Annual Report • Mar 20, 2014
Annual Report
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An industry leader in ultra-low power wireless solutions
Look around your home or office, and there's a good chance you'll find us. Since our founding we have sold over 1 billion wireless solutions, which are found in many of the products you are using every day.
We are the market leader in wireless solutions for PC mice and keyboards. We are the market leader in wireless solutions for sports, fitness and health monitoring. And we have a growing presence in wireless remote controls, gaming, toys, security, ticketing, home automation and mobile phone accessories.
How has a small company from Norway taken such a market position?
We have been a pioneer in the field of ultra-low power wireless – designing high performance wireless solutions which can operate for months or years on ordinary AA, AAA or coin cell batteries. Our solutions are best in class in power consumption and ease of product design.
As the leader in our market, we have excellent growth opportunities as a growing number of products are designed with the freedom and convenience of wireless communication. Our team of specialists is committed to developing innovative new wireless technology and helping our customers implement wireless solutions across their product lines.
Sound interesting? Learn more about us at www.nordicsemi.com
2013 was a landmark year in the history of Nordic Semiconductor. During the course of 2013, the company sold 200 million semiconductor units and sold its one billionth semiconductor chip in total – an accomplishment that puts Nordic Semiconductor among the world's largest semiconductor companies in terms of wireless units sold.
In addition to achieving high sales volumes, Nordic Semiconductor successfully expanded into new product categories during 2013, products which will drive the company's growth for years to come. During the first half of the year, the company's revenues fell based on slower market conditions in Nordic's traditional business segments of PC accessories and ASICs. By the second half of the year, sales to these categories stabilized, and the company's revenue took off based on accelerating demand for its wireless solutions within smartphone accessories. By the fourth quarter, the company sales increased at annual rate of 29%, driven by many new design wins.
This diversification into new high growth markets for smartphone accessories and sensor networks is the result of the company's successful execution of its business strategy during the last several years – which has been to become the market leader in the emerging area of Bluetooth Smart technology (aka Bluetooth low energy).
Bluetooth Smart is a new standard for ultra-low power wireless communication which can connect small, low cost battery devices (e.g., sensors, controls, accessories) with traditional Bluetooth devices (mobile phones / PC's / home media centers). The Bluetooth Smart standard started as a research collaboration with Nokia, focused on for connecting mobile phones with a broad range of new battery powered electronics. Nordic was the first company to partner with Nokia on this initiative starting in 2005, and contributed core technology and expertise to the wireless standard.
The Nokia initiative was absorbed within the Bluetooth SIG in 2007, where it was rebranded Bluetooth Smart and formally released with Bluetooth 4.0 in 2010. Apple began supporting the new Bluetooth Smart standard in 2011, enabling its iPhones, iPads and Macs to communicate with Bluetooth Smart wireless accessories. Microsoft followed in 2012, providing native support for Bluetooth Smart accessories within its Windows 8 operating system. Finally, Google began supporting Bluetooth Smart accessories with an update to its Android operating system in 2013. Today, all major operating systems contain Bluetooth Smart support, and nearly all new smartphone and tablet product releases are expected to support the Bluetooth Smart standard.
Based on Nordic's contribution to the Bluetooth Smart standard, the company was appointed to the Board of the Bluetooth SIG in 2011, where it now participates with Apple, Intel, Motorola, Lenovo, Nokia, Microsoft, Ericsson AB, Toshiba, LG and CSR on the Board of Directors. In December 2012, Nordic's Chief Technology Officer Svein-Egil Nielsen was elected Chairman of the Bluetooth SIG Board.
Svenn-Tore Larsen Chief Executive Officer
As support for Bluetooth Smart expands across a base of billions of Bluetooth phones, tablets, PC's, media centers and other devices, the market for Bluetooth Smart accessories to connect with this ecosystem has exploded. In particular, we are seeing demand for Bluetooth Smart technology emerge within markets as diverse as wireless sports monitors, fitness trackers, medical devices, tablet accessories, RFID tags, remote controls, toys and gaming devices, home appliances, building sensors, and automotive applications. We have also seen new technologies implement the Bluetooth Smart standard as part of a complete solution, such as within new generations of wireless chargers ("Rezence" technology) and within retail and indoor location services ("iBeacon" technology).
Nordic has benefited greatly from the growth in demand for Bluetooth Smart accessories during 2013. During the past year, the company's sales of Bluetooth Smart solutions grew from MUSD 0.6 in the fourth quarter of 2012 to MUSD 9.8, or nearly 28% of revenue, in the fourth quarter of 2013. The company expects that sales of Bluetooth Smart solutions will continue to accelerate in 2014 and beyond.
Nordic Semiconductor has a leading market share in Bluetooth Smart technology today. This market share has been attained by the strength of Nordic's product portfolio and by its experience in Bluetooth Smart and ultra-low power wireless technology. Nordic's nRF51 wireless system-on-chip provides an ideal solution for Bluetooth Smart product developers -- featuring ultra-low power consumption, a strong integrated microcontroller featuring ARM Cortex technology, and a software design optimized for ease of Bluetooth Smart product development and upgrade.
Nordic believes that the market for ultra-low power wireless solutions is just at the beginning of a long-term growth trend which will transform way we use electronics. In the coming years, we will see wireless connectivity become a standard feature in a growing range of electronic devices, including many new types of sensors, controls and accessories. Collectively, this growth in connected devices is known as the "Internet of Things" and is widely recognized as one of the most important new trends in technology today.
The Internet of Things can be defined as "the collection of smart, sensor-enabled physical objects, and the networks, sensors and services that interact with them" (source: ARM). Growth in the Internet of Things is being driven by several major technology trends, including: (a) the falling cost of sensors, MEMS, and microcontrollers to build intelligence into everyday objects ("nodes"), (b) the growing installed base of mobile computers such as smartphones ("hubs") for these devices to communicate with, (c) ultra-low power wireless technologies such as Bluetooth Smart for connecting the nodes and hubs, and (d) the availability of cloud computing and app software to process data and create experiences for end users.
The Internet of Things can add significant value to objects we use (or will use) every day. Among other things, this technology enables people to control objects remotely, monitor information from sensors attached to objects such as people, animals, goods and environments, identify and secure objects and areas, receive information targeted to their location, simplify transactions and other activities, and experience new forms of interactive entertainment. By enabling value-added interaction between users and an almost infinite number of objects, the Internet of Things creates a long-term market opportunity for embedded, ultra-low power wireless solutions which is practically without limit.
In the near term, the market opportunity will be driven by con-
necting electronic devices with the user's smartphone. The smartphone is an ideal product for connecting to wireless sensors and accessories, due to its massive installed base, its portability and processing power, its touch screen interface for interacting with wireless devices, its software support for developing and downloading new applications, and its connection to the web. We expect to see a tremendous growth in new wireless smartphone accessories (which we call "appcessories") in the coming years, a trend similar to the growth of smartphone applications (or "apps") during the last six years.
The company believes that Bluetooth Smart will be a core technology for connecting smartphones and other devices with the Internet of Things. Bluetooth Smart wireless solutions enable sensors and accessories to connect with billions of smartphones and other devices, at very low cost and with minimal power consumption.
In sum, Nordic Semiconductor expects the market for its ultralow power wireless solutions to grow dramatically in 2014 and beyond, as wireless connectivity become a standard feature in a growing range of electronic devices. Nordic is well positioned for the vast market opportunity within the Internet of Things based on its leadership in ultra-low power wireless technology, including Bluetooth Smart. Today, we are accelerating our efforts in developing breakthrough new technologies and complete solutions for our customers to implement wireless connectivity across a broad range of new products.
We at Nordic Semiconductor are proud of our market leadership within Bluetooth Smart and ultra-low power wireless technology, and of the over 1 billion units we have sold to date. Our team has demonstrated the vision and competence to design solutions on the leading edge of our industry. With the talent and drive of our organization supporting us and the market opportunity ahead, I am confident that our one billionth unit sold is just the beginning of our journey.
Nordic Semiconductor's business accelerated and diversified into new markets during the course of 2013. During the first half of the year, slower market conditions in the company's traditional PC accessories and ASIC business segments led to a decline in total revenue. During the second half of the year, sales to the PC accessories and ASIC segments stabilized, and the company had strong growth in emerging product categories, driven by accelerating demand for its new Bluetooth Smart wireless products. The company finished the year at a rapid growth rate.
Nordic Semiconductor is a fabless semiconductor company which designs, sells and delivers integrated circuits and related intellectual property for use in short-range wireless applications. The company specializes in ultra-low power wireless solutions, based on its proprietary 2.4 GHz RF and Bluetooth Smart technology. Nordic Semiconductor is a pioneer and market leader in ultra-low power wireless technology, with 200 million units sold last year.
Nordic Semiconductor's components are manufactured by world-class subcontractors and sold through electronics distributors to manufacturers of branded electronics across a wide range of product categories. These categories include PC and tablet accessories, Sports/Health monitors, Mobile phone accessories, Media remote controls, Gaming controllers, Toys, RFID solutions, Home and industrial automation, and other applications.
The company is headquartered in Trondheim and Oslo, Norway, and has offices in the US, China, Korea, Japan, Taiwan, Poland and the Philippines.
Nordic Semiconductor's total revenue in 2013 fell by 6% to MUSD 124.4 (MUSD 131.8). Revenue declined during the first half of the year, based on slower market conditions within the company's traditional PC accessories and ASIC business segments.
During the second half of the year, sales to these segments stabilized, and the remainder of the company's business segments grew rapidly, based on accelerating demand for the company's Bluetooth Smart wireless components within smartphone accessories. By the fourth quarter of 2013, the company's revenue grew by 29% from the prior year, and sales of Bluetooth Smart solutions represented 27.5% of revenue (compared with 2.3% in the fourth quarter of 2012).
Gross margins in 2013 fell to 49.5% (50.5%). Gross margins were weakest in the first half of the year, but improved throughout the year as the Group's revenue mix shifted from its highest-volume PC accessory customers toward smaller customers in other business segments. By the fourth quarter of 2013, the company had a gross margin of over 53%.
Operating expenses including depreciation increased by 13% to MUSD 47.9 (MUSD 42.4), or 38.5% (32.2%) of revenue. During 2013, the company invested heavily in developing and releasing new wireless product platforms to enhance its competitive position within Bluetooth Smart technology. In particular, the company added 15 new employees within R&D, and increased its spending on product development and marketing-related activities.
Development of new wireless components is essential to the company's continued competitiveness in a rapidly evolving market. At the end of 2012, R&D personnel represented 69% of the Group's employees.
During 2013, R&D activities were focused on developing enhancements to the company's existing product platforms, as well as on conducting research and early stage development on its future product platforms. At the start of the year, the company's R&D activities were more heavily focused on existing product lines, but shifted to research on future product platforms during the course of the year. In accordance with IAS 38 criteria, this resulted in capitalized R&D costs of MUSD 5.4 (MUSD 3.6), which fell sequentially during the course of the year as resources shifted from development to research activities.
As a result of weaker financial performance in the first half of the year, Nordic Semiconductor's operating profit in 2013 fell by 44% to MUSD 13.6 (MUSD 24.2). By the fourth quarter, Nordic Semiconductor had returned to a strong growth in operating profit, based on increasing sales of its Bluetooth Smart wireless solutions.
Net financial items in 2013 were a gain of MUSD 0.6 (MUSD -0.2). This gain was primarily the result of exchange rate changes on foreign currency balance sheet items.
Profit before tax in 2013 was MUSD 14.2 (MUSD 24.0). Net profit after tax was MUSD 9.6 (MUSD 17.7), generating a basic earnings per share of USD 0.059 (USD 0.109).
Cash inflow from operations totaled MUSD 3.6 (MUSD 30.6). The reduction in operating cash flow was caused by lower operating profits, as well as by an increase in inventory balances as the company prepared for stronger sales in 2014. Cash outflow for investments were MUSD 13.9 (MUSD 5.6), driven by large investments in new test capacity and software licenses, as well as by higher capitalized R&D expenses. Cash outflows for financing activities were MUSD 4.0 (MUSD 8.5), as the company repurchased 1,411,000 of its own shares.
In total, Nordic Semiconductor's cash balance fell by MUSD 14.3 during 2013. The Group had a cash balance of MUSD 26.1 and no interest bearing debt at the end of the year. The remainder of the Group's balance sheet primarily consists of non-current assets (such as equipment, software and capitalized R&D) and net working capital items, which grew as the company prepared for stronger sales in 2014 and beyond.
The financial statements for 2013 have been prepared and presented in accordance with International Financial Reporting Standards and the Norwegian Accounting Act. A summary of internal controls related to the accounting process can be found in the Corporate Governance section of this annual report.
Demand for Nordic Semiconductor's short-range wireless solutions is tied to the greater semiconductor and electronics markets and is sensitive to fluctuations in economic conditions. Overall, the market is expected to grow rapidly as wireless solutions are embedded into a growing range of new products. As demand increases, new competitors are expected to enter the market.
Nordic Semiconductor's success depends on its ability to anticipate customer needs and address these with competitive technical solutions and outstanding customer support. Furthermore, the company's outsourcing of manufacturing and direct distribution highlights its reliance on a close collaboration with third-party subcontractors and distributors.
Nordic Semiconductor's liquidity risk is very limited. The company maintained a cash balance of MUSD 26.1 and had no interest bearing debt at the end of 2012. The company has an open line of credit agreement of MUSD 20 available for short-term borrowing needs. As the company holds no interest-bearing debt, the company's exposure to risk associated with interest rate fluctuations is very limited.
The company is exposed to foreign exchange risk in its ordinary business activities, which can impact profit margins. The company's operating expenses are primarily in Norwegian krone and its sales and direct production costs are nearly entirely in US dollars. The company does not use financial instruments to hedge this risk.
Finally, the company is exposed to credit risk, although this has historically not resulted in significant losses. The company sells its components to leading international distributors of electronics components, primarily based in Asia. The company's receivables are not credit insured, but credit monitoring routines are in place for setting up credit lines, providing security (payment guarantees) and demanding advance payments when required. The company's losses on accounts receivables were less than 1% during the last year.
At the end of 2013, Nordic Semiconductor had 211 (194) employees of whom 37 (36) were employed outside of Norway. Cooperation between management and the employee representatives functions well and makes a valuable contribution to addressing the challenges faced by the company.
There were 31 (26) female employees at the end of 2013, corresponding to 15% (13%) of total employees. There were 174 full-time employees in Norway, including 23 women, and 37 in Hong Kong, South Korea, Japan, the Philippines, Taiwan and the USA, including 8 women. The average salary for women was 66% of the average salary for men. Gender differences in employee salary are driven by both the location and function of the employees, with a larger proportion of women in administration functions and based in the Philippines. Gender equality is a fundamental principle of the company, and efforts are being made to ensure that there is no gender imbalance when recruiting for positions within the company.
Absence due to illness was 1.4% in 2013, compared with 1.9% in 2012. No occupational illnesses or injuries were reported in 2013.
The Board of Directors would like to thank all of the Group's employees for their contribution to the business during the year.
Nordic Semiconductor does not own or operate manufacturing facilities. Manufacturing is done through third parties that comply with the ISO 14001 environmental standard, among others. Consequently, there is little pollution associated with the company's operations. Nordic Semiconductor seeks to limit resource consumption, prevent unnecessary environmental pollution and manage waste in an environment-friendly and resource-efficient manner, and has established routines to monitor these conditions under its ISO9001:2008 sertified quality system.
Nordic Semiconductor complies with all current laws and regulations, and all of our products comply fully with the REACH and RoHS hazardous substance directives. This enables the company to market itself as a "green" supplier, which also gives it an advantage with major customers who have their own stringent environmental standards.
Nordic Semiconductor has established standards for Corporate Social Responsibility (CSR), including policies for supporting human rights, the rights of workers, the environment and anticorruption practices in its business strategy and daily operations. A description of the company's CSR policies, results and execution plans is published on the company's website, in accordance with the Norwegian Accounting Act §3-3.
The company has recently donated to a relief organization aiding the victims of Typhoon Haiyan, which devastated regions of the Philippines in November 2013.
Nordic Semiconductor's guidelines for Corporate Governance are in accordance with the Norwegian Code of Practice for Corporate Governance, dated 23 October 2012, as required for all listed companies on the Oslo Stock Exchange. Furthermore, the guidelines meet the disclosure requirements of the Norwegian Accounting Act and Securities Trading Act.
The guidelines are included separately in this annual report.
In accordance with Norwegian accounting regulations, the Board confirms that the prerequisites of a going concern have been met in the presentation of the annual financial statements.
Nordic Semiconductor ASA, the parent company of the Group, reported a net profit for the year of MUSD 9.5 during 2013. The net profit has been transferred in its entirety to other equity.
The Board and Management believe that the company is very well-positioned for future growth opportunities, as wireless connectivity becomes a standard feature in a growing range of electronic products. In order to pursue its long-term growth strategy in a highly cyclical business environment, the company's financial management policy is to preserve a high proportion of equity and liquidity on its balance sheet.
The company aims to provide an annual dividend, assuming that the requirements of its growth strategy are addressed. Based on the current cash balance and interest in preserving cash to pursue its growth strategy in the coming years, the Board has determined not to propose a dividend payment at its Annual General Meeting in April.
Nordic Semiconductor is by far the market leader within ultra-low power wireless technology, with 200 million wireless components sold last year. Based on market trends and current design activity with customers, the company expects strong growth in demand for its ultra-low power wireless solutions during the coming years.
The company believes that wireless connectivity will soon become a standard feature in a growing range of electronic devices, including many new types of sensors and controls. Collectively, this growth in connected devices is known as the "internet of things" and is widely recognized as one of the most important new trends in consumer electronics.
The company believes that Bluetooth Smart (aka Bluetooth low energy) will be a core technology for connecting the "internet of things". Bluetooth Smart enables small, batterypowered sensors and accessories to communicate with traditional Bluetooth devices (e.g., mobile phones / PC's / home media centers labeled Bluetooth Smart Ready), while minimizing power consumption
Bluetooth Smart Ready was first released in smartphones in late-2011, and has since been sold in nearly one billion PC's, handsets and tablets. By 2015, nearly two billion mobile phones, PC's, and home media centers are expected to be sold each year with Bluetooth Smart Ready solutions (source: ABI research). As the ecosystem of these Bluetooth Smart Ready mobile phones, PC's and home media centers expands, this creates a major market opportunity for new wireless accessories to connect with these devices using Nordic's Bluetooth Smart technology.
Nordic Semiconductor has been actively involved in the development of the Bluetooth Smart wireless standard since its origin as a Nokia initiative in 2006. In June 2011, Nordic's contribution to the Bluetooth organization was recognized with an appointment to its Board, where it now participates with Apple, Intel, Motorola, Lenovo, Nokia, Microsoft, Ericsson AB, Toshiba, LG and CSR on the Board of Directors. In December 2012, Nordic's Chief Technology Officer Svein-Egil Nielsen was elected Chairman of the Bluetooth SIG Board.
In 2012, Nordic released the latest generation of its ultralow power wireless solutions, called the nRF51 series, with a focus on Bluetooth Smart applications. The nRF51 series features best-in-class processing power and energy consumption among Bluetooth Smart solutions, and offers a very easy-to-use platform for designing new wireless applications, with a software architecture that cleanly separates the application and protocol stacks.
Based on its market leadership in ultra-low power wireless solutions, its best-in-class product line including the new nRF51 platform, and its highly experienced team of engineers and sales professionals, Nordic Semiconductor is very well-positioned for growth as the wireless market expands into many new product categories.
Chairman Vice Chairman Board member
Karsten Rönner Arnhild Schia Markus Bakka Hjertø
Thomas Ulleberg Svenn-Tore Larsen Oslo, 19 March 2014 Board member Chief Executive Officer
Board member Board member Board member
Tore Engebretsen Terje Rogne Anne-Cecilie Fagerlie
for the year ended 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* |
|---|---|---|---|
| Total Revenue | 3 | 124 390 | 131 819 |
| Cost of materials | 4 | -61 840 | -64 891 |
| Direct project costs | -1 006 | -331 | |
| Gross profit | 61 543 | 66 597 | |
| Payroll expenses | 9/10/12/16 | -28 741 | -26 410 |
| Other operating expenses | 5/12/19 | -14 393 | -13 188 |
| Depreciation | 11/12 | -4 802 | -2 839 |
| Operating profit | 13 607 | 24 161 | |
| Financial income | 6/20 | 334 | 433 |
| Financial expenses | 6/20 | -4 | -42 |
| Net foreign exchange gains (losses) | 6/20 | 231 | -562 |
| Profit before tax | 14 168 | 23 989 | |
| Income tax expense | 7 | -4 590 | -6 240 |
| Net profit after tax | 9 577 | 17 749 | |
| Attributable to | |||
| Equity holders of the parent | 9 577 | 17 749 | |
| Earnings per share | |||
| Ordinary earnings per share (USD) | 8 | 0,06 | 0,11 |
| Fully diluted earnings per share (USD) | 8 | 0,06 | 0,11 |
| Comprehensive Income | 2013 | 2012* | |
| Net profit after tax | 9 577 | 17 749 | |
| Other comprehensive income not to be reclassified to profit or loss in subsequent periods: | |||
| Actuarial gains (losses) on defined benefit plans (before tax) | -1 292 | 4 967 | |
| Income tax effect | 349 | -1 391 | |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
Total Comprehensive Income 8 634 21 324
as of 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* | 01.01.2012* |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Capitalized development expenses | 12 | 7 498 | 3 471 | 305 |
| Software and other intangible assets | 12 | 3 451 | 1 846 | 2 117 |
| Deferred tax assets | 7 | 3 077 | 2 510 | 3 323 |
| Property assets | 11 | 583 | 405 | 373 |
| Equipment | 11/20 | 7 464 | 4 211 | 4 350 |
| Other long term assets | 10 | 759 | 1 133 | 1 208 |
| Total non-current assets | 22 832 | 13 576 | 11 675 | |
| Current assets | ||||
| Inventory | 4/20 | 22 167 | 11 748 | 24 583 |
| Accounts receivable | 13/20 | 30 047 | 26 069 | 22 450 |
| Other short-term receivables | 2 703 | 2 268 | 2 166 | |
| Cash and cash equivalents | 14/20 | 26 082 | 40 350 | 23 808 |
| Total current assets | 81 000 | 80 435 | 73 006 | |
| TOTAL ASSETS | 103 832 | 94 011 | 84 681 | |
| EQUITY | ||||
| Share capital | 15 | 283 | 283 | 283 |
| Treasury shares | 15 | -4 | -2 | -9 |
| Share Premium | 15 | 14 253 | 14 253 | 14 253 |
| Other paid in capital Retained earnings |
1 757 55 954 |
51 292 | 32 441 | |
| TOTAL EQUITY | 72 244 | 65 826 | 46 977 | |
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Pension liability | 16 | 10 090 | 9 146 | 12 978 |
| Total non-current liabilities | 10 090 | 9 146 | 12 978 | |
| Current liabilities Short-term loan facility |
20 | 0 | 0 | 6 000 |
| Accounts payable | 18/20 | 6 261 | 2 481 | 3 266 |
| Income taxes payable | 7 | 4 822 | 7 105 | 7 363 |
| Public duties | 18 | 2 405 | 1 374 | 1 083 |
| Other short-term debt | 18 | 8 011 | 8 080 | 7 013 |
| Total current liabilities | 21 498 | 19 039 | 24 726 | |
| TOTAL LIABILITES | 31 588 | 28 185 | 37 704 | |
| TOTAL EQUITY AND LIABILITIES | 103 832 | 94 011 | 84 681 | |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
Karsten Rönner Arnhild Schia Markus Bakka Hjertø
Chairman Vice Chairman Board member
Board member Board member Board member
Board member Chief Executive Officer
Tore Engebretsen Terje Rogne Anne-Cecilie Fagerlie
Thomas Ulleberg Svenn-Tore Larsen Oslo, 19 March 2014
for the year ended 31 December 2013
| Amount in USD 1000 | Share capital |
Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|
| Equity as of 01.01.2012 | 292 | (9) | 14 253 | 39 039 | 53 575 | |
| Changes in accounting policies | (6 598) | (6 598) | ||||
| Equity as of 01.01.2012 (restated)* | 292 | (9) | 14 253 | 32 441 | 46 977 | |
| Net profit for the period | 17 749 | 17 749 | ||||
| Actuarial gain/loss recognised in equity | 3 576 | 3 576 | ||||
| Purchase of treasury shares | (2) | (2 473) | (2 475) | |||
| Cancellation of treasury shares | (9) | 9 | - | - | ||
| Equity as of 31.12.2012 | 283 | (2) | 14 253 | 51 292 | 65 826 | |
| Net profit for the period | 9 577 | 9 577 | ||||
| Share based compensation | 1 757 | 1 757 | ||||
| Actuarial gain/loss recognised in equity | (943) | (943) | ||||
| Purchase of treasury shares | (2) | (3 975) | (3 977) | |||
| Equity as of 31.12.2013 | 283 | (4) | 14 253 | 1 757 | 55 954 | 72 244 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
for the year ended 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before tax | 14 168 | 23 989 | |
| Taxes paid for the period | 7 | -7 041 | -7 649 |
| Depreciation | 11/12 | 4 802 | 2 839 |
| Change in inventories, trade receivables and payables | 4/13/18/20 | -10 617 | 8 430 |
| Share-based compensation | 2 690 | ||
| Movement in pensions | -566 | -257 | |
| Other operations related adjustments | 137 | 3 291 | |
| Net cash flows from operating activities | 3 573 | 30 644 | |
| Cash flows from investing activities | |||
| Capital expenditures (including software) | 11/12 | -8 456 | -1 983 |
| Capitalized development expenses | 12 | -5 410 | -3 644 |
| Net cash flows from investing activities | -13 866 | -5 627 | |
| Cash flows from financing activities | |||
| Purchase of treasury stock | 15 | -3 975 | -2 475 |
| Repayment short-term loan | 20 | -6 000 | |
| Net cash flows from financing activities | -3 975 | -8 475 | |
| Net change in cash and cash equivalents | -14 268 | 16 543 | |
| Cash and cash equivalents as of 1.1. | 40 350 | 23 808 | |
| Cash and cash equivalents as of 31.12. | 14/20 | 26 082 | 40 350 |
| Cash and cash equivalents as of 31.12. which is restricted cash | 869 | 887 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
Nordic Semiconductor is a public limited company whose shares are listed on the Oslo Stock Exchange. The Group's head office is located at Otto Nielsens vei 12, 7052 Trondheim, Norway. The Group includes the parent company Nordic Semiconductor ASA and two wholly-owned subsidiarys, Nordic Semiconductor Inc. and Nordic Semiconductor Poland Sp. z o.o. Nordic Semiconductor ASA develops and sells integrated circuits and related solutions for shortrange wireless communication. The company specializes in ultra-low power (ULP) components, based on its proprietary 2.4 GHz and Bluetooth Smart technology.
The financial accounts were approved for publication by the Board of Directors on March 19, 2014, and will be presented for approval at the Annual General Meeting on April 10, 2014.
The financial accounts for Nordic Semiconductor ASA ("the Parent Company") and its wholly-owned and controlled subsidiary, together called "the Group", are prepared in accordance with International Financial Reporting Standards (IFRS) as established by the EU.
The financial accounts are presented in USD, rounded off to the nearest thousand, if nothing else is noted. As a result of rounding off differences, it is possible that amounts and percent does not add up to the total.
The financial accounts are based on the principles of historic cost accounting, with the exception of the following asset: Financial instruments (money market fund) are measured at fair value, with changes in value recognized on the income statement.
A subsidiary is a company in which the Group has control over financial and operating activity. Control is normally achieved when the Group owns - directly or indirectly - more than 50% of the shares in the company. Such companies are included in the Group financial statements from the date at which the Group obtains control over the company and until the date that such control ceases.
All intra-group balances, income and expenses, and unrealized gains and losses are eliminated in full. The financial statements in the subsidiaries are prepared using consistent accounting policies as the parent company, for the same reporting period.
The preparation of financial accounts in accordance with IFRS
requires that management use assessments, estimates and assumptions that influence the amount reported in the financial statements and notes. Management bases its estimates and assessments on previous experience and on various other factors deemed to be reasonable and sensible given the specific circumstances. These assessments form the basis for evaluating the accounting value of assets and obligations which would not be possible based on other available sources. The actual earnings may differ from these estimates. The main areas of uncertainty for assessments and estimates on the balance sheet date, which represent a risk for creating significant changes to the value of assets and liabilities recorded in the accounts for the following financial year, are discussed below.
The costs of the defined benefit pension plan are determined upon actuarial calculations. Actuarial calculations are based on expectations regarding the discount rate, expected return on pension funds, future increases in wages/salaries, annual adjustment in the national insurance base rate, annual adjustment of pensions, average turnover and death rates. Based on the natural long-term nature of these obligations, such estimates entail a large degree of uncertainty. Previously the return on the plan assets was calculated by using a long-term expected return on the plan assets. As a result of applying IAS 19R, the net interest cost for the period is now calculated by using the discount rate for the liability at the beginning of the period. As such the net interest cost consists of interest on the liability and the return on the plan assets, whereas both have been calculated by using the discount rate. Changes in net pension liabilities as a result of payments of premiums and pension payments have been taken into consideration. The difference between the actual return and the calculated return is recognised continuously through other comprehensive income.
Further details are provided in note 16. The book value of pension obligations as of December 31, 2013 and 2012 was USD 10,090,000 and USD 9,146,000 respectively.
Nordic Semiconductor implemented a stock option program for employees on February 18, 2013. For several years prior to 2013, Nordic Semiconductor ASA provided all employees with performance-based compensation through an annual cash bonus tied to the achievement of targets for group revenue and operating profits for the year. The Board implemented a change to this program in 2013, which enabled performancebased compensation to be awarded through a stock option grant as an alternative to the existing cash bonus program.
The group measures the cost of share based payments at the date which they are granted. The fair value of options granted in 2013 was USD 0.5 (NOK 3.00) per option, according to the Black & Scholes option-pricing model. The Black & Scholes valuation of the option program was conducted by an independent advisory company.
Development costs are capitalized in accordance with the principles in Note 2.9. In order to determine the amount to be capitalized, it is necessary for management to make assumptions regarding expected future cash flow, discount rates and the expected period of benefits. Capitalized development costs are subject to amortization on a straight-line basis over the period of expected future benefit, normally 3-5 years. Uncertainty exists with respect to the estimated period of expected future benefit, as this depends on the future technological development in the market. The carrying amount of capitalized development costs as of December 31, 2013 and 2012 was USD 7,498,000 and USD 3,471,000 respectively.
Management has made an estimate of future credits to be given to distributors based on components sold in 2012 and 2013, if the following scenarios are met:
If a distributor sells components to specified customer accounts, the distributor will receive an additional discount after the sale is made, Ship and Debit. An estimate for this discount is provided in the accounts, reducing the revenue and increasing current liabilities. See note 2.12 for futher details.
Estimates are continually reassessed based on changes in the underlying premises. Changes in accounting estimates are recognized in the period in which such changes occur. If such changes also apply to future periods, the effect is distributed between current and future periods.
In 2013 the group implemented the latest amendments to IFRS 13 Fair value measurements and IAS 19 Employee Benefits in its financial reporting. The accounts were not affected by the changes to IFRS 13.
The accounts were affected by the changes to IAS 19 which regulate defined benefit pension accounting. Due to the changes, the comparative financial amount for 2012 has been restated in accordance with the new regulation. The transition from calculating gross liabilities to net liabilities has caused the net pension liability to increase by MUSD 9 as of January 1, 2012.
The reason for the change is that the value of the pension assets is now calculated based on an expected return equal to the discount rate used to calculate the liability. The increase is caused by the fact that we in prior periods have calculated the expected return on the pension assets which has been higher than the discount rate on the liabilities. We expect that actual return will be higher than the one used in the calculation of the liabilities. The effect of the difference between actual return on the pension assets and the discount rate will be recognised in other comprehensive income in the statement of comprehensive income in accordance with the new regulation in IAS 19.
Accrued actuarial gains and losses which were not recognised as of January 1, 2012 have been recognised in equity. In total this has resulted in a decrease of the equity balance of MUSD 6.6 as of January 1, 2012. In addition the pension cost changed due to actuarial gains and losses of MUSD -4.2 which were recognised in 2012 in other comprehensive income. The total effect on the pension cost in 2012 is MUSD 0.25 and the total effect on the equity was MUSD 3.6.
The Group presents its financial statements in USD which also is the the functional currency of the parent company. Transactions in currency other than USD, are converted at the exchange rate at the date of the transaction. Any exchange gains or losses arising as a result of changes in the exchange rate between the time of the transaction and the time of payment are recognized in the income statement.
Cash includes cash balances and bank deposits. Cash equivalents are short-term liquid investments which do not involve significant risk factors and are convertible into a known amount of cash within three months.
Accounts receivable are valued at amortized cost, less impairment. Losses arising from impairment are recognized in the income statement.
Hedge accounting is not employed. Efforts are made to reduce foreign currency risk by matching revenues and costs in the various currencies. Financial derivatives that are not designated as hedging instruments are recognized at fair value through profit or loss.
Inventory, components and components under production are valued at the lower of cost and net realizable value after deduction for obsolescence. Net realizable value is estimated as the selling price less cost of completion and the cost necessary to make the sale. Costs are determined using the FIFO method. Work in progress includes variable cost and non-variable cost which can be allocated to items based on normal capacity. Non-current inventory is written down completely.
Non-current assets are stated at the lowest of cost net of accumulated depreciation and net realizable value. When an asset is sold or discontinued, the cost and accumulated depreciation are reversed and gain or loss from the transaction are recognized in the income statement.
The company's building is an apartment stated at cost. No depreciation is made since the residual value of the apartment exceeds the cost.
Cost of non-current assets includes fees/taxes and direct costs associated with commissioning the non-current asset for use. Repair and maintenance costs are expensed when incurred. If repair and maintenance increase the value of the non-current asset, the value will be added to the asset on the balance sheet.
Depreciation is calculated on a straight-line basis over the following periods of time:
| Office and lab equipment | 3-5 years |
|---|---|
| Computer equipment | 3-4 years |
| Installations in buildings | 5 years |
The assets' residual value, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if necessary.
The Group does not have any significant financial leases.
Leases where the most significant risk rests with the lessor are classified as operational leases. Lease payments are classified as operating costs and are expensed over the contract period.
Research costs are expensed as incurred. Costs associated with development are capitalized if the following criteria are met in full:
Costs which were expensed in prior accounting periods will not be capitalized.
Capitalized development costs are subject to amortization on a straight-line basis over the expected period of benefits, normally 3-5 years. Depreciation begins when the product is transferred from development to production. Uncertainty exists with respect to the expected period of benefits, as this depends on the future technological development in the market.
The fair value of capitalized development costs will be estimated when there is an indication of a decline in value or that the need for impairment charged in prior periods no longer exists.
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are reviewed each balance sheet date and the level reflects the best estimate of the obligation. When the time value is insignificant, the amount of the provision will be equal to the expenditure required to settle the obligation. When the time effect is significant, the amount of the provision will be equal to the present value of future expenditures to settle the obligation. Changes in the net present value of provisions resulting from discounting are recognized as finance costs.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from sales of components is recognized at the time of delivery to distributor or end customer. The time of delivery is usually the time when the goods are transferred to the transport carrier. Certain provisions have been made for credits to distributors based on the estimates described in Note 2.2.
Revenue from services is recognized as the services are rendered/delivered. The service consists of working hours, and invoicing of other costs, such as work done by subcontractors. Interest earned is recognized as it is generated.
If the distributor's pricing to specific end customer accounts changes according to a previous agreement with Nordic Semiconductor, the distributor will receive a price protection credit based on the difference between the old and new price.
In certain cases, distributors have the right to exchange inventory with Nordic Semiconductor. Stock rotation provisions are made for this if necessary.
The Group offers a defined benefit pension plan to its employees who were hired before December 31, 2007. Pension plan assets are valiued at their fair value
As of January 1, 2013 the Group applied IAS 19 Employee Benefits and changed the basis for calculating the pension liability and costs. The Group previously used the corridor approach when recognizing unamortized changes in accounting estimates. The corridor approach is no longer accepted and all changes in accounting estimates shall be recognized in other comprehensive income in accordance with IAS 19R. See Note 2.3
Net liability is calculated on the basis of the present value of future pension benefits which an employee has earned as of the balance sheet due date, after deduction of the actual value of pension assets. The discount rate corresponds to covered bonds (OMF) with the allowance to take the term into account. The Group believes that the marked for covered bonds is sufficiently deep and the pricing reliable. The interest rate for covered bonds is calculated on the basis of bonds with maturities over 14 years, which fit the remaining maturity for the Groups pension liability. The calculations were performed by a qualified actuary.
Employees in Norway hired after January 1, 2008 have a defined contribution pension plan described in note 16.
The Group has a share option program for its employees. The options are measured at fair value at the date of the grant. The fair value of the options is expensed over the vesting period which in this case is one year. This transaction is recognised as personnel cost in the income statement and in other paid-in capital on the balance sheet.
Social security tax on options is recorded as a liability based on the share price on the balance sheet date until the option is exercised. See note 17.
Grants received are classified as operating grants. Operating grants are accounted for at the same time as the costs they are intended to cover. Tax refunds are accounted for as a cost reduction. See note 7.
Income tax expenses consist of taxes due and changes to the deferred tax. Deferred tax and tax credits are calculated based on all differences between the financial accounts and the value for tax purposes of assets and liabilities.
Deferred tax credits are recognized to the extent that it is probable that the individual company will have sufficient taxable income in later periods to utilize the tax credit. Similarly, the company will reduce recognition of the deferred tax benefit to the extent the company no longer deems it probable that it will be able to utilize such tax benefits.
Deferred tax liabilities are accounted for at the nominal value and classified as long-term obligations in the balance sheet. Taxes payable and deferred taxes are recognized directly to equity to the extent that the tax loss carryforwards relate to equity transactions.
The Group has only one operating segment. The group does not report or monitor profitability on a lower level, but breaks down its revenue into the following end product areas: PC/ tablet accessories, Mobile/wearabledevices, Home electronic devices, Installed sensor networks, ASIC components and Consulting services. The Group's secondary segment is the geographical market areas in which its products are sold. See note 3.
Information available after the balance sheet date and applicable to conditions existing at the balance sheet date is included in the preparation of the financial statements. Events after the balance sheet date that do not affect the Group's financial position as of the balance sheet date, but that will affect the Group's financial position in the future, are disclosed if they are significant. See note 21.
The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments.
When treasury shares are purchased, the purchase price, including directly attributable costs are posted as changes in equity. Treasury shares are presented as a reduction of equity. Gains or losses on transactions in treasury shares are not recognized.
The Group has determined that none of the changes in standards and interpretations will affect the financial statements.
All figures in USD 1000.
The Group has only one segment which is the semiconductor business. The Group classifies its revenues based on the end product applications in which its products are used.
The Group focuses on the sale of standard components for wireless communication. These wireless components are broken into the following end product areas: PC/tablet accessories, Home electronic devices, Mobile/wearable devices and Installed sensor networks. In 2013, wireless components accounted for 90.2% of sales versus 87.5% in 2012.
In addition to standard components, the Group sells customer-specific ASIC components (Application Specific Integrated Circuits) and related consulting services.
| 2013 | 2012 | |
|---|---|---|
| Revenue | ||
| PC/tablet accessories | 68 509 | 84 461 |
| Home electronic devices | 5 305 | 6 399 |
| Mobile/wearable devices | 26 181 | 17 822 |
| Installed sensor networks | 12 259 | 6 607 |
| Wireless components | 112 255 | 115 290 |
| ASIC components | 10 401 | 15 501 |
| Consulting services | 1 734 | 1 029 |
| Total revenues | 124 390 | 131 819 |
The Group also classifies its revenues on a geographical basis according to its customers' location.
| 2013 | 2012 | |
|---|---|---|
| Europe | 16 229 | 20 337 |
| Americas | 7 735 | 7 122 |
| Asia / Pacific | 100 427 | 104 360 |
| Total revenues | 124 390 | 131 819 |
Revenue in Asia/Pacific is primarily from Taiwan, which represented MUSD 67.4 in 2013 and MUSD 81.1 in 2012.
The Group sells its components to distributors, which then sell components onward to electronics manufacturers which build end products and sell them to customers across the world. Two distributors represented more than 10% of the Group's total revenues in 2013. These two distributors represented 37% and 17% of the Group's total revenues respectively. In comparison, two distributors represented more than 10% of the Group's total revenues in 2012, with 35% and 27% of revenues respectively. These distributors are based in Asia.
| Note 4 Cost of materials / inventory | ||
|---|---|---|
| All figures in USD 1000. | ||
| 2013 | 2012 | |
| Cost of goods, gross | 72 259 | 52 057 |
| Changes in inventory | -10 419 | 12 834 |
| Cost of goods, net | 61 840 | 64 891 |
| 2013 | 2012 | |
| Finished goods | ||
| At net realizable value | 20 287 | 11 758 |
| At cost price | 10 065 | 5 928 |
| Total Finished goods | 10 065 | 5 928 |
| Work in progress, at cost | 12 102 | 5 820 |
| Total inventory | 22 167 | 11 748 |
| 2013 | 2012 | |
|---|---|---|
| Service and maintenance | 3 289 | 2 993 |
| Other consultancy fees | 4 326 | 3 235 |
| Office rental expenses | 2 083 | 1 829 |
| Office equipment | 571 | 609 |
| Material and components | 1 024 | 1 520 |
| Capitalized development expenses | -571 | -554 |
| Travel and meeting expenses | 1 672 | 1 692 |
| Other operating expenses | 1 999 | 1 864 |
| Total other operating expenses | 14 393 | 13 188 |
Fees to the auditor are included in consultancy fees above.
| 2013 | 2012 | |
|---|---|---|
| Statutory audit servces | 50 | 50 |
| Tax advisory services | 8 | 3 |
| Other non-audit services | 45 | 29 |
| Total | 103 | 82 |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Interest income | 91 | 133 |
| Customer dividend | 10 | 8 |
| Interest expenses | -3 | -41 |
| Changes in money market fund, | ||
| reported in the income statement | 232 | 292 |
| Financial income | 330 | 390 |
| Foreign exchange loss (net) | 231 | -562 |
| Financial expenses | 231 | -562 |
All figures in USD 1000.
| Tax expense consists of: | 2013 | 2012 |
|---|---|---|
| Tax payable | -4 808 | -6 588 |
| Adjustment in prior year | -234 | |
| Change in deferred tax / tax benefit | 330 | 582 |
| Changes in tax rate | -112 | |
| Tax expense | -4 590 | -6 240 |
| Reconciliation of taxes payable in balance sheet and income statement | 2013 | 2012 |
| Taxes payable for year, in the balance sheet | -4 822 | -6 544 |
| Adjustment to prior year tax, in the balance sheet | -234 | |
| Currency effect from translation to USD | 14 | -44 |
| Taxes payable in income statement | -4 808 | -6 822 |
| Reconciliation of nominal and actual tax expense | 2013 | 2012 |
|---|---|---|
| Profit before tax | 14 168 | 23 989 |
| Tax at nominal rate (28%) | -3 967 | -6 717 |
| Adjustment in prior year | -234 | |
| Tax effect permanent differences | 409 | 1 160 |
| Effect of change in tax rate* | -112 | |
| Actuarial gains | -349 | -1 124 |
| Currency effect from translation to USD | -571 | 675 |
| Tax expense | -4 590 | -6 240 |
| 2013 | 2012 | |
|---|---|---|
| Earnings before tax | 14 168 | 23 989 |
| Government grants | -163 | -170 |
| Non-taxable changes in fair value | -23 | |
| Non-deductible other expenses | 46 | 65 |
| Actuarial gain/loss pension | -1 292 | -4 014 |
| Change in temporary differences | 2 495 | 5 988 |
| Currency effect of translation to USD | 1 917 | -2 306 |
| Basis for payable tax | 17 171 | 23 529 |
| Payable tax on earnings (28%) | -4 808 | -6 588 |
| Deferred tax and deferred tax benefits: | Balance Sheet | Income Statement | Other Comp. income | ||||
|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||
| Deferred tax benefit | |||||||
| Inventory | 683 | 702 | 42 | 299 | |||
| Fixed assets | 1 745 | 591 | 355 | 420 | |||
| Accounts receivable | 2 | 22 | -20 | 26 | |||
| Pension obligation | 10 090 | 9 146 | 444 | 805 | 1 292 | -4 967 | |
| Deferred tax benefit – gross | 12 520 | 10 460 | 821 | 1 550 | 1 292 | -4 967 | |
| Deferred tax obligation | |||||||
| Intangible assets | |||||||
| Gain and loss account | -1 342 | -1 694 | -336 | -423 | |||
| Accounts receivable | |||||||
| Deferred tax obligation – gross | -1 342 | -1 694 | -336 | -423 | |||
| Currency effect of translation to USD | 218 | 198 | -350 | 105 | |||
| Total temporary differences | 11 396 | 8 964 | 807 | 2 079 | 1 292 | -4 967 | |
| Net deferred tax obligation/benefit | 3 077 | 2 510 | |||||
| Change in deferred tax obligation/benefit | 218 | 582 | 349 | -1 391 |
| Reconciliation of net deferred tax liability: | 2013 | 2012 |
|---|---|---|
| Opening balance as of 1.1 | 2 510 | 778 |
| Effect changes in accounting policies, pension | - | 2 454 |
| Tax expense/income recognised in profit and loss | 217 | 581 |
| Tax expense/income recognised in other comprehensive income | 349 | -1 391 |
| Currency effect from translation to USD | 1 | 88 |
| Net deferred tax obligation/benefit | 3 077 | 2 510 |
| Net deferred tax liability as of 31.12: | 2013 | 2012 |
|---|---|---|
| Net gain/(loss) on actuarial gains and losses | 362 | -1 391 |
| Effect of changes in tax rates | -13 | - |
| Total tax OCI | 349 | -1 391 |
* As of January 1, 2014, the tax rate in Norway was reduced to 27%. Deferred tax liability and deferred tax assets as of December 31, 2013 has been calculated with a tax rate of 27%. The effect on the current year's tax expense is USD 112,000 and is recognized in other comprehensive income.
| Note 8: Shares outstanding | ||
|---|---|---|
| 2013 | 2012 | |
| Basis for calculation of basic earnings per share | ||
| Earnings for the year (USD '000) | 9 577 | 17 749 |
| Weighted average number of outstanding shares ('000) | 161 268 | 163 402 |
| Earnings per share (USD) | 0.06 | 0.11 |
| Basis for calculation of fully diluted earnings per share | ||
| Earnings for the year (USD '000) | 9 577 | 17 749 |
| Weighted average number of outstanding shares ('000) | 161 854 | 163 402 |
| Earnings per share (USD) | 0.06 | 0.11 |
| Reconciliation of average number of ordinary shares ('000) | ||
| Weighted average number of outstanding shares | 163 441 | 163 441 |
| Weighted average number of treasury shares | 2 173 | 39 |
| Weighted average number of outstanding shares, corrected for treasury shares | 161 268 | 163 402 |
The number of shares was as follows:
| Date | Number of shares issued | Shares outstanding | |
|---|---|---|---|
| 2013-01-01 | Balance at beginning of period | 163 440 600 | 162 460 600 |
| 2013-12-31 | Balance at end of period | 163 440 600 | 161 049 600 |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Salary and vacation pay | 21 709 | 20 837 |
| Other compensation | 5 553 | 3 314 |
| Payroll tax | 4 316 | 2 891 |
| Defined benefit pension | 1 402 | 1 887 |
| Defined contribution pension | 569 | 560 |
| Capitalized development expenses (hourly costs) | -4 808 | -3 080 |
| Total | 28 741 | 26 410 |
| Weighted average number of full-time employees | 202 | 166 |
| 2013 | 2012 | |
|---|---|---|
| Norway | 173 | 158 |
| China | 9 | 9 |
| South Korea | 2 | 2 |
| USA | 9 | 8 |
| Taiwan | 1 | 1 |
| Japan | 1 | 2 |
| Philippines | 15 | 13 |
| Switzerland | 1 | 1 |
| Total | 211 | 194 |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Tore Engebretsen, chairman of the board | 68 | 60 |
| Terje Rogne, vice chairman of the board. | 51 | 33 |
| Anne Cecilie Fagerlie, board member | 37 | 40 |
| Arnhild Schia, board member | 37 | 32 |
| Karsten Rönner, board member | 37 | 17 |
| Kjell Bråthen, former board member | 7 | |
| Markus Bakka Hjertø, employee representative | 10 | 10 |
| Thomas Ulleberg, employee representative | 10 | |
| John Helge Nistad, employee representative | 10 |
| Total compensation earned by the CEO and other executives: | ||||||||
|---|---|---|---|---|---|---|---|---|
| Other | Pension | |||||||
| 2013 | Salary | Bonus | compensation | expenses | Total | |||
| Svenn-Tore Larsen, CEO | 452 | 468 | 3 | 33 | 956 | |||
| Robert Giori, CFO | 297 | 213 | 2 | 13 | 525 | |||
| Svein Egil Nielsen, CTO | 199 | 19 | 3 | 12 | 233 | |||
| Bertel-Eivind Flaten, R&D Director | 190 | 213 | 2 | 38 | 442 | |||
| Ebbe Rømcke, Quality Director | 167 | 106 | 3 | 19 | 295 | |||
| Geir Langeland, Sales & Marketing Director | 241 | 213 | 2 | 21 | 477 | |||
| Total | 1 546 | 1 231 | 15 | 136 | 2 928 |
| Other | Pension | ||||
|---|---|---|---|---|---|
| 2012 | Salary | Bonus | compensation | expenses | Total |
| Svenn-Tore Larsen, CEO | 455 | 387 | 3 | 33 | 877 |
| Robert Giori, CFO | 298 | 172 | 3 | 11 | 484 |
| Bertel-Eivind Flaten, R&D Director | 191 | 172 | 2 | 22 | 387 |
| Ebbe Rømcke, Quality Director | 168 | 86 | 3 | 35 | 292 |
| Geir Langeland, Sales & Marketing Director | 235 | 172 | 11 | 31 | 449 |
| Total | 1 346 | 989 | 22 | 132 | 2 488 |
Two members of the executive team have entered loan agreements with the company. Interest accumulates on these loans according to the applicable minimum rate on employee loans (normrente). The loans are secured with the employees' holdings of Nordic Semiconductor shares.
| Loans to executives: | 2013 | 2012 | Repayment terms |
|---|---|---|---|
| Svenn-Tore Larsen | 571 | 791 | To be repaid in installments of USD 234 thousand on January 20, 2014 and |
| USD 337 thousand on January 20, 2015 | |||
| Geir Langeland | 163 | 288 | To be repaid in installments of USD 163 thousand on January 20, 2014 |
In 2011, the company entered into a retention bonus agreement with the CEO, which provides the CEO with additional compensation in the event that the CEO is still employed with the company for each of the four years ending December 31, 2011 - 2014. The retention bonus is paid annually in increasing sums following each of the calendar years, and totals MNOK 10 for the entire four-year term. In the event that the company is acquired during the term, the remainder of the unpaid retention bonuses will be paid to the CEO following the closing of the acquisition. As of December 31, 2013, 3.75 MNOK of this retention bonus had not yet been earned by the CEO and would be earned in the final year of the agreement, if the employment conditions are reached.
The Group has no other obligations to the CEO in the event of resignation over and above the normal resignation time of six (6) months, except that the resignation period increases to twelve (12) months in the event that the Group is acquired or merged with another company.
The company's policy on salaries and other remuneration to the CEO and other senior employees (in accordance with the Public Limited Companies Act § 6-16a) is the following:
The main principle in the Company's policy for remuneration and compensation is that the leading employees shall be offered competitive terms, so as to achieve the desired competence and incentives in the Company's executive management team. Salary and other benefits for executive management will during the next year be established in accordance with the above-mentioned main principle.
The Company has established an annual performance bonus and a retention bonus program for the executive management team, in which the manager must remain within his position until the start of the following year in order to be eligible. The bonuses may be awarded through a direct cash payment or through the grant of share options in the company. Performance-based compensation will be subject to an absolute limit and fulfilment of performance criteria, both decided by the Board at its discretion.
The Company offers pensions plans to all employees, managers included. In addition, the Company provides managers with other limited benefits in kind such as a company telephone.
For 2013, the Board has decided to grant stock options to senior executives as a form of performance based compensation. In exchange, the executive team will not receive an annual performance bonus paid in cash for their work during 2013.
The options were granted on February 18, 2013. The options vest after one year if the executive has not resigned his position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 17.15. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the Company's share price exceeds a cap of NOK 37.00, the Company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The Company has granted executives and employee Board members the following options according to the terms stated above:
Svenn-Tore Larsen, CEO: 375,000 stock options Robert Giori, CFO: 250,000 stock options Geir Langeland, Sales Director: 250,000 stock options Bertel-Eivind Flaten, R&D Director: 250,000 stock options Ebbe Rømcke, Quality Director: 125,000 stock options
Markus Bakke Hjertø, Board: 20,000 stock options Thomas Ulleberg, Board: 23,800 stock options
For 2014, the Board has decided to grant stock options to senior executives as a form of performance based compensation. In exchange, the executive team will not receive an annual performance bonus paid in cash for their work during 2014.
The options were granted on February 18, 2014. The options vest after one year if the executive has not resigned his position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 38.43. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the Company's share price exceeds a cap of NOK 150.00, the Company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The Company has granted executives and employee Board members the following options according to the terms stated above:
| Svenn-Tore Larsen, CEO: | 575,000 stock options |
|---|---|
| Robert Giori, CFO: | 350,000 stock options |
| Geir Langeland, Sales Director: | 350,000 stock options |
| Svein Egil Nielsen, CTO: | 350,000 stock options |
| Ebbe Rømcke, Quality Director: | 200,000 stock options |
| Markus Bakke Hjertø, Board: | 20,000 stock options |
| Thomas Ulleberg, Board: | 23,800 stock options |
All figures in USD 1000.
| 2013 | Office and lab equipment |
Computer equipment and machinery |
Fixture and fittings |
Property | Total |
|---|---|---|---|---|---|
| Acquisition cost | |||||
| Opening balance | 2 553 | 11 742 | 488 | 333 | 15 116 |
| Additions | 422 | 5 548 | 220 | 6 190 | |
| Sale / disposal of assets | |||||
| Acquisition cost as of 31.12 | 2 974 | 17 290 | 709 | 333 | 21 306 |
| Accumulated depreciation | |||||
| Opening balance | 1662 | 8 422 | 416 | 10 500 | |
| Depreciation expenses | 440 | 2 276 | 42 | 2 759 | |
| Sale / disposal of assets | |||||
| Accumulated depreciation as of 31.12 | 2 102 | 10 698 | 459 | 0 | 13 259 |
| Net carrying value as of 31.12 | 872 | 6 592 | 249 | 333 | 8 047 |
| Fully depreciated fixed assets, | |||||
| which are still in use | 796 | 4 971 | 393 |
| Office and | Computer equipment | Fixture and | |||
|---|---|---|---|---|---|
| 2012 | lab equipment | and machinery | fittings | Property | Total |
| Acquisition cost | |||||
| Opening balance | 1 896 | 10 685 | 423 | 333 | 13 337 |
| Additions | 657 | 1 057 | 65 | 1 779 | |
| Sale / disposal of assets | |||||
| Acquisition cost as of 31.12 | 2 553 | 11 742 | 488 | 333 | 15 116 |
| Accumulated depreciation | |||||
| Opening balance | 1 307 | 6 922 | 383 | 8 612 | |
| Depreciation expenses | 355 | 1 500 | 33 | 1 888 | |
| Sale / disposal of assets | |||||
| Accumulated depreciation as of 31.12 | 1 662 | 8 422 | 416 | 0 | 10 500 |
| Net carrying value as of 31.12 | 891 | 3 320 | 72 | 333 | 4 616 |
| Fully depreciated fixed assets, | |||||
| which are still in use | 796 | 4 971 | 393 | ||
| Estimated useful life | 3 – 5 years | 3 - 4 years | 5 years | ||
| Depreciation method | Straight-line | Straight-line | Straight-line | Not depreciated | |
| Annual lease of | |||||
| non-recognized capital assets | 0 | 32 | 0 | 0 |
Total depreciation expenses consist of depreciation of fixed assets and depreciation of intangible assets (note 12).
The Parent company has an apartment in Trondheim for use by employees in the Oslo office while in Trondheim. The apartment is assessed at acquisition cost. The residual value is expected to be at least equal to the entered value.
All capital assets that are ready to be scrapped have been fully depreciated and have no residual book value.
The Group has no capital assets that are temporarily out of operation.
The Group does not have any leased equipment.
There are no indicators that assets need to be written off.
There has been no basis for changing depreciation periods on fixed assets.
All figures in USD 1000.
| 2013 | Purchased | Capitalized | |
|---|---|---|---|
| Software | Development costs | Total | |
| Acquisition cost | |||
| Opening balance | 6 592 | 12 295 | 18 888 |
| Additions | 2 267 | 5 410 | 7 676 |
| Sale / disposal of assets | |||
| Accumulated cost as of 12.31 | 8 859 | 17 705 | 26 564 |
| Accumulated depreciation | |||
| Opening balance | 4 746 | 8 825 | 13 571 |
| Depreciation expenses | 661 | 1 382 | 2 043 |
| Sale / disposal of assets | |||
| Total accumulated depreciation as of 12.31 | 5 407 | 10 206 | 15 614 |
| Net carrying amount | 3 451 | 7 498 | 10 950 |
| Fully depreciated fixed assets, | |||
| which are still in use | 336 | 7 156 | |
| Non-capitalized R&D expenses: | |||
| Personnel expenses | 10 629 | 10 629 | |
| Other operating expenses | 4 216 | 4 216 | |
| Total cost recognized in income statement | 14 845 | 14 845 | |
| Total expenses for R&D | 20 255 | 20 255 |
| Software Development costs Acquisition cost |
Total 15 041 |
|---|---|
| Opening balance 6 390 8 651 |
|
| Additions 203 3 644 |
3 847 |
| Sale / disposal of assets | |
| Accumulated cost as of 12.31 6 593 12 295 |
18 888 |
| Accumulated depreciation | |
| Opening balance 4 273 8 347 |
12 620 |
| Depreciation expenses 474 477 |
951 |
| Sale / disposal of assets | |
| Total accumulated depreciation as of 12.31 4 747 8 824 |
13 571 |
| Net carrying amount 1 846 3 471 |
5 317 |
| Fully depreciated fixed assets, | |
| which are still in use 336 7 156 |
|
| Non-capitalized R&D expenses: | |
| Personnel expenses 11 763 |
11 763 |
| Other operating expenses 4 257 |
4 257 |
| Total cost recognized in income statement 16 020 |
16 020 |
| Total expenses for R&D 19 664 |
19 664 |
Total depreciation expenses consist of depreciation of intangible assets and depreciation of fixed assets (note 11).
| Economic lifetime | 10 years | 1– 5 years |
|---|---|---|
| Depreciation plan | Straight-line | Straight-line |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Gross receivables | 30 049 | 26 092 |
| Provision for doubtful accounts | -2 | -23 |
| Accounts Receivable, net | 30 047 | 26 069 |
The provision for loss on debt receivables covers approx. 0.001% of the accounts receivable in 2013 compared with 0.08% in 2012.
All figures in USD 1000.
Cash and cash equivalents as of the balance sheet date were as follows:
| 2013 | 2012 | |
|---|---|---|
| Cash holdings | 16 428 | 30 108 |
| Tax deduction account (restricted funds) | 869 | 887 |
| Short-term investments (money market fund) | 8 785 | 9 355 |
| Cash and cash equivalents in consolidated statement of financial position | 26 082 | 40 350 |
| Cash and cash equivalents in consolidated statement of cash flows | 26 082 | 40 350 |
All figures in USD 1000.
The share capital in Nordic Semiconductor as of December 31, 2013 consists of one share class with a total of 163,440,600 shares with a face value of NOK 0.01, with a total share capital of NOK 1,634,406. Each share grants the same rights in the company, and in the event of any increase in capital existing shareholders have pre-emptive rights for any new shares.
During the year the following changes have been made in the number of shares, share capital and share premium:
| Number of shares | Share capital | Treasury shares | Share premium | |||||
|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Ordinary shares, issued and paid | ||||||||
| Holdings as of 1.1 | 163 440 600 | 168 736 600 | 283 | 292 | -2 | -9 | 14 253 | 14 253 |
| Purchase of treasury shares | -2 | -2 | ||||||
| Cancellation of treasury shares | -5 296 000 | -9 | 9 | |||||
| Holdings as of 31.12 | 163 440 600 | 163 440 600 | 283 | 283 | -4 | -2 | 14 253 | 14 253 |
No dividend was paid during 2012 or 2013.
The Board of the Parent company, based on a resolution from the annual general meeting on April 19, 2013, has the authority to increase the company's share capital by issuing up to 16,300,000 shares with a par value of NOK 163,000. The shareholders' pre-emptive right may be waived according to the Norwegian Private Limited Companies Act §10-4. This authority is valid until the company's annual general meeting in 2014, and by June 30, 2014 the latest. The resolution covers the issue of shares in connection with a merger.
The Company owned 2,391,000 treasury shares on December 31, 2013. During 2012, the Company purchased 980,000 treasury shares through brokers at an average price of USD 2.44. During 2013, the Company purchased an additional 1,411,000 treasury shares through brokers at an average price of USD 2.79. Based on a resolution of the annual general meeting of April 19, 2013, the Board has authority to purchase the company's own shares with a limit of a face value of NOK 163,000 through one or more transactions. This authority is limited to 9.97% of the company's share capital, and the price per share that the company may pay for shares shall not be lower than the face value and not higher than NOK 200. This authority applies until the company's regular general meeting in 2014, and by June 30, 2014 the latest.
On February 18, 2013, the Board approved a grant of 3,960,470 share options to employees. The options vest after one year if the employee is in an unresigned position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 17.15. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the company's share price exceeds a cap of NOK 37.00, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
On February 18, 2014, the Board approved a grant of 5,843,712 share options to employees. The options vest after one year if the employee is in an unresigned position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 38.43. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the company's share price exceeds a cap of NOK 150.00, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The largest shareholders in Nordic Semiconductor ASA were as follows as of December 31, 2013:
| Shareholder | Shares Percentage | |
|---|---|---|
| ACCELERATOR LTD | 17 332 950 | 10.61% |
| FOLKETRYGDFONDET | 15 145 837 | 9.27% |
| ENGEBRETSEN TORE | 7 537 500 | 4.61% |
| ALDEN AS | 5 750 000 | 3.52% |
| KLP AKSJE NORGE VPF | 4 100 000 | 2.51% |
| MP PENSJON PK | 4 100 000 | 2.51% |
| STATOIL PENSJON | 3 923 178 | 2.40% |
| INAK 3 AS | 3 400 000 | 2.08% |
| VERDIPAPIRFONDET DNB NORGE (IV) 3 329 762 | 2.04% | |
| GOLDMAN SACHS INT. | 3 230 000 | 1.98% |
| SKANDINAVIA ENSKILDA BANKEN AB 2 930 000 | 1.79% | |
| KOMMUNAL LANDSPENSJONSKASSE 2 800 000 | 1.71% | |
| TVENGE TORSTEIN INGVALD | 2 500 000 | 1.53% |
| AWILCO INVEST AS | 2 400 000 | 1.47% |
| NORDIC SEMICONDUCTOR ASA | 2 391 000 | 1.46% |
| MÆLAND ARNE KRISTIAN | 2 340 000 | 1.43% |
| FOUGNER INVEST AS | 2 335 806 | 1.43% |
| CANICA AS | 2 329 200 | 1.43% |
| TTC INVEST AS | 2 200 000 | 1.35% |
| HAADEM INVEST AS | 2 152 920 | 1.32% |
| Total for the 20 largest shareholders | 92 228 153 | 56.43% |
| Other shareholders | 71 212 447 | 43.57% |
| Total shares outstanding | 163 440 600 | 100.00% |
Shares held by the Board of directors and Executive management were as follows as of December 31, 2013.
| Name | Shares |
|---|---|
| Board of directors | |
| Tore Engebretsen | 7 687 500 |
| Terje Rogne | 1 250 000 |
| Anne Cecilie Fagerlie | 0 |
| Arnhild Schia | 0 |
| Karsten Rönner | 30 000 |
| Thomas Ulleberg | 0 |
| Markus Bakka Hjertø | 0 |
| Management | |
| Svenn-Tore Larsen | 2 640 400 |
| Robert Giori | 66 400 |
| Geir Langeland | 177 700 |
| Bertel-Eivind Flaten | 1 037 900 |
| Ebbe Rømcke | 58 900 |
| Svein Egil Nielsen | 15 000 |
| Total | 12 948 800 |
All figures in USD 1000.
The Norwegian company in the Group is required to have mandatory employment pension for Norwegian employees, according to the Mandatory Employment Pension Act. As of January 1, 2008, the Company has chosen to have both a defined benefit and a defined contribution pension plan. Both pension plans satisfy the requirements of the law. Individual employees hired before January 1, 2008, could choose between retaining the original defined benefit pension plan, or moving to a defined contribution pension plan. All new employees after January 1, 2008 automatically enter the defined contribution pension plan. The two different types of pensions are described below:
Some employees in Norway have a defined benefit pension plan. The employee will receive 66% of salary based on 30 years of employment at the company. The plan includes disability pension. As of December 31, 2013 the plan had 66 members.
The pension fund is managed by DNB Life Insurance ASA. At the end of 2013 the value of the pension fund was USD 8,601,000.
The portfolio was invested as follows:
| 2013 | 2012 | |
|---|---|---|
| Equities | 6,8% | 10,2% |
| Alternative investments | 3,5% | 0,0% |
| Bonds | 17,0% | 15.2% |
| Money market | 22,0% | 17,5% |
| Bonds held to maturity | 35,2% | 37,1% |
| Property | 14,3% | 18,6% |
| Other | 1,1% | 1.4% |
| Total | 100% | 100% |
| 2013 | 2012 | |
|---|---|---|
| Current service cost | 963 | 1 334 |
| Interest expense | 548 | 435 |
| Expected return on plan assets | -296 | -176 |
| Administration fee | 14 | 61 |
| Total pension expense excl. social security tax | 1 229 | 1 654 |
| Social security tax | 173 | 233 |
| Total pension expense incl. social security tax | 1 402 | 1 887 |
Net pension obligation for the year was calculated as follows:
| 2013 | 2012 | |
|---|---|---|
| Pension obligations | 17 444 | 16 374 |
| Plan assets | 8 601 | 8 358 |
| Estimated net pension obligations | -8 843 | -8 016 |
| Social security tax | -1 247 | -1 130 |
| Total actual net obligation incl. social security tax | -10 090 | -9 146 |
| 2013 | 2012 | |
|---|---|---|
| Net pension obligation 1.1 | 14 982 | 18 721 |
| Current service cost | 985 | 1 489 |
| Interest expense | 610 | 486 |
| Actuarial gain / loss | 931 | -4 260 |
| Pension payments | -75 | -62 |
| Currency effect of translation to USD | 12 | 0 |
| Pension obligation 12.31 | 17 444 | 16 374 |
| 2013 | 2012 | |
|---|---|---|
| Pension assets 1.1 | 7 648 | 7 091 |
| Expected return on plan assets | 315 | 311 |
| Actuarial gain / loss | -203 | -22 |
| Administration fee | -15 | -69 |
| Employer contribution | 932 | 1 109 |
| Pension payment | -75 | -62 |
| Pension assets 31.12. | 8 601 | 8 358 |
| 2013 | 2012 | |
|---|---|---|
| Remeasurements loss (gain) - change in discount rate | (365) | 3 583 |
| Remeasurements loss (gain) - change in other financial assumptions | 745 | (16) |
| Remeasurements loss (gain) - change in mortality table | 848 | - |
| Remeasurements loss (gain) - change in other demographic assumptions | - | - |
| Remeasurements loss (gain) - experience DBO | (238) | (8 572) |
| Remeasurements loss (gain) - experience Assets | 211 | 39 |
| Investment management cost | 91 | - |
| OCI losses (gains) during period | 1 292 | (4 967) |
The following assumptions have been used as a basis for the calculation of pension expense and net pension obligation:
| 2013 | 2012 | |
|---|---|---|
| Discount rate | 4,0% | 3,9% |
| Expected return on plan assets | 4.0% | 3,9% |
| Expected future salary increase | 3.75% | 3.5% |
| Expected future increase in base amount | 3.50% | 3.25% |
| Expected future increase in pensions | 3.50% | 3.25% |
| Average turnover | 2.2% | 2.2% |
In the insurance company, risk of death and disability is distributed among all the insurance customers, and therefore this is the relevant indicator for future disability and life expectancy. Risk tables for death (mortality table K2013 ) and disability are based on general tables in Norway updated with historic data from the population of the insurance company. This data involves an adjustment of available tables in the form of increased life expectancy and increased probability of disability. The average life expectancy for all age groups in the tables is 85 years for men and 88 years for women. Extracts from the tables are shown below. The table shows life expectancy and probably for disability and death respectively within one year for various age groups.
| Remaining life expectancy | Probability of death | ||||
|---|---|---|---|---|---|
| Age | Men | Women | Age | Men | Women |
| 20 | 63.3 | 66.7 | 20 | 0.02% | 0.01% |
| 40 | 43.7 | 46.9 | 40 | 0.06% | 0.04% |
| 60 | 24.7 | 27.7 | 60 | 0.45% | 0.30% |
| 80 | 9.4 | 11.4 | 80 | 4.46% | 3.08% |
The average duration for the defined benefit obligation at the end of the reporting period is 17.27 years (17.54 in 2012) Expected contribution to the plan in 2014 is: USD 967,000.
The table below is giving an estimate of potential effects of changes to certain assumptions for defined benefit schemes in Norway. Other assumptions are not considered to be significant. The estimates are based on facts and circumstances as of 31.12.2013. Actual results may deviate significantly from these estimates.
| Discount rate | Wage growth in % | Life expectancy | ||||
|---|---|---|---|---|---|---|
| 0,5% | 2 208 | 1% | -1 843 | +1 year | -819 | |
| -0,5% | -2 571 | -1% | 1 846 | -1 year | 750 |
Some employees in Norway have a defined contribution pension plan. The main benefit is a contribution of 5% of salary between 1 and 6 basis points and 8% of salary between 6 and 12 basis points. Along with this the company has a disability pension of approximately 66% of salary including estimated social security based on 30 years of full employment. In 2013, the cost of the defined contribution pension was USD 569,000. As of December 31, 2013 the plan had 101 members.
All figures in USD 1000.
Nordic Semiconductor implemented a stock option program for employees on February 18, 2013.
For several years prior to 2013, Nordic Semiconductor ASA provided all employees with performance-based compensation through an annual cash bonus tied to the achievement of targets for group revenue and operating profits for the year.
The Board implemented a change to this program in 2013, which enabled performance-based compensation to be awarded through a stock option grant as an alternative to the existing cash bonus program.
On February 18, 2013, Nordic Semiconductor granted 3,960,470 share options to 132 employees. The options are exercisable after one year, and expire after three years. The options were granted at a strike price of USD 2.82 (NOK 17.15) If the company's share price exceeds a cap of USD 6.08 (NOK 37.00) the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
A summary of share option transactions during 2013 is below. There were no share option transactions during 2012.
| 2013 | 2012 | |
|---|---|---|
| Outstanding options 1.1 | 0 | 0 |
| Options granted | 3 960 470 | 0 |
| Options forfeited | -20 000 | 0 |
| Options exercised | 0 | 0 |
| Options expired | 0 | 0 |
| Outstanding options 31.12 | 3 940 470 | 0 |
| Of which exercisable | 0 | 0 |
The fair value of the options is set on the grant date and expensed over the vesting period. USD 1,703,000 was expensed during 2013. The recognised share option programme liability is related to social security tax USD 2,659,000 as of 31.12.13. for the parent company only.
The fair value of options granted in 2013 was USD 0.5 (NOK 3.00) per option, according to the Black & Scholes option-pricing model. The Black & Scholes valuation of the option program was conducted by an independent advisory company.
The calculations are based on the following assumptions:
The share price is set to the value weighted average price of shares traded on the grant date, which was USD 2.56 (NOK 15.59) on the date of grant in 2013.
The strike price is the share price on the grant date * 110%.
The cap price on the options granted is NOK 37. At this price, the company may settle the option grant by compensating the employee the difference between the cap and the strike price. When calculating the value of the stock option, the value of the cap is calculated through the Black Scholes model, and deducted from the uncapped value of the option to the employee.
It is assumed that historic volatility is an indication of future volatility. The expected volatility is therefore stipulated to be the same as the historic volatility, which equalled 49.32% on the date of grant in 2013.
It is assumed that all employees will exercise the options once they are exercisable. The options are expected to have an average term of 2 years (between the minimum vesting period of one year and the maximum exercise period of three years).
The company does not forecast a dividend payout in the Black-Scholes model.
The risk-free interest rate is set equal to the relevant interest rate on government bonds on the date of grant in 2013, i.e. 1.64 %.
| All figures in USD 1000. | ||
|---|---|---|
| 2013 | 2012 | |
| Accounts payable | 6 261 | 2 481 |
| Taxes payable | 4 822 | 7 105 |
| Social security tax | 2 405 | 1 374 |
| Holiday pay | 2 380 | 2 303 |
| Allocation ship and debit | 2 340 | 1 758 |
| Accrued expenses | 3 290 | 4 018 |
| Total Current liabilities | 21 498 | 19 039 |
See note 19 liquidity risk
All figures in USD 1000.
The company has several operating leases for machinery and office space. The lease expenses consist of the following:
| 2013 | 2012 |
|---|---|
| 1 500 | 1 389 |
| 32 | 33 |
| 1 532 | 1 422 |
As of December 31, 2013, the Group leased offices in Trondheim, Oslo, Hong Kong, Seoul, Tokyo, Manila and San Jose, California (USA). The lease amounts are fixed with index regulation based on Statistics Norway's consumer price index.
Conditions for major leases are:
Trondheim office: The office lease was renewed January 1, 2013, and expires on December 31, 2017 without notice of termination. Nordic Semiconductor has a pre-emptive right to renew the lease if the lessor does not wish to make use of the premises.
Oslo office: The office lease was reneved January 1, 2014, and expires on December 31, 2015, without notice of termination.
Japan office: The office lease has a 3 months notice of termination.
Hong Kong office: The office lease has a 6 months notice of termination.
Future minimum payments for non-cancellable leases are as follows:
| Within 1 year | 1 301 |
|---|---|
| 1 to 5 years | 2 884 |
| After 5 years | |
| Total non-cancellable leases | 4 186 |
All figures in USD 1000.
Nordic Semiconductor's strategy relating to its capital structure is to maintain sufficient cash and cash equivalents to meet the Group's requirements for ongoing operations and for new investments. Management believes that it is especially important for a small company to retain a strong credit rating and significant liquidity as the Group competes in a global market against larger companies.
Nordic Semiconductor manages its capital structure and makes revisions in light of changes in the overall economy and its operating assumptions. In order to maintain or amend the capital structure, the company must purchase its own shares on the market, pay dividends to shareholders, pay back capital to shareholders or issue new shares. No changes were made in procedures or processes in the course of 2013.
Nordic Semiconductor manages its capital structure based on an equity ratio. This relationship is calculated as total equity divided by total assets. In this phase of the company's development, the goal is to keep the equity ratio above 50%.
| 2013 | 2012 | |
|---|---|---|
| Total equity | 72 244 | 65 826 |
| Total assets | 103 832 | 94 011 |
| Equity share | 70% | 70% |
The Group has a credit agreement with a bank, which makes it possible to borrow up to MUSD 20 at any time with an interest rate equal to LIBOR + 1.15%. The line of credit agreement expires in October 2014. As of December 31, 2013, the company has no loan from the line of credit. The security is provided by inventory, receivables and operating equipment with book values as follows: inventories USD 22 167 000, accounts receivable USD 30 047 000 and operating equipment USD 7 464 000. The remainder of the company's financing is made through short-term, non-interest-bearing debt. This financing typically consists of debt to suppliers, the public sector, employees or others.
| Fair value Amortized cost |
Total | |||
|---|---|---|---|---|
| Money market | Receivables | Other financial | ||
| fund | and loans | obligations | ||
| Cash and cash equivalents | 8 785 | 17 297 | 26 082 | |
| Receivables and other short-term receivables | 30 047 | 30 047 | ||
| Long-term receivables | 759 | 759 | ||
| Total financial assets | 8 785 | 48 103 | 56 888 | |
| Accounts payable and other short-term debt | 21 498 | 21 498 | ||
| Total financial liabilities | 21 498 | 21 498 |
| Fair value | Amortized cost | Total | ||
|---|---|---|---|---|
| Money market | Receivables | Other financial | ||
| fund | and loans | obligations | ||
| Cash and cash equivalents | 9 355 | 30 995 | 40 350 | |
| Receivables and other short-term receivables | 28 337 | 28 337 | ||
| Long-term receivables | 1 133 | 1 133 | ||
| Total financial assets | 9 355 | 60 465 | 69 820 | |
| Accounts payable and other short-term debt | 19 039 | 19 039 | ||
| Total financial liabilities | 19 039 | 19 039 |
Cash equivalents at fair value are assets held as short-term deposits in interest-bearing funds invested within high-quality issuers, with floating earnings and no set maturity date (Valuation category 1, prices in active markets for identical assets or liabilities).
As Nordic Semiconductor manages an international operation, the company is subject to financial risk, primarily credit risk and foreign currency risk. Procedures for control of financial risk have been adopted by the Board and are carried out by its finance department.
The company's sale of components takes place through its distribution partners within defined geographic regions. The number of invoice recipients is thereby significantly lower than the end customer base, which increases the credit risk on customer receivables.
In order to manage credit risk, the company has established guidelines to ensure that each customer's outstanding receivables do not exceed established credit limits and that sales are only made to customers who have not had significant problems with previous payments. In the event of the bankruptcy of a distribution partner, end customer demand will be unchanged and a new distribution channel will have to be established. In 2013, 47% of revenues went through the largest distribution partner, compared to 40% in 2012.
Age distribution of customer receivables was:
| 2013 | 2012 | ||||
|---|---|---|---|---|---|
| Gross | Provision for | Gross | Provision for | ||
| Total | doubtful accounts | Total | doubtful accounts | ||
| Not due | 29 215 | 25 469 | |||
| Past due 0-30 days | 789 | 1 274 | |||
| Past due 31-120 days | 135 | -710 | |||
| Over 120 days | 1 | 2 | 60 | 22 | |
| Total | 30 140 | 2 | 26 091 | 22 |
Based on its experience, it is not deemed necessary for the company to make a provision for accounts receivable that are not due (97% of receivables). Receivables to which interest applies are set aside in their entirety, as these receivables are generally difficult to collect. For the remaining receivables, loss provisions have been estimated based on the age of the receivables and the customer's payment history.
| 2013 | 2012 | |
|---|---|---|
| January 1 | 22 | 5 |
| Change in estimated loss provision | -20 | 17 |
| December 31 | 2 | 22 |
The book value of financial assets represents the maximum credit exposure. The maximum exposure to credit risk on the balance sheet date was:
| 2013 | 2012 | |
|---|---|---|
| Accounts receivable and other short-term receivables | 32 750 | 28 337 |
| Cash and cash equivalents | 26 082 | 40 350 |
| Total | 58 832 | 68 688 |
Overall, the group seeks to minimize risk when investing its cash balance. Investments can only be made in securities which have been approved by the Board. As of December 31, 2013, the Group had invested USD 8,785 thousand as short-term deposits in money market funds with a broad distribution of high-quality issuers, floating earnings and no set maturity. An additional USD 17,294 thousand was deposited in the bank.
The Group has no externally imposed capital requirements or agreements, and has no contracts or legal requirements which are not being upheld. The Group has the following due dates with regard to contracts for financial obligations as of December 31, 2013:
| Entered amount |
Contractual cash flows |
0-3 months |
3-6 months |
6-12 months |
1-2 years |
2-5 years |
|
|---|---|---|---|---|---|---|---|
| Supplier debt and other short-term debt Other contractual |
21 498 | -21 498 | -13 488 | -8 011 | |||
| obligations | 0 | -4 186 | -325 | -325 | -651 | -1 301 | -1 583 |
The Group's liquidity requirements and risk assessment determine its investment strategy and interest rate exposure. The Group's policy is to maintain a short-term investment horizon for its surplus cash. The investment portfolio should not have an average duration longer than six (6) months.
The Group has a line of credit agreement with its bank, which allows it to borrow up to MUSD 20 at an interest rate of LIBOR + 1.15%. The line of credit agreement expires in October 2014.
Below is a sensitivity analysis of changes in general interest rate levels on Profit before tax:
| Profit before tax | |
|---|---|
| Interest rate level +/- 0.25% | 65 |
The company is subject to foreign currency risk as it has its development and commercial activities in different countries. Nearly all revenues and cost of goods are in USD, while approximately 85% of the company's operating expenses excluding depreciation are in NOK. The company does not hedge its exposure to foreign currency risk.
The table below shows sales in the most significant currencies:
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Local | USD (1000) | Share of total | Local | USD (1000) | Share of total | |
| currency | revenues in % | currency | revenues in % | |||
| USD | 123 207 | 123 207 | 98.8 % | 128 663 | 128 663 | 97.6 % |
| EUR | 1 435 | 1 915 | 1.5 % | 2 020 | 2 606 | 2.0 % |
| NOK | -2 263 | -384 | -0.3 % | 3 127 | 550 | 0.4 % |
| Total | 124 390 | 100,0 % | 131 819 | 100,0 % |
Below is a sensitivity analysis of changes in the NOK exchange rate on balance sheet items, and their impact on Profit before tax:
| Profit before tax | |
|---|---|
| NOK exchange rate +/- 10% | 3 666 |
As of December 31, 2013 the company had no financial assets where there is considered to be a difference between book value and fair value. The following financial instruments are not recognized at fair value: customer receivables and other short-term receivables.
The book value of Money market fund is approximately equal to fair market value, as it has ultra-short collection cycle with low inherent risk.
Below is an overview of the Group's financial instruments:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Book | Fair | Book | Fair | |
| value | market value | value | market value | |
| Financial assets | ||||
| Cash and bank deposits | 17 297 | 17 297 | 30 995 | 30 995 |
| Money market fund | 8 785 | 8 785 | 9 355 | 9 355 |
| Accounts receivable | 30 047 | 30 047 | 26 069 | 26 069 |
| Financial debt liabilities | ||||
| Accounts payable | 6 261 | 6 261 | 2 481 | 2 481 |
On February 18, 2014, Nordic Semiconductor ASA granted 5,843,712 stock options to employees of the Group, including Company executives and Employee board members. The stock option grant is described in Notes 10 and 15.
On February 18, 2014, employees of the Group exercised 2,190,366 stock options in Nordic Semiconductor ASA which had been granted during 2013. The closing share price on the exercise date was NOK 36.00, which was just below the cap on the share options of NOK 37.00.
One primary insider exercised options and sold shares in Nordic Semiconductor ASA on February 18. Thomas Ulleberg, employee representative on the board of directors, exercised 23,800 options and sold these shares at a price of NOK 34.50.
Otherwise, no events have occurred since the end of the fiscal year which are expected to materially affect the financial statements.
The Group has the following related parties:
Management: See note 10, where the members of the Board and management group are listed.
Nordic Semiconductor Inc.: Internal Group transactions between Nordic Semiconductor ASA and its Nordic Semiconductor Inc. subsidiary consist of marketing and sales promotion which the subsidiary conducts on behalf of the Parent Company, as well as management, administration and accounting which the Parent Company undertakes on behalf of the subsidiary. These transactions are made on normal business terms.
In December 2013, Nordic Semiconductor ASA set up a new fully-owned operating subsidiary, Nordic Semiconductor Poland Sp. z o.o. The new subsidiary will commence operations in 2014 as an extension of the existing R&D operations of the company.
for the year ended 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* |
|---|---|---|---|
| Total Revenue | 3 | 124 745 | 132 159 |
| Cost of materials | 4 | -61 840 | -64 891 |
| Direct project costs | -1 006 | -332 | |
| Gross profit | 61 899 | 66 936 | |
| Payroll expenses | 9/10/11/15 | -27 336 | -25 251 |
| Other operating expenses | 5/11/18 | -16 264 | -14 782 |
| Depreciation | 10/11 | -4 793 | -2 829 |
| Operating profit | 13 506 | 24 074 | |
| Financial income | 6/19 | 323 | 433 |
| Financial expenses | 6/19 | 7 | -42 |
| Net foreign exchange gains (losses) Profit before tax |
6/19 | 266 14 102 |
-573 23 893 |
| Income tax expense | 7 | -4 568 | -6 215 |
| Net profit after tax | 9 534 | 17 678 | |
| Attributable to | |||
| Equity holders of the parent | 9 534 | 17 678 | |
| Earnings per share | |||
| Ordinary earnings per share (USD) | 0,06 | 0,11 | |
| Fully diluted earnings per share (USD) | 0,06 | 0,11 | |
| Comprehensive Income | 2013 | 2012* | |
| Net profit after tax | 9 534 | 17 678 | |
| Other comprehensive income not to be reclasified to profit or loss in subsequent periods: | |||
| Actuarial gains(losses) on defined benefit plans | -1 292 | 4 967 | |
| Income tax effect | 349 | -1 391 | |
| Total Comprehensive Income | 8 590 | 21 254 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
as of 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* | 01.01.2012* |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Capitalized development expenses | 11 | 7 498 | 3 471 | 305 |
| Software and other intangible assets | 11 | 3 451 | 1 846 | 2 117 |
| Deferred tax assets | 7 | 3 077 | 2 510 | 3 323 |
| Property assets | 10 | 583 | 405 | 373 |
| Equipment | 10/19 | 7 447 | 4 187 | 4 340 |
| Shares in subsidiary | 1 | 7 | 5 | 5 |
| Other long term assets | 9 | 759 | 1 133 | 1 208 |
| Total non-current assets | 22 822 | 13 558 | 11 669 | |
| Current assets | ||||
| Inventory | 4/20 | 22 167 | 11 748 | 24 583 |
| Accounts receivable | 13/20 | 30 047 | 26 069 | 22 450 |
| Other short-term receivables | 2 753 | 2 296 | 2 184 | |
| Cash and cash equivalents | 14/20 | 25 836 | 40 230 | 23 696 |
| Total current assets | 80 802 | 80 342 | 72 912 | |
| TOTAL ASSETS | 103 625 | 93 900 | 84 582 | |
| EQUITY | ||||
| Share capital Treasury shares |
14 14 |
283 -4 |
283 -2 |
292 -9 |
| Share premium | 14 | 14 253 | 14 253 | 14 253 |
| Other paid in capital | 1 703 | |||
| Retained earnings | 55 656 | 51 034 | 32 254 | |
| TOTAL EQUITY | 71 891 | 65 568 | 46 790 | |
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Pension liability | 15 | 10 090 | 9 146 | 12 978 |
| Total non-current liabilities | 10 090 | 9 146 | 12 978 | |
| Current liabilities | ||||
| Short-term loan facility | 19 | 0 | 0 | 6 000 |
| Accounts payable Income taxes payable |
17/19 7 |
6 261 4 806 |
2 481 7 088 |
3 266 7 341 |
| Public duties | 17 | 2 405 | 1 374 | 1 083 |
| Other short-term debt | 17 | 8 172 | 8 243 | 7 124 |
| Total current liabilities | 21 644 | 19 186 | 24 814 | |
| TOTAL LIABILITES | 31 734 | 28 332 | 37 792 | |
| TOTAL EQUITY AND LIABILITIES | 103 625 | 93 900 | 84 582 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
Karsten Rönner Arnhild Schia Markus Bakka Hjertø
Chairman Vice Chairman Board member
Board member Board member Board member
Board member Chief Executive Officer
Tore Engebretsen Terje Rogne Anne-Cecilie Fagerlie
Thomas Ulleberg Svenn-Tore Larsen Oslo, 19 March 2014
for the year ended 31 December 2013
| Amount in USD 1000 | Share capital |
Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|
| Equity as of 01.01.2012 | 292 | (9) | 14 253 | 38 852 | 53 388 | |
| Changes in accounting policies | ||||||
| 6 598 | 6 598 | |||||
| Equity as of 01.01.2012 (restated)* | 292 | (9) | 14 253 | 32 254 | 46 790 | |
| Net profit for the period | 17 678 | 17 678 | ||||
| Actuarial gain/loss recognised in equity | 3 576 | 3 576 | ||||
| Purchase of treasury shares | (2) | (2 473) | (2 475) | |||
| Cancellation of treasury shares | (9) | 9 | - | - | ||
| Equity as of 31.12.2012 | 283 | (2) | 14 253 | 51 034 | 65 568 | |
| Net profit for the period | 9 534 | 9 534 | ||||
| Share based compensation | 1 703 | 1 703 | ||||
| Actuarial gain/loss recognised in equity | (943) | (943) | ||||
| Purchase of treasury shares | (2) | (3 970) | (3 972) | |||
| Equity as of 31.12.2013 | 283 | (4) | 14 253 | 1 703 | 55 656 | 71 891 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
for the year ended 31 December 2013
| Amount in USD 1000 | Note | 2013 | 2012* |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before tax | 14 102 | 23 893 | |
| Taxes paid for the period | 7 | -7 041 | -7 649 |
| Depreciation | 10/11 | 4 793 | 2 829 |
| Change in inventories, trade receivables and payables | 4/12/17/19 | -10 617 | 8 430 |
| Share-based compensation | 2 635 | ||
| Movement in pensions | 15 | -566 | 1 137 |
| Other operations related adjustments | 135 | 1 973 | |
| Net cash flows from operating activities | 3 439 | 30 614 | |
| Cash flows from investing activities | |||
| Capital expenditures (including software) | 10/11 | -8 453 | -1 961 |
| Capitalized development expenses | 11 | -5 410 | -3 644 |
| Net cash flows from investing activities | -13 863 | -5 605 | |
| Cash flows from financing activities | |||
| Purchase of treasury stock | 14 | -3 970 | -2 475 |
| Repayment short-term loan | 19 | -6 000 | |
| Net cash flows from financing activities | -3 970 | -8 475 | |
| Net change in cash and cash equivalents | -14 394 | 16 534 | |
| Cash and cash equivalents as of 1.1. | 40 230 | 23 696 | |
| Cash and cash equivalents as of 31.12. | 13/19 | 25 836 | 40 230 |
| Cash and cash equivalents as of 31.12. which is restricted cash | 869 | 887 |
*Prior period financials have been restated as a result of the implementation of revisions to IAS 19 from January 1, 2013. See Note 2.3 for more details
Nordic Semiconductor ASA is a public limited company whose shares are listed on the Oslo Stock Exchange. The company's head office is located at Otto Nielsens vei 12, 7052 Trondheim, Norway. The company has two whollyowned subsidiaries, Nordic Semiconductor Inc. and Nordic Semiconductor Poland Sp. z o.o. Nordic Semiconductor ASA develops and sells integrated circuits and related solutions for short-range wireless communication. The company specializes in ultra-low power (ULP) components, based on its proprietary 2.4 GHz and Bluetooth Smart technology.
The financial accounts were approved for publication by the Board of Directors on March 19, 2014, and will be presented for approval at the Annual General Meeting on April 10, 2014.
The financial accounts for Nordic Semiconductor ASA are prepared in accordance with International Financial Reporting Standards (IFRS) as established by the EU.
The financial accounts are presented in USD, rounded off to the nearest thousand, if nothing else is noted. As a result of rounding off differences, it is possible that amounts and percent does not add up to the total.
The financial accounts are based on the principles of historic cost accounting, with the exception of the following asset: Financial instruments (money market fund) are measured at fair value, with changes in value recognized on the income statement.
A subsidiary is a company in which the Group has control over financial and operating activity. Control is normally achieved when the Group owns - directly or indirectly - more than 50% of the shares in the company. Such companies are included in the Group financial statements from the date at which the Group obtains control over the company and until the date that such control ceases.
All intra-group balances, income and expenses, and unrealized gains and losses are eliminated in full. The financial statements in the subsidiaries are prepared using consistent accounting policies as the parent company, for the same reporting period.
The preparation of financial accounts in accordance with IFRS requires that management use assessments, estimates and assumptions that influence the amount reported in the financial statements and notes. Management bases its estimates and assessments on previous experience and on various other factors deemed to be reasonable and sensible given the specific circumstances. These assessments form the basis for evaluating the accounting value of assets and obligations which would not be possible based on other available sources. The actual earnings may differ from these estimates. The main areas of uncertainty for assessments and estimates on the balance sheet date, which represent a risk for creating significant changes to the value of assets and liabilities recorded in the accounts for the following financial year, are discussed below.
The costs of the defined benefit pension plan are determined upon actuarial calculations. Actuarial calculations are based on expectations regarding the discount rate, expected return on pension funds, future increases in wages/salaries, annual adjustment in the national insurance base rate, annual adjustment of pensions, average turnover and death rates. Based on the natural long-term nature of these obligations, such estimates entail a large degree of uncertainty. Previously the return on the plan assets was calculated by using a long-term expected return on the plan assets. As a result of applying IAS 19R, the net interest costs for the period is now calculated by using the discount rate for the liability at the beginning of the period. As such the net interest cost consists of interest on the liability and the return on the plan assets, whereas both have been calculated by using the discount rate. Changes in net pension liabilities as a result of payments of premiums and pension payments have been taken into consideration. The difference between the actual return and the accounted return is recognised continuously through other comprehensive income.
Further details are provided in note 16. The book value of pension obligations as of December 31, 2013 and 2012 was USD 10,090,000 and USD 9,146,000 respectively.
Nordic Semiconductor implemented a stock option program for employees on February 18, 2013. For several years prior to 2013, Nordic Semiconductor ASA provided all employees with performance-based compensation through an annual cash bonus tied to the achievement of targets for group revenue and operating profits for the year. The Board implemented a change to this program in 2013, which enabled performance-based compensation to be awarded through a stock option grant as an alternative to the existing cash bonus program.
The group measures the cost of share based payments at the date which they are granted. The fair value of options granted in 2013 was USD 0.5 (NOK 3.00) per option, according to the Black & Scholes option-pricing model. The Black & Scholes valuation of the option program was conducted by an independent advisory company.
Development costs are capitalized in accordance with the principles in Note 2.9. In order to determine the amount to be capitalized, it is necessary for management to make assumptions regarding expected future cash flow, discount rates and the expected period of benefits. Capitalized development costs are subject to amortization on a straight-line basis over the period of expected future benefit, normally 3-5 years. Uncertainty exists with respect to the estimated period of expected future benefit, as this depends on the future technological development in the market. The carrying amount of capitalized development costs as of December 31, 2013 and 2012 was USD 7,498,000 and USD 3,471,000 respectively.
Management has made an estimate of future credits to be given to distributors based on components sold in 2012 and 2013, if the following scenarios are met:
If a distributor sells components to specified customer accounts, the distributor will receive an additional discount after the sale is made, Ship & Debit. An estimate for this discount is provided in the accounts, reducing the revenue and increasing the current liabilities. See note 2.12 for futher details.
Estimates are continually reassessed based on changes in the underlying premises. Changes in accounting estimates are recognized in the period in which such changes occur. If such changes also apply to future periods, the effect is distributed between current and future periods.
In 2013 the company implemented the latest amendments to IFRS 13 Fair value measurements and IAS 19 Employee Benefits in its financial reporting. The accounts were not affected by the changes to IFRS 13.
The accounts were affected by the changes to IAS 19 which regulate defined benefit pension accounting. Due to the changes, the comparative financial amount for 2012 has been restated in accordance with the new regulation. The transition from calculating gross liabilities to net liabilities has caused the net pension liability to increase by MUSD 9 as of January 1, 2012.
The reason for the change is that the value of the pension assets is now calculated based on an expected return equal to the discount rate used to calculate the liability. The increase is caused by the fact that we in prior periods have calculated the expected return on the pension assets which has been higher than the discount rate on the liabilities. We expect that actual return will be higher than the one used in the calculation of the liabilities. The effect of the difference between actual return on the pension assets and the discount rate will be recognised in other comprehensive income in the statement of comprehensive income in accordance with the new regulation in IAS 19.
Accrued actuarial gains and losses which were not recognised as of January 1, 2012 have been recognised in equity. In total this has resulted in a decrease of the equity balance of MUSD 6.6 as of January 1, 2012. In addition the pension cost changed due to actuarial gains and losses of MUSD -4.2 which were recognised in 2012 in other comprehensive income. The total effect on the pension cost in 2012 is MUSD 0.25 and the total effect on the equity was MUSD 3.6.
The Company presents its financial statements in USD, which is also the company's functional currency. Transactions in currency other than USD, are converted at the exchange rate at the date of the transaction. Any exchange gains or losses arising as a result of changes in the exchange rate between the time of the transaction and the time of payment are recognized in the income statement.
Cash includes cash balances and bank deposits. Cash equivalents are short-term liquid investments which do not involve significant risk factors and are convertible into a known amount of cash within three months.
Accounts receivable are valued at amortized cost, less impairment. Losses arising from impairment are recognized in the income statement.
Hedge accounting is not employed. Efforts are made to reduce foreign currency risk by matching revenues and costs in the various currencies. Financial derivatives that are not designated as hedging instruments are recognized at fair value through profit or loss.
Inventory, components and components under production are valued at the lower of cost and net realizable value after deduction for obsolescence. Net realizable value is estimated as the selling price less cost of completion and the cost necessary to make the sale. Costs are determined using the FIFO method. Work in progress include variable cost and non-variable cost which can be allocated to items based on normal capacity. Non-current inventory are written down completely.
Non-current assets are stated at the lowest of cost net of accumulated depreciation and net realizable value. When an asset is sold or discontinued, the cost and accumulated depreciation are reversed and gain or loss from the transaction are recognized in the income statement.
The company's building is an apartment stated at cost. No depreciation is made since the residual value of the apartment exceeds the cost.
Cost of non-current assets includes fees/taxes and direct costs associated with commissioning the non-current asset for use. Repair and maintenance costs are expensed when incurred. If repair and maintenance increase the value of the non-current asset, the value will be added to the asset on the balance sheet.
Depreciation is calculated on a straight-line basis over the following periods of time:
| Office and lab equipment | 3-5 years |
|---|---|
| Computer equipment | 3-4 years |
| Installations in buildings | 5 years |
The assets' residual value, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if necessary.
The Company does not have any significant financial leases.
Leases where the most significant risk rests with the lessor are classified as operational leases. Lease payments are classified as operating costs and are expensed over the contract period
Research costs are expensed as incurred. Costs associated with development are capitalized if the following criteria are met in full:
Costs which were expensed in prior accounting periods will not be capitalized.
Capitalized development costs are subject to amortization on a straight-line basis over the expected period of benefits, normally 3-5 years. Depreciation begins when the product is transferred from development to production. Uncertainty exists with respect to the expected period of benefits, as this depends on the future technological development in the market.
The fair value of capitalized development costs will be estimated when there is an indication of a decline in value or that the need for impairment charged in prior periods no longer exists.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are reviewed each balance sheet date and the level reflects the best estimate of the obligation. When the time value is insignificant, the amount of the provision will be equal to the expenditure required to settle the obligation. When the time effect is significant, the amount of the provision will be equal to the present value of future expenditures to settle the obligation. Changes in the net present value of provisions resulting from discounting are recognized as finance costs.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from sales of components is recognized at the time of delivery to distributor or end customer. The time of delivery is usually the time when the goods are transferred to the transport carrier. Certain provisions have been made for credits to distributors based on the estimates described in Note 2.2.
Revenue from services is recognized as the services are rendered/delivered. The service consists of working hours, and invoicing of other costs, such as work done by subcontractors. Interest earned is recognized as it is generated.
If the distributor's pricing to specific end customer accounts changes according to a previous agreement with Nordic Semiconductor, the distributor will receive a price protection credit based on the difference between the old and new price.
In certain cases, distributors have the right to exchange inventory with Nordic Semiconductor. Stock rotation provisions are made for this if necessary.
The Company offers a defined benefit pension plan to its employees who were hired before December 31, 2007.
As of January 1, 2013 the Company applied IAS 19 Employee Benefits and changed the basis for calculating the pension liability and costs. The Company previously used the corridor approach when recognizing unamortized changes in accounting estimates. The corridor approach is no longer accepted and all changes in accounting estimates shall be recognized in other comprehensive income in accordance with IAS 19R. See Note 2.3
Net liability is calculated on the basis of the present value of future pension benefits which an employee has earned as of the balance sheet due date, after deduction of the actual value of pension assets. The discount rate corresponds to covered bonds (OMF) with the allowance to take the term into account. The Company believes that the marked for covered bonds is sufficiently deep and the pricing reliable. The interest rate for covered bonds is calculated on the basis of bonds with maturities over 14 years, which fit the remaining maturity for the Company pension liability. The calculations were performed by a qualified actuary.
Employees in Norway hired after January 1, 2008 have a defined contribution pension plan described in note 15.
The Group has a share option program for its employees. The options are measured at fair value at the date of the grant. The fair value of the options is expensed over the vesting period which in this case is one year. This transaction is recognised as personnel cost in the income statement and in other paid-in capital on the balance sheet.
Social security tax on options is recorded as a liability based on the share price on the balance sheet date until the option is exercised. See note 16.
Grants received are classified as operating grants. Operating grants are accounted for at the same time as the costs they are intended to cover. Tax refunds are accounted for as a cost reduction. See note 7.
Income tax expenses consist of taxes due and changes to the deferred tax. Deferred tax and tax credits are calculated based on all differences between the financial accounts and the value for tax purposes of assets and liabilities. Deferred tax credits are recognized to the extent that it is probable that the individual company will have sufficient taxable income in later periods to utilize the tax credit. Similarly, the company will reduce recognition of the deferred tax benefit to the extent the company no longer deems it probable that it will Deferred tax liabilities are accounted for at the nominal value and classified as long-term obligations in the balance sheet.
Taxes payable and deferred taxes are recognized directly to equity to the extent that the tax loss carryforwards relate to equity transactions.
The Company has only one operating segment. The group does not report or monitor profitability on a lower level, but breaks down its revenue into the following end product areas: PC/tablet accessories, Mobile/wearable devices, Home electronic devices, Installed sensor networks, ASIC components and Consulting services. The Group's secondary segment is the geographical market areas in which its products are sold. See note 3.
Information available after the balance sheet date and applicable to conditions existing at the balance sheet date is included in the preparation of the financial statements. Events after the balance sheet date that do not affect the Company's financial position as of the balance sheet date, but that will affect the Company's financial position in the future, are disclosed if they are significant. See note 20.
The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments.
When treasury shares are purchased, the purchase price, including directly attributable costs are posted as changes in equity. Treasury shares are presented as a reduction of equity. Gains or losses on transactions in treasury shares are not recognized.
The company has determined that none of the changes in standards and interpretations will affect the financial statements.
All figures in USD 1000.
The Group has only one segment which is the semiconductor business. The company classifies its revenues based on the end product applications in which its products are used.
The Company focuses on the sale of standard components for wireless communication. These wireless components are broken into the following end product areas: PC/tablet accessories, Home electronic devices, Mobile/wearable devices and Installes sensor networks. In 2013, wireless components accounted for 90% of sales versus 87% in 2012.
In addition to standard components, the Company sells customer-specific ASIC components (Application Specific Integrated Circuits) and related consulting services.
| 2013 | 2012 | |
|---|---|---|
| Revenue | ||
| PC/tablet accessories | 68 509 | 84 461 |
| Home electronic devices | 5 305 | 6 399 |
| Mobile/wearable devices | 26 181 | 17 822 |
| Installed sensor networks | 12 259 | 6 607 |
| Wireless components | 112 255 | 115 290 |
| ASIC components | 10 401 | 15 501 |
| Consulting services | 2 089 | 1 369 |
| Total revenues | 124 745 | 132 159 |
The Company also classifies its revenues on a geographical basis according to its customers' location.
| 2013 | 2012 | |
|---|---|---|
| Europe | 16 229 | 20 337 |
| Americas | 8 090 | 7 462 |
| Asia / Pacific | 100 427 | 104 360 |
| Total revenues | 124 745 | 132 159 |
Revenue in Asia/Pacific is primarily from Taiwan, which represented MUSD 67.4 in 2013 and MUSD 81.1 in 2012.
The company sells its components to distributors, which then sell components onward to electronics manufacturers which build end products and sell them to customers across the world. Two distributors represented more than 10% of the company's total revenues in 2013. These two distributors represented 37% and 17% of the company's total revenues respectively. In comparison, two distributors represented more than 10% of the company's total revenues in 2012, with 35% and 27% of revenues respectively. These distributors are based in Asia.
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Cost of goods, gross | 72 259 | 52 057 |
| Changes in inventory | -10 419 | 12 834 |
| Cost of goods, net | 61 840 | 64 891 |
| 2013 | 2012 | |
| Finished goods | ||
| At net realizable value | 20 287 | 11 758 |
| At cost price | 10 065 | 5 928 |
| Total Finished goods | 10 065 | 5 928 |
| Work in progress, at cost | 12 102 | 5 820 |
| Total inventory | 22 167 | 11 748 |
| Amount written down: | 683 | 702 |
| All figures in USD 1000. | ||
|---|---|---|
| 2013 | 2012 | |
|---|---|---|
| Service and maintenance | 3 289 | 2 993 |
| Other consultancy fees | 4 301 | 3 215 |
| Office rental expenses | 2 041 | 1 794 |
| Office equipment | 539 | 574 |
| Material and components | 1 020 | 1 508 |
| Capitalized development expenses | -571 | -554 |
| Travel and meeting expenses | 1 440 | 1 484 |
| Other operating expenses | 4 205 | 3 768 |
| Total other operating expenses | 16 264 | 14 782 |
Fees to the auditor are included in consultancy fees above.
| 2013 | 2012 | |
|---|---|---|
| Statutory audit servces | 50 | 50 |
| Tax advisory services | 8 | 3 |
| Other non-audit services | 45 | 29 |
| Total | 103 | 82 |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Interest income | 91 | 133 |
| Customer dividend | 10 | 8 |
| Interest expenses | -3 | -41 |
| Changes in money market fund, | ||
| reported in the income statement | 232 | 292 |
| Financial income | 330 | 391 |
| Foreign exchange loss (net) | -266 | -573 |
| Financial expenses | -266 | -573 |
All figures in USD 1000.
| Tax expense consists of: | 2013 | 2012 |
|---|---|---|
| Tax payable | -4 785 | --6 562 |
| Adjustment in prior year | -234 | |
| Change in deferred tax / tax benefit | 324 | 581 |
| Changes in tax rate | -108 | |
| Tax expense | -4 568 | -6 215 |
| Reconciliation of taxes payable in balance sheet and income statement | 2013 | 2012 |
| Taxes payable for year, in the balance sheet | -4 805 | -6 854 |
| Adjustment to prior year tax, in the balance sheet | -234 | |
| Currency effect from translation to USD | 120 | 292 |
| Taxes payable in income statement | -4 785 | -6 796 |
| Reconciliation of nominal and actual tax expense | 2013 | 2012 |
|---|---|---|
| Profit before tax | 14 102 | 23 893 |
| Tax at nominal rate (28%) | -3 949 | -6 690 |
| Adjustment in prior year | -234 | |
| Tax effect of permanent differences | 393 | 1 160 |
| Effect of change in tax rate* | -108 | |
| Actuarial gains of OCI | -349 | -1 124 |
| Currency effect from translation to USD | -556 | 640 |
| Tax expense | -4 568 | -6 215 |
| 2013 | 2012 | |
|---|---|---|
| Earnings before tax | 14 102 | 23 893 |
| Government grants | -163 | -170 |
| Non-taxable changes in fair value | -23 | |
| Non-deductible other expenses | 44 | 65 |
| Actuarial gain/loss pension | -1 292 | -4 014 |
| Change in temporary differences | 2 400 | 5 988 |
| Currency effect of translation to USD | 1 998 | -2 302 |
| Basis for payable tax | 17 089 | 23 436 |
| Payable tax on earnings (28%) | -4 785 | -6 562 |
| Deferred tax and deferred tax benefits: | Balance Sheet | Income Statement | Other Comp. Income | |||
|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Deferred tax benefit | ||||||
| Inventory | 683 | 702 | 42 | 299 | ||
| Fixed assets | 1 745 | 591 | 355 | 420 | ||
| Accounts receivable | 2 | 22 | 20 | 26 | ||
| Pension obligation | 10 090 | 9 146 | 444 | 805 | 1 292 | -4 967 |
| Deferred tax benefit – gross | 12 520 | 10 460 | 821 | 1 550 | 1 292 | -4 967 |
| Deferred tax obligation Intangible assets Gain and loss account Accounts receivable |
-1 342 | -1 694 | -336 | -423 | ||
| Deferred tax obligation – gross | -1 342 | -1 694 | -336 | -423 | ||
| Currency effect of translation to USD | 218 | 198 | -350 | 105 | ||
| Total temporary differences | 11 396 | 8 964 | 807 | 2 079 | 1 292 | -4 967 |
| Net deferred tax obligation/benefit Change in deferred tax obligation/benefit |
3 077 | 2 510 | 218 | 582 | 349 | -1 391 |
| Reconciliation of net deferred tax liability: | 2013 | 2012 |
|---|---|---|
| Opening balance as of 1.1 | 2 510 | 778 |
| Effect changes in accounting policies, pension | - | 2 454 |
| Tax expense/income recognised in profit and loss | 217 | 581 |
| Tax expense/income recognised in other comprehensive income | 349 | -1 391 |
| Currency effect from translation to USD | 1 | 88 |
| Net deferred tax obligation/benefit | 3 077 | 2 510 |
| Net deferred tax liability as of 31.12: | 2013 | 2012 |
|---|---|---|
| Net gain/(loss) on actuarial gains and losses | 362 | -1 391 |
| Effect of changes in tax rates | -13 | - |
| Total tax OCI | 349 | -1 391 |
* As of January 1, 2014, the tax rate in Norway was reduced to 27%. Deferred tax liability and deferred tax assets as of December 31, 2013 has been calculated with a tax rate of 27%. The effect on the current year's tax expense is USD 108,000 and is recognized in other comprehensive income.
| 2013 | 2012 | |
|---|---|---|
| Salary and vacation pay | 20 471 | 19 843 |
| Other compensation | 5 385 | 3 226 |
| Payroll tax | 4 316 | 2 891 |
| Defined benefit pension | 1 402 | 1 887 |
| Defined contribution pension | 569 | 483 |
| Capitalized development expenses (hourly costs) | -4 808 | -3080 |
| Total | 27 336 | 25 251 |
| Weighted average number of full-time employees | 196 | 160 |
| 2013 | 2012 | |
|---|---|---|
| Norway | 173 | 158 |
| China | 9 | 9 |
| South Korea | 2 | 2 |
| USA | 2 | 2 |
| Taiwan | 1 | 1 |
| Japan | 1 | 2 |
| Philippines | 15 | 13 |
| Switzerland | 1 | 1 |
| Total | 204 | 188 |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Tore Engebretsen, chairman of the board | 68 | 60 |
| Terje Rogne, vice chairman of the board. | 51 | 33 |
| Anne Cecilie Fagerlie, board member | 37 | 40 |
| Arnhild Schia, board member | 37 | 32 |
| Karsten Rönner, board member | 37 | 17 |
| Kjell Bråthen, former board member | 7 | |
| Markus Bakka Hjertø, employee representative | 10 | 10 |
| Thomas Ulleberg, employee representative | 10 | |
| John Helge Nistad, employee representative | 10 |
| Total compensation earned by the CEO and other executives: | |||||
|---|---|---|---|---|---|
| Other | Pension | ||||
| 2013 | Salary | Bonus | compensation | expenses | Total |
| Svenn-Tore Larsen, CEO | 452 | 468 | 2,8 | 33 | 956 |
| Robert Giori, CFO | 297 | 213 | 2,5 | 13 | 525 |
| Svein Egil Nielsen, CTO | 199 | 19 | 2,6 | 12 | 233 |
| Bertel-Eivind Flaten, R&D Director | 190 | 213 | 2,0 | 38 | 442 |
| Ebbe Rømcke, Quality Director | 167 | 106 | 2,7 | 19 | 295 |
| Geir Langeland, Sales & Marketing Director | 241 | 213 | 2,5 | 21 | 477 |
| Total | 1 546 | 1 231 | 15,1 | 136 | 2 928 |
| Other | Pension | ||||
|---|---|---|---|---|---|
| 2012 | Salary | Bonus | compensation | expenses | Total |
| Svenn-Tore Larsen, CEO | 455 | 387 | 3 | 33 | 877 |
| Robert Giori, CFO | 298 | 172 | 3 | 11 | 484 |
| Bertel-Eivind Flaten, R&D Director | 191 | 172 | 2 | 22 | 387 |
| Ebbe Rømcke, Quality Director | 168 | 86 | 3 | 35 | 292 |
| Geir Langeland, Sales & Marketing Director | 235 | 172 | 11 | 31 | 449 |
| Total | 1 346 | 989 | 22 | 132 | 2 488 |
Several members of the executive team have entered loan agreements with the company. Interest accumulates on these loans according to the applicable minimum rate on employee loans (normrente). The loans are secured with the employees' holdings of Nordic Semiconductor shares.
| Loans to executives: | 2013 | 2012 | Repayment terms |
|---|---|---|---|
| Svenn-Tore Larsen | 571 | 791 | To be repaid in installments of USD 234 thousand on January 20, 2014 |
| and USD 337 thousand on January 20, 2015 | |||
| Geir Langeland | 163 | 288 | To be repaid in installments of USD 163 thousand on January 20, 2014 |
In 2011, the company entered into a retention bonus agreement with the CEO, which provides the CEO with additional compensation in the event that the CEO is still employed with the company for each of the four years ending December 31, 2011 - 2014. The retention bonus is paid annually in increasing sums following each of the calendar years, and totals MNOK 10 for the entire four-year term. In the event that the company is acquired during the term, the remainder of the unpaid retention bonuses will be paid to the CEO following the closing of the acquisition. As of December 31, 2013, 3.75 MNOK of this retention bonus had not yet been earned by the CEO and would be earned in the final year of the agreement, if the employment conditions are reached.
The Company has no other obligations to the CEO in the event of resignation over and above the normal resignation time of six (6) months, except that the resignation period increases to twelve (12) months in the event that the Company is acquired or merged with another company.
The company's policy on salaries and other remuneration to the CEO and other senior employees (in accordance with the Public Limited Companies Act § 6-16a) is the following:
The main principle in the Company's policy for remuneration and compensation is that the leading employees shall be offered competitive terms, so as to achieve the desired competence and incentives in the Company's executive management team. Salary and other benefits for executive management will during the next year be established in accordance with the above-mentioned main principle.
The Company has established an annual performance bonus and a retention bonus program for the executive management team, in which the manager must remain within his position until the start of the following year in order to be eligible. The bonuses may be awarded through a direct cash payment or through the grant of share options in the company. Performance-based compensation will be subject to an absolute limit and fulfilment of performance criteria, both decided by the Board at its discretion.
The Company offers pensions plans to all employees, managers included. In addition, the Company provides managers with other limited benefits in kind such as a company telephone.
For 2013, the Board has decided to grant stock options to senior executives as a form of performance based compensation. In exchange, the executive team will not receive an annual performance bonus paid in cash for their work during 2013.
The options were granted on February 18, 2013. The options vest after one year if the executive has not resigned his position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 17.15. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the Company's share price exceeds a cap of NOK 37.00, the Company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The Company has granted executives and employee Board members the following options according to the terms stated above:
Svenn-Tore Larsen, CEO: 375,000 stock options Robert Giori, CFO: 250,000 stock options Geir Langeland, Sales Director: 250,000 stock options Bertel-Eivind Flaten, R&D Director: 250,000 stock options Ebbe Rømcke, Quality Director: 125,000 stock options
Markus Bakke Hjertø, Board: 20,000 stock options Thomas Ulleberg, Board: 23,800 stock options
For 2014, the Board has decided to grant stock options to senior executives as a form of performance based compensation. In exchange, the executive team will not receive an annual performance bonus paid in cash for their work during 2014.
The options were granted on February 18, 2014. The options vest after one year if the executive has not resigned his position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 38.43. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the Company's share price exceeds a cap of NOK 150.00, the Company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The Company has granted executives and employee Board members the following options according to the terms stated above:
| Svenn-Tore Larsen, CEO: | 575,000 stock options |
|---|---|
| Robert Giori, CFO: | 350,000 stock options |
| Geir Langeland, Sales Director: | 350,000 stock options |
| Svein Egil Nielsen, CTO: | 350,000 stock options |
| Ebbe Rømcke, Quality Director: | 200,000 stock options |
| Markus Bakke Hjertø, Board: | 20,000 stock options |
| Thomas Ulleberg, Board: | 23,800 stock options |
All figures in USD 1000.
| 2013 | Office and lab equipment |
Computer equipment and machinery |
Fixture and fittings |
Property | Total |
|---|---|---|---|---|---|
| Acquisition cost | |||||
| Opening balance | 2 536 | 11 723 | 488 | 333 | 15 082 |
| Additions | 422 | 5 545 | 220 | 6 187 | |
| Sale / disposal of assets | |||||
| Acquisition cost as of 31.12 | 2 958 | 17 268 | 708 | 333 | 21 269 |
| Accumulated depreciation | |||||
| Opening balance | 1 661 | 8 411 | 417 | 10 489 | |
| Depreciation expenses | 440 | 2 268 | 42 | 2 750 | |
| Sale / disposal of assets | |||||
| Accumulated depreciation as of 31.12 | 2 101 | 10 679 | 459 | 0 | 13 239 |
| Net carrying value as of 31.12 | 857 | 6 589 | 249 | 333 | 8 030 |
| Fully depreciated fixed assets, | |||||
| which are still in use | 796 | 4 971 | 393 |
| Office and | Computer equipment | Fixture and | |||
|---|---|---|---|---|---|
| 2012 | lab equipment | and machinery | fittings | Property | Total |
| Acquisition cost | |||||
| Opening balance | 1 894 | 10 673 | 423 | 333 | 13 323 |
| Additions | 672 | 1 050 | 65 | 1 787 | |
| Sale / disposal of assets | |||||
| Acquisition cost as of 31.12 | 2 536 | 11 723 | 488 | 333 | 15 080 |
| Accumulated depreciation | |||||
| Opening balance | 1 308 | 6 919 | 383 | 8 610 | |
| Depreciation expenses | 352 | 1 493 | 33 | 1 878 | |
| Sale / disposal of assets | |||||
| Accumulated depreciation as of 31.12 | 1 660 | 8 412 | 416 | 0 | 10 488 |
| Net carrying value as of 31.12 | 876 | 3311 | 72 | 333 | 4 592 |
| Fully depreciated fixed assets, | |||||
| which are still in use | 796 | 4 971 | 393 | ||
| Estimated useful life | 3 – 5 years | 3 - 4 years | 5 years | ||
| Depreciation method | Straight-line | Straight-line | Straight-line | Not depreciated | |
| Annual lease of | |||||
| non-recognized capital assets | 0 | 32 | 0 | 0 |
Total depreciation expenses consist of depreciation of fixed assets and depreciation of intangible assets (note 12).
The company has an apartment in Trondheim for use by employees from the Oslo office while in Trondheim. The apartment is assessed at acquisition cost. The residual value is expected to be at least equal to the entered value.
All capital assets that are ready to be scrapped have been fully depreciated and have no residual book value.
The Company has no capital assets that are temporarily out of operation.
The Company does not have any leased equipment.
There are no indicators that assets need to be written off.
There has been no basis for changing depreciation periods on fixed assets.
All figures in USD 1000.
| 2013 | Purchased | Capitalized | |
|---|---|---|---|
| Software | Development costs | Total | |
| Acquisition cost | |||
| Opening balance | 6 592 | 12 295 | 18 888 |
| Additions | 2 267 | 5 410 | 7 676 |
| Sale / disposal of assets | |||
| Accumulated cost as of 12.31 | 8 859 | 17 705 | 26 564 |
| Accumulated depreciation | |||
| Opening balance | 4 746 | 8 825 | 13 571 |
| Depreciation expenses | 661 | 1 382 | 2 043 |
| Sale / disposal of assets | |||
| Total accumulated depreciation as of 12.31 | 5 407 | 10 206 | 15 614 |
| Net carrying amount | 3 451 | 7 498 | 10 950 |
| Fully depreciated fixed assets, | |||
| which are still in use | 336 | 7 156 | |
| Non-capitalized R&D expenses: | |||
| Personnel expenses | 10 629 | 10 629 | |
| Other operating expenses | 4 216 | 4 216 | |
| Total cost recognized in income statement | 14 845 | 14 845 | |
| Total expenses for R&D | 20 255 | 20 255 |
| 2012 | Purchased | Capitalized | |
|---|---|---|---|
| Software | Development costs | Total | |
| Acquisition cost | |||
| Opening balance | 6 390 | 8 651 | 15 041 |
| Additions | 203 | 3 644 | 3 847 |
| Sale / disposal of assets | |||
| Accumulated cost as of 12.31 | 6 593 | 12 295 | 18 888 |
| Accumulated depreciation | |||
| Opening balance | 4 273 | 8 347 | 12 620 |
| Depreciation expenses | 474 | 477 | 951 |
| Sale / disposal of assets | |||
| Total accumulated depreciation as of 12.31 | 4 747 | 8 824 | 13 571 |
| Net carrying amount | 1 846 | 3 471 | 5 317 |
| Fully depreciated fixed assets, | |||
| which are still in use | 336 | 7 156 | |
| Non-capitalized R&D expenses: | |||
| Personnel expenses | 11 763 | 11 763 | |
| Other operating expenses | 4 257 | 4 257 | |
| Total cost recognized in income statement | 16 020 | 16 020 | |
| Total expenses for R&D | 19 664 | 19 664 |
Total depreciation expenses consist of depreciation of intangible assets and depreciation of fixed assets (note 11).
| Economic lifetime | 10 years | 1– 5 years |
|---|---|---|
| Depreciation plan | Straight-line | Straight-line |
All figures in USD 1000.
| 2013 | 2012 | |
|---|---|---|
| Gross receivables | 30 049 | 26 092 |
| Provision for doubtful accounts | -2 | -23 |
| Accounts Receivable, net | 30 047 | 26 069 |
The provision for loss on debt receivables covers approx. 0.01% of the accounts receivable in 2013 compared with 0.08% in 2012.
All figures in USD 1000.
Cash and cash equivalents as of the balance sheet date were as follows:
| 2013 | 2012 | |
|---|---|---|
| Cash holdings | 16 181 | 29 987 |
| Tax deduction account (restricted funds) | 869 | 887 |
| Short-term investments (money market fund) | 8 785 | 9 355 |
| Cash and cash equivalents in consolidated statement of financial position | 25 836 | 40 230 |
| Cash and cash equivalents in consolidated statement of cash flows | 25 836 | 40 230 |
All figures in USD 1000.
The share capital in Nordic Semiconductor as of December 31, 2013 consists of one share class with a total of 163,440,600 shares with a face value of NOK 0.01, with a total share capital of NOK 1,634,406. Each share grants the same rights in the company, and in the event of any increase in capital existing shareholders have pre-emptive rights for any new shares.
During the year the following changes have been made in the number of shares, share capital and share premium:
| Number of shares | Share capital | Treasury shares | Share premium | |||||
|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Ordinary shares, issued and paid | ||||||||
| Holdings as of 1.1 | 16 440 600 | 168 736 600 | 283 | 292 | -2 | -9 | 14 253 | 14 253 |
| Purchase of treasury shares | -2 | -2 | ||||||
| Cancellation of treasury shares | -5 296 000 | -9 | 9 | |||||
| Holdings as of 31.12 | 163 440 600 | 163 440 600 | 283 | 283 | -4 | -2 | 14 253 | 14 253 |
No dividend was paid during 2012 or 2013.
The Board of the company, based on a resolution from the annual general meeting on April 19, 2013, has the authority to increase the company's share capital by issuing up to 16,300,000 shares with a par value of NOK 163,000. The shareholders' pre-emptive right may be waived according to the Norwegian Private Limited Companies Act §10-4. This authority is valid until the company's annual general meeting in 2014, and by June 30, 2014 the latest. The resolution covers the issue of shares in connection with a merger.
The Company owned 2,391,000 treasury shares on December 31, 2013. During 2012, the Company purchased 980,000 treasury shares through brokers at an average price of USD 2.44. During 2013, the Company purchased an additional 1,411,000 treasury shares through brokers at an average price of USD 2.79. Based on a resolution of the annual general meeting of April 19, 2013, the Board has authority to purchase the company's own shares with a limit of a face value of NOK 163,000 through one or more transactions. This authority is limited to 9.97% of the company's share capital, and the price per share that the company may pay for shares shall not be lower than the face value and not higher than NOK 200. This authority applies until the company's regular general meeting in 2014, and by June 30, 2014 the latest.
On February 18, 2013, the Board approved a grant of 3,960,470 share options to employees. The options vest after one year if the employee is in an unresigned position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 17.15. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the company's share price exceeds a cap of NOK 37.00, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
On February 18, 2014, the Board approved a grant of 5,843,712 share options to employees. The options vest after one year if the employee is in an unresigned position at the vesting date, and expire after three years. The options were granted at a strike price of NOK 38.43. On the exercise date, Nordic can determine whether they wish to settle the options contract in cash or through the issue of shares. If the company's share price exceeds a cap of NOK 150.00, the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
The largest shareholders in Nordic Semiconductor ASA were as follows as of December 31, 2013:
| Shareholder | Shares Percentage | |
|---|---|---|
| ACCELERATOR LTD | 17 332 950 | 10.61% |
| FOLKETRYGDFONDET | 15 145 837 | 9.27% |
| ENGEBRETSEN TORE | 7 537 500 | 4.61% |
| ALDEN AS | 5 750 000 | 3.52% |
| KLP AKSJE NORGE VPF | 4 100 000 | 2.51% |
| MP PENSJON PK | 4 100 000 | 2.51% |
| STATOIL PENSJON | 3 923 178 | 2.40% |
| INAK 3 AS | 3 400 000 | 2.08% |
| VERDIPAPIRFONDET DNB NORGE (IV) 3 329 762 | 2.04% | |
| GOLDMAN SACHS INT. | 3 230 000 | 1.98% |
| SKANDINAVIA ENSKILDA BANKEN AB 2 930 000 | 1.79% | |
| KOMMUNAL LANDSPENSJONSKASSE 2 800 000 | 1.71% | |
| TVENGE TORSTEIN INGVALD | 2 500 000 | 1.53% |
| AWILCO INVEST AS | 2 400 000 | 1.47% |
| NORDIC SEMICONDUCTOR ASA | 2 391 000 | 1.46% |
| MÆLAND ARNE KRISTIAN | 2 340 000 | 1.43% |
| FOUGNER INVEST AS | 2 335 806 | 1.43% |
| CANICA AS | 2 329 200 | 1.43% |
| TTC INVEST AS | 2 200 000 | 1.35% |
| HAADEM INVEST AS | 2 152 920 | 1.32% |
| Total for the 20 largest shareholders | 92 228 153 | 56.43% |
| Other shareholders | 71 212 447 | 43.57% |
| Total shares outstanding | 163 440 600 | 100.00% |
Shares held by the Board of directors and Executive management were as follows as of December 31, 2013.
| Name | Shares |
|---|---|
| Board of directors | |
| Tore Engebretsen | 7 687 500 |
| Terje Rogne | 1 250 000 |
| Anne Cecilie Fagerlie | 0 |
| Arnhild Schia | 0 |
| Karsten Rönner | 30 000 |
| Thomas Ulleberg | 0 |
| Markus Bakka Hjertø | 0 |
| Management | |
| Svenn-Tore Larsen | 2 640 400 |
| Robert Giori | 66 400 |
| Geir Langeland | 177 700 |
| Bertel-Eivind Flaten | 1 037 900 |
| Ebbe Rømcke | 58 900 |
| Svein Egil Nielsen | 15 000 |
Total 12 964 800
All figures in USD 1000.
The Norwegian company is required to have mandatory employment pension, for Norwegian employees, according to the Mandatory Employment Pension Act. As of January 1, 2008, the Company has chosen to have both a defined benefit and a defined contribution pension plan. Both pension plans satisfy the requirements of the law. Individual employees hired before January 1, 2008, could choose between retaining the original defined benefit pension plan, or moving to a defined contribution pension plan. All new employees after January 1, 2008 automatically enter the defined contribution pension plan. The two different types of pensions are described below:
The employee will receive 66% of salary based on 30 years of employment at the company. The plan includes disability pension. As of December 31, 2013 the plan had 65 members.
The pension fund is managed by DNB Life Insurance ASA. At the end of 2013 the value of the pension fund was USD 8,601,000.
The portfolio was invested as follows:
| 2013 | 2012 | |
|---|---|---|
| Equities | 6,8% | 10,2% |
| Alternative investments | 3,5% | 0,0% |
| Bonds | 17,0% | 15.2% |
| Money market | 22,0% | 17,5% |
| Bonds held to maturity | 35,2% | 37,1% |
| Property | 14,3% | 18,6% |
| Other | 1,1% | 1.4% |
| Total | 100% | 100% |
| 2013 | 2012 | |
|---|---|---|
| Current service cost | 963 | 1 334 |
| Interest expense | 548 | 435 |
| Expected return on plan assets | -296 | -176 |
| Administration fee | 14 | 61 |
| Total pension expense excl. social security tax | 1 229 | 1 654 |
| Social security tax | 173 | 233 |
| Total pension expense incl. social security tax | 1 402 | 1 887 |
| 2013 | 2012 | |
|---|---|---|
| Pension obligations | 17 444 | 16 374 |
| Plan assets | 8 601 | 8 358 |
| Estimated net pension obligations | -8 843 | -8 016 |
| Social security tax | -1 247 | -1 130 |
| Total actual net obligation incl. social security tax | -10 090 | -9 146 |
| 2013 | 2012 | |
|---|---|---|
| Net pension obligation 1.1 | 14 982 | 18 721 |
| Current service cost | 985 | 1 489 |
| Interest expense | 610 | 486 |
| Actuarial gain / loss | 931 | -4 260 |
| Pension payments | -75 | -62 |
| Currency effect on translation to USD | 12 | |
| Pension obligation 12.31 | 17 444 | 16 374 |
| 2013 | 2012 | |
|---|---|---|
| Pension assets 1.1 | 7 648 | 7 091 |
| Expected return on plan assets | 315 | 311 |
| Actuarial gain / loss | -203 | -22 |
| Administration fee | -15 | -69 |
| Employer contribution | 932 | 1 109 |
| Pension payment | -75 | -62 |
| Pension assets 31.12. | 8 601 | 8 358 |
| 2013 | 2012 | |
|---|---|---|
| Remeasurements loss (gain) - change in discount rate | (365) | 3 583 |
| Remeasurements loss (gain) - change in other financial assumptions | 745 | (16) |
| Remeasurements loss (gain) - change in mortality table | 848 | - |
| Remeasurements loss (gain) - change in other demographic assumptions | - | - |
| Remeasurements loss (gain) - experience DBO | (238) | (8 572) |
| Remeasurements loss (gain) - experience Assets | 211 | 39 |
| Investment management cost | 91 | - |
| OCI losses (gains) during period | 1 292 | (4 967) |
The following assumptions have been used as a basis for the calculation of pension expense and net pension obligation:
| 2013 | 2012 | |
|---|---|---|
| Discount rate | 4,0% | 3,9% |
| Expected return on plan assets | 4.0% | 3,9% |
| Expected future salary increase | 3.75% | 3.5% |
| Expected future increase in base amount | 3.50% | 3.25% |
| Expected future increase in pensions | 3.50% | 3.25% |
| Average turnover | 2.2% | 2.2% |
In the insurance company, risk of death and disability is distributed among all the insurance customers, and therefore this is the relevant indicator for future disability and life expectancy. Risk tables for death (mortality table K2013) and disability are based on general tables in Norway updated with historic data from the population of the insurance company. This data involves an adjustment of available tables in the form of increased life expectancy and increased probability of disability. The average life expectancy for all age groups in the tables is 85 years for men and 88 years for women. Extracts from the tables are shown below. The table shows life expectancy and probably for disability and death respectively within one year for various age groups.
| Remaining life expectancy | Probability of death | ||||
|---|---|---|---|---|---|
| Age | Men | Women | Age | Men | Women |
| 20 | 63.3 | 66.7 | 20 | 0.02% | 0.01% |
| 40 | 43.7 | 46.9 | 40 | 0.06% | 0.04% |
| 60 | 24.7 | 27.7 | 60 | 0.45% | 0.30% |
| 80 | 9.4 | 11.4 | 80 | 4.46% | 3.08% |
The average duration for the defined benefit obligation at the end of the reporting period is 17.27 years (17.54 in 2012) Expected contribution to the plan in 2014 is: USD 967,000.
The table below is giving an estimate of potential effects of changes to certain assumptions for defined benefit schemes in Norway. Other assumptions are not considered to be significant. The estimates are based on facts and circumstances as of 31.12.2013. Actual results may deviate significantly from these estimates.
| Discount rate | Wage growth in % | Life expectancy | |||
|---|---|---|---|---|---|
| 0,5% | 2 208 | 0,5% | -1 843 | +1 year | -819 |
| -0,5% | -2 571 | -0,5% | 1 846 | -1 year | 750 |
Some employees in Norway have a defined contribution pension plan. The main benefit is a contribution of 5% of salary between 1 and 6 basis points and 8% of salary between 6 and 12 basis points. Along with this the company has a disability pension of approximately 66% of salary including estimated social security based on 30 years of full employment. In 2013, the cost of the defined contribution pension was USD 569,000. As of December 31, 2013 the plan had 101 members.
All figures in USD 1000.
Nordic Semiconductor implemented a stock option program for employees on February 18, 2013.
For several years prior to 2013, Nordic Semiconductor ASA provided all employees with performance-based compensation through an annual cash bonus tied to the achievement of targets for group revenue and operating profits for the year.
The Board implemented a change to this program in 2013, which enabled performance-based compensation to be awarded through a stock option grant as an alternative to the existing cash bonus program.
On February 18, 2013, Nordic Semiconductor granted 3,960,470 share options to 132 employees. The options are exercisable after one year, and expire after three years. The options were granted at a strike price of USD 2.82 (NOK 17.15) If the company's share price exceeds a cap of USD 6.08 (NOK 37.00) the company may settle the option grant by compensating the employee the difference between the cap and the strike price.
A summary of share option transactions during 2013 is below. There were no share option transactions during 2012.
| 2013 | 2012 | |
|---|---|---|
| Outstanding options 1.1 | 0 | 0 |
| Options granted | 3 960 470 | 0 |
| Options forfeited | -20 000 | 0 |
| Options exercised | 0 | 0 |
| Options expired | 0 | 0 |
| Outstanding options 31.12 | 3 940 470 | 0 |
| Of which exercisable | 0 | 0 |
The fair value of the options is set on the grant date and expensed over the vesting period. USD 1,703,000 was expensed during 2013. The recognised share option programme liability is related to social security tax USD 2,659,000 as of 31.12.13. for the parent company only.
The fair value of options granted in 2013 was USD 0.5 (NOK 3.00) per option, according to the Black & Scholes option-pricing model. The Black & Scholes valuation of the option program was conducted by an independent advisory company.
The calculations are based on the following assumptions:
The share price is set to the value weighted average price of shares traded on the grant date, which was USD 2.56 (NOK 15.59) on the date of grant in 2013.
The strike price is the share price on the grant date * 110%.
The cap price on the options granted is NOK 37. At this price, the company may settle the option grant by compensating the employee the difference between the cap and the strike price. When calculating the value of the stock option, the value of the cap is calculated through the Black Scholes model, and deducted from the uncapped value of the option to the employee.
It is assumed that historic volatility is an indication of future volatility. The expected volatility is therefore stipulated to be the same as the historic volatility, which equalled 49.32% on the date of grant in 2013.
It is assumed that all employees will exercise the options once they are exercisable. The options are expected to have an average term of 2 years (between the minimum vesting period of one year and the maximum exercise period of three years).
The company does not forecast a dividend payout in the Black-Scholes model.
The risk-free interest rate is set equal to the relevant interest rate on government bonds on the date of grant in 2013, i.e. 1.64 %.
| All figures in USD 1000. | ||
|---|---|---|
| 2013 | 2012 | |
| Accounts payable | 6 261 | 2 481 |
| Taxes payable | 4 806 | 7 088 |
| Social security tax | 2 405 | 1 374 |
| Holiday pay | 2 380 | 2 303 |
| Allocation ship and debit | 2 340 | 1 758 |
| Accrued expenses | 3 452 | 4 182 |
| Total Current liabilities | 21 644 | 19 186 |
| See note 19 liquidity risk |
All figures in USD 1000.
The company has several operating leases for machinery and office space. The lease expenses consist of the following:
| 2013 | 2012 | |
|---|---|---|
| Office lease | 1 500 | 1 354 |
| Lease of machinery | 32 | 33 |
| Total lease expense | 1 532 | 1 387 |
As of December 31, 2013, the Group leased offices in Trondheim, Oslo, Hong Kong, Seoul, Tokyo, and Manila. The lease amounts are fixed with index regulation based on Statistics Norway's consumer price index.
Conditions for major leases are:
Trondheim office: The office lease was renewed January 1, 2013, and expires on December 31, 2017 without notice of termination. Nordic Semiconductor has a pre-emptive right to renew the lease if the lessor does not wish to make use of the premises.
Oslo office: The office lease was renewed January 1, 2014, and expires on December 31, 2015, without notice of termination.
Japan office: The office lease has a 3 months notice of termination.
Hong Kong office: The office lease has a 6 months notice of termination.
Future minimum payments for non-cancellable leases are as follows:
| Within 1 year | 1 301 |
|---|---|
| 1 to 5 years | 2 884 |
| After 5 years | 0 |
| Total non-cancellable leases | 4 186 |
All figures in USD 1000.
Nordic Semiconductor's strategy relating to its capital structure is to maintain sufficient cash and cash equivalents to meet the Company 's requirements for ongoing operations and for new investments. Management believes that it is especially important for a small company to retain a strong credit rating and significant liquidity as the Company competes in a global market against larger companies.
Nordic Semiconductor manages its capital structure and makes revisions in light of changes in the overall economy and its operating assumptions. In order to maintain or amend the capital structure, the company must purchase its own shares on the market, pay dividends to shareholders, pay back capital to shareholders or issue new shares. No changes were made in procedures or processes in the course of 2013.
Nordic Semiconductor manages its capital structure based on an equity ratio. This relationship is calculated as total equity divided by total assets. In this phase of the company's development, the goal is to keep the equity ratio above 50%.
| 2013 | 2012 | |
|---|---|---|
| Total equity | 71 891 | 65 568 |
| Total assets | 103 625 | 93 900 |
| Equity share | 70% | 70% |
The Company has a of credit agreement with a bank, which makes it possible to borrow up to MUSD 20 at any time with an interest rate equal to LIBOR + 1.15%. The line of credit agreement expires in October 2014. As of December 31, 2013, the company has no loan from the line of credit. The security is provided by inventory, receivables and operating equipment with book values as follows: inventories USD 11,748,000, accounts receivable USD 26,069,000 and operating equipment USD 4,211,000. The remainder of the company's financing is made through short-term, non-interest-bearing debt. This financing typically consists of debt to suppliers, the public sector, employees or others.
| Fair value | Amortized cost | Total | ||
|---|---|---|---|---|
| Money market | Receivables | Other financial | ||
| fund | and loans | obligations | ||
| Cash and cash equivalents | 8 785 | 17 050 | 25 836 | |
| Receivables and other short-term receivables | 32 800 | 32 800 | ||
| Long-term receivables | 759 | 759 | ||
| Total financial assets | 8 785 | 50 609 | 59 394 | |
| Accounts payable and other short-term debt | 21 644 | 21 644 | ||
| Total financial liabilities | 21 644 | 21 644 |
| Fair value | Amortized cost | Total | ||
|---|---|---|---|---|
| Money market | Receivables | Other financial | ||
| fund | and loans | obligations | ||
| Cash and cash equivalents | 9 355 | 30 875 | 40 230 | |
| Receivables and other short-term receivables | 28 365 | 28 365 | ||
| Long-term receivables | 1 133 | 1 133 | ||
| Total financial assets | 9 355 | 60 373 | 69 728 | |
| Accounts payable and other short-term debt | 19 186 | 19 186 | ||
| Total financial liabilities | 19 186 | 19 186 |
Cash equivalents at fair value are assets held as short-term deposits in interest-bearing funds invested within high-quality issuers, with floating earnings and no set maturity date (Valuation category 1, prices in active markets for identical assets or liabilities).
As Nordic Semiconductor manages an international operation, the company is subject to financial risk, primarily credit risk and foreign currency risk. Procedures for control of financial risk have been adopted by the Board and are carried out by its finance department.
The company's sale of components takes place through its distribution partners within defined geographic regions. The number of invoice recipients is thereby significantly lower than the end customer base, which increases the credit risk on customer receivables.
In order to manage credit risk, the company has established guidelines to ensure that each customer's outstanding receivables do not exceed established credit limits and that sales are only made to customers who have not had significant problems with previous payments. In the event of the bankruptcy of a distribution partner, end customer demand will be unchanged and a new distribution channel will have to be established. In 2013, 47% of revenues went through the largest distribution partner, compared to 40% in 2012.
Age distribution of customer receivables was:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Gross | Provision for | Gross | Provision for | |
| Total | doubtful accounts | Total | doubtful accounts | |
| Not due | 29 122 | 25 469 | ||
| Past due 0-30 days | 789 | 1 274 | ||
| Past due 31-120 days | 135 | -710 | ||
| Over 120 days | 1 | 2 | 60 | 22 |
| Total | 30 047 | 2 | 26 093 | 22 |
Based on its experience, it is not deemed necessary for the company to make a provision for accounts receivable that are not due (97% of receivables). Receivables to which interest applies are set aside in their entirety, as these receivables are generally difficult to collect. For the remaining receivables, loss provisions have been estimated based on the age of the receivables and the customer's payment history.
| 2013 | 2012 | |
|---|---|---|
| January 1 | 22 | 5 |
| Change in estimated loss provision | -20 | 17 |
| December 31 | 2 | 22 |
The book value of financial assets represents the maximum credit exposure. The maximum exposure to credit risk on the balance sheet date was:
| 2013 | 2012 | |
|---|---|---|
| Accounts receivable and other short-term receivables | 32 800 | 28 365 |
| Cash and cash equivalents | 25 836 | 40 230 |
| Total | 58 635 | 68 594 |
Overall, the Company seeks to minimize risk when investing its cash balance. Investments can only be made in securities which have been approved by the Board. As of December 31, 2012, the Company had invested USD 8,785 thousand as short-term deposits in money market funds with a broad distribution of high-quality issuers, floating earnings and no set maturity. An additional USD 16,181 thousand was deposited in the bank.
The Company has no externally imposed capital requirements or agreements, and has no contracts or legal requirements which are not being upheld. The Company has the following due dates with regard to contracts for financial obligations as of December 31, 2013:
| Entered amount |
Contractual cash flows |
0-3 months |
3-6 months |
6-12 months |
1-2 years |
2-5 years |
|
|---|---|---|---|---|---|---|---|
| Supplier debt and other short-term debt Other contractual |
21 498 | -21 498 | -13 488 | -8 011 | |||
| obligations | 0 | -4 186 | -325 | -325 | -651 | -1 301 | -1 583 |
The Company's liquidity requirements and risk assessment determine its investment strategy and interest rate exposure. The Company's policy is to maintain a short-term investment horizon for its surplus cash. The investment portfolio should not have an average duration longer than six (6) months.
The Group has a line of credit agreement with its bank, which allows it to borrow up to MUSD 20 at an interest rate of LIBOR + 1.15%. The line of credit agreement expires in October 2014.
Below is a sensitivity analysis of changes in general interest rate levels on Profit before tax:
Interest rate level +/- 0.25% 65
Profit before tax
The company is subject to foreign currency risk as it has its development and commercial activities in different countries. Nearly all revenues and cost of goods are in USD, while approximately 85% of the company's operating expenses excluding depreciation are in NOK. The company does not hedge its exposure to foreign currency risk.
The table below shows sales in the most significant currencies:
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Local | USD (1000) | Share of total | Local | USD (1000) | Share of total | |
| currency | revenues in % | currency | revenues in % | |||
| USD | 123 207 | 123 207 | 98.8 % | 129 003 | 129 003 | 97.6 % |
| EUR | 1 435 | 1 915 | 1.5 % | 2 020 | 2 606 | 2.0 % |
| NOK | -2 263 | -384 | -0.3 % | 3 127 | 550 | 0.4 % |
| Total | 124 745 | 100.0 % | 132 159 | 100.0 % |
Below is a sensitivity analysis of changes in the NOK exchange rate on balance sheet items, and their impact on Profit before tax:
| Profit before tax | |
|---|---|
| NOK exchange rate +/- 10% | 3 666 |
As of December 31, 2013 the company had no financial assets where there is considered to be a difference between book value and fair value. The following financial instruments are not recognized at fair value: customer receivables and other short-term receivables.
The book value of Money market fund is approximately equal to fair market value, as it has ultra-short collection cycle with low inherent risk.
Below is an overview of the Company's financial instruments:
| 2013 | 2012 | ||||
|---|---|---|---|---|---|
| Book | Fair | Book | Fair | ||
| value | market value | value | market value | ||
| Financial assets | |||||
| Cash and bank deposits | 17 050 | 17 050 | 30 875 | 30 875 | |
| Money market fund | 8 785 | 8 785 | 9 355 | 9 355 | |
| Accounts receivable | 30 047 | 30 047 | 26 069 | 26 069 | |
| Financial debt liabilities | |||||
| Accounts payable | 6 261 | 6 261 | 2 841 | 2 841 |
On February 18, 2014, Nordic Semiconductor ASA granted 5,843,712 stock options to employees of the Group, including Company executives and Employee board members. The stock option grant is described in Notes 10 and 15.
On February 18, 2014, employees of the Group exercised 2,190,366 stock options in Nordic Semiconductor ASA which had been granted during 2013. The closing share price on the exercise date was NOK 36.00, which was just below the cap on the share options of NOK 37.00.
One primary insider exercised options and sold shares in Nordic Semiconductor ASA on February 18. Thomas Ulleberg, employee representative on the board of directors, exercised 23,800 options and sold these shares at a price of NOK 34.50.
Otherwise, no events have occurred since the end of the fiscal year which are expected to materially affect the financial statements.
The Company has the following related parties:
Management: See note 10, where the members of the Board and management group are listed.
Nordic Semiconductor Inc.: Internal Group transactions between Nordic Semiconductor ASA and its Nordic Semiconductor Inc. subsidiary consist of marketing and sales promotion which the subsidiary conducts on behalf of the Parent Company, as well as management, administration and accounting which the Parent Company undertakes on behalf of the subsidiary. These transactions are made on normal business terms.
In December 2013, Nordic Semiconductor ASA set up a new fully-owned operating subsidiary, Nordic Semiconductor Poland Sp. z o.o. The new subsidiary will commence operations in 2014 as an extension of the existing R&D operations of the company.
The Board of Directors and management of Nordic Semiconductor aim to execute their respective tasks in accordance with the highest standards for corporate governance.
Nordic Semiconductor's standards for corporate governance provide a critical foundation for the company's management. These principles must be viewed in conjunction with the company's efforts to constantly promote a sound corporate culture throughout the organization. The company's core values of respect, trust, accountability and equal treatment are central to the Board's and management's efforts to build confidence in the company, both internally and externally. Nordic Semiconductor promotes principles of corporate social responsibility according to the guidelines of the Electronics Industry Citizenship Coalition (EICC) code of conduct.
Nordic Semiconductor's principles for corporate governance are based on Norwegian law, regulations by the Oslo Stock Exchange and the Norwegian Code of Practice for corporate governance published on October 23, 2012. The company's policy on corporate governance are published each year in the annual report, and described in detail below.
Nordic Semiconductor's Articles of Association states, "The object for which the company is established is the development and sale of electronic components, integrated circuits, design tools and related solutions."
Nordic Semiconductor designs, sells and delivers integrated circuits and related intellectual property for use in shortrange wireless applications. The company specializes in ultra-low power components, based on its proprietary 2.4 GHz RF and Bluetooth Smart technology. All manufacturing and direct distribution of components are outsourced to specialist subcontractors. The company is headquartered in Trondheim and Oslo, Norway, and has offices in the US, Poland, Hong Kong, Korea, Japan, Taiwan and the Philippines.
The company's growth philosophy, as well as the cyclicality of its business, means that the company will undertake to maintain a high equity ratio and considerable liquidity.
The company aims to provide shareholders with returns in the form of dividends based on surplus cash generated by the company. This assumes that the company's needs for financial strength relative to operational requirements and new investments are addressed. The company's dividend policy is reviewed each year by the Board of Directors.
The Board of Directors, in accordance with the resolution of the Annual General Meeting held April 19, 2013, has been authorized to buy back up to 16,300,000 own shares for a total par value of NOK 163,000.00 in one or more transactions. The authorization is limited to 10 percent of the company's share capital, and the price per share which the company may pay for shares acquired in this manner shall not be less than the par value nor greater than NOK 200. This power of attorney will remain in effect until the company's ordinary annual general meeting in 2014.
In accordance with the decision passed at the general meeting held April 19, 2013, the Board of Directors has the authority to increase the company's share capital by issuing up to 16,300,000 shares with a total par value of NOK 163,000. The authority is to be used for purposes defined in the Notice of the Annual General Meeting, including to strengthen the company's shareholder's equity, to execute share capital increases with one or more strategic partners, or to complete a merger or acquisition using shares or cash. This power of attorney will remain in effect until the company's annual general meeting in 2014, and can be implemented through a private placement, rights issue or public offering.
Nordic Semiconductor has one class of shares, where each share has one vote at the company's shareholders' meeting. Nordic Semiconductor strictly adheres to the principle of equal treatment of all shareholders. The company's transactions in its own shares are conducted in accordance with good stock exchange practice in Norway.
If the Board wishes to quickly raise capital, the Board has been authorized to direct a share capital increase to selected investors chosen by the Board, up to the limits quantified above. In this event, the company will notify the stock exchange of its reasons for implementing a directed share placement. Existing shareholders' pre-emptive subscription rights under §10-4 in the Norwegian Companies Act can be waived under these circumstances.
Such capital increases shall be executed at or near the current stock price listed on the Oslo Stock Exchange. This authorization remains valid until the company's ordinary annual general meeting in 2014.
The company is generally cautious with regards transactions with shareholders, members of the Board of Directors, senior employees or related parties to the above. To ensure that the best code of conduct applies, the company requires notification and review of any process or transaction in which both the company and a senior employee or member of the Board of Directors may have interests.
Nordic Semiconductor will seek to conform to the principles of equal treatment of related parties and possible transactions with related parties that are laid down in the Norwegian Code of Practice for Corporate Governance.
Nordic Semiconductor's shares are freely tradable and there are no restrictions on the sale and purchase of the company's shares beyond those pursuant to Norwegian law.
The Annual General Meeting is the company's highest body and the shareholders exert their authority in the company through the Annual General Meeting. Nordic Semiconductor encourages all shareholders to participate and exercise their rights in the Annual General Meeting.
Nordic Semiconductor has an ambition to hold the Annual General Meeting in accordance with the Norwegian Code of Practice for Corporate Governance. The notice of the Annual General Meeting, including relevant information shall be announced and distributed at least 21 days in advance of the Annual General Meeting, and the final date for notification of attendance is three working days prior to the Annual General Meeting.
Shareholders who are unable to attend may vote by proxy. Members of the Board of Directors and the auditor attend the Annual General Meeting. The Annual General Meeting is chaired by a person independent of the company's Board of Directors and management.
Pursuant to the Articles of Association the following issues shall be discussed and decided at the Annual General Meeting:
Nordic Semiconductor has a Nomination Committee which is elected with a defined mandate during the Annual General Meeting. The Nomination Committee's duties are to represent the interests of the shareholders in general, and to propose qualified candidates for the Annual General Meeting's election of the Board of Directors as well as to propose the remuneration to the Board of Directors. The Nomination Committee will provide reasons for its recommendation in the notice for the AGM, including information on the candidates' competence, capacity and independence.
The Nomination Committee consists of three members who are shareholders or who represent the shareholders. The company's executive personnel are not represented on the Nomination Committee. The deadline for submitting proposals to the Nomination Committee is one month before the Annual General Meeting.
The members of the Nomination Committee are:
The Board of Directors and the Chairman of the Board of Directors are elected by the Annual General Meeting on the basis of proposals from the Election Committee.
Both the Chairman and the shareholder-elected members of the Board of Directors are elected for a term of up to two years. The Board of Directors has a permanent Vice Chairman. A more detailed description of the background, qualifications, and term of service of each member of the Board of Directors and the number of Nordic Semiconductor shares they own are provided in the annual report. Members of the Board are encouraged to hold shares in the company.
The composition of the Board of Directors meets the requirements of the Norwegian Code of Practice for Corporate Governance with respect to members' independence of the executive management and with respect to important business relationships. The independence of the members of the Board of Directors is also evident in the fact that there are few instances of disqualification in connection with matters dealt with at Board meetings. Representatives of the executive personnel are not members of the Board of Directors.
The conduct of the Board of Directors is in accordance with the Board instructions of Nordic Semiconductor ASA. In accordance with the said instructions, the Board is responsible, to the degree necessary, for approving business strategies and budgets for the company. The Board is also responsible for ensuring that the company has a competent management with clear internal distribution of responsibility and work.
Each year, the Board of Directors adopts a specific meeting and activity plan for the following year. This plan covers strategic planning, monitoring of the business, and other relevant business issues. The Board's activity plan for 2014 stipulates eight meetings, two of which were scheduled for all day meetings to discuss and explore strategy and technology-specific issues.
The Board of Directors carries out an evaluation of its activities each year and on this basis discusses improvements in the organisation and implementation of its work.
The Board has established a Compensation Committee to discuss and decide the remuneration principles for the CEO and executive management.
The Board acts as the Audit Committee for the purpose of identifying, understanding and evaluating operational and financial risks. In order for the entire Board of Directors to be directly involved in evaluating the company's financial reporting, audit, and control procedures, the Board has received shareholder approval to function as the Company's audit committee, in accordance with the Public Companies Act § 6-42 (3). The Board holds biannual meetings with the company's appointed Auditor, one in the fall to discuss the preparations for the annual accounts and company audit, and one in the spring to discuss the final accounts and other findings.
The Board and management are committed to ensuring that the company maintains sound and effective internal controls to safeguard the value of the enterprise, as well as its principles of ethical conduct and corporate social responsibility. Nordic Semiconductor's risk management system is fundamental to the achievement of its financial goals.
The company's primary internal control routines related to financial reporting are as follows:
The finance team prepares a monthly financial report which is distributed to and reviewed by CEO and the Board of Directors. In preparing the monthly financial report, the accounting team conducts reconciliations of all major balance sheet items, which are independently reviewed by a second member of the team. Balance sheet items subject to accounting estimates are regularly analyzed to ensure that all assumptions relating to the accounting estimate remain valid. As part of the monthly financial report, the financial results are compared with the company's budget and prior forecast to analyze variances and ensure that they are not the result of incorrect reporting.
Each year, the auditor also performs tests of the company's internal control routines. The quarterly and annual financial reports are also subject to review and approval by the Board. In addition, the Board of Directors performs biannual reviews of the company's business strategy focusing on market development, technology updates, competitive positioning and risk factors.
The Board presents an in depth description and analysis of the company's financial status in the Report of the Board of Directors in the company's annual report. The report also describes the main drivers and risks related to the operation of the business.
All remuneration to the Board of Directors is disclosed in Note 10 of the Nordic Semiconductor Group annual accounts.
Members of the Board of Directors do not receive additional remuneration from the company beyond the compensation awarded to Board members. The remuneration to Board members is not performance based, and the company does not provide share options to Board members.
The Board of Directors discusses and approves the terms and conditions for the CEO once a year and monitors the general terms and conditions for other senior employees of the group.
The main principle in the Company's policy for remuneration and compensation is that the leading employees shall be offered competitive terms, so as to achieve the desired competence and incentives in the Company's executive management team. Salary and other benefits for executive management will in the current year be established in accordance with the above-mentioned main principle.
The Company has established an annual performance bonus and a retention bonus program for the executive management team, in which the manager must remain within his position until the start of the following year in order to be eligible. The bonuses may be awarded through a direct cash payment or through the grant of share options in the company. Performance-based compensation will be subject to an absolute limit and fulfillment of performance criteria, both decided by the Board at its discretion.
Nordic Semiconductor strives to communicate actively and openly with the market. Nordic Semiconductor's accounting procedures are highly transparent and its financial statements are prepared and presented in accordance with the International Financial Reporting Standards (IFRS). The Board of Directors monitors the company's reporting.
Nordic Semiconductor's financial reporting calendar for 2014 has been announced to the Oslo Stock Exchange and can be found on the company's website. The company's annual and quarterly reports contain extensive information about the various aspects of the company's activities. The company's quarterly presentations are transmitted directly on the internet and may be found on Nordic Semiconductor's websites together with the quarterly and annual reports. A comprehensive and detailed presentation of other information, reports and documents may also be found on Nordic Semiconductor's websites. The company always ensures that all shareholders are treated equally as regards access to financial information.
Nordic Semiconductor's Chief Financial Officer is responsible for contact with shareholders apart from the General Meeting. The Chief Financial Officer reports regularly to the Board about the company's investor relations activities. The Board has appointed an investor relations committee to further review the company's communications activities.
The Board of Directors will not seek to hinder or obstruct any takeover bid for the company's activities or shares. In the event of a takeover bid, as discussed in item 14 of the Norwegian Code of Practice for Corporate Governance, the Board of Directors will seek to comply with the recommendations therein as well as complying with relevant legislation and regulations.
If the Company is acquired, the CEO's resignation period extends to 12 months, and any remaining retention bonus to the CEO will be paid in its entirety following the closing of the acquisition, as described in Note 10 of the Group financial statements. There are otherwise no material obligations expected by the company as a result of an acquisition, aside from normal legal and advisory fees.
Ernst & Young has been elected by the Annual General Meeting to act as auditor to confirm to the Annual General Meeting that Nordic Semiconductor's annual accounts have been prepared and presented in accordance with current laws and regulations. Fees paid to the auditor are reported at the Annual General Meeting.
In the fall, the external auditor presents to the Board of Directors an evaluation of risk, internal control and the quality of reporting at Nordic Semiconductor, and the audit plan for the following year. The external auditor also takes part in the Board's discussions on the annual financial statements. On both occasions, the Board of Directors ensures that the Board and the external auditor are able to discuss relevant matters at a meeting at which the executive management is not present.
The auditor shall be independent of the company. As a consequence, Nordic Semiconductor does not engage the elected auditor for tasks other than the financial audit required by law. Nevertheless, the auditor is used for tasks that are naturally related to the audit, such as technical assistance with tax returns, annual accounts, understanding of accounting and tax rules and confirmation of financial information in various contexts.
Nordic Semiconductor has a world-class sales organization composed of regional sales directors, technical sales managers, and local application engineers, headquartered in Norway with sales offices in the US, China, Japan, and Korea.
The sales organization works directly with Nordic's largest customers to build awareness and adoption of Nordic's solutions within these high-volume accounts. The Company uses a network of leading electronic component distributors for sales to small- and medium-size customers in the different sales regions. In addition, the Company outsources responsibility for all direct distribution to its distributors, including all warehousing, end-customer invoicing and logistics within the regions.
The sales process generally runs through a number of phases before volume shipments of a component can begin.
Nordic Semiconductor's components are compared with components from three or four other suppliers.
The customer makes a first model with components from Nordic Semiconductor, often based on modules or an evaluation kit.
A smaller series is produced to test the end product from a marketing perspective or with key customers.
All end products must be approved in accordance with national and/or regional regulation for sales of electronics and radio frequency products.
This is first achieved after the steps above have been completed and after the project has passed the internal product release criteria of customers.
The introductory sales and development phase usually takes 12-18 months, from the start of the evaluation phase until the finished end product.
Once a product is released with a Nordic Semiconductor wireless solution, customers are generally interested in building a platform for future releases of related products. This progress is an advantage to the Company as it speeds up development of subsequent products, and it also gives Nordic Semiconductor the opportunity to develop more application-specific solutions to serve the needs of the customer.
Nordic Semiconductor expects demand for its wireless solutions to grow dramatically in the coming years, as the "internet of things" expands and as wireless connectivity becomes a standard feature in many new products. The company believes that its Bluetooth Smart technology will be a core technology behind the coming wave of wireless products, as it will enable
Geir Langeland Sales and Marketing Director
the products to connect a huge and growing ecosystem of existing smartphones, PC's, tablets and TV's.
In particular, the company expects the following growth opportunities to emerge across its key business segments:
PC accessories are the company's largest business segment, and represented 55% of the company's annual revenue in 2013. Despite recent weakness in the PC market, Nordic continues to view the market for PC accessories as a business opportunity, as wireless accessories grow in popularity. The company estimates that only approximately 20% of PC buyers are purchasing a wireless mouse/keyboard with a new PC (including aftermarket purchases), leaving a large unaddressed market for wireless accessories among PC users.
In addition to PC accessories, Bluetooth Smart technology also creates new opportunities for Nordic to address the tablet accessory market. Currently, many tablets cannot connect with ultra-low power wireless accessories, as they do not contain ports for inserting a proprietary 2.4 GHz USB dongle. Therefore, they are limited to communicating with established wireless standards such as Basic Data Rate ("classic") Bluetooth or WiFi. Due to significantly higher power consumption, these wireless standards are not optimal for connecting with small battery-powered sensor applications such as wireless keyboards.
As tablets implement Bluetooth Smart Ready technology, these devices will soon connect with ultra-low power Bluetooth Smart keyboards and other accessories. These keyboards will enable tablets to be used much more effectively for productivity applications (such as writing or work activities) in addition to more casual use.
(includes wearable electronics such as sports / health monitoring devices and hearing aids, and portable electronics such as mobile phone accessories, and proximity sensors):
Nordic considers the market for mobile/wearable technology to be its largest business opportunity during the next few years based on the explosive growth of Smartphones and related applications. The Smartphone is an ideal device to connect with wireless accessories due to its huge market volumes, portability, compatibility with wireless standards, highly functional screen and touch interface, and ease of downloading new software ("apps") for interacting with a wireless device.
As Smartphones adopt Bluetooth Smart Ready technology, many new Bluetooth Smart wireless accessories are being released to connect with this growing installed base of compatible devices. The potential applications for these Bluetooth Smart mobile accessories ("app-cessories") are nearly endless, as they encompass any sensor which can transmit data to the Smartphone, or any device which the Smartphone can control.
For example, the healthcare industry is promoting medical devices with Bluetooth Smart technology to enable cost-effective monitoring of a growing elderly population as well as patients with chronic illness. With these devices, patients with conditions such as high blood pressure, diabetes or heart ailments can monitor their condition through a body-worn health sensor connected wirelessly to a mobile handset. The handset can also transfer medical data further (via web services) to a healthcare provider to follow up on the patient's condition.
In addition to health sensors, many other new low-power wireless applications are currently being developed to connect mobile handsets to watches, ID/security tags, fitness and gaming accessories, to name only a few applications.
(includes wireless solutions for appliances such as TV's / settop boxes, gaming, toys and wireless charging units):
Wireless solutions are currently being implemented in a broad range of home electronic appliances to enable users to interact with these devices via a Smartphone or other remote control unit. Bluetooth Smart is an ideal wireless solution for many of these embedded applications.
For example, new generations of home media centers (called Connected TV's) are increasingly providing internet-based services and software apps in addition to the television offering, and will require remote controls with advanced navigation functionality similar to a mouse/keyboard/motion control device to search for content. Bluetooth Smart technology provides an excellent remote control solution for Connected TV's, enabling advanced navigation functionality with high performance and ultra-low power consumption.
In addition to next generation remote controls, Bluetooth Smart will allow many other appliances throughout the home to wirelessly connect with users and with each other. Examples include new generations of wireless toys, game controllers and home automation solutions for common household items.
Even battery charging units are now implementing wireless technology. Recently, the Alliance for Wireless Power consortium (A4WP) has developed a standard for a small charging appliance which can wirelessly recharge batteries on a broad range of electronic devices. This standard (called Rezence™) relies on Bluetooth Smart technology to wirelessly transfer critical information such as battery type and charge status from the electronic device to the charger. This enables the charger to manage the charge session between the charger and the device. Nordic Semiconductor is an active member of the A4WP consortium, along with mobile phone industry giants such as Samsung, LG and HTC.
(i.e., RFID / security systems, building sensors, industrial automation, automotive sensors): Installed sensor networks were Nordic's fastest growing area during 2013, and represent the largest and most diverse market opportunity in the longer term.
Wireless sensor networks are increasingly being utilized for identifying people and products, and for managing the efficient use of resources and public goods. Examples of such applications include access control, indoor mapping and location services, logistics, and energy management systems for homes and offices.
In addition, sensor networks can provide information about a device's internal operations and its external environment to ensure that problems are quickly identified. Wireless sensors for autos and home appliances, and sensors to manage factory processes are all emerging examples of such applications.
Wireless sensor networks are sometimes referred to as "machine-to-machine" (or "M-to-M") technologies, as they often collect and distribute information from objects rather than people. While this market is still in its earliest stages of development, the potential applications are so numerous that they are impossible to quantify. Bluetooth Smart provides a very attractive standard for building these wireless sensor networks, based on its compatibility with a huge existing installed base of Smartphones and other devices.
One example of a Bluetooth Smart-based sensor network which has gained recent attention is the location beacon (frequently called "iBeacon"). Location beacons featuring Bluetooth Smart technology can detect when a user's Smartphone is in range and activate information both on the user's Smartphone and at the location which has installed the beacons.
For example, location beacons positioned at a retail store can enable customers to upload targeted information on their Smartphone such as product information, promotions, and an indoor positioning map when they approach the beacon. In return, the retailer can capture information regarding its customers and their shopping patterns. Finally, information gathered by location beacons can be used to expedite mobile payments between the customer's Smartphone and the retail location.
Nordic Semiconductor's R&D department consists of a highly qualified team of engineers, which develops worldleading technology for wireless applications. The company's primary focus is on ultra-low power wireless solutions, based on proprietary 2.4 GHz RF and Bluetooth Smart technologies (aka Bluetooth low energy, Bluetooth 4.0).
Bluetooth Smart is the first wireless standard to combine interoperability and a "light" protocol optimized for ultra-low power consumption. The Bluetooth Smart standard makes it possible for small peripheral devices such as watches and health sensors to communicate wirelessly with mobile telephones and PCs equipped with Bluetooth technology.
The following core activities are involved in developing and supplying wireless solutions to customers:
Nordic Semiconductor began its development of shortrange wireless solutions with low power consumption in 1996, based on research originating at NTNU university in Trondheim, Norway. Based on this expertise, the company has since 2002 sold wireless solutions within the 2.4 GHz frequency band to vendors of high volume consumer electronics products. Standard components from Nordic Semiconductor have been developed in collaboration with key customers and markets. The result of this development activity is a state-of-the-art RFIC design which provides excellent performance for data transfer, coexistence and ultra-low power consumption.
Maintaining a competitive advantage within integrated circuit technology for wireless communications requires a sustained focus on design methodology, production technology and the use of CAD tools. Nordic Semiconductor continues to develop its design methodology for mixedmode design in collaboration with the world's leading semiconductor producer, Taiwan Semiconductor Manufacturing Company (TSMC). The Company also actively cooperates with major tool vendors and IEEE work groups to enhance the industry's methodologies and productivity for low-power design.
Competence within production technology is also an important source of competitive advantage in integrated circuit design. Nordic Semiconductor focuses its R&D efforts on developing standard wireless components with cost-effective CMOS production technology. In order to improve wireless performance while maintaining low production costs, Nordic Semiconductor's design team concentrates
Svein-Egil Nielsen Chief Technology Officer
on exploiting CMOS technology in new and unique ways.
The integration of Nordic Semiconductor's transceivers with other electronics components is a critical factor for maximizing the performance and reducing the total cost of the end product applications. In recent years, Nordic Semiconductor has created integrated system-on-chip solutions for customers, developing a single wireless component which combines Nordic's wireless transceivers with microcontrollers, memory, protocols and application peripheral software in an optimal and cost-efficient manner.
In 2012, Nordic released the latest generation of its system-on-chip platform, called the nRF51 series. The nRF51 series improves upon the industry-leading specifications of the previous generation of Nordic's products, reducing power consumption by up to 50%. In addition, the nRF51 offers a powerful ARM Cortex M0 processor which provides up to 10X more processing power for system-onchips than the previous generation. Finally, the nRF51 provides a very easy-to-use platform for application development, with a software architecture that cleanly separates the application and protocol stacks and a hardware architecture that facilitates maximum reuse across product designs. The new system-on-chip platform has been very well-received by customers, and many new products featuring the nRF51 have been released.
Nordic Semiconductor provides application peripheral software and protocols for its system-on-chip solutions. The Company places particular focus on developing protocols to minimize energy consumption and to protect its units against disturbance from other radio equipment such as WLAN and Bluetooth. Gazell™ is Nordic Semiconductor's own proprietary protocol, and is customized for wireless mice, keyboards and remote control units. This protocol provides the lowest possible energy consumption and can coexist with other 2.4 GHz systems.
In addition to Nordic's proprietary protocol, Nordic Semiconductor has implemented the Bluetooth Smart protocol in its firmware. This ultra-low power implementation offers the customers all the functionality and performance of the Bluetooth Smart technology, while reducing the impact of the complexity of the underlying protocol on the system's performance.
Nordic Semiconductor works closely with the manufacturers of end product applications in its strategic segments. In order to reduce time and cost requirements to design Nordic's technology into end products, a full suite of development tools has been created for Nordic's wireless solutions. This development suite includes a complete hardware and software development kit, as well as reference designs for end product applications.
New reference designs are being developed that are tailored to selected applications for each new component. This means that the customer receives a complete sample product design from Nordic, including hardware and circuit board layout as well as microcontroller software and protocols, so that the customer can test and build an application around an existing reference solution from Nordic. This results in shorter design time for Nordic Semiconductor's customers and ensures the highest possible quality of the end product.
During the last year, Nordic Semiconductor has released reference designs for some of the most popular Bluetooth Smart applications, including wireless mouse / keyboard, remote control, and proximity sensors, to complement thirdparty product designs in areas such as sports and health.
In addition, Nordic Semiconductor has released the Demo App, which provides developers with an ideal starting point to develop Bluetooth Smart accessories for smartphones and tablets. The Demo App is a fully functional software application that will work with a broad range of Bluetooth Smart accessories for the mobile phone including wireless heart rate belts, foot pods, temperature, proximity tags, weight scales, and blood pressure monitors. Developers receive complete source code and documentation for the Demo App, enabling them to accelerate development of Bluetooth Smart accessories for smartphones and tablets by building on top of a ready-built design framework with proven code for ultra-low power wireless connectivity.
Nordic Semiconductor manufactures its components through specialist subcontractors. Taiwan Semiconductor Manufacturing Company (TSMC) is Nordic Semiconductor's main wafer supplier, while Advanced Semiconductor Engineering (ASE) and Amkor Technology manages encapsulation and testing.
These suppliers are the largest in their fields. Because of their size, these companies are able to provide world-class manufacturing facilities as well as technological expertise and flexibility to support Nordic Semiconductor's growth and production requirements. Nordic Semiconductor's suppliers use well-established and documented methods for process control and are certified in accordance with all relevant industrial standards, including ISO 9001:2008 and ISO/TS 16949.
The manufacturing process begins with the production of a raw silicon wafer. The raw silicon wafer is refined through layered processing until there are a number of functional circuits, called integrated circuits (IC), spread over the surface. There can be hundreds or thousands of circuits on a single wafer. Processing takes place in what is referred to as a "wafer-fab". Modern wafer-fabs are characterized by complex technology, and the cost of such facilities may be in the billions of dollars. The production capacity of such units is often in the range of hundreds of thousands of wafers per month.
The next stage after processing is encapsulation. The main purpose of encapsulation is to connect the integrated circuit to the surroundings in a reliable manner. The processed wafer is cut and each individual circuit is positioned in a form of basic frame. The main function of the frame is to adapt the electrical connection to the specification of the manufacturer of the printed circuit board. The electrical connection is made in this example by connecting a thin gtold thread from the connection point on the circuit to the equivalent points on the frame. Finally, the whole structure is molded into a protective cover, resulting in a mechanically robust unit.
The final stage of the production process for a semiconductor component is an electrical test, various other quality checks, and finally packing for dispatch. Management at Nordic Semiconductor believes testing capacity to be critical to avoid production bottlenecks, and has acquired its own operational testers to support its production requirements.
In addition to testing, Nordic Semiconductor regularly monitors and optimizes process-related factors that can improve production quality. The Company also carries out test chip measurements to ensure the quality of technology models. These quality assurance activities enable Nordic Semiconductor to manage its production with high yields and to avoid costly redesigns.
The main objectives of the shareholder policy of Nordic Semiconductor are the following:
Nordic Semiconductor will publish financial reports for 2014 as follows:
| Interim Report Q1 2014 | April 10, 2014 |
|---|---|
| Interim Report Q2 2014 | July 11, 2014 |
| Interim Report Q3 2014 | October 16, 2014 |
| Interim Report Q4 2014 | February 10, 2015 |
The regularly scheduled General Meeting of Shareholders of the Company is planned to be held following the
Weekly share price and volume trend 2013
Robert Giori Chief Financial Officer
Nordic Semiconductor prioritizes open communication with investors and financial markets.
Q1 financial presentation in Oslo, at 9:00 am, on Thursday April 10, 2014.
Presentations will be held for shareholders, brokers and analysts in connection with the publication of the annual and interim reports. The Company prioritizes open communication with investors and financial markets.
The intention is to increase knowledge about Nordic Semiconductor ASA through openness and adequate information, thereby encouraging interest in the Company and ensuring that the price of the Company's shares will reflect the fair value of the Company.
The Company will provide up-to-date information about events of significance for the determination of the fair value of the Company through announcements on the Oslo Stock Exchange, press releases and information on Nordic Semiconductor's website www.nordicsemi. com. The annual and quarterly reports of the Company will be available on the Company's website www.nordicsemi. com, as well as through the Oslo Stock Exchange.
The registered share capital in Nordic Semiconductor as of December 31, 2013 consists of one share class with a total of 163,440,600 shares with a face value of NOK 0.01, so that the total share capital is NOK 1,634,406. Each share grants the same rights in the company. The Company's shares are registered in the Norwegian Central Securities Depository (VPS) under VPS No. ISIN NO 000 3055501. The evolution of the share capital is as shown in the table below.
| Change in | Changes in | New share | ||||
|---|---|---|---|---|---|---|
| number of | Par value | share capital | capital | Shares | ||
| Changes | Date | shares | (NOK) | (NOK) | (NOK) | issued |
| Status | Jan 1996 | - | 1,00 | - | 1 000 000 | 1 000 000 |
| New share issue | Mar 1996 | 175 000 | 1,00 | 175 000 | 1 175 000 | 1 175 000 |
| New share issue | Feb 1997 | 117 000 | 1,00 | 117 000 | 1 292 000 | 1 292 000 |
| Share split (1:4) | Apr 1997 | 3 876 000 | 0,25 | - | 1 292 000 | 5 168 000 |
| Conversion | Sep 1997 | 141 119 | 0,25 | 35 280 | 1 327 280 | 5 309 119 |
| Conversion | Sep 1998 | 127 461 | 0,25 | 31 865 | 1 359 145 | 5 436 580 |
| Conversion | Jun 1999 | 30 791 | 0,25 | 7 698 | 1 366 843 | 5 467 371 |
| Conversion | Apr 2000 | 32 957 | 0,25 | 8 239 | 1 375 082 | 5 500 328 |
| Option exercise | Jun 2000 | 16 666 | 0,25 | 4 167 | 1 379 249 | 5 516 994 |
| New share issue | Oct 2000 | 550 000 | 0,25 | 137 500 | 1 516 749 | 6 066 994 |
| Conversion | Apr 2001 | 28 127 | 0,25 | 7 032 | 1 523 780 | 6 095 121 |
| Option exercise | Jun 2001 | 6 834 | 0,25 | 1 709 | 1 525 489 | 6 101 955 |
| Option exercise | Jun 2002 | 4 270 | 0,25 | 1 068 | 1 526 556 | 6 106 225 |
| Share split (1:5) | Apr 2004 | 24 424 900 | 0,05 | - | 1 526 556 | 30 531 125 |
| Option exercise | May 2004 | 601 938 | 0,05 | 30 097 | 1 556 653 | 31 133 063 |
| Option exercise | Jul 2004 | 600 000 | 0,05 | 30 000 | 1 586 653 | 31 733 063 |
| Option exercise | Apr 2005 | 200 000 | 0,05 | 10 000 | 1 596 653 | 31 933 063 |
| Option exercise | Apr 2005 | 400 000 | 0,05 | 20 000 | 1 616 653 | 32 333 063 |
| Option exercise | May 2005 | 756 837 | 0,05 | 37 842 | 1 654 495 | 33 089 900 |
| Option exercise | Feb 2006 | 2 044 220 | 0,05 | 102 211 | 1 756 706 | 35 134 120 |
| Cancellation of shares | Sep 2009 | (1 386 800) | 0,05 | (69 340) | 1 687 366 | 33 747 320 |
| Share split (1:5) | Jun 2010 | 134 989 280 | 0,01 | - | 1 687 366 | 168 736 600 |
| Cancellation of shares | Oct 2012 | (5 296 000) | 0,01 | (52 960) | 1 634 406 | 163 440 600 |
As of December 31, 2013, Nordic Semiconductor had 1,590 shareholders. The company had 131 foreign shareholders, which owned a total of 25% of the Company's shares. Nordic Semiconductor also owned 1.5% of its own shares which were repurchased during 2012 and 2013 Based on the number of shares, the composition of shareholders is as follows:
| 31.12.2013 | 31.12.2012 | |||
|---|---|---|---|---|
| Top 20 shareholders | Shareholding | Percent | Shareholding | Percent |
| Accelerator Ltd | 17 332 950 | 10.6 % | 17 332 950 | 10.6 % |
| Folketrygdfondet | 15 145 837 | 9.3 % | 9 919 024 | 6.1 % |
| Tore Engebretsen | 7 537 500 | 4.6 % | 7 537 500 | 4.6 % |
| Alden AS | 5 750 000 | 3.5 % | 5 750 000 | 3.5 % |
| KLP Aksje Norge | 4 100 000 | 2.5 % | 4 193 205 | 2.6 % |
| MP Pensjon | 4 100 000 | 2.5 % | 4 500 000 | 2.8 % |
| Statoil Pensjonskassen | 3 923 178 | 2.4 % | 3 553 268 | 2.2 % |
| INAK 3 AS | 3 400 000 | 2.1 % | 5 140 000 | 3.1 % |
| Verdipapirfondet DNB Norge (IV) | 3 329 762 | 2.0 % | 1 094 249 | 0.7 % |
| Goldman Sachs Int. Equity (nominee account) | 3 230 000 | 2.0 % | 4 980 190 | 3.0 % |
| Skandinaviska Enskilda Banken AB | 2 930 000 | 1.8 % | 2 015 013 | 1.2 % |
| Kommunal Landspensjonskasse | 2 800 000 | 1.7 % | 3 200 000 | 2.0 % |
| Torstein Tvenge | 2 400 000 | 1.5 % | 2 500 000 | 1.5 % |
| Awilco Invest AS | 2 900 000 | 1.5 % | 5 121 000 | 3.1 % |
| Nordic Semiconductor ASA | 2 391 000 | 1.5 % | 383 000 | 0.2 % |
| Arne-Kristian Mæland | 2 340 000 | 1.4 % | 2 805 000 | 1.7 % |
| Fougner Invest AS | 2 335 806 | 1.4 % | 2 900 000 | 1.8 % |
| Canica AS | 2 329 200 | 1.4 % | 2 015 013 | 1.2 % |
| TTC Invest AS | 2 200 000 | 1.3 % | 2 200 000 | 1.3 % |
| Haadem Invest AS | 2 152 920 | 1.3 % | 1 880 000 | 1.2 % |
| Total for the 20 largest shareholders* | 92 228 153 | 56.4 % | 98 859 586 | 60.5 % |
| Other shareholders | 71 212 447 | 43.6 % | 64 581 014 | 39.5 % |
| Total shares outstanding | 163 440 600 | 100.0 % | 163 440 600 | 100.0 % |
* Reflects total shareholding of the 20 largest shareholders as of 31.12.13 and 31.12.12. Several of the largest shareholders as of 31.12.12 do not appear on the list of the 20 largest shareholders as of 31.12.13.
Tore Engebretsen has a cand. real. degree from the University of Oslo, with a major in theoretical physics (1978). He was one of the founders of VMETRO ASA, and served as its CEO from the company's founding in 1986 until 2003 and its Chairman from 2003 until 2008. Engebretsen has been Chairman of Nordic Semiconductor since 2001. He has also been a board member in the companies Ferd Venture ASA, Prof-
doc ASA and Nera ASA. Engebretsen is a partner in the investment company Nunatak AS, and is a Chairman of the Board in the associated portfolio companies Elliptic Labs AS, Squarehead Technologies AS, Media Network Services AS and Transpacket AS. Holdings in the company: 7 687 500 shares.
Anne-Cecilie Fagerlie is Executive Vice President Industry Verticals in EVRY Norway. She has a Master degree in Computer Science from NTH (now NTNU). Afterward, she began working at Arthur Andersen/Andersen Consulting/Accenture where she became partner in 1993. In 2002, Fagerlie joined Aker Kværner as Senior Vice President of Group IT. From 2006 to 2012 she was General Manager
of Nordics in Avanade, an international consultancy owned by Accenture and Microsoft.
Dr. Karsten Rönner has a PhD in Electrical Engineering and a MSc. in Physics from University of Hannover, Germany. He has 17 years experience from the semiconductor and electronics industries at Siemens, Infineon and Systemonic. During this time he worked for several years in Japan and in Silicon Valley. In addition, Dr. Rönner has more than seven years of experience in corporate finance as managing director
and co-owner of Sardis Capital. He is a German citizen, and has been managing partner of the Startbahn venture fund in Dresden, Germany since 2011. Holdings in the company: 30 000 shares.
Terje Rogne is currently Chairman of Nokas AS, and is also a Board member of Apptix ASA, Dolphin Group ASA, Projectiondesign AS and Unified Messaging Systems AS. From 1994 until 2004, Rogne was Chief Financial Officer of Tandberg ASA. Afterward, he then served as the Head of Operations and Investor Relations for Tandberg until 2008. Before his career in Tandberg, Rogne was Finance Director
in Kværner AS. He has an MBA from the University of San Diego and a Bachelor of Business degree from the Oslo School of Business Administration. Holdings in the company: 1 250 000 shares.
Arnhild Schia has a Master in Computer Science degree from Strathclyde University and a Business degree from BI. She has 20 years experience from the IT, Software and Telecommunication industries and has since 2011 been the CCO of T-VIPS / Nevion. Schia has previously served as Senior Vice President for Comptel Corporation, as CEO for EDB Telecom, as CEO for Incatel AS, as Executive Vice President
of Telesciences Inc. and as IT director for Telenor.
Thomas Ulleberg has a Masters degree in Production and Quality from NTNU (2005) and a Bachelor degree in Electronics from HIST. He has been employed at Nordic Semiconductor since 2010, and currently works as manager for the system architect group. Prior to joining Nordic, he was employed by SIN-TEF conducting research on sensory electronics and robotics for automated production processes. Holdings in the
company: 23 800 share options.
Markus Bakka Hjertø has a Master of Science degree in Electrical engineering from NTNU and the University of Adelaide. He has been employed in Nordic Semiconductor since 2005, first within quality assurance and now as a Senior R&D Engineer in Oslo. Holdings in the company: 40 000 share options.
Svenn-Tore Larsen is an Electronic Engineer from the University of Strathclyde, UK. He was appointed Chief Executive Officer of Nordic Semiconductor in February 2002. Mr. Larsen has broad international experience in the semiconductor business, previously as Director for the Nordic region for Xilinx Inc. He has also been working at Philips Semiconductor. Larsen was member of the Board of Nor-
dic Semiconductor from 2000–2002. Holdings in the company: 2 640 400 shares and 950 000 share options
Robert Giori has an MBA from Harvard University and a Bachelors degree in International Relations from Stanford University. Mr. Giori was appointed Chief Financial Officer of Nordic Semiconductor in June 2009, and is also responsible for the adminstration functions within the company. Prior to joining Nordic Semiconductor, Mr. Giori has held positions as Chief Financial Officer of TeleComputing ASA, as Finance Direc-
tor of Dell Norway, and as a consultant with McKinsey & Company. Holdings in the company: 66 400 shares and 600 000 share options
Geir Langeland has a B.eng Honours degree in Electronics from University of Manchester Institute of Science and Technology (UMIST). He was appointed Product Manager Standard Components at Nordic Semiconductor in October 1999, before being appointed to Director Sales and Marketing September 2005. Before joining Nordic, Mr. Langeland worked as Field Sales/Applications Engineer in Memec
Norway, a leading global electronic components distribution company. Holdings in the company: 177 700 shares and 600 000 share options
Chief Technology Officer
sity of California, Berkeley and Bachelor of Engineering honors degree in Computer and Electronics Systems from University of Stathclyde. He joined nordic in 2001 as Director of Sales and Marketing. He also held a position as R&D director from 2005 to 2006 and Director of Emerging Technoligies and Strategic Partnerships from 2010
to 2012. Additionally, he served Innovation Norway as their Director of San Francisco and Huston offices where he was in charge of promoting Norwegian technology from 2007 to 2010. Prior to Nordic, he worked for Boston Consulting Group as a consultant.
Holdings in the company: 15 000 shares and 350 000 share options
Ebbe Rømcke has a M.Sc. degree in Electronics Engineering from Norwegian University of Science and Technology (NTNU). He was appointed Quality Director of Nordic Semiconductor in 2002. Prior to this Mr. Rømcke worked eight years in the company as Digital Designer, Project Manager and Group Manager. He has also experience from Digital Design and Project Management in Normarc AS
(now Park Air Systems), a leading manufacturer of aviation systems. Holdings in the company: 58 400 shares and 325 000 share options
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