Quarterly Report • May 12, 2014
Quarterly Report
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Carl Zeiss Meditec
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Adjusted for currency effects, Carl Zeiss Meditec increased its revenue by 8.5 % in the fi rst six months. Once again, "Surgical Ophthalmology" achieved the highest growth rates within the Group. "Microsurgery" made up for its revenue decline in the fi rst quarter. Japan considerably contributed to this result due to a forthcoming VAT increase.
R&D ratio remains high at 10.4 %. Further product innovations launched as key to sustainable growth
The launch of the OPMI LUMERA® 700 and RESCANTM 700 saw the introduction of the fi rst ophthalmic surgery microscope with integrated OCT technology, which offers surgeons a whole new range of intraoperative visualization possibilities by combining two established ZEISS gold standards.
EBIT margin down slightly compared with same quarter of previous year; medium-term target of 15 % by 2015 confi rmed
The EBIT margin reached the previous year's level in the second quarter, but is down slightly based on the fi rst six months.
"Asia/Pacifi c" region achieves highest regional growth rates of approx. 21 %
The main growth drivers in the "Asia/Pacifi c" region were Japan, China and Southeast Asia.
Once again, "Surgical Ophthal mology" achieved the highest growth rates of approx. 22 %
"Surgical Ophthalmology" benefi ts from the acquisition of Aaren Scientifi c Inc. in January 2014, as well as from a persistently strong demand for standard and premium IOLs, with an organic growth rate well into the double digits.
| Notes to the consolidated interim fi nancial statements | 24 |
|---|---|
| 1. General information | 24 |
| 2. Purchase and sale of business operations | 27 |
| 3. Effects of purchases in previous years | 33 |
| 4. Notes to the consolidated income statement | 33 |
| 5. Disclosures on fair value | 34 |
| 6. Events after the end of the interim reporting period | 35 |
| Responsibility statement |
Carl Zeiss Meditec increased its revenue by about 4 percent in the fi rst six month of fi nancial year 2013/2014. Revenue climed to a total of € 461 million. As in the previous year, this positive development of revenue was curtailed by negative currency effects. Earnings before interest and taxes (EBIT) amounted to € 63.7 million, which approximates the previous year's level, while the EBIT margin of 13.8 percent was slightly lower compared with the previous year.
All three strategic business units (SBUs) contributed to growth. The highest growth rate was once again achieved by our youngest strategic business unit: the "Surgical Ophthalmology" SBU recorded double-digit organic growth, thanks to its strong product portfolio for cataract surgery – even without taking the fi rsttime consolidation of the acquired IOL specialist Aaren Scientifi c into account: revenue here increased by 22 percent compared with the previous year. In the "Ophthalmic Systems" SBU, refractive lasers made the largest contribution to growth. Below the line, this SBU achieved a slight increase in revenue of 2.5 percent, in spite of persistently strong competitive pressure, particularly in diagnostics, and negative currency effects; adjusted for currency effects this increase amounts to 7 percent. The "Microsurgery" SBU, which had made a cautious start to the new fi nancial year, recorded a double-digit percentage increase in revenue in the second quarter, thus achieving overall revenue on a par with the previous year again, in spite of high exchange rate losses in the fi rst half of the year. We were helped, however, particularly in this SBU, by a one-off special effect: Japan developed well after a VAT increase from 1 April accelerated investment decisions.
The encouraging fi gures from Japan are also refl ected in the regional distribution of revenue. Besides China and the countries of Southeast Asia, the revenue increase in Japan resulted in a particularly good performance of the "APAC" ("Asia/Pacifi c") region. In the fi rst six months of the fi nancial year, this region achieved total revenue growth of 9.8 percent, which equates to growth of around 21 percent after adjustment for currency effects. The "Americas" region, on the other hand, recorded a slight decline in revenue, although adjustment for currency effects resulted in slight growth. As in previous years, the individual markets of the "EMEA" ("Europe, Middle East and Africa") region performed very differently, but the region as a whole grew by 3.8 percent. The fi gures for Germany were stable. Business in Russia continued to decline sharply, now that some government investment schemes, from which it benefi ted over the past two years, have come to an end. Revenue in Southern Europe was recovering to some extent.
All in all, the development of Carl Zeiss Meditec's business was largely satisfactory in the fi rst six months of fi nancial year 2013/2014. It should not be forgotten that we still face some major challenges: the rise in competitive pressure in individual segments is immense; exchange rate losses continuously threaten to curtail the positive results. How can we confront these challenges? Our answer: cost awareness and product innovations. We recently launched another promising innovation. The OPMI LUMERA® 700 and RESCANTM 700 is the fi rst ophthalmic surgery microscope with an integrated OCT camera. This unique combination of two established ZEISS gold standards means we can now offer surgeons more comprehensive visualization during surgery, which enables better treatment results. With contributions to innovation such as this, Carl Zeiss Meditec shall also remain on course for growth in the medium term. Another task ahead of us in the current fi nancial year, which shall make a positive contribution to growth, is the successful integration of the acquisitions of Aaren Scientifi c and Optronik.
Carl Zeiss Meditec shall adhere fi rmly to its objective to increase revenue at least in line with market growth. At the current time, the Company's management forecasts total revenue of between € 910 and € 940 million, which would correspond to overall growth of 0.4 to 3.7 percent. At the currency rates of the previous year, this would have equated to a growth of about 3.7 percent to 7.5 percent. We shall also adhere fi rmly to our target to reach an EBIT margin of 15 percent by 2015.
I would like to invite you to continue to put your trust in us and accompany us on the successful path we have chosen.
Jena, May 2014 May
Dr Ludwin Monz President and CEO Carl Zeiss Meditec AG
Carl Zeiss Meditec AG, Jena, Germany, is the parent company of the Carl Zeiss Meditec Group ("Carl Zeiss Meditec", the "Group", the "Company"), which comprises additional subsidiaries.
The following changes occurred with respect to the Group's reporting entity and the structure of its consolidated fi nancial statements in the fi rst six months of 2013/2014:
At the end of the fi rst quarter Carl Zeiss Meditec assumed 100 percent of the shares in the distribution and service company Optronik A.S. in Turkey. Carl Zeiss Meditec assumed Optronik's business activities with effect from 30 December 2013, as contractually agreed.
Furthermore, on 7 January 2014 Carl Zeiss Meditec acquired 100 % of the shares in US intraocular lens manufacturer, Aaren Scientifi c Inc., which is domiciled in Ontario/California. Aaren Scientifi c Inc. is a company engaged in the research, development, manufacture and global distribution of intraocular lenses and other ophthalmic surgery products for cataract surgery. Aaren Scientifi c Inc. has been integrated in the strategic business unit "Surgical Ophthalmology" and supplements the existing locations Berlin in Germany and La Rochelle in France. This acquisition is an important strategic step for Carl Zeiss Meditec in terms of generating further growth in the "Surgical Ophthalmology" SBU in future.
Table 1: Summary of key ratios in the consolidated income statement (fi gures in € '000, unless otherwise stated)
| 6 Months 2012/2013 |
6 Months 2013/2014 |
Change | |
|---|---|---|---|
| Revenue | 442,957 | 460,922 | + 4.1 % |
| Gross margin | 53.2 % | 52.6 % | - 0.6 %-pts |
| EBITDA | 73,298 | 73,008 | - 0.4 % |
| EBITDA margin | 16.5 % | 15.8 % | - 0.7 %-pts |
| EBIT | 64,767 | 63,660 | - 1.7 % |
| EBIT margin | 14.6 % | 13.8 % | - 0.8 %-pts |
| Earnings before income taxes | 69,986 | 66,502 | - 5.0 % |
| Tax rate | 33.0 % | 33.6 % | + 0.6 %-pts |
| Consolidated net income after non-controlling interests | 42,447 | 39,473 | - 7.0 % |
| Earnings per share after non-controlling interests | € 0.52 | € 0.49 | - 7.0 % |
The Carl Zeiss Meditec Group increased its total revenue in the fi rst six months of fi nancial year 2013/2014, from € 443.0 million in the same period of the previous year, to € 460.9 million. This corresponds to revenue growth of 4.1 % (adjusted for currency effects: 8.5 %).
The highest growth rates were achieved in particular by the strategic business unit "Surgical Ophthalmology" and, at a regional level, by the "Asia/Pacifi c" region.
Currency effects continued to infl uence growth, especially in the "Asia/Pacifi c" region.
Due to its signifi cant growth, the "Surgical Ophthalmology" SBU's share of total revenue has now increased to 15.9 % after the fi rst six months of the current fi nancial year (previous year: 13.6 %). The "Ophthalmic Systems" SBU accounted for 39.1 % (previous year: 39.7 %) of consolidated revenue, while the "Microsurgery" SBU accounted for 45.0 % (previous year: 46.7 %).
| Figure 1: Share of strategic business units in consolidated revenue in the fi rst six months of fi nancial year 2013/2014 | ||
|---|---|---|
| Ophthalmic Systems SBU | 39.1 % | |
| Surgical Ophthalmology SBU | 15.9 % | |
| Microsurgery SBU | 45.0 % |
Revenue in the "Ophthalmic Systems" SBU increased to € 180.2 million after the fi rst six months of the current fi nancial year (previous year: € 175.8 million). This SBU therefore achieved growth of 2.5 % (adjusted for currency effects: 6.9 %), in spite of persistently high exchange rate losses. In particular the refractive laser business contributed to this growth. In the area of diagnostic equipment, on the other hand, a strong competitive pressure persisted.
The "Surgical Ophthalmology" SBU increased its revenue by 21.5 % to € 73.4 million (previous year: € 60.5 million). Therefore, this business unit once again made a signifi cant contribution to growth in the fi rst six months. Even without taking the fi rst-time consolidation of Aaren Scientifi c Inc. into account, the SBU achieved a clear double-digit percentage organic growth rate. This business remained largely unaffected by exchange rate fl uctuations. The business unit continued to benefi t in particular from the growing demand for innovative intraocular lenses and multifocal and toric premium lenses for minimally invasive cataract surgery. The AT LISA® tri toric lens, an advancement of the AT LISA® tri, with additional astigmatism correction, has established itself very successfully in the market within the fi rst few months of its launch.
The "Microsurgery" SBU made up for the decline in its revenue in the fi rst quarter and generated € 207.3 million, which is at almost the same level as the previous year (previous year € 206.7 million; 0.3 %) (adjusted for currency effects: 5.9 %). The strongest sales drivers continued to be the surgical microscopes for neurosurgery and ENT surgery.
Figure 3: Consolidated revenue by strategic business unit based on constant exchange rates (fi gures in € '000)
The Carl Zeiss Meditec Group has a very balanced range of business activities worldwide, with each of its three strategic business regions generating around one third of its total revenue. After the fi rst six months 34.4 % of consolidated revenue was attributable to the region "Europe, Middle East and Africa" (EMEA). The "Americas" and "Asia/Pacifi c" (APAC) regions accounted for 30.7 % and 34.9 %, respectively, of the Group's total revenue.
Figure 4: Share of regions in consolidated revenue in the fi rst six months of fi nancial year 2013/2014
Revenue in the "EMEA" region increased by 3.8 % in the fi rst six months (adjusted for currency effects: 3.8 %), to a total of € 158.5 million (previous year: € 152.6 million). As in the previous quarters, the development in the individual markets of the region was very varied in some cases. The core markets Germany and France were stable as a whole. The countries of Southern Europe grew overall. Revenue growth in Russia – which contributed signifi cantly to this region's growth in the past two years, due to government investment schemes – was curtailed, as expected, by the expiry of these investment schemes.
In the "Americas" region, the Carl Zeiss Meditec Group generated revenue of € 141.7 million, resulting in slightly lower consolidated revenue compared with the previous year's total of € 143.9 million (- 1.5 %), due mainly to unfavorable foreign exchange rate fl uctuations. Based on constant exchange rates, business in this region grew slightly, by 1.9 %. Business in the USA was largely stable, however. The countries of South America continued to grow signifi cantly.
The "APAC" region made the greatest contribution to overall growth. However, currency effects continued to have a noticeable impact in this region, due, in particular, to the considerable volatility of the Japanese yen in the fi rst six months. Nevertheless, the region increased its revenue by 9.8 % in the fi rst six months, to € 160.8 million (previous year: € 146.5 million). Excluding the signifi cant currency effects, revenue increased by as much as 20.8 %. Japan, China and the countries of Southeast Asia proved to be the region's strongest growth drivers, with Japan's development receiving a particular boost by a forthcoming increase in VAT as from 1 April 2014.
Figure 6: Consolidated revenue by region based on constant exchange rates (fi gures in € '000)
Gross profi t amounted to € 242.3 million at the end of the fi rst six months of the current fi nancial year (previous year: € 235.8 million). The corresponding margin for the period under review is 52.6 % (previous year: 53.2 %).
Functional costs for the fi rst six months of the reporting year amount to € 178.6 million (previous year: € 171.0 million). The ratio of functional costs to revenue remained almost constant, however, compared with the previous year, at 38.8 % (previous year: 38.6 %).
Selling and marketing expenses: Selling and marketing expenses increased slightly in the fi rst six months of the current fi nancial year, from € 104.7 million to € 109.3 million. The increase in selling and marketing expenses is primarily attributable to higher costs of trademark licenses proportionate to revenue, higher personnel expenses, and the acquisitions of Aaren Scientifi c Inc. and Optronik A.S. Relative to sales revenues, selling and marketing expenses remained on almost the same level as in the same period of the previous year, at 23.7 % (previous year: 23.6 %).
The Carl Zeiss Meditec Group uses earnings before interest and taxes (EBIT = operating result) as a key performance indicator. EBIT amounted to € 63.7 million for the period from October to March, and was thus almost as high as in the previous year (€ 64.8 million). The EBIT margin was 13.8 % (previous year: 14.6 %).
Earnings before interest, taxes, depreciation and amortization (EBITDA) were almost the same as for the fi rst six months of the previous year, at € 73.0 million (previous year: € 73.3 million). The EBITDA margin was thus 15.8 % (previous year: 16.5 %).
Currency effects arose in the form of foreign currency gains in the amount of € 3.5 million (previous year: € 5.5 million), mainly as a result of the implementation of currency forward contracts and their valuation as of 31 March 2014.
The tax rate increased slightly year-on-year, from 33.0 % to 33.6 %. Generally, an average annual tax rate of between 32 % and 34 % is assumed.
In the fi rst six months basic consolidated net income1 amounted to € 39.5 million (previous year: € 42.4 million). Non-controlling interests accounted for € 4.7 million of this (previous year: € 4.5 million). In the past six months, basic earnings per share of the parent company thus amount to € 0.49 (previous year: € 0.52).
The Carl Zeiss Meditec Group's statement of cash fl ows shows the origins and use of the cash fl ows during the reporting period. The statement of cash fl ows is also presented with adjustments for the effects of the acquisitions of Aaren Scientifi c Inc. and Optronik A.S. A distinction is made between cash fl ows from operating activities and cash fl ows from investing and fi nancing activities.
Changes in individual items in the income statement and the statement of fi nancial position are recorded in the statement of cash fl ows. In contrast, the consolidated statement of fi nancial position presents the fi gures as they stood at the end of the reporting period on 31 March 2014. As a result, the statements in the analysis of the fi nancial position may differ from the presentation of net assets based on the consolidated statement of fi nancial position.
| 6 Months 2013/2014 | 6 Months 2012/2013 | |
|---|---|---|
| Cash fl ow from operating activities |
22,308 18,191 |
|
| Cash fl ow from investing activities |
- 44,385 - 25,541 |
|
| Cash fl ow from fi nancing activities |
27,790 6,406 |
|
| Change in cash and cash equivalents |
5,431 - 1,912 |
Figure 7: Summary of key ratios in the consolidated statement of cash fl ows (fi gures in € '000)
Cash fl ow from operating activities amounted to € 22.3 million in the reporting period (previous year: € 18.2 million). The higher cash infl ow compared with the previous year is mainly attributable to a more moderate increase in trade receivables compared with the previous year. Higher tax payments than in the previous year reduced cash fl ow from operative activities.
In the reporting period cash fl ow from investing activities amounted to € - 44.4 million (previous year: € - 25.5 million). It should be noted, that there was a higher outfl ow of cash during the fi rst six months of this fi nancial year than in the previous year, due mainly to the acquisition of the longstanding distribution partner Optronik A.S. in Turkey and the U.S. intraocular lens manufacturer Aaren Scientifi c Inc.
Cash fl ow from fi nancing activities in the fi rst six months of the current fi nancial year amounts to € 27.8 million (previous year: € 6.4 million). The difference here is mainly due to a reduction of treasury receivables from the treasury of Carl Zeiss Financial Services.
| Key ratio | Defi nition | 30 September 2013 |
31 March 2014 |
Change |
|---|---|---|---|---|
| Cash and cash equivalents |
Cash-in-hand and bank balances | 6,286 | 11,717 | + 86.4 % |
| Net cash | Cash-in-hand and bank balances + Treasury receivables from Group treasury of Carl Zeiss AG2 ./. Treasury payables to Group treasury of Carl Zeiss AG |
351,839 | 265,132 | - 24.6 % |
| Net working capital | Current assets including fi nancial investments ./. Cash and cash equivalents ./. Treasury receivables from Group treasury of Carl Zeiss AG3 ./. Current liabilities excl. treasury payables to Group treasury of Carl Zeiss AG |
316,377 | 329,431 | + 4.1 % |
| Working capital | Current assets ./. Current liabilities |
528,216 | 476,563 | - 9.8 % |
Table 2: Key ratios relating to fi nancial position (fi gures in € '000)
11
| Table 3: Key ratios relating to fi nancial position | ||||
|---|---|---|---|---|
| Key ratio | Defi nition | 6 Months 2012/2013 |
6 Months 2013/2014 |
Change |
| Cash fl ow per share | Cash fl ow from operating activities | € 0.22 | € 0.27 | + 22.6 % |
| Weighted average number of shares outstanding | ||||
| Capex ratio | Investment (cash) in property, plant and equipment | 0.9 % | 1.2 % | + 0.3 %-pts |
| Consolidated revenue |
Total assets amounted to € 986.1 million as of 31 March 2014 (30 September 2013: € 983.1 million).
Figure 8: Structure of the consolidated statement of fi nancial position: assets (all fi gures in € '000)
Non-current assets increased due to the increase in goodwill associated with the acquisition of Optronik A.S. and Aaren Scientifi c Inc. and to the increase in intangible assets, from € 247.6 million on 30 September 2013 to € 309.6 million on 31 March 2014.
There were signifi cant changes in current assets as of 31 March 2014 (€ 676.6 million; 30 September 2013: € 735.5 million), due in particular to the higher inventories, mainly as a result of the acquisitions of Optronik A.S. and Aaren Scientifi c Inc. Inventories increased to € 161.6 million as of 31 March 2014 (30 September 2013: € 148.5 million).
Figure 9: Structure of the consolidated statement of fi nancial position: liabilities (all fi gures in € '000)
The equity recognized in Carl Zeiss Meditec's consolidated statement of fi nancial position amounts to € 709.3 million as of 31 March 2014 (30 September 2013: € 715.3 million). The equity ratio is 71.9 % (30 September 2013: 72.8 %) and thus remains high.
Non-current liabilities amounted to € 76.8 million as of 31 March 2014 (30 September 2013: € 60.5 million). Under current liabilities (€ 200.0 million; 30 September 2013: € 207.2 million) trade payables and liabilities to related parties decreased, due, among other things, to effects relating to the end of the reporting period.
| Table 4: Key ratios relating to net assets | ||||
|---|---|---|---|---|
| Key ratio | Defi nition | 30 September 2013 |
31 March 2014 |
Change |
| Equity ratio | Equity (incl. non-controlling interests) | 72.8 % | 71.9 % | - 0.9 %-pts |
| Total assets | ||||
| Rate of inventory | Cost of goods sold | 2.9 | 2.8 | - 0.1 |
| turnover | Average inventories | |||
| Days of sales outstanding (DSO)4 |
Trade receivables at the end of the reporting period (gross) ./. rolling monthly sales |
50.8 days | 53.2 days | + 4.7 % |
As of 31 March 2014 orders on hand of the Carl Zeiss Meditec Group amounted to € 107.7 million, which corresponds to a slight increase of 2.0 % compared with the previous year (31 March 2013: € 105.6 million).
At the end of the fi rst quarter Carl Zeiss Meditec acquired its longstanding business partner Optronik A.S. in Turkey, which is domiciled in Ankara. In the past Optronik A.S. was the Company's exclusive distribution partner; it shall now be integrated into the global distribution and service network.
On 7 January 2014 Carl Zeiss Meditec acquired the US manufacturer of intraocular lenses, Aaren Scientifi c Inc., which is domiciled in Ontario/California. Aaren Scientifi c Inc. is integrated in the strategic business unit "Surgical Ophthalmology" and supplements the existing locations Berlin in Germany and La Rochelle in France. This acquisition is an important strategic step for Carl Zeiss Meditec in terms of generating further growth in the "Surgical Ophthalmology" SBU in future.
No further events of material signifi cance for the net assets, fi nancial position and results of operations of the Company occurred in the fi rst six months of fi nancial year 2013/2014.
No events of material signifi cance for the Group's net assets, fi nancial position and earnings occurred after the end of the fi rst six months of fi nancial year 2013/2014. The development of business at the beginning of the second half of fi nancial year 2013/2014 validates the statements made in the "Outlook" below.
As of 31 March 2014, the Group had a workforce of 2,909 worldwide (31 March 2013: 2,532). This increase is mainly related to the acquisition of Aaren Scientifi c Inc.
Research and development plays an important role within the Carl Zeiss Meditec Group. The Carl Zeiss Meditec Group has the necessary resources to secure the Company's future earnings strength with its research and development activities. The Company shall therefore continue to offer innovations in future that make leading technologies available for its customers, enable improvements in effi ciency and continuously enhance treatment results for patients.
The Carl Zeiss Meditec Group once again further expanded its research and development activities in the fi rst three months of the current fi nancial year, and invested a total of € 48.0 million (previous year: € 46.0 million) in research and development. At 10.4 % of sales revenue the R&D ratio remained almost constant in comparison to the previous year.
As of 31 March 2014, there were 423 research and development employees Group-wide (31 March 2013: 411). This corresponds to 14.5 % (31 March 2013: 16.2 %) of the Carl Zeiss Meditec Group's entire workforce.
Research and development at Carl Zeiss Meditec mainly focuses on:
Once again, a number of innovations were launched on the market during the reporting period:
The MEL® 90 is a new and improved excimer laser for laser vision correction. It enables a reduction in the depth of ablation and treatment times, and also ensures even greater reproducibility at the same time. The MEL® 90 guarantees gentle correction and excellent predictability, even in patients with very high or very low ametropia. The shorter treatment time increases comfort for both the patient and the surgeon.
The ZEISS Cataract Suite markerless enables a comprehensive, end-to-end workfl ow for cataract surgery with astigmatism correction, with all components working together in perfect harmony. It incorporates components such as the ZEISS IOLMaster® 500 for quick reference images of the eye, the comprehensive data management system FORUM®, the OR assistance system CALLISTO eye®, right through to the OPMI LUMERA® 700 surgical microscope. Surgeons can therefore devote their full attention to the surgical procedure and patients benefi t from a more comfortable treatment.
The new ultrasound modulation APMTM (Advanced Power Modulation) for the VISALIS® 500, the phacoemulsifi cation device, is proving impressive in medical tests by signifi cantly reducing phaco energy and increasing anterior chamber stability. For the patient this means better treatment outcomes and faster recovery of the eye after surgery, as well as a signifi cantly shorter treatment time.
The toric trifocal intraocular lens expands the Company's range of premium intraocular lenses. The AT LISA® tri toric 939MP is the fi rst preloaded trifocal toric intraocular lens on the market. Following the extremely successful launch of the AT LISA® tri 839MP last year, ophthalmologists can now also give cataract patients with astigmatism an almost natural visual experience without glasses in the near, distance and intermediate range. Based on the LISA concept and its product platform, the AT LISA® tri toric also offers very good light transmission, as well as an innovative enhancement of asymmetric light distribution: for the patient this means very good vision, even in diffi cult light conditions, the preservation of contrast sensitivity and the reduction of halos and undesirable glare effects, which is particularly important at night.
This system for integrated intraoperative OCT imaging combines two of ZEISS's gold standard technologies. The system incorporates the OPMI LUMERA® 700 surgical microscope and the integrated OCT camera RESCANTM 700. The system provides surgeons with top-quality OCT images of the eye, without the need for the surgeon to interrupt the operation to capture the images. The OCT images are superimposed over the microscope image in the eyepiece as three-dimensional real-time images, thus giving a view of anatomical details below the surface and making it possible to identify even transparent structures of the anterior and posterior segments of the eye. This means that the necessary preoperative OCT information is constantly available during the surgical procedure. Continuous OCT scanning also helps to improve the treatment results, as the surgeon can monitor progress and can review the outcome during the operation. The new device thus provides a better foundation for making decisions during surgery.
Carl Zeiss Meditec anticipates further growth in the medical technology market, as the main growth drivers – such as the growing global population, the rising number of older people, and the increasing proportion of the global population with access to medical care – shall endure.
If nothing else, the development of the global economy shall infl uence the growth of the medical technology industry. Private customers or public budgets may postpone their investment decisions until the future, or make them prematurely.
Based on the Company's balanced regional presence, its broad product portfolio and substantial investments in research and development, and in spite of imponderable macroeconomic conditions, the management assumes that there will be further revenue growth in the next two fi nancial years that is at least on a par with the expected market growth for this industry.
The "Ophthalmic Systems" SBU is characterized by growing competitive pressure. However, having largely redesigned our model range in optical coherence tomography at the beginning of the last fi nancial year, and launching product innovations with refractive lasers, such as the ReLEx® smile procedure and the new excimer laser MEL® 90, we feel cautiously optimistic about the current fi nancial year and are confi dent that we will be able to defend our market shares.
The "Surgical Ophthalmology" SBU continued to grow in the past three months. We expect this growth to continue in the fi nancial year. To achieve this we need to exploit and exhaust any potential that remains in the markets in which we operate and further strengthen our market position through innovations. Microincision (MICS) lenses, which are already well established in the market, shall play a key role in this, as well as the injectors suitable for implantation. Carl Zeiss Meditec's AT LISA® tri, in combination with the BLUEMIXSTM 180 injector, is the only preloaded MICS-compliant trifocal intraocular lens on the market. The recently launched toric version of the AT LISA® tri for astigmatism patients also performed very well in the fi rst quarter. The portfolio in the fi eld of "Surgical Ophthalmology" shall also be signifi cantly expanded by the acquisition of Aaren Scientifi c Inc. at the beginning of the second quarter. Carl Zeiss Meditec therefore has an even more extensive product range for ophthalmic surgery, which, with the extended range of intraocular ranges, is the broadest in the industry. As a result, we are confi dent that we will be able to further increase our market shares in the current fi nancial year.
We have an extraordinarily strong market position in the "Microsurgery" SBU. In spite of a rather restrained fi rst six months overall, we are cautiously optimistic about the development of revenue in the second half of the fi nancial year, due also to the positive development in the second quarter. With our surgical microscopes OPMI® Pentero® for neuro, spinal and plastic surgery, the OPMI LUMERA® for surgical procedures on the eye, which we recently combined successfully with our OCT technology into a new system, and the OPMI® VARIO, which is used in ENT surgery and other areas, we are well diversifi ed and are exploiting the associated market opportunities to an even greater degree by upgrading the products in terms of additional supporting applications for the user. We expect the "Microsurgery" SBU to continue to make signifi cant contributions to earnings in future. We are confi dent that we will be able to defend our market shares in the current fi nancial year.
As a global Group, our continued aim in the years ahead shall be to maintain as balanced a distribution of revenue as possible across our individual markets. Carl Zeiss Meditec currently generates around one third of its revenue in each of its three strategically important business regions: "EMEA", the "Americas" and "APAC".
Given the generally favourable conditions for market development in the medium and long term, and Carl Zeiss Meditec's good strategic position, the Company's management assumes that revenue will continue to grow in the current fi nancial year, provided that general economic conditions remain stable. We anticipate revenue growth that is at least on a par with the market growth expected for the industry.
The management's current prediction for this fi nancial year is total revenue of between € 910 and € 940 million, which would equate to total growth of 0.4 % to 3.7 %.
A crucial advantage for even greater stability of our overall business is a higher proportion of revenue with case-number-dependent products and services, since there is generally less fl uctuation in these areas than in the capital goods business, for example. From a current perspective, we expect a further increase in case-number-dependent revenue in fi nancial year 2013/2014. In the medium term we still aim to increase this share of revenue to around 30 % of consolidated revenue.
The EBIT margin for the fi rst six months is 13.8 %. We shall continue to adhere to our medium-term target of an EBIT margin of 15 % by 2015.
If there are any signifi cant changes in the economic environment currently forecast over the course of the fi nancial year and should it thus become necessary to amend the statements made here on business development from today's perspective, we shall publish these amendments promptly and specify our expectations in more detail.
In the fi rst six months of the current fi nancial year no member of the Management Board or Supervisory Board and no individual closely related to a member of the Management Board or Supervisory Board executed any notifi able securities transactions pursuant to Section 15a German Securities Trading Act (Wertpapierhandelsgesetz, WpHG).
The details of all securities transactions executed by members of the Management Board and Supervisory Board are published immediately after their disclosure on the Company's website at www.meditec.zeiss.com/ir | Corporate Governance | Directors' Dealings in accordance with the prevailing legal requirements of Section 15b WpHG. The publication documents and the relevant disclosures are forwarded to the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin).
At the current time, no Company shares are held by members of the Management Board or Supervisory Board of Carl Zeiss Meditec AG.
| Figure 10: Shareholder structure of Carl Zeiss Meditec AG (as of 31 March 2014) | ||
|---|---|---|
| Carl Zeiss Group | ca. 65 % | |
| Free fl oat | ca. 35 % | |
| (Figures in € '000) | ||||
|---|---|---|---|---|
| 2nd quarter 2013/2014 1 January 2014 – 31 March 2014 |
2nd quarter 2012/2013* 1 January 2013 – 31 March 2013 |
Financial year 2013/2014 1 October 2013 – 31 March 2014 |
Financial year 2012/2013* 1 October 2012 – 31 March 2013 |
|
| Revenue | 248,643 | 223,958 | 460,922 | 442,957 |
| Cost of goods sold | (120,335) | (105,622) | (218,649) | (207,205) |
| Gross profi t | 128,308 | 118,336 | 242,273 | 235,752 |
| Selling and marketing expenses | (55,606) | (51,268) | (109,277) | (104,656) |
| General administrative expenses | (11,336) | (10,715) | (21,363) | (20,298) |
| Research and development expenses | (24,200) | (22,911) | (47,973) | (46,031) |
| Earnings before interests, income taxes, depreciation and amortization |
42,468 | 37,706 | 73,008 | 73,298 |
| Depreciation and amortization | 5,302 | 4,264 | 9,348 | 8,531 |
| Earnings before interests and income taxes |
37,166 | 33,442 | 63,660 | 64,767 |
| Interest income | 285 | 587 | 907 | 1,288 |
| Interest expense | (1,631) | (1,522) | (3,130) | (2,829) |
| Foreign currency gains/(losses), net | (1,981) | (1,465) | 3,529 | 5,488 |
| Other fi nancial result | 826 | 639 | 1,536 | 1,272 |
| Earnings before income taxes | 34,665 | 31,681 | 66,502 | 69,986 |
| Income tax expense | (11,942) | (9,956) | (22,355) | (23,074) |
| Net income | 22,723 | 21,725 | 44,147 | 46,912 |
| Attributable to: Shareholders of the parent company Non-controlling interest |
19,375 3,348 |
19,120 2,605 |
39,473 4,674 |
42,447 4,465 |
| Profi t/(loss) per share, attributable to the shareholders of the parent company in the current fi nancial year (€): – Basic/diluted |
0.24 | 0.24 | 0.49 | 0.52 |
* The prior-year fi gures are adjusted due to amended IAS 19 regulations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (IFRS)
| (Figures in € '000) | ||||
|---|---|---|---|---|
| 2nd quarter 2013/2014 1 January 2014 – 31 March 2014 |
2nd quarter 2012/2013* 1 January 2013 – 31 March 2013 |
Financial year 2013/2014 1 October 2013 – 31 March 2014 |
Financial year 2012/2013* 1 October 2012 – 31 March 2013 |
|
| Net income | 22,723 | 21,725 | 44,147 | 46,912 |
| Other comprehensive income: | ||||
| Items, that may be reclassifi ed subsequently to net income/loss |
||||
| Foreign currency translation | 679 | (1,030) | (8,529) | (14,007) |
| Total of items that may be reclassifi ed subsequently to net income/loss |
679 | (1,030) | (8,529) | (14,007) |
| Items, that will not be reclassifi ed subsequently to net income/loss |
||||
| Actuarial gains (losses) on defi ned benefi t pension plans |
(5,649) | 943 | (5,060) | (946) |
| Total of items that will not be reclassifi ed subsequently to net income/loss |
(5,649) | 943 | (5,060) | (946) |
| Other comprehensive income | (4,970) | (87) | (13,589) | (14,953) |
| Comprehensive income | 17,753 | 21,638 | 30,558 | 31,959 |
| Attributable to: Shareholders of the parent company Non-controlling interest |
13,981 3,772 |
21,265 373 |
28,598 1,960 |
34,516 (2,557) |
* The prior-year fi gures are adjusted due to amended IAS 19 regulations.
| (Figures in € '000) | ||
|---|---|---|
| 31 March 2014 | 30 September 2013* | |
| ASSETS | ||
| Goodwill | 154,142 | 121,046 |
| Other intangible assets | 40,189 | 12,531 |
| Property, plant and equipment | 54,735 | 54,433 |
| Investments | 167 | 124 |
| Deferred tax assets | 54,070 | 52,828 |
| Non-current trade receivables | 5,016 | 5,421 |
| Other non-current assets | 1,237 | 1,232 |
| Total non-current assets | 309,556 | 247,615 |
| Inventories | 161,553 | 148,467 |
| Trade receivables | 152,137 | 150,000 |
| Accounts receivable from related parties | 64,315 | 62,701 |
| Treasury receivables | 261,114 | 352,412 |
| Tax refund claims | 3,969 | 310 |
| Other current fi nancial assets | 6,196 | 6,384 |
| Other current non-fi nancial assets | 15,592 | 8,899 |
| Cash and cash equivalents | 11,717 | 6,286 |
| Total current assets | 676,593 | 735,459 |
* The prior-year fi gures are adjusted due to amended IAS 19 regulations.
| 31 March 2014 | 30 September 2013* | |
|---|---|---|
| LIABILITIES AND EQUITY | ||
| Share capital | 81,310 | 81,310 |
| Capital reserve | 313,863 | 313,863 |
| Retained earnings | 325,649 | 322,765 |
| Gains and losses recognized directly in equity | (49,933) | (39,058) |
| Equity before non-controlling interest | 670,889 | 678,880 |
| Non-controlling interest | 38,394 | 36,434 |
| Total equity | 709,283 | 715,314 |
| Provisions for pensions and similar commitments | 41,288 | 32,747 |
| Other non-current provisions | 3,619 | 3,703 |
| Non-current fi nancial liabilities | 1,607 | 1,820 |
| Non-current leasing liabilities | 10,631 | 11,969 |
| Other non-current non-fi nancial liabilities | 7,448 | 7,863 |
| Deferred tax liabilities | 12,243 | 2,415 |
| Total non-current liabilities | 76,836 | 60,517 |
| Current provisions | 37,611 | 35,785 |
| Current accrued liabilities | 60,922 | 60,274 |
| Current fi nancial liabilities | 2,550 | 2,717 |
| Current portion of non-current fi nancial liabilities | 462 | 507 |
| Current portion of non-current leasing liabilities | 1,997 | 1,835 |
| Trade payables | 29,415 | 35,861 |
| Current income tax liabilities | 10,848 | 11,962 |
| Accounts payable to related parties | 16,426 | 19,833 |
| Treasury payables | 7,699 | 6,859 |
| Other current non-fi nancial liabilities | 32,100 | 31,610 |
| Total current liabilities | 200,030 | 207,243 |
Total liabilities 986,149 983,074
(Figures in € '000)
* The prior-year fi gures are adjusted due to amended IAS 19 regulations. The following notes to the consolidated fi nancial statements are an integral part of the unaudited consolidated fi nancial statements.
| (Figures in € '000) | ||
|---|---|---|
| Financial year 2013/2014 1 October 2013 – 31 March 2014 |
Financial year 2012/2013* 1 October 2012 – 31 March 2013 |
|
| Cash fl ows from operating activities: | ||
| Net income | 44,147 | 46,912 |
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities |
||
| Income tax expenses | 22,355 | 23,074 |
| Result from carve-out of microscopy business of Optronik A.S. | (146) | – |
| Interest income/expenses | 2,223 | 1,541 |
| Depreciation and amortization | 9,348 | 8,531 |
| Gains/losses on disposal of fi xed assets | 61 | (40) |
| Interest received | 928 | 2,234 |
| Interest paid | (620) | (910) |
| Income tax reimbursement | 1,217 | 1,608 |
| Income taxes paid | (30,170) | (22,504) |
| Other non-cash income | (1,327) | – |
| Changes in working capital: | ||
| Trade receivables | (1,399) | (23,555) |
| Inventories | (11,923) | (11,895) |
| Other assets | (6,319) | (5,234) |
| Trade payables | (8,517) | (4,742) |
| Provisions and fi nancial liabilities | 2,320 | 3,395 |
| Other liabilities | 130 | (224) |
| Total adjustments | (21,839) | (28,721) |
| Net cash provided by operating activities | 22,308 | 18,191 |
| Cash fl ows from investing activities: | ||
| Investment in property, plant and equipment | (4,040) | (3,206) |
| Investment in intangible assets | (2,242) | (579) |
| Proceeds from fi xed assets | 411 | 151 |
| Proceeds from fi xed term deposits | 140,000 | 120,000 |
| Investments in fi xed term deposits | (118,000) | (140,000) |
| Acquisition of IOL/OVD-business IMEX Clinic S.L., Spain | (716) | (1,907) |
| Acquisition of consolidated companies/businesses, net of cash acquired | ||
| Optronik A.S., Turkey: | (10,800) | – |
| Aaren Scientifi c Inc., USA: | (51,206) | – |
| Carve-out of microscopy business of Optronik A.S. | 2,208 | – |
| Net cash used in investing activities | (44,385) | (25,541) |
| Cash fl ows from fi nancing activities: | ||
| Proceeds from/(repayment of) short-term debt | (101) | (22) |
| Proceeds from/(repayment of) non-current fi nancial liabilities | (277) | (254) |
| (Increase)/decrease in treasury receivables | 64,807 | 44,314 |
| Increase/(decrease) in treasury payables | 840 | (4,207) |
| Change of leasing liabilities | (890) | (901) |
| Dividend payments to shareholders of Carl Zeiss Meditec AG | (36,589) | (32,524) |
| Net cash provided by/(used in) fi nancing activities | 27,790 | 6,406 |
| Effect of exchange rate fl uctuation on cash and cash equivalents | (282) | (968) |
| Net increase/(decrease) in cash and cash equivalents | 5,431 | (1,912) |
| Cash and cash equivalents, beginning of reporting period | 6,286 | 9,526 |
| Cash and cash equivalents, end of reporting period | 11,717 | 7,614 |
* The prior-year fi gures are adjusted due to amended IAS 19 regulations.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)
| (Figures in € '000) | |||||||
|---|---|---|---|---|---|---|---|
| Share capital |
Capital reserve |
Retained earnings |
Gains and losses recognized directly in equity |
Equity before non controlling interest |
Non controlling interest |
Total equity |
|
| As of 1 October 2012 as reported | 81,310 | 313,863 | 261,309 | (1,491) | 654,991 | 40,806 | 695,797 |
| Effects from the retrospective application of IAS 19 revised |
– | – | 1,849 | (17,780) | (15,931) | – | (15,931) |
| As of 1 October 2012 | 81,310 | 313,863 | 263,158 | (19,271) | 639,060 | 40,806 | 679,866 |
| Foreign currency translation | – | – | – | (17,564) | (17,564) | (9,996) | (27,560) |
| Changes in value recognized directly in equity |
– | – | – | (17,564) | (17,564) | (9,996) | (27,560) |
| Net income | – | – | 93,505 | – | 93,505 | 5,617 | 99,122 |
| Sum of comprehensive income for the period |
– | – | 93,505 | (17,564) | 75,941 | (4,379) | 71,562 |
| Dividend payments | – | – | (32,524) | – | (32,524) | – | (32,524) |
| As of 30 September 2013 as reported | 81,310 | 313,863 | 322,290 | (19,055) | 698,408 | 36,427 | 734,835 |
| Effects from the retrospective application of IAS 19 revised |
– | – | (1,374) | (2,223) | (3,597) | 7 | (3,590) |
| As of 1 October 2013 | 81,310 | 313,863 | 322,765 | (39,058) | 678,880 | 36,434 | 715,314 |
| Foreign currency translation | – | – | – | (5,815) | (5,815) | (2,714) | (8,529) |
| Changes in equity from the remeasurement of pensions liabilities |
– | – | – | (5,060) | (5,060) | – | (5,060) |
| Changes in value recognized directly in equity |
– | – | – | (10,875) | (10,875) | (2,714) | (13,589) |
| Net income | – | – | 39,473 | – | 39,473 | 4,674 | 44,147 |
| Sum of comprehensive income for the period |
– | – | 39,473 | (10,875) | 28,598 | 1,960 | 30,558 |
| Dividend payments | – | – | (36,589) | – | (36,589) | – | (36,589) |
| As of 31 March 2014 | 81,310 | 313,863 | 325,649 | (49,933) | 670,889 | 38,394 | 709,283 |
Carl Zeiss Meditec AG prepared its consolidated fi nancial statements as of 30 September 2013 in accordance with the International Financial Reporting Standards (IFRSs) promulgated by the International Accounting Standards Board (IASB), London, as applicable in the EU as of that date. Accordingly, this interim report has been prepared in accordance with IAS 34 "Interim Financial Reporting".
The accounting and valuation principles applied for the interim fi nancial statements as of 31 March 2014 correspond to those applied for the consolidated fi nancial statements for fi nancial year 2012/2013, with the exceptions described below. A detailed description of these methods was published in the notes to the consolidated fi nancial statements as of 30 September 2013.
The Group was obliged to apply the following standards and interpretations for the fi rst time at the beginning of this fi nancial year:
| Date of issue | Standard/Interpretation | Amendment/New statutory regulation |
|---|---|---|
| 12 May 2011 | IFRS 13 "Fair Value Measurement" | Guidance on measurement and disclosures on the measurement of fair value |
| 16 June 2011 Amendment IAS 19 "Employee Benefi ts" |
Accounting treatment of defi ned benefi t pension plans, defi nition of the individual types of employee benefi ts and enhanced disclosure requirements |
|
| 19 October 2011 | IFRIC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine |
Accounting treatment of overburden removal costs during the production phase in surface mining |
| 16 December 2011 | Amendments IFRS 7 "Financial Instruments: Disclosures" |
Additional disclosures relating to the offsetting of fi nancial assets and liabilities |
| 13 March 2012 | Amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" |
Specifi cation of the accounting treatment of government loans with a below-market rate of interest |
| 17 May 2012 | Improvements to IFRSs (2009 – 2011) | Amendments to Standards IFRS 1, IAS 1, 16, 32 and 34 |
| 28 June 2012 | Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) |
Expansion of transition regulations to IFRS 10, 11 and 12 |
With the exception of the amendments to IFRS 13 and IAS 19, there were no signifi cant changes to the accounting and valuation methods in connection with any standards and interpretations applied for the fi rst time, nor are such changes expected.
IFRS 13 "Fair Value Measurement", which Carl Zeiss Meditec shall be obliged to apply prospectively from this fi nancial year, specifi es uniform guidelines for calculating fair value and enhances the disclosures in the notes on fair value measurement. The Standard does not, however, contain any requirements stipulating in which cases the fair value is to be applied. The fi rst-time application of IFRS 13 did not have any material effects on the measurement of fair value by the Group. A number of specifi c disclosures concerning fair value are required under IAS 34.16A(j), specifi cally for fi nancial instruments, and therefore affect the reporting period for the condensed consolidated interim fi nancial statements. The Group presents these disclosures in Section 5.
The amendments to IAS 19 "Employee Benefi ts" shall generally be mandatory with retrospective effect for fi nancial statements for fi nancial years starting on or after 1 January 2013. Carl Zeiss Meditec has adjusted the fi gures reported for the previous year for the effects of the amendments to IAS 19. Overall, the amendments to IAS 19 have the following material effects at Carl Zeiss Meditec:
Pensions and similar obligations: Up until now the Group has applied the corridor method. With the abolition of the corridor method as a result of the amended IAS 19, actuarial gains and losses have an immediate effect in the consolidated statement of fi nancial position and led to an increase in provisions for pensions and similar obligations and to a decrease in equity. In addition, pension obligations and plan assets are subject to a standard interest rate (Net Interest Approach).
Partial retirement obligations: Due to the amended defi nition under IAS 19, top-up contributions within the scope of partial retirement agreements shall no longer to be carried in their full amount as liabilities at their present value, rather, the top-up contributions shall be accumulated on a pro rata basis over the respective active service years within the term of the agreement with the partially retired employees. This shall reduce the provisions for partial retirement.
The following table shows the effects of the application of IAS 19 on the main items in the consolidated statement of fi nancial position as of 1 October 2012, and as of 30 September 2013.
(in € '000)
| 30 September 2013 | 1 October 2012 | |
|---|---|---|
| Deferred income taxes | 8,647 | 7,286 |
| Other non-current assets | - 6,144 | - 10,881 |
| Assets | 2,503 | - 3,595 |
| Retained earnings | 475 | 1,849 |
| Gains and losses recognized directly in equity | - 20,003 | - 17,780 |
| Non-controlling interest | 7 | 0 |
| Equity | - 19,521 | - 15,931 |
| Provisions for pensions and similar commitments | 22,113 | 14,944 |
| Other non-current provisions | - 89 | - 2,608 |
| Liabilities | 2,503 | - 3,595 |
The effects on the consolidated income statement for the period 1 October to 31 March 2013 are presented in the following table.
| (in € '000) | |
|---|---|
| 6 months Financial year 2012/2013 1 October 2012 – 31 March 2013 |
|
| Cost of goods sold | 177 |
| Selling and marketing expenses | 128 |
| General administrative expenses | 209 |
| Research and development costs | 106 |
| Earnings before interest and income taxes | 620 |
| Other fi nancial result | - 347 |
| Income tax expense | - 73 |
| Consolidated net income | 200 |
| thereof attributable to: Shareholders of the parent company Non-controlling interests |
200 0 |
The IASB and IFRS IC also issued the following standards, interpretations and revisions of existing standards; however, application of these is not yet mandatory for Carl Zeiss Meditec. The Company did not opt to apply these standards early:
| Date of issue Standard/Interpretation |
Amendment/New statutory regulation | Date of fi rst mandatory application |
Adopted by the EU |
|
|---|---|---|---|---|
| 12 November 2009 | IFRS 9 "Financial Instruments" | Classifi cation and measurement of fi nancial assets |
Not yet specifi ed | no |
| 28 October 2010 | Revision IFRS 9 "Financial Instruments" | Additional requirements for the accounting of fi nancial liabilities |
Not yet specifi ed | no |
| 12 May 2011 | IFRS 10 "Consolidated Financial Statements" Accounting regulations for the presentation of consolidated fi nancial statements and notes on the principle of control |
Financial years beginning on or after 1 January 2014 |
yes | |
| 12 May 2011 | IFRS 11 "Joint Arrangements" | Expansion of requirements for joint arrangements and their accounting treatment |
Financial years beginning on or after 1 January 2014 |
yes |
| 12 May 2011 | IFRS 12 "Disclosure of Interests in Other Entities" |
Enhanced disclosure requirements for subsidiaries, joint ventures and associates, as well as unconsolidated structured entities |
Financial years beginning on or after 1 January 2014 |
yes |
| 12 May 2011 | IAS 27 "Separate Financial Statements" | Guidance on the accounting treatment of investments in subsidiaries, associates and joint ventures in separate fi nancial statements |
Financial years beginning on or after 1 January 2014 |
yes |
| 12 May 2011 | IAS 28 "Investments in Associates and Joint Ventures" |
Guidelines for the accounting treatment of associates and principles for applying the equity method |
Financial years beginning on or after 1 January 2014 |
yes |
| 16 December 2011 | Amendments IFRS 32 "Financial Instruments: Presentation" |
Amendment to provisions for offsetting fi nancial assets and liabilities |
Financial years beginning on or after 1 January 2014 |
yes |
| 31 October 2012 | Amendment to IFRS 10, IFRS 12 and IAS 27 "Investment Entities" |
Special regulations for fi nancial statements of investment entities |
Financial years beginning on or after 1 January 2014 |
yes |
| 20 May 2013 | IFRIC Interpretation 21: Levies | Accounting treatment of levies imposed by governments |
Financial years beginning on or after 1 January 2014 |
no |
| 29 May 2013 | Amendment to IAS 36 "Impairment of Assets" |
Amendment of recoverable amount disclosures for non-fi nancial assets following the adoption of IFRS 13 |
Financial years beginning on or after 1 January 2014 |
yes |
| Date of issue | Standard/Interpretation | Amendment/New statutory regulation | Date of fi rst mandatory application |
Adopted by the EU |
|---|---|---|---|---|
| 27 June 2013 | Amendment to IAS 39 "Financial instruments: Recognition and Measurement" |
Novation of derivatives and continuation of hedge accounting |
Financial years beginning on or after 1 January 2014 |
yes |
| 19 November 2013 | Amendment IFRS 9 "Financial instruments" | Enhancement of provisions on hedge accounting |
Not yet specifi ed | no |
| 21 November 2013 | Amendment IAS 19 "Employee Benefi ts" | Specifi cation of the accounting treatment of employee contributions or third-party contributions for defi ned benefi t plans |
Financial years beginning on or after 1 July 2014 |
no |
| 12 December 2013 | Improvements to IFRSs (2010 – 2012) | Amendments to Standards IFRS 2, 3, 8, 13, IAS 16, 24 and 38 |
Financial years beginning on or after 1 July 2014 |
no |
| 12 December 2013 | Improvements to IFRSs (2011 – 2013) | Amendments to Standards IFRS 1, 3, 13, IAS 40 |
Financial years beginning on or after 1 July 2014 |
no |
Carl Zeiss Meditec is not expected to apply any of the standards listed above until the date of fi rst mandatory application. According to the current state of knowledge, the future application of these standards is only expected to have material effects on the accounting and valuation with respect to IFRS 9. The specifi c effects of the fi rst-time application of IFRS 9 are still under review. The other standards listed shall, in some cases, also lead to more extensive disclosures in the notes to the fi nancial statements.
On 5 December 2013 a purchase agreement was concluded between Carl Zeiss Meditec AG and Mr. Ömer Engin Kalinyazgan, Ankara, Turkey, which provides for the purchase of 100 percent of the shares in the distribution and service company Optronik Optik Ve Elektronik Cihazlar Ticaret Ve Sanayi Anonim Sirketi (hereinafter referred to as Optronik), domiciled in Ankara, Turkey. As contractually agreed, Carl Zeiss Meditec assumed the company's business activities with effect from 30 December 2013 (acquisition date). With effect from 6 February 2014 the company was renamed Carl Zeiss Meditec Medikal Çözümler Ticaret ve Sanayi Anonim Şirketi ("Carl Zeiss Meditec Medikal").
Optronik was the exclusive trader for Carl Zeiss Meditec products in the Turkish medical sector, as well as for the products of the Microscopy division of Carl Zeiss AG. The latter mainly includes microscopes for the industrial sector, as well as the biomedical research sector. In addition to selling the products mentioned, the business also includes product-related services for private and public customers. Up until the date of the transaction, the company was the exclusive distribution partner of Carl Zeiss Meditec and Carl Zeiss AG for the products mentioned.
This acquisition strengthens Carl Zeiss Meditec's business, particularly in Turkey, and it is a systematic investment in its distribution and service organization. The acquisition of Optronik means that Carl Zeiss Meditec shall be represented in the Turkish market by a team of established experts in the area of distribution and support, and shall offer customer-focused product solutions and related services.
The purchase price is € 12.9 million and consists of a fi xed sum of € 11.5 million and a contingent earn-out component of € 1.4 million.
The fi xed price component is in part dependent on key ratios in Optronik's statement of fi nancial position according to Turkish accounting standards, and was calculated based on Optronik's audited statement of fi nancial position as of the acquisition date. Pursuant to the agreement, the fi xed price of € 11.5 million was paid at the end of December 2013; a small adjustment payment of € 0.1 million was made in February 2014 as part of the fi nal purchase price calculation. The earn-out component shall be payable in one tranche one year from the acquisition date, and shall depend on the revenue of the acquired business.
The calculation of the earn-out is based on the achievement of defi ned revenue targets for the subsequent 12 months. In the event of deviations from the expected revenue targets, the earn-out shall be increased or decreased accordingly. The expected earn-out of € 1.4 million results from an achievement of the revenue target of 100 %. The contractual margin of fl uctuation of the earn-out has a lower limit of € 0 and, in the case of over-achievement of the specifi ed targets, is capped at € 2.2 million.
On 30 December 2013 Optronik and the seller, Mr. Ömer Engin Kalinyazgan, Ankara, Turkey, concluded a consultancy agreement, which regulates the rendering of relevant services to Optronik in the period of one year from the acquisition date. The agreement did not specify any remuneration. For this reason it is assumed that the consultancy services, which, based on a preliminary estimate, amount to signifi cantly less than € 0.1 million, shall be compensated for with the earn-out payment. This results in a deduction from the earn-out in the same amount and the corresponding recognition of a prepaid expense under other current non-fi nancial assets, which shall be reversed as an expense under administrative expenses over the term of the agreement.
Prior to the merger, business relations existed between Carl Zeiss Meditec and Optronik in the form of supply and service transactions. At the acquisition date Carl Zeiss Meditec had outstanding trade receivables in the medical technology business from this period amounting to € 0.3 million, as well as outstanding sales commission liabilities, also amounting to € 0.3 million. These transactions, which Optronik accounted for identically, shall be treated separately from the acquisition of the assets and liabilities. These items were eliminated as part of consolidation in the consolidated fi nancial statements as of 31 March 2014.
At the date of publication of the interim fi nancial statements of Carl Zeiss Meditec as of 31 March 2014 the allocation of the purchase price to the assets and liabilities of the acquired company was not yet complete. The preliminary fair values of the identifi ed assets and liabilities at the date of acquisition and the corresponding carrying amounts directly prior to the date of acquisition are as follows:
| (in millions of €) | |||
|---|---|---|---|
| Optronik A.S. | |||
| Fair value | Carrying amount | ||
| Intangible assets | 4.3 | – | |
| Property, plant and equipment | 0.1 | 0.1 | |
| Deferred income tax assets | 0.2 | 0.2 | |
| Inventories | 1.6 | 1.6 | |
| Trade receivables | 3.0 | 3.0 | |
| Cash and cash equivalents | 0.7 | 0.7 | |
| Total assets | 9.9 | 5.6 | |
| Non-current provisions | 0.3 | 0.3 | |
| Deferred tax liabilities | 0.9 | – | |
| Current provisions | 0.2 | 0.2 | |
| Current accrued liabilities | 0.5 | 0.5 | |
| Current income tax liabilities | 0.3 | 0.3 | |
| Other current non-fi nancial liabilities | 0.2 | 0.2 | |
| Total liabilities | 2.4 | 1.5 | |
| Net assets | 7.5 | 4.1 | |
| Goodwill from acquisition | 5.4 | ||
| Total costs of acquisition | 12.9 | ||
| Cash received | 0.7 | ||
| Capital outfl ow for purchase price components | (11.5) | ||
| Net capital outfl ow as of 31 March 2014 | (10.8) | ||
| Contingent purchase price payment pursuant to IFRS 3 B64 (g) (i) | (1.4) |
(in millions of €)
| Optronik A.S. | |||
|---|---|---|---|
| Preliminary fair value 31 December 2013 |
Preliminary fair value 31 March 2014 |
||
| Intangible assets | 1.6 | 4.3 | |
| Property, plant and equipment | 0.1 | 0.1 | |
| Deferred income tax assets | – | 0.2 | |
| Inventories | 1.6 | 1.6 | |
| Trade receivables | 2.9 | 3.0 | |
| Other current non-fi nancial assets | 0.2 | – | |
| Cash and cash equivalents | 0.7 | 0.7 | |
| Total assets | 7.1 | 9.9 | |
| Non-current provisions | – | 0.3 | |
| Deferred tax liabilities | 0.3 | 0.9 | |
| Current provisions | – | 0.2 | |
| Current accrued liabilities | – | 0.5 | |
| Current income tax liabilities | – | 0.3 | |
| Other current non-fi nancial liabilities | 0.5 | 0.2 | |
| Total liabilities | 0.8 | 2.4 | |
| Net assets | 6.3 | 7.5 | |
| Goodwill from acquisition | 6.6 | 5.4 | |
| Total costs of acquisition | 12.9 | 12.9 | |
| Cash received | 0.7 | 0.7 | |
| Capital outfl ow for purchase price components | (11.5) | (11.5) | |
| Net capital outfl ow as of 31 March 2014 | (10.8) | (10.8) | |
| Contingent purchase price payment pursuant to IFRS 3 B64 (g) (i) | (1.4) | (1.4) |
The following additional information is given for the acquired receivables:
| (in millions of €) | |||
|---|---|---|---|
| Fair value | Gross amount | Valuation allowances | |
| Trade receivables | 3.0 | 3.1 | 0.1 |
The preliminary goodwill identifi ed from the acquisition of Optronik is mainly the result of the anticipated synergy effects of the integration of the distribution and service business into the existing business. It shall be allocated to all business units of Carl Zeiss Meditec and to the Microscopy division. As expected, goodwill shall not be deductible for tax purposes.
Incidental acquisition costs amounting to € 0.1 million were incurred in the fi rst quarter of fi nancial year 2013/2014. These were recognized under general administrative expenses.
Since the acquisition, Optronik has contributed € 1.2 million to the revenue generated by the Group, which is recognized in the income statement. The acquired company's share of consolidated net income was € 0.1 million. These shares relate exclusively to the Medical Technology division, since the Microscopy division was sold with effect from 1 January 2014, as detailed below. The presented amounts are not
incremental; rather, in the previous year they also include the share of revenue and earnings generated with the former distribution partner, which is now carried, as of this fi nancial year, directly via Optronik distribution company of Carl Zeiss Meditec.
Assuming that the presented acquisition had already been completed as of 1 October 2013, pro forma revenue would have amounted to € 462.7 million; pro forma consolidated net income would have amounted to € 44.4 million.
These pro forma fi gures were prepared exclusively for comparison purposes. They provide neither a reliable indication of the operating results that would actually have been achieved had the acquisition taken place at the beginning of the period, nor of future results. These amounts contain only the shares of revenue and earnings generated by the Medical Technology business in fi nancial year 2013/2014.
On 5 March 2014 a purchase agreement was concluded between Carl Zeiss Meditec Medikal (formerly Optronik) and Carl Zeiss Teknoloji Çözümleri Ticaret Limited Şirketi ("Carl Zeiss Teknoloji"), a Turkish subsidiary of Carl Zeiss AG, domiciled in Istanbul, Turkey, which foresees the sale of assets and liabilities and the transfer of employees to this company associated with the sale of the products and services of the Microscopy division. As contractually agreed, Carl Zeiss Teknoloji assumed the assets and liabilities retrospectively as of 1 January 2014. The purchase price amounts to € 2.2 million.
Due to the fact that the distribution of the purchase price among the assets and liabilities of the acquired Optronik is not yet complete, the carrying amounts of the identifi ed assets and liabilities are also provisional at the date of sale of the Microscopy business. These are as follows:
| (in millions of €) | |
|---|---|
| Microscopy business Carl Zeiss Meditec Medikal |
|
| Carrying amount | |
| Goodwill | 0.6 |
| Intangible assets | 0.8 |
| Inventories | 0.4 |
| Trade receivables | 0.5 |
| Total assets | 2.3 |
| Deferred tax liabilities | 0.2 |
| Total liabilities | 0.2 |
| Carrying amount of the sold net assets | 2.1 |
| Selling price | 2.2 |
| Net capital infl ow as of 31 March 2014 | 2.2 |
The gain on the disposal of € 0.1 million was recognized in the other fi nancial result. The appropriateness of the selling price was assured by an independent third party based on a fairness opinion in accordance with the guidelines of IDW S 8.
On 7 January 2014 a purchase agreement was concluded between Carl Zeiss Meditec Inc., Dublin, USA, and the shareholders of Aaren Scientifi c Inc., which provides for the acquisition of 100 percent of the shares in Aaren Scientifi c Inc. (hereinafter referred to as Aaren), domiciled in Ontario/California, USA. As contractually agreed, Carl Zeiss Meditec assumed the company's business activities with effect from the same date.
Aaren is a company engaged in the research, development, manufacture and global distribution of a portfolio of intraocular lenses and other ophthalmic surgery products for cataract surgery.
The broadening of the product range as a result of this acquisition facilitates the expansion of Carl Zeiss Meditec's customer base, the addressing of new market segments, as well as the development of new geographical markets in the fi eld of surgical ophthalmology.
The preliminary purchase price is € 51.4 million and is composed of preliminary fi xed sum of € 44.1 million and an escrow amount of € 7.3 million, which has been deposited in a trust account.
The fi xed price component is partly dependent on key ratios in Aaren's statement of fi nancial position prepared in accordance with US-GAAP, and was calculated based on preliminary data available at the acquisition date. A fi nal calculation of this component shall be performed during the course of fi nancial year 2013/2014 based on Aaren's fi nal statement of fi nancial position at the acquisition date. The escrow amount serves to secure contractually regulated warranties and guarantees in a period of 24 months from the acquisition date, for circumstances that date from the time before the merger. The preliminary fi xed price was also paid, like the escrow amount, in January 2014. The escrow amount shall be released to the seller 24 months after the acquisition date, subject to any claims that may have been made during this period.
At the date of publication of the interim fi nancial statements of Carl Zeiss Meditec as of 31 March 2014 the allocation of the purchase price to the assets and liabilities of the acquired company was not yet complete. The preliminary fair values of the identifi ed assets and liabilities at the date of acquisition and the corresponding carrying amounts directly prior to the date of acquisition are as follows:
| (in millions of €) | ||
|---|---|---|
| Aaren Scientifi c Inc. | ||
| Fair value | Carrying amount | |
| Intangible assets | 26.7 | 2.2 |
| Property, plant and equipment | 2.2 | 2.2 |
| Deferred income tax assets | 0.2 | 0.2 |
| Inventories | 3.4 | 3.4 |
| Trade receivables | 2.7 | 2.7 |
| Other current assets | 0.3 | 0.3 |
| Cash and cash equivalents | 0.2 | 0.2 |
| Total assets | 35.7 | 11.2 |
| Other non-current non-fi nancial liabilities | 1.5 | 1.5 |
| Deferred tax liabilities | 9.5 | – |
| Current accrued liabilities | 1.1 | 1.1 |
| Trade payables | 1.0 | 1.0 |
| Other current non-fi nancial liabilities | 0.2 | 0.2 |
| Total liabilities | 13.3 | 3.8 |
| Net assets | 22.4 | 7.4 |
| Goodwill from acquisition | 29.0 | |
| Total costs of acquisition | 51.4 | |
| Cash received | 0.2 | |
| Capital outfl ow for purchase price components | (51.4) | |
| Net capital outfl ow as of 31 March 2014 | (51.2) |
The following additional information is given for the acquired receivables:
| (in millions of €) | |||
|---|---|---|---|
| Fair value | Gross amount | Valuation allowances | |
| Trade receivables | 2.7 | 3.1 | 0.4 |
The expected identifi ed goodwill from the acquisition of Aaren is mainly the result of the anticipated synergy effects of the company's integration into the existing surgical ophthalmology business. As expected, goodwill shall not be deductible for tax purposes.
Incidental acquisition costs in the amount of € 0.7 million were incurred in the second quarter of fi nancial year 2013/2014. These were recognized under general administrative expenses.
Since the acquisition, Optronik has contributed € 3.2 million to the revenue generated by the Group, which is recognized in the income statement. The acquired company's share of consolidated net income was € - 0.2 million.
The contribution to earnings includes a positive effect of € 0.4 million before taxes. This results from the complete write-off, in the second quarter of fi nancial year 2013/2014, of a licensing right to a third-party patent, as well as from the write-off of the corresponding obligation for future minimum license royalties.
Assuming that the presented acquisition had already been completed as of 1 October 2013, pro forma revenue would have amounted to € 465.1 million; pro forma consolidated net income would have amounted to € 43.7 million.
These pro forma fi gures were prepared exclusively for comparison purposes. They provide neither a reliable indication of the operating results that would actually have been achieved had the acquisition taken place at the beginning of the period, nor of future results.
With effect from 1 December 2012 Carl Zeiss Meditec AG assumed from Carl Zeiss EyeTec GmbH (CZ EyeTec GmbH), Aalen, Germany, the necessary assets for the continuation of this company's existing business operations. CZ EyeTec GmbH helps Carl Zeiss Meditec to select qualifi ed suppliers and develops and optimizes optometric diagnostic equipment in collaboration with Carl Zeiss Meditec. The relevant assets (approx. € 0.1 million) and the employees and the related personnel commitments (approx. € 0.5 million) were transferred to Carl Zeiss Meditec AG's strategic business unit "Ophthalmic Systems". The purchase price amounted to around € - 0.4 million. The resulting receivable from CZ EyeTec GmbH was settled, pursuant to the purchase agreement, in the second quarter of fi nancial year 2012/2013.
This is a transaction under common control, as all companies involved are directly or indirectly majorityowned by Carl Zeiss AG. In line with the accounting method applied by Carl Zeiss Meditec, the transaction is carried at the prior carrying amounts. No hidden reserves or charges are disclosed. Consequently, it does not give rise to any goodwill. Due to the small scope of the transaction in relation to the assets and liabilities of Carl Zeiss Meditec AG this purchase is considered insignifi cant.
On 21 September 2011, Carl Zeiss Meditec Iberia, S.A., concluded a purchase agreement with medical distribution and service company IMEX Clinic S.L, Paterna, Spain (IMEX), and Dismedica S.A., Las Arenas/ Bilbao, Spain, which regulated the purchase of assets and the transfer of employees in connection with the distribution and support of intraocular lenses (IOLs) and viscoelastics (OVDs).
The purchase price amounted to € 16.4 million and consisted, in addition to a fi xed sum of € 9.0 million, of a discounted contingent earn-out component of € 3.6 million and a price for the assumed inventories of € 3.8 million. The fi xed price components and the price of the inventories were paid in fi nancial year 2011/2012. The earn-out component shall be payable in three tranches over 30 months starting from the acquisition date, and shall depend on the success of the acquired business.
In December 2012 the fi rst tranche of the earn-out component was paid to the seller in the amount of € 1.9 million. The second tranche was paid in December 2013 in the amount of € 0.7 million. There remains a contingent discounted purchase price payment pursuant to IFRS 3 B54 (g) (i), of € 1.3 million, which is based on an unchanged expectation of the future earnings contribution in comparison with 30 September 2012.
The Group has three operating segments, which are simultaneously the Group's strategic business units ("SBUs"). The "Ophthalmic Systems" and "Surgical Ophthalmology" SBUs comprise Carl Zeiss Meditec's activities in the ophthalmic market. Ophthalmic Systems include medical laser and diagnostic systems. The Surgical Ophthalmology segment combines the Company's activities in the fi eld of intraocular lenses and consumables. The activities in the fi eld of neuro, ear, nose and throat surgery are presented in the "Microsurgery" segment (the former "Neuro/ENT surgery" SBU). Surgical visualization solutions in the area of ophthalmic surgery and activities in the fi eld of intraoperative radiation are also allocated to this SBU. Internal management reports are evaluated by the CEO at least every quarter for each of the strategic business units.
| (in € '000) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ophthalmic Systems |
Ophthalmology | Surgical | Microsurgery | Total | ||||
| 6 Months | 6 Months | 6 Months | 6 Months | |||||
| 2013/2014 | 2012/2013* | 2013/2014 | 2012/2013* | 2013/2014 | 2012/2013* | 2013/2014 | 2012/2013* | |
| External revenue | 180,192 | 175,766 | 73,437 | 60,459 | 207,293 | 206,732 | 460,922 | 442,957 |
| EBIT | 2,456 | 1,313 | 10,188 | 8,926 | 51,016 | 54,528 | 63,660 | 64,767 |
| Reconciliation of segments' comprehensive income to the Group's period-end result. | ||||||||
| Comprehensive income of the segments | 63,660 | 64,767 | ||||||
| Consolidated earnings before interest and taxes (EBIT) | 63,660 | 64,767 | ||||||
| Financial result | 2,842 | 5,219 | ||||||
| Consolidated earnings before income taxes | 66,502 | 69,986 | ||||||
| Income tax expense | (22,355) | (23,074) | ||||||
| Consolidated net income | 44,147 | 46,912 |
The operating segments for the reporting period are as follows:
* The previous year was adjusted due to the amendment to IAS 19.
As a general rule there were no intersegment sales between the SBUs.
There are no signifi cant changes in segment assets compared with the disclosures in the notes to the last consolidated annual fi nancial statements; nor is this the subject of internal management reports.
In the reporting period 2013/2014, transactions with related parties result in revenue of € 127,262 thousand (previous year: € 113,672 thousand). The term "related parties" refers here to Carl Zeiss AG and its subsidiaries.
The principles and methods for measuring at fair value are essentially the same as in the previous year. Detailed notes on the evaluation principles and methods are contained in the Annual Report as of 30 September 2013.
The allocation of the fair values to the three categories of fair value hierarchy is based on the availability of observable market prices on an active market. The valuation categories are defi ned as follows:
Financial instruments traded on active markets, for which the listed prices were taken over unchanged for valuation.
Category 2
Valuation is based on valuation methods for which the infl uencing factors used were derived directly or indirectly from observable market data.
Category 3
Valuation is based on valuation methods for which the infl uencing factors used are not exclusively based on observable market data.
The table below provides an overview of the items in the statement of fi nancial position measured at fair value:
(in € '000)
| 31 March 2014 | |||||
|---|---|---|---|---|---|
| Carrying amount |
Category 1 | Category 2 | Category 3 | ||
| From held-for-trading fi nancial assets | 5,477 | – | 5,477 | – | |
| From held-for-trading fi nancial liabilities | (1,528) | – | (1,528) | – |
Carl Zeiss Meditec shall review at the end of each reporting period whether there are grounds for reclassifi cation to or from a valuation category. In the reporting period there were no reclassifi cations amongst the valuation categories.
The fair value of the fi nancial instruments measured at amortized cost, such as receivables and liabilities, is determined through discounting, taking into account a risk-based market interest rate with matching maturity. In comparison with 30 September 2013 there are no signifi cant changes in the ratios between carrying amount and fair value with respect to non-current assets and liabilities. For reasons of materiality the fair value shall be equated to the carrying amount for current items in the statement of fi nancial position.
There were no events of particular signifi cance after the end of the reporting period, 31 March 2014.
To the best of our knowledge, and in accordance with the applicable interim reporting principles, the consolidated interim fi nancial statements of Carl Zeiss Meditec give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the consolidated interim management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Carl Zeiss Meditec Group. p Thomas Responsibility statement
Dr Ludwin Monz Dr Christian Müller Thomas Simmerer President and Chief Financial Offi cer Member of the Chief Executive Offi cer and Member of the Management Board Management Board
| Date | Financial year 2013/2014 |
|---|---|
| 14 August 2014 | 9 Month Report |
| 14 August 2014 | Telephone conference |
| 8 December 2014 | Annual Financial Statements 2013/2014 |
| 8 December 2014 | Analyst's Conference, Frankfurt am Main |
Investor Relations Sebastian Frericks
Phone: +49 36 41 22 01 16 Fax: +49 36 41 22 01 17 [email protected]
Concept and editing by: Henriette Meyer
Visual concept and design by: Publicis Erlangen, Zweigniederlassung der PWW GmbH, Erlangen, Germany www.publicis.de
Translation service by: Herold Fachübersetzungen, Bad Vilbel, Germany www.heroldservice.de
This report has been published on 9 May 2014.
The 6 Month Report 2013/2014 of Carl Zeiss Meditec AG has been published in German and English.
Both versions and the key fi gures contained in this report can be downloaded from the following address:
www.meditec.zeiss.com/ir
Germany www.meditec.zeiss.com/ir
Carl Zeiss Meditec AG Phone: +49 36 41 22 01 15 Goeschwitzer Strasse 51– 52 Fax: +49 36 41 22 01 17 07745 Jena [email protected]
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