrace value selling.

04. Capturing more sales opportunities

04.

We are looking to create more opportunities for after-sales, upselling and cross-selling. Key Account Managers help us improve our cross-selling capabilities.

05. Joining forces We are intensifying our partnerships with resellers. In addition, sales is also increasingly involved in product development.

05.


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Value engineering As a technology company, we typically strive to always come up with better, brighter, stronger products. That, however, may not be what our customers really need and want. Value engineering helps us think how we can create value for our customers, while keeping in mind the profitability, serviceability, reliability, sustainability, etc. of our solutions.

The power of collaboration Collaboration is key in value engineering. We’re working in cross-functional teams to question product requirements, the product design and the manufacturing process and to look critically at the costs incurred at every step. Our engineers are also increasingly interacting with people in production and sales to optimize solutions, and we often team up with customers and suppliers.

Does my product have the right features?

Value engineering Design for ‘-ility’ How can I achieve a lower cost design?

• Profitability • Serviceability • Sustainability • Reliability • Manufacturability

Saving costs and meeting customer needs If done well, value engineering helps us cut costs and develop products that better meet customer needs, while often being better for the environment, too. Do I make and purchase my parts at the right costs?


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Doing global business requires local affinity. Glocalisation is the key to opening up new markets. Rajiv Bahlla Country director India

In country for country Barco knows that there is huge potential in emerging markets for products like our healthcare solutions and ClickShare. Yet doing business successfully implies that you know your customer really, really well. That’s why ‘going local’ in countries like China and India is key to our strategy.

Different markets = • different business models • different price points • different needs and requirements Business success requires • local leadership team • local design, engineering and manufacturing • local sales channels


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Offer outcome-based solutions 'Enabling bright outcomes' is Barco’s ambition statement: we want to help exhibitors create amazing movie experiences and help radiologists deliver the best possible care. In today’s digital – Netflix and Spotify – world, however, customers increasingly demand an ultimate peace of mind. For businesses, that implies a move to selling outcome-based solutions.

Projection, not just projectors Pay for awe-inspiring projection without buying projectors or for reliable diagnostic imaging without investing in our diagnostic display systems: that’s just two examples of outcome-based solutions that Barco could offer in the future. As our technology is mission-critical for our customers, the potential is huge.

Overhauling the way we work The road to this new business model is long. It implies that we have to change from being a tech ‘specs’ vendor to a partner that delivers outcomes – through hardware, software and services. So, we’ll have to keep strengthening our capabilities in these fields. More than that, it changes the dynamics of our relationships with customers and business partners. In other words: an outcome-based business model will require rethinking the way we work and do business.

Center of Excellence To support us on our journey, we have welcomed several new colleagues who will steer services-related projects. We have also established a brand-new Services Center of Excellence, where we’re molding new initiatives. Our joint efforts already led to the first results in 2017: our Digital Engagement Platform.


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The Digital Engagement Platform: our very first SaaS! In 2017, our Enterprise division launched a brand-new offering that perfectly illustrates our commitment to providing outcome-based solutions: our Digital Engagement Platform. Through this platform, we will be offering all kinds of subscription-based services to our partners and customers. In this model, our customers pay a monthly subscription fee for services that we provide. The benefits? The concept is truly a win-win. For our customers: • a low threshold to Barco products, without big upfront investments; • peace of mind: they are always using the best, most reliable, always-on Barco solutions; • attractive cost of ownership. For Barco: • a lower threshold to our solutions; • strategic, long-term partnerships with our customers; • recurring revenues; • happy users of Barco solutions.

In 2017, we launched weConnect, our education solution, via the Digital Engagement Platform.


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Go for sustainable impact When deciding how to execute on our strategy, we decided on a very clear path forward: we want to work with respect. Respect for our colleagues, for the community we operate in and for the planet we all live on. In other words, we will innovate, focus on performance and deliver outcome-based solutions in a sustainable way. More details and insights on our Sustainable Impact Program is available in Section B, the Barco Sustainability Report.

Going sustainable is smart business • It helps build customer loyalty: statistics show us that 40% to 80% of customers want to buy from a ‘responsible’ firm. • It helps to attract and retain talent: sustainable companies enjoy 55% stronger employee engagement. • It matches the aspirations of our shareholder base.

Planet, people and communities To support our quest for sustainable impact, we drafted a sustainability strategy. Based on conversations, comparisons and studies, we identified three sustainable development goals, which we translated in three focus domains: planet, communities and people. • Planet: act on climate change, in our operations and in the solutions we bring to our customers. • People: help our people respond proactively to change. • Communities: help the communities where we operate to thrive and make progress.

40% to 80%

55%

of customers want to buy from a ‘responsible’ firm

Sustainable companies enjoy 55% stronger employee engagement


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Governance Corporate governance statement

Board of Directors

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Declaration regarding the information given in the Annual Report 2017

The undersigned declare that: • The annual accounts, which are in line with the standards applicable for annual accounts, give a true and fair view of the capital, the financial situation and the results of the issuer and the consolidated companies; • The annual report gives a true and fair view of the development and the results of the company and of the position of the issuer and the consolidated companies, as well as a description of the main risks and uncertainties they are faced with.

Jan De Witte, CEO

Ann Desender, CFO


Governance

Barco annual report 2017

Corporate governance statement In accordance with article 96, §2 of the Companies Code, Barco applies the Corporate Governance Code 2009 as reference code. This code can be downloaded via the link www.CorporateGovernanceCommittee.be Barco deviates from art. 8.4 of the Corporate Governance Code. Barco makes the information defined in this article available only on its website. An analysis of website traffic revealed that visitors search for this information on the webpages themselves, rather than in the Corporate Governance Charter, which is also available on the website.

Barco’s Corporate Governance Charter is available for download at www.barco.com/corporategovernance

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Board of Directors

Charles Beauduin

Jan De Witte

Frank Donck

Bruno Holthof

Ashok K. Jain

Hilde Laga


Governance

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Luc Missorten

Jan P. Oosterveld

An Steegen

Christina von Wackerbarth

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Board of Directors Situation on 1 February 2018 Chairman

Charles Beauduin

2020*

Directors

Jan De Witte

2020*

An Steegen (1)

2020*

Praksis BVBA (represented by Bruno Holthof) (1)

2018*

Luc Missorten (1)

2018*

Secretary

Oosterveld Nederland B.V. (represented by Jan P. Oosterveld)

2018*

Kanku BVBA (represented by Christina von Wackerbarth)

2018*

Adisys Corporation (represented by Ashok K. Jain)

2020*

Hilde Laga (1)

2018*

Frank Donck (1)

2020*

Kurt Verheggen

General Counsel

(1) independent directors // * date on which the term of office expires: end of the annual meeting

Charles Beauduin (°1959) has been CEO and owner of Michel Van de Wiele NV since 1993. Van de Wiele is an international technology player and leader in solutions for the textile industry. Mr. Beauduin holds several positions in trade associations and employer organizations. He holds a Master of Law from KU Leuven and an MBA from Harvard Business School. Mr. Beauduin has broad professional management experience, including international assignments in Asia and the United States.

Jan De Witte (°1964) is CEO of Barco as of September 2016. He is a global leader who has served in a variety of operational and business leadership roles over the past 25 years, delivering operational excellence, product development and growth in services, solutions and software businesses for technology companies.

Prior to joining Barco, Mr. De Witte was an officer of General Electric Cy. (GE), and CEO of the Software and Solutions business in the Healthcare Division. During his 17-year, tenure with GE, he worked in global management roles in manufacturing supply chain, Quality/Lean Six Sigma, services and software solutions and lived in Chicago, Milwaukee and Paris. Prior to GE, Mr. De Witte held operational management positions in supply chain and manufacturing at Procter & Gamble in Europe. He also served as Senior Consultant with McKinsey & Company, serving clients in airline, process and high tech industries across Europe. Mr. De Witte holds a Master of Electromechanical Engineering from KU Leuven, and an MBA from Harvard Business School.


Governance

Frank Donck (°1965) has been the managing director of investment holding company 3D NV since 1998, investing in a mix of long-term public equity, private equity and real estate. He also serves as Chairman of Atenor Group NV and Telecolumbus AG, as non-executive director of KBC Group NV and as independent director of Elia System Operator NV. Frank Donck holds a Master of Law from the University of Ghent and he obtained a Master of Finance from Vlerick Business School. He started his career as investment manager for Investco NV and was a board member for several listed and privately owned companies. Mr. Donck was Chairman of Telenet Group Holding NV. He is also vice-chairman of Vlerick Business School and is a member of Belgium’s Corporate Governance Commission.

Bruno Holthof (°1961) is the Chief Executive Officer (CEO) of Oxford University Hospitals Foundation Trust (OUHFT). OUHFT employs 12,000 staff across four hospital sites and 44 other locations. Before OUHFT, he was CEO of the Antwerp Hospital Network from January 2004 until September 2015. During this period, he transformed ZNA into the most profitable hospital group in Belgium. Before becoming a CEO, he was a partner at McKinsey & Company. During this period, he served a wide range of healthcare clients in Europe and the United States and gained significant expertise in the areas of strategy, organization and operations. Bruno Holthof is a member of the Board of Barco, and a member of the Board of Armonea, a European private care home provider. He holds an MBA from Harvard Business School and an MD/PhD from the University of Leuven.

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Ashok K. Jain (°1955) holds a Master of Technology degree from the Indian Institute of Technology in Delhi, India. During his career, Mr. Jain has founded several technology start-ups and has converted them into successful businesses through strong leadership coupled with insights into emerging opportunities and trends in the global economy. Mr. Jain was founder and Chairman of the Board of IP Video Systems, which was acquired by Barco in February 2012. He is currently a General Partner at Co=Creation=Capital LLC. Mr. Jain is of Indian origin and has US citizenship.

Hilde Laga (°1956) holds a PhD in law. She is one of the founding partners of the law firm Laga, which she led as managing partner and head of the corporate M&A practice until 2013. Hilde Laga joined the Board of Directors of Barco NV and NV Greenyard Foods in 2014. In 2015, she joined the Board of Directors of Agfa-Gevaert NV and of Gimv NV. In 2016, she became president of Gimv NV. She is a member of the Belgian Corporate Governance Committee and served as a member of the supervisory board of the F.S.M.A. (formerly C.B.F.A) until 2014.

Luc Missorten (°1955) is currently Chairman of the Board of Directors of Ontex and member of the Board of Gimv NV, Recticel, Scandinavian Tobacco Group A/S and Corelio. He served on the boards of LMS, Vandemoortele and Bank Degroof. Throughout his professional career and until the end of 2014, Mr. Missorten exercised executive roles at various companies, such as Corelio (CEO), UCB (CFO) and ABInbev (CFO). He holds a law degree from KU Leuven, a Master of Laws from the University of California–Berkeley and a Certificate of Advanced European Studies from the College of Europe in Bruges.


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Changes Jan P. Oosterveld (°1944) held several senior management positions at Royal Philips Electronics before he retired in 2004 as member of the Group Management Committee. He is a professor at IESE, owns a consultancy company and holds several board positions. Mr. Oosterveld has a Master of Mechanical Engineering from Eindhoven Technical University and an MBA from IESE Business School, Barcelona.

Ann Steegen (°1971) is executive vice president of Semiconductor Technology & Systems at imec, a world-leading nanotech knowledge center in Leuven, Belgium. She is responsible for developing state-of-the-art nanoelectronics technology to accelerate the growth of a connected and sustainable society. Dr. Steegen is a world-recognized authority in nanoelectronics that enable system solutions for IoT infrastructure, sensors and actuator-based applications. She began her career as R&D director at IBM in New York. She holds a PhD in material science from KU Leuven and more than 100 publications and patents.

Christina von Wackerbarth (°1954) has held several top positions at VNU Belgium, VNU Magazines International, Sanoma WSOY and the Flemish public broadcaster VRT. Today, she is active as international consultant and executive coach ad INSEAD Leadership Development Center and in private practice for major global firms in many industries. She has served on various boards, including those of telecom operator Mobistar in Belgium and Tamedia in Switzerland. Ms. von Wackerbarth holds a degree in linguistics, an AMP diploma from INSEAD (France), a Certificate in Financial Management at UAMS (Belgium), a MSc in consulting and clinical coaching from HEC (France) and the same diploma from INSEAD (France).

After serving as director for nearly 17 years, Eric Van Zele resigned on 27 April 2017. ADP Vision BVBA, permanently represented by Antoon De Proft, did not seek renewal of his directorship due to other professional duties. At the general meeting of 27 April 2017, the shareholders appointed Jan De Witte and An Steegen, and reappointed Adisys Corporation, permanently represented by Ashok Jain and Frank Donck as directors. With the appointment of Ms. Steegen, the composition of the Board meets the statutory requirement for gender diversity. Following the appointment of Mr. De Witte, the Board appointed him managing director on 29 April 2017. All directors hold or have held senior positions in leading international companies or organizations. Their biographies can be found on pages A/56-A/60 of this annual report.

Board Committee Further to the changes in the Board, the composition of the Remuneration & Nomination Committee and the Strategic & Technology Committee has also been adapted accordingly.

Strategic and Technology Committee As of 26 June 2017, the Strategic & Technology Committee is composed as follows: Mr. Charles Beauduin, who acts as Chairman, Mr. Jan De Witte, Mr. Bruno Holthof, Mr. Jan P. Oosterveld, Mr. Ashok Jain and Mrs. An Steegen.


Governance

Audit Committee The Audit Committee is composed of three members, Mr. Luc Missorten, who acts as Chairman, Mr. Bruno Holthof and Mr. Jan P. Oosterveld. Mr. Missorten and Mr. Holthof are independent directors. The Audit Committee’s members have relevant expertise in financial, accounting and legal matters as shown in the biographies on pages A/56-A/60. The Board of Directors therefore opines that the Audit Committee meets the statutory requirements of independence and expertise in accounting and auditing. Each year, the Audit Committee assesses its composition and its operation, evaluates its own effectiveness and makes the necessary recommendations regarding these matters to the Board of Directors. Both the Statutory Auditor and the head of Internal Audit have direct and unlimited access to the Chairman of the Audit Committee and to the Chairman of the Board of Directors.

Remuneration and Nomination Committee The Board of Directors have combined the Remuneration Committee and the Nomination Committee into a single committee. As of 27 April 2017, the Remuneration & Nomination Committee consists of three directors: Mr. Charles Beauduin, who acts as Chairman, Mr. Luc Missorten and Mrs. Hilde Laga. Mr. Missorten and Mrs. Laga are independent non-executive directors. The Committee has the necessary expertise to perform its mission.

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Core Leadership Team

Jan De Witte

An Dewaele

Nicolas Vanden Abeele

George Stromeyer

CEO

Senior VP - Chief HR Officer

Ann Desender

Filip Pintelon

Senior VP - CFO

Senior VP - GM Healthcare

Senior VP - GM Entertainment

Wim Buyens

CEO - New Cinema Joint Venture

Senior VP - GM Enterprise

Piet Candeel

Senior VP - EMEA


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Ney Corsino

Senior VP - Americas

Chang Tet Jong

Senior VP - MD Barco China

Olivier Croly

Senior VP - APAC

Johan Heyman

Senior VP - Operations

Senior VP - Information Technologies

Kurt Verheggen

Senior VP - General Counsel

Xavier Bourgois


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Jan De Witte See biographies of Board of Directors (A/58 - A/60)

Ann Desender Ann Desender joined Barco in 2008 and has been leading Barco’s global finance team since 2010. Prior to joining Barco, she held management positions as Corporate Director of Finance & Reporting at Unilin and was a Senior Audit Manager at Arthur Andersen and Deloitte. Mrs. Desender holds a Master of Applied Economic Sciences from the University of Ghent and completed an advanced management program at IESE Barcelona.

An Dewaele is Chief Human Resources Officer. Prior to joining Barco in 2017, she worked for five years as an HR consultant with De Witte & Morel, followed by 20 years with the Volvo Group, where she held several senior HR positions, both local and global, on operational and strategic levels. Mrs. Dewaele holds a Master of Industrial Psychology from the University of Ghent. She is also graduate of Vlerick’s Business School Compensation and Benefits Management Program.

Filip Pintelon joined Barco in 2008 and has been successively President of Avionics & Simulation, President of Media, Entertainment & Simulation, and COO. As of early 2015, he became General Manager of the Healthcare division, and currently also acts as ad interim CTO. Prior to joining Barco, he held top positions at Siemens Simulation & Testing, Accenture and The Boston Consulting Group. After graduating from KU Leuven with a Master of Mathematics & Informatics in 1986, Mr. Pintelon earned an MBA from Vlerick Leuven Gent Management School.

Nicolas Vanden Abeele is General Manager of the Entertainment division. He joined Barco in December 2017. Mr. Vanden Abeele has over 20 years of experience in the technology and process industry in global leadership roles across the globe, having been stationed during his career in the Americas, Asia (China/ Singapore) and Europe. Prior to joining Barco, he was a division head and part of the Executive Committee of the Etex Group. From 1997 until 2010, he held several leadership positions in regional and business divisional roles at Alcatel-Lucent. He started his career at Arthur Andersen in management and strategy consulting. Mr. Vanden Abeele holds a degree in business administration from KU Leuven, and a masters’ degree in business from the College of Europe and Solvay School of Management.

Wim Buyens heads the New Cinema Joint Venture. He has held several senior management positions in high tech companies during the past 15 years. He started his career in IT and CAD/CAM, later joining the Danish company Brüel & Kjaer where he enjoyed several global senior management positions in sales and product strategy. Mr. Buyens started his career at Barco in November 2007 as Vice President Digital Cinema. He has also been appointed in 2017 as chairman of the board of governors of the Advanced Imaging Society in Hollywood. He has been General Manager of the Barco Entertainment division for 7 years. Mr. Buyens holds a degree in Engineering and obtained his executive management at Stanford University and IMD in Lausanne.


Governance

George Stromeyer began his career with Raychem Corporation in 1988. Since then, he has assumed roles of increasing responsibility for global technology commercialization with Scientific Atlanta Inc., Cisco Inc. and Harmonic Inc. Mr. Stromeyer joined Barco in February of 2016 to lead the Enterprise division, which integrates seven worldwide sites. A native of Silicon Valley, he has developed a multi-cultural, multilingual background, with extensive years living and working in Europe and Latin America. George Stromeyer holds a Bachelor of Science in Mechanical Engineering from Cornell University and a Master of Business Administration from the Tuck School at Dartmouth College.

Piet Candeel heads the EMEA region for Barco. Prior to his present position, he was the General Manager of the Healthcare division for over 10 years. Preceding that assignment, he held several positions in marketing, sales and general management in a variety of business units in Barco. Mr. Candeel is an Officer of Nautical Electronics, holds a post-graduate degree in marketing from EHSAL Brussels and an MBA from the University of Antwerp (UFSIA). He is also a graduate of Stanford University’s Executive Program (SEP).

Ney Corsino is the Regional President of the Americas. Prior to this, he managed the International Sales and Sales Operations of Barco. Before joining Barco, he held several management positions at Philips, through various industry segments, in foreign assignments around the globe. Mr. Corsino holds a degree in electronic engineering with post-graduate studies in economics. He further extended his executive education at Insead and Kellogg School of Management.

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Chang Tet Jong joined Barco China as Senior Vice President and Managing Director on 1 April, 2017 and is a member of Barco's Core Leadership Team. He is responsible for leading the Greater China organization and Barco’s activities in the China region. This includes the governance of the different joint ventures and other strategic relationships. Mr. Chang brings 30 years of experience to Barco across R&D, sales & marketing and general management. He has a diverse professional background in several Asia Pacific countries, notably in China, South East Asia and India. He has also worked in Western Europe and has lived in Brussels for a few years. Prior to his current role, he was the Vice Chairman and General Manager of Sanbei Seed and Head of Corn and Vegetables business at Syngenta. Mr. Chang holds a Master of Science from Oklahoma State University, USA.

Olivier Croly joined Barco in 2017 as Senior Vice President of APAC. Prior to joining Barco, he held top positions at GE Healthcare & Philips, leading businesses across EMEA & Asia. After graduating from the National Telecom Institute with a Master of Telecommunications & Informatics in 1988, Mr. Croly earned an MBA from Paris Dauphine University.


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Johan Heyman is Vice President Operations & Logistics, managing Barco's manufacturing sites worldwide as well as the worldwide Logistics Procurement, Quality and Facilities teams. He joined the company in 2008. Before joining Barco, he held several management positions in the semiconductor industry at Alcatel Microelectronics, AMI Semiconductor and ON Semiconductor. Mr. Heyman holds a Master of Electronic Engineering from the University of Ghent as well as a post-graduate degree in industrial management from the same university.

Xavier Bourgois is Senior Vice President of Information Technologies. He joined Barco in 2015 after a career at General Electric and continuing at The Stanley Works, International Paper and bpost. He held positions of increasing leadership in Operations, Supply Chain, IT and Business Transformation. Xavier holds an MBA from the University of Chicago Booth School of Business and a Master of Mechanical Engineering from KU Leuven.

Kurt Verheggen serves as Company Secretary of the Board. He is the General Counsel of Barco. He started his career with the law firm Linklaters and then worked as legal counsel for CMB, Engie and General Electric. He holds a law degree from KU Leuven, a DEUG en droit from UniversitĂŠ de Havre, a Master of Laws from Tulane University Law School in New Orleans and a Master of Real Estate from Antwerp Management School.


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Activity report on Board and Committee meetings Board of Directors Refer to Title 1 and 2 of Barco’s Corporate Governance Charter for an overview of the responsibilities of the Board of Directors and its Committees. The table below provides a comprehensive overview of the directors’ attendance at Board of Directors and Committee meetings during the 2017 calendar year:

STRATEGIC & TECHNOLOGY COMMITTEE

7

3

4

Antoon De Proft (1)

2

2

Jan De Witte

5

Frank Donck (1)

7

Bruno Holthof (1)

7

Ashok K. Jain

7

Hilde Laga (1)

7

Luc Missorten (1)

7

5

Jan P. Oosterveld

7

5

An Steegen (1)

5

Christina von Wackerbarth

5

Eric Van Zele

2

(1) independent directors

AUDIT COMMITTEE

Charles Beauduin

BOARD OF DIRECTORS

REMUNERATION & NOMINATION COMMITTEE

Directors’ attendance at Board and Committee meetings

5

3

5

2

3 4 3 5

In 2017, the Board of Directors met seven times. In February, the Directors met in Amsterdam (the Netherlands) and visited the ISE tradeshow to learn about the newest product offerings and latest technology trends in the audiovisual industry. At every meeting, the Board of Directors reviewed and discussed the financial results as well as the short to mid-term financial forecast of the company. At the beginning of the year, upon recommendation by the Audit Committee, the Board approved the financial results of 2016 and proposed the dividend for approval by the shareholders. It also deliberated on the renewal of the director mandates as presented by the Remuneration and Nomination Committee. The Board, in close concert with the Core Leadership Team, reflected on each of the divisions’ strategies for the short to mid-term, discussed and decided upon the growth initiatives for the company and approved the 2018 financial budget. The Board closely monitored the implementation of strategic projects such as the sale of Barco's lighting activity and the New Cinema Joint Venture for cinema with China Film Group, Appotronics and CITIC. Finally, the Board also attended several demonstrations of new technologies in areas such as automated decision support and nearseamless LCD.

2 2 2

Audit Committee The Audit Committee meets at least twice a year with the Statutory Auditor and the head of Internal Audit to consult about matters falling under the Committee’s authority and the findings of the internal audits. The CEO and CFO also attend the meetings of the Audit Committee, unless the members of the Audit Committee wish to meet separately.


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The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the: • risk management and internal control arrangements; • reliability and integrity of the Group’s financial statements and periodical and occasional reporting; • compliance with legal and regulatory requirements as well as the Code of Ethics; • performance, qualifications and independence of the external auditors; • performance of the internal audit function. In 2017, the Audit Committee convened five times. The Chairman of the Audit Committee reported the outcome of each meeting to the Board of Directors. The yearly report of the activities of the Audit Committee, including the Audit Committee’s self-assessment, has been submitted to the Board of Directors. The Statutory Auditor attended three meetings during which they reported on the results of their audit procedures and highlighted specific attention points. The Statutory Auditor’s management letter contained no recommendations for material adjustments. The Audit Committee reviewed the Group’s overall risk areas and risk management and control procedures related to the following areas: legal & compliance, IT, currency and treasury instrument, health, safety and environmental, internal control and the insurance program. Each quarter, the financial reports are discussed with special attention to the critical accounting judgments and uncertainties, consistent application of valuation rules and off balance sheet obligations. The Audit Committee meeting of December is dedicated to the preparation of the year-end closing, with a particular focus on the review of the impairment testing procedures performed on goodwill and on capitalized development cost.

Remuneration and Nomination Committee The Remuneration and Nomination Committee fulfills the mission imposed on it by law and meets at least three times per year, as well as whenever the Committee needs to address imminent topics within the scope of its responsibilities. The CEO is invited to meetings, except for matters that concern him personally. The meetings are prepared by the Chief HR Officer, who attends the meetings. The Committee gives its opinion on appointments to the Board of Directors (Chairman, new members, renewals and committees) and to Core Leadership Team positions. Other topics for the agenda of the committee typically are remuneration policies, senior leadership remuneration, critical successions and nominations. In fulfilling its responsibilities, the Remuneration and Nomination Committee has access to all resources that it deems appropriate, including external advice. The Committee is aware of the importance of diversity in the composition of the Board of Directors in general and of cultural and gender diversity in particular. The Committee took this into account in the recent director appointments, according to article 526 quater §2 of the Companies Code. For further reference on how the company deals with diversity and equal opportunities we refer to the sustainability section of this report (Sustainable Impact Plan – people). In 2017, the Remuneration and Nomination Committee met five times. The HR Plan for 2017-2020 was presented to the Committee at the beginning of the year. The Remuneration and Nomination Committee has reviewed the remuneration of the Core Leadership Team and the CEO. This included the definition and evaluation of bonus criteria,


Governance

bonus deferral principles as well as an overall assessment of composition and positioning of the reward packages based on external data. This was done with regard to the 2016 bonus review as well as the 2017 salary review and bonus plans. The Remuneration and Nomination Committee discussed the results of a broad global study on pay mix (base salary, short-term incentives and long-term incentives) and possible reward tools, providing direction for the Barco Reward Strategy. The nomination of new Board members, new Core Leadership Team members, and the performance as well as the succession of the Core Leadership Team were also on the agenda. In preparation for the general meeting, the Committee prepared and reviewed the remuneration report. With regard to the 2017 stock option plan, the Committee discussed and confirmed the 2017 plan guidelines. Particular attention was drawn to the balance between the different components of senior management remuneration and the relative weight of the equity-based part, before approving and submitting it for Board approval. Upon the CEO’s recommendation, the Committee approved the grants for the Core Leadership Team and the principles for eligibility of Barco employees. The grant for the CEO was proposed and reviewed by the Committee in preparation for Board approval. In preparation for 2018, the proposed salary increase budgets for the different countries were reviewed. Following the announcement to set up a new joint venture which will focus on commercializing cinema solutions, a number of HR aspects of this change have been highlighted to the Committee.

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Strategic and Technology Committee The Board of Directors has set up a Strategic and Technology Committee, including the Chairman and the CEO. The Chairman presides over this Committee. The Committee meets when an issue is introduced by the CEO. Members of the Core Leadership Team and other members of the Board can be invited to attend meetings of the Committee. The Committee meets at least one time per year to evaluate the existing strategy and technology roadmap. The Strategic and Technology Committee discusses options that could influence the company’s strategic path. Possible topics include mergers & acquisitions, investments in new technologies and markets or regions that could have an important impact on the future of the company. This relates to investments running over a number of years that involve a minimum commitment by the company of 10 million euro over the entire duration of the project. In 2017, the Strategic and Technology Committee met four times. The Committee organized specific working sessions by division, thus ensuring appropriate depth and focus for each of Barco’s divisions. The Core Leadership Team presented a select number of proposals for acquisitions. The Strategic and Technology Committee conducted in-depth discussions about the strategic value of the proposed transactions in view of the company’s long-term strategy. The Committee also evaluated the opportunities as well as the risk profiles of the projects and gave appropriate instructions regarding the transaction parameters.


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Evaluation of the Board of Directors and its Committees The Board of Directors regularly carries out a process of self-evaluation. The intention is to evaluate the functioning of the Board as a whole and of its Committees. In this respect, individual and private interviews are held with each of the directors, leading to a report which is submitted to the full Board for review and action. The topics discussed are: the quality of the interaction between management and the Board, the quality of the information and documents submitted to the Board, the preparation of the Board meetings, the quality of the discussions and decision-making of the Board, the extent to which all relevant strategic, organizational and managerial issues are addressed by the Board and the contribution of all Board members to the decisionmaking process of the Board. This process allows for actions to be taken, aiming at the continuous improvement of the governance of the company. Moreover, prior to a director’s (re-) appointment, the Remuneration and Nomination Committee discusses and evaluates the individual director’s contribution to the Board. The above is fully in line with the Corporate Governance Code. Reference is also made to Title 1 (1.3) of the company’s Corporate Governance Charter at www.barco.com/corporategovernance


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Remuneration report for financial year 2017 Procedures for developing the remuneration policy and for determining the remuneration granted to non-executive directors and members of the Core Leadership Team The remuneration policy for the Board and CLT takes account of prevailing legislation, the Corporate Governance Code and market data. It is monitored and regularly checked by the Remuneration and Nomination Committee – with the assistance of specialist members of staff – to see whether it complies with changes in the law, the Corporate Governance Code, and prevailing market practices and trends. The Chairman of the Remuneration and Nomination Committee informs the Board of the Committee's activities and advises it of any changes to the remuneration policy. If required by law, the Board will submit any policy changes to the General Meeting for approval.

Remuneration awarded to non-executive directors (in euro) On 27 April 2017, pursuant to article 17 of the Articles of Association, the General Meeting set the aggregate annual remuneration for the year 2017 at 2,426,043 euro for the entire Board of Directors. This amount also includes the remuneration of the executive director. The balance of the amount was apportioned among the other members of the Board in line with its internal rules.

The remuneration paid to non-executive directors consists solely of an annual fixed component plus the fee received for each meeting attended. In light of the considerable time he devotes to the ongoing supervision of Barco group affairs, the Chairman of the Board receives a different remuneration package that comprises solely a fixed component, which is set separately by the Remuneration and Nomination Committee and approved by the Board. The Ordinary Shareholders’ Meeting of 25 April 2013 decided to set director’s pay, starting from the 2013 financial year, and to grant: • an annual gross fixed compensation of 100,000 euro for the Chairman of the Board • an annual gross fixed compensation of 20,500 euro per director to non-executive directors and additionally an individual attendance fee of 2,550 euro gross per Board meeting attended • 2,550 euro gross for members of the Audit Committee and 5,125 euro gross for its Chairman for each meeting of the committee attended • 2,550 euro gross for members of the Remuneration and Nomination Committee for each meeting of the committee attended • 2,550 euro gross per full day and 1,500 euro gross per half day for members of the Strategic & Technology Committee for each meeting of the committee attended • the Chairman of the Board, the CEO and the members of the CLT do not receive attendance fees for taking part in meetings of the Board and the committees Non-executive directors do not receive any variable compensation linked to results or other performance criteria. They are not entitled to stock options or shares, nor to any supplemental pension scheme. These remunerations are charged as general costs.


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Individual remuneration awarded to non-executive directors Board of Directors FIXED REMUNERATION Charles Beauduin

BOARD ATTENDANCE

COMMITTEE ATTENDANCE

100,000

TOTAL 2017 100,000

Antoon De Proft

10,250

2,550

5,100

17,900

Frank Donck

20,500

17,850

0

38,350

Bruno Holthof

20,500

17,850

17,250

55,600

Ashok K. Jain

20,500

17,850

6,000

44,350

Hilde Laga

20,500

17,850

7,650

46,000

Luc Missorten

20,500

17,850

38,375

76,725

Jan P. Oosterveld

20,500

17,850

12,750

51,100

An Steegen

13,667

12,750

3,000

29,417

Christina von Wackerbarth

20,500

12,750

5,100

38,350

6,833

5,100

3,000

14,933

Eric Van Zele

At the company’s request, the following directors have taken up specific assignments outside the scope of their directorship for which they have been compensated as described hereafter: • Jan P. Oosterveld is a non-executive director of Barco BV (Netherlands) and receives a fixed remuneration of 12,000 euro per year • Ashok K. Jain: based on his extensive experience in Silicon Valley, Mr. Ashok K. Jain is requested to invest additional time in technology assessments and potential M&A identification as well as contract initiation: 16,500 euro (11 days at 1,500 euro per day)

Remuneration policy for the next two financial years We intend not to make any changes to the remuneration awarded to non-executive directors.


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Remuneration paid to the CEO and Core Leadership Team (in euro) For the CEO and the Core Leadership Team, the remuneration is determined by the Remuneration and Nomination Committee, in line with the rules described in the company’s Corporate Governance Charter under Title 4 (‘Remuneration’), available at www.barco.com/corporategovernance.

Reward strategy and compensation structure Barco wants to be an attractive company for top talent in the technology market space, based on sustainable human resources practices. Competitive rewards, together with career and development opportunities, are at the heart of Barco’s employee value proposition. Overall, Barco strives for a position above the market median on the total reward proposition, with a substantial variable part based on company, team and individual performance. Compensation decisions are compliant and equitable, and balance cost and value appropriately. The reward packages of the Core Leadership Team are reviewed by the Remuneration and Nomination Committee on an annual basis. The Committee assesses overall market competitiveness (based on biannual external market data), individual market positioning and sustained individual performance. This review results in updated individual reward packages and reward policies, as well as the criteria for the variable remuneration. The main elements of the Group’s executive remuneration policy are a base remuneration, a short-term variable remuneration, stock options, a pension contribution and various other components.

Base salary The base salary reflects role responsibilities, job characteristics, experience and skill sets. Base salary is reviewed annually and may increase if justified by external market.

Pension and benefits The primary purpose of pension and insurance plans is to establish a level of security for our employees and their dependents with respect to age, health, disability and death.

Short-term incentive A strong focus on performance and achievements at Group, divisional/regional/functional and individual level is reflected in the short-term variable remuneration program, which is directly linked to the annual business objectives. If the target variable part of the compensation of individual members of the executive management should exceed the 25% threshold on total compensation, this excess amount will be deferred and paid subject to future sustained performance.

Stock options The stock option plans provide each beneficiary with the right to buy Barco shares at a strike price corresponding to the fair market value of the shares upon grant. Since stock option grants are based on neither individual nor company performance, these are not to be considered variable remuneration as defined by the Law on Corporate Governance.


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Chief Executive Officer remuneration package The remuneration package of the Chief Executive Officer consists of a base remuneration, a variable remuneration, stock options, a pension contribution and other components. The remuneration package aims to be competitive and is aligned with the responsibilities of a Chief Executive Officer leading a globally operating industrial group with various business platforms. Jan De Witte

REMUNERATION

The amount of the remuneration and other benefits granted directly or indirectly to the Chief Executive Officer, by the Company or its subsidiaries, in respect of 2017 for his Chief Executive Officer role is set forth below. There were no shares granted.

COMMENTS

Base remuneration

600,000 euro

Includes Belgian base remuneration as well as foreign director fees

Short-term variable remuneration

570,000 euro

Annual variable remuneration based on 2017 performance, maximum bonus payout capped at 120% of base remuneration. This amount is part of the bonus provision included in the 2017 results.* In line with the Belgian law of 6 April 2010 on Corporate Governance, the payment of half of the variable remuneration is deferred (25% after 1 year and 25% after 2 years) and subject to multi-year targets or criteria

Stock option grant Pension and insurance plans Other benefits

30,000 options

Number of stock options granted in 2017

300,000 euro 24,182 euro

* This does include the deferred annual variable remuneration based on 2017 performance.

Senior Vice Presidents (Core Leadership Team) remuneration package The remuneration package of the Core Leadership Team members other than the Chief Executive Officer consists of a base remuneration, a variable remuneration, stock options, a pension contribution and various other components. The remuneration package aims to be competitive and is aligned with the role and responsibilities of each CLT member, being a member of a team leading a globally operating industrial group with various business platforms.

The Chief Executive Officer evaluates the performance of each of the other members of the CLT and submits his assessment to the Nomination and Remuneration Committee. This evaluation is done annually based on documented objectives directly derived from the business plan and taking into account the specific responsibilities of each CLT member. The achievements measured against those objectives will determine all performance-related elements.


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Barco annual report 2017

Pension and other benefits The Core Leadership Team is entitled to retirement, deathin-service and disability benefits on the basis of the provisions of the plans to senior executives in their base countries. Other benefits, such as medical care and company cars or car allowances, are also provided according to the rules applicable in the base country. The nature and magnitude of these other benefits are largely in line with the median market practice.

Short-term incentive A strong focus on performance and achievements at Group and individual level is reflected in the short-term variable remuneration program, which is directly linked to the annual business objectives.

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Stock options The Core Leadership Team receives stock options. The Core Leadership Team under analysis of this chapter includes 14 persons. One person left and three persons joined in the course of 2017.

Remuneration policy for the next two financial years We intend not to make material changes to the characteristics and modalities of the renumeration awarded to the Core Leadership Team.

The short-term incentive payment is based on Group (40%), divisional/regional/functional (30%) and individual performance (30%). The 2017 variable payment is based on EBITDA, free cash flow, costs, orders, sales and individual targets.

REMUNERATION Base remuneration Short-term variable remuneration

Stock option grant Pension and death-in service-coverage Disability coverage Other benefits *

3,060,721 euro 928,920 euro

49,000 options 297,853 euro

COMMENTS Includes local base remuneration as well as foreign director fees Annual variable remuneration based on 2017 performance, maximum bonus payout capped at 150% of on-target bonus. The amount of 928,920 euro has been provided for in the 2017 results, but the individual assessment is pending approval of the Board. Number of stock options granted in 2017 Defined contribution plans

69,642 euro 213,642 euro

* Includes health insurance, risk insurances, company cars, luncheon vouchers, representation allowances.


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Stock options for the Core Leadership Team granted in 2017

In 2017, following authorization by the general meeting and at the proposal of the Remuneration and Nomination Committee, the Board of Directors allotted stock options to some 147 Group senior managers. The exercise price amounts to 87,75 euro per option, with a three-year vesting period for the EEA plan and a two-year vesting period for the non-EEA plan. The number of options to be offered to each individual beneficiary is variable in part, based on an assessment of such person’s long-term contribution to the success of the Company. The options are offered to the beneficiaries free of charge.

The Core Leadership Team does not receive shares as part of their compensation packages. Reference is made to pages C/70 in the Financial Statements for an overview of the warrants and stock options exercisable under the warrant and stock option plans. The Core Leadership Team is presented on pages A/62 – A/66 of this annual report.

49,000 stock options were granted to and accepted by the members of the Core Leadership Team.

Name

Number of stock options granted in 2017

Number of stock options exercised in 2017

Number of stock options expired in 2017

Xavier Bourgois

1,500

-

-

Piet Candeel

3,000

3,000

-

Tet Jong Chang

4,000

-

-

Ney Corsino

3,000

550

-

Olivier Croly

4,000

-

-

Ann Desender

6,000

-

-

An Dewaele

4,000

-

-

Johan Heyman Filip Pintelon George Stromeyer Kurt Verheggen

500

250

-

5,000

3,000

-

15,000

-

-

3,000

-

-


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Most important provisions of the contractual relationships with the Company and/or affiliated company, including the provisions relating to compensation in the event of early departure

Members of the Core Leadership Team, including the CEO, have directorships in Group subsidiaries as a function of their responsibilities. Where such directorships are compensated, they are included in the amounts given above, regardless of whether the position is deemed to be salaried or undertaken on a self-employed basis under local legislation. Local law and normal practice are the basis for the severance arrangements of the members of the Core Leadership Team, except for: • The Chief Executive Officer, whose contractual arrange- ments, entered into at the time of his appointment, provide for a notice period of six months. • Ney Corsino who transferred to a US employment agree ment which includes a severance payment of 12 months annual compensation in case of termination not for cause. Core Leadership Team members’ contracts do not include a clause providing a right of claw-back of variable compensation in cases of erroneous financial information. The audited results are used as the basis for the assessment of the performance.

Departure of members of the Core Leadership Team Paul Matthijs left the Barco Group in 2017.

Presentation of the remuneration report to the shareholders The Remuneration Report will be submitted for vote to the shareholders at the shareholders’ meeting of 26 April, 2018.


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Policies of conduct

Transparency of transactions involving shares or other financial instruments of Barco The company’s dealing code is part of its Corporate Governance Charter charter which is available for review on the company’s website (www.barco.com/corporategovernance). It meets the requirements of the EU Regulation of 16 April, 2014 n° 596/2014 on market abuse. Persons discharging managerial responsibilities and persons closely associated with them must notify the Financial Services Market Authority (“FSMA”) of any transactions involving shares or other financial instruments of Barco within three business days after the transaction. Such transactions are made public on the website of the FSMA (www.fsma.be) as well as the company’s website, the latter on an aggregate basis.

Conflicts of interest Basic principles • Art. 523 of the Companies Code sets the rules for conflicts of interest that may arise within the context of a director’s mandate. • Each Board member sees to it that these rules are strictly observed. • Any act or transaction which may potentially give rise to a conflict of interest is carefully scrutinized to avoid that such conflict may arise. • In 2017, none of the directors reported any conflict of interest as referred to in article 523 of the Companies Code.

Functional conflict of interest A director who is a director or business manager of a customer or supplier or who is employed by a customer or supplier shall report this fact to the Board of Directors prior to the deliberations concerning a topic on the agenda relating (whether directly or indirectly) to this customer or supplier. This obligation also applies when a family member of the director is in the abovementioned position. The same rule applies when a director or his or her family members (whether directly or indirectly) hold more than 5% of the shares with voting rights of a customer or supplier. Subsequently, the director in question: • shall leave the meeting while this topic on the agenda is being dealt with; • shall not be permitted to participate in the deliberations and decision-making about the topic in question. These provisions are not applicable when the customer or supplier is a listed company and the participation of the director (or his or her family members) takes place within the framework of assets that have been placed under the management of an asset manager who manages these assets in accordance with their own judgment, without taking the director (or his or her family members) into account.


Governance

Statutory auditor

At the annual shareholders meeting of 30 April, 2015, Ernst & Young Bedrijfsrevisoren BCVBA, De Kleetlaan 2, 1831 Brussels, was reappointed as statutory auditor of the company for a period of three years. In 2017, remuneration paid to the statutory auditor for auditing activities amounted to 375,774 euro. Remuneration paid to the statutory auditor for special assignments was 0 euro.

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Risk management and control processes Risk management process

Risk factors

Page A/83

Page A/87

Financial risk management and internal control Page A/89


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Within the context of its business operations, Barco is exposed to a wide variety of risks that can affect its ability to achieve its objectives and to execute its strategy successfully. To anticipate, identify, prioritize, manage and monitor the business risks that impact its organization, Barco put a sound risk management and control system into place in accordance with the Companies Code and the 2009 Corporate Governance Code. Risk control is a core task of the Board of Directors, the Core Leadership Team (CLT) as well as all other employees with managerial responsibilities.

Barco’s risk management and control system was set up to achieve the following objectives:

Operational and strategic objectives

The principles of the COSO reference framework and the ISO 31000 risk management standard have served as sources of inspiration to Barco in setting up its risk management and control system.

Operational excellence

Monitoring

Information & communication

Goals Control activities

Compliance with all applicable laws and regulations

Correct and timely financial reporting

Control Environment

Objectives

Risk management and control system Identification

Risk response

Analysis & evalutation


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Control environment Barco strives for a total compliance culture and risk awareness attitude by defining clear roles and responsibilities in all relevant domains. In this way, the company fosters an environment in which it pursues its business objectives and strategy in a controlled manner. This environment is created by implementing various company-wide policies and procedures, such as: • The updated Code of Ethics • Decision and signature authority rules • The Barco values • Quality and other management systems • Risk profiling, reporting and mitigation processes

Risk management process Risk management is firmly embedded into Barco’s processes, at all levels. For every key management, assurance and supporting process, Barco has developed and implemented a systematic risk management approach. It consists of five steps: identification, analysis, evaluation, response and monitoring. The CLT fully endorses this approach. Employees are regularly informed and trained on these subjects to ensure sufficient risk management and control at all levels and in all areas of the organization.

Identification and analysis: yearly risk assessment and compliance gap analysis In the fourth quarter of each year, Barco performs a companywide risk assessment and compliance gap analysis. This exercise, which involves a major part of the management team as well as other key people, aims to strengthen and formalize risk awareness throughout Barco. It encourages the management team to actively think about the risks that impact our business and provides them – as well as other executives – with a clear view of how their peers around the world perceive risk. To identify risks, Barco organizes a series of risk interviews, audits and on-site surveys, the results of which are consolidated in an overview that is passed on to CLT members. All domains from the Barco risk universe are taken into account. They then determine and rank the inherent (likelihood, impact) and residual risks (control level). The result of their work is summarized in a final report that is reviewed by the Audit Committee. The outcome is used for internal audit planning, as input for the risk and compliance work program, for insurance programs and for corrective and mitigation actions. The Risk and Compliance Manager is in charge of this exercise, together with Internal Audit.


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Barco risk universe All risks are classified in the Barco risk universe, which is divided into four risk areas:

Operational risks

Financial risks

Compliance risks

Strategic risks

HRM (Social matters, personnel, human rights, ...)

Accounting & controlling

Ethics & business conduct

Technology (external dynamics/evolutions)

Financial reporting

Legislation and governmental restrictions

New product development & product lifecycle management Sales and service Operations Information technologies Sourcing & supplier Relationship management Properties & fixed assets

Technology (internal)

Treasury management Working capital management

Environmental, health, safety & security

Operational strategy Market & competition

Product regulatory Forecast & planning

Organizational strategy International standards


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Risk evaluation

Risk response

To set the right priorities, the risk is first evaluated in a consistent manner in terms of impact and likelihood scale. The resulting inherent risk does not yet take into account any management activities or control measures developed to mitigate it.

Management response to residual risks ‘Risks to improve’ are contained by means of an action plan to minimize their effects of such risks on the organization’s ability to achieve its objectives. These types of risks, if any, reside under the ownership of the CEO.

FREQUENT

‘Risks to monitor’ are monitored by a member of the CLT team. ‘Acceptable risks’ and ‘risks to optimize’ are recorded in the risk register of the related process. Each risk is allocated to a risk owner responsible for its monitoring and follow-up.

RARELY DESTRUCTIVE

NEGLIGIBLE

The residual risk level is then determined by taking into account the control level (control measures and their effectiveness) of each risk.

INHERENT RISK

Improve

Monitor

Accept

Optimize

CONTROL LEVEL

The scales for impact, likelihood and control level are based on the acceptable level of risk exposure that is ratified by the Board of Directors.

The Risk and Compliance Manager supports the adoption of clear processes and procedures for a wide range of business operations related to compliance, security and export control. In addition to these control activities, an insurance program has been implemented for selected risk categories that cannot be absorbed without material impact on the company’s balance sheet.


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Risk monitoring Information and communication A timely, complete and accurate information flow – both top-down and bottom-up – is a cornerstone of effective risk management.

Monitoring helps to ensure that internal controls continue to operate effectively. The continuity and the quality of Barco’s risk management and control system is assessed by following actors:

In operational domains, Barco has implemented a management control and reporting system (MCRS) to support efficient management and reporting of business transactions and risks. This system enables Barco’s management to capture relevant information on particular areas of business operations at regular time intervals. The process enforces the clear assignment of roles and responsibilities, thus ensuring consistent communication to all stakeholders regarding external and internal changes or risks impacting their areas of responsibility.

• Internal Auditor – the tasks and responsibilities assigned to Internal Audit are recorded in the Internal Audit charter, which has been approved by the Audit Committee. The key mission of Internal Audit as defined in the Internal Audit charter is “to add value to the organization by applying a systematic, disciplined approach to evaluating the internal control system and providing recommendations to improve it”. • External Auditor – in the context of the External Audit review of the annual accounts. • Compliance Officer – within the framework of the company’s Corporate Governance Charter. • Risk and Compliance Manager – plays a pivotal role in the organization by ensuring appropriate coordination and follow-up of risk management activities. The Legal, Risk and Compliance Department to which the Risk and Compliance Manager also belongs, reports directly to the CEO via the General Counsel. • Audit Committee – the Board of Directors and the Audit Committee have ultimate responsibility with respect to internal control and risk management. (See also the ‘Board Committees’ section in the ‘Company report’)

In addition to the MCRS, the company has put several measures into place to ensure the security of confidential information and to provide a communication channel for employees to report any (suspected) violation of laws, regulations, company policies or ethical values.


Risk management

Barco annual report 2017

A/87

Risk factors Just like in previous years, Barco assessed and analyzed its corporate risks in 2017. Below are the main risks identified by this exercise along with the trend and main measures.

Trend p

CYBER RISK/DATA PROTECTION • Implementation of an Information Security Management System and certification for ISO27001 • Fostering a global personal data compliance program (GDPR) • Coordination by an Information Security Council • Continued adjustment of the new product introduction (NPI) methodology to enhance the security of our products

An extensive GDPR compliance program, which is rolled out globally, will help us ensure personal data protection.

MARKET/COMPETITION RISK

Trend p

• Governance model in place via business review meetings and strategic management plan • Rolling out of the New Technology Introduction process (NPI) • Strengthening the Central Technology Office

INTELLECTUAL PROPERTY • • • •

Trend p

Regular IP awareness trainings Proactively monitoring and combating infringements Structured approach for filing of patents Monitoring freedom to operate

QUALITY – NEW PRODUCT INTRODUCTION (NPI) • Initiative to further improve the quality culture • NPI workgroups to sustain and improve rigorous NPI process implementation • Completing and sustaining NPI methodology for software

Trend 


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Barco annual report 2017

QUALITY - POST FINAL QUALIFICATION REVIEW (FQR)

Trend 

• Increased strategic focus on customer service • Implementation of a Corporate Services Center of Excellence

M&A GOVERNANCE AND INTEGRATION

Trend p

• Control relationship with Joint Venture partners • Pay attention to post-acquisition integration

BUSINESS ETHICS • Update of Code of Ethics with mandatory sign-off and e-learning module • Regular awareness campaign – compliance awareness month – compliance challenge • General and dedicated compliance trainings

Trend 

More than half of our white-collar workers worldwide participated in the 3rd yearly Compliance Challenge, which helps raising awareness and understanding of our Code of Ethics in a fun way.

COST CONSCIOUSNESS • Value engineering program • Strict follow-up on cost center spending • Enhancement of the business expenses control cycle Notes: 1) GDPR: General Data Protection Regulation approved by the EU Parliament on 14 April 2016 and enforcement on 5 May 2018. 2) The trend indicates whether the risk for Barco has increased or decreased compared to last year. 3) The risk measures related to the accounting and financial reporting risks are described in the Financial Statements of this annual report.

Trend p


Risk management

Barco annual report 2017

A/89

Financial risk management and internal control The accurate and consistent application of accounting rules throughout the company is assured by means of finance and accounting manuals, which are available to the key accounting sections. Specifically within the financial domain, a quarterly, bottom-up risk analysis is conducted to identify and document current risk factors. Action plans are defined for all key risks. The results of this analysis are discussed with the statutory auditor. The accounting teams are responsible for producing the accounting figures (closing books, reconciliations, etc.), whereas the controlling teams check the validity of these figures. These checks include coherence tests by comparison with historical and budget figures, as well as sample checks of transactions according to their materiality. All material areas of the financial statements concerning critical accounting judgments and uncertainties are periodically reported to the Audit Committee. Specific internal control activities with respect to financial reporting are in place, including the use of a periodic closing and reporting checklist. This checklist assures clear communication of timelines, completeness of tasks, and clear assignment of responsibilities. Specific identification procedures for financial risks are in place to assure the completeness of financial accruals. Uniform reporting of financial information throughout the organization ensures a consistent flow of information, which allows the detection of potential anomalies.

An external financial calendar is planned in consultation with the Board and the Core Leadership Team and this calendar is announced to the external stakeholders. The objective of this external financial reporting is to provide Barco’s stakeholders with the information necessary for making sound business decisions.


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Barco annual report 2017

Management discussion Comments on the results

Consolidated results for the fiscal year 2017

Divisional results for the fiscal year 2017

Page A/92

Page A/94

Page A/100


Management discussion

Barco annual report 2017

A/91


A/92

Barco annual report 2017

Comments on the results + 20% EBITDA growth on flat sales, reflecting tangible progress on ‘focus to perform’ initiatives

Fiscal year 2017 financial highlights • Incoming orders at 1,105.2 million euro (+ 2.2%) • Sales at 1,084.7 million euro (- 1.6%), flat excluding lighting divestment 1 • EBITDA of 107.1 million euro (+ 19.1 million euro) or 9.9% of sales (+ 1.9 ppts) • Adjusted EBIT2 of 73.2 million euro (+36.7 million euro) or 6.8% of sales (+3.5 ppts) • Net income3 of 24.8 million euro4 (+13.8 million euro) • Free cash flow of 40.0 million euro, down from 57.4 million euro • ROCE @ 19% (+4 ppts)5 • Proposal to increase the dividend to 2.10 euro per share from 1.90 euro

(1) The reported results are not corrected for currency effects and the impact of the lighting activity, which the company divested in 1H17. Excluding the impact of lighting, sales for 2017 were flat compared to 2016 ; excluding currency effects reported sales were 1.0% below last year. (2) Adjusted EBIT is EBIT excluding restructuring charges and impairments and other non-operating income expenses, see the 'Glossary' in Module C of the report. (3) Net income attributable to the equity holder of the parent (4) Net income include impairments and restructuring costs of 32.4 million euro (5) ROCE in 2017, and applying an adjusted tax rate of 16%, is 4 percentagepoints higher than ROCE 2016, excluding impact of amortization on capitalized product development costs


Management discussion

Barco annual report 2017

A/93

Comments on the results A solid gain in gross profit margin combined with OPEX control lifted the EBITDA margin by 1.9 percentage points to 9.9%, with each division posting gains. Barco delivered this profitability improvement while maintaining R&D spending levels to ensure the healthy pipeline of innovative solutions. Reported sales were slightly below last year and flat excluding the impact of the divestiture of the company’s lighting business. Enterprise continued to deliver strong growth for ClickShare and launched Control Room’s UniSeeTM, a new LCD-based video wall as part of a turnaround plan for this business. Healthcare increased sales and strengthened its market position in the diagnostic and surgical segments. In Entertainment a promising uptake in the Venue & Hospitality segment partially offset softer results in Cinema. Barco undertook a strategic review of its businesses, assets, manufacturing footprint and investments as part of its ‘focus to perform’ program. The outcome of this review included the divestiture of the company’s lighting activity, a redeployment of resources away from underperforming or non-strategic initiatives to core business opportunities and the decision to relocate the manufacturing activities from Norway to Belgium. As a result of the strategic review, the company recorded 32.4 million euro in restructuring and impairment charges consisting of 5.2 million euro of cash restructuring costs and 27.2 million euro of non-cash charges. During 2017 Barco took decisive actions to establish a stronger foundation for sustainable profitable growth and improved quality of earnings. Choices were made across the organization and management attention was intensified on operational efficiencies and gross margin accretion initiatives.

(6) BarcoCFG is the entity where Barco joined forces with China Film Group to address the Chinese cinema market. Barco holds a 58% stake in this entity. See also 'Glossary' in Module 3 of the Annual Report.

While Barco’s performance in 2017 demonstrates that the company is moving in the right direction, Barco has not finished improving its profitability and execution efficiency. Therefore, in 2018, Barco remains focused on its strategic initiatives in order to deliver another year of EBITDA growth and on improving the effectiveness of its sustained R&D investment to deliver future topline growth.

Outlook 2018 The following statements are forward looking and actual results may differ materially. Assuming a stable economic environment and currencies at current levels, management expects to generate further margin improvement on flat sales for 2018 compared to 2017. Management‘s full year outlook on sales anticipates unfavorable currency comparison for the first half offset by stronger sales on a comparable currency basis in the second half of the year. Management’s guidance for 2018 excludes the impact of the New strategic Cinema Joint Venture and the new ownership structure in BarcoCFG6.

Dividend The Board of Directors will propose to the General Assembly to increase the dividend from 1.90 euro to 2.10 euro per share to be paid out in 2018. The following timetable will be proposed to the Annual General Shareholder Meeting: • Ex-date: Monday, 7 May 2018 • Record date: Tuesday, 8 May 2018 • Payment date: Wednesday, 9 May 2018


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Barco annual report 2017

Consolidated results for the fiscal year 2017 Order intake and order book Order book at year end was 318.8 million euro, essentially flat with FY 16 reflecting increases in Enterprise for mainly

the Corporate segment offset by declines in Entertainment related to cinema and the divested lighting activity.

Order book IN MILLIONS OF EURO Order book

Order intake was 1,105.2 million euro, an increase of 2.2% compared to last year driven by strong gains in Healthcare

FY17

FY16

318.8

FY15

320.8

333.2

and Enterprise. Declines in the APAC region were mainly offset by strong growth in the Americas region.

Order intake IN MILLIONS OF EURO Order intake

FY17

FY16

1,105.2

FY15

1,081.2

1,043.7

Order intake by division IN MILLIONS OF EURO

FY17

FY16

CHANGE

Entertainment

535.7

574.8

-6.8%

Enterprise

323.9

290.2

+11.6%

Healthcare

245.8

216.3

+13.7%

Group

1,105.2

1,081.2

+2.2%

Order intake by region

IN MILLIONS OF EURO

FY17

CHANGE

FY16

(IN NOMINAL VALUE)

The Americas

35%

34%

+7.5%

EMEA

32%

32%

+1.5%

APAC

33%

34%

-2.3%


Management discussion

Barco annual report 2017

A/95

Sales Full year sales decreased 1.6% driven by a softer cinema market, divested business activities, de-emphasis of non-core activities and unfavourable currency. Progress in the Healthcare and Enterprise nearly offset the decline in Entertainment.

• Excluding the impact of Barco’s lighting activity, which the company divested in 1H17, sales for the year were flat compared to 2016. • Excluding currencies effects (mainly the impact of the Chinese Yuan) reported sales were 1.0% below last year.

Sales IN MILLIONS OF EURO Sales

FY17

FY16

1,084.7

FY5

1,102.3

1,028.9

Sales by division IN MILLIONS OF EURO

FY17

FY16

CHANGE

Entertainment

533.3

578.1

-7.7%

Enterprise

308.2

289.7

+6.4%

Healthcare

243.2

234.6

+3.7%

Group

1,084.7

1,102.3

-1.6%

Sales by region IN MILLIONS OF EURO

FY17

CHANGE

FY16

(IN NOMINAL VALUE)

The Americas

36%

36%

EMEA

32%

31%

-0.1% -1.4%

APAC

32%

33%

-3.5%


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Barco annual report 2017

Profitability Gross profit Gross profit increased from 378.8 to 404.2 million euro, an increase of 25.3 million euro. Gross profit margin increased 2.9 percentage points to 37.3% compared to 34.4% in 2016, reflecting a favorable product mix and the benefit of cost down engineering actions taken in all divisions. Operating expenses & other operating results Total operating expenses (excluding other operating results) were 327.2 million euro compared to 322.7 million euro a year earlier. As a percentage of sales, operating expenses were 30.2% compared to 29.3% for 2016. • • •

On a cash basis, Research & Development expenses were 122.3 million euro compared to 120.5 million euro last year. As percentage of sales, R&D expenses were 11.3% compared to 10.9% a year earlier. Sales & Marketing expenses were 146.8 million euro compared to 147.1 million euro for 2016. As percentage of sales, Sales & Marketing expenses were 13.5% compared to 13.3% in 2016. General and administration expenses increased 5.4% to 58.1 million euro compared to 55.1 million euro last year and increased to 5.4% as a percentage of sales compared to 5.0% in 2016.

Other operating results amounted to a negative 3.7 million euro mainly driven by additional provisions made. Other operating results in 2016 were 3.3 million euro positive partly driven by reversals of bad debt.

EBITDA and adjusted EBIT EBITDA grew 21.7% to 107.1 million euro compared to 88.0 million euro for the prior year. EBITDA margin was 9.9% versus 8.0% for 2016. By division, EBITDA and EBITDA margins are as follows: 2017 (IN MILLIONS OF EURO)

SALES

EBITDA

EBITDA %

Entertainment

533.3

38.9

7.3%

Enterprise

308.2

40.7

13.2%

Healthcare

243.3

27.5

11.3%

Group

1,084.7

107.1

9.9%

EBITDA by division 2017 versus 2016 is as follows:

(IN MILLIONS OF EURO)

2017

2016

CHANGE

Entertainment

38.9

30.4

+27.8%

Enterprise

40.7

33.0

+23.3%

Healthcare

27.5

24.6

+12.1%

Group

107.1

88.0

+21.7%


Management discussion

Barco delivered double-digit EBITDA growth for 2017 with each division reporting gains, led by Entertainment and Enterprise together accounting for 85% of the year-overyear variance. EBITDA growth resumed for the Entertainment division by discontinuing non-profitable activities and scaling back certain growth initiatives and supported by a stable performance in its base business. Significant EBITDA growth in the Enterprise division was driven by continued strong contributions from the Corporate activity. The Healthcare division booked profitability gains on favorable product mix. Adjusted EBIT was 73.2 million euro, or 6.8% of sales, compared to 36.6 million euro, or 3.3% of sales, for 2016. EBIT in 2016 included 22.9 million euro of amortizations and impairment of capitalization of product development expenses. Barco recorded restructuring and impairment charges of 32.4 million euro including a 5.2 million euro of cash restructuring charges and 27.2 million euro of non-cash impairment charges. The cash component includes the lay-off costs related to the decision to relocate the production in Norway to Belgium and the decision to revisit a number of growth initiatives in the Entertainment division and the X2O activity in the Enterprise division.

Barco annual report 2017

A/97

Non-cash items include 10.9 million euro impairment cost on goodwill, 9.1 million euro on investments and a 4.4 million euro cost related to write-off of inventories. As a result, EBIT was 40.8 million euro compared to 30.5 million euro in 2016.

Income taxes In 2017 taxes were 11.4 million euro for an effective tax rate of 26.5%. Taxes in 2016 were 6.3 million euro for an effective tax rate of 20.0%. 2017 income taxes were negatively impacted by changes in tax regulation in Belgium and US resulting in a non-recurring impact of 15.6 million euro tax cost. Excluding the non-recurring impact, adjusted tax rate in 2017 was 16%.

Net income Net income attributable to the equity holders was 24.8 million euro compared to 11.0 million euro in 2016. This is net income after deducting non-controlling interest for 8 million euro. This was 14.7 million euro in 2016, mainly resulting from a strong year 2016 in Chinese cinema. Net income per ordinary share (EPS) was 2.01 euro compared to 0.91 euro in 2016. Fully diluted earnings per share were 1.99 euro compared to 0.88 euro.


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Barco annual report 2017

Cash flow and balance sheet Free cash flow and working capital As a result of strong working capital management in the second semester, Barco generated a free cash flow of 40.0 million euro for the year compared to 57.4 million euro for

IN MILLIONS OF EURO Gross operating free cash flow

2016. Free cash flow at the end of the first semester was a negative 33.5 million euro.

2017

2016

2015

104.0

81.9

Changes in trade receivables

-7.3

0.2

-5.4

Changes in inventory

-3.6

-2.8

27.6

Changes in trade payables

67.4

-19.7

-2.7

16.3

-8.1

11.9

32.8

Change in net working capital

-38.7

6.6

71.2

Net operating free cash flow

65.3

88.5

138.6

2.0

4.1

0.2

-4.4

-11.5

-14.9

Other changes in net working capital

Interest income/expense Income taxes Free cash flow from operating activities

63.0

81.1

123.9

Purchase of tangible and intangible FA (excl. One Campus)

-23.2

-24.2

-14.7

0.2

0.6

1.1

Free cash flow from investing

-23.0

-23.7

-13.6

FREE CASH FLOW

40.0

57.4

110.3

Proceeds on disposal of tangible and intangible FA

Barco realized a 22.1 million euro higher gross operating cash flow mainly driven by higher profitability.

Working capital and Return on Capital Employed Working capital actions in the 2nd semester brought Inventory + Accounts Receivables – Accounts Payables to 20% on flat sales. Net working capital was -3.8% of sales compared to -5.1% in 2016 mainly due to lower outstanding trade payables and lower advances on customer contracts.


Management discussion

Barco annual report 2017

IN MILLIONS OF EURO

FY17

Trade Receivables DSO Inventory

1H17

A/99

FY16

182.1

189.7

55

63

188.6 55

154.1

169.4

166.2

Inventory turns

3.6

3.3

3.6

Trade Payables

-114.5

-121.3

-135.1

DPO Other working capital TOTAL WORKING CAPITAL

Capital expenditure Capital expenditure was 23.2 million euro compared to 24.2 million euro in 2016, excluding the cash-outs for the One Campus project in 2016.

Return on Capital Employed ROCE calculated on an adjusted tax basis was 19%, a 4 percentage points improvement versus last year.7

Goodwill Goodwill on the group level stood at 105.4 million euro compared to 124.3 million euro at the end of 2016 and 132.4 million euro at the end of 2015. During 2017, Barco recorded impairment charges on goodwill totalling 10.9 million euro mainly related to the Enterprise division’s X2O activity, which was acquired in 2014. In addition and related to the decision to change the ownership structure of BarcoCFG, 8.0 million euro goodwill is transferred to assets held for sale.

58

59

63

-263.3

-232.8

-276.0

-41.6

5.1

-56.4

Cash position Barco ended the year with a net financial cash position of 210.7 million euro, excluding the cash held in BarcoCFG. This is 24 million euro higher than the cash position at the end of 2016, mainly as a result of positive free cash flows partially offset by dividend payments.8 BarcoCFG held 67.4 million euro cash at the end of the year and intends to pay this out over the next 2 to 3 years through phased dividend payments to its shareholders.

Barco began expensing product development costs as incurred effective 1 January 2015. Previously the company had capitalized product development costs and the outstanding balance of capitalized development costs was amortized in 2015 and ROCE in 2016, excluding these amortizations, was 15%. 8 Cash levels refer to the immediately available net cash position, excluding the cash in BarcoCFG. 7


A/100 Barco annual report 2017

Divisional results for fiscal year 2017

Barco’s organizational structure Barco is a global technology company that develops solutions for three main markets, which is also reflected in its divisional structure: the entertainment, enterprise and healthcare markets.

Entertainment

Cinema Venues & Hospitality

The Entertainment division is the combination of the Cinema and of the Venues & Hospitality activities, which includes Professional AV, Events and Simulation activities.

Enterprise

Corporate Control Rooms

The Enterprise division is the combination of the Control Rooms activities and the Corporate activities. ClickShare is the main contributor to the Corporate activity which also includes the Medialon activities.

Healthcare

Surgical Diagnostic

The Healthcare division includes the activities in Diagnostic Imaging (Diagnostic and Modality Imaging) and in Surgical.


Management discussion

Barco annual report 2017

A/101

Entertainment division

IN MILLIONS OF EURO

2017

2016

CHANGE VS FY16

2015

Orders

535.7

574.8

536.4

Sales

533.3

578.1

514.5

-7.7%

EBITDA

38.9

30.4

43.6

+27.8%

EBITDA margin

7.3%

5.3%

8.5%

As anticipated, the Entertainment division saw cinema orders and sales volumes decline during 2017, while Venues & Hospitality sales and orders grew. Venues & Hospitality sales and orders. Venues and Hospitality accounted for 38% of the orders versus 35% in 2016. EBITDA and EBITDA margins benefited from ‘focus to perform’ actions including divesting the lighting activity at the end of the first quarter of 2017, repositioning some growth initiatives including the LED activities and reducing content financing support for the Barco Escape format. In the cinema segment, Barco augmented its leadership position and expanded its installed base of smart laser and laser flagship projectors. More than a third of all cinema projector units shipped in 2017 were smart laser projectors and Barco attained deployments in 100 all-laser multiplexes globally a milestone and competitive differentiator for the company. In China and North America, sales declined while Barco recorded growth in South East Asia, India and Latin America. Gearing up for the renewal wave in cinema, Barco announced it will enter into a strategic joint venture with Appotronics and China Film Group in 2018 to create a dedicated commercialized solutions channel for the global cinema market excluding mainland China. The Venues & Hospitality segment delivered good uptake mainly in the events market and some fixed install areas such as theme parks. These increases were mainly driven

-6.8%

by demand for new products, such as laser phosphor projectors and image processing solutions which strengthened Barco’s competitive positioning.

Note on Barco Escape As previously disclosed, Barco had been exploring strategic options to secure content financing for the Barco Escape format. Because the results of this exercise were not satisfactory, management has decided to discontinue this growth initiative. The 30 theatres with Escape installations have been informed and Barco is working with each of these customers to reach a satisfactory outcome.

Note on Barco Fredrikstad On 4 January 2018, Barco announced to restructure its activities in Frederikstad, Norway. In the course of 2018, the Frederikstad manufacturing activities will be relocated to Kortrijk, where they will be combined with our larger, new projection factory. Currently, 78 people work in manufacturing and related activities at the Frederikstad facility.


A/102 Barco annual report 2017

Enterprise division IN MILLIONS OF EURO

2017

2016

CHANGE VS FY16

2015

Orders

323.9

290.2

287.0

Sales

308.2

289.7

300.4

+6.4%

40.7

33.0

11.1

+23.3%

13.2%

11.4%

3.7%

EBITDA EBITDA margin

The Enterprise division performed well in 2017, producing an 180 basis point gain in EBITDA margin and solid increases in orders and sales driven by continued growth in the Corporate segment. The Corporate segment accounted for about 57% of Enterprise’s sales in 2017 compared to 50% a year ago. The Corporate segment continued to grow in all regions with ClickShare now installed in approximately 350,000 meeting rooms, up from 200,000 meetings rooms for 2016. 40% of Fortune 1000 companies now use ClickShare. North America and Europe registered the strongest sales growth. During the year, Barco expanded the ClickShare portfolio with the introduction of a new higher-end version and continued to extend its sales reach and channel network, adding distributors in the US and APAC markets. In order to enlarge its meeting room ecosystem, the company also entered into a global collaboration agreement with Logitech.

+11.6%

With key sectors such as oil and gas and some emerging geographic markets investing less, Control Rooms’ order intake was flat and sales declined, resulting in lower EBITDA. With the rear projection cube market maturing and related markets awaiting the next generation of LCD displays, the launch of Barco’s new LCD-based video wall, UniseeTM, in November 2017, was timely and met with positive initial feedback from the market. Management expects UniseeTM to begin contributing sales to Control Rooms in the second quarter of 2018. In addition, the company continued to invest in software and workflow solutions which are gradually being introduced in to the market. Management also decided to evaluate strategic options for Silex and X2O, two non-strategic smaller activities in the Enterprise portfolio. As a result, Silex, an advanced chip design activity, was sold to Anseribus NV in December 2017. Management plans to complete its analysis of X2O options in the next coming months.


Management discussion

Barco annual report 2017 A/103

Healthcare division IN MILLIONS OF EURO

2017

2016

CHANGE VS FY16

2015

Orders

245.8

216.3

221.2

Sales

243.2

234.6

216.0

+3.7%

27.5

24.6

19.4

+12.1%

11.3%

10.5%

9.0%

EBITDA EBITDA margin

Healthcare achieved an 11.3% EBITDA margin for 2017, up from 10.5% in 2016, driven by modest growth in sales for both the diagnostic and the surgical segments. Gross profit margin expanded, reflecting positive mix-effects and continued value engineering efforts. Modality experienced softer demand. Orders indicated good uptakes in both the diagnostic and the surgical segments, primarily in North America. In the diagnostic market, Healthcare strengthened its market leadership and increased sales of its flagship Uniti® display. Surgical gradually made progress and the division is working on expanding the platform by aligning with new partners to fuel growth. During the year, Healthcare’s ‘focus to perform’ actions included reducing investments in patient care solutions. The division is preparing to increase local Chinese production of healthcare displays and enhance business development capabilities to further penetrate this high-growth developing market. In addition, the division is also making progress in growing its installed base of diagnostic displays in Latin America.

+13.7%


A/104 Barco annual report 2017

Shareholder information


Shareholder information

Barco annual report 2017 A/105


A/106 Barco annual report 2017

Key figures for the shareholder Number of shares (in thousands): PER SHARE (IN EURO)

13,064

13,057

13,016

2017

2016

2015

EPS

2.01

0.91

Diluted EPS

1.99

0.88

1.41

Gross dividend

2.10

1.90

1.75

Net dividend

1.45

1.47

1.33

1.31

2.4%

2.4%

2.8%

Gross dividend yield

(a)

Yearly return

(b)

13.9%

33.0%

8.5%

Pay-out ratio

(c)

110.7%

225.1%

130.9%

Price/earnings ratio

(d)

44.4

88.4

42.5

(a) Gross dividend / share price at year-end closing date (b) Increase or decrease share price + gross dividend paid out in the year, divided by closing share price of previous year (c) Gross dividend*number of shares on 31 December / net income attributable to the equity holder of the parent (d) Share price 31 December / earnings per share


Shareholder information

Barco annual report 2017

A/107

Share price performance 100

80

60

40

20

0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Share price PER SHARE (IN EURO)

2017

2016

2015

2014

2013

2012

2011

Average closing price

86.91

65.90

58.37

56.61

59.96

48.64

46.40

Highest closing price

95.31

80.50

64.26

59.59

69.95

58.75

59.50

Lowest closing price

78.94

54.37

53.54

50.60

52.58

36.52

31.20

Closing price 31 Dec

89.25

80.04

61.60

58.24

56.70

54.50

38.76

16.862

21,921

22,188.95

31,962.04

34.019

29.298

29.722

1,166

1,045.05

801.60

757.00

736.50

696.40

494.37

Average number of shares traded daily (e) Stock market capitalization on 31 December (in millions)

(e) The average number of shares traded daily is taking into account the trades on the Lit Venues: Euronext as well as registered trades on alternative platforms BATS, Chi-X, Turquoise and Equiduct.


A/108 Barco annual report 2017

Liquidity LIQUIDITY

SOURCE

Total yearly volume (shares)

Daily average number of shares traded

Total yearly volumes (turnover) in million euro

2017

2016

2015

Euronext

3,447,772

4,186,998

4,395,360

Lit venues (1)

4,299,723

5,633,738

5,724,749

All venues (2)

7,851,057

10,007,069

9,345,749

Euronext

13,521

16,292

17,036

Lit venues (1)

16,862

21,921

22,189

All venues (2)

30,788

38,938

36,224

Euronext

262.09

354.33

235.77

Lit venues (1)

373.15

370.83

334.84

All venues (2) Velocity

684.20

652.48

547.33

25.43%

31.40%

34.90%

Comment (1&2): Based on the Fidessa stock report: http://fragmentation.fidessa.com/ The numbers referenced here take into account trades in the Lit-category. The category “Lit venues� includes Euronext and the alternative platforms BATS Chi-X, Turquoise and Equiduct. All Venues includes Lit-venues, the Systematic internalisers, off-book transactions and dark venues.

Daily average shares traded 2017

2016

All venues Euronext

2015

120,000

100,000

80,000

60,000

40,000

20,000

December

October

November

September

July

August

May

June

April

March

January

February

December

October

November

September

July

August

May

June

April

March

January

February

December

October

November

September

July

August

May

June

April

March

January

February

0


02-10-2017 02-11-2017 02-12-2017 31-12-2017

02-10-2017 02-11-2017 02-12-2017 31-12-2017

80 02-09-2017

100

02-09-2017

120 02-08-2017

Next 150

02-08-2017

140 02-07-2017

Barco / Bel 20 / Next 150

02-07-2017

02-06-2017

02-05-2017

02-04-2017

Eurostoxx 50

02-06-2017

Bel 20

02-05-2017

02-04-2017

Barco 02-03-2017

02-02-2017

02-01-2017

Barco

02-03-2017

02-02-2017

02-01-2017

Eurostoxx technology

31-12-2017

02-12-2017

02-11-2017

02-10-2017

02-09-2017

02-08-2017

02-07-2017

02-06-2017

02-05-2017

02-04-2017

02-03-2017

02-02-2017

02-01-2017

Shareholder information Barco annual report 2017 A/109

Barco

Barco share price 2017

100

80

60

Barco / Eurostoxx 50 / Eurostoxx Technology / Nasdaq - 100

140

Nasdaq - 100

120

100

80


A/110

Barco annual report 2017

Shareholder structure Shareholders A study of Barco’s global shareholdership on 31 December 2017 plotted almost 92% of the company’s shareholder composition1. Identified institutional investors hold 72% of all shares (versus 70% at the end of 2016), 5% being treasury shares held by the company and 13% held by retail investors (versus 14% at the end of 2016).

Investment style While value-oriented shareholders remain the second largest category within Barco’s institutional shareholder base, once more there was a decline in proportional representation, to 23% of identified institutional shares at the end of December 2017 (-3.7pp). The share price peak(s) seen throughout the year may have prompted value investors to book some profits.

Stable shareholder structure All in all, Barco’s main shareholder structure remained stable in 2017, with no material changes in the +3% positions.

Meanwhile, more bullish activity from growth-oriented investors was noted, suggesting that investors are able to see attractive entry points, given the growth profile of the company.

Barco’s institutional ownership increased, with institutional investors holding more than 9.3 million shares, led by increases in ownership in the Rest of Europe category and in Belgium. Value-oriented shareholders remained the second-largest category within Barco’s institutional shareholder base. However, there was a decline in proportional representation, to 23% of identified institutional shares. The growth-oriented investors position increased to +12% of institutional ownership.

Geographic distribution Belgium remains the dominant investment region in Barco’s institutional shareholder base, with a strong proportional representation versus peers and industry averages. The Rest of Europe investors reversed the selling seen over 2016 and added shares with purchases out of London, UK, Frankfurt, Germany. This was partly countered by selling activity out of Geneva, Switzerland and United States. (1) Shareholder analysis performed by Nasdaq Advisory services in January 2018

The level of passive index ownership in Barco has increased (+1.1pp) to 6.2% of identified institutional shares, moving closer to the averages seen across Nasdaq’s technology clients (17.9%).

Concentration Concentration level among Barco’s top 10 investors reduced over this analysis period, following a couple of divestments, while concentration within the top 25 remained relatively stable, and increased slightly among the top 50 group of investors. The categories now account for: • Top 10: 50.4% (-1.2pp) • Top 25: 65.2% (+0.0pp) • Top 50: 72.4% (+0.4pp) Compared to the mid cap client benchmark, Barco’s concentration levels are slightly above the average observed in the benchmark.


Shareholder information

Barco annual report 2017

Institutional 72% Retail 13% Company-related 5% Brokerage/trading 2% Miscellaneous 8%

Belgium 47% United States 23% Luxembourg 7% Norway 6% France 6% Rest of Europe 11% Rest of world <1%

Value 23% Growth 12% GARP 9% Index 6% Hedge fund 1% Other 49%

Ownership of Barcoâ&#x20AC;&#x2122;s shares 2017 (per 31 December 2017) Michel Van de Wiele NV

18.33%

ACF IV Investment SARL

5.04%

Norges Bank (the Central Bank of Norway)

4.49%

Templeton Investment Counsel, LLC

4.70%

3D NV

3.94%

Barco NV

5.40%

Public

58.10%

TOTAL

100.00%

A/111


A/112

Barco annual report 2017

Shareholder remuneration Dividend

Dividend policy

The Board of Directors decided to recommend that the general assembly pay a dividend of 2.10 euro (gross) per share over 2017 (compared to 1.9 euro over 2016). This is 1.47 euro net, on a withholding tax of 30%. At 2.10 euro, the payout ratio is 110.7% and the gross dividend yield is 2.4%.

The company confirms its dividend policy to grow the dividend in line with the long-term performance and evolution of the company. The dividend is set by the Board of Directors and subsequently proposed at the Annual General Meeting of shareholders at the end of each fiscal year.

Ex-date: Record date (+1): Payment date (+1):

Monday, 7 May 2018 Tuesday, 8 May 2018 Wednesday, 9 May 2018


Shareholder information

Barco annual report 2017

A/113

Investor relations The year in retrospect: evolution of the share price Barco achieved a solid financial performance in 2017: while sales remained flat, we attained a good uptake in profits on flat sales. Fueled by stable intermediary results, a number of ‘focus to perform’ proofpoints and new dynamics, stakeholder confidence increased in 2017, which was clearly reflected in our share price: the Barco share price rose by 12%.

Strong ‘focus to perform’ quarter Opening at 80 euro, the share price fluctuated between 78 euro and 96 euro throughout 2017 to finally close at 89 euro. The year 2017 started slow until the full-year results were published. The positive 2016 annual results – with solid sales growth and improved profitability – were well-received, which led to share price rises. The ‘focus to perform’ message – including the news about the divestment of our lighting activity – and a successful Capital Markets Day, led to a steep climb in March and April to reach a peak of 96 euro at the end of April. As Q1 results were more modest and following the dividend payout, the Barco share price leveled out – in line with general market trends – to close at 85 euro at the end of Q2.

Slow summer and strong September The summer of 2017 was particularly slow, which may be attributable to a mixed update on the half-year results. At the end of August, when the share price had fallen back down to the January level, the stock started a remarkable upsurge in September, triggered by overall renewed attention, reratings and a new initiation by Berenberg. With comforting Q3 results, the share price remained flat in Q4 to end at 89 euro, the best closing price in the last 17 years. The yearly return including the dividend is 14%. It is a positive outcome for the sixth consecutive year and once again a great return that outperforms all main international indices.

Market cap: gradually moving up The market capitalization on 31 December 2017 was 1166.0 million euro, up 11.6% up compared to 2016 (1040 million euro). The lowest market capitalization in the year was at 1031.3 million euro (29 August 2017) while the highest was at 1245.1 million euro (5 April 2017).


A/114

Barco annual report 2017

Barco's investment case Backed by over 85 years of experience, Barco is a strong brand that is known the world over for its technology leadership in three healthy and solid markets: entertainment, enterprise and healthcare. The solutions we deliver to these markets are mostly mission-critical: there is a real need for the high-quality, utterly reliable technology that we are able to provide, thanks to our experience and well-developed technological skills.

Solid financial results Barco has established global leadership positions. To achieve that aim, we have significantly streamlined our organization, sharpened the focus of our activities and developed more channels into the market, thus extending our customer base. In 2017, under the umbrella of the strategic ‘focus to perform’ program, Barco decided to sharpen its company profile. As a result, it delivered a healthier result on the back of a flat organic topline result. We significantly enhanced our gross margins, thanks to value engineering, smarter sourcing and a good product mix. Our cash flow recovered nicely in the second half of the year. Over the years, Barco has always followed a cautious course in managing its financials and enjoys year-on-year net cash positive results.

Focused to perform The new management team – new CEO, new CFO, new Chief Human Resources and new General Manager of the Enterprise division that came on board in 2016 – all with impressive track records in leading international companies – works closely with the existing leadership team to define the course of the company in the coming years. Confident that Barco has all the required assets to further deliver sustainable profitable growth, we will continue to sharpen our focus on performance in 2018 and beyond. While putting together a balanced portfolio of strategic growth initiatives, we will concentrate on improving the performance of our core businesses, i.e. striving to reach execution – operational and commercial – excellence and nailing down profitability. In this way, Barco will create even more value for its customers as well as its shareholders.

Shareholder trust Our sound strategy, strong business model and our solid financials inspire the trust and confidence of our shareholders. Barco therefore has a very stable international shareholder base with a predominance of value-oriented investors. Since 2015, both Van de Wiele NV and 3D NV are represented in the Board of Directors. Together, they now own 22% of Barco’s shares. Year after year, our shareholders see consistent growth in the dividend, which reflects our increasing profitability and overall growth.


Shareholder information

Barco annual report 2017

Analysts covering Barco ABN AMRO Bank

Marc Hesselink

Bank Degroof Petercam

Stefaan Genoe

Flemish Federation of Investors and Investor Club

Gert De Mesure

ING

Marc Zwartsenburg

Berenberg

Trion Reid & Anna Patrice

KBC Securities

Guy Sips

Oppenheimer

Andrew Uerkwitz & Paul Dean

Financial calendar 2018 Announcement of results 4Q17 and FY17

Thursday 8 February 2018

Trading update 1Q18

Wednesday 18 April 2018

Annual general shareholders meeting

Thursday 26 April 2018

Announcement of results 1H18

Thursday 19 July 2018

Trading update 3Q18

Wednesday 17 October 2018

Share info Barco share

BAR

ISIN BE0003790079

Barco VVPR-strip

BARS

ISIN BE0005583548

Reuters

BARBt.BR

Bloomberg

BAR BB

More info including the quarterly consensus update, reports, reference to conference, roadshows and relevant tradeshows are available on Barcoâ&#x20AC;&#x2122;s investor portal www.barco.com/investors

A/115


Introduction & ambition statement

Barco annual report 2017

For Barco, 2017 was a year of gradual change and steady progress. To guide us and enable us to thrive in todayâ&#x20AC;&#x2122;s rapidly changing world, we formulated and began executing a clear strategy. Focused on innovation, performance and outcome-based solutions, our renewed strategy also includes a resolute choice to go for sustainable impact, because we believe that sustainable business is smart business.

Say.Do.Care. Barco Sustainability Report 2017

This sustainability report, which is an integral part of our 2018 annual report as well as a self-contained assessment, underpins our commitment to sustainability. It provides a comprehensive overview of our ambition, strategy and roadmap in the field of sustainability and zooms in on our results.

B/2


B/3

Barco annual report 2017

Introduction and ambition statement A milestone year

A continuous journey

2017 has been a major milestone in our journey towards sustainability, in many ways:

Today, we have solid foundations in place to achieve our ambitious sustainability objectives in the coming years. Sustainability is, of course, a continuous journey of learning and improving. Yet, we are confident that every step we take will bring us closer to being a truly sustainable company – which is critical for every business to be successful in the long run.

• Sustainability became an integral part of our strategy, in line with our values and more specifically with the ‘we care’ value. We strongly believe that growing our company goes hand in hand with helping our people and the communities around us thrive, while safeguarding our planet. As a result, we are giving sustainability a central role in our organization and in our strategy. • Under the ‘Sustainable Impact Plan’, we are now firmly embedding sustainability into every division and process. We are fully aware that we cannot realize our ambitions on our own. We count on the help and full engagement of our employees and business partners. • We defined and set performance measures and targets for the most important (material) topics. • The governance of sustainability-related initiatives has been put into a structural shape that ensures continued follow-up and progress. Our roles and committees at both the executive and management level will spearhead a program to raise awareness and identify sustainability challenges and opportunities.


Introduction & ambition statement

Barco annual report 2017

Barcoâ&#x20AC;&#x2122;s sustainability ambition statement In line with our ambition to fully integrate sustainability into our corporate DNA, we at Barco have launched our â&#x20AC;&#x2DC;Sustainable Impact Programâ&#x20AC;&#x2122;, aiming for sustainability leadership on three levels: planet, people and communities. 1. We will lower our own environmental footprint and those of our customers. 2. We will prepare our people for future-proof and sustainable employability by energizing, engaging and inspiring them. We also empower our employees to constantly explore more sustainable ways of working. 3. We will take up our responsibilities and play an active role in our ecosystem by safeguarding ethical business standards both inside Barco and in the relationships with our stakeholders, and engaging with our local communities by providing underprivileged people across the world with access to the innovation society through knowledge and resources. Barco is ready to gear up, move forward and take the lead towards a more sustainable future.

Jan De Witte, Barco CEO

B/4


B/5

Barco annual report 2017

Barco in a changing world Our world is changing at dazzling speed, driven by a series of megatrends, i.e. large global trends that are accelerating economic, environmental, health, safety and social challenges. As these trends, which interconnect in many ways, largely impact our customers’ businesses – as well as ours, it is key to understand them and be on top of them. Below, we briefly describe four main trends that are shaping the world of Barco and of its customers. In addition, we illustrate how our solutions and services can help our customers address the opportunities and challenges driven by these four main trends.

#1 DIGITAL TRANSFORMATION

#2 INDIVIDUALISM

The combination of the internet, mobile and connected devices, data analytics, cloud computing, and machine learning is shaking up our lives and businesses. Even more, the pace of change is increasing exponentially. Every new technological advancement brings vast opportunities for organizations to become more productive and relevant, yet presents substantial risks at the same time.

Increasing globalization and digitization give people a broader perspective of the world, with numerous possibilities to work, learn, live and play. As a result, people – be it consumers, employees, students, patients, etc. – become more demanding. They crave freedom, they want to be recognized as individuals with personal needs and they are always on the lookout for ways to express themselves and enjoy life.

Our impact: • ClickShare and our projectors foster collaboration in meeting rooms. • Our learning environment helps engage today’s digitalnative students. • Barco video walls help organizations visualize – and, consequently, analyze – data. • Nexxis helps surgeons share video and audio in operating rooms.

Our impact: • Barco projectors ensure amazing, customized experiences. • ClickShare and our learning platform invite people to share their own views. • Our growing focus on services instead of products helps us give our customers what they want and when and how they want it. • Our SaaS-platform meets the need for outcome-based solutions.


Introduction & ambition statement

Barco annual report 2017

B/6

#3 CHANGING DEMOGRAPHICS

Strengthening data and systems protection at Barco In addition to opportunities, our digital, increasingly interconnected society is ushering in new risks too – for Barco as well. As software, connected devices and services comprise a larger share of our product portfolio, we are also collecting more customer data. That means we have to comply with data protection regulations, including the upcoming EU GDPR. Barco is working hard to prepare for the introduction of GDPR in May 2018. In addition, we have to protect our systems, networks and data from the accelerating threat of cyberattacks. We are fully aware of these threats and take measures to withstand these disruptions. To underpin our commitment, we are currently implementing an information security management system according to the ISO27001 standard. Certification in this standard will prove that we have every process in place required to deliver secure solutions. In a first phase, we’re working to get our ClickShare solutions certified.

The world’s population is aging, mainly due to increased life expectancy in developed regions. Developing countries, for their part, are struggling with fierce population growth. Changing demographics is poised to be one of the most significant social transformations of the 21 st century. It will have major implications for nearly all sectors of society, and not in the least for healthcare. Our impact: • Barco’s diagnostic display solutions help radiologists make accurate diagnoses while raising productivity. • Our surgical solutions help surgeons work more effectively, with better outcomes.

#4 CLIMATE & RESOURCES UNDER PRESSURE Climate change is expected to increasingly threaten natural ecosystems and their biodiversity, slow economic growth, threaten human health, etc. In addition, natural resources such as water and fossil fuels are being depleted. Creating a more sustainable world may well be the biggest challenge of today’s society.

Our impact: • ClickShare and weConnect enable video conferencing and remote meetings, thus helping organizations reduce their carbon footprint. • Our laser-illuminated projectors reduce energy consumption and avoid lamp swaps (i.e. less transport of lamps and less waste). • Barco opts for sustainable design (material use, energy efficiency, packaging and end-of-life optimization) across its product portfolio.


B/7

Barco annual report 2017

Materiality assessment Barco wants to focus its sustainability efforts on the issues that are most urgent and relevant to its stakeholders, its business and the technology sector. A materiality assessment helped us identify and prioritize these issues, as well as the risks involved, from economic, societal and environmental points of view. Our approach involved three steps and resulted in a materiality matrix.

Our approach to materiality

Result: Barco’s material issues

1. Outside-in perspective

The result of this process is a set of issues that stand out as ‘material’ – i.e. important - for Barco’s sustainability strategy. It features 10 issues that can be arranged under our three sustainability pillars:

We analyzed a vast range of internal and external data, including trend reports and other documents created by peers and competitors, sector associations and sustainability networking organizations (CDP, SASB, GRI, Sustainalytics, United Nations Sustainable Development Goals), as well as internal documents. This research led to a container of over 50 issues.

Planet People Communities

2. Consultation round We surveyed a select group of Barco employees (sustainability ambassadors) to determine the issues they thought were most important and relevant to Barco (priority setting).

3. Landing phase Finally, the Executive sustainability steering committee determined the impact of each of the points on Barco’s success (see page B/59).

For more information on how Barco engages with its stakeholders to determine risks and points of attention, we refer to the ‘Stakeholder engagement’ segment on pages B60 and B62 of this report.


Barco’s corporate and sustainability strategy

Barco annual report 2017

U.N. SUSTAINABLE DEVELOPMENT GOAL S

MATERIAL ISSUES

OUR SUSTAINABILIT Y PILL ARS

Cluster of the material topics under our three sustainability pillars

Planet

People

Communities

• Climate change / Greenhouse gas emissions • Energy efficiency of products & operations • Circular economy

• Learning & development • Employee safety • Employee health / care • Diversity / equal opportunities

• Supplier auditing / assurance • Community engagement • Business ethics

B/8


B/9

Barco annual report 2017

Barcoâ&#x20AC;&#x2122;s corporate and sustainability strategy

We enable bright outcomes by transforming content into insight and emotion.

Planet

Our mission Barcoâ&#x20AC;&#x2122;s mission is to enable bright outcomes by transforming content into insight and emotion. To achieve that mission, we offer best-in-class networked visualization solutions (hardware and software) and related services.

Our strategy Inspired by our fast-changing world in which technology introduces new ways to live, play and work, Barco updated its mission statement and its strategy in 2017. Both now include a commitment to outcomes. The Barco DNA, which will guide us on our path toward continuing success, includes three intertwined pillars: Lead by innovation Focus on performance Offer outcome-based solutions

People

Communities


Barco’s corporate and sustainability strategy

Barco annual report 2017

B/10

Planet People Communities

Our sustainability stategy We want to execute on our strategic pillars in a sustainable way, and increase our focus on the effects they have on our planet, people and communities. • Planet: all initiatives that reduce our environmental impact and that help reduce those of our customers. • People: all initiatives targeted to encouraging sustainability employability among all (future) employees. • Communities: all initiatives targeted towards the development of our own Barco community, in relation to our business partners, stakeholders, and the communities in which we live and work.

Our seven values For years, seven core values have guided us in everything we do. In 2017, we changed ‘we care about our people’ into ‘we care’ to underpin the importance of our sustainable impact program.

– We lead by innovation – We delight our customer – We deal openly and ethically – We encourage team play – We are accountable – We trust each other – We care


B/11

Barco annual report 2017

Our Sustainability Impact Plan (SIP) Measuring our sustainability performance

Planet

People

Page B/11

Page B/21

Page B/37


Our Sustainability Impact Plan (SIP)

Communities Page B/45

Barco annual report 2017

B/12


B/13

Barco annual report 2017

To firmly embed sustainability into every division and process, we drafted the Barco ‘Sustainability Impact Plan’ (SIP). It helps us organize, prioritize and facilitate our sustainability efforts, measure our performance and diligently manage our actions.

Barco’s Sustainability Impact Plan considers the fact that a successful sustainability program contains: • a clear strategy and clear focus domains; • a system that measures performance and tracks it against defined targets and ambitions; • a roadmap towards leadership in all focus domains; • the right leadership, governance and culture to drive every initiative.

Measuring our sustainability performance We use two different types of indicators to measure our sustainability performance: • 4 key performance indicators (KPIs), balanced across relevant sustainability domains (people, planet and community) and material topics, help us measure and set targets for Barco’s sustainable development. • 25 performance indicators (PIs), i.e. descriptive statistics, help us measure and track performance on sustainability focus domains.

The following summary tables give an overview of the performance indicators and our progress since 2014, when we started measuring our performance. Note that we are only at the start of our sustainability journey. Month after month and year after year, we are learning, fine-tuning and sharpening our approach.


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

GHG-EMISSIONS

Planet (key) performance indicators PLANET KPIs

UNIT

2014

2015 (BASELINE)

2016

2017*

TARGET 2020**

GHG-emissions operations (1)***

tCO2e / mio €

94.4 excl. end-user, incl. Defense & Aerospace division

75.4 excl. end-user and Defense & Aerospace division

67.7

TBD 2018

-20%

Eco-performance new products (2)

# / score

Energy footprint products/delivered capability (3)

Watt / delivered capability

NA

0.19

0.18

TBD 2018

GHG-emissions products, end-user emissions

tCO2e / mio €

NA

727.1

726.5

TBD 2018

GHG-emissions, scope 1

tCO2e / mio €

5.8

5.1

4.2

TBD 2018

GHG-emissions, scope 2

tCO2e / mio €

6.4

5.4

5.0

TBD 2018

GHG-emissions, scope 3 (incl. enduser emissions)

tCO2e / mio €

82.2 (end-user scope: healthcare)

792.0 (end-user scope: all divisions)

785.0 (end-user scope: all divisions)

TBD 2018

Total GHG-emissions (scope 1+2+3)

tCO2e / mio €

94.4

802.5

794.2

TBD 2018

All eco-scored No D 25% A

Barco will start eco-scoring products from January 2018 onwards

-25%

* 2017 data will be available in June 2018. We will update our progress in the online version of this Sustainability Report in the course of 2018. ** Barco will explore longer term (2025) carbon emission targets in 2018. *** See page B/16.

B/14


WA S T E

E N E R GY M A N A G E M E N T

B/15

Barco annual report 2017

PLANET KPIs

UNIT

2014

2015

2016

2017*

Energy intensity

(MWH / FTE)

14.2

15.6

14.6

TBD 2018

(MWH / mio â&#x201A;Ź)

46.0

44.2

39.9

TBD 2018

% energy from renewable sources

%

NA

NA

60%

60%

Hazardous industrial waste

%

NA

NA

0.1%

TBD 2018

Recycling rate

%

NA

NA

69%

TBD 2018

* 2017 data will be available in June 2018. We will update our progress in the online version of this Sustainability Report in the course of 2018.


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

B/16

KPIs in the ‘planet’ domain: • GHG emissions (1): We started measuring the GHG emissions of our own operations (logistics, infrastructure and mobility) in 2015, using the relative total carbon footprint (tCO2e / mio € turnover) as the standard unit. • The energy footprint of our products (2): In 2015, we began measuring the GHG emissions of our products (limited to the energy consumption of the use phase), which is one of the main drivers of Barco’s full product environmental footprint.

 Read

• Eco-performance of new products (3): From 2018 onwards, Barco will assess the sustainability performance of its products in various domains (material use, energy efficiency, packaging and end-of-life optimization) and summarize the results in an ecoscore (A, B, C or D). Every new product launched will be assessed (see the ‘Green customer solutions’ section pages B/31 - B/36).

the ‘planet’ section for more details about our performance, policies and past and future initiatives in this domain.

A

-10%  -20%

-25%

25%

The GHG emissions of our own operations fell by 10% between 2015-2016. Our target is to reduce them by 20% by 2020 (using 2015 as a baseline).

The energy footprint of products per delivered capability decreased by 6% between 2015-2016. We aim to reduce it by 25% by 2020.

By 2020, we want at least 1 in every 4 new products that we launch to have an A eco-performance score.


B/17

Barco annual report 2017

DIVERSIT Y & INCLUSION

E M P L OY E E H E A LT H & S A F E T Y

LEARNING & DEVLEOPMENT

E M P L OY E ENGAGEMENT

People (key) performance indicators PEOPLE KPIs

UNIT

2014

2015

2016

2017

TARGET 2020

employee engagement (employee NPS) (4)

#

NA

*

17

**

We will formulate a target on employee engagement in 2018.

iGemba (5): # of improvement sugg.

#

4685

5332

6610

6751

# of improvement sugg. per operator

#

6.5

6.7

8.4

8.6

% implementation

%

87%

86%

84%

85%

% of employees in internal mobility

%

2.2%

2.9%

3.3%

2.7%

Avg hours L&D / employee

#

19.5

20.7

17.2

14.7

Turnover / Outflow voluntary

%

5.8%

5.6%

6.0%

7.7%

% of people in LT illness (> 1 yr)

%

1.1%

0.9%

0.7%

0.7%

Accident rate

#

0.03

0.01

0.16

0.03

Severity rate

#

2.12

1.58

8.25

4.16

Frequency rate Safety index

#

2.72

6.33

0.3

1.39

% women Barco overall

%

28.8%

28%

28.2%

28.4%

% women mgmt. â&#x20AC;&#x201C; Hay grade+18

%

11.6%

14%

14.5%

15.2%

Avg age of active Barco payroll employees

#

44

43

42

41

* Employee engagement surveys done bi-annually. ** In 2018, Barco will put in place a revised employee engagement and enablement measuring system.


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

B/18

(K)PIs in the ‘people’ domain: • Employee engagement (4): Every two years, we measure employee engagement by administering a structured survey. In the 2016 survey, we received an employee net promoter score 1 of 17. We are currently reviewing our employee engagement measuring method and will set long-term targets for employee engagement scores in the course of the 2018.

 Read

• iGemba (5): In 2009 we launched the iGemba project, a global, operator-driven program aimed at installing a culture of continuous improvement across all Barco’s operating sites. The number of improvement suggestions (per operator) is a leading performance indicator for employee (i.e. blue-collar operator) engagement.

the ‘people’ section for more details on our performance, policies and past and future initiatives in this domain.

6,751

17

In 2017, iGemba triggered 6,751 suggestions for improvement, i.e. 8.6 suggestions per operator.

In giving Barco an employee net promotor score1 of 17, our employees agree that Barco is a great place to work.

1 eNPS indicates how likely it is that Barco employees would recommend – Barco – as a great place to work to their peers (% promoters - % detractors)


B/19

Barco annual report 2017

COMMUNIT Y ENGAGEMENT

ETHICS & COMPLIANCE

CUSTOMER S AT I S FA C T I O N

Communities (key) performance indicators COMMUNITY KPIs

UNIT

2014

2015

2016

2017

Customer loyalty index (6)

#

87

*

83

*

Employees educated in (Code of) Ethics (7)

%

NA **

92%

92%

Supplier compliance with RBA (EICC) Code of Conduct (8)

%

100% core

100% core

100% core

100% core

Employees covered by collective agreements

%

100%

100%

100%

100%

Community investment (9)

â&#x201A;Ź

NA ***

125,000

Community involvement (10)

# heads

NA ***

+600 heads (20% of total workforce)

* Customer satisfaction surveys done bi-annually. The last one was performed in 2016. ** No employee ethics training in 2014-2015. *** Barco did not track its community engagement efforts quantitatively before 2017.


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(K)PIs in the ‘communities’ domain: • Customer satisfaction survey (6): Barco holds a bi-annual customer satisfaction survey across divisions and types of customers (partners vs. end-customers). The last survey was held in 2016.

• Community investment and involvement (9) (10): In 2017, we started measuring our community engagement efforts both in amount of funds contributed and the number of Barco employees involved in community engagement efforts globally.

• The penetration of ethics and compliance (07) (08): By measuring the percentage of employees educated in our Code of Ethics and the percentage of suppliers that comply with the RBA (EICC) Code of Conduct, we can gauge acceptance of the codes of conduct that guide us in our activities.

 Read

the ‘communities’ section for more details on our performance, policies and past and future initiatives in this domain.

83

600+

With a customer loyalty score of 83, we far exceed the industry benchmark (69).

Over 600 Barco employees were involved in community engagement projects in 2017.


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Barco annual report 2017

MEASURING OUR CARBON FOOTPRINT Methodology

Scope

Reporting period

• Bilan Carbone® methodology • Compliant with ISO 140064 standard • Sources of emission factors: Emission factors from scientific sources, ADEME, GHG Protocol, IEA, supplier’s specific for electricity

• Technical: All GHG such as carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), refrigerants (HFC’s, PFC’s, CFC’s), are converted into CO2 equivalent using Intergovernmental Panel on Climate Change (IPCC) 100-year global warming potential (GWP) coefficients • Boundaries: Operational (vs. equity) approach, as it better defines the boundaries of influence • Geographical scope: main production facilities and offices in Belgium, China, Italy, Germany, India, Norway, Taiwan and US, accounting for 85% of Barco’s total headcount (3,006 FTEs)

• FY 2016 • The 2017 results will be available in June 2018; the report will be updated accordingly

Baseline

• For targets and performance comparison, Barco selects FY 2015 as baseline

Reporting

• Annual reporting to the Carbon Disclosure Project (CDP)

Planet As a global company, we are aware of the impact our operations have on our planet. We are therefore working hard to minimize the ecological footprint of our operations and our products. More than meeting the regulatory requirements in each country, we take voluntary steps to proactively comply with the most stringent rules and guidelines.

881 KtCO2e

Barco’s total carbon footprint in 2016 (absolute)

794.2 tCO2e / mio € turnover

Barco’s total carbon footprint in 2016 (relative to turnover)


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Total carbon footprint Logistics, mobility, infrastructure and end-user emissions: these are the four main sources of CO2 emissions at Barco. On this page, we share some numbers on our total carbon footprint. We will then zoom in on more detailed results,

targets and actions for each of logistics, mobility and infrastructure emission sources. End-user emissions are discussed in the ‘Green customer solutions’ section.

Share of carbon footprint across our activities

Total carbon footprint 2015-2016 (tCO2 / mio €)

802.5

794.2

800

-1% End-user emissions 91% Own emissions 9%

700

600

500

400

END USER

END USER

300

Own emissions Logistics 6% Mobility 2% Infrastructure 1%

200

-10%

100

OWN

OWN

2015

2016


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Barco annual report 2017

Carbon footprint per emission category

Carbon footprint of own emissions 2015 – 2016, incl. 2020 target All figures in tCO2e / mio € turnover

The following sections detail the performance, past initiatives and targets for our own emissions (i.e. emissions related to our own activities) in three main emission categories : logistics, mobility and infrastructure. They encompass scope 1, 2 and part of scope 3 (logistics) emissions. End-user emissions are discussed more in detail in the ‘Green customer solutions’ section.

-20% INFR -10% 70

INFR INFR

60

MOB MOB

50 40 30

LOG

LOG

3 CATEGORIES

20 10

2015

2016

75.4

67.7

TARGET 2020 60.3

Logistics

Mobility

OUR 2016 PERFORMANCE -10% Greenhouse gas intensity, excl. end-user emissions decreased by 10% over 2016.

By 2020 -20% We want to reduce greenhouse gas intensity for logistics, mobility and infrastructure, excl. end-user emissions, by 20% by 2020 (compared to 2015).

Infrastructure


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

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1. LOGISTICS

43.3 tCO2e / mio € turnover

Barco’s carbon footprint for logistics in 2016

63%

The share of logistics in Barco’s own CO2 emissions in 2017

Breakdown of logistics emissions by source (2016)

Air (long) 60% Air (middle) 2% Air (short) 1% Maritime 34% Road 3% Rail 0%

Air (long) 89% Air (middle) 7% Air (short) 3% Maritime 1% Road 0% Rail 0%

% ton.kms (tons * distance transported)

% tCO2 footprint

• 34% of Barco’s total tkms (tons * distance shipped) is transported over deep sea corridors, while deep sea transport is responsible for less than 1% of the CO2 footprint in logistics.

• 60% of Barco’s total tkms is transported over long-haul air, causing 89% of Barco’s CO2 footprint in logistics.


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Barco annual report 2017

PROGRESS -13% Reduction in relative CO2 emissions (tCO2e / mio € turnover) for logistics between 2015 and 2016.

How? A solid plan to optimize transport worldwide helped us cut logistics emissions in recent years. In 2016 (and 2017) Barco focused on the following measures:

Carbon footprint of logistics emissions 2015 - 2016, incl. 2020 target

• Changing our transportation modes: We increasingly adopt more carbon-friendly transportation modes, swapping long-haul air transport for sea cargo transportation. That shift requires building a more stable and predictable business supported by increased supply chain capabilities in terms of planning, forecasting and inventory management. We made substantial progress in 2016 and 2017, which led to considerable modal shifts on the following corridors:

All figures in tCO2e / mio € turnover

-17% INFR

50

 +40% cargo shipped from India to Belgium by sea instead of plane (from 0% > 40%);  +11% cargo shipped by sea from China to US (from 55% > 67%).

-13% 40

• Designing products for the supply chain: When designing new products, we try to minimize their volumes and chargeable/actual weights.

30

20

49.8

43.3

39.9

2015

2016

TARGET 2020

10

 E.g. our new UDX projector is 52% more compact than the HDF FLEX projector, with 26% smaller shipment dimensions.


Our Sustainability Impact Plan (SIP)

• Packaging for logistics: By optimizing our packaging, we can substantially raise transport efficiency too. These efforts have yielded the first results (non-exhaustive list) in 2016 and 2017:  Elimination of plastic ‘sea-bags’ for deep sea cargo transportation  We increasingly choose cardboard packaging and removed foam as buffer material when transporting our dental displays  ClickShare CS100 and CSE200 are now shipped in smaller packages (- 30%)

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MID-TERM TARGET (2020) Barco aims to further execute on its carbon reduction roadmap in logistics in the period 2018 – 2020.

-17% By 2020, we will cut logistics emissions (tCO2 / mio € turnover) by 17%.

How? • Continuing the modal shift: i.e. replacing air freight with transport by ship (+20%), train +5%) or truck (+5%). • Reorganizing the supply chain network to accommodate more localization: sourcing, manufacturing, repairing and providing services locally, near the customer. • Designing packaging and products for the supply chain: reducing the volume/weight of high-running appliances by giving clear impulses to new product introductions.


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Barco annual report 2017

2. MOBILITY

16.99

26%

tCO2e / mio € turnover

Barco’s carbon footprint for mobility in 2016

Breakdown of mobility emissions by source (2016)

The share of mobility in Barco’s own emissions

PROGRESS -1% Decrease in relative emissions (tCO2e / mio € turnover) for mobility between 2015 and 2016.

Business travel 67% Home-work commuting 16% Company cars 15%

How? • Updating our car fleet policy (since 2016) does pay off in most countries. By gradually replacing our petrol-fueled cars with CNG and electric vehicles and sensitizing employees to eco-driving, we reduced the relative emissions of our own fleet by 15% between 2015 and 2016. • Emissions from business travel and home-work commuting, however, rose by 1% and 5% respectively. We will work hard to decrease our footprint in the coming years (see actions below).


Our Sustainability Impact Plan (SIP)

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MID-TERM TARGET (2020) -18% By 2020, we will cut relative emissions for mobility (tCO2 / mio € turnover) by 18%.   How? • Encouraging staff to use our virtual meeting room infrastructure to cut back on business trips or help them plan business trips smarter. • Changing our business travel policy: for short distances (<600 km), Barco will promote train travel instead of flights. In addition, we will look for ways to further cut down on the number of flights for business travel (-8% by 2020). • Promoting our mobility plan: the mobility plan that we introduced in 2016 should motivate Belgian employees to come to work in eco-friendlier ways. We continued this in 2017 and hope to reap the benefits in 2018.

• Facilitating carpooling: by making carpooling ‘easier’ (infrastructure changes, a digital carpool calendar, transparency in cost benefits, etc.), we want to strengthen the carpooling community that we launched in 2017. • Promoting the use of bikes: in 2017, we further reinforced the infrastructure, safety and incentives for bikers by providing a standard bicycle allowance and organizing a bicycle group purchase in the Belgian HQ. In 2018, we will put more emphasis on even better infrastructural and safety support and raise the financial bicycle allowance. • Reaping the benefits of OneCampus: as every Belgian Barco employee will work at OneCampus from early 2018 onwards, we expect fuel emissions to drop significantly. • Updating our new car policy: we will keep replacing our petrol-fueled cars with CNG and electric vehicles in the coming years.


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Barco annual report 2017

3. INFRASTRUCTURE

7.43

11%

tCO2e / mio € turnover

Barco’s carbon footprint for infrastructure in 2016

The share of infrastructure in Barco’s own emissions

Breakdown of infrastructure emissions by source (2016)

Electricity 72% Other sources 28%

• 72% electricity, which we use as our main energy source (electricity accounts for 55% of all energy needed).

• 28% other sources: gas for heating, fuel use (excl. company cars), refrigerant gas leakages from cooling equipment (air conditioning).


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

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PROGRESS

MID-TERM TARGET (2020)

-6% reduction in average energy consumption per FTE (14.6 MWh/FTE) between 2015 and 2016.

-67% By 2020, we will cut relative emissions for infrastructure (tCO2 / mio € turnover) by 67%.

-10% reduction in relative energy consumption (per turnover) between 2015 and 2016

How? To further reduce carbon emissions from our infrastructure, we will continue the initiatives that we began in 2017 and expand on these:

61% of electricity consumption is provided by green electricity with certificates of origin (mainly Belgium and Italy).

• Monitoring energy consumption and changing our behavior across the globe.  At OneCampus, we will monitor energy consumption at team level to encourage rational energy behavior.

How? • Investing in energy-efficiency measures: we replaced old lighting systems with LED solutions or resolutely chose LEDs for new offices (Belgium, Italy, US). One Campus features energy-efficient adiabatic cooling. • Investing in renewables across the globe: in 2017, we installed photovoltaic panels at One Campus and in our manufacturing facilities in China. After positive feasibility study results, we will also equip our facilities in Italy with photovoltaic panels in 2018. In parallel, we are executing a windmill feasibility study for our OneCampus site in Kortrijk. • Creating awareness campaigns to engage employees in energy efficiency and change their behavior in the workplace (Italy, Taiwan and India).

• Extending our green energy procurement program to other regions, notably Germany, India, China and the US. • Investing in renewables and energy-efficiency measures across the globe (e.g. LED lighting).


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Barco annual report 2017

Green customer solutions MEASURING OUR CARBON FOOTPRINT RELATED TO END-USER EMISSIONS Methodology

• GHG Protocol Methodology Formula to be used: ∑ (total lifetime expected uses of product × number sold in reporting period × electricity consumed per use (kWh) × emission factor for electricity (kg CO2e/kWh))

Scope

• Emissions based solely on the energy consumption of the product (excluding the embodied energy of components, end-of-life emissions, etc.) • Approx. 90% of the products covered (in terms of sales volume) in 2016

As we are committed to assessing Barco’s total environmental impact, it is imperative that we measure more than the impact of our own activities (logistics, mobility and infrastructure). In 2016, we began actively measuring and managing end-user emissions, i.e. the energy consumption of our products and their impact on the environment. We initially began by measuring the end-user emissions of our Healthcare division. In 2017, we extended the exercise, measuring the footprint of all our products (across all divisions) for the years 2015 and 2016.

726.5 tCO2e / mio € turnover

Reporting period

• FY 2016 • The 2017 results will be available in June 2018; the report will be updated accordingly

Our carbon footprint for end-user emissions in 2016


Our Sustainability Impact Plan (SIP)

Breakdown of end-user emissions per type/division (2016)

Barco annual report 2017

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PROGRESS 0% End-user emissions (per mio € turnover) remained stable between 2015 and 2016.

End-user emissions 91% Own emissions 9%

-5% Reduction in energy performance per delivered capability for Entertainment (82% of end-user emissions), thanks to the use of more energy-efficient laser technology.

MID-TERM TARGET (2020) -25% watt/delivered capability By 2020, we will cut end-user emissions per delivered capability by 25%.

Entertainment 82% Enterprise 15% Healthcare 3%

Generally, we see that market trends and customer preferences are shifting towards solutions with ever-higher performance (brightness, resolution, etc.) – which require higher energy consumption levels. That is why Barco measures (and manages) the energy performance of its solutions, i.e. the energy consumption relative to brightness, resolution, luminance, etc. (watt/delivered capability).

How? • Improving the energy efficiency of our displays: our latest displays consume far less energy while maintaining the quality of light output. • Switching to solid-state illumination: solid-state (laser) projectors and video walls, which make up an ever-growing part of our product portfolio, consume far less power (-50 to -150%) than traditional lamp-based systems.


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Barco annual report 2017

Fostering the sustainability performance of our solutions 3 examples

Entertainment

Healthcare

Energy efficiency • Our laser-illuminated projectors could reduce energy consumption of cinema projectors in Europe by 150 GWh per year – which equals the electricity production of a small nuclear power plant in one month. • 50-150% more energy efficient per delivered lumen.

Energy efficiency When designing new healthcare displays, we look for ways to increase their energy efficiency (in active use and standby). E.g: our 27-inch pathology display consumes less power: -10% in operating and over -50% in standby mode.

Material use • Laser technology eliminates any concerns about potential pollution from xenon lamp disposal. • Extremely long life time. Supply chain • The use of laser projectors could avoid over 1 million lamp swaps annually in Europe. This is the equivalent of 670 trucks filled with lamps navigating Europe. • Our UDX projector is 50% more compact than earlier stage HDF projectors End-of-life optimization • Modular design enables retrofit (reuse of casing / standard parts). • Platforming for easy maintenance and refurbishment.

Material use Our 26-inch high-bright surgical display (MDSC 2326) uses LED backlights, thus eliminating lead and mercury. Supply chain Design for supply chain both in volume and weight reduction: E.g: by redesigning the pedestal of our 19-inch MDRC-1219 display we can now pack 24 displays per pallet instead of 16 (+50%). By slightly redesigning our 58-inch 8MP MDSC 8358 display, we reduced its weight by ca. 7%. End-of-life optimization Barco improved the design of many healthcare displays to make them easily serviceable but also easy to dismantle at the end of their lifetime.


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

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Enterprise Launching our energy-efficient power control circuit for video walls The large video walls that our Enterprise division develops for control rooms consume quite a bit of energy, even in standby mode. Barco Noida (India) came up with a solution to substantially reduce that energy use. Following three years of development, the team has now filed a patent for an ‘energy-efficient power control circuit’.

This technology will help our customers substantially reduce their energy consumption, leading to a smaller ecological footprint. Mahesh Chandra Joshi The project’s originator, first inventor and chief inspirer

Blending innovation with sustainability The new solution, which Barco India developed together with their colleagues from Karlsruhe (Germany), allows users to turn multiple screens off completely and all at once, in order to save energy. It is, however, also very easy to switch the screens on again, with a remote controller, for example. In the past, several companies have tried to create similar technologies, but they could never get past the component level and succeeded only in controlling part of a display wall. The innovation is an inspiring illustration of Barco’s aim to transcend mere product development and instead create sustainable solutions for customers.


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Barco annual report 2017

Design for the environment More than improving the energy-efficiency of our technology solutions, we want our products to be composed of low-impact materials (material use), be packed in eco-friendly packaging (packaging) and be easy to maintain, refurbish and eventually recycle (end-of-life optimization). That is why an increasing number of innovation initiatives are focused on sustainable product innovation. To anticipate to upcoming standards and regulations, we set up an sustainable product design/eco-design program, which entails an eco-design scoring mechanism (A, B, C, D) on product level. Barco’s Eco Office supports these efforts.

Our journey towards sustainable Barco solutions 2013 - 2015 • Phaseout high-impact hazardous toxic materials • Adoption of the Barco Substances List • REACH, RoHS compliance 2016 - 2017 • Energy efficiency (Laser, LED,... ) • Design for supply chain (weight, volume, material reduction) 2018 - 2020 • Low-impact materials • Reduce the use of halogens & PVC • Design for refurbishment & repair/maintenance

PILLAR

EXAMPLE/PROGRESS

Energy efficiency

• Barco chooses consistently and deliberately for high-energy efficiency technologies (laser, LED, ...) • Barco invests in research and development of active power management solutions (e.g. standby mode, deep sleep mode, etc.)

Material use (toxicity/hazardous, impact, recycled/ renewable)

• REACH/ROHS compliance • Increase transparency of product composition (via: Barco’s Substances List, GreenSoft and BomCheck.net) • Successfully replaced non-ROHS II components • Data evidence delivery made stricter in procurement contracts

Product packaging

• Packaging designed for the supply chain • Eco-friendlier packaging materials

End-of-life optimization (design for repair, refurbishment, etc.)

• From 2017 onwards, Barco is putting more emphasis on its services portfolio and providing more retrofit solutions. Design for serviceability (maintenance, repair, upgrading) is key in all new design tracks. • In 2017, Barco joined several initiatives to expand its knowledge of the circular economy, such as the Agoria circular economy learning network and Benelux remanufacturing project. We also joined JWG CLC10. As an active member, we will help write future standards to improve the sustainable performance of products.


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Our eco-scoring methodology Energy • Efficiency • Eco mode • Standby mode • Power management

Packaging • Design • Recyclability • Accessories in the packaging • Manuals

Material use • Toxic substances • Product weight • Recycled material

End-of-life optimization • Durability • Design for disassembly • Modularity • Accessibility of critical components

A

Significant effort

B

Upright effort

C

Minimum effort

D

No deliberate effort

Degree of sustainability effort

Our Design for the Environment program is supported by a robust eco-scoring methodology that helps us determine the sustainability performance of our products. Sustainable products must demonstrate balanced leadership on all eco-design dimensions – energy-efficiency, material use, packaging and end-of-life optimization – compared to industry standards. This is done by either outperforming reference (competitor, older version) products with an eco-performance label or by outperforming current legislation. In 2017, we set up, fine-tuned and applied our eco-scoring methodology in different pilot projects. From 2018 onwards, all new products will be assessed from a sustainability point of view and rated according to an ABCD-scale.

MID-TERM GOAL (2020) 25% Percentage of all new Barco products that should have an A eco-performance score by 2020.

+ • We want all our products to have an eco-performance score. • All new Barco products should have an ecoperformance score higher than D.


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Barco annual report 2017

People

You are you and together we are one.

In 2017, Barco employed 3,590 people. We care about every single one of them. That is why we work hard to ensure a healthy, safe and motivating workplace where everyone is treated fairly and with respect and where it is fun to work. The key to well-being in the workplace? Sustainable employability. By appreciating and stimulating talent, by encouraging our people to learn and develop themselves, by motivating them and by keeping them healthy â&#x20AC;&#x201C; both physically and mentally â&#x20AC;&#x201C;, we want them to feel strong, valued and fit. Moreover, we focus on their ability to proactively anticipate change, evolution and trends so they are ready to face the challenges of an ever-changing world â&#x20AC;&#x201C; either within or outside our company.


Our Sustainability Impact Plan (SIP)

Number of employees

Barco annual report 2017

2013

3,982

2014 2015

B/38

3,836 3,361

2016 2017

Gender

3,524 3,590

73% male 27% female

Geographical

11% Greater China 15% The Americas 23% Asia-Pacific 51% EMEA**

Per functional group

284 Administration 84 Customer projects 327 Customer service 230 Marketing 1,183 Manufacturing & logistics 65 Procurement 61 Quality, supply chain & support 840 Research & development 517 Sales

* Number of full-time equivalents (FTEs), excluding temporary workforce (Database Corporate Associates per 31/12/2017) **EMEA: Europe & Middle East & Africa


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Barco annual report 2017

Our You+ program To achieve our objectives in the field of sustainable employability, we created the You+ program. Since 2015, we have been framing all our people-related initiatives in this global program. It consists of three pillars, which match the results of the materiality assessment we performed in 2017 (see B7/ - B/8).

Training & personal development

Engaging all employees in the Barco journey

Providing a healthy, safe and energizing workplace


Our Sustainability Impact Plan (SIP)

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Engaging all employees in the Barco journey We are all part of the same Barco team – OneBarco – with one mutual goal: achieving operational excellence in order to maintain and strengthen Barco’s global leadership position. That’s why we want everyone to understand and actively contribute to our strategy and vision. To spread our message, we provide structured communication platforms. Our new OneCampus in Kortrijk is designed to foster interaction. Yet in other regions too, we encourage our employees to ask questions, provide feedback, share ideas and become truly involved in our operations.

Strategy roadshows and more To foster awareness of our new strategy, we prepared a strategy roadshow in 2017. In early 2018, our CLT members will tour the world to help every Barco employee understand the bigger picture. Yet there are local initiatives, too. In the Americas, for example, Ney Corsino, Senior Vice President of the Americas, hosts a monthly teleconference to share results and discuss programs and activities.

BarcoZone and the CEO blog BarcoZone, our Intranet, is an excellent platform for sharing information with every Barco employee. Besides practical information, BarcoZone spreads new insights – including blog posts by our CEO, Jan De Witte.

Employee appreciation week Every year, our American colleagues organize Employee Appreciation Week: a full week of fun activities – from football games and painting contests through barbeques – to bring all the Barco employees and their managers closely together.

Self-steering teams To ensure that our employees feel more engaged and have the chance to grow and develop, we increasingly rely on self-steering teams, ranging from administrative teams to blue-collar workers. The team working on our Lean Line, for example, is responsible for the quality checks and the logistics of the complete production process. As almost every team member can execute every step in the production procedure, they can rotate working stations easily, which helps avoid monotony.


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Barco annual report 2017

Training and personal development At Barco, we cherish talent and actively help it to grow and flourish. Through Barco University, dedicated training programs and coaching, we seek to empower our people, ensuring that they are flexible, agile employees while encouraging them to think about how they want to contribute to our company, today and tomorrow.

To make sure our people feel happy in their professional roles, we provide them with a series of tools to help them self-manage their careers: In addition, we promote internal mobility. In 2017, 2.7% of Barco’s total workforce was internally mobile.

Our Leadership Development track includes multiple custom-made programs to help Barco leaders expand their skillsets and foster their leadership potential.

Innovation is one of the key strategic levers of Barco as a company. As we want to foster innovation in everything we do, we try to involve every Barco employee in our innovation processes. Barco STREAM is a corporate ideation platform a new initiative to boost our innovation capabilities.

15 hours/employee

100%

With courses on topics ranging from GDPR regulations, ethics and compliance to health and well-being, Barco employees received on average 15 hours of learning and development throughout 2017. Barco University remains our ‘tool’ to stimulate lifelong learning. To promote participation, we combine on-site courses with e-learning.

Our advanced performance management process helps all Barco employees discover and develop their talents. Based on 360° feedback tools, team managers discuss the performance, training needs, career planning and, of course, job satisfaction of their team members.


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Providing a healthy, safe and energizing workplace Barco keeps investing in a healthy and safe work environment, around the world. Every year, we launch a series of initiatives to energize our employees and improve their mind and body balance. Besides encouraging them to keep healthy and fit, we launched a series of initiatives to promote their psycho-social well-being and offer additional support when required. In 2017, we focused on mental health and well-being.

• Through dedicated training courses, we help supervisors and HR business partners to develop their coaching skills and their capability to spot warning signs of stress or burnout early on. • We have a strong network of confidant(e)s that are the primary go-to persons in case of problems with sexual discrimination and harassment, other forms of discrimination or psychosocial issues.

• In 2017, we launched the RAPSY – Risk Analyses of PsychoSocial aspects at work – methodology, an approach to assessing departments or groups on their potential for psychosocial risks and to link action plans to possible issues. • Since 2016, Belgian employees who are wrestling with psychosocial issues can get professional advice and counselling through the employee assistance program (dedicated hotline, 24/7 assistance). In 2017, 22 employees used this channel to find help to tackle private or workrelated (stress) issues. • In 2017, our Prevention and Protection Working Group drafted an integrated policy to foster the re-integration of employees after a long-term illness (0.7% of our workforce in 2017).


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Barco annual report 2017

B-Energized Week 2017 For several years, we have been organizing a ‘B-Energized week’ at our headquarters – a full week of activities centered around ‘health’. Under the ‘Stay sharp, relax smart’ motto, Barco employees were introduced to yoga, joined a ‘recharge session’ and learned all about healthy food and their mental capital in 2017. More than in Belgium, we see B-Energized initiatives popping up around the world: a walk-a-thon in the Americas, Ayurveda sessions and biometric screenings in India, energizing breaks in Germany, weekly energizing breakfast and ‘work stretches’ in Norway, a mental health seminar and yoga in Japan, etc.


Our Sustainability Impact Plan (SIP)

Diversity and inclusion For Barco, diversity and inclusion are priorities in all their aspects and on all levels. In terms of our workforce, we strive for a healthy gender balance and geographical spread in addition to providing local employment in all communities in which we operate (see overview on page B/39). More than priding ourselves on the diversity level of our workforce, we also steer actively towards diversity at the hightest governance bodies. We continually monitor, assess and evaluate gaps and areas for improvement in the composition of our Board of Directors and Core Leadership Team – in terms of gender, age, capabilities, expertise, educational and professional experience as well as geography. In 2017, our Core Leadership Team expanded and diversified from different angles:

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Mix of Barco’s Core Leadership Team Worked / lived Out of 13 executive staff members: 2

1

11

7 5

3

No. of years in executive positions in / out of Barco Out of 13 executive staff members:

• Age: average age fell by 5 years.

5-10 years

• Size: expanded from 9 to 14 members.

+10 years

+20 years

• Gender: 2 women. • Competencies: increased focus on management, technology and services and executive-level experience. • Geographies: more international experience, with more local representation (esp. China). For more information about the age, gender, capabilities and educational and professional expertise of the Board of Directors and Core Leadership Team members, including changes in 2017, we refer to the ‘Governance’ section of the Company Report.

4

4

5

Experience Out of 13 executive staff members:

7

Hardware

6

Software

5

Services


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Barco annual report 2017

Communities

Increasing stakeholder engagement and helping our communities thrive.

As a responsible corporate citizen, Barco is focused on caring for its entire community - employees, customers and business partners; investors, analysts and shareholders; authorities and the media; and, of course, the local communities in which it operates. The Barco team does its utmost to continuously contribute to a safe, healthy and pleasant world for every stakeholder. Besides working closely together with customers and business partners, we also support artistic and cultural initiatives, promote technology and innovation and help people around the world build better futures.


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

Customer satisfaction

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Ethics & compliance

Community engagement

In line with our commitment to increasingly measure and set targets for our sustainability performance, we have also identified different types of indicators for the â&#x20AC;&#x2DC;communityâ&#x20AC;&#x2122; domain (see performance indicators on page B/19 - B/20 of this report). . The topics that we identified as crucial for our community strategy match the results of the materiality assessment that we performed in 2017.


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Barco annual report 2017

Putting customers first As Barco is committed to enabling bright outcomes for its customers, we set great store by offering outstanding customer services. Our growing focus on services helps us to further customize the customer journey, enabling us to give our customers what they want and when and how they want it. Our design and development processes too, are becoming more customer-centric: we listen to our customers’ needs and take these into account when developing new Barco solutions.

Barco @Barco

Leading provider of #eHealth & digital imaging solutions @AgfaHealthCare honors @BarcoHealth w/ Supplier Excellence award http://bit.ly/2CIRg9G #radiology #diagnosticdisplays

Customer loyalty study Every two years, we measure the satisfaction of our customers with a loyalty study. In 2014, we recorded the highest customer loyalty index in our history. At 83%, the 2016 score was slightly lower than the 87% we achieved in 2014, but it is still a strong result that far exceeds the industry benchmark (69). The survey yielded a ton of great insights on how to improve our products and services to score even higher in the future. The Supplier Excellence Award that we received from Agfa Healthcare in 2017 is testament to our customer excellence mindset.  More details on how we co-operate with our customers is available in the section ‘Stakeholder engagement’ towards the end of this report

11:00 AM - 18 Jan 2018


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Community engagement Barco significantly stepped up its community engagement efforts in 2017. Under the umbrella of our community engagement vision, we aim to help tackle important socioeconomic challenges where we can make the biggest impacts. Using the United Nations’ Sustainable Development Goals (UNSDG) as a guideline, Barco is committed to: “Promoting an innovation society by supporting worldwide initiatives that strengthen education and entrepreneurship, close the gap between rich and poor, help underprivileged, yet talented youth and improve health and well-being.”

EUR 125,000

is the amount we invested in community engagement initiatives in 2017

+600

employees (~18% of the total workforce) were happy to help support our community engagement initiatives

Supporting good health and well-being Our headquarters was colored pink in October 2017: every Barco employee wore a pink ribbon and we had pink drinks and pink cookies to support Breast Cancer Awareness Month. To highlight our respect for cancer clinicians worldwide, we launched the ‘There’s a hero behind every hero fighting cancer’ video. In addition, we shared useful insights on breast cancer detection throughout the month.

Barco India donated 60,000 euro to CANSUPPORT, India’s largest free home-based palliative care program. The money is used to fund three mobile teams, each comprising a doctor, a nurse and a counselor.

Also in India, a group of underprivileged children suffering from cancer was invited to the Barco campus for Barco Play Day. Financed by donations made by Barco employees, Barco Play Day gave the children a look behind the scenes of our plant and an amazing cinema experience. Most importantly, however, it provided them with one day free of worries, allowing them to forget about their disease for a short while.


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Stimulating quality education In October 2017, the new Barco Sakshi Education Center opened in Noida, India – a school for underprivileged children. The donation of Barco India (20,000 euro) helps pay for teachers’ wages, as well as for daily – healthy – meals. More than giving money, Barco employees are encouraged to support the initiative by helping teach or providing books, stationery, bags, water bottles or any other items that the center may require.

Through the innovative ‘iGemba Scholarship Scheme’, Barco India helps its employees pay for the education of their children. The concept is simple: for each improvement suggestion that operators make through our iGemba program, Barco contributes 3 euro, which are collected in a scholarship fund. Since the start of the program, 52 children of Barco employees received scholarships. The program not only supports our sustainability and CSR efforts, but also reinforces the Barco value ‘we care’.

The iGemba Scholarship Scheme sends a clear message to everyone at Barco India: we value your input, appreciate your improvement ideas and we strongly believe in the power of education.”


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Closing the digital divide and supporting local communities Barco supports `Ondernemers voor Ondernemers’ (Entrepreneurs for Entrepreneurs), a Belgian non-profit organization committed to fostering sustainable economic growth in developing countries by encouraging local entrepreneurship. Reducing inequality

In February 2017, the Cambodian Children’s Fund (CCF) treated 700 children and their families in Steung Meanchey, a former waste dump in southern Phnom Penh (Cambodia), to an outdoor screening of the Cambodian blockbuster Jailbreak. Barco provided the necessary projection equipment.

Nine students joined the Barco team at our headquarters for one day in October 2017, working for good causes in El Salvador and Belgium during YOUCA ACTION DAY (Youth for Change and Action).

During the fifth Barco Play Day in Kortrijk, we welcomed over 300 children from underprivileged families for a day full of fun and games – including an introduction to our technology. Moreover, Barco Play Day went international in 2017, with similar initiatives in India (Noida) and Germany (Karlsruhe).

In 2015, Barco stared partnering with Close the Gap – an international non-profit organization that aims to bridge the digital divide by donating used IT equipment to educational, medical, entrepreneurial and social projects in developing and emerging countries. Close the Gap collects our laptops, desktops, displays, servers, etc. and refurbishes them for reuse. When end users can’t use the devices anymore, Close the Gap collects them so they can be recycled correctly. We will keep supporting the initiative, not only by donating products, but also by providing access to knowledge, resources, infrastructure and technology through the “Digital 4 Development – Igniting Partnerships” program.

For people in developing countries, our used laptops could be a ticket out of poverty. Frank Verstraete IT Service Engineer and Coordinator at Barco


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Barco is a proud partner of Hangar K, a co-creation hub that was inaugurated in October 2017 in Kortrijk, Belgium. More than just a workspace, Hangar K is a competence center as well as an incubator: a place where start-ups, scale-ups, established companies and the academic world come together to inspire each other and embrace the opportunities of the digital age to build new, successful businesses.

I am looking forward to sharing Barco’s experience and, at the same time, learning from the young entrepreneurs who we are going to coach. Jan De Witte CEO and member of Hangar K’s Board of Directors

A cycling challenge and a DJ booth were two of the initiatives set up to raise money for different causes during ‘De Warmste Week’ – a popular annual charity event organized by Belgian radio station Studio Brussel.

EUR 17,500 In ‘De Warmste Week’, Barco collected 17,500 euro for a range of different good causes.


Our Sustainability Impact Plan (SIP)

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Ethics and compliance We know that compliance and integrity are crucial to our business success, as they instill trust in our customers and business partners. That is why ethical conduct is deeply embedded across our operations. We expect our employees to work in alignment with our values: ‘we are accountable’, ‘we deal openly and ethically’ and ‘we trust each other’. Moreover, we expect our business partners to adhere to the highest possible ethical standards as well.

Communicating the standards

Ensuring the compliance of our employees and our business environment

• It has been read and signed by all our top and middle managers (grade 18 and above) and translated into the major international languages.

To foster a corporate culture in which compliance is taken seriously, we need to establish a common understanding of what we mean by ethics and compliance. Among other actions, we do this by creating a Code of Ethics outlining the basic principles of compliant and ethical behavior when dealing with each other, business partners, company assets, information, infrastructure, etc. The code contains guidelines that all Barco employees worldwide are expected to adhere to in their daily work – an ethics compass. In 2017, we thoroughly revised the Code of Ethics to make sure it addresses the issues defined in our materiality assessment and to reflect new trends in compliance domains, such as privacy, IT security, data protection, open- source software and social media.

In 2017, we reviewed the Code of Ethics, making sure that all employees understand how it applies to their day-to-day activities. • The revised code, which is available online1, combines theory with practice, including a load of real-life examples (in Q&A style).

• An e-learning course makes sure that all employees receive full training on the standards. • We designed a dedicated ethics & compliance portal and an ethics blog with practical information. • 50% of our white-collar workers across all sites worldwide participated in our compliance challenge 2017, a live quiz with 12 compliance-related questions. Barco is committed to building further towards a positive, ethical company culture – and stresses the positive aspects of ethical business conduct in all its communication across all channels.

Today, the code reflects on ethics topics relating to work environment, relationships (incl. anti-bribery and anti-corruption), compliance, company resources and records and governance.

1 http://www.barco.com/en/aboutbarco/corporate%20sustainability/compliance/code%20of%20ethics


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Supervising compliance, clarifying ethics for all employees and raising concerns

Several reporting channels

We have built a network of professionals that ensure that every employee adheres to our Code of Ethics and that general inquiries on ethics can be quickly clarified. Employees who have questions or want to raise concerns or issues can do so via several channels:

Ethics Ethics inbox inbox

â&#x20AC;˘ Their direct supervisor or HR business partner is the first line of contact. â&#x20AC;˘ Questions and/or concerns can also be communicated via the ethics inbox. In 2017, several formal questions/concerns were handled via the ethics inbox. Topics included general interpretations of the Code of Ethics as well as requests for guidance on how to handle business relationships (anti-bribery and anti-corruption).

Ethics Ethics Committee Committee

An Ethics Committee, consisting of the General Counsel, the Chief HR Officer and the internal auditor, formally deals with the concerns raised on a case-by-case basis.

Direct Direct supervisor supervisor

Moreover, Barco takes a proactive approach to raising the ethics bar at Barco. At regular intervals, we organize internal audits and internal control projects to assure ethical employee behaviour.

Code of Code of Ethics Ethics

Covering a wide spectrum of business ethics topics Our ethics approach includes several aspects that support our business activities. Specific risks and risk management procedures are included in the risk report (see Company Report).

Yearly Yearly compliance compliance challenge challenge


Our Sustainability Impact Plan (SIP)

Barco annual report 2017

TOPIC

POLICY

Non-discrimination

What? Ensuring non-discrimination in various domains (e.g. recruiting, …) and countries.

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How? Anti-discrimination policy. • Available on our Intranet (BarcoZone). • Governed by HR department. Freedom of association and collective bargaining

What? Ensuring compliance with local and international social security and minimum wage legislations; industrial relation policies and with international standards on freedom of association. How? • Barco includes all employees in collective bargaining agreements by complying with all necessary local workforce regulations in the countries where Barco operates.  E.g. in Belgium, Barco adheres to sector agreements for automatic wage indexation, leave, etc. • Barco handles specific workforce-related topics by closing off company-specific collective bargaining agreements.  Where applicable, Barco organizes workers’ councils (both national and international).  Collective labor agreements on company level with specific stipulations for wage and working conditions, parental leave, etc. • Applying the ILO-framework (International Labor Organization)) to ensure freedom of association.

Anti-bribery and anti-corruption

What? Avoiding and reporting situations in which a Barco employee is offered or offers money or a favor to influence the judgment or conduct of a person in a position of trust. How? The Code of Ethics includes a section on how to deal with anti-bribery and anti-corruption in professional business relationships.

Human rights

What? Barco safeguards human rights as entitled to all people, regardless of nationality, place of residence, sex, national or ethnic origin, skin color, religion, language, or any other status or characteristic. How? Barco applies a human rights policy in line with the standards and policies set by the ILO (International Labor Organization). • The Code of Ethics includes sections on “Respect for the individual” and “Positive workplace” • The Statement on Child Labor, Forced Labor and Human Trafficking articulates our position regarding child labor, forced labor and human trafficking.


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Ensuring compliance of our suppliers We expect our suppliers to adhere to the same sustainability standards we do. Over the past few years, we have worked hard to ensure that every member of our supply chain understands our standards and can demonstrate responsibility and transparency. Our Supplier Sustainability Program is based on six pillars: • Supplier classification: Segmenting suppliers into core, key and commercial categories based on magnitude of spend and criticality of technology provided. • Training and awareness: Through webinars and other communication channels, we train suppliers and inform them on developments in environmental compliance guidelines, eco-design and corporate social responsibility. • RBA Code of Conduct: Each one of our core suppliers is expected to (contractually) comply with standards relating to social, environmental and ethical issues in the electronics industry supply chain as set out in the RBA Code of Conduct (Responsible Business Alliance), formerly known as the EICC Code of Conduct. • Supplier audits: Barco audits every (new) supplier via a questionnaire or on-site. In the case of shortfalls, an action plan is developed. Our core suppliers are subject to yearly audits. • Product compliance: Every component that our suppliers deliver must comply with the Product Compliance Requirements Code, which includes worldwide regulations, industry standards and many criteria that we have voluntarily defined. • Responsible Sourcing Program: This program strives to make sure that our raw materials, components and packaging come from sustainable sources. In recent years, we have adopted a conflict minerals policy and improved the transparency and traceability of metals in our supply chain.

100% All of our core suppliers comply to the RBA Code of Conduct. The RBA Code of Conduct, formerly known as the EICC Code of Conduct, is a set of standards covering social, environmental and ethical topics relevant to the electronics industry supply chain. The standards reference international norms and standards, including the Universal Declaration of Human Rights, International Labor Standards (ILO), OECD Guidelines for Multinational Enterprises, ISO and SA standards, and many more. Topics covered include: • Labor: Freely chosen employment, humane treatment, non-discrimination, freedom of association, ... • Health and safety: Occupational safety, machine safeguarding, health and safety communication, ... • Environment: Greenhouse gas emissions, hazardous substances, environmental permits and reporting, ... • Ethics: Business integrity, fair business, advertising and competition, responsible sourcing of materials, privacy, …


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iGemba: where all the dimensions of our Sustainable Impact Plan come together For over five years now, our iGemba program has encouraged Barco operators around the globe to continuously improve processes by placing them at the heart of improvement ideas. Much to our satisfaction, the program continues to gain momentum year after year. In 2017, operators came up with an all-time high of 6,751 improvement suggestions

People iGemba promotes a safety culture as one of the most important values, but uses self-steering teams as a step-up towards more operator engagement. In this context the supervisor makes the transition from ‘boss’ to ‘coach’, which stimulates the continuous development of operators.

(8.6 per operator), of which 85% were implemented. The project was driven by clear leadership commitment, as shown by the 1,500 Gemba walks that fueled the project. We are proud that our iGemba program succesfully combines all our sustainability dimensions: planet, people and communities.

Planet Environmentally friendly operations is one the cornerstone of Barco’s operations strategy. Barco challenges i t s o p e r a to r s to co m e u p w i t h improvement ideas that enhance its environmental footprint by reducing material use and waste, transportation, and packaging.

Communities The iGemba Scolarship Fund is a yearly initiative through which Barco (India) donates 3 euro to the education of employees’ children for every internal improvement idea that iGemba generates in India (totaling around 6,000 euro per year). It is one of Barco’s ways of fostering prosperity in its local communities.


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Our sustainability management Governance structure specifically related to sustainability

Stakeholder engagement

Page 59

Page 60


Our sustainability management

External initiatives (platforms and commitments) Page 63

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Governance structure specifically related to sustainability Executive sustainability steering committee Barco integrates its sustainability governance structure in its corporate governance structure by putting in place the following committees and roles:

Board of Directors

• Directs the overall sustainability strategy and program and frames the different initiatives across Barco’s worldwide organization. This committee is chaired by Filip Pintelon (Senior VP and General Manager Healthcare and acting CTO). • The sustainability program office reports directly to the executive sustainability steering committee.

Sustainability ambassador meetings Core Leadership Team

Sustainability program office

Executive sustainability steerco

Sustainability ambassador meeting

All Barco’s corporate governance structures can be found in the ‘Governance’ section of the Company Report.

• A cross-functional committee with Barco’s key sustainability stakeholders gathers feedback and discusses ideas and partnerships, etc. This committee is chaired by Filip Pintelon (Senior VP and General Manager of Healthcare), and led by Carl Vanden Bussche (VP of Investor Relations). The committee meets every two months. • The sustainability ambassador group communicates the accomplishment of key initiatives to all relevant stakeholders.

Sustainability program office and manager • Guards overall program progress, objectives, etc. • Works together with work stream leaders (functional leaders in logistics, procurement, facilities, sales and marketing, etc.) in the different sustainability fields (planet, people, communities) to ensure timely implementation of sustainable development measures.


Our sustainability management

Stakeholder engagement Barco aims to engage all relevant stakeholders to integrate stakeholder (economic, social and environmental) concerns or issues into all its strategies, actions and policies. By continuing to standardize the process of interacting with our stakeholders, we can mitigate risks, identify new business opportunities and improve financial results. • At Barco, every department is responsible for identifying and engaging with its own stakeholders (i.e. those they affect or are affected by). Barco’s corporate functions provide the departments with a framework on how to tackle stakeholder engagement (i.e. stakeholder identification and classification, guidelines for stakeholder communication, etc.). • Barco actively engages in stakeholder dialogues over a broad range of topics and channels to promote participative and integrated decision-making. We understand that stakeholder involvement supports our long-term success and innovation capability. • Barco’s main stakeholder groups are o Customers o Employees o Suppliers o Sector federations o Policymakers o NGOs o Consumer organizations o Investors o Academic institutions

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Barco annual report 2017

STAKEHOLDER GROUP

SPOC

Customers

• Sales • Corporate and strategic marketing • Customer service • External communication • Product management ThinkSales is an initiative to strengthen Barco’s commercial capabilities and inject customer-centricity into our business (e.g. customer journey pilot projects)

Employees

• CHRO • Internal communication

Suppliers

• VP procurement • Eco-office

Public organizations (sector federations, NGOs, policymakers)

• Global leadership team

(e.g.: The Shift, Agoria, Etion, VBO, Voka, VLAIO)

Investors

• VP Investor relations


Our sustainability management

Barco annual report 2017

ENGAGEMENT METHOD

SPECIFIC ORGANIZATIONS/TOOLS

• Yearly general customer satisfaction survey, to be replaced in 2018 • Daily contacts in the field (sales, strat. mkt, customer service, NPI, …) • Engagement with consumer organizations - bilateral

• • • • •

• • • • •

• Involve employees in continuous improvement (iGemba) • Involve employees in ideation (Barco STREAM) • Strategy roadshow

2-yearly employee engagement/enablement surveys Involve key teams in action plan development YOU+ program: B-inspired, B-engaged, B-involved Intranet, CEO blog, town hall meetings (straight-ups) Performance evaluation review

Customer loyalty score Press releases Digital interaction via social media, website, ... Entertainment: UNIC, GL Events, VERPRG, Healthcare/Enterprise: key account mgmt.

• Communicate expectations on social, environmental and ethical topics through RBA (formerly EICC) Code of Conduct • Audit system to evaluate supplier performance • Training to core and key suppliers

• Product compliance requirements for suppliers • RBA/EICC Code of Conduct • Barco Substances List • Data collection through Greensoft • Bomcheck.net

• • • •

• European commission – CENELEC • Laser-illuminated projector association (LIPA) • Close the Gap/The Shift • Sustainability networks: The Shift, We Mean Business, … • IMEC • Kulak, howest, VIVES, UGent, KU Leuven • Hangar K: co-creation space with educational institutions • Sector federations: VBO, VOKA, Agoria, Etion by senior leadership team

Participation in (governmental) workings groups of policymakers Meetings and roundtables Participation in global networks Scientific groups and educational institutions

• Symmetric way of information dispersion through different deliverables • Bilateral contact via investor roadshows, conferences, communities • Support on equity research by brokers

• • • •

Annual report, press releases, investor portal Capital Market Days (investor days) Conference calls Equity research documents

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External initiatives (platforms and commitments) We Mean Business A coalition of organizations working with thousands of the world’s most influential businesses and investors to accelerate the transition to a low-carbon economy. As a member, Barco is committed to the initiatives and commitments put forward by the We Mean Business Coalition.

Voka Charter for Sustainable Management (Voka Charter Duurzaam Ondernemen) By signing this Flemish charter, which helps and urges companies to take environmental and social responsibility, we commit ourselves to developing an action plan involving ten themes: • Corporate governance • Engagement with society • Communication and dialogue • Being a people-friendly company • Risk management • Sustainable investing, procurement and product development • Supply chain management • Climate change and energy • Quality of the company’s direct environment • Sustainable logistics and mobility


Our sustainability management

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The Shift

Carbon Disclosure Project (CDP)

Barco is a member of The Shift, Belgiumâ&#x20AC;&#x2122;s largest corporate sustainability network.

Every year, Barco measures and reports its carbon footprint to the Carbon Disclosure Project (CDP), benchmarking its sustainability performance to peer groups that CDP suggests. We commit to the feedback program as organized by CPD, and set up action plans to mitigate the risks and capitalize on the opportunities that CPD points out.

In June 2017, The Shift organized a roundtable discussion on sustainable development, featuring Queen Mathilde of Belgium as the guest of honor. As an advocate for the UNâ&#x20AC;&#x2122;s Sustainable Development Goals, Queen Mathilde sat around the table with deputy Prime Minister Alexander De Croo and ten Belgian captains of industry for whom sustainability is an important cornerstone of their businesses. Our CEO Jan De Witte was delighted to join the discussion and explain how Barco helps promote the SDGs around the globe.

The UNSDG framework and The Shift initiative are great points for Barco to rally around, strengthen our efforts, and provide thought and execution leadership around sustainability. Jan De Witte Barco CEO

Other sustainability benchmark groups and networks Barco is constantly evaluating additional platforms, benchmarks, etc. to continually benchmark, assess and improve its sustainability performance, such as participating in MSCI ESG ratings and the Ecovadis sustainability benchmark.


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About this sustainability report Reporting period, cycle and scope

GRI standards

We published our first corporate Sustainability Report on 18 February 2016 (â&#x20AC;&#x2DC;Sustainability Report 2015â&#x20AC;&#x2122;) and will continue to report on an annual basis. This report provides a clear overview of our most relevant intentions, achievements and objectives in the field of corporate sustainability in 2017, unless stated otherwise.

Barco has used the Global Reporting Initiative (GRI) framework to guide the reporting in this sustainability overview. Barco will continue to work throughout 2018 to be able to report sustainability efforts in accordance with GRI.


GRI Content Index

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GRI Content Index DISCLOSURE

PAGE

GRI 100

UNIVERSAL STANDARDS

GRI 102

General Disclosures 2016

102-1

Name of the organization

C/105

102-2

Activities, brands, products and services

A/14, A/16-33, A/41-43, A/49

102-3

Location of headquarters

C/105

102-4

Location of operations

A/15

102-5

Ownership and legal form

C/105

102-6

Markets served

A/14-15, A/18-21, A/26-27, A/30-31, A/100, C/39

102-7

Scale of the organization

A/8-9, A/14-15, B/38

102-8

Information on employees and other workers

A//14, B/38

102-9

Supply chain

B/55

102-10

Significant changes to the organization's size, structure, ownership or supply chain

A/24, A/112-113, C/28-31

102-12

External initiatives

B/35,/B/63-64

102-13

Membership of associations

B/63-64

102-14

Statement from senior decision-maker

A/7, B/3-4

102-15

Key impacts, risks, and opportunities

A/87-89, B/5-6, C/79-80

102-16

Values, principles, standards, and norms of behavior

B/10, B/52


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DISCLOSURE

PAGE

102-17

Mechanisms for advice and concerns about ethics

B/42, B/53

102-18

Governance structure

A/56-66, A/69, B/59

102-19

Delegating authority

B/59

102-20

Executive-level responsibility for economic, environmental, and social topics

B/59

102-21

Consulting stakeholders on economic, environmental, and social topics

B/56

102-22

Composition of the highest governance body and its committees

A/56-66, A/69

102-23

Chair of the highest governance body

A/58

102-24

Nominating and selecting the highest governance body

A/68-69

102-25

Conflicts of interest

A/78

102-26

Role of highest governance body in setting purpose, values, and strategy

A/67, A/69, B/59

102-27

Collective knowledge of highest governance body

A/67, A/69

102-28

Evaluating the highest governance bodyâ&#x20AC;&#x2122;s performance

A/70

102-29

Identifying and managing economic, environmental, and social impacts

A/67, A/69, B/59

102-30

Effectiveness of risk management processes

A/80-89, C/79-80

102-31

Review of economic, environmental, and social topics

A/67

102-32

Highest governance bodyâ&#x20AC;&#x2122;s role in sustainability reporting

B/59

102-35

Remuneration policies

A/68-69, A/71-76

102-36

Process for determining remuneration

A/69, A/71, A/73

102-40

List of stakeholder groups

B/60-62

102-41

Collective bargaining agreements

B/19, B/54

102-42

Identifying and selecting stakeholders

B/60-62

102-43

Approach to stakeholder engagement

A/40, B/17-18, B/40, B/47, B/56, B/60-62

102-45

Entities included in the consolidated financial statements

C/25-26

102-47

List of material topics

B/7-8


GRI Content Index

DISCLOSURE

Barco annual report 2017

PAGE

102-49

Changes in reporting

B/7-8

102-50

Reporting period

B/65

102-51

Date of most recent report

B/65

102-52

Reporting cycle

B/65

102-53

Contact point for questions regarding the report

C/105

102-54

Claims of reporting in accordance with the GRI Standards

B/65

102-55

GRI Content Index

B/65-69

GRI 103 103-3

Management Approach 2016 Evaluation of the management approach

GRI 200

ECONOMIC TOPICS

GRI 201

Economic Performance 2016

201-2

Financial implications and other risks and opportunities due to climate change

GRI 300

ENVIRONMENTAL TOPICS

GRI 301

Materials 2016

301-2 GRI 302

Recycled input materials used

B/13-20

B/6

B/15

Energy 2016

302-1

Energy consumption within the organization

B/15, B/29-30

302-2

Energy consumption outside of the organization

B/31

302-3

Energy intensity

B/15

302-4

Reduction of energy consumption

B/30

302-5

Reductions in energy requirements of products and services

B/32-33

GRI 305 305-1

Emissions 2016 Direct (Scope 1) GHG emissions

B/14, B/21, B/27, B/29-30

B/68


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Barco annual report 2017

DISCLOSURE

PAGE

305-2

Energy indirect (Scope 2) GHG emissions

B/14, B/21, B/29-30

305-3

Other indirect (Scope 3) GHG emissions

B/14, B/21, B/24 -25, B/27, B/31

305-5

Reduction of GHG emissions

B/16, B/22-23, B/25-30

GRI 308 308-1

Supplier Environmental Assessment 2016 New suppliers that were screened using environmental criteria

GRI 400

SOCIAL TOPICS

GRI 403

Occupational Health & Safety 2016

403-2 GRI 404

Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

B/19, B/55

B/17

Training and Education 2016

404-1

Average hours of training per year per employee

B/17, B/41

404-2

Programs for upgrading employee skills and transition assistance programs

B/41

404-3

Percentage of employees receiving regular performance and career development reviews

B/41

GRI 405 405-1 GRI 407 407-1 GRI 412 412-2 GRI 413 413-1 GRI 414 414-1

Diversity and equal opportunity 2016 Diversity of governance bodies and employees

A/68, B/17, B/44

Freedom of Association and Collective Bargaining 2016 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk

B/54

Human Rights Assessment 2016 Employee training on human rights policies or procedures

B/52

Local Communities 2016 Operations with local community engagement, impact assessments, and development programs

B/48-51

Supplier Social Assessment 2016 New suppliers that were screened using social criteria

B/19, B/55


GRI Content Index

Barco annual report 2017

B/70


Financial statements

Barco annual report 2017

Say.Do.Perform. IFRS financial statements This chapter of the Annual Report contains the IFRS audited consolidated financial statements including the notes thereon, prepared in accordance with the International Financial Reporting Standards as adopted by the European Union. The chapter â&#x20AC;&#x2DC;Comments on the resultsâ&#x20AC;&#x2122; (see page A/92) provides an analysis of trends and results of the 2017 financial year, and is based on the IFRS consolidated financial statements and should be read in conjunction with these statements.

C/2


C/3

Barco annual report 2017

Table of content Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/5 Statement of comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/6 Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/7 Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/8 Changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/10 Significant IFRS accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/12 IFRS accounting standards adopted as of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/18 IFRS accounting standards issued but not yet effective as of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/19 Reclassifications of professional services and customer services overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/22 Critical accounting judgments and key sources of estimation uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/23 Notes to the consolidated financial statements 1. Consolidated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/25 2. Operating Segments information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/33 3. Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/40 4. Income from continued operations (EBIT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/41 5. Revenues and expenses by nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/46 6. Restructuring and impairment costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/47 7. Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/48 8. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/49 9. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/50 10. Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/51 11. Capitalized development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/55 12. Other intangible and tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/56 13. Deferred tax assets â&#x20AC;&#x201C; deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/59 14. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/61 15. Amounts receivable and other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/62 16. Net financial cash/debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/64 17. Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/68 18. Equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/69 19. Non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/72 20. Trade payables and advances received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/74 21. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/74 22. Risk management - derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/79 23. Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/84 24. Rights and commitments not reflected in the balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/85


Financial statements

Barco annual report 2017

C/4

25. Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/85 26. Cash flow statement: effect of acquisitions and disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/86 27. Events subsequent to the balance sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/88 Auditorâ&#x20AC;&#x2122;s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/89 Supplementary information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/95 Barco NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/95 Balance sheet after appropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/96 Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/98 Proposed appropriation of Barco NV result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/99 Supplementary statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/100 Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/100 Return on operating Capital Employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/102 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C/103


C/5

Barco annual report 2017

Income statement IN THOUSANDS OF EURO

2017

2016

2015

4

1,084,706

1,102,342

1,028,856

Cost of goods sold

4

-680,554

-723,538

-691,091

Gross profit

4

404,152

378,804

337,765

Research and development expenses

4(a)

-122,305

-143,362

-150,222

Sales and marketing expenses (a)

4(b)

-146,802

-147,088

-137,829

General and administration expenses

4(c)

-58,095

-55,122

-50,977

Other operating income (expense) - net

4(d)

-3,710

3,325

2,960

Adjusted EBIT (b)

4

73,241

36,557

1,698

Restructuring and impairments

6

-32,404

-12,939

-29,099

12.2

-

6,866

-

-

33

35 -27,366

Sales

Gain on sale building

NOTE

Other non-operating income/(expense) EBIT

40,836

30,516

Interest income

4,666

4,401

7,103

Interest expense

-2,653

-3,161

-4,098

42,849

31,756

-24,360

-11,355

-6,345

4,879

31,494

25,411

-19,481

Income before taxes Income taxes

7

Result after taxes Share in the result of joint ventures and associates

9

Net income/(loss) from continuing operations Net income from discontinued operations Net income Net income attributable to non-controlling interest

1,290

263

-1,073

32,784

25,674

-20,554

-

-

47,031

32,784

25,674

26,477

8,008

14,652

9,009

Net income attributable to the equity holder of the parent

24,776

11,023

17,468

Net income/(loss) (continuing) attributable to the equity holder of the parent

24,776

11,023

-29,563

-

-

47,031 1.45

19

Net income (discontinued) attributable to the equity holder of the parent Earnings per share (in euro)

8

2.01

0.91

Diluted earnings per share (in euro)

8

1.99

0.88

1.41

Earnings (continuing) per share (in euro)

8

2.01

0.91

-2.45

Diluted earnings (continuing) per share (in euro)

8

1.99

0.88

-2.38

(a) Sales and marketing expenses shown here do not correspond to the 2015 financial statements and reflect reclassifications of professional services and customer services overhead. For more information about the reclass, see page C/22 (b) Management considers adjusted EBIT to be a relevant performance measure in order to compare results over the period 2015 to 2017, as it excludes adjusting items. Adjusting items include restructuring costs and impairments, one-time gains such as the sale of the headquarter building in 2016 and other non-operating income/(expense).


Financial statements

Barco annual report 2017

C/6

Statement of comprehensive income IN THOUSANDS OF EURO

2017

Net income

2016

2015

32,784

25,674

26,477

Exchange differences on translation of foreign operations Continuing operations

-24,201

1,165

11,539

Discontinued operations

-

-

-1,154

Discontinued operations recycled through PL

-

-

1,154

-24,201

1,165

11,539

Net gain/(loss) on cash flow hedges

535

-280

735

Income tax

-142

56

-147

393

-224

588

(a) Cash flow hedges

Net gain/(loss) on cash flow hedges continuing operations, net of tax Other comprehensive income/(loss) continuing operations, recycled through retained earnings for the period Other comprehensive income/(loss) to be recycled through profit and loss in subsequent periods Remeasurement gains/(losses) on defined benefit plans

-

-

-

-23,808

941

12,127

5,223

-12,318

-

-2,284

4,187

-

Actuarial gains or losses, net of tax

2,939

-8,131

-

Other comprehensive income/(loss) not to be reclassified to profir or loss in subsequent periods

2,939

-8,131

-

-20,869

-7,190

12,127

-19,574

-6,746

11,757

-1,294

-445

370

Deferred tax on remeasurement gains/(losses) on defined benefit plans

Other comprehensive income/(loss) for the period, net of tax effect Attributable to equity holder of the parent Attributable to non-controlling interest Total comprehensive income/(loss) (continuing), for the year, net of tax

11,915

18,484

38,604

Attributable to equity holder of the parent

5,201

4,277

29,224

Attributable to non-controlling interest

6,714

14,207

9,380

Attributable to continuing operations

11,915

18,484

-8,427

0

0

47,031

Attributable to discontinued operations

The accompanying notes are an integral part of this income statement. (a) Translation exposure gives rise to non-cash exchange gains/losses. Examples are foreign equity and other long-term investments abroad. These long-term investments give rise to periodic translation gains/losses that are non-cash in nature until the investment is realized or liquidated. The comprehensive income line commonly shows a positive result in case the foreign currency appreciates versus the Euro in countries where investments were made and a negative result in case the foreign currency depreciates.

In 2017, the negative exchange differences from continuing operations in the comprehensive income line were mainly booked on foreign operations held in US Dollar, Chinese Yuan, Indian Rupee, Hong Kong Dollar and Norwegian Krone. In 2016, the positive exchange differences from continuing operations in the comprehensive income line were mainly booked on foreign operations held in US Dollar, Norwegian Krone and Taiwan dollar, partly offset by a negative exchange difference on the Chinese Yuan. In 2015, the positive exchange differences from continuing operations in the comprehensive income line were mainly booked on foreign operations held in US Dollar, Chinese Yuan and Indian Rupee.


C/7

Barco annual report 2017

Balance sheet IN THOUSANDS OF EURO

NOTE

31 DEC 2017

31 DEC 2016

31 DEC 2015

Assets Goodwill

10

105,385

124,255

132,386

Capitalized development cost

11

-

-

22,846

Other intangible assets

12(1)

63,361

75,765

52,628

Land and buildings

12(2)

57,964

53,019

20,221

Other tangible assets

12(2)

47,366

50,916

72,346

Investments

9

7,906

14,460

9,031

Deferred tax assets

13

69,859

89,100

78,031

Other non-current assets

15

Non-current assets

12,887

19,112

23,226

364,729

426,627

410,715

Inventory

14

132,754

166,202

165,960

Trade debtors

15

149,438

188,561

186,910

Other amounts receivable

15

19,368

15,584

26,157

Cash and cash equivalents

16

254,130

353,549

341,277

5,041

8,709

9,308

3

139,536

-

-

700,267

732,605

729,612

1,064,996

1,159,231

1,140,327

597,739

Prepaid expenses and accrued income Assets held for sale Current assets Total assets Equity and liabilities Equity attributable to equityholders of the parent

18

579,449

590,243

Non-controlling interests

19

14,065

25,244

13,925

593,514

615,487

611,664

Equity Long-term debts

16

41,036

66,811

79,527

Deferred tax liabilities

13

4,647

8,813

4,462

Other long-term liabilities

17

4,555

11,198

2,839

21

24,607

30,824

17,992

74,845

117,647

104,820

Current portion of long-term debts

16

10,000

11,500

10,000

Short-term debts

16

686

2,085

2,124

Trade payables

20

102,943

135,127

139,504

Advances received from customers

20

67,040

109,064

113,874

9,752

13,880

13,016

Employee benefit liabilities

49,983

57,050

48,757

Other current liabilities

10,586

9,684

7,690

Accrued charges and deferred income

18,074

58,050

59,967

21

26,904

29,657

28,910

3

100,669

-

-

396,637

426,098

423,842

1,064,996

1,159,231

1,140,327

Long-term provisions

(a)

Non-current liabilities

Tax payables

Short-term provisions Liabilities directly associated with the assets held for sale Current liabilities Total equity and liabilities

(a)

The accompanying notes are an integral part of this balance sheet. (a) Long-term and short-term provisions presented here do not correspond to the 2016 and 2015 financial statements and reflect reclassifications of (i) the defined benefit obligations and (ii) the technical warranty provisions. For more information about the long-term portion of these liabilities, see Note 21.


Financial statements

Barco annual report 2017

C/8

Cash flow statement IN THOUSANDS OF EURO

NOTE

2017

2016

2015

Cash flow from operating activities Adjusted EBIT Impairment of capitalized development costs Restructuring

73,241

36,557

1,698

4(a)

-

1,364

4,866 -3,622

21

-4,244

-4,917

Gain on sale of divestments

4(d)

-513

-1,000

-1,406

Amortization capitalized development cost

4(a)

-

21,509

44,575

12

33,877

28,572

22,906

362

-401

-543

18

1,549

1,234

1,313

9

1,290

263

-1,073

-

-

-4,407

Depreciation of tangible and intangible fixed assets Gain/(loss) on tangible fixed assets Share options recognized as cost Share in the profit/(loss) of joint ventures and associates Discontinued operations: cash flow from operating activities Gross operating cash flow

105,560

83,180

64,308

Changes in trade receivables

-7,326

205

-5,443

Changes in inventory

-3,577

-2,829

27,565

-19,660

-2,676

16,297

-8,113

11,883

32,773

-

-

12,767

Change in net working capital

-38,677

6,583

83,958

Net operating cash flow

148,266

Changes in trade payables Other changes in net working capital Discontinued operations: change in net working capital

66,883

89,763

Interest received

4,666

7,272

4,303

Interest paid

-2,653

-3,161

-4,098

Income taxes

-4,395

-11,538

-14,938

-

-

-5,094

64,501

82,337

128,439

-23,160

-24,241

-14,730

168

578

1,137

-

9,292

-

-5,889

-10,229

-9,635

Discontinued operations: income taxes and interest received/(paid) Cash flow from operating activities Cash flow from investing activities Purchases of tangible and intangible fixed assets

12

Proceeds on disposals of tangible and intangible fixed assets Proceeds from sale of building Acquisition of Group companies, net of acquired cash

1.3, 26

Disposal of Group companies, net of disposed cash

1.3, 26

Other investing activities (a) Discontinued operations : cash flow from investing activities Cash flow from investing activities (including acquisitions and divestments)

6,437

1,000

139,622

-3,729

-16,667

-23,072

-

-

-887

-26,173

-40,267

92,435


C/9

Barco annual report 2017

IN THOUSANDS OF EURO

NOTE

2017

2016

2015

Cash flow from financing activities Dividends paid Dividends received Capital increase/(decrease) (Acquisition)/sale of own shares Proceeds from (+)/Payments (-) of long-term liabilities Proceeds from (+), payments of (-) short-term liabilities Dividend distributed to non-controlling interest

-23,292

-20,951

8

376

-19,364 -

433

2,498

895 -1,744

5,314

5,684

-17,532

-11,381

8,740

1,401

-2,239

-17,980

-17,893

-5,707

-3,006

Capital increase from non-controlling interest

-

2,912

406

Cash flow from financing activities

-51,562

-28,809

-32,053

Net increase (decrease) in cash and cash equivalents

-13,234

13,261

188,821

Cash and cash equivalents at beginning of period

353,549

341,277

145,340

Cash and cash equivalents (CTA)

-18,801

-989

7,116

Cash and cash equivalents at end of period (b)

321,514

353,549

341,277

(a) â&#x20AC;&#x2DC;Other investing activitiesâ&#x20AC;&#x2122; includes net effect of capital contributions in and results of other investments (3.8 million euro in 2017, 5.5 million euro in 2016, nil in 2015) (see note 9) and the investment in the One Campus project, the new headquarter building ( 2016: 9.1 million euro; 2015: 23.1 million euro). (b) Cash and cash equivalents at the end of the period includes the 67.4 million euro cash in BarcoCFG which is classified as held for sale in the balance sheet. Excluding BarcoCFG, cash and cash equivalents amount to 254.1 million euro (balance sheet).


Financial statements

Barco annual report 2017

C/10

Noncontrolling interest

Equity

Changes in equity

IN THOUSANDS OF EURO Balance on 1 January 2015

Share capital and premium

Retained earnings

Share-based payments

Cumulative translation adjustment

Cash flow hedge reserve

Own shares

Equity attributable to equityholders of the parent

198,083

472,822

5,942

-33,589

-1,857

-53,984

587,415

7,146

594,561

Net income (continuing) attributable to the equity holder of the parent

-

-29,563

-

-

-

-

-29,563

9,009

-20,554

Net income (discontinued) attributable to the equity holder of the parent

-

47,031

-

-

-

-

47,031

-

47,031

Net income attributable to equityholders of the parent

-

17,468

-

-

-

-

17,468

9,009

26,477

Dividend

-

-19,364

-

-

-

-

-19,364

-

-19,364

Dividend distributed to non-controlling interest

-

-

-

-

-

-

-

-3,006

-3,006

Capital and share premium increase

895

-

-

-

-

-

895

406

1,301

Other comprehensive income (loss) for the period (continuing), net of tax

-

-

-

11,169

588

-

11,757

370

12,127

Other comprehensive income (loss) for the period, net of tax

-

-

-

11,169

588

-

11,757

370

12,127

Share-based payment

-

-

1,313

-

-

-

1,313

-

1,313

Exercise of options

-

-

-1,286

-

-

4,587

3,301

-

3,301

Share buy-back

-

-

-

-

-

-5,046

-5,046

-

-5,046

Balance on 31 December 2015

198,978

470,926

5,968

-22,421

-1,269

-54,443

597,739

13,925

611,664

Balance on 1 January 2016

198,978

470,926

5,968

-22,421

-1,269

-54,443

597,739

13,925

611,664

Net income attributable to equityholders of the parent

-

11,023

-

-

-

-

11,023

14,652

25,674

Dividend

-

-21,188

-

-

-

-

-21,188

-

-21,188

Dividend distributed to non-controlling interest

-

-

-

-

-

-

-

-5,707

-5,707

Capital and share premium increase

2,498

-

-

-

-

-

2,498

2,819

5,317

Other comprehensive income (loss) for the period (continuing), net of tax

-

-8,131

-

1,610

-224

-

-6,746

-445

-7,190

Other comprehensive income (loss) for the period, net of tax

-

-8,131

-

1,610

-224

-

-6,746

-445

-7,190

201,476

452,629

1,234 -972 6,230

-20,811

-1,493

6,656 -47,787

1,234 5,684 590,243

25,244

1,234 5,684 615,487

Share-based payment Exercise of options Balance on 31 December 2016


C/11

Barco annual report 2017

IN THOUSANDS OF EURO Balance on 1 January 2017

Share capital and premium

Retained earnings

Share-based payments

Cumulative translation adjustment

Cash flow hedge reserve

Own shares

Equity attributable to equityholders of the parent

NonControlling interest

Equity

201,476

452,629

6,230

-20,811

-1,493

-47,787

590,243

25,244

615,487

Net income attributable to equityholders of the parent

-

24,776

-

-

-

-

24,776

8,008

32,784

Dividend

-

-23,292

-

-

-

-

-23,292

-

-23,292

Dividend distributed to non controlling interest

-

-

-

-

-

-

-

-17,893

-17,893

433

-

-

-

-

-

433

-

433

Other comprehensive income (loss) for the period (continuing), net of tax

Capital and share premium increase

-

2,940

-

-22,907

393

-

-19,573

-1,294

-20,868

Other comprehensive income (loss) for the period, net of tax

-

2,940

-

-22,907

393

-

-19,573

-1,294

-20,868

Share-based payment

-

-

1,549

-

-

-

1,549

-

1,549

Exercise of options

-

-

-268

-

-

5,582

5,314

-

5,314

201,908

457,053

7,511

-43,717

-1,100

-42,205

579,449

14,065

593,514

Balance on 31 December 2017

The accompanying notes are an integral part of this statement.


Financial statements

Barco annual report 2017

C/12

Significant IFRS accounting principles 1. Accounting principles 1.1. Statement of compliance and basis of presentation The consolidated financial statements of the Barco group have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use by the EU. All standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) effective year-end 2017 and adopted by the European Union are applied by Barco. The consolidated financial statements are presented in thousands of euro and are prepared under the historical cost convention, except for the measurement at fair value of investments and derivative financial instruments. The financial statements were authorized for issue by the board of directors on 5 February 2018. The chairman has the power to amend the financial statements until the shareholders’ meeting of 26 April 2018. 1.2. Principles of consolidation General The consolidated financial statements comprise the financial statements of the parent company, Barco NV (registered office: 35 President Kennedypark, 8500, Kortrijk, Belgium), and its controlled subsidiaries, after the elimination of all intercompany transactions Subsidiaries Subsidiaries are consolidated from the date the parent obtains control until the date control ceases. Acquisitions of subsidiaries are accounted for using the purchase method of accounting. Control exists when Barco is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are prepared according to the parent’s company reporting schedule, using consistent accounting policies.

Non-controlling interest Non-controlling Interests represent the portion of profit or loss and net assets not held by the group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from shareholder’s equity. Investments in associated companies and joint ventures The company has investment in join ventures when it shares joint control with other investments and it has right to the net assets of these joint ventures. Investments in associated companies over which the company has significant influence (typically those that are 20-50% owned) are accounted for under the equity method of accounting and are initially recognized at cost. Thereafter the carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate since the acquisition date. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Investments in associated companies and joint ventures are presented as non-current asset on the face of the balance sheet on the line ‘investments’. 2. Goodwill Goodwill represents the excess of the cost of the acquisition over the fair value of identifiable net assets and contingent liabilities of a subsidiary or associated company at the date of acquisition. Goodwill is carried at cost less any accumulated impairment losses. 3. Research and development costs Research and development costs are expensed as incurred, except for development costs, which relate to the design and testing of new or improved materials, products or technologies, which are capitalized to the extent that it is expected that such assets will generate future economic benefits and


C/13

Barco annual report 2017

the recognition criteria of IAS38 are met. Shorter life cycles, unpredictability of which development projects will be successful, and the volatility of technologies and the markets in which Barco operates led the Board of Directors to conclude that Barcoâ&#x20AC;&#x2122;s development expenses in 2015, 2016 and 2017 no longer meet the criteria of IAS38.57. As the criteria of IAS38.57 are no longer fulfilled, capitalization of development expenses in 2015, 2016 and 2017 was not allowed. Capitalized development costs are amortized on a systematic basis over their expected useful lives. General estimate of useful life is 2 years, unless a longer or shorter period can be justified. 4. Other intangible assets Intangible assets acquired separately are capitalized at cost. Intangible assets acquired as part of a business combination are capitalized at fair value separately from goodwill if the fair value can be measured reliably upon initial recognition and are amortized over their economic lifetimes. Other intangible assets are amortized on a straight-line basis not exceeding 7 years.

5. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Generally, depreciation is computed on a straight-line basis over the estimated useful life of the asset. When there is an indication that the item of property, plant and equipment is impaired, the carrying amounts are reviewed to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount. Estimated useful life is: - buildings 20 years - installations 10 years - production machinery 5 years - measurement equipment 4 years - tools and models 3 years - furniture 10 years - office equipment 5 years - computer equipment 3 years - vehicles 5 years - demo material 1 to 3 years - leasehold improvements and finance leases: cfr underlying asset, limited to outstanding period of lease contract

A property, plant or equipment item is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognized.


Financial statements

6. Leases Finance leases, which effectively transfer to the group substantially all risks and benefits incidental to ownership of the leased item, are capitalized as property, plant and equipment at the fair value of the leased property, or, if lower, at the present value of the minimum lease payments. The corresponding liabilities are recorded as long-term or current liabilities depending on the period in which they are due. Lease interest is charged to the income statement as a financial cost using the effective interest method. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating leases, where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term, are classified as operating leases. Operating lease payments are expressed in the income statement on a straight line basis over the lease term. 7. Investments in available-for-sale financial assets Investments are treated as financial assets available for sale and are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. For investments quoted in an active market, the quoted market price is the best measure of fair value. For investments not quoted in an active market, the carrying amount is the historical cost, if a reliable estimate of the fair value cannot be made. An impairment loss is recorded when the carrying amount exceeds the estimated recoverable amount. These investments are presented on the balance sheet on the line â&#x20AC;&#x2DC;Investmentsâ&#x20AC;&#x2122;.

Barco annual report 2017

C/14

8. Other non-current assets Other non-current assets include long-term interest-bearing receivables and cash guarantees. Such long-term receivables are accounted for as loans and receivables originated by the company and are carried at amortized cost. An impairment loss is recorded when the carrying amount exceeds the estimated recoverable amount. 9. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first in first out (FIFO) or weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs of completing the sale. In addition to the cost of materials and direct labor, the relevant proportion of production overhead is included in the inventory values. 10. Revenue recognition Revenue is recognized when it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. For product sales, revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, and collectability is probable. For revenue out of projects, the percentage of completion method is used, provided that the outcome of the project can be assessed with reasonable certainty. These projects generally have a lifetime of less than one year. For sales of services, revenue is recognized by reference to the stage of completion.


C/15

Barco annual report 2017

11. Government grants Government grants related to development projects, for which costs are capitalized, are classified as deferred income and recognized as income in proportion to the depreciation of the underlying fixed assets. Government grants related to research projects and other forms of government assistance are recognized as income upon irreversible achievement and by reference to the relevant expenses incurred. 12. Trade debtors and other amounts receivable Trade debtors and other amounts receivable are shown on the balance sheet at nominal value (in general, the original amount invoiced) less an allowance for doubtful debts. Such an allowance is recorded in operating income when it is probable that the company will not be able to collect all amounts due. Allowances are calculated on an individual basis, and on a portfolio basis for groups of receivables that are not individually identified as impaired. The calculation of the allowances is based on an aging analysis of the trade debtors. 13. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances with banks and short-term investments with an original maturity date or notice period of three months or less. It is the Groupâ&#x20AC;&#x2122;s policy to hold investments to maturity. All investments are initially recognized at fair value, which is the cost at recognition date.

14. Provisions Provisions are recorded when the group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made to the amount of the obligation. The group recognizes the estimated liability to repair or replace products still under warranty at the balance sheet date. The provision is calculated based on historical experience of the level of repairs and replacements. A provision for restructuring is only recognized when the group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced to those affected by the plan before the balance sheet date. On the line item â&#x20AC;&#x2DC;Long-term provisionsâ&#x20AC;&#x2122;, the company presents the net liability relating to the post-retirement benefit obligations which includes the Belgian defined-contribution pension plans that are by law subject to minimum guaranteed rates of return. Pension legislation was amended at the end of 2015 and defines the minimum guaranteed rate of return as a variable percentage linked to government bond yields observed in the market as from 1 January 2016 onwards. For 2017 the minimum guaranteed rate of return remains as in 2016 1.75% on employer contributions and employee contributions. The old rates (3.25% on employer contributions and 3.75% on employee contributions) continue to apply to the accumulated past contributions in the group insurance as at 31 December 2015. As a consequence, the defined contribution plans have been accounted for as defined benefit plans in the course of 2016. We refer to note 21 for more detailed information.


Financial statements

15. Equity – costs of an equity transaction The transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. 16. Interest-bearing loans and borrowings All loans and borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the loan/borrowing. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any issue costs and any discount or premium on settlement. 17. Trade and other payables Trade and other payables are stated at fair value, which is the cost at recognition date. 18. Employee benefits Employee benefits are recognized as an expense when the group consumes the economic benefit arising from service provided by an employee in exchange for employee benefits, and as a liability when an employee has provided service in exchange for employee benefits to be paid in the future. 19. Transactions in foreign currencies Transactions in foreign currencies are recorded at the rates of exchange prevailing at the date of transaction or at the end of the month before the date of the transaction. At the end of the accounting period the unsettled balances on foreign currency receivables and liabilities are valued at the rates of exchange prevailing at the end of the accounting period. Foreign exchange gains and losses are recognized in the income statement in the period in which they arise.

Barco annual report 2017

C/16

20. Foreign Group companies In the consolidated accounts, all items in the profit and loss accounts of foreign subsidiaries are translated into euro at the average exchange rates for the accounting period. The balance sheets of foreign group companies are translated into euro at the rates of exchange ruling at the year-end. The resulting exchange differences are classified in a separate component of ‘other comprehensive income’, until disposal of the investment. 21. Derivative financial instruments Derivative financial instruments are recognized initially at cost, which is the fair value of the consideration given (in the case of an asset) or received (in the case of a liability) for it. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The fair values of derivative interest contracts are estimated by discounting expected future cash flows using current market interest rates and yield curve over the remaining term of the instrument. The fair value of forward exchange contracts is estimated using valuation techniques which include forward pricing and swap models at the balance sheet date. Derivative financial instruments that are either hedging instruments that are not designated or do not qualify as hedges are carried at fair value with changes in value included in the income statement. Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognized asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognized directly in ‘other comprehensive income’ with the ineffective part recognized directly in profit and loss.


C/17

Barco annual report 2017

22. Income taxes Current taxes are based on the results of the group companies and are calculated according to local tax rules. Deferred tax assets and liabilities are determined, using the liability method, for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Tax rates used are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax credits and tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. 23. Impairment of assets Goodwill is reviewed for impairment at least annually. For other tangible and intangible assets, at each balance sheet date, an assessment is made as to whether any indication exists that assets may be impaired. If any such indication exists, an impairment test is carried out in order to determine if and to what extent an impairment is necessary to reduce the asset to its recoverable amount (which is the higher of (i) value in use and (ii) fair value less costs to sell). The fair value

less costs to sell is determined as (i) the fair value (that is the price that would be received to sell an asset in an orderly transaction in the principal market at the measurement date under current market conditions) less (ii) the costs to sell while value in use is the present value of the future cash flows expected to be derived from an asset. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit (CGU) to which the assets belong. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. Reversal of impairment losses recognized in prior years is included as income when there is an indication that the impairment losses recognized for the asset are no longer needed or the need has decreased, except for impairment losses on goodwill, which are never reversed. 24. Share-based payment Barco created warrants for staff and non-executive directors as well as for individuals who play an important role in the company. According to the publication of IFRS2, the cost of share-based payment transactions is reflected in the income statement. The warrants are measured at grant date, based on the share price at grant date, exercise price, expected volatility, dividend estimates, and interest rates. Warrant cost is taken into result on a straight-line basis from the grant date until the end of the vesting period. 25. Earnings per share The group calculates both basic and diluted earnings per share in accordance with IAS 33, Earnings per share. Under IAS 33, basic earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed using the


Financial statements

Barco annual report 2017

C/18

IFRS accounting standards adopted as of 2017 weighted average number of shares outstanding during the period plus the dilutive effect of warrants outstanding during the period. As diluted earnings per share cannot be higher than basic earnings per share, diluted earnings per share are kept equal to basic earnings per share in case of negative net earnings. 26. Discontinued operations and non-current assets held for sale A discontinued operation is a component of the group that either has been disposed of, or is classified as held for sale and represents a separate major line of business and is part of a single coordinated plan to dispose of a separate major line of business or is a subsidiary acquired exclusively with a view to resale. The group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale expected within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale. Immediately before classification as held for sale, the group measures the carrying amount of the asset (or all the assets and liabilities in the disposal group) in accordance with applicable IFRSs. Then, on initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of their carrying amounts and fair value less costs to sell. Impairment losses are recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.

The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Although these new standards and amendments apply for the first time in 2017, they do not have a material impact on the annual consolidated financial statements of the Group. The nature and the impact of each of the following new standards, amendments and/or interpretations are described below: • Amendments to IAS 7 Statement of Cash Flows – Disclosure Initiative, effective 1 January 2017 • Amendments to IAS 12 Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses, effective 1 January 2017 • Annual Improvements Cycle - 2014-20161 , effective 1 January 2017


C/19

Barco annual report 2017

IFRS accounting standards issued but not yet effective as of 2017 Standards issued but not yet effective

IFRS 9 Financial Instruments

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards and interpretations, if applicable, when they become effective.

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

• Amendments to IFRS 2 Share-based Payment - Classification and Measurement of Share-based Payment Transactions1, effective 1 January 2018 • Amendments to IFRS 4 Insurance Contracts – Applying IFRS 9 Financial instruments with IFRS 4 Insurance Contracts1, effective 1 January 2018 • IFRS 9 Financial Instruments, effective 1 January 2018 • IFRS 15 Revenue from Contracts with Customers, including amendments to IFRS 15: Effective date of IFRS 15 and Clarifications to IFRS 15 Revenue from Contracts with Customers2, effective 1 January 2018 • IFRS 16 Leases1, effective 1 January 2019 • IFRS 17 Insurance Contracts1, effective 1 January 2021 • Amendments to IAS 40 Investment Property – Transfers of Investment Property1, effective 1 January 2018 • IFRIC 22 Foreign Currency Transactions and Advance Consideration1, effective 1 January 2018 • IFRIC 23 Uncertainty over Income Tax Treatments 1 , effective 1 January 2019 • Annual Improvements Cycle - 2014-20161 , effective 1 January 2018

Not yet endorsed by the EU as at 31 December 2017. IFRS 15 including Amendments to IFRS 15: Effective date of IFRS 15 has been endorsed by the EU. The Clarifications to IFRS 15 have not yet been endorsed by the EU as at 31 December 2017. 1

2

The Group will adopt the new standard on the required effective date and doesn’t expect a significant impact on its balance sheet and equity. (a) Classification and measurement The Group does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. The equity shares in non-listed companies are intended to be held for the foreseeable future. At the transition date, the Group has one investment for which it decided to present fair value changes through profit and loss and thereafter for every new acquisition the decision will be made on an instrument by instrument basis. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. Thus, the Group expects that these will continue to be measured at amortised cost under IFRS 9. Following the assessment of the


Financial statements

Barco annual report 2017

C/20

IFRS 15 Revenue from Contracts with Customers contractual cash flow characteristics of its debt instruments the Group concluded that the loans and trade receivables can be classified at amortised cost measurement under IFRS9. (b) Impairment IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group expects to apply the simplified approach and record lifetime expected losses on all trade receivables. The Group has concluded that the application of the expected credit loss will not have a significant impact on equity due to secured nature of its loans and receivables. (c) Hedge accounting The Group believes that all existing hedge relationships that are currently designated in effective hedging relationships will still qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, the Group does not expect a significant impact as a result of applying IFRS 9.

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The Group plans to adopt the new standard on the required effective date using the full retrospective method. The Group is considering the clarifications issued by the IASB in April 2016 and will monitor any further developments. During 2017, the Group continued its assessment started in 2016 and concluded that there will not be an impact on revenues. (a) Sale of goods Contracts with customers in which equipment sale is generally expected to be the only performance obligation are not expected to have any impact on the Groupâ&#x20AC;&#x2122;s profit or loss. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods. In preparing to IFRS 15, the Group is considering the following warranty options: the Group provides warranties for general repairs of which the Group determined that such warranties are assurance-type warranties which will continue to be accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with its current practice.


C/21

Barco annual report 2017

IFRS 16 Leasing (b) Rendering of services The Group provides services within all segments. These services are sold either on their own in contracts with the customers or bundled together with the sale of equipment to a customer. Currently, the Group accounts for the equipment and service as separate deliverables of bundled sales and allocates consideration between these deliverables using the relative fair value approach. The Group recognises service revenue by reference to the stage of completion. Under IFRS 15, allocation will be made based on relative stand-alone selling prices. As a result, the allocation of the consideration and, consequently, the timing of the amount of revenue recognised in relation to these sales may be impacted. The Group has assessed that the services are satisfied over time given that the customer simultaneously receives and consumes the benefits provided by the Group. Consequently, the Group would continue to recognise revenue for these service contracts/service components of bundled contracts over time rather than at a point of time. (c) Presentation and disclosure requirements IFRS 15 provides presentation and disclosure requirements, which are more detailed than under current IFRS. The presentation requirements represent a significant change from current practice and significantly increase the volume of disclosures required in Group’s financial statements. Many of the disclosure requirements in IFRS 15 are completely new. In 2016, the Group developed and started, and in 2017 continued, testing of appropriate systems, internal controls, policies and procedures necessary to collect and disclose the required information.

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.


Financial statements

Barco annual report 2017

C/22

Reclassifications of professional services and customer services overhead IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15 Revenue from Contract with Customers. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standardâ&#x20AC;&#x2122;s transition provisions permit certain reliefs. During 2017, the Group performed a preliminary assessment of IFRS 16, which is subject to changes arising from a more detailed ongoing analysis. The Group checked the completeness of its lease contracts in its contract database and assessed whether these contracts will meet the definition of lease in accordance with IFRS16. Based on this analysis, the Group expects that it will still meet all requirements of the loan covenants on its existing credit facilities after applying IFRS16.

In line with international accounting practices, Barco has reclassified professional services overhead associated with project management & customer services from sales and marketing expenses to cost of goods sold. This reclassification impacts gross profit margin and accordingly the results for 2015 have been restated. There is no impact on EBIT or net income resulting from this reclassification. Prior-period amounts have been revised to reflect professional service and customer services overhead in Gross Profit (as part of the full cost of inventory) instead of as part of Indirect Costs. The table below outlines the impact of these reclassifications.

IN THOUSANDS OF EURO

2015

Project overhead

-4,159

Services overhead

-18,580

Decrease in gross profit

-22,739

Decrease in sales and marketing expenses Impact on EBIT

22,739 -

There is no impact on net income nor retained earnings as of 31 December, 2015.


C/23

Barco annual report 2017

Critical accounting judgments and key sources of estimation uncertainty

General business risks We refer to the chapter ‘Risk factors’ on C/87 for an overview of the risks affecting businesses of the Barco Group.

Key sources of estimation uncertainty • Deferred tax assets are recognized for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. In making its judgment, management takes into account elements such as long-term business strategy and tax planning opportunities (see note 13 ‘Deferred tax assets – deferred tax liabilities’). • Impairment of goodwill: the Group tests the goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired (see note 10.’Goodwill’). • Write offs on inventories: inventories are stated at the lower cost or net realizable value. The calculation of the allowance for slow-moving inventory is based on consis tently applied write off rules, which depend on both his torical and future demand, of which the latter is subject to uncertainty due to rapid technological changes.

Accounting treatment of development expenses • Shorter life cycles, unpredictability of which development projects will be successful, and the volatility of techno logies and markets in which Barco operates led the Board of Directors to conclude that Barco’s development expenses in 2015, 2016 and 2017 no longer meet the criteria of IAS38.57. As the criteria of IAS38.57 are no longer

fulfilled, our accounting policy, with respect to research and development costs, no longer allows the capitalization of development expenses. Before 2015, development costs were capitalized in accordance with the accounting policy. Capitalization of costs was based on management’s judgment that technological and economic feasibility was confirmed, usually when a product development project reached a defined milestone according to an esta blished project management model. In determining the amounts to be capitalized management made assump tions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. • Impairment of development costs: Barco has tested the capitalized development for impairment if there are indications that capitalized development might be impaired (see note 11. ‘Capitalized development costs’).

Defined benefit obligations • Defined benefits: the cost of the defined benefit pension plan (see note 21) and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation, and its long-term nature, a defined obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed on reporting date.


Financial statements

Barco annual report 2017

C/24

Assets held for sale â&#x20AC;˘ Assets held for sale; Barco announced on 4 December 2017, that it has reached an agreement with China Film Group (CFG) to change the ownership structure of BarcoCFG for the Chinese cinema market. 

Barco will sell 9% of its shares in the BarcoCFG to China Film Group in exchange for 175 million CNY (or 22.4 million euro), thereby reducing its stake in the subsidiary from 58% to 49% and by consequence will lose control once the transaction is completed. The new ownership structure is expected to take effect by mid-2018 pending customary regulatory approvals after which Barco, as a result of the change in control, will report financial results of BarcoCFG using the equity method.

Operations of BarcoCFG are classified as a disposal group held for sale, as this will impact the consolidation method.

Barco considered the subsidiary to meet the criteria to be classified as held for sale at the reporting date for the following reasons: â&#x20AC;˘ The shares of BarcoCFG are available for immediate sale and can be sold to the buyer in its current condition. â&#x20AC;˘ The actions to complete the sale were initiated, subject to Chinese government approval, which is a customary process and there is no indication that it would stop the disposal. Therefore the sale is considered as highly probable. In connection with the held for sale classification, Barco allocated goodwill to BarcoCFG. We refer to note 10 for the judgements applied for this allocation. For more details on the assets held for sale, we refer to Note 3.


C/25

Barco annual report 2017

1. Consolidated companies 1.1.

List of consolidated companies on 31 December 2017

COUNTRY OF INCORPORATION

LEGAL ENTITY

REGISTERED OFFICE

%

Europe, Middle-East and Africa BELGIUM

Barco Coordination Center NV

Beneluxpark 21, 8500 Kortrijk BELGIUM

100

BELGIUM

Barco Integrated Solutions NV

Beneluxpark 21, 8500 Kortrijk BELGIUM

100

DENMARK

Barco A/S

c/o PwC, att. RAS Strandvejen 44, 2900 Hellerup DENMARK

100

FRANCE

Barco SAS

177 avenue Georges Clémenceau, Immeuble "Le Plein Ouest", 92000 Nanterre FRANCE

100

GERMANY

Barco Control Rooms GmbH

Greschbachstrasse 5 a, 76229 Karlsruhe GERMANY

100

GERMANY

Barco GmbH

Greschbachstrasse 5 a, 76229 Karlsruhe GERMANY

100

ITALY

Barco S.r.l.

Via Monferrato 7, 20094 Corsico-MI ITALY

100

ITALY

FIMI S.r.l.

c/o Studio Ciavarella, via Vittor Pisani n. 6, 20124 Milano ITALY

100

UNITED ARAB EMIRATES*

Barco Middle East L.L.C.

Concord Tower, Suite 1212, PO Box 487786, Dubai Media City, Dubai UNITED ARAB EMIRATES

49* 100

NETHERLANDS

Barco B.V.

Helmond NETHERLANDS

NORWAY

Barco Fredrikstad AS

Habornveien 53, 1630 Gamle Fredrikstad NORWAY

100

NORWAY

Habornveien 53 AS

Habornveien 53, 1630 Gamle Fredrikstad NORWAY

92.18

NORWAY

Habornveien Hjemmel AS

Habornveien 53, 1630 Gamle Fredrikstad NORWAY

100

POLAND

Barco Sp. z o.o.

Annopol 17, 03-236 Warsaw POLAND

100

RUSSIA

Barco Services OOO

ulitsa Kondratyuka, 3, 129515 Moscow RUSSIAN FEDERATION

100

SPAIN

Barco Electronic Systems, S.A.

Travesera de las Corts 371, 08029 Barcelona SPAIN

100

SWEDEN

Barco Sverige AB

c/o Grant Thornton, Box 2230, 403 14 Göteborg SWEDEN

100

UNITED KINGDOM

Barco Ltd.

Venture House, 2 Arlington Square, Downshire Way, RG12 1WA Bracknell, Berkshire UNITED KINGDOM

100

UNITED KINGDOM

JAOtech Ltd. - in liquidation

Building 329, Doncastle Road, RG12 8PE Bracknell, Berkshire UNITED KINGDOM

100

Americas BRAZIL

Barco Ltda.

Av. Ibirapuera, 2332, 8° andar, conj 82, Torre II, Moema, 04028-002 São Paulo BRAZIL

100

CANADA

X2O Media Inc.

147 Saint Paul Street West, Suite 300, H2Y 1Z5 Montreal, Quebec CANADA

100

CANADA

MTT Innovation Incorporated

Suite 2400, 745 Thurlow Street, V6E 0C5 Vancouver, BC CANADA

100

COLOMBIA

Barco Colombia SAS

Carrera 15, n° 88-64, Torre Zimma Oficina 610, 110221 Bogota COLOMBIA

100

MEXICO

Barco Visual Solutions S.A. de C.V.

Mariano Escobedo No. 476 Piso 10 Col. Anzures, C.P. 11590 D.F. México MEXICO

100

UNITED STATES

Barco, Inc.

1209 Orange Street, 19801 Wilmington DE UNITED STATES

100

UNITED STATES

Advan Int'l Corp.

47817 Fremont Blvd. , 94538 Fremont CA UNITED STATES

100

(*)

Barco has control over the relevant activities of the entity by virtue of a contractual agreement with the local investor .


Financial statements

COUNTRY OF INCORPORATION

Barco annual report 2017

LEGAL ENTITY

REGISTERED OFFICE

C/26

%

Asia-Pacific AUSTRALIA

Barco Systems Pty. Ltd.

2 Rocklea Drive, VIC 3207 Port Melbourne AUSTRALIA

100

CHINA

Barco Trading (Shanghai) Co., Ltd.

Rm501, 180 Hua Shen Road, Wai Gao Qiao Free Trade Zone, 200031 Shanghai CHINA

100

CHINA

Barco Visual (Beijing) Electronics Co., Ltd. No. 16 Changsheng Road, Chang Ping Park, Zhong Guan Cun Science Park, Chang Ping District, 102200 Beijing CHINA

100

CHINA

Barco Visual (Beijing) Trading Co., Ltd.

No. 16 Changsheng Road, Chang Ping Park, Zhong Guan Cun Science Park, Chang Ping District, 102200 Beijing CHINA

100

CHINA

CFG Barco (Beijing) Electronics Co., Ltd.

No. 16 Changsheng Road, Chang Ping Park, Zhong Guan Cun Science Park, Chang Ping District, 102200 Beijing CHINA

58

CHINA

Barco China Electronic Visualization Technology (Nanjing) Co., Ltd.

No.1, Hengtong Road, Nanjing development zone, 210038 Nanjing, Jiangsu CHINA

65

HONG KONG

Barco Ltd.

Suite 2607-2610, 26/F, Prosperity Center, 25 Chong Yip Street, Kwun Tong, Kowloon HONG KONG

100

HONG KONG

Barco Visual Electronics Co., Ltd.

Suite 2607-2610, 26/F, Prosperity Center, 25 Chong Yip Street, Kwun Tong, Kowloon HONG KONG

100

HONG KONG

Barco China (Holding) Ltd.

Suite 2607-2610, 26/F, Prosperity Center, 25 Chong Yip Street, Kwun Tong, Kowloon HONG KONG

100

HONG KONG

Barco CEC (Hong Kong) Limited

Unit 2607-10, 26/F, Prosperity Center, 25 Chong Yip Street, Kwun Tong, Kowloon HONG KONG

100

INDIA

Barco Electronic Systems Pvt. Ltd.

c/o Perfect Accounting & Shared Services P.Ltd., E-20, 1st & 2nd Floor, Main Market, Hauz Khas, 110016 New Delhi INDIA

100

JAPAN

Barco Co., Ltd.

Yamato International Bldg 8F, 5-1-1 Heiwajima, Ota-ku, 143-0006 Tokyo JAPAN

100

SOUTH KOREA

Barco Ltd.

42 Youngdong-daero 106-gil, Gangnam-gu, 06172 Seoul KOREA, REPUBLIC OF

100

MALAYSIA

Barco Sdn. Bhd.

No. 13A, Jalan SS21/56B, Damansara Utama, 47400 Petaling Jaya, Selangor MALAYSIA

100

SINGAPORE

Barco Singapore Private Limited

No. 10 Changi South Lane #04-01, 486162 Singapore SINGAPORE

100

TAIWAN

Barco Limited

33F., No. 16, Xinzhan Rd., Banqiao Dist., 220 New Taipei City TAIWAN, PROVINCE OF CHINA

100

TAIWAN

Barco Taiwan Technology Ltd.

No. 5, Ti Tang Gang Rd., Feng Hua Village, Xin Shi District, 74148 Tainan City TAIWAN, PROVINCE OF CHINA

90


C/27

1.2.

Barco annual report 2017

List of equity accounted companies on 31 December 2017

COUNTRY OF INCORPORATION

LEGAL ENTITY

REGISTERED OFFICE

%

Americas UNITED STATES

Audience Entertainment LLC

108 West 13th Street, 19801 Wilmington, Delaware UNITED STATES

UNITED STATES

CCO Barco Airport Venture LLC

Corporation Trust Center, 1209 Orange Street, 19801 Wilmington-DE UNITED STATES

18.9 35

Exemption of publishing Financial Statements and management report according German legislation §264 Abs. 3 HGB:

Exemption of publishing Financial Statements and management report according UK legislation section 479A of the Companies Act 2006:

Following subsidiary-companies will be released of publishing their financial statements and management report 2017: • Barco GmbH • Barco Control Rooms GmbH

Following subsidiary-companies will be released of publishing their financial statements and management report 2017: • Barco Ltd.

These companies are included in the consolidation scope of Barco Consolidated 2017 as listed above.


Financial statements

1.3.

Barco annual report 2017

C/28

Acquisitions and divestments

2017 Acquisition of assets of P2M On 31 August 2017, Barco acquired the assets of P2M, former distribution agent of Barco for wePresent - an Awind solution - in EMEA and the Americas. The total acquisition cost amounts to 2.6 million euro upfront payment and a contingent consideration of expected 0.5 million euro. The full cost is allocated to customer list. IFRS3 is not applicable as the acquisition of the asset does not constitute a business.

Acquisition of Habornveien 53 AS On 15 December 2017, Barco acquired 51% extra shares in the real-estate company of which Barco previously owned 42%. The total acquisition cost amounts to 1.9 million euro and is mainly allocated to land and buildings. IFRS3 is not applicable as the acquisition is not a business combination.

Divestment of Barco Lighting Systems On April 1st, 2017 Barco reached an agreement with US-based lighting company ETC to sell its Lighting activity, Barco Lighting Systems (also known as High End Systems) for an amount of 7.5 million dollar (7 million euro), of which 0.75 million dollar (0.7 million euro) was put in escrow over a period of eighteen months (with projected full release on October 1 st, 2018). This escrow amount was not recognized in profit and loss in 2017. Closing of the transaction happened on the same day. In addition, a price correction caused by an adjustment on the closing net working capital in comparison to the agreed target working capital of 0.7 million euro was paid to ETC in May 2017.

The operating results of the Lighting segment including the gain on the transaction resulted in a break-even result in 2017. We refer to note 26 'Cash flow statement: effect of acquisitions and disposals' for impact of the disposal on the cash flow of the group.

Divestment of Barco Silex SA On December 22, 2017 Barco reached an agreement with the Belgian company Anseribus NV regarding the sale of 100% of the shares of Barco Silex for an amount of 0.5 million euro, without any escrow. The transaction was cash and debt free. Closing of the transaction happened on the same day. The result on the transaction was break-even. We refer to note 26 'Cash flow statement: effect of acquisitions and disposals' for impact of the disposal on the cash flow of the group.


C/29

Barco annual report 2017

2016 Acquisition of MTT and Medialon In April 2016, Barco acquired 100% of the shares of the US-based company Medialon Inc, for which the major part of the consideration paid is allocated to in-process development. On June 10, 2016, Barco announced it acquired 100% of the shares of the Canadian-based company MTT Innovation Inc, a developer of next-generation projection technology with expertise in high dynamic range (HDR), applied imaging algorithms, advanced color science and specialized hardware development. MTTâ&#x20AC;&#x2122;s technology is still in a research phase and will need further de-risking and development over the years to come. Major part of the consideration paid is hence allocated to in-process development. Barco continues to invest in the acquired in-process development but as per 31 December 2016 those additional development efforts cannot be capitalized since Barco is unable to demonstrate that the criteria of IAS 38 are fulfilled. The total aggregated acquisition cost paid at closing amounts to 13.1 million dollar (11.7 million euro), of which 1.5 million dollar was put in escrow. On an aggregate basis, the contracts further provide for a deferred payment of 6 million dollar (5.4 million euro), 2 million dollar paid in 2017, the remaining deferred consideration is payable over the next 2 years and three earn-outs. One of the earn-outs is subject to the filing of patents on the in-process technology and is capped at 5 million dollar (4.5 million euro) of which one patent was filed in 2017. The two other earn-outs are subject to future performance and one is capped at 15 million dollar while the other is uncapped. Barco recognized as contingent consideration at acquisition only the earn-out related to the patent filing. The earn-out which is capped at 15 million dollar is linked to future results as well as to the retention of the former shareholders while the uncapped earn-out is only based on future results. At the time of the acquisition Barco was unable to make a reliable estimate.

The in-process technology of MTT has been allocated to the Entertainment division and the in-process technology of Medialon has been allocated to the Enterprise division. Aggregated transaction costs of 0.2 million euro have been expensed and are included in administrative expenses in the statement of profit or loss and are part of operating cash flows in the statement of cash flows. The acquisitions have been accounted for using the acquisition method conform IFRS3 Business Combinations (Revised). The following table summarizes the aggregated consideration paid for MTT and Medialon and the amounts of the aggregated assets acquired and liabilities assumed recognized at acquisition date, including the payments of 2017.


Financial statements

Barco annual report 2017

Aggregated assets and liabilities acquired

C/30

06/01/2016 Before acquisition

Fair value restatements

After acquisition

Other intangible fixed assets

79

28,897

28,976

Other non-current assets

60

-

60

Total non-current assets

139

28,897

29,036

Total current assets

509

-

509

Deferred tax liability

-

-7,953

-7,953

IN THOUSANDS OF EURO

Total non-current liabilities

-

-7,953

-7,953

Total current liabilities

-561

-

-561

Cash

504

-

504

Total net assets acquired

591

20,944

21,535

Upfront consideration

11,673

Deferred consideration

5,379

Contingent consideration

4,483

Aggregated acquisition cost Goodwill

21,535 -

Cash flow on acquisition Net cash acquired with the subsidiary Cash paid in 2016

504 -11,673

Cash paid in 2017

-2,022

Net cash flow on acquisition

-13,191

As the effective control is transferred on 1 May, 2016, the Medialon figures are taken up in the figures of the Group from 1 May, 2016 onwards. In 2016, Medialon has contributed 8 months of turnover and EBITDA: 0.9 million euro to the total turnover of the Group, contributing to the EBITDA 0.1 million euro. The effective control for MTT has transferred

on June 1 st, 2016 and as a result the MTT figures are taken up in the figures of the Group from 1 June, 2016 onwards. In 2016, seven months further development of the acquired technology of MTT has impacted the Group EBITDA for an amount of -0.6 million euro.


C/31

Barco annual report 2017

2015 Acquisition of Advan Per 12 June 2015, Barco acquired 100% of the shares of the US-based company Advan Intâ&#x20AC;&#x2122;l Corp, a manufacturer of high-quality LCD displays for medical modality applications. The acquisition fits within Barcoâ&#x20AC;&#x2122;s strategy to grow its market share in the modality imaging segment and strengthen its partnerships with leading medical device manufacturers worldwide. As the effective control was transferred on 1 July, 2015, the Advan figures were taken up in the figures of the Barco Group from 1 July, 2015 onwards. In 2015 Advan contributed six months of turnover and EBITDA: 10.7 million euro to the total turnover of the Group, contributing positive to the net result (1.1 million euro EBITDA). If the acquisition had taken place at the beginning of the year, the total turnover would have been 19.5 million euro and the EBITDA for the period would have been 0.9 million euro. Transaction costs of 0.1 million euro were expensed and included in administrative expenses in the statement of profit or loss and were part of operating cash flows in the statement of cash flows. The acquisition was accounted for using the acquisition method conform IFRS3 Business Combinations (Revised).

The total acquisition cost paid at closing amounted to 13.5 million dollar (11.8 million euro), of which 3.4 million dollar (3.0 million euro) was put in escrow. The contract further provides for an additional earn-out, which is based on the future performance of Advan and is capped at 5 million dollar (4.4 million euro) over the next three years. In 2016, the earnout targets were not met and therefore no earn-out had to be paid in the first year after acquisition. The earn-out liability was not released as the earn-out could still be reached over the remaining years of the earn-out period (which is June 2015 until May 2018) and at the end of 2016 we did not have enough information to conclude that the earn-out could not be reached anymore. Also in 2016 a price correction, caused by an adjustment on the closing net working capital in comparison to the agreed target working capital, of 0.8 million dollar (0.8 million euro) was released from escrow. Together with a correction of the net assets, this resulted in a decrease of the goodwill of 0.7 million dollar (0.6 million euro). See note 10. In 2017, an earn-out of 0.5 million dollar (0.4 million euro) is realized on the second earn-out period. A change in the estimated earn-out resulted in 0.2 million euro gain in other operating income. Additionally, there was a release from escrow of 0.7 million euro under the reps and warranties of the agreement to cover for costs incurred. The goodwill recognized at acquisition is related to the future cash flows Barco expects to realize based on the sale of products to the Advan customers. The goodwill is not tax deductible. The goodwill has been assigned to the Healthcare division. The following table summarizes the consideration paid for Advan and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.


Financial statements

Barco annual report 2017

Advan assets and liabilities

C/32

07/01/2015 Before acquisition

Fair value restatements

After acquisition

1,049

1,657

2,707

Inventory

2,427

-1,029

1,398

Trade receivables

2,815

-

2,815

Other current assets

449

211

661

Total current assets

5,692

-818

4,874

IN THOUSANDS OF EURO Total non-current assets

Deferred tax liability

-

-74

-74

Total non-current liabilities

-

-74

-74

-2,934

-465

-3,398

Total current liabilities Cash

2,168

-

2,168

Total net assets acquired

5,976

300

6,276

Upfront consideration Contingent consideration Total acquisition cost Goodwill

9,343 1,123 10,466 4,190

Cash flow on acquisition Net cash acquired with the subsidiary

2,168

Cash paid

-11,044

Net cash flow on acquisition

-8,876

Discontinued operations On September 29th, 2014, Barco reached an agreement with US-based aerospace and defense group Esterline Corporation to sell its Defense & Aerospace division. The sale, which covers both shares of the legal entities Barco Singapore Private Ltd, Barco Texen, Barco Federal Systems LLC and

Barco Electronic Systems Ltd and assets of the Defense & Aerospace division in Belgium and the United States, is valued at 150 million euro. Closing was finalized on January 31 st 2015.


C/33

Barco annual report 2017

2. Operating segments information 2.1. Basis of operating segments information Effective 1 January 2015, Barco streamlined its organization into three divisions: Entertainment, Enterprise and Healthcare which reflects the products and services that it offers to its customers. - Entertainment: the Entertainment division is the combination of the Cinema and Venues & Hospitality activities, which includes Professional AV, Events and Simulation activities. - Enterprise: the Enterprise division is the combination of the Control Rooms activities and the Corporate activities. ClickShare is the main contributor to the Corporate activity which also includes the Medialon activities. - Healthcare: the Healthcare division includes the activities in Diagnostic Imaging (Diagnostic and Modality Imaging) and in Surgical. No operating segments have been aggregated to form the above reportable operating segments. The CEO and his core leadership team monitor the results of each of the three divisions separately, so as to make decisions about resource allocation and performance assessment and consequently, the divisions qualify as operating segments. These operating segments do not show similar economic characteristics and do not exhibit similar long-term financial performance and therefore cannot be aggregated into reportable segments. Division performance is evaluated based on EBITDA. Group financing (including finance costs and finance revenue) and income taxes are managed on a group basis and are not allocated to the operating divisions.

As of January 1, 2016, the remaining projector activity which had been part of Enterprise was transferred to the Entertainment division. The 2015 financial segment data have not been restated for comparison reasons as the information is not available and the cost to develop it is excessive. In this case in accordance with IFRS8.30, the segment information for the current period should be presented on both the old and the new bases of segmentation. However the necessary information is unavailable and the cost of developing it is excessive, therefore Barco can also not present the current information on the old basis of segmentation. Transfer prices between operating segments are on an armâ&#x20AC;&#x2122;s length basis in a manner similar to transactions with third parties. We refer to C/18 for more explanation on the activities performed by each division.


Financial statements

Barco annual report 2017

C/34

2.2. Entertainment

IN THOUSANDS OF EURO

2017

2016

2015

Variance 2017 - 2016

Variance 2016-2015 12.4%

Net sales

533,345

100.0%

578,151

100.0%

514,474

100.0%

-7.7%

- external sales

533,285

100.0%

578,057

100.0%

513,332

99.8%

-7.7%

12.6%

- interdivision sales

61

0.0%

94

0.0%

1,142

0.2%

-35.5%

-91.8%

Cost of goods sold

15.4%

-370,428

-69.5%

-416,628

-72.1%

-361,097

-70.2%

-11.1%

Gross profit

162,917

30.5%

161,523

27.9%

153,377

29.8%

0.9%

5.3%

EBITDA

38,922

7.3%

30,446

5.3%

43,561

8.5%

27.8%

-30.1%

Amortization capitalized development

-

0.0%

10,142

1.8%

21,251

4.1%

-100.0%

-52.3%

Depreciation TFA and (acquired) intangibles

15,718

2.9%

14,787

2.6%

8,526

1.7%

6.3%

73.4%

Adjusted EBIT

23,205

4.4%

5,517

1.0%

13,784

2.7%

320.6%

-60.0%

Capital expenditures TFA and software

10,890

2.0%

10,345

1.8%

5,184

1.0%

5.3%

99.5%

Variance 2017 - 2016

Variance 2016-2015 -3.6%

Segment assets

228,108

315,164

295,242

Segment liabilities

145,780

269,241

243,894

Segment assets and liabilities for Entertainment are excluding the assets held for sale.

2.3. Enterprise IN THOUSANDS OF EURO

2017

2016

2015

Net sales

308,161

100.0%

289,652

100.0%

300,391

100.0%

6.4%

- external sales

308,161

100.0%

289,652

100.0%

299,627

99.7%

6.4%

-3.3%

- interdivision sales

-

0.0%

-

0.0%

764

0.3%

-

-100.0%

Cost of goods sold

-159,264

-51.7%

-156,758

-54.1%

-191,452

-63.7%

1.6%

-18.1%

Gross profit

148,898

48.3%

132,895

45.9%

108,939

36.3%

12.0%

22.0%

40,662

13.2%

32,984

11.4%

11,081

3.7%

23.3%

197.7%

-

0.0%

5,440

1.9%

15,400

5.1%

-100.0%

-64.7%

Depreciation TFA and (acquired) intangibles

13,295

4.3%

8,904

3.1%

9,335

3.1%

49.3%

-4.6%

Adjusted EBIT

27,368

8.9%

18,640

6.4%

-13,654

-4.5%

46.8%

-236.5%

7,807

2.5%

9,041

3.1%

7,307

2.4%

-13.7%

23.7%

EBITDA Amortization capitalized development

Capital expenditures TFA and software Segment assets Segment liabilities

149,633

177,073

179,330

71,224

73,364

71,492


C/35

Barco annual report 2017

2.4. Healthcare

IN THOUSANDS OF EURO

2017

2016

2015

Variance 2017 - 2016

Variance 2016-2015 8.6%

Net sales

243,260

100.0%

234,633

100.0%

215,984

100.0%

3.7%

- external sales

243,259

100.0%

234,633

100.0%

215,896

100.0%

3.7%

8.7%

- interdivision sales

-

0.0%

-

0.0%

88

0.0%

0.0%

-100.0%

Cost of goods sold

-150,922

-62.0%

-150,246

-64.0%

-140,535

-65.1%

0.4%

6.9%

Gross profit

92,337

38.0%

84,386

36.0%

75,449

34.9%

9.4%

11.8%

EBITDA

27,533

11.3%

24,572

10.5%

19,403

9.0%

12.1%

26.6%

-

0.0%

7,290

3.1%

12,790

5.9%

-100.0%

-43.0%

4,865

2.0%

4,881

2.1%

5,045

2.3%

-0.3%

-3.3%

22,668

9.3%

12,400

5.3%

1,568

0.7%

82.8%

690.7%

4,464

1.8%

4,855

2.1%

2,239

1.0%

-8.1%

116.9%

Amortization capitalized development Depreciation TFA and (acquired) intangibles Adjusted EBIT Capital expenditures TFA and software Segment assets Segment liabilities

104,373

102,768

123,621

63,654

59,847

63,006


Financial statements

Barco annual report 2017

C/36

2.5. Reconciliation of segment information with group information

IN THOUSANDS OF EURO

2017

2016

2015

External sales Entertainment

533,285

578,057

513,332

Enterprise

308,161

289,652

299,627

Healthcare

243,259

234,633

215,896

1,084,706

1,102,342

1,028,856

Entertainment

38,922

30,446

43,561

Enterprise

40,662

32,984

11,081

Healthcare

27,533

24,572

19,403

Entertainment

-

10,142

21,251

Enterprise

-

5,440

15,400

Healthcare

-

7,290

12,790

Entertainment

15,718

14,787

8,526

Enterprise

13,295

8,904

9,335

Healthcare

4,865

4,881

5,045

Total external sales segments

Net Income EBITDA

Amortization

Depreciation

Adjusted EBIT Entertainment

23,205

5,517

13,784

Enterprise

27,368

18,640

-13,654

Healthcare

22,668

12,400

1,568

Total adjusted EBIT

73,241

36,557

1,698 -29,099

Restructuring and impairments

-32,404

-12,939

Gain on sale building

-

6,866

-

Other non-operating income (expense) - net

-

33

35


C/37

Barco annual report 2017

IN THOUSANDS OF EURO EBIT

2017

2016

2015

40,836

30.516

2,013

1.240

3.006

Income/(loss) before taxes

42,849

31,756

-24,360

Income taxes

-11,355

-6,345

4,879

Result after taxes

31,494

25,411

-19,481

Interest income (expense) - net

Share in the result of joint ventures and associates Net income from continuing operations Net income from discontinued operations Net income Non-controlling interest

-27.366

1,290

263

-1,073

32,784

25,674

-20,554

-

-

47,031

32,784

25,674

26,477

8,008

14,652

9,009

Net Income attributable to the equity holder of the parent

24,776

11,023

17,468

Net Income (continuing) attributable to the equity holder of the parent

24,776

11,023

-29,563

-

-

47,031

Net Income (discontinued) attributable to the equity holder of the parent

Note: For 2015 and 2016 adjusted EBIT includes amortization on capitalized development due to the change in accounting treatment of development expenses since 2015.


Financial statements

IN THOUSANDS OF EURO

Barco annual report 2017

2017

2016

C/38

2015

Assets Segment assets Entertainment

228,108

315,164

295,242

Enterprise

149,633

177,073

179,330

Healthcare

104,373

102,768

123,621

482,114

595,005

598,193

Total segment assets Investments

7,906

14,460

9,031

69,859

89,100

78,031

Cash and cash equivalents

254,130

353,549

341,277

Other non-allocated assets

111,450

107,119

113,795

Assets held for sale

139,536

-

-

1,064,996

1,159,231

1,140,327

243,894

Deferred tax assets

Total assets

Liabilities Segment liabilities Entertainment

145,780

269,241

Enterprise

71,224

73,364

71,492

Healthcare

63,654

59,847

63,006

Total segment liabilities

280,658

402,452

378,391

Equity attributable to equityholders of the parent

579,449

590,243

597,739

Non-controlling interest

14,065

25,244

13,925

Long-term debts

41,036

66,811

79,527

Deferred tax liabilities Current portion of long-term debts Short-term debts Other non-allocated liabilities Liabilities directly associated with the assets held for sale Total equity and liabilities

4,647

8,813

4,462

10,000

11,500

10,000

686

2,085

2,124

33,787

52,083

54,158

100,669

-

-

1,064,996

1,159,231

1,140,327


C/39

Barco annual report 2017

2.6. Geographic information Management monitors sales of the Group based on the regions to which the goods are shipped or the services are rendered in three geographical regions Europe, Americas (NA and LATAM) and Asia-Pacific (APAC). We refer to the ‘Comments on the results’ on A/92 for a split of revenue from external customers based on the geographical location of the customers to whom the invoice is issued. There is no significant (i.e. representing more than 10% of the Group’s revenue) concentration of Barco’s revenues with one customer.

IN THOUSANDS OF EURO

Sales to Belgium represent 38.3 million euro of the Group revenues in 2017 versus 50.0 million euro in 2016 and 48.7 million in 2015. In 2017, Belgium’s non-current assets amount to 170.6 million euro (rest of the world 194.1 million euro); in 2016 183.6 million euro (rest of the world 243.0 million euro) and in 2015 180.8 million euro (rest of the world 229.9 million euro). Below table gives an overview of the assets per region and the most important capital expenditures in non-current assets per region:

2017

2016

2015

Net sales Europe

339,526

31.3%

344,355

31.2%

332,589

Americas

394,509

36.4%

394,634

35.8%

384,921

37.4%

Asia-Pacific

350,671

32.3%

363,354

33.0%

311,346

30.3%

1,084,706

100%

1,102,342

100%

1,028,856

100%

Europe

458,383

43.0%

494,569

42.7%

559,733

49.1%

Americas

185,006

17.4%

241,994

20.9%

220,887

19.4%

Asia-Pacific

421,607

39.6%

422,669

36.5%

359,707

31.5%

1,064,995

100%

1,159,232

100%

1,140,327

100%

82.5%

Total

32.3%

Total assets

Total Purchases of tangible and intangible fixed assets Europe

22,094

82.0%

25,251

75.7%

35,471

Americas

1,578

5.9%

2,732

8.2%

1,030

2.4%

Asia-Pacific

3,272

12.1%

5,370

16.1%

6,484

15.1%

26,944

100%

33,353

100%

42,984

100%

Total


Financial statements

Barco annual report 2017

3. Assets held for sale We refer to C/23 on the critical accounting judgements for more background on the intended sale of 9% of Barcoâ&#x20AC;&#x2122;s current stake of 58% in BarcoCFG. The major classes of assets and liabilities of BarcoCFG classified as held for sale as at 31 December are, as follows:

IN THOUSANDS OF EURO

NOTE

31 DEC 2017

ASSETS Goodwill

10

8,000

Deferred tax assets

13

10,174

14

21,309

Trade debtors

15

32,668

Cash and cash equivalents

16

Non-current assets Inventory

18,174

67,385

Current assets

121,362

Total assets

139,536

LIABILITIES Non-current accrued charges and deferred income

6,167

Non-current liabilities

6,167

Trade payables

20

Advances received from customers

20

Tax payables

1,179

Accrued charges and deferred income Current liabilities Total liabilities

21,814 13,600

Employee benefit liabilities Provisions

11,605

42,696 21

3,608 94,502 100,669

Per end of 2017, -1.8 million euro CTA was included in equity for BarcoCFG. Once deconsolidated, this will be recycled through profit and loss.

C/40


C/41

Barco annual report 2017

4. Income from continued operations (EBIT) IN THOUSANDS OF EURO

2017

2016

2015

Sales

1,084,706

1,102,342

1,028,856

Cost of goods sold

-680,554

-723,538

-691,091

404,152

378,804

337,765

37.3%

34.4%

32.8%

-327,201

-345,573

-339,028

Gross profit Gross profit as % of sales Indirect costs Other operating income (expenses) - net

-3,710

3,325

2,960

Adjusted EBIT

73,241

36,557

1,698

6.8%

3.3%

0.2%

-32,404

-12,939

-29,099

Gain on sale building

-

6,866

-

Other non-operating income/(expense)

-

33

35

40,836

30,516

-27,366

3.8%

2.8%

-2.7%

Adjusted EBIT as % of sales Restructuring and impairments

EBIT EBIT as % of sales

After an increase in topline of 7% from 2015 to 2016, sales remained at the same level in 2017 (-1.6%, flat excluding the impact of the divested Lighting business). A strong gross profit margin improvement has been realized, from 32.8% in 2015 to 34.4% in 2016 and then up 2.9 percentage points to 37.3% in 2017. A positive mix effect and value engineering efforts yielding into results across the 3 divisions are contributors to this improvement. The higher gross profits while keeping indirect costs under control result in an adjusted EBIT of 6.8% in 2017, up 3.5 percentage points vs 2016. The decrease in indirect costs over the period is fully explained by amortizations on capitalized development costs still included in 2016 (see below). EBIT in 2017 includes following adjusting items: restructuring costs (5.2 million euro) and non-cash impairment charges (27.2 million euro) totaling 32.4 million euro (2016: adjusting items: 6 million euro (net after gain on sale of headquarter building); 2015: 29.1 million euro).

For more details on adjusting items we refer to note 6. Restructuring and impairment. The restructuring costs in 2017 mainly relate to the announced relocation of the production of the Norway plant to Belgium and the decision to stop loss-making activities mainly in the Entertainment division for an amount of 5.2 million euro (in 2016: 5.8 million euro, mainly related to Entertainment, in 2015: 8.3 million euro, mainly related to Enterprise). We refer to note 6 for more details on restructuring charges recorded.


Financial statements

Barco annual report 2017

IN THOUSANDS OF EURO

NOTE

Adjusted EBIT Depreciations and amortizations

12

Amortizations and impairments on development expenses

2017

36,557

1,698

33,877

28,572

22,906

-

22,873

49,441

107,118

88,002

74,080

9.9%

8.0%

7.2%

EBITDA as % of sales

IN THOUSANDS OF EURO

2015

73,241 4a - 11

EBITDA

The change in accounting treatment of development expenses (see (a)), which resulted in no capitalization of development expenses in 2016 and 2015, negatively impacts adjusted EBIT in 2016 and 2015 due to amortizations on the remaining capitalized development balance (2016: 22.9

2016

C/42

million euro; 2015: 49.4 million euro). EBITDA excludes these impacts and shows a steady improvement in EBITDA performance of 9.9% on sales in 2017, compared to 8% in 2016 and 7.2% in 2015.

2017

2016

2015

Product sales

888,753

82%

883,437

80%

793,341

77%

Project sales

96,016

9%

120,089

11%

142,237

14%

Service sales

99,936

9%

98,815

9%

93,278

9%

Sales

Major part of the sales relate to product sales (in 2017: 82%, in 2016: 80%, 2015: 77%). Project sales include combined sales from products, installations and services and are declining since 2015 as a result of declining project sales in the control rooms business. Most of these project sales have a lifetime of less than one year. Service sales remained stable, counting for 9% of total sales.

1,084,706

1,102,342

1,028,856

We refer to note 2.Segment Information and to the chapter â&#x20AC;&#x2DC;Comments on the resultsâ&#x20AC;&#x2122; for more explanation on sales and income from operations (A/92).


C/43

Barco annual report 2017

Indirect costs and other operating income (expenses) - net IN THOUSANDS OF EURO

2017

2016

2015

Research and development expenses (a)

-122,305

-143,362

-150,222

Sales and marketing expenses (b)

-146,802

-147,088

-137,829

General and administration expenses ( c )

-58,095

-55,122

-50,977

Indirect costs

-327,201

-345,573

-339,028

Other operating income (expenses) - net (d) Indirect costs and other operating income (expenses) - net

-3,710

3,325

2,960

-330,911

-342,247

-336,067

Indirect costs represent 30% of sales in 2017 versus 31% of sales in 2016 and 33% of sales in 2015.

(a) Research and development expenses IN THOUSANDS OF EURO Research & development expenses

2017

2016

2015

122,305

120,490

100,781

Amortization capitalized development expenses

-

21,509

44,575

Impairment of capitalized development expenses

-

1,364

4,866

Capitalized development, net

-

22,873

49,441

122,305

143,362

150,222

Research and development expenses, net

In order to sustain our technological leadership, Barco strongly invests in R&D, new technologies and innovation. We refer to ‘Our strategy’ on page A/34 for more details. Shorter life cycles of products, unpredictability of which development projects will become successful together with the volatility of technologies and the markets Barco operates in, made the Board of Directors conclude that Barco’s development expenses no longer fully meet the criteria of IAS38.57. As the criteria of IAS38.57 are no longer fulfilled, our accounting policy, with respect to research and development costs, does

no longer allow the capitalization of development expenses since 2015. 2017 Research and development cash expenses represent 11.3% of sales in 2017, which is in line with 2016 and 9.8% of sales in 2015.The increase from 2016 to 2015 is related to development in new growth initiatives and acquisitions in MTT and Medialon, by which Barco acquired in-process development which requires additional internal development.


Financial statements

Barco annual report 2017

C/44

No longer capitalizing development expenses since 2015, had a negative impact on the income from operations (EBIT and adjusted EBIT) in 2016 and 2015.

the amortization on the remaining capitalized development expenses for an amount of 22.9 million euro (2015: 44.6 million euro).

As capitalized development expenses are amortized over their expected useful lives, which is generally 2 years, 2017 is no longer impacted by the change in accounting treatment of development expenses. In 2016 and 2015 net research and development expenses, still include a full year amortization cost. Adjusted EBIT in 2016 is negatively impacted by

Impairment costs on capitalized development expenses (2016: 1.4 million euro; 2015: 4.9 million euro) are presented on the line â&#x20AC;&#x153;Research and development expensesâ&#x20AC;?. For more explanation on impairment costs on capitalized development we refer to note 11.

Research and development activities are spread over the divisions as follows:

IN THOUSANDS OF EURO

2017

% of sales

2016

% of sales

2015

% of sales

Entertainment

50,142

9%

65,450

11%

60,812

12%

Enterprise

48,768

16%

49,722

17%

56,885

19%

23,395

10%

28,190

12%

32,525

15%

Healthcare Total Research & development expenses

122,305

143,362

150,222

(b) Sales and marketing expenses

IN THOUSANDS OF EURO Sales and marketing expenses

2017 146,802

Sales and marketing expenses include all indirect costs related to the sales and customer service organization which are not billed as part of a product or service to the customer as well as the costs related to regional or divisional marketing activities.

% of sales 13,5%

2016 147,088

% of sales 13,3%

2015 137,829

% of sales 13,4%

Sales and marketing expenses, as percentage of sales, amounts to 13.5%, which is in line with previous years.


C/45

Barco annual report 2017

(c) General and administration expenses IN THOUSANDS OF EURO General and administration expenses

2017 58,095

General and administration expenses include the costs related to general and divisional management, finance and accounting, information technology, human resources and

% of sales 5.4%

2016

% of sales

55.122

2015

5.0%

% of sales

50,977

5.0%

investor relations. Expenses increased to 5.4% of sales in 2017 compared to 5% in 2016 and 2015 partly the result of increased investments in IT infrastructure (SAP and Cloud).

(d) Other operating income (expense) â&#x20AC;&#x201C; net

IN THOUSANDS OF EURO

NOTE

2017

2016

2015

Sale divestments

(a)

513

1,000

1,405

Investment grants

(b)

-

58

5,569

434

-

-

(c)

2,246

-

-

-674

2,788

-1,362

-1,549

-1,234

-1,313

-705

-982

-974

-2,325

1,819

-669

Dividend received from external investment Reversal other long term liability Bad debt provisions (net of write-offs and reversals of write-offs) Cost of share-based payments Bank charges Other provisions (net of additions and reversals of provisions) Gains/(loss) on disposal of tangible fixed assets

-362

-142

548

Other (net)

-1,288

19

-243

Total

-3,710

3,325

2,960

(a) In 2014, Barco sold its venture Orthogon. In 2015 a price correction resulting from the contractual adjustment on the final closing net working capital in comparison to the agreed target working capital, of 1.4 million euro was received and recognized in other operating income. In 2016 the remaining escrow on the sale of Orthogon was received.

In 2017 sale of divestment mainly relates to the sold Lighting activities. We refer to note 1.3. Acquisitions and divestments for more explanation.

(b)

As of 2016 government grants and other forms of government assistance related to research projects are recognized as income on the line research and development expenses. In 2015 these government grants were included in other operating income (expense) (2015: 5.6 million euro).

(c) This concerns the loan on the former DAT business. For further information, see note 17.


Financial statements

Barco annual report 2017

C/46

5. Revenues and expenses by nature The table below provides information on the major items contributing to the adjusted EBIT, categorized by nature.

IN THOUSANDS OF EURO

2017

2016

2015

Sales

1,084,706

1,102,342

1,028,856

Material cost

-560,388

-580,142

-575,130

Services and other costs

-135,309

-166,234

-128,796

Personnel cost

-278,181

-271,289

-253,846

-

-22,873

-49,441

-33,877 -3,710 73,241

-28,572 3,325 36,557

-22,906 2,960 1,698

Amortizations on development Depreciation property, plant, equipment and software Other operating income (expense) - net (note 4) Adjusted EBIT

Personnel cost includes the cost for temporary personnel for an amount of 5.3 million euro (in 2016: 6.6 million euro, in 2015: 5.7 million euro).

Average number of employees in 2017 was 3,515 (versus 3,456 in 2016; 3,298 in 2015), including 2,683 white-collars (in 2016: 2,615, in 2015: 2,509) and 832 blue-collars (in 2016: 841, in 2015: 788).


C/47

Barco annual report 2017

6. Restructuring and impairment costs The table below shows the restructuring and impairment costs recognized in the income statement.

IN THOUSANDS OF EURO

NOTE

2017

2016

2015

Total restructuring (cash):

-5,200

-2,297

Lay-off costs

-5,200

-2,297

-8,315

-27,204

-10,642

-20,783

10

-10,870

-7,546

-16,940

9

-9,074

416

-3,843

-4,400

-3,512

-

-2,860

-

-

-32,404

-12,939

-29,099

Total impairments (non-cash): Impairment on goodwill Impairment on investments Write-off on inventories Impairment (in)tangible fixed assets Total restructuring and impairments

Please refer to note 10 for explanation on impairment on goodwill, note 9 for explanation on the impairment on investments and note 12 for impairment of (in)tangible fixed assets. Restructuring costs include lay off costs (2017: 5.2 million euro, 2016: 2.3 million euro, 2015: 8.3 million euro). Noncash impairment costs relate to impairment on intangible and tangible fixed assets (2017: 2.9 million euro), goodwill (2017: 10.9 million euro, 2016: 7.5 million euro and 2015: 16.9 million euro), write off on inventories (2017: 4.4 million euro, 2016: 3.5 million euro) and investments (2017: 9 million euro, 2016: -0.4 million euro and 2015: 3.8 million euro). Restructuring and impairment costs in 2017 relate to Barcoâ&#x20AC;&#x2122;s decision to move the production activities in Norway to Belgium, leading to a provision for lay off costs as well as an impairment on the building (in Entertainment division), and

12

-8,315

to Barcoâ&#x20AC;&#x2122;s decision to revisit the future of certain growth initiatives (in Entertainment division) and the X2O business (in Enterprise division). Based on the latter decision, management assessed additional write offs on inventories (growth initiatives), impairment on goodwill and know-how (X2O) and provision for lay-off costs. At the end of 2016 Barco decided to scale down the Interactive Patient Care business, which resulted in an impairment of the remaining goodwill (see note 10) and additional write off on inventories for an amount of 0.5 million euro. The decision to revisit the future of the Lighting business, resulted in additional write offs on inventories (3 million euro).


Financial statements

Barco annual report 2017

C/48

7. Income taxes IN THOUSANDS OF EURO

NOTE

2017

2016

2015

Current versus deferred income taxes Current income taxes

-11,779

-16,612

424

10,267

10,374

Income taxes

-11,355

-6,345

-6,879

Income taxes continuing operations

-11,355

-6,345

4,879

-

-

-11,758

40,836

30,516

-27,366

-

-

58,790

2,013

1,240

3,006

42,849

31,756

34,430

Deferred income taxes

Income taxes discontinuing operations

-17,253

Income taxes versus income before taxes EBIT continuing operations EBIT discontinuing operations Interest income (expense) - net Income before taxes Income taxes Effective income tax rate

%

Income before taxes Theoretical tax rate Theoretical tax credit/(cost)

-11,355

-6,345

-6,879

-26.5%

-20.0%

-20.0%

42,849

31,756

34,430

34%

34%

34%

-14,565

-10,797

-11,706

Effect of change in expected tax rate on deferred taxes

(a)

-15,562

A

-

-

Set-up/(use) of deferred tax assets, not recognised in prior years

(b)

11,063

A

1,620

-27

Innovation income deduction (IID)

(c)

8,243

-

-

Effect of different tax rates in foreign companies

4,463

11,542

5,867

Tax adjustments related to prior periods

1,728

-53

4,784

Non deductible expenses/non taxable income for tax purposes Goodwill impairments non-deductible

(d)

-3,695

-2,423

-6,233

Impairment on investment

(e)

-3,364

-

-

Dividends received

(f)

-1,523

-4,610

-

-1,873

-4,699

-1,873

1,636

-

4,132

1,726

1,995

1,156

-

1,769

2,756

Other non-deductible expenses Income not taxed Capital loss carried back/Gain on sold share deal entities

(g)

Government grants exempt from tax Notional interest deduction (NID)

(h)

Investment allowances

(i)

854

1,771

2,324

Deferred tax assets, derecognised in current year

(j)

-487

-2,460

-8,058

-11,355

-6,345

-6,879

Taxes related to current income before taxes

Note: Adjusted tax rate 2017 = 16% (Taxes related to current income before taxes - non-recurring tax items (i.e. sum of A))/income before taxes = (-11,355 â&#x20AC;&#x201C; (-15,562 + 11,063 ))/42,849 Adjusted tax rate is the tax rate used in the calculation of ROCE (see page C/80).


C/49

Barco annual report 2017

(a) (b) Impact of the change in tax regulation in Belgium and US is -4.5 million euro cost, net of -15.6 million euro (a) reduction on deferred tax assets in Belgium and US due to a lower enacted tax rate and 11 million euro (b) new deferred tax assets set-up on uncapped or faster deductible tax credits in Belgium, in combination with higher than anticipated taxable results in Belgium. (c) As of 2016 Innovation Income Deduction (IID) in Belgium, not used in the tax year it is incurred, can be carried forward to the next years. This has resulted in an extra deferred tax asset of 8.2 million euro on the IID not used in 2016 and 2017 as management believes there will be sufficient taxable profit in the future to be able to offset the IID carried forward. (d) See note 10 for more details on goodwill impairment recorded in 2017, 2016 and 2015. The 2017, 2016 and major part of the 2015 goodwill impairment is non-deductible. Only the part recorded in the US is tax deductible. (e) See note 9 for more details on impairment on investments recorded in 2017. Impairments on investments are non-tax deductible.

(f) Net effect of deferred taxes on DBI deduction carried forward and 5% taxable income on dividends received. (g) Gain realized on divested share deal entities as part of the sale of the DAT business is tax exempt in 2015. In 2017 the sale of the Lighting activities resulted in a capital loss for which part could be carried back to the gain realized on the sale of the assets of the DAT business in 2015 in the US. (h) Decrease of notional interest percentage allowed over the years â&#x20AC;&#x201C; no usage of NID in 2017. (i) Spread taxation on capital expenditure and research and development costs of prior years. (j) Deferred tax assets not recognized on tax losses or tax losses carried forward when assessment shows it is not probable that these tax benefits can be utilized in the near future. In 2016 this mainly relates to tax losses in Belgium and Canada. In 2015 and 2014 this mainly relates to tax losses in Belgium and Germany. See note 13.

8. Earnings per share

IN THOUSANDS OF EURO

2017

Net income/(loss) (continuing) attributable to the equity holder of the parent Weighted average of shares Basic earnings per share (in euro)

2016

2015

24,776

11,023

-29,563

12,328,663

12,171,969

12,065,396

2.01

0.91

-2.45

Net income/(loss) (discontinued) attributable to the equity holder of the parent

-

-

47,031

Weighted average of shares

-

-

12,065,396

Basic earnings per share (in euro)

-

-

3.90

2.01

0.91

1.45

Basic earnings per share Net income/(loss) (continuing) attributable to the equity holder of the parent Weighted average of shares (diluted) Diluted earnings per share (in euro) Net income/(loss) (discontinued) attributable to the equity holder of the parent Weighted average of shares (diluted)

24,776

11,023

-29,563

12,428,453

12,591,376

12,411,732

1.99

0.88

-2.38

-

-

47,031

-

-

12,411,732

Diluted earnings per share (in euro)

(a)

-

-

3.79

Diluted earnings per share

(a)

1.99

0.88

1.41

(a) The difference between the weighted average of shares and weighted average of shares (diluted) is due to exercisable warrants, which are in the money (which means that the closing rate of the Barco share was higher than the exercise price). For more detailed information concerning the shares and warrants, we refer to note 18.


Financial statements

Barco annual report 2017

C/50

9. Investments Investments include entities in which Barco owns less than 20% of the shares. These are accounted for as AFS instruments, which implies that the Group measures these investments on a fair value basis with differences in fair value reflected in profit and loss. Interest in associates represent entities in which Barco owns between 20% and 50% of the shares. The decrease from 2016 to 2017 is the net effect of the impairment on an investment in Entertainment and an additional capital contribution in CCO Barco Airport Venture LLC. The impaired investment is facing cash flow problems, for which no solution is found to date. This, together with the return criteria no longer being met, let the Board decide to impair the investment which is presented in the line restructuring and impairment costs. In 2016, the equity instruments’ fair value is based on a binding agreement with a third party investor (i.e. price of the last round – level 1 fair value), as these investments are unquoted instruments. In 2016 the balance also included the 35% interest in CCO Barco Airport Venture LLC, as well as a 27.32% interest in Audience Entertainment and a 41.18% interest in Habornveien 53, a Norwegian real estate company owning the building leased by Barco Frederikstad AS in Norway. Barco has purchased an additional 51% of the shares on 22 December

2017, resulting in Barco acquiring control of Habornveien 53 as per 31 December 2017. We refer to note 1.3 Acquisitions and divestments. The investment in Habornveien 53 is therefore no longer included per 31 December 2017 in the investments in associated companies. The results of the equity investment until 31 December 2017 are included in the share in the profit/(loss) of joint ventures and associates in the income statement. The Audience Entertainment results include in each year the fourth quarter result of the previous year and the first three quarters of the result of the current year, as the fourth quarter figures of the current year are not yet available. In 2015 this investment has been fully impaired (3.8 million euro impairment) to zero. This impairment was recorded in the income statement in the line restructuring and impairment costs. In 2016 the result of Audience Entertainment from October 2015 till September 2016 amounts -0.4 million euro. This amount is offset in the income statement in the line restructuring and impairment costs in order to keep the investment at zero. See note 6. Restructuring and impairment. In 2017, this entity did not generate significant result.

The Group’s share of the assets and liabilities as at 31 December 2017, 2016 and 2015 and income and expenses of the joint ventures and associates for the year ended 31 December 2017, 2016 and 2015, which are accounted for using the equity method: IN THOUSANDS OF EURO

2017

2016

2015

Share of the associates' balance sheets: Current assets

3,046

3,262

269

Non-current assets

7,207

8,244

3,858

Current liabilities

2,652

2,549

451

10

3,805

2,904

7,591

5,153

772 422

Non-current liabilities Equity Share of the associates' revenue and profit: Sales

13,460

10,207

Gross profit

3,095

1,676

194

EBIT

1,439

394

-873

Profit/(loss) of the year

1,290

263

-1,073

The Group has no contingent liabilities or capital commitments in relation to its associates as at 31 December 2017, 2016 and 2015. For all equity accounted investees, the parent’s or other investor’s consent is required to distribute its profits; which is not foreseen at the reporting date. The equity accounted investees did not recognize items in other comprehensive income.


C/51

Barco annual report 2017

10. Goodwill IN THOUSANDS OF EURO

2017

2016

2015

At cost On 1 January

187,548

188,133

182,581

Acquisitions

-

-584

4,774

Sale

-

-

-

-8,000

-

-

-

-

777

179,548

187,548

188,133

On 1 January

63,292

55,746

38,807

Impairment losses

10,870

7,546

16,940

On 31 December

74,163

63,292

55,746

On 1 January

124,255

132,386

143,774

On 31 December

105,385

124,255

132,386

Transfer to assets held for sale Translation (losses)/gains On 31 December Impairment

Net book value

Barco announced on 4 December 2017 that it has reached an agreement with China Film Group (CFG) to change the ownership structure of BarcoCFG for the Chinese cinema market (we refer to assets held for sale in note 3 and critical accounting judgments estimate on page C/24 for more explanation). The announcement resulted in the presentation of the assets and liabilities associated with BarcoCFG as assets held for sale. BarcoCFG is included in the cash generating unit Entertainment, which has a total allocated goodwill of 43.6 million euro per end of 2017. BarcoCFG has been established in 2011 and contributed to the cash generating unit Entertainment since 1 January 2013, from the date on which Barco obtained control over BarcoCFG. At acquisition date, no goodwill was recognized on BarcoCFG but following the acquisition the entity contributed significantly to the sales and net income of the CGU. At the announcement of the disposal, goodwill is allocated at the level of the Entertainment CGU and

Barco disposes of an operation within this CGU. Therefore, in accordance with IAS36.86, it needs to determine the goodwill associated with that operation in order to include it in the result of the disposal. Barco applied the relative value based on the sales generated by BarcoCFG compared to the sales of the Entertainment CGU because most of the China Entertainment sales are done through BarcoCFG. This has led to an allocation of 8 million euros goodwill to BarcoCFG, presented in assets held for sale at the end of 2017. In 2015 acquisitions relate to the acquisition of Advan for 4.8 million euro. In 2016 a price correction resulting from an adjustment on the opening net working capital of Advan in comparison to the agreed target working capital, of 0.6 million euro, was adjusted to goodwill, as received within the one year window period. Following managementâ&#x20AC;&#x2122;s decision to reorganize the Enterprise CGU by revisiting the future of X2O, Barco considered


Financial statements

IAS 36.12(f) and concluded that based on this decision there are impairment indicators. The goodwill allocated to the cash-generating unit Enterprise has been re-allocated and Barco believes that an arbitrary method as permitted by IAS 36.87 would better reflect the goodwill associated with the re-organized units. In order to support, Barco considered the facts and circumstances relating to the acquisition of X20. The legal entity X2O has been acquired (100% of the shares) on 18 March 2014. The acquisition reflected Barcoâ&#x20AC;&#x2122;s strategy to move beyond display and projection technology and expands Barcoâ&#x20AC;&#x2122;s portfolio with a complete solution to deliver enhanced and cross-divisional content distribution and workflow, based on advanced networking and connectivity capabilities. The goodwill allocated to the cash-generating unit Enterprise has been reallocated as permitted by IAS36.87 based on the allocation to goodwill of the total acquisition price paid. Of the total acquisition price of 13.3 million euro, 3.2 million euros was allocated to intangibles (know-how; 1.5 million euro remaining book value per end of 2017) and 10.9 million euro was allocated to residual goodwill. Barco believes that the method of allocating goodwill after the re-organization of the Enterprise cash-generating unit best reflects the goodwill associated with the remaining Enterprise cash-generating

Barco annual report 2017

C/52

unit, i.e. the previous goodwill of 52.7 million euro less the goodwill associated with the X20 acquisition of 10.9 million euro. Consequently, Barco allocates 10.9 million euro goodwill to the operations of X20 which is immediately impaired together with the remaining book value of the acquired know-how (1.5 million euro) because Barco estimates that the recoverable amount of the X2O operations is insufficient to cover. The impairment tests on goodwill in 2017 did not result in additional impairments for other cash-generating units. In 2016 an impairment loss was recorded for an amount of 7.5 million euro, related to the remaining goodwill on the cash-generating unit Interactive Patient Care, after the decision to stop this business. The impairment tests on goodwill in 2016 did not result in additional impairments for other cash-generating units. In 2015, an impairment charge of 16.9 million euro was booked, related to goodwill on Industrial & Government (9.5 million euro) and Interactive Patient Care (7.5 million euro). There is no remaining goodwill on Industrial & Government and Interactive Patient Care after the impairments were booked. See below for explanations on the impairment testing performed.

Goodwill by cash-generating unit On acquisition, goodwill acquired in a business combination is allocated to the cash-generating units which are expected to benefit from that business combination. These cash-generating units correspond to the division level for Entertainment and Enterprise. For Healthcare, the business unit Interactive Patient Care (IPC) and Healthcare excluding Interactive Patient Care were monitored as separate cash-generating units in the division Healthcare.

As in 2016 the business unit Interactive Patient Care (IPC) was stopped, the cash-generating unit corresponds to the division Healthcare. Therefore, impairment testing is performed at the level of the cash-generating units as indicated below.


C/53

Barco annual report 2017

The carrying amount of goodwill (after impairment) has been allocated to the cash-generating units as follows (in thousands of euro): Cash generating units IN THOUSANDS OF EURO

2017

2016

Entertainment

35,564

43,564

Healthcare

28,036

28,036

Enterprise Total goodwill (net book value)

41,785

52,655

105,385

124,255

The Group performed its annual impairment test in the fourth quarter of 2017 consistently with prior years.

The assumptions of the annual impairment test are consistent with external sources.

The Group looks at the relationship between its market capitalization and its book value, amongst other factors, when reviewing the indicators of impairment. At 31 December 2017, the market capitalization of the group exceeded the equity of the Group with 101%. As such, this general test does not show an indication for impairment.

For none of the cash-generating units management identified an impairment after the impairments' test. In 2016 an impairment was booked on the remaining goodwill of the business unit Interactive Patient Care (IPC) as it was decided to stop this business because business plan targets were not reached. As a result, an impairment loss of 7.5 million euro was recorded.

The annual impairment tests were performed for each cash-generating unit. The recoverable amount for each of the cash-generating units has been determined based on a value-in-use calculation using cash flow projections generated by divisional management covering a five year period. Due to the level of uncertainty of future years, these financial projections have been adjusted to more conservative levels for the purpose of our impairment testing. The pre-tax discount rate applied to projected cash flows is 8.9% (2016: 8.8%, 2015: 9%) and cash flows beyond the five year period are extrapolated using a conservative growth rate of 0% (2016: 0%, 2015: 0%). The amount by which the unitâ&#x20AC;&#x2122;s recoverable amount exceeds its carrying amount is 95 million euro in Entertainment, 158 million euro in Enterprise and 84 million euro in Healthcare. A sensitivity analysis is performed on all cash-generating units with respect to the discount rate (see Sensitivity to changes in assumptions â&#x20AC;&#x201C; Discount rate).

Impairment losses recorded are shown in a separate line â&#x20AC;&#x2DC;Restructuring and impairments on the face of the income statement. We refer to note 6 Impairment and restructuring costs for a detailed break-down of the amounts shown in this line of the income statement.


Financial statements

Barco annual report 2017

C/54

Key assumptions used in value-in-use calculations

average cost of capital, the risks being implicit in the cash flows. It was determined on group level.

The calculation of value-in-use for all cash-generating units is most sensitive to the following assumptions: • Sales growth rate used during the projection period; • EBITDA; • Growth rate used to extrapolate cash flows beyond the budget period; • Discount rates;

Sensitivity to changes in assumptions

The assumptions are shown in below table: ENTERTAINMENT Sales growth rate used during the projection period EBITA as % of sales Growth rate estimates Discount rates

HEALTHCARE

ENTERPRISE

0%

0%

0%

7.3%

10.3%

9.4%

0%

0%

0%

8.9%

8.9%

8.9%

Per 31 December 2017, only the change in EBITDA percentage on sales could result in impairment losses. The implications of the key assumptions for the recoverable amount are discussed below: Sales growth rate used during the projection period – Management has considered the possibility of lower than projected sales growth during the projection period. Changes in sales growth rates do not cause the carrying value of the cash-generating units to materially exceed its recoverable amount. EBITDA percentage on sales – Management has considered the possibility of lower than projected EBITDA percentages on sales.

Sales growth rate used during the projection period – Sales growth rate used over the projection period has been kept conservatively at zero percent for all cash-generating units, since even then there is no risk of impairment.

For Entertainment, Enterprise and Healthcare a reduction of the EBITDA percentage in the last year of the projected period of respectively more than 3%, 7% and 4% would result in an impairment.

EBITDA as percentage of sales – EBITDA as percentage of sales is based on average percentages over the three years preceding the start of the budget period for all divisions except for Entertainment where the 2017 actuals EBITDA percentage was used as this is closer to reality than an average which suffered from non-recurring items in the previous years.

Discount rates – Management has considered the possibility of a significant higher weighted average cost (i.e. 20% instead of 8.9%) to test the sensitivity. For none of the cash-generating units this leads to an impairment.

Growth rate estimates – The long-term rate used to extrapolate the projection has been kept conservatively at zero percent for all cash-generating units. Discount rates – Discount rates reflect the current market assessment of the risks specific to Barco Group. The discount rate was estimated based on a (long-term) pre-tax weighted

Growth rate estimate (beyond the projection period) – For all divisions, no reasonable possible change in the growth rate, used to extrapolate beyond the projection period, would result in an impairment.


C/55

Barco annual report 2017

11. Capitalized development costs

IN THOUSANDS OF EURO

2017

2016

2015

At cost On 1 January

342,375

340,918

-6,027

1,457

5,044

336,347

342,375

340,918

34,274

32,911

28,044

-

1,364

4,866

34,274

34,274

32,911

On 1 January

308,100

285,161

236,479

Amortization

-

21,509

44,575

-6,028

1,430

4,108

302,072

308,100

285,161

On 1 January

-

22.846

71,351

On 31 December

-

-

22,846

Translation (losses)/gains On 31 December

335,874

Impairment On 1 January Expenditure On 31 December Amortization

Translation (losses)/gains On 31 December Net book value

As the criteria of IAS38.57 are no longer fulfilled, Barcoâ&#x20AC;&#x2122;s accounting policy, with respect to research and development costs, no longer allows the capitalization of development expenses since 2015. Capitalized development expenses are amortized over their expected useful lives, which is generally 2 years (see Accounting principles). As of the end of 2016, capitalized development expenses are fully amortized.

Impairment tests on capitalized development costs, resulted in the recognition of impairment costs in 2016, for an amount of 1.4 million euro, on certain specific capitalized development projects, which were predicted to be less successful as originally anticipated and in 2015, for an amount of 4.9 million euro, representing mainly the write-off of all

remaining capitalized development projects in LED and Lighting (in the Entertainment division), in view of the lower results realized. The recognized impairment losses on capitalized development are allocated to the divisions as follows:

IN THOUSANDS OF EURO

2016

2015

Entertainment

679

3,039

Enterprise

402

1,683

Healthcare

283

144

1,364

4,866

Total


Financial statements

Barco annual report 2017

C/56

12. Other intangible assets and tangible fixed assets 12.1 Other intangible assets

IN THOUSANDS OF EURO

2017

2016

2015

SOFTWARE

CUSTOMER RELATIONS

KNOW HOW

OTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS UNDER CONSTRUCTION

On 1 January

48,329

19,000

23,817

37,366

12,151

140,663

101,874

93,640

Expenditure

2,592

-

-

49

3,992

6,634

6,946

5,418

Sales and disposals

-260

-

-186

-16

-

-462

-26

-272

-

3,036

166

-

-

3,202

28,979

2,622

TOTAL

TOTAL

TOTAL

At cost

Acquisition of subsidiaries Disposal of subsidiaries Transfers Translation (losses)/gains On 31 December

-124

-

-

-

-

-124

-

-

10,062

-

26,429

-26,418

-10,073

-

-9

17

-228

-1,017

-2,474

-893

-

-4,612

2,897

448

60,372

21,019

47,752

10,087

6,071

145,300

140,663

101,874

24,326 6,783

14,719 -461

12,808 7,224

13,045 4,012

-

64,898 18,481

49,246 14,329

37,714 11,632

Depreciation and impairment On 1 January Depreciation Impairment Sales and disposals Acquisition of subsidiaries Disposal of subsidiaries Transfers Translation (losses)/gains On 31 December

-

-

1,536

-

-

1,536

-

-

-260

-

-186

-16

-

-462

-24

-245 325

-

-

-

-

-

-

3

-114

-

-

-

-

-114

-

-

-

2,324

4,880

-7,204

-

-

96

-

-181

-807

-1,265

-146

-

-2,400

1,246

-180

30,555

16,697

24,997

9,690

-

81,939

64,898

49,246

Carrying amount On 1 January

24,003

4,281

11,009

24,321

12,151

75,765

52,628

55,926

On 31 December

29,817

4,322

22,755

397

6,071

63,361

75,765

52,628

In 2017, capital expenditures for intangible assets amount to 6.6 million euro (2016: 6.9 million euro; 2015: 5.4 million euro). Expenditures in 2017 include the implementation cost of SAP ERP software for 5.4 million euro. The customer list from the P2M asset deal (3.0 million euro) is included in â&#x20AC;&#x2DC;acquisition of subsidiariesâ&#x20AC;&#x2122;. In 2016, total intangible assets include the investment in in-process development

acquired through the MTT and Medialon acquisitions (29.0 million euro) which are amortized between four and six years over their useful life and the SAP ERP system (4.6 million euro). In 2015, acquisition of subsidiaries related for the major part to the customer list acquired through the acquisition of Advan. The SAP capital expenditures are depreciated as roll out is performed successfully pro rata the amount of licenses used.


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Barco annual report 2017

For the total scope of the OnePlatform SAP project Barco foresees 2,600 licenses. Per successful roll-out (India, Belgium, Germany, US) a part of the licenses are activated and used. These SAP capital expenditures are depreciated over 7 years conform the valuation rules for intangible fixed assets. This was done as of April 2014 in India, July 2015 in Belgium, July 2016 in Germany and July 2017 in the US. The impairment of 1.5 million euro relates to the acquired know-how on the X2O acquisition, which resulted from

Barco’s decision to revisit the future of X2O. We refer to note 6 restructuring and impairments. We refer to Note 1.3 on “Acquisitions and divestments” and Note 26 on “Cash flow statement: effect of acquisitions and disposals” for more details on these transactions. Barco does not hold intangible assets with indefinite lifetime.

12.2. Tangible fixed assets

IN THOUSANDS OF EURO

2017

LAND AND BUILDINGS

PLANT, MACHINERY AND EQUIPMENT

FURNITURE, OFFICE EQUIPMENT AND VEHICLES

OTHER PROPERTY, PLANT AND EQUIPMENT

2016

2015

ASSETS UNDER CONSTRUCTION

TOTAL OTHER TANGIBLE ASSETS

TOTAL

TOTAL

TOTAL

187,889

At cost 77,260

90,800

39,755

26,456

4,688

161,699

238,959

225,828

Expenditure

263

4,807

3,345

719

11,177

20,048

20,311

26,406

37,563

Sales and disposals

-322

-7,137

-4,334

-1,530

-

-13,002

-13,324

-15,320

-4,058

Acquisition of subsidiaries

836

-

-

-

-

-

836

120

1,333

-3

-2,003

-646

-389

-

-3,038

-3,042

-

-

Transfers

13,515

3,930

776

-9,512

-8,708

-13,514

-

9

-17

Translation (losses)/gains

-2,036

-1,753

-1,314

-931

-38

-4,035

-6,071

1,915

3,118

On 31 December

89,511

88,643

37,581

14,813

7,119

148,156

237,668

238,959

225,828

On 1 January

24,241

67,029

30,082

13,673

-

110,783

135,024

133,262

121,977

Depreciation

3,352

5,091

4,158

2,795

-

12,045

15,397

14,243

11,274

Impairment

1,324

-

-

-

-

-

1,324

-

-

-159

-6,876

-4,234

-1,526

-

-12,635

-12,794

-13,518

-3,490

On 1 January

Disposal of subsidiaries

Depreciation and impairment

Sales and disposals

-

-

-

-

-

-

-

82

919

-2

-1,847

-562

-254

-

-2,662

-2,664

-

-

Transfers

3,947

-18

49

-3,978

-

-3,947

-

-97

-

Translation (losses)/gains

-1,156

-1,305

-997

-492

-

-2,794

-3,950

1,052

2,582

On 31 December

31,547

62,074

28,496

10,219

-

100,790

132,337

135,024

133,262

Acquisition of subsidiaries Disposal of subsidiaries

Carrying amount On 1 January

53,019

23,772

9,673

12,783

4,688

50,916

103,935

92,566

65,912

On 31 December

57,964

26,569

9,085

4,594

7,119

47,366

105,330

103,935

92,566


Financial statements

In 2017, capital expenditures amount to 20.3 million euro (26.4 million euro in 2016; 37.6 million euro in 2015) and relate mainly to an extended operations facility at the new headquarters of Barco (12.2 million euro) which started in 2016. Per end of 2017, 6.9 million euro is included in assets under construction for this extended operations. Capital expenditure in 2016 (26.4 million euro) mainly relates to plant, machinery, equipment, furniture and hardware at the new headquarters of Barco (14.2 million euro). Abroad, 1.6 million euro in new machinery and R&D equipment was deployed in Barco Taiwan Technology Ltd. in 2017 (2.1 million euro in 2016). Per end of 2015, the new headquarter building was included in the assets under construction for a total amount of 44.2 million euro. This was reclassified to mainly land and buildings and to plant, machinery and equipment in 2016. The depreciations started as of 1 February, 2016, as the building was finished and people moved into the new building. In 2017, following the acquisition of the additional 51% share in Habornveien 53 AS, Barco transferred the building (Barco Frederikstad AS) from assets under finance lease to building of net 5.6 million euro. An impairment of 1.3 million euro related to this building in Barco Frederikstad AS was recorded in 2017 (see note 6). In 2017, disposal of subsidiaries relates to the sale of Barco Lighting Systems and Barco Silex SA. More information can be found in note 1.3 and 26. In 2017 also, large disposals were booked on the move from the old production building to the new headquarters building. In 2016, sales and disposals contains the sale of the former headquarters building on which a gain of 6.9 million euro was realized.

Barco annual report 2017

C/58

The main capex realized in the period 2015 â&#x20AC;&#x201C; 2017 relate to the new headquarters of Barco 70.6 million euro (spread over 2017: 12.2 million euro; 2016: 14.2 million euro; 2015: 44.2 million euro) and to the new factory in Taiwan 3.7 million euro (spread over 2017: 1.6 million euro; 2016: 2.1 million euro).


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Barco annual report 2017

13. Deferred tax assets â&#x20AC;&#x201C; deferred tax liabilities Deferred tax assets and liabilities are attributable to the following items:

IN THOUSANDS OF EURO

ASSETS 2017

LIABILITIES

2016

2015

2017

2016

NET ASSET/(LIABILITY) 2015

2017

2016

2015

Capitalized development cost

-

2,690

3,244

-

-

-2,028

-

2,690

1,216

Patents, licenses, ...

1

-

60

-8,841

-13,107

-6,298

-8,840

-13,107

-6,238

1,891

1,579

1,889

-519

-1,044

-988

1,372

535

901

416

-

-

-

-

-1,148

416

-

-1,148

15,089

20,538

21,718

-148

-

-406

14,941

20,538

21,312

601

815

1,736

3

-

-3,810

604

815

-2,074

17,055

20,428

14,967

-345

-986

-859

16,710

19,442

14,108

670

2,787

2,346

22

-782

-510

692

2,005

1,836

3,550

5,040

4,838

12

-44

-216

3,562

4,996

4,622

Tangible fixed assets and software Other investments Inventory Trade debtors Provisions Employee benefits Deferred revenue Other items Tax value of loss carry forward

972

799

1,617

-131

-1,035

-1,126

841

-236

491

23,531

15,524

15,676

-

-

-

23,531

15,524

15,676

Tax value of tax credits

21,558

27,084

22,866

-

-

-

21,558

27,084

22,866

Gross tax assets/(liabilities)

85,334

97,284

90,957

-9,947

-16,998

-17,389

75,387

80,286

73,568

Offset of tax

-5,300

-8,184

-12,926

5,300

8,184

12,926

-

-

-

Net tax assets/(liabilities)

80,034

89,100

78,031

-4,647

-8,814

-4,463

75,387

80,286

73,568

Transfer to assets held for sale

-10,174

-

-

-

-

-

-10,174

-

-

Net tax assets/(liabilities)

69,860

89,100

78,031

-4,647

-8,814

-4,463

65,213

80,286

73,568


Financial statements

Barco annual report 2017

C/60

Movements in the deferred tax assets/(liabilities) arise from the following:

IN THOUSANDS OF EURO Capitalized development cost Patents, licenses, ... Tangible fixed assets and software Other investments Inventory Trade debtors

AS AT 1 JANUARY

RECOGNIZED THROUGH INCOME STATEMENT

RECOGNIZED THROUGH OCI

ACQUISITIONS AND DISPOSALS

EXCHANGE GAINS AND LOSSES

TRANSFER TO ASSETS HELD FOR SALE

AS AT 31 DECEMBER

2,690

-2,690

-

-

-

-

-

-13,107

3,623

-

-41

686

-

-8,840

535

1,090

-

-156

-97

-

1,372

-

442

-

-

-26

-

416

20,538

-4,278

-

-93

-1,226

-1,592

13,349

815

-151

-

-

-60

-255

349

19,442

575

-2,336

-

-971

-8,327

8,383

Employee benefits

2,005

-1,169

-

-

-144

-

692

Deferred revenue

4,996

-889

-

-

-545

-

3,562

Provisions

Other items

-236

1,122

-

-

-46

-

840

15,524

8,271

-

-

-264

-

23,531

Tax value of tax credits

27,084

-5,522

-

-

-4

-

21,558

Total

80,286

425

-2,336

-290

-2,697

-10,174

65,213

Tax value of loss carry forward

On top of the tax losses and tax credits for which a net deferred tax is recognized (net deferred tax asset of respectively 23.5 million euro and 21.6 million euro), the Group owns tax losses carried forward and other temporary differences on which no deferred tax asset is recognized amounting to 70.2 million euro as of 31 December 2017 (resulting in a non-recognized deferred tax asset of rounded 18.8 million euro) and unutilized capital losses carried forward on which no deferred tax asset is recognized amounting to 31.4 million euro (resulting in a non-recognized deferred tax asset of rounded 8.0 million euro). Deferred tax assets have not been recognized on these items because it is not probable that taxable profit will be available in the near future against which the benefits can be utilized. The tax losses carried forward and other temporary differences on which no deferred tax asset is recognized have no expiration date.

Deferred tax assets relate for the major part to the tax value of loss carry forwards and tax credits and almost fully relate to Belgium. We refer to note 7 for impact of changes in tax regulations in Belgium and US. In assessing the realization of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will be realized within the foreseeable future. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profit during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable profit and tax planning strategies in making this assessment. A time period of 5 years is considered. In order to fully realize the deferred tax asset, the group will need to generate future taxable profit in the countries where the net operating losses were incurred. Based upon the level of historical taxable income and projections for future taxable profit over the periods in which the deferred tax assets are deductible, management believes as at 31 December 2017, it is probable that the group will be able to recover these deductible temporary differences.


C/61

Barco annual report 2017

Barco has not recognized income taxes on undistributed earnings of its subsidiaries, joint ventures and associates, as the undistributed earnings will not be distributed in the foreseeable future. The cumulative amount of undistributed earnings on which the Group has not recognized income taxes was approximately 457 million euro at 31 December 2017; 529 million euro at 31 December 2016 and 747 million euro at 31 December 2015.

14. Inventory

IN THOUSANDS OF EURO

2017

2016

2015

Raw materials and consumables

73,456

80,922

77,092

Work in progress

50,133

65,288

61,390

Finished goods

100,951

128,835

129,620

Write-off on inventories

-91,786

-108,843

-102,142

Inventory

132,754

166,202

165,960

3.6

3.6

3.6

Inventory turns

The amount of write-offs recognized as expense in 2017 amounts to 8.4 million euro or 0.8% of sales (2016: 10.8 million euro; 1% of sales, 2015: 14.2 million euro; 1.4% of sales). In 2017 4.4 million euro write-offs resulting from the decision to phase out certain businesses are included in restructuring and impairment costs (in 2016 3.5 million euro). See note 6. The inventory turns, including BarcoCFG, remained stable at 3.6.


Financial statements

Barco annual report 2017

C/62

15. Amounts receivable and other non-current assets IN THOUSANDS OF EURO

2017

Trade debtors - gross

2016

2015

153,920

194,119

196,262

Trade debtors - bad debt reserve

(a)

-4,481

-5,558

-9,351

Trade debtors - net

(b)

149,439

188,561

186,910

V.A.T. receivable

7,461

7,461

6,376

Taxes receivable

4,787

3,074

10,881

Interest receivable

777

1

2,800

Currency rate swap (note 21)

677

858

1,750

74

60

51

5,592

4,130

4,299

19,368

15,584

26,157

12,887

19,112

23,226

55

55

58

Guarantees paid Other Other amounts receivable Other non-current assets

(c)

Number of days sales outstanding (DSO) incl CFG

Per 31 December 2017, the number of days sales outstanding (including trade debtors of BarcoCFG, presented in assets held for sale) are 55 days or equal to 2016 (58 days at the end of 2015). Decrease in trade debtors, is mainly the result of the presentation of the trade debtors in BarcoCFG as assets held for sale. Excluding this impact, trade debtors are 3%

lower than last year. At constant currencies, trade debtors have increased (see Free CashFlow on C/100). The bad debt reserve in proportion to the gross amount of trade debtors has remained stable at 2.9% (2016: 2.9%, 2015: 4.8%).

(a) Movement in bad debt reserve: IN THOUSANDS OF EURO On 1 January Acquisition of subsidiaries Sale of subsidiary Additional provisions Amounts used

2017

2016

2015

-5,558

-9,351

-8,711

-

-

-121

43

-

-

-3,913

-1,329

-2,850

199

928

1,350

Amounts unused

3,472

4,117

1,488

Transfer to assets held for sale

1,021

-

-

256

78

-507

-4,481

-5,558

-9,351

Translation (losses) / gains On 31 December


C/63

Barco annual report 2017

(b) At 31 December 2017, the aging analysis of trade receivables is as follows: IN THOUSANDS OF EURO Not due

2017

2016

2015

120,603

152,402

19,426

18,121

23,177

8,184

13,358

16,375

Overdue between 90 days and 180 days

2,331

5,308

4,816

Overdue more than 180 days

3,376

4,930

7,482

153,920

194,119

196,262

Overdue less than 30 days Overdue between 30 and 90 days

Total gross Bad debt reserve Total

In 2017, total overdue amounts decreased to a total amount of 33.3 million euro compared to 41.7 million euro in 2016 (2015: 51.9 million euro). The bad debt reserve in 2017 amounts to 133% of the trade receivables overdue more than 180 days (2016: 113%, 2015: 125%).

144,412

-4,481

-5,558

-9,351

149,439

188,561

186,910

(c) Other non-current assets The non-current assets include long-term receivables in the frame of vendor financing programs, amounting to 8.3 million euro per 31 December 2017, of which 8.3 million euro (see note 16) offset by long term debt of the same amount (2016: 13.5 million euro, of which 13.5 million euro offset by a long-term debt; 2015: 15.4 million euro, of which 15.4 million euro offset by a long-term debt) and cash guarantees for an amount of 3.6 million euro (2016: 3.7 million euro, 2015: 5.1 million euro)).


Financial statements

Barco annual report 2017

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16. Net financial cash/debt IN THOUSANDS OF EURO

2017

2016

2015

Deposits

(a)

88,043

108,349

123,814

Cash at bank

(b)

166,016

245,177

217,374

71

22

90

254,130

353,549

341,277

Cash in hand Cash and cash equivalents Long-term financial receivables

(c)

8,267

13,485

15,430

(c) (d)

-41,036

-66,811

-79,527

Current portion of long-term debts

(d)

-10,000

-11,500

-10,000

Short-term debts

(e)

-686

-2,085

-2,124

210,676

286,638

265,056

Long-term debts

Net financial cash/(debt) Cash held for sale

67,385

Total net financial cash / (debt)

The net financial cash position decreased with 76.0 million euro in 2017, mainly explained by the exclusion of the cash of BarcoCFG of 67.4 million euro (see note 3: assets held for sale). We refer to the cash flow note for explanation on the cash movements. The net financial cash in BarcoCFG amounted to 100 million euro in 2016 and 77 million euro in 2015. The decrease in 2017 versus 2016 mainly relates to dividend payments and currency translation impact.

IN THOUSANDS OF EURO

278,061

(a) Deposits Deposits are short-term, highly liquid investments, which are readily convertible to known amounts of cash. The short-term deposits do not carry a material risk of change in valuation.

2017

2016

2015

- deposits in INR, with an average interest rate of 6.98%

15,950

11,060

5,202

- deposits in USD, with an average interest rate of 1.37%

5,469

14,475

23,560

- deposits in CNY, with an average interest rate of 4.03%

64,728

75,978

81,144

1,895

6,837

13,907

88,043

108,349

123,814

- deposits in other currencies Total deposits


C/65

Barco annual report 2017

(b) Cash at bank Cash at bank is immediately available, except for the cash held in BarcoCFG (in CNY) (taken Barco only holds an ownership of 58% in this entity). In 2017 the cash at bank in BarcoCFG is included in the assets held for sale (see note 3).

Most of the cash is held on accounts with higher interest-yield compared to classical cash accounts. It is denominated in the following currencies:

2017

2016

2015

- EUR

47.7%

43.3%

- USD

25.8%

14.3%

7.9%

- CNY

12.8%

34.8%

18.6%

- INR - Others

59.7%

0.4%

1.3%

2.7%

13.4%

6.3%

11.1%

(c) Long-term financial receivables Barco entered into a number of vendor financing programs granted to a selective number of international customers. The purpose of vendor financing is to grant extended payment terms to such customers, while Barco continues to benefit from prompt payment of the open accounts receivable position, e.g. by having a financial institution or other thirdparty in the middle. The third-party will directly or following a receivable sale by Barco open a credit in favor of the customer, thereby assuming the risk of non-payment on the spread payment plan in all material respect.

When the vendor financing takes the form of a buyer credit (direct financial contract between customer and financial institution, and no role for Barco as collection agent), no positions are being reflected in the balance sheet.

In the case of a supplier credit, Barco continues to serve as collection agent after the sale of the accounts receivable on a non-recourse basis, which leads to a long-term financial receivable from the customer (in line “Other non-current assets”) this being offset by a long-term financial debt position towards the third-party for the same amount (in line “Long-term debts”). Due to its non-recourse character, both positions are being eliminated in the net financial cash/(debt). Per end of 2017, the outstanding long-term financial receivables have decreased to 8.3 million euro compared to 13.5 million euro in 2016.

(d) Long-term financial debts

Where Barco assumes a small residual risk on the customer’s payment behavior with recourse character (either in the form of supplier credit or buyer credit), provisions are being account for.

Besides a specific real estate credit facility in the US, the Barco Group has a total of 116.0 million euro committed credit facilities available. The portfolio consists of 3 major tranches: - Barco NV received a research, development and innovation (RDI) credit facility from the European Investment Bank. The aim of the facility is to finance RDI activities for networked visualization connectivity and software. Drawings under the facility have a long-term tenor of minimum 4 years.


Financial statements

Barco annual report 2017

An amount of 15.0 million euro is available and drawn under the RDI credit facility, noting that the credit line is closed going forward for new drawings. - Barco NV and Barco Coordination Center NV (as co obligors) signed a number of bilateral committed credit facilities with a selected group of commercial banks for a total amount of 75 million euro. The credit facilities have an availability period till December 2020. Drawings under the facilities have a short-term tenor. - Barco NV signed a number of bilateral committed credit facilities aiming at financing Barcoâ&#x20AC;&#x2122;s headquarter campus.

C/66

Drawings have a long-term tenor of 15 years following the end of the availability period (as of the end of 2015). An amount of 26 million euro is available and drawn under this long-term real estate financing. These commitments carry either a variable interest rate, or have been swapped via derivatives into fixed rate character. Barco is meeting all requirements of the loan covenants on its available credit facilities.

The below table summarizes the long-term financial debts, including the current portion of long-term financial debts, per currency:

IN THOUSANDS OF EURO

2017

2016

2015

- EUR

41,000

52,500

- USD

2,745

4,961

5,893

- NOK

-

9,365

8,999

7,291

11,486

13,634

51,036

78,311

89,527

- Other Total

61,000

The below table gives an overview of the long-term financial debts including the current portion of long-term financial debts, per type of interest rate:

TYPE OF INTEREST RATE

MATURITY

31 DEC 2017

31 DEC 2016

31 DEC 2015

Real estate financing: - variable, swapped into fixed (EU)

Later than 2022

14,663

15,938

17,213

- variable (EU)

Later than 2022

11,338

12,063

12,788

Later than 2022

1,666

2,844

3,672

Later than 2022

-

9,365

8,999

2020

15,000

24,500

31,000

8,268

13,485

15,430

103

118

425

51,036

78,311

89,527

- variable, swapped into fixed (US) - fixed, financial leasing (Norway)

(1)

RDI financing: - fixed, European Investment Bank Vendor financing (offset by long-term receivable) Other Total long-term financial debts

The financial leasing in Norway becomes zero due to the purchase of the shares of Habornveien 53, the entity owning the building leased by Barco Frederikstad AS (see note 9. Investments). This results in a transfer of fixed assets held under leasing to buildings (see note 12b. Tangible fixed assets). (1)


C/67

Barco annual report 2017

The long-term debts (including interests due), excluding the current portion of the long-term debts, are payable as follows:

PER 31 DECEMBER 2017

PER 31 DECEMBER 2016

PER 31 DECEMBER 2015

Payable in 2019

16,592

Payable in 2018

14,101

Payable in 2017

Payable in 2020

4,129

Payable in 2019

20,638

Payable in 2018

11,923

Payable in 2021

2,561

Payable in 2020

5,115

Payable in 2019

22,422

4,184

Payable in 2021

3,585

Payable in 2020

Payable in 2022

15,558

5,119

Later

17,802

Later

35,156

Later

39,072

Total long-term debts

45,267

Total long-term debts

78,596

Total long-term debts

94,095

(e) Short-term financial debts The below table gives an overview of the short-term financial debts on 31 December 2017:

IN THOUSANDS OF EURO

2017 EFFECTIVE INTEREST RATE

- Other

0.0%

Total

The available 75 million euro bilateral credit facilities are undrawn per end of December 2017.

2016 BALANCE

686 686

EFFECTIVE INTEREST RATE

2.4%

2015 BALANCE

2,085 2,085

EFFECTIVE INTEREST RATE

2.3%

BALANCE

2,124 2,124


Financial statements

Barco annual report 2017

C/68

17. Other long-term liabilities

IN THOUSANDS OF EURO

2017

2016

Loan former DAT business

(a)

310

2,666

MTT long-term liability

(b)

3,745

8.533

Contingent consideration

(c)

2,839

500

Other long-term liabilities

4,555

(a) Following the divestment of the Defense & Aerospace division, a governmental loan in the amount of 2.8 million euro was formally transferred to Esterline BVBA, whilst the payment obligation though (based on the sales agreement) remains with Barco in a back-to-back structure. In 2017 Barco refunded 0.1 million euro on this loan (2016: 0.2 million euro). The remaining pay-outs for 2018 and 2019 are expected to amount to 0.3 million euro. The resulting revenue amounting to 2.2 million euro was booked in other operating income (see note 4d). The amount is repayable in 2019 as shown in the below table. (b) The MTT long-term liability consists of a deferred payment (1.7 million euro) and an earn-out subject to filing of patents on the in-process technology of 2.1 million euro (capped at 5 million dollar (4.7 million euro)), linked to the MTT acquisition. The deferred payment originally amounted to 6 million dollar (5.7 million euro), of which 2 million dollar (1.8 million euro) was paid in 2017. 2 million dollar (1.8 million euro) becomes payable in 2018 and

2015

11.198

2,839

is included in other current liabilities. The remaining 2 million dollar (1.8 million euro) shown in other long-term liabilities is payable in 2019. The remaining decrease in the MTT long-term liability is linked to the earn-out payable: one patent got filed in 2017, another two are expected to be filed in 2018 (total amount of 2.5 million dollar or 2.1 million euro for the three patents), all included in other current liabilities. The timing of the remaining patent filings is difficult to predict and are therefore shown as payable in 2019 in the below table. (c) The contingent consideration of 0.5 million euro is linked to the P2M acquisition and based on a revenue target, payable in 2019.

The other long-term liabilities, excluding the current portion of the long-term liabilities, are repayable as follows:

PER 31 DECEMBER 2017

PER 31 DECEMBER 2016

PER 31 DECEMBER 2015

Payable in 2019

4,555

Payable in 2018

5,599

Payable in 2017

Payable in 2020

-

Payable in 2019

5,599

Payable in 2018

946

Payable in 2021

-

Payable in 2020

-

Payable in 2019

946 -

Payable in 2022

-

Payable in 2021

-

Payable in 2020

Later

-

Later

-

Later

Other long-term liabilities

4,555

Other long-term liabilities

11,198

Other long-term liabilities

946

2,839


C/69

Barco annual report 2017

18. Equity attributable to equity holders of the parent IN THOUSANDS OF EURO Share capital Share premium Share-based payments

2017

2016

2015

55,857

55,823

55,648

146,051

145,653

143,330

7,511

6,230

5,968

Acquired own shares

-42,205

-47,787

-54,443

Retained earnings

457,053

452,629

470,926

Cumulative translation adjustment

-43,717

-20,811

-22,421

-1,100

-1,493

-1,269

579,449

590,243

597,739

Derivatives Equity attributable to equity holders of the parent

1. Share capital, share premium and own shares The following capital increases took place in 2017: - Through the exercise of 6,027 warrants into the same number of new shares on 26 June 2017 with a resulting increase of the statutory capital of 26 (‘000) euro and an increase of the share premium account of 308 (‘000) euro. - Through the exercise of 1,070 warrants into the same number of new shares on 25 September 2017 with a resulting increase of the statutory capital of 5 (‘000) euro and an increase of the share premium account of 47 (‘000) euro. - Through the exercise of 760 warrants into the same number of new shares on 22 December 2017 with a resulting increase of the statutory capital of 3 (‘000) euro and an increase of the share premium account of 43 (‘000) euro. As a result thereof the company’s share capital amounts to 55.9 million euro on 31 December 2017, consisting of 13,064,464 fully paid shares. Barco acquired own shares in 2015, based on the shareholder authorization granted by the Extraordinary General Meeting of 24 April 2014 and the announcement on May 7th, 2014 that the company would launch a first share buy-back

program, for a period of 6 months, starting on 8 May, 2014 and a second announcement on 7 November, 2014 to extend the share buy-back period with another 6 months, starting 10 November. Barco acquired 89,410 own shares for a total amount of 5,046 (000) Euro in 2015. In 2016 and 2017, Barco did not acquire own shares. In total, Barco now owns 704,949 own shares. Barco sold 77,843 own shares upon the exercise of 77,843 stock options per 21 June 2017 with a resulting decrease of the own shares of 4,680 (000) euro and a decrease of the share based payment account of 216 (000) euro, 9,872 own shares through the exercise of 9,872 stock options per 20 September 2017 with a resulting decrease of the own shares of 594 (‘000) euro and a decrease of the share based payment account of 31 (000) and 5,125 own shares through the exercise of 5,125 stock options per 21 December 2017 with a resulting decrease of the own shares of 308 (‘000) euro and a decrease of the share based payment account of 22 (‘000) euro.


Financial statements

Barco annual report 2017

As a result thereof the companyâ&#x20AC;&#x2122;s share premium account amounts to 146 million euro, the share-based payments amount to 7.5 million euro and the number of own shares acquired by Barco NV up to 31 December 2017 therefore decreased to 704,949 own shares (2016: 797,789; 2015: 908,484 own shares).

2. Share-based payments On 20 October 2017, 3 new option plans have been approved by the Board of Directors. These 3 option plans entitled the Board of Directors to grant maximum 156,000 stock options before 31 December 2017. Each stock option gives right to the acquisition of one (1) share. In 2017, 130,925 stock options have been granted to employees and management of the group based upon these option plans. On 31 December 2017, no options remained available for distribution under the 2017 stock option schemes given the expiry dates of the plans per 31 December 2017.

C/70

Warrants exercisable under the warrant and stock option plans The total number of outstanding warrants on 31 December 2017 amounted to 10,956 which can lead to the creation of 10,956 new shares. Since 2010, stock options have been granted. The total number of outstanding stock options on 31 December 2017 amounted to 488,600. The companyâ&#x20AC;&#x2122;s own shares will be used under the outstanding stock option plan to fulfill the commitment. There were 10,956 warrants and 74,295 stock options exercisable at year-end. During 2017, 7,857 warrants and 92,840 stock options have been exercised (in 2016, 40,875 warrants and 110,695 stock options). These warrants and stock options may be exercised the earliest 3 years after the allocation date (i.e. the vesting period) over a period of maximum 10 years and during a couple of fixed periods over the year. The cost of the awards are recognized over the vesting period on a straight-line basis. Below is an overview given of the outstanding warrant and stock option plans:

Table on warrants END TERM ALLOCATION DATE

EXERCISE PRICE (IN EURO)

BALANCE ON 31 DEC 2016

GRANTED IN 2017

EXERCISED IN 2017

CANCELLED IN 2017

EXPIRED IN 2017

BALANCE ON 31 DEC 2017

Warrants 11/09/061

11/08/16

65.05

9,395

-

-4,209

-

-750

4,436

11/12/071

11/11/17

50.68

8,245

-

-2,649

-

-4,246

1,350

11/12/072

11/11/17

51.53

1,687

-

-99

-

-1,588

-

05/28/09

05/27/19

19.62

4,650

-

-450

-

-

4,200

05/28/09

05/27/19

24.00

1,420

-

-450

-

-

970

25,397

-

-7,857

-

-6,584

10,956

Total number of warrants


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Barco annual report 2017

Table on warrants END TERM ALLOCATION DATE

EXERCISE PRICE (IN EURO)

BALANCE ON 31 DEC 2016

GRANTED IN 2017

EXERCISED IN 2017

CANCELLED IN 2017

EXPIRED IN 2017

BALANCE ON 31 DEC 2017

Stock options 10/28/10

10/27/20

35.85

1,400

-

-

-

-

1,400

10/28/11

10/27/21

36.65

5,150

-

-750

-

-

4,400

10/31/12

10/30/22

52.37

8,100

-

-2,325

-

-800

4,975

10/31/12

10/30/20

52.37

6,100

-

-1,750

-150

-

4,200

10/31/123

10/30/20

53.00

12,735

-

-4,050

-

-

8,685

10/21/13

10/20/23

59.03

56,650

-

-48,400

-250

-1,000

7,000

10/21/13

10/20/21

59.03

11,200

-

-3,625

-150

-250

7,175

10/21/133

10/20/21

60.94

17,200

-

-4,350

-

-200

12,650

10/23/14

10/22/24

55.00

53,040

-

-

-950

-

52,090

10/23/14

10/22/22

55.00

30,650

-

-16,490

-1,150

-250

12,760

10/23/14

10/22/22

55.40

22,500

-

-11,100

-150

-200

11,050

10/22/15

10/21/25

57.10

54,825

-

-

-2,450

-

52,375

10/22/15

10/21/23

57.10

31,550

-

-

-3,500

-

28,050

10/22/153

10/21/23

57.85

24,550

-

-

-1,850

-

22,700

10/24/16

10/23/26

72.80

74,205

-

-

-

-

74,205

10/24/16

10/23/24

72.80

20,110

-

-

-1,000

-

19,110

10/24/163

10/23/24

74.24

35,750

-

-

-900

-

34,850

10/20/17

10/19/27

87.75

-

87,625

-

-

-

87,625

10/20/17

10/19/25

87.75

-

12,600

-

-

-

12,600

10/20/173

10/19/25

88.70

-

30,700

-

-

-

30,700

465,715

130,925

-92,840

-12,500

-2,700

488,600

3

Total number of stockoptions

(1) For a number of warrants this last exercise date was extended with three (3) years according to article 407 of the law of 24 December 2002 (2) Deviation of exercise price as a result of the implementation of the UK sub plan (3) Deviation of exercise price as a result of the implementation of the US sub plan

The cost of these warrant/stock option plans is included in the income statement in other operating expense. The warrants/stock options are measured at grant date, based on the share price at grant date, exercise price, expected volatility, dividend estimates and interest rates. The warrant/

stock option cost is taken into result on a straight-line basis from the grant date until the first exercise date. The sharebased payment expenses amounted to 1.5 million euro in 2017 (2016: 1.2 million euro; 2015: 1.3 million euro).


Financial statements

Barco annual report 2017

C/72

3. Retained earnings The change in retained earnings includes the net income of 2017, 2.9 million euro of actuarial gains and losses and the distribution of 23.3 million euro dividend, as approved by the general shareholders meeting of 27 April 2017. The board of directors of Barco NV proposed a gross dividend of 2.1 euro per share relating to the result as of 31 December 2017. In 2017 a gross dividend of 1.9 euro per share was paid out on the results of 2016; in 2016 1.75 euro was paid out.

mainly relating to foreign operations held in US Dollar (-9.5 million euro), Chinese Yuan (-8.6 million euro), Indian Rupee (-2.8 million euro), Hong Kong Dollar (-1 million euro) and Norway Krone (-1 million euro). On the divestment of Barco Lighting Systems, -2.0 million euro is recycled through profit and loss.

5. Derivatives 4. Cumulative translation adjustment

Derivative financial instruments are disclosed in note 22.

In 2017, the exchange differences on translation of foreign operations have a negative impact of 22.9 million euro,

19. Non-controlling interest The below table represents the proportion of equity interest held by non-controlling interests:

NAME

COUNTRY OF INCORPORATION AND OPERATION

2017

2016

2015

CFG Barco (Beijing) Electronics Co., Ltd

China

42%

42%

42%

Barco Taiwan Technology Ltd.

Taiwan

10%

10%

10%

Barco China Electronic Visualization Technology

China

35%

35%

0%

Overview of the equity attributable to non-controlling interest:

IN THOUSANDS OF EURO CFG Barco (Beijing) Electronics Co., Ltd Barco Taiwan Technology Ltd. Barco China Electronic Visualization Technology Total equity attributable to non-controlling interest

2017

2016

2015

11,793

22,415

13,614

-374

78

310

2,646

2,751

-

14,065

25,244

13,925


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Barco annual report 2017

The main contributor to the non-controlling interest is CFG Barco (Beijing) Electronics Co., Ltd. Below is its balance sheet as at 31 December 2017, 2016 and 2015. This information is based on amounts before intercompany eliminations. In 2017 assets and liabilities of BarcoCFG are included in assets held for sale (note 3).

IN THOUSANDS OF EURO

2017

Total non-current assets

2016

2015

10,827

7,881

5,883

Total current assets

129,047

164,987

123,088

Total assets

139,874

172,868

128,971

Equity attributable to equityholders of the parent

16,326

31,031

18,848

Equity attributable to non-controlling interest

11,793

22,415

13,614

Total equity

28,118

53,447

32,462

Total current liabilities

111,755

119,422

96,509

Total liabilities

139,874

172,868

128,971

Overview of the net income attributable to non-controlling interest:

IN THOUSANDS OF EURO

% noncontrolling

2017

2016

2015

CFG Barco (Beijing) Electronics Co., Ltd

20,025

35,628

21,666

Barco Taiwan Technology Ltd.

-4,650

-2,369

-903

178

-215

0

15,553

33,044

20,762

Barco China Electronic Visualization Technology Net income CFG Barco (Beijing) Electronics Co., Ltd

42%

8,411

14,964

9,100

Barco Taiwan Technology Ltd.

10%

-465

-237

-90

Barco China Electronic Visualization Technology

35%

62

-75

0

8,008

14,652

9,009

Net income attributable to non-controlling interest

Other comprehensive income / (loss) for the period, net of tax effect, part attributable to non-controlling interest amounts to -1.3 million euro in 2017, -0.4 million euro in 2016 and 0.4 million euro in 2015. Total comprehensive income for the year, net of tax, part attributable to non-controlling interest amounts to 6.7 million euro in 2017, 14.2 million euro in 2016 and 9.4 million euro in 2015.


Financial statements

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20. Trade payables and advances received from customers IN THOUSANDS OF EURO

2017

Trade payables

2016 135,127

139,504

58

63

69

67,040

109,064

113,874

Days payable outstanding (DPO) Advances received from customers

(a)

2015

102,943

(a) Most payment terms of customers define that 30% of the total invoice needs to be prepaid before delivery of the goods. The decrease in advances received in 2017 compared to 2016 is partly caused by the advances received in BarcoCFG (21.8 million euro), which are in 2017 shown as part of the assets held for sale (see note 3) and partly by lower advances received in Entertainment, mainly linked to lower cinema sales. The decrease in advances in 2016 compared to 2015 is mainly caused by lower advances received in in BarcoCFG.

21. Provisions BALANCE SHEET 2017

SALE OF SUBSIDIARY (-)

Total long-term provision

24,607

-100

3,135

-974

-2,349

-5,224

Defined benefit obligations (b)

12,596

-100

1,034

-974

-102

-5,224

Technical warranty

12,011

-

2,101

-

-2,247

IN THOUSANDS OF EURO

(a)

Total short-term provision

ADDITIONAL AMOUNTS UNUSED REMEASURE- TRANSFER PROVISIONS USED AMOUNTS MENT GAINS / TO ASSETS MADE REVERSED (LOSSES) HELD FOR ON DBO SALE

TRANSLATION (LOSSES) / GAINS

BALANCE SHEET 2016

BALANCE SHEET 2015

-

-704

30,824

17,992

-

27

17,936

5,811

-

-

-731

12,888

12,181

26,904

-231

11,087

-6,370

-2,579

-

-3,608

-1,052

29,657

28,910

Technical warranty

(a)

12,011

-231

2,101

-1,739

-

-

-3,608

-731

16,219

12,181

Restructuring provision

(c)

6,596

-

5,200

-4,244

-

-

-

-

5,640

8,260

Other claims and risks

(d)

8,297

-

3,785

-386

-2,579

-

-

-321

7,798

8,469

51,512

-331

14,221

-7,345

-4,928

-5,224

-3,608

-1,755

60,481

46,903

Provisions

The amounts shown in the balance sheet on employee benefit liabilities are short term obligations and consist mainly of salaries, bonuses and holiday payments.

(a) Technical warranty Provisions for technical warranty are based on historical experience of the level of repairs and replacements. Additional provisions are set up when a technical problem is detected. There are three different technical warranty provisions:

provisions related to ‘normal’ (mostly 2 years) warranty period, provisions related to extended warranty periods and provisions for specific claims/issues.


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Barco annual report 2017

(b) Defined benefit obligations As per 31 December 2017 and 2016, the defined benefit obligations are composed of:

IN THOUSANDS OF EURO Pension plans in Belgium Early retirement plans in Belgium Local legal requirements (mainly France, Germany, Japan, Korea and Italy) A small number of individual plans Total

2017

2016

7,405

12,318

869

1,067

4,079

4,435

243

116

12,596

17,936

Early retirement plans are recognized as liability and expensed when the company is committed to terminate the employment of the employees affected before the normal retirement date.

In Belgium, a multi-employer plan exists for some blue-collars where payments go into a sectoral fund. As Barco does not have access to information about the plan that satisfies the requirements of the standard, the plan is further classified as a defined contribution plan and expensed as incurred. The employer contributions made in 2017 amount to 0.1 million euro, the same as in 2016 and 2015. In 2015 and earlier years, the majority of the pension plans at Barco were treated as defined contribution plans. Obligations for these plans were recognized as an expense in the income statement as incurred. During 2015, Barco recognized a defined contribution expense of 5.1 million euro on these plans. On 18 December 2015, however, Belgian legislation has been updated and clarification was provided on the minimum guaranteed rate of return. Before 31 December 2015, the minimum guaranteed rate of return on employer and participant contributions were respectively 3.25% and 3.75%. As from 2016 onwards, the rate decreased to 1.75% and is annually recalculated based on a risk free rate

of 10-year government bonds. According to IAS19, Belgian defined contribution plans that guarantee a specified return on contributions are defined benefit plans, as the employer is not responsible for the contribution payments, but has to cover the investment risk until the legal minimum rates applicable. The returns guaranteed by the insurance companies are in most cases lower than or equal to the minimum return guaranteed by law. As a result, the Group has not fully hedged its return risk through an insurance contract and a provision needs to be accounted for. The plans at Barco are financed through group insurance contracts. The contracts are benefiting from a contractual interest rate granted by the insurance company. When there is underfunding, this will be covered by the financing fund and in case this is insufficient, additional employer contributions will be requested. IAS 19 requires an entity to recognize a liability when an employee has provided service in exchange for employee benefits to be paid in the future. Therefore, pension provisions are setup. The obligations are measured on a discounted basis because they are settled many years after the employees render the related service. A qualified actuary has determined the present value of the defined benefit obligations and the fair value of the plan assets. These assets are held by an insurance company. The projected unit credit method was used to estimate the defined benefit obligations, the defined benefit cost and the re-measurements of the net liability. There are 15 defined benefit plans in Barco Belgium, for which we show below the aggregated view as these do not differ materially from geographical location, characteristics, regulatory environment, reporting segment or funding arrangement. In accordance with IAS 19 the disclosure is in the form of a weighted average. The change in accounting treatment that resulted in an increase in the defined benefit obligation was recognized through other comprehensive income in 2016.


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2017 changes in the Belgian defined benefit obligation and fair value of plan assets:

IN THOUSANDS OF EURO

2017 DEFINED BENEFIT OBLIGATION

On 1 January

FAIR VALUE OF PLAN ASSETS

92,041

NET DEFINED BENEFIT LIABILITY

-79,722

12.318 6.556

Pension cost charged to P/L Service cost

6,556

-

Net interest expense

1,047

-944

104

Sub-total included in profit or loss

7,603

-944

6.660

Benefits paid

-484

484

-

Remeasurement gains/losses in OCI Increase due to effect of transfers

-

-

-

Return on plan assets (excluding amounts included in net interest expense)

-

-1,882

-1,882

-

-

-

-3,567

-

-3,567

Actuarial changes arising from changes in demographic assumptions Actuarial changes arising from changes in financial assumptions Experience adjustments Sub-total included in OCI Contributions by employer Disposal of subsidiaries On 31 December

226

-

226

-3,341

-1,882

-5,223

-

-6,198

-6,198

-1,743

1,591

-152

94,077

-86,672

7,405

2016 changes in the Belgian defined benefit obligation and fair value of plan assets:

IN THOUSANDS OF EURO

BALANCE SHEET 2015

REMEAUSUREMENT GAINS/LOSSES IN OCI

BALANCE SHEET 2016

INCREASE DUE TO EFFECT OF TRANSFERS

SUBTOTAL INCLUDED IN OCI

Defined benefit obligations

-

92,041

92,041

Fair value of plan assets

-

-79,722

-79,722

Net defined benefit liability

-

12,318

12,318


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Barco annual report 2017

The fair value of the plan assets (86.9 million euro) are fully invested in insurance policies. The target asset mix consists of 65.3% government bonds, 16% real estate, 9.2% corporate bonds, 5.5% corporate loans and 4% shares. The principal assumptions used in determining pension obligations for the Group's plans are shown below:

2017

The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. These may not be representative for an actual change in the defined benefit obligation, as it is unlikely that changes in assumptions would occur in isolation of one another.

2016

Discount rate

1.51%

1.16%

Future salary increases

2.58%

2.59%

Future consumer price index increases

1.90%

1.90%

The following payments are the expected benefit payments from the plan assets:

IN THOUSANDS OF EURO

The following overview summarizes the sensitivity analysis performed for significant assumptions as at 31 December. The figures show the impact on the defined benefit obligation.

IN THOUSANDS OF EURO

2017

Within the next 12 months Between 2 and 5 years

2017

2016

3,684

2,408

16,393

13,947

Between 5 and 10 years

29,748

23,614

Total expected payments

49,826

39,969

2016

Discount rate: 0.25% decrease

2,032

2,361

0.25% increase

-2,019

-2,605

0.25% decrease

-564

-494

0.25% increase

762

478

0.25% decrease

-253

-901

0.25% increase

557

836

Future salary change:

Future consumer price index change:

The average duration of the defined benefit plan obligation at the end of the reporting period is 13.8 years (same in 2016). The expected employer contributions to the plan for the next annual reporting period amounts to 6.6 million euro (6.3 million euro in 2016); the expected employee contributions 1.1 million euro (1.0 million euro in 2016).


Financial statements

(c) Restructuring provision See note 6 Restructuring and impairments. (d) Other claims and risks This provision relates to disputes with suppliers and specific customer warranty disputes. Barco cannot provide details on the specific cases, as this could cause considerable harm to Barco in the particular disputes. On December 2nd, 2014, Barco has communicated that an enquiry is ongoing with the authorities of the Peopleâ&#x20AC;&#x2122;s Republic of China regarding the importation of large video walls. These import transactions were managed via custom brokers on behalf of local distributors and the investigation relates to the period between 1997 and 2009, prior to the local assembly of such video walls in China. No provision has been set up related to this investigation, as no formal claim has been made towards Barco. With respect to the contingent liabilities related to the MTT and Medialon acquisitions, there is one earn-out capped at 15 million euro linked to the retention of the former shareholders and one uncapped for which the future results could not be reliably estimated at acquisition. The earn-outs would flow through profit and loss at moment of payment over the earn-out period, i.e. per end of 2021 for the capped one and per end of June 2018 for the uncapped one.

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Barco annual report 2017

22. Risk management - derivative financial instruments General risk factors are described in the director’s report “Risk Factors”. Derivative financial instruments are used to reduce the exposure to fluctuations in foreign exchange rates and interest rates. These instruments are subject to the risk of market rates changing subsequent to acquisition. These changes are generally offset by opposite effects on the item being hedged.

Foreign currency risk Recognized assets and liabilities Barco incurs foreign currency risk on recognized assets and liabilities when they are denominated in a currency other than the company’s local currency. Such risks may be naturally covered when a monetary item at the asset side (such as a trade receivable or cash deposit) in a given currency is matched with a monetary item at the liability side (such as a trade payable or loan) in the same currency. Forward exchange contracts and selectively option contracts are used to manage the currency risk arising from recognized receivables and payables, which are not naturally hedged. The balances on foreign currency monetary items are valued at the rates of exchange prevailing at the end of the accounting period. Derivative financial instruments that are used to reduce the exposure of these balances are rated in the balance sheet at fair value. Both changes in foreign currency balances and in fair value of derivative financial instruments are recognized in the income statement. Forecasted transactions Barco selectively designates forward contracts to forecasted sales. Hedge accounting is applied to these contracts. The portion of the gain or loss on the hedging instrument that will be determined as an effective hedge is recognized directly in

comprehensive income. As at 31 December 2017, there were no forward contracts outstanding under hedge accounting treatment. Estimated sensitivity to currency fluctuations Sensitivity to currency fluctuations is mainly related to the evolution of a portfolio of foreign currencies (mainly USD and CNY) versus the euro. This sensitivity is caused by the following factors: - The fair value of foreign currency monetary items is impacted by currency fluctuations. In order to eliminate most of these effects in foreign currencies, Barco uses monetary items and/or derivative financial instruments as described above, which are meant to offset the impact of such results to a major extent. - As the company has no cash flow hedges in place that aim at hedging forecasted transactions, a similar fluctuation in foreign currencies would not have any effect on the equity position of Barco. - Profit margins may be negatively affected because an important part of sales are realized in foreign currencies, while costs are incurred for a smaller part in these currencies. Barco has done great efforts in recent years to increase its natural hedging ratio in USD (being its main foreign currency in terms of sales) by increasing its operational costs and by purchasing more components in this currency. Impact on adjusted EBIT is currently estimated at 18 million euro when the weighted average rate of a foreign currency basket that has an overall overweight of CNY and a heavily reduced weight of USD changes by 10% versus the euro in a year. The overall natural hedge ratio of foreign currencies reached a level of more than 70% in 2017. - Another impact is the fact that some of Barco’s main competitors are USD-based. Whenever the USD decreases in value against the euro, these competitors have a worldwide competitive advantage over Barco. This impact on operating result cannot be measured reliably.


Financial statements

Barco annual report 2017

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Interest rate risk

Credit risk

Barco uses following hedging instruments to manage its interest rate risk:

Credit risk on accounts receivable Credit evaluations are performed on all customers requiring credit over a certain amount. The credit risk is monitored on a continuous basis. In a number of cases collateral is being requested before a credit risk is accepted. Specific trade finance instruments such as letters of credit and bills of exchange are regularly used in order to minimize the credit risk.

Swap on outstanding or anticipated borrowing Barco has an outstanding variable loan of 2.0 million US dollar (1.7 million euro equivalent) in place, of which variable interest rate conditions have been swapped into a fixed 3.86%. The fair value of the interest rate swap with a notional amount of 9.4 million US dollar or 7.8 million euro equivalent is fully recognized in the income statement. Barco also concluded a series of interest rate swaps with an outstanding notional amount of 14.7 million euro by means of a partial hedge for the bilateral committed Credit Facilities (currently outstanding at 26.0 million euro) that aim at financing Barco's new HQ campus. This instrument swaps the variable interest rate into a fixed 1.76%. These swaps are determined as an effective hedge of outstanding or anticipated borrowings and meet the hedging requirements of IAS 39. The fair values of the effective portion of the hedging instrument are therefore recognized directly in comprehensive income under hedge accounting treatment. Estimated sensitivity to interest rate fluctuations Management doesnâ&#x20AC;&#x2122;t expect the short-term interest rate to increase significantly in the immediate foreseeable future, which limits the interest exposure on the short-term debt portfolio. With reference to the Fair Values table below, just over 20% of Barcoâ&#x20AC;&#x2122;s outstanding long-term debt portfolio has a fixed interest rate character, which again limits the exposure of the company to interest rate fluctuations. This ratio increases to close to 60% when including the swap instruments disclosed above.

In 2017, Barco continued to conclude credit insurances in order to cover credit risks on specific customers with whom Barco entered into vendor financing agreements. Such vendor financing agreements are concluded and monitored on a case by case basis. Credit risk on liquid securities and short-term investments A policy defining acceptable counter parties and the maximum risk per counter party is in place. Short-term investments are made in marketable securities, cash holdings or in fixed term deposits with reputable banks.


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Fair values Set out below is an overview of the carrying amounts of the groupâ&#x20AC;&#x2122;s financial instruments that are showing in the financial statements.

IN THOUSANDS OF EURO

In general, the carrying amounts are assumed to be a close approximation of the fair value.

2017

2016

2015

Carrying amount/Fair value (approx.) Financial assets Trade receivables

149,438

188,561

Other receivables

19,368

15,584

26,157

17,913

14,725

22,315 2,800

Loan and other receivables

186,910

Interest rate receivable

777

1

Currency rate swap

677

858

1,042

12,887

19,112

23,226

Other non-current assets Cash and short-term deposits

254,130

353,549

341,277

Total

435,822

576,806

577,570

39,302

61,862

69,390

31,159

36,671

37,211

Fixed rate borrowings

8,143

25,191

32,179

Other long-term liabilities

4,555

11,198

2,839

686

2,085

2,124

102,943

135,127

139,504

10,586

9,684

7,690

5,771 2,347 515

3,625 2,368 932

1,991 2,134 809

Financial liabilities Financial debts Floating rate borrowings

Short-term debts Trade payables Other current liabilities Other short term amounts payable Dividends payable Currency rate Swap Interest rate swap Total

The fair value of the financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in orderly transaction in the principal market at the measurement date under current market conditions which are other than in a forced or liquidation sale.

1,953

2,759

2,756

158,072

219,956

221,547

The following methods and assumptions were used to estimate the fair values: - Cash and short-term deposits, trade receivables, trade payables, and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. - Long term fixed rate and variable rate other assets are evaluated by the Group based on parameters such as interest


Financial statements

rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are made to account for the expected losses of these receivables. As at 31 December 2017, the carrying amounts of such receivables, net of allowances, are assumed not to be materially different from their calculated fair values. - The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases as well as other non-current financial liabilities is estimated by discounting future cash flows using the effective interest rates currently available for debt on similar terms, credit risk and remaining maturities. As of 31 December 2017, the effective interest rate is not materially different from the nominal interest rate of the financial obligation.

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- The group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate (cap/floor) swaps and foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves.

Fair value hierarchy As at 31 December 2017, the Group held the following financial instruments measured at fair value::

IN THOUSANDS OF EURO

2017

2016

2015

Assets measured at fair value Financial assets at fair value through profit or loss Foreign exchange contracts - non-hedged

677

858

1,042

-

9,074

8,000

Financial assets at fair value through equity AFS investments Liabilities measured at fair value Financial liabilities at fair value through profit or loss Foreign exchange contracts - non-hedged

515

932

809

Interest rate swap

884

1,297

658

1,069

1,462

2,098

Financial liabilities at fair value through equity Interest rate swap


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Barco annual report 2017

The group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

All fair values mentioned in the above table relate to Level 2, except for the AFS investments which were based on Level 1 input (binding agreement of third party investor).

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques that use inputs having a significant effect on the recorded fair value that are not based on observable market data.

During the reporting period ending 31 December 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Capital Management Management evaluates its capital needs based on following data:

IN THOUSANDS OF EURO Net financial cash/(debt) Equity % Net financial cash (debt)/equity

IN THOUSANDS OF EURO Equity Total equity and liabilities % Equity/Total equity and liabilities

In 2017, the net cash position ended at a level of 210.7 million euro compared to 286.7 million euro as per end of 2016, mainly explained by the exclusion of the cash of BarcoCFG at 67.4 million euro (assets held for sale).

NOTE

2017 16

2016

2015

210,676

286,638

265,056

593,514

615,487

611,664

35.5%

46.6%

43.3%

2017

2016

2015

593,514

615,487

611,664

1,064,996

1,159,231

1,140,327

55.7%

53.1%

53.6%

The solvency position and other current ratios consolidate at very healthy levels. Together with the existing committed credit facilities, management considers that it has secured a very healthy liquidity profile and strong capital base for the further development of the group.


Financial statements

Barco annual report 2017

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Changes in liabilities arising from financing activities

IN THOUSANDS OF EURO

NON-CASH CHANGES Foreign exhange movements

Vendor financing1

Other

-8,401

-746

-1,038

-2,031

33,745

1,401

-4,299

-

-

10,686

1 January 2017

Cash flows

Long-term borrowings

45,961

Short-term borrowings

13,585

31 December, 2017

Lease liabilities

20,850

-9,131

-1,519

-2,910

-

7,291

Total liabilities from financing activities

80,396

-16,131

-6,565

-3,948

-2,031

51,722

(1) The long-term borrowings include long-term payables in the frame of vendor financing programs, of which the offset is included in the long-term receivables. The long-term borrowings and lease liabilities are together the long-term debts as shown in the balance sheet. The short-term borrowings are the total of current portion of long-term debts and short-term debts, as shown in the balance sheet.

23. Operating leases

IN THOUSANDS OF EURO

2017

2016

2015

Non-cancellable operating leases are payable as follows: Less than one year Between one and five years More than five years Total

Non-cancellable operating leases mainly relate to leases of factory facilities, warehouses and sales offices. During the current year, the total rent expenses recognized in the income statement amounted to 18 million euro (2016: 17.8

7,457

7,335

6,628

11,281

11,018

12,426

3,202

3,834

5,208

21,941

22,187

24,262

million euro, 2015: 15.7 million euro), of which 9.3 million euro relating to rent of buildings (2016: 10.2 million euro, 2015: 10.2 million euro).


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24. Rights and commitments not reflected in the balance sheet

IN THOUSANDS OF EURO

2017

2016

2015

Guarantees given to third parties

(a)

2,567

3,009

3,662

Mortgage obligations given as security

(b)

30,000

32,844

33,672

48,152

57,115

46,376

Buy back obligations

- book value of the relevant assets (c)

996

3,486

3,565

Purchase commitment

(d)

7,507

2,002

2,723

Sales commitment

(e)

1,151

(a) Guarantees given to third parties mainly relate to guarantees given to customers for ongoing projects, guarantees given to suppliers for investment projects and to authorities for commitments related to VAT, duties, etc. (b) The total mortgage includes three loans of 10 million euro each to fund the headquarter Campus project. The increase in the book value in 2015, 2016 relates to the new building at the headquarters of Barco; decrease as of 2017 due to depreciation. (c) Barco appeals on a vendor-lease program with the obligation to take back sold goods, in case of insolvency of the client. No buy-back provision is set

up for this risk as all risks and rewards are transferred upon the sale. Total possible value of the obligation to take back sold goods amounts to 1 million euro in 2017 (2016: 3.5 million euro, 2015: 3.6 million euro). (d) This relates to the extended production facility at the headquarter in Belgium in 2017. In 2015 and 2016, this relates to the new headquarters in Belgium. There are no purchase commitments on intangible fixed assets. (e) This relates to preliminary sales agreements of parts of the land on the Poperinge site in Belgium.

On 4 December 2017, Barco announced that it has reached an agreement to enter into a strategic joint venture with China Film Group, Appotronics and CITIC. This new cinema JV will focus on commercializing cinema solutions based on each company’s products and services for the global cinema market excluding mainland China.

The joint venture is expected to become effective during the second quarter of 2018 after customary regulatory approvals have been obtained and following consultation with the relevant social and governmental entities.

25. Related party transactions Barco NV has entered into arrangements with a number of its subsidiaries and affiliated companies in the course of its business. These arrangements relate to service transactions and financing agreements and were conducted at market prices. Transactions between the Company and its subsidiaries, which are related parties, have been eliminated in the consolidation and are accordingly not disclosed in this note. None of the related parties have entered into any other transactions with the Group that meet the requirements of IAS 24, ‘Related party disclosures’. We refer to note 1 Consolidated companies for an overview of the consolidated and equity accounted companies. We refer to the ‘Corporate Governance Chapter’ on page A/71 for information with respect to remuneration of directors and members of the core leadership team.


Financial statements

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26. Cash flow statement: effect of acquisitions and disposals The following table shows the effect of acquisitions and disposals on the balance sheet movement of the group. In 2017, the movement on the balance sheet coming from acquisitions relates to the acquisition of P2M assets, the additional purchase of 51% shares in Habornveien and the payments and releases of previous acquisitions MTT and Advan. The movement coming from divestments relates to the divestment of Barco Lighting and Barco Silex. In 2016, the movement on the balance sheet coming from acquisitions relates to the acquisition of Medialon and MTT, the divestment relates

to the sale of the Orthogon business where the remaining 1 million euro was released from escrow. In 2015 the movement on the balance sheet coming from acquisitions relates to the acquisition of Advan. The divestments in 2015 relate to the Defense & Aerospace divestment. As the balance sheet of the Defense & Aerospace business has been presented as assets of discontinued operations per end of 2014, the balances sold as of the end of January 2015 represent no movement of the continued balance sheet. See Note 1.3 for more information on these acquisitions and divestments.

IN THOUSANDS OF EURO

ACQUISITIONS 2017

Non-current assets

2016

DIVESTMENTS 2015

2017

2016

2015

5,724

28,693

3,048

451

-

19,521

-

-

-

-

-

11,933

3,036

-

2,226

-

-

-

-

-

71

10

-

-

Know-how

166

28,976

-

-

-

870

Buildings and (leased) building

836

-

-

2

-

884

-

38

414

374

-

2,821

Capitalized development cost Customer list Software

Tangible assets and other intangible assets Deferred tax assets

-

-

-

-93

-

-

1,687

-322

337

158

-

3,013

Current assets

-

496

4,887

6,079

-

79,139

Inventory

-

-90

1,623

2,595

-

47,615

Trade debtors & other receivables

-

586

3,264

3,484

-

31,523

Non-current liabilities

697

17,577

312

331

-

6,616

Other long term liabilities

500

9,862

-

-

-

2,920

Deferrred tax liabilities

197

7,715

312

-

-

343

-

-

-

331

-

3,352

-861

798

2,763

274

-

37,497

-861 5,888

50 748 10,813

2,519 244 4,861

349 -75 5,925

-

20,316 17,181 54,547

Other non-current assets

Provisions Current liabilities Trade payables Other payables Net-identifiable assets and liabilities


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Barco annual report 2017

IN THOUSANDS OF EURO

ACQUISITIONS 2017

2016

DIVESTMENTS 2015

2017

2016

2015

Non-operating profit (losses) on disposals

-

-

-

-

-

-

Goodwill on acquisitions/disposals

-

-584

4,774

-

-

13,048

Gain on sale of divestments

-

-

-

513

-

64,102

Acquired/(sold) cash

6

504

2,168

727

-

7,924

Received consideration Purchase price

The total purchase price in 2017 relates to the acquisition of the P2M assets for 2.6 million euro, the first deferred consideration of 2.0 million euro on the MTT/Medialon acquisition and the increased investment in Habornveien for 1.9 million euro. On the other hand, 0.7 million euro was released from escrow to cover reps and warranties. The 2017 divestment relates to the sale of the Lighting business and Barco Silex for respectively an amount of 6.2 million euro and 1.1 million euro. The total purchase price in 2016 relates to the acquisition of Medialon and MTT of 11.7 million euro, minus the purchase price correction on Advan of 0.8 million euro and a release from escrow on the Awind acquisition of 2013. The cash flow statement acquisition of group companies show net of acquired cash of Medialon and MTT as the acquisition was cash and debt free. The total purchase price in 2015 relates to the acquisition of Advan of 11.8 million euro. The cash flow statement acquisition of group companies show net of acquired cash of Advan as the acquisition was cash and debt free.

-

-

-

7,165

1,000

146,146

5,894

10,732

11,803

-

-

-

The 2016 divestment relates to the remaining escrow on the sale of the Orthogon business of 1 million euro. The 2015 divestment relates to the sale of the Defense & Aerospace business for an amount of 146.1 million euro and the escrow and net working capital adjustment received on the sale of the Orthogon business for an amount of 1.4 million euro. The cash flow statement disposal of group companies shows net of sold cash of the business for an amount of 7.9 million euro. We refer to the Cash flow statement and note 1.3 on acquisitions and divestments. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are carried in terms of historical cost using the exchange rate at the date of the acquisition.


Financial statements

27. Events subsequent to the balance sheet date There are no major events subsequent to the balance sheet date which have a major impact on the further evolution of the company.

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Barco annual report 2017

Auditor’s report INDEPENDENT AUDITOR’S REPORT TO THE GENERAL MEETING OF BARCO NV FOR THE YEAR ENDED 31 DECEMBER 2017

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS 2017

As required by law and the Company’s by-laws, we report to you as statutory auditor of Barco NV (“the Company”) and its subsidiaries (together “the Group”). This report includes our opinion on the consolidated balance sheet as at 31 December 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year ended 31 December 2017 and the disclosures (all elements together “the Consolidated Financial Statements”), and includes as well our report on other legal and regulatory requirements. These two reports are considered as one report and are inseparable.

Unqualified Opinion We have audited the Consolidated Financial Statements of Barco NV, which consists of the consolidated balance sheet as at 31 December 2017, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year ended 31 December 2017 and the disclosures, which show a consolidated balance sheet total of € 1.064.996 thousands and of which the consolidated income statement shows a profit for the year of € 32.784 thousands.

We have been appointed as statutory auditor by the shareholders meeting held on 30 April 2015, in accordance with the proposition by the Board of Directors following recommendation of the Audit Committee and on recommendation of the workers council. Our mandate expires at the shareholders meeting that will deliberate on the annual accounts for the year ending 31 December 2017. We have been performing the audit of the Consolidated Financial Statements of the Group since before 1990.

In our opinion the Consolidated Financial Statements of the Group as at 31 December 2017 give a true and fair view of the consolidated net equity and financial position, as well as its consolidated results and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the European Union (“IFRS”), and with applicable legal and regulatory requirements in Belgium. Basis for the unqualified opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the section “Our responsibilities for the audit of the consolidated financial statements” of our report.


Financial statements

Barco annual report 2017

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We have complied with all ethical requirements that are relevant to our audit of the Consolidated Financial Statements in Belgium, including those with respect of independence.

is complex, contains various judgmental decisions, and is strongly affected by assumptions with regard to expected future cash flows and market conditions.

We have obtained from the Board of Directors and the Company's officials the explanations and information necessary for the performance of our audit and we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Procedures performed Our audit procedures included, among others, the following: • We have analyzed the Company’s impairment model including the significant underlying assumptions (sales growth rate during the 5-year projection period, EBITDA percentage on sales, long term growth rate beyond the projection period, discount rate). • We have assessed whether the cash generating units were defined in accordance with IFRS. • We made an assessment of the historical accuracy of management’s estimates and compared forecasted sales growth and EBITDA percentages on sales for all cash generating units with the Group’s business plan as adopted and approved by the Board of Directors. • We used a valuation expert in our firm to assess the methodology, clerical accuracy, long term growth rate and discount rate by comparison to market practice, past performance, the Group’s cost of capital and relevant risk factors. • We analyzed the sensitivity analyses prepared by management to understand the impact of reasonable changes in the key assumptions. • We considered additional impairment triggers by reading board minutes, and holding regular discussions with management. • We assessed the adequacy of the Group’s disclosures in Note 10 to the Consolidated Financial Statements.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated Financial Statements. The key audit matters were addressed in the context of our audit of the Consolidated Financial Statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of goodwill Description of the matter Goodwill amounts to € 105.4 million or 10% of the consolidated balance sheet at 31 December 2017. In accordance with IFRS, the Group is required to annually test for impairments on goodwill. As described in Note 10 of the Consolidated Financial Statements, the test resulted in an impairment loss of € 10.9 million. The valuation of goodwill is significant to our audit because the assessment process thereof by the Group’s management


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Barco annual report 2017

Valuation of deferred tax assets

Allowance for inventory

Description of the matter Deferred tax assets on tax carry-forward losses and tax credits amount to € 45.1 million or 4% of the consolidated balance sheet at 31 December 2017, (as described in Note 13 of the Consolidated Financial Statements). The Group recognizes deferred tax assets on unused tax carry-forward losses and tax credits to the extent that it is probable that future taxable profits will be realized against which unused tax losses and tax credits can be utilized.

Description of the matter The allowance for slow-moving inventory amounts to € 91.8 million as at 31 December 2017 and comprises allowances on raw materials, work in progress and finished products that are considered excess or obsolete. The Group states inventory at the lower of cost or net realizable value. The allowance for slow-moving inventory is calculated based on the age and the expected turnover of the inventory.

The valuation and recoverability of deferred tax assets is significant to our audit due to the magnitude of the amount recognized for these assets and because the Group’s assessment process requires management estimates, in particular on the assumptions regarding expected future market and economic conditions and tax laws and regulations. Procedures performed Our audit procedures included, among others, the following: • We have evaluated the amounts and local expiry periods of unused tax carry-forward losses and tax credits together with any other applicable restrictions in recovery for each relevant jurisdiction. • We assessed and discussed management’s forecasts of taxable income including the underlying assumptions such as revenue growth, gross margin, cost developments, the applicable tax legislation and tax planning assumptions. • We used a tax expert in our firm to assist us in these audit procedures. • We assessed the adequacy of the Group’s disclosures in Note 13 of the Consolidated Financial Statements.

The allowance for slow-moving inventory is important to our audit due to the magnitude of the gross inventory amount (€ 224.5 million) and related allowance, and because the calculation of the slow-moving inventory items involves management’s judgment and is subject to uncertainty due to rapid technological changes. Procedures performed Our audit procedures included, among others, the following: • We have assessed the design and operating effectiveness of the Group’s internal controls on the inventory allowan ce and write-off process, including relevant IT application controls. • We evaluated and discussed the analyses and assessments made by management with respect to slow-moving and obsolete stock items and related sales forecasts. • We have evaluated the historic accuracy of the assess ments made by management. • We tested the net realizable value of a sample of inventory items by comparing their actual sales price with inventory unit value. • We assessed the adequacy of the Group’s disclosures in Note 14 of the Consolidated Financial Statements.


Financial statements

Responsibilities of the Board of Directors and Audit Committee for the preparation of the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the Consolidated Financial Statements that give a true and fair view in accordance with IFRS and with applicable legal and regulatory requirements in Belgium. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of the Consolidated Financial Statements that give a true and fair view and that are free from material misstatement, whether due to fraud or error. As part of the preparation of the Consolidated Financial Statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Board of Directors should prepare the financial statements using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Our responsibilities for the audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the Consolidated Financial Statements are free from material misstatement, whether due to fraud or error and to express an opinion on these Consolidated Financial Statements based on our audit. Reasonable assurance is a high level of assurance, but not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to

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influence the economic decisions of users taken on the basis of these Consolidated Financial Statements. As part of an audit in accordance with ISAs, we apply professional judgment and we maintain professional scepticism throughout the audit. We also perform the following tasks: • Identification and assessment of the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error, the planning and execution of audit procedures to respond to these risks, and obtain audit evidence which is sufficient and appropriate to provide a basis for our audit opinion. The risk of not detecting material misstatements is larger when these misstatements are due to fraud, since fraud can be the result of conspiracy, forgery, deliberate failure to record transactions, deliberate misrepresentation or breaking through the internal control system; • Obtaining insight in the system of internal controls that are relevant for the audit and with the objective to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; • Evaluate the selected and applied accounting policies, and evaluating the reasonability of the accounting estimates and disclosures in the given circumstances; • Conclude on the appropriateness of the Board of Director’s use of the going-concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company or Group’s ability to continue as a going concern.


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Barco annual report 2017

If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated Financial State ments or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the Company or Group to cease to continue as a going-concern. • Evaluating the overall presentation, structure and content of the Consolidated Financial Statements, and whether these financial statements reflect the underlying trans actions and events in a true and fair view.

From the matters communicated with the Audit Committee within the Board of Directors, we determine those matters that were of most significance in the audit of the Consolidated Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our report, unless the law or regulations prohibit this.

We communicate with the Audit Committee within the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit.

Responsibilities of the Board of Directors The Board of Directors is responsible for the preparation and the content of the Board of Director’s report and other information included in the annual report, the compliance with the legal and regulatory requirements regarding bookkeeping, as well as compliance with the Belgian Companies Code (“BCC”) and with the Company’s by-laws.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the audits of the subsidiaries. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. We provide the Audit Committee within the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENT

Responsibilities of the auditor In the context of our mandate and in accordance with the additional standard to the ISA’s applicable in Belgium, it is our responsibility to verify, in all material respects, the Board of Director’s report and other information included in the annual report, as well as compliance with certain legal and regulatory requirements and to report any matters.


Financial statements

Aspects relating to Board of Director’s report and other information included in the annual report In our opinion, after carrying out specific procedures on the Board of Director’s report, the Board of Director’s report is consistent with the Consolidated Financial Statements and has been prepared in accordance with article 119 of the BCC. In the context of our audit of the Consolidated Financial Statements, we are also responsible to consider whether, based on the information that we became aware of during the performance of our audit, the Board of Director’s report and other information included in the annual report, being: • Letter from the CEO (section A page 4-7) • Key Figures (section A page 8-9) • Financial Highlights (section A page 10-11) contain any material inconsistencies or contains information that is inaccurate or otherwise misleading. In light of the work performed, we do not need to report any material inconsistencies. In addition, we do not express any form of assurance regarding the individual elements included in the Board of Director’s report and other information included in the annual report. The non-financial information required by article 119 §2 of the BCC has been included in the Board of Director’s report on the Consolidated Financial Statements, which is part of section B of the annual report. The Group has prepared this non-financial information based on the Global Reporting Initiative standards (hereafter “GRI”). However, we do not comment on whether this non-financial information has been prepared, in all material respects, in accordance with GRI.

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Independence matters We have not performed any assignments that are not compatible with the legal audit of the Consolidated Financial Statements and during the course of our mandate we have remained independent of the Company and the Group. The fees for additional assignments that are compatible with the legal audit of the Consolidated Financial Statements intended by article 134 of the BCC have been correctly disclosed and detailed in the notes to the Consolidated Financial Statements. Other communications • This report is consistent with our supplementary declaration to the Audit Committee as specified in article 11 of the regulation (EU) nr. 537/2014. Ghent, 8 February 2018 Ernst & Young Bedrijfsrevisoren BCVBA Statutory auditor Represented by

Marnix Van Dooren Partner* * Acting on behalf of a BVBA/SPRL


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Barco annual report 2017

Supplementary information Barco NV Summary version of statutory accounts Barco NV The financial statements of the parent company, Barco NV, are presented below in a condensed form. The accounting principles used for the statutory annual accounts of Barco NV differ from the accounting principles used for the consolidated annual accounts: the statutory annual accounts follow the Belgian legal requirements, while the consolidated annual accounts follow the International Financial Reporting Standards. Only the consolidated annual financial statements as set forth in the preceding pages present a true and fair view of the financial position and performance of the Barco Group. The management report of the Board of Directors to the Annual General Meeting of Shareholders and the annual accounts of Barco NV, as well as the Auditorâ&#x20AC;&#x2122;s Report, will be filed with the National Bank of Belgium within the statutory periods. These documents are available upon request from Barcoâ&#x20AC;&#x2122;s Investor Relations department, and at www.barco.com. The statutory auditorâ&#x20AC;&#x2122;s report is unqualified and certifies that the non-consolidated financial statements of Barco NV for the year ended 31 December 2017 gives a true and fair view of the financial position and results of the company in accordance with all legal and regulatory dispositions.


Financial statements

Barco annual report 2017

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Balance sheet after appropriation

IN THOUSANDS OF EURO Non-current assets

2017

2016

2015

451,277

655,445

978,420

Intangible fixed assets

42,113

49,931

63,496

Tangible fixed assets

71,094

64,284

55,427

Financial fixed assets

336,991

539,113

856,736

1,079

2,117

2,761

239,454

255,985

254,590

69,326

72,617

69,314

112,564

118,758

114,537

Investments (own shares)

42,386

47,968

54,624

Cash at bank and in hand

524

503

370

14,654

16,139

15,745

Total assets

690,731

911,430

1,233,010

Capital and reserves

328,165

365,156

409,524

55,858

55,824

55,649

146,543

146,144

143,821

Amounts receivable after more than one year Current assets Stocks and contracts in progress Amounts receivable within one year

Deferred charges and accrued income

Capital Share premium account Reserves

48,599

54,181

60,837

Accumulated profits

76,480

108,164

148,627

685

843

590

Investment grants Provisions and deferred taxes

21,506

20,177

17,432

Provisions for liabilities and charges

21,506

20,177

17,432

341,060

526,097

806,054

36,641

54,321

365,936

Amounts payable within one year

304,419

471,776

440,116

Total Iiabilities

690,731

911,430

1,233,010

Creditors Amounts payable after more than one year

Barco NVâ&#x20AC;&#x2122;s balance sheet further strengthened as a result of a capital decrease in Barco Coordination Center (168 million euro) of which 140 million euro has been used to reimburse the short term loan to Barco Coordination Center in 2017.

The financial fixed assets further decreased because of an impairment on Projection Design (24.7 million euro) because of the announced transfer of business from Norway to Belgium.


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Barco annual report 2017

In 2016 financial fixed assets decreased with 318 million euro mainly as the result of a capital decrease in Barco Coordination Center (232 million euro) and Barco Integrated Solutions (95 million euro). A long term loan to Barco Coordination Center was reimbursed for an amount of 308 million euro.

Next to this, the decrease of the intangible fixed assets in 2017 is the result of further amortizing the capitalized development, ending in 2017, after the change in accounting treatment in 2015, which resulted in no longer capitalizing development expenses.

The increase of 92 million euro of financial fixed assets in 2015 consists of the intercompany acquisition of the shares of Barco Integrated Systems (106 million euro net), partly offset by the impairment of the shares of X2O Media Inc (12.8 million euro) and the sale of the participation in Barco Texen (-4.3 million euro) and Barco Singapore (-1.3 million euro) to Esterline (as part of the Defense & Aerospace divestment).

The increase of the tangible fixed assets with 7 million euro in 2017, 11.4 million in 2016 and 25 million euro in 2015, relates to the new headquarter building in Kortrijk, which has been taken in use as of February 2016. The total gross value of the new building is 45 million euro. An extended operations facility is currently under construction (6.8 million euro in 2017 compared to 2.8 million euro in 2016).

The intangible fixed assets relate mainly to the implementation cost of SAP ERP software (increase in 2017: 5.4 million euro, increase in 2016: 4.6 million euro, 2015: 3.6 million euro). The total gross value of the SAP ERP software implementation cost per December 2017 amounts 44.4 million euro.

In 2017 and 2016, the inventory remained stable (-3 million euro in 2017 and + 3 million euro in 2016) while in 2015, the stocks and contracts in progress decreased due to the divestment of Defense and Aerospace (-37.7 million euro).

The SAP capital expenditures are depreciated as roll out is performed successfully (April 2014 in India, July 2015 in Belgium, July 2016 in Germany and July 2017 in US). Per rollout a part of the licenses are taken into use. Pro rata these licenses in use, the SAP capital expenditures are taken into use and amortized over 7 years. The amortization in 2017 amounts to 4.7 million euro compared to 4.3 million euro in 2016 and 1.7 million euro in 2015.


Financial statements

Barco annual report 2017

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Income statement

IN THOUSANDS OF EURO Sales Operating income/(loss) Financial result Extraordinary result Income taxes Profit/(loss) for the year

Barco NV sales in 2017 increased to 634 million euro, up 11%, compared to 569.5 million euro in 2016. The operating income in 2017 is a profit of 18.7 million euro, compared to a loss of -25.3 million euro in 2016. Higher sales combined with a gross profit margin improvement, as result of a positive mix effect and value engineering efforts, results in a higher operating income. All years are negatively impacted by the change in accounting treatment of development expenses as from 2015 there was no capitalization of development expenses anymore while amortizations on the capitalized development expenses were still included (2017 : 7.9 million euro, 2016: 17.7million euro, 2015: 29.2 million euro). In 2017 the financial income decreased as a result of lower intercompany dividends received of 6.1 million euro (Barco Taiwan), while in 2016 the financial income increased with 10 million mainly as a result of 14.5 million euro dividends received (no dividends received in 2015), although no interest income from Intercompany loans was received (3.7 million euro in 2015).

2017

2016

2015

634.306

569,504

520,910

18,673

-25,280

-36,390

2.581

4,218

-5,795

-32,437

-3,368

33,460

-128

601

2,627

-11,311

-23,829

-6,098

The extra-ordinary result in 2017 and 2016 consists of impairments booked on financial fixed assets explained above and in 2017 a loss on the realization of an intercompany receivable from X2O of -7.2 million euro. In 2015 the extra- ordinary result mainly relates to the gain realized on the divestment of the Defense and Aerospace division for an amount of 50.4 million euro, impairments on intercompany participations (-15.6 million euro) and -1.3 million euro realisation loss on own shares. The income tax in 2017 shows a small cost of 0.1 million euro. This is the total of a withholding tax cost on received dividends of 0.7 million euro and a tax credit on research and development expenses. The latter was 0.5 million euro in 2017, 1.3 million euro in 2016 and 2.6 million euro in 2015. There was also a withholding tax cost on received dividends of 0.7 million euro in 2016.


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Barco annual report 2017

Proposed appropriation of Barco NV result

IN THOUSANDS OF EURO Profit/(loss) for the year for appropriation

2017

2016

2015

-11,311

-23,829

-6,099

Profit brought forward

108,164

148,628

176,373

Profit to be appropriated

96,853

124,799

170,273

Transfer from other reserves

-5,582

-6,656

458

Profit to be carried forward

76,480

108,164

148,628

Gross dividends

25,955

23,292

21,188

Total

96,853

124,800

170,273

The board of directors of Barco NV proposed a gross dividend of 2.1 euro per share relating to the result as of 31 December 2017. In 2017 a gross dividend of 1.9 euro per share was paid out on the results of 2016; in 2016 1.75 euro was paid out.


Financial statements

Barco annual report 2017 C/100

Supplementary statements Free Cash Flow

IN THOUSANDS OF EURO Adjusted EBIT Impairment of capitalized development costs Restructuring Gain on sale of divestments Amortization capitalized development cost Depreciation of tangible and intangible fixed assets Gain/(Loss) on tangible fixed assets Share in the profit/(loss) of joint ventures and associates Gross operating Free Cash Flow

2017

2016

2015

73,241

36,557

1,698

-

1,364

4,866

-4,244

-4,917

-3,622

-513

-1,000

-1,406

-

21,509

44,575

33,877

28,572

22,906

362

-401

-543

1,290

263

-1,073

104,011

81,947

67,402

Changes in trade receivables

-7,326

205

-5,443

Changes in inventory

-3,577

-2,829

27,565

-19,660

-2,676

16,297 32,773

Changes in trade payables Other changes in net working capital

-8,113

11,883

Change in net working capital

-38,677

6,583

71,191

Net operating Free Cash Flow

65,334

88,530

138,593

Interest received

4,666

7,272

4,303

Interest paid

-2,653

-3,161

-4,098

Income taxes

-4,395

-11,538

-14,938

Free Cash flow from operating activities

62,952

81,103

123,861

Purchases of tangible & intangible FA (excl One Campus)

-23,160

-24,241

-14,730

168

578

1,137

Free Cash flow from investing activities

-22,992

-23,663

-13,593

FREE CASH FLOW

39,960

57,440

110,268

Proceeds on disposals of tangible & intangible fixed assets

The below comments include the assets held for sale of BarcoCFG. We refer to page C/23 on the critical accounting judgements for more background on the intended sale of 9% of Barcoâ&#x20AC;&#x2122;s current stake of 58% in BarcoCFG. Positive Free Cash Flow of 40 million euro generated in 2017 (2016: 57.4 million euro, 2015: 110.3 million euro) coming from a considerable improvement in gross operating free cash flow, partly offset by a lower DPO (decrease from

63 days in 2016 to 58 days in 2017) and lower advances received. The net of the components trade debtors, inventory and accounts payable remained stable as percentage of sales at 20% (2016: 20%, 2015: 21%). At the end of December 2017, Barcoâ&#x20AC;&#x2122;s net cash position is 278.1 million euro, slightly lower than 2016 (2016: 286.6 million euro, 2015: 265 million euro).


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Barco annual report 2017

Balance Sheet The below comments include assets held for sale of BarcoCFG. We refer to page C/23 on the critical accounting judgements for more background on the intended sale of 9% of Barcoâ&#x20AC;&#x2122;s current stake of 58% in BarcoCFG. On 31 December 2017, trade receivables ended at 182.1 million euro. DSO remained at the same level of 2016 at 55 days (2016: 55 days; 2015: 58 days). Inventory ended (excluding acquisitions, disposals and currency impact) at 154 million euro, slightly lower than previous year, resulting in turns of 3.6. This is at the same level as per end of 2016 and 2015.

Trade payables decreased to 114.5 million euro from 135.1 million euro at the end of 2016 (2015: 139.5 million euro). Decrease is the result of paying suppliers sooner, on average after 58 days in 2017 compared to 63 days in 2016.


Financial statements

Barco annual report 2017 C/102

Return on operating Capital Employed

IN THOUSANDS OF EURO

2017

2016

2015

Trade debtors

182,106

188,561

186,910

Inventory

154,063

166,202

165,960

Trade payables

-114,548

-135,127

-139,504

Other working capital

-263,270

-276,004

-234,358

-41,649

-56,368

-20,991

-

-

22,847

Other long term assets & liabilities

244,079

259,987

218,762

Operating capital employed

220,618

Working capital Capitalized development

202,430

203,618

Goodwill

113,385

124,255

132,386

Operating capital employed (incl goodwill)

315,815

327,874

353,004

73,241

36,557

1,698

19%

9%

0%

Adjusted EBIT ROCE after tax (%)

(a)

(a) Tax rate used is the adjusted tax rate in 2017(16%), the effective tax rate in 2016 and 2015 (both at 20%). See note 7 for the calculation of the adjusted tax rate.

Note: The operating capital employed includes the assets held for sale of BarcoCFG. Total working capital remained low, negative at -3.8% of sales versus -5.1% at year-end 2016. Difference is mainly related to lower outstanding trade payables and lower advances on customer contracts. In 2016 and 2015 adjusted EBIT was negatively impacted by the decision to no longer capitalize development expenses; excluding the impact of the amortization on capitalized development, return on capital employed stood at 15% in 2016, 11% in 2015. Return on capital employed further improved in 2017 to 19%, as a result of a higher adjusted EBIT, lower capital employed and a lower adjusted tax rate.


C/103 Barco annual report 2017

Glossary Financial term or APM

Explanation

Adjusted EBIT

EBIT excluding restructuring costs and impairments relating to reorienting or stopping certain activities, business or product lines, as well as impairments on goodwill and revenues resulting from a single material transaction not linked to current business activities (e.g. sales building headquarters) and other non-operating income/(expense). Results out of divestments or acquisitions are included in EBIT(DA).

Adjusted return on operating capital employed (ROCE)

Adjusted EBIT after tax relative to operating capital employed (including goodwill), including the assets held for sale. ROCE = Adjusted EBIT*(1- adjusted tax rate)/Operating capital employed (including goodwill)

Adjusted tax rate

(Taxes related to current income before taxes - non current items of 2017 (effect of change in expected tax rate on deferred taxes+ set up of deferred tax assets, not recognized in prior years))/Income before taxes.

Associates

Companies in which Barco has a significant influence, generally reflected by an interest of at least 20%. Associates are accounted for using the equity method.

BarcoCFG

Full name is CFG Barco (Beijing) Electronics Co, Ltd. Barco CFG is the entity where Barco joined forces with China Film Group to address the Chinese cinema market. Barco holds a 58 % stake in this entity at end of 2017.

Book value per share

Equity attributable to the Group divided by number of shares outstanding at balance sheet date.

Capital ratio

Equity relative to total assets.

Dividend yield

Gross dividend as a percentage of the share price on 31 December.

DPO

Days payable outstanding calculated as Trade Payables / (Material cost + Services and other costs) x 365; including assets held for sale.

DSO

Days sales outstanding calculated as ((Trade debtors + trade debtors Barco CFG (see note 3 assets held for sale), net) / (sales past quarter)) * 90; including assets held for sale.

EBIT

Operating result (earnings before interest and taxes), calculated as gross profit less research & development expenses, sales and merketing expenses, general and administration expenses, other operating income (expense)-net and plus or minus adjusting items.

EBITDA

Adjusted EBIT + depreciation, amortization and impairments (if any).

Equity method

Method of accounting whereby an investment (in a joint venture or an associate) is initially recognized at cost and subsequently adjusted for any changes in the investorâ&#x20AC;&#x2122;s share of the joint venture's or associateâ&#x20AC;&#x2122;s net assets (i.e. equity). The income statement reflects the investorâ&#x20AC;&#x2122;s share in the net result of the investee.

Free cashflow

Gross operating cash flow excluding share options recognized as cost + change in networking capital + Interest (expense)/income + income taxes + purchase of tangible and intangible fixed assets (excl. One Campus) + proceeds on disposals of tangible and intangible fixed assets.

Indirect costs / expenses

Research & development expenses, sales and marketing expenses and general and administration expenses including depreciations and amortizations.

Inventory turns

Inventory turns = 12 / [Inventory / (average monthly sales last 12 months x material cost of goods sold %)], including assets held for sale.


Financial statements

Barco annual report 2017 C/104

Financial term or APM

Explanation

Net financial cash/(debt)

Cash and cash equivalents + long-term financial receivables - long-term debts - current portion of long-term debts - short-term debts.

Non-recurring tax items

Effect of change in expected tax rate on deferred taxes + innovation income deduction (IID) + tax adjustments related to prior periods + capital loss carried back/gain on sold share deal entities.

Operating capital employed (including goodwill)

Operating capital employed + goodwill including assets held for sale.

Operating capital employed (OCE)

Working capital + other long term assets and liabilities, including assets held for sale.

Operating expenses (OPEX)

Research & development expenses, sales and marketing expenses and general and administration expenses excluding depreciations and amortizations.

Order

An order can only be recognized if a valid purchase order has been received from the invoice-to customer. An order is only valid if it is: - In writing. This includes e-mail and electronic version of the purchase order out of the customer’s ERP system.  The e-mail needs to originate from the customer’s mail server and not from a personal mail account. - The contract needs to be signed by an authorized person from the business partner. Next to this, a minimum number of fields need to be mentioned on the order like customer name, address, etc.

Orderbook

Orderbook are previously received orders, which still fulfill all the conditions of an order, but are not deliverd yet and hence not taken in revenue.

Other long term assets and liabilities

Other long term assets & liabilities include the sum of other intangible assets, land and buildings, other tangible assets, deferred tax assets (net). We refer to note 11, 12 and 13 for the amounts.

Other working capital

Other working capital include the net of other non-current assets, other amounts receivable, prepaid expenses and accrued income, other long term liabilities, advances received from customers, tax payables, employee benefits liabilities, other current liabilities, accrued charges and deferred income and provisions, includings assets held for sale.

Subsidiaries

Companies in which Barco exercises control.

Working capital (net)

Trade debtors + inventory - trade payables - other working capital.


B/71

Barco annual report 2017

Group management Beneluxpark 21 BE-8500 Kortrijk Tel.: +32 (0)56 23 32 11 Registered office President Kennedypark 35 BE-8500 Kortrijk Tel.: +32 (0)56 23 32 11 Stock exchange Euronext Brussels Financial information More information is available from the Group’s Investor Relations Department: Carl Vanden Bussche Vice President Investor Relations Tel.: +32 (0)56 26 23 22 E-mail: carl.vandenbussche@barco.com

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Barco annual report 2017  
Barco annual report 2017