AI assistant
Rapala VMC Oyj Annual Report 2011
3287_rns_2012-03-16_5ba32ead-10ad-47a8-b2dc-15c196a272ec.pdf
Annual Report
Open in viewerOpens in your device viewer
RAPALA®
RAPALA VMC CORPORATION
FINANCIAL STATEMENTS 2011
Domicile: Asikkala
IC: 1016238-8
Financial Statements
RAPALA VMC CORPORATION
FINANCIAL STATEMENTS 2011
Review of the Board of Directors ... 1
Auditor's Report ... 4
Consolidated Financial Statements, IFRS
Consolidated Income Statement ... 5
Consolidated Statement of Comprehensive Income ... 5
Consolidated Statement of Financial Position ... 6
Consolidated Statement of Cash Flows ... 7
Consolidated Statement of Changes in Equity ... 8
Notes to Consolidated Financial Statements ... 9
Key Financial Figures
Scope of Activity and Profitability ... 43
Share Related Key Figures ... 44
Key Figures by Quarter ... 45
Definition of Key Figures ... 47
Parent Company Financials, FAS
Parent Company Income Statement ... 48
Parent Company Statement of Financial Position ... 49
Parent Company Statement of Changes in Equity ... 50
Parent Company Statement of Cash Flows ... 51
Notes to Parent Company Financial Statements ... 52
Risk Management ... 60
Corporate Responsibility and Sustainable Development ... 62
Shares and Shareholders ... 66
Board of Directors and Management ... 68
Rapala Financial Statements 2011
Review of the Board of Directors
REVIEW OF THE BOARD OF DIRECTORS
Market Situation and Sales
The general sentiment in the world economy changed significantly during 2011. Toward the end of the year this had some, although limited, negative impacts also on Rapala's sales. Year started on a growth trend in line with the positive expectations. Beginning of the year was supported by the good winter weathers in the Nordic countries. At the same time summer fishing season started early and lasted long in the major European markets. In North America beginning of the season was delayed, but the sales came back strong during second half of the year. In general the US consumer and retail confidence was still shadowed by the economical uncertainties, but some indications of improvement were witnessed in the end of the year. During the latter part of the year the increased uncertainties in the world economy affected some markets and product categories putting pressure on customers' financial position and creating some uncertainties to the coming season. Late beginning of winter in 2011/2012 affected sales of winter sports and winter fishing equipment both to Rapala and its customers. Regardless of the increased uncertainties Rapala's sales in 2011 reached all time record.
KEY FIGURES
| EUR million | 2011 | 2010 |
|---|---|---|
| Net sales | 279.5 | 269.4 |
| EBITDA | 37.7 | 37.4 |
| Operating profit | 30.7 | 31.3 |
| Profit before taxes | 25.2 | 29.5 |
| Net profit for the period | 17.2 | 20.7 |
| Employee benefit expenses | 62.4 | 59.1 |
| Average personnel for the period, persons | 2 208 | 2 317 |
| Research and development expenses | 2.1 | 2.1 |
| as a percentage of net sales, % | 0.7 | 0.8 |
| Net cash generated from operating activities | 15.2 | 13.0 |
| Total net cash used in investing activities | 9.6 | 13.2 |
| Net interest-bearing debt at the end of the period | 91.2 | 92.0 |
| Equity-to-assets ratio at the end of the period, % | 43.2 | 42.6 |
| Debt-to-equity ratio (gearing) at the end of the period, % | 67.2 | 71.2 |
| Return on equity, % | 13.0 | 17.2 |
Equity-to-assets ratio %
Debt-to-equity ratio (gearing) %
Net sales for 2011 increased by 4% to annual record of EUR 279.5 million (EUR 269.4 million). Changes in currency exchange rates reduced the sales EUR 3.0 million compared to last year. With comparable exchange rates and organization structure net sales increased by 2% compared to last year.
Net sales of Group Fishing Products increased by 9% compared to last year, driven by good sales of fishing lines and accessories as well as new sales generated by Dynamite Baits. Net sales of Other Group Products declined by 10% in 2011, primarily due to reduced yearly sales of the gift products and reduced sales of winter sports equipment in the fourth quarter. Annual net sales of Third Party Products were at last year's level, with increased sales of third party fishing and outdoor products, while sales of third party winter sports equipment was down.
Net sales of North America increased by 1%. In local currency increase in sales was higher, but this was offset by weakening of the US Dollar, which was on average 5% weaker against euro than last year. Sales were supported by the Group's good delivery performance, high customer satisfaction and introduction of new range of winter fishing products.
Nordic sales in 2011 increased by 1% compared to last year, mainly as a result of increased intra-group sales to other geographical areas, whereas the external sales were negatively impacted by reduced sales of winter sports and high-end hunting equipment.
Net sales in Rest of Europe increased by 13% compared to last year. Increase was driven by strong sales in many East European countries and France as well as the new sales generated by Dynamite Baits. Countries impacted by the economic turbulence were Hungary and Portugal as well as Spain and Switzerland, where the sales still remained at last year level.
In 2011 the net sales in Rest of World increased 2% compared to last year. In most of the South East Asian countries the annual growth of external sales was in double-digits, while sales of gift products and internal sales of the Asian manufacturing units was lower than last year.
Financial Results and Profitability
Comparable operating profit for 2011 was down EUR 1.3 million from last year's record level at EUR 30.5 million (EUR 31.8 million). Comparable operating profit margin was slightly lower than last year at 10.9% (11.8%). The gross margin for 2011 was burdened by the inventory clearance sales, being still slightly better than in previous year, while comparable operating profit margin was lowered by increased fixed costs.
Reported operating profit was EUR 30.7 million (EUR 31.3 million) for the year 2011, EUR 0.6 million down from last year. Reported operating profit included net gain of non-recurring items of EUR 0.2 million (non-recurring net costs of EUR 0.5 million in 2010). Non-recurring items included EUR 1.5 million net gain from divestment of the gift business closed during the fourth quarter and various non-recurring relocation and restructuring costs and costs relating to business acquisitions. Reported operating profit margin was 11.0% (11.6%) and return on capital employed 13.7% (15.2%).
Reported operating profit of Group Fishing Products reduced to EUR 19.9 million (EUR 21.4 million) and operat-
Personnel at the end of the period
Rapala Financial Statements 2011
Review of the Board of Directors
ing profit margin was 13.0% (15.4%). Operating profit was negatively impacted by weakening US Dollar, increased share in sales of lower margin baits and lower profitability in hooks. In 2011 operating profit of Other Group Products was up from last year at EUR 2.5 million (EUR 2.0 million), following the non-recurring gain from divestment of the gift business. Comparable profitability was lower than last year due to lower profits of gift and winter sports equipment business. In 2011 operating profit of Third Party Products increased from last year to EUR 8.4 million (EUR 7.8 million). Biggest contribution to the profit increase came from third party fishing products, while profitability of third party winter sports equipment declined.
MANAGEMENT ANALYSIS
| EUR million | 2011 | 2010 |
|---|---|---|
| Net sales as reported | 279.5 | 269.4 |
| EBITDA as reported | 37.7 | 37.4 |
| Non-recurring items included in EBITDA | -0.6 | 0.5 |
| EBITDA excluding non-recurring items | 37.1 | 37.9 |
| Operating profit as reported | 30.7 | 31.3 |
| Reported operating profit margin, % | 11.0 | 11.6 |
| Non-recurring items included in operating profit | -0.2 | 0.5 |
| Operating profit excluding non-recurring items | 30.5 | 31.8 |
| Comparable operating profit margin, % | 10.9 | 11.8 |
Total financial (net) expenses increased significantly in 2011 and amounted to EUR 5.5 million (EUR 1.8 million). The increase was primarily due to EUR 3.3 million negative change in (net) currency exchange expenses, which amounted to EUR 1.8 million (net gain EUR 1.6 million in 2010). Net interest and other financial expenses increased modestly to EUR 3.7 million (EUR 3.4 million).
Net profit for the year and earnings per share decreased from last year's record levels to EUR 17.2 million (EUR 20.7 million) and EUR 0.36 (EUR 0.46) respectively, impacted by increased effective tax rate and share of non-controlling interest in net result.
Net sales by unit location
■ North America 19%
■ Nordic 30%
■ Rest of Europe 32%
■ Rest of the World 19%
Net sales by market area
■ North America 25%
■ Nordic 22%
■ Rest of Europe 39%
■ Rest of the World 14%
Cash Flow and Financial Position
In 2011 cash flow from operations improved from last year to EUR 15.2 million (EUR 13.0 million). Compared to last year, while net profit for the year was lower, positive cash flow impact came from the change in inventories and accounts receivable. Cash flow impact of net change in working capital was EUR -7.3 million (EUR -13.0 million) for the year. Year-end inventories amounted to EUR 115.5 million (EUR 112.2 million). The Group's inventories were at unsatisfactory high-levels throughout the year, but were not on the same increasing trend as they were especially in the end of last year.
Net cash used in investing activities was down to EUR 9.6 million (EUR 13.2 million) for the year, due to smaller business acquisitions.
In the end of 2011 net interest-bearing debt reduced to EUR 91.2 million (Dec 2010: EUR 92.0 million) and was impacted by divestment of the gift business. Equity-to-assets ratio improved to 43.2% (Dec 2010: 42.6%). In line with increased equity and reduced net debt, Group's balance sheet strengthened further and gearing was at all time lows at 67.2% (71.2%).
Strategy Implementation
Implementation of Rapala's strategy continued during 2011 by taking actions relating to both manufacturing and distribution activities.
The European distribution cooperation with Shimano was deepened in the UK by establishing a true 50:50 joint venture company to distribute products of both Rapala and Shimano to this fishing tackle market, which is one of the biggest in Europe.
Also in the UK Rapala concluded a deal to acquire Advanced Carp Equipment Ltd ("ACE"), a company engaged in design and sales of equipment and accessories for carp fishing. ACE will form the platform for Rapala's fast entry into these product categories in the UK and in Europe. Acquisition of ACE is a continuum to the year 2010 acquisition of Dynamite Baits Ltd, leading manufacturer of carp baits.
In order to secure access to cost competitive production resources also in the future, Rapala made a decision to open new lure and hook manufacturing units on Batam Island in Indonesia in 2011. At first stage the operation will employ some 200-250 people and run parallel to the Group's Chinese manufacturing operations. Possibilities to expand the operations in Batam further will be studied once the first stage is successfully implemented.
In December 2011 Rapala sold its non-core Chinese gift manufacturing business to its largest customer French Pylones SAS, releasing funds and resources for developing the core fishing tackle business.
Net sales by operating segments
■ Group Fishing Products 54%
■ Other Group Products 8%
■ Third Party Products 38%
Rapala Financial Statements 2011
Review of the Board of Directors
New distribution companies started operations in Mexico, Indonesia and Kazakhstan during 2011. In Kazakhstan the business is operated under the jointly owned Russian distribution company. Special performance improvement initiatives were carried out in the Norwegian and Australian distribution companies.
During the fourth quarter Rapala USA opened B2C webshop targeted solely to US consumers. The webshop enables Rapala to offer full range of its products to consumers.
Finnish distribution company Normark Suomi Oy and ski manufacturer Peltonen Ski Oy relocated into new larger premises during 2011, enabling better distribution efficiencies and larger production volumes and efficiencies.
Working capital and cash flow management was still one of the top priorities for the Group. Net cash flow from operating activities improved from last year, but inventory levels are still far from desired levels. Changes in the Group's manufacturing units to provide better flexibility towards the distribution units are gradually bearing fruit, and work to reduce the inventory levels and develop the Group's internal supply chain will continue further to 2012.
Development of organic growth in terms of extensions of current product categories continued. New products for the season 2012 were introduced to the market in summer and were received well by the markets.
Discussions and negotiations regarding other acquisitions and business combinations continued also during 2011. Rapala is a key player in the fishing tackle industry with a recognized global distribution network and it has a good access to any discussions concerning industry consolidation or other business expansion possibilities. Strengthening of the Group's balance sheet further supports such initiatives.
Personnel and R&D
Number of personnel decreased 17% compared to last year and was 1 921 (2 313) at the year-end, majority of the reduction resulting from divestment of the gift manufacturing business. The average number of personnel decreased by 5% to 2 208 (2 317).
Research and development expenses remained at last year's level at EUR 2.1 million (EUR 2.1 million).
Risk Management, Internal Controls and Corporate Responsibility
Internal control and risk management processes previously developed were further applied in 2011. The principles of the Group's risk management are described in the section Risk Management. Updated Corporate Governance Statement was approved by the Board and it is presented in Rapala's Annual Report 2011 and also available at Rapala's website.
Progress made in environmental, economical and social responsibility is described in more detail in the section Corporate Responsibility and Sustainable Development attached to the consolidated financial statements.
For information on shareholders, shares, option and board authorization, see the sections Shares and Shareholders included in the consolidated financial statements. Related party transactions are disclosed in the note 28.
Dividend$/share, EUR
Dividend$/earnings ratio, %
Short-term Outlook
The negative changes in the sentiment of the economy globally and especially in Europe during latter part of the year increased the uncertainty concerning retail and consumer demand. Despite these uncertainties expectations for the coming year are optimistic.
There are promising signs of accelerating recovery in the USA and Rapala's position with major US customers is currently very good. There is also good progress in coming summer season's presales in several markets.
The late start of winter season 2011/2012 as well as the divestment of the gift business will have some reducing impact on the Group's net sales and the continuing inventory cleaning initiatives may pressure the profitability, while at same time performance improvement initiatives in various units are expected to show results.
It is expected that in 2012 the net sales will increase from 2011 and the comparable operating profit is targeted to improve.
Proposal for profit distribution
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.23 for 2011 (2010: EUR 0.23) per share be paid from the Group's distributable equity and that any remaining distributable funds be allocated to retained earnings. At December 31, 2011, the parent company's distributable equity totaled EUR 24.4 million.
No material changes have taken place in the Group's financial position after the end of the financial year 2011. Group's liquidity is good and the view of the Board of Directors is that the distribution of the proposed dividend will not undermine this liquidity.
Helsinki, February 8, 2012
Board of Directors of Rapala VMC Corporation
Effective dividend yield, %3)
Rapala Financial Statements 2011
Auditor's Report
AUDITOR'S REPORT
To the Annual General Meeting of Rapala VMC Corporation
We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Rapala VMC Corporation for the year ended 31 December, 2011. The financial statements comprise the consolidated statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.
Responsibility of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion on the Consolidated Financial Statements
In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
Opinion on the Company's Financial Statements and the Report of the Board of Directors
In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.
Helsinki, 23 February, 2012
Ernst & Young Oy
Authorized Public Accountant Firm
Mikko Järventausta
Authorized Public Accountant
Ernst & Young Oy, Elielinaukio 5 B, 00100 Helsinki
4
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CONSOLIDATED FINANCIAL STATEMENTS, IFRS
CONSOLIDATED INCOME STATEMENT
| EUR million | Note | 2011 | 2010 |
|---|---|---|---|
| Net sales | 2 | 279.5 | 269.4 |
| Other operating income | 4 | 2.9 | 0.7 |
| Change in inventory of finished products and work in progress | 4.0 | 11.0 | |
| Production for own use | 0.2 | 0.9 | |
| Materials and services | 6 | -133.2 | -135.7 |
| Employee benefit expenses | 7 | -62.4 | -59.1 |
| Other operating expenses | 5 | -53.3 | -49.7 |
| Share of results in associates and joint ventures | 14 | -0.1 | 0.0 |
| Operating profit before depreciation and impairments | 37.7 | 37.4 | |
| Depreciation and impairments | 8 | -7.0 | -6.1 |
| Operating profit | 30.7 | 31.3 | |
| Financial income | 10 | 10.0 | 8.5 |
| Financial expenses | 10 | -15.5 | -10.4 |
| Profit before taxes | 25.2 | 29.5 | |
| Income taxes | 11 | -8.0 | -8.7 |
| Net profit for the period | 17.2 | 20.7 | |
| Attributable to | |||
| Equity holders of the Company | 14.0 | 18.0 | |
| Non-controlling interests | 3.2 | 2.8 | |
| Earnings per share | 30 | ||
| Earnings per share, EUR | 0.36 | 0.46 | |
| Diluted earnings per share, EUR | 0.36 | 0.46 | |
| Weighted average number of shares, 1000 shares | 38 928 | 39 038 | |
| Diluted weighted average number of shares, 1000 shares | 38 928 | 39 038 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | Note | 2011 | 2010 |
|---|---|---|---|
| Net profit for the period | 17.2 | 20.7 | |
| Other comprehensive income (net of tax)* | 11 | ||
| Change in translation differences | 2.0 | 7.8 | |
| Gains and losses on cash flow hedges | |||
| Gains and losses arising during the period | -0.9 | -1.9 | |
| Reclassification adjustment for gains included in profit or loss | 0.8 | 0.7 | |
| Gains and losses on cash flow hedges total | -0.1 | -1.2 | |
| Gains and losses on hedges of net investment | |||
| Gains and losses arising during the period | -0.4 | -1.1 | |
| Gains and losses on hedges of net investment | -0.4 | -1.1 | |
| Other comprehensive income for the period, net of tax* | 1.5 | 5.5 | |
| Total comprehensive income for the period | 18.7 | 26.3 | |
| Attributable to | |||
| Equity holders of the Company | 15.8 | 23.1 | |
| Non-controlling interests | 2.9 | 3.2 |
*The income tax relating to each of the component of the other comprehensive income is disclosed in the note 11.
5
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR million | Note | 2011 | 2010 |
|---|---|---|---|
ASSETS
| Non-current assets | |||
|---|---|---|---|
| Goodwill | 12 | 46.0 | 46.5 |
| Trademarks | 12 | 17.9 | 17.1 |
| Customer relations | 12 | 1.8 | 2.2 |
| Other intangible assets | 12 | 2.3 | 2.0 |
| Land | 13 | 1.8 | 1.8 |
| Buildings | 13 | 7.7 | 8.0 |
| Machinery and equipment | 13 | 13.7 | 13.2 |
| Other tangible assets | 13 | 4.4 | 5.0 |
| Advance payments and construction in progress | 13 | 1.0 | 0.7 |
| Investment in associates and joint ventures 1) | 14 | 1.5 | 0.0 |
| Available-for-sale financial assets 1) | 15 | 0.3 | 0.3 |
| Interest-bearing receivables 1) | 16 | 5.8 | 1.5 |
| Non-interest-bearing receivables | 16 | 0.2 | 0.2 |
| Deferred tax assets | 11 | 8.9 | 8.9 |
| Total non-current assets | 113.2 | 107.4 | |
| Current assets | |||
| --- | --- | --- | --- |
| Inventories | 17 | 115.5 | 112.2 |
| Trade and other non-interest-bearing receivables | 16 | 53.5 | 55.3 |
| Income tax receivable | 1.5 | 1.2 | |
| Derivatives 1) | 16, 22 | 0.2 | 0.0 |
| Interest-bearing receivables 1) | 16 | 1.3 | 0.0 |
| Cash and cash equivalents 1) | 18 | 28.9 | 27.9 |
| Total current assets | 201.0 | 196.6 | |
| Assets classified as held-for-sale | 13 | 0.3 | |
| Total assets | 314.5 | 304.0 | |
| EUR million | Note | 2011 | 2010 |
| --- | --- | --- | --- |
SHAREHOLDERS' EQUITY AND LIABILITIES
| Equity | |||
|---|---|---|---|
| Share capital | 3.6 | 3.6 | |
| Share premium fund | 16.7 | 16.7 | |
| Fair value reserve | -1.6 | -1.5 | |
| Fund for invested non-restricted equity | 4.9 | 4.9 | |
| Own shares | -2.6 | -2.5 | |
| Retained earnings | 93.6 | 82.7 | |
| Net income for the period | 14.0 | 18.0 | |
| Equity attributable to equity holders of the Company | 19 | 128.6 | 121.8 |
| Non-controlling interests | 7.2 | 7.4 | |
| Total equity | 135.8 | 129.2 | |
| Non-current liabilities | |||
| --- | --- | --- | --- |
| Interest-bearing liabilities 1) | 24 | 10.8 | 25.3 |
| Non-interest-bearing liabilities | 25 | 3.7 | 4.3 |
| Employee benefit obligations | 20 | 1.3 | 1.3 |
| Deferred tax liabilities | 11 | 8.3 | 8.0 |
| Provisions | 21 | 0.1 | 0.0 |
| Derivatives 1) | 22, 24 | 2.0 | 1.8 |
| Total non-current liabilities | 26.2 | 40.8 | |
| Current liabilities | |||
| --- | --- | --- | --- |
| Interest-bearing liabilities 1) | 24 | 116.4 | 94.1 |
| Trade and other non-interest-bearing payables | 25 | 35.8 | 38.6 |
| Option programs to be settled in cash | 29 | 0.3 | |
| Income tax payable | 0.1 | 0.3 | |
| Provisions | 21 | 0.1 | 0.2 |
| Derivatives 1) | 22, 24 | 0.2 | 0.4 |
| Total current liabilities | 152.5 | 134.0 | |
| Total shareholders' equity and liabilities | 314.5 | 304.0 | |
| --- | --- | --- |
1) Included in net interest-bearing debt.
6
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CONSOLIDATED STATEMENT OF CASH FLOWS
| EUR million | Note | 2011 | 2010 |
|---|---|---|---|
| Net profit for the period | 17.2 | 20.7 | |
| Adjustments | |||
| Income taxes | 11 | 8.0 | 8.7 |
| Financial income and expenses | 10 | 5.5 | 1.8 |
| Reversal of non-cash items | |||
| Depreciation and impairments | 8 | 7.0 | 6.1 |
| Share based payments | 7.29 | -0.3 | 0.0 |
| Exchange rate differences | 10 | -0.7 | 0.4 |
| Share of results in associates and joint ventures | 14 | 0.1 | 0.0 |
| Gains/losses on disposals of intangible, tangible assets and subsidiaries | -2.0 | 0.0 | |
| Change in provisions and employee benefits | 0.0 | 0.4 | |
| Total adjustments | 17.6 | 17.4 | |
| Financial items | |||
| Interest paid | -3.6 | -3.3 | |
| Interest received | 0.2 | 0.2 | |
| Income taxes paid | -8.2 | -8.8 | |
| Dividends received | 0.0 | 0.0 | |
| Other financial items, net | -0.8 | -0.2 | |
| Total Financial items | -12.3 | -12.1 | |
| Change in working capital | |||
| Change in receivables | 0.3 | -8.8 | |
| Change in inventories | -4.6 | -11.2 | |
| Change in liabilities | -3.0 | 7.0 | |
| Total change in working capital | -7.3 | -13.0 | |
| Net cash generated from operating activities | 15.2 | 13.0 | |
| Net cash used in investing activities | |||
| Proceeds from disposal of intangible | 12 | 0.1 | 0.1 |
| Acquisition of intangible assets | 12 | -0.5 | -0.1 |
| Proceeds from sale of tangible assets | 13 | 0.6 | 0.2 |
| Acquisition of tangible assets | 13 | -7.9 | -6.1 |
| Escrow deposit related to Dynamite Baits acquisition | 3, 16 | -1.3 | |
| Acquisition of Sufix trademark | 3, 12 | -0.7 | -1.2 |
| Acquisition of Dynamite Baits, net of cash | 3 | -0.1 | -4.8 |
| Acquisition of other subsidiaries, net of cash | 3 | 0.0 | 0.0 |
| Acquisition of joint venture Shimano Normark UK Ltd. | 3 | -1.5 | |
| Proceeds from disposal of Willitech Gift, net of cash | 3 | 0.6 | |
| Change in interest-bearing receivables | 0.0 | 0.0 | |
| Total net cash used in investing activities | -9.6 | -13.2 | |
| EUR million | Note | 2011 | 2010 |
| --- | --- | --- | --- |
| Net cash generated from financing activities | |||
| Dividends paid to parent company shareholders | -9.0 | -7.4 | |
| Dividends paid to non-controlling interest | -2.9 | ||
| Purchase of own shares | -0.1 | -1.1 | |
| Investment by non-controlling interest | 0.0 | ||
| Non-current loan withdrawals | 2.4 | ||
| Current loan withdrawals | 111.4 | 93.0 | |
| Non-current loan repayments | -14.5 | -14.4 | |
| Current loan repayments | -90.0 | -74.9 | |
| Payment of finance lease liabilities | -0.1 | -0.1 | |
| Total net cash generated from financing activities | -5.2 | -2.5 | |
| Adjustments | 0.4 | -0.5 | |
| Change in cash and cash equivalents | 0.8 | -3.2 | |
| Cash and cash equivalents at the beginning of the period | 27.9 | 29.0 | |
| Foreign exchange rate effect | 0.2 | 2.2 | |
| Cash and cash equivalents at the end of the period | 18 | 28.9 | 27.9 |
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| EUR million | Attributable to equity holders of the Company | Non-controlling interest | Total equity | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Share capital | Share premium fund | Fair value reserve | Fund for invested non-restricted equity | Own shares | Translation differences | Retained earnings | |||
| Equity on Jan. 1, 2010 | 3.6 | 16.7 | -0.3 | 4.9 | -1.4 | -12.3 | 96.3 | 4.2 | 111.7 |
| Net profit for the period | 18.0 | 2.8 | 20.7 | ||||||
| Other comprehensive income* | |||||||||
| Change in translation differences | 7.4 | 0.4 | 7.8 | ||||||
| Gains and losses on cash flow hedges | -1.2 | -1.2 | |||||||
| Gains and losses on hedges of net investment | -1.1 | -1.1 | |||||||
| Total comprehensive income | -1.2 | 6.3 | 18.0 | 3.2 | 26.3 | ||||
| Purchase of own shares | -1.1 | -1.1 | |||||||
| Dividends paid | -7.4 | -7.4 | |||||||
| Share based payment | -0.1 | -0.1 | |||||||
| Other changes | 0.0 | 0.0 | |||||||
| Equity on Dec. 31, 2010 | 3.6 | 16.7 | -1.5 | 4.9 | -2.5 | -6.0 | 106.7 | 7.4 | 129.2 |
| Net profit for the period | 14.0 | 3.2 | 17.2 | ||||||
| Other comprehensive income* | |||||||||
| Change in translation differences | 2.3 | -0.3 | 2.0 | ||||||
| Gains and losses on cash flow hedges | -0.1 | -0.1 | |||||||
| Gains and losses on hedges of net investment | -0.4 | -0.4 | |||||||
| Total comprehensive income | -0.1 | 1.9 | 14.0 | 2.9 | 18.7 | ||||
| Purchase of own shares | -0.1 | -0.1 | |||||||
| Dividends paid | -9.0 | -3.2 | -12.1 | ||||||
| Other changes | 0.0 | 0.0 | |||||||
| Equity on Dec. 31, 2011 | 3.6 | 16.7 | -1.6 | 4.9 | -2.6 | -4.1 | 111.8 | 7.2 | 135.8 |
- Net of tax
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED ACCOUNTS
COMPANY'S BACKGROUND
Rapala VMC Oyj ("Company") is a Finnish public limited liability company organized under the laws of Finland, domiciled in Asikkala and listed on the NASDAQ OMX Helsinki stock exchange since 1998. The parent company Rapala VMC Oyj and its subsidiaries ("Rapala" or "the Group") operate in some 30 countries and the Company is one of the leading fishing tackle companies in the world.
The consolidated financial statements have been prepared for the accounting period of 12 months from January 1 to December 31, 2011. The Board of Directors of the Company has approved these financial statements for publication at its meeting on February 7, 2012. Under Finland's Companies Act, shareholders have the option to accept or reject the financial statements in a meeting of shareholders, which will be held after the publication of the financial statements. The meeting has also the option of changing the financial statements.
A copy of the consolidated financial statements is available at the Group's website www.rapala.com or from Arabiankatu 12, 00560 Helsinki, Finland.
BASIS FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), including IAS and IFRS standards as well as the SIC and IFRIC interpretations in effect on December 31, 2011. The term 'IFRS standards' refers to standards and interpretations which are approved and adopted by the European Union (regulation EY 1606/2002) and thus are in force in the Finnish legislation. The Group has not early adopted any new, revised or amended standards or interpretations.
The consolidated financial statements have been prepared on a historical cost basis, unless otherwise stated. The consolidated financial statements are presented in millions of euros.
APPLIED NEW AND AMENDED STANDARDS AND INTERPRETATIONS
The Group adopted in 2011 the following new, revised or amended standards and interpretations:
- IAS 24 Related Party Disclosures (revised, effective for annual periods beginning on or after January 1, 2011). The revision did not have a material impact on the Group's consolidated financial statements.
- IAS 32 Financial Instruments: Presentation – Classification of Rights Issues (amendment; effective for annual periods beginning on or after February 1, 2010). The amendment influences the classification of foreign-currency-denominated rights issues. The amendment did not have a material impact on the Group's consolidated financial statements.
- IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (amendment; effective for annual periods beginning on or after January 1, 2011). The amendment did not have a material impact on the Group's consolidated financial statements.
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 1, 2010). The interpretation did not have a material impact on the Group's consolidated financial statements.
Additionally, the IFRS standards' annual improvement project's amendments which have been approved for application in the EU have been taken into account in the consolidated financial statements.
ADOPTION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS IN 2012-2015
In 2012, the Group will adopt the following new, revised or amended standards and interpretations:
- IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets (amendment; effective for annual periods beginning on or after July 1, 2011). The amendment adds disclosure requirements related to transfers of financial assets and derecognition of financial assets. The amendment will not have a material impact on the Group's consolidated financial statements.
- IAS 12 Income Taxes (amendment; effective for annual periods beginning on or after January 1, 2012). The amendment added an exception that the measurement of deferred tax assets or liabilities arising on investment property measured at fair value according to IAS 40 is based on a rebuttable presumption that investment property is recovered entirely by sale. The amendment will not have a material impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
In 2013 or later, the Group will adopt the following new, revised or amended standards and interpretations:
- IAS 1 Presentation of Items of Other Comprehensive Income (amendment; effective for annual periods on or after July 1, 2012). The amendments change the grouping of items presented in other comprehensive income. Items that would be reclassified to profit or loss at future point of time would be presented separately from items that will never be reclassified. Amendment has not yet been approved for application in the EU.
- IFRS 10 Consolidated Financial Statements and IAS 27 (revised; effective for annual periods beginning on or after January 1, 2013). The new IFRS 10 standard replaces the portion of current IAS 27 that addresses to the accounting for consolidated financial statements. The new standard changes the definition of control and may in some cases change whether an entity is consolidated. The change will not have a material impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
- IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures (revised; effective for annual periods beginning on or after January 1, 2013). The IFRS 11 replaces the current IAS 31 Interest in Joint Ventures. IAS 28 was also amended to include the application of the equity method to investments in joint ventures and associates. The changes are not expected to have a material impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
- IFRS 12 Disclosures of Interest in Other Entities (effective for annual periods beginning on or after January 1, 2013). The new standard gathers all disclosure requirements related to interest in other entities, and also adds several new disclosure requirements mainly regarding subsidiaries with a material non-controlling interest. The Group investigates this new standard's impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
- IFRS 13 Fair Value Measurement (effective for annual periods beginning on or after January 1, 2013). The new standard describes how to measure fair value where fair value is required or permitted by IFRS. The Group investigates this new standard's impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
- IAS 19 Employee Benefits (revised; effective for annual periods beginning on or after January 1, 2013). The revised standard includes a number of amendments to recognitions of defined benefit plans, for example removal of the corridor approach. The Group investigates this new standard's impact on the Group's consolidated financial statements. Amendment has not yet been approved for application in the EU.
- IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2015; earlier adoption possible). This new standard will gradually replace the current standard 'IAS 39 Financial Instruments: Recognition and Measurement'. The Group investigates this new standard's impact on the Group's consolidated financial statements. This new standard has not yet been approved for application in the EU.
9
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CONSOLIDATION PRINCIPLES
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries in which it holds, directly or indirectly, over 50% of the voting rights or other governing power. The financial statements of the subsidiaries are prepared for the same accounting period as the Company, using consistent accounting policies.
Acquired subsidiaries are accounted for using the acquisition cost method, according to which the assets and liabilities of the acquired company are measured at fair value at the date of acquisition. The excess of the consideration over the fair value of net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fair value of the Group's share of the net assets acquired, the difference is recognized directly through income statement. Goodwill on consolidation is not amortized but tested for impairment annually. Consideration includes the fair value of any contingent consideration arrangement. Costs related to acquisitions are recognized directly to income statement. The consolidated financial statements include the results of acquired companies for the period from the completion of the acquisition. Conversely, divestments are included up to their date of sale. The Group has applied the revised IFRS 3 standard to all business combinations from January 1, 2010.
Associated companies are companies where the Group holds voting rights of 20–50% and in which the Group has significant influence, but not control. Joint ventures are companies, over which the Group has contractually agreed to share control with another venturer. Associated companies and joint ventures are included in the consolidated financial statements using the equity method. Under the equity method, the Group's share of the profit or loss of an associate or a joint venture is recognized in the consolidated income statement before operating profit. Presentation was changed in 2011. Previously the share of profit or loss was presented after operating profit. Comparable period has been restated to reflect the change, which did not have any significant effect on the figures. Associated companies and joint ventures are closely and essentially related to Group's core business and therefore including the share of profit or loss in the Group's operating profit gives a more fair view on the Group's performance.
The Group's interest in an associated company or a joint venture is carried in the balance sheet at an amount that reflects the Group's share of the net assets of the associate or joint venture together with goodwill on acquisition, as amortized, less any impairment. Unrealized gains, if any, between the Group and the associated companies or joint ventures are eliminated to the extent of the Group's ownership. Associated companies' and joint ventures' financial statements have been converted to correspond with the accounting principles in use in the Group. If the Group's share of losses exceeds the carrying amount of the investment, the carrying amount is reduced to nil and any recognition of further losses ceases unless the Group has incurred obligations in respect of the associated companies or joint venture.
The investments in subsidiaries have been eliminated using the acquisition cost method. All transactions between Group companies as well as assets and liabilities, dividends and unrealized internal margins in inventories and tangible assets have been eliminated in the consolidated financial statements. Non-controlling interest is presented separately from the net profit and disclosed as a separate item in the equity in accordance with the share of the non-controlling interest. All transactions with non-controlling interests are recorded in equity when the parent company remains in control. When the Group loses the control in a subsidiary, the remaining investment is recognized at fair value through the income statement. The Group has applied the amendments to IAS 27 standard to all transactions with non-controlling interests from January 1, 2010.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. Non-monetary items denominated in foreign currency, measured at fair value, are translated using the exchange rates at the date when the fair value was determined. Other non-monetary items have been translated into the functional currency using the exchange rate on the date of the transaction. Foreign exchange gains and losses for operating business items are recorded in the appropriate income statement account before operating profit. Foreign exchange gains and losses from the translation of monetary interest-bearing assets and liabilities denominated in foreign currencies are recognized in financial income and expenses. Exchange differences arising on a monetary item that forms a part of a net investment in a foreign operation are recognized in the statement of other comprehensive income and recognized in profit or loss on disposal of the foreign operation.
The consolidated financial statements are presented in euros, which is the Company's functional and reporting currency. Income statements of subsidiaries, whose functional and reporting currencies is not euro, are translated into the Group reporting currency using the average exchange rate for the year. Their balance sheets are translated using the exchange rate of balance sheet date. All exchange differences arising on the translation are entered in the statement of other comprehensive income and presented in equity. The translation differences arising from the use of the purchase method of accounting and after the date of acquisition as well as fair value changes of loans which are hedges of such investments are recognized in statement of other comprehensive income and presented in equity. On the disposal of a subsidiary, whose functional and reporting currency is not euro, the cumulative translation difference for that entity is recognized in the income statement as part of the gain or loss on the sale.
Any goodwill arising on the acquisition of a foreign company and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign subsidiary and translated using the exchange rate of balance sheet date. Goodwill and fair value adjustments arising from the acquisition prior to January 1, 2004 have been treated as assets and liabilities of the Group, i.e. in euros.
REVENUE RECOGNITION
Net sales comprise of consideration received less indirect sales taxes, discounts and exchange rate differences arising from sales denominated in foreign currency. Sales of goods are recognized after the significant risks and rewards of ownership of the goods have passed to the buyer and no significant uncertainties remain regarding the consideration, associated costs and possible return of goods. The costs of shipping and distributing products are included in other operating expenses. Revenues from services are recorded when the service has been performed.
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms. Royalty income is recorded according to the contents of the agreement. Interest income is recognized by the effective yield method. Dividend income is recognized when the company has acquired a right to receive the dividends.
INCOME TAXES
The Group's income tax expense includes taxes of the Group companies based on taxable profit for the period, together with tax adjustments for previous periods and the change in deferred income taxes. The income tax effects of items recognized directly in other comprehensive income are similarly recognized. The current tax expense for the financial year is calculated from the taxable profit based on the valid tax rate of each country. The tax is adjusted with possible taxes related to previous periods. The share of results in associated companies is reported in the income statement as calculated from net profit and thus including the income tax charge.
Deferred taxes are provided using the liability method, as measured with enacted tax rates, to reflect the temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The main temporary differences arise from the depreciation difference on tangible assets, fair valuation of net assets in acquired companies, intra-group inventory profits, defined benefit pension plans, inventories and other provisions, untaxed reserves and tax losses carried forward. Temporary differences are recognized as a deferred tax asset to the extent that it is probable that future taxable profits will be available, against which the deductible temporary difference can be utilized.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as they are incurred, unless they relate to a clearly defined project that meets certain criteria. Development costs for such projects are capitalized if they are separately identifiable and if the products are assessed to be technically feasible and commercially viable and the related future revenues are expected to exceed the aggregate deferred and future development costs and related production, selling and
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
administrative expenses, and if adequate resources exist or will be available to complete the project. Capitalized development costs include all directly attributable material, employee benefit and testing costs necessary to prepare the asset to be capable of operating in the manner intended. Research and development costs that were initially recognized as an expense are not to be capitalized at a later date.
Amortization of such a product is commenced when it is available for use. Unfinished products are tested annually for impairment. Capitalized development expenses are amortized on a straight-line basis over their expected useful lives, a maximum of five years.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of the subsidiary, associated undertaking or joint venture acquired after January 1, 2004. Until 31.12.2009, any costs directly attributable to the business combination, such as professional fees, were included to the cost of an acquisition. From 1.1.2010 onwards, costs related to acquisitions are recognized directly to income statement. Goodwill from the combination of operations acquired prior to January 1, 2004 corresponds to the carrying amount according to the previous financial statement standards, which has been used as the assumed acquisition cost according to IFRS.
Goodwill is tested annually for impairment. For this purpose, goodwill has been allocated to cash generating units. Goodwill is measured at cost less any accumulated impairment loss, and is not amortized.
INTANGIBLE ASSETS
Intangible assets include customer relations, trademarks, capitalized development expenses, patents, copyrights, licenses and software. An intangible asset is recognized in the balance sheet only if it is probable that the future economic benefits that are attributable to the asset will flow to the Group, and the cost of the asset can be measured reliably. Intangible assets are stated at cost, amortized on a straight-line basis over the expected useful lives which vary from 3 to 15 years and adjusted for any impairment charges. Trademarks and other intangible assets whose useful life is estimated to be indefinite are estimated to affect cash flow accumulation for an undefined period of time. The expected useful life for most trademarks is indefinite and therefore they are not amortized. These intangibles are measured at cost less any accumulated impairment loss and not amortized. Intangible assets with indefinite useful lives are tested for impairment annually. The valuation of intangible assets acquired in a business combination is based on fair value as at the date of acquisition.
Expected useful lives and indefinite lives of intangible assets are reviewed at each balance sheet date and, where they differ significantly from previous estimates, depreciation periods are changed accordingly.
TANGIBLE ASSETS
Tangible assets are stated at historical cost, amortized on a straight-line basis over the expected useful life and adjusted for any impairment charges. The valuation of tangible assets acquired in a business combination is based on fair value as at the date of acquisition. Land is not depreciated as it is deemed to have an indefinite life.
Depreciation is based on the following expected useful lives:
- Buildings: 10–25 years
- Machinery and equipment: 5–10 years
- Other tangible assets: 3–10 years
Expected useful lives of tangible assets are reviewed at each balance sheet date and, where they differ significantly from previous estimates, depreciation periods are changed accordingly. Ordinary maintenance and repair costs are expensed as incurred. The cost of significant renewals and improvements are capitalized and depreciated over the remaining useful lives of the related assets. Gains and losses on sales and disposals are determined by comparing the received proceeds with the carrying amount and are included in the income statement in the item other operating income and expenses.
Depreciation of a tangible asset is discontinued when the tangible asset is classified as being held-for-sale in accordance with IFRS 5 standard Non-Current Assets Held-for-sale and Discontinued Operations.
BORROWING COSTS
Borrowing costs, that are directly attributable to the acquisition, construction or production of a qualifying asset, are capitalized as part of the cost of that asset. Other borrowing costs are expensed when incurred.
GOVERNMENT GRANTS
Government or other grants are recognized in the income statement as other operating income on a systematic basis over the periods necessary to match them with the related costs, which they are intended to compensate. Government grants relating to purchase of tangible assets are recognized as revenue on a systematic basis over the useful life of the asset when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. In the balance sheet, grants are deducted from the value of the asset they relate to. The grants are recognized to decrease depreciations over the useful life of the asset. Currently, all grants of the Group have been recognized in the income statement as other operating income.
IMPAIRMENTS OF TANGIBLE AND INTANGIBLE ASSETS
The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If indication exists, the recoverable amount is measured. Indications of potential need for impairment may be for example changes in market conditions and sales prices, decisions on significant restructurings or change in profitability. Goodwill, intangible assets with indefinite useful lives and unfinished tangible assets are in all cases tested annually. For the purposes of assessing impairment, assets are grouped at the lowest cash generating unit level for which there are separately identifiable, mainly independent, cash inflows and outflows.
An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is determined by reference to discounted future net cash flows expected to be generated by the asset. Discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment loss is immediately recognized in the income statement. Impairment losses attributable to a cash-generating unit are used to deducting first the goodwill allocated to the cash-generating unit and, thereafter, the other assets of the unit on an equal basis. The useful life of the asset to be depreciated is reassessed in connection with the recognition of the impairment loss. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount. However, the reversal must not cause that the adjusted value is higher than the carrying amount that would have been determined if no impairment loss had been recognized in prior years. Impairment losses recognized for goodwill are not reversed.
ASSETS HELD-FOR-SALE
Non-current assets (or a disposal group) are classified as held-for-sale, if their carrying amount will be recovered principally through the disposal of the assets rather than through continuing use. For this to be the case, the sale must be highly probable, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary, the management must be committed to selling and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets held-for-sale (or assets included in the disposal group) are measured at the lower of carrying amount and fair value less estimated selling expenditure. After an asset has been classified as held-for-sale, it is not depreciated. If the classification criterion is not met, the classification is reversed and the asset is measured at the lower of carrying amount prior to the classification less depreciation and impairment, and recoverable amount. A non-current asset held-for-sale and assets included in the disposal group classified as held-for-sale are disclosed separately from the other asset items.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
ACCOUNTING FOR LEASES
Group as a lessee
Leases of tangible assets, where the Group has substantially all the rewards and risks of ownership, are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset or the estimated present value of the underlying lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. The corresponding rental obligations, net of finance charges, are included in interest-bearing liabilities with the interest element of the finance charge being recognized in the income statement over the lease period. Tangible assets acquired under finance lease contracts are depreciated over the shorter of the estimated useful life of the asset or lease period.
Leases of tangible assets, where the lessor retains all the risks and benefits of ownership, are classified as operating leases. Payments made there under, and under rental agreements, are expensed on a straight-line basis over the lease periods. Received incentives are deducted from the paid leases based on the time elapse of benefit.
Currently the Group does not have other arrangements that contain a lease.
Group as a lessor
Those leases under which the Group is a lessor are classified as operating leases. Leased assets are presented in the lessor's balance sheet under tangible assets according to the nature of the asset. They are depreciated over their estimated useful lives in accordance with the depreciation policy used for comparable assets in own use. Lease income is recognized in the income statement on a straight-line basis over the lease term.
FINANCIAL ASSETS
Financial assets are classified as financial assets at fair value through profit or loss, financial assets held-to-maturity, loans and receivables or available-for-sale financial assets. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate re-evaluates this designation at each financial year-end. Financial assets include current and non-current assets and they can be interest-bearing or non-interest-bearing.
Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition as at fair value through profit or loss. The Group has not applied the fair value option. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling in the near term. All of the Group's currency derivatives, which do not qualify for hedge accounting, are classified as financial assets held-for-trading. Financial assets classified as held-for-trading are measured at fair value. Unrealized and realized changes in fair value are recognized in the income statement.
Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has a positive intention and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest rate method less any allowance for impairment. Initially recognized amount includes directly attributable transaction costs. Gains and losses are recognized in the income statement when loans and receivables are derecognized, impaired, and through the amortization process.
Financial assets that are not classified in the two preceding categories are classified as available-for-sale. When available-for-sale financial assets are recognized initially, they are measured at fair value by using quota market rates and market prices, discounted cash flow analyses and other appropriate valuation models. Certain unlisted shares for which fair values cannot be measured reliably are reported at cost less impairment. The fair value changes of available-for-sale financial assets, net of tax, are recognized as other comprehensive income. Changes in fair value are transferred from the statement of other comprehensive income to the income statement when the instrument is sold or its value has fallen so that an impairment loss has to be recognized for the instrument. Purchases and sales of available-for-sale financial assets are recognized on the trade date.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
The Group is exposed to financial risks related especially to changes in foreign currency exchange rates and interest rates for loans and borrowings. Derivative financial instruments are used, from time to time, to hedge financial risk. All derivatives are initially recognized at fair value on the date derivative contract is entered into, and are subsequently remeasured at fair value on each balance sheet date. Determination of fair values is based on quoted market prices and rates, discounting of cash flows and option valuation models.
Derivatives may be designated as hedging instruments, in which case hedge accounting is applied. If hedge accounting is not applied, fair value changes in derivatives are recognized in the income statement. In the case hedge accounting is applied, the accounting for hedging instruments is dependent on the particular nature of the hedging relationship.
In cash flow hedges, changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognized as other comprehensive income and the ineffective portion is recognized immediately in the income statement. If hedge accounting is not applied, fair value changes in derivatives are recognized in the income statement. Gains and losses from derivative instruments recognized in the income statement are presented in other operating expenses and in financial income or expenses only when the derivative instrument is assigned to interest-bearing financial assets or liabilities. Accumulated fair value changes recognized in the statement of other comprehensive income are reclassified into income statement in the period when the hedged cash flow affects income or if the hedged subsidiary is sold or liquidated.
Changes of the fair value of derivative financial instruments that are designated and qualify as fair value hedges are recorded in the income statement together with the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If derivative financial instrument does not qualify for hedge accounting, any changes in fair value are recognized in the income statement.
Currently, the Group has short-term zero-cost currency option pair instruments and currency forwards to which hedge accounting is not applied but which have been made to hedge operative cash flow against exchange rate risk. The fair values of these instruments are based on market valuations received from the bank.
The Group also has interest rate swaps, which are designated and effective as cash flow hedge. The fair values of interest rate derivatives have been calculated using a discounted cash flow method and are received from the bank. Currently, the Group does not have any fair value hedges or embedded derivatives.
Hedge accounting is applied to hedges of net investment in the foreign subsidiaries. Group hedges its net investments in foreign subsidiaries using currency loans. Hedges of net investments in foreign subsidiaries are recorded in the same way as cash flow hedges. Effective portion of changes in the fair value are recognized in translation differences in the statement of other comprehensive income and the ineffective portion is recognized in financial income and expenses. Accumulated fair value changes recognized in the items of other comprehensive income are reclassified into income statement if the hedged subsidiary is sold or liquidated.
If hedge accounting is applied, hedging programs are documented according to the requirements of IAS 39 and designated hedging instruments are subject to prospective and retrospective testing of effectiveness.
INVENTORIES
Inventories are valued at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (FIFO) method or, alternatively, weighted average cost where it approximates FIFO. The cost of finished goods and work in progress comprises raw materials, direct labor, depreciation, other direct costs and related production overheads, but excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
TRADE RECEIVABLES
Trade receivables are carried at their anticipated realizable value, which is the original invoice amount less an estimated valuation allowance. A credit loss allowance of trade receivables is made when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due accord-
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
ing to the original terms of the receivables. The assessment and decision for credit loss allowances is done locally in each business unit on case-by-case -basis.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current interest-bearing loans.
OWN SHARES
Own shares acquired by the Group, including directly attributable costs, are presented as a deduction from the total equity on the day of trading in the consolidated financial statements. Purchases or subsequent sales of treasury shares are presented as changes in equity.
FINANCIAL LIABILITIES
Financial liabilities are initially recognized at the fair value of the consideration received plus directly attributable transactions costs. After initial recognitions, they are subsequently measured at amortized cost using the effective interest method. Also commercial paper programs are measured at amortized cost. Gains and losses are recognized in the income statement when the liabilities are derecognized, impaired and through the amortization process.
Financial liabilities include current and non-current liabilities and they can be interest-bearing or non-interest-bearing. Contingent considerations of business combinations are classified as non-interest-bearing financial liabilities.
RECOGNITION AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities, except for derivatives and available-for-sale financial assets, are recognized at the settlement date.
A financial asset or a financial liability is recognized on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.
A financial asset is derecognized when, and only when the contractual rights to the cash flows from the financial asset expire or when it transfers the financial asset, so that all the risks and rewards of ownership of the financial asset are substantially transferred. A financial liability or a part of a financial liability is removed from the balance sheet when, and only when, it is extinguished, that the obligation specified in the contract is discharged or cancelled or expires.
IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses at each balance sheet date whether a financial asset or group of financial asset is impaired. An impairment loss in respect of loans and receivables is measured as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is measured as a difference between its acquisition costs and its current fair value, less any impairment loss on that financial asset previously recognized in the income statement. An impairment loss in respect of an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.
All impairment losses are recognized in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in the items of other comprehensive income is reclassified into income statement when the asset is sold or when the impairment is permanent.
A previously recognized impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets amortized at cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognized in the statement of other comprehensive income. An impairment loss in respect of an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, cannot be reversed.
PROVISIONS
Provisions are recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. Provisions are valued at the net present value of the expenses required to cover the obligation. The discount factor used when calculating present value is selected so that it describes the market view of the time value of the money and the risk relating to the obligation at the time of examination.
A warranty provision is recognized when a product containing a warranty clause is sold. The size of the sum involved is determined on the basis of what is known about past warranty costs. A restructuring provision is recognized when the Group has compiled a detailed restructuring plan, launched its implementation or has informed the parties concerned.
WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT
The Group is a distributor of electrical equipment that fails under the EU Directive on Waste Electrical and Electronic Equipment. Expected costs are recognized as part of other operating expenses and as a current non-interest-bearing payable.
EMPLOYEE BENEFITS
Pension obligations
Throughout the Group operates various pension plans in accordance with local conditions and practices. The plans are classified as either defined contribution plans or defined benefit plans. The contributions to defined contribution plans are charged to the income statement in the year to which they relate.
The Group operates defined benefit pension plans only in France and Sweden. For defined benefit plans, pension costs are assessed using the projected unit credit actuarial valuation method, in which the costs of providing pensions is charged to the income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries who carry out a full valuation of the plan. The pension obligation is measured as the present value of estimated future cash outflows. Defined benefit liability comprises of the present value of the defined benefit obligation less past service and actuarial gains and losses not yet recognized and less the fair value of plan assets. All actuarial gains and losses are recognized in the income statement over the average remaining service lives of employees, to the extent that they exceed 10% of pension obligations or the fair value of plan assets. The past service cost is recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested immediately following the introduction of, or change to, a pension plan, past service cost is recognized immediately. In accordance with the exemption under IFRS 1, all cumulative actuarial gains and losses have been recognized in retained earnings at the date of transition, January 1, 2004.
Share-based payments
Currently, the Group does not have share-based payment programs
Share-based payment programs are valued at fair value on the grant date and recognized as an expense in the income statement during the vesting period with a corresponding adjustment to the equity or liability. In the cash settled option program the liability is revalued at each balance sheet date with changes in fair value recognized in the income statement. The income statement effect of the share-based payments programs is recognized in employee benefit expenses.
13
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
The expense of the share-based payments determined at the grant date reflects the Group's estimate of the number of options or share rewards that will ultimately vest. Grant date is the date at which the entity and another party agree to a share-based payment arrangement, being when the entity and the counterparty have a shared understanding of the terms and conditions of the arrangement. The options are valued at fair value using Black-Scholes option-pricing model. The non-market criteria are not included in the fair value of the option but taken into account in the number of options that are assumed to vest. On a regular basis the Group reviews the assumptions made and revises its estimates of the share-based payments that are expected to be settled. The changes in the estimates are recognized in the income statement with a corresponding adjustment to the equity or liability.
When the share options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (nominal value) and share premium fund.
DIVIDEND
The dividend proposed by the Board of Directors is not deducted from distributable equity until approved by the Annual General Meeting of Shareholders.
EARNINGS PER SHARE
Earnings per share is calculated by dividing the net profit attributable to the shareholders of the Company by the weighted average number of shares in issue during the year, excluding shares purchased by the Group and held as treasury shares, if any.
Diluted earnings per share amounts have been calculated by applying the "treasury stock" method, as if the options were exercised at the beginning of the period, or on the issuance of options, if that occurs later during the period, and as if the funds obtained thereby were used to purchase common stock at the average market price during the period. In addition to the weighted average number of shares outstanding, the denominator includes the incremental shares obtained through the assumed exercise of the options. The assumption of exercise is not reflected in earnings per share when the exercise price of the options exceeds the average market price of the shares during the period. The share options have a diluting effect only when the average market price of the share during the period exceeds the exercise price of the options.
OPERATING PROFIT
The IAS 1 (Presentation of Financial Statements) standard does not define operating profit. The Group has defined it as follows: Operating profit is the net amount arising from adding other operating income and share of results in associates and joint ventures to net sales, deducting cost of sales corrected for changes in inventories and cost of production for own use, deducting costs related to employee benefits, depreciation and possible impairments as well as other operating expenses. Foreign exchange differences and changes in the fair value of derivative financial instruments are included in operating profit in case they originate from operating business items; otherwise they are booked in financial income and expenses.
CASH FLOW STATEMENT
Cash and cash equivalents presented in the cash flow statement comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Cash generated from operating activities has been reported using the indirect method. All income taxes paid during the financial year are presented in net cash generated from operating activities, unless they can be particularly allocated to net cash from (used in) investing or financing activities. Unrealized exchange gains and losses from cash and cash equivalents denominated in foreign currencies and from transactions between Group companies are presented on a separate row before change in cash and cash equivalents, separate from cash generated from (used in) operating, investing and financing activities.
NON-RECURRING ITEMS
In order to improve comparability between reporting periods, the Group classifies certain items as non-recurring in its financial reporting. Non-recurring items include mainly income and expenses related to restructurings of Group's business operations, non-recurring impairments of assets, external costs related to mergers and acquisitions and other exceptional non-recurring items which materially distort the comparability of the Group's underlying profitability.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the consolidated financial statements in accordance with IFRS requires management to make certain estimates and assumptions that affect the amounts recognized in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates. In addition, judgment has to be exercised in applying the accounting principles of the financial statements. Management's estimates and assumptions are based on historical experience and plausible future scenarios, which are continually evaluated. Possible changes in estimates and assumptions are recognized in the accounting period during which estimates and assumptions were fixed and in all subsequent accounting periods.
The key assumptions concerning the future and other key sources of uncertainty related to estimations at the balance sheet date, that have significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next accounting period, are discussed below.
Determining fair value of acquisitions
The fair values of acquired working capital and tangible assets were evaluated by Rapala and external appraisal personnel before the acquisition. The fair value of intellectual property rights (trademarks, patents and technology) and customer relations are established with discounting the related cash flows.
Impairment testing
The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. Goodwill, intangible assets with indefinite useful lives and unfinished tangible assets are in all cases tested annually. For the purposes of assessing impairment, assets are grouped at the lowest cash generating unit level for which there are separately identifiable, mainly independent, cash inflows and outflows. An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is determined by reference to discounted future net cash flows expected to be generated by the asset. These calculations require the use of estimates.
Income taxes
The Group reviews at each balance sheet date especially the carrying amount of deferred tax assets. Deferred taxes are provided using the liability method, as measured with enacted tax rates, to reflect the temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The main temporary differences arise from the depreciation difference on tangible assets, fair valuation of net assets in acquired companies, intra-group inventory profits, defined benefit pension plans, inventories and other provisions, untaxed reserves and tax losses carried forward. Temporary differences are recognized as a deferred tax asset to the extent that it is probable that future taxable profits will be available, against which the deductible temporary difference can be utilized. The likelihood for the recovery of deferred tax assets from future taxable income is assessed, and to the extent the recovery is not considered likely the deferred asset is adjusted in accordance. At each balance sheet date the Group reviews whether distribution of earnings in subsidiaries is in its control and probable, and books a deferred tax accordingly.
14
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
Pension obligations
Pension costs for defined benefit plans are assessed using the projected unit credit actuarial valuation method. Several statistical and other actuarial assumptions are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, future salary increase and annual inflation rate. Statistical information used may differ from actual results. Changes in actuarial assumptions are charged or credited to income over the expected remaining service lives of the employees which could have a slight impact on the Group's income statement.
Share-based payments
The expense of the share-based payments determined at the grant date reflects the Group's estimate of the number of options or share rewards that will ultimately vest. Options are valued at fair value using Black-Scholes option-pricing model. Several assumptions are used in calculating the fair value of the option. These factors include dividend yield, risk free interest rate, expected life of option and personnel forfeit ratio. The non-market criteria are not included in the fair value of the option but taken into account in the number of options that are assumed to vest. On a regular basis the Group reviews the assumptions made and revises its estimates of the share-based payments that are expected to be settled. The changes in the estimates are recognized in the income statement.
Provisions
The timing of the recognition of a provision is based on management's estimate of the moment when the Group has a present legal or constructive obligation, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Hyperinflation
The Group may have operations in hyperinflatory economies. The financial statements of a subsidiary whose functional currency is the currency of a hyperinflationary economy are restated in accordance of IAS 29 (Financial Reporting in Hyperinflatory Economies) in case the adjustments are material in relation to the Group Financial Statements.
ROUNDING OF FIGURES
All figures in these accounts have been rounded. Consequently, the sum of individual figures can deviate from the presented sum figure. Key figures have been calculated using exact figures.
In the financial statements, EUR 0.0 million means the figure is less than EUR 50 000. If the amount is EUR 0, the cell is left empty.
72 SEGMENT INFORMATION
Rapala Group is led as a whole, as an integrated chain of units engaged in sourcing, manufacturing and distributing fishing tackle equipment. The base unit of Group's management is a single subsidiary engaged in one or several activities within the integrated supply chain. The Group does not have any division structure, but nearly all of the Group's subsidiaries report directly to the Group's CEO, who together with the Board is the ultimate decision maker.
Despite the integrated nature of Group's operations, the type and source of products being processed by the units creates difference in Group's management approach. There is a distinction in the strategic and operative role of the products depending on whether the product sold is being manufactured by the Group itself; whether the product is sourced by the Group externally, but sold under one of Group's own brands; whether the product is a third party product represented and distributed by the Group; or whether the product is part of Group's core fishing tackle business or some supporting product category outside of fishing. This distinction between the type and source of products is the basis for Group's operating segments.
Group's operating segments are Group Fishing Products, Other Group Products and Third Party Products. Group Fishing Products are fishing tackle products manufactured or sourced by the Group itself and sold under Group's brands. Group Fishing Products include Group Lures, Fishing Hooks, Fishing Lines and Fishing Accessories. Other Group Products include Group manufactured and/or branded products for winter sports and some other non-fishing businesses as well as gift products. Third Party Products include non-Group branded fishing products and third party products for hunting, outdoor and winter sports, which are distributed by the Group utilizing the same supply channel as Group Fishing Products and Other Group Products.
The Group operates in four geographical areas which are North America, Nordic Countries, Rest of Europe and Rest of the World.
The Group measures segment performance based on operating profit. Reported figures are consistent with IFRS accounting principles. Pricing of inter-segment transactions is based on market prices.
OPERATING SEGMENTS
| EUR million | 2011 | 2010 |
|---|---|---|
| Net sales | ||
| Group Fishing Products | 152.3 | 139.5 |
| Other Group Products | 22.8 | 25.2 |
| Third Party Products | 105.0 | 105.6 |
| Intra-segment sales | -0.7 | -0.9 |
| Net sales | 279.5 | 269.4 |
| Operating profit | ||
| Group Fishing Products | 19.9 | 21.4 |
| Other Group Products | 2.5 | 2.0 |
| Third Party Products | 8.4 | 7.8 |
| Operating profit | 30.7 | 31.3 |
In 2011 operating profit included impairment related costs of EUR 0.4 million: Group Fishing Products EUR 0.0 million, Other Group Products EUR 0.2 million and Third Party Products EUR 0.2 million. In 2010 operating profit included impairment related costs of EUR 0.0 million, which was allocated to Group Fishing Products, Other Group Products and Third Party Products.
The share of results in associates and joint ventures, EUR -0.1 million (EUR 0.0 million) was allocated to all operating segments.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
| EUR million | 2011 | 2010 |
|---|---|---|
| Assets | ||
| Group Fishing Products | 195.5 | 190.5 |
| Other Group Products | 12.2 | 12.7 |
| Third Party Products | 68.8 | 71.1 |
| Intra-segment | 0.0 | |
| Non-interest bearing assets total | 276.5 | 274.3 |
| Unallocated interest-bearing assets | 38.1 | 29.7 |
| Total assets | 314.5 | 304.0 |
| Liabilities | ||
| Group Fishing Products | 32.5 | 35.1 |
| Other Group Products | 2.5 | 2.9 |
| Third Party Products | 14.5 | 15.1 |
| Intra-segment | 0.0 | |
| Non-interest bearing liabilities total | 49.5 | 53.1 |
| Unallocated interest-bearing liabilities | 129.3 | 121.7 |
| Total liabilities | 178.8 | 174.8 |
GEOGRAPHICAL INFORMATION
Net sales by unit location
| EUR million | 2011 | 2010 |
|---|---|---|
| North America | 69.2 | 68.5 |
| Nordic | 111.9 | 110.4 |
| Rest of Europe | 117.8 | 104.6 |
| Rest of the World | 70.8 | 69.6 |
| Intra-segment sales | -90.2 | -83.8 |
| Total net sales | 279.5 | 269.4 |
External net sales by destination
| EUR million | 2011 | 2010 |
|---|---|---|
| Finland | 24.8 | 25.5 |
| Other Nordic countries | 36.5 | 37.7 |
| Nordic total | 61.3 | 63.2 |
| Russia | 29.2 | 27.4 |
| France | 33.8 | 30.5 |
| Other European countries | 45.5 | 39.4 |
| Rest of Europe total | 108.5 | 97.3 |
| USA | 56.8 | 60.8 |
| Other North America | 13.8 | 12.2 |
| North America total | 70.6 | 73.0 |
| Rest of the World | 39.2 | 35.9 |
| Total | 279.5 | 269.4 |
Non-current assets by unit location
| EUR million | 2011 | 2010 |
|---|---|---|
| Finland | 13.9 | 13.5 |
| Other Nordic Countries | 2.8 | 3.1 |
| Nordic total | 16.6 | 16.6 |
| Rest of Europe total | 18.9 | 16.6 |
| USA | 26.2 | 25.7 |
| Other North America | 4.2 | 4.3 |
| North America total | 30.5 | 30.0 |
| China | 26.9 | 29.7 |
| Other countries | 5.2 | 3.6 |
| Rest of the World total | 32.0 | 33.3 |
| Total | 98.1 | 96.5 |
These non-current assets exclude non-current financial instruments and deferred tax assets.
16
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
ACQUISITIONS AND DISPOSALS
CORPORATE ACQUISITIONS IN 2011
In July Rapala acquired 100% of the shares and voting rights of a UK based company Advance Carp Equipment Ltd ("ACE"), engaged in design and sales of equipment and accessories for carp fishing. ACE will form the platform for Rapala's fast entry into these product categories in UK and in Europe. The consideration GBP 0.0 million (EUR 0.0 million) was paid to the sellers in cash at closing.
The acquisition of ACE contributed EUR 0.1 million to the 2011 sales and EUR -0.1 million to the net profit. If the acquisition had taken place at the beginning of the year, it would have contributed some EUR 0.2 million and some EUR -0.1 million to the net profit for the year.
OTHER ACQUISITIONS IN 2011
In September Rapala acquired 50% of the share capital and voting rights of Shimano UK Ltd, forming a true 50/50 joint venture company, Shimano Normark UK Ltd, to distribute both Rapala and Shimano products in the UK on an exclusive basis. The total consideration was based on the net assets upon closing and totaled to GBP 1.4 million. The acquisition did not create any goodwill. For more details on the joint venture, see note 14.
CORPORATE ACQUISITIONS IN 2010
In February 2010, Rapala purchased a 10% share of the Group's Hungarian distribution company. This acquisition raised Rapala's ownership to 66.6%. Acquisition has no significant impact on the Group's consolidated financial statements.
On August 27th, Rapala acquired 100% of the share capital of UK based Dynamite Baits Ltd ("Dynamite"), a manufacturer of boilies, groundbaits, liquid attractants, pellets and bagged particle baits for sport fishing. The total consideration for the deal was some GBP 5.3 million (some EUR 6.5 million). The total consideration is subject to realization of contingent consideration. Dynamite has its own efficient distribution system in the UK securing deliveries directly to some 1,200 sales outlets. Its products enjoy an excellent reputation for catching fish. The acquisition of Dynamite brought Rapala into an important segment of the bait market in which it has not been represented before.
The acquisition of Dynamite contributed EUR 1.8 million to the net sales and EUR -0.3 million to the net profit for the year. If this acquisition had taken place at the beginning of the year, it would have contributed some EUR 8.2 million to the I-IV/2010 net sales and some EUR 0.2 million to the net profit for the year.
ACQUISITIONS
| EUR million | Note | Fair value | 2011 Seller's carrying value | Fair value | 2010 Seller's carrying value |
|---|---|---|---|---|---|
| Cash and cash equivalents and interest-bearing assets | 0.0 | 0.0 | 0.2 | 0.2 | |
| Inventories | 0.2 | 0.2 | 1.4 | 1.4 | |
| Trade and other non-interest-bearing receivables | 0.0 | 0.0 | 1.2 | 1.2 | |
| Intangible assets | 12 | 0.4 | 6.4 | ||
| Tangible assets | 13 | 0.1 | 0.1 | 0.5 | 0.5 |
| Trade and other non-interest-bearing payables | -0.6 | -0.6 | -1.7 | -1.7 | |
| Interest-bearing liabilities | -0.1 | -0.1 | -0.7 | -0.7 | |
| Deferred tax liability (net) | 11 | -0.1 | -1.6 | 0.2 | |
| Non-controlling interest | 0.0 | ||||
| Fair value of acquired net assets | 0.0 | -0.3 | 5.6 | 1.0 | |
| EUR million | Note | 2011 | 2010 | ||
| --- | --- | --- | --- | ||
| Cash paid during financial year | 0.0 | 5.0 | |||
| Cash to be paid later 1) | 1.3 | ||||
| Contingent consideration | 0.2 | ||||
| Total purchase consideration | 0.0 | 6.5 | |||
| Excess of Group's interest in the net fair value of acquired net assets over cost | |||||
| Goodwill | 12 | 0.1 | 0.9 | ||
| Net goodwill | 0.1 | 0.9 | |||
| Cash paid for the acquisitions 2) | 0.2 | 5.0 | |||
| Cash and cash equivalents acquired | 0.0 | -0.2 | |||
| Net cash flow | 0.2 | 4.8 |
1) Paid to an escrow account and will be released to sellers in 2013.
2) Cash paid in 2011 includes EUR 0.1 million payment of the contingent consideration related to 2010 acquisition of Dynamite. The contingent consideration required the acquired company Dynamite to receive a tax benefit of EUR 0.2 million based on preliminary tax calculations. Rest of the contingent consideration, EUR 0.1 million, is expected to be paid according to the original estimation during 2012. The discounted value of the contingent consideration was estimated by applying the income approach assuming a discount rate of 1%.
In 2011 the total amount of cash and cash equivalents and other interest-bearing receivables consisted of cash.
The transaction costs of EUR 0.3 million have been expensed and are included in the other operating expenses in the income statement and treated as a non-recurring item.
Acquired companies are accounted for using the purchase method of accounting, which involves allocating the cost of the business combination to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition.
The fair value of acquired intellectual property rights is established with the estimated discounted royalty payments. Determination of fair value is the market based estimated royalty rate (normalized net cash flow), that an external party would be willing to pay for the license contract. The fair value of customer relations is established based on the estimated duration of customer relationship (average minimum duration) and discounted net cash flows of present customer relationships.
The ACE acquisition in 2011 created EUR 0.1 million of goodwill, which is justified by a fast entry into new product markets. The goodwill of 2010 (EUR 0.9 million) resulted from acquiring Dynamite. Goodwill is justified by expansion of product assortment and market coverage as well as utilization of economies of scale in production, sourcing and distribution.
The goodwill has been tested for impairment. None of the goodwill is expected to be deductible for income tax purposes.
DISPOSALS IN 2011
In December a deal to sell 100% of the shares of Willtech Gift (HK) Ltd ("Willtech Gift"), the Rapala unit engaged in manufacturing of gift items in China, was closed. Rapala's gift item manufacturing and distribution activities were transferred under Willtech Gift before the transaction. The transaction resulted into a gain of EUR 1.9 million that was booked in other operating income. The value of assets disposed totaled to EUR 4.8 million, including EUR 1.0 million of goodwill. Part of the consideration was received in cash in December, and the rest was settled by a guaranteed interest bearing promissory note that matures during 2012-2016.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
DISPOSALS
| EUR million | Note | 2011 |
|---|---|---|
| Working capital | 1.9 | |
| Tangible assets | 13 | 1.0 |
| Cash | 0.9 | |
| Goodwill | 12 | 1.0 |
| Disposed asset total | 4.9 | |
| Cash received at closing | 1.4 | |
| Cash received later | 5.3 | |
| Total Consideration | 6.7 | |
| Gain on sale | 1.9 |
OTHER OPERATING INCOME
| EUR million | 2011 | 2010 |
|---|---|---|
| Sale of gift manufacturing unit in China | 1.9 | |
| Other gains from sale of intangible and tangible assets | 0.2 | 0.1 |
| Royalty income | 0.3 | 0.2 |
| Insurance compensations | 0.1 | 0.0 |
| Rental income | 0.1 | 0.1 |
| Government grants | 0.0 | 0.1 |
| Scrap sales | 0.0 | 0.0 |
| Other income | 0.2 | 0.1 |
| Total | 2.9 | 0.7 |
Other income, EUR 0.2 million (2010: EUR 0.1 million) is a combination of several smaller income items, of which none is individually significant. More information on the sale of Gift manufacturing unit in China, see note 3.
OTHER OPERATING EXPENSES
| EUR million | 2011 | 2010 |
|---|---|---|
| Selling and marketing expenses | -12.2 | -12.1 |
| Rents paid | -7.4 | -6.8 |
| Freight | -5.7 | -5.3 |
| Maintenance and utility expenses | -5.2 | -5.0 |
| Traveling expenses | -4.6 | -4.4 |
| Sales commissions | -3.6 | -3.6 |
| Consulting expenses | -2.2 | -1.7 |
| IT and telecommunication | -1.9 | -1.8 |
| Valuation allowance for trade receivables | -1.2 | -0.6 |
| Insurance expenses | -0.8 | -0.8 |
| Auditors' fees and services | -0.8 | -0.7 |
| Outsourced logistics | -0.6 | -0.6 |
| Other expenses | -7.0 | -6.4 |
| Total | -53.3 | -49.7 |
AUDITORS' FEES AND SERVICES
| EUR million | 2011 | 2010 |
|---|---|---|
| Audit fees | -0.7 | -0.6 |
| Fees for tax services | 0.0 | 0.0 |
| Other fees | 0.0 | 0.0 |
| Total | -0.8 | -0.7 |
NON-RECURRING INCOME AND EXPENSES INCLUDED IN OPERATING PROFIT
| EUR million | 2011 | 2010 |
|---|---|---|
| Costs related to business acquisitions | -0.3 | -0.2 |
| Restructuring of Hungarian operations | 0.1 | -0.2 |
| Relocation of Finnish operations | -0.3 | |
| Sale of gift manufacturing unit in China 1) | 1.5 | |
| Other restructuring costs | -0.4 | -0.1 |
| Other non-recurring items | -0.1 | |
| Total included in EBITDA | 0.6 | -0.5 |
| Non-recurring impairment of non-current assets in China | 0.0 | |
| Impairment of non-current assets relating to relocation of Finnish operations | -0.4 | |
| Other non-recurring impairments | 0.0 | |
| Total included in operating profit | 0.2 | -0.5 |
1) Including a gain of EUR 1.9 million and costs related to divestment
Non-recurring income is included in other operating income in the consolidated income statement. Non-recurring expenses are included in other operating expenses, employee benefit expenses and depreciation and impairments.
18
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
6 MATERIALS AND SERVICES
| EUR million | 2011 | 2010 |
|---|---|---|
| Materials, goods and supplies | ||
| Purchases during the period | -125.6 | -123.1 |
| Change in inventory | 0.6 | 0.2 |
| External services | -8.2 | -12.9 |
| Total | -133.2 | -135.7 |
7 EMPLOYEE BENEFIT EXPENSES
| EUR million | 2011 | 2010 |
|---|---|---|
| Wages and salaries | -50.4 | -48.0 |
| Pension costs – defined contribution plans | -3.8 | -3.6 |
| Pension costs – defined benefit plans | -0.2 | -0.3 |
| Other long-term employee benefits | 0.0 | -0.2 |
| Option programs to be settled in shares | 0.1 | |
| Option programs to be settled in cash | 0.1 | -0.1 |
| Other personnel expenses | -7.9 | -7.1 |
| Total | -62.4 | -59.1 |
The employee benefit expenses in 2011 include EUR 0.8 million (2010: EUR 0.3 million) employee related restructuring expenses. For more details on employee benefits for top management and option programs, see notes 28 and 29.
AVERAGE PERSONNEL
| Persons | 2011 | 2010 |
|---|---|---|
| North America | 116 | 112 |
| Nordic | 444 | 468 |
| Rest of Europe | 835 | 842 |
| Rest of the World | 813 | 895 |
| Total | 2 208 | 2 317 |
1 DEPRECIATION, AMORTIZATION AND IMPAIRMENTS
| EUR million | 2011 | 2010 |
|---|---|---|
| Amortization and impairment of intangible assets | ||
| Amortization of customer relations | -0.3 | -0.3 |
| Amortization of other intangible assets | -0.3 | -0.2 |
| Depreciation and impairment of tangible assets | ||
| Depreciation of buildings | -0.8 | -0.7 |
| Depreciation of machinery and equipment | -3.4 | -3.5 |
| Depreciation of other tangible assets | -1.7 | -1.4 |
| Impairment losses of buildings | -0.4 | |
| Impairment losses of other tangible assets | 0.1 | 0.0 |
| Total | -7.0 | -6.1 |
In 2011 the impairments of tangible and intangible assets were related to the relocation of Finnish operations, restructuring of winter sport business in Norway and other non-recurring impairments on tangible and intangible assets. In 2010 impairments were mainly related to the reorganization of the Chinese manufacturing operations.
2 RESEARCH AND DEVELOPMENT EXPENSES
Net profit for the period includes research and development expenses of EUR 2.1 million recognized as an expense in 2011 (2010: EUR 2.1 million). Group has not capitalized research and development costs.
19
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
10 FINANCIAL INCOME AND EXPENSES
| EUR million | 2011 | 2010 |
|---|---|---|
| Foreign exchange gains | ||
| From loans and receivables | 7.2 | 6.9 |
| From financial liabilities measured at amortized cost | 2.6 | 1.4 |
| Foreign exchange losses | ||
| From loans and receivables | -7.3 | -4.3 |
| From financial liabilities measured at amortized cost | -4.3 | -2.4 |
| Interest and other financial income | ||
| Interest income from loans and receivables | 0.2 | 0.2 |
| Other financial income | 0.0 | 0.0 |
| Interest and other financial expenses | ||
| Interest expense on financial liabilities measured at amortized cost | -3.6 | -3.4 |
| Other financial expenses | -0.3 | -0.3 |
| Total | -5.5 | -1.8 |
Interest expenses include interest expense of finance lease contracts of EUR -0.0 million in 2011 (2010: EUR -0.0 million).
RECOGNIZED IN THE STATEMENT OF OTHER COMPREHENSIVE INCOME
| EUR million | 2011 | 2010 |
|---|---|---|
| Change in fair value of interest rate derivatives – hedge accounted, net of tax | -0.1 | -1.2 |
| Gains and losses on hedges of net investments, net of tax | -0.4 | -1.1 |
| Total | -0.5 | -2.3 |
EXCHANGE GAINS AND LOSSES IN THE INCOME STATEMENT
| EUR million | 2011 | 2010 |
|---|---|---|
| In net sales | 0.4 | 0.9 |
| In purchases | -0.1 | -0.4 |
| In other operating expenses | ||
| Change in fair value of currency derivatives, non-hedge accounted | -0.1 | 0.5 |
| In financial income and expenses | ||
| Foreign exchange gains and losses, net | -1.8 | 1.6 |
| Total | -1.6 | 2.5 |
In 2011 and 2010, hedges of net investments and interest rate derivatives, which fulfill IAS 39 effectiveness requirements, had no income statement effect.
11 INCOME TAXES
INCOME TAXES IN THE INCOME STATEMENT
| EUR million | 2011 | 2010 |
|---|---|---|
| Income taxes for the current year | -7.9 | -8.5 |
| Deferred taxes | -0.1 | -0.3 |
| Total | -8.0 | -8.7 |
INCOME TAX RECONCILIATION
| EUR million | 2011 | 2010 |
|---|---|---|
| Income taxes at Finnish corporate tax rate (26%) | -6.6 | -7.7 |
| Effect of different tax rates in foreign subsidiaries | -1.2 | -0.3 |
| Non-deductible expenses and tax exempt income | 0.4 | 0.2 |
| Foreign withholding taxes | -0.3 | -0.4 |
| Losses for which no deferred tax benefit is recognized | -0.4 | -0.1 |
| Taxes for prior years | -0.5 | -0.7 |
| Changes in the carrying amounts of deferred tax assets and liabilities from prior years | 0.5 | 0.2 |
| Impact of the changes in the tax rates on deferred tax balances | 0.0 | 0.0 |
| Effect of consolidation and eliminations | 0.0 | 0.0 |
| Other items | 0.0 | 0.0 |
| Income taxes in the income statement | -8.0 | -8.7 |
TAX EFFECTS RELATING TO EACH COMPONENT OF OTHER COMPREHENSIVE INCOME
| 2011 | EUR million | Before tax | Tax expense/benefit | Net of tax |
|---|---|---|---|---|
| Change in translation differences | 2.0 | 2.0 | ||
| Gains and losses on cash flow hedges | -0.1 | 0.0 | -0.1 | |
| Gains and losses on hedges of net investment | -0.5 | 0.1 | -0.4 | |
| Total | 1.4 | 0.1 | 1.5 | |
| 2010 | EUR million | Before tax | Tax expense/benefit | Net of tax |
| Change in translation differences | 7.8 | 7.8 | ||
| Gains and losses on cash flow hedges | -1.6 | 0.4 | -1.2 | |
| Gains and losses on hedges of net investment | -1.5 | 0.4 | -1.1 | |
| Total | 4.7 | 0.8 | 5.5 |
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
MOVEMENT OF DEFERRED TAXES
| 2011
EUR million | Jan. 1 | Income statement | Equity | Translation differences | Acquisitions (see note 3) | Dec. 31 |
| --- | --- | --- | --- | --- | --- | --- |
| Tax losses and credits carried forward | 2.3 | 0.4 | | 0.0 | | 2.7 |
| Provisions | 0.1 | 0.1 | | 0.0 | | 0.2 |
| Pension obligations | 0.3 | 0.0 | | 0.0 | | 0.3 |
| Depreciation difference | 0.1 | 0.1 | | 0.0 | | 0.2 |
| Effect of consolidation and eliminations | 5.0 | -0.4 | | 0.1 | | 4.7 |
| Other temporary differences | 1.8 | -0.2 | 0.0 | 0.0 | | 1.6 |
| Total deferred tax assets | 9.7 | 0.0 | 0.0 | 0.1 | | 9.8 |
| Depreciation difference and other untaxed reserves | 2.6 | 0.1 | | 0.1 | | 2.7 |
| Inventory | 2.4 | -0.1 | | 0.1 | | 2.4 |
| Fair value adjustments for acquired net assets | 3.2 | 0.0 | | 0.0 | 0.1 | 3.3 |
| Other temporary differences | 0.6 | 0.2 | | 0.0 | | 0.8 |
| Total deferred tax liabilities | 8.8 | 0.2 | | 0.2 | 0.1 | 9.2 |
| Net deferred tax asset | 0.9 | -0.1 | 0.0 | -0.1 | -0.1 | 0.6 |
| 2010
EUR million | Jan. 1 | Income statement | Equity | Translation differences | Acquisitions | Dec. 31 |
| Tax losses and credits carried forward | 1.9 | 0.4 | | 0.0 | | 2.3 |
| Provisions | 0.1 | 0.0 | | 0.0 | | 0.1 |
| Pension obligations | 0.2 | 0.0 | | 0.0 | | 0.3 |
| Depreciation difference | 0.2 | -0.1 | | 0.0 | | 0.1 |
| Effect of consolidation and eliminations | 4.5 | 0.1 | | 0.4 | | 5.0 |
| Other temporary differences | 0.9 | 0.2 | 0.4 | 0.1 | 0.2 | 1.8 |
| Total deferred tax assets | 8.0 | 0.5 | 0.4 | 0.5 | 0.2 | 9.7 |
| Depreciation difference and other untaxed reserves | 2.1 | 0.3 | | 0.2 | | 2.6 |
| Inventory | 2.1 | 0.2 | | 0.1 | | 2.4 |
| Fair value adjustments for acquired net assets | 1.4 | 0.0 | | 0.1 | 1.7 | 3.2 |
| Other temporary differences | 0.2 | 0.4 | | 0.0 | | 0.6 |
| Total deferred tax liabilities | 5.8 | 0.8 | | 0.5 | 1.7 | 8.8 |
| Net deferred tax asset | 2.2 | -0.3 | 0.4 | 0.0 | -1.5 | 0.9 |
Deferred taxes have been reported as a net balance according to IAS 12. As of December 31, 2011, the Group had tax losses carried forward of EUR 7.1 million (2010: EUR 6.8 million), for which deferred tax assets have not been recognized in the consolidated financial statements because the realization of the tax benefit is not probable. EUR 3.7 million of these tax losses will expire during the next five years (2010: EUR 3.6 million).
Deferred tax liability on undistributed earnings of subsidiaries has not been recognized in the consolidated balance sheet because distribution of the earnings is in the control of the Group and such distribution is not probable within the foreseeable future.
The consolidated balance sheet includes deferred tax assets of EUR 0.9 million (2010: EUR 0.4 million) in subsidiaries, which have generated losses in financial year 2011 or 2010. The recognition of these assets is based on result estimates, which indicate that the realization of these deferred tax assets is probable.
21
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
INTANGIBLE ASSETS
2011
| EUR million | Trademarks | Customer relations | Goodwill | Other intangible assets | Total |
|---|---|---|---|---|---|
| Acquisition cost Jan. 1 | 17.7 | 3.5 | 46.5 | 5.8 | 73.5 |
| Additions | 0.4 | 0.4 | |||
| Acquisitions (see note 3) | 0.4 | 0.1 | 0.0 | 0.5 | |
| Disposals | -1.1 | -0.1 | -1.2 | ||
| Reclassifications 1) | 0.2 | 0.2 | |||
| Translation differences | 0.4 | 0.0 | 0.5 | 0.0 | 0.9 |
| Acquisition cost Dec. 31 | 18.5 | 3.4 | 46.0 | 6.4 | 74.3 |
| Accumulated amortization Jan. 1 | -0.6 | -1.3 | -3.8 | -5.7 | |
| Acquisitions (see note 3) | 0.0 | 0.0 | |||
| Disposals | 0.0 | 0.0 | |||
| Reclassifications 1) | -0.2 | -0.2 | |||
| Amortization during the period | -0.3 | -0.3 | -0.7 | ||
| Translation differences | 0.0 | 0.0 | 0.0 | 0.0 | |
| Accumulated amortization Dec. 31 | -0.6 | -1.6 | -4.2 | -6.4 | |
| Carrying value Jan. 1 | 17.1 | 2.2 | 46.5 | 2.0 | 67.8 |
| Carrying value Dec. 31 | 17.9 | 1.8 | 46.0 | 2.3 | 67.9 |
2010
| EUR million | Trademarks | Customer relations | Goodwill | Other intangible assets | Total |
|---|---|---|---|---|---|
| Acquisition cost Jan. 1 | 11.9 | 2.2 | 43.7 | 5.5 | 63.3 |
| Additions | 0.0 | 0.2 | 0.2 | ||
| Acquisitions (see note 3) | 5.3 | 1.0 | 0.9 | 7.3 | |
| Disposals | 0.0 | 0.0 | 0.0 | ||
| Reclassifications 1) | 0.1 | 0.1 | |||
| Translation differences | 0.4 | 0.3 | 1.9 | 0.1 | 2.7 |
| Acquisition cost Dec. 31 | 17.7 | 3.5 | 46.5 | 5.8 | 73.5 |
| Accumulated amortization Jan. 1 | -0.6 | -0.9 | -3.5 | -5.0 | |
| Disposals | 0.0 | 0.0 | 0.0 | ||
| Reclassifications 1) | 0.0 | 0.0 | |||
| Amortization during the period | 0.0 | -0.3 | -0.2 | -0.5 | |
| Translation differences | 0.0 | -0.1 | 0.0 | -0.2 | |
| Accumulated amortization Dec. 31 | -0.6 | -1.3 | -3.8 | -5.7 | |
| Carrying value Jan. 1 | 11.3 | 1.3 | 43.7 | 1.9 | 58.3 |
| Carrying value Dec. 31 | 17.1 | 2.2 | 46.5 | 2.0 | 67.8 |
1) Includes reclassifications between intangible and tangible assets.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
Other intangible assets include patents, licenses and computer software. Intangible assets are stated at cost, amortized on a straight line method over expected useful lives which vary from 3 to 15 years and adjusted for any impairment charges. The expected useful life for most trademarks is decades and therefore these intangibles are measured at cost less any accumulated impairment loss and not amortized. Goodwill is measured at cost less any accumulated impairment loss, and not amortized. Trademarks with indefinite lives and goodwill are tested for impairment annually.
GOODWILL AND TRADEMARKS WITH INDEFINITE LIVES BY BUSINESS SEGMENTS
| EUR million | Group Fishing Products | Other Group Products | Third Party Products | Total |
|---|---|---|---|---|
| 2011 | ||||
| Goodwill | 43.7 | 0.0 | 2.3 | 46.0 |
| Trademarks with indefinite lives | 17.2 | 0.1 | 0.5 | 17.9 |
| 2010 | ||||
| Goodwill | 43.0 | 1.1 | 2.4 | 46.5 |
| Trademarks with indefinite lives | 16.4 | 0.1 | 0.6 | 17.1 |
IMPAIRMENT TESTING OF GOODWILL AND TRADEMARKS WITH INDEFINITE LIVES
The Group is led as a whole and not organized nor managed in segments. Most of the units are also strongly interlinked i.e. some units do not have a sales or a production organization or some other functions or operations needed to operate on a stand-alone basis. However, according to IFRS, the lowest cash-generating unit (CGU) cannot be larger than an operating segment in the Group's segment reporting. As a consequence, goodwill and trademarks with indefinite lives are tested on the operating segment level.
The recoverable amount of the CGU is determined based on value-in-use calculations. Cash flow projections, which were used in these calculations, were based on most recent 5-year financial forecasts prepared by the management and approved by the Board. The estimated sales and production volumes are derived from the utilization of existing property, plant and equipment. The most important assumptions on which management has based its cash flow projections are the sales and gross margins. Discount rate is the weighted average pre-tax cost of capital (WACC), which was 5.4% in 2011 and 6.0% in 2010. In the impairment tests prepared in 2011 and 2010, the growth rate used to extrapolate the cash flow beyond the five-year period is 0%. As a result of the performed impairment tests, no impairment losses have been recognized in 2011 or 2010.
Key assumptions
Sales - The Group's estimated sales are based on present and future product assortment and utilization of distribution and manufacturing capacity. In addition, estimated sales are based on long-term growth of industry and further implementation of Group's strategic objectives.
EBITDA margin - The Group's estimated EBITDA margin, operating profit before depreciation and impairments compared to net sales, is based on past years actual margins and management's view on sales and gross margin development. The increase in general cost level has also been taken into account in the development of EBITDA margin.
Discount rate - Discount rate is the weighted average pre-tax cost of capital (WACC). Weighted average cost of capital represents the total cost of Group's equity and debt taken into account their different return requirements. The WACC has been determined using the Group's actual cost of debt as the basis for the cost of debt but adding the estimated premium that would be added if the loan portfolio was refinanced now, and for cost of equity, the fact that the risk factor of the Group's equity is markedly lower than the average risk level in the Finnish stock market.
Growth rate - Compared to actual growth rates during past 5 years, management has been conservative in determining the growth rate for impairment purposes.
Sensitivity analysis
The key sensitivity factors for the impairment test are the estimated EBITDA margin and the discount rate. It is the management's opinion that no probable change in any of the key sensitivity factors would lead to a situation where the carrying amount would exceed the recoverable amount. Even if the discount rate would be 8 percentage points higher or EBITDA margin 30% lower than used in the management's estimates, it would not lead to an impairment loss in Group Fishing Products and Third party Products. In Other Group Products the sensitivity level is some half of the others.
23
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
TANGIBLE ASSETS
| 2011
EUR million | Land | Buildings | Machinery and equipment | Other tangible assets | Advance payments and construction in progress | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Acquisition cost Jan. 1 | 1.8 | 21.4 | 49.8 | 10.9 | 0.7 | 84.6 |
| Additions | 0.0 | 1.1 | 3.5 | 2.0 | 1.4 | 8.1 |
| Acquisitions (see note 3) | | | 0.1 | 0.0 | | 0.2 |
| Disposals | | | -2.5 | -3.1 | 0.0 | -5.6 |
| Reclassifications 1) | | 0.1 | 0.7 | 0.1 | -1.1 | -0.2 |
| Transfer to assets held-for-sale | -0.1 | -0.9 | | | | -1.0 |
| Translation differences | 0.0 | 0.1 | 0.2 | 0.1 | 0.0 | 0.5 |
| Acquisition cost Dec. 31 | 1.8 | 21.7 | 51.8 | 10.1 | 1.0 | 86.4 |
| Accumulated depreciation Jan. 1 | | -13.4 | -36.6 | -5.9 | | -55.9 |
| Acquisitions (see note 3) | | | 0.0 | 0.0 | | -0.1 |
| Disposals | | | 2.0 | 1.9 | | 3.9 |
| Reclassifications 1) | | | 0.1 | 0.1 | | 0.2 |
| Transfer to assets held-for-sale | | 0.7 | | | | 0.7 |
| Depreciation during the period | | -0.8 | -3.4 | -1.7 | | -6.0 |
| Impairment | | -0.4 | | 0.1 | | -0.3 |
| Translation differences | | -0.1 | -0.2 | -0.1 | | -0.4 |
| Accumulated depreciation Dec. 31 | | -14.0 | -38.2 | -5.7 | | -57.9 |
| Carrying value Jan. 1 | 1.8 | 8.0 | 13.2 | 5.0 | 0.7 | 28.7 |
| Carrying value Dec. 31 | 1.8 | 7.7 | 13.7 | 4.4 | 1.0 | 28.5 |
| 2010
EUR million | Land | Buildings | Machinery and equipment | Other tangible assets | Advance payments and construction in progress | Total |
| Acquisition cost Jan. 1 | 1.6 | 16.7 | 47.1 | 8.7 | 1.4 | 75.5 |
| Additions | 0.0 | 0.6 | 3.1 | 1.5 | 1.2 | 6.4 |
| Acquisitions (see note 3) | | | 1.1 | 0.3 | | 1.4 |
| Disposals | | | -3.4 | -0.5 | -0.5 | -4.4 |
| Reclassifications 2) | | 3.6 | 0.8 | 0.4 | -1.4 | 3.5 |
| Translation differences | 0.1 | 0.5 | 1.1 | 0.5 | 0.0 | 2.2 |
| Acquisition cost Dec. 31 | 1.8 | 21.4 | 49.8 | 10.9 | 0.7 | 84.6 |
| Accumulated depreciation Jan. 1 | | -8.9 | -35.0 | -4.2 | | -48.0 |
| Acquisitions (see note 3) | | | -0.7 | -0.2 | | -1.0 |
| Disposals | | | 3.1 | 0.4 | | 3.4 |
| Reclassifications 2) | | -3.6 | 0.3 | -0.2 | | -3.5 |
| Depreciation during the period | | -0.7 | -3.5 | -1.4 | | -5.6 |
| Impairment | | | 0.0 | 0.0 | | 0.0 |
| Translation differences | | -0.2 | -0.8 | -0.2 | | -1.2 |
| Accumulated depreciation Dec. 31 | | -13.4 | -36.6 | -5.9 | | -55.9 |
| Carrying value Jan. 1 | 1.6 | 7.8 | 12.1 | 4.5 | 1.4 | 27.5 |
| Carrying value Dec. 31 | 1.8 | 8.0 | 13.2 | 5.0 | 0.7 | 28.7 |
1) Includes reclassifications between intangible and tangible assets.
2) Includes reclassifications between acquisition cost and accumulated depreciation.
The carrying value of the machinery included in tangible assets was EUR 12.6 million as of December 31, 2011 (2010: EUR 12.7 million).
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
ASSETS LEASED BY FINANCE LEASE AGREEMENTS
| EUR million | Machinery and equipment | Other tangible assets | Machinery and equipment | Other tangible assets |
|---|---|---|---|---|
| Carrying value Jan. 1 | 0.4 | 0.1 | 0.1 | |
| Additions | 0.0 | 0.1 | 0.2 | |
| Acquisitions (see note 3) | 0.2 | 0.0 | ||
| Disposals | 0.0 | -0.1 | ||
| Reclassifications 1) | -0.1 | 0.1 | -0.1 | 0.1 |
| Depreciation during the period | -0.1 | -0.1 | -0.1 | 0.0 |
| Translation differences | 0.0 | 0.0 | 0.0 | 0.0 |
| Carrying value Dec. 31 | 0.2 | 0.1 | 0.4 | 0.1 |
| Accumulated depreciation Dec. 31 | -0.2 | -0.1 | -0.2 | 0.0 |
| Acquisition cost Dec. 31 | 0.4 | 0.2 | 0.5 | 0.1 |
1) Includes reclassification between machinery and equipment and other tangible assets
ASSETS HELD-FOR-SALE
As part of the relocation of Finnish distribution operations, an office and warehouse building in Korpilahti, Finland, was classified as held for sale during 2011. This resulted in an impairment loss of EUR 0.4 million.
14 INVESTMENTS IN ASSOCIATED COMPANIES
In September, Rapala acquired 50% of the share capital and voting rights of Shimano UK Ltd, forming a true 50/50 joint venture company, Shimano Normark UK Ltd, to distribute both Rapala and Shimano products in the UK on an exclusive basis. The total consideration was based on the net assets of the acquired company upon closing and totaled to GBP 1.4 million (EUR 1.5 million). The acquisition did not create any goodwill. The consolidated accounts include share of profit/loss from acquisition to December 31. Shimano Normark UK Ltd's income statement and balance sheet figures are based on the information for the accounting year ending on November 30.
The Group has a 33.3% interest in unlisted Lanimo Oü. Its main activity is producing leather-haberdashery. The carrying amount of Lanimo Oü does not include goodwill or impairments. Lanimo Oü's figures are based on the information for the period ending on September 30, due to differences in reporting time schedule. Information for the financial period ending on December 31, 2010 is the following: assets EUR 0.1 million, liabilities EUR 0.1 million, sales EUR 0.1 million and loss EUR 0.0 million.
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost Jan. 1 | 0.0 | 0.0 |
| Acquisitions | 1.5 | |
| Share of profit/loss | -0.2 | 0.0 |
| Translation differences | 0.1 | |
| Acquisition cost Dec. 31 | 1.5 | 0.0 |
INFORMATION ON ASSOCIATES AND JOIN VENTURES
| 2011 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Ownership, % | Domicile | Non-Current Assets | Current Assets | Non-Current Liabilities | Current Liabilities | Sales | Profit/loss | |
| Shimano Normark UK Ltd. | 50.0 | United Kingdom | 0.2 | 4.0 | 0.0 | 1.1 | 8.5 | 0.0 | |
| Lanimo OÜ | 33.3 | Estonia | 0.1 | 0.1 | 0.0 | 0.0 | 0.1 | 0.0 | |
| 2010 | |||||||||
| EUR million | Ownership, % | Domicile | Non-Current Assets | Current Assets | Non-Current Liabilities | Current Liabilities | Sales | Profit/loss | |
| Lanimo OÜ | 33.3 | Estonia | 0.1 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 |
15 AVAILABLE-FOR-SALE FINANCIAL ASSETS
| EUR million | 2011 | 2010 |
|---|---|---|
| Carrying value Jan. 1 | 0.3 | 0.3 |
| Translation differences | 0.0 | 0.0 |
| Carrying value Dec. 31 | 0.3 | 0.3 |
Available-for-sale financial assets comprise of unlisted shares that are measured at fair value. Certain unlisted shares for which fair values cannot be measured reliably are measured at cost less possible impairment. The fair value changes of available-for-sale financial assets, net of tax, are recognized in shareholders' equity. As Oy Tahlon Eagle is the most significant available-for-sale financial asset.
25
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
16 RECEIVABLES
| EUR million | 2011 | 2010 |
|---|---|---|
| Non-current receivables | ||
| Interest-bearing | ||
| Loan receivables | 4.5 | 0.1 |
| Escrow deposit | 1.3 | 1.3 |
| Non-interest-bearing | ||
| Other receivables | 0.2 | 0.2 |
| Current receivables | ||
| Interest-bearing | ||
| Loan receivables | 1.1 | 0.0 |
| Derivatives | 0.2 | 0.0 |
| Interest receivables | 0.2 | |
| Non-interest-bearing | ||
| Trade receivables | 51.1 | 53.0 |
| VAT receivable | 1.4 | 1.4 |
| Prepaid insurance expenses | 0.3 | 0.2 |
| Other prepaid expenses and accrued income | 1.7 | 1.9 |
| Other receivables | 1.8 | 1.1 |
| Valuation allowance for trade receivables | -2.8 | -2.3 |
| Total | 61.1 | 57.0 |
Due to their short maturity, the fair value of current receivables is regarded as corresponding to their original carrying amount.
The weighted average interest rate of non-current loan receivables was 3.96% (2010: 3.44%). The weighted average interest rate of current loan receivables at December 31, 2011 was 4.04% (2010: 2.56%).
ALLOWANCE FOR TRADE RECEIVABLES
| EUR million | 2011 | 2010 |
|---|---|---|
| Allowance for trade receivables Jan. 1 | 2.3 | 2.5 |
| Additions | 1.2 | 0.7 |
| Deductions | -0.3 | -1.0 |
| Recovery | -0.3 | -0.1 |
| Translation differences | 0.0 | 0.1 |
| Allowance for trade receivables Dec. 31 | 2.8 | 2.3 |
In most cases allowances are determined individually, when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due according to the original terms of the receivables. Allowances have not been made on other receivables.
17 INVENTORIES
| EUR million | 2011 | 2010 |
|---|---|---|
| Raw material | 8.4 | 8.1 |
| Work in progress | 9.4 | 9.7 |
| Finished products | 100.9 | 97.4 |
| Net realizable value provisions | -3.2 | -3.0 |
| Total | 115.5 | 112.2 |
In 2011, the carrying value of inventories included a provision for net realizable value of EUR 3.2 million (2010: EUR 3.0 million).
18 CASH AND CASH EQUIVALENTS
| EUR million | 2011 | 2010 |
|---|---|---|
| Cash at bank and in hand | 27.8 | 27.3 |
| Short-term deposits | 1.1 | 0.6 |
| Total | 28.9 | 27.9 |
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current interest-bearing loans.
Fair value of cash and cash equivalents does not differ significantly from the carrying value.
26
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
13 EQUITY ATTRIBUTABLE TO SHAREHOLDERS
| EUR million | 2011 | 2010 |
|---|---|---|
| Share capital Jan. 1 | 3.6 | 3.6 |
| Share capital Dec. 31 | 3.6 | 3.6 |
| Share premium fund Jan. 1 | 16.7 | 16.7 |
| Share premium fund Dec. 31 | 16.7 | 16.7 |
| Fair value reserve Jan. 1 | -1.5 | -0.3 |
| Gains and losses on cash flow hedges, net of tax | -0.1 | -1.2 |
| Fair value reserve Dec. 31 | -1.6 | -1.5 |
| Fund for invested non-restricted equity Jan. 1 | 4.9 | 4.9 |
| Fund for invested non-restricted equity Dec. 31 | 4.9 | 4.9 |
| Own shares Jan. 1 | -2.5 | -1.4 |
| Purchase of own shares | -0.1 | -1.1 |
| Own shares Dec. 31 | -2.6 | -2.5 |
| Retained earnings Jan. 1 | 100.7 | 84.0 |
| Translation differences | 2.3 | 7.4 |
| Gains and losses on hedges of net investments, net of tax | -0.4 | -1.1 |
| Dividends paid | -9.0 | -7.4 |
| Share-based payments | -0.1 | |
| Other changes | 0.0 | |
| Net income for the period | 14.0 | 18.0 |
| Retained earnings Dec. 31 | 107.7 | 100.7 |
In those cases where option rights were granted during the period when the old Finnish Companies Act (September 29, 1978/734) was in force, the proceeds received for option-based share subscriptions, net of any transaction costs, have been credited to share capital (nominal value) and share premium fund. The fund for invested non-restricted equity includes other investments of equity nature and subscription prices for shares to the extent that it is specifically not to be credited to share capital. The payments received for share subscriptions based on the options granted after the entry into force (September 1, 2006) of the new Finnish Companies Act (21 July 2006/624) are fully recognized in the fund for invested non-restricted equity. The Group has not decided on any option programs since the new Finnish Companies Act came into effect.
Translation differences contain exchange differences arising from the currency translation of foreign subsidiaries' financial statements and exchange differences arising from a monetary item that forms part of a net investment in a foreign company. Translation differences also contain fair value changes from hedging the net investment in foreign companies where this meets the conditions for hedge accounting. Fair value reserve includes movements in the fair values of available-for-sale financial assets and derivative instruments used for cash flow hedging. Own shares acquired by the Group, including directly attributable costs, are presented as a deduction from the total equity in the consolidated financial statements.
DIVIDENDS
For more details on dividends, see note 31.
SHARES AND SHARE CAPITAL
On December 31, 2011, the share capital fully paid and reported in the Trade Register was EUR 3.6 million and the total number of shares was 39 468 449 (2010: 39 468 449). The book value of a share is EUR 0.09.
OWN SHARES
On February 4, 2010, the Board decided to continue buying back own shares in accordance with the authorization granted by the AGM on April 7, 2009. The repurchasing of shares started on February 15, 2010 and ended on March 31, 2010 when Rapala held 368 144 own shares. Based on the authorization of the AGM held on April 14, 2010 the repurchasing of own shares continued from May 3 to June 30, from August 2 to September 30 and from November 1 to December 31, 2010. At the end of December 2010, Rapala held 540 198 own shares, representing 1.4% of the total number and the total voting rights of Rapala shares. The average price for the repurchased own shares in January-December 2010 was EUR 5.72. The average share price of all repurchased own shares held by Rapala was EUR 4.71.
On November 17, 2011, the Board decided to continue buying back own shares in accordance with the authorization granted by the AGM on April 5, 2011. In 2011 a total of 11 859 shares were repurchased at the average price of EUR 5.46. At the end of December 2011, Rapala held 552 057 own shares, representing 1.4% of the total number and the total voting rights of Rapala shares. The average share price of all repurchased own shares held by Rapala was EUR 4.73.
CHANGES IN SHARE CAPITAL IN 2010-2011
There were no changes in the share capital in 2010 and 2011.
BOARD'S AUTHORIZATIONS
Based on authorization given by the Annual General Meeting (AGM) in April 2007, the Board can decide to issue shares through issuance of shares, options or special rights entitling to shares in one or more issues. The number of new shares to be issued including the shares to be obtained under options or special rights shall be no more than 10 000 000 shares. This authorization includes the right for the Board to resolve on all terms and conditions of the issuance of new shares, options and special rights entitling to shares, including issuance in deviation from the shareholders' preemptive rights. This authorization is in force for a period of 5 years from the resolution by the AGM.
The Board is also authorized to resolve to repurchase a maximum of 2 000 000 shares by using funds in the unrestricted equity. This amount of shares corresponds to less than 10% of all shares of the company. The shares will be repurchased through public trading arranged by NASDAQ OMX Helsinki at the market price of the acquisition date. The shares will be acquired and paid in pursuance of the rules of NASDAQ OMX Helsinki and applicable rules regarding the payment period and other terms of the payment. This authorization is effective until the end of the next AGM.
SHARE BASED PAYMENTS
For more details on share based payments, see note 29.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
20 EMPLOYEE BENEFIT OBLIGATIONS
Most of the Group’s pension plans are defined contribution plans. The Group has defined benefit pension plans only in France and Sweden. In France, the retirement benefits are determined based on salary and period of employment. These French obligations are unfunded. In Sweden, the ITP-pension plans operated by Alecta are multi-employer defined benefit pension plans. Because it has not been possible to get sufficient information for the calculation of obligations and assets by employer from plan operations, and because these Swedish plans are not significant for the Group, they have been treated as defined contribution plans in the financial statements. The Group has no other post-employment benefit obligations. The pension security of the personnel of the Group's Finnish companies is arranged under the Finnish statutory employee pension plan (TyEL) through an external pension insurance company. Employee benefit obligations also include a long-term profit-sharing payable to the employees in France.
EXPENSES RECOGNIZED IN THE INCOME STATEMENT
| EUR million | 2011 | 2010 |
|---|---|---|
| Current service cost | -0.1 | -0.3 |
| Interest cost | -0.1 | 0.0 |
| Actuarial gains and losses | 0.0 | 0.0 |
| Total | -0.2 | -0.3 |
AMOUNTS RECOGNIZED IN THE BALANCE SHEET
| EUR million | 2011 | 2010 |
|---|---|---|
| Present value of unfunded obligations | 1.4 | 1.3 |
| Unrecognized actuarial gains/losses | 0.0 | 0.0 |
| Unrecognized prior service cost | -0.1 | -0.1 |
| Net obligations | 1.3 | 1.2 |
BALANCE SHEET RECONCILIATION
| EUR million | 2011 | 2010 |
|---|---|---|
| Obligations Jan. 1 | 1.2 | 1.0 |
| Current service cost | 0.1 | 0.3 |
| Interest cost | 0.1 | 0.0 |
| Actuarial gains and losses | 0.0 | 0.0 |
| Effect of any curtailments or settlements | -0.1 | -0.1 |
| Obligations Dec. 31 | 1.3 | 1.2 |
ASSUMPTIONS
| % | 2011 | 2010 |
|---|---|---|
| Discount rate | 4.8 | 4.8 |
| Future salary increase | 2.6 | 2.5 |
| Annual inflation rate | 2.0 | 2.0 |
AMOUNTS FOR CURRENT AND PREVIOUS FOUR PERIODS
| EUR million | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Present value of funded obligations | 0.1 | 0.1 | |||
| Fair value of plan assets | -0.1 | -0.1 | |||
| Present value of unfunded obligations | 1.4 | 1.3 | 1.0 | 0.7 | 0.7 |
| Experience adjustment on plan liabilities | 0.0 | 0.0 | 0.0 | -0.1 | -0.1 |
The Group expects to contribute EUR 0.0 million to its defined benefit pension plans in 2012.
21 PROVISIONS
| EUR million | 2011 | 2010 |
|---|---|---|
| Restructuring provisions | ||
| Provisions Jan. 1 | 0.1 | 0.0 |
| Additions | 0.1 | |
| Utilized provisions | -0.1 | 0.0 |
| Translation differences | 0.0 | 0.0 |
| Provisions Dec. 31 | 0.1 | |
| Warranty provisions | ||
| Provisions Jan. 1 | 0.0 | |
| Reversal of unutilized provisions | 0.0 | |
| Provisions Dec. 31 | ||
| Other provisions | ||
| --- | --- | --- |
| Provisions Jan. 1 | 0.1 | 0.0 |
| Additions | 0.1 | 0.1 |
| Utilized provisions | -0.1 | 0.0 |
| Reclassification from current non-interest-bearing liabilities | 0.1 | |
| Translation differences | 0.0 | 0.0 |
| Provisions Dec. 31 | 0.2 | 0.1 |
| Non-current | 0.1 | 0.0 |
| Current | 0.1 | 0.2 |
| Total provisions | 0.2 | 0.2 |
Other provisions include distinct provisions, which are not significant individually. Short-term provisions are expected to realize within the next 12 months, and the long-term provisions are expected to realize during a longer period.
28
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
FINANCIAL RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS
The main objective of the Group's financial risk management is to reduce the impacts of price fluctuations in financial markets and other factors of uncertainty on earnings, cash flows and balance sheet, as well as to ensure sufficient liquidity. The Board has approved the Group's risk management principles and CEO is responsible, together with the Group's finance management, for development and implementation of financial risk management procedures.
In 2011, the Group continued to develop its risk management processes. Group Risk Management, consisting of the Group CFO, Group Funding Manager and Group Risk Manager, review financial risks on regular basis to manage Group's financial risk position and decide on necessary actions to manage financial risks. Uncertainty in global economy and financial markets increased at the latter part of 2011 and Group Risk Management continued monitoring and management of foreign exchange, interest rate, liquidity and counterparties' solvency risks.
Financial risks consist of market risks, credit and default risks and liquidity risks. This note also presents the Group's capital management.
MARKET RISKS
The Group's market risks are mainly caused by changes in foreign exchange and interest rates. These changes may have a significant impact on the Group's earnings, cash flows and balance sheet. The Group is also exposed to market price changes of certain raw materials, mainly metals and plastics, which are priced on commodity markets.
1. Foreign exchange risk
Major part of the Group's sales is in euros and US dollars. Also a significant part of expenses arise in euros, US dollars as well as HK dollars and Chinese yuans (renminbi). Group Risk Management monitors regularly the balance between Group's foreign currency sales and expenses as well as the development of the key currencies. Income and expenses within different currencies net each other out to some extent, creating an effective natural hedge in this respect. The Group's principle is not to hedge systematically all transactions or open positions, but to apply hedging dynamically based on the prevailing market situation and concentrate on the income statement impact of the most relevant currencies, especially US dollar.
In order to mitigate adverse impacts of foreign exchange movements on sales and purchases as well as forecasted cash flows and firm commitments, the Group uses derivative instruments. Derivative instruments are in most cases short term and with aim to hedge some proportion of the next season's foreign currency nominated sales or purchases. Instruments used may consist of foreign currency forward contracts, option contracts or combination instruments. Business units do most of their currency hedging against the Group's parent company. Group Risk Management monitors the Group's consolidated risk position and exercises external derivative instruments in line with general guidance and instructions set by the Board and CEO.
Group does not apply hedge accounting (IAS 39) for the currency derivatives made to fix exchange rates of sales and purchases, but the derivatives are used for the purpose of reducing adverse impacts of market price changes on net earnings and cash flow. All derivatives are revalued at fair value on each balance sheet date. The underlying hedged foreign currency denominated transaction will however take place at a later date. As hedge accounting is not applied, these derivatives cause timing differences between the Group's exchange gains/losses and sales/purchases.
Currency derivatives used by the Group at the end of 2011 were short-term zero cost option pair instruments. The fair values of the options are received from the bank and are determined based on fair value calculations using the Black and Scholes model. All changes in fair value of currency derivatives are recognized in the income statement. In 2011, currency derivatives had an income statement effect of EUR -0.1 million (2010: EUR 0.5 million). Fair values of currency derivatives are summarized under section 4. Derivatives.
As a result of sales and purchases in foreign currencies as well as operations in several jurisdictions, Group has foreign currency denominated receivables and payables. These are revalued at each balance sheet date and consequently exposed to foreign exchange rate movements. Depending on whether foreign currency monetary
receivables and payables relate to sales and purchases or financial items, the foreign exchange gains/losses are booked in the income statement either above or below operating profit.
Group Risk Management regularly monitors the balance between foreign currency denominated monetary receivables and payables and takes actions to increase or decrease the hedge if necessary and financially feasible.
The Group has its external loan payable portfolio in several foreign currencies and it aims to use them to partially hedge loans and accounts receivable as well as net income in these foreign currencies. However, the foreign exchange impact on these does not always meet in the same section of the income statement. The purpose of this hedging is thought to reduce the adverse impact of currency movements on the Group's net income and equity.
The Group has net investments in subsidiaries whose equity is in foreign currency and thus exposed to foreign exchange rate movements when translated into euro. At the end of 2011, the Group hedged partially its net investments in JPY and USD currency denominated subsidiaries using equivalent currency loans. Hedging relationships are treated according to IAS 39 as effective hedges of a net investment in a foreign subsidiary, which means that the effective portion of foreign exchange effect on these loans is recorded directly in equity. The total non-euro-denominated equity of the Group's foreign subsidiaries was EUR 90.6 million on December 31, 2011 (2010: EUR 85.2 million), of which 10.7% was on Dec. 31 subject to equity hedging (2010: 16.8%). If the currencies linked to Euro based on ERM II (DKK, LTL and LVL) are excluded, the hedge ratio was 11.3% (2010: 18.1%).
The most relevant non-euro-denominated equities not subject to equity hedging are in HKD-, USD- and CAD-currencies.
Group Risk Management monitors regularly the amounts of foreign exchange nominated net investments and decides on equity hedging actions accordingly.
Hedging of net investments in foreign subsidiaries
| 2011 | ||||||
|---|---|---|---|---|---|---|
| Total net investment (currency million) | Loans used for hedging (currency million) | Total net investment (EUR million) | Loans used for hedging (EUR million) | Hedge rate (%) | Booked in translation difference in equity (EUR million) | |
| USD | 37.7 | 11.7 | 29.2 | 9.0 | 31.0 | -0.2 |
| JPY | 138.7 | 65.0 | 1.4 | 0.6 | 46.9 | -0.1 |
| Other | 60.1 | -0.2 | ||||
| Total | 90.6 | 9.7 | 10.7 | -0.5 | ||
| 2010 | ||||||
| Total net investment (currency million) | Loans used for hedging (currency million) | Total net investment (EUR million) | Loans used for hedging (EUR million) | Hedge rate (%) | Booked in translation difference in equity (EUR million) | |
| USD | 33.8 | 18.3 | 25.3 | 13.7 | 54.0 | -1.1 |
| JPY | 127.8 | 75.0 | 1.2 | 0.7 | 58.7 | -0.1 |
| NOK | 16.3 | 2.1 | -0.1 | |||
| AUD | 5.6 | 4.3 | -0.2 | |||
| Other | 52.4 | 0.0 | ||||
| Total | 85.2 | 14.4 | 16.8 | -1.5 |
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
Exposure to foreign exchange risk from transactions
Below is presented the foreign currency exposure in companies whose functional currency is other than the currency under analysis. The connections possibly prevailing between different currencies are not take into account, e.g. US dollar and Hong Kong dollar are considered as separate currencies in this analysis.
Balance sheet items include both Group's external and internal items. Income statement items do not include internal items to the extent reported currency is foreign currency for both transaction parties and hence does not expose the Group to foreign exchange risk.
The positions of other currencies are smaller.
2011
| EUR million | USD | CNY | EUR |
|---|---|---|---|
| Foreign currency trade receivables Dec. 31. | 11.9 | 0.0 | 0.1 |
| Foreign currency trade payables Dec. 31. | -18.8 | -0.6 | -3.3 |
| Foreign currency loans receivable Dec. 31. | 10.1 | 0.4 | 5.5 |
| Foreign currency loans payable Dec. 31. (1) | -24.2 | -10.0 | |
| Foreign currency cash and cash equivalents Dec. 31. | 5.3 | 0.2 | 0.9 |
| Net exposure in balance sheet Dec. 31. | -15.8 | 0.0 | -6.8 |
| Actual foreign currency sales and purchases Jan. 1–Dec. 31 | 46.2 | 0.7 | -8.9 |
| Actual foreign currency expenses Jan. 1–Dec. 31 | -61.1 | -19.9 | -3.6 |
| Net exposure in the income statement Jan. 1–Dec. 31 | -14.9 | -19.2 | -12.5 |
| Currency derivatives Dec. 31. (2) | 3.4 | ||
| Net exposure | -27.3 | -19.2 | -19.3 |
2010
| EUR million | USD | CNY | EUR |
|---|---|---|---|
| Foreign currency trade receivables Dec. 31. | 9.0 | 0.1 | 16.6 |
| Foreign currency trade payables Dec. 31. | -16.4 | -2.8 | -2.2 |
| Foreign currency loans receivable Dec. 31. | 11.0 | 0.3 | 0.1 |
| Foreign currency loans payable Dec. 31. (1) | -20.3 | -5.9 | |
| Foreign currency cash and cash equivalents Dec. 31. | 6.6 | 0.6 | 0.9 |
| Net exposure in balance sheet Dec. 31. | -10.1 | -1.8 | 9.6 |
| Actual foreign currency sales and purchases Jan. 1–Dec. 31 | 52.1 | 1.0 | 0.7 |
| Actual foreign currency expenses Jan. 1–Dec. 31 | -56.8 | -26.4 | -14.7 |
| Net exposure in the income statement Jan. 1–Dec. 31 | -4.7 | -25.4 | -14.0 |
| Currency derivatives Dec. 31. (2) | 9.0 | ||
| Net exposure | -5.8 | -27.1 | -4.5 |
(1) Excluding loans used for hedging net investments in foreign subsidiaries
(2) Currency derivatives are used to hedge a portion of purchases in foreign currency.
Sensitivity analysis
The effect of a 10% weakening of USD, HKD, CNY, AUD, NOK, CAD, SEK and RUB (against euro) in euro based on the following assumptions and factors:
- The sensitivity analysis is based on change of value in a single analyzed currency and assumes other variables (including values of other currencies) to remain unchanged. The connections possibly prevailing between some currencies are not taken into account.
- The sensitivity is analyzed against income statement and balance sheet conversion rates prevailing at Dec. 31.
- The analysis includes the effect of income statement transactions made in the analyzed currency between Jan. 1 and Dec. 31 in Group companies, whose functional currency is other than the analyzed currency (so called transaction impact) as well as in Group companies, whose functional currency equals to the analyzed currency (so called translation impact). The analysis takes into account the currency forward contracts in place at Dec. 31. The sensitivity analysis of income statement transactions excludes Group's internal items as these net out.
- The sensitivity analysis includes the effect of valuation of the most significant financial assets and liabilities included in the balance sheet as per Dec. 31 in companies whose functional currency is other than the analyzed currency. The balance sheet items include both Group's external and internal items. Hedging of net investments as per Dec. 31 is taken into account in the analysis of the balance sheet items.
- The sensitivity analysis includes the effect of the translation of subsidiaries' equity as per Dec. 31 in subsidiaries, whose reporting currency equals to the analyzed currency, taking into account the hedging of the net investment as per Dec. 31.
- The tax effect included in the sensitivity analysis is calculated by using the Group's total effective tax rate. Translation differences in equity do not include any tax effect.
- On average, the effect of other currencies is smaller than the ones analyzed here.
2011
| EUR million | USD | HKD | CNY | AUD | NOK | CAD | SEK | RUB |
|---|---|---|---|---|---|---|---|---|
| Operating profit | 1.5 | 0.9 | 2.0 | -0.4 | -0.5 | -1.0 | -0.7 | -2.4 |
| Net income (net of tax) | 1.7 | 0.7 | 1.3 | -0.4 | -0.6 | -0.7 | -0.6 | -1.7 |
| Equity (net of tax) (3) | -2.3 | -2.3 | 0.0 | -0.4 | -0.1 | -1.0 | -0.6 | -0.1 |
2010
| EUR million | USD | HKD | CNY | AUD | NOK | CAD | SEK | RUB |
|---|---|---|---|---|---|---|---|---|
| Operating profit | -0.6 | 0.1 | 2.8 | -0.4 | -0.7 | -0.8 | -0.4 | -1.9 |
| Net income (net of tax) | -0.3 | 0.1 | 1.9 | -0.4 | -0.8 | -0.6 | -0.3 | -1.3 |
| Equity (net of tax) (3) | -1.6 | -2.0 | -0.1 | -0.4 | -0.2 | -0.8 | -0.5 | -0.2 |
(3) Without the effect of net income.
A 10% strengthening would have the equal but opposite effect with exception of USD, where 10% strengthening would have EUR 0.5 million larger opposite effect on operating profit and net income than stated above as a result of the used hedging instruments.
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
2. Interest rate risk
The Group has interest-bearing borrowings and interest rate swaps, where the interest is variable and connected to market rates. Consequently the Group is exposed to changes in market interest rates.
| EUR million | 2011 | 2010 | ||
|---|---|---|---|---|
| Non-current | Current | Non-current | Current | |
| Loans from financial institutions with fixed interest rate | 0.0 | 0.0 | 0.1 | 0.1 |
| Pension loans with fixed interest rate | 2.2 | 4.4 | 6.6 | 4.9 |
| Loans from financial institutions with variable interest rate | 8.4 | 86.6 | 18.3 | 67.8 |
| Commercial paper program with variable interest rate | 25.0 | 21.0 |
The Group's borrowings are mainly in euros and US dollars, which have a substantial contribution to the overall interest rate risk. The Group's borrowings are almost fully flowing through the Group's parent company, which is consequently managing the Group's overall interest rate risk. The Group's interest rate risk is monitored as cash flow and fair value risks. Group Risk Management analyzes regularly the interest rate risk and agree on actions if needed. These actions may include changing the currency split of the external loan portfolio, selection between different sources of loan financing, changing the interest rate periods as well as entering into derivative financial instruments available to manage the interest rate risk. The Group does not have a fixed policy on how interest rates are fixed to different time periods, but this is decided based on prevailing market conditions.
Most of the Group's interest-bearing liabilities have an interest period of less than one year. In order to manage the interest rate risk and to take benefit of favorable interest rate levels, EUR 7.0 million of the Group's loans payable is connected to fixed interests or interest periods of 12-month or longer (2010: EUR 11.8 million).
The interest rate risk may also be managed by using interest rate swaps, where the Group pays a fixed rate and receives variable rate. As of Dec. 31 the Group had 10 interest rate swaps, which were designated and effective as cash flow hedges in accordance with IAS 39. The market price based fair values of interest rate derivatives are received from issuer bank. In 2011, interest rate derivatives had an equity effect of EUR -0.1 million (2010: EUR -1.2 million) and no income statement effect (2010: no effect). Fair values of interest rate derivatives are summarized under section 4. Derivatives.
Sensitivity analysis
Below is presented the effect of liabilities with variable interest rate and interest rate swaps on net income and equity if there was a 1% increase in interest rates. The sensitivity analysis is based on following assumptions and factors:
- All other variables, in particular foreign exchange rates, are assumed to remain unchanged.
- The sensitivity is analyzed against interest rates applicable on Dec. 31.
- The sensitivity analysis includes the liabilities and interest rate swaps with variable interest rate in force on Dec. 31.
- The sensitivity analysis of interest rate swaps is based on calculations received from the bank.
- The tax effect included in the sensitivity analysis is calculated by using the Group's total effective tax rate.
| EUR million | 2011 | 2010 | ||
|---|---|---|---|---|
| Net income (net of tax) | Equity (net of tax) 4) | Net income (net of tax) | Equity (net of tax) 4) | |
| Loans from financial institutions with variable interest rate | -0.6 | 0.6 | -0.6 | 1.0 |
| Commercial paper program with variable interest rate | -0.2 | -0.1 |
4) Without the effect of net income.
3. Other market price risks
The Group purchases some raw-materials, which are priced on global financial markets. These include commodity metals such as copper, zinc and lead, and some plastics. The value of these purchases is still relatively low and market price risk management actions are done in each manufacturing unit locally. Group Risk Management also monitors the development of these raw-material prices. No commodity hedging is currently carried out.
The Group does not own any such publicly traded shares or securities which would be subject to market price risks. The Group's investments in available-for-sale financial instruments are insignificant and consist of real estate investments and other unlisted shares for which no clear market price exists.
4. Derivatives
| EUR million | Foreign currency options | Foreign currency forwards | Interest rate swaps | 2011 | 2010 | |||
|---|---|---|---|---|---|---|---|---|
| Total | Foreign currency options | Foreign currency forwards | Interest rate swaps | Total | ||||
| Nominal amount | 3.4 | 67.9 | 9.0 | 0.1 | 86.3 | 95.4 | ||
| Positive fair values | 0.2 | 0.0 | 0.0 | 0.0 | ||||
| Negative fair values | 2.1 | 0.3 | 0.0 | 2.0 | 2.3 | |||
| Net fair values | 0.2 | -2.1 | -1.9 | -0.3 | 0.0 | -2.0 | -2.3 |
All foreign currency derivatives mature within the next 12 months. Interest rate swaps, which are effective and mature between 2012 and 2013, generate following non-discounted cash flows, calculated based on interest rates and foreign exchange rates prevailing as per Dec. 31: EUR -1.1 million during year 2012 and EUR -0.9 million during year 2013.
31
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
LIQUIDITY RISK
Generally, the seasonality of the Group's cash flow is fairly predictable and Group's finance management monitors Group's liquidity position using the cash pooling system as well as monthly cash flow and liquidity reporting.
Group's finance management raises most of the Group's interest-bearing debt centrally. The Group seeks to reduce liquidity and refinancing risks with balanced maturity profile of loans as well as by keeping sufficient amount of credit lines available. As from 2007, the flexibility of the Group's liquidity management has been increased with a EUR 25 million domestic commercial paper program, which together with Group's credit limits is utilized to balance the seasonality of the Group's cash flow. The size and maturity of issued commercial papers is decided by the CFO and Group Funding Manager, based on forecasted cash flows, status of commercial paper markets and applicable interest rates. The renewal of commercial papers upon maturity creates certain liquidity risk, which is managed by maintaining sufficient other liquidity reserves available at the maturity dates. The commercial paper program was used actively as part of Group funding and competitively priced debt was acquired through this market.
Group's loan facilities, which were renewed in 2006, include ordinary loan covenants, which set conditions among other things on corporate restructurings, continuation of business, disposal of assets and external obligations as well as the Group's financial indicators like investments, equity-to-assets and gearing ratios, net debt to EBITDA ratio and cash flow to total debt service ratio. Increased sales in 2011 as well as increased working capital levels did put pressure on the cash flow covenant in some quarters in 2011. The Board and Group management are monitoring the fulfillment of the bank covenants on a monthly basis. The Group does not foresee that the bank covenants would create exposures to its liquidity in near future.
The Group's credit limits not drawn at December 31, 2011 were EUR 6.4 million (2010: EUR 19.8 million). Major part of the Group's credit limits is part of the Group's loan facilities renewed in 2006 and maturing in 2013. Group's domestic commercial paper program not sold at December 31, 2011 was EUR 0.0 million (2010: EUR 4.0 million).
MATURITY OF THE GROUP'S FINANCIAL LIABILITIES
The following are the contractual maturities of financial liabilities, including interest payments.
2011
| EUR million | Carrying value | Financial liabilities 2) | Contractual cash flows | 2012 | 2013 | 2014 | 2015 | 2016 | Total |
|---|---|---|---|---|---|---|---|---|---|
| Interest-bearing liabilities | |||||||||
| Loans from financial institutions 1) | 95.1 | 95.1 | 95.8 | 87.3 | 8.4 | 0.0 | 0.0 | 95.8 | |
| Pension loans | 6.6 | 6.6 | 6.8 | 4.5 | 2.1 | 0.1 | 6.8 | ||
| Commercial paper program | 25.0 | 25.0 | 25.0 | 25.0 | 25.0 | ||||
| Finance lease | 0.2 | 0.2 | 0.3 | 0.1 | 0.1 | 0.1 | 0.0 | 0.3 | |
| Other interest-bearing liabilities 3) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Non-interest-bearing liabilities | |||||||||
| Trade and other non-interest-bearing payables | 39.5 | 29.5 | 29.5 | 25.9 | 2.3 | 0.7 | 0.7 | 29.5 | |
| Derivatives, net settled 4) | |||||||||
| Liabilities (payments) | |||||||||
| Interest rate derivatives, hedge accounted | 2.1 | 2.1 | 2.0 | 1.1 | 0.9 | 2.0 | |||
| Currency derivatives, non-hedge accounted | |||||||||
| Assets (receipts) | |||||||||
| Currency derivatives, non-hedge accounted | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | ||||
| Total | 168.4 | 158.4 | 159.1 | 143.8 | 13.8 | 0.9 | 0.7 | 159.1 |
33
http://www.nap.edu
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
2010
| EUR million | Carrying value | Financial liabilities 2) | Contractual cash flows | 2011 | 2012 | 2013 | 2014 | 2015 | Total |
|---|---|---|---|---|---|---|---|---|---|
| Interest-bearing liabilities | |||||||||
| Loans from financial institutions | 86.3 | 86.3 | 87.6 | 68.8 | 10.4 | 8.3 | 0.0 | 0.0 | 87.6 |
| Pension loans | 11.5 | 11.5 | 12.0 | 5.2 | 4.6 | 2.1 | 0.1 | 12.0 | |
| Commercial paper program | 21.0 | 21.0 | 21.0 | 21.0 | 21.0 | ||||
| Finance lease | 0.4 | 0.4 | 0.4 | 0.1 | 0.1 | 0.1 | 0.1 | 0.0 | 0.4 |
| Other interest-bearing liabilities 3) | 0.2 | 0.2 | 0.0 | 0.0 | 0.0 | ||||
| Non-interest-bearing liabilities | |||||||||
| Trade and other non-interest-bearing payables | 43.0 | 31.8 | 31.8 | 27.5 | 1.0 | 2.0 | 0.6 | 0.7 | 31.8 |
| Derivatives, net settled 4) | |||||||||
| Liabilities (payments) | |||||||||
| Interest rate derivatives, hedge accounted | 2.0 | 2.0 | 3.1 | 0.9 | 1.2 | 1.0 | 3.1 | ||
| Currency derivatives, non-hedge accounted | 0.3 | 0.3 | 0.0 | 0.0 | 0.1 | ||||
| Assets (receipts) | |||||||||
| Currency derivatives, non-hedge accounted | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Total | 164.6 | 153.5 | 156.0 | 123.7 | 17.3 | 13.5 | 0.9 | 0.7 | 156.1 |
2) EUR 71.6 million of the interest-bearing liabilities maturing in 2012 is part of Group's revolving credit facilities, which mature in 2013 or later.
3) The proportion of the carrying values which are classified as financial liabilities according to IAS 39.
4) Maturity of interest payable has been presented in the contractual cash flows of loans and commercial paper program.
4) Cash flows of interest rate and currency derivatives are calculated based on interest and foreign exchange rates as per Dec. 31
CREDIT AND DEFAULT RISK
The Group followed actively credit and default risks associated with customers and other counterparties in 2011. The Group's credit and default risk portfolio did not significantly change during the course of the year. The proportional amount of Group's trade receivables, which are past due date, increased slightly from 2010. Credit loss net allowances for trade receivables increased moderately from 2010 to 2011.
The Group's accounts receivables are generated by a large number of customers worldwide. Consequently, the credit risk is spread against multiple counterparties. The credit risk management is allocated to each operative business unit. Before providing credit to any new customer, background checks are carried out. Cash, advance payments and letters of credit are also applied with new and existing customers. Customer specific credit limits and financial situation of the existing credit customers are monitored and set locally in each business unit. Customers' payment behavior is monitored regularly and delays in payments may trigger payment reminders, stopping the shipments, requirements for advance payments for future shipments and eventually legal collection procedures. In significant cases, business units consult with the CFO before final decisions. In exceptional cases, payment terms may be renegotiated.
Group Risk Management manages most of the credit and default risk related to financial instruments. It seeks to reduce these risks by limiting the counterparties to banks, which have a good credit standing. Majority of the Group's bank deposits and forward contracts have been made with the Group's leading banks (Nordea Bank Finland Plc and Pohjola Bank Plc), whose credit ratings are Aa2 (Moody's) and AA- (Standard&Poor's) for both. Group's all investments related to liquidity management are made in liquid instruments with low credit risk. For instance, commercial paper investments are not made.
The Group's maximum credit and default risk is the carrying amount of all financial assets which are disclosed in note 23.
For information on allowance for trade receivables, see note 16. An allowance of trade receivables is made when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due according to the original terms of the receivables. The assessment and decision for allowances is done locally in each business unit on case-by-case basis.
No allowance is made on overdue trade receivables from customers, whose solvency is considered solid.
ANALYSIS OF TRADE RECEIVABLES THAT WHERE DUE BUT NOT IMPAIRED
| EUR million | 2011 | 2010 |
|---|---|---|
| Neither past due or impaired | 36.1 | 39.7 |
| Past due but not impaired | ||
| Less than 1 month | 4.7 | 4.4 |
| 1-3 months | 3.4 | 2.3 |
| 4-5 months | 1.3 | 1.3 |
| 6-7 months | 1.0 | 1.3 |
| Over 7 months | 1.6 | 1.7 |
| Total | 48.3 | 50.8 |
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
CAPITAL MANAGEMENT
The objective of the Group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and to maximize shareholder value. Therefore, the Group seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.
The Group manages its capital structure and makes adjustments to it taking into account changes in economic conditions and requirements of strategy implementation. To maintain or develop the capital structure, the Group may adjust the dividend payments and repayments of capital to shareholders by buying back shares, issue new shares and/or increase/decrease the amount of borrowings.
The Group monitors the effectiveness of its capital management using gearing ratio, return on equity, average interest rate on net interest-bearing debt, net interest-bearing debt to EBITDA and equity-to-assets ratio. The Group objective for capital management is to keep:
- Gearing ratio below 150%
- Return on equity clearly above the average interest rate on net interest-bearing debt
- Net interest-bearing debt to EBITDA below 3.8
- Equity-to-assets ratio above 33%.
For definitions of key figures, see page 47.
| EUR million | 2011 | 2010 |
|---|---|---|
| Non-current interest-bearing liabilities | 12.7 | 27.1 |
| Current interest-bearing liabilities | 116.6 | 94.6 |
| Cash and cash equivalents | 28.9 | 27.9 |
| Interest-bearing receivables | 9.1 | 1.8 |
| Net interest-bearing debt at the end of the period | 91.2 | 92.0 |
| Total equity Dec. 31 | 135.8 | 129.2 |
| Debt-to-equity (gearing) ratio, % | 67.2 | 71.2 |
| Net profit for the period | 17.2 | 20.7 |
| Total equity Jan. 1 | 129.2 | 111.7 |
| Total equity Dec. 31 | 135.8 | 129.2 |
| Total equity (average for the period) | 132.5 | 120.4 |
| Return on equity, % | 13.0 | 17.2 |
| Net interest expense | 3.4 | 3.1 |
| Net interest-bearing debt Dec. 31 | 91.2 | 92.0 |
| Average interest rate on net interest-bearing debt, % | 3.7 | 3.4 |
| Net interest-bearing debt at the end of the period | 91.2 | 92.0 |
| Operating profit before depreciation and impairments (EBITDA) | 37.7 | 37.4 |
| Net interest-bearing debt to EBITDA - ratio | 2.4 | 2.5 |
| Total equity | 135.8 | 129.2 |
| Total shareholders' equity and liabilities – advances received | 314.3 | 303.6 |
| Equity-to-assets ratio, % | 43.2 | 42.6 |
In 2010, the Group met its objectives for capital management:
- Gearing ratio was 67.2% (2010: 71.2%).
- Return on equity, 13.0% (2010: 17.2%), was clearly higher than the average interest rate on net interest-bearing debt, which was 3.7% (2010: 3.4%).
- Net interest-bearing debt to EBITDA was 2.4 (2010: 2.5).
- Equity-to-assets ratio was 43.2% (2010: 42.6%).
The Group capital structure is reviewed by the Board annually. The Group is not subject to externally imposed capital requirements other than the financial covenants set by the banks. For more information on financial covenants set by the banks, see section on liquidity risks.
34
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
23 FINANCIAL ASSETS AND LIABILITIES BY CATEGORIES AND FAIR VALUES
| EUR million | Carrying value | 2011 | 2010 | ||||
|---|---|---|---|---|---|---|---|
| Financial assets and liabilities a | Fair value of financial assets and liabilities a | Carrying value | Financial assets and liabilities a | Fair value of financial assets and liabilities a | Note | ||
| FINANCIAL ASSETS | |||||||
| Loans and receivables | |||||||
| Non-current financial assets | |||||||
| Loan receivables | 4.5 | 4.5 | 4.5 | 0.1 | 0.1 | 0.1 | 16 |
| Other interest-bearing receivables | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 16 |
| Non-interest-bearing receivables | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 16 |
| Current financial assets | |||||||
| Cash and cash equivalents | 28.9 | 28.9 | 28.9 | 27.9 | 27.9 | 27.9 | 18 |
| Loan receivables | 1.1 | 1.1 | 1.1 | 0.0 | 0.0 | 0.0 | 16 |
| Trade and other non-interest-bearing receivables | 53.5 | 51.8 | 51.8 | 55.3 | 53.9 | 53.9 | 16 |
| Available-for-sale financial assets | |||||||
| Available-for-sale investments | 0.3 | 0.3 | 0.3 | 0.3 | 0.3 | 0.3 | 15 |
| Financial assets at fair value through income statement - held-for-trading | |||||||
| Currency derivatives - non-hedge accounted | 0.2 | 0.2 | 0.2 | 0.0 | 0.0 | 0.0 | 16, 22 |
| FINANCIAL LIABILITIES | |||||||
| Financial liabilities at fair value through income statement - held-for-trading | |||||||
| Currency derivatives - non-hedge accounted | 0.3 | 0.3 | 0.3 | 22, 24 | |||
| Hedge accounted derivatives | |||||||
| Interest rate derivatives - hedge accounted | 2.1 | 2.1 | 2.1 | 2.0 | 2.0 | 2.0 | 22, 24 |
| Financial liabilities measured at amortized cost | |||||||
| Non-current financial liabilities | |||||||
| Loans from financial institutions | 8.4 | 8.4 | 8.4 | 18.4 | 18.4 | 18.4 | 24 |
| Pension loans | 2.2 | 2.2 | 2.2 | 6.6 | 6.6 | 6.7 | 24 |
| Finance lease | 0.1 | 0.1 | 0.1 | 0.3 | 0.3 | 0.3 | 24 |
| Other non-interest-bearing liabilities | 3.7 | 3.7 | 3.7 | 4.3 | 4.3 | 4.3 | 25 |
| Current financial liabilities | |||||||
| Loans from financial institutions | 86.7 | 86.7 | 86.7 | 67.9 | 67.9 | 67.9 | 24 |
| Commercial paper program | 25.0 | 25.0 | 25.0 | 21.0 | 21.0 | 21.0 | 24 |
| Pension loans | 4.4 | 4.4 | 4.4 | 4.9 | 4.9 | 4.9 | 24 |
| Finance lease | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 24 |
| Other interest-bearing liabilities | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 24 |
| Trade and other non-interest-bearing payables | 35.8 | 25.8 | 25.8 | 38.6 | 27.5 | 27.5 | 25 |
a The proportion of the carrying value which is classified as financial assets and liabilities according to IAS 39.
35
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
FAIR VALUE HIERARCHY OF THE FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
| EUR million | Total | Level 1 | Level 2 | 2011 Level 3 | Total | Level 1 | Level 2 | 2010 Level 3 |
|---|---|---|---|---|---|---|---|---|
| FINANCIAL ASSETS AT FAIR VALUE | ||||||||
| Available-for-sale financial assets | ||||||||
| Available-for-sale investments | 0.3 | 0.3 | 0.3 | 0.3 | ||||
| Financial assets at fair value through income statement - held-for-trading | ||||||||
| Currency derivatives - non-hedge accounted | 0.2 | 0.2 | 0.0 | 0.0 | ||||
| Hedge accounted derivatives | ||||||||
| Interest rate derivatives - hedge accounted | ||||||||
| Total | 0.5 | 0.2 | 0.3 | 0.3 | 0.0 | 0.3 | ||
| FINANCIAL LIABILITIES AT FAIR VALUE | ||||||||
| Financial liabilities at fair value through income statement - held-for-trading | ||||||||
| Currency derivatives - non-hedge accounted | 0.3 | 0.3 | ||||||
| Hedge accounted derivatives | ||||||||
| Interest rate derivatives - hedge accounted | 2.1 | 2.1 | 2.0 | 2.0 | ||||
| Total | 2.1 | 2.1 | 2.3 | 2.3 |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Fair value hierarchy levels
The fair values of the financial assets and liabilities on the hierarchy level 1 are based on quoted market prices of similar financial instruments traded in an active market. Currently there are no financial instruments on level 1.
The fair values of the financial assets and liabilities on the hierarchy level 2 are based on other price information than quoted market prices for a significant part of the valuation. This information is supported by observable market inputs either directly (i.e. prices) or indirectly (i.e. derived from prices).
The fair values of the financial assets and liabilities on the hierarchy level 3 are calculated using a valuation technique based on assumptions that are not supported by available observable market data. For example management estimates are utilized in generally accepted valuation models of the financial instruments on the Level 3.
The fair value hierarchy level, into which the entire financial asset or liability is classified, is determined based on the lowest-hierarchy-level information being significant for the valuation of that particular financial asset or liability. The significance of the information is estimated considering the financial asset or liability in its entirety.
No significant transfers between the hierarchy levels took place during the financial period.
Available-for-sale investments
Available-for-sale investments comprise of unlisted shares that are measured at fair value. Certain unlisted shares for which fair values cannot be measured reliably are measured at cost less possible impairment.
Derivatives
All derivatives are initially recognized at fair value on the date derivative contract is entered into, and are subsequently remeasured at fair value on each balance sheet date. Determination of fair values is based on quoted market prices and rates, discounting of cash flows and option valuation models.
Finance leases
The fair value of finance lease liabilities corresponds to their book value. The fair value of finance leases is based on discounted future cash flows. The discount rate used corresponds to that applied to similar finance leases.
Current financial assets and liabilities
Due to their short maturity, the fair value of current financial assets and liabilities is regarded as corresponding to their original carrying amount.
Non-current financial assets
The fair value of non-current financial assets is based on discounted future cash flows. The discount rate used corresponds to the market rate on the balance sheet date.
Non-current interest-bearing liabilities
On December 31, 2011, 81.8% of non-current loans based on floating rates was connected to one-month euribor, libor or similar and the rest to maximum three-month euribor, libor or similar (2010: 77.5%). Therefore, the fair value of non-current loans based on floating rates is regarded as equaling their book value. A part of non-current loans on floating rates is hedged with separate interest rate derivatives which are described in Note 22. The fair value of non-current loans on fixed rates is based on discounted future cash flows. The discount rate used corresponds to the market rate on the balance sheet date.
Non-current non-interest-bearing liabilities
Contingent considerations of business combinations and other acquisitions are recognized at fair value on the date of acquisition. Determination of fair values is based on discounted future cash flows.
36
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
24 INTEREST-BEARING LIABILITIES
| EUR million | 2011 Average interest rate, % 1) | 2011 | 2010 |
|---|---|---|---|
| Non-current interest-bearing liabilities | |||
| Loans from financial institutions | 1.79 | 8.4 | 18.4 |
| Pension loans | 2.33 | 2.2 | 6.6 |
| Finance lease | 4.43 | 0.1 | 0.3 |
| Derivatives | 2.0 | 1.8 | |
| Current interest-bearing liabilities | |||
| Loans from financial institutions | 1.90 | 76.4 | 57.9 |
| Current portion of non-current loans from financial institutions | 1.78 | 10.2 | 10.0 |
| Commercial paper program | 2.27 | 25.0 | 21.0 |
| Pension loans | 2.18 | 4.4 | 4.9 |
| Finance lease | 4.78 | 0.1 | 0.1 |
| Derivatives | 0.2 | 0.4 | |
| Other current liabilities | 0.2 | 0.2 | |
| Total | 129.3 | 121.7 |
1) Some of the loans are subject to interest rate swaps. Average interest rates are calculated without the effect of the interest rate swaps. More information in note 22.
INTEREST-BEARING LIABILITIES BY CURRENCY
| EUR million | Current | 2011 Non-Current | Non-Current | 2010 Current |
|---|---|---|---|---|
| Loans from financial institutions | ||||
| EUR | 4.3 | 43.0 | 9.4 | 24.7 |
| USD | 4.0 | 35.2 | 8.8 | 29.6 |
| NOK | 4.0 | 7.0 | ||
| GBP | 0.1 | 0.0 | 0.1 | 0.6 |
| AUD | 0.0 | 0.0 | 0.1 | 1.6 |
| DKK | 1.4 | 1.4 | ||
| ZAR | 0.2 | 0.4 | ||
| JPY | 0.6 | 0.7 | ||
| CHF | 2.1 | 2.0 | ||
| Pension loans and commercial paper program | ||||
| EUR | 2.2 | 29.4 | 6.6 | 25.9 |
| Finance lease | ||||
| GBP | 0.1 | 0.0 | 0.1 | 0.1 |
| NOK | 0.0 | 0.0 | 0.1 | |
| Other | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 10.7 | 116.1 | 25.1 | 93.9 |
FINANCE LEASE
| EUR million | Minimum lease payments | 2011 Present value of payments | Minimum lease payments | 2010 Present value of payments |
|---|---|---|---|---|
| Within one year | 0.1 | 0.1 | 0.1 | 0.1 |
| 1–3 years | 0.2 | 0.1 | 0.2 | 0.2 |
| 3–5 years | 0.0 | 0.0 | 0.1 | 0.1 |
| Total minimum lease payments | 0.3 | 0.2 | 0.4 | 0.4 |
| Less future finance charges | 0.0 | 0.0 | ||
| Present value of minimum lease payments | 0.2 | 0.2 | 0.4 | 0.4 |
Finance lease contracts are for machinery and equipment and other tangible assets, and are not individually significant.
37
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
25 NON-INTEREST-BEARING LIABILITIES
| EUR million | 2011 | 2010 |
|---|---|---|
| Non-current non-interest-bearing liabilities | ||
| Other non-current liabilities | 3.7 | 4.3 |
| Current non-interest-bearing liabilities | ||
| Advances received | 0.2 | 0.5 |
| Trade payables | 17.6 | 19.9 |
| Accrued employee-related expenses | 8.7 | 9.5 |
| VAT payable | 1.3 | 1.6 |
| Other accrued expenses and deferred income | 5.3 | 5.4 |
| Other current liabilities | 2.6 | 1.8 |
| Total | 39.5 | 43.0 |
Other non-current non-interest-bearing liabilities include contingent considerations of business combinations and other acquisitions on the date of acquisition. Contingent considerations of business combinations are recognized at fair value. Determination of fair values is based on discounted future cash flows.
Due to their short maturity, the fair value of current non-interest-bearing liabilities is regarded as corresponding to their book value.
26 COMMITMENTS AND CONTINGENCIES
COMMITMENTS
| EUR million | 2011 | 2010 |
|---|---|---|
| On own behalf | ||
| Business mortgages | 16.1 | 16.1 |
| Guarantees | 0.1 | 0.1 |
| Total | 16.2 | 16.2 |
The mortgages given as security for own commitments include a business mortgage of the parent company of EUR 16.1 million. Since Normark Sport Finland Oy, a 100% owned subsidiary of Rapala VMC Corporation, is the legal shareholder of the distribution joint venture with Shimano, the parent company has guaranteed to Shimano the fulfillment of its subsidiary's obligations related to the joint venture.
Group's lease commitments are presented in note 27.
27 DESPUTES AND LITIGATIONS
In 2008, the Group appealed to the Administrative Court against the Finnish tax authorities' decision made in 2007, based on which the parent company's taxation has been amended since 2004. The appeal was rejected in 2011, and the Group passed an appeal to the Supreme Administrative Court. The case is still pending. The taxes and the penalties for delayed payments levied by the tax authorities have been fully paid and booked. The cumulative disputed taxes totaled EUR 5.0 million on December 31, 2011.
Group's subsidiary has been sued in the US on alleged infringement of two patents that the Group has denied. Due to the ongoing court proceedings it is not possible to give any prediction or forecast of the likely outcome of the case. Based on the current estimates and the fact that the Group is fully indemnified by a third party against any expenses or payments resulting from the claim against one of the two patents, these cases are not expected to have any material financial impact to the Group Financial Statements. The Financial Statements do not include any provisions related to these claims.
The Group's management does not have knowledge of any other open disputes or litigations, which would have a significant impact on the Company's financial position.
28 LEASE CONTRACTS
THE GROUP AS A LESSEE
Future minimum rental payable under non-cancellable operating lease commitments
| EUR million | 2011 | 2010 |
|---|---|---|
| Within one year | 5.5 | 5.3 |
| 1-3 years | 4.4 | 2.7 |
| 3-5 years | 2.0 | 0.6 |
| Later than 5 years | 3.4 | 0.6 |
| Total | 15.2 | 9.3 |
The Group leases offices, warehouses and manufacturing facilities under several non-cancellable operating leases. The leases have varying terms and lengths, some of which may contain renewal options.
THE GROUP AS A LESSOR
Future minimum rental receivable under non-cancellable operating leases
| EUR million | 2011 | 2010 |
|---|---|---|
| Within one year | 0.1 | 0.1 |
| 1-3 years | 0.1 | 0.1 |
| Total | 0.1 | 0.2 |
Some of the offices, warehouses and manufacturing facilities that are currently not used by the Group are leased to external parties. The leases have varying terms and lenghts, some of which may contain renewal options.
38
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
28. RELATED PARTY TRANSACTIONS
Subsidiaries owned directly or indirectly by the parent company as well as foreign branches are listed in note 33. Related party transactions between Group companies have been eliminated.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES
| EUR million | Sales and other income | Purchases | Paid rents | Other expenses | Receivables | Payables |
|---|---|---|---|---|---|---|
| 2011 | ||||||
| Joint venture Shimano | ||||||
| Normark UK Ltd. | 1.6 | 0.1 | ||||
| Associated company | ||||||
| Lanimo Oú | 0.1 | 0.0 | ||||
| Entity with significant | ||||||
| influence over the Group 1) | 0.2 | 0.1 | 0.0 | 0.0 | ||
| Management | 0.3 | 0.0 | 0.0 | |||
| 2010 | ||||||
| Associated company | ||||||
| Lanimo Oú | 0.1 | 0.0 | ||||
| Entity with significant | ||||||
| influence over the Group 1) | 0.2 | 0.1 | 0.0 | |||
| Management | 0.3 | 0.0 | 0.1 |
1) Lease agreement for the real estate for the consolidated operations in Morvillars, France and a service fee.
EMPLOYEE BENEFITS FOR TOP MANAGEMENT
| EUR million | 2011 | 2010 |
|---|---|---|
| Salaries and other short-term employee benefits | -2.9 | -2.9 |
| Costs for option programs to be settled in cash | 0.0 | |
| Costs for share rewards | 0.1 | |
| Total | -2.9 | -2.9 |
Top management consists of members of the Board of Directors, CEO and other members of the Executive Committee. In 2011 one new member was appointed to the Board of Directors and one member left his position in the Board.
On December 31, 2011, the members of the Board and the Executive Committee held directly a total of 3000 Company shares (on December 31, 2010: 1773843). Indirect shareholding was 0 (on December 31, 2010: 1130000). Top management owned approximately 0.0% (7.4%) of the issued share capital and voting rights of Rapala on December 31, 2011.
In 2011 and 2010, no options were granted to top management.
For more information on share-based payments, see note 29 and the section 'Shares and Shareholders'. Details of top management shareholdings and options are given on pages 68-69.
The Group's business transactions or outstanding balances with top management or close members of their family are presented in the table 'Transactions and balances with related parties'.
EMPLOYEE BENEFITS FOR CHIEF EXECUTIVE OFFICER
| EUR million | 2011 | 2010 |
|---|---|---|
| Salaries and other short-term employee benefits | -0.5 | -0.5 |
| Costs for option programs to be settled in cash | 0.0 | |
| Costs for share rewards | 0.0 | |
| Total | -0.5 | -0.5 |
The monthly salary of the CEO is EUR 27000. CEO is also entitled to a profit bonus according to the principles of the Group's senior management bonus scheme. His bonus accrued for 2011 totaled EUR 123646 (2010: EUR 153464). In addition to the mandatory pension insurance, CEO has the right to receive further compensation of EUR 8400 annually to be placed in a voluntary pension scheme or a similar arrangement. A supplementary pension has not been arranged for the CEO. The retirement age and pension of CEO are determined in accordance with the legislation in force. The Company shall give notice at any time or using 24 months notice period and CEO shall give notice 3 or 6 months prior to terminating the service contract. The term of notice is dependent on the cause for termination of employment. If the service agreement is terminated by the Company without a cause, CEO is entitled to severance compensation corresponding to 24 months' salary (excluding profit bonuses).
EMPLOYEE BENEFITS FOR OTHER MEMBERS OF THE EXECUTIVE COMMITTEE
| EUR million | 2011 | 2010 |
|---|---|---|
| Salaries and other short-term employee benefits | -2.0 | -2.2 |
| Costs for option programs to be settled in cash | 0.0 | |
| Costs for share rewards | 0.1 | |
| Total | -2.0 | -2.2 |
In addition to the monthly salary members of the Executive Committee participate in the Group's senior management bonus scheme. The amount and payment of the bonus requires that the result and cash flow targets are achieved. If the targets are not achieved, payment of bonus is fully at the discretion of the Board of Directors. Bonuses awarded under the scheme are paid in two installments, the first when the audited results for the relevant financial year are known and the second after a predetermined vesting period of a few months, to encourage retention of senior management.
EMPLOYEE BENEFITS FOR BOARD OF DIRECTORS
| EUR million | 2011 | 2010 |
|---|---|---|
| Salaries and other short-term employee benefits | -0.4 | -0.2 |
| Total | -0.4 | -0.2 |
Chairman of the Board is paid an annual remuneration of EUR 100 000 and other Members of the Board of Directors an annual remuneration of EUR 45 000. The members of the Remuneration Committee do not receive further compensation. Members of the Board of Directors are reimbursed for travel expenses following the company's traveling compensation principles. Members of the Board of Directors were paid a total of EUR 370 000 for their work on the Board of Directors and the Remuneration Committee in the financial year 2011 (2010: EUR 240 000).
39
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
29 SHARE-BASED PAYMENTS
The Group did not have any share-based payment programs in place on December 31, 2011. The synthetic option program ended on March 31, 2011, and a reward totaling to 0.3 MEUR was disbursed during the second quarter.
Share-based payment programs are valued at fair value on the grant date and recognized as an expense in the income statement during the vesting period with a corresponding adjustment to the equity or liability. In the cash settled option program and in the share reward program the liability is revalued at each balance sheet date with changes in fair value recognized in the income statement. The income statement effect of the share-based payment programs is recognized in employee benefit expenses.
For more information on share-based payment programs, see section 'Shares and Shareholders'.
GENERAL TERMS AND CONDITIONS OF THE SHARE-BASED PAYMENTS PROGRAMS
| 2006A (expired) | 2006B (expired) | |
|---|---|---|
| Nature of program | Granted synthetic options | Granted synthetic options |
| Personnel at the grant date | 113 | 116 |
| Number of options/share rewards granted | 483 500 | 495 000 |
| Number of options/share rewards outstanding | ||
| Exercise price, EUR 1) | 6.14 | 5.95 |
| Share price at the grant date, EUR | 5.93 | 5.93 |
| Term of contract | Dec. 14, 2006–Mar. 31, 2011 1) | Dec. 14, 2006–Mar. 31, 2012 1) |
| Vesting period | Dec. 14, 2006–Mar. 31, 2009 | Dec. 14, 2006–Mar. 31, 2010 |
| Conditions of the agreement | 1) | 2) |
| Execution | In cash 1) | In cash 1) |
1) The exercise price has been reduced by the amount of dividends distributed after the subscription period for option rights has ended and before the commencement of the subscription period for shares. For more details on dividends, see note 31.
2) Employment during vesting period. As a general rule, in case of prior employment termination, options are forfeited.
3) The share-specific cash value will be determined in accordance with the end price on the test date (i.e. vesting date) or, as the case may be, on an additional test date. End price is the volume weighted average price of the share during the ten trading days before the test date. If at test date the difference between the exercise price and the end price (including the dividend adjustment) is positive, the reward will be paid. If the difference between the exercise price and end price on the test date (including the dividend adjustment) is negative, the end price will be determined again on an additional test date, which is the six, twelve, eighteen and twenty-four months' anniversary of the test date. If the difference between the exercise price and the end price is positive on any of the additional test dates, the reward will be paid and this incentive scheme shall automatically expire.
| 2010 | 2006A | 2006B |
|---|---|---|
| Expected volatility, % | 11 | 12 |
| Expected life of option at the grant date (years) | 4.3 | 5.3 |
| Risk-free interest rate, % | 0.11 | 0.56 |
| Estimated forfeit ratio at the grant date, % | 5 | 7 |
| Fair value of the option at the grant date, EUR | 1.09 | 1.34 |
| Option-pricing model | Black-Scholes | Black-Scholes |
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
The expected volatility has been determined by using the historical volatility of the share price. Period very close to Initial Public Offering, in December 1998, has been excluded from the history, since it is not considered to be qualitative for volatility estimation purposes. The historical volatility is calculated based on the weighted average remaining life of the share options. The expected life of the option is based on historical data. The non-market criteria are not included in the fair value of the option but taken into account in the number of options that are assumed to vest.
In 2010 and 2011, no new options were granted. The options exercised in 2011 were synthetic options, and the weighted average share price during the ten trading days before the exercise date was EUR 6.85 (2006A) and EUR 5.98 (2006B). No options were exercised in 2010. The weighted average remaining contractual life for the share options outstanding as of December 31, 2010 was 0.25 years and the exercise price (reduced by the amount of dividends distributed) for options outstanding at the end of the year 2010 was EUR 6.14. At the end of December, 2011, there were no outstanding option programs.
MOVEMENT IN NUMBER OF OPTIONS AND WEIGHTED AVERAGE EXERCISE PRICES OF OPTIONS DURING THE YEAR
| Pcs. | 2011 Weighted average exercise price EUR/share | Pcs. | 2010 Weighted average exercise price EUR/share | |
|---|---|---|---|---|
| Outstanding Jan. 1 | 876 000 | 6.05 | 1 343 500 | 6.06 |
| Forfeited during the year | -50 500 | 6.07 | -34 500 | 6.01 |
| Exercised during the year | -825 500 | 6.04 | ||
| Expired during the year | -433 000 | 6.09 | ||
| Outstanding Dec. 31 | 876 000 | 6.05 | ||
| Exercisable at the end of the year | 876 000 | 6.05 |
SHARE-BASED PAYMENT RECOGNITION IN THE INCOME STATEMENT
| EUR million | 2011 | 2010 |
|---|---|---|
| Employee benefit expenses | ||
| Share-based payment programs to be settled in shares | 0.1 | |
| Option programs to be settled in cash | 0.1 | -0.1 |
| Social security expense liability for share-based payments | 0.0 | 0.1 |
| Deferred taxes | -0.1 | 0.0 |
| Total | -0.1 | 0.1 |
SHARE-BASED PAYMENT RECOGNITION IN THE BALANCE SHEET
| EUR million | 2011 | 2010 |
|---|---|---|
| Assets | ||
| Deferred tax assets | 0.1 | |
| Equity and liabilities | ||
| Equity | -0.3 | |
| Liabilities from option programs to be settled in cash | 0.3 | |
| Social security expense liability for share-based payments 1) | 0.0 |
1) Included in current other non-interest-bearing payables.
EARNINGS PER SHARE
| 2011 | 2010 | |
|---|---|---|
| Net profit for the period attributable to the equity holders of the Company, EUR million | 14.0 | 18.0 |
| Weighted average number of shares, 1000 shares | 38 928 | 39 038 |
| Diluted weighted average number of shares, 1000 shares | 38 928 | 39 038 |
| Earnings per share, EUR | 0.36 | 0.46 |
| Diluted earnings per share, EUR | 0.36 | 0.46 |
For more details on the calculations of earnings per share, see accounting principles for the consolidated accounts page 34.
DIVIDEND PER SHARE
The dividend paid for 2010 was EUR 0.23 per share, totaling EUR 9.0 million. A dividend of EUR 0.23 per share, a total of EUR 9.0 million, is proposed for the Annual General Meeting of Shareholders to be held on April 11, 2012. This dividend payable is not reflected in the financial statements for 2011.
EVENTS AFTER THE BALANCE SHEET DATE
The Group has no knowledge of any significant events after the balance sheet date that would have a material impact on the financial statements for 2011. Material events after the balance sheet date have been discussed in the Review of the Board of Directors.
41
Rapala Financial Statements 2011
Consolidated Financial Statements, IFRS
33 GROUP COMPANIES
| Subsidiaries by geographical area | Country | Group holding (%) | Nature of activity |
|---|---|---|---|
| Nordic | |||
| Normark Denmark A/S | Denmark | 100 | Distribution |
| KL-Teho Oy | Finland | 100 | Manufacturing |
| Marttiini Oy | Finland | 100 | Manufacturing |
| Normark Sport Finland Oy | Finland | 100 | Distribution |
| Normark Suomi Oy | Finland | 100 | Distribution |
| Peltonen Ski Oy | Finland | 90 | Manufacturing |
| Rapala Shimano East Europe Oy | 3) | Finland | 50 |
| Rapala VMC Iceland ehf | Iceland | 100 | Distribution |
| Elbe Normark AS | Norway | 100 | Distribution |
| Remen Slukfabrikk AS | Norway | 100 | Administration |
| Vangen AS | Norway | 100 | Administration |
| Normark Scandinavia AB | Sweden | 100 | Distribution |
| Rest of Europe | |||
| FLLC Normark | Belarus | 100 | Distribution |
| Rapala Finance N.V. | Belgium | 100 | Administration |
| Normark S.r.o. | 3) | Czech Republic | 50 |
| ACE Ltd. | 2) | UK | 100 |
| Dynamite Baits Ltd. | UK | 100 | Manufacturing/Distribution |
| Normark Sport Ltd. | UK | 100 | Administration |
| Marttiini Oú | Estonia | 100 | Manufacturing |
| Normark Eesti Oú | Estonia | 100 | Distribution |
| Rapala Eesti AS | Estonia | 100 | Manufacturing |
| Rapala France SAS | France | 100 | Distribution |
| VMC Pêche SA | France | 100 | Manufacturing |
| Normark Hungary Ltd | Hungary | 66.6 | Distribution |
| SIA Normark Latvia | Latvia | 100 | Distribution |
| Normark UAB | Lithuania | 100 | Distribution |
| Rapala B.V | Netherlands | 100 | Administration |
| Normark Polska Sp.z.o.o. | Poland | 100 | Distribution |
| Normark Portugal SA | Portugal | 100 | Distribution |
| SC Normark Sport Romania S.r.l. | Romania | 66.6 | Distribution |
| ODO Raptech | Russia | 100 | Manufacturing |
| ZAO Normark | 3) | Russia | 50 |
| Normark Spain SA | Spain | 100 | Distribution |
| Rapala-Fishco AG | Switzerland | 100 | Distribution |
| VMC-Water Queen Ukraine | 3) | Ukraine | 50 |
| Subsidiaries by geographical area | Country | Group holding (%) | Nature of activity |
| --- | --- | --- | --- |
| North America | |||
| Normark Inc. | Canada | 100 | Distribution |
| NC Holdings Inc. | USA | 100 | Administration |
| Normark Corporation | USA | 100 | Distribution |
| Normark Innovations, Inc. | USA | 100 | Source: http://www.ifrs.fi/ |
| VMC Inc. | USA | 100 | Distribution |
| Rest of the World | |||
| Rapala VMC Australia Pty Ltd | Australia | 100 | Distribution |
| Rapala V.M.C. Do Brazil | Brazil | 100 | Distribution |
| Kentec Gift (Shenzhen) Ltd | China | 100 | Distribution |
| Rapala VCM China Co | China | 100 | Distribution |
| Rapala VMC (Hong Kong) Ltd | Hong Kong | 100 | Administration/ |
| Willtech (PRC) Ltd. | Hong Kong | 100 | source: http://www.ifrs.fi/ |
| PT Rapala Indonesia | 1) | Indonesia | 80 |
| PT Rapala VMC Batam | 1) | Indonesia | 100 |
| PT VMC Fishing Tackle Indonesia | 1) | Indonesia | 100 |
| Rapala Japan K.K. | Japan | 100 | Distribution |
| Normark Kazakhstan LLP | 1)3) | Kazakhstan | 50 |
| Rapala VMC (Asia Pacific) Sdn Bhd. | Malaysia | 100 | Distribution |
| Rapala VMC Mexico S. de R.L. de C.V | 1) | Mexico | 100 |
| Rapala VMC South-Africa Distributors | South Africa | 70 | Distribution |
| Pty Ltd. | South Africa | 70 | Distribution |
| Rapala VMC Korea Co., Ltd | South Korea | 100 | Distribution |
| Rapala VMC (Thailand) Co., Ltd. | Thailand | 100 | Distribution |
| Associated companies and joint ventures by geographical area | Country | Group holding (%) | Nature of activity |
| Shimano Normark UK Ltd. | 2) | UK | 50 |
| Lanimo Oú | Estonia | 33.3 | Manufacturing |
Foreign branches
Rapala VMC (Hong Kong) Ltd, branch office in Taiwan
Normark S.r.o., branch office in Slovak Republic
1) Established in 2011
2) Acquired in 2011
3) Controlled by Rapala
4) Shares owned by the parent company
Rapala Financial Statements 2011
Key Financial Figures
KEY FINANCIAL FIGURES
SCOPE OF ACTIVITY AND PROFITABILITY
| 2007 | 2008 | 2009 | 2010 | 2011 | ||
|---|---|---|---|---|---|---|
| Net sales | EUR million | 242.5 | 243.0 | 234.6 | 269.4 | 279.5 |
| Operating profit before depreciation and impairments | EUR million | 33.8 | 37.5 | 28.9 | 37.4 | 37.7 |
| as a percentage of net sales | % | 13.9 | 15.5 | 12.3 | 13.9 | 13.5 |
| Operating profit | EUR million | 28.3 | 31.3 | 22.1 | 31.3 | 30.7 |
| as a percentage of net sales | % | 11.7 | 12.9 | 9.4 | 11.6 | 11.0 |
| Profit before taxes | EUR million | 23.3 | 26.5 | 19.9 | 29.5 | 25.2 |
| as a percentage of net sales | % | 9.6 | 10.9 | 8.5 | 10.9 | 9.0 |
| Net profit for the period | EUR million | 17.5 | 19.2 | 14.3 | 20.7 | 17.2 |
| as a percentage of net sales | % | 7.2 | 7.9 | 6.1 | 7.7 | 6.2 |
| Attributable to | ||||||
| Equity holders of the Company | EUR million | 17.3 | 17.7 | 12.1 | 18.0 | 14.0 |
| Non-controlling interest | EUR million | 0.3 | 1.6 | 2.2 | 2.8 | 3.2 |
| Capital expenditure | EUR million | 9.3 | 13.7 | 7.6 | 12.7 | 10.0 |
| as a percentage of net sales | % | 3.8 | 5.6 | 3.2 | 4.7 | 3.6 |
| Research and development expenses | EUR million | 1.6 | 1.8 | 2.0 | 2.1 | 2.1 |
| as a percentage of net sales | % | 0.7 | 0.7 | 0.9 | 0.8 | 0.7 |
| Net interest-bearing debt at the end of the period | EUR million | 80.2 | 89.5 | 79.4 | 92.0 | 91.2 |
| Capital employed at the end of the period | EUR million | 177.1 | 193.2 | 191.1 | 221.3 | 227.0 |
| Return on capital employed (ROCE) | % | 15.9 | 16.9 | 11.5 | 15.2 | 13.7 |
| Return on equity (ROE) | % | 19.7 | 19.2 | 13.3 | 17.2 | 13.0 |
| Equity-to-assets ratio at the end of the period | % | 38.2 | 38.0 | 42.8 | 42.6 | 43.2 |
| Debt-to-equity ratio (gearing) at the end of the period | % | 82.8 | 86.4 | 71.1 | 71.2 | 67.2 |
| Average personnel for the period | Persons | 4 577 | 4 143 | 2 259 | 2 317 | 2 208 |
| Personnel at the end of the period | Persons | 4 356 | 3 197 | 2 271 | 2 313 | 1 921 |
Net sales, EUR million
Operating profit, EUR million
Operating profit margin, %
Profit before taxes, EUR million
Rapala Financial Statements 2011
Key Financial Figures
| 2007 | 2008 | 2009 | 2010 | 2011 | ||
|---|---|---|---|---|---|---|
| Share related key figures 1) | ||||||
| Earnings per share | EUR | 0.45 | 0.45 | 0.31 | 0.46 | 0.36 |
| Fully diluted earnings per share | EUR | 0.45 | 0.45 | 0.31 | 0.46 | 0.36 |
| Equity per share | EUR | 2.43 | 2.59 | 2.75 | 3.13 | 3.30 |
| Dividend per share 2) | EUR | 0.18 | 0.19 | 0.19 | 0.23 | 0.23 |
| Dividend/earnings ratio 2) | % | 40.2 | 42.2 | 61.3 | 49.9 | 63.7 |
| Effective dividend yield 2) | % | 3.24 | 5.46 | 3.82 | 3.35 | 4.07 |
| Price/earnings ratio | 12.5 | 7.8 | 16.1 | 14.9 | 15.7 | |
| Share price at the end of the period | EUR | 5.55 | 3.48 | 4.97 | 6.86 | 5.65 |
| Lowest share price | EUR | 5.40 | 2.95 | 3.50 | 4.80 | 4.86 |
| Highest share price | EUR | 6.27 | 5.65 | 5.16 | 6.86 | 7.38 |
| Average share price | EUR | 5.82 | 4.21 | 4.46 | 5.75 | 6.23 |
| Number of shares traded | Shares | 8 684 433 | 4 144 626 | 3 138 597 | 4 051 489 | 6 479 735 |
| Number of shares traded of average number of shares | % | 22.51 | 10.52 | 8.01 | 10.38 | 16.65 |
| Share capital | EUR million | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| Dividend for the period 2) | EUR million | 6.9 | 7.5 | 7.4 | 9.0 | 9.0 |
| Year end market capitalization 2) | EUR million | 219.3 | 136.6 | 194.5 | 267.0 | 219.9 |
| Number of shares at the end of the period excluding own shares 1) | 1000 shares | 39 468 | 39 256 | 39 128 | 38 928 | 38 916 |
| Weighted average number of shares 1) | 1000 shares | 38 781 | 39 403 | 39 208 | 39 038 | 38 928 |
| Fully diluted number of shares at the end of the period 1) | 1000 shares | 39 468 | 39 256 | 39 128 | 38 928 | 38 916 |
| Fully diluted weighted average number of shares 1) | 1000 shares | 38 781 | 39 403 | 39 208 | 39 038 | 38 928 |
1) In 2007, new restricted shares (RAP1VN0107) granted their holders the same rights as the old shares (RAP1V), except that these new shares did not give right to dividend paid from financial year 2007 and there was a lock-up period of 12 months. The new class of shares was combined to the old class of shares on October 24, 2008 when the difference regarding the right to dividend between the classes ended. For more details on RAP1VN0107 shares and its effect on share related key figures of 2007, see Annual Report 2007.
2) Year 2011 board proposal.
3) Excluding own shares.
Earnings per share, EUR
Dividend per share, EUR
a) Board proposal
Dividend/earnings ratio, %
a) Board proposal
Equity per share, EUR
Rapala Financial Statements 2011
Key Financial Figures
KEY FIGURES BY QUARTER
| Q1/10 | Q2/10 | Q3/10 | Q4/10 | Q1/11 | Q2/11 | Q3/11 | Q4/11 | ||
|---|---|---|---|---|---|---|---|---|---|
| Net sales by operating segment | |||||||||
| Group Fishing Products | EUR million | 37.7 | 42.7 | 29.7 | 29.4 | 41.9 | 44.5 | 32.9 | 33.0 |
| Other Group Products | EUR million | 5.0 | 4.0 | 5.8 | 10.4 | 5.3 | 5.1 | 5.1 | 7.3 |
| Third Party Products | EUR million | 28.2 | 31.1 | 25.3 | 21.0 | 27.9 | 31.4 | 25.1 | 20.6 |
| Intra-segment sales | EUR million | -0.2 | -0.2 | -0.2 | -0.3 | -0.3 | -0.2 | -0.1 | -0.2 |
| Total net sales | EUR million | 70.8 | 77.6 | 60.6 | 60.4 | 74.7 | 80.9 | 63.0 | 60.8 |
| Operating profit before depreciation and impairments | EUR million | 13.1 | 14.1 | 4.5 | 5.7 | 13.7 | 14.4 | 4.1 | 5.5 |
| as a percentage of net sales | % | 18.6 | 18.2 | 7.4 | 9.5 | 18.4 | 17.8 | 6.5 | 9.0 |
| Operating profit by operating segment | |||||||||
| Group Fishing Products | EUR million | 8.1 | 8.6 | 0.7 | 4.0 | 8.6 | 7.9 | 1.6 | 1.8 |
| Other Group Products | EUR million | 0.5 | 0.1 | 1.1 | 0.3 | 0.5 | 0.4 | -0.2 | 1.8 |
| Third Party Products | EUR million | 3.1 | 3.8 | 1.1 | -0.2 | 3.1 | 4.5 | 0.9 | -0.1 |
| Total Group operating profit | EUR million | 11.7 | 12.5 | 2.9 | 4.2 | 12.1 | 12.8 | 2.3 | 3.5 |
| as a percentage of net sales | % | 16.5 | 16.1 | 4.8 | 6.9 | 16.2 | 15.8 | 3.6 | 5.8 |
| Profit before taxes | EUR million | 12.1 | 12.1 | 1.7 | 3.5 | 11.1 | 11.3 | 0.3 | 2.5 |
| as a percentage of net sales | % | 17.1 | 15.6 | 2.8 | 5.8 | 14.8 | 14.0 | 0.5 | 4.2 |
| Net profit for the period | EUR million | 9.1 | 8.4 | 1.4 | 1.8 | 7.9 | 8.0 | 0.2 | 1.1 |
| as a percentage of net sales | % | 12.9 | 10.8 | 2.4 | 3.0 | 10.6 | 9.9 | 0.3 | 1.8 |
| Attributable to | |||||||||
| Equity holders of the Company | EUR million | 8.6 | 7.2 | 0.5 | 1.7 | 7.0 | 6.6 | -0.5 | 0.9 |
| Non-controlling interest | EUR million | 0.6 | 1.1 | 0.9 | 0.1 | 0.9 | 1.4 | 0.7 | 0.2 |
Net sales, EUR million
Operating profit, EUR million
Operating profit, %
Profit before taxes, EUR million
Rapala Financial Statements 2011
Key Financial Figures
| Q1/10 | Q2/10 | Q3/10 | Q4/10 | Q1/11 | Q2/11 | Q3/11 | Q4/11 | ||
|---|---|---|---|---|---|---|---|---|---|
| Assets by operating segment | |||||||||
| Group Fishing Products | EUR million | 182.4 | 186.0 | 185.3 | 190.5 | 200.0 | 192.4 | 190.3 | 195.5 |
| Other Group Products | EUR million | 11.1 | 10.5 | 10.2 | 12.7 | 13.5 | 16.5 | 17.8 | 12.2 |
| Third Party Products | EUR million | 78.4 | 75.6 | 69.3 | 71.1 | 85.2 | 77.4 | 67.1 | 68.8 |
| Intra-segment | EUR million | -0.1 | -0.1 | -0.1 | 0.0 | ||||
| Non-interest bearing assets total | EUR million | 271.9 | 272.1 | 264.7 | 274.3 | 298.6 | 286.3 | 275.2 | 276.5 |
| Liabilities by operating segment | |||||||||
| Group Fishing Products | EUR million | 32.1 | 35.4 | 35.9 | 35.1 | 35.6 | 36.2 | 33.4 | 32.5 |
| Other Group Products | EUR million | 2.2 | 2.3 | 2.4 | 2.9 | 3.2 | 4.2 | 4.2 | 2.5 |
| Third Party Products | EUR million | 16.7 | 14.8 | 13.8 | 15.1 | 19.1 | 13.3 | 13.0 | 14.5 |
| Intra-segment | EUR million | -0.1 | -0.1 | -0.1 | |||||
| Non-interest bearing liabilities total | EUR million | 50.9 | 52.6 | 52.0 | 53.1 | 57.8 | 53.6 | 50.7 | 49.5 |
| Capital expenditure | EUR million | 1.8 | 1.5 | 7.7 | 1.7 | 1.8 | 1.7 | 3.8 | 2.7 |
| Net interest-bearing debt at the end of the period | EUR million | 96.6 | 90.4 | 87.9 | 92.0 | 106.7 | 103.4 | 93.9 | 91.2 |
| Capital employed at the end of the period | EUR million | 221.0 | 219.6 | 212.8 | 221.3 | 240.8 | 232.7 | 224.5 | 227.0 |
| Return on capital employed (ROCE) | % | 22.6 | 24.4 | 5.7 | 8.1 | 21.0 | 22.6 | 4.1 | 6.3 |
| Return on equity (ROE) | % | 31.0 | 27.8 | 4.8 | 5.9 | 24.1 | 24.8 | 0.7 | 3.2 |
| Equity-to-assets ratio at the end of the period | % | 41.7 | 41.3 | 41.9 | 42.6 | 41.2 | 40.4 | 42.2 | 43.2 |
| Debt-to-equity ratio (gearing) at the end of the period | % | 77.7 | 70.0 | 70.4 | 71.2 | 79.5 | 79.9 | 71.8 | 67.2 |
| Average personnel for the period | Persons | 2 178 | 2 214 | 2 308 | 2 341 | 2 257 | 2 304 | 2 271 | 2 223 |
| Personnel at the end of the period | Persons | 2 275 | 2 285 | 2 322 | 2 313 | 2 248 | 2 251 | 2 101 | 1 921 |
Quarterly key figures are not audited.
46
Rapala Financial Statements 2011
Key Financial Figures
DEFINITION OF KEY FIGURES
| Operating profit before depreciation and impairments (EBITDA) | = | Operating profit + depreciation and impairments | Dividend/earnings ratio, % | = | Dividend for the period x 100
Net profit for the period attributable to the equity holders of the Company |
| --- | --- | --- | --- | --- | --- |
| Net interest-bearing debt | = | Total interest-bearing liabilities
- total interest-bearing assets | Equity per share, EUR | = | Equity attributable to equity holders of the Company |
| Capital employed | = | Total equity + net interest-bearing liabilities | | | Adjusted number of shares at the end of the period |
| Working capital | = | Inventories + total non-interest-bearing assets
- total non-interest-bearing liabilities | Effective dividend yield, % | = | Dividend per share x 100
Adjusted share price at the end of the period |
| Total non-interest-bearing assets | = | Total assets - interest-bearing assets
- intangible and tangible assets
- assets classified as held-for-sale | Price/earnings ratio | = | Adjusted share price at the end of the period
Earnings per share |
| Total non-interest-bearing liabilities | = | Total liabilities - interest-bearing liabilities | Average share price, EUR | = | EUR amount traded during the period |
| Average interest rate on net interest-bearing debt, % | = | (Interest paid - interest received) x 100
Net interest-bearing debt | | | Adjusted number of shares traded during the period |
| Net interest-bearing debt to EBITDA | = | Net interest-bearing debt
Operating profit before depreciation and impairments | Year-end market capitalization, EUR | = | Number of shares at the end of the period x share price at the end of the period |
| Return on capital employed (ROCE), % | | Operating profit x 100
Capital employed (average for the period) | Average number of personnel | = | Calculated as average of monthly averages |
| Return on equity (ROE), % | = | Net profit for the period x 100
Total equity (average for the period) | | | |
| Debt-to-equity ratio (Gearing), % | = | Net interest-bearing liabilities x 100
Total equity | | | |
| Equity-to-assets ratio, % | = | Total equity x 100
Total shareholders' equity and liabilities
- advances received | | | |
| Earnings per share, EUR | = | Net profit for the period attributable to the equity holders of the Company
Adjusted weighted average number of shares | | | |
| Dividend per share, EUR | = | Dividend for the period
Adjusted number of shares at the end of the period | | | |
Rapala Financial Statements 2011
Parent Company Financials, FAS
PARENT COMPANY FINANCIAL STATEMENTS, FAS
PARENT COMPANY INCOME STATEMENT
| EUR | Note | 2011 | 2010 |
|---|---|---|---|
| Net sales | 2 | 28 993 892 | 31 030 908 |
| Other operating income | 3 | 90 606 | 113 087 |
| Change in inventory of finished products and work in progress | 170 910 | 1 143 306 | |
| Production for own use | 84 682 | 145 004 | |
| Materials and services | 5 | -12 526 371 | -14 041 159 |
| Employee benefit expenses | 6 | -8 582 102 | -9 829 724 |
| Other operating expenses | 4 | -5 035 372 | -5 073 791 |
| Operating profit before depreciation and impairments | 3 196 246 | 3 487 631 | |
| Depreciation and impairments | 7 | -1 300 101 | -1 315 824 |
| Operating profit | 1 896 145 | 2 171 807 | |
| Financial income and expenses | 8 | -3 575 242 | -829 997 |
| Profit before extraordinary items | -1 679 097 | 1 341 810 | |
| Extraordinary items | 9 | 2 300 000 | 2 800 000 |
| Profit before appropriations and taxes | 620 903 | 4 141 810 | |
| Appropriations | 10 | 36 069 | -413 953 |
| Income taxes | 11 | -1 762 701 | -1 600 569 |
| Net profit for the period | -1 105 729 | 2 127 288 |
Rapala Financial Statements 2011
Parent Company Financials, FAS
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
ASSETS
| EUR | Note | 2011 | 2010 |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 12 | 850 903 | 1 234 717 |
| Tangible assets | 13 | 6 092 578 | 5 774 160 |
| Investments | 14 | 148 193 410 | 146 464 229 |
| Interest-bearing receivables | 16 | 4 432 871 | 6 402 346 |
| Non-interest-bearing receivables | 16 | 1 653 093 | 917 431 |
| Total non-current assets | 161 222 855 | 160 792 883 | |
| Current assets | |||
| Inventories | 15 | 7 434 861 | 7 052 657 |
| Current financial assets | |||
| Interest-bearing | 16 | 17 261 540 | 17 858 804 |
| Non-interest-bearing | 16 | 16 245 067 | 12 325 069 |
| Cash and cash equivalents | 5 836 545 | 5 929 500 | |
| Total current assets | 46 778 012 | 43 166 030 | |
| Total assets | 208 000 867 | 203 958 913 |
SHAREHOLDERS' EQUITY AND LIABILITIES
| EUR | Note | 2011 | 2010 |
|---|---|---|---|
| Shareholders' equity | |||
| Share capital | 3 552 160 | 3 552 160 | |
| Share premium fund | 16 680 961 | 16 680 961 | |
| Fair value reserve | -2 132 705 | -2 013 673 | |
| Fund for invested non-restricted equity | 4 914 371 | 4 914 371 | |
| Own shares | -2 611 276 | -2 516 723 | |
| Retained earnings | 25 336 095 | 32 162 305 | |
| Net income for the period | -1 105 729 | 2 127 288 | |
| Total shareholders' equity | 44 633 877 | 54 906 689 | |
| Appropriations | 859 049 | 895 118 | |
| Non-current liabilities | |||
| Interest-bearing | 13 190 385 | 30 666 286 | |
| Non-interest-bearing | 1 383 363 | ||
| Total non-current liabilities | 17 | 14 573 748 | 32 210 438 |
| Current liabilities | |||
| Interest-bearing | 119 031 270 | 91 233 946 | |
| Non-interest-bearing | 28 902 923 | 24 712 722 | |
| Total current liabilities | 17 | 147 934 194 | 115 946 668 |
| Total shareholders' equity and liabilities | 208 000 867 | 203 958 913 |
Rapala Financial Statements 2011
Parent Company Financials, FAS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
| EUR | 2011 | 2010 |
|---|---|---|
| Share capital Jan. 1 | 3 552 160 | 3 552 160 |
| Share capital Dec. 31 | 3 552 160 | 3 552 160 |
| Share premium fund Jan. 1 | 16 680 961 | 16 680 961 |
| Share premium fund Dec. 31 | 16 680 961 | 16 680 961 |
| Fair value reserve Jan. 1 | -2 013 673 | -455 548 |
| Gains and losses on cash flow hedges | -119 032 | -1 558 125 |
| Fair value reserve Dec. 31 | -2 132 705 | -2 013 673 |
| Fund for invested non-restricted equity Jan. 1 | 4 914 371 | 4 914 371 |
| Fund for invested non-restricted equity Dec. 31 | 4 914 371 | 4 914 371 |
| Own shares Jan. 1 | -2 516 723 | -1 403 580 |
| Purchase of own shares | -94 553 | -1 113 143 |
| Own shares Dec. 31 | -2 611 276 | -2 516 723 |
| Retained earnings Jan. 1 | 34 289 593 | 39 591 363 |
| Dividends paid | -8 953 498 | -7 429 058 |
| Net income for the period | -1 105 729 | 2 127 288 |
| Retained earnings Dec. 31 | 24 230 367 | 34 289 593 |
DISTRIBUTABLE EQUITY
| Other distributable funds | 2011 | 2010 |
|---|---|---|
| Retained earnings | 34 289 593 | 39 591 363 |
| Dividends paid | -8 953 498 | -7 429 058 |
| Purchase of own shares | -2 611 276 | -2 516 723 |
| Gains and losses on cash flow hedges | -2 132 705 | -2 013 673 |
| Net income for the period | -1 105 729 | 2 127 288 |
| Distributable earnings | 19 486 385 | 29 759 197 |
| Other distributable equity | ||
| Fund for invested non-restricted equity | 4 914 371 | 4 914 371 |
| Total distributable equity | 24 400 756 | 34 673 568 |
PARENT COMPANY SHARE CAPITAL
| 2011 | 2010 | |
|---|---|---|
| Shares | 39 468 449 | 39 468 449 |
| EUR | 3 552 160 | 3 552 160 |
Each share is entitled to one vote.
Based on authorization given by the Annual General Meeting in April 2007, the Board can decide to issue shares through issuance of shares, options or special rights entitling to shares in one or more issues. The number of new shares to be issued including the shares to be obtained under options or special rights shall be no more than 10 000 000 shares. This authorization includes the right for the Board to resolve on all terms and conditions of the issuance of new shares, options and special rights entitling to shares, including issuance in deviation from the shareholders' preemptive rights. This authorization is in force for a period of 5 years from the resolution by the Annual General Meeting. The Board is also authorized to resolve to repurchase a maximum of 2 000 000 shares by using funds in the unrestricted equity. This amount of shares corresponds to less than 10% of all shares of the company. The shares will be repurchased through public trading arranged by NASDAQ OMX Helsinki at the market price of the acquisition date. The shares will be acquired and paid in pursuance of the rules of NASDAQ OMX Helsinki and applicable rules regarding the payment period and other terms of the payment. This authorization is effective until the end of the next Annual General Meeting.
On December 31, 2011, the share capital fully paid and reported in the Trade Register was 3 552 160 MEUR and the total number of shares was 39 468 449. The average number of shares in 2011 was 39 468 449. On November 17, 2011, the Board decided to continue buying back own shares in accordance with the authorization granted by the AGM on April 5, 2011. In 2011 a total of 11 859 shares were repurchased at the average price of EUR 5.46. At the end of December 2011, Rapala held 552 057 own shares, representing 1.4% of the total number and the total voting rights of Rapala shares. The average share price of all repurchased own shares held by Rapala was EUR 4.73.
50
Rapala Financial Statements 2011
Parent Company Financials, FAS
PARENT COMPANY STATEMENT OF CASH FLOWS
| EUR thousand | Note | 2011 | 2010 |
|---|---|---|---|
| Net profit for the period | -1 106 | 2 127 | |
| Adjustments | |||
| Income taxes | 11 | 1 763 | 1 601 |
| Financial income and expenses | 8 | 3 575 | 830 |
| Reversal of non-cash items | |||
| Depreciation and impairments | 7 | 1 300 | 1 316 |
| Other items | -2 800 | -1 977 | |
| Total adjustments | 3 838 | 1 769 | |
| Financial items | |||
| Interest paid | -3 373 | -3 119 | |
| Interest received | 704 | 598 | |
| Income taxes paid | -1 892 | -1 472 | |
| Dividends received | 330 | 3 156 | |
| Other financial items, net | -569 | -132 | |
| Total financial items | -4 800 | -969 | |
| Change in working capital | |||
| Change in receivables | -11 741 | -1 792 | |
| Change in inventories | -383 | -1 691 | |
| Change in liabilities | 4 100 | 5 825 | |
| Total change in working capital | -8 024 | 2 342 | |
| Net cash generated from operating activities | -10 092 | 5 270 | |
| Net cash used in investing activities | |||
| Purchases of intangible assets | 12 | -53 | |
| Proceeds from disposal of tangible assets | 13 | 80 | |
| Purchases of tangible assets | 13 | -1 337 | -1 311 |
| Acquisition of subsidiaries and joint venture | 14 | -1 855 | -6 399 |
| Escrow deposit related to Dynamite Baits acquisition | -1 319 | ||
| Change in interest-bearing receivables | 5 693 | -7 287 | |
| Total net cash used in investing activities | 2 581 | -16 369 | |
| Net cash generated from financing activities | |||
| Dividends paid | -8 953 | -7 429 | |
| Purchase of own shares | -94 | -1 113 | |
| Loan withdrawals | 120 289 | 106 053 | |
| Loan repayments | -103 881 | -87 226 | |
| Total net cash generated from financing activities | 7 361 | 10 285 | |
| Change in cash and cash equivalents | -150 | -814 | |
| Cash and cash equivalents at the beginning of the period | 5 930 | 6 132 | |
| Foreign exchange rate effect | 57 | 612 | |
| Cash and cash equivalents at the end of the period | 5 837 | 5 930 |
51
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING PRINCIPLES
The financial statements of Rapala VMC Oyj have been prepared according to Finnish Accounting Standards (FAS).
FOREIGN CURRENCY TRANSACTIONS
Monetary assets and liabilities denominated in foreign currencies are translated into euros using the exchange rates at the balance sheet date and exchange differences arising from translation are recognized in the income statement.
REVENUE RECOGNITION
Sales of goods and services are recognized on accrual basis when the significant risks related to goods and services sold have passed to the buyer and it is not probable that the client would return the goods. Net sales comprise of gross sales less cash discounts and sales taxes.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as they are incurred, unless they clearly relate to developing new business areas. Such development costs are capitalized if they are separately identifiable and if the products are assessed to be technically feasible and commercially viable and the related future revenues are expected to exceed the accrued and future development costs and related production, selling and administrative expenses, and other possible costs related to the project.
Capitalized development expenses are amortized on a straight-line basis over their expected useful lives, a maximum of five years.
INVENTORIES
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises of raw materials, direct labor costs including social costs and other direct costs. Inventories are shown net of a reserve for obsolete or slow-moving inventories.
TANGIBLE AND INTANGIBLE ASSETS
Tangible and intangible assets are stated at historical cost excluding accumulated depreciation according to plan. Planned depreciation is based on historical cost and expected useful life.
Land is not depreciated. Depreciation is based on the following expected useful lives:
| Intangible assets | 3–15 years |
|---|---|
| Buildings | 10–20 years |
| Machinery and equipment | 5–10 years |
| Other tangible assets | 3–10 years |
PENSION ARRANGEMENTS
All of the company's pension arrangements are defined contribution plans, with the majority being local statutory arrangements. Pension costs are expensed as incurred.
VALUATION OF FINANCIAL DERIVATIVES
Financial derivatives are valued at fair value. Currently, the company has short-term standard and modified foreign currency forwards to which hedge accounting is not applied but which have been made to hedge cash flow exchange risk. Fair value of standard foreign currency forwards are determined by discounting the future nominal cash flows with relevant interest rates and then converting the discounted cash flows to the foreign currency using spot rates. The fair value of modified foreign currency forwards are received from the bank. The company also has an interest rate swap, which is designated and effective as cash flow hedge, in which the company pays fixed interest and received variable interest. The fair value of interest rate derivatives have been calculated using a discounted cash flow method and are received from the bank.
In cash flow hedges, changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognized directly in equity and the ineffective portion is recognized immediately in the income statement.
OWN SHARES
Own shares acquired by the company, including directly attributable costs, are presented as a deduction from the total equity on the day of trading. Purchases or subsequent sales of treasury shares are presented as changes in equity.
CASH FLOW STATEMENT
Changes in financial position are presented as cash flows from operating, investing and financing activities.
2 NET SALES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| By destination | ||
| North America | 15 605 | 18 801 |
| Nordic | 2 158 | 2 143 |
| Rest of Europe | 7 458 | 7 002 |
| Rest of the World | 3 773 | 3 085 |
| Total | 28 994 | 31 031 |
The parent company's net sales consist of Lure Business which is included in Group Fishing Products in the consolidated operating segment reporting.
52
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
3 OTHER OPERATING INCOME
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Rental income | 63 | 57 |
| Government grants | 37 | |
| Other income | 27 | 19 |
| Total | 91 | 113 |
Other income, EUR 27 thousand (2010: EUR 19 thousand) is a combination of several smaller income items, of which none is individually significant.
4 OTHER OPERATING EXPENSES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Maintenance | -1 198 | -1 530 |
| Selling and marketing expenses | -638 | -563 |
| Traveling expenses | -495 | -537 |
| Rents paid | -274 | -236 |
| IT and telecommunication | -288 | -224 |
| Auditors fees and services | -146 | -93 |
| Freight | -58 | -86 |
| Sales commissions | -141 | -144 |
| Other expenses | -1 798 | -1 660 |
| Total | -5 035 | -5 074 |
AUDITORS' FEES AND SERVICES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Audit fees | -138 | -67 |
| Fees for tax services | -1 | -8 |
| Other fees | -7 | -18 |
| Total | -146 | -93 |
5 MATERIALS AND SERVICES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Materials, goods and supplies | ||
| Purchases during the financial year | -12 627 | -14 353 |
| Change in inventory | 211 | 548 |
| External services | -111 | -236 |
| Total | -12 526 | -14 041 |
6 EMPLOYEE BENEFIT EXPENSES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Wages and salaries | -7 013 | -8 012 |
| Pension costs | -1 149 | -1 330 |
| Other personnel expenses | -420 | -488 |
| Total | -8 582 | -9 830 |
| Average personnel for the period | 189 | 222 |
The remuneration of the Board of Directors amounted to EUR 370 thousand (2010: EUR 240 thousand).
7 DEPRECIATION AND IMPAIRMENTS
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Depreciation of intangible assets | ||
| Trademarks | -92 | -92 |
| Other intangible assets | -291 | -391 |
| Depreciation of tangible assets | ||
| Buildings | -165 | -156 |
| Machinery and equipment | -751 | -676 |
| Total | -1 300 | -1 316 |
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
8 FINANCIAL INCOME AND EXPENSES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Dividend income from subsidiaries | 996 | 3 155 |
| Dividend income from third parties | 2 | 2 |
| Foreign exchange gains | 5 627 | 4 280 |
| Foreign exchange losses | -7 699 | -6 039 |
| Interest and other financial income | ||
| Interest income | 989 | 780 |
| Other financial income | 84 | 90 |
| Interest and other financial expenses | ||
| Interest expense | -3 269 | -2 948 |
| Other financial expenses | -305 | -150 |
| Total | -3 575 | -830 |
FINANCIAL INCOME AND EXPENSES FROM AND TO SUBSIDIARIES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Dividend income from subsidiaries | 996 | 3 155 |
| Interest and other financial income | ||
| Interest income | 954 | 758 |
| Other financial income | 84 | 90 |
| Interest and other financial expenses | ||
| Interest expense | -279 | -279 |
| Total | 1 756 | 3 725 |
TRANSLATION DIFFERENCES RECOGNIZED IN THE INCOME STATEMENT
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Translation differences recognized in net sales | 269 | 641 |
| Translation differences included in purchases and other expenses | 343 | 221 |
| Foreign exchange gains and losses in financial income and expenses | -2 072 | -1 759 |
| Total | -1 460 | -896 |
9 EXTRAORDINARY ITEMS
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Group contributions received | 2 300 | 2 800 |
| Total | 2 300 | 2 800 |
10 APPROPRIATIONS
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Change in depreciation difference | ||
| Intangible assets | 36 | -39 |
| Buildings | 68 | 42 |
| Machinery and equipment | -67 | -416 |
| Total | 36 | -414 |
11 INCOME TAXES
INCOME TAXES IN THE INCOME STATEMENT
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Income taxes | ||
| Income taxes on extraordinary items | -598 | -728 |
| Income taxes on operating activities | -822 | -249 |
| Taxes from previous financial years | -343 | -623 |
| Total | -1 763 | -1 601 |
Deferred tax assets and liabilities of the parent company are not presented in the parent company's balance sheet.
54
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
INTANGIBLE ASSETS
2011
| EUR thousand | Trademarks | Other intangible assets | Total |
|---|---|---|---|
| Acquisition cost Jan. 1 | 924 | 7 506 | 8 430 |
| Additions | |||
| Acquisition cost Dec. 31 | 924 | 7 506 | 8 430 |
| Accumulated depreciation Jan. 1 | -100 | -7 095 | -7 195 |
| Depreciation during the period | -92 | -292 | -384 |
| Accumulated depreciation Dec. 31 | -193 | -7 387 | -7 579 |
| Book value Jan. 1 | 824 | 411 | 1 235 |
| Book value Dec. 31 | 732 | 119 | 851 |
2010
| EUR thousand | Trademarks | Other intangible assets | Total |
|---|---|---|---|
| Acquisition cost Jan. 1 | 924 | 7 453 | 8 377 |
| Additions | 53 | 53 | |
| Acquisition cost Dec. 31 | 924 | 7 506 | 8 430 |
| Accumulated depreciation Jan. 1 | -8 | -6 703 | -6 711 |
| Depreciation during the period | -92 | -391 | -484 |
| Accumulated depreciation Dec. 31 | -100 | -7 095 | -7 195 |
| Book value Jan. 1 | 917 | 750 | 1 666 |
| Book value Dec. 31 | 824 | 411 | 1 235 |
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
TANGIBLE ASSETS
2011
| EUR thousand | Land | Buildings | Machinery and equipment | Other tangible assets | Advance payments and construction in progress | Total |
|---|---|---|---|---|---|---|
| Acquisition cost Jan. 1 | 144 | 4 569 | 15 203 | 44 | 662 | 20 621 |
| Additions | 370 | 1 011 | 1 381 | |||
| Disposals | -132 | -15 | -147 | |||
| Reclassifications | 86 | 1 011 | -1 097 | |||
| Acquisition cost Dec. 31 | 144 | 4 655 | 16 452 | 44 | 561 | 21 855 |
| Accumulated depreciation Jan. 1 | -3 685 | -11 162 | -14 847 | |||
| Depreciation during the period | -165 | -751 | -916 | |||
| Accumulated depreciation Dec. 31 | -3 850 | -11 913 | -15 763 | |||
| Book value Jan. 1 | 144 | 884 | 4 041 | 44 | 662 | 5 774 |
| Book value Dec. 31 | 144 | 805 | 4 539 | 44 | 561 | 6 092 |
2010
| EUR thousand | Land | Buildings | Machinery and equipment | Other tangible assets | Advance payments and construction in progress | Total |
|---|---|---|---|---|---|---|
| Acquisition cost Jan. 1 | 128 | 4 454 | 13 943 | 44 | 1 162 | 19 730 |
| Additions | 16 | 50 | 180 | 1 068 | 1 314 | |
| Disposals | -4 | -419 | -423 | |||
| Reclassifications | 65 | 1 084 | -1 149 | |||
| Acquisition cost Dec. 31 | 144 | 4 569 | 15 203 | 44 | 662 | 20 621 |
| Accumulated depreciation Jan. 1 | -3 529 | -10 486 | -14 015 | |||
| Depreciation during the period | -156 | -676 | -832 | |||
| Accumulated depreciation Dec. 31 | -3 685 | -11 162 | -14 847 | |||
| Book value Jan. 1 | 128 | 925 | 3 457 | 44 | 1 162 | 5 715 |
| Book value Dec. 31 | 144 | 884 | 4 041 | 44 | 662 | 5 774 |
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
14 INVESTMENTS
| 2011 | ||||
|---|---|---|---|---|
| EUR thousand | Shareholdings in subsidiaries | Holdings in joint ventures | Available-for-sale investments | Total |
| Book value Jan. 1 | 146 230 | 234 | 146 464 | |
| Acquisitions | 120 | 1 609 | 1 729 | |
| Book value Dec. 31 | 146 350 | 1 609 | 234 | 148 193 |
| 2010 | ||||
| --- | --- | --- | --- | --- |
| EUR thousand | Shareholdings in subsidiaries | Holdings in joint ventures | Available-for-sale investments | Total |
| Book value Jan. 1 | 138 288 | 234 | 138 522 | |
| Additions | 1 161 | 1 161 | ||
| Acquisitions | 6 781 | 6 781 | ||
| Book value Dec. 31 | 146 230 | 234 | 146 464 |
15 INVENTORIES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Raw material | 2 097 | 1 886 |
| Work in progress | 3 606 | 3 394 |
| Finished products | 1 732 | 1 772 |
| Total | 7 435 | 7 053 |
16 RECEIVABLES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Non-current receivables | ||
| Interest-bearing | ||
| Loan receivables | 3 136 | 5 062 |
| Derivatives | 4 | 21 |
| Other receivables | 1 293 | 1 319 |
| Non-interest-bearing | ||
| Other receivables | 1 653 | 917 |
| Current receivables | ||
| Interest-bearing | ||
| Loan receivables | 16 911 | 17 704 |
| Derivatives | 351 | 155 |
| Non-interest-bearing | ||
| Trade receivables | 13 437 | 10 461 |
| Prepaid expenses and accrued income | 1 516 | 839 |
| Other receivables | 1 292 | 1 024 |
| Total | 39 593 | 37 504 |
RECEIVABLES FROM SUBSIDIARIES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Non-current receivables | ||
| Interest-bearing | ||
| Loan receivables | 3 136 | 5 062 |
| Derivatives | 4 | 21 |
| Non-interest-bearing | ||
| Other receivables | 1 653 | 917 |
| Current receivables | ||
| Interest-bearing | ||
| Loan receivables | 16 911 | 17 704 |
| Derivatives | 131 | 153 |
| Non-interest-bearing | ||
| Trade receivables | 13 209 | 10 234 |
| Prepaid expenses and accrued income | 351 | 103 |
| Other receivables | 1 292 | 1 024 |
| Total | 36 687 | 35 219 |
In addition to receivables from subsidiaries, prepaid expenses and accrued income consists of VAT and other tax receivables and other accrued income, but of which none is individually significant.
57
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
17 LIABILITIES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Non-current liabilities | ||
| Interest-bearing | ||
| Loans from financial institutions | 8 309 | 18 198 |
| Pension loans | 2 208 | 6 625 |
| Derivatives | 1 951 | 1 843 |
| Other non-current liabilities | 721 | 4 000 |
| Non-interest-bearing | ||
| Other liabilities | 1 383 | 1 544 |
| Current liabilities | ||
| Interest-bearing | ||
| Loans from financial institutions | 65 534 | 46 396 |
| Commercial paper program | 25 000 | 21 000 |
| Pension loans | 4 417 | 4 917 |
| Derivatives | 448 | 734 |
| Other current liabilities | 23 632 | 18 187 |
| Non-interest-bearing | ||
| Advances received | 11 | 26 |
| Trade payables | 25 152 | 22 251 |
| Accrued liabilities and deferred income | 3 740 | 2 436 |
| Other current liabilities | ||
| Total | 162 508 | 148 157 |
LIABILITIES TO SUBSIDIARIES
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Non-current liabilities | ||
| Interest-bearing | ||
| Other non-current liabilities | 721 | 4 000 |
| Current liabilities | ||
| Interest-bearing | ||
| Derivatives | 267 | 295 |
| Other non-current liabilities | 25 153 | 18 187 |
| Non-interest-bearing | ||
| Trade payables | 18 710 | 16 646 |
| Total | 44 852 | 35 128 |
All loans included in non-current liabilities mature in less than 5 years.
Accrued liabilities and deferred income consists of interests, personnel costs and prepaid income, of which none is individually significant.
18 LEASE CONTRACTS
PARENT COMPANY AS A LESSEE
Repayment Schedule of Non-Cancellable Operating Lease Commitments
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Within one year | 213 | 220 |
| 1–3 years | 51 | 52 |
| Total | 264 | 272 |
PARENT COMPANY AS A LESSOR
Rental Receivable Schedule of Non-Cancellable Operating Leases
| EUR thousand | 2011 | 2010 |
|---|---|---|
| Within one year | 11 | 10 |
| Total | 11 | 10 |
19 COMMITMENTS AND CONTINGENCIES
COMMITMENTS
| EUR thousand | 2011 | 2010 |
|---|---|---|
| On own behalf and on behalf of subsidiaries | ||
| Business mortgage | 16 055 | 16 055 |
| Guarantees | 7 622 | 2 329 |
| Total | 23 677 | 18 384 |
Commitments are to secure Group's loans from financial institutions and pension loans. The parent company has also guaranteed some rental agreements on behalf of subsidiaries.
Since Normark Sport Finland Oy, a 100% owned subsidiary of Rapala VMC Corporation, is the legal shareholder of the distribution joint venture with Shimano Inc., the parent company has guaranteed to Shimano the fulfillment of its subsidiary's obligations related to the joint venture.
58
Rapala Financial Statements 2011
Notes to Parent Company Financial Statements
| 20 | DERIVATIVES | |
|---|---|---|
| EUR thousand | 2011 | |
| 2010 | ||
| Currency derivatives with bank | ||
| Fair value | 220 | |
| Nominal value | 3 389 | |
| 8 981 | ||
| Currency derivatives with subsidiaries | ||
| Fair value | -132 | |
| Nominal value | 4 819 | |
| 11 554 | ||
| Interest rate derivatives | ||
| Fair value | -2 133 | |
| Nominal value | 67 886 | |
| 86 342 |
In 2011, currency derivatives had an income statement effect of EUR 324 thousand (2010: EUR 87 thousand). Change in fair value of interest rate derivative has been directly booked to fair value reserve in equity.
59
Rapala Financial Statements 2011
Risk Management
RISK MANAGEMENT
The objective of Rapala's risk management is to support the implementation of the Group's strategy and execution of business targets. This is done by monitoring and mitigating the related threats and risks and simultaneously identifying and managing opportunities.
Rapala's Approach to Risk Management
The Board evaluates the Group's financial, operational and strategic risk position regularly and establishes related policies and instructions to be implemented and coordinated by Group management. The daily risk management activities are primarily delegated to the management of business units.
The importance of risk management has increased as the Group has continued to expand its operations. Risk management continued to receive significant attention and new development initiatives by Group management also in 2011. In 2011 the focus of Group level risk management was on foreign exchange, liquidity, interest rate and hazard risks and further development of Group wide insurance programs and strategic supply chain management.
Below is a summary of key strategic, operational and financial risks as well as the main actions to mitigate these risks.
Strategic Risks
Sport fishing is one form of leisure hobby and the Group's products are competing against a wide range of other hobbies. The Group is promoting the attractiveness of sport fishing through active sales and marketing as well as brand management. By utilizing its unique research and development processes and resources, the Group is constantly developing new products to meet consumer needs and creating new needs for the consumers.
Brand portfolio and corporate reputation are among the most valuable intangible assets of the Group. Rapala is actively managing its brands and their identity and securing that the value of the brands or corporate reputation are not jeopardized or violated by any means. The Group's brands are also legally protected.
Consumers relate the Group's brands to high quality, unique fishing experience, special functional features and trustworthy distribution channel. Consumers are able to differentiate illegal copy products and they don't constitute a strategic threat for the Group. The Group protects vigorously its intellectual property rights and acts against illegal copiers and distributors.
Sport fishing is dependent on availability of fresh fishing waters for fishes to live and breed. Increased pollution and potential environmental catastrophes are growing concerns for the Group. Rapala is actively promoting initiatives to enhance environmental protection and increasing preparedness to comply with continuously tightening environmental regulations by taking steps to reduce the environmental impacts of its operations and products. The Group is also acting in the forefront to develop products, e.g. catch-and-release equipment, to comply with fish protection initiatives. For more details on environmental actions, see the section "Corporate Responsibility and Sustainable Development".
The Group faces competition in all markets where its products are sold. Due to the uniquely wide distribution network, the Group's geographical market risk is truly globally spread, evening out seasonal and local market fluctuations.
Rapala has a limited amount of global competitors. The biggest competitors have significant power in their home markets, but globally the geographical scope of their operations is narrower. Rapala's global distribution network is unique in the industry and difficult to imitate. Within each market, Rapala's competitors are often local fishing tackle producers operating with limited geographical scope and limited range of products.
In some countries, competition is created by fishing tackle retailers selling private label products. Cross-border internet sales are an increasing trend and could cause some price erosion. Established fishing tackle brands' expansion into new product categories is also creating competition in some product segments. The strength of the Group's product development and brand portfolio, as well as flexibility to serve different markets with market-specific products ranges, is essential in succeeding in market competition.
The Group's production is spread out in several countries. Some of these countries have higher political risks but simultaneously provide access to competitive labor cost. The Group monitors the country risks and costs and is actively seeking ways to manage the risk of rising production and distribution costs. The production risk was lowered in 2011 by establishing a new factory in Batam, Indonesia.
Manufacturing of sport fishing products is not dependent on any proprietary manufacturing technologies or patents. The Group's manufacturing units are actively monitoring the development of generic manufacturing technologies and considering different production applications.
Distribution of third party fishing and outdoor products creates a material part of the Group's sales. Due to the geographical spread and multitude of the existing and potential suppliers, the Group is not critically dependent on any single product or raw material supplier. Rapala's strategic partnerships with Shimano (for the distribution of mainly rods and reels) and Yao I (the producer of Group's Sufix fishing lines) have proven to be successes.
Rapala's customer base is geographically and quantitatively well diversified. Customers are mostly country-specific and not operating globally. The Group is not critically dependent on any single customer: even the biggest single customer represents less than 5% of the Group's net sales. Rapala is not largely engaged in direct consumer retailing. This is not considered to be a risk as consumer demand is largely driven by brand consciousness and alternative routes to market can be established when needed.
Rapala is expanding through organic growth as well as mergers and acquisitions. Careful target selection, proper due diligence process and post-merger integration have been and will be key issues in securing that the expansion initiatives are successful and in line with the Group's strategic objective of profitable growth.
The Board evaluates the Group's strategic risks annually as part of the strategy process and Group management continuously monitors changes in the business environment. Strategic risk management in local jurisdictions is delegated to the management of each business unit.
Operational and Hazard Risks
Even though the fishing tackle business has not traditionally been strongly influenced by the increased uncertainties and downturns in the general economic climate, these may influence at least for a short while, the sales of fishing tackle when retailers reduce their inventory levels and face financial challenges. Also quick and strong increases in living expenses, such as gasoline price, uncertainties concerning employment and governmental austerity measures may temporarily affect consumer spending also in the fishing tackle business. However the underlying consumer demand has historically proven to be fairly solid.
The underlying consumer demand for the Group's products is seasonal and also impacted by unforeseeable factors such as weather. To offset the seasonality, the Group is engaged in production and distribution of winter fishing and winter sports equipment. To mitigate the effects of seasonality, the Group has also expanded its own distribution network to the southern hemisphere and is developing its production planning to better respond to market demand.
Due to the seasonality in demand, the Group's product shipments concentrate annually to relatively short time periods, where supply problems could endanger the sales of the season. Similarly, lower than expected sales volumes may lead to excess inventories, as it is difficult to cancel committed orders within short notice.
There is a high level of dependency between the Group's manufacturing and distribution units and interruption at earlier stage of the supply chain could have knock-on effects throughout the rest of the organization. The importance of proper order forecasting and production planning has increased. The related risks are managed with high level of cooperation between manufacturing and distribution units, safety stocks and extensive insurance coverage. The Group-wide supply chain and logistics initiatives continued in 2011 and mitigated these risks relating to operational efficiencies.
The Group's sales prices are primarily fixed annually or bi-annually, normally before each season. Sudden changes in raw material prices or foreign exchange rates may have significant impact on costs of some products. The Group aims to push increases in costs to the sales prices immediately or during a period of time. The Group's
Rapala Financial Statements 2011
Risk Management
market risks and mitigation actions are analyzed in more detail in the section "Financial Risks" and in note 22 to the consolidated financial statements.
In respect of manufacturing activities, the Group is not critically dependent on any single external production factor supplier. The Group uses several subcontractors in China, but the Group is not as such critically dependent on any of these subcontractors. This risk has been further reduced as the new production facility in Indonesia has taken over some production previously done by Chinese subcontractors. Availability of competent production labor is essential and the Group aims to maintain good employer reputation and labor relations.
There are significant dependencies between the Group's manufacturing units, which could cause supply problems e.g. in case of fire or other hazard. Such hazard could lead to property damages but also to business interruption losses throughout the supply chain. Therefore, Rapala has increased the emphasis of hazard risk management. The Group has together with its insurance company continued to conduct annually several hazard prevention reviews to Group's key locations. Group management has also continued to build risk awareness throughout the organization.
The Group is, with assistance of its insurance broker, further developing the global insurance programs, which cover most of the Group companies. Global insurance policies, which take into account the Group's interdependency, are in place for property damage and business interruption, transportation as well as general and product liabilities.
The Board evaluates the Group's operational risks at least once a year as part of operational plans and budgets. Group management monitors and coordinates the continuous management of operational risks, which is the responsibility of the management of each business unit.
Financial Risks
The Group's financial risks consist of market risks, credit and default risks and liquidity risks. The Board evaluates financial risks several times during the year and Group management monitors and manages them continuously. Financial risks are discussed in detail, as required by IFRS 7, in note 22 of the consolidated financial statements.
61
Rapala Financial Statements 2011
Corporate Responsibility and Sustainable Development
CORPORATE RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT
Rapala recognizes its responsibility in relation to the shareholders, clients, employees and society as well as those with whom the Group does business. Rapala is committed to carry on business in an ethically correct manner and according to local or international legislation and regulations. The mission of Rapala is to provide a positive and strong human experience in the nature and especially in sport fishing and, therefore, the Group lives from and promotes a clean and healthy environment.
Group Strategy and Management Approach to Sustainable Development
Rapala's strategic objective is profitable growth. This strategy is founded on three sub-categories and established strengths: a leading global distribution network, a strong brand portfolio with several leading brands and a unique manufacturing, sourcing and R&D platform.
The Group's fishing tackle manufacturing and sourcing platform consists of Europe's largest production facilities for lures with specialized factories in Finland, Estonia and Russia, manufacturing operations for lures and accessories in China, a treble hook production facility in France, newly established lure and hook manufacturing operations in Indonesia, knife manufacturing in Finland and carp bait manufacturing in the UK. The Group has a well established sourcing unit in Taiwan managing the high quality but low cost external sourcing of the products not considered feasible to manufacture in the Group's own manufacturing units.
The Group's own personnel operate in 37 countries and its products are sold to over 100 countries. Rapala has been in the lure business, which was the first product category for the Group, for some 75 years. The VMC hook operations acquired in 2000 have over 100 years of experience. Marttiini knife manufacturing, acquired in 2005, has operated for more than 80 years already. Many products still offered by the Group, have a life-cycle of several dozens of years. Almost all of the Group's products relate to outdoor life and sports with a close connection to nature.
In its operations, Rapala takes into account its personnel, the local societies and environment as well as health and safety issues. All Group companies worldwide co-operate transparently, honestly and responsibly with authorities, local societies and other relevant parties in economic, social and environmental matters.
Economic Responsibility
Rapala's purpose is to create value for its stakeholders including customers, personnel, suppliers and subcontractors as well as shareholders and investors who are interested in the Group's financial performance. The financial success provides the Group companies with the resources and possibilities to develop their operations in a responsible and sustainable way also in the future.
Rapala focuses on profitable growth to increase shareholder value. This objective is achieved by providing customers with high-quality products and service, creating long-lasting partnerships with suppliers, subcontractors and customers, and offering employees competitive compensation and good working conditions. With operations in 37 countries worldwide, Rapala also influences and creates well-being for the local societies. The Group's value added is distributed to these different stakeholders as shown in the graph below.
Rapala creates value for its customers by offering its products and services worldwide. By market areas, North America contributed 25% (27%), Nordic countries 22% (24%), Rest of Europe 39% (36%) and Rest of the World 14% (13%) to the Group's total net sales. See Note 2 to the consolidated financial statements for detailed geographical information.
In 2011, Group companies paid interests of EUR 3.6 million (EUR 3.3 million) to financial institutions and corporate income taxes of EUR 8.2 million (EUR 8.8 million) to tax authorities worldwide. As presented in the graph below, the shareholders were paid dividends of total EUR 11.8 million in 2011, of which EUR 9.0 million to the shareholders of the parent company (EUR 7.4 million to the shareholders of the parent company).
Social Responsibility
Importance of Competent and Motivated Personnel
With some 2000 employees in 37 countries worldwide, Rapala recognizes the importance of competent and well-motivated personnel. Rapala appreciates the continuous development of its employees who have possibilities to both on-the-job learning and special training or education. The Group's strategy for profitable growth requires that the management systems, the group-wide knowledge sharing and the everyday practices are developed systematically in all Group companies.
Personnel coaching and instructions together with good working conditions and appropriate protective equipment are important in minimizing occupational health and safety risks. The human resources management practices vary between the Group companies depending on the nature of the business units' operations in manufacturing, distribution, research and development and administration, and, to some extent, between different geographical areas due to the different regulations and local practices.
One of the Group's key values in the corporate culture is entrepreneurship. Rapala respects diversity and equal opportunities of all employees irrespective of color, nationality, gender, age or religion. Rapala employs men (49%)
Distribution of value added
- Employees 51%
- Public sector 20%
-
Creditors 3%
-
Shareholders 12%
- Business development and other 14%
Dividends to shareholders
Percentages of men & women
- Men 49%
- Women 51%
Ages of personnel
- Under 29 years 25%
- 30–49 years 57%
- Over 50 years 18%
Rapala Financial Statements 2011
Corporate Responsibility and Sustainable Development
and women (51%) of all ages as shown in the graph on previous page. Rapala's employees represent tens of different nationalities worldwide. There is no use of child labor in the Group's manufacturing or other operations. At the end of 2011, 54% (61%) of the employees worked in manufacturing or R&D, 18% (16%) in administration and 29% (23%) in distribution.
The Group's employee benefit expenses of EUR 62.4 million (EUR 59.1 million) represent 22% (22%) of the consolidated net sales. The employee benefits include wages, salaries, pension and other social security costs as well as other performance incentives. The CEO and senior management participate in the Group's senior management bonus scheme encouraging the achievement of the Group's targets and performance improvement. More information on top management remuneration can be found on note 28 to the consolidated financial statements.
In order to secure Group's profitability and enhanced efficiencies and quality, Group occasionally carries out performance improvement initiatives, which may result in personnel reductions. When carrying out such initiatives, Rapala strives to act responsibly and in accordance with local legislation and practices as well as good human resources management principles.
Supporting Local Societies and Human Rights
When operating in 37 countries and expanding its business into new markets, Rapala supports the sustainable development of local societies and the protection of human rights. Group companies worldwide contribute to many fundraising campaigns of local societies, and, for example, donate fishing equipment as prizes and encouragement for fishing competitions and environmental cleaning projects organized by non-profit organizations.
Rapala was a founder member of the European Fishing Tackle Trade Association (EFTTA) which was established in London in 1981, as an international, independent association to serve the European fishing tackle trade by campaigning to promote sport fishing, environmental issues and international business. Rapala has its own representative in EFTTA's Board. EFTTA supports annually several environmental and training projects across Europe.
For more than a decade already, Rapala's Swedish subsidiary has been the sole supporting partner to one of the world's most professional sport fishing educational institute, the Sport Fishing Academy (SFA) in Sweden. SFA has educated more than 800 dedicated and advanced sport fishing instructors and guides, marine conservationists and specialists to the international markets. Rapala provides the students and their teachers with fishing tackle and with business and fishing expertise. SFA has expanded also to hunting and each year Rapala awards four scholarships to the academy's fishing and hunting branches.
Personnel by geographical areas
Personnel by functions
Rapala's South-African subsidiary has been participating in fundraising of Eco-Care Trust, which is a nongovernmental organization focused on the conservation of South Africa's natural water sources and ecosystems. The subsidiary has also for a couple of years conducted several seminars and workshops under the name "Rapala Fishing for the Future" aimed at educating anglers on fishing, fisheries, catch and release and how to enjoy the sport more and be more aware of the environment.
With two well-known local non-profit organizations, Rapala has established and sponsored a fish farm in North-West Tanzania for three years. The objective of the project has been to help the local population to have access to a steady supply of protein-rich food as well as a regular employment and long-term income to all those involved in the activity.
The launching phase of the project is complete, and the fish-farming project is now an autonomous, profitable and financially balanced project, and the families are able to continue benefiting from it without any further help. Additionally, Rapala has helped to establish a fish farm that will act as a reference for many other families to copy in this extremely poor region of Tanzania. Fish farming also relieves the pressure of over-fishing on Lake Victoria and improves Lake Victoria's ecology and wealth.
In the UK, Rapala has, for example, participated in several projects to provide teaching of fishing and environmental awareness for children and also supported a fishing festival for disabled people.
Also in the USA, Rapala has provided products and information to many different local elementary, middle and high schools for their outdoor curriculums and sponsored tournaments and contests.
In Sortavala, Russia, Rapala supports the local kindergarten and elementary school encouraging the children to educate and develop themselves.
High-Quality Products and Services
Today Rapala's distribution network covers six continents and is locally present in 34 different countries. The network allows to satisfy the specific needs of local retailers and consumers and thereby to build strong local partnerships with customers who range from smallest fishing tackle shops to world's largest retailers. It allows the Group to introduce new products efficiently and effectively to the market and also acts as a direct channel for customer input, which is valuable in product development.
Rapala's research and development is globally well known and respected for its capability to continuously bring new high-quality products with new and exceptional features to meet the fishermen's demanding expectations.
As a proof of the quality and continuous development Rapala holds world record of catching world record fish. With Rapala, Storm, Sufix, and VMC products the Group holds total of 903 International Game Fish Association (IGFA) world records, which is a clear proof of the quality and continuous development of the Group's products.
Rapala's research and development expenses totaled to EUR 2.1 million in 2011 (EUR 2.1 million) and represent 12% (10%) of the Group's net profit for the period.
Environmental Responsibility
Rapala's Approach to Environmental Affairs
Healthy and clean environment is important for Rapala for the reason that its sport fishing, hunting and outdoor businesses originate from, and are based on, human experience in the nature. Industrial and business activities inevitably create various impacts on the environment that the Group is trying to manage in a way that also future generations of man would be able to go and experience the nature using Rapala's products. In addition, the Group promotes environmental issues beyond its own operations.
The use of raw materials, airborne emissions and waste are the most significant environmental impacts of the Group. Rapala is improving its environmental performance through continuous development efforts, by increasing awareness and actively developing processes to replace hazardous materials and decreasing the use of energy and increasing the effectiveness in the use of raw materials.
63
Rapala Financial Statements 2011
Corporate Responsibility and Sustainable Development
The Group aims to develop its products, manufacturing processes and operating methods so that their environmental impact throughout the product's lifecycle will remain as small as possible. This process is long-lasting and, meanwhile, changes in production volumes and product mix may have greater short-term effects than the development trend as such.
Less than 50% of the products sold by Rapala are produced in the Group's own manufacturing facilities. Rapala's manufacturing sites develop their environmental operations in accordance with local legislation and regulations.
Possible safety risks in manufacturing operations are caused by handling of flammable and toxic raw materials during the production process.
More than one third of Rapala's sales come from selling and distributing outsourced and third party products. The most significant environmental impacts of these products, while in Group ownership, are related to transportation and storage of goods.
Rapala and its Group companies operate in line with the local environmental laws and regulations. Ways of conducting business, including internal and external business processes, are continuously developed keeping in mind the environmental aspects and the principles of sustainable development.
Several Group companies are members of local and national environmental organizations. They take part in the funding of these organizations, providing education on clean and healthy waters and other environmental issues and participating in clean-up actions.
The following is a summary of practical actions and measurements the Group is taking to minimize the negative impacts of its business to environment and actions to improve environmental affairs in areas where it operates.
Production Processes
In Rapala's own production, in order to minimize the waste in painting, the lures are electronically engaged for better adherence of the paint. With this advanced painting technique, also usage and waste of lacquer is minimized.
Production waste is separated into energy, plastics, bio materials, metals, carton, paper waste and hazardous materials to promote and increase recycling. In addition, some of the Group's factories have replaced oil as an energy source with gas, which is more environmental friendly. In Finland and partly also in China, paint has partly been changed from soluble dies to water-dilutable to reduce VOC emissions. The long-term plan is to develop qualities of current paint to fully replace soluble dies with water-dilutable paints.
VOC Emissions
CO₂ Emissions
Raw Materials
Hard-body lures manufactured by the Group are made of balsa, apache and plastics. An important part of the wood is sourced from the registered farms that respect the local law and regulations and sustainable development rules in farming and forestry. The Group's research and development department continuously seeks for possibilities to replace currently used raw materials with more environmentally friendly substitutes that do not decrease the desired features of the products. For example, some metal lures contain led, but to the extent functionally feasible, led is being replaced with other metals such as zinc or tungsten. The Group is also working in cooperation with external suppliers in order to find more environmentally friendly raw materials.
Products
Most of the Group products are long-lasting, kept and used by consumers for years and even decades. All of the wooden parts of the Group products are biodegradable and most of the metal used in the Group products can be recycled. The biggest environmental challenge has been the plastic products but the Group has successfully progressed in developing and replacing certain models with biodegradable plastics. Even if some of the products may end up in the water or nature during e.g. the sport fishing activities, the important challenge is to get the consumers to make their unused or damaged products available for recycling.
Also, emphasis has been given on sustainable packaging. More efficient packaging, for example, reducing the package size, increasing the count in the inner packs and using recyclable packages saves energy in production and transportation in addition to creating less waste.
Transportation and Storage of Goods
To reduce the environmental impacts of transportation, the Group aims to maximize sea transportation and minimize air transportation between the continents, from the factories to distribution units. The Group also aims to consolidate the shipments so that small quantities will not be shipped separately. The storage of goods does not have much impact on environment other than use of energy for heating and lighting of the premises. The Group also optimizes its production to minimize the shipping volumes between factories and distribution companies and manages inventories to minimize the volume of goods stored.
Water consumption
Waste
Rapala Financial Statements 2011
Corporate Responsibility and Sustainable Development
Special Issues and Actions in 2011
In 2011, Rapala has continued to develop and increased the reporting and follow-up of environmental affairs. More work is still needed to further develop these indicators and to standardize the measurement but especially to implement new ways of working to ensure long-term improvement in the underlying environmental effects.
Environmental R&D work especially on biodegradable plastics proceeded in 2011. The first biodegradable products under Trigger X brand were launched already in 2008 and have been well received by the markets. New products are continuously being developed to expand the category.
In 2011 Rapala introduced the new Eco Wear Reflection waders, which are the first waders in the trade manufactured with a unique, ecological process from DuPont(TM) that significantly reduces their environmental footprint and the dependence on petroleum. More products will be introduced under Rapala Eco Wear brand with focus in its core values: environment, innovation and sustainable development.
In 2011, the Group companies participated in several countries in fisheries restoration and recreational fishing promotion campaigns. In addition, the Group supported cleaning of lakes, rivers and sea shores as well as environmental and fishing related education in many countries.
In Finland Rapala supported financially an initiative to promote best practices of sustainable recreational fishing for landlocked salmon. Additionally, at the end of the year 2011 Rapala launched a new fund to support small scale, volunteer-based fisheries improvement projects and studies in Finland. First grants will be issued for chosen projects in 2012.
In the USA, Rapala continued the participation in a project organized by Northwest Sportfishing Industry Association (NSIA) to support the efforts to preserve and restore the fisheries environment. Through the efforts of NSIA, fisheries that had been closed to fishing for decades are now open due to a mass marking program of all Columbia River hatchery salmon and steelhead. NSIA has also convinced the Columbia River hydroelectric owners to increase the spill over the dams to further assist the down river migration of salmon and steelhead smolts, which has significantly increased their survival rates.
In Canada Rapala is one of the founding financial supporters of a volunteer fish hatchery called Ringwood Hatchery. In 2011 the hatchery released over 500 000 Chinook salmon into the Great Lakes.
No material non-compliance, environmental accidents or hazards occurred in 2011.
Environmental Performance in 2011
Rapala monitors the environmental performance of its own manufacturing operations globally. Depending on the level of use of outsourcing partners in manufacturing the environmental measures of Group's direct manufacturing operations may fluctuate from one year to another as shown in the presented graphs.
The most significant emissions for the Group are the volatile organic compounds (VOC) and carbon dioxides $(\mathrm{CO}{2})$. Rapala's VOC emissions are calculated based on materials used in production, and carbon dioxides are calculated based on energy purchased and fuel used. In 2011, Rapala's VOC emissions decreased from last year and were 139 (176) tons and carbon dioxide emissions were 17 (15) thousand tons. VOC emissions originate mainly from different types of solvent used in conjunction with painting operations. Majority of the $\mathrm{CO}{2}$ emissions are created indirectly when energy produced elsewhere is purchased and consumed by the Group factories. The main reason for the decrease in $\mathrm{CO}_{2}$ emissions during the past few years is that in some factories the use of heating oil has been reduced and replaced with natural gas.
Rapala's operations generate e.g. metal, wood, plastics, cardboard and municipal waste. Significant part of the waste is biodegradable like wood or recyclable like metals. Waste is recycled in compliance with local regulations and practices.
During 2011 the waste handling processes have been improved in Rapala's factory in Vaakoy, Finland. All the waste that can't be recycled can still be utilized and used as energy fraction towards energy production. In 2011, Rapala's manufacturing operations generated 980 tons (840 tons) of waste of which 143 tons (181 tons) were hazardous waste, which is processed by disposal facilities dedicated for hazardous waste.
Rapala's manufacturing is not very energy-intensive but energy consumption is an environmental aspect measured by the Group. The majority of the energy is consumed in the form of electricity, natural gas and district heat. Fuel oil is used in some units for reserve and additional energy. In 2011, Rapala's total energy consumption was 68 (69) TJ. The majority of this is electricity. This amount does not include the fuels used in transportation and vehicles.
Rapala manufacturing units do not use much water in their processes. Most of the use is for sanitation and catering purposes. In 2011, the water consumption was 66 000 (58 000) m³.
In 2011, the Group's environmental expenses were some EUR 0.2 million (EUR 0.2 million) and environmental investments were some EUR 0.1 million (EUR 0.2 million).
65
Rapala Financial Statements 2011
Shares and Shareholders
SHARES AND SHAREHOLDERS
Rapala's shares have been traded on the NASDAQ OMX Helsinki since 1998. In 2011, the shares traded between EUR 4.86 and 7.38 with an average price of EUR 6.23.
Shares and Voting Rights
On December 31, 2011, the share capital fully paid and reported in the Trade Register was EUR 3.6 million and the total number of shares was 39 468 449 (2010: 39 468 449). The book value of a share is EUR 0.09. Each share is entitled to one vote.
Board's Authorizations
Based on authorization given by the Annual General Meeting (AGM) in April 2007, the Board can decide to issue shares through issuance of shares, options or special rights entitling to shares in one or more issues. The number of new shares to be issued including the shares to be obtained under options or special rights shall be no more than 10 000 000 shares. This authorization includes the right for the Board to resolve on all terms and conditions of the issuance of new shares, options and special rights entitling to shares, including issuance in deviation from the shareholders' preemptive rights. This authorization is in force for a period of 5 years from the resolution by the AGM.
The Board is also authorized to resolve to repurchase a maximum of 2 000 000 shares by using funds in the unrestricted equity. This amount of shares corresponds to less than 10% of all shares of the Company. Shares can be repurchased by deviating from the proportion in which the company's shareholders own shares in the company. The shares will be repurchased through public trading arranged by NASDAQ OMX Helsinki at the market price of the acquisition date. The shares will be acquired and paid in pursuance of the rules of NASDAQ OMX Helsinki and applicable rules regarding the payment period and other terms of the payment. This authorization is effective until the end of the next AGM.
Own Shares
On November 17, 2011, the Board decided to continue buying back own shares in accordance with the authorization granted by the AGM on April 5, 2011. In 2011 a total of 11 859 shares were repurchased at the average price of EUR 5.46. At the end of December 2011, Rapala held 552 057 own shares, representing 1.4% of the total number and the total voting rights of Rapala shares. The average share price of all repurchased own shares held by Rapala was EUR 4.73.
Changes in Share Capital
There were no changes in the share capital in 2011.
Shareholder Register
The shares of the Company belong to the Book Entry Securities System. Shareholders should notify the particular register holding their Book Entry Account about changes in address or account numbers for payment of dividends and other matters related to ownership of shares.
Share-Based Incentive Plans
The Group did not have any share-based payment programs in place on December 31, 2011. The synthetic option program ended on March 31, 2011, and a reward totaling to EUR 0.3 million was disbursed during the second quarter.
The share-based program was in place for senior and middle management (non-executive Board members have not participated in any share based remuneration programs).
For more details on share-based payments see note 29 in the consolidated financial statements.
Management Shareholding
On December 31, 2011, the members of the Board and the Executive Committee held directly a total of 3 000 Company shares and corresponding to 0.0% of all shares and voting rights. Details of management shareholdings are given on pages 68–69.
Trading and Performance of the Company's Shares
The Company share (RAP1V) is quoted on the NASDAQ OMX Helsinki. The 2011 closing price on December 31 was EUR 5.65. The highest price in 2011 was EUR 7.38, the lowest price EUR 4.86 and the average price EUR 6.23. The share price decreased 17.6% in 2011, while during the same period, the OMX Nordic Mid Cap price index decreased 24.7%. A total of 6 479 735 Rapala shares were traded in 2011. This represents 16.4% of all shares on December 31, 2011.
At the end of 2011, the market capitalization of all outstanding shares, excluding own shares, was EUR 219.9 million. Earnings per share (basic) were EUR 0.36 (EUR 0.46 in 2010). For more share related key figures see page 14.
Dividend
The Board proposes to the AGM that a dividend of EUR 0.23 per share will be paid for the financial year 2011.
66
Rapala Financial Statements 2011
Shares and Shareholders
PRINCIPAL SHAREHOLDERS ON DECEMBER 31, 2011*
| Shareholders | Number of shares | % |
|---|---|---|
| Viellard Migeon & Cie | 11 809 949 | 29.9 |
| Sofina S.A. | 7 500 000 | 19.0 |
| Odin Norden I-II c/o Odin Forvaltnings AS | 1 499 372 | 3.8 |
| Ilmarinen pension insurance company | 1 490 424 | 3.8 |
| Odin Finland I-II | 1 399 754 | 3.5 |
| The State Pension Fund | 1 290 000 | 3.3 |
| Nordea Nordic Small Cap Fund | 1 128 527 | 2.9 |
| Mutual Insurance Company Pension Fennia | 929 000 | 2.4 |
| Shimano Singapore Private Limited | 889 680 | 2.3 |
| OP-Finland Small Firms Fund | 783 000 | 2.0 |
| Administrative registrations | 4 100 008 | 10.4 |
| Other shareholders total | 6 648 735 | 15.4 |
| Total number of shares | 39 468 449 | 100 |
SHAREHOLDERS BY CATEGORY ON DECEMBER 31, 2011*
| Shareholders | Number of shares | % |
|---|---|---|
| Private and public corporations | 1 581 306 | 4.0 |
| Financial and insurance companies | 5 166 449 | 13.1 |
| Public institutions | 4 108 081 | 10.4 |
| Non-profit organizations | 85 468 | 0.2 |
| Individuals | 1 183 647 | 3.0 |
| International shareholders | 23 243 490 | 58.9 |
| Administrative registrations | 4 100 008 | 10.4 |
| Total | 39 468 449 | 100 |
DISTRIBUTION OF SHAREHOLDING ON DECEMBER 31, 2011*
| Number of shares | Number of shareholders | % | Total shares | % |
|---|---|---|---|---|
| 1–100 | 690 | 33.5 | 48 165 | 0.1 |
| 101–500 | 862 | 41.9 | 237 448 | 0.6 |
| 501–1 000 | 255 | 12.4 | 212 636 | 0.5 |
| 1 001–10 000 | 192 | 9.3 | 597 903 | 1.5 |
| 10 001–1 000 000 | 50 | 2.4 | 8 439 615 | 21.4 |
| 1 000 001– | 9 | 0.4 | 29 932 682 | 75.8 |
| Total | 2 058 | 100 | 39 468 449 | 100 |
- Number of shares includes 552 057 own shares held by the parent company.
Share price development in 2007–2011, EUR
Share price in 2011, %
Rapala Financial Statements 2011
Board of Directors and Management
BOARD OF DIRECTORS AND MANAGEMENT
BOARD OF DIRECTORS
Emmanuel Viellard
Chairman
Chairman of the Rapala Board since 2005
President of Viellard Migeon & Cie
Vice Chairman and Executive Vice President of Lisi Industries
B.A., CPA
Year of birth: 1963
Shareholding and options*: -
Jorma Kasslin
President and Chief Executive Officer
Rapala Board member since 1998
M.Sc. (Eng.)
Year of birth: 1953
Shareholding and options*: -
Eero Makkonen
Rapala Board member since 1998
Chairman of the Rapala Board 1999-2005
B.Sc. (Eng.)
Year of birth: 1946
Shareholding and options*: -
Jan-Henrik Schauman
Rapala Board member since 1999
M.Sc. (Econ.). MBA
Year of birth: 1945
Shareholding and options*: -
Christophe Viellard
Rapala Board member since 2000
Chairman of Viellard Migeon & Cie
Diploma ESCP
Year of birth: 1942
Shareholding and options*: -
Marc Speeckaert
Rapala Board member since 2005
MBA
Year of birth: 1951
Managing Director of Sofina
Shareholding and options*: -
Isabelle de Bardies
Rapala Board member since 2011
Degree from the ESCP
Year of birth 1961
Shareholding and options*: -
King Ming (William) Ng was a member of the board from December 12, 2001 until April 5, 2011.
*Shareholdings and options on December 31, 2011.
68
Rapala Financial Statements 2011
Board of Directors and Management
EXECUTIVE COMMITTEE
Jorma Kasslin
President and Chief Executive Officer (CEO)
Rapala Executive Committee member since 1998
See information in section 'Board of Directors'
Jussi Ristimäki
Chief Financial Officer (CFO)
Rapala Executive Committee member since 2010
Shareholding and options*: -
King Ming (William) Ng**
Head of Chinese Manufacturing Operations and Hong Kong Office
Rapala Executive Committee member since 2001
Shareholding and options*: -
Olli Aho
Company Counsel, Secretary of the Board and Investor Relations
Company Counsel, Secretary of the Board and Investor Relations
Rapala Executive Committee member since 1998
Shareholding and options*: -
Juhani Pehkonen
Head of Lure Business
Rapala Executive Committee member since 1998
Shareholding and options*: -
Stanislas de Castelnau
Head of Fishing Hook Business
Rapala Executive Committee member since 2002
Shareholding and options*: -
Tom Mackin
President of Rapala USA
Rapala Executive Committee member since 2007
Shareholding*: 3 000
Options*:
Lars Ollberg
Head of Fishing Line and Accessory Business
Rapala Executive Committee member since 2008
Shareholding and options*: -
*Shareholdings and options on December 31, 2011.
**Mr. King Ming (William) Ng resigned from executive committee on February 8, 2012.
OTHER GROUP KEY MANAGERS
LURES
Jari Kokkonen, Sales
Teemu Mäkelä, Marketing – Lures, Fishing Lines and Accessories
Jukka Sairanen, Research & Development – Rapala
Arto Nygren, Vääksy Factory
Juha Siltala, Pärnu Factory
Marina Sharapova, Sortavala Factory
Björn Floberghagen, Willtech Fishing Products
Kevin Au, Willtech Lures Factory
Victor Yan, Willtech Administration
Brian Wong, Willtech Supply Chain
Juha Siirtola, Batam Project
Marcus Twidale, Dynamite Baits Factory
FISHING HOOKS
Cyril Alexeline, Sales and Marketing (Europe)
Cyrille Mathieu, Sales and Marketing (USA)
Rodolphe Jacques, Asian operations
FISHING ACCESSORIES
Päivi Ohvo, Marttiini Knives
Jeremy Grayson, Willtech Accessories
Peter Nordlander, Sourcing
OTHER PRODUCTS
Juhani Eskelinen, Peltonen Cross Country Skis
Jukka Roikonen, KL-Teho Parts and Products
ADMINISTRATION
Esko Jäntti, Group Funding and Vääksy Factory
Anu Koskinen, Group Reporting
Anna Vitikainen, Group Reporting
Nina Serlachius, Group Supply Chain Management
Jan-Elof Cavander, Group Risk Management and Finance Projects
DISTRIBUTION
Gregg Wollner, USA
Nancy Adelmann, USA
John Newton, Canada
Philippe Guiga, France
Jean-Philippe Nicolle, France and VMC
Janne Paukkunen, Spain, Portugal, Mexico and Brazil
Saku Kulmala, Finland
Matts Baum, Sweden
Nils Larsen, Denmark
Morten Fredriksen, Norway and Iceland
Craig Brew, UK
Pete Chandler, UK
Thomas Brumann, Switzerland
Victor Skvortsov, Russia, Belarus, Kazakhstan
Valentin Savva, Belarus
Mikko Häikiö, Czech, Slovakia, Poland and Ukraine
Mirek Adamski, Poland
Roman Sereda, Ukraine
Daniel Sirucka, Czech Republic
Vitas Miskinia, Baltic countries
Mati Banhard, Estonia
Remigijus Zubavicius, Lithuania
Hannu Murtonen, Hungary
Dorel Tomescu, Romania
Manabu Kimoto, Japan
Leong Loke, Malaysia, Thailand and Indonesia
Jay Choi, South Korea
Aku Valta, Australia and Southeast Asia
Grant Pledger, South Africa
Mark Pledger, South Africa