Notes to the interim condensed consolidated financial statements

1 Reporting entity

The Tecan Group is a global provider of laboratory instruments and solutions in biopharmaceuticals, forensics and clinical diagnostics. The Group specializes in the development, production and distribution of automation solutions for laboratories in the life sciences sector. Its clients include pharmaceutical and biotechno­logy companies, university research departments, forensic and diagnostic laboratories. As an original equipment manufacturer, the Group also develops and manufactures OEM instruments and components that are then distributed by partner companies. Founded in Switzerland in 1980, the Group has manufacturing, research and development sites in both Europe and North America and maintains a sales and service network in 52 countries.  

The ultimate parent company is Tecan Group Ltd., a limited liabi­lity company incorporated in Switzerland, whose shares are publicly traded. Tecan Group Ltd.’s registered office is located at Seestrasse 103, 8708 Männedorf, Switzerland.

2 Basis of preparation and significant accounting policies

2.1 Basis of preparation

These unaudited financial statements are the interim condensed consolidated financial statements of Tecan Group Ltd. and its subsidiaries (together referred to as the “Group”) for the six-month period ending June 30, 2014. The financial statements are prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” and should be read in conjunction with the Group’s annual financial statements as they provide an update of previously reported information. The interim condensed consolidated financial statements were authorized for issue on August 11, 2014.

The preparation of these interim condensed consolidated financial statements requires management to make assumptions and estimates that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of these interim financial statements. If in the future such assumptions and estimates deviate from the actual circumstances, the original assumptions and estimates will be modified as appropriate in the period in which the circumstances change.

The Group operates in industries where significant seasonal or cyclical variations in total sales are not experienced during the financial year. 

Income tax expense is recognized based on the best estimate of the weighted average annual income tax rate expected for the full financial year.

2.2 Introduction of new and revised/amended accounting standards and interpretations

The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ending December 31, 2013, except for the adoption of the following new or revised/amended standards and interpretations, effective as from January 1, 2014: 

Standard/interpretation1

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) 

IAS 32 amended ‘Financial Instruments: Presentation’ – 

Offsetting Financial Assets and Liabilities 

IAS 39 amended ‘Financial Instruments: Recognition and 

Measurement’ – Novation of Derivatives and Continuation of Hedge 

Accounting 

IIFRIC 21 ‘Levies’

1 IAS = International Accounting Standards, IFRS = International Financial Reporting Standards, IFRIC = Interpretations as by the IFRS Interpretations Committee (formerly International Financial Reporting Interpretations Committee)


The adoption of these new or revised/amended standards and interpretations did not result in substantial changes to the Group’s accounting policies.

2.3 New standards and interpretations not yet applied

The following new and revised/amended standards and interpretations have been issued, but are not yet effective and are not applied early in these interim condensed consolidated financial statements: 

 

Standard/interpretation1

Effective date 
for the Group

IAS 19 amended ‘Employee Benefits’ – 

Defined Benefit Plans: Employee Contributions

Reporting year 2015

Annual Improvements to IFRSs 2010 – 2012 Cycle

Reporting year 2015

Annual improvements to IFRSs 2011 – 2013 Cycle

Reporting year 2015

IFRS 11 amended ‘Joint Arrangements’ – 

Accounting for Acquisitions of Interests in Joint Operations

Reporting year 2016

IAS 16 amended ‘Property, Plant and Equipment’ and IAS 38 amended ‘Intangible Assets’ – Clarification of Acceptable Methods of 

Depreciation and Amortization

Reporting year 2016

IFRS 15 ‘Revenue from Contracts with 

Customers’

Reporting year 2017

IFRS 9 ‘Financial Instruments’

Not yet determined

1 IAS = International Accounting Standards, IFRS = International Financial Reporting Standards, IFRIC = Interpretations as by the IFRS Interpretations Committee (formerly International Financial Reporting Interpretations Committee)


These changes are not expected to have a significant impact on the consolidated financial statements except for IFRS 15 ‘Revenue from Contracts with Customers’. However, a comprehensive and profound analysis is yet to be performed.

3 Change in scope of consolidation

There has been no change in the scope of the consolidation since December 31, 2013.

4 Interim segment information

4.1 Segment information by business segments

 

Life Sciences Business

Partnering Business

Corporate /consolidation

Group

January to June, CHF 1,000 

2013 

2014

2013

2014

2013

2014

2013

2014

Sales third

 97,605 

 100,920 

 84,205 

 71,082 

-

-

 181,810 

 172,002 

Intersegment sales1

 6,382 

 4,948 

 1,426 

 1,584 

 (7,808) 

 (6,532) 

-

-

Total sales

 103,987 

 105,868 

 85,631 

 72,666 

 (7,808) 

 (6,532) 

 181,810 

 172,002 

 

 

 

 

 

 

 

 

 

Operating profit 

 1,083 

 14,825 

 25,017 

 11,277 

 (2,978) 

 (3,782) 

 23,122 

 22,320 

 

 

 

 

 

 

 

 

 

Depreciation and amortization2

 (3,325) 

 (2,804) 

 (1,835) 

 (1,713) 

 - 

-

 (5,160) 

 (4,517) 

Impairment losses

-

-

-

-

-

-

-

-

1 Intersegment transactions are conducted at arm’s length. 

2 No significant non-cash items other than depreciation of property, plant and equipment and amortization of intangible assets were incurred.

January to June, CHF1,000 

2013 

2014

Reconciliation of reportable segment sales

 

 

  Total sales for reportable segments

 189,618 

 178,534 

  Elimination of intersegment sales

 (7,808) 

 (6,532) 

  Total consolidated sales 

 181,810 

 172,002 

 

 

 

Reconciliation of reportable segment profit

 

 

  Total operating profit for reportable segments

 26,100 

 26,102 

  Unallocated costs (business development, investor relations

  and other corporate costs) and consolidation entries

 (2,978) 

 (3,782) 

  Financial result

 (2,706)

 95 

  Total consolidated profit before taxes

 20,416 

 22,415 

4.2 Entity-wide disclosures

 

Products and services

January to June, CHF 1,000 

2013

2014

Products

 118,041 

 108,774 

Services

 63,769 

 63,228 

 

 

 

Total sales third 

 181,810 

 172,002 

Sales by regions (by location of customers)

January to June, CHF 1,000 

2013

2014

Switzerland

 4,178 

 4,530 

Other Europe

 73,983 

 71,443 

North America

 76,006 

 69,752 

Asia

 22,776 

 21,257 

Others

 4,867 

 5,020 

 

 

 

Total sales third

 181,810 

 172,002 

Non-current assets by regions (by location of assets)

 

Property, plant and equipment

Intangible assets

CHF1,000

31.12.2013

30.06.2014

31.12.2013

30.06.2014

Switzerland

 10,721 

 9,323 

 46,720 

 58,596 

Other Europe

 4,884 

 4,527 

 1,419 

 1,404 

United States

 3,814 

 3,588 

-

-

Asia

 436 

 424 

 432 

 409 

 

 

 

 

 

Total

 19,855 

 17,862 

 48,571 

 60,409 

Information about major customers

There are no sales to individual customers in the first half of 2013 and 2014 that accumulated exceeded 10% of total sales.

5 Operating expenses by nature

January to June, CHF 1,000

2013

2014

Material costs

 55,115 

 48,209 

Personnel costs

 70,262 

 72,147 

Depreciation of property, plant and equipment 

 3,162 

 3,042 

Amortization of intangible assets

 1,998 

 1,475 

Other operating costs (net)

 55,264 

 50,313 

 

 

 

Total operating cost incurred (gross)

 185,801 

 175,186 

 

 

 

Capitalization of development costs in position inventories (see note 6) 

 (22,897) 

 (12,762) 

Capitalization of development costs in position intangible assets

 (4,216) 

 (12,742) 

 

 

 

Total operating expenses, according to statement of profit or loss 

 158,688 

 149,682 

6 Inventories

In 2010, the Group entered into an OEM agreement with a global diagnostics company. The agreement comprises the development and supply of a dedicated diagnostic instrument. The related customer-specific development costs are currently capitalized in the position inventories as part of the production costs and amounted to CHF 123.0 million at the end of June 2014 (December 31, 2013: CHF 110.4 million). Once the instrument is launched and the customer calls the units with individual purchase orders, the corresponding development costs will be recognized in cost of sales.

Further information regarding this critical accounting estimate and judgment can be found in note 2.2.4 of the consolidated financial statements 2013.

7 Shareholders’ equity and employee participation plans

7.1 Dividends paid

 

2013

2014

Number of shares eligible for dividend and payout

10,991,802

11,098,831

Dividends paid (CHF/share)

0.50

1.50

Payout from statutory capital contribution reserve (CHF/share)

1.00

 - 

7.2 Movements in shares outstanding

Number (each share has a nominal value of CHF 0.10)

Shares issued

Treasury shares

Shares outstanding

Balance at January 1, 2013

 11,444,576 

(546,590)

10,897,986

Treasury shares issued based on employee participation plans

-

 90,874 

90,874

Sale of treasury shares

-

 26,025 

 26,025 

 

 

 

 

Balance at June 30, 2013

 11,444,576 

 (429,691) 

11,014,885

 

 

 

 

Balance at January 1, 2014

 11,444,576 

 (362,840) 

 11,081,736 

Treasury shares issued based on employee participation plans

-

 51,408 

 51,408 

Sale of treasury shares

-

 125 

 125 

 

 

 

 

Balance at June30, 2014

 11,444,576 

 (311,307) 

 11,133,269 

7.3 Employee share option plans

(See note 10.4.1 of the consolidated financial statements 2013 for the terms and principal conditions) 

Movements in employee share options

Employee share options 

2013

2014

Balance at January 1

 264,769 

 148,704 

Exercised 

 (70,615) 

 (23,505) 

Forfeited and expired

 (5,400) 

 (5,638) 

 

 

 

Balance at June 30

 188,754 

 119,561 

 

 

 

Thereof vested at period-end 

 99,045 

 46,242 

7.4 Employee share plans (Performance Share Matching Plans [PSMP] and other share plans)

(See note 10.4.2 of the consolidated financial statements 2013 for the terms and principal conditions)

Movements in employee shares

Employee shares (excluding voluntary investments)

2013

2014

Balance at January 1

 222,660 

 223,527 

Share plan - Board of Directors – shares granted

 - 

 3,151 

PSMP – extended Management Board – initial shares granted

 17,742 

 17,394 

PSMP – extended Management Board – maximum of matching shares granted

 50,648 

 52,870 

PSMP – other Management – initial shares granted

 - 

 2,902 

PSMP – other Management – maximum of matching shares granted

 - 

 7,255 

Matching shares forfeited

 (64,710) 

 (40,772) 

Shares deblocked and available to the participants

 (353) 

 (7,085) 

 

 

 

Balance at June30

 225,987 

 259,242 

 

 

 

Thereof vested, but blocked until the end of the performance period

 41,919 

 43,514 

8 Principal exchange rates

 

 

Closing exchange rates

Average exchange rates 

January to June

CHF

 

31.12.2013

30.06.2014

2013

2014

EUR

1

1.23

1.21

1.23

1.22

USD

1

0.89

0.89

0.95

0.89

9 Fair value measurement and disclosures

(See note 25 of the consolidated financial statements 2013 for definitions and the valuation techniques used)

 

9.1 Assets and liabilities measured at fair value on a recurring basis after initial recognition

CHF 1,000

Fair value hierarchy

Net carrying amount in balance sheet 

measured at fair value

Position

 

31.12.2013

30.06.2014

Currency forwards

 Level 2 

 2,739 

 2,529

Currency options

 Level 2

 (70) 

-

There have bee no transfers between the levels in 2013 and 2014.

 

9.2 Fair value disclosures of assets and liabilities measured at amortized cost

CHF 1,000

Fair value hierarchy

Net carrying amount in balance sheet measured at amortized cost

Fair value disclosure

Position

 

31.12.2013

30.06.2014

31.12.2013

30.06.2014

Receivables

n/a

 75,798 

62,300

75,798

62,300

Payables

n/a

 10,301 

10,155

10,301

10,155

Bank loans

Level 2

 4,824 

 4,772 

4,741

4,742

10 Contingencies and commitments

There have been no significant changes for contingencies and commitments.

 

11 Events after the reporting period

Acquisition of IBL International Group

The Tecan Group acquired 100% of the voting rights of IBL International Group as of July 31, 2014 (closing date) consisting of the following companies:

Company 

Domicile

Participation in %

Activities

IBL International Holding B.V.

Deventer (NL)

100%

S

• IBL International GmbH

Hamburg (DE)

100%

R/P/D

• IBL International B.V.

Nijkerk (NL)

100%

D

• IBL International Corp.

Toronto (CA)

100%

D

S = services, holding functions, R = research and development, P = production, D = distribution

The IBL International Group develops, manufactures and offers a comprehensive portfolio of immunoassays for the life science research and routine clinical diagnostics. The acquired Group will become part of Tecan’s Life Sciences Business, le­veraging Tecan’s global presence and strong position in im­munoassay instruments. 

Established over 30 years ago, the IBL International Group employs staff of over 80 and has its main operations located in Hamburg, Germany. Further, the Group has dedicated sales teams in Germany, North America and the Benelux as well as an extensive distributor network. In 2013, the IBL International Group generated total sales of approximately EUR 16 million (CHF 20 million) with an EBITDA margin at a similar level to the Tecan Group. 

The provisional consideration was EUR 29.0 million (CHF 35.2 million) on a cash- and debt-free basis. The initial purchase price was paid in cash and is subject to final adjustments based on completion statements that are prepared within the next weeks after the closing. Financial statements of the acquired Group in accordance with IFRS are currently not available and the purchase price allocation is yet to be performed.