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, 2015.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 10, 2015.

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, 2014, except for the adoption of the following new or revised/amended standards and interpretations, effective as from January 1, 2015:

Standard/interpretation1

IAS 19 amended “Employee Benefits” – Defined Benefit Plans: 
Employee Contributions

Annual Improvements to IFRSs 2010 – 2012 Cycle

Annual improvements to IFRSs 2011 – 2013 Cycle

1IAS = 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.

The Group has made a minor presentational change to the financing section of the interim consolidated statement of cash flows to increase the relevance of the information provided. “Proceeds from employee participation plans” are now disclosed as separate line item. Prior year figures have been re-presented accordingly.

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

IFRS 10 amended “Consolidated Financial Statements” and IAS 28 amended “Investments in Associates and Joint Ventures” – Sale or Contribution of Assets
 between an Investor and its Associate or Joint Venture

Reporting year 2016

IFRS 11 amended “Joint Arrangements” – Accounting for Acquisitions of Interests
in Joint Operations

Reporting year 2016

IAS 1 amended “Presentation of Financial Statements” – Disclosure Initiative

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

IAS 27 amended “Separate Financial 
Statements” – Equity Method

Reporting year 2016

Investment Entities: Applying the 
Consolidation Exception (Amendments 
to IFRS 10, IFRS 12 and IAS 28)

Reporting year 2016

Annual improvements to IFRSs 2012 – 2014 Cycle

Reporting year 2016

IFRS 15 “Revenue from Contracts with 
Customers”

Reporting year 2017

IFRS 9 “Financial Instruments”

Reporting year 2018

1IAS = 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, 2014.

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 

2014

2015

2014

2015

2014

2015

2014

2015

Sales third

 100,920 

 107,535 

 71,082 

 92,415 

 172,002 

 199,950 

Intersegment sales1

 4,948 

 7,960 

 1,584 

 775 

 (6,532) 

 (8,735) 

– 

– 

Total sales

 105,868 

 115,495 

 72,666 

 93,190 

 (6,532) 

 (8,735) 

 172,002 

 199,950 

 

 

 

 

 

 

 

 

 

Operating profit 

 14,825 

 11,342 

 11,277 

 17,359 

 (3,782) 

 (3,438) 

 22,320 

 25,263 

 

 

 

 

 

 

 

 

 

Depreciation and amortization2

 (2,804) 

 (4,581) 

 (1,713) 

 (2,748) 

– 

– 

 (4,517) 

 (7,329) 

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, CHF 1,000 

2014

2015

Reconciliation of reportable segment sales

 

 

 Total sales for reportable segments

 178,534 

 208,685 

 Elimination of intersegment sales

 (6,532) 

 (8,735) 

 Total consolidated sales 

 172,002 

 199,950 

 

 

 

Reconciliation of reportable segment profit

 

 

 Total operating profit for reportable segments

 26,102 

 28,701 

Unallocated costs (business development, investor relations 
and other corporate costs) and consolidation entries

 (3,782) 

 (3,438) 

 Financial result

 95 

 4,789 

 Total consolidated profit before taxes

 22,415 

 30,052 

4.2 Entity-wide disclosures

Products and services

January to June, CHF 1,000 

2014

2015

Products

 108,774 

 128,162 

Services

 63,228 

 71,788 

 

 

 

Total sales third 

 172,002 

 199,950 

Sales by regions (by location of customers)

January to June, CHF 1,000 

2014

2015

Switzerland

 4,530 

 3,646 

Other Europe

 71,443 

 84,992 

North America

 68,478 

 80,999 

Asia

 22,531 

 25,447 

Others

 5,020 

 4,866 

 

 

 

Total sales third

 172,002 

 199,950 

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

 

Property, plant and equipment

Intangible assets

CHF 1,000

31.12.2014

30.06.2015

31.12.2014

30.06.2015

Switzerland

 9,414 

 8,497 

 81,521 

 80,148 

Other Europe

 5,942 

 4,935 

 12,946 

 10,822 

North America

 4,304 

 3,815 

 751 

 685 

Asia

 454 

 417 

 352 

 274 

 

 

 

 

 

Balance

 20,114 

 17,664 

 95,570 

 91,929 

Information about major customers

There are sales to one individual customer (CHF 22.8 million) relating to business segment “Partnering Business” that accumulated exceeded 10% of total sales in the first half of 2015 (first half of 2014: none).

5 Operating expenses by nature

January to June, CHF 1,000

2014

2015

Material costs

 48,209 

 62,096 

Personnel costs

 72,147 

 73,988 

Depreciation of property, plant and equipment 

 3,042 

 3,081 

Amortization of intangible assets

 1,475 

 4,248 

Other operating costs (net)

 50,313 

 38,167 

 

 

 

Total operating cost incurred (gross)

 175,186 

 181,580 

 

 

 

Capitalization of development costs in position inventories (see note 7) 

 (12,762) 

 (2,153) 

Capitalization of development costs in position intangible assets

 (12,742) 

 (4,740) 

 

 

 

Total operating expenses, according to statement of profit or loss 

 149,682 

 174,687 

6 Income taxes

Due to the sale of all treasury shares in the first half of 2015, the outstanding employee share options and the employee shares are covered only by the conditional share capital (see note 8) and no longer by treasury shares. This change in funding of the employee participation plans is resulting in a one-time tax benefit of CHF 0.8 million, of which CHF 0.6 million was recognized in the statement of profit or loss and the rest in equity.

7 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 capitalized in the position inventories as part of the production costs and amounted to CHF 127.0 million at the end of June 2015 (December 31, 2014: CHF 127.3 million). In October 2014, the first version of the instrument was launched and the customer calls the units with individual purchase orders. The corresponding development costs are 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 2014.

8 Shareholders’ equity and employee participation plans

8.1 Dividends paid

 

2014

2015

Number of shares eligible for dividend

11,098,831

11,238,250

Dividends paid (CHF/share)

1.50

1.50

8.2 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, 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 June 30, 2014

 11,444,576 

 (311,307) 

 11,133,269 

 

 

 

 

Balance at January 1, 2015

 11,444,576 

 (286,020) 

 11,158,556 

New shares issued based on employee participation plans

 1,457 

 – 

 1,457 

Treasury shares issued based on employee participation plans

 – 

 36,689 

 36,689 

Sale of treasury shares

 – 

 249,331 

 249,331 

 

 

 

 

Balance at June 30, 2015

 11,446,033 

– 

 11,446,033 

8.3 Conditional share capital reserved for the employee participation plans

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

2014

2015

Balance at January 1

 858,636 

 858,636 

Employee share options exercised

 – 

 (1,457) 

 

 

 

Balance at June 30

858,636

857,179

 

 

 

Employee share options and employee shares, not yet delivered

 306,996 

 303,029 

8.4 Employee share option plans

(See note 10.4.1 of the consolidated financial statements 2014 for the terms and principal conditions)

Movements in employee share options:

Employee share options

2014

2015

Balance at January 1

 148,704 

 124,379 

Exercised 

 (23,505) 

 (7,199) 

Forfeited and expired

 (5,638) 

 (873) 

 

 

 

Balance at June 30

 119,561 

 116,307 

 

 

 

Thereof vested at period-end 

 46,242 

 50,915 

8.5 Employee share plans (Performance Share Matching Plans (PSMP) and other share plans)

(See note 10.4.2 of the consolidated financial statements 2014 for the terms and principal conditions)

Movements in employee shares:

Employee shares (excluding voluntary investments)

2014

2015

Balance at January 1

 223,527 

 234,805 

Share plan – Board of Directors – shares granted

 3,151 

 2,902 

PSMP – extended Management Board – initial shares granted

 17,394 

 18,457 

PSMP – extended Management Board – mandatory shares granted

 4'847 

PSMP – extended Management Board – maximum of matching shares granted

 52,870 

 58,260 

PSMP – other Management – initial shares granted

 2,902 

 2,270 

PSMP – other Management – maximum of matching shares granted

 7,255 

 5,675 

Matching shares forfeited

 (40,772) 

 (62,855) 

Shares deblocked and available to the participants

 (7,085) 

 (8,332) 

 

 

 

Balance at June 30

 259,242 

 256,029 

 

 

 

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

 43,514 

 41,149 

9 Principal exchange rates

 

 

Closing exchange rates

Average exchange rates January to June

CHF

 

31.12.2014

30.06.2015

2014

2015

EUR

1

1.20

1.04

1.22

1.06

USD

1

0.99

0.94

0.89

0.95

On January 15, 2015 the Swiss National Bank announced that it was discontinuing the minimum exchange rate of CHF 1.20 per euro (EUR). As a consequence, the value of the Swiss franc increased substantially.

10 Financial instruments and fair value disclosures

Cash and cash equivalents as per cash flow statement comprise cash and cash equivalents as per balance sheet and bank overdrafts under bank pooling arrangements (December 31, 2014: CHF 0.0 million; June 30, 2015: CHF 0.2 million) that are included in the position “Current bank liabilities and derivatives”.

10.1 Carrying amounts and fair values

 

 Carrying amount

Fair value

 

Financial assets

Financial liabilities

 

 

CHF 1,000 

Cash and cash 

equivalents

Current derivatives

Trade and other receivables

Non–current financial assets

Total 

assets

Current bank liabilities and derivatives

Trade and other payables / accrued expenses

Non–current bank loans and derivatives

Total liabilities

 

Financial instruments measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency forwards 

– 

 1,754 

– 

 – 

 1,754 

 (6,410) 

 – 

 (1,765) 

 (8,175) 

 (6,421) 

Currency options

– 

 70 

– 

 15 

 85 

 (794) 

 – 

 (219) 

 (1,013) 

 (928) 

 

 

 

 

 

 

 

 

 

 

 

Financial instruments measured at amortized costs1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 128,715 

 – 

 – 

 – 

 128,715 

 – 

 – 

 – 

 – 

 

Receivables

 – 

 – 

 96,549 

 – 

 96,549 

 – 

 – 

 – 

 – 

 

Rent and other deposits

 – 

 – 

 443 

 777 

 1,220 

 – 

 – 

 – 

 – 

 

Current bank liabilities

 – 

 – 

 – 

 – 

 – 

 (2,691) 

 – 

 – 

 (2,691) 

 

Bank loans

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 (3,321) 

 (3,321) 

 (3,279) 

Payables and accrued expenses

 – 

 – 

 – 

 – 

 – 

 – 

 (48,221) 

 – 

 (48,221) 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciling items2

 – 

 – 

 12,168 

 – 

 12,168 

 – 

 (11,009) 

 – 

 (11,009) 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 128,715 

 1,824 

 109,160 

 792 

 240,491 

 (9,895) 

 (59,230) 

 (5,305) 

 (74,430) 

 

1The carrying amount of financial instruments measured at amortized costs is a reasonable approximation of their fair value due to their short–term nature. bank loans are the only exception due to their long–term nature.

2Receivables/payables arising from POC, VAT/other non–income taxes and social security. 

 

 

 Carrying amount

Fair value

 

Financial assets

Financial liabilities

 

 

CHF 1,000 

Cash and cash 

equivalents

Current derivatives

Trade and other receivables

Non–current financial assets

Total 

assets

Current bank liabilities and derivatives

Trade and other payables / accrued expenses

Non–current bank loans and derivatives

Total liabilities

 

Financial instruments measured 

 at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency forwards 

 – 

 900 

 – 

 473 

 1,373 

 (2,523) 

 – 

 (157) 

 (2,680) 

 (1,307) 

 

 

 

 

 

 

 

 

 

 

 

Financial instruments measured at amortized costs1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 171,425 

 – 

 – 

 – 

 171,425 

 – 

 – 

 – 

 – 

 

Receivables

 – 

 – 

 72,365 

 – 

 72,365 

 – 

 – 

 – 

 – 

 

Rent and other deposits

 – 

 – 

 301 

 724 

 1,025 

 – 

 – 

 – 

 – 

 

Current bank liabilities

 – 

 – 

 – 

 – 

 – 

 (2,908) 

 – 

 – 

 (2,908) 

 

Bank loans

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 (2,878) 

 (2,878) 

 (2,841) 

Payables and accrued expenses

 – 

 – 

 – 

 – 

 – 

 – 

 (35,708) 

 – 

 (35,708) 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciling items2

 – 

 – 

 9,024 

 – 

 9,024 

 – 

 (11,003) 

 – 

 (11,003) 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2015

 171,425 

 900 

 81,690 

 1,197 

 255,212 

 (5,431) 

 (46,711) 

 (3,035) 

 (55,177) 

 

1The carrying amount of financial instruments measured at amortized costs is a reasonable approximation of their fair value due to their short–term nature bank loans are the only exception due to their long–term nature.

2Receivables/payables arising from POC, VAT/other non–income taxes and social security.

 

10.2 Valuation techniques used

Position

Level

Data source

Model

Currency forwards

 Level 2

 Bloomberg 

(forward rate - [spot rate +/- forward points]) * amount in foreign currency

Currency options

 Level 2

 Bloomberg 

Black-Scholes model

Bank loans

 Level 2

 Bloomberg 

The fair value is estimated by discounting the future contractual cash flows at the current market interest rate that is available
to the Group for similar financial instruments

11 Contingencies and commitments

There have been no significant changes for contingencies and commitments.

12 Events after the reporting period

There were no significant events after the reporting period.