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Elmos Semiconductor SE

Quarterly Report Nov 6, 2014

137_10-q_2014-11-06_2cc88c15-5516-4da1-97a0-037326cd193f.pdf

Quarterly Report

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Elmos Product Quartets

Interim report Q3 2014

Overview

In focus

  • -> Sales up 18.5% in the third quarter 2014
  • -> Asian business continues course for growth
  • -> Positive adjusted free cash flow strengthens net cash position
  • -> Forecast confirmed

Key figures

3rd quarter 9 months
in million Euro or percent
unless otherwise indicated
7/1 –
9/30/2014
7/1 –
9/30/20131
Change 1/1 –
9/30/2014
1/1 –
9/30/20131
Change
Sales 54.7 46.2 18.5% 156.0 136.4 14.4%
Semiconductor 49.8 42.5 17.0% 142.5 124.9 14.0%
Micromechanics 5.0 3.6 36.3% 13.6 11.5 18.2%
Gross profit 25.0 19.9 25.9% 67.1 55.1 21.9%
in percent of sales 45.7% 43.1% 43.0% 40.4%
R&D expenses – 10.2 –7.8 31.8% –27.0 –25.6 5.5%
in percent of sales –18.7% –16.8% –17.3% – 18.7%
Operating income before other operating expenses (–)/income 5.8 3.7 56.1% 13.0 3.6 >100.0%
in percent of sales 10.6% 8.0% 8.3% 2.7%
Exchange rate gains/losses (–) 1.7 –0.2 n/a 1.5 –0.2 n/a
Other operating expenses (–)/income –1.4 0.2 n/a –0.1 2.1 n/a
EBIT 6.1 3.7 63.7% 14.4 5.5 >100.0%
in percent of sales 11.1% 8.0% 9.2% 4.1%
Consolidated net income after non-controlling interests 3.9 3.1 28.8% 12.0 4.5 >100.0%
in percent of sales 7.2% 6.6% 7.7% 3.3%
Basic earnings per share in Euro 0.20 0.16 28.2% 0.62 0.23 >100.0%
Cash flow from operating activities 14.1 7.4 90.7% 33.4 14.2 >100.0%
Capital expenditures for intangible assets and property, plant and equipment 7.4 4.5 64.5% 25.0 13.1 90.7%
in percent of sales 13.4% 9.7% 16.0% 9.6%
Free cash flow2 6.6 2.8 >100.0% 6.7 –24.2 n/a
Adjusted free cash flow3 6.8 2.9 >100.0% 8.4 2.7 >100.0%
in million Euro or percent
unless otherwise indicated
9/30/2014 12/31/2013 Change
Equity 203.4 192.7 5.5%
in percent of total assets 70.0% 71.1%

1 Adjustment of prior-year amounts; please refer to note 1 in the condensed notes to the consolidated financial statements

2 Cash flow from operating activities less cash flow from investing activities

3 Cash flow from operating activities less capital expenditures for intangible assets and property, plant and equipment, less payments for investments, plus disposal of investments

Employees (reporting date) 1,119 1,060 5.6%

Due to calculation processes, tables and references may produce rounding differences from the mathematically exact values (monetary units, percentage statements, etc.).

Interim group management report

Course of business

Sales development and order situation

Elmos Semiconductor AG generated sales of 156.0 million Euro in the first nine months of 2014 (9M 2013: 136.4 million Euro). Sales thus increased significantly compared to the prioryear period (+14.4%). With respect to the third quarter, sales grew even by 18.5% to 54.7 million Euro (Q3 2013: 46.2 million Euro). This positive performance is driven by the increase in new car registrations in Europe, China and the U.S.A. as well as by product ramp-ups and a deeper market penetration with existing products.

The sales performance in Asia continues to be highly disproportionate. With a gain of 28.2% in the first nine months of 2014, sales generated in the Asian market reached 39.8 million Euro (9M 2013: 31.0 million Euro). While Germany shows a continuation of the positive trend (+5.4 million Euro or 11.3%), sales in the other EU countries went down by 0.7 million Euro or 2.0%. Sales generated in the U.S.A. was up 54.6% to 15.7 million Euro (9M 2013: 10.2 million Euro). Changes in the logistics management implemented by individual customers are the main reason for this growth.

The semiconductor segment gained 14.0% on the prior-year period and came to 142.5 million Euro (9M 2013: 124.9 million Euro). The ramp-ups of the micromechanics segment reflect in the strong growth in sales of 18.2% to 13.6 million Euro (9M 2013: 11.5 million Euro). In the third quarter of 2014, sales in this segment grew even by 36.3% compared to the prior-year period, reaching 5.0 million Euro (Q3 2013: 3.6 million Euro).

The ratio of order backlog to sales generated in the semiconductor segment, the so-called book-to-bill, was above one at the end of the first nine months of 2014.

Third-party sales 1/1 – 9/30/2014
thousand Euro
in percent
of sales
1/1 – 9/30/2013
thousand Euro
in percent
of sales
Change
Germany 53,374 34.2% 47,960 35.2% 11.3%
Other EU countries 37,102 23.8% 37,848 27.7% –2.0%
U.S.A. 15,729 10.1% 10,177 7.5% 54.6%
Asia/Pacific 39,759 25.5% 31,013 22.7% 28.2%
Other countries 10,063 6.4% 9,390 6.9% 7.2%
Consolidated sales 156,027 100.0% 136,388 100.0% 14.4%

Profit situation, finances, and assets and liabilities

Compared to the prior-year period, the cost of sales rose by 9.3% to 88.9 million Euro in the nine months of 2014, a disproportionately low increase in relation to sales (9M 2013: 81.3 million Euro). Also as a consequence of the successively improved production efficiency due to the ongoing conversion of production from 6-inch to 8-inch, the gross profit went up. The gross margin grew accordingly to 43.0% (9M 2013: 40.4%).

Research and development expenses of the first nine months went up from 25.6 million Euro in the prior-year period to 27.0 million Euro in the reporting period. R&D expenses of the third quarter 2014 were affected by special depreciation of intangible assets in the amount of 1.8 million Euro. Due to increased sales, R&D expenses went down in relation to sales from 18.7% in the first nine months of 2013 to 17.3% in the reporting period. Distribution expenses went up 4.8% to 14.3 million Euro in the first nine months of 2014 (9M 2013: 13.6 million Euro). Administrative expenses also went up disproportionately to sales by 5.1% to 12.9 million Euro (9M 2013: 12.2 million Euro). On the whole, operating expenses went down considerably in comparison with the prioryear period from 37.7% to 34.7% of sales.

As a result of the sales increase and the gain in effectiveness regarding cost of sales and operating expenses, the operating income before other operating expenses/income went up significantly from 3.6 million Euro in the first nine months of 2013 to 13.0 million Euro in the reporting period. The margin increased accordingly from 2.7% to 8.3%.

While exchange rate gains in the amount of 1.5 million Euro turned out much higher than in the corresponding prior-year period (9M 2013: exchange rate losses in the amount of 0.2 million Euro), essentially due to income from exchange rate hedges recognized in profit or loss, the item of other operating income/expenses, with a net expense of 0.1 million Euro, was much lower than over the first nine months of 2013 (net income of 2.1 million Euro). Earnings before interest and taxes (EBIT) thus went up to a similar extent as the operating income before other operating expenses/income did, reaching 14.4 million Euro in the first nine months of 2014 (9M 2013: 5.5 million Euro). The EBIT margin was 9.2% as compared to 4.1% in the corresponding prior-year period.

Due to the positive contribution of the accounting treatment of deferred tax income in connection with tax-deductible losses in the first quarter of 2014, the tax rate was relatively low for the first nine months of 2014 and the consolidated net income attributable to owners of the parent amounted to 12.0 million Euro (9M 2013: 4.5 million Euro). This equals basic earnings per share (EPS) of 0.62 Euro (9M 2013: 0.23 Euro).

The operating cash flow was increased substantially, coming to 33.4 million Euro in the reporting period as compared to 14.2 million Euro in the prior-year period. Apart from the higher consolidated net income (+7.6 million Euro), another main reason for the rising cash flow from operating activities is the reduction of trade receivables. The cutback by 2.9 million Euro in the reporting period is contrasted by an increase in trade receivables in the prior-year period by 4.0 million Euro.

Capital expenditures for intangible assets and property, plant and equipment were significantly higher in the first nine months of 2014 due to the continued conversion from 6-inch to 8-inch production and the expansion of testing capacity, reaching 25.0 million Euro (9M 2013: 13.1 million Euro). Despite the high amount of capital expenditures, the adjusted free cash flow (cash flow from operating activities less capital expenditures for intangible assets and property, plant and equipment, less payments for investments, plus disposal of investments) was increased. In the reporting period Elmos generated a positive adjusted free cash flow of 8.4 million Euro (9M 2013: 2.7 million Euro).

Cash and cash equivalents plus fungible securities amounted to 84.2 million Euro as of September 30, 2014 (December 31, 2013: 77.1 million Euro). Net cash was up due to the positive free cash flow – despite the payment of a dividend totaling 4.8 million Euro – and reached 46.3 million Euro as of September 30, 2014 (December 31, 2013: 39.3 million Euro). The equity ratio remained stable at 70.0% as of September 30, 2014 (December 31, 2013: 71.1%).

1

Economic environment

The three largest car markets Western Europe, U.S.A. and China continued their course for growth over the first nine months of 2014. Western Europe's new registrations gained close to 6% to about 9.6 million automobiles, according to the VDA, Germany's Association of the Automotive Industry. The highest growth rates were recorded by Spain (+17%) and Great Britain (+9%). Increases achieved in the other relevant markets turned out much lower: Italy (+4%), Germany (+3%), and France (+2%).

The U.S. market for light vehicles (passenger cars and light trucks) gained more than 5% in the reporting period to altogether 12.4 million vehicles. This growth is driven primarily by the category of light trucks (+17%); the passenger car market grew merely by 1%.

The Chinese passenger car market reached a volume of close to 13.1 million cars in the first nine months of 2014, thus recording growth of almost 13% over the corresponding 2013 period of comparison.

In Japan the demand for passenger cars went up 6% to 3.7 million vehicles. However, the sales tax increase of April this year has negatively affected the current passenger car market. In September 2014 new registrations were down by more than 3%.

Significant events

The Elmos management explained the annual results 2013 within the framework of the annual press conference and the analysts' conference held on March 20, 2014. The CEO also informed about the Company's positive performance by addressing the Annual General Meeting on May 13, 2014. The shareholders passed the proposal for a dividend of 0.25 Euro per share with a large majority. Apart from the dividend payment, the other resolutions on the agenda were also decided on with significant majorities of the votes.

Nicolaus Graf von Luckner, CFO of Elmos, retired as of June 30, 2014. His successor Dr. Arne Schneider assumed his responsibilities effective July 1, 2014. Dr. Schneider has been with Elmos Semiconductor AG since 2011 and used to be in charge of Corporate Development.

1,135,789 Elmos shares were reallocated among institutional investors, thus compensating previous rights held by former Elmos partners entirely. Weyer Beteiligungsgesellschaft mbH and ZOE VVG GmbH, companies owned by the founders of Elmos and today's Supervisory Board members, Dr. Klaus Weyer and Prof. Dr. Günter Zimmer, reallocated the Elmos stock to institutional investors off-market by way of accelerated bookbuilding on June 26, 2014, acting as trustees for former Elmos partner BMW INTEC Beteiligungs GmbH. Weyer Beteiligungsgesellschaft mbH compensated another portion of those rights out of the company's own pocket, thus increasing its economic share in Elmos Semiconductor AG.

Elmos presented its products at the world's leading trade shows. In the first nine months of 2014, Elmos showcased the product lines at "embedded world 2014" in Nuremberg, "electronica China" in Shanghai, and "Light+Building" in Frankfurt/Main, receiving highly positive customer feedback.

Elmos subsidiary SMI (Silicon Microstructures, Inc.) has developed a new MEMS low-pressure sensor and transferred it to series production. The sensor is characterized by high precision and stability. Elmos also pushed the marketing of an LED controller family and a USB power supply for use in automobiles. Furthermore, Elmos introduced a number of products for "smart home solutions", including motion and smoke detectors. Stepper, DC and BLDC drivers were presented as well. As a new distributor of Elmos products we managed to enlist Silica, a subsidiary of Avnet, Inc.

Effective April 1, 2014 Elmos increased its shares in the company DMOS in Dresden from previously 20% to 74.8%, resulting in the subsidiary's full consolidation as of that date.

Based on successes in winning new projects, Elmos founded a subsidiary in Tokyo/Japan for distribution and application support in mid-2014.

In early September Elmos presented the new corporate video "Magic Moments" to the public. The video is available at www.elmos.com.

Other disclosures

Staff development

The Elmos Group's workforce came to 1,119 employees as of September 30, 2014. Compared with December 31, 2013 (1,060 employees), the staff is thus increased by 5.6%. This is accounted for essentially by the full consolidation of DMOS.

Elmos share

While the Elmos share showed a clearly positive performance over the first half-year 2014, it took to a sideways movement in the third quarter of 2014; still it performed ahead of the market indices, all of which suffered losses in value over the third quarter.

Over the first nine months of 2014, the DAX even recorded a slight loss of 0.8%. Due to its highly positive performance in the first half-year 2014, the TecDAX managed to show a 7.1% gain for the nine-month period. The technology relevant industryspecific indices DAX Sector Technology and Technology All Share came up with gains of 8.2% and 5.8% respectively on the nine-month basis.

1

Based on the first nine months, the Elmos share gained altogether 39.5% in value. It closed at 14.93 Euro on September 30, 2014. Market capitalization was 296.1 million Euro as of that date (based on 19.8 million issued shares). The share reached its high on June 6, 2014 at 15.80 Euro and recorded its low on January 2, 2014 at 10.65 Euro (Xetra closing prices all).

The average daily trading volume of the first nine months of 2014 came to 36.3 thousand shares (Xetra and Frankfurt floor) and was thus clearly above the 2013 average (21.6 thousand shares). Partly by servicing stock options with treasury shares, the treasury stock was reduced. As of September 30, 2014 Elmos Semiconductor AG held 280,825 treasury shares (December 31, 2013: 327,697).

Some 1.1 million shares were reallocated in June 2014 to institutional investors. More information about this can be found in the chapter "Significant events" in this quarterly report. Company boards Supervisory Board Prof. Dr. Günter Zimmer, chairman Graduate physicist | Duisburg

Dr. Burkhard Dreher, deputy chairman Graduate economist | Dortmund

Dr. Klaus Egger Graduate engineer | Steyr-Gleink, Austria

Thomas Lehner Graduate engineer | Dortmund

Sven-Olaf Schellenberg Graduate physicist | Dortmund

Dr. Klaus Weyer Graduate physicist | Penzberg

Management Board

Dr. Anton Mindl, chairman Graduate physicist | Lüdenscheid

Dr. Arne Schneider, since July 1, 2014 Graduate economist | Hamburg

Nicolaus Graf von Luckner, until June 30, 2014 Graduate economist | Oberursel

Reinhard Senf Graduate engineer | Iserlohn

Dr. Peter Geiselhart Graduate physicist | Ettlingen

Outlook Opportunities and risks

Risk management and the individual corporate risks and opportunities are described in our Annual Report 2013. No material changes of the Company's risks and opportunities as detailed therein have occurred in the first nine months of 2014. No risks are visible at present that could either separately or collectively jeopardize the Company's continued existence.

Economic framework

In October 2014 the Federal Government has lowered its economic forecast for Germany significantly because of numerous international crises. The gross domestic product is now supposed to gain only 1.2% this year instead of the previously expected 1.8%. For the next year 2015 the government also no longer assumes a 2.0% growth but only 1.3%. "The German economy is navigating rough waters in foreign trade," said Sigmar Gabriel, Federal Minister for Economic Affairs. The Ifo Institute's business climate indicator of the end of October has turned for the worse again. For the sixth time in a row, the mood among German companies has deteriorated.

The European Central Bank (ECB) sees difficult times for the euro area, too. Risks of a downward trend for the economic outlook in the eurozone continue, according to the ECB's most recent monthly report released in October 2014. For 2015 the central bank still expects a "modest recovery" of the economy in the euro area.

On the global scale, the International Monetary Fund (IMF) cautions against the threat of a new global economic crisis. According to the organization, the risks for the world economy have become larger again over the past few months. In its global economic outlook, the IMF reduced the forecast for this year's global growth to 3.3%. In April expectations had still been higher by 0.4 percentage points. The IMF has also slightly lowered its forecast for 2015, now expecting 3.8% growth. Thus the Fund has repeatedly felt compelled to reduce its expectations. According to the IMF, a stagnation of the economic recovery in the euro area represents the single largest risk. The Fund also identifies major difficulties for the Russian economy due to the sanctions imposed because of the Ukraine crisis. Erstwhile growth driver Brazil is struggling with an even weaker economy than recently expected, too. The IMF does not see major problems for China, however, whose growth is supposed to exceed 7% over the next two years.

For the auto industry, the President of Germany's Association of the Automotive Industry (VDA), Matthias Wissmann, expects an increase in the global passenger car market of approx. 4% to 75.9 million vehicles in 2014; however, indicators of a slowdown were accumulating in October 2014. Ford, Opel and Fiat announced plans to reduce their production output in several countries. The VDA also recently noticed that "the mood among consumers and in the industry has been deteriorating to some degree due to geopolitical uncertainty."

Outlook for the Elmos Group

Based on the currently available information and the performance of the first nine months of 2014, the Management Board provides the following outlook for the full year 2014.

Elmos notices the current rather cautious economic indications in its orders received only to a limited extent. Elmos raised its forecast for the full year in August 2014 and confirms it now. Management expects sales growth and EBIT margin to range between 9 and 12% respectively. Capital expenditures for intangible assets and property, plant and equipment are budgeted to amount to no more than 15% of sales in 2014. Management further assumes that Elmos will generate a positive adjusted free cash flow once again. This forecast is based on an exchange rate of 1.35 USD/EUR on a yearly average.

The outlook is based on the premise that the economy will not slow down further. At the same time it is true that such expectations can be affected by market turbulence. Particularly the consequences of the political and economic developments and crises in the international markets cannot be foreseen with respect to their effects on the global economy and our core market.

Interim consolidated financial statements

Condensed consolidated statement of financial position

Assets 9/30/2014
thousand Euro
12/31/2013
thousand Euro
Non-current assets
Intangible assets 1 22,229 26,664
Property, plant and equipment 1 82,081 72,388
Investments in associates 0 0
Securities 1, 2 46,874 48,987
Investments 1, 2 20 470
Other financial assets 1 4,182 2,493
Deferred tax assets 2,506 2,671
Total non-current assets 157,893 153,674
Current assets
Inventories 1 48,175 40,480
Trade receivables 2 36,040 38,450
Securities 2 5,727 203
Other financial assets 3,336 2,905
Other receivables 7,332 7,007
Income tax assets 541 61
Cash and cash equivalents 2 31,576 27,949
132,728 117,055
Non-current assets held for sale 0 121
Total current assets 132,728 117,176
Total assets 290,620 270,850

Cf. note 3 2 Cf. note 4

Equity and liabilities 9/30/2014
thousand Euro
12/31/2013
thousand Euro
Equity
Equity attributable to owners of the parent
Share capital 1 19,829 19,675
Treasury stock 1 –281 –328
Additional paid-in capital 89,411 88,161
Surplus reserve 102 102
Other equity components –2,381 –3,920
Retained earnings 94,066 86,868
200,746 190,559
Non-controlling interests 2,626 2,127
Total equity 203,372 192,686
Liabilities
Non-current liabilities
Provisions 353 492
Financial liabilities 2 37,185 37,491
Other liabilities 4,443 4,650
Deferred tax liabilities 3,949 3,049
Total non-current liabilities 45,931 45,682
Current liabilities
Provisions 12,914 7,505
Income tax liabilities 2,330 1,613
Financial liabilities 2 659 303
Trade payables 2 21,716 19,492
Other liabilities 3,699 3,569
Total current liabilities 41,318 32,482
Total liabilities 87,248 78,164
Total equity and liabilities 290,620 270,850

Cf. note 3

Cf. note 4

7/1 –
9/30/2014
in percent 7/1 –
9/30/2013
in percent
For the period July 1 through September 30 thousand Euro of sales thousand Euro of sales Change
Sales 54,731 100.0% 46,176 100.0% 18.5%
Cost of sales –29,699 –54.3% –26,295 –56.9% 12.9%
Gross profit 25,032 45.7% 19,881 43.1% 25.9%
Research and development expenses 1 –10,223 –18.7% –7,758 –16.8% 31.8%
Distribution expenses –5,011 –9.2% –4,389 –9.5% 14.2%
Administrative expenses –4,008 –7.3% –4,023 –8.7% –0.4%
Operating income before other
operating expenses (–)/income
5,790 10.6% 3,710 8.0% 56.1%
Exchange rate gains/losses (–) 1,679 3.1% –243 –0.5% n/a
Other operating income 342 0.6% 579 1.3% –41.0%
Other operating expenses –1,746 –3.2% –339 –0.7% >100.0%
Earnings before interest and taxes (EBIT) 6,065 11.1% 3,706 8.0% 63.7%
Finance income 520 1.0% 576 1.2% –9.7%
Finance cost –445 –0.8% –476 –1.0% –6.5%
Earnings before taxes 6,141 11.2% 3,806 8.2% 61.3%
Taxes on income
Current income tax expense –744 –1.4% –365 –0.8% >100.0%
Deferred taxes –1,186 –2.2% –376 –0.8% >100.0%
–1,930 –3.5% –741 –1.6% >100.0%
Consolidated net income 4,210 7.7% 3,065 6.6% 37.4%
Consolidated net income attributable to
Owners of the parent 3,933 7.2% 3,053 6.6% 28.8%
Non-controlling interests 277 0.5% 12 0.0% >100.0%
Earnings per share
Basic earnings per share 0.20 0.16
Fully diluted earnings per share 0.20 0.16

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

For the period July 1 through September 30 7/1 –
9/30/2014
thousand Euro
7/1 –
9/30/2013
thousand Euro
Consolidated net income 4,210 3,065
Other comprehensive income
Items that may be reclassified to the income statement
in future periods including respective tax effects
Foreign currency adjustments not affecting deferred taxes 227 –39
Foreign currency adjustments affecting deferred taxes 1,104 –423
Deferred tax (on foreign currency adjustments affecting deferred taxes) –278 106
Value differences relating to hedges 36 –46
Deferred tax (on value differences relating to hedges) –12 15
Changes in market value of available-for-sale financial assets –4 210
Deferred tax (on changes in market value of available-for-sale financial assets) 1 –69
Items that will not be reclassified to the income statement
in future periods including respective tax effects
Actuarial gains from pension plans 9 21
Deferred tax on actuarial gains from pension plans –3 –6
Other comprehensive income after taxes 1,080 –231
Total comprehensive income after taxes 5,290 2,834
Total comprehensive income attributable to
Owners of the parent 5,009 2,828
Non-controlling interests 281 6

Cf. note 3

Condensed consolidated income statement

1/1 –
9/30/2014
in percent 1/1 –
9/30/2013
in percent
For the period January 1 through September 30 thousand Euro of sales thousand Euro of sales Change
Sales 156,027 100.0% 136,388 100.0% 14.4%
Cost of sales –88,904 –57.0% –81,326 –59.6% 9.3%
Gross profit 67,123 43.0% 55,063 40.4% 21.9%
Research and development expenses 1 –26,979 –17.3% –25,572 –18.7% 5.5%
Distribution expenses –14,298 –9.2% –13,638 –10.0% 4.8%
Administrative expenses –12,864 –8.2% –12,236 –9.0% 5.1%
Operating income before other
operating expenses (–)/income
12,982 8.3% 3,616 2.7% >100.0%
Exchange rate gains/losses (–) 1,531 1.0% –177 –0.1% n/a
Other operating income 2,573 1.6% 3,034 2.2% –15.2%
Other operating expenses –2,698 –1.7% –931 –0.7% >100.0%
Earnings before interest and taxes (EBIT) 14,388 9.2% 5,542 4.1% >100.0%
Finance income 1,745 1.1% 1,620 1.2% 7.7%
Finance cost –1,337 –0.9% –1,608 –1.2% –16.8%
Earnings before taxes 14,796 9.5% 5,554 4.1% >100.0%
Taxes on income
Current income tax expense –1,692 –1.1% –1,383 –1.0% 22.3%
Deferred taxes 1 –727 –0.5% 631 0.5% n/a
–2,419 –1.6% –752 –0.6% >100.0%
Consolidated net income 12,377 7.9% 4,802 3.5% >100.0%
Consolidated net income attributable to
Owners of the parent 12,001 7.7% 4,531 3.3% >100.0%
Non-controlling interests 376 0.2% 270 0.2% 39.2%
Earnings per share
Basic earnings per share 0.62 0.23
Fully diluted earnings per share 0.61 0.23

Cf. note 3

Condensed consolidated statement of comprehensive income

For the period January 1 through September 30 1/1 –
9/30/2014
thousand Euro
1/1 –
9/30/2013
thousand Euro
Consolidated net income 12,377 4,802
Other comprehensive income
Items that may be reclassified to the income statement
in future periods including respective tax effects
Foreign currency adjustments not affecting deferred taxes 233 –104
Foreign currency adjustments affecting deferred taxes 1,239 –318
Deferred tax (on foreign currency adjustments affecting deferred taxes) –312 79
Value differences relating to hedges –36 206
Deferred tax (on value differences relating to hedges) 12 –56
Changes in market value of available-for-sale financial assets 561 –429
Deferred tax (on changes in market value of available-for-sale financial assets) –184 164
Items that will not be reclassified to the
income statement in future periods including respective tax effects
Actuarial gains from pension plans 28 63
Deferred tax on actuarial gains from pension plans –9 –19
Other comprehensive income after taxes 1,532 –414
Total comprehensive income after taxes 13,909 4,388
Total comprehensive income attributable to
Owners of the parent 13,539 4,153
Non-controlling interests 370 234

Elmos Interim Report July 1 − September 30, 2014 | 11

1/1–
9/30/2014
thousand
Euro
1/1–
9/30/2013
thousand
Euro1
7/1–
9/302014
thousand
Euro
7/1–
9/30/2013
thousand
Euro1
Cash flow from operating activities
Consolidated net income 12,377 4,802 4,210 3,065
Depreciation and amortization 20,103 16,974 8,287 5,575
Financial result –408 –12 –75 –100
Other non-cash income (–)/expenses 182 –783 1,135 326
Current income tax expense 1,692 1,383 744 365
Expenses for stock options/stock awards/share matching 262 308 67 98
Changes in pension provisions –111 –299 –37 –100
Changes in net working capital:
Trade receivables 2,864 –4,044 242 –968
Inventories –7,695 –4,335 –3,727 –2,016
Other assets –629 –1,047 – 415 894
Trade payables 1,582 2,100 1,114 1,987
Other provisions and other liabilities 4,602 1,043 2,338 –558
Income tax payments –1,776 –1,942 156 –1,266
Interest paid –1,337 –1,608 –445 –476
Interest received 1,707 1,611 525 577
Cash flow from operating activities 33,415 14,151 14,119 7,403

Condensed consolidated statement of cash flows

1 Adjustment of prior-year amounts; please also refer to note 1 in the condensed notes to consolidated financial statements

1/1–
9/30/2014
thousand
Euro
1/1–
9/30/2013
thousand
Euro1
7/1–
9/302014
thousand
Euro
7/1–
9/30/2013
thousand
Euro1
Cash flow from investing activities
Capital expenditures for intangible assets –1,354 –1,387 –372 –593
Capital expenditures for property, plant and equipment –23,676 –11,738 –6,985 –3,878
Payments for (–)/Disposal of non-current assets held for sale 2 –975 0 –97
Disposal of non-current assets 997 531 33 1
Payments for the acquisition of shares
in subsidiaries plus acquired cash and cash equivalents
546 0 0 0
Payments for (–)/Disposal of securities –2,850 –26,445 0 1
Disposal of investments 0 1,709 0 0
Payments for (–)/Payments from other non-current financial assets –402 –10 –147 7
Cash flow from investing activities –26,737 –38,315 –7,471 –4,559
Cash flow from financing activities
Repayment of non-current liabilities –306 –40 –266 0
Repayment (–)/Borrowing of current liabilities to banks 355 –5,165 505 –5,024
Purchase of treasury shares 0 –1,525 0 0
Share-based remuneration/Issue of treasury shares 336 457 0 0
Capital increase from conditional capital 865 157 330 116
Dividend payment –4,844 –4,814 0 0
Dividend payment to non-controlling shareholders –367 –400 0 0
Increase of majority stake 0 –570 0 0
Other changes 41 –3 –2 1
Cash flow from financing activities –3,920 –11,903 567 –4,907
Increase/Decrease (–) in cash and cash equivalents 2,758 –36,067 7,215 –2,064
Effect of exchange rate changes on cash and cash equivalents 869 –280 790 –250
Cash and cash equivalents at beginning of reporting period 27,949 55,576 23,571 21,543
Cash and cash equivalents at end of reporting period 31,576 19,229 31,576 19,229

1 Adjustment of prior-year amounts; please also refer to note 1 in the condensed notes to consolidated financial statements

2

Condensed consolidated statement of changes in equity

Non
controlling
Equity attributable to owners of the parent interests Group
Other equity components
Shares
thousand
Share
capital
thousand
Euro
Treasury
stock
thousand
Euro
Additional
paid-in
capital
thousand
Euro
Surplus
reserve
thousand
Euro
Reserve for
available-for-sale
financial assets
thousand Euro
Hedges
thousand Euro
Foreign currency
translation
thousand Euro
Unrealized
actuarial gains/
losses
thousand Euro
Retained
earnings
thousand
Euro
Total
thousand
Euro
Total
thousand
Euro
Total
thousand
Euro
January 1, 2013 before adjustments 19,616 19,616 –240 88,599 102 71 –1,306 –1,634 0 82,255 187,463 2,587 190,050
Effects of first-time application of IAS 19R –533 72 –461 –461
January 1, 2013 after adjustments 19,616 19,616 –240 88,599 102 71 –1,306 –1,634 –533 82,327 187,002 2,587 189,589
Consolidated net income 4,531 4,531 270 4,802
Other comprehensive income for the period –265 150 –307 44 –378 –36 –414
Total comprehensive income –265 150 –307 44 4,531 4,153 234 4,388
Share-based remuneration/Issue of treasury shares 101 356 457 457
Capital increase from conditional capital 42 42 115 157 157
Transaction costs –4 –4 –4
Purchase of treasury shares –189 –1,336 –1,525 –1,525
Dividend payment –4,814 –4,814 –4,814
Dividend payment to non-controlling shareholders 0 –400 –400
Expenses for stock options and stock awards 308 308 308
Increase of majority stake –85 –85 –485 –570
Other changes 11 11 –11 0
September 30, 2013 19,658 19,658 –328 88,038 102 –194 –1,156 –1,941 –489 81,970 185,660 1,925 187,585
January 1, 2014 19,675 19,675 –328 88,161 102 78 –1,119 –2,191 –688 86,868 190,559 2,127 192,686
Consolidated net income 12,001 12,001 376 12,377
Other comprehensive income for the period 377 –24 1,167 19 1,538 –6 1,532
Total comprehensive income 377 –24 1,167 19 12,001 13,539 370 13,909
Share-based remuneration/Issue of treasury shares 47 289 336 336
Capital increase from conditional capital 154 154 711 865 865
Transaction costs –12 –12 –12
Changes in basis of consolidation 0 483 483
Dividend payment –4,844 –4,844 –4,844
Dividend payment to non-controlling shareholders 0 –367 –367
Expenses for stock options/stock awards/share matching 262 262 262
Other changes 41 41 13 54
September 30, 2014 19,829 19,829 –281 89,411 102 455 –1,143 –1,024 –669 94,066 200,746 2,626 203,372

Condensed notes to the consolidated financial statements

The condensed interim consolidated financial statements for the 3rd quarter of 2014 were released for publication pursuant to Management Board resolution in November 2014.

1 – General information

Elmos Semiconductor Aktiengesellschaft ("the Company" or "Elmos") has its registered office in Dortmund (Germany) and is entered in the register of companies maintained at Dortmund District Court (Amtsgericht), section B, no. 13698. The Articles of Incorporation are in effect in the version of March 26, 1999, last edited pursuant to Supervisory Board resolution of January 13, 2014.

The Company's business is the development, manufacture and distribution of microelectronic components and system parts (application specific integrated circuits, or in short: ASICs) as well as technological devices with similar functions. The Company may conduct all transactions suitable for serving the object of business directly or indirectly. The Company may establish branches, acquire or lease businesses of the same or a similar kind or invest in them, and conduct all business transactions that are beneficial to the Articles of Association. The Company is authorized to conduct business in Germany as well as abroad.

In addition to its domestic branches, the Company has sales companies and business locations in Europe, Asia, South Africa and the United States and cooperates with other German and international companies in the development and production of ASIC chips.

Basic principles of the preparation of financial statements

The condensed interim consolidated financial statements for the period January 1 through September 30, 2014 have been prepared in accordance with IAS 34: Interim Financial Reporting. These financial statements do therefore not contain all the information and disclosures required for consolidated financial statements and should therefore be read in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2013.

Essential accounting policies and valuation methods

For the preparation of the condensed interim consolidated financial statements, the same accounting policies and valuation methods have been adopted as were applied for the preparation of the consolidated financial statements for the fiscal year ended December 31, 2013, with the exception of the following new or amended IFRS standards and interpretations listed below.

  • ->IFRS 10: Consolidated Financial Statements
  • ->IFRS 11: Joint Arrangements
  • -> IFRS 12: Disclosure of Interests in Other Entities
  • ->IAS 28: Investments in Associates and Joint Ventures
  • ->Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities
  • -> Amendments to IAS 36: Recoverable Amount Disclosures for Non-Financial Assets
  • ->Amendments to IAS 39: Novation of Derivatives and Continuation of Hedge Accounting ->IFRIC 21: Levies

First-time application of these standards or interpretations did not result in material effects on the Group's financial, profit and economic situation.

Adjustment of prior-year amounts

-> Clarification of accounting treatment of spare parts according to IAS 16 by Annual Improvements 2009-2011 Cycle

Pursuant to IAS 16.8, items such as spare parts are recognized according to the standard applicable to property, plant and equipment if those parts meet the definition of an item of property, plant and equipment. Otherwise such items are treated as inventory. Within the framework of the Annual Improvements 2009-2011 Cycle, the IASB provided a clarification to the effect that spare parts and servicing equipment must generally be capitalized as property, plant and equipment regardless of whether or not they can only be used in connection with an item of property, plant and equipment if only they meet the respective definition (see IAS 16.6). In previous years Elmos reported all spare parts as part of the inventory. In order to comply with the IASB's clarification and the amended IAS 16, spare parts have been reclassified to non-current assets. This reclassification was carried out effective December 31, 2013 for the first time. For the 9-month financial statements as of September 30, 2013, the clarification described above did not have to be implemented yet so that the prior-year amounts have been adjusted for this change in these 9-month financial statements.

The following effects resulted for the presentation of the consolidated statement of cash flows:

thousand Euro 7/1 –9/30/2013
before adjustments
Corrections
pursuant to IAS 8
7/1 – 9/30/2013
after adjustments
Consolidated statement of cash flows
Depreciation and amortization 4,530 1,045 5,575
Changes in inventories –1,758 –258 –2,016
Cash flow from operating activities 6,616 787 7,403
Capital expenditures for property, plant and equipment –3,091 –787 –3,878
Cash flow from investing activities –3,772 –787 –4,559
thousand Euro 1/1 –9/30/2013
before adjustments
Corrections
pursuant to IAS 8
1/1 – 9/30/2013
after adjustments
Consolidated statement of cash flows
Depreciation and amortization 13,839 3,135 16,974
Changes in inventories –3,561 –774 –4,335
Cash flow from operating activities 11,790 2,361 14,151
Capital expenditures for property, plant and equipment –9,377 –2,361 –11,738
Cash flow from investing activities –35,954 –2,361 –38,315

Estimates and assumptions

The Company recognizes provisions for pension and partial retirement obligations pursuant to IAS 19. For 2014 actuarial interest rates of 3.1% have been applied for pension obligations and of 1.41% for partial retirement obligations respectively, unchanged from December 31, 2013.

Exceptional business transactions

There were no exceptional business transactions in the first nine months of 2014.

Basis of consolidation

The Elmos Group's basis of consolidation was expanded by two companies in the first nine months of 2014.

A Japanese subsidiary for sales and application support was established in May 2014, included in the consolidated financial statements in the second quarter for the first time.

Furthermore, Elmos AG acquired 54.8% of the shares in DMOS Dresden MOS Design GmbH, Dresden ("DMOS GmbH") for a purchase price of 21 thousand Euro, which had been fixed in the past, with economic effect as of April 1, 2014 by exercising an option. Up to and including March 31, 2014, Elmos AG accounted for its 20% stake in DMOS GmbH at amortized cost in accordance with IAS 39. Upon the acquisition of the additional stake of 54,8%, Elmos AG is now in a position to exercise control over DMOS GmbH within the meaning of IFRS 3. Therefore DMOS GmbH has been included as a subsidiary in the consolidated financial statements of Elmos AG as of April 1, 2014. The company, established in 2002, operates in the semiconductor industry and primarily acts as supplier of development services in the field of analog and digital circuits as well as program developments for testing production circuits. The services and software solutions offered by the company find use especially in the realm of automotive applications.

The preliminary fair values of the identifiable assets and liabilities of DMOS GmbH at the time of obtaining control are as follows:

Fair value at the time of obtaining control
(in thousand Euro)
Assets
Intangible assets 148 (thereof 143 from the disclosure
of hidden reserves)
Property, plant and equipment 1,128
Cash and cash equivalents 567
Trade receivables 1
Receivables from affiliated companies 453
Tenant loans 772
Prepaid expenses and accrued income 617
Other assets 250
3,936
Liabilities
Provisions –744
Deferred tax liabilities –45
Trade payables –44
Liabilities to affiliated companies –898
Other equity and liabilities –291
–2,022
= total identifiable net assets at fair value 1,914
Non-controlling interests at fair value –540
Non-controlling interests as of the acquisition date –483
Overpayment of intangible assets –454
Badwill from business acquisition –416
= transferred consideration 21
Breakdown of cash inflow due to obtaining control:
Cash and cash equivalents obtained upon the transition from investment to subsidiary 567
Cash outflow –21
Actual cash inflow due to business acquisition 546

2

The fair value of trade receivables equals the gross amount of trade receivables and comes to 1 thousand Euro. These receivables were not impaired and the entire contractually determined amount is probably recoverable.

The business transaction resulted in badwill in the amount of 416 thousand Euro recognized in other operating income in the consolidated income statement. This income from an acquisition at a price below market value is accountable for by the fact that the purchase price for the most recently acquired 54.8% stake in DMOS GmbH was fixed at a much earlier point in time.

Transaction costs in the amount of 50 thousand Euro were recognized as expense and are reported in the consolidated income statement under administrative expenses.

The revaluation of the previously held 20% interest at fair value resulted in a positive contribution to earnings in the amount of 91 thousand Euro, reported in the consolidated income statement under other operating income.

The disclosure pursuant to IAS 34 16A (i) read in conjunction with IFRS 3 B64 q is passed on. DMOS GmbH almost exclusively performs group-internal services so that the effects of the entity's firsttime inclusion in the consolidated financial statements can be qualified as immaterial with regard to sales and earnings.

Altogether it can be declared that comparability with the prior-year consolidated financial statements with respect to financial, profit and economic situation has not been materially affected by the first-time inclusion of the two new subsidiaries.

Seasonal and economic impact on business operations

Some economic indicators have been reduced considerably in part over the past few weeks. In October 2014 the Federal Government has lowered its economic forecast for Germany significantly because of numerous international crises. The European Central Bank (ECB) sees difficult times for the euro area, too. On the global scale, the International Monetary Fund (IMF) cautions against the threat of a new global economic crisis. According to the IMF, a stagnation of the economic recovery in the euro area represents the single largest risk. The business of Elmos Semiconductor AG shows only minor seasonal fluctuations.

2 – Segment reporting

The business segments correspond to the Elmos Group's internal organizational and reporting structure. The definition of segments considers the different products and services supplied by the Group. The accounting principles of the individual segments correspond to those applied by the Group.

The Company divides its business activities into two segments. The semiconductor business is operated through the various national subsidiaries and branches in Germany, the Netherlands, South Africa, Asia, and the U.S.A. Sales in this segment are generated predominantly with electronics for the automotive industry. In addition to that, Elmos operates in the markets for industrial and consumer goods and provides semiconductors e.g. for applications in household appliances, photo cameras, installation and building technology, and machine control. Sales in the micromechanics segment are generated by the subsidiary SMI in the U.S.A. Its product portfolio includes micro-electro-mechanical systems (MEMS) which are primarily silicon-based highprecision pressure sensors. The following tables provide information on sales and earnings (for the period January 1 through September 30, 2014 and 2013, respectively) as well as on assets of the Group's business segments (as of September 30, 2014 and December 31, 2013).

9 months as of September 30, 2014 Semiconductor
thousand Euro
Micromechanics
thousand Euro
Consolidation
thousand Euro
Group
thousand Euro
Sales
Third-party sales 142,450 13,577 0 156,027
Inter-segment sales 393 1,183 –1,576 1 0
Total sales 142,843 14,760 –1,576 156,027
Earnings
Segment earnings 12,196 2,192 0 14,388
Finance income 1,745
Finance cost –1,337
Earnings before taxes 14,796
Taxes on income –2,419
Consolidated net income including non-controlling interests 12,377
Assets
Segment assets 238,163 17,814 34,623 2 290,600
Investments 20 0 0 20
Total assets 290,620
Other segment information
Additions of intangible assets and property,
plant and equipment
28,099 679 0 28,778
Depreciation and amortization 21,724 603 0 22,327
9 months as of September 30, 2013 Semiconductor
thousand Euro3
Micromechanics
thousand Euro
Consolidation
thousand Euro
Group
thousand Euro3
Sales
Third-party sales 124,902 11,486 0 136,388
Inter-segment sales 303 586 –889 1 0
Total sales 125,205 12,072 –889 136,388
Earnings
Segment earnings 4,705 837 0 5,542
Finance income 1,620
Finance cost –1,608
Earnings before taxes 5,554
Taxes on income –752
Consolidated net income including non-controlling interests 4,802
Assets (as of 12/31/2013)
Segment assets 223,533 16,166 30,681 2 270,380
Investments 470 0 0 470
Total assets 270,850
Other segment information
Additions of intangible assets and property,
plant and equipment
12,121 1,004 0 13,125
Depreciation and amortization 16,450 524 0 16,974

1 Sales from inter-segment transactions have been eliminated for consolidation purposes.

2 Non-attributable assets as of September 30, 2014 include cash and cash equivalents (31,576 thousand Euro), income tax assets (541 thousand Euro), and deferred tax (2,506 thousand Euro), as these assets are controlled at group level.

1 Sales from inter-segment transactions have been eliminated for consolidation purposes.

2 Non-attributable assets as of December 31, 2013 include cash and cash equivalents (27,949 thousand Euro), income tax assets (61 thousand Euro), and deferred tax (2,671 thousand Euro), as these assets are controlled at group level.

3 Adjustment of prior-year amounts; please also refer to note 1 in the condensed notes to consolidated financial statements

Geographical information

Third-party sales 9 months as of
9/30/2014
thousand Euro
9 months as of
9/30/2013
thousand Euro
Germany 53,374 47,960
Other EU countries 37,102 37,848
U.S.A. 15,729 10,177
Asia/Pacific 39,759 31,013
Other countries 10,063 9,390
Consolidated sales 156,027 136,388
Geographical distribution of non-current assets 9/30/2014
thousand Euro
12/31/2013
thousand Euro
Germany 142,192 139,613
Other EU countries 3,946 4,297
U.S.A. 4,939 4,511
Other countries 128 89
Non-current assets 151,205 148,510

3 – Notes on essential financial statement items

Selected non-current assets

Development of
selected non-current
assets January 1 through
September 30
Net book value
1/1/2014
thousand Euro
Reclassification
thousand Euro
Additions
thousand Euro
Disposals/Other
movements
thousand Euro
Depreciation
and
amortization
thousand Euro
Net book
value
9/30/2014
thousand Euro
Intangible assets 26,664 25 1,963 505 5,918 22,229
Property, plant and equipment 72,388 –25 26,815 688 16,409 82,081
Securities 48,987 0 5,350 7,463 0 46,874
Investments 470 0 0 450 0 20
Other financial assets 2,493 0 1,957 267 0 4,182
151,002 0 36,085 9,373 22,327 155,387

The item "Disposals/Other movements" includes negative currency adjustments in the amount of 399 thousand Euro.

Inventories

9/30/2014
thousand Euro
12/31/2013
thousand Euro
Raw materials 4,180 3,866
Work in process 36,644 28,731
Finished goods and merchandise 7,351 7,883
48,175 40,480

Equity

As of September 30, 2014, the share capital of Elmos Semiconductor AG consists of 19,828,883 shares. The Company currently holds 280,825 treasury shares.

As of September 30, 2014, altogether 814,619 options from stock option plans are outstanding. The options are attributable to the separate tranches as follows:

2009 2010 2011 2012 Total
2009 2010 2011 2012
3.68 7.49 8.027 7.42
3 4 4 4
3 3 3 3
140,910 235,128 243,510 394,693 1,014,241
96,770 77,728 0 0 174,498
1,650 5,915 8,980 8,579 25,124
42,490 151,485 234,530 386,114 814,619
42,490 151,485 0 0 193,975

Intangible assets/Research and development expenses

In a regular review of the intangible assets a reassessment of the purchased technology licenses with related know how has been undertaken. As a consequence, license costs capitalized in this context under intangible assets have been written down by 1,759 thousand Euro. This additional expense has been reported in the consolidated income statement under research and development expenses.

Taxes on income

The first nine months of 2014 include a one-off effect with respect to recognized deferred taxes, favoring the taxes on income reported in the consolidated financial statements in the amount of 1,847 thousand Euro. The corresponding recognized deferred tax assets have already been consumed almost entirely in fiscal year 2014.

4 – Information on financial instruments

The following table lists the book values and fair values of the Group's financial instruments. The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability between market participants in a regular business transaction as of the measurement date. In view of varying factors of influence, the presented fair values can only be regarded as indicators of the amounts actually recoverable in the market. Detailed information on the methods and assumptions underlying the determination of the value of financial instruments can be found under note 29 to the 2013 consolidated financial statements. Their relevance to these nine-month financial statements is undiminished.

Book values and fair values of financial instruments

9/30/2014 12/31/2013
thousand Euro Book value Fair value Book value Fair value
Financial assets
Investments 20 20 470 470
Long-term securities 46,874 46,874 48,987 48,987
Short-term securities 5,727 5,727 203 203
Trade receivables 36,040 36,040 38,450 38,450
Cash and cash equivalents 31,576 31,576 27,949 27,949
Other financial assets
Other receivables and assets 1,932 1,932 2,639 2,639
Other loans 3,857 3,857 2,711 2,711
Forward exchange contracts/foreign exchange options 1,654 1,654 0 0
Call option 48 48 48 48
Embedded derivatives 27 27 0 0
Earn-out 0 0 0 0
Financial liabilities
Trade payables 21,716 21,716 19,492 19,492
Liabilities to banks 37,844 39,081 37,795 38,811
Other financial liabilities
Miscellaneous financial liabilities 328 328 429 429
Put option 2,392 2,392 2,392 2,392
Hedged derivatives (short-term) 612 612 522 522
Hedged derivatives (long-term) 1,089 1,089 1,144 1,144

At the end of the reporting period a review is conducted to find out whether reclassifications between valuation hierarchies must be made. The following presentation shows which valuation hierarchy levels (according to IFRS 13) financial assets and liabilities measured at fair value are classified to.

Hierarchy of fair values

The Group applies the following hierarchy for the determination and reporting of the fair values of financial instruments according to the respective valuation methods:

Level 1: quoted (unadjusted) prices in active markets for similar assets or liabilities

Level 2: methods where all input parameters with material effect on the determined fair value are observable either directly or indirectly

Level 3: methods using input parameters that have material effect on the determined fair values and are not based on observable market data

As of September 30, 2014, the Group held the following financial instruments measured at fair value:

Securities Level 1
thousand Euro
Level 2
thousand Euro
Level 3
thousand Euro
January 1, 2014 42,691 0 0
Addition of securities (long-term) 5,350 0 0
Disposal of securities (long-term) –2,620 0 0
Market valuation of securities (long-term) 656 0 0
Addition of securities (short-term) 2,620 0 0
Market valuation of securities (short-term) –95 0 0
September 30, 2014 48,602 0 0
Investments
January 1, 2014 0 0 470
Disposal of investments 0 0 –450
September 30, 2014 0 0 20
Hedged derivatives
January 1, 2014 0 –1,665 0
Correction of valuation of hedged derivatives outside profit or loss
(short-term and long-term)
0 –36 0
September 30, 2014 0 –1,701 0
Call option
January 1, 2014 0 0 48
September 30, 2014 0 0 48
Put option
January 1, 2014 0 0 –2,392
September 30, 2014 0 0 –2,392
Forward exchange contracts/Foreign exchange options
January 1, 2014 0 0 0
Addition of forward exchange contracts/foreign exchange options 0 1,654 0
September 30, 2014 0 1,654 0
Embedded derivatives
January 1, 2014 0 0 0
Addition of embedded derivatives 0 27 0
September 30, 2014 0 27 0

The securities reported under hierarchy level 1 are bonds classified by Elmos as available for sale. Plausible alternative assumptions would not result in material changes of the reported fair value.

The hedged derivatives allocated to hierarchy level 2 comprise the Company's interest rate swaps. In addition to that, foreign currency transactions (USD) and credit linked notes (embedded derivatives) of various issuers are also reported under this hierarchy level.

The available-for-sale financial assets reported under hierarchy level 3 are investments in various companies, among other assets. With this respect, the book value essentially corresponds to the market value. The call and put options agreed on with a non-controlling shareholder are measured annually at fair value, most recently as of December 31, 2013, in application of the DCF method and in consideration of the terms and conditions of the contract. In the course of the measurement process, the required publicly available market data are collected and the input parameters that cannot be observed are reviewed on the basis of internally available current information and updated if necessary. Material changes of the input parameters and their respective effects on book values are subject to routine reporting to management.

5 – Related party disclosures

As reported in the consolidated financial statements for the fiscal year ended December 31, 2013, the Elmos Group maintains business relationships with related companies and individuals in the context of the ordinary course of business.

These supply and performance relationships continue to be transacted at market prices.

Directors' dealings according to Section 15a WpHG (Securities Trading Act)

The following reportable securities transactions (directors' dealings) were made in the reporting period January 1 through September 30, 2014:

Date
Place
Name Function Transaction Number Price/Basic
price (Euro)
Total volume
(Euro)
6/2/2014
off-market
Thomas Lehner Supervisory Board
member
Sale of Elmos shares from
exercise of stock options
2,500 15.63 39,081
6/11/2014
off-market
Dr. Peter Geiselhart Management Board
member
Purchase of
Elmos shares
654 15.27 9,989
6/11/2014
off-market
Reinhard Senf Management Board
member
Purchase of
Elmos shares
654 15.27 9,989
6/18/2014
off-market
Reinhard Senf Management Board
member
Sale of Elmos shares from
exercise of stock options
5,000 15.07 73,333
6/24/2014
off-market
ZOE-VVG GmbH Legal entity closely
related to the
chairman of the
Supervisory Board
Disposal 1 742,894 not
quantifiable
6/24/2014
off-market
Weyer Beteiligungs
gesellschaft mbH
Legal entity
closely related to a
Supervisory Board
member
Disposal 1 392,895 not
quantifiable
6/27/2014
off-market
Dr. Anton Mindl CEO Purchase of
Elmos shares
654 15.27 9,989
6/27/2014
off-market
Nicolaus
Graf von Luckner
Management Board
member
Purchase of
Elmos shares
654 15.27 9,989
9/19/2014
off-market
Reinhard Senf Management Board
member
Sale of Elmos shares from
exercise of stock options
5,000 15.27 76,364

1 The transfer of the shares took place without valuation for the settlement of the right to recover possession owned by previous partner BMW INTEC Beteiligungs GmbH resulting from the time of the IPO of Elmos Semiconductor AG (please also refer to the press release of Elmos Semiconductor AG of June 26, 2014).

6 – Significant events after the end of the first nine months of 2014

There have been no reportable significant events or transactions after the end of the first nine months of 2014.

Dortmund, November 5, 2014

Dr. Anton Mindl Dr. Arne Schneider Reinhard Senf Dr. Peter Geiselhart

Contact | Imprint

Janina Rosenbaum | Investor Relations Phone: + 49 (0) 231-75 49-287 Fax: + 49 (0) 231-75 49-548 [email protected]

Elmos Semiconductor AG

Heinrich-Hertz-Straße 1 44227 Dortmund | Germany Phone: + 49 (0) 231-75 49-0 Fax: + 49 (0) 231-75 49-149 [email protected] | www.elmos.com

Further information

This interim report was released on November 5, 2014 in English and German. Both versions are available for download on the Internet at www.elmos.com.

We are happy to send you additional informative material free of charge on your request.

This report contains statements directed to the future that are based on assumptions and estimates made by the management of Elmos. Even though we assume the underlying expectations of our statements to be realistic, we cannot guarantee these expectations will prove right. The assumptions may carry risks and uncertainties, and as a result actual events may differ materially from the current statements made with respect to the future. Among the factors that could cause such differences are changes in economic and business conditions, fluctuations of exchange rates and interest rates, the introduction of competing products, lack of acceptance of new products, and changes in business strategy. Elmos neither intends nor assumes any obligation to update its statements with respect to future events.

Financial calendar 2014/2015

9-month results Q3/20141 November 5, 2014
Equity Forum in Frankfurt/Main November 25-26, 2014
Preliminary results 20141, 2 February 18, 2015
Results 2014, annual press and analysts' conference March 18, 2015
3-month results Q1/20151, 2 May 5, 2015
Annual General Meeting in Dortmund May 8, 2015
6-month results Q2/20151, 2 August 5, 2015
9-month-results Q3/20151, 2 November 4, 2015
1 The German Securities Trading Act (Wertpapierhandelsgesetz) obliges issuers to announce immediately any information that may have a
substantial price impact, irrespective of the communicated schedules. Therefore we cannot exclude that we have to announce key figures
of quarterly and annual results ahead of the dates mentioned above. As we can never rule out changes of dates, we recommend checking
them on the Company's website (www.elmos.com).

2 Starting with the calendar year 2015 the results will usually be published before the markets open.

Elmos Semiconductor AG Heinrich-Hertz-Straße 1 44227 Dortmund | Germany Phone + 49 (0) 231 - 75 49 - 0 Fax + 49 (0) 231 - 75 49 - 149 [email protected] | www.elmos.com

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