Annual Report • Apr 19, 2010
Annual Report
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| Foreword by the Management Board5 | |
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| aap Group Management Report 20097 | |
| A) General Terms and Framework Conditions7 | |
| 1. Organizational and Legal Structure 7 |
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| Subsidiaries8 | |
| aap Biomaterials GmbH 8 | |
| aap bio implants markets GmbH 8 | |
| aap bio implants Netherlands B.V. 8 | |
| European Medical Contract Manufacturing (EMCM) B.V8 | |
| Bactimm B.V. and Farmalyse B.V. 8 | |
| ADC Advanced Dental Care GmbH8 | |
| Associated Companies8 | |
| AEQUOS Endoprothetik GmbH 8 | |
| Executive Bodies8 | |
| Management Board 8 | |
| Supervisory Board 9 | |
| 2. Segments9 |
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| 3. Important Products and Business Processes9 |
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| 4. Important Sales Markets and Competitive Positions9 |
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| 5. Fundamental Legal and Economic Influencing Factors10 |
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| 6. Research and Development Activities10 |
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| Management Boards opinion as to how the overall economic and industry-specific development | |
| has affected the course of business12 | |
| B) Earnings, Financial and Assets Position13 | |
| 1. Restructuring and Rationalization Measures13 |
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| 2. Signing or Ending of Cooperation Agreements and Other Important Contracts13 |
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| Earning Position13 | |
| 1. Description of Development in Results/Results Structure13 |
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| 2. Analysis of the Most Significant Financial and Non-Financial Performance Indicators15 |
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| 3. Developments in Sales and Order Position 15 |
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| 4. Fundamental Changes in the Structure of Individual Income and Expense Items 17 |
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| Financial position 17 | |
| Asset Position19 | |
| C) Supplementary Report 20 | |
| D) Risk Report20 | |
| 1) Internal system of controlling and risk management relating to the (group-wide) accounting procedure (report pursuant to Sections 289(5) and 315(2) No. 5 German Commercial Code [HGB]) 20 |
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| 2) Risk Management System21 | |
| 3) Description of Individual Risks, Quantification and Explanation of Possible Consequences 21 | |
| a) Market, Competition, New Products and Technologies 21 |
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| b) Approval of Products22 | |
| c) Dependency on Customers and Suppliers22 |
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| d) Patents and Intellectual Property23 | |
| e) Product Liability Risks23 |
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| f) Legal Risks 23 |
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| 4) Further Information Required by Section 315 (2) No. 2 German Commercial Code(HGB)23 | |
| E) Forecast Report24 | |
| F) Other information 26 | |
| 1. Composition of Subscribed Capital 26 |
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| 2. Basic Principles of the Remuneration System (Remuneration Report) 26 |
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| Management Board Remuneration26 |
| Stock Option Program 200627 | ||
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| Stock Option Program 200828 | ||
| 3. | Restrictions on Voting Rights and the Transfer of Shares31 | |
| 4. | Direct and Indirect Shareholdings > 10% of Voting Rights 31 | |
| 5. | Statutory Provisions, Provisions of the Articles of Incorporation for Appointing and | |
| Dismissing Board Member and Amending Articles of Incorporation 31 | ||
| 6. | Management Board Powers to Issue and Repurchase Shares31 | |
| 7. Important agreements concluded by the Company that are conditional on a change of control | ||
| resulting from a takeover bid, and the consequences 33 | ||
| 8. | Compensation Agreements in the Event of Takeover Offers with Members of the | |
| Management Board or Employees34 | ||
| G) Assurance from the Legal Representative (pursuant to Section 37y No. 1 Securities Trading Act).34 | ||
| Consolidated Income Statement according to IFRS for the Period January 1 to December 31, 200935 | ||
| Schedule of Total Comprehensive Income 36 | ||
| Consolidated Balance Sheet according to IFRS at December 31, 2009 37 | ||
| Consolidated Cash Flow Statement according to IFRS 38 | ||
| Consolidated Schedule of Assets at December 31, 2009 according to IFRS39 | ||
| Consolidated Schedule of Assets at December 31, 2008 according to IFRS40 | ||
| Notes to the Consolidated Annual Financial Statements dated December 31, 2009 in Accordance with | ||
| IFRS 42 | ||
| A. Company Data42 | ||
| B. General Information43 | ||
| Basic Principles 43 | ||
| Cash Flow Statement43 | ||
| Segment Reporting 44 | ||
| C. Consolidation Principles44 | ||
| Consolidation Entity44 | ||
| Changes in Holdings44 | ||
| Disposal Group 45 | ||
| Reporting Date of the Consolidated Financial Statements46 | ||
| Accounting and Valuation Methods46 | ||
| Capital Consolidation46 | ||
| Debt Consolidation 46 | ||
| Consolidation of Earnings 47 | ||
| Currency Translation 47 | ||
| D. Accounting and Valuation Methods47 | ||
| E. Changes in Accounting and Valuation Methods50 | ||
| Accounting Regulations Applied for the First Time in the Reporting Year50 | ||
| Accounting Regulations Published but not yet in Force51 | ||
| F. Notes on the Profit and Loss Statements52 | ||
| (1) | Sales Revenues 52 | |
| (2) | Other Operating Income 52 | |
| (3) | Personnel Expenses53 | |
| (4) | Depreciation53 | |
| (5) | Other Operating Expenses53 | |
| (6) | Financial Results54 | |
| (7) | Exchange Rate Differences 54 | |
| (8) | Taxes on Income 54 | |
| (9) | Earnings per Share as per IAS 3355 | |
| G. Notes on the Balance Sheet56 | ||
| (10) | Long-term Fixed Assets56 | |
| 1. | Intangible Assets (Excluding Development Costs and Goodwill) 56 | |
| 2. | Development Costs 56 | |
| 3. | Goodwill57 |
| 4. | Tangible Fixed Assets58 | |
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| 5. | Financial Assets58 | |
| (11) | Deferred Taxes59 | |
| (12) | Inventories60 | |
| (13) | Accounts Receivable and Other Assets 60 | |
| (14) | Tax Refund Entitlements60 | |
| (15) | Equity60 | |
| (16) | Share Price-based Remuneration 67 | |
| (17) | Provisions70 | |
| (18) | Liabilities70 | |
| (19) | Other Financial Liabilities71 | |
| (20) | Contingent Liabilities72 | |
| H. Other Disclosures72 | ||
| (21) | Reporting on Financial Instruments72 | |
| (22) | Management of Financial Risks77 | |
| (23) | Capital Management80 | |
| (24) | Cash Flow Statement 80 | |
| (25) | Participating Interests81 | |
| (26) | Related Enterprises and Persons81 | |
| (27) | Management Board, Supervisory Board 83 | |
| (28) | Notifications as per Section 160 (1) 8 AktG 85 | |
| (29) | Auditor's Fees86 | |
| (30) | Events Since the Balance Sheet Date 86 | |
| (31) | Statement on the German Corporate Governance Code86 | |
| (32) | Publication86 | |
| (33) | Responsibility Statement by the Company's Authorized Officers as per Section 37y (1) | |
| of the German Securities Trading Act (WpHG)87 | ||
| Audit Certificate 88 | ||
Ladies and Gentlemen,
Dear shareholders, employees and business partners,
In the fiscal year 2009 we successfully achieved our strategic goal of profitable growth. Turnover increased by almost 4% to €33.1 million, while EBITDA increased 78% to €6.6 million.
We would now like to explain the operative and strategic successes achieved in the financial year 2009 using the focus points defined in the performance-improving program put into place at the end of 2008:
On March 16, 2009, the Management Board, with the consent of the Supervisory Board, decided to increase the share capital from approved capital by approx. 5 %. By entry of March 23, 2009, the share capital of the company was increased by €1,267,357 to €27,881,870.
At the beginning of 2009, we successfully improved the liquidity of the company by negotiating better repayment conditions, mainly with larger OEM partners.
We have maximised the ratio of interest-bearing liabilities to EBITDA at 1.2, which is considerably lower than the objective set in the capital management plan (which was 3.5), in order inter alia to allow us to exploit third party financing opportunities in the form of bank loans. In addition, our interest coverage ratio has improved significantly and, at 7.8, is well over the planned value for 2009 of 5.
Our consolidated annual financial statement for 2008 was audited as part of a random selection by the Financial Reporting Enforcement Panel (FREP) from April 2009 to December 2009. We are proud to announce that this audit did not result in any objections from the FREP.
With our mission statement we are committed to the development, manufacturing and marketing of innovative, cost-effective, high-quality biomaterials and implants, with considerable benefits for both patients and our customers, the service providers in the healthcare system. This mission statement is clearly reflected in our development projects:
In 2010 too, the focus on customers, costs and liquidity will continue to be at the core of aap's corporate strategy, resulting in a reduction of the working capital that will enable us to achieve profitable growth. The goal is to develop aap from a manufacturer of generic products into a leading medical device manufacturer with its own brand of patented products.
We would like to take this opportunity to express our sincere thanks to our employees for their commitment, creativity and cooperation, and to our business partners and shareholders for their support and trust. We look forward to continuing our successful cooperation in the future.
Biense Visser Bruke Seyoum Alemu Chairman of the Management Board/CEO Management Board/COO
In the following, the relationships within the Group will be reported using the terms "aap", "aap Group", "the Group" or "Company Group".
There may be technical rounding-off differences in the figures stated below, but these do not affect the overall information.
A) General Terms and Framework Conditions
aap Implantate AG is the parent company of the aap Group. According to the economic diagram, the aap Group has the following active companies as per December 31, 2009: aap Implantate AG, aap Biomaterials GmbH, ADC Advanced Dental Care GmbH (ADC GmbH) and the subsidiary of aap bio implants Netherlands B.V. - European Medical Contract Manufacturing (EMCM) B.V.
All German development and production activities in the field of medicinal biomaterials are concentrated at aap Biomaterials GmbH. The company seat is in Dieburg, near Frankfurt am Main. There is another office in Obernburg near Aschaffenburg.
Originally, all marketing and sales activities relating to aap biomaterials were bundled at the aap bio implants markets GmbH. As part of the restructuring of the aap Group and the creation of a Center of Excellence for Marketing & Sales in Berlin that this entailed, it was decided that the company's seat would be relocated from Düsseldorf to Berlin. This was registered in the commercial register on March16, 2009. In a second step, by entry of September 2, 2009, aap bio implants markets GmbH was merged with aap Implantate AG, with effect from January 1, 2009. The company no longer exists.
aap bio implants Netherlands B.V.
This company is the holding company of the Dutch group with the registered seat in Nijmegen.
European Medical Contract Manufacturing (EMCM) B.V.
EMCM with registered seat in Nijmegen bundles the Dutch development and manufacturing functions in the field of medical biomaterials.
Bactimm (microbiological analyses, seat in Nijmegen) and Farmalyse (chemical analyses, seat in Zaandam) are companies that work for aap and for third parties in the field of analytics. As a result of the restructuring of aap, analytics was identified as a non-core area at the beginning of 2009. In the course of the implementation of this strategy, the companies were sold to a Dutch investor on December 17, 2009 for an enterprise value of €3.1 million.
Other fully-owned subsidiaries of aap bio implants Netherlands B.V. are Tissue Processing International B.V. (TPI), which holds a tissue & bone bank license, and Broockeville Corporation N.V., which owns the patents of the Dutch companies.
aap Implantate AG holds a majority share of 54% in ADC Dental Care GmbH, a distributor in the field of dentistry. In order to simplify the corporate structure, ADC GmbH & Co. KG was amalgamated with ADC Verwaltungs-GmbH with economic effect from July 1, 2008 and will operate keeping the same shareholding structure under the name ADC Advanced Dental Care GmbH. ADC GmbH & Co. KG was dissolved on April 2, 2009. The change in the company name and the relocation of the seat of the GmbH from Elsenfeld to Dieburg were registered on August 13, 2009.
Following the increase in the share capital based on the shareholders' resolution dated May 27, 2009 (entered into the commercial register on January 18, 2010), aap Implantate AG's shareholding in AEQUOS Endoprothetik GmbH was reduced from 5.60% to 5.32%. The company owns and operates the innovative knee system AEQUOS®, which was jointly developed and manufactured together with aap Implantate AG.
The Management Board of aap Implantate AG has two members. Mr. Biense Visser was appointed as of January 1, 2009 and was also named chairman of the management board (CEO). In addition to his work as CEO, he is also responsible for financial matters.
Mr. Bruke Seyoum Alemu is COO (Chief Operating Officer) and responsible for development, manufacturing, distribution and marketing at the aap group.
The deputy chairman of the supervisory board, Mr. Jürgen Krebs, resigned from the Supervisory Board following many years of service for aap Implantate AG at the General Meeting on August 7, 2009. Dr. Winfried Weigel was appointed in his place; he is a German citizen resident in Switzerland and is also managing director of CleanTech Capital GmbH with registered seat in Baar (Switzerland). In its constitutive meeting, which took place straight after the General Meeting, the Supervisory Board confirmed Mr. Rubino Di Girolamo as chairman, and Mr. Ronald Meersschaert was appointed new deputy chairman.
Up to and including 2008, aap Implantate AG compiled separate segment reports for the Traumatology/Orthopaedics and Biomaterials divisions. By decision of the management board in January 2009 it was decided as part of the new strategic focus of the aap Group, to move away from this segment-based approach and to run the aap Group both externally and internally as a company without separate segments. This approach is also reflected throughout the management and reporting structure.
aap has three manufacturing sites in Germany: Berlin, Dieburg and Obernburg. aap Implantate AG manufactures osteosynthesis and endoprosthetic products in Berlin. aap has one of the most modern and efficient manufacturing sites in the world for bone cements in Dieburg. Biomaterials are produced in Obernburg and Dieburg. In the Netherlands aap has a modern biomaterials production plant in Nijmegen, where products are manufactured under clean room conditions and in accordance with Good Manufacturing Practice Standards (GMP). In addition, there is a logistics centre and distribution warehouse for international distributors in Nijmegen.
The new strategic approach, the amalgamation of the divisions and the management of all divisions from one location have resulted in the restructuring of business processes. Cross-Functional-Teams ensure that business processes are continuously optimised. A Center of Excellence for Marketing and Sales has been set up at aap's headquarters in Berlin in order to boost efficiency and effectiveness in these areas. A group-wide research and development body, as well as a quality management body, encourage synergetic effects between technologies from the field of metal implants and biomaterials. The IT infrastructure has also been harmonised further and standardized.
The highlights in 2009 included, among other things, the excellent response to the nationwide marketing promotion for the product PerOssal® in infection therapy. PerOssal® is a synthetic bone replacement material and serves as the carrier material for antibiotics. It is of great interest to all physicians active in the field of bone surgery. In addition, we procured four companies as OEM manufacturer in 2009, who distribute our vertebroplasty cement BonOs® Inject under a private label. The products from the cannulated screw range have also been available in individual sterile packaging since mid-2009.
aap has three distribution channels. Direct distribution to hospitals, buying syndicates and clinics accounts for around 12% (previous year: 13%). Distribution is also carried out via an international network of distributors in over 40 countries and OEM-partnerships with national and international customers. The distribution channels with existing and new products are being consistently developed. The international distribution activities are focused on the EMEA-states (Europe, Middle East, Asia). Furthermore, aap sells its products worldwide to distribution partners under its own brand name and with third party brands and is one of the global technology leaders in several niche markets. aap achieves a large proportion of turnover through the development and production of products for leading orthopaedic companies that distribute products manufactured by aap worldwide under their own labels. In addition, as part of the turnover targets from project profits that began in 2009 (e.g. out-licensing, sale of patents for IP-protected products and technologies) aap has created a further pillar for future growth. Project turnover is to be achieved in 2010 in particular with the technologies WSG, Silver Coating, Magnesium and all-in-one-mixing systems.
The objective of the analysis of the existing IP-portfolios was to identify products and technologies which, on account of their unique selling points, can help to strengthen the competitive position and thus boost the value of the company. Thus, the continuous development of the strategic IP-portfolio is also a key to the development of aap from its position today as mainly a manufacturer of generic products, to a leader in innovation and product development.
aap presented its range of products at the most important international trade fairs in 2009, such as Arab Health in Dubai and the A.A.O.S. (American Academy of Orthopaedic Surgeons) in Las Vegas. In Vienna aap presented its products at the 28th Annual Meeting of European Bone Joint Society (EBJIS). In Germany, aap was present inter alia at the Medica 2009 in Düsseldorf, the Congress of the German Society for Surgery in Munich and the annual meeting of the South German Orthopaedic Surgeons in Baden-Baden.
In the course of the fiscal year, diverse products were approved or registered in international growth markets. CE approvals were granted for sterile cannulated screws 2.7 to 7.5, product expansion of the 9 mm shaft for the trauma shoulder system, the cannulated screw set 2.0 for hand and foot surgery, the new radius system 2.5 and cannulated screws 2.0/2.7 as well as for a vertebroplasty cement. In addition, endoprosthetic products were successfully re-classified in class III in the course of the fiscal year. In the third quarter, aap was granted market approval for BonOs® Inject in the United States. In addition, aap supported various major customers in obtaining approval for their products manufactured by aap.
Official registration and authorisation are an essential prerequisite for marketing medicinal products on every market all over the world. Since aap products are generally intended for worldwide distribution, the quality management system is based on the requirements of harmonised international rules and European regulations. Accordingly, the aap Group is regularly audited and certified accordingly, so that the products can be CE-marked and marketed. Furthermore, production is carried out in conformity with FDA requirements and according to GMP (Good Manufacturing Practice) at the Dutch subsidiaries.
All of the companies are certified according to the current applicable regulations for medical device manufacturers EN ISO 13485:2003 and Council Directive 93/42/EEC concerning medical devices. In addition, all companies in the group have undergone voluntary EN ISO 9001:2008 certification. All applicable environmental protection regulations are observed in the course of aap's business operations. Neither the manufacturing methods nor the products manufactured by aap constitute an indirect or direct risk for the environment.
The medical technology industry is a dynamic and highly innovative sector. Germany is placed second in the world behind the USA in terms of its world trade share and number of patents. Around a third of turnover for German medical technology manufacturers is achieved with products that are less than three years old. On average, medical technology companies invest around 9% of turnover in research and development. The innovation and research site Germany plays a particularly important role for medical technology companies in this context. Further evidence of the innovative power of the sector: according to the European Patent Office in Munich, medical technology heads up the list of inventions registered with more than 15,700 patents. 11.4% of patent registrations thus come from the field of medical technology.
The development of medical technology is far from being complete at the end of the 20th century. On the contrary, it is to be expected that progress will be even more rapid than ever now. A range of new, highly innovative technologies is already at the clinical trial stage or just about to begin this stage.
According to the experts, the "most encouraged fields of research" are: orthopaedics (above all spinal surgery and biomaterials), cardiology (above all coating procedures for medical devices and minimally-invasive procedures) and internal medicine (primarily endoscopy, diabetes).
International developments in medical technology are characterised inter alia by progressive miniaturisation, minimally invasive procedures (surgery), increased use of IT-based technologies, the development of new biomaterials with improved tolerance and the integration of biotechnological procedures. Only those developments that also make a measurable contribution to greater efficiency or cost-effectiveness in the healthcare system will provide sustainable future opportunities for new products. Recognising this efficiency at an early stage demands special procedures in product development.
Many experts predict that medical technology for regenerative medicine will become significantly more important. One reason for this is that cell and tissue technologies will be able to make the leap from basic research to application in the next few years. The development of new functional biomaterials must be included in this context. These ought to have improved biomimetic (i.e. mimicking natural conditions) characteristics, to facilitate easier cell colonisation and integration in the body. Implants are to be fitted with additional functions in the form of "regeneration of biological functions". Research groups in many parts of the world are already hard at work developing and applying nanoparticles for drug delivery.
In the fiscal year 2009, aap invested considerable amounts in research and development, and, as in the previous year, 25% of the total numbers of employees were employed in R&D, Clinical Affairs, Regulatory and Quality Management. aap invests approx. 13% of turnover in the development of new products (previous year: 15%). In addition to its own R&D activities, aap cooperates with numerous academic institutions (research institutes, university clinics) in new developments and the further development of existing technologies, as well as clinical trials. In addition, in the course of 2009 aap identified four projects that could be of considerable interest in global technological competition for the world leaders in Orthopaedics and Traumatology. The objective in this context is to cooperate with the market leaders at an early stage and to secure technologies. aap intends to create an additional future-proof pillar of turnover and profit using this model.
With its objectives of sustainable innovation leadership and the development in the value of the company, aap is pursuing research and development into 'platform technologies'. The strategic IP-portfolio is targeted at protecting these technologies and the resulting products.
| Platform Technology | Derivative Products | |||||
|---|---|---|---|---|---|---|
| PMMA-Cements | Disposable Mixing System | |||||
| HA-PMMA-Cements | Disposable Mixing/Transfer System Vertebro. | |||||
| Cement and Cement Mixing Technology | Vertebroplasty Cements | Cement injection gun | ||||
| Vacuum Mixing Systems | Vacuum pump | |||||
| All-in-One Prepack Mixing System | ||||||
| Nano/Micro-Silver Technology | Nano/Micro-Ag-Coating | Nano/Micro-Ag-Cement | ||||
| Ostim® | Osteo Cem (CaP-Cement) | |||||
| HA und CaPTechnology | PerOssal® | Ostim® granules | ||||
| Oral Care Products | Cerabone®, natural HA-ceramic | |||||
| Nano-HA-Coating | Synthetic non-resorbable HA-ceramic | |||||
| Small Plates & Screws, | Interference Screws | |||||
| Magnasium Alloy Technology | Products for Cartilage Repair | |||||
| Locking Compression Fixation | Anatomical Plates | WSG, Tibia & Femur | ||||
| Technology | WSG, Radius & Humerus | |||||
| Shoulder System Technology | Trauma Shoulder System | Inverse Shoulder System | ||||
| Jason® | Collagen prolonged release | |||||
| Collagen Technology | Jason® G | Dermis Dental | ||||
| Jason® Membrane | Dermis Rotator | |||||
| Collagen with Chondrocytes |
As a rule, all products are developed in close cooperation with medical users, often even at their initiative.
Developments in Traumatology are centred around the expansion of anatomical fixed-angle plate systems for various areas of the body based on patented or patentable technologies. In addition, the 2.0 screw set, the new Radius System 2.5 and the cannulated screws 2.0/2.7 have been completed and delivered to customers.
In orthopaedics we focused our work on the expansion of the shoulder and hip systems.
The re-classification of endoprosthetic products in class 3 was successfully completed in the fiscal year. The higher classification of replacement joints for hips, knees and shoulders on account of Commission Directive 2005/50/EC of August 11, 2005 on the re-classification of hip, knee and shoulder joint replacements in the framework of Council Directive 93/42/EEC concerning medical devices posed a potential risk, since a conformity
assessment procedure pursuant to Annex II para. 4 of Directive 93/42/EEC had to be completed by August 31, 2009. All aap products affected by this were granted the relevant conformity declarations by the end of December 2009.
In biomaterials, the main focus was on the development of new bone cement for vertebroplastics, the "all-inone" mixing systems and in the field of collagen-based membranes and fabrics for localised wound treatment. Furthermore, aap is also involved in the development of new implant substances and coating procedures.
Management Boards opinion as to how the overall economic and industry-specific development has affected the course of business
At the end of 2008 and well into 2009, the global economy experienced the most severe recession since the end of the Second World War. As a result of the international financial crisis, economic activity took a nosedive almost simultaneously in all of the industrialised nations. Even the emerging markets that had been experiencing strong growth had to withstand some major economic setbacks. In the second half-year 2009 there are growing indications of renewed stability. According to current estimates, the global GDP for 2009 – following growth of 3.2% in the previous year – has fallen 1.4%.
The downturn in international trade in goods and services was even greater than that seen in the global GDP. This is attributable primarily to the severe economic crisis in the USA since autumn of 2008. Not until the second quarter of 2009 did the economic downturn in the US begin to slow; in the third quarter it was possible to achieve a small amount of growth again at 0.9%. However, despite a slight upswing in the second half-year, in 2009 the USA's economic performance remained far below the previous year's level.
In the Euro-zone, the economic downswing initially continued in the first half of 2009, before slowing considerably in the second quarter. Despite the decline in capital investments, private consumption and state expenditure prevented a more severe downturn. Nevertheless, it is likely that GDP for 2009 will have fallen by a total of 4%. Following a major downturn, the German economy experienced minor growth in comparison with the preceding quarter. In addition, the downwards spiral was perceptibly slower in exports and investments in defence. Despite the growing economic stability towards the middle of the year, overall, economic performance declined severely in 2009.
The global recession also hindered growth in emerging and developing countries. The slump in world trade was felt most strongly in the smaller emerging countries in Asia.
aap has not been immune to the financial crisis and the economic recession. Although the medical technology sector is only linked to a limited degree to general economic development, aap also faces a difficult situation. While the number of orders and the use of the products did not decrease, due to the reduction of stock on inventory by customers and a deterioration in payment behaviour, a limited deferment of turnover to 2010 and pressure on the operative margin were clearly felt.
The medical technology sector is a global growth market and developments in medical technology, demographic change with a growing proportion of older people, and a more expansive definition of health will ensure that it continues to be in the future. The demand for health services is set to increase further with patients increasingly willing to invest in their health. The worldwide market for medical technology is valued at around €220 billion. The European market is the second-largest in the world after the USA (€90 billion), with €70 billion. With €23 billion, Germany is the third largest national market in the world after the USA and Japan (€25 billion) and by far the largest market in Europe. It is almost twice as large as in France and around three times larger than Italy or the UK. Nevertheless, due to the costs pressure in the healthcare systems in all western countries, there is considerable pressure on prices among all providers. The ongoing financial crisis is also affecting all market participants; increasing prices worldwide lead to costs pressure when purchasing materials and a decrease in the operative margin. In addition, customers are reducing stock on inventory; the deterioration in payment behaviour is also putting pressure on aap's liquidity. In order to counteract this trend, aap has agreed with its most important OEM-customers a reduction in the time allowed for payment in return for the grant of a discount (payment on delivery), which significantly improved the liquidity of the aap Group in 2009.
aap is countering these developments by maintaining good value for money, particularly since demand for European products is still high. aap is also using its reputation as a contract developer for leading companies in
the orthopaedics sector to its advantage. Due to these long-term supply agreements for the global markets of our customers, up- and downturns in the global economy have a less severe effect on aap. In addition, aap did not have any major US-Dollar risks due to almost equal in and out-payments in Dollars.
B) Earnings, Financial and Assets Position
Against the background of the streamlining of the group structure, aap Biomaterials GmbH & Co. KG merged with aap Biomaterials Verwaltungs-GmbH with effect from July 1, 2008. This was registered in the commercial register together with the change of the company name from Verwaltungs-GmbH to aap Biomaterials GmbH on February 4, 2009.
With economic effect from July 1, 2008, ADC GmbH & Co. KG was integrated into ADC Verwaltungs-GmbH. Keeping the same shareholding, the company now operates under the name ADC Advanced Dental Care GmbH. The limited partnership (KG) was dissolved on April 2, 2009 and the change in company name and relocation of the company seat from Elsenfeld to Dieburg were registered on August 13, 2009.
As part of the costs reduction and restructuring programme, it was decided to relocate the seat of aap bio implants markets GmbH to Berlin (registered on March 16, 2009) and to close the Düsseldorf office. By entry of September 2, 2009, aap bio implants markets GmbH merged with aap Implantate AG effective as of January 1, 2009.
In the course of the restructuring measures, the two Dutch subsidiaries, Bactimm B.V. and Farmalyse B.V., were defined as not belonging to the core business and were sold to a Dutch investor on December 17, 2009.
In the third quarter, EMCM B.V. concluded an unlimited exclusive license agreement with a distribution partner on the use of intellectual property in a product from the Medical Aesthetics field worth a total of €3 million.
Furthermore, in the third quarter an agreement was concluded regarding the sale of a patent in a bone replacement material for dental use worth €1 million.
In August 2009, aap Biomaterials GmbH concluded a manufacturing and supply agreement for bone cement for the use in spinal surgery and Traumatology with a global distribution partner. This agreement is also one of the building blocks for the development of the business in 2010. The delivery of the bone cement began at the end of 2009 and by concluding this agreement; aap has again confirmed its leading position in this field.
In the first quarter, aap concluded a distribution agreement for dental products with an exclusive distribution partner that is promoting the international marketing of the products.
In the fiscal year 2009, aap increased sales in comparison to the previous year by 4% from €31.9 million to €33.1 million. The sale in the amount of €33.1 million comprises sales achieved with products and services (€28.6 million) as well as profit from projects (€4.5 million; sale of patents and out-licensing IP). The sales realised with projects is not a one-time effect; on the contrary, these form the basis for strong growth in sales in the coming fiscal years and intensify business dealings with the respective partners based on aap's status as exclusive manufacturer for these partner companies. The 10% (€3.3 million) decrease in sales for products in comparison with 2008 is a result first and foremost of the reduced transaction volume with one OEM-customer in the Traumatology sector. Compared with the same period in the previous year, in 2009 aap achieved sales of €1.6 million (2008: €3.5 million) with this customer, whereby sales in 2008 were influenced largely by initial purchases of instruments and implants of €2.0 million. In addition, aap's profits from cooperation agreements in the bone cement (HF cement) and cementing technology sector (EASYMIX®) concluded in 2008 were down €0.6 million and €1.0 million respectively on the comparable period in 2008. Following a change in the distribution partner for cementing technology in mid-2008, the completed fiscal year is the first complete fiscal year for our new partners to establish the system in the market. It is thus still at the market-entry stage. With the exception of the decreases in OEM-traumatology, we expect to see the opposite effect in the other sectors in 2010.
The other operating income in the amount of €2.7 million (previous year: €2.2 million) comprises mainly income from national and European subsidies, income relating to other periods, the successful deconsolidation through the sale of the Analytics division and income from the liquidation of reserves and profit from written off liabilities.
In accordance with IFRS, aap, as a company with a focus on development, in addition to self-produced assets also incurs expenses for development projects that are highly likely to obtain authorisation and be marketed successfully (2009: €3.1 million; 2008: €2.9 million). Following the placement of the products on the market, these activated development costs are written-off for the duration of their useful economic life. The increase in capitalised development costs in 2009 resulted on the one hand from the number of employees in the research
and development division, which was higher than in 2008, and on the other hand clearly follows the strategy of developing aap into an innovator for medical implants and biomaterials.
The decrease in depreciation of fixed assets by €5.4 million from €8.3 million to €3.0 million is due mainly to the special depreciation in the previous year. Without taking account of the special depreciation in 2008 in the amount of €5.2 million, planned depreciation is, in comparison with other years, at almost exactly the same level.
The EBITDA increased 78% from €3.7 million to €6.6 million, while the EBIT or operative result improved from - €4.6 million to €3.6 million. Without taking into account the aforementioned one-time effects in the amount of €6.3 million, the comparable EBITDA for 2008 would be €4.9 million and the EBIT 2008 €1.7 million.
As in the previous year, no income from investments was achieved.
The financial result improved slightly from -€923 thousand to -€840 thousand. Due to the marked reduction in interest-bearing liabilities through the repatriation of loans and divestment of the Analytics division, aap expects to see a noticeable improvement in the financial results for the fiscal year 2010.
aap thus achieved results of ordinary business activities of €2.8 million (not including the divestment of the Analytics division: €2.4 million) compared with -€5.6 million in the previous year. Excluding the unplanned onetime effects in 2008, this represents a comparable result for standard business activity for 2008 of €753 thousand.
The stated Income tax in the amount of €816 thousand resulted from actual tax expenditure of €81 thousand and the costs from the balanced change in active and passive deferred taxes in the amount of €735 thousand. We refer to the information stated in the annex regarding the changes in the amount of deferred taxes. The result after tax is €1.9 million (previous year: -€5.2 million) and €0.07 per share according to DVFA/SG (previous year: -€0.20 per share).
As an innovative growth company, aap considers sustainable profitable growth, the development of long-term partnerships with leading global orthopaedics companies and the development of innovative products to be the main performance indicators. In addition, as part of the implementation of the new approach in the Ortho/Trauma/Spine divisions, as well as the restructuring of the aap Group, the focus is on customers, costs and liquid funds.
The aap Group achieved its overall sales in two ways: on the one hand from biomaterials and implant products sold under its own label or manufactured for OEM-partners, and on the other hand from project sales and outlicensing.
The group sales improved in comparison to the previous year (€31.9 million) by 4% to €33.1 million. Sales in Germany fell primarily due to the switch of sales to other European countries and today accounts for just 21% of the overall sales. Sales in North- and South America fell mainly due to the reduced transaction volume with an OEM partner in the USA in comparison to the previous year in the Traumatology sector. The increase in sales in Asia was achieved first and foremost through the expansion of sales with existing and new distributors in these markets, as well as the licensing business with a distribution partner in the field of Medical Aesthetics.
The product area Traumatology & orthopaedics comprises all products for fracture healing for all main skeletal regions and joint replacements for the shoulders, hips and knees. In 2009, sales in this field fell 21% to €9.5 million (previous year: €12.1 million). The decline in this product area was due largely to the reduced transaction volume with an OEM-customer in Traumatology. In comparison with the same period in the previous year, aap achieved €1.6 million with this customer in 2009 (2008: €3.5 million), whereby sales in 2008 was dominated by initial purchases of instruments and implants to the value of €2.0 million. Based on current figures, aap expects
sales with this OEM-partner to decrease further in 2010. For this reason, aap presented this range of products to other global companies during the fiscal year and is currently in advanced negotiations. The main contributors to turnover in Traumatology continue to be cannulated screws and orthopaedic products for the hips.
The field of biomaterials with the product areas bone cement and cementing technologies, treatment of infections and bone & tissue regeneration boosted external sales to €23.6 million (previous year: €19.8 million). The increase in sales was attributable mainly to the three IP agreements concluded in the fiscal year 2009 with a total value of €4.5 million. All transactions are designed so that they do not have only a one-time effect but will also generate further growth for aap in years to come. Pursuant to the agreements, aap shall continue to be the contract manufacturer and supplier of the products concerned.
Through the expansion of the international business – in both areas with OEM-customers and local distribution partners – aap now attains 88% of sales outside German direct distribution (2008: 87%) freeing it up even more from costs pressures and structural changes in the German healthcare system.
The Total output (sum of profits from sales, inventory changes in finished goods and work in progress, as well as liquidated capital and development output) decreased from €36.5 million to €34.8 million primarily as a result of the significant reduction in stock of €1.4 million.
aap's adjusted cost of materials ratio – excluding sales revenue of €4.5 million for which there is no corresponding expenditure in terms of material - is 24% (previous year: 25%). The reason for the decrease was above all the reduction of inventory stock produced in the fourth quarter of 2008, which was not re-stocked to the same extent during the reporting period, as well as a change to the mix of products. Sufficient monitoring of inventories will continue to be a central element of aap's working capital management strategy in the future, particularly with the goal of reducing the volume of capital tied up in inventory stock.
The cost of personnel ratio remained the same as in the previous year at 38%, despite a reduction in overall performance. This is a result of the reduction in the number of staff in the course of the restructuring from 315 (December 31, 2008) to 242 (December 31, 2009). It should be noted that the significant reduction in the number of staff in 2008 did not take place until the end of the third and the fourth quarter and 32 employees left as a result of the sale of the Analytics division, which only took place in December 2009. The resulting savings will only be fully realised in 2010.
The company group employed 242 employees as per 31 December 2009, 193 full-time and 49 part-time employees (previous year: 315, 240 full-time, 75 part-time employees). In order to secure production capabilities in the long term, aap Implantate AG is continuing to train its own specialist staff.
The other operating expenses decreased in absolute terms by €1.6 million to €10.3 million (previous year: €11.9 million). The decrease resulted on the one hand from restructuring reserves set aside in the fiscal year 2008 in the amount of €525 thousand (inter alia relocation of aap bio implants markets GmbH to Berlin and resultant closure of the Düsseldorf office) as well as the costs savings achieved in the course of the restructuring measures. The ratio of other operating expenses fell along with the overall performance from 33% to 30%.
The planned depreciation of intangible assets adjusted by one-time effects (2008: €5.2 million), decreased from €3.2 million to €3.0 million; the adjusted depreciation ratio remained unaltered from the previous year at 9%.
The operative cash-flow (before investments and financing) of the aap Group increased by €4.2 million to €4.8 million (previous year: €544 thousand). Of particular importance here is the change in short-term current assets (sum of inventory, receivables and other assets), which had a positive effect on the operative cash-flow. Excluding the claims under supplies and services resulting from the two transactions concluded in the third quarter (sale of patent for bone replacement material and license agreement Medical Aesthetic), in the amount of €2.2 million reduced the balance of the short-term current assets (excluding liquid funds) from €22.4 million to €16.9 million.
The cash-flow from investment activities in the amount of -€1.9 million (previous year: -€4.1 million) was dominated mainly by out-payments for development projects and investments in technical equipment and
machinery as well as factory and office equipment. In addition, the sale of the Analytics division contributed €2.2 million (assets and debts as well as goodwill) to the reduction of the cash-flow from investments.
The €3.9 million lower cash-flow from financing activities in the amount of -€546 thousand resulted first and foremost from the increased net change in financing debts (balance from taking out and repatriation of loans, fiscal year: -€1.8 million, previous year: €752 thousand). In this context it is worth noting that, among other things, aap significantly reduced interest-bearing liabilities in the fiscal year 2009. Thus, of the €2.0 million accrued in the fiscal year under a financing agreement, €500 thousand were amortised ahead of schedule to the end of the year. In addition, long-term financing obligations in the amount of €2.1 million were amortised as planned. The loans taken out in the fiscal year 2009 as well as the funds liquidated through the capital increase serve to secure the company financing and to finance the following business activities, among others
aap will not be paying out any dividends in the foreseeable future, since the available liquid assets will be invested in full in the development and expansion of the company.
The Group's liquid assets as per December 31, 2009 were €2.4 million (previous year: €96 thousand). This level, which has increased significantly compared with December 31, 2008 is a result inter alia of the capital increase of €1,267,357 effected in March 2009 to secure the company's financing; the assumption by a shareholder of a financing obligation with a net accrual of €2.0 million; an improved debt management system and the cash revenue from the IP transactions concluded in the third quarter of 2009. Furthermore, aap was able to agree a reduction in time for payment with various global customers coupled with more favourable purchasing conditions. Various suppliers of the company agreed at the beginning of 2009 to a temporary extension of the term for payment. These measures are part of aap´s performance-improving program to encourage profitable company growth, which, in addition to optimising the capital structure, also features measures such as costs reduction, simplifying the corporate structure, divestment of non-core areas and continuing to maintain the rate of innovation achieved in the past.
As per December 31, 2009, the aap Group had at its disposal contractually guaranteed credit lines in the amount of €6.7 million, of which, as per the balance sheet date, €4.5 million gross and €2.2 million net were used. As a result of the sale of the Dutch Analytics division and the reduced need for financing this entailed, aap reduced the framework of the credit lines for the Dutch companies in February 2010 from €3.2 million to €1.5 million with a simultaneous significant reduction in financing costs. As a result, aap Group has at its disposal credit lines in the total amount of €5.0 million for 2010. As of July 1, 2010, the credit lines for the Dutch companies will be reduced by a further €250 thousand.
| million € | 31.12.2009 | 31.12.2008 |
|---|---|---|
| Gross availment of credit lines | - 4.5 | - 5.8 |
| Credit available on credit lines | 2.3 | 0.0 |
| Net availment of credit lines | - 2.2 | - 5.8 |
Interest risks result from financing debts and financial investments. The aap Group is attempting to optimise the interest result and minimise interest risks. To this end, a group-wide system of cash-management is in operation and original financial transactions have been concluded. Risks relating to interest and price changes are controlled by means of a mixture of terms and fixed- and variable rate items.
Liquidity risks result inter alia from lack of availability of sources of financing resulting among other things from failure to observe so-called "financial covenants" in loan agreements. If these financial covenants are not observed, the financing bank has the right to terminate the loans concerned and to require immediate repayment. Pursuant to current long-term loan agreements, for instance, aap may not fall below a certain minimum rating according to "Moody's", or must comply with specific maximum/minimum limits as regards the equity ratio, the level of indebtedness or the debt burden. aap considers the risk of non-compliance with the
financial covenants that could result from the retrograde calculation by the financing bank concerned to be very minor, since in the course of 2009 it was possible to markedly reduce interest-bearing liabilities and achieve a significantly better earnings situation. In this context, aap has a very transparent and open communication policy with its financing banks, to enable it to identify potential risks at an early stage and find a suitable solution together with the financing institutions.
Based on the planned budget for 2010, aap considers the liquidity situation to be sufficient due to the marked improvement towards the end of 2009 and the existing loan commitments. aap expects to end 2010 with a positive cash-flow. The standards introduced in 2009 for target values for debt coverage of less than 3 and interest coverage of more than 6 (in each case based on EBITDA) also apply for 2010. For further information on liquidity management please refer to the explanation set forth in the annex (capital management).
The asset position of the aap Group altered in comparison to the previous year above all on account of the sale of the Dutch Analytics division as well as reduced values for short-term assets. In the course of the sale of the Analytics division and the resultant divestment of the relevant assets, the balance sheet total of the aap Group decreased by €2.7 million. The proportion of goodwill attributable to this division amounts to €567 thousand, which also contributed to a reduction of the balance sheet amount in the course of the deconsolidation. For further information please refer to part C. 3. of the annex.
The €1 million increase in long-term intangible assets from €34.5 million to €35.5 million resulted primarily from access to capitalised service and development investments in the amount of €3.1 million.
The decrease in short-term assets (excluding liquid assets) by €3.3 million to €19.2 million (previous year: €22.4 million) is a result in particular of the consistent reduction of the inventory stock built up at the end of 2008 and a smaller volume of claims relating to deliveries and services and other assets.
Other major changes to the financial situation can be seen in equity capital, which was affected by the capital increase (increase in subscribed capital) and the annual surplus and increased to €44.7 million (previous year: €41.3 million).
The equity ratio increased primarily as a result of the reduced level of outside financing and the simultaneous increase in equity capital from 62% to 71% with a reduced balance sheet total.
The level of capitalised deferred taxes decreased from €2.3 million to €127 thousand currently. Since 2008, aap, in compliance with the IFRS, has been capitalising deferred taxes from the expected use of losses carried forward only to the extent that these are covered by passive deferred taxes that can be set off.
The development of important items in the consolidated balance sheet as per December 31, 2009 in comparison with the same period in the previous year is summarised in the diagram below:
There were no major business transactions during the period between the end of the fiscal year and the preparation of this report.
1) Internal system of controlling and risk management relating to the (group-wide) accounting procedure (report pursuant to Sections 289(5) and 315(2) No. 5 German Commercial Code [HGB])
The objective of the internal control system (ICS) for the accounting process is to ensure by implementing appropriate controls that a financial report that complies with the relevant provisions is produced. aap Implantate AG, as the parent company, prepares the annual financial statement for the aap Group.
With reference to the accounting ICS there can only ever be relative certainty, not absolute certainty that material errors in the accounting will be avoided or uncovered.
The accounting and reporting procedures at aap are controlled by the central financing division. Laws, accounting standards and other rules are continuously examined as to their relevance and effects on the group financial statement. Relevant requirements are communicated and, together with the group-wide reporting calendar these form the basis of the procedure for preparing reports.
In the organisation of the ICS, the Management Board exercises overall responsibility at the group level. Of the various control mechanisms and processes in accounting, several are essential. These are:
Accounting guidelines for particularly relevant accounting provisions, both at the group level and within the individual group companies
- Involvement of external experts as necessary
All structures and processes described are subject to ongoing review by the respective persons responsible for debt management. Furthermore, aap operates an active benchmarking process concerning examples of Best Practice in other companies. Identified scope for improvement is implemented in a targeted manner.
By the very nature of its operative business, the aap–Group is of course exposed to a large number of risks that are inherent in commercial activity.
The risk management system at aap is a fixed component of the corporate management strategy and is based on three main elements:
Competition in the market for medical technology in general and specifically in the market for orthopaedic and biological implants is expected to increase further. Thus, there is a risk that aap will be slower than its competitors to respond to market developments with new products or improvements to existing products. This could have a negative effect on the assets, earnings and financial position of the company and lead to a decline in its market position.
aap is taking active measures to counter this risk, by investing significant amounts in research and development and operating an ongoing system of market and technology screening.
In addition, government changes to the healthcare system could have a negative effect on sales and the revenue of the Group. aap is countering this risk through the progressive internationalisation of its sales as well as
intensive monitoring of the German healthcare system with the goal of anticipating negative developments in order to be able to counter these.
A constant process of corporate consolidation is underway on the global market which has also affected aap customers. aap is responding to this consolidation by cooperating with a large number of companies and is constantly building new partnerships.
The medical technology and healthcare systems are subject to strict approval requirements that differ from one country to the next. Rejection or delays to the grant of approval applications for the company's products could have a negative effect on the future turnover and revenue of aap.
In order to recognise such developments at any early stage and to enable us to react appropriately, the company monitors developments in this area very closely and supervises approval procedures in great detail in the course of its quality management system.
The approval requirements for aap products are becoming increasingly stringent. For implants that remain in the patient's body (endoprosthetics, bone cement, resorbable regeneration materials) clinical trials are required in some cases as a prerequisite of approval. aap has reacted to this development by expanding the Regulatory and Clinical Affairs divisions and making sales more and more international, so that increased costs can be covered by higher production volumes.
The more strict classification of replacement joints for hips, knees and shoulders on the basis of Commission Directive 2005/50/EC of August 11, 2005 on the reclassification of hip, knee and shoulder joint replacements in the framework of Council Directive 93/42/EEC concerning medical devices posed a potential risk, since a conformity assessment procedure pursuant to Annex II title 4 of Directive 93/42/EEC had to be completed by August 31, 2009. All products affected by this were reclassified by December 2009.
Increasingly, demands are being voiced in the public discussion that the authorisation requirements for medical devices should be brought to the same level as those for medicinal products, which are far more stringent. In order to truly reflect the needs of the medical technology sector, the differences between it and the pharmaceuticals industry need to be understood and taken into consideration:
For these reasons, medical devices and medicinal products must also be handled differently.
In addition to the products developed and produced by aap itself, aap supplements its range of products with consumer goods (e.g. instruments, lavage systems). Various aap-products are manufactured by outside suppliers if aap itself does not have sufficient production skills (e.g. injection-moulding, polymeres, collagen). Partnerships of this kind entail a higher degree of dependency on the quality and readiness to supply of these suppliers. aap protects itself as far as possible against this risk through strategic cooperation with a few qualified suppliers and regular reviews of their qualification for the job.
aap achieved 31% of sales in 2009 (previous year: 24%) (including project sales realised with the respective customers) with the company's three largest customers. The OEM sales are set to increase further in the next few years. The short-term withdrawal or any possible inability to pay on the part of one of these customers could threaten the Group's earnings and financial position. Due to the size of these OEM partners, however, we consider this risk to be very slight indeed.
aap is countering this risk through progressive internationalization and procurement of additional major clients (stability, sales power, financial power).
It cannot be excluded that third parties will assert claims based on the breach of industrial property rights against aap in the future. Any such breach could, under certain circumstances, delay the delivery of products. In the event of a negative outcome in litigation, aap could be required to enter into fee or license agreements. Thus, a suit filed against aap based on the breach of intellectual property rights could have a detrimental affect on the Group's assets, financial position and earnings.
In order also to actively protect the Group's intellectual property, aap set up a group-wide IP committee during the fiscal year that regularly monitors current developments on the patent and authorization market and protects own developments at an early stage through comprehensive patent protection.
The products produced by aap are intended for insertion into, and in some cases, for permanent placement in the human body. Due to variations in healing as well as the varying degree of experience of the physicians using the products, it is not possible to fully exclude any malfunction of the products. No compensation claims of any significance have yet been asserted against aap under product liability rules, but the possibility of this occurring in the future cannot be excluded.
aap protects itself against possible product liability suits by means of a stringent system of quality control and product liability insurance as customary in the industry. There is of course a residual risk that the existing insurance protection may not be sufficient to secure potential claims, especially in the USA.
At the extraordinary general meeting of aap Implantate AG on February 15, 2007 a capital interest in return for contributions in kind was passed to facilitate the takeover of Fame Holding B.V. The entry into the commercial register was delayed due to suits filed by individual shareholders. aap then proceeded with "fast track proceedings" introduced in 2006. This procedure is intended to afford companies affected by these kinds of lawsuits with a greater degree of legal certainty and to ensure a swifter process. Having won the suit at first instance, the pending proceedings were concluded in the third quarter of 2009, since the plaintiffs either did not appeal or withdrew their appeals.
On February 13, 2009, aap Biomaterials GmbH received notice of a lawsuit based on alleged unauthorised sharing and utilisation of operational secrets with a suggested amount in dispute of €30 million. Since aap is merely the contracting partner or contract manufacturer for another indicted company, aap currently expects that the case against aap will be dismissed and that it will not be under any obligation to pay compensation.
In the course of the termination of a distribution agreement, a former distributor asserted compensation claims against aap Biomaterials GmbH. Following an analysis of the facts and having obtained legal advice, the management of aap Biomaterials GmbH set aside reserves proportionate to the risk in the amount €70 thousand.
Price adjustment risks cannot be fully excluded. aap is countering such risks by shifting sales to own developments and production of innovative products with higher profit margins.
Possible risks resulting from the loss of claims relating to deliveries and services are minimised by an active system of accounts receivable management. Moreover, aap regularly sets aside sufficient risk coverage for this purpose. Overall, however, the risk is very minor, since losses of accounts receivable in the reporting year amounted to just €324 thousand (1.0% of sales revenue).
The financing situation of the Group and aap Implantate AG is considered sufficient as per the reporting date of December 31, 2009 in view of the liquid funds available and open credit lines. As per December 31, 2009, the aap Group had at its disposal contractually assured credit lines in the amount of €6.7 million, of which €4.5 million gross and €2.2 million net had been used by the reporting date. As a result of the sale of the Dutch Analytics division and the resultant decreased need for financing, aap reduced the limit of the credit lines for the Dutch companies from €3.2 million to €1.5 million in February 2010 while at the same time significantly reducing financing costs. Thus, for 2010, aap Group has at its disposal credit lines to the total value of €5.0 million. From July 1, 2010, the credit lines for the Dutch companies will be reduced by a further €250 thousand.
| million € | 31.12.2009 | 31.12.2008 |
|---|---|---|
| Gross availment of credit lines | - 4,5 | - 5,8 |
| Balance on credit lines | 2,3 | 0,0 |
| Net availment of credit lines | - 2,2 | - 5,8 |
Liquidity risks result inter alia from lack of availability of sources of financing resulting among other things from failure to observe so-called "financial covenants", that are to be observed in the course of loan agreements. If these financial covenants are not observed, the financing bank has the right to terminate the loans concerned and to require immediate repayment. Pursuant to current long-term loan agreements, for instance, aap may not fall below a certain minimum rating according to "Moody's", or must comply with specific maximum/minimum limits as regards the equity ratio, the level of indebtedness or the debt burden. aap considers the risk of noncompliance with the financial covenants that could result from the retrograde calculation by the financing bank concerned, to be very minor, since in the course of 2009 it was possible to markedly reduce interest-bearing liabilities and achieve a significantly better earnings situation. In this context, aap has a very transparent and open communication policy with its financing banks, to enable it to identify potential risks at an early stage and jointly find a suitable solution.
To ensure company financing at the beginning of the fiscal year, aap effected a capital increase in the amount of €1,267,357 in March 2009. In 2009 aap was able to achieve net contribution of funds of €2 million through the assumption of a financing obligation by a shareholder. Furthermore, aap was able to agree a reduction in time for payment with various global customers and an extension of payment terms with selected suppliers. aap is not subject to any major fluctuations in cash flow.
In the fiscal year 2009, aap concluded only internal foreign currency hedging transactions, since there was only a minor currency risk and US Dollar claims and liabilities largely balanced one another out. However, in the future, aap plans to secure these claims externally for larger deals in US Dollars.
The medical technology market is powered by an increasingly ageing society. Despite the steady growth in volume, we are seeing an increasing awareness of costs among customers that is reflected among other things in the bundled order procedure used by purchasing associations.
aap's business model is based on the development, manufacturing and marketing of innovative products and technologies. We are convinced that the quality of our products coupled with the breadth and depth of our product portfolio provides our customers with unique solutions. Accordingly, we are currently developing innovative combinations of traditional trauma products and biomaterials using new materials and bioactive substances.
Our financial goal will be to use product sales for the fiscal year 2010 to achieve a positive EBIT. The realisation of this goal will require growth at the product level of around 15%, which we hope to achieve with existing products and new customers (c~ment®, Cerabone® bzw. Adcon® and Ostim®), as well as with new products. These include anatomical fixed-angle plate systems with sliding hole fixing technology (sliding and locking screw fixation) and developments in endoprosthetic products for the shoulders, hips and knees, products for wound treatment and soft tissue regeneration, as well as bone cement and collagen products.
We are planning to achieve project sales in particular with the sliding and locking screw fixation technologies, Silver Coating, Magnesium and "all in one" mixing systems. The plan is to successfully conclude two of these projects by concluding semi-exclusive license agreements as part of our R&D partner program. For projects and/or products with no future potential in the form of two-figure growth we will be examining divestment options, since these projects are not compatible with our strategy of establishing aap as a product leader.
On the other hand, profitable growth is to be supported by further costs savings. The working capital must be reduced further and the current loan obligations replaced with new agreements with lower interest rates and more favourable payment terms.
The Management Agenda 2009, which set out these ambitious goals, has proved to be a useful tool. The Agenda for 2010 has defined goals in the following categories: customers, innovation, finances and internal organisation combined with the strategy of product leadership in specific ortho/trauma/spine-markets.
| Customers | Results Management Agenda 2009 Expansion and development of global partnerships Establishment of a Center of Excellence for Marketing and Sales in Berlin |
Goals Management Agenda 2010 Expansion of the international distribution network and global partnerships Development of an entry strategy for the US market Planned product launch of the fixed-angle sliding screw system Æ positive contribution to sales expected for 2010 Additions to the Export- and Product Management Teams |
|---|---|---|
| Innovation | New definition of priorities for research and development projects Group-wide organisation of the R&D division Creation of a strategic IP committee for portfolio management Supplementing IP portfolio with own products and purchase of licenses |
Conclusion of two semi-exclusive license agreements for development projects Improving the freshness index by introducing IP-protected products (e.g. collagen, WSG, bone cement, Allograft) Attaining milestones in key R&D projects (e.g. silver cement in Q4/2010) Further expansion of the IP portfolios |
| Finances | Strong organic growth, EBITDA of €5-7 million, improving liquidity Realisation of turnover growth of at least 2% Achieving a debt coverage level < 3 and interest coverage level > 6 Divestment of the Analytics division Outsourcing of dental distribution to an exclusive distributor Halting development of Medical Aesthetics and structured analysis of divestment options |
Reduction of outside financing costs by at least 25% Planned growth in sales at the product level of more than 15%; profitable growth with positive operative cash-flow Maintaining the strategic goals debt coverage level < 3 and interest coverage level > 6 Reduction of operating working capital in all divisions by at least 10% Improving the central reporting and controlling at the group level Optimising benefits from stock market valuation |
| Organisation/IT | Creation of an Executive Management Team Implementation of an integrated business strategy (Biomaterials and Trauma & Ortho) Relocation and closure of aap bio implants markets GmbH Appointment of a Director of Marketing and Sales and a Marketing Manager Reduction of the number of employees to below 250 Reduction of the number of offices from 6 to 4 |
Strengthening the Executive Management Team in the fields of Finance and R&D Implementation of a development program for the management team to boost individual skills Boosting efficiency by means of new structures and responsibilities within divisions R&D and Business Development are intended to attract and retain high potential candidates Further reduction of costs by simplifying corporate structure Boosting efficiency by further reduction of the number of offices |
aap's future success will be built on four pillars:
We are convinced that only coordinated team effort can deliver the desired result. This demands a clear customer focus, powered by innovation to develop new products and processes and a strong commitment to quality.
aap will take every effort to enter into mutually beneficial partnerships with all interest groups, including patients, medical and nursing staff as well as suppliers and investors. aap will apply only proper, recognised business principals and uphold ethical standards.
The Management Board of aap expects to continue this double-figure growth in sales in the product area in 2011. This growth will be powered primarily by considerable increase in sales from IP-protected products distributed under the aap brand name. In addition, the sales from marketing the IP portfolio initiated in 2009 will be continued in 2010 and 2011 and should also contribute to further profitable growth.
In order to be able to secure the international growth of aap's own products in the long-term, from 2011 aap will support its sales and marketing activities by building corresponding capacity outside of the German-speaking countries. Diversity, professionalism and sustainability will be our guiding principles when expanding our body of staff. In addition, the structures in Finance and IT will be made more professional, to enable these divisions to provide effective and efficient support for the Research and Development and Marketing and Sales divisions.
Overall, all of the aforementioned measures will contribute to the priority goal of sustainable increases in results per share and boosting the value of the company.
On March 16, 2009 the Management Board decided with the approval of the Supervisory Board to increase the share capital from approved capital by approx. 5%, that is €1,267,357. The new shares were issued in exchange for cash contributions excluding subscription rights by means of private placement at a price of €1.00. The share capital of the company increased by €1,267,357, by entry of March 23, 2009 from €26,614,513 to €27,881,870.
As per December 31, 2009, the share capital of the company was €27,881,870.00, divided into 27,881,870 fully paid-up individual share certificates. Each share carries one vote at the general meeting. Only the statutory restrictions on voting rights apply. There are no differences in voting rights.
Management Board Remuneration
The remuneration of the Management Board members and the structure thereof are determined by the Supervisory Board. The goal is to provide the Management Board members with compensation appropriate to their work and responsibilities, taking into account personal performance, the economic situation, as well as the success and future prospects of the company. The management contract with Mr. Visser is due to run until December 31, 2010, while that with Mr. Alemu will remain in force until December 31, 2012.
The remuneration of Management Board members was amended with effect from January 1, 2009. The total cash remuneration comprises a fixed component and a performance-based component, whereby the variable component is limited to the maximum amount of the fixed component. The reference value for the variable component is the EBIT as stated in the group financial statement compiled in accordance with IFRS. In the event of unusually high positive changes in profits in comparison with the previous year, the Supervisory Board can decide at its discretion as to whether to issue an additional appropriate special share in the profits for the Management Board. Furthermore, the remuneration of the Management Board members includes benefits in kind and other earnings, above all the amounts for the use of company cars to be allocated pursuant to tax rules and premiums for accident insurance and pension program. Management Board members also have options under the aap Implantate AG Share Option Plan 2008 for a total of 800,000 shares, which are allocated according to the publication of individual quarterly results.
Please refer to point 7, below for information on the consequences for Management Board remuneration in the event of takeover offers.
If aap acquires another company or merges with another company representing more than 50% of sales for Traumatology & Orthopaedics or Biomaterials in 2008 (what is decisive is the division to which the acquired company belongs), the Management Board will receive an additional 75,000 options in aap Implantate AG as compensation for the time and effort involved, which can be drawn on at the next possible date following the conclusion of the transaction in accordance with the rules of the resolution of the general meeting 2008 on the option program, provided a sufficient number of options for the Management Board is available pursuant to the relevant resolution of the general meeting, or insofar as the option ratio for the Management Board has not yet been used in full. If there are no longer sufficient options available under the share option program 2008, the remainder will be distributed accordingly.
The income of the Management Board in the fiscal year 2009 was as follows:
| Remuneration components in thousands of € | |||||||
|---|---|---|---|---|---|---|---|
| Non-performance | Performance | with long-term | total | ||||
| based | based | incentive effect | |||||
| Biense Visser | 152 | 135 | 19 | 306 | |||
| Bruke Seyoum Alemu | 275 | 135 | 57 | 467 | |||
| 773 |
In addition to the reimbursement of their expenses, the members of the Supervisory Board shall each receive remuneration per meeting in the amount of €1,250; the chairman receives double this amount, the deputy chairman one and a half times this amount.
By resolution of the General Meeting of June 30, 2006, the Management Board – provided members of the Management Board of the company are among the entitled persons – with the consent of the Supervisory Board of the company is authorised to issue stock option programs by December 31, 2008 for the members of the Management Board of the company and members of the management of affiliated companies within the meaning of Section 15 ff. German Stock Corporation Act (AktG), and to grant option rights in up to 1,200,000 individual share certificates in the company with a term of up to four years from the date of issue. Only options entitling to purchase a maximum number of 600,000 shares are to be issued through stock option programs in one calendar year. The shareholders in the company do not have subscription rights. The option rights exercised can, at the company's discretion, be fulfilled either by exploiting the contingent capital 2006/I or pursuant to any authorisations to purchase own shares in the company to be decided in the future.
The total volume of the option rights is allocated to the entitled groups as follows:
The stock options are issued to the entitled persons only between the 10th and 20th trading day following publication of the quarterly or annual results of the company.
The exercise price to be paid when exercising the option concerned for an individual share is calculated based on the average value of the final auction price of the shares in aap Implantate AG in XETRA-trading (or a comparable replacement system) on the stock exchange in Frankfurt am Main during the last 10 trading days prior to the date of issue, but at least the minimum issue amount pursuant to Section 9 (1) German Stock Corporation Act, and thus not below the proportional amount per share of the share capital of € 1.00.
Subscription rights can only be exercised under the stock options if the average value of the final auction price of the shares in aap Implantate AG in XETRA-trade (or a comparable replacement system) on the stock exchange in Frankfurt am Main during the last 10 trading days prior to the date of issue exceeds the exercise price by at least 10% since the date of issue.
The option rights granted can be exercised at the earliest two years after the date of issue.
By resolution of the general meeting of September 29, 2008, the Management Board and – provided members of the management of the company are entitled – the Supervisory Board of the company is authorised to issue stock option programs by September 28, 2013 for those persons belonging to one of the groups named in clause 1 below, and to grant up to 1,200,000 stock options with subscription rights in one share in the company each with a term of up to five years from the date of issue as defined in clause 3, below. The shareholders in the company do not have subscription rights. The stock options can also be taken over by a bank with the obligation to transfer them to the entitled parties as defined in clause 1, below, as instructed by the company; in this case also, options can only be exercised by the entitled persons. The fulfilment of the exercised option rights can be effected at the discretion of the company either by exploiting contingent capital 2008/I suggested for resolution under lit. b) below or through own shares in the company. The grant of the option to subscribe to shares in the company and the issue of these shares shall be effected in accordance with the following provisions:
The following persons are entitled to acquire share options and to subscribe to shares in the company
The total number of option rights is allocated as follows:
| Up to 800,000 individual share options: | for the members of the Management Board of the company, |
||||||
|---|---|---|---|---|---|---|---|
| Up to 200,000 individual share options: | for selected members of executive staff of the company and members of the management of affiliated companies – but only if they are not also entitled pursuant to (i) as members of the Management Board of the company on the date of issue – and selected members of executive staff of affiliated companies, |
||||||
| Up to 200,000 individual share options: | for employees of the company and affiliated companies. |
A report will be published on the issue of stock options to members of the Management Board once per year as an annex to the annual financial statement, stating the names of the beneficiaries and the respective number of stock options issued to them. The same applies to the number of subscription rights exercised under option rights by members of the Management Board in the previous fiscal year in
each case, the exercise price paid and the number of share options still held by members of the Management Board at the end of the year.
Each option right entitles the holder of the option to purchase a bearer share in the company in return for the payment of the exercise price pursuant to clause 4. The new shares participate in the profits from the beginning of the financial year for which at the time of the exercise of the subscription right no general meeting resolution has yet been passed on the utilisation of the net profit.
The issue of the stock options shall take place in no less than three annual tranches, subject to the proviso that no tranche may include more than 50% of the total volume. The stock options can only be issued to the entitled person between the 10th and the 20th trading day following the publication of the quarterly or annual results of the company (the date upon which the option agreement signed by the company is handed over to the entitled party is referred to as the "date of issue").
The exercise price to be paid for the exercise of the option for each share corresponds to the average value of the final auction price of the shares in aap Implantate AG in XETRA-trading (or a comparable replacement system) on the stock exchange in Frankfurt am Main during the last 20 trading days prior to the date of issue, but at least the minimum issue amount pursuant to Section 9 (1) German Stock Corporation Act, and thus not below the proportional amount per share of the share capital of €1.00.
The option conditions can in the event of measures during the term of the stock option that affect the value of the options (capital increase with grant of a direct or indirect subscription right for shareholders of the company, sale of own shares, the issue of bonds with conversion and/or option rights in shares in the company), be subject to adjustments in the exercise price and/or the subscription situation. A reduction will not be made if the entitled person has a direct or indirect subscription right in the new shares or own shares or new bonds are granted that places them in the same position as if he/she had exercised the option right. The option conditions can furthermore provide for an adjustment of the option rights in the event of a capital increase from company funds and a reduction in capital, in the event of a new division of the shares (share split) or a consolidation of shares as well as bonuses and extraordinary cash and/or dividend in kind corresponding to the practices on German and international futures exchanges. This is without prejudice to Section 9 (1) German Stock Corporation Act.
Subscription rights can only be exercised under stock options if the average value of the final auction price of the shares in aap Implantate AG in XETRA-trade (or a functionally comparable replacement system for the XETRA-system) on the stock exchange in Frankfurt am Main during the last 20 trading days prior to the date of the subscription right under the share option is at least 20% above the exercise price (absolute threshold).
The option rights granted to individual entitled persons can be exercised at the earliest upon expiry of a waiting period of two years from the date of issue. In each case at the earliest two years after the date of issue 25%, 25% three years after the date of issue, another 25% after four years and the last 25% five years after the date of issue.
Upon expiry of the preceding waiting periods, the subscription rights under the stock options can be exercised at any time, but not within the following periods:
- in the period from the last day upon which shareholders can register to attend the General Meeting of the company until the third banking day in Frankfurt am Main following the General Meeting;
The stock options can only be exercised by the entitled persons themselves. This also applies if the stock options are assumed by a credit institute with the obligation to transfer them to the individual entitled persons as instructed by the company. Disposition rights in the share options are excluded, specifically, they are non-transferable. The share options can, however, be inherited. The option condition can, in derogation from this, provide special rules in the event that the entitled person dies or retires, or their employment agreement with the company or the affiliated companies is otherwise ended by means other than termination, or the affiliated company withdraws from the aap Group.
(a) The stock options expire six years from the date of issue.
(b) Stock options that are not exercised also expire upon receipt of the written termination of the option right agreement by the company. Such termination, which can be made with a notice period of one month, is possible if either a creditor of the entitled person effects compulsory enforcement measures in the stock options, if insolvency proceedings are initiated regarding the assets of the entitled person, the initiation of insolvency proceedings is rejected due to lack of assets or if the entitled person contravenes material obligations set forth in the law, the articles of association of the company or his/her employment contract with the company or an affiliated company, or in the option right agreement.
(c) Stock options that are not exercised also expire as soon as the respective service or employment relationship with the entitled person – be it as member of the Management Board, selected member of executive staff or employee of the company or as a member of the management, selected executive staff or employee of an affiliated company – is terminated or cancelled, or for other reasons, in particular if it ends through expiry of the term; upon termination or cancellation, the time of the receipt of the termination declaration or that of the effective conclusion of the cancellation agreement is decisive, even if the termination only enters into effect in the future. The options of a member of the Management Board of the company or the management of an affiliated company in this capacity granted stock options expire also upon the surrender of his office or the dismissal of this member of the Management Board or this member of the management of the affiliated companies.
(d) Insofar as the termination of the service or employment relationship at the company or an affiliated company with the initiation of a new service or employment agreement at the company or an affiliated company is connected with an affiliated company, the stock options granted to an entitled person do not expire. This applies accordingly to the end of the position as executive body, if this is related to a new appointment in the company or at an affiliated company.
(e) The option rights granted to an entitled person furthermore do not expire if his/her term of service or employment ends upon reaching pensionable age, or through invalidity or death. In these cases, the entitled person or his/her heirs can exercise the option rights upon expiry of the waiting period pursuant to clause 7 sentence 2 during the next exercise period. The options rights shall lapse if they are not exercised during this period.
In place of subscription to new shares, the entitled person can be granted cash compensation. The Management Board shall decide on the exercise of this choice; insofar as Management Board members are affected, the Supervisory Board shall decide. The cash compensation shall correspond to the difference between the exercise price and the average value of the last auction price of the shares in aap Implantate AG in XETRA-trade (or a functionally comparable replacement system for the XETRAsystem) on the stock exchange in Frankfurt am Main during the last 20 trading days prior to the date of the exercise of the subscription right under the stock option.
The Management Board is authorised to specify the additional details for the issue of shares from contingent capital and the further conditions of the stock option program, including the conditions of the option for entitled groups of persons. In derogation from this, the Supervisory Board decides on behalf of the members of the Management Board of the company. These additional details include, in particular, provisions governing the allocation of option rights within the entitled groups of persons, the date of issue within the specified period, the procedure of allocation to the individual entitled persons and the exercise of the option rights, as well as other procedural rules.
The Management Board is aware that certain subscribers of the share capital increase in 2004 joined together in a pool. The purpose of this pool was to coordinate votes in the general meeting. Restrictions on dispositions were not agreed. According to most recent information, the pool members held a total of 32.06% of the shares in aap as per December 31, 2008 (previous year: 32.06%). The pool was disbanded on January 13, 2009.
To our knowledge, as per December 31, 2009, the following direct and indirect shareholdings of more than 10% of the share capital in the amount of €27,881,870.00 were held in aap Implantate AG:
| Name | Voting rights in % |
|---|---|
| 1. Noes Beheer B.V. | 19.12 |
| 2. Elocin B.V. | 12.87 |
| 3. Jürgen W. Krebs | 11.79 |
The appointment and dismissal of members of the Management Board are governed by Section 84 f. German Stock Corporation Act as well as the Articles of Incorporation of the company. Pursuant to the articles of the company, the Management Board shall comprise one or more members. The Supervisory Board specifies the number of members and appoints them. The Supervisory Board can appoint a member of the Management Board as chairman and another as deputy chairman. As of January 1, 2009, the Supervisory Board appointed Mr. Biense Visser as chairman of the Management Board. The Supervisory Board also dismisses the members of the Management Board. The members of the Management Board are appointed for a maximum of five years. Reappointment or extension of the period of office for an additional five years is also permissible. The Supervisory Board can revoke the appointment of a Management Board member before expiry of his term of office for good cause, for instance in the event of gross breach of material obligations, inability to properly carry out management tasks or if the General Meeting passes a vote of no confidence in the Management Board member, unless this vote of no confidence was passed for obviously irrelevant or non-business related reasons.
Amendments to the Articles of Incorporation must be made in accordance with the provisions set forth in Sections 179 ff. German Stock Corporation Act and the Articles of Incorporation of the company. Pursuant to the Articles of the company, the Supervisory Board is authorised to make amendments to the Articles that affect only the wording thereof.
The Management Board is authorised to increase the share capital with the consent of the Supervisory Board up until June 10, 2010 (approved capital 2005/I). The shareholders' subscription right can be excluded. Following use of part of the approved capital, the approved capital now amounts to €4,192,786.
The Management Board is authorised, with the consent of the Supervisory Boards to increase the share capital of the company once or on several occasions up to the total amount of €2,988,935 in return for contributions in cash or in kind by August 26, 2012 (approved capital 2007/I) and, with the consent of the Supervisory Board, to determine the conditions for the issue of shares. The subscription right of the shareholders can be excluded with the agreement of the Supervisory Board. The approved capital, following partial use, now amounts to €1,721,578.
The Management Board is authorised, with the consent of the Supervisory Board, to increase the share capital once or on several occasions up to the total amount of €8,026,571 in return for contributions in cash or in kind by August 6, 2014 (approved capital 2009/I) and, with the consent of the Supervisory Board, to determine the
conditions for the issue of shares. The subscription right of the shareholders can be excluded with the agreement of the Supervisory Board.
The General Meeting of August 27, 2007 authorised the company to purchase and use own shares in accordance with Section 71 (1) No. 8 German Stock Corporation Act and to exclude subscription rights. Holdings in the share capital could be purchased up to an arithmetical share of €1,000,000 in total. This authorisation was valid until February 26, 2009. A new authorisation was passed at the General Meeting in 2009.
The General Meeting on August 7, 2009 authorised the company to purchase and use own shares in accordance with Section 71 (1) No. 8 German Stock Corporation Act and to exclude subscription rights. Holdings in the share capital can be purchased up to an arithmetical share of €1,000,000 in total. The acquired shares may not at any time, together with other shares owned by the company or attributable to it pursuant to Sections 71 a ff. German Stock Corporation Act, account for more than 10% of the share capital. The authorisation may not be used for the purpose of trade in own shares. The authorisation can be exercised by the company or by third parties on behalf of the company in full or in part, once or several times, in pursuit of one or several goals. The authorisation is valid until February 4, 2011. The purchase shall be effected at the discretion of the Management Board either via the stock exchange or by means of a public purchase offer or through a public tender for such offer:
The Management Board is authorised to use the shares in the company purchased on the basis of this authorisation for all legally permissible purposes, in particular for the following:
10% in total of the share capital of the company at the time of the resolution of the General Meeting.
The authorizations specified in II. to IV. above also cover the use of shares in the company purchased on the basis of Section 71 d sentence 5 German Stock Corporation Act.
The authorisations can be exercised once or on several occasions, in full or in part, individually or jointly; the authorisations under II. to IV. can also be exercised by independent companies or companies majority-owned by the company, or for their account or on the account of third parties acting on behalf of the company. The price (excluding ancillary costs of the realisation) at which the shares in the company are sold or issued pursuant to an authorisation under II. and III., may not fall more than 5% below the rate determined in the opening auction of shares in aap Implantate AG in XETRA-trading (or a comparable replacement system) on the securities exchange Frankfurt/Main on the day of the sale or the binding agreement with the third party. The price (excluding ancillary costs of the realisation) at which the shares in the company in accordance with the authorisation pursuant to IV. are used, must be at least 80% of the average value of the closing auction prices of the shares in aap Implantate AG in XETRA-trading (or a comparable replacement system) on the stock exchange in Frankfurt/Main during the last 10 trading days prior to the date of the resolution on the issue of convertible bonds or bonds with warrants. This is without prejudice to Section 9 (1) German Stock Corporation Act.
The subscription right of the shareholders in these own shares is excluded insofar as these shares are used in accordance with the preceding authorization under II. to IV.
The Supervisory Board can decide that measures may only be taken by the Management Board on the basis of this resolution of the General Meeting with its consent.
7. Important agreements concluded by the Company that are conditional on a change of control resulting from a takeover bid, and the consequences
In March 2009 the Company secured a €2.0 million loan by the terms of a loan commitment. As of December 31, 2009 the shareholder loan had a nominal value of €1.5 million. It is due for immediate repayment in the event of a takeover. Takeover here means the day on which it is publicly announced that more than 50% of aap stock has been acquired by a person or company, or various persons or companies acting in concert, as defined in Section 30 (2) of the German Securities Acquisition and Takeover Act (WpÜG).
There is a service agreement between an aap subsidiary and an external company on the provision of certain services that constitute a material business relationship for the subsidiary. In the event of a change of control the external company is entitled to cancel the agreement if a change in the subsidiary's share ownership occurs in the course of which another person, group or company takes over or acquires more than 50% of the voting rights or is found to hold them.
Between a subsidiary and another external company there is a distribution and license agreement for certain products of the subsidiary's that constitutes a material business relationship for the subsidiary. In the event of a change of control the external company is entitled to cancel the agreement. If the external company were to exercise this right and the buyer of the subsidiary were, in the final analysis, to be a company named in this agreement, aap would be required to repay all one-time and sales-related license fees paid by the terms of the agreement. A change of control by the terms of the distribution and license agreement means a person or company, or various persons or companies, gaining control over the company in one or more transactions or acquiring assets that individually or jointly play a material role in delivering performance by the terms of the agreement. Control here means holding – directly or indirectly – the right to determine the company's business policy and management.
By the terms of a loan agreement the Company (debtor) was granted a €1.0 million loan (debt obligation) to be repaid in full on maturity. Each of the creditors (lenders or assignees in the event of assignment) is entitled to call in his share of the loan wholly or in part for cause as defined in Sections 490 and 314 of the German Civil Code (BGB). One such cause would be, especially, if a qualified change in share ownership were to occur without the creditor's prior consent having been secured. A qualified change in share ownership takes place when a change in direct or indirect share ownership or partnership occurs that leads to the direct or indirect shareholders or partners at the time when the loan agreement was signed ceding control over the debtor or a a person or group of persons acting in concert acquires more than 50% of voting rights and/or more than 50% of the debtor's share capital.
Otherwise the Company has no material agreements in place that are conditional on a change of control.
8. Compensation Agreements in the Event of Takeover Offers with Members of the Management Board or Employees
If the company is taken over, the Management Board shall be issued any stock options not yet granted.
If a person or company or several persons or companies acting in concert (acting in concert as defined in the German Securities Acquisition and Takeover Act) acquires more than 50% of the shares in the company ("Change of Control") the Management Board is entitled to a bonus.
The amount of the bonus is calculated according to the number of stock options to which the Management Board is entitled and the difference between the price offered per share in the takeover offer (or the average price paid in other acquisitions) and the preferential prices for the options pursuant to the stock option program 2008.
In the event of a Change of Control, the Management Board is entitled to a Change of Control Bonus, which is calculated based on the agreed purchased price. The bonus is due for payment on the day of the closing of the Change of Control.
G) Assurance from the Legal Representative (pursuant to Section 37y No. 1 Securities Trading Act)
We assure to the best of our knowledge that, pursuant to the applicable accounting principles, the group financial statement provides an accurate overview of the assets, finances and earnings of the group that reflects the factual circumstances and that the group financial statement portrays the development of the business, including the result and the position of the group, such that it reflects the factual circumstances and outlines the main opportunities and risks inherent in the expected development of the group.
Berlin, March 25, 2010
The Management Board
Biense Visser Bruke Seyoum Alemu Chairman of the Management Board/CEO Management Board/COO
| Notes | 2009 2008 |
||||
|---|---|---|---|---|---|
| €K | €K | €K | |||
| 1. | Sales revenues | (1) | 33,101 | 31,884 | |
| 2. | Change in finished goods inventories and work in process | ||||
| -1,409 | 1,717 | ||||
| 3. | Capitalized cost of self-constructed assets | 3,096 | 2,875 | ||
| 4. | Other operating income | (2) | 2,666 | 2,230 | |
| 5. | Cost of materials | ||||
| a) Cost of raw materials, consumables and supplies, |
|||||
| and of purchased materials | -6,186 | -7,421 | |||
| b) Cost of purchased services |
-1,225 | -1,812 | |||
| -7,411 | -(9,233) | ||||
| 6. | Personnel expenses | (3) | |||
| a) Wages and salaries |
-11,237 | -11,765 | |||
| b) Social security and other pension costs |
-1,904 | -2,055 | |||
| -13,141 | -(13,820) | ||||
| 7. | Depreciation of intangible fixed assets and tangible assets |
(4) | |||
| -2,969 | -8,348 | ||||
| 8. | Other operating expenses | (5) | -10,333 | -11,940 | |
| 9. | Other interest and similar income | (6) | 10 | 7 | |
| 10. Depreciation on financial assets | (6) | 0 | 0 | ||
| 11. Other interest and similar expenses | (6) | -850 | -930 | ||
| 12. Result before Tax | 2,760 | -5,558 | |||
| 13. Taxes on income | (8) | -816 | 329 | ||
| 14. Other taxes | -6 | -5 | |||
| 15. Result after Tax | 1,938 | -5,234 | |||
| thereof: Result of other partner | -1 | -34 | |||
| thereof: Net Result//Result of shareholder of aap AG | 1,937 | -5,268 | |||
| thereof: Earnings per share (undiluted) | 0.07 | -0.20 | |||
| thereof: Earnings per share (diluted) | 0.07 | -0.20 |
| 2,009 | 2008 | |
|---|---|---|
| €K | €K | |
| Result | 1,938 | -5,235 |
| Other Comprehensive Income | 0 | 0 |
| Total Comprehensive Income | 1,938 | -5,235 |
| thereof: account for shareholder of aap AG | 1,937 | -5,268 |
| thereof: account for other partner | 1 | 34 |
| AS | SET S |
Lia bili |
ties d S har an |
eho lde |
rs´ Equ ity |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| No tes |
200 | 9 | 200 8 |
No tes |
200 | 9 | 200 8 |
|||||
| €K | €K | €K | €K | €K | €K | |||||||
| A. | Lo | m A ter ts ng- sse |
(10 ) |
A. | Ca | ita l St ock p |
(15 ) |
|||||
| I. | Int ible As set ang s |
I. | Su bsc ribe d C ita l ap |
27, 882 |
26 ,61 4 |
|||||||
| Co ssio ind rial rig hts d ust rty 1. nce ns, pr ope an |
II. | Ca ital Re p ser ve |
39, 795 |
39 ,58 8 |
||||||||
| sim ilar rig hts d v alu and lic an es, ens es |
3,3 28 |
3,7 90 |
III. | Rev e R enu ese rve |
||||||||
| h | Leg al r 1. ese rve |
42 | 42 | |||||||||
| Go odw ill 2. |
12, 490 |
13 ,05 7 |
Ot her 2. rev enu e re ser ve |
273 | 273 | |||||||
| Ca ita lize d s ice nde red fo 3. p erv s re r o wn ac cou |
nt | 16 ,40 8 |
14 ,28 3 |
IV. | Rev alu ati Res on erv e |
608 | 608 | |||||
| Ot her in ible 4. tan set g as s |
3,1 32 |
3,3 76 |
V. | Co lida ted Ba lan She Los et nso ce s |
-24 ,01 4 |
-25 ,95 0 |
||||||
| 5. A dva nce s |
170 | 0 | VI. | m f Ad jus tm ent Ite Int sts He ld b or ere y |
||||||||
| 35, 528 |
(34 6) ,50 |
Pa rtie s O ide th e G uts rou p |
129 | 128 | ||||||||
| II. | Tan ible As set g s |
44, 715 |
(41 3) ,30 |
|||||||||
| Lan d a nd le ho ld rig hts d 1. ase an |
||||||||||||
| bu ild ing inc lud ing bu ild ing hir d n t s, s o |
846 | 1,7 71 |
||||||||||
| B. | Lo | s (a ar) ter Lia bili tie bov e 1 ng- m ye |
(18 ) |
|||||||||
| Pla and ach ine 2. nt m ry |
3,1 46 |
4,3 83 |
1. | Ot her lo isio ter ng- m p rov ns |
0 | 256 | ||||||
| Ot her fix and fit tin ls a nd ipm 3. tur too es gs, equ |
ent | 1,0 33 |
1,1 55 |
2. | Lon du ba nks g-t e to erm |
1,8 36 |
3,0 08 |
|||||
| Ad 4. van ces |
30 | 3. | Sp eci al i s fo r in tem tm ent ant ves gr s |
134 | 153 | |||||||
| 5,0 55 |
(7, ) 309 |
4. | De fer red ta xes |
2,2 49 |
3,7 02 |
|||||||
| III. | Fin ial Ass ets anc |
5. | Lon fin ial lea sin liab ilit ies g-t erm anc g |
89 | 1,0 67 |
|||||||
| Oth Inv est nts er me |
(25 ) |
35 6 |
358 | 6. | Sh hol der ovi sio are pr ns |
0 | 53 1,1 |
|||||
| 356 | (35 8) |
7. | Ot her lo m l iab ilit ies ter ng- |
36 | 54 | |||||||
| IV. | De fer red Ta xes |
127 | 2,3 20 |
4,3 44 |
(9, ) 393 |
|||||||
| B. | Sh | ort -te As set rm s |
C. | Sh | s (u ) ort -te Lia bili tie to 1 y rm p ear |
(17 ), (18 ) |
||||||
| I. | Inv ori ent es |
(12 ) |
||||||||||
| Ra rial nd lies 1. ate w m s a sup p |
2,8 11 |
3,6 29 |
1. | Ot her sh vis ion ort -te rm pro s |
(17 ) |
19 3 |
36 1 |
|||||
| 2. Wo rk i n p roc ess |
1,3 76 |
2,6 60 |
2. | Sh ovi sio ort -te tax rm pr ns |
(17 ) |
0 | 0 | |||||
| F ini she d s ice 3. erv s |
0 | 108 | 3. | Du ba nks e to |
||||||||
| Fin ish ed ds 4. goo |
7,3 01 |
7,3 17 |
5,6 84 |
7,4 34 |
||||||||
| 5. Ad van ces |
50 | 0 | 4. | Ad fro ust van ces m c om ers |
78 | 289 | ||||||
| 11, 538 |
(13 4) ,71 |
5. | Ac ble nts cou pa ya |
1,7 99 |
3,2 18 |
|||||||
| II. | Ac cei vab le a nd oth er A nts ts cou re sse |
(13 ) |
||||||||||
| 6. | Sp eci al i s fo r in tem tm ent ant ves gr s |
41 | 78 | |||||||||
| le ( s) Ac cei vab de deb 1. nts tra tor cou re |
6,0 07 |
6,7 95 |
7. | Ac du e f her nts ot cou rom gr ou p c om pan |
ies | 4 | 22 | |||||
| Ac du e f her ies 2. nts ot cou rom gr ou p c om pan |
0 | 1 | 8. | Sh fin ial lea sin liab ilit ies ort -te rm anc g |
56 | 463 | ||||||
| Ot 3. her set as s |
1,6 38 |
1,9 31 |
9. | Sh hol der lia bili ties are |
2,2 65 |
0 | ||||||
| 7,6 45 |
(8, ) 727 |
10 | . O the r sh liab ilit ies ort -te rm |
3,4 76 |
4,4 69 |
|||||||
| III. | Ca sh and sh iva len ts ca equ |
2,4 06 |
96 | 13, 596 |
(16 4) ,33 |
|||||||
| 62, 655 |
67 ,03 0 |
62, 655 |
67 ,03 0 |
| 2009 | 2008 | |
|---|---|---|
| € K |
€K | |
| 1. Net profit/loss for the year | 1,938 | -5,234 |
| 2. Stock options with effect on payments | 222 | 436 |
| 2,160 | -4,798 | |
| 3. Ohter profits from non effective payments | -427 | 0 |
| 4. Depreciation | 2,969 | 3,193 |
| 5. Extraordinary Depreciation | 0 | 5,155 |
| 6. Changes of deferred taxes | 683 | -472 |
| 7. Increase in provisions | -423 | 52 |
| 8. Loss from retirement of tangible assets | 0 | 0 |
| 9. Profit from disposed Disposal group | -312 | |
| 10. Write-ups of intangible assets | 0 | 0 |
| 11. Increase in inventories, trade receivables and other assets | 2,302 | -2,516 |
| 12. Increase/Decrease in trade accounts payable and other liabilitie | -2,135 | -12 |
| 13. Income from retransfer of special item for investment allowances | ||
| -56 | -58 | |
| 14. Inflow of funds from current business activity | 4,761 | 544 |
| 15. Payments for intangible and tangible assets | -4,054 | -4,193 |
| 16. Inpayments from disposal of Disposal Group | 2,150 | 0 |
| 1 7. Inpayments from investment grants |
0 | 116 |
| 18. Payments from investment grants | 0 | -27 |
| 1 9. Outflow of funds from investment activity |
-1,904 | -4,104 |
| 20. Inpayments from capital increase and shareholder grants | 1,267 | 2,763 |
| 21. Equity procurement transaction costs | -21 | -156 |
| 2 2. Inpayments from the take-up of loans |
2,601 | 2,648 |
| 2 3. Inpayments from new shareholder grants |
2,000 | 0 |
| 24. Payments to redeem shareholder grants | -500 | 0 |
| 2 5. Payments to redeem loans and dormant equity holdings |
-5,426 | -1,828 |
| 26. Payments to financial leasing-agreements | -468 | -68 |
| 27. Inflow of funds from investment activity | -547 | 3,359 |
| 2 8. Cash and cash equivalents at start of period |
96 | 297 |
| 28. Cash and cash equivalents at end of period | 2,406 | 96 |
| Re ire t Sta Sta Sta De cia tio n in Ret ire Sta tus at tus at tus at tus at as as as pre as 12 1 12 Tra fer Tra fer / / / / / / / / Ad di tio nts fin ial 1 1 09 31 09 1 09 nts 31 09 me ns s ns s ns anc yea r me T T T T T T T T T T € € € € € € € € € € Lo As -te set ng rm s I. Int i b le As set an g s 1. Co ion in du ia l p str ert nce ss s, rop y 20 42 2 0 99 20 36 16 63 2 50 99 10 6 12 03 6 14 4 -4 4 15 4 4 4 -4 ig hts d s im i lar ig hts d r an r an , , , , , , lue d l ice he s t ret va s, a n nse o Go dw i l l 2. 17 07 5 0 56 7 0 16 50 8 4, 01 8 0 0 0 4, 01 8 o , , Ca ita l ize d dev lop iv it ies 3. nt act 23 19 7 3, 09 6 0 0 26 29 3 8, 91 4 97 1 0 0 9, 88 5 p e me , , Ot he int i b le a 4. ts 3, 66 1 0 0 0 3, 66 1 28 5 24 4 0 0 52 9 r an g sse A dv 0 0 0 0 0 0 0 0 0 0 5. 17 17 an ces |
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|
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Company Name, Domicile aap Implantate AG, Berlin, Germany
Head Office
Lorenzweg 5, 12099 Berlin
Commercial Register
The Company is registered at the Berlin-Charlottenburg district court as HR B 64083 and was entered into the court's commercial register on September 10, 1997.
aap Implantate AG was listed on the regulated market from May 10, 1999 and traded in the Frankfurt Stock Exchange's Neuer Markt segment under Security ID number 506 660. Since May 16, 2003 the Company has been listed in the Prime Standard regulated market section with further and more exacting admission requirements.
The Company was incorporated by means of modifying conversion of aap Ahrens, Ahrens & Partner GmbH & Co. Betriebs KG on January 1, 1997.
aap Implantate AG is a medical sector enterprise. The Group's business activity consists of the research, development, manufacture and sale of implants, medical instruments, bone cements and replacement materials.
The consolidated financial statements of aap Implantate AG, Berlin, to December 31, 2009 were drawn up in accordance with International Financial Reporting Standards (IFRS) as applied in the European Union, and with the commercial law provisions of Section 315 a (1) of the German Commercial Code (HGB) and were released for publication by aap Implantate AG's Management Board on March 25, 2010. As a matter of principle all of the International Financial Reporting Standards that had come into binding force as of the balance sheet date are applied in the consolidated financial statements.
The consolidated financial statements of aap Implantate AG to December 31, 2009 consist of the consolidated balance sheet, the consolidated income statement, the schedule of the total comprehensive income, the cash flow statement, the schedule of the movement in equity, and the notes. In contrast to previous years, the segment reporting is no longer included (Note B 3).
The consolidated financial statements are based on the financial statements of the companies in the Group and were drawn up applying uniform accounting and valuation methods as used by the parent company in accordance with the HGB and the German Stock Corporation Act (Aktiengesetz). The transfer to IFRS was undertaken at individual company level.
The consolidated balance sheet and the consolidated income statement are structured in accordance with IFRS. The consolidated income statement was drawn up using the total cost method.
The consolidated financial statements are denominated in euros (€). Unless otherwise specified, all amounts are stated in thousands of euros (€K).
These annual financial statements for the fiscal year 2009 are based on a reporting period from January 1 to December 31, 2009.
aap Implantate AG's Management Board is responsible for the preparation, completeness and accuracy of the consolidated financial statements and the group management report.
The consolidated financial statements, the group management report and the audit report were discussed in detail, with the auditors present, at the Supervisory Board's accounts meeting. The result of this review is contained in the Supervisory Board's report.
The consolidated cash flow statement was drawn up in accordance with IAS 7 using the indirect method. It is arranged by payment flows from commercial, investment and financing activity. The total of cash and cash equivalents shown in the cash flow statement corresponds to the total of cash and cash equivalents shown in the balance sheet. Cash and cash equivalents consist of cash in hand and at banks.
No restraints on disposal exist. The effects of exchange rate changes are stated separately. Inflows and outflows of funds from the sale of a disposal group are stated separately at C (3) below.
At the beginning of the fiscal year 2009 the Group was restructured as part of a performance improvement program. With a view to achieving sustainable profitable growth there was a clear focus on the Ortho/Trauma/Spine areas. As a result of this strategic alignment the previous Traumatology & Orthopaedics and Biomaterials segments were merged and are managed as a single unit. aap's internal organizational and reporting structure was adjusted accordingly. Reportable business segments as defined in IFRS 8 no longer existed in the reporting year. Reporting has been discontinued.
The consolidated financial statements include, in addition to the parent company aap Implantate AG, all subsidiaries in which aap Implantate AG directly or indirectly holds a controlling interest. Participating interests are listed at H (25) below.
Subsidiaries:
| 2009 | 2008 | |
|---|---|---|
| Shareholding | Shareholding | |
| aap Biomaterials GmbH, Dieburg | 100 % | 100 % |
| OSARTIS Verwaltungs-GmbH, Elsenfeld | 100 % | 100 % |
| ADC Advanced Dental Care GmbH, Dieburg | 54 % | 51 % |
| aap bio implants Netherlands B.V., Nijmegen (Netherlands) | 100 % | 100 % |
| aap bio implants markets GmbH, Düsseldorf | 0 % | 100 % |
The merger of aap Biomaterials GmbH & Co. KG with aap Biomaterials GmbH with effect from July 1, 2008 was decided during the fiscal year 2008. The merger was entered in both companies' commercial register on February 4, 2009.
The partners in ADC Advanced Dental Care GmbH & Co. KG made over their shares to ADC Advanced Dental Care Verwaltungs-GmbH (now ADC Advanced Dental Care GmbH) with economic effect from July 1, 2008 by way of a capital increase in kind. The capital increase was entered in the commercial register on August 13, 2009.
By the terms of an agreement dated August 7, 2009, aap bio implants markets GmbH was merged with aap Implantate AG by the transfer of its assets by dissolution without liquidation. The merger was entered in the commercial register on September 2, 2009.
These transactions had no effect on the consolidated financial statements because they were restructurings within the Group that involved only companies under ongoing joint control.
On December 17, 2009, after approval by the Supervisory Board, the Management Board signed a contract to sell to a Dutch investor the shares in Bactimm B.V., Nijmegen, and, indirectly, its subsidiary Farmalyse B.V., Zaandam, held by aap bio implants Netherlands B.V. Bactimm B.V. (microbiological analysis) and the Farmalyse B.V. (chemical analysis) were companies that did business in analytics for aap itself and for third parties. In the course of restructuring aap and the focus on its core areas Ortho/Trauma/Spine, the Analytics segment was defined as a non-core business at the beginning of 2009. As a result of the contracts signed, aap bio implants Netherlands B.V. lost control over Bactimm B.V. and Farmalyse B.V. as defined in IFRS 3 with effect from December 17, 2009. From the viewpoint of aap Implantate AG and the Group, the companies sold constitute a disposal group as defined in IFRS 5. The disposal group's profits are stated in the consolidated income statement under other operating income (F (2)).
| 2009 | |
|---|---|
| €'000 | |
| Proceeds of disposal | 2,300 |
| Assets and liabilities of the disposal group | |
| Current assets | |
| Receivables and other assets | 820 |
| Inventories | 240 |
| Non-current assets | |
| Goodwill | 567 |
| Financial investment | 2 |
| Machinery, office and plant equipment | 1,649 |
| Deferred tax assets | 56 |
| Total assets | 3,334 |
| Current liabilities | |
| Owed to banks | 96 |
| Trade payables | 450 |
| Non-current liabilities | |
| Other financial liabilities | 950 |
| Total liabilities | 1,496 |
| Net assets | 1,838 |
| Profit from the disposal group | |
| Proceeds of disposal | 2,300 |
| Net assets | ./. 1,838 |
| Disposal costs | ./. 150 |
| 312 | |
|---|---|
| Net cash flow from the disposal group | 2009 |
| €'000 | |
| Proceeds of disposal | 2,300 |
| Disposal costs | ./. 150 |
| Net cash flow | 2,150 |
The financial year of the companies included is the calendar year. The consolidated financial statements were accordingly prepared to December 31, 2009.
The financial statements of the companies included in the consolidated financial statements were drawn up applying uniform accounting and valuation methods as used by the parent company. The consolidated companies draw up their financial statements in their national currency, the euro (€), as the functional currency in which they do most of their business.
Financial statements for mergers are prepared in accordance with IFRS 3 "Business Combinations" on the basis of the purchase method. Capital consolidation is thereby undertaken at the time of purchase by netting out the purchase price against the revalued pro rata net assets of the subsidiaries acquired.
Subsidiaries' allowable assets, debts and contingent liabilities are stated at their full market value irrespective of the minority interest. Intangible assets are shown separately from goodwill insofar as they can be separated from the company and result from a contractual or other right. No initial restructuring reserves are created in the course of purchase price allocation. Any positive remaining differential amounts are capitalized as goodwill. Negative differential amounts arising from initial consolidation are retransferred with effect on results.
Capitalized goodwill is not depreciated according to schedule but subjected to an impairment test at least once a year. Cash-generating units to which a part of the goodwill is allocated are impairmenttested annually or more frequently whenever there are indications of an impairment of value. If a cashgenerating unit's recoverable amount is less than its book value, the impairment charge must first be allocated at the book value of all goodwill allocated to the unit and then pro rata to the other assets on the basis of the book values of each asset within the unit. An impairment charge on goodwill may not be recovered in future period. On the disposal of a subsidiary, its share of goodwill is taken into account in determining the net proceeds of disposal. Income and expenses of the companies acquired are included in the consolidated financial statements from the time of acquisition.
Intra-group receivables and liabilities are offset. Any balancing differences that arose in the reporting period were recorded as affecting earnings.
In the context of earnings consolidation, internal sales and intra-group income and expenses are offset. Interim results are eliminated insofar as they are of minor significance.
In their individual financial statements companies translate business transaction denominated in foreign currencies at the exchange rates valid on the transaction date. Monetary items are translated at the exchange rate valid on the balance sheet date. Gains and losses arising by the balance sheet date from the valuation of monetary balance sheet items in a foreign currency are stated with an effect on results under other operating income or expenses.
Intangible assets are shown at cost of acquisition less scheduled depreciation. All intangible assets except goodwill have an ascertainable useful life and were therefore depreciated according to schedule.
Development costs are capitalized as intangible assets if a newly developed product or process can be demarcated clearly, is technically realizable, and if the company plans to use it itself or to market it. Further prerequisites for capitalization are the likelihood of deriving future economic benefit and a reliable valuation of the asset. Capitalized development costs also include costs of borrowing. They are depreciated according to schedule in a straight line over their useful life, as a rule between 5 and 10 years from the date on which they were first put to use. Research costs are recorded as expenses in the period in which they were incurred.
Tangible fixed assets are valued at cost of acquisition or production and, where depreciable, taking scheduled depreciation into account. The production costs of tangible fixed assets include the full costs. Costs of borrowing are capitalized as part of acquisition or production costs insofar as they relate to the purchase, construction or manufacture of a qualified asset.
Fixed assets that are leased by way of financial leasing are capitalized at the lesser of either their market value or the cash value of the leasing installments and depreciated in a straight line over their likely useful life.
Intangible assets and tangible fixed assets are depreciated off schedule if the sum obtainable for the asset is less than the book value. In the case of goodwill or capitalized development costs, annual impairment tests are undertaken irrespective of any specific indication. Assets are written up if and when the reason for any previous unscheduled depreciation no longer applies. The resulting increase in book value may not exceed the depreciated cost of acquisition or production. Goodwill is not written up.
Other holdings listed under financial investments come in the "available for disposal" category. They are valued both on first inclusion in the balance sheet and in subsequent periods at market value insofar as the market value can be ascertained reliably. Initial valuation is on the day of fulfillment. Unrealized profits or losses are shown under equity. On disposal, the profit or loss affects results. If substantial objective indications of impairment of an asset exist, it is written off with effect on results.
Deferred taxes result from valuations at different times in IFRS and fiscal balance sheets of individual companies and from consolidation events. Deferred taxes on the assets side include tax reduction entitlements arising from anticipated utilization of loss carryovers in later years the realization of which
is sufficiently certain. Deferred tax assets that anticipate the use of loss carryovers are only included if they are already covered on the balance sheet date by deferred tax liabilities arising from temporary differences. Deferred taxes are based on the rates of taxation that apply or are anticipated at the time of realization taking into account tax regulations valid or passed on the balance sheet date. Deferred taxes are netted out for each company.
Inventories are valued at the lesser of cost of acquisition or production or net sale value. Production costs are full costs calculated on the basis of ordinary employment. In detail, production costs include, in addition to directly attributable costs, appropriate proportions of essential production overheads. These include material and manufacturing overheads and production-related administrative costs as well as straight-line depreciation of production plant and equipment. Loan capital costs are not capitalized as a part of acquisition or production costs. Valuation is based on the FIFO assumed sequence of consumption. Inventory risks arising from diminished usability are taken account of by means of appropriate write-downs. Lower values on the reporting date to lower net losses on disposal are stated.
Financial instruments are all contracts that lead simultaneously to a financial asset at one company and to a financial liability or an equity instruments at another. Reporting in accordance with IFRS 7 is at H (21).
Receivables and other assets are shown in the balance sheet at cost of acquisition less essential value adjustments in line with the actual risk of default. Interest-free receivables with a term of more than one year are reported at cash value. Foreign currency receivables are converted at the rates valid on the transaction date. As of the balance sheet date foreign currency receivables are converted at the exchange rate on the reporting date. Translation differences are reported with effect on results.
Cash and cash equivalents are cash at hand or with banks. They are valued at ongoing cost of acquisition.
Assets held for sale are assets that can be sold in their present condition and are very likely to be sold. They can be individual non-current assets, disposal groups or discontinued operations. Non-current assets held for sale are no longer written down. They are stated at current market value less cost of disposal insofar as this is less than their book value. Liabilities are included as a part of the disposal group if they are to be transferred with the disposal. Until final disposal, profits and losses from assets held for sale and disposal groups are stated under results of discontinued operations.
Investment allowances and investment grants received are carried as liabilities under the heading special investment allowances items. They are written down, with the resulting effect on earnings, in a straight line in accordance with the useful economic life of the assets they helped to acquire.
Other public sector grants are stated as income in the period that is required to allocate them to the expenses they are intended to offset. Grants received to offset expenses already incurred are stated with an effect on the operating result for the period in which their entitlement originated.
The revaluation reserve contains unrealized profits and losses from changes in the market value of financial assets that are available for disposal. These profits or losses do not affect results.
Company stock option programs are shown in the balance sheet as stock-based remuneration by means of equity capital instruments.
Stock options granted to employees and executives are stated as personnel expenses on the one hand and as a contribution toward capital reserves on the other. The transfer to capital reserves takes place over a period that corresponds to the contractually agreed two- to five-year blocking period. The market value of stock options granted is calculated on their grant date.
Provisions are created if a liability to a third party arising from a past event exists, if a claim is likely, and if the foreseeable level of provision required can be estimated reliably. Provisions are stated at the settlement amount that is likeliest to be determined and are not netted out against claims to reimbursement.
Liabilities are stated at market value on first mention. In subsequent years they are valued using the effective yield rate at their net book value. Liabilities from financial leasing agreements are carried as liabilities at their market value. Where the cash value of minimum leasing payments is lower than the market value, the cash value will count. Foreign currency liabilities are translated at the exchange rates valid on the transaction date. As of the balance sheet date foreign currency liabilities are translated at the exchange rate on the reporting date. Translation differences are reported with effect on results.
Leasing transactions are classified as either finance leases or operating leases. They are treated as finance leases if the group as the lessee bears all of the opportunities and risks arising from the use of the leasing item, which therefore counts as its economic property. In this case the leasing item and the corresponding liability are stated in the balance sheet. Other leasing transactions are shown in the balance sheet as operating leases. In these cases the leasing item is capitalized as an asset by the lessor and the leasing payments made by the aap Group are stated as expenses at the time when they occurred.
Contingent liabilities are possible or existing liabilities based on past events that are not likely to involve an outflow of funds. They are not recorded in the balance sheet. The amounts stated as contingent liabilities correspond to the extent of liability on the balance sheet date.
Sales revenue is realized when due delivery or performance has been rendered and the risk has been transferred to the customer. This does not apply to order-related income that results from applying the percentage-of-completion method. Customer discounts and rebates and returned goods are taken into account in the appropriate period in line with the sales revenue on which they are based.
Discretion must be exercised in applying accounting and evaluation methods to, for example, noncurrent assets that are up for disposal. It must here be determined whether the assets are saleable in their current condition and their disposal is likely. In this case the assets and, if applicable, attendant debts must be stated and evaluated as assets or debts held for disposal.
For some items, drawing up the consolidated financial statements requires making estimates and assumptions that affect the statement and level of assets, debts and contingent liabilities and of income and expenses reported. Actual amounts may diverge from these estimated values. These assumptions and estimates relate inter alia to the forward-looking premises assumed in connection with the impairment test for goodwill, to assessments on deriving future economic benefit from a development project, and to the likelihood of realizing tax carryovers.
All such assumptions and estimates are based on circumstances and assessments on the balance sheet date and on the future business development anticipated for the enterprise, taking into account realistic expectations of future development of its economic environment. Insofar as these framework conditions
develop differently, the assumptions and, if necessary, book values of the assets and debts affected will be adjusted accordingly.
On the basis of the facts known when the consolidated financial statements were being drawn up, no material change in the assumptions and estimates needs to be assumed, so no adjustment of the book values of the stated assets and debts is to be expected in the fiscal year 2009.
The International Accounting Standards Board (IASB) has both approved amendments to existing International Financial Reporting Standards (IFRS) and issued new IFRS standards and interpretations. The aap Group used the following for the first time in the reporting year.
This standard contains new regulations on the presentation of financial statements. They require inter alia a strict distinction between owner-related and non owner-related changes in equity and greater detail on other comprehensive income. Its first-time adoption has led in aap's consolidated financial statements to changes in the presentation of results and in the statement of stockholders' equity and to greater detail in the notes to the statements.
IFRS 3 (2008) Business Combinations
IAS 27 (2008) Consolidated and Separate Financial Statements
IFRS 3 (2008) "Business Combinations" contains changes in how corporate acquisitions are to be stated in the balance sheet. In the case of successive changes in ownership interest, interests previously held are revalued with effect on results at the time when a controlling interest is acquired. The difference between the revalued book value of the shareholding in the subsidiary and the subsidiary's pro rata revalued net assets is to be stated as goodwill. In stating stock held by other stockholders there will be a choice in the future between stating them at market value or at their identifiable pro rata net asset value. Furthermore, liabilities stated at the time of acquisition can no longer be accounted for with regard to future purchase adjustments without effect on results by changes to the goodwill. Incidental acquisition costs must be stated as expenditure.
The revised version of IAS 27 (2008) amends the regulations governing the statement of transactions with non-controlling stockholders and in the event of loss of a controlling interest in subsidiaries. In the future, a reduction in the percentage holdings must be stated as an equity transaction without effect on results as long as the parent company retains an opportunity to exercise control. If control is lost, the subsidiary's assets and liabilities must be booked out entirely and the remaining shareholding must be stated at its market value. Shares held by other stockholders that become negative due to losses incurred must be stated at their negative balance.
IFRS 3 (2008) and IAS 27 (2008) must be applied at the latest to fiscal years beginning on or after July 1, 2009. They were adopted prematurely in the fiscal year under review.
Amendment to IFRS 7 Improving Disclosures about Financial Instruments The changes require the statement of greater detail on financial instruments, especially details of how market values are determined and greater detail about liquidity risks.
First-time adoption of the following standards and interpretations that were mandatory for the fiscal year 2009 had no material influence on the presentation of the assets, financial and earnings position of the Group or on consolidated earnings per share. Its effect was not significant enough to require any adjustment of previous year's figures.
| Amendment to IFRS 1 (2008) and IAS | Costs of Acquisition of Shares in Subsidiaries, Joint | |||||
|---|---|---|---|---|---|---|
| 27 (2008) | Ventures or Associated Companies | |||||
| Amendment to IAS 32 (2008) and IAS 1 | Callable Financial Instruments and Obligations Arising on | |||||
| (2008) | Liquidation | |||||
| Amendment to IFRS 2 (2008) | Share-based Payment: Vesting Conditions and Cancellations |
|||||
| Amendment to IFRIC 9 and IAS 39 (2009) |
Embedded Derivatives |
Collective Standard with Amendments to Various IFRSs (2008) Improvements to International Financial Reporting Standards
aap Implantate AG did not yet apply in the reporting year the following standards and interpretations published but not yet adopted by the EU or not yet in force. The effects of the following standards on aap's consolidated financial statements are currently under review.
Improvements to IFRSs (2009): Collective Standard with Amendments to Various Financial Reporting Standards
The collective standard contains a large number of minor IFRS amendments aimed at making regulations more specific and at eliminating inconsistencies. Most changes apply to fiscal years beginning on or after January 1, 2010.
IFRS 9 (2009) Financial Instruments
The standard will replace the previous provisions of IAS 39 on the classification and valuation of financial instruments. IFRS 9 (2009) will apply for the first time to fiscal years beginning on or after January 1, 2013.
IAS 24 (2009) Related Party Disclosures
This standard mainly provides for easements in disclosures on related parties that are controlled or materially influenced by the state. IAS 24 (2009) will apply for the first time to fiscal years beginning on or after January 1, 2011.
The following standards and interpretations that did not yet apply in the fiscal year 2009 are unlikely to have any material effect on aap's consolidated financial statements:
| Amendment to IAS 32 (2009) | Classification of Rights Issues |
|---|---|
| IFRS 1 (2008) | First-time Adoption of International Financial Reporting Standards |
| Amendment to IFRS 1 (2009) | Additional Exemptions for First-time Adopters |
| Amendment to IFRS 1 (2010) | Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters |
| Amendment to IFRS 2 (2009) | Group Cash-settled Share-based Payment Transactions |
| Amendment to IAS 39 (2009) | Suitable Underlying Transactions |
| Amendment to IFRIC 14 | Prepayments of a Minimum Funding Requirement |
| (2009) | |
| IFRIC 15 | Agreements for the Construction of Real Estate |
| IFRIC 16 | Hedges of a Net Investment in a Foreign Operation |
| IFRIC 17 | Distributions of Non-Cash Assets to Owners |
| IFRIC 18 | Transfers of Assets from Customers |
| IFRIC 19 | Extinguishing Financial Liabilities with Equity Instruments |
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| By region | ||
| Germany | 7,110 | 8,195 |
| Other European countries | 16,183 | 13,894 |
| Asia | 5,314 | 3,676 |
| The Americas | 4,196 | 5,923 |
| Africa | 298 | 196 |
| 33,101 | 31,884 | |
| By lines of business | ||
| Trauma & Orthopaedics | 6,511 | 12,244 |
| Biomaterials | 28,929 | 19,654 |
| Transfer/Consolidation | ./. 2,339 | ./. 14 |
| 33,101 | 31,884 |
Sales revenues include €2.644 million (previous year: €2.326 million) in income from the provision of services. The remaining sales revenues are income from the sale of products.
In the fiscal year 2009 three of the Company's main customers accounted for €10.295 million (previous year: €7.757 million) in sales revenue.
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Income from selling the Disposal Group (C.3.) | 312 | 0 |
| Income from grants toward expenses | 1,489 | 1,196 |
|---|---|---|
| Income from private use of company cars | 131 | 170 |
| Income for periods unrelated to the accounting period | 65 | 116 |
| Income from exchange rate differences | 12 | 106 |
| Income from retransfer of provisions | 147 | 85 |
| Income from retransfer of special item for investment grants and allowances | 57 | 69 |
| Income from write-down of receivables | 103 | 63 |
| Income from disposal short term assets | 0 | 45 |
| Income from insurance compensation | 92 | 23 |
| Income from disposal long term assets | 0 | 21 |
| Other | 258 | 336 |
| 2,666 | 2,230 |
Other operating income includes €15K (previous year: €277K) in income from booking out trade accounts payable for which the time limit had expired.
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Wages and salaries | 11,237 | 11,765 |
| Social insurance contributions and expenses | ||
| for old-age provision and for support | 1,904 | 2,055 |
| 13,141 | 13,820 | |
| Average headcount over the year | ||
| Wage-earners | 139 | 155 |
| Salary-earners | 131 | 148 |
| 270 | 303 |
Scheduled depreciation of fixed assets amounted to €1.250 million (previous year: €1.413 million), and €1.719 million (previous year: €1.781 million) in intangible assets. There were no extraordinary development project write-downs in 2009 (previous year: €5.155 million).
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Costs of research, analysis, sampling and sterilization | 1,161 | 1,880 |
| Premises costs | 1,782 | 1,755 |
| Advertising and travel expenses | 1,094 | 1,568 |
| Consulting costs | 1,430 | 878 |
| Vehicle costs | 613 | 652 |
| Insurance | 460 | 520 |
| Office costs, phones, fax, postage | 400 | 474 |
| Repairs and maintenance | 490 | 472 |
|---|---|---|
| Losses and depreciation of receivables | 325 | 411 |
| Outgoing packaging and freight costs | 347 | 391 |
| Sales commission | 153 | 267 |
| Patent and other fees | 294 | 263 |
| Currency differences | 191 | 249 |
| Leasing | 218 | 238 |
| Expenses unrelated to the accounting period | 362 | 225 |
| Further training costs | 79 | 132 |
| Other expenses | 934 | 1,566 |
| 10,333 | 11,941 |
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Other interest and similar income | 10 | 7 |
| Other interest and similar expenditure | ||
| Interest on long-term loans | ./. 357 | ./. 389 |
| Interest on current debts to banks | ./. 493 | ./. 541 |
| ./. 850 | ./. 930 | |
| ./. 840 | ./. 923 |
Exchange rate differences affecting the operating resulting in the accounting period were:
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Income from exchange rate differences | 12 | 106 |
| Cost of exchange rate differences | ./. 191 | ./. 250 |
| ./. 179 | ./. 144 |
For calculating deferred taxes in Germany a tax rate of 30.2% (previous year: 30.2%) is applied, consisting of corporation tax at 15% since January 1, 2008, solidarity surcharge at 5.5% of the corporation tax payable, and trade tax at 14.4%.
Deferred taxes in the consolidated financial statements that relate to German companies in the Group are tax loss carryovers and temporary differences resulting mostly from capitalization of development costs with reverse effects that will not apply until after January 1, 2010. Deferred taxes on the assets side in respect of tax credit entitlements arising from the anticipated use of existing loss carryovers were taken into account in the reporting year only insofar as they were covered on the balance sheet date by existing deferred taxes on the liabilities side arising from temporary differences and even if tax loss carryovers were potentially higher.
Deferred tax liabilities totaling €1.594 million (previous year: €1.727 million) were a result of first-time consolidation of the Dutch sub-group. Scheduled depreciation of undisclosed reserves of acquisitions
uncovered in purchase price allocation led to €133K (previous year: €158K) in deferred tax income. €6,000 (previous year: €47K) in tax expenses was stated in respect of equity capital transaction costs.
The tax ratio for the reporting period is therefore around 30% (previous year: 6%).
Reconciliation of income tax expenses to IFRS to theoretical tax expenses is as follows:
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Earnings before tax | 2,754 | ./. 5,564 |
| Theoretical tax earnings/expense (income) 30.2% (previous year: 30.2%) | ./. 831 | 1,679 |
| Tax effects on Not useable loss carryover/utilization of loss carryovers/depreciation - |
||
| on loss carryovers | ./. 342 | ./. 976 |
| Disposal of none activated tax-deductable good will (disposal Group - - |
||
| C.3.) | ./. 171 | 0 |
| Tax frees income from selling a group of assets (disposal Group - C.3.) - |
221 | 0 |
| · Tax rate differences within the group |
216 | ./. 266 |
| · Permanent differences |
113 | ./. 75 |
| · Non-deductible expenses and applicable trade tax |
./. 36 | ./. 61 |
| · Tax-free income |
9 | 25 |
| · Other |
5 | 4 |
| Total adjustments | 15 | ./. 1,349 |
| Income tax expenses to IFRS | ./. 816 | 330 |
| Effective tax rate in % | 30 % | 6 % |
Income tax expenses to IFRS include €81K (previous year: €37K) in tax actually paid.
Undiluted earnings per share are calculated by dividing earnings from the shares for the period by the average weighted number of shares.
| 2009 | 2008 | |
|---|---|---|
| Result for the period in €K | 1,938 | ./. 5,268 |
| Number of shares ('000s) | 27,601 | 26,201 |
| Earnings per share in € | 0.07 | ./. 0.20 |
Diluted earnings per share take into account stock options granted between 2006 and 2009.
| 2009 | 2008 | |
|---|---|---|
| Result for the period in €K | 1,938 | ./. 5,268 |
| Number of diluted shares ('000s) | 27,601 | 26,201 |
| Earnings per share in € | 0.07 | ./. 0.20 |
In the reporting year, as in the previous year, undiluted earnings were the same as diluted earnings because the performance targets for the stock options were not achieved by the balance sheet date.
The Management Board and Supervisory Board of aap Implantate AG agreed on March 16, 2009 to a €1,267,357 capital increase from authorized capital by issuing 1,267,357 shares ruling out subscription rights for existing shareholders. The shares are entitled to a share in profits from January 1, 2009. aap Implantate AG's capital stock is thereby increased to €27,881,870.
The development of long-term fixed assets is shown in the attached consolidated schedule of assets. Of the additions in the reporting year, internally produced assets amounted to €3.096 million (previous year: €2.875 million).
Intangible assets acquired in return for payment are depreciated pro rata in a straight line from the historic cost of acquisition.
| Useful economic life is as follows: | Years |
|---|---|
| Industrial property rights and similar rights and values | 3–20 |
Write-downs totaling €748K (previous year: €781K) were made in the reporting period.
Development costs totaling €3.096 million (previous year: €2.843 million) were capitalized in the reporting period. They included €418K (previous year: €297K) in directly attributable borrowing costs based on the average Group financing cost rate of 7.19% (previous year: 6.02%). Development costs related for the most part to the following projects:
In addition, research and other development costs totaling €1.196 million (previous year: €1.302 million) were capitalized as expenses Write-downs in the reporting period totaled €971K) (previous year: €6.154 million, of which €5.155 million was unscheduled depreciation). Service lives range from 10 to 15 years.
Irrespective of specific indications, the aap Group carries out annual impairment tests of development projects by determining their useful value. The useful value of a development project is the cash value of the cash flow that the project is likely to generate in the future. It is determined internally. Determination of useful value is based on cash flow planning approved by the Management Board and valid at the time when the impairment test is carried out. In principle it covers a period of four years.
The discount rates used were derived from market data and the project-specific risk run by the underlying development project and amount to between 9.5% and 14.6% p. a. (previous year: between 12.0% and 15.4%) before and between 9.5% and 11.3% p. a. (previous year: 9.4% and 12.2%) after taxes. There was no extraordinary depreciation requirement in the reporting year. The previous year's extraordinary depreciation requirement amounted to €5.155 million; affecting net income, it is stated under Depreciation (F (4)).
The following cash-generating units were identified on the basis of the smallest identifiable group of aap Group assets as defined in accordance with IAS 36.6 that generate cash inflows from continuing use and are largely independent of cash inflows from other assets or groups of assets.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| €K | €K | |
| Status at the beginning of the year | 17,075 | 17,075 |
| Disposal of a group of assets (disposal Group - C.3.) | ./. 567 | 0 |
| Status at the end of the year | 16,508 | 17,075 |
| Accumulated Impairment Losses | ||
| 31.12.2009 | 31.12.2008 | |
| €K | €K | |
| Status at the beginning of the year | 4,018 | 4,018 |
| Impairment losses stated in the course of the year | 0 | 0 |
| Status at the end of the year | 4,018 | 4,018 |
| Book Value | ||
| 31.12.2009 | 31.12.2008 | |
| €K | €K | |
| Status at the beginning of the year | 13,057 | 13,057 |
| Status at the end of the year | 12,490 | 13,057 |
The aap Group's total goodwill as of December 31, 2009 amounted to €12.5 million (previous year: €13.1 million), consisting of the amounts listed above.
Irrespective of specific indications, the aap Group carries out annual impairment tests. Goodwill was found to be unimpaired, so – as in the previous year – no write-downs were undertaken.
The amount achievable by the cash-generating unit was determined on the basis of its useful value. Useful value is the cash value of the cash flow that a cash-generating unit is likely to generate in the future. It is determined internally. Determination of useful value is based on a discount rate of 12.7% p. a. (previous year: 12.4%) derived from market data. The discount rate after taxes is 9.5% (previous year: 10.8%).
For the purpose of impairment testing, goodwill was allocated to the Biomaterials cash-generating unit.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| €K | €K | |
| Biomaterials | 12,490 | 13,057 |
Goodwill results from the acquisition of aap bio implants Netherlands B.V. and Osartis GmbH & Co. KG and the majority shareholding in the former ADC Advanced Dental Care GmbH & Co. KG. The (partial) disposal results from the sale in the reporting year of Bactimm B.V., Nijmegen, and Farmalyse B.V., Zaandam, by aap bio implants Netherlands B.V. (C 3).
Impairment of the cash-generating unit's goodwill was tested using the cash flow forecasts in the fouryear plan for the biomaterials cash-generating unit approved by the Management Board and a discount rate of 12.7% (previous year: 12.4%). In determining the perpetuity a growth discount of 1.5% of weighted average capital costs (WACC) and a safety discount of 10% (previous year: 20%) on the cash flow of the last detailed planning period were taken into consideration. The Management Board is of the opinion that no reasonably conceivable change in the basic assumption on which the determination of the achievable amount is based would lead to the cumulative book value of the cash-generating unit exceeding its cumulative achievable amount.
Tangible fixed assets are depreciated in a straight line from historic cost of acquisition or cost of production.
| Useful economic life is, on average, as follows: | Years |
|---|---|
| Land and buildings | 50 |
| Technical plant and machinery | 5–15 |
| Other plant, office and business equipment | 5–15 |
The book value of leased fixed assets as of December 31, 2009 was €350K (previous year: €1.939 million). The €145K (previous year: €1.531 million) in consolidation obligations arising from this financial leasing is covered by the lessors' rights to the leasing items.
The book value of fixed assets assigned as collateral for liabilities was €1.308 million (previous year: €2.884 million).
| Other Participating Interests | 2009 | 2008 | ||||
|---|---|---|---|---|---|---|
| €K | Holding | €K | Holding | |||
| 1. | AEQUOS Endoprothetik GmbH, Munich | 356 | 5.32 % | 356 | 6.25 % |
| 2. | Cybernetic Vision AG | ||||
|---|---|---|---|---|---|
| Health Monitoring Technologies, Berlin | 0 | 5.69 % | 0 | 5.69 % | |
| 3. | Rofil Medical International N.V. | 0 | 10 % | 0 | 10 % |
| 4. | Prisna B.V. | 0 | 0 % | 2 | 20 % |
| Total | 356 | 358 |
The book value of the AEQUOS Endoprothetik GmbH shareholding is its market value. With the increase in capital stock based on the resolution adopted by the meeting of shareholders on May 27, 2009 and entered in the commercial register on January 18, 2010, aap Implantate AG's stake in AEQUOS Endoprothetik GmbH was reduced to 5.32%. Prisna B.V. is a part of the Bactimm/Farmalyse disposal group (C 3).
Deferred tax assets and liabilities are netted out against each other by company or by tax entity. In the reporting year the tax entity comprised aap Implantate AG and aap Biomaterials GmbH (C (1)).
Tax accruals carried as assets totaling €127K (previous year: €2.320 million) include the following capitalized tax credit entitlements arising from anticipated utilization of existing loss carryovers in the years ahead:
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Corporate income tax, including solidarity surcharge | 1,539 | 1,915 |
| Trade tax | 1,290 | 1,171 |
| 2,829 | 3,086 |
Deferred taxes on the assets side for tax credit entitlements arising from anticipated utilization of existing loss carryovers were only taken into account in the reporting year insofar as they were covered on the balance sheet balance by existing deferred taxes on the liabilities side arising from temporary differences even if existing company planning resulted in a higher potential use (F (8)). Deferred taxes apply almost entirely to the German part of the Group. The €612K in deferred taxes on the asset side relating to the Dutch sub-group was for the most part used up in the reporting year. €56K in deferred tax assets was disposed of by the sale of a group of assets (disposal group, C (3)).
As of the end of the reporting year, corporation tax or trade tax loss carryovers for which no deferred tax entitlements were capitalized amounted to around €10.5 million and €8.5 million (previous year: €9.9 million and €10.8 million) respectively.
Deferred taxes on the liabilities side amounting to €3.506 million (previous year: €3.702 million) and deferred taxed on the assets side amounting to €127K (previous year: €176K) result from consolidation (elimination of interim results and consolidation of liabilities, including currency differences) and from temporary differences between tax values and balance sheet item statements to IFRS. A further €1.594 million (previous year: €1.727 million) in deferred taxes on the liabilities side results from first-time consolidation of the Dutch sub-group.
Trade earnings tax was calculated on the basis of the net result for the year to IFRS adding trade tax and subtracting trade earnings. The trade tax rate is around 14.4% (previous year: 14.4%). Corporation tax was calculated on the basis of the 15% rate in force since January 1, 2008 plus the solidarity surcharge of 5.5% on trade tax due.
Deferred taxes arising from consolidation were calculated on the basis of an average Group tax rate of 30.2% (previous year: 30.2%).
Value adjustments totaling €175K (previous year: €783K) were made in the reporting year to state inventories at their net residual value. Depreciation of inventories amounted to €2.227 million (previous year: €2.342 million). The book value of inventories stated at their net residual value was €859K (previous year: €657K).
Inventories amounting to €530K (previous year: €1.183 million) were assigned as collateral for liabilities.
| 31.12.2009 | Of which due in > 1 year |
31.12.2008 | Of which due in > 1 year |
|
|---|---|---|---|---|
| €K | €K | €K | €K | |
| Trade receivables | 6,007 | 20 | 6,795 | 10 |
| Accounts due from other | ||||
| group companies | 0 | 0 | 1 | 0 |
| Other assets | ||||
| - Tax refund claims | 448 | 0 | 696 | 0 |
| - Warranty claims | 406 | 0 | 482 | 0 |
| - Other | 783 | 8 | 753 | 8 |
| 1,637 | 8 | 1,931 | 8 | |
| 7,644 | 28 | 8,727 | 18 | |
*RLZ = Restlaufzeit
The claim for breach of warranty is against the contributing partners of holdings in CORIMED Kundenorientierte Medizinprodukte GmbH, CORIPHARM Medizinprodukte-Verwaltungs-GmbH and CORIPHARM Medizinprodukte GmbH & Co. KG. It is backed by shares in aap Implantate AG.
Trade receivables totaling €3.983 million (previous year: €4.816 million) were assigned as collateral for liabilities.
This item consists mainly of sales tax (VAT) refund entitlements.
The Company's capital stock as of December 31, 2009 amounted to €27,881,870 and was divided into 27,881,870 bearer shares.
By a resolution adopted on March 16, 2009 the capital stock of aap Implantate AG was increased by €1,267,357 from €26,614,513 to €27,881,870 by the issue of 1,267,357 individual bearer shares, each with a nominal €1 share of the capital stock. The capital increase was by cash contribution from authorized capital. The new shares are entitled to a share in profits from January 1, 2009. The issue price was €1.00. The commercial register entry was made on March 23, 2009.
The statutory reserve totaled €41,703.95 at the end of the fiscal year. Jointly with the capital reserve it amounted to more than one tenth of the capital stock.
The General Meeting held on June 30, 2006 approved a conditional increase in the Company's capital stock by up to 1,200,000 new individual bearer shares. The new shares are entitled to a share in the profits from the beginning of the fiscal year in which they are issued (Conditional Capital 2006/I). Conditional Capital 2006/I serves to fulfill option rights granted on the basis of the authorization by the General Meeting held on June 30, 2006 and exercised by December 31, 2008. The General Meeting held on June 30, 2006 approved a conditional €6,000,000 increase in the Company's capital stock by the issue of up to 6,000,000 individual bearer shares (Conditional Capital 2006/II). This conditional capital increase is solely for the purpose of issuing shares to the holders of options or convertible bonds that are issued by the Company by June 29, 2011.
By the terms of the convertible bond issue the conditional capital increase also serves to issue shares to holders of convertible bonds with a conversion obligation. The new shares are entitled to a share in profits from the beginning of the fiscal year in which they originate either by the exercise of option or conversion rights or the fulfillment of conversion obligations. The Management Board is authorized, subject to Supervisory Board approval, to specify the further details of implementing the conditional capital increase.
The General Meeting held on September 29, 2008 approved a conditional increase in capital stock by up to 1,200,000 new bearer shares in the Company. The new shares are entitled to a share in profits from the beginning of the fiscal year in which they are issued (Conditional Capital 2008/I). Conditional Capital 2008/I serves to fulfill option rights granted by authorization of the General Meeting held on September 29, 2008 and exercised by September 28, 2013.
The General Meeting held on June 30, 2006 authorized the Management Board or, if Management Board members were among the beneficiaries, the Supervisory Board to launch until December 31, 2008 stock option programs for aap Management Board members and members of the management of associated companies as defined in Section 15 ff. of the German Stock Corporation Act (AktG) and to grant option rights to up to 1,200,000 shares in the Company with a term to maturity of up to four years from the date of issue. In any one calendar year stock option programs were only to establish option rights that entitled the holders to a maximum of 600,000 shares. Existing shareholders were not entitled to subscribe to the new shares. Fulfillment of option rights exercised may be by making use of either Conditional Capital I or future share buyback authorizations at the Company's discretion.
The total volume of option rights was to be allocated to the groups of people who were entitled to them as follows:
Stock options will only be granted to the groups of people who are entitled to them between the tenth and twentieth stock market trading days after publication of the Company's quarterly or annual financial statements.
The exercise price to be paid per share on exercising the option is based on the average closing price of the aap Implantate AG share in XETRA trading (or a functionally comparable successor system) on the Frankfurt stock exchange on the ten trading days prior to the issue date and at least the lowest issue price as per Section 9 (1) AktG, or no less than each share's €1.00 share of the Company's capital stock.
Option rights may only be exercised if the average closing price of the aap Implantate AG share in XETRA trading (or a functionally comparable successor system) on the Frankfurt stock exchange on the ten trading days prior to the day on which the option right is exercised is at least 10% higher than the share price on the issue date.
Option rights may only be exercised two years after the issue date at the earliest.
The General Meeting held on September 29, 2008 authorized the Management Board or, if Management Board members are among the beneficiaries, the Supervisory Board to launch by September 28, 2013 stock option programs for people who belong to a category of person specified at (1) below and to issue up to 1,200,000 stock options, each with a right to one share in the Company, with a term to maturity of up to five years from the date of issue as defined at (3) below. Existing shareholders are not entitled to subscribe to the new shares. Stock options may also be taken over by a bank subject to the requirement that it transfers them as instructed by the Company to the individual persons entitled as per (1) below; in this case too, options may only be exercised by the authorized person. Fulfillment of options rights that are exercised may, at the Company's discretion, be either by making use of the conditional capital that is up for approval at b) below or by allocating Treasury stock. The granting of options to buy shares in the Company and the issue of these shares is subject to the following regulations:
Those entitled to acquire stock options and to buy shares in the Company are:
The total volume of option rights is to be shared out as follows:
| Up to 800,000 stock options: | to members of the Company's Management Board, |
|---|---|
Up to 200,000 stock options: to selected executives of the Company and members of the management – but the latter only
if on the day of issue they are not at the same time entitled in accordance with (i) above – and selected executives of associated companies,
Up to 200,000 stock options: to employees of the Company and of associated companies.
The number of stock options granted to Management Board members must be stated yearly in the Notes to the Annual Financial Statements, listing the names of the beneficiaries and the number of stock options granted to them. The same applies to the number of option rights exercised by Management Board members in the reporting year, the exercise prices paid, and the number of stock options still held by Management Board members at the year's end.
(2) Right to Purchase Stock
Each stock option grants the holder the right to purchase a bearer share certificate in return for payment of the exercise price as defined at (4) below. New shares are entitled to a share in profits from the beginning of the fiscal year for which, at the time the option right was exercised, an Annual General Meeting had yet to decide on the distribution of balance sheet profits.
(3) Purchase Periods
Stock options are to be issued in no fewer than three tranches subject to the provision that no tranche must account for more than 50% of the total volume. Stock options may only be issued to allottees between the tenth and twentieth stock market trading day after publication of the Company's quarterly or annual report (the day on which the option agreement, signed by the Company, is issued to the allottee is termed the "issue date").
(4) Exercise Price
The exercise price to be paid when exercising an option right to acquire a share certificate corresponds to the average of the closing prices of the aap Implantate AG share in XETRA trading (or a functionally comparable successor to the XETRA system) at the Frankfurt stock exchange over the last 20 trading days before the issue date, but is at least the lowest issue price according to Section 9 (1) AktG and is therefore not less than each share's €1.00 pro rata share of the capital stock.
(5) Adjustment in the Event of Capital Measures
Option terms and conditions may, in the case of measures undertaken during the term of stock options that influence the value of the options (a capital increase with a direct or indirect right for existing shareholders to buy stock, the sale of Treasury stock, or the issue of stock warrants with conversion and/or option rights to shares in the Company), provide for adjustments of the exercise price and/or purchase terms and conditions. There will be no price reduction if allottees are granted a direct or indirect right to purchase the new shares or Treasury stock that puts them in a position as if they had exercised the option. In addition, the option terms and conditions can provide for an adjustment of option rights in the case of a capital increase from Company funds and capital reduction, a share split or share consolidation, and premiums and extraordinary distributions in cash or kind in keeping with practice at German and international futures markets. Section 9 (1) AktG is not affected.
Purchase rights to stock options may only be exercised if the average closing price of the aap Implantate AG share in XETRA trading (or a functional comparable successor to the XETRA system) at the Frankfurt stock exchange over the last 20 trading days before the day on which the option right is exercised is at least 20% higher than the exercise price (absolute hurdle).
Option rights granted to individual allottees may be exercised at the earliest after a waiting period of two years from the issue date. At the earliest, 25% of the total may be exercised two years after the issue date, a further 25% three years after the issue date, a further 25% four years after the issue date, and the final 25% five years after the issue date.
Once the above waiting periods have elapsed, purchase rights arising from the stock options may be exercised at any time except the following:
Only the allottees themselves may exercise stock options. This applies even if the stock options have been taken over by a bank subject to the provision that it will transfer them to individual allottees as instructed by the Company. The right to dispose over stock options is ruled out and they are, in particular, non-transferable. Stock options may, however, be bequeathed. The option terms and conditions may, in deviation herefrom, make special provision for the event that the allottee dies or retires or ends his or her employment with the Company or associated company in any other way that does not involve termination of contract or the associated company leaves the aap Group.
allottee do not expire. The same applies to the end of a term as director if it is followed by a renewal of contract with the Company or by a contract as director with an associated company.
(e) Stock options granted to an allottee do likewise not expire if his employment ends by reaching retirement age or by invalidity or death. In cases such as these the allottee or the heirs of the deceased allottee is entitled to exercise the option rights on expiration of the waiting period as defined at (7) Sentence 2 (above) within the next exercise period, taking into account the staggering of waiting periods in accordance with (7) Sentence 2 (above). If they are not exercised during this exercise period, they will then expire.
Instead of buying new shares, an allottee may also be granted a cash settlement. The Management Board decides on the exercise of this option, with the Supervisory Board taking its pace if members of the Management Board are involved. The cash settlement corresponds to the difference between exercise price and the average closing price of the aap Implantate AG share in XETRA trading (or a functionally comparable successor system) in the Frankfurt stock market over the last 20 trading days before the day on which option rights arising from stock options are exercised.
(12) Regulation of Details
The Management Board is authorized to specify further details for the issue of shares from Conditional Capital and to lay down the further terms and conditions of the stock option program, including the option conditions for the groups of people entitled to options. As an exception to this rule the Company's Supervisory Board shall decide where members of the Management Board are concerned. These further details include in particular provisions with regard to the allocation of option rights within the groups in question, the issue date within the specified period, the allocation procedure for individual allottees, and the exercise of option rights and other procedural arrangements.
The General Meeting held on June 30, 2006 authorized the Management Board to issue by June 29, 2011 on one or more occasions, subject to approval by the Supervisory Board, bearer stock warrants and/or convertible bonds up to a total face value of €6,000,000 with a term to maturity of up to ten years and to grant the holders of stock warrants option rights and the holders of convertible bonds conversion rights to up to 6,000,000 individual bearer shares in the Company by the stock warrant or convertible bond terms and conditions of issue.
The stock warrants and/or convertible bonds with conversion rights or obligations are to be offered for sale to shareholders. The Management Board is, however, authorized, subject to approval by the Supervisory Board, to waive the existing shareholders' right to any residual amounts that result from the subscription ratio to the extent that may be necessary to ensure that the holders of existing or pending option or conversion rights are able to buy as many shares in aap Implantate AG as they are entitled to buy.
The conversion or option price for a share must be at least 80% of the average closing price of the aap Implantate AG share in XETRA trading (or a functionally comparable successor system) on the Frankfurt stock exchange on the ten trading days prior to the Management Board's decision to issue the convertible bonds or stock warrants without prejudice to Section 9 (1) AktG.
The General Meeting held on August 27, 2007 authorized the Company to acquire and use Treasury stock in accordance with Section 71 (1) 8 AktG and rule out a subscription right. It was able to buy Treasury stock amounting to a €1,000,000 share of the capital stock. This authorization ran until February 26, 2009. At the 2009 General Meeting a further authorization was approved.
The General Meeting held on August 7, 2009 authorized the Company to buy Treasury shares up to a nominal €1 million of the capital stock. These shares, together with any other Treasury stock held by the Company or attributable to it by the terms of Section 71a ff. AktG, must at no time exceed 10% of the capital stock. The authorization may not be used for the purpose of trading in the Company's shares.
The authorization may be exercised in its entirety or in partial amounts, on one or more occasions, in pursuit of one or more purposes by the Company or by third parties on the Company's behalf. The authorization runs until February 4, 2011.
The purchase may, at the Management Board's discretion, be made in the stock market or by means of a public purchase offering or a public solicitation to make an offer.
The General Meeting held on June 10, 2005 authorized the Management Board to increase the Company's capital stock by June 10, 2010 on one or more occasions by up to €7,300,000 in cash or kind (Approved Capital 2005/I) and to lay down the terms and conditions of the share issue. Subject to Supervisory Board approval, subscription rights for existing shareholders may be ruled out:
After partial utilization the Approved Capital now totals only €4,192,786.
The General Meeting held on August 27, 2007 authorized the Management Board to increase the Company's capital stock, subject to approval by the Supervisory Board, by August 26, 2012 on one or more occasions by up to €2,988,935 in cash or kind (Approved Capital 2007) and, as agreed with the Supervisory Board, to lay down the terms and conditions of the share issue. Subject to Supervisory Board approval, subscription rights for existing shareholders may be ruled out:
a) To balance residual amounts,
After partial utilization the Approved Capital 2007 now totals only €1,721,578.
The General Meeting held on August 7, 2009 authorized the Management Board to increase the Company's capital stock, subject to approval by the Supervisory Board, by August 6, 2014 on one or more occasions by up to €8,026,571 in cash or kind (Approved Capital 2009/I) and, as agreed with the Supervisory Board, to lay down the terms and conditions of the share issue. Subject to Supervisory Board approval, subscription rights for existing shareholders may be ruled out:
The capital reserve contains premiums from share issues, voluntary additional payments made by partners, and partners' contributions resulting from the issue of stock options.
For further details see the equity statements.
In the fiscal year 2006 a share price-based remuneration system with equity capital adjustment was introduced throughout the Group for employees of aap Implantate AG and associated companies. A further stock option program was launched in 2008.
The Management Board and employees of aap have received stock options that entitle them, subject to certain conditions, to acquire aap shares at a prearranged price. aap will create the shares required by means of capital increases and has for this purpose various conditional capitals at its disposal.
The following conditions apply to the stock option programs. As long as no specific mention is made of specific arrangements in the following, the conditions apply to the 2006 and 2008 stock option programs in equal measure.
Each option entitled the allottee to acquire one aap bearer share certificate with a nominal face value of €1.00.
Members of the Management Board, selected executives of the Company, employees of the Company, and members of the managements and employees of associated companies as defined in Section 15 ff. AktG.
Two years from the decision to allocate stock options to the allottee. By the terms of the 2008 stock option program, each being the earliest time, 25% of option rights may be exercised two years, a further 25% three years, a further 25% four years, and the remaining 25% five years after the issue date.
Rights may be exercised at any time after expiration of the waiting period except the following:
The exercise price to be paid per share is based on the average closing price of the aap Implantate AG share in XETRA trading (or a functionally comparable successor system) on the Frankfurt stock exchange on the 10 (2006 stock option program) or 20 (2008 stock option program) trading days prior to the issue date and at least the lowest issue price as per Section 9 (1) AktG, or no less than each share's €1.00 share of the Company's capital stock.
Purchase rights to stock options may only be exercised if the average closing price of the aap Implantate AG share in XETRA trading (or a functional comparable successor to the XETRA system) at the Frankfurt stock exchange over the last 10 (2006 stock option program) or 20 (2008 stock option program) trading days before the day on which the option right is exercised is at least 10% (2006 stock option program) or 20% (2008 stock option program) higher than the price on the issue date.
| Date of commitment | Number of options issued | Exercise price in € |
|---|---|---|
| 22.11.2006 | 385,000 | 2.28 € |
| 18.04.2007 | 152,500 | 2.37 € |
| 30.11.2007 | 477,500 | 2.41 € |
| 17.04.2008 | 131,500 | 2.27 € |
| 10.09.2008 | 96,000 | 2.23 € |
| 01.12.2008 | 200,000 | 1.61 € |
| 26.05.2009 | 487,500 | 1.29 € |
The average fair market value of the newly issued options was as follows:
| 17.04.2008 | 0.87 € |
|---|---|
| 10.09.2008 | 0.74 € |
| 01.12.2008 | 0.55 € |
| 26.05.2009 | 0.48 € |
Fair market values were established in the reporting year by means of a binomial model. Volatility was measured on the basis of weekly yields. Expenditure on share-based remuneration in the reporting period totaled €222K (previous year: €436K).
| Stock Options program 2006 | 2006 Tranche | 2007 Tranche | 2008 Tranche |
|---|---|---|---|
| Outstanding at beginning of | |||
| financial year | 1,200,000 | 845,000 | 227,500 |
| Issued in the financial year | 385,000 | 630,000 | 227,500 |
| Lapsed | 30,000 | 12,500 | 7,500 |
| Exercised | 0 | 0 | 0 |
| Outstanding at end of financial year | 845,000 | 227,500 | 7,500 |
| Exercisable at end of financial year | 0 | 0 | 0 |
In 2009, 190,500 options from the 2006 stock option program expired.
In establishing the fair market value using the binomial model the following parameters were taken into consideration:
| Stock Options | 11/2006 | 4/2007 | 11/2007 | 4/2008 | 9/2008 | |
|---|---|---|---|---|---|---|
| Tranche | Tranche | Tranche | Tranche | Tranche | ||
| Target price | 2.64 € | 2.60 € | 2.51 € | 2.50 € | 2.46 € | |
| Risk-free interest rate | 3.65 % | 4.11 % | 3.80 % | 3.77 % | 3.89 % | |
| Volatility | 5.50 % | 48.58 % | 41.14 % | 44.14 % | 42.15 % | |
| Stock market price when | ||||||
| the options were granted | 2.35 € | 2.55 € | 2.27 € | 2.40 € | 2.24 € | |
| Stock Options program 2008 | 2008 Tranche | 2009 Tranche | ||||
| Outstanding at beginning of | ||||||
| financial year | 1,200,000 | 1,000,000 | ||||
| Issued in the financial year | 200,000 | 487,500 | ||||
| Lapsed | 0 | 0 | ||||
| Exercised | 0 | 0 | ||||
| Outstanding at end of financial year | 1,000,000 | 512,500 | ||||
| Exercisable at end of financial year | 0 | 0 | ||||
| Stock Options | 12/2008 Tranche | 05/2009 Tranche | ||||
| Target price | 1.94 € | 1.55 € | ||||
| Risk-free interest rate | 2.26 % | 1.98 % | ||||
| Volatility | 50.35 % | 55.74 % | ||||
| Stock market price when | ||||||
| the options were granted | 1.49 € | 1.20 € | ||||
Stock options issued at the end of the fiscal year had a weighted average term to maturity of 2.65 years (previous year: 2.92 years).
| As at 01.01.2009 |
Con sumption |
Write-back | Additions | As at 12.31.2009 |
|
|---|---|---|---|---|---|
| €K | €K | €K | €K | €K | |
| Other provisions | 15 | 0 | 0 | 0 | 15 |
| Restructuring expense | |||||
| 510 | - 363 | - 147 | 0 | 0 | |
| Commitment employee | 32 | - 7 | 0 | 8 | 33 |
| Storage costs | |||||
| 0 | 0 | 0 | 28 | 28 | |
| Other uncertain liabilities | |||||
| 10 | 0 | 0 | 25 | 35 | |
| Legal costs and risks | |||||
| 50 | 0 | 0 | 32 | 82 | |
| 617 | - 370 | - 147 | 93 | 193 |
The provisions shown have terms of up to one year.
Terms to maturity of liabilities – arranged by balance sheet heading – are as follows:
| Time to maturity | |||||
|---|---|---|---|---|---|
| 31.12.2009 total | Up to | 1-5 years | More than | Previous | |
| 1 year | 5 years | year | |||
| €K | €K | €K | €K | €K | |
| Amounts owed to banks | |||||
| 7,521 | 5,685 | 1,836 | 0 | 10,442 | |
| Prepayments received | 78 | 78 | 0 | 0 | 289 |
| Trade payables | 1,799 | 1,799 | 0 | 0 | 3,218 |
| Special investment grant | |||||
| item | 175 | 41 | 134 | 0 | 231 |
| Liabilities to associated | |||||
| companies | 4 | 4 | 0 | 0 | 22 |
| Liabilities to partners | 2,265 | 2,265 | 0 | 0 | 1,153 |
| Financial leasing liabilities | 145 | 56 | 89 | 0 | 1,530 |
| Other liabilities | 3,511 | 3,476 | 35 | 0 | 4,523 |
| Of which | |||||
| (Social Security-related) | (0) | (0) | (0) | (0) | (25) |
| (Taxes) | (429) | (429) | (0) | (0) | (176) |
| 15,498 | 13,404 | 2,094 | 0 | 21,408 |
Of the €2.094 million (previous year: €5.435 million) in non-current liabilities with terms to maturity of more than 1 year, €1.961 million (previous year: €5.281 million) bore interest. Of the €13.404 million (previous year: €15.973 million) in current liabilities with terms to maturity of up to 1 year, €8.050 million (previous year: €8.187 million) bore interest. Average interest paid was around 7% (previous year: 7%).
As of December 31, 2009 the aap Group had contractually guaranteed credit lines totaling €6.7 million at its disposal, of which €4.5 million gross and €2.2 million net had been taken up as of the balance sheet date. Cash and cash equivalents held as of December 31, 2009 totaled €2.406 million (previous year: €96K).
| Mio. € | 31.12.2009 | 31.12.2008 |
|---|---|---|
| Gross availment of credit lines | - 4,5 | - 5,8 |
| Cash at banks | 2,3 | 0,0 |
| Net availment of credit lines | - 2,2 | - 5,8 |
The aap Group's current and non-current liabilities to banks are all denominated in euro. Foreign current liabilities as of December 31, 2009 totaled €10K in USD and were stated under other liabilities.
Financial leasing liabilities are for machinery and are covered by the assets leased. Interest was agreed for the entire term of the leasing agreement and amounts to average of around 7% (previous year: 7%).
Other financial liabilities break down as follows:
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| €K | €K | |
| Future rent payments | 2,199 | 4,619 |
| Future operating lease payments | 1,008 | 1,202 |
| Other financial obligations | 0 | 227 |
| 3,207 | 6,048 |
| Capital repayments | ||||
|---|---|---|---|---|
| 31.12.2009 | 2010 | 2011 till 2014 | from 2015 | |
| €K | €K | €K | €K | |
| Future rent payments | 2,199 | 1,215 | 984 | 0 |
| Future operating lease payments | 1,008 | 438 | 570 | 0 |
| Other financial obligations | 0 | 0 | 0 | 0 |
| 3,207 | 1,653 | 1,554 | 0 |
The operating lease contracts are short-term contracts for cars and provide in some instances for renewal and purchase options. Expenditure on operating lease contract stated in the reporting period totaled €218K (previous year: €238K).
Contingent liabilities totaling €115K relate to public sector grants in case preconditions for entitlement did not exist and continue not to do so, the funding received was not used for the stated purpose and the grant guideline requirements were therefore not fulfilled.
Contingent liabilities totaling €136K exist in respect of investment grants received. The grants are conditional on the assets financed remaining at the Berlin production facility for at least five years after completion of the investment project. And most of the goods manufactured must be sold in the region.
On February 13, 2009 aap Biomaterials GmbH was served a damages claim for allegedly passing on trade secrets and utilizing them without permission. The proposed value of the claim was €30 million. As aap is merely a contractual partner or contract manufacturer for another company against which the claim was lodged, aap currently assumes that the suit against it will be rejected and that it will not be required to pay damages.
The aap Group holds only primary financial instruments. On the assets side they consist mainly of participating interests, receivables and cash assets. Financial assets available for sale are stated at market value, other financial assets at the depreciated cost of acquisition. Market values are established on the basis of acknowledged valuation methods.
On the liabilities side primary financial instruments consist mainly of liabilities stated at cost of acquisition. Holdings of primary financial instruments are shown in the balance sheet. The level of financial assets corresponds to the maximum risk of default. Where default risks are apparent, they are covered by value adjustments. Write-downs of trade receivables are shown in separate value adjustment accounts.
Market values are either stock market prices or calculated on the basis of recognized valuation methods.
The market values of cash and cash equivalents, of current receivables, of trade payables, of other financial liabilities and financial debts correspond to their book values, especially in view of the short term to maturity of financial instruments of this kind.
Non-current fixed-interest and floating-rate liabilities are valued on the basis of various parameters such as interest rates, the customer's creditworthiness and the risk structure of the financial transaction. The book values of these receivables less the value adjustments undertaken as of December 31, 2009 and December 31, 2008 more or less correspond to their market values.
The market value of money owed to banks and other financial debts, liabilities arising from financial leasing and other financial liabilities is valued by discounting the anticipated future payment streams at the going market rates of interest for similar financial liabilities with comparable terms to maturity.
Financial assets with the exception of assets stated at their fair market value with effect on net income are reviewed on every balance sheet date for signs of impairment. Financial assets are impaired if, as a
result of one or more events that occur after their first-time statement, there are objective indications that anticipated future cash flows may have changed for the negative.
Value adjustments for receivables shown under the following balance sheet items developed as follows:
| Value adjustment for receivables in 2009 |
Trade receivables | Other receivables and other assets |
Total |
|---|---|---|---|
| €K | €K | €K | |
| As of 1/1/09 | 284 | 354 | 637 |
| Value adjustment in reporting year |
189 | 76 | 265 |
| Disposals | ./.116 | ./. 31 | ./. 147 |
| As of 12/31/09 | 357 | 399 | 755 |
Trade receivables include €347K (previous year: €240K) in accounts receivable that were value adjusted by €313K (previous year: €209K) in view of anticipated payment difficulties.
| Value adjustment for | Trade receivables | Other receivables | Total |
|---|---|---|---|
| receivables in 2008 | and other assets | ||
| €K | €K | €K | |
| As of 1/1/08 | 179 | 162 | 335 |
| Value adjustment in | |||
| reporting year | 178 | 192 | 370 |
| Disposals | ./. 68 | 0 | ./. 68 |
| As of 12/31/08 | 284 | 354 | 637 |
As of December 31, 2009, overdue receivables that had not been value adjusted were as follows:
| Book value | Thereof not value-adjusted but overdue as follows on the | |||||
|---|---|---|---|---|---|---|
| as of | reporting date | |||||
| Up to 3 | Up to 6 | Up to 9 | Up to 12 | More than | ||
| Dec. 31, | months | months | months | months | 1 year | |
| 2009 | ||||||
| €K | €K | €K | €K | €K | €K | |
| Trade | 140 | |||||
| receivables | 6,007 | 1,233 | 1,292 | 56 | 211 | |
| 6,007 | 1,233 | 1,292 | 56 | 211 | 140 | |
| Book value | Thereof not value-adjusted but overdue as follows on the | |||||
| as of | reporting date | |||||
| Up to 3 | Up to 6 | Up to 9 | Up to 12 | More than | ||
| Dec. 31, | months | months | months | months | 1 year | |
| 2008 | ||||||
| €K | €K | €K | €K | €K | €K | |
| Trade |
| receivables | |||||||
|---|---|---|---|---|---|---|---|
| 6,795 | 2,349 | 303 | 242 | 135 | 175 | ||
| 6,795 | 2,349 | 303 | 242 | 135 | 175 | ||
| Book value as of |
Thereof not value-adjusted but overdue as follows on the reporting date |
||||||
| Up to 3 | Up to 6 | Up to 9 | Up to 12 | More than | |||
| Dec. 31, 2009 |
months | months | months | months | 1 year | ||
| €K | €K | €K | €K | €K | €K | ||
| Other receivables |
1,637 | 0 | 0 | 0 | 0 | 0 | |
| 1,637 | 0 | 0 | 0 | 0 | 0 | ||
| Book value as of |
Thereof not value-adjusted but overdue as follows on the reporting date |
||||||
| Up to 3 | Up to 6 | Up to 9 | Up to 12 | More than | |||
| Dec. 31, 2008 |
months | months | months | months | 1 year | ||
| €K | €K | €K | €K | €K | €K | ||
| Other | |||||||
| receivables | 1,931 | 38 | 0 | 0 | 0 | 16 | |
| 1,931 | 38 | 0 | 0 | 0 | 16 |
For the non value adjusted but overdue receivables there were no indications as of the balance sheet date that the debtors would not honor their payment obligations.
Valuations of individual financial instruments by category are shown in the following tables. Along with financial assets and liabilities, other assets and other liabilities include non-financial assets and liabilities that serve to reconcile the corresponding balance sheet items. With the exception of the book values of amounts owed to banks, book values stated in the tables largely corresponded to the fair market values as of the balance sheet date. The fair market value of amounts owed to banks as of December 31, 2009 amounted to €2.989 million (previous year: €10.134 million). As of December 31, 2009 the market value of amounts owed to partners was €2.256 million (previous year: nil).
| Balance sheet valuation in accordance with IAS 39 |
||||
|---|---|---|---|---|
| Book value | Continued cost | Fair value, | ||
| as of | of acquisition | no effect on | ||
| 12/31/09 | operating result | |||
| €K | €K | €K | ||
| Assets | ||||
| Other investments | 356 | 0 | 356 | |
| Trade receivables | 6,007 | 6,007 | 0 | |
| Other assets | ||||
| - financial assets | 1,053 | 1,053 | 0 | |
| - non-financial assets | 584 | 0 | 0 |
Cash and cash equivalents
| 2,406 | 2,406 | 0 | |
|---|---|---|---|
| Liabilities | |||
| Amounts owed to banks | 7,520 | 7,520 | 0 |
| Financial leasing liabilities | 145 | 145 | 0 |
| Trade liabilities | 1,799 | 1,799 | 0 |
| Amounts owed to partners | 2,265 | 2,265 | 0 |
| Owed to undertakings with which the company is linked by participating interests |
4 | 4 | 0 |
| Other liabilities - financial liabilities - non-financial liabilities |
2,759 752 |
2,759 0 |
0 0 |
thereof aggregated by valuation methods in accordance with IAS 39:
| Balance sheet valuation as per IAS 39 | |||||
|---|---|---|---|---|---|
| Book | Continued cost of | Fair value, | |||
| value as | acquisition | not affecting | |||
| of | operating result | ||||
| 12/31/09 | |||||
| €K | €K | €K | |||
| Loans and receivables, including cash | |||||
| and cash equivalents | |||||
| 9,466 | 9,466 | 0 | |||
| Financial assets held as available for | |||||
| sale | 356 | 0 | 356 | ||
| Total financial assets | 9,822 | 9,466 | 356 | ||
| Liabilities valued at their continued | |||||
| cost of acquisition | 14,492 | 14,492 | |||
| Total financial liabilities | 14,492 | 14,492 | 0 |
| Balance sheet valuation in accordance | |||
|---|---|---|---|
| with IAS 39 | |||
| Book value as | Continued cost | Fair value, | |
| of 12/31/08 | of acquisition | no effect on | |
| operating result | |||
| €K | €K | €K | |
| Assets |
| Other investments | 358 | 0 | 358 |
|---|---|---|---|
| Trade receivables | 6,795 | 6,795 | 0 |
| Due from undertakings with which the company is linked by participating |
|||
| interests | 1 | 1 | 0 |
| Other assets | |||
| - financial assets | 1,185 | 1,185 | 0 |
| - non-financial assets | 746 | 0 | 0 |
| Cash and cash equivalents | 96 | 96 | 0 |
| Liabilities | |||
| Amounts owed to banks | 10,442 | 10,442 | 0 |
| Financial leasing liabilities | 1,530 | 1,530 | 0 |
| Trade liabilities | 3,218 | 3,218 | 0 |
| Amounts owed to partners | 1,153 | 1,153 | 0 |
| Owed to undertakings with which the company is linked by participating |
|||
| interests | 22 | 22 | 0 |
| Other liabilities | |||
| - financial liabilities | 3,941 | 3,941 | 0 |
| - non-financial liabilities | 582 | 0 | 0 |
thereof aggregated by valuation methods in accordance with IAS 39:
| Balance sheet valuation as per IAS 39 | |||||
|---|---|---|---|---|---|
| Book value as | Continued cost of | Fair value, | |||
| of 12/31/08 | acquisition | not affecting | |||
| operating result | |||||
| €K | €K | €K | |||
| Loans and receivables, including | |||||
| cash and cash equivalents | 8,077 | 8,077 | 0 | ||
| Financial assets held as available | |||||
| for sale | 358 | 0 | 358 | ||
| Total financial assets | 8,435 | 8,077 | 358 | ||
| Liabilities valued at their | |||||
| continued cost of acquisition | 20,306 | 20,306 | 0 | ||
| Total financial liabilities | 20,306 | 20,306 | 0 |
| Income | Interest | Expenses from | Income from | Net | |
|---|---|---|---|---|---|
| 2009 | from | costs | loss in value | appreciation | income |
| interest | |||||
| €K | €K | €K | €K | €K | |
| Loans and receivables, | |||||
| including cash and cash | |||||
| equivalents | 10 | -30 | -325 | 103 | -242 |
| Financial assets held as | |||||
| available for sale | |||||
| 0 | 0 | 0 | 0 | 0 | |
| Liabilities valued at their | |||||
| continued cost of acquisition | 0 | -820 | 0 | 0 | -820 |
| Total | 10 | -850 | -325 | 103 | -1,062 |
| 2008 | Income | Interest | Expenses from | Income from | Net |
| from | costs | loss in value | appreciation | income | |
| interest | |||||
| €K | €K | €K | €K | €K | |
| Loans and receivables, | |||||
| including cash and cash | |||||
| equivalents | 7 | 0 | -411 | 63 | -341 |
available for sale 0 0 0 0 0
continued cost of acquisition 0 -930 0 0 -930
Gesamt 7 -930 -411 63 -1,271
In view of its operating activities, the aap Group is liable to risks in the following areas:
• Market risks
Financial assets held as
Liabilities valued at their
Market risks are understood to include interest risks, foreign currency risks, and other risks.
Interest risks result from financial liabilities and investments. The aap Group seeks to optimize interest results and to minimize interest risks. To do so it operates cash management across the Group and for original financial transactions. Interest and price change risks are managed by mixing terms and by
taking up variable and fixed interest positions. The use of derivative financial instruments is currently under consideration.
Buying and selling in foreign currencies can, depending on how exchange rates develop, lead to risks for the Company.
The major part of the Group's business activity is conducted in the euro zone. Business conducted outside of Europe has not been generally suitable in nature or extent for hedging by means of exchange futures trading or similar hedging measures. For individual contracts that involve large amounts in foreign currencies currency risks are currently limited by intra-group foreign exchange business, with dollar-denominated receivables and liabilities largely balancing each other out. In the future, aap is, however, planning to hedge currency risks for sales involving larger amounts in US dollars. Further hedging is currently being considered.
In connection with the presentation of market risks, IFRS 7 requires details of how hypothetical changes in risk variables might affect the prices of financial instruments.
At aap Implantate AG the market prices of listed securities are the only relevant risk variables. Yet as of December 31, 2009, aap Implantate AG held no shares in listed companies.
The Company's liquidity risk is that of possibly being unable to meet financial obligations on time for lack of liquidity. This risk arises, for example, in connection with the repayment of financial liabilities, payment for purchases, and commitments arising from financial leasing. Lack of availability of sources of funding may result inter alia from failure to abide by so-called financial covenants that must be observed in connection with loan agreements. If these covenants are not observed, the financing bank is entitled to cancel loans without notice and demand their immediate repayment. By the terms of the current long-term loan agreements, for example, aap must not fall below a certain minimum Moody's rating or must abide by certain maximum or minimum levels of equity ratio, indebtedness, or borrowing. aap considers the risk of failure to comply with financial covenants that could result from downgrading by the financing bank to be very low because it achieved a significant reduction in interest-bearing liabilities and a marked improvement in earning position in the course of 2009. Furthermore, aap pursues a very open and transparent communication policy with the banks that finance it in order to identify possible danger potential at an early stage and draw up jointly solutions that are appropriate to the risk.
In addition, aap Implantate AG limits this risk by means of effective central cash management and by negotiating adequate credit lines. In addition to cash and cash equivalents, the aap Group has at its disposal until further notice credit lines for its German companies totaling €3.5 million and credit lines for its Dutch companies amounting to €3.15 million. Of the contractually assured credit lines totaling €6.7 million, €4.5 million was taken up gross and €2.2 million net as of the balance sheet date. As a consequence of the disposal of the Dutch analytics division and the resulting reduction in financing requirement, aap reduced in February 2010 the credit line framework for its Dutch companies from €3.2 million to €1.5 million along with a significant reduction in financing costs. The aap Group thereby now
has an initial total of €5.0 million in credit lines at its disposal for the year 2010. From July 1, 2010 the credit lines for the Dutch companies will be reduced by a further €250K.
| Mio. € | 31.12.2009 | 31.12.2008 |
|---|---|---|
| Gross availment of credit lines | - 4.5 | - 5.8 |
| Cash at banks | 2.3 | 0.0 |
| Net availment of credit lines | - 2.2 | - 5.8 |
Contractually agreed payments, such as interest and capital, for financial obligations stated in the balance sheet are as follows:
| Capital/interest | Book value on | Capital payments Interest payments |
|||||
|---|---|---|---|---|---|---|---|
| payments toward | 12/31/09 | 2010 | 2011 - | from | 2010 | 2011 - | from |
| financial liabilities | 2014 | 2015 | 2014 | 2015 | |||
| €K | €K | €K | €K | €K | €K | €K | |
| Owed to banks | 7,521 | 5,684 | 1,837 | 0 | 411 | 134 | 0 |
| financial liabilities due | |||||||
| to partners | 2,265 | 2,265 | 0 | 0 | 60 | 5 | 0 |
| Leasing liabilities | 145 | 56 | 89 | 0 | 8 | 17 | 0 |
| Other liabilities | 83 | 48 | 35 | 0 | 3 | 2 | 0 |
| Total | 10,014 | 8,053 | 1,961 | 0 | 482 | 158 | 0 |
| Capital/interest | Book value on | Capital payments | Interest payments | ||||
|---|---|---|---|---|---|---|---|
| payments toward | 12/31/08 | 2009 | 2010 - | from | 2009 | 2010 - | from |
| financial liabilities | 2013 | 2014 | 2013 | 2014 | |||
| €K | €K | €K | €K | €K | €K | €K | |
| Owed to banks | 10,442 | 7,434 | 3,008 | 0 | 658 | 922 | 0 |
| financial liabilities due | |||||||
| to partners | 1,153 | 0 | 1,153 | 0 | 69 | 23 | 0 |
| Leasing liabilities | 1,530 | 463 | 1,067 | 0 | 96 | 187 | 0 |
| Other liabilities | 4,523 | 4,469 | 54 | 0 | 19 | 5 | 0 |
| Total | 17,648 | 12,366 | 5,282 | 0 | 842 | 1,137 | 0 |
A credit risk is the risk of default by a customer or contracting partner that leads to a need for value adjustments of assets, investments or receivables in the consolidated balance sheet. The risk is therefore limited to the book value of these assets.
Credit risks result mainly from trade receivables. Credit risks in respect of contracting partners are checked before the contract is signed and are monitored constantly. Credit risks still exist because customers may not honor their payment obligations. The aap Group limits this risk by undertaking a regular creditworthiness review of its customers and by means of efficient receivables management. Write-offs in the reporting year and the previous year were immaterial.
For trade receivables that were not value-adjusted as of December 31 there were no indications of possible default.
aap manages its capital with a view to ensuring the Company's long-term development, its short-term solvency, and a sufficiently high level of self-financing. This ensures that all companies in the Group are able to operate on the assumption that it will stay in business as a going concern. In addition, the aim of aap's capital management is to ensure that inter alia a credit rating appropriate to its credit agreements and a good equity ratio are maintained. The Group manages its capital structure and undertakes adjustments taking the change in economic framework conditions into account. aap monitors its capital by means of its debt and interest coverage ratios and its net indebtedness. The aap Management Board considers a debt coverage ratio of less than 3 and an interest coverage ratio of more than 6 to be strategically achievable targets.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| €K | €K | |
| Interest-bearing Liabilities | 7,853 | 13,288 |
| EBITDA | 6,562 | 3,708 |
| Debt interest ratio | 1.2 | 3.6 |
| 31.12.2009 | 31.12.2008 | |
| €K | €K | |
| Interest expenses | -850 | -930 |
| EBITDA | 6,562 | 3,708 |
| Interest coverage ratio | 7.7 | 4.0 |
The aap Group's net indebtedness at the end of the financial year was as follows:
| 31.12.2009 | 31.12.2008 |
|---|---|
| €K | €K |
| 7,853 | 13,288 |
| ./. 2,406 | ./. 96 |
| 5,447 | 13,192 |
| 44,715 | 41,303 |
| 12 % | 32 % |
(i) Equity here comprises the aap Group's entire equity capital and reserves.
The inflow of funds from current business activities includes inter alia:
| Interest income | €8K (previous year: €7K) |
|---|---|
| Interest expenses | €836K (previous year: €863K) |
Income tax paid totaled €128K (previous year: €183K); income tax refunded was €8K (previous year: €3K).
| Name | Domicile | Participation % |
Equity €K |
Result €K |
|
|---|---|---|---|---|---|
| 1. | aap Biomaterials GmbH | Dieburg | 100 | 2,140 | 0 |
| 2. | OSARTIS Verwaltungs-GmbH | Elsenfeld | 100 | 23 | ./. 2 |
| 3. | ADC Advanced Dental Care | ||||
| GmbH | Dieburg | 54 | 191 | 3 | |
| 4. | aap bio implants Netherlands | ||||
| B.V.* | Nijmegen (NL) | 100 | 4,504 | 3,121 | |
(* The figures stated related to the annual financial statements to IFRS)
By the terms of an agreement dated December 15, 2008, aap Biomaterials GmbH & Co. KG was merged with aap Biomaterials GmbH.
All shares in ADC Advanced Dental Care GmbH & Co. KG have been transferred by way of legal succession to ADC Advanced Dental Care GmbH. Since the capital increase was entered in the commercial register the shareholding quota has been 54%.
By the terms of an agreement dated August 7, 2009, aap bio implants markets GmbH was merged with aap Implantate AG by means of a transfer of its assets and dissolution without liquidation (C 2).
| Name | Domicile | Participation | Equity | Result | |
|---|---|---|---|---|---|
| % | €K | €K | |||
| 5. | AEQUOS Endoprothetik GmbH | Munichen | 5.32 | 703 | ./. 1,336 |
| 6. | Cybernetic Vision AG Health | ||||
| Monitoring Technologies | Berlin | 5.69 | - | - | |
| 7. | Rofil Medical International N.V. | 10.00 | - | - |
The annual financial statements of Cybernetic Vision AG Health Monitoring Technologies and Rofil Medical International N.V. to December 31, 2009 are not available. The figures for AEQUOS Endoprothetik GmbH relate to the annual financial statements to December 31, 2009. With the increase in capital stock based on the resolution adopted by the meeting of shareholders on May 27, 2009 and entered in the commercial register on January 18, 2010, aap Implantate AG's stake in AEQUOS Endoprothetik GmbH was reduced from 5.6% to 5.32%.
In the fiscal year 2009 the shareholding in Prisna B. V. was sold along with the totality of Bactimm B. V. and Farmalyse B. V.
Insolvency proceedings in respect of the assets of Cybernetic Vision AG Health Monitoring Technologies (initiated in 2000) and the assets of Rofil Medical International N.V. (initiated in 2007) have yet to be concluded.
Relations with related enterprises and persons are shown by groups of persons.
The following transactions with related enterprises and persons took place during the reporting period:
| 2009 | Related enterprises | Other related persons |
|---|---|---|
| Selling of goods | €K 202 |
€K 1,652 |
| Selling of assets | 475 | 0 |
| Purchased services | ./. 126 | ./. 130 |
| Financing | ||
| - Loans | 2,000 | 0 |
| - Interest expense | ./. 172 | 0 |
| - Interest rate | 8 % | - |
| 2008 | Related enterprises | Other related persons |
| €K | €K | |
| Selling of goods | 467 | 0 |
| Selling of assets | 0 | 0 |
| Purchased services | ./. 173 | ./. 56 |
| Financing | ||
| - Loans | 0 | 0 |
| - Interest expense | ./. 70 | 0 |
| - Interest rate | 6 % | - |
All transactions are undertaken on market terms and conditions and do not, as a matter of principle, differ from delivery and performance relations with unrelated third parties.
Business with related enterprises and persons led to the following balance sheet items:
| 2009 | Related enterprises | Other related persons |
|---|---|---|
| €K | €K | |
| Trade receivables | 0 | 1,039 |
| Liabilities loans | ./. 2,265 | 0 |
| Trade receivables from companies with which a | ||
| participating relationship exists | 4 | 0 |
| Trade liabilities | 0 | 2 |
| Accrurals | 0 | 13 |
| 2008 | Related enterprises | Other related persons |
| €K | €K | |
|---|---|---|
| Trade receivables | 0 | 0 |
| Trade receivables from companies with which a | ||
| participating relationship exists | 1 | 0 |
| Liabilities loans | ./. 1,153 | 0 |
| Liabilities from companies with which a |
||
| participating relationship exists | ./. 22 | 0 |
Members of the Company's Management Board in the year under review were:
Mr. Biense Visser, businessman, Utrecht, Netherlands Mr. Bruke Seyoum Alemu, Dipl.-Ing., Berlin
Management remuneration totaled €773K (previous year: €655K).
| Remuneration components in €K | ||||||||
|---|---|---|---|---|---|---|---|---|
| Fixed | Performance related |
Long-term incentive |
Total | |||||
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |
| Biense Visser | 152 | 0 | 135 | 0 | 19 | 0 | 306 | 0 |
| Bruke Seyoum Alemu | 275 | 163 | 135 | 90 | 57 | 77 | 467 | 330 |
| Oliver Bielenstein* | 0 | 193 | 0 | 5 | 0 | 127 | 0 | 325 |
| 773 | 655 |
* Until December 31, 2008
The Company has taken out D&O insurance cover for the management. Premiums paid in 2009 totaled €27K (2008: €27K).
Of the members of the Management Board only Mr. Visser holds Supervisory Board directorships. They are as follows:
| Biense Visser | Mediq N.V. (formerly OEG) |
|---|---|
| HZPC Holland B.V. | |
| Kreatech Biotechnology B.V. (since Feb. 10, 2009) |
Members of the Company's Supervisory Board in the reporting year were:
| Mr. Rubino Di Girolamo, business economist, Oberägeri near Zug, Switzerland | (Chairman) |
|---|---|
| Mr. Jürgen W. Krebs, business economist, Kilchberg near Zurich, Switzerland (Deputy | Chairman until |
| Aug. 7, 2009) | |
| Mr. Ronald Meersschaert, businessman, Arnhem, Netherlands | (Deputy Chairman since Aug. 7, |
| 2009) | |
| Prof. Dr. Dr. med. Reinhard Schnettler, university professor, Hofheim/Taunus | |
| Mr. Uwe Ahrens, Diplom-Ingenieur, Berlin | |
| Mr. Marcel Boekhoorn, businessmann, Arnhem, Netherlands | |
| Dr. Winfried Weigel, businessmann, Zurich, Switzerland | (since Aug. 7, 2009) |
Supervisory Board members were elected for the full term of office permitted by the Company's Articles of Incorporation, until the end of the General Meeting that resolves to approve the Board's actions for the fiscal year 2009.
Supervisory Board remuneration in the fiscal year totaled €36K (previous year: €36K) and breaks down as follows:
| 2009 | 2008 | |
|---|---|---|
| €K | €K | |
| Mr. Rubino Di Girolamo | 13 | 13 |
| Mr.Jürgen W. Krebs (bis 7.8.2009) | 4 | 9 |
| Mr. Prof. Dr. Dr. med. Reinhard Schnettler | 4 | 6 |
| Mr. Uwe Ahrens | 5 | 4 |
| Mr. Ronald Meersschaert | 7 | 1 |
| Mr. Marcel Boekhoorn | 1 | 0 |
| Mr. Dr. Windfried Weigel (seit 7.8.2009) | 2 | 0 |
| Mr. Oliver Bielenstein (bis 30.11.2008) | 0 | 1 |
| 36 | 36 |
Payments in the reporting year totaled €17K (previous year: nil).
Members of the Supervisory Board hold the following Supervisory Board directorships in addition to their work on behalf of aap Implantate AG:
| Mr. Rubino Di Girolamo | Deepblue Holding AG | Administrative Council Chairman | ||
|---|---|---|---|---|
| Bastei Privatfinanz AG | ||||
| Metalor Dental Holding AG | ||||
| Mr. Jürgen W. Krebs | Merval Holding AG | Administrative Council Chairman | ||
| (until Aug. 7, 2009) | Basisinvest AG | Administrative Council Chairman | ||
| MainFirst Holding AG | ||||
| MainFirst Financial Service AG | ||||
| Reviderm AG | ||||
| Prof. Dr. Dr. med. Reinhard Schnettler | Kliniken des Main-Taunus-Kreises GmbH | |||
| Mr. Uwe Ahrens | None | |||
| Mr. Marcel Boekhoorn | Openlot Systems B.V. | |||
| Motip Dubli Group | ||||
| Toeca International Company B.V. (since Oct. 24, 2008) | ||||
| Mr. Ronald Meersschaert | Toeca International Company B.V. | |||
| Voice Cash Holding B.V | ||||
| Voice Trust AG | ||||
| Dr. Winfried Weigel | None | |||
| (since Aug. 7, 2009) |
Shares in the Company held by members of the Supervisory Board and Management Board are as follows:
| Shares | Options | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Supervisory Board | ||||
| Jürgen W. Krebs (bis 7.8.2009) | 3,287,200 | 3,287,200 | 0 | 0 |
| Rubino di Girolamo | 1,622,357 | 1,530,000 | 0 | 0 |
| Prof. Dr. Dr. med. Reinhard Schnettler | 182,094 | 182,094 | 0 | 0 |
|---|---|---|---|---|
| Uwe Ahrens | 858,536 | 1,053,723 | 0 | 0 |
| Marcel Boekhoorn | 3,589,036 | 2,720,500 | 0 | 0 |
| Biense Visser (bis 31.12.2008) | 0 | 95,000 | 0 | 0 |
| Dr. Winfried Weigel (seit 7.8.2009) | 0 | 0 | 0 | 0 |
| Ronald Meerschaert | 0 | 0 | 0 | 0 |
| Management Board | ||||
| Biense Visser (seit 1.1.2009) | 355,000 | 0 | 200,000 | 0 |
| Bruke Seyoum Alemu | 70,000 | 45,000 | 400,000 | 400,000 |
Fair market values of the options when they were granted were between €1.14 and €0.42.
By March 25, 2010, the day on which the Management Board released the annual financial statements, aap Implantate AG had received the following notifications in accordance with Section 21 (1) or (1a) of the Securities Trading Act (WpHG):
| Name/Company | Domicile (only if company) |
reached, exceeded or fallen below threshold |
Day of reaching, exceeding or fallen below the threshold |
Amount of own proportion on voting rights |
|---|---|---|---|---|
| Uwe Ahrens | 3% | 13.01.2010 | 2.82 % | |
| Jan Albert de Vries | 20 % | 26.03.2009 | 19.48 % | |
| Noes Beheer B.V. | Nijmengen | 20 % | 26.03.2009 | 19.48 % |
| Jürgen W. Krebs | 15, 20, 25, 30 % | 13.01.2009 | 12.35 % | |
| Merval AG | Zug | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 1.30 % |
| Rubino Di Girolamo |
10, 15, 20, 25, 30 % |
13.01.2009 | 5.75 % | |
| Deepblue Holding AG |
Zug | 10, 15, 20, 25, 30 % |
13.01.2009 | 5.75 % |
| Oliver Bielenstein | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 1.89 % | |
| Bruke Alemu | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 0.17 % | |
| Bernhard Gottwald |
3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 0.77 % | |
| Oliver Benz | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 0.15 % | |
| Carpe Diem Holding AG |
Uerikon | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 0.15 % |
| KST Beteiligungs AG |
Stuttgart | 3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 2.36 % |
| Hanspeter Schwager |
3, 5, 10, 15, 20, 25, 30 % |
13.01.2009 | 2.49 % | |
| DZ Bank AG | Frankfurt | 5 % | 05.09.2008 | 4.80 % |
| Ramphastos Investments N.V. |
Arnhem | 10 % | 07.05.2008 | 10.04 % |
| Elocin B.V. | Arnhem | 10 % | 07.05.2008 | 10.04 % |
| Martinus Jacobus Johannes Boekhoorn |
10 % | 07.05.2008 | 10.04 % |
| Union Investment | Luxemburg | 3 % | 27.09.2007 | 2.57 % |
|---|---|---|---|---|
| Luxembourg S.A. | ||||
| Highclere | London | 3 % | 26.09.2007 | 2.1 % |
| International | ||||
| Investors Limited | ||||
| Highclere | Westport | 3 % | 26.09.2007 | 2.1 % |
| International | ||||
| Investors Smaller | ||||
| Companies Fund | ||||
| Asuncion Barrueto | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % | |
| 25, 30, 50 % | ||||
| Oliver Borrmann | 3, 5, 10, 15, 20, | 20.09.2007 | 0.01 % | |
| 25, 30, 50 % | ||||
| Fermann AG | Zürich | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % |
| 25, 30, 50 % | ||||
| Martin Lechner | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % | |
| 25, 30, 50 % | ||||
| Dr. Frank | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % | |
| Husemann | 25, 30, 50 % | |||
| Berlex AG | Berlin | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % |
| 25, 30, 50 % | ||||
| Robert Schrödel | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % | |
| 25, 30, 50 % | ||||
| Christian Walliker | 3, 5, 10, 15, 20, | 20.09.2007 | 0 % | |
| 25, 30, 50 % |
Auditor's fees stated as expenses in the fiscal year totaled:
| a) For auditing the annual financial statements (Company and Group) | €240K |
|---|---|
| (previous year: €121K) | |
| thereof for previous year: €60K | |
| b) Other certificates or valuation services | Nil |
| (previous year: €31K) | |
| c) Other services | €68K |
| (previous year: nil) |
No reportable events have occurred since the balance sheet date.
aap Implantate AG has issued and made available to shareholders on our website at www.aap.de/de/Investor/Corporate_Governance/index_html the declaration on the German Corporate Governance Code required by Section 161 AktG.
The Company's Management Board on March 25, 2010 authorized these consolidated financial statements to December 31, 2009 for publication.
To the best of our knowledge and in accordance with the applicable reporting principles for financial reporting, the consolidated financial statements give a true and fair view of the Group's assets, liabilities, financial and earnings position, and the group management report includes a fair review of the development and performance of the Group's business and position together with a description of the principal opportunities and risks associated with the Group's expected development.
Berlin, March 25, 2010
The Management Board
__________________________ _________________________
Chairman/CFO Director/COO
Biense Visser Bruke Seyoum Alemu
We have audited the consolidated financial statements prepared by aap implantate Aktiengesellschaft comprising the balance sheet, the income statement, statement beginning with profit or loss and displaying components of other comprehensive income, statement of changes in equity, cash flow statement, and the notes to the consolidated financial statements, together with the group management report for the fiscal year from January 1 to December 31, 2009. The preparation of the consolidated financial statements and the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law under section 315a (1) of the Handelsgesetzbuch (German Commercial Code, HGB) are the responsibility of the parent company's management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with section 317 of the HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position, and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken in to account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in the consolidated financial statements, the determination of entities to be included in consolidation, the accounting and consolidation principles used, and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU and the additional requirements of German commercial law under section 315a (1) of the HGB, and give a true and fair view of the net assets, financial position, and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's positions and suitably presents the opportunities and risks of future development.
Berlin, March 26, 2010
RÖVERBRÖNNER GMBH & CO.KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
Helmut Schuhmann Bettina Grothe Auditor Auditor
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