R A I S I N G C O M F O R T R A I S I N G C O M F O R T A N N U A L R E P O R T 2 0 1 5 K E Y F I G U R E S Year ended Sept 30, IN € MILLIONS Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Capital expenditure Free cash flow (FCF) EBITDA as % of revenue Adjusted EBITDA as % of revenue EBIT as % of revenue Adjusted EBIT as % of revenue Capital expenditure as % of revenue FCF as % of adjusted EBITDA 2015 611.3 99.5 107.3 55.7 76.2 (51.5) 2.6 16.3% 17.6% 9.1% 12.5% 8.4% 2.4% 2014 CHANGE % CHANGE 20.5% 39.6% 16.0% 78.5% 17.1% 44.7% (88.2)% 507.3 104.0 28.2 14.8 24.5 11.1 (15.9) (19.5) 71.3 92.5 31.2 65.1 (35.6) 22.1 14.1% 18.2% 6.2% 12.8% 7.0% 23.9% Revenue by markets Revenue by region (location of Stabilus company) 2 3 % POWERISE 5 % SWIVEL CHAIR 3 8 % NAFTA 1 2 % ASIA 2 4 % INDUSTRIAL 4 8 % GAS SPRING 5 0 % EUROPE A s w o r l d m a r ke t l e a d e r f o r g a s s p r i n g s a n d d a m p e r s, w e h a v e d e m o n s t r a t e d o u r e x p e r t i s e f o r e i g h t d e c a d e s : I n t h e a u t o m o t i v e i n d u s t r y , i n t h e f u r n i t u r e s e c t o r, i n h o u s e a n d b u i l d i n g t e c h n o l o g y a s w e l l a s a v a r i e t y o f o t h e r s e c t o r s s u c h a s m e d i c a l p r o d u c t s a n d r e h a b i l i t a t i o n t e c h n o l o g y . O u r g a s s p r i n g s, d a m p e r s a n d e l e c t r o m e c h a n i c a l d r i v e s a l l o w u s e r s t o o p t i m i z e o p e n i n g , c l o s i n g , l i f t i n g , l o w e r i n g , d a m p i n g a n d a d j u s t i n g a c t i o n s. A N N U A L R E P O R T 2 0 1 5 01 O U R U N I T S E U R O P E Luxembourg, Luxembourg Koblenz, Germany Derio, Spain Poissy, France Banbury, Great Britain Torino, Italy Brasov, Romania B R A Z I L Itajubá U S A Gastonia, NC Sterling Heights, MI Schaumburg, IL M E X I C O Ramos Arizpe L E G E N D O U R U N I T S Production Powerise Production Gas Spring Sales Office Stabilus S.A. R U S S I A Moscow S O U T H K O R E A Busan Suwon J A P A N Yokohama S I N G A P O R E Singapore C H I N A Changzhou City Shanghai A U S T R A L I A Dingley N E W Z E A L A N D Auckland P A G E 1 8 T H E M E G A T R E N D O F D E M O G R A P H I C C H A N G E W e h e l p y o u t o s t a y a c t i v e P A G E 2 2 T H E ME G A T R E N D O F C O M F O R T W e m a k e e v e r y d a y m a n u a l t a s k s e a s i e r P A G E 2 6 T H E M E G A T R E N D O F O C C U P A T I O N A L H E A LT H A N D S A F E T Y W e m a k e l o a d s m a n a g e a b l e 04 A N N U A L R E P O R T 2 0 1 5 C O N T E N T T O O U R S H A R E H O L D E R S C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S 08 11 14 16 30 35 35 37 38 39 43 44 45 47 47 53 55 55 Letter from the Chief Executive Officer Report of the Supervisory Board International Management Team Three Megatrends as Growth Drivers Stabilus Share C O M B I N E D M A N A G E M E N T R E P O R T General Strategy Research and Development Business and General Environment Results of Operations Development of Operating Segments Financial Position Liquidity Results of Operations and Financial Position of Stabilus S.A. Risk and Opportunities Corporate Governance Subsequent Events Outlook 59 60 62 63 64 123 124 125 126 130 132 133 141 146 146 147 149 Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Responsibility Statement Management Board of Stabilus S.A. Supervisory Board of Stabilius S.A. Independent Auditor's Report A N N U A L A C C O U N T S Balance Sheet Profit and Loss Account Notes to the Annual Accounts Independent Auditor's Report A D D I T I O N A L I N F O R M A T I O N Financial Calendar Disclaimer Table Directory Information Resources A N N U A L R E P O R T 2 0 1 5 05 ABCDE A TO O U R S H A R E H O L D E R S S R E D L O H E R A H S R U O O T A P I S TO N R O D O I L C O M P E N S AT I N G C H A M B E R P R E S S U R E T U B E S E A L A N D G U I D E PA C K A G E M E M B R A N E B OT TO M VA LV E P R OT E C T I O N T U B E P I S TO N PA C K A G E N A M E STAB-O-SHOC ® TA20 The TA20 damper is a high-performance, non-pressure, hydraulic vibration damper. Specific areas of application in utility vehicles are steering dampers in trailing axles or medical technology, e.g. backrest adjustments in hospital and nursing beds. T 0 5 1 8 – 0 5 5 8 4 2 – 0 6 5 6 N P R – 1 8 0 CEO Letter K o p f z e i l e : C E O L e t t e r D i e t m a r S i e m s s e n C h i e f E x e c u t i v e O f f i c e r L E T T E R F R O M T H E C H I E F L E T T E R F R O M T H E C H I E F E X E C U T I V E O F F I C E R E X E C U T I V E O F F I C E R Dear Shareholders, Customers, Business Partners, Employees, Ladies and Gentlemen, A successful fiscal year 2015 lies behind us, with continued profitable growth and record revenues of more than €600 million. We enjoyed significant growth across all segments and sales markets and, at the same time, kept our operating profitability at the strong level recorded in previous years. Our growth continues to be driven by consist- ent execution of our long-term strategy STAR which is supported by three megatrends that you will read more about in the course of this report: demographic developments, the growing need for comfort, and rising occupa- tional health and safety standards. We plan to continue our successful development and have therefore systematically invested an increasing amount of capital into expanding our capacities – in line with rising demand from our customers worldwide and to address the considerable market potential for our gas springs, dampers and electrical drives. To increase our gas springs and dampers production footprint, we started construction of new, fully automated production lines in Germany and the US, expanded our plant in Romania with a new building and new machinery, completed a new semiauto- matic production line in Mexico and began setting up two new production lines for automotive and industrial 08 ANNUAL REPORT 2015TO OUR SHAREHOLDERS CEO L etter products as well as commissioning new machinery in China. We also strengthened our sales organization in the high-growth Asian market and expanded our capacity to include a new powder coating line in South Korea in order to reflect the sustained high level of potential offered by the market. In the Powerise segment, we expanded our plant in Romania with a new building and a new production line, established an additional Powerise produc- tion line in Mexico, and expanded our Chinese plant by adding a new building and a new production line that will start production in summer 2016. We are also continuously developing new applications for our products as part of our innovation process. An example for this are the innovative wing doors of Tesla Model X which are actuated by our Powerise technology the first time Powerise utilization has been expanded into more than tailgate applications. Even for our more tradi- tional products we continue to find new applications. In solar parks, for example, they are increasingly being used in solar modules that follow the course of the sun – our dampers absorb forces applied by sometimes severe weather conditions protecting the expensive modules against breakages and other damage. In terms of financing, too, we made extensive progress in the past fiscal year in order to prepare our company for further growth. In December 2014, we took advantage of the attractive interest rate environment to complete a long-term refinancing, which we used to redeem our high-yield bond in June 2015. This will improve our future cash flow reducing the interest burden by about €13 million p.a. compared with the previous structure. Looking at our operational performance figures, in fiscal year 2015 we increased our revenue by 20.5 percent year- on-year, from €507.3 million to €611.3 million. We produced a total of 144 million gas springs and dampers (pre- vious year: 138 million) and 3.2 million Powerise systems (previous year: 2.2 million). Automotive business accounted for total revenue of €434.2 million, while €149.3 million was attributable to industrial business. The main growth driver in automotive business remained the electromechanical Powerise drive, whose revenue increased from €85.8 million in the previous year to €139.8 million in fiscal year 2015. In geo- graphical terms, our strongest growth was achieved in the NAFTA region, but we also increased our revenue in Asia and Europe. Despite extensive investment and the refinancing of our high-yield bond, our growth was profita- ble: our adjusted EBIT improved by 17.1 percent, from €65.1 million in the previous year to €76.2 million. In addition to the positive performance of our automotive business, I would also like to highlight the development of our Swivel Chair unit, which recorded profitable revenue growth of 14.5 percent to a total of €27.7 million in fiscal year 2015. I am personally very happy with this turnaround, which has been achieved by dedicated manage- ment after many years of loss making. We continue to see an unabated trend towards the increased use of gas springs, dampers, and electromechanical drives across a wide range of industries. Consequently, we are planning to systematically press ahead with the implementation of our successful strategy, expand our share of existing markets and develop new sales markets 09 ANNUAL REPORT 2015TO OUR SHAREHOLDERS CEO Letter thanks to innovative new solutions and our strong product pipeline. For fiscal year 2016, we are targeting reve- nues of approximately €660 million – equating to organic growth of 8 percent – and plan for our adjusted EBIT margin to remain at a level of 12 – 13 percent. I would like to take this opportunity to thank all shareholders for your confidence in Stabilus. I believe you will join me when I express my gratitude on your behalf to our customers for their loyalty and quality awareness and to our business partners for the close and – in many cases – long-standing working relationships we enjoy. Last but not least I would like to especially thank our more than 4,000 employees around the world for their extraordinary commitment and their valuable contribution to the success of our company. We all together look forward to the new fiscal year 2016. Yours sincerely, D i e t m a r S i e m s s e n C h i e f E x e c u t i v e O f f i c e r 10 ANNUAL REPORT 2015TO OUR SHAREHOLDERS Repor t of t he Sup ervisory Boa rd U d o S t a r k C h a i r m a n o f t h e S u p e r v i s o r y B o a r d R E P O R T O F T H E S U P E R V I S O RY B O A R D Dear Shareholders, During the reporting period, i.e. the period since October 1, 2014, to September 30, 2015, two changes occurred within the Supervisory Board: Mr. Andi Klein left the Board on May 12, 2015 and was succeeded by Dr. Joachim Rauhut; Mr. Nizar Ghoussaini left the Board as per September 30, 2015 and was succeeded by Dr. Ralf-Michael Fuchs. Dr. Joachim Rauhut was also elected as Chairman of the Audit Committee of Stabilus, effective May 12, 2015. The Supervisory Board is very grateful to Messrs. Klein and Ghoussaini for their valuable contributions to the develop- ment of our Group. The Supervisory Board of Stabilus S.A. performed its tasks and monitored the management activi- ties of the Board of Management in accordance with legal requirements and the Articles of Association of Stabilus S.A. The Board of Management and the Supervisory Board maintained close and regular contacts. The Supervisory Board advised the Board of Management in regard to strategic and operational decisions as well as governance topics and decided on matters requiring supervisory approval. 11 ANNUAL REPORT 2015TO OUR SHAREHOLDERS Report of the Superv isor y B oard C O O P E R AT I O N W I T H T H E B O A R D O F M A N A G E M E N T The Board of Management reported regularly, promptly and extensively in verbal and written form to the Supervi- sory Board regarding the position and performance of the Company and the Stabilus Group. Furthermore, the Board of Management informed the Supervisory Board on a regular basis concerning the future business policy, including the strategic and organizational direction of the Group. Between Supervisory Board meetings, Stabilus’ management kept the Chairman of the Supervisory Board informed about new developments. In each of the Supervisory Board meetings, of which there were six in total during the last fiscal year and so far one in the current fiscal year, the Board of Management reported on the commercial position of the Company as well as key financial data. The Board of Management also regularly provided reports about Stabilus’ business performance in the various geographic markets (operating segments) and about the development of Stabilus’ four business units, namely Automotive, Powerise, Industrial and Swivel Chair. Major investments of the Group companies, in particular invest- ments for capacity extensions in key markets, were presented to and approved by the Supervisory Board. The Board of Management reported about cost and quality matters as well as other operational topics related to Stabilus’ products. The Supervisory Board and the Audit Committee examined the risk position of the Stabilus Group and the development of systems and procedures for internal controls and risk management. The Supervisory Board and the Audit Committee also reviewed the Group’s compliance organization. The Supervisory Board was closely involved in Stabilus’ refinancing in fiscal year 2015. This refinancing resulted in a significant reduction of interest to be paid by Stabilus for its credits. D R A W I N G U P O F T H E F I N A N C I A L S TAT E M E N T S The Supervisory Board examined the Company’s stand-alone annual accounts, the consolidated financial statements and the management report for the financial year ending on September 30, 2015. Representatives of the auditor KPMG Luxembourg Société coopérative attended the meeting of the Audit Committee on December 18, 2015 at which the financial statements were examined. The representatives of the auditor reported extensively on their findings, provided a written presentation and were available to give additional explanations and opinions. 12 ANNUAL REPORT 2015TO OUR SHAREHOLDERS Repor t of t he Sup ervisory Boa rd The Supervisory Board did not raise objections to the Company’s stand-alone annual accounts or to the consoli- dated financial statements drawn up by the Board of Management for the financial year ending on September 30, 2015 and to the auditors’ presentation. According to the recommendation of the Audit Committee, the Supervisory Board agreed to the proposal of the Board of Management to approve both the Company’s stand-alone annual accounts and the consolidated financial statements for fiscal year 2015. The auditor issued unqualified audit opin- ions on December 18, 2015. On behalf of the Supervisory Board, I want to thank the Board of Management for the open and effective collabo- ration during the year, the Stabilus employees for their excellent contributions to the Company’s success as well as our shareholders for the trust they place in Stabilus. Luxembourg, December 18, 2015 On behalf of the Supervisory Board of Stabilus S.A U d o S t a r k C h a i r m a n o f t h e S u p e r v i s o r y B o a r d 13 ANNUAL REPORT 2015TO OUR SHAREHOLDERS In ter national Management Team I N T E R N AT I O N A L M A N A G E M E N T T E A M 0 1 0 2 0 4 0 6 0 7 0 3 0 5 0 1 H Ä R I N G, F R E D 0 2 H U B E R , R A L P H 0 3 S A N D E R , K A R S T E N 0 4 W I D M E R , M A R T I N A V i c e P r e s i d e n t V i c e P r e s i d e n t V i c e P r e s i d e n t V i c e P r e s i d e n t B u s i n e s s U n i t S w i v e l C h a i r B u s i n e s s U n i t I n d u s t r i a l B u s i n e s s U n i t A u t o m o t i v e G l o b a l H R 0 5 K A D E N B A C H , E K K E H A R D 0 6 B A L M E R T, J O A C H I M 0 7 L E E , J O O N G - H O ( J A M E S ) V i c e P r e s i d e n t G l o b a l P u r c h a s i n g V i c e P r e s i d e n t Q u a l i t y M a n a g e m e n t C o u n t r y H e a d Ko r e a 14 ANNUAL REPORT 2015TO OUR SHAREHOLDERS In ternatio nal Man ag ement Tea m 0 8 0 9 1 2 1 3 1 0 1 1 1 4 0 8 S I E M S S E N , D I E T M A R 0 9 T I A N , X U E F E N G ( A L E X ) 1 0 P I N K , J O H A N N E S 1 1 H A B A , A N T H O N Y C h i e f E x e c u t i v e O f f i c e r C o u n t r y H e a d C h i n a V i c e P r e s i d e n t R e g i o n a l H e a d N A F TA G l o b a l O p e r a t i o n s 1 2 H I N C K , M I C H A E L 1 3 S A B E T, DAV I D 1 4 W I L H E L M S, M A R K C o u n t r y H e a d J a p a n V i c e P r e s i d e n t C h i e f F i n a n c i a l O f f i c e r B u s i n e s s U n i t Po w e r i s e 15 ANNUAL REPORT 2015TO OUR SHAREHOLDERS T H R E E M E G AT R E N D S A S G R O W T H D R I V E R S A g r o w i n g , c o m f o r t - l o v i n g m i d d l e c l a s s i n d e v e l o p e d c o u n t r i e s a n d e m e r g i n g n a t i o n s, a g l o b a l p o p u l a t i o n t h a t i s b o t h g r o w i n g a n d a g i n g , a n d g l o b a l p r o g r e s s i n o c c u p a t i o n a l h e a l t h a n d s a f e t y s t a n d a r d s : Th e s e t h r e e m e g a t r e n d s r e p r e s e n t i m p o r t a n t d e v e l o p m e n t s a n d t h u s a l s o s e t t h e d i r e c t i o n f o r t h e f u t u r e o f t h e g l o b a l e c o n o m y . E R G O N O M I C S O L U T I O N S F O R E V E R Y D A Y M A N U A L T A S K S As global market leader for gas springs and dampers, and with its electromechanical Powerise drives, Stabilus benefits directly from these three global megatrends because the Company’s products provide ergonomic solutions for virtually all the challenges involved in opening, closing, lifting, lowering, damping and adjust- ing actions. 144gas springs and dampers produced M by Stabilus in fiscal year 2015 (previous year: 138 million). A L E A D E R I N M O T I O N C O N T R O L People are living to an ever older age and want to stay active longer. One of the requirements for achieving this aim is to improve the ergonomics of recurring motion sequences on a long-term basis. Consequently, Stabilus products are an integral part of daily life in many commercial applications and private households, where they help to make everyday manual tasks easier and more enjoya- ble to perform. Even today, the possibilities extend way beyond the automotive business and cover a wide range of uses in industry, in air and rail transport, in nursing professions and in private house- holds – and the trend is continuing upward. The following pages illustrate the role that the megatrends play for the global business of Stabilus in the automotive and industrial sectors. But above all, they highlight the opportunities for signifi- cant global growth that these megatrends continue to offer the Company. The automotive business, for example, is expected to grow significantly faster than the automotive market as a whole. 3.2Powerise systems produced by M Stabilus in fiscal year 2015 (previous year: 2.2 million). Three Megatrends as Growth Drivers T O O U R S H A R E H O L D E R S » W H AT H E L P S P E O P L E S TAY F I T L O N G E R ? « T h e m e g a t r e n d o f d e m o g r a p h i c c h a n g e : H a l f a c e n t u r y a g o , 5 0 - y e a r- o l d s w e r e c o n s i d e r e d t o b e o l d e v e n i n E u r o p e a n d N o r t h A m e r i c a , w h e r e a s n o w a d a y s , m o r e a n d m o r e p e o p l e m a k e a f r e s h s t a r t a t t h i s a g e . Forecasted rise in world population over the age of 60 2015: around 0.9 billion people 2030: around 1.4 billion people 2050: around 2.1 billion people 18 ANNUAL REPORT 2015 T O O U R S H A R E H O L D E R S Three Megatrends as Growth Drivers 19 ANNUAL REPORT 2015 W E H E L P TO S TAY A C T I V E ! G a s s p r i n g s , d a m p e r s a n d e l e c t r o m e c h a n i c a l d r i v e s f r o m S t a b i l u s s e r v e a s r e l i a b l e h e l p e r s . While the world population was 5.3 billion in 1990, it had already S TA B I L U S P R O D U C T S H E L P TO H A N D L E increased to almost 7 billion by 2010. The United Nations expects D E M O G R A P H I C C H A N G E a further increase in the world population to some 8.4 billion by 2030 and further unstoppable growth even after that. Besides the indus- Solutions that relieve the human musculoskeletal system from chal- trialization of agriculture and progress in the medical sector, a key lenging tasks and make everyday motion sequences more ergo- factor for this development is the decrease in poverty. nomic help to maintain people’s abilities to move and work. With a large number of possible applications, gas springs, dampers and Life expectancy and the percentage of older people in the overall electromechanical drives from Stabilus offer a broad spectrum of population are increasing around the globe, almost in line with the use in industrial and private contexts. In its role as a component world population. According to the United Nations, almost 901 mil- and system supplier to leading providers in the automotive, furni- lion people around the world are over 60, and this number is expected ture and kitchen industries, in aircraft construction, mechanical to rise to 1.4 billion by 2030 and to roughly 2.1 billion by 2050. engineering and medical and commercial vehicle technology, Stabilus Progress in the medical sector will enable people to remain both guarantees ergonomically optimized applications. active and fit for work longer in the future. Swivel chairs with STAB-O-MAT gas springs make working comfortable. Pleasantly dampened, they feature variable height adjustment and gently absorb the weight of the occupant. 20 Three Megatrends as Growth Drivers ANNUAL REPORT 2015TO OUR SHAREHOLDERS Sick or injured people often have to stay in bed for a long time. Our locking gas springs have proven themselves for smooth and safe adjustment of the various hospital bed segments for many years. Oil-hydraulic dampers from Stabilus ensure safe lowering of the side rails. One of the important trends of the future is the creation of com- N U M E R O U S P O S S I B I L I T I E S F O R U S E O N T H E bined standing / sitting workstations with height-adjustable office G R O W T H M A R K E T O F M E D I C A L T E C H N O L O G Y desks. This type of desk is already in use in many companies. These desks are designed to actively prevent back problems during work- The implications of aging societies are not only that longer active ing hours and thus to ensure the employees’ ability to work. Useful participation in professional life must be ensured through improved side effects of switching between a sitting and standing position at ergonomics, but also that more and more people will require more work include an improved ability to concentrate and react quickly intensive medical care including the need for nursing care in their as well as a lower likelihood of getting tired. later stages of life. The use of gas springs, dampers and electrome- At the moment, Scandinavia and Switzerland are the trend-setters development. For example, Stabilus products support the adjustment when it comes to standing / sitting workstations, but more and more mechanism of sickbeds, help to make it easier to operate height- companies in other countries as well are deciding to introduce this adjustable side tables, and lift treatment chairs or operating tables future-oriented workstation design. The height is usually adjusted by to the optimum height for the attending physician. chanical drives in medical products is increasing as a result of this means of an electric motor with power assistance provided by a gas spring. Stabilus supplies gas springs to the market leaders among the furniture manufacturers in this growing market segment. 21 Three Megatrends as Growth DriversANNUAL REPORT 2015TO OUR SHAREHOLDERS Three Megatrends as Growth Drivers T O O U R S H A R E H O L D E R S » H O W C A N W E M A K E E V E RY DAY L I F E M O R E C O M F O R TA B L E ? « T h e m e g a t r e n d o f c o m f o r t : A n i n c r e a s i n g n u m b e r o f p e o p l e c a n a f f o r d a m e n i t i e s t h a t m a k e l i f e n o t i c e a b l y e a s i e r ; s o o n , w e w i l l n o t b e a b l e t o i m a g i n e l i f e w i t h o u t m a n y o f t h e s e c o m f o r t - e n h a n c i n g f u n c t i o n s i n o u r c a r s a n d h o u s e h o l d s . Disposable income of global middle class in US dollar purchasing power parity 2005 Worldwide: approx. $21.3 trillion in 2009 approx. $35.0 trillion in 2020 22 Growth in middle class by 2020 In 2009, around 1.8 billion people belonged to the middle class. In 2020, it will be around 3.2 billion people. ANNUAL REPORT 2015 T O O U R S H A R E H O L D E R S Three Megatrends as Growth Drivers 23 ANNUAL REPORT 2015 W E M A K E E V E RY DAY M A N U A L TA S K S E A S I E R ! S t a b i l u s p r o d u c t s i n c r e a s e t h e c o m f o r t i n h a n d l i n g i t e m s . The demand for comfort-enhancing solutions that make life easier Demographically, this trend is supported by the growth of the global is increasing all over the world. While features such as electric middle class: In 2009, roughly 1.8 billion people or well over 25% window winders or air-conditioning systems were largely reserved of the world population belonged to the global middle class as defined for top-of-the-range and luxury class vehicles three decades ago, by the OECD; this number will increase to 3.2 billion or more than hardly any passenger car or truck rolls off the line without this 40% by 2020. This means that more and more people are able to equipment nowadays. At the same time, the number of customers afford that extra bit of comfort here and there, for example when who choose optional equipment such as heated seats, parking ordering a new vehicle or a new kitchen. In this context, Stabilus assist systems or electromechanical lid drives like the Powerise gas springs, dampers and electromechanical drives are the product systems offered by Stabilus is increasing these days. of choice whenever the aim is to increase comfort by significantly improving ergonomics. P O W E R I S E G R O W T H B E N E F I T S F R O M “ D E M O C R AT I Z AT I O N ” O F C O M F O R T Market penetration of comfort features usually takes place from the top down: New features are first introduced in top-of-the-range and luxury class models and then gradually offered in the lower vehicle classes as they become better known and more popular. With this step-by-step democratization of equipment features that are initially reserved for the top vehicle categories, the number of installed units increases accordingly over time. 24 Three Megatrends as Growth Drivers ANNUAL REPORT 2015TO OUR SHAREHOLDERS With the Powerise systems from Stabilus, the trunk will open and close by remote control within seconds. Integrated in the Powerise drives is a sensor system that reliably eliminates safety risks due to improper operation or use. Stabilus is achieving particularly high growth rates with the electro- E A S I E R O P E R AT I O N I S A C R O S S - S E C TO R mechanical lid drive Powerise, which allows car tailgates to be G R O W T H TO P I C opened and closed by pressing a button or even by means of ges- ture control. This way, your hands stay clean even if the car is very The trend toward easier operation is unbroken across sectors and dirty, and you can save yourself the effort needed to open or close all over the world. Stabilus products are therefore also used out- conventional tailgates. In the years following the market introduc- side of the automotive sector when it comes to increasing the ease tion of the Powerise systems, they were fitted predominantly in of use or ergonomics of products. For example, customers of the luxury class vehicles, all-terrain vehicles and SUVs. Now, an increasing Stabilus “Industrial” business use gas springs in the adjustment number of vehicle manufacturers are offering their customers this mechanism of high-quality ironing tables or use them to help option in mid-range and even compact models as well. Sales of adjust the height of hotel beds, which makes it easier for the ser- Powerise systems are increasing accordingly: While Stabilus pro- vice personnel to attend to the beds. What is more, the advancing duced 1.2 million Powerise units in fiscal year 2013, in fiscal year electrification of many items enables Powerise applications to be 2015 it already produced approx. 3.2 million units. This currently used outside of the automobile sector and thus opens up new pos- applies to the European market in particular, because mid-range sibilities for use. On the whole, these are excellent growth pros- and compact vehicles traditionally account for an especially large pects and Stabilus is working intensively on making use of them. market share here. 25 Three Megatrends as Growth DriversANNUAL REPORT 2015TO OUR SHAREHOLDERS Three Megatrends as Growth Drivers T O O U R S H A R E H O L D E R S » W H O M A K E S H A R D W O R K E A S I E R ? « T h e m e g a t r e n d o f o c c u p a t i o n a l h e a l t h a n d s a f e t y : H e a l t h y e m p l o y e e s m e a n f e w e r a b s e n c e s a n d i n t e r r u p - t i o n s t o o p e r a t i o n s . T h i s i s w h y i n v e s t m e n t s i n e r g o - n o m i c s p a y o f f f o r e m p l o y e r s i n e c o n o m i c t e r m s a s w e l l . Development in number of care- dependent people worldwide Number of jobs in global service sector 26 A N N U A L R E P O R T 2 0 1 5 T O O U R S H A R E H O L D E R S Three Megatrends as Growth Drivers A N N U A L R E P O R T 2 0 1 5 27 W E M A K E L O A D S M A N A G E A B L E ! S t a b i l u s p r o d u c t s i m p r o v e e r g o n o m i c s a n d t h e r e b y i n c r e a s e p e r f o r m a n c e . When employees are absent from work, companies are left with gas springs are increasingly being installed in load carriers – they high costs. In highly competitive industries as well as small and enable the intermediate layers to be moved with ease. Up to 30 medium-sized companies, the absence of employees can lead to gas springs are installed in a single load carrier. serious interruptions to operations and have considerable economic consequences. This is why today the prevention of industrial acci- Every day, several million bed linens are changed in the hotel industry dents and health risks in the workplace is a top priority in most all over the world. The room staff have to bend over to perform this countries around the globe. task, so back problems and absence of staff are bound to occur. With Product solutions for improving working conditions, reducing chest height with a simple hand movement, allowing the sheet to be work-related health risks and optimizing the working equipment changed without straining the back. This solution is being used for its respective task are a global growth market and occupy an increasingly by hotel groups all over the world. the help of two Stabilus gas springs, the mattress can be raised to important position in the strategy of the “Industrial” business at Stabilus. More than 2,500 customers from a wide range of indus- tries are already convinced that investments in ergonomics pay off economically and rely on the expertise of Stabilus when it comes to designing and manufacturing their products all over the world. S TA B I L U S P R O D U C T S P R OT E C T T H E W E L L - B E I N G O F L O G I S T I C S A N D H OT E L E M P L OY E E S Let us take the example of back protection: The industrial division of labor, which often extends across continents, is changing the working world. In industrial production, system suppliers or suppli- ers of individual components are delivering more and more parts “straight to the line,” where they are usually installed promptly. In order to ensure that the components reach the next production sta- tion undamaged and on time, large numbers of what are known as load carriers are used throughout the world. For example, airbags or headlamps are placed in these reusable containers so that they can be transported safely to a car manufacturer’s production facility. Inside the load carriers, there are folding intermediate layers where the parts to be shipped are held in place. Whenever the parts are removed from the load carriers, the stable and therefore rather heavy intermediate layers must be folded up repeatedly. This is why Stabilus 28 Three Megatrends as Growth Drivers ANNUAL REPORT 2015TO OUR SHAREHOLDERS Stabilus offers specific gas springs for load carriers in order to ensure that products can be transported safely without taking any damage. During the trans- portation route the products are always held in place. H E A LT H I E R B A C K S F O R P E O P L E W O R K I N G I N A S I T T I N G P O S I T I O N Many people whose profession requires them to sit all day com- plain about back problems due to lack of movement and uncom- fortable office chairs. Stabilus is a leading manufacturer of mainte- nance-free gas springs for swivel chairs that allow the height of the chair to be adjusted continuously and easily, and thus to be better adapted to the height of the user. A further area in which Stabilus products can be applied in the growth market of occupa- tional health and safety is that of protecting the backs of truck and construction vehicle drivers: Gas springs not only make it easier to adjust the drivers’ seats, they also improve the spring characteris- tics of the seats. In this way, they help to prevent the drivers’ backs from being put under too much strain from long periods of sitting and the many uneven and bumpy roads they drive on during a working day. Stabilus now even offers adjustable dampers for installation in drivers’ seats that enable the hardness to be varied and thus allow the seat to be even better adapted to the driver’s weight. In order to supply customers all over the world with a wide range of gas springs and to benefit from the megatrend of occupa- tional health and safety, Stabilus is continuously investing in the expansion of its production capacities in Europe, the USA and Asia. 29 Three Megatrends as Growth DriversANNUAL REPORT 2015TO OUR SHAREHOLDERS STABI LUS SHARE S TA B I L U S S H A R E Stabilus share rose by 30% in fiscal year 2015 and outper formed peer indices Free float of 99% af ter Triton’s last placement in March 2015 S TO C K M A R K E T S R E M A I N E D V O L AT I L E T H E S TA B I L U S S H A R E I N F I S C A L Y E A R 2 0 1 5 The stock markets remained volatile in fiscal year 2015. On the one 20,723,256 bearer shares with a nominal value of €0.01. The share hand they benefited among others from the continued availability of Stabilus S.A. has been listed in the Prime Standard (regulated of liquidity from the major central banks and from low interest market) of the Frankfurt Stock Exchange since May 23, 2014. In rates which supported the new all-time high of the DAX which September 2014 the Stabilus share gained further visibility with Stabilus S.A. has a share capital of €207,232.56 represented by climbed to 12,000 points in April 2015. On the other hand the slow- its inclusion in the SDAX index. down of China’s economic growth and the devaluation of the yuan in mid- August 2015 led to significant turbulences in the Chinese S TA B I L U S S H A R E O U T P E R F O R M E D T H E M A R K E T stock market which, together with other external shocks such as the crisis in Ukraine, the war in Syria and the VW emission scandal, From October 1, 2014 to September 30, 2015, the Stabilus share considerably weakened the European stock markets as well. In this price increased by 30% from €24.75 to €32.25. Consequently and environment the SDAX, the index on which Stabilus shares are as in the previous fiscal year, the Stabilus shares were able to sub- listed, performed considerably well and closed at 8,310 points on stantially outperform its sector indices: SDAX, DAXsector All Auto- September 30, 2015 (6,853 points on September 30, 2014) and mobile and DAXsector Industrial. thus increased by 21% in the last twelve months. S H A R E H O L D E R S T R U C T U R E : F R E E F L O AT AT A P P R OX I M AT E LY 9 9 % On December 5, 2014 and on March 17, 2015 funds advised by Triton successfully placed 4.4 million and 4.2 million shares of Stabilus with institutional investors respectively. As a result of these placements the free float increased to approximately 99%. The remaining 1% of the Stabilus shares which are not included in the free float are held by the members of the Management and the Supervisory Board. According to the voting rights notifications received until September 30, 2015, Mondrian Investment Partners Limited holds 5.01% of the Stabilus shares. A N N U A L G E N E R A L M E E T I N G The ordinary Annual General Meeting 2015 of Stabilus S.A. was held on February 18, 2015 at 10:00 a.m. at the Chambre de Com- merce, 7, rue Alcide de Gasperi, L-2981 Luxembourg. Overall 61% of the voting rights were represented at the meeting and all motions presented were approved by the shareholders. All documents and information regarding the Annual Shareholders’ Meeting can be found on our investor relations website at www.ir.stabilus.com. 5% MONDRIAN INVESTMENT PARTNERS LIMITED 1% MANAGEMENT Shareholder Structure in % as of September 30, 2015 94% OTHER INSTITUTIONAL AND PRIVATE INVESTORS 30 TO OUR SHAREHOLDERSANNUAL REPORT 2015 STABI LUS SHA RE Share price performance Data in per cent for October 1, 2014 to September 30, 2015 Closing price Sept 30, 2015: €32.25 Opening price Oct 1, 2014: €24.75 Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Stabilus SDAX (Price index) DAXsector Industrial (Price index) DAXsector All Automobile (Price index) G E N E R A L DATA Ticker symbol ISIN STM LU1066226637 German securities code (WKN) A113Q5 Stock exchange Frankfurt Stock Exchange Market Segment / Transparency Standard Regulated market / Prime Standard Index SDAX Number of shares outstanding 20,723,256 Nominal value per share Capital stock €0.01 €207,232.56 Closing price as of Sept 30, 2014 (Xetra) €24.70 Closing price as of Sept 30, 2015 (Xetra) €32.25 Market capitalization as of Sept 30, 2014 €511.9 m Market capitalization as of Sept 30, 2015 €668.3 m +50% +40% +30% +20% +10% 0% – 10% – 20% – 30% 31 TO OUR SHAREHOLDERSANNUAL REPORT 2015 B C O M B I N E D M A N A G E M E N T R E P O R T T R O P E R T N E M E G A N A M B P R E S S U R E T U B E E N D F I T T I N G N I T R O G E N P I S TO N PA C K A G E O I L P R E S S U R E T U B E N A M E BLOC-O-LIFT® The BLOC-O-LIFT gas springs are so-called locking gas springs. They can have spring or rigid locking. The rigid locking version is available as orientation-specific or non-orientation specific. Depending on the application, BLOC-O-LIFT can be equipped with a patented, corrosion- free actuation tappet. Primarily application areas for BLOC-O-LIFT gas springs are furniture manufacture, medical technology, building technology, aviation and aeronautics, automotive design, and many industrial applications. T 1 5 8 3 – 1 8 7 2 8 4 – 4 6 7 9 N P R – 1 1 0 S E A L A N D G U I D E PA C K A G E P I S TO N R O D P I S TO N R O D E N D F I T T I N G Contents C O M B I N E D M A N A G E M E N T R E P O R T C O M B I N E D M A N A G E M E N T R E P O R T as of and for the fiscal year ended September 30, 2015 3 5 G E N E R A L 4 5 L I Q U I D I T Y 3 5 S T R A T E G Y 4 7 R E S U L T S O F O P E R A T I O N S A N D F I N A N C I A L P O S I T I O N S O F S T A B I L U S S . A . 3 7 R E S E A R C H A N D D E V E L O P M E N T 3 8 B U S I N E S S A N D G E N E R A L E N V I R O N M E N T 3 9 R E S U LT S O F O P E R A T I O N S 4 7 R I S K S A N D O P P O R T U N I T I E S 5 3 C O R P O R A T E G O V E R N A N C E 5 5 S U B S E Q U E N T E V E N T S 4 3 D E V E L O P M E N T O F O P E R A T I N G S E G M E N T S 5 5 O U T L O O K 4 4 F I N A N C I A L P O S I T I O N 34 A N N U A L R E P O R T 2 0 1 5 G e n e r a l S t r a t e g y G E N E R A L new applications and selected add-on acquisitions and (iv) main- tain and strengthen the Company’s cost and quality leadership. Stabilus S.A., Luxembourg, hereafter also referred to as “Stabilus” D R I V E P R O F I TA B L E A N D C A S H G E N E R AT I N G or the “Company” is a public limited liability company (société G R O W T H I N A L L R E G I O N A L S E G M E N T S A N D anonyme) incorporated in Luxembourg and governed by Luxem- A C R O S S E N D M A R K E T S bourg law. The registered office is 2 rue Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg. The Stabilus Management aims to continue to increase revenue, Stabilus S.A. is the parent company of the Stabilus Group. regions and sectors where the Stabilus Group currently has lower profits and cash flows across all businesses by further focusing on market shares, entering new markets and by strengthening our Stabilus Group’s operating entities typically use the brand name position with selected add-on acquisitions. “Stabilus” in their registered name. The Group operates in three regions with its subsidiaries. These regions are Europe (Luxem- Automotive & Powerise: focus on rapidly growing bourg, Germany, Romania, France, Italy, Spain, Switzerland and regions and increased comfort United Kingdom), NAFTA (United States and Mexico) and Asia / Stabilus intends to continue to further expand its international Pacific and Rest of World (RoW) (China, South Korea, Japan, Aus- presence in rapidly growing markets, in particular in Asia, which tralia, Brazil, New Zealand). has become a significant growth driver for the automotive sector and where the Company’s market share still lags behind the market The Stabilus Group is a leading manufacturer of gas springs and share in other regions. Management seeks to increase revenue dampers as well as electromechanical tailgate opening systems. from South Korean and Japanese OEMs in the automotive business, The products are used in a wide range of applications in the auto- supported by new targeted investments in additional production motive and the industrial sector, including furniture applications. capacity in Asia. To take advantage of the rapidly growing Chinese Typically the products are used to aid the lifting and lowering or automotive manufacturing sector, the Company plans to increase dampening of movements. As world market leader for gas springs, revenue from Chinese OEMs. To achieve this goal, management has the Group ships to all key vehicle producers. Various Tier 1 suppli- implemented a targeted sales strategy and is further strengthening ers of the global vehicle industry diversify the Group’s customer engineering capabilities in China, which has already secured orders base. A broad spectrum of industrial customers diversify the Groups from several local Chinese OEMs. customer base. S T R AT E G Y Stabilus plans to further take advantage of the strong growth rates of automatic opening and closing systems driven by comfort require- ments across all regions. The strong consumer demand for SUVs, crossovers and hatchback cars provides a reliable base for a business growth. The Company is in the process of adding further capabilities for Powerise production in all the markets Stabilus is active. The Stabilus Group is the leading supplier of gas springs and hydraulic dampers for the automotive and industrial sectors world- Industrial: increase regional coverage wide. In addition, the Company has successfully expanded into the While Stabilus has a large industrial market share in certain Euro- production and sale of automatic opening and closing systems. pean countries in which the Company has a strong commercial Stabilus’ strategic aim is to further extend its leadership positions presence, the Group believes that there is still potential to increase in these industries. The key focus areas of its strategy STAR are to: market share in other European countries, as well as in Asia and (i) drive profitable and cash generating growth, (ii) benefit from North America, where the Company’s market coverage is compara- megatrends, such as increased standard of living, increasing com- tively less strong. Management has identified regions and countries fort requirements and aging population, (iii) focus on innovative in which the Company is in the process of repeating the successful gas spring solutions, especially in the industrial business through strategies from markets where Stabilus has a high share, by 35 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT S t r a t e g y improving market coverage with the objective of strengthening the F O C U S O N I N N O VAT I V E C O M P O N E N T S A N D local sales footprint. In addition, Stabilus intends to transfer our S YS T E M S TO TA K E A D VA N TA G E O F G L O B A L production, application engineering and sales know-how from I N D U S T RY T R E N D S Europe and NAFTA to the Asia / Pacific region, where the Group’s footprint is comparatively less strong. The Company is increasing its The products of Stabilus are at the forefront of innovation in presence in China. Stabilus has extended its Chinese production motion control. The Company employs 256 people in R&D across its capabilities and set up local application engineering, sales and pro- three regional segments as of September 30, 2015. Stabilus is ject management teams. In China, the Company is in the process of focused on designing and manufacturing highly-engineered com- ramping up the first production line for Industrial products, which ponents, modules and system solutions that address key global will help gain additional local market shares. The Stabilus manage- trends in the automotive and industrial sectors. The Company aims ment believes that a strong local presence in China will further to adapt to these trends by continuously improving its existing strengthen the Group’s position in the Asia / Pacific region. technology, in particular the requirement for ergonomic solutions as well as automated opening and closing systems. Management Swivel Chair: supplying high quality products believes that actively addressing these key trends reinforces the As the only non-Asian producer of gas springs for high quality swivel Company’s ability to maintain its market share and profitability. chairs, Stabilus is in an excellent position to gain further market shares in Europe and NAFTA. Management has successfully turned In the industrial sector, the Company continues to develop products around the Swivel Chair business and today, the business is grow- for enhanced safety and comfort. For example, it has developed an ing profitably again. Stabilus expects this positive trend to continue. application based on the Bloc-O-Lift system for use in airplane seats. B E N E F I T F R O M M E G AT R E N D S, S U C H A S used in solar modules for solar parks that automatically follow the I N C R E A S I N G C O M F O R T R E Q U I R E M E N T S A N D sunlight in their setup, thus being subject to sometimes severe A G I N G P O P U L AT I O N weather conditions such as strong winds – the dampers from Stabi- In addition, the dampers manufactured by Stabilus are increasingly lus help protect the modules from damage. Stabilus continues to adapt its product offerings towards mega- trends, such as comfort requirements. The Powerise solution, for Management expects that recent and continued wins with key cli- example, enhances comfort through automatically opening and ents for Powerise solutions due to the superior technology features closing car tailgates and trunk lids. In addition, the Company’s gas of the Company’s products will be a key growth driver for Stabilus. springs offer more comfortable opening and closing solutions as While Powerise systems were in the past being deployed only in well as increased comfort in swivel chairs and industrial applica- the luxury and SUV car segments, Powerise has recently success- tions, such as airplane seats. fully gained market shares with midsize vehicles such as the VW The global population of older persons is growing considerably in improving and further developing its current spindle drive tech- faster than the population as a whole. Stabilus focuses on capitaliz- nology to further reduce noise, weight and cost. In addition, Stabi- ing on this megatrend. It is inevitable that an aging consumer base lus is exploring new industrial applications for its Powerise systems. Passat and Ford Mondeo. The Company is working on and investing requests more automated systems in their vehicles and in other aspects of their daily lives. The Group intends to benefit from this megatrend as it has a leading position as a system provider in automatic opening and closing systems that will continue to expe- rience an increasing demand in applications for its solutions. 36 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT R e s e a r c h a n d D e v e l o p m e n t M A I N TA I N A N D S T R E N G T H E N C O S T A N D ments, overhead reduction, consolidation of manufacturing sites Q U A L I T Y L E A D E R S H I P and the rollout/implementation of local sourcing, to improve the Company’s operating cost. Build on the Group’s global footprint and proximity to customers For the coming years, management expects to continue on this path Based on Stabilus’ guiding strategy “in the region, for the region”, with productivity improvements, a range of initiatives to profitability it has established its facilities in close proximity to the Group’s cus- backed by a high level of business which has already been locked in. tomers and has done so continuously over the past years e.g. in Due to the Company’s production know-how and long-standing China, South Korea, the US, Mexico and Romania. It is the Compa- client relationships backed by Stabilus’ quality leadership, man- ny’s goal to continue to provide a comprehensive product and ser- agement is confident that it can protect the Group’s market shares vice offering to current and new customers globally. The Group in gas springs in Europe and NAFTA and gain further market shares seeks to fully globalize its product portfolio and to provide an even for gas springs in the Asia / Pacific region, especially with local cus- broader range of components and systems to each customer. tomers. An increasing market share in Powerise supports the positive Continue to optimize cost base Stabilus continuously implements operational improvements relat- ing to plant and overhead, which includes productivity improve- outlook. R E S E A R C H A N D D E V E L O P M E N T Research and development is a key function for Stabilus to develop The global research and development department with an average products that anticipate customer needs and desires. Already of 241 employees comprises several locations with its major loca- today, the products of Stabilus are used in a considerable number tion in Koblenz (Germany). The Romanian and US entities have of applications in a large variety of industries. been strengthened to provide R&D services to the Group as well as local customers. Research and development activities are not per- Stabilus research and development aim is to ensure a long-time formed directly by Stabilus S.A. future viability and enhancing technological competitiveness. The optimization of the research and development resource allocation is a future goal. Research and development R&D expenditures (incl. capitalized R&D) % of revenue Thereof capitalized Employees (average) 2015 37,693 6.2% 13,475 241 2014 33,190 6.5% 12,899 224 2013 31,387 6.8% 13,814 209 T _ 001 2012 26,785 6.0% 12,834 163 37 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Busines s and general env ironment BUSINESS AND GENERAL E N V I R O N M E N T Macroeconomic development The global demand for vehicles developed positively in the last twelve months. Following the global increase in demand for pas- In its latest October 2015 World Economic Outlook, the Interna- senger cars, SUVs, crossovers, station wagons, vans and light com- tional Monetary Fund (IMF) reduced the growth forecast for the mercial vehicles, the number of vehicles produced in calendar year global economy from 3.3% to 3.1% for the current calendar year 2015 is expected to increase to around 89 million units, up by 2015. This reduced forecast reflects the slowdown in emerging approximately 6% from the 82 million units in calendar year 2012. markets and a weaker recovery in advanced economies. While the About 80% of this increase relates to China, but also the develop- forecast for 2016 still expects a significant growth of global GDP ment of production volumes in NAFTA continues to be positive. The compared to 2015, the forecast for 2016 was reduced by 0.2 per- number of light vehicles produced in Europe slightly improved. centage points down to a growth of 3.6%. The total worldwide production of light vehicles in 2015 is The IMF sees risks in the high debt levels of many so called expected to reach 89 million units. The total increase by approxi- “advanced” economies, the weakness of commodity prices and mately 2% compared to 2014 is driven by the positive develop- the prospect of tighter global financial conditions. Structural ments in NAFTA (around +5%), Asia (around +2%) and Europe reforms in many countries continue to be needed to effectively (around +3%), while the production volumes in Rest of World are counter the risks. expected to shrink by around (5)%. Development of regional markets Development of industrial markets The development of the regional markets in which the Company In our industrial business, the Company sells its products to customers operates shows a divergent development. As the growth rate of in a large number of industries, including, among others, agricultural the Eurozone is projected on a stable base of about 1.6%, the machines, railway, aircraft applications, commercial vehicles, marine projections for the NAFTA countries show a growth rate of 2.3% applications, furniture, health care and production equipment. These to 2.8%. The growth rate for ASEAN region is projected to rise sales depend on the industrial production level in general, therefore, from 4.6% in 2014 to 4.8% in 2016. The projected growth rate its performance in the industrial segment is influenced by the general for China is still on a high level but decreasing from 7.3% in state and the performance of the global economy. 2013 to 6.3% in 2016. Development of vehicle markets An important driver for Group revenue in the automotive and industrial market is the global production volume of light vehicles which comprise passenger cars, SUVs, crossovers, station wagons, vans and light commercial vehicles weighing less than six tons. 38 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Resu lts of o perati ons R E S U LT S O F O P E R AT I O N S The table below sets out Stabilus Group’s consolidated income statement for the fiscal year 2015 in comparison to the fiscal year 2014: Income statement I N € M I L L I O N S Revenue Cost of sales Gross profit Research and development expenses Selling expenses Administrative expenses Other income Other expenses Profit from operating activities (EBIT) Finance income Finance costs Profit / (loss) before income tax Income tax income/ (expense) Profit / (loss) for the period Revenue Group’s total revenue developed as follows: Year ended Sept 30, 2015 611.3 (463.6) 147.7 (24.2) (44.1) (27.3) 11.2 (7.6) 55.7 17.9 (42.4) 31.1 (14.1) 17.0 2014 507.3 (387.7) 119.6 (20.3) (38.7) (32.6) 6.0 (2.9) 31.2 17.5 (38.8) 9.9 0.1 10.0 T _ 002 Change % change 104.0 (75.9) 28.1 (3.9) (5.4) 5.3 5.2 (4.7) 24.5 0.4 (3.6) 21.2 20.5% 19.6% 23.5% 19.2% 14.0% (16.3)% 86.7% >100.0% 78.5% 2.3% 9.3% >100.0% (14.2) <(100.0)% 7.0 70.0% Revenue by region (location of Stabilus company) T _ 003 I N € M I L L I O N S Europe NAFTA Asia / Pacific and RoW Revenue Year ended Sept 30, 2015 308.5 229.3 73.5 611.3 2014 267.3 176.8 63.2 507.3 Change % change 41.2 52.5 10.3 104.0 15.4% 29.7% 16.3% 20.5% 39 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Resu lts of operatio ns Revenue by markets I N € M I L L I O N S Automotive Gas Spring Powerise Industrial Swivel Chair Revenue Year ended Sept 30, 2015 434.2 294.4 139.8 149.3 27.7 611.3 2014 340.8 255.0 85.8 142.3 24.2 507.3 T _ 004 Change % change 93.4 39.4 54.0 7.0 3.5 104.0 27.4% 15.5% 62.9% 4.9% 14.5% 20.5% Total revenue in the fiscal 2015 increased by 20.5% compared to percentage of revenue, R&D expenses remained at 4.0% in fiscal the previous fiscal year supported a stronger US Dollar (+€33.0 mil- year 2015 compared to 4.0% in fiscal year 2014. The Group lion). All Stabilus regions have shown an increase in revenue. At invests in the development of new applications and products and 29.7% NAFTA was up the most, compared with Europe at 15.4% and in the continuous optimization and improvement of existing prod- Asia / Pacific and RoW at 16.3%. The increase is mainly due to our ucts and product lines. The focus in the fiscal year 2015 were the growing Powerise business. Its revenue increased from €85.8 mil- R&D projects for the Powerise products. lion in the fiscal year 2014 to €139.8 million in the fiscal year 2015 by 62.9% or €54.0 million. The ongoing increase in the Powerise S E L L I N G E X P E N S E S business is the result of new OEM platform wins, supported by the launch of various Powerise variants and by increased take rates. The Selling expenses increased to €(44.1) million in the fiscal year increase in the Automotive Gas Spring by 15.5% or €39.4 million ended September 30, 2015 from €(38.7) million in the fiscal year is mainly driven by the improved economic environment and recov- ended September 30, 2014. As a percent of revenue, these ering vehicle sales in NAFTA and Europe. Sales in the Industrial expenses decreased from 7.6% to 7.2%. business increased by 4.9% from €142.3 million in the fiscal year ended September 30, 2014 to €149.3 million in the fiscal year A D M I N I S T R AT I V E E X P E N S E S ended September 30, 2015. Our revenue in the Swivel Chair busi- ness increased year-on-year by 14.5% to €27.7 million after a Administrative expenses decreased significantly from €(32.6) mil- slight decrease in the prior year. lion in fiscal year 2014 to €(27.3) million in fiscal year 2015. As a Cost of sales and overhead expenses regards to the 2014 IPO. The expenses returned to historical aver- percentage of revenue, administrative expenses decreased as well, from 6.4% to 4.5%. The decrease is mainly due to the expenses in C O S T O F S A L E S age levels. OT H E R I N C O M E A N D E X P E N S E Cost of sales in the fiscal year 2015 increased by 19.6%, compared to the previous fiscal year, and thus increased lower than the Other income increased from €6.0 million in fiscal year 2014 by increase in revenue. The cost of sales as a percentage of revenue €5.2 million to €11.2 million in fiscal year 2015. This increase is decreased to 75.8% compared to 76.4% in the prior year. primarily the result of exchange rate-related valuation at the bal- R & D E X P E N S E S ance sheet day. R&D expenses (net of R&D capitalization) in the fiscal year 2015 €(7.6) million in fiscal year 2015 mainly as the result of exchange increased by 19.2% compared to the prior fiscal year 2014. As a rate related valuation at the balance sheet day. Other expense increased from €(2.9) million in fiscal year 2014 to 40 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Resu lts of o perati ons F I N A N C E I N C O M E A N D C O S T S I N C O M E TA X E X P E N S E Finance income increased slightly from €17.5 million in fiscal year After income tax income of €0.1 million in the previous fiscal year, 2014 to €17.9 million in fiscal year 2015 primarily due to the the Group recorded a tax expense of €(14.1) million in the fiscal increased net foreign exchange gains on financial assets and liabil- year 2015. This was mainly driven by the generation of taxable profits ities compensating the effect of the gains in the fair value in deriv- in most of the jurisdictions in which the Group operates. Certain ative instruments and carrying amount of financial assets in the expenses in fiscal year 2015 are deemed to be not tax deductable. prior year. In the prior fiscal year 2014 the tax expenses were compensated by the deferred tax income driven by the usage of the interest carry- Finance costs increased from €(38.8) million to €(42.4) million in forwards in the German tax group. See notes to Consolidated fiscal year 2015. The increase was essentially caused by a loss from Financial Statements below, note 10, for further details. changes in the carrying amount of derivative instruments by €15.4 mil- lion that incurred in course of the early redemption of Stabilus’ senior E B I T DA A N D A D J U S T E D E B I T DA secured notes in June 2015 in comparison to a loss from changes in the carrying amount of EUSIs (equity upside sharing instruments) The table below sets out a reconciliation of EBIT to EBITDA and by € 6.7 million in the prior year. The interest expense decreased by adjusted EBITDA for the fiscal years 2015 and 2014: € 5.1 million resulting from the new re-financing in the fiscal year 2015 as well as lower debt levels than in fiscal year 2014. Reconciliation of EBIT to adjusted EBITDA T _ 005 I N € M I L L I O N S Profit from operating activities (EBIT) Depreciation Amortization EBITDA Advisory* Restructuring / ramp-up Pension interest add back Total adjustments Adjusted EBITDA Year ended Sept 30, 2015 55.7 22.6 21.2 99.5 1.4 5.3 1.1 7.8 107.3 2014 31.2 20.2 19.9 71.3 17.6 2.1 1.5 21.2 92.5 Change % change 24.5 2.4 1.3 28.2 (16.2) 3.2 (0.4) (13.4) 14.8 78.5% 11.9% 6.5% 39.6% (92.0)% >100.0% (26.7)% (63.2)% 16.0% * IPO, legal, bond issuance, tax audit and reorganization related advisory expenses. Adjusted EBITDA represents EBITDA, as adjusted by management sented because we believe it is a relevant measure for assessing primarily in relation to severance, consulting, restructuring and other performance as it is adjusted for certain one-time or non- recurring non-recurring costs (e.g. IPO), expenses for one-time legal disputes items that are not expected to impact our Group going forward, as well as interest on pension changes. Adjusted EBITDA is pre- and thus aids in an understanding of EBITDA in a given period. 41 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Resu lts of operatio ns E B I T A N D A D J U S T E D E B I T The table below shows reconciliations of profit from operating activities (EBIT) to adjusted EBIT for the fiscal years 2015 and 2014: Reconciliation of EBIT to adjusted EBIT T _ 006 Year ended Sept 30, 2015 55.7 1.4 5.3 1.1 12.7 20.5 76.2 2014 31.2 17.6 2.1 1.5 12.7 33.9 65.1 Change % change 24.5 (16.2) 3.2 (0.4) – (13.4) 11.1 78.5% (92.0%) >100.0% (26.7%) 0.0% (39.5%) 17.1% I N € M I L L I O N S Profit from operating activities (EBIT) Advisory* Restructuring / ramp-up Pension interest add back PPA adjustments - depreciation and amortization Total adjustments Adjusted EBIT * IPO, legal, bond issuance, tax audit and reorganization related advisory expenses. Adjusted EBIT represents EBIT, as adjusted by management primarily in relation to severance, consulting, restructuring and other non- recurring costs, expenses for one-time legal disputes, IPO- related expenses, launch costs for new products as well as interest on pension changes and the depreciation and amortization of adjust- ments of Group’s assets to fair value resulting from the April 2010 purchase price allocation. 42 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Develop ment of op erating segmen ts D E V E L O P M E N T O F O P E R AT I N G S E G M E N T S Stabilus Group is organized and managed primarily on a regional The table below sets out the development of our operating seg- level. The three reportable operating segments of the Group are ments for the fiscal years 2015 and 2014. Europe, NAFTA, Asia / Pacific and RoW. Operating segments I N € M I L L I O N S Europe External revenue1) Intersegment revenue1) Total revenue1) Adjusted EBITDA as % of total revenue Adjusted EBIT as % of total revenue as % of external revenue NAFTA External revenue1) Intersegment revenue1) Total revenue1) Adjusted EBITDA as % of total revenue Adjusted EBIT as % of total revenue as % of external revenue Asia/ Pacific and RoW External revenue1) Intersegment revenue1) Total revenue1) Adjusted EBITDA as % of total revenue Adjusted EBIT as % of total revenue as % of external revenue 1) Revenue breakdown by location of Stabilus company (i. e. “billed-from view”). Year ended Sept 30, 2015 2014 Change % change T _ 007 308.5 28.3 336.8 62.5 18.6% 41.1 12.2% 13.3% 229.3 4.6 233.9 31.6 13.5% 25.1 10.7% 10.9% 73.5 0.4 73.9 13.2 17.9% 10.0 13.5% 13.6% 267.3 23.5 290.8 57.5 19.8% 38.0 13.1% 14.2% 176.8 2.5 179.3 22.8 12.7% 16.6 9.3% 9.4% 63.2 0.1 63.3 12.2 19.3% 10.2 16.1% 16.1% 41.2 4.8 46.0 5.0 15.4% 20.4% 15.8% 8.7% 3.1 8.2% 52.5 2.1 54.6 8.8 29.7% 84.0% 30.5% 38.6% 8.5 51.2% 10.3 0.3 10.6 1.0 16.3% >100.0% 16.7% 8.2% (0.2) (2.0)% 43 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Financ ial positio n The external revenue generated by our European companies (in 51.2% or €8.5 million from €16.6 million as of September 30, terms of revenue the strongest region of the Group) increased by 2014 to €25.1 million as of September 30, 2015. 15.4% from €267.3 million in the fiscal year 2014 to €308.5 mil- lion in the fiscal year 2015. Adjusted EBITDA of this operating seg- In the fiscal year 2015, the external revenue of our companies in the ment increased in this period by 8.7% to €62.5 million with an Asia / Pacific and RoW segment increased by €10.3 million or 16.3% adjusted EBITDA margin of 18.6%. Adjusted EBIT of the segment to €73.5 million compared to the corresponding fiscal year 2014. Europe increased by 8.2% or €3.1 million from €38.0 million as of This segment’s result, measured as adjusted EBITDA, increased by September 30, 2014 to €41.1 million as of September 30, 2015. €1.0 million to €13.2 million. Within this segment China remains The external revenue of our companies located in the NAFTA strong, while Brazil recorded lower revenue and margin than in fiscal region, our most dynamically growing region, increased by 29.7% year 2014. In China we are clearly benefiting from the trend towards from €176.8 million in the fiscal year 2014 to €229.3 million in the more SUVs, a body style that offers many gas spring application fiscal year 2015 primarily due to the strong growth in Powerise opportunities. Adjusted EBIT of the segment Asia / Pacific and RoW business and a strong US Dollar. NAFTA’s adjusted EBITDA margin slightly decreased by €0.2 million from €10.2 million as of Septem- increased from 12.7% in the fiscal year 2014 to 13.5% in the fis- ber 30, 2014 to €10.0 million as of September 30, 2015. cal year 2015. Adjusted EBIT of the segment NAFTA increased by F I N A N C I A L P O S I T I O N Balance sheet I N € M I L L I O N S Assets Total non-current assets Total current assets Total assets Equity and liabilities Total equity Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Sept 30, 2015 Sept 30, 2014 Change % change T _ 008 358.7 183.6 542.2 76.7 349.4 116.2 465.5 542.2 351.1 169.2 520.3 76.1 353.7 90.5 444.2 520.3 7.6 14.4 21.9 0.6 (4.3) 25.7 21.3 21.9 2.2% 8.5% 4.2% 0.8% (1.2)% 28.4% 4.8% 4.2% TOTA L A S S E T S N O N - C U R R E N T A S S E T S The Group’s balance sheet total increased from €520.3 million as Our non-current assets increased by €7.6 million or 2.2% mainly due of September 30, 2014 by 4.2% to €542.2 million as of September to higher assets under construction which result from the capacity 30, 2015 mainly due to higher current assets (+€14.4 million) and – expansion of our Chinese plant, the powder paint equipment at our on the equity and liabilities side of the balance sheet – due to Korean production facility, gas spring capacity expansion projects at higher current liabilities (+€25.7 million). the German and US facilities, a finance lease production facility in Romania as well as from expansion of Powerise production. 44 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Liq uid ity C U R R E N T A S S E T S N O N - C U R R E N T L I A B I L I T I E S Current assets increased by 8.5% or €14.4 million. This is essen- Non-current liabilities decreased slightly from €353.7 million as tially the consequence of a higher cash balance and higher trade of September 30, 2015 by €(4.3) million to €349.4 million as of accounts receivable, compared to September 30, 2014. September 30, 2015. The senior secured notes with the remaining E Q U I T Y principal amount of €256.1 million (and an interest rate of 7.75% p.a.) were replaced with a new €270.0 million facility A commit- ment (with an interest rate of currently 2% over Euribor p.a.) in The Group’s equity as of September 30, 2015 increased, as com- June 2015. A redemption of €2.5 million was made as of Septem- pared to September 30, 2014, from €76.1 million to €76.7 million. ber 30, 2015. The profit generated in the fiscal year 2015 amounts to 17.0 mil- lion and other comprehensive income amounts to €(16.4) million. C U R R E N T L I A B I L I T I E S Other comprehensive income comprises unrealized actuarial gains of € 0.1 million on our German pension plan and losses from foreign Current liabilities increased by €25.7 million from €90.5 million as currency translations of €(16.4) million. The equity ratio slightly of September 30, 2014 to €116.2 million as of September 30, decreased from 14.6% as of September 30, 2014 to 14.1% as of 2015. The increase of the trade account payables and current pro- September 30, 2015. visions was partly offset by a decrease in current tax liabilities. L I Q U I D I T Y Our primary sources of liquidity are cash flows from operating C A S H F L O W F R O M O P E R AT I N G A C T I V I T I E S activities. Going forward we expect that our capital expenditure and debt service will be covered by operating cash flow in the next Cash flow from operating activities decreased by €(1.8) million twelve months. Cash flows I N € M I L L I O N S Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities (incl. interest) Net increase / (decrease) in cash Effect of movements in exchange rates on cash held Cash as of beginning of the period Cash as of end of the period from €87.8 million in fiscal year 2014 to €86.0 million in fiscal year 2015 mainly due to higher working capital, inspite of launching a €6.7 million factoring program in Romania. Year ended Sept 30, 2015 86.0 (51.2) (28.4) 6.4 (0.4) 33.5 39.5 2014 87.8 (35.6) (41.2) 11.0 0.7 21.8 33.5 T _ 009 Change % change (1.8) (15.6) 12.8 (4.6) (1.1) 11.7 6.0 (2.1%) 43.8% (31.1)% (41.8)% <(100.0)% 53.7% 17.9% 45 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Liquidity C A S H F L O W F R O M I N V E S T I N G A C T I V I T I E S The cash flow from financing activities also comprises payments for finance interest of €(32.2) million (PY: €(30.1) million). The interest Cash outflow from investing activities increased by €(15.6) million in fiscal year 2015 includes a €(9.9) million early redemption pay- from €(35.6) million in fiscal year 2014 to €(51.2) million in fiscal year ment to the holder of the senior secured notes. 2015, mainly due to the investments in the Powerise production and the Chinese expansion. F R E E C A S H F L O W ( F C F ) C A S H F L O W F R O M F I N A N C I N G A C T I V I T I E S Free cash flow (FCF) decreased from €22.1 million in fiscal year 2014 to €2.6 million. The following table sets out the composition Cash flow from financing activities amounted to €(28.4) million in of the non-IFRS figure free cash flow. fiscal year 2015 and to €(41.2) million in fiscal year 2014. This is mainly driven by the Group’s refinancing in June 2015, i.e. pay- Free cash flow (FCF) comprises IFRS cash flow statement items ments for redemption of senior secured notes (€(256.1) million) “cash flow from operating activities”, “cash flow from investing and receipts under the new facility A commitment (€270 million). activities” and “payments for interest” (net interest payments). Free cash flow T _ 010 I N € M I L L I O N S Cash flow from operating activities Cash flow from investing activities Payments for interest Free cash flow Year ended Sept 30, 2015 86.0 (51.2) (32.2) 2.6 2014 87.8 (35.6) (30.1) 22.1 Change % change (1.8) (15.6) (2.1) (19.5) (2.1%) 43.8% 7.0% (88.2%) 46 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT C O M B I N E D M A N A G E M E N T R E P O R T Statu tory results of op eratio ns an d finan cial p ositi ons of STABI LU S S. A. Risks and Op por tunit ies S TAT U TO RY R E S U LT S R I S K S A N D O F O P E R AT I O N S A N D O P P O R T U N I T I E S F I N A N C I A L P O S I T I O N S O F S TA B I L U S S. A . Income Risk management and control over financial reporting in the Stabilus Group The Company considers Risk Management (RM) to be a key part of effective management and internal control. The Company strives The Company’s income results from services to Stabilus Group entities. for effective RM and financial navigation to safeguard the assets of Charges the Company and to proactively support the Company’s strategic and compliance initiatives. The goal of RM is to help the Company to operate more effectively in a dynamic environment by providing The charges in the fiscal year 2015 are mainly driven by expenses a framework for a systematic approach to risks management and with regard to the 2015 refinancing. The refinancing expenses exploring opportunities with an acceptable level of risk. The Super- amount to €5.8 million. visory Board and the Management Board regularly discuss the oper- Equity ational and financial results as well as the related risks. Risk Management covers financial, strategic, compliance as well The Company holds a strong position with its 96.3% equity ratio. operational aspects. Operational risk is the risk of direct or indirect Assets loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks The fixed assets mainly consist of the shares in affiliated undertakings. such as those arising from legal and regulatory requirements and Current assets are driven by amounts owed by affiliated undertak- tional risks arise from all of the Group’s operations. The Group’s ings triggered by the service level agreements. objective is to manage operational risk in a way to balance the generally accepted standards of corporate behavior. These opera- Liabilities avoidance of financial losses and damage to the Group’s reputa- tion with overall cost effectiveness, as well as avoiding control pro- cedures that restrict initiative and creativity. The Company’s policy Current liabilities increased by €1.5 million, mainly driven by the on managing financial risks seeks to ensure effective liquidity and amounts owed to affiliated companies. cash flow management and protection of group equity capital against financial risks. As part of its evolution, the Company imple- ments continuous improvements in its risk management and inter- nal control system. 47 ANNUAL REPORT 2015 Risks an d opport unit ies Our accounting control system is designed to ensure all business a significant extent, by the general state and the performance of transactions are correctly and promptly accounted for and that reli- the global economy. able data on the Company’s financial situation is available. It ensures compliance with legal stipulations, accounting standards Although the global economy has recovered a lot from the severe and accounting rules. A Group-wide calendar of deadlines helps downturn in 2008 and 2009, the recent volatility of the financial ensure the complete and timely processing of financial statements. markets and also the slower than expected economic growth in By separating financial functions and through ongoing review, we Asia show that there can be no assurance that any recovery is sus- ensure that potential errors are identified on a timely basis and tainable or that there will be no recurrence of the global financial accounting standards are complied with. and economic crisis or similar adverse market conditions. Our internal control system is an integral component of the risk Stabilus manages these opportunities and risks by operating in dif- management. The purpose of our internal control system for ferent regions and markets for local and global customers. accounting and reporting is to ensure its compliance with legal stipulations, with the principles of proper accounting, with the W E O P E R AT E I N C Y C L I C A L I N D U S T R I E S rules on the International Financial Reporting Standards as adopted by the EU and with Group standards. In addition, we per- Our business is characterized by high fixed costs. Should our facili- form assessments to help identify and minimize any risk with a ties be underutilized, this could result in idle capacity costs, write- direct influence on our financial reporting. We monitor changes in offs of inventories and losses on products due to falling average accounting standards and enlist the advice of external experts to sale prices. Furthermore, falling production volumes cause declines reduce the risk of accounting misstatements in complex issues. in revenue and earnings. On the other hand, our facilities might have insufficient capacity to meet customer demand if the markets The Company and individual entity financial statements are subject in which we are active grow faster than we have anticipated. to external audits which act as an independent check and monitor- ing mechanism of the accounting system and its output. The princi- Our automotive business, from which we generated 71% of our pal risks that could have a material impact on the Group are set revenue in the fiscal year ended September 30, 2015, sells its prod- out in the Note 32 of the consolidated financial statements and are ucts primarily to automotive original equipment manufacturers summarized below: Risks and opportunities related to the markets in which we operate (“OEMs”) in the automotive industry. These sales are cyclical and depend, among other things, on general economic conditions as well as on consumer spending and preferences, which can be affected by a number of factors, including employment, consumer confidence and income, energy costs, interest rate levels and the availability of consumer financing. Given the variety of such eco- We are exposed to risks and opportunities associated with the per- nomic parameters influencing the global automotive demand, the formance of the global economy and the performance of the econ- volume of automotive production has historically been, and will omy in the jurisdictions in which we operate. continue to be, characterized by a high level of fluctuation, making it difficult for us to accurately predict demand levels for our prod- Due to our global presence, we are exposed to substantial risks ucts aimed at automotive OEMs. and opportunities associated with the performance of the global economy. In general, demand for our products is dependent on the We generated, in the aggregate, 29% of our revenue in the fiscal demand for automotive products as well as for commercial vehi- year ended September 30, 2015 from sales to our industrial and cles, agricultural machinery, medical equipment, aerospace, marine swivel chair customers. We sell our products to customers in and furniture components, which in turn is directly related to the diverse industries, including, among others, agricultural machines, strength of the global economy. Therefore, our financial perfor- railway, aircraft applications, commercial vehicles, marine applica- mance has been influenced, and will continue to be influenced, to tions, furniture, health care and production equipment. These sales depend on the industrial production level in general as well as on 48 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Risks and opp ort unit ies the development of new products and technologies by our custom- exchange controls, exchange rate fluctuations and devaluations; ers, which include our products as component parts. Stabilus man- changes in local economic conditions; governmental restrictions on ages these opportunities and risks by operating in different regions foreign investment, transfer or repatriation of funds; protectionist and markets for the local and global customers. trade measures, such as anti-dumping measures, duties, tariffs or embargoes; prohibitions or restrictions on acquisitions or joint ven- The business environment in which we operate is characterized by tures; changes in laws or regulations and unpredictable or unlawful intense competition, which affects some of our products and mar- government actions; the difficulty of enforcing agreements and col- kets, which could reduce our revenue or put continued pressure on lecting receivables through foreign legal systems; variations in pro- our sales prices. tection of intellectual property and other legal rights; potential nationalization of enterprises or other expropriations; and political The markets in which we operate are competitive and have been or social unrest or acts of sabotage or terrorism. As personnel costs characterized by changes in market penetration, increased price have a significant effect on our business, we are also exposed to competition, the development and introduction of new products, the risks of labor cost inflation and limited employment contract product designs and technologies by significant existing and new flexibility in the countries in which our production facilities are competitors. The majority of gas springs and electromechanical lift- located and where we have sales personnel. Any of these risks ing and closing systems manufactured globally are used for either could have a material adverse effect on our business, financial con- automotive, industrial or swivel chair applications, which are core dition and results of operations. markets for us. Our competitors are typically regional companies and our competition with them is generally on a regional scale. We W E A R E E X P O S E D TO O P P O R T U N I T I E S A N D R I S K S compete primarily on the basis of price, quality, timeliness of deliv- A S S O C I AT E D W I T H M A R K E T T R E N D S A N D D E V E L- ery and design as well as the ability to provide engineering support O P M E N T S and service on a global basis. Should we fail to secure the quality of our products and the reliability of our supply in the future, then There can be no assurance that (i) we will be successful in develop- more and more of our customers could decide to procure products ing new products or systems or in bringing them to market in a from our competitors. timely manner, or at all; (ii) products or technologies developed by others will not render our offerings obsolete or non-competitive; Our efforts to expand in certain markets are subject to a variety of (iii) our customers will not substitute our products with competing business, economic, legal and political risks. products or alternate technologies (such as third arm systems, hydraulic drives or hinge/direct drives); (iv) the market will accept We manufacture our products in several countries and we market our innovations; (v) our competitors will not be able to produce our and sell our products worldwide. We are actively operating and non-patented products at lower costs than we can; and (vi) we will expanding our operations in various markets, with a focus on the be able to fully adjust our cost structure in the event of contraction rapidly growing and emerging markets in the Asia / Pacific region, of demand. where we have production plants in China and South Korea, oper- ate a wide network of representative sales offices and employ our The Company develops appropriate strategies as a response to own sales force and distribution network. We plan to expand our these or similar market trends and to enhance existing products, Asian production capacities to meet growth expectations and sup- develop new products or keep pace with developing technology, to plement demand with our other regional productions as needed. counter loss of growth opportunities, pressure margins or the loss of existing customers. We devote resources to the pursuit of new Potential social, political, legal, and economic instability may pose technologies and products. In addition, technological advances and significant risks to our ability to conduct our business and expand wider market acceptance of our Powerise automatic lid drive sys- our activities in certain markets. Inherent in our international oper- tems (or the development and wider market acceptance of similar ations is the risk that any number of the following circumstances automatic lid drive systems by our competitors) could result in can- could affect our operations: underdeveloped infrastructure; lack of nibalization of our gas spring applications. qualified management or adequately trained personnel; currency 49 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Risks an d opport unit ies Risks and opportunities related to our business well as to the affected customer as manufacturer. In addition, defective products could result in loss of sales, loss of customers and loss of market acceptance. We are exposed to fluctuations in prices of prefabricated materials and components. L E G A L , TA X AT I O N A N D E N V I R O N M E N TA L R I S K S A N D O P P O R T U N I T I E S We procure large quantities of prefabricated materials and compo- nents from third-party suppliers. The prices of prefabricated materi- We are exposed to warranty and product liability claims. als, components and manufacturing services we purchase from our suppliers depend on a number of factors, including to a limited As a manufacturer, we are subject to product liability lawsuits and extent the development of prices of raw materials used in these other proceedings alleging violations of due care, violation of war- products, such as steel, copper, rubber and water, as well as energy, ranty obligations, treatment errors, safety provisions and claims which have been volatile in the past. arising from breaches of contract (like delivery delays), recall actions or fines imposed by government or regulatory authorities in So far, this has not resulted in a general increase in the cost of pre- relation to our products. Any such lawsuits, proceedings and other fabricated materials and components we procure for the manufac- claims could result in increased costs for us. Additionally, authori- ture of our products. However, it cannot be excluded that this vola- ties could prohibit the future sale of our products, particularly in tility may result in a cost increase in the future. If we are not able cases of safety concerns. The aforementioned scenarios could result to compensate for or pass on our cost increases to customers, such in loss of market acceptance, loss of revenue and loss of customers, price increases could have a material adverse impact on our finan- in particular against the background that many of our products are cial results. Even to the extent that we are successful in compen- components which often have a major impact on the overall safety, sating for or passing on our increased costs to our customers by durability and performance of our customers’ end-product. increasing prices on new products, the positive effects of such price increases may not occur in the periods in which the additional The risks arising from such warranty and product liability lawsuits, expenses have been incurred, but in later periods. If costs of raw proceedings and other claims are insured as we consider economi- materials and energy rise, and if we are not able to undertake cost cally reasonable, but the insurance coverage could prove insuffi- saving measures elsewhere in our operations or increase to an ade- cient in individual cases. Additionally, any major defect in one of quate level the selling prices of our products, we will not be able to our products could also have a material adverse effect on our repu- compensate such cost increases, which could have a material tation and market perception, which in turn could have a signifi- adverse effect on our business, financial condition and results of cant adverse effect on our revenue and results of operations. operations. The long-term increase of our costs (and resultant increase in the price of our products) may also negatively impact In addition, vehicle manufacturers are increasingly requiring a con- demand for our products. tribution from, or indemnity by, their suppliers for potential product Our future business success depends on our ability to maintain the continuing efforts by our customers to change contract terms and high quality of our products and processes. conditions concerning warranty and recall participation. liability, warranty and recall claims and we have been subject to For customers, one of the determining factors in purchasing our Furthermore, we manufacture many products pursuant to OEM cus- components and systems is the high quality of our products and tomer specifications and quality requirements. If the products man- manufacturing processes. A decrease in the actual and perceived ufactured and delivered by us are deemed not to be fit for use by quality of these products and processes could damage our image our OEM customers at the agreed date of delivery, production of and reputation as well as those of our products. Any errors or the relevant products is generally discontinued until the cause of delays caused by mistakes or miscalculations in our project man- the product defect has been identified and remedied. Furthermore, agement could negatively affect our customers’ own production our OEM customers could potentially bring claims for damages on processes, resulting in reputational damage to us as supplier as the basis of breach of contract, even if the cause of the defect is 50 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Risks and opp ort unit ies remedied at a later point in time. In addition, failure to perform ble rights to inventions if we fail to claim the invention in a timely with respect to quality requirements could negatively affect the manner. market acceptance of our other products and our market reputa- tion in various market segments. The realization of any of these risks could give rise to intellectual property claims against us. Such claims, if successful, could require We are and may become party to certain disadvantageous con- us to cease manufacturing, using or marketing the relevant technol- tracts pursuant to which we are required to sell certain products at ogies or products in certain countries or be forced to make changes to a loss or to agree to broad indemnities. For example, we may enter manufacturing processes or products. In addition, we could be lia- into a contract at an agreed price and production costs may end up ble to pay compensation or damages for infringements or could be exceeding what was assumed in the development phase. If the forced to purchase licenses to make use of technology from third assumptions on which we rely in contract negotiations turn out to parties. This could have a material adverse effect on our business, be inaccurate, this could have an adverse effect on our revenue financial condition and results of operations. and results of operations. We are subject to risks from legal, administrative and arbitration We are exposed to certain risks and opportunities with regards to proceedings. our intellectual property, its validity and the intellectual property of third parties. We are involved in a number of legal and administrative proceed- ings related to products, patents and other matters incidental to Our products and services are highly dependent upon our techno- our business and could become involved in additional legal, admin- logical know-how and the scope and limitations of our proprietary istrative and arbitration proceedings in the future. These proceed- rights therein. We have obtained or have applied for a number of ings or potential proceedings could involve, in particular in the intellectual property rights, which can be difficult, lengthy and United States, substantial claims for damages or other payments. expensive to procure. Furthermore, patents may not provide us with Based on a judgment or a settlement agreement, we could be meaningful protection or a commercial advantage. In addition, obligated to pay substantial damages. Our litigation costs and where we incorporate an individual customer’s input to create a those of third parties could also be significant. product that responds to a particular need, we face the risk that such customer will claim ownership rights in the associated intel- Due to our high market share, we may be exposed to legal risks lectual property. regarding anti-competition fines and related damage claims. Our competitors, suppliers, customers and other third parties also Our market share in most of the markets in which we operate is submit a large number of intellectual property protection applica- high, which may induce competition authorities to initiate proceed- tions. Such other parties could hold effective and enforceable intel- ings or third parties to file claims against us alleging violation of lectual property rights to certain processes, methods or applica- competition laws. A successful anti-competition challenge could tions and consequently could assert infringement claims (including adversely affect us in a variety of ways. For example, it could result illegitimate ones) against us. in the imposition of fines by one or more authorities and/or in third parties (such as competitors or customers) initiating civil litigation A major part of our know-how and industrial secrets is not pat- claiming damages caused by anti-competitive practices. In addition, ented and cannot be protected through intellectual property rights. anti-competitive behavior may give rise to reputational risk to us. Consequently, there is a risk that third parties, in particular com- petitors, will copy our know-how without incurring any expenses of The realization of this risk could have a material effect on our busi- their own. Our intellectual property is oftentimes discovered by and ness, financial condition and results of operations. during the course of our employees’ employment. As a result, there is a risk that we have failed or will fail to properly utilize inventions Interest carry-forwards may be forfeited in part or in full as a result of our employees. Present or former employees who made or make of subsequent share sales. employee inventions might continue to be the owners of the valua- 51 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Risks an d opport unit ies Some Stabilus subsidiaries have significant interest carry-forwards as public discussion, there is a risk that our reputation or relations a result of the application of the statutory interest ceiling rules that with our customers could be harmed. limit the deduction of net interest expenses for tax purposes. The interest carry-forward may be deducted to the extent that in subse- Furthermore, at some of the sites at which we operate, or at which quent assessment periods the then current interest expenses do not we operated in the past, small quantities of hazardous materials reach the interest ceiling applicable to the relevant assessment were used in the past, such as asbestos-containing building mate- period, and, thus, reduce the tax payable by the relevant subsidiary. rials used for heat insulation. While we consider it unlikely, it can- not be ruled out that the health and safety of third parties (such as However, the interest carry-forward will be forfeited on a pro rata former employees) may have been affected due to the use of such base or in full if more than defined percentage of the shares in hazardous materials or that other claims may be asserted and we entities are directly or indirectly transferred to a new shareholder, could therefore be exposed to related damage claims in the future. persons related to such shareholder or a group of shareholders act- Even if we have contractually excluded or limited our liability in con- ing in the same interest, or in case of similar transactions (such as nection with the sale of such properties, we could be held responsi- a capital increase) that result in a change of the shareholder struc- ble for currently unknown contamination on properties which we ture. Such forfeiture would increase the tax payable by the relevant previously owned or used. subsidiary if without the forfeiture the interest carry-forward could have been used in part or in full. The in-house legal department monitors these risks continuously and reports regularly to Group management and the Supervisory Board. We could be held liable for soil, water or groundwater contamina- tion or for risks related to hazardous materials. Many of the sites at which we operate have been used for indus- trial purposes for many years, leading to risks of contamination and Risks and opportunities related to our capital structure the resulting site restoration obligations. In addition, we could be Due to our high level of debt we face potential liquidity risks. held responsible for the remediation of areas adjacent to our sites if these areas were potentially contaminated due to our activities. Our cash from operating activities, current cash resources and Groundwater contamination was discovered at a site in Colmar, existing sources of external financing could be insufficient to meet Pennsylvania operated by us from 1979 to 1998. In June 2012, the our further capital needs, especially if our sales decrease signifi- U.S. Environmental Protection Agency (“EPA”) issued an adminis- cantly. Disruptions in the financial markets, including the bank- trative order against our U.S. subsidiary and determined require- ruptcy, insolvency or restructuring of a number of financial institu- ments in respect of the remedy and the remedy cost. Our subsidi- tions, and restricted availability of liquidity could adversely impact ary, together with the other responsible parties, is requested to the availability and cost of additional financing for us and could reimburse the EPA for past and current expenses and to bear the adversely affect the availability of financing already arranged or remediation costs. If additional contamination is discovered in the committed. Our liquidity could also be adversely impacted if our future, the competent authorities could assert further claims against suppliers tighten terms of payment as the result of any decline in us, as the owner or tenant of the affected plots, for the examina- our financial condition or if our customers were to extend their tion or remediation of such soil or groundwater contamination, or normal payment terms. order us to dispose of or treat contaminated soil excavated in the course of construction. We could also be required to indemnify the Stabilus has set an appropriate liquidity risk management frame- owners of plots leased by us or of other properties, if the authori- work for the management of the Group’s short, medium and long- ties were to pursue claims against the relevant owner of the prop- term funding and liquidity requirements. The Group manages erty and if we caused the contamination. Costs typically incurred in liquidity risk by regular reviews, maintaining certain cash reserves, connection with such claims are generally difficult to predict. Also, as well as open credit lines. if any contamination were to become the subject of a more intense 52 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Corp orate Governan ce We are exposed to risks and opportunities associated with changes in currency exchange rates. We operate worldwide and are therefore exposed to financial risks that arise from changes in exchange rates. Currency exchange fluc- C O R P O R AT E G O V E R N A N C E tuations could cause losses if assets denominated in currencies As a Luxembourg société anonyme, the Company is subject to the with a falling exchange rate lose value, while at the same time lia- corporate governance regime as set forth in particular in the law of bilities denominated in currencies with a rising exchange rate August 10, 1915 on commercial companies. As a company whose appreciate. In addition, fluctuations in foreign exchange rates could shares are listed on a regulated market, the Company is further sub- enhance or minimize fluctuations in the prices of materials, since ject to the law of May 24, 2011 on the exercise of certain share- we purchase a considerable part of the prefabricated materials holder rights in listed companies. which we source from foreign currencies. As a result of these fac- tors, fluctuations in exchange rates could affect our results of oper- As a Luxembourg société anonyme whose shares are exclusively ations. External and internal transactions involving the delivery of listed on a regulated market in Germany, the Company is not products and services to and/or by third parties result in cash required to adhere to the Luxembourg corporate governance regime inflows and outflows which are denominated in currencies other applicable to companies that are traded in Luxembourg or to the than the functional currency of our respective group member. German corporate governance regime applicable to stock corpora- Among other factors, we are particularly exposed to fluctuations of tions organized in Germany. The Company has decided to set up net inflows in U.S. dollar (surplus) and net outflows in Romanian own corporate governance rules as described in the following para- Leu (demand). To the extent that cash outflows are not offset by graphs rather than to confirm such corporate governance regimes cash inflows resulting from operational business in such currency, in order to build up a corporate governance structure which meets the remaining net foreign currency exposure is not hedged as of the specific needs and interests of the Company. September 30, 2015. Although we may enter into certain hedging arrangements in the ment of financial information is described in the section “Risk man- future, there can be no assurance that hedging will be available or agement and control over financial reporting in the Stabilus Group”. The internal control systems and risk management for the establish- continue to be available on commercially reasonable terms. In addition, if we were to use any hedging transactions in the future According to the Articles of Incorporation of the Company, the in the form of derivative financial instruments, such transactions Management Board must be composed of at least two Management may result in mark-to-market losses. In addition, we are exposed to Board members, and the Supervisory Board must be composed of foreign exchange risks arising from internal loan agreements, at least three Supervisory Board members. The Supervisory Board which result from cash inflows and outflows in currencies other has set up the following committees in accordance with the Arti- than the functional currency of our respective Group member. As of cles of Incorporation: Audit Committee and Remuneration Commit- the September 30, 2015, these foreign exchange risks are not tee. The Audit Committee is responsible for the consideration and hedged against by using derivative financial instruments. Our net evaluation of the auditing and accounting policies and its financial foreign investments are generally not hedged against exchange controls and systems. The Remuneration Committee is responsible rate fluctuations. In addition, a number of our consolidated compa- for making recommendations to the Supervisory Board and the nies report their results in currencies other than the Euro, which Management Board on the terms of appointment and the benefits requires us to convert the relevant items into Euro when preparing of the managers of the Company as well as for making recommen- our consolidated financial statements. Translation risks are gener- dations on bonus payments to be made to all Stabilus employees. ally not hedged. Further details on the composition and purpose of these commit- tees and of the Management Board and the Supervisory Board The Management Board does not see any individual or aggregate is described in the section “Management and Supervisory Board risk that could endanger Stabilus future in any material way. of Stabilus S.A.”. 53 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT CorporateGovernance The Annual General Meeting shall be held on the third Wednesday H) Rules governing the appointment and replacement of Manage- of the month of February at 10 a.m. Luxembourg time. If such day ment Board members and the amendment of the Articles of is not a business day in Luxembourg, the meeting shall be held on Incorporation: the next following business day, at the same hour. The Management – The Management Board members are appointed by the Board and Supervisory Board may convene extraordinary general Supervisory Board by the majority of the votes of the mem- meetings as often as the Company’s interests so require. An extraor- bers present or represented (abstention or non-participation dinary general shareholders’ meeting must be convened upon the being taken into account as a vote against the appoint- request of one or more shareholders who together represent at ment), or in the case of a vacancy, by way of a decision of least one tenth of the Company’s share capital. the remaining Management Board members for the period until the next Supervisory Board Meeting. Each share entitles the holder to one vote. The right of a share- – Management Board members serve for the following terms: holder to participate in a General Meeting and to exercise the vot- Chief Executive Officer four years, Chief Financial Officer ing rights attached to his shares are determined with respect to three years and other Board members one year. Manage- the shares held by such shareholder the 14th day before the General ment Board members are eligible for re-appointment. Meeting. Each shareholder can exercise his voting rights in person, – Management Board members may be removed at any time through a proxyholder or in writing (if provided for in the relevant with or without cause by the Supervisory Board by a simple convening notice). majority of the votes. – Resolutions to amend the Articles of Incorporation may be The information required by Article 10.1 of Directive 2004 / 25 / EC adopted by a majority of two thirds of the votes validly on takeover bids which has been implemented by Article 11 of cast, without counting the abstentions, if the quorum of half the law of May 19, 2006 on takeovers (the “Law on Takeovers”) is of the share capital is met. If the quorum requirement of set forth here below under “Disclosure Regarding Article 11 of the half of the share capital of the Company is not met at the Law on Takeovers of May 19, 2006”. Annual General Meeting, then the shareholders may be re- convened to a second General Meeting. No quorum is D I S C L O S U R E R E G A R D I N G A R T I C L E 1 1 O F T H E required in respect of such second General Meeting and the L A W O N TA K E O V E R S O F M AY 1 9 , 2 0 0 6 resolutions are adopted by a supermajority of two-thirds of the votes validly cast, without counting the abstentions. A) For information regarding the structure of capital, reference is I) Powers of the Management Board: made to Note 21 of the consolidated financial statements. – The Company is managed by a Management Board under B) The Articles of Incorporation of the Company do not contain the supervision of the Supervisory Board. any restrictions on the transfer of shares of the Company. – The Management Board is vested with the broadest powers C) Information regarding section c) of the law (significant direct to perform or cause to be performed any actions necessary and indirect shareholdings) can be found in Note 38 of the con- or useful in connection with the purpose of the Company. solidated financial statement. – All powers not expressly reserved by the Companies Act or D) The Company has not issued any securities granting special by the Articles of Incorporation to the General Meeting or control rights to their holders. the Supervisory Board fall within the authority of the Man- E) The control rights of any shares issued in connection with agement Board. employee share schemes are exercised directly by the respective – Certain transactions and measures are subject to the prior employees. approval of the Supervisory Board on the terms set out in F) The Articles of Incorporation of the Company do not contain the Articles of Incorporation. any restrictions on voting rights. – The Management Board may appoint one or more persons, G) There are no agreements with shareholders which are known to who may be a shareholder or not, or who may be a member the Company and may result in restrictions on the transfer of of the Management Board or not, to the exclusion of any securities or voting rights within the meaning of Directive member of the Supervisory Board, who shall have full author- 2004 / 109 / EC (Transparency Directive). 54 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT Sub seq uent events Outlo ok ity to act on behalf of the Company in all matters pertaining to the daily management and affairs of the Company. – The Management Board is also authorized to appoint a per- O U T L O O K son, either a director or not, to the exclusion of any member Key forecast institutions see an annual production growth for the of the Supervisory Board, for the purposes of performing global light vehicle production of between 3% and 4% over the specific functions at every level within the Company. next three years. The growth rate in China is expected to slow – The Management Board may also appoint committees and down to around 4% in 2018. The NAFTA region is expected to sub-committees in order to deal with specific tasks, to grow on a constant level of 2% where as the production in Europe advise the Management Board or to make recommendations is expected to increase by 2016 and 2017 with an annual growth to the Management Board and / or, as the case may be, the rate of around 4%. General Meeting, the members of which may be selected either from among the members of the Management Board or not, Based on the afore described light vehicle production growth as to the exclusion of any member of the Supervisory Board. well as overall market trends for our industrial products we envis- – The Management Board does not have currently any author- age a sales growth in Europe of about 6% for fiscal year 2016. ity to issue shares in the Company under the Articles of Within this a major increase will come from Powerise based on a Incorporation. number of platforms launched in 2015 and coming to a volume – The Management Board does not have currently any author- production in fiscal year 2016. Industrial, which includes swivel ity to buy back shares under the Articles of Incorporation or chair, is expected to provide modest growth. In the NAFTA region a buy-back program. we estimate an 8% year-on-year growth for fiscal year 2016. This J) There are no significant agreements to which the Company is rests on a strong US light vehicle industry and continuing consumer party and which take effect, alter or terminate upon a change interest in SUVs allowing us to increase the Powerise sales further. of control of the Company following a takeover bid. The industrial segment is envisaged to provide a growth rate K) There are no agreements between the Company and its Man- around the regional average 8%. This is supported by new swivel agement Board members or employees providing for compensa- chair orders obtained in the fiscal year 2015. In Asia / Pacific and tion if they resign or are made redundant without valid reason Row the continued trend to SUVs in China will open further gas or if their employment ceases because of a takeover bid. spring opportunities for Stabilus. The local Powerise production in S U B S E Q U E N T E V E N T S China starting in May 2016 should show first local delivery in the fiscal year 2016. Contract wins with Asian car manu factures will allow us to strength our gas spring position in this region. Within the industrial segment the 2015 sales initiatives in China will allow Stabilus to load the new industrial gas spring production line with orders. In the Asia / Pacific and Row region we foresee a double As of December 18, 2015, there were no further events or develop- digit increase for industrial revenue. ments that could have materially affected the measurement and pre- sentation of Group’s assets and liabilities as of September 30, 2015. For fiscal year 2016, we expect revenue of approximately €660 million and an adjusted EBIT margin at the historical level of 12% to 13%. 55 ANNUAL REPORT 2015COMBINED MANAGEMENT REPORT C C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S S T N E M E T A T S L A I C N A N I F C C P I S TO N R O D E N D F I T T I N G C A M S L E E V E C A M R I N G P R E S S U R E T U B E N A M E LIFT-O-MAT® PTL The LIFT-O-MAT PTL is a gas spring with an additional mechanical lock in the compressed position. Similar to the ball point principle, the lock can be released by a light push; the gas spring then extends by itself. Besides the force support function, LIFT-O-MAT PTL features and end position stop, thereby eliminating the need for addi- tional fixing elements. At the same time, LIFT-O-MAT is easy and comfortable to use. T 5 0 2 1 – 7 3 6 0 9 0 – 1 0 6 0 N P R – 1 7 0 P R E S S U E T U B E E N D F I T T I N G Contents C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S for the fiscal year ended September 30, 2015 5 9 C O N S O L I D A T E D S T A T E M E N T 92 15 Other financial assets O F C O M P R E H E N S I V E I N C O M E 6 0 C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N 6 2 C O N S O L I D A T E D S T A T E M E N T 93 16 Other assets 93 17 Inventories 94 18 Trade accounts receivable 95 19 Current tax assets 95 20 Cash and cash equivalents 95 21 Equity 96 22 Financial liabilities 97 23 Other financial liabilities O F C H A N G E S I N E Q U I T Y 98 24 Provisions 6 3 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S 6 4 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S 1 General Information 2 Basis for presentation 3 Accounting policies 4 Revenue 100 25 Pension plans and similar obligations 103 26 Trade accounts payable 103 27 Current tax liabilities 104 28 Other liabilities 104 29 Leasing 106 30 Contingent liabilities and other financial commitments 108 31 Financial instruments 110 32 Risk reporting 113 33 Capital management 114 34 Notes to the consolidated statement of cash flows 114 35 Segment reporting 118 36 Share-based payment 120 37 Auditor’s fees 5 Cost of sales, research and development, 121 38 Related party relationships selling and administrative expenses 122 39 Remuneration of key management personnel 6 Other income 7 Other expenses 8 Finance income 9 Finance costs 10 Income tax expense 11 Earnings per share 122 40 Subsequent events 1 2 3 R E S P O N S I B I L I T Y S T A T E M E N T 1 2 4 M A N A G E M E N T B O A R D O F S T A B I L U S S . A . 12 Property, plant and equipment 1 2 5 S U P E R V I S O R Y B O A R D O F S T A B I L U S S . A . 13 Goodwill 14 Other intangible assets 1 2 6 I N D E P E N D E N T A U D I T O R’ S R E P O R T A N N U A L R E P O R T 2 0 1 5 64 65 71 80 81 82 82 83 83 83 87 88 90 91 58 C O N S O L I DAT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E for the fiscal year ended September 30, 2015 Consolidated statement of comprehensive income I N € T H O U S A N D S Revenue Cost of sales Gross profit Research and development expenses Selling expenses Administrative expenses Other income Other expenses Profit from operating activities Finance income Finance costs Profit / (loss) before income tax Income tax income / (expense) Profit / (loss) for the period thereof attributable to non-controlling interests thereof attributable to shareholders of Stabilus Other comprehensive income / (expense) Foreign curreny translation difference 1) Unrealized actuarial gains and losses 2) Other comprehensive income / (expense), net of taxes Total comprehensive income / (expense) for the period thereof attributable to non-controlling interests thereof attributable to shareholders of Stabilus Earnings per share (in €): basic diluted N OT E 4 5 5 5 5 6 7 8 9 147,677 (24,218) (44,095) (27,329) 11,238 (7,602) 55,671 17,851 (42,405) 31,117 10 (14,120) 16,997 47 21 21 11 11 (16,390) 34 (16,356) 641 47 594 0.82 0.82 1) Item that may be reclassified (‘recycled’) to profit and loss at a future point in time when specific conditions are met. 2) Item that will not be reclassified to profit and loss. The accompanying Notes form an integral part of these Consolidated Financial Statements. Comp rehensive Inc ome T _ 011 Year ended Sept 30, 2015 611,271 2014 507,333 (463,594) (387,737) 11 16,950 10,086 119,596 (20,291) (38,703) (32,563) 6,012 (2,855) 31,196 17,451 (38,775) 9,872 78 9,950 (136) (422) (6,444) (6,866) 3,084 (136) 3,220 0.54 0.54 59 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Financ ial Posit ion C O N S O L I DAT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N as of September 30, 2015 Consolidated statement of financial position T _ 012 N OT E Sept 30, 2015 Sept 30, 2014 12 13 14 16 10 17 18 19 15 16 20 133,952 51,458 166,475 1,864 4,929 119,642 51,458 170,971 1,102 7,919 358,678 351,092 59,783 62,848 3,465 7,899 10,093 39,473 183,561 542,239 49,540 56,497 2,403 18,304 8,972 33,494 169,210 520,302 I N € T H O U S A N D S Assets Property, plant and equipment Goodwill Other intangible assets Other assets Deferred tax assets Total non-current assets Inventories Trade accounts receivable Current tax assets Other financial assets Other assets Cash and cash equivalents Total current assets Total assets 60 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Fi nanci al Position Consolidated statement of financial position T _ 012 I N € T H O U S A N D S Equity and liabilities Issued capital Capital reserves Retained earnings Other reserves Equity attributable to shareholders of Stabilus Non-controlling interests Total equity Financial liabilities Other financial liabilities Provisions Pension plans and similar obligations Deferred tax liabilities Other liabilities Total non-current liabilities Trade accounts payable Financial liabilities Other financial liabilities Current tax liabilities Provisions Other liabilities Total current liabilities Total liabilities Total equity and liabilities The accompanying Notes form an integral part of these Consolidated Financial Statements. N OT E Sept 30, 2015 Sept 30, 2014 21 21 21 21 22 23 24 25 10 28 26 22 23 27 24 28 207 73,091 24,871 (21,484) 76,685 24 76,709 258,644 2,139 1,032 47,989 38,976 576 349,356 68,929 5,000 7,978 3,040 20,128 11,099 116,174 465,530 542,239 207 73,091 7,920 (5,128) 76,090 33 76,123 256,556 960 4,060 48,353 43,765 – 353,694 53,724 5,789 6,360 5,082 8,551 10,979 90,485 444,179 520,302 61 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS T _ 013 Equity attributable to shareholders of Stabilus Non- controlling interests Total equity 80,162 10,086 169 (136) 80,331 9,950 Changes in Equit y C O N S O L I DAT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y for the fiscal year ended September 30, 2015 Consolidated statement of changes in equity I N € T H O U S A N D S N OT E Issued capital Capital reserves Retained earnings Other reserves Balance as of Sept 30, 2013 adjusted Profit / (loss) for the period Other comprehensive income / (expense) Total comprehensive income for the period 5,013 74,403 (991) 1,737 10,086 – 21 – – – – – – Reduction of issued capital (4,836) 4,836 Proceeds from capital increase Contributions by owners IPO costs directly recognized in equity, net of tax Dividends 30 – – – Profit / (loss) for the period Other comprehensive income / (expense) Total comprehensive income for the period Dividends – – – – 21 21 – – – – – (6,866) (6,866) – (6,866) 10,086 (6,866) 3,220 (136) 3,084 64,970 10,020 – – – – (1,175) (81,137) – – – – – – 16,950 – – 65,000 10,020 (1,175) (81,137) 76,090 16,950 – – – – – 33 47 – 65,000 10,020 (1,175) (81,137) 76,123 16,997 – (16,356) (16,356) – (16,356) 16,950 (16,356) – – 594 – 47 (56) 24 641 (56) 76,709 Balance as of Sept 30, 2014 207 73,091 7,920 (5,128) Balance as of Sept 30, 2015 207 73,091 24,871 (21,484) 76,685 The accompanying Notes form an integral part of these Consolidated Financial Statements. 62 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Cash Fl ows C O N S O L I DAT E D S TAT E M E N T O F C A S H F L O W S for the fiscal year ended September 30, 2015 Consolidated statement of cash flows I N € T H O U S A N D S Profit / (loss) for the period Current income tax expense Deferred income tax expense Net finance result Depreciation and amortization (incl. impairment losses) Other non-cash income and expenses Changes in inventories Changes in trade accounts receivable Changes in trade accounts payable Changes in other assets and liabilities Changes in provisions Changes in deferred tax assets and liabilities Income tax payments Cash flow from operating activities Proceeds from disposal of property, plant and equipment Purchase of intangible assets Purchase of property, plant and equipment Cash flow from investing activities Receipts from contributions of equity Receipts under senior facility Receipts under revolving credit facility Payments under revolving credit facility Payments for redemption of senior secured notes Repayments of senior facility Payments for redemption of other financial liabilities Payments for finance leases Payments of transaction costs Dividends paid to non-controlling interests Payments for interest Cash flow from financing activities Net increase / (decrease) in cash and cash equivalents Effect of movements in exchange rates on cash held Cash and cash equivalents as of beginning of the period Cash and cash equivalents as of end of the period The accompanying Notes form an integral part of these Consolidated Financial Statements. T _ 014 Year ended Sept 30, N OT E 10 10 8/9 5 34 14 12 2015 16,997 16,920 (2,800) 24,554 43,813 (3,142) (10,243) (6,351) 15,205 (2,718) 8,235 2,800 (17,274) 85,996 267 (15,365) (36,068) (51,166) – 22 270,000 22 22 29 21 34 – – (256,123) (2,500) – (1,841) (5,650) (56) (32,237) (28,407) 6,423 (444) 33,494 39,473 2014 9,950 10,522 (10,600) 21,325 40,110 (10,222) (3,477) 11,279 8,747 5,705 896 10,600 (7,065) 87,770 48 (14,394) (21,246) (35,592) 65,000 – 8,000 (8,000) (58,877) – (1,661) (1,191) (14,362) – (30,113) (41,204) 10,974 701 21,819 33,494 63 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS N OT E S TO C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S as of and for the fiscal year ended September 30, 2015 1 General Information Stabilus S.A., Luxembourg, hereinafter also referred to as “Stabilus” or the “Company” is a public lim- ited liability company (société anonyme) incorporated in Luxembourg and governed by Luxembourg law. The Company is registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés Luxembourg) under No. B0151589 and its registered office is located at 2, rue Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg. The Company was founded under the name Servus HoldCo S.à r.l. on February 26, 2010. The Company´s fiscal year is from October 1 to September 30 of the following year (twelve-month period). The consolidated financial statements of Stabilus S.A. include Stabilus and its subsidiaries (hereafter also referred to as “Stabilus Group” or the “Group”). The Stabilus Group is a leading manufacturer of gas springs and dampers, as well as electric tailgate opening and closing equipment. The products are used in a wide range in automotive and industrial applications, as well as in the furniture industry. Typically the products are used to support the lifting and lowering or dampening of movements. As world market leader for gas springs, the Group ships to all key vehicle manufacturers. Various Tier 1 suppliers of the global car industry as well as large techni- cal focused distributors further diversify the Group’s customer base. The consolidated financial statements are prepared in euro (€) rounded to the nearest thousand. Due to rounding, numbers presented may not add up precisely to totals provided. The consolidated financial statements of Stabilus and its subsidiaries have been prepared in accor- dance with International Financial Reporting Standards (IFRS), as adopted by the EU. The consolidated financial statements were authorized for issue by the Management Board on Decem- ber 18, 2015. 64 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS 2 Basis for presentation P R E PA R AT I O N Applying IAS 1, items of the statement of financial position are differentiated between non-current and current assets and liabilities. Assets and liabilities are classified as current if they have a remaining term of less than one year. Accordingly, assets and liabilities are classified as non-current if they remain in the Group for more than one year. Deferred tax assets and deferred tax liabilities, as well as assets and provisions from defined benefit pension plans and similar obligations are reported as non-current items. The consolidated statement of comprehensive income is presented using the cost of sales method. M E A S U R E M E N T The consolidated financial statements have been prepared on the historical cost basis, with the excep- tion of certain items, such as derivative financial instruments or hedged transactions and pensions and similar obligations. The measurement methods applied to these exceptions are described below. U S E O F E S T I M AT E S A N D J U D G M E N T S Certain of the accounting policies require critical accounting estimates that involve complex and sub- jective judgments and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Such critical accounting estimates could change from period to period and have a material impact on the financial position or results of operations. Critical accounting estimates could also involve estimates where management could reasonably have used a different esti- mate in the current accounting period. Management wishes to point out that future events often vary from forecasts and that estimates routinely require adjustment. Impairment of non-financial assets: Stabilus assesses at every reporting date whether there are indications that its non-financial assets may be impaired. Goodwill and development cost under construction are tested annually for impair- ment. Further tests are carried out if there are indications for impairment. Other non-financial assets are tested for impairment if there are indications that the carrying amount may not be recoverable. If the fair value less costs of disposal is calculated, management must estimate the expected future cash flows from the asset or the cash-generating unit and select an appropriate discount rate in order to determine the present value of this cash flow. Trade and other receivables: The allowance for doubtful accounts involves significant management judgment and review of individ- ual receivables based on individual customer creditworthiness, current economic trends and analysis of historical allowances. We refer also to Note 18. 65 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS Deferred tax assets: The valuation of deferred tax assets is based on mid-term business plans of the respective entities which recorded deferred tax assets. These mid-term business plans range from three to five years and include several underlying assumptions and estimates in respect of the business development, strategic changes, cost optimization and business improvement and also general market and economic develop- ment. Deferred tax assets are recognized to the extent that sufficient taxable profit at the level of the relevant tax authority will be available for the utilization of the deductible temporary differences. Stabi- lus recognizes a valuation allowance for deferred tax assets when it is unlikely that sufficient future taxable profit will be available. We refer also to Note 10. Provisions: Significant estimates are involved in the determination of provisions related to pensions and other obligations, contract losses, warranty costs and legal proceedings. We refer also to Note 24 and 25. R I S K S A N D U N C E R TA I N T I E S The Group’s net assets, financial position and results of operations are subject to risks and uncertainties. Factors that could affect the future net assets, financial position and results of operations and there- fore cause actual results to vary from the expectations include sales volume changes due to changes in the overall economy, evolvement of price-aggressive competitors, significant price changes for raw materials and overall purchase costs. Quality issues may result in significant costs for the Group, in spite of a benchmarked insurance cover. The Group financing with its variable interest rates face future risks and uncertaincies depending on the development of the underlying Euribor and the net leverage level of the Company. The variable interest rates are committed until June 2020. G O I N G C O N C E R N These consolidated financial statements are prepared based on the going concern assumption. S C O P E O F C O N S O L I DAT I O N The consolidated financial statements include the financial statements of Stabilus S.A. and the finan- cial statements of all subsidiaries, including structured entities which are directly or indirectly con- trolled by Stabilus S.A. Control exists if the parent company has the power of decision over a subsidi- ary based on voting rights or other rights, if it participates in positive and negative variable returns from a subsidiary, and if it can affect these returns by its power of decision. Non-controlling interests represent the portion of profit and loss and net assets not held by the Group and are presented separately in the consolidated statement of comprehensive income and the consoli- dated statement of financial position. The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Inclusion in the consolidated financial statements ends as soon as the Com- pany no longer has control. 66 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS In addition to Stabilus, altogether 27 subsidiaries (see following list), are included in the consolidated financial statements as of September 30, 2015. Subsidiaries N A M E O F T H E C O M PA N Y Servus Sub S.à r.l. Servus Luxembourg S.à r.l. Servus III (Gibraltar) Limited Registered office of the entity Luxembourg Luxembourg Gibraltar Stabilus S.A. Stabilus S.A. Stabilus S.A. Interest and control held by Holding in % T _ 015 Consolidation method Servus Luxembourg Holding S.C.A. Luxembourg Servus Sub S.à r.l. Servus Luxembourg S.à r.l. Blitz F10-neun GmbH Frankfurt, Germany Stabilus S.A. Blitz F10-acht-drei-drei GmbH & Co KG Frankfurt, Germany Servus III (Gibraltar) Limited Stable II S.à r.l. Luxembourg Servus Luxembourg Holding S.C.A. Blitz F10-acht-drei-drei GmbH & Co KG Stable Beteiligungs GmbH Koblenz, Germany Stable II S.à r.l. Stable HoldCo Inc. Wilmington, USA Stable Beteiligungs GmbH Stable HoldCo Australia Pty. Ltd. Dingley, Australia Stable II S.à r.l. Stable UK HoldCo Ltd. Banbury, United Kingdom Stabilus UK Ltd. LinRot Holding AG Stabilus UK Ltd. Stabilus GmbH Zurich, Switzerland Stable II S.à r.l. Banbury, United Kingdom Stable Beteiligungs GmbH Koblenz, Germany Stable Beteiligungs GmbH Stabilus Powerise GmbH Melle, Germany LinRot Holding AG Stabilus Pty. Ltd. Stabilus Ltda. Stabilus Espana S.L. Stabilus Co. Ltd. Stabilus S.A. de C.V. Stabilus Inc. Stabilus Limited Dingley, Australia Stable HoldCo Australia Pty. Ltd. Itajubá, Brazil Lezama, Spain Stabilus GmbH Stabilus GmbH Busan, South Korea Stabilus GmbH Stabilus UK Ltd. Gastonia, USA Stable HoldCo Inc. Auckland, New Zealand Stabilus GmbH Ramos Arizpe, Mexico Stabilus GmbH 99.9998% Stabilus Japan Corp. Yokohama, Japan Stable Beteiligungs GmbH Stabilus France S.à r.l. Poissy, France Stabilus GmbH Stabilus Romania S.R.L. Brasov, Romania Stable Beteiligungs GmbH Stabilus (Jiangsu) Ltd. Wujin, China Stabilus GmbH Stabilus GmbH Orion Rent Imobiliare S.R.L. Brasov, Romania Stable Beteiligungs GmbH Stabilus UK Ltd. 100.00% 100.00% 100.00% 99.9968% 0.0032% 100.00% 94.90% 94.90% 5.10% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.99% 100.00% 100.00% 0.0002% 100.00% 80.00% 100.00% 100.00% 3.01% 96.99% 100.00% 98.00% 2.00% Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full 67 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS In the fourth quarter of the fiscal year 2015, “Stabilus Ltd.” was renamed to “Stable UK Holdco Ltd.” and “Stabilus UK Holdco Ltd.” changed its name to “Stabilus UK Ltd.”. P R I N C I P L E S O F C O N S O L I DAT I O N The assets and liabilities of the domestic and foreign entities included in consolidation are recognized in accordance with the uniform accounting policies of the Stabilus Group. Receivables and liabilities or provisions between the consolidated companies are offset. Intragroup revenue and other intragroup income and the corresponding cost and expenses are eliminated. Intercompany gains and losses on intragroup delivery and service transactions are eliminated through profit or loss, unless they are immaterial. Deferred taxes, which reflect the average income tax charge on the recipient group entity, are recognized on consolidation adjustments affecting profit or loss. B U S I N E S S C O M B I N AT I O N Business combinations are accounted for using the acquisition method as of the acquisition date, which is the date on which control is transferred to the Group. Goodwill is measured at the acquisition date as: • • • the fair value of the consideration transferred, plus the recognized amount of any non-controlling interests in the acquiree, less the net recognized amount (generally the fair value) of the identifiable assets acquired and liabili- ties assumed. The consideration transferred does not include amounts related to the settlement of pre-existing rela- tionships. Such amounts are generally recognized in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities that the Group incurs in connec- tion with the business combination are expensed as incurred. Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. F O R E I G N C U R R E N C Y T R A N S L AT I O N The consolidated financial statements are presented in euro (€), as the Group’s functional and presenta- tion currency. Each entity in the Group determines its own functional currency, which is the currency of its primary economic environment in which the entity operates. Items included in the financial state- ments of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange at the balance sheet date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as of the date of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying 68 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the historic rate. Assets and liabilities of foreign subsidiaries where the functional currency is other than euro (€) are translated using the financial period-end exchange rates, while their income and expenses are trans- lated using the average exchange rates during the period. Foreign currency transaction gains and losses on operating activities are included in other operating income and expenses. Foreign currency gains and losses on financial receivables and debts are included in interest income and expenses. Translation adjustments arising from exchange rate differences are included in a separate component of shareholder’s equity in amounts recognized directly in equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recog- nized in profit or loss. The exchange rates of the significant currencies of non-euro countries used in the preparation of the consolidated financial statements were as follows: Exchange rates T _ 016 C O U N T RY Australia Brazil China South Korea Mexico Romania USA Closing rate Sept 30, Average rate for the year ended Sept 30, 2015 1.6118 4.6145 7.1672 2014 1.4539 3.0926 7.8098 2015 1.4596 3.4048 7.1614 2014 1.4753 3.1070 8.3414 1,346.6700 1,338.6700 1,286.5100 1,424.7400 19.2032 17.0692 17.3371 17.7724 4.4167 1.1245 4.4114 1.2687 4.4410 1.1602 4.4525 1.3575 I S O C O D E AUD BRL CNY KRW MXP ROL USD 69 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS C H A N G E S I N A C C O U N T I N G P O L I C I E S O N A C C O U N T O F N E W S TA N DA R D S New standards and interpretations T _ 017 S TA N D A R D / I N T E R P R E TAT I O N IFRS 10 IFRS 11 IFRS 12 Effective date stipulated by IASB Effective date stipulated by EU Impact on Stabilus financial statements Consolidated Financial Statements January 1, 2013 January 1, 2014 No impact Joint Arrangements January 1, 2013 January 1, 2014 No impact Disclosures of Interest in Other Entities January 1, 2013 January 1, 2014 No impact Amendments to IFRS 10, 11, 12 Transition Guidance January 1, 2013 January 1, 2014 No impact IAS 27 (2011) IAS 28 (2011) Separate Financial Statements January 1, 2013 January 1, 2014 No impact Investements in Associates and in Joint Ventures January 1, 2013 January 1, 2014 No impact Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities January 1, 2014 January 1, 2014 No impact Amendment to IAS 32 Offsetting Financial Assets and Liabilities January 1, 2014 January 1, 2014 No impact Amendment to IAS 36 Amendment to IAS 39 Recoverable Amount Disclosures for Non-Financial Assets Novation of Derivatives and Continua- tion of Hedge Accounting January 1, 2014 January 1, 2014 No impact January 1, 2014 January 1, 2014 No impact The effective date presented above is the date of mandatory application in annual periods beginning on or after that date. The accounting policies applied in the consolidated financial statements comply with the IFRSs required to be applied in the EU as of September 30, 2015. S TA N DA R D S A N D I N T E R P R E TAT I O N S I S S U E D B U T N OT Y E T A D O P T E D Standards and interpretations issued and endorsed by the EU (not yet adopted) T _ 018 S TA N D A R D / I N T E R P R E TAT I O N Effective date stipulated by IASB Effective date stipulated by EU Impact on Stabilus financial statements Amendments to IAS 19 Defined Benefit Plans: Employee Contributions July 1, 2014 February 1, 2015 Evaluating Annual Improvements Annual Improvements Annual Improvements to IFRSs 2010-2012 Cycle (issued on 12 December 2013) Annual Improvements to IFRSs 2011-2013 Cycle (issued on 12 December 2013) July 1, 2014 February 1, 2015 Small impact July 1, 2014 January 1, 2015 No impact IFRIC 21 Levies January 1, 2014 June 17, 2014 No impact The effective date presented above is the date of mandatory application in annual periods beginning on or after that date. Amendments to IAS 19: Defined Benefits Plans — Employee Contributions The amendments to IAS 19 clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to the periods of service. In addition, it per- mits a practical solution if the amount of the contributions is independent of the number of years of service. The IASB concluded that contributions from employees or third parties reduce the ultimate cost of a defined benefit and should therefore be accounted for consistently with the accounting for the 70 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS defined benefit itself. The investigation of the effects on the consolidated financial statements resulting from the amendments to IAS 19 has not yet been completed. Annual improvements — 2010–2012 cycle The annual improvements to IFRSs 2010-2012 cycle (issued on December 12, 2013) targeted to enhance the quality of the following standards for which the amendments were considered necessary but also non-urgent and sufficiently narrow in scope: IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24, IAS 38. These amendments will result in slightly enhanced disclosures and are not expected to have a significant impact on the consolidated financial statements of the Group. Annual improvements — 2011–2013 cycle The annual improvements to IFRSs 2011-2013 cycle (issued on December 12, 2013) targeted to enhance the quality of the following standards for which the amendments were considered necessary but also non-urgent and sufficiently narrow in scope: IFRS 1, IFRS 3, IFRS 13, IAS 40. These amendments are not expected to have an impact on the consolidated financial statements of the Group. Standards and interpretations issued but not yet endorsed by the EU T_019 I F R S S I S S U E D B U T N OT Y E T A D O P T E D : S TA N D A R D / I N T E R P R E TAT I O N Amendment to IFRS 10, IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Effective date stipulated by IASB Effective date stipulated by EU January 1, 2016 January 1, 2016 Amendment to IFRS 10, 12, IAS 28 Investment Entities: Applying the Consolidation Exception January 1, 2016 January 1, 2016 IFRS 14 IFRS 15 IFRS 9 Regulatory Deferral Accounts January 1, 2016 January 1, 2016 Revenue from Contracts with Customers January 1, 2018 January 1, 2018 Financial Statements January 1, 2018 January 1, 2018 The effective date presented above is the date of mandatory application in annual periods beginning on or after that date. The investigation of the effects on the consolidated financial statements resulting from IFRS 9 and IFRS 15 has not yet been completed. 3 Accounting policies R E V E N U E Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of goods have passed to the customer, a price is agreed upon or can be determined and when the payment is probable. Revenue from a contract to provide services is recognized according to the stage of completion, if the amount of the revenue can be measured reliably and it is probable that the economic benefits from the business will flow to the Group. 71 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS C O S T O F S A L E S Cost of sales comprises the cost of the conversion of products sold as well as the purchase costs of sold merchandise. In addition to the directly attributable material and production costs, it also includes indirect production-related overheads like production and purchase management, warranty expenses, depreciation on production plants and amortization of intangible assets. Cost of sales also includes write-downs on inventories to the lower net realizable value. R E S E A R C H E X P E N S E S A N D N O N - C A P I TA L I Z E D D E V E L O P M E N T E X P E N S E S Research expenses and non-capitalized development expenses are recognized in profit or loss when incurred. S E L L I N G E X P E N S E S Selling expenses include sales personnel costs and operating sales costs such as for marketing. Ship- ping and handling costs are expensed within selling expenses when incurred. Fees charged to custom- ers are shown as sales. Advertising costs (expenses for advertising, sales promotion and other sales- related activities) are expensed within selling expenses when incurred. B O R R O W I N G C O S T S Borrowing costs are expensed as incurred, unless they are directly attributable to the acquisition, con- struction or production of a qualifying asset and therefore form part of the cost of that asset. I N T E R E S T I N C O M E A N D E X P E N S E The interest income and expense include the interest expenses from liabilities and the interest income from the investment of cash. The interest components from defined benefit pension plans and similar obligations are reported under the personnel expenses. OT H E R F I N A N C I A L I N C O M E A N D E X P E N S E The other financial result includes all remaining expenses and income from financial transactions that are not included in the interest result. I N C O M E TA X E S Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Income tax expenses represent the sum of taxes currently payable and deferred taxes. The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of compre- hensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date. 72 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS In accordance with IAS 12 deferred taxes are recognized on temporary differences between the carry- ing amounts and the corresponding tax base of assets and liabilities used in the computation of taxable income. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible tempo- rary differences can be utilized. Deferred tax assets and deferred tax liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business com- bination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets on tax loss carry-forwards are only recognized if there is sufficient probability that the tax reductions resulting from them will actually occur. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recov- ered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabili- ties. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. G O O D W I L L Goodwill is determined to have an indefinite useful life. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. In accordance with IAS 36, the Group tests the goodwill for impairment by comparing its recoverable amount with its carrying amount annually, and whenever there is an indication that goodwill may be impaired. For the purpose of impairment testing goodwill acquired in a business combination is allocated at the acqusition date to the cash-generating units (CGU) that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. An impairment of goodwill is recognized if the recoverable amount of the cash-generating unit is below its carrying amount. Impairment losses are recognized in profit or loss. According to IAS 36, impairment losses recognized for goodwill are not reversed. Goodwill impairment is tested at the lowest level within the Group at which goodwill is being managed. OT H E R I N TA N G I B L E A S S E T S Purchased or internally generated intangible assets are capitalized according to IAS 38, if a future eco- nomic benefit can be expected from the use of the asset and the costs of the asset can be determined reliably. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as of the date of acquisition. Fol- lowing initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized devel- opment costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. 73 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS Intangible assets with finite useful lives are amortized on a straight-line basis over the useful eco- nomic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a pro- spective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if all of the following have been demonstrated: (1) the technical fea- sibility of completing the intangible asset so that it will be available for use or sale; (2) the intention to complete the intangible asset and use or sell it; (3) the ability to use or sell the intangible asset; (4) how the intangible asset will generate probable future economic benefits; (5) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (6) the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recog- nition criteria listed above. Where no internally-generated intangible asset can be recognized, develop- ment cost is charged to profit or loss in the period in which it is incurred. Subsequent to initial recogni- tion, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses on the same basis as intangible assets acquired separately. Internal- ly-generated intangible assets are disposed when the life time cycle of the underlying product has ended. The following useful lives are used in the calculation of amortization: Software (3 to 5 years), patented technology (16 years), customer relationships (24 years), unpatented technology (6 to 10 years) and trade names (18 years). R E S E A R C H A N D D E V E L O P M E N T E X P E N S E S Expenditure on research activities is recognized as an expense in the period in which it is incurred. Devel- opment costs are capitalized at cost if the relevant recognition criteria according to IAS 38 are met. Capitalized development costs comprise all costs directly attributable to the development process. Capi- talized development costs are amortized systematically from the start of production over the expected product cycle of three to fifteen years depending on the lifetime of the product. P R O P E R T Y, P L A N T A N D E Q U I P M E N T Property, plant and equipment is used for business purposes and is measured at cost less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. The Group develops and assembles various production equipment internally; the related costs are also capitalized. Depreciation on property, plant and equipment is recorded on a straight-line basis in accordance with its utilization 74 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS and based on the useful lives of the assets. The residual values, depreciation methods and useful lives are reviewed annually and adjusted, if necessary. Property in the course of construction for production, rental or administrative purposes is carried at cost, less any recognized impairment loss. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. The gain or loss arising on the disposal or retirement of an item of prop- erty, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. The Stabilus Group recognizes government grants when there is reasonable assurance that the condi- tions attached to the grants are complied with and the grants will be received. Government grants awarded for the purchase or the production of fixed assets are generally offset against the acquisition or production costs of the respective assets so that the grant is recognized in profit or loss over the life of the asset through a reduced depreciation expense. Systematic depreciation is primarily based on the following useful lives: Buildings (40 years), machinery and equipment (5 to 10 years) and other equipment (5 to 8 years). L E A S I N G Leases comprise all arrangements that transfer the right to use a specified asset for a stated period of time in return for a payment, even if the right to use that asset is not explicitly described in an arrange- ment. Leases are classified as either finance or operating. In accordance with the regulations under IAS 17 on accounting for leases, economic ownership is attributed to the lessee if it bears substantially all of the risks and rewards associated with ownership (finance lease). If the criteria for a finance lease are fulfilled, assets and liabilities are recognized at the commencement of a lease term at fair value or the lower present value of the minimum lease payments. Assets are depreciated on a straight-line basis over the estimated useful life of the asset or shorter term of the lease. The discounted payment obligations resulting from the future leasing instalments are recognized under other current and non-current liabilities. Lease payments resulting from finance leases are divided into principal payments and interest pay- ments. Lease and rent payments resulting from operating leases are recognized as an expense in the consolidated statement of comprehensive income. Future burdens under operating lease relation- ships are disclosed under other financial obligations. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term. Operating leases refer to the leasing of office equipment. I M PA I R M E N T O F N O N - F I N A N C I A L A S S E T S Stabilus assesses at each reporting date whether there are indications that an asset may be impaired. If such indications exist or if annual impairment testing is required (for instance, for goodwill and development cost unter construction), Stabilus estimates the recoverable amount of the asset. The recov- erable amount is determined for each individual asset, unless an asset generates cash inflows that are not largely independent of those from other assets or groups of assets (cash-generating units). The recoverable amount is the higher of its fair value less cost of disposal and its value in use. Stabilus 75 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS determines the recoverable amount as fair value less cost of disposal and compares this with the carry- ing amounts (including goodwill). The fair value is measured by discounting future cash flows using a risk-adjusted interest rate. The future cash flows are estimated on the basis of the operative planning (five-year-window). Periods not included in the business plans are taken into account by applying a residual value which considers a growth rate of 1.0%. If the fair value less cost of disposal cannot be determined or is lower than the carrying amount, the value in use is calculated. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the amount of the difference. The calculation of the fair value less cost of disposal and the value in use is most sensitive to the fol- lowing assumptions: (1) Gross margins are based on average values achieved in the last two years adopted over the budget period for anticipated efficiency improvements. (2) Discount rates reflect the current market assessments of the risks of the cash-generating unit. The rate was estimated based on the average percentage of a weighted average cost of capital for the industry. (3) Estimates regarding the raw materials price developments are obtained by published indices from countries in which the resources are mainly bought. Forecast figures (mainly in Europe and the US) and past price develop- ments have been used as an indicator for future developments. (4) Management notices that the Group’s position continues to strengthen, as customers shift their purchases to larger and more stable companies. Therefore there is no need for any doubt regarding the assumption of market share. (5) Revenue growth rates are estimated based on published industry research. An assessment for assets other than goodwill is made at each reporting date to determine whether there is any indication that impairment losses recognized in earlier periods no longer exist or may have decreased. In this case, Stabilus would record a partial or entire reversal of the impairment loss. I N V E N TO R I E S Inventories are valued at the lower of cost and net realizable value using the average cost method. Production costs include all direct costs of material and labor and an appropriate portion of fixed and variable overhead expenses. Net realizable value is the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Borrowing costs for the produc- tion period are not included. Provisions are set up on the basis of the analysis of stock moving and/or obsolete stock. F I N A N C I A L I N S T R U M E N T S A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or an equity instrument of another entity. Financial instruments recorded as financial assets or financial liabilities are generally reported separately. Financial instruments are recognized as soon as the Stabilus Group becomes a party to the contractual provisions of the financial instrument. Financial instruments comprise financial receivables or liabilities, trade accounts receivable or liabilities, cash and cash equivalents and other financial assets or liabilities. Financial instruments are initially measured at fair value. For the purpose of subsequent measurement, financial instruments are allocated to one of the categories defined in IAS 39 “Financial Instruments: Recognition and Measurement.” The measurement categories within the meaning of IAS 39 relevant 76 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS for Stabilus Group are loans and receivables, financial assets at fair value through profit or loss and financial liabilities measured at amortized costs. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Examples include trade accounts receivable and loans originated by the Group. After initial recognition, loans and receivables are subsequently carried at amortized cost using the effective interest method less impairment losses. Gains and losses are recognized in the con- solidated earnings when the loans and receivables are derecognized or impaired. Interest effects from using the effective interest method are similarly recognized in profit or loss. For the accounting of pur- chase or sale of financial assets, Stabilus uses the settlement date. Loans and receivables bearing no or lower interest rates compared to market rates with a maturity of more than one year are discounted. F I N A N C I A L A S S E T S In addition to financial instruments assigned to a measurement category, financial assets also include cash and cash equivalents. Cash and cash equivalents consist primarily of cash on hand, cheques and deposits at banks. The Group considers all highly liquid investments purchased with an original matu- rity of three months or less to be cash equivalents. Cash and cash equivalents correspond with the classification in the consolidated statement of cash flows. Interest received on these financial assets is generally recognized in profit or loss applying the effective interest method. Dividends are recognized in profit or loss when legal entitlement to the payment arises. In the third quarter of fiscal year 2015 the Group started a second sale of receivables programm (for- faiting). Trade accounts receivable amounting to €25.6 million (PY: €20.2 million) were sold to factors as of September 30, 2015. As of September 30, 2015 the Group does not measure any financial assets at fair value through profit or loss (PY: €15.4 million). I M PA I R M E N T O F F I N A N C I A L A S S E T S At each reporting date the carrying amounts of the financial assets, except those measured at fair value through profit or loss, are investigated to assess whether objective evidence of impairment (such as the debtor’s inability to meet its current obligations or significant changes in the technological, economic, legal or the market environment of the debtor) exists. For equity instruments a significant or prolonged decline in fair value is considered to be objective evidence for impairment. Stabilus has defined criteria for the significance and duration of a decline in fair value. Loans and receivables If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use 77 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS of an allowance account. The amount of the loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent reversal of an impairment loss is recognized in profit or loss. In relation to trade accounts receivable, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will be unable to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible. D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S The Group does not have any derivative financial instruments apart from the derivatives which were embedded in the bond indenture and were derecognized following the full redemption of the senior secured notes in June 2015. Embedded derivatives are separated from the host contract, which is not measured at fair value through profit and loss, if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract. Separa- ble embedded derivatives are measured at fair value at initial recognition and at each subsequent reporting date. The fair value of embedded derivatives is calculated using a standard option pricing model. For the valuation, the credit spread used is calibrated such that the model reproduces the current market price quoted on the Luxembourg Stock Exchange (Bourse de Luxembourg) at the respective valu- ation date. Derivatives are presented as assets if their fair value is positive and as liabilities if the fair value is negative. Following initial recognition, changes in the fair value of derivative financial instru- ments are recognized in profit and loss. F I N A N C I A L L I A B I L I T I E S A N D E Q U I T Y I N S T R U M E N T S Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. E Q U I T Y I N S T R U M E N T S An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. F I N A N C I A L L I A B I L I T I E S Financial liabilities primarily include a senior facility (prior year: notes), trade accounts payable and other financial liabilities. Financial liabilities measured at amortized cost Financial liabilities measured at amortized cost include senior facilities. 78 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS After initial recognition the financial liabilities are subsequently measured at amortized cost applying the effective interest method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process. Financial liabilities at fair value through profit or loss As of September 30, 2015 and 2014 the Group does not measure any financial liabilities at fair value through profit or loss. P E N S I O N S A N D S I M I L A R O B L I G AT I O N S The contributions to our pension plans are recognized as an expense when the entity consumes the economic benefits arising from the services provided by the employees in exchange for employee bene- fits. For defined benefit pension plans the projected unit credit method is used to determine the present value of a defined benefit obligation, the current service cost and any past service cost. For the valuation of defined benefit plans, differences between actuarial assumptions used and actual developments as well as changes in actuarial assumptions result in actuarial gains and losses, which have a direct impact on the consolidated statement of financial position and on other comprehensive income. OT H E R P R O V I S I O N S Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable esti- mate can be made of the amount of the obligation. All cost elements that are relevant flow into the measurement of other provisions - in particular those for warranties and potential losses on pending transactions. Non-current provisions with a residual term of more than one year are recognized at bal- ance sheet date with their discounted settlement amount. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. A restructuring provision is recognized when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measure- ment of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Termination benefits are granted if an employee is terminated before the normal retirement age or if an employee leaves the company voluntarily in return for the payment of a termination benefit. The Group records termination benefits if it is demonstrably committed, without realistic possibility of with- 79 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS drawal, to a formal detailed plan to terminate the employment of current employees or if it is demon- strably committed to pay termination benefits if employees leave the company voluntarily. Provisions for warranties are recognized at the date of sale of the relevant products, at the manage- ment’s best estimate of the expenditure required to settle the Group’s obligation. 4 Revenue The Group’s revenue developed as follows: Revenue by region (location of Stabilus company) I N € T H O U S A N D S Europe NAFTA Asia / Pacific and Rest of World Revenue Revenue by markets I N € T H O U S A N D S Automotive Gas Spring Powerise Industrial Swivel Chair Revenue Group revenue results from sales of goods. 80 T _ 020 Year ended Sept 30, 2015 308,474 229,285 73,512 611,271 2014 267,271 176,817 63,245 507,333 T _ 021 Year ended Sept 30, 2015 434,212 294,400 139,812 149,321 27,738 611,271 2014 340,804 255,023 85,781 142,279 24,250 507,333 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS 5 Cost of sales, research and development, selling and administrative expenses Expenses by function T _ 022 Year ended Sept 30, 2015 I N € T H O U S A N D S Capitalized development cost Personnel expenses Material expenses Depreciation and amortization (incl. impairment losses) Other Total I N € T H O U S A N D S Capitalized development cost Personnel expenses Material expenses Depreciation and amortization (incl. impairment losses) Other Total Research & development expenses Selling expenses Cost of sales – (119,966) (299,844) (27,084) (16,700) 13,475 (14,278) (4,384) (11,280) (7,751) (463,594) (24,218) Administrative expenses – Total 13,475 (29,288) (178,401) (2,479) (315,906) (1,629) 6,067 (43,813) (34,591) (27,329) (559,236) – (14,869) (9,199) (3,820) (16,207) (44,095) Year ended Sept 30, 2014 Research & development expenses Selling expenses 12,899 (12,374) (4,769) (9,750) (6,297) – (12,745) (7,663) (3,826) (14,469) (38,703) Cost of sales – (107,093) (239,206) (25,012) (16,426) (387,737) (20,291) Selling expenses include shipping and handling cost amounting to €20,991 thousand (PY: €18,122 thousand). Other expenses exclude recharges to other functions. Administrative personnel expenses include all Koblenz second level managers, as well as all functional heads globally. The expense items in the statement of comprehensive income include following personnel expenses. Personnel expenses I N € T H O U S A N D S Wages and salaries Compulsory social security contributions Pension cost Other social benefits Personnel expenses Administrative expenses – Total 12,899 (18,908) (151,120) (2,255) (253,893) (1,522) (9,878) (40,110) (47,070) (32,563) (479,294) T _ 023 Year ended Sept 30, 2015 2014 (123,993) (105,683) (32,637) (15,183) (6,588) (28,360) (13,423) (3,654) (178,401) (151,120) 81 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS The following table shows the Group’s average number of employees. Number of employees Wage earners Salary earners Trainees and apprentices Average number of employees 6 Other income Other income I N € T H O U S A N D S Foreign currency translation gains Gains on sale / disposal of assets Income from the release of other accruals Miscellaneous other income Other income 7 Other expenses Other expenses I N € T H O U S A N D S Foreign currency translation losses Losses on sale / disposal of tangible assets Addition to other provisions Miscellaneous other expenses Other expenses 82 Year ended Sept 30, 2015 3,399 898 86 4,383 Year ended Sept 30, 2015 9,261 102 43 1,832 11,238 T _ 024 2014 3,134 836 85 4,055 T _ 025 2014 3,360 38 10 2,604 6,012 T _ 026 Year ended Sept 30, 2015 (6,631) (307) (139) (525) 2014 (2,577) (100) (147) (31) (7,602) (2,855) ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS 8 Finance income Finance income I N € T H O U S A N D S Interest income on loans and financial receivables not measured at fair value through profit and loss Net foreign exchange gain Gains from changes in carrying amount of financial assets Gains from changes in fair value of derivative instruments Other interest income Finance income 9 Finance costs Finance costs I N € T H O U S A N D S Interest expense on financial liabilities not measured at fair value through profit and loss Loss from changes in fair value of derivative instruments (note 15) Loss from changes in carrying amount of EUSIs1) Interest expenses finance lease Other interest expenses Finance costs 1) Equity upside-sharing instruments (EUSIs) which were extinguished in the fiscal year 2014 as part of the IPO reorganization. The interest expense of finance liabilities not measured at fair value through profit and loss includes early redemption fees of €9,925 thousand (PY: € 4,563 thousands) in regard of the early redemption of the senior secured notes. 10 Income tax expense Income taxes comprise current taxes on income (paid or owed) in the individual countries and deferred taxes. The tax rates which are applicable on the reporting date are used for the calculation of current taxes. Tax rates for the expected period of reversal, which are enacted or substantively enacted at the report- ing date, are used for the calculation of deferred taxes. Deferred taxes are recognized as deferred tax expenses or income in the statement of comprehensive income, unless they relate to items directly rec- ognized in equity. In these cases the deferred taxes are also recognized directly in equity. T _ 027 Year ended Sept 30, 2015 90 16,936 – – 825 17,851 2014 35 6,034 5,714 4,576 1,092 17,451 T _ 028 Year ended Sept 30, 2015 (26,450) (15,422) – (169) (364) 2014 (31,647) – (6,720) (66) (342) (42,405) (38,775) 83 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS Income tax expense I N € T H O U S A N D S Current income taxes Deferred taxes Income tax expense The respective local rates have been used to calculate the deferred taxes. A tax rate of 30% has been used for group purposes. The current income taxes comprise prior year taxes amounting to €1,589 thousand (PY: €495 thousand). The actual income tax expense of €(14,120) thousand deviates in the amount of €(4,785) thousand from the expected tax expense of €(9,335) thousand that results from applying the group income tax rate of 30% to the annual earnings of the Group before income taxes. The €(4,785) thousand are driven by non-tax deductible effects related to this years Group refinancing as well as a number of tax related positions detailed in the table below. Tax expense reconciliation (expected to actual) I N € T H O U S A N D S Income / (loss) before income tax Expected tax income / (expense): 30% Prior year taxes Tax effect of non-deductible expenses Change of the valuation allowance on deferred tax assets Tax-free income Tax audit reserve Non-capitalized deferred taxes on domestic losses Additions / deductions due to trade tax Effect of divergent tax rates Deductible withholding tax Tax rate changes Other tax effects Tax related deviations Actual income tax income / (expense) Tax charge in % 84 T _ 029 Year ended Sept 30, 2015 (16,920) 2,800 (14,120) 2014 (10,522) 10,600 78 T _ 030 Year ended Sept 30, 2015 31,117 (9,335) 1,589 (10,231) 6,447 (489) – – (703) 1,919 (1,588) (58) (1,671) (4,785) (14,120) 45.4% 2014 9,872 (2,962) 495 (2,317) 6,449 – (460) 44 (663) (833) – – 325 3,040 78 (0.8)% ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS The tax effect of non-deductible expenses mostly includes the effect of German and US non-deducti- ble expenses as well some 2015 refinancing expenses. The tax effect due to non-recognition of deferred tax assets includes the valuation allowance for the current tax loss carry-forwards. The tax effect of non-capitalized deferred taxes on domestic losses is calculated with the local tax rates on the basis of the negative earnings before taxes (EBTs) of the respective companies. The deferred tax assets (DTA) and deferred tax liabilities (DTL) in respect of each type of the temporary difference and each type of unused tax losses are as follows: Deferred tax assets and liabilities Sept 30, 2015 Sept 30, 2014 I N € T H O U S A N D S Intangible assets Property, plant & equipment Inventories Receivables Other assets Provisions and liabilities Tax and interest losses Subtotal Netting Total DTA 111 2,625 1,109 471 31 11,010 17,150 32,507 DTL Total (49,874) (7,257) (45) (3,197) (300) (5,881) – (49,763) (4,632) 1,064 (2,726) (269) 5,129 17,150 (66,554) (34,047) DTA 188 3,166 329 236 39 10,130 16,176 30,264 DTL (50,925) (8,786) (999) (808) (134) (4,458) – (27,578) 27,578 – (22,345) 22,345 – 4,929 (38,976) (34,047) 7,919 (43,765) (35,846) (66,110) (35,846) T _ 031 Total (50,737) (5,620) (670) (572) (95) 5,672 16,176 Deferred tax assets and deferred tax liabilities have been offset if they relate to income taxes levied by the same tax authorities and if there is a right to offset current tax assets against current tax liabilities. As of September 30, 2015, the Group has unused tax loss carry-forwards (including German interest loss carry fowards) of €96,045 thousand (PY: €34,545 thousand excluding German interest loss carry fowards). 85 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS The following table provides a detailed overview of the tax loss and interest carry-forwards and the expiration dates. Tax loss and interest carry-forwards T _ 032 I N € T H O U S A N D S Germany Spain Romania Total I N € T H O U S A N D S Germany* Spain Romania Total Year ended Sept 30, 2015 Tax loss and interest carry-forward Tax rate Deferred tax asset (gross) Valuation allowance Deferred tax asset (net) Expiration date 74,393 27.0% – 30.0% 20,149 28.0% 16.0% 1,571 2,567 (5,566) (1,571) 14,583 – Indefinite Indefinite – 2,567 Within 5 years 24,287 (7,137) 17,150 Year ended Sept 30, 2014 Tax rate 30.2% 28.0% 16.0% Deferred tax asset (gross) Valuation allowance Deferred tax asset (net) Expiration date 25,763 1,183 4,538 (14,125) (1,183) 11,638 – Indefinite Indefinite – 4,538 Within 5 years 31,484 (15,308) 16,176 5,611 16,041 96,045 Tax loss and interest carry-forward 85,364 4,226 28,360 117,950 The prior year information in table T_032 was adjusted by the information for the German interst carry- forward (*), which was not included in the prior year report in this table. The interest carry-forward amounts to €83,405 thousand with a gross deferred tax asset of €25,171 thousand of which a deferred tax assets of €11,638 thousand was shown in the balance sheet. The unused tax loss carry-forward comprises €12,952 thousand relating to corporate tax and trade tax. The interest carry forward amounts to €83,093 thousand. The amount recognized as a deferred tax asset is calculated under consideration of the actual corporate planning and its utilization within the planning period. Interest carry-forwards in USA and Luxembourg are not considered, as it is not likely that these carry- forwards will be utilized. 86 ANNUAL REPORT 2015Notes CONSOLIDATED FINANCIAL STATEMENTS 11 Earnings per share The weighted average number of shares used for the calculation of earnings per share in the fiscal years ended September 30, 2015 and 2014 is set out in the following table. Weighted average number of shares D AT E September 30, 2013 October 1, 2013 May 27, 2014 September 30, 2014 October 1, 2014 September 30, 2015 Number of days Transaction Change Total shares T _ 033 Total shares (time-weighted) 238 17,700,000 17,700,000 17,700,000 11,541,370 127 Capital increase 3,023,256 20,723,256 7,210,558 365 20,723,256 18,751,927 20,723,256 20,723,256 20,723,256 20,723,256 The earnings per share for the fiscal years ended September 30, 2015 and 2014 were as follows: Earnings per share Profit / (loss) attributable to shareholders of the parent (in € thousands) Weighted average number of shares Earnings per share (in €) T _ 034 Year ended Sept 30, 2015 16,950 2014 10,086 20,723,256 18,751,927 0.82 0.54 Basic and diluted earnings per share are calculated by dividing the profit attributable to the shareholders of the Company by the weighted average number of shares outstanding. 87 ANNUAL REPORT 2015 NotesCONSOLIDATED FINANCIAL STATEMENTS Notes 12 Property, plant and equipment Property, plant and equipment are presented in the following table. NOTES Property, plant and equipment I N € T H O U S A N D S Gross value Balance as of Sept 30, 2013 Foreign currency difference Additions Disposals Reclassifications Balance as of Sept 30, 2014 Foreign currency difference Additions Disposals Reclassifications Balance as of Sept 30, 2015 10,926 37,966 133,006 Land, equivalent rights to real property Buildings and land improve- ments Technical equipment and machinery Other tangible equipment Construc- tion in progress T _ 035 Total 25,715 20,229 183,244 10,868 119 – – – 10,987 (61) – – – 29,673 1,094 1,459 – 245 96,759 4,138 6,222 (1,333) 13,754 32,471 119,540 698 3,928 (2) 871 376 8,760 (1,406) 5,736 1,347 4,601 (2,648) 1,568 30,583 1,751 4,114 (1,095) 1,565 36,918 228 8,950 (83) (15,602) 13,722 (152) 20,800 – (8,036) 26,334 – – – – – – – – – – – (5,358) (423) (1,555) – – (46,439) (14,352) (819) (2,911) (13,852) 1,321 – (1,069) (4,838) 2,633 – – – – – (7,336) (61,881) (17,626) (819) (87,662) (442) (1,908) 2 – (1,045) (14,991) 1,089 (23) (1,379) (5,724) 998 (113) – – – – (2,866) (22,623) 2,089 (136) (9,684) (76,851) (23,844) (819) (111,198) 10,987 10,926 25,135 28,282 57,659 56,155 12,957 13,074 12,903 25,515 119,642 133,952 6,926 21,232 (4,064) (35) 207,303 2,612 37,602 (2,503) 136 245,150 (66,968) (4,403) (20,245) 3,954 – Accumulated depreciation Balance as of Sept 30, 2013 Foreign currency difference Depreciation expense Disposal Reclassifications Balance as of Sept 30, 2014 Foreign currency difference Depreciation expense Disposal Reclassifications Balance as of Sept 30, 2015 Carrying amount Balance as of Sept 30, 2014 Balance as of Sept 30, 2015 88 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Property, plant and equipment includes assets resulting from two finance lease contracts with a carry- ing amount of €3,312 thousand (PY: €3,197 thousand). One finance lease agreement was signed in December 2010 by Orion Rent Imobiliare S.R.L., Bucharest, prior to the Stabilus Group taking the majority of the company and relates to a real estate lease agreement. The second finance lease agreement was signed in March 2015 by Stabilus Romania S.R.L. In prior year property, plant and equipment also included a machinery lease agreement with a carrying amount of €2,059 thousand which ended December 2014. The property, plant and equipment include the land and building of Stabilus in Spain, where the activity was shut down in 2011. The Company is preparing the sale of the land and building. We are currently in the process of clarifying the local administrative requirements for the sale of the land and building, e.g. necessary payment confirmations regarding local dues and environmental clearance. For this reason we do not yet consider the sale as highly probable in this phase of the process. Therefore the assets are not yet classified as assets held for sale according to IFRS 5. In fiscal year 2015, Stabilus Group has received government grants amounting to € 805 thousand (PY: € –) which are linked to the installation of our third powerise production line in Romania. For the entitlement to this grant Stabilus Romania S.R.L. has to meet certain thresholds over a five year period. If such thresh- olds were not met, the grant would have to be paid back. Contractual commitments for the acquisition of property, plant and equipment amount to €10,576 thousand (PY: €3,755 thousand). The total depreciation expense for tangible assets is included in the consolidated statement of compre- hensive income in the following line items: Depreciation expense for property, plant and equipment T _ 036 I N € T H O U S A N D S Cost of sales Research and development expenses Selling expenses Administrative expenses Depreciation expense Prepayments by the Stabilus Group for property, plant and equipment and intangible assets of €1,080 thousand (PY: €158 thousand) are included in other non-current assets. Larger prepayments are typically secured by a bank guarantee or an in-depth check of the relevant supplier. Year ended Sept 30, 2015 (20,568) (775) (311) (969) 2014 (18,517) (714) (294) (720) (22,623) (20,245) 89 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 13 Goodwill The first-time consolidation of Stable II S.à r. l., Luxembourg as of April 8, 2010, resulted in goodwill of €51 million and the first-time consolidation of Orion Rent Imobiliare S.R.L, Bucharest, Romania resulted in goodwill of €396 thousand. These acquisitions resulted in a total goodwill of €51,458 thou- sand (PY: €51,458 thousand). Goodwill is allocated to the operating segments (CGUs) based on their relative fair values. As such €27,787 thousand have been allocated to Europe, €13,379 thousand to NAFTA and €10,292 thousand to Asia / Pacific and Rest of World (RoW). The value in use for each cash-generating unit as the smallest identifiable group of assets that gener- ates cash inflows that are largely independent of the cash inflows from other assets or other groups of assets is measured by discounting the future cash flows generated from the continuing use of the unit and was based on the following key assumptions: The underlying cash flow forecasts are based on the five-year medium term plan (“MTP”) approved by the Management Board. The cash flow planning takes into account price agreements based on experience and anticipated efficiency enhancements (e.g. relo- cation from high cost to low cost countries, higher automation etc.) as well as average sales growth of approximately 2.8% (PY: 7.8%) for Europe, 5.3% (PY: 5.3%) for NAFTA and 20.0% (PY: 20.8%) for Asia / Pacific and RoW on compound average based on the strategic outlook leading to an average higher growth rate for the free cash flow. The higher free cash flow growth rate is also effected by the product mix effects and the assumed stable gross margins and improved fix costs absorption. While the overall economic outlook is very volatile, the Group believes that its market-orientated approach and leading edge products and services allow for some revenue growth. Cash flows after the five-year period were extrapolated by applying a 1% (PY: 1%) growth rate. This growth rate was based on the expected consumer price inflation for the countries included in the respective cash generating units, adjusted for expected technological progress and efficiency gains in the overall economy. The discount rate applied to cash flow projections is 9.1% (PY: 8.8%) for Europe, 9.1% (PY: 9.3%) for NAFTA and 8.9% (PY: 9.2%) for Asia / Pacific and RoW. The pre-tax discount rates are 12.0% (PY: 11.5%) for Europe, 13.3% (PY: 13.6%) for NAFTA and 13.2% (PY: 12.0%) for Asia / Pacific and RoW. The following table shows the input data to selected key figures required for the respective recoverable amounts to equal the carrying amount. In management’s view this change is not reasonably possible. Goodwill sensitivity analysis T _ 037 Sept 30, 2015 Input data required for carrying amount to equal recoverable amount Europe 15.0 9.4 (31.7) NAFTA 15.5 7.5 (32.4) Asia / Pacific and RoW 9.2 6.9 (9.6) I N P E R C E N T Base interest rate Budgeted gross margin reduction to plan Sustainable growth rate after 5-year period 90 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 14 Other intangible assets Other intangible assets are presented in the following table. Intangible assets T _ 038 Develop- ment cost under construction Develop- ment cost Software Patents Customer relation- ship Tech- nology Trade name Total I N € T H O U S A N D S Gross value Balance as of Sept 30, 2013 52,926 22,856 3,922 1,268 83,683 58,132 13,246 236,033 Foreign currency difference 454 400 Additions Disposals 3,934 10,027 – – Reclassifications 11,583 (12,054) 94 433 (26) 479 20 – – 27 – – – – – – – – – – – – 968 14,394 (26) 35 Balance as of Sept 30, 2014 68,897 21,229 4,902 1,315 83,683 58,132 13,246 251,404 Foreign currency difference 937 874 Additions Disposals 3,675 10,582 (11,134) – Reclassifications 5,453 (6,745) Balance as of Sept 30, 2015 67,828 25,940 (197) 1,105 (132) 1,372 7,050 8 3 (8) (80) – – – – – – – – – – – – 1,622 15,365 (11,274) – 1,238 83,683 58,132 13,246 257,117 Accumulated amortization Balance as of Sept 30, 2013 (22,620) Foreign currency difference Amortization expense Impairment loss Disposals (218) (8,280) (776) – Balance as of Sept 30, 2014 (31,894) Foreign currency difference Amortization expense Impairment loss Disposals (437) (9,648) (794) 11,080 Balance as of Sept 30, 2015 (31,693) Carrying amount – – – – – – – – – – – (2,703) (994) (12,204) (19,173) (2,576) (60,270) (87) (1,051) – 26 (19) (57) – – – – – (324) (3,487) (5,479) (735) (19,089) – – – – – – (776) 26 (3,815) (1,070) (15,691) (24,652) (3,311) (80,433) 130 (964) – 132 71 (83) – 4 1 – – (235) (3,487) (5,478) (736) (20,396) – – – – – – (794) 11,216 (4,517) (1,078) (19,177) (30,130) (4,047) (90,642) Balance as of Sept 30, 2014 37,003 21,229 1,087 Balance as of Sept 30, 2015 36,135 25,940 2,533 245 160 67,992 33,480 9,935 170,971 64,506 28,002 9,199 166,475 During the fiscal year, costs of €14,257 thousand (PY: €13,961 thousand) were capitalized for develop- ment projects that were incurred in the product and material development areas. Systematic amortization of capitalized internal development projects amounted to €9,648 thousand (PY: €8,280 thousand). The bor- 91 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes rowing costs capitalized during the period amounted to €782 thousand (PY: €1,062 thousand). A capi- talization rate of 11.53% (PY: 7.75%) was used to determine the amount of borrowing costs. The total amortization expense and impairment loss for intangible assets is included in the consoli- dated statements of comprehensive income in the following line items: Amortization expense for intangible assets I N € T H O U S A N D S Cost of sales Research and development expenses Selling expenses Administrative expenses T _ 039 Year ended Sept 30, 2015 (6,515) (10,506) (3,509) (660) 2014 (6,495) (9,036) (3,532) (802) Amortization expense (incl. impairment loss) (21,190) (19,865) Amortization expenses on development costs include impairment losses of €794 thousand (PY: €776 thousand) due to the withdrawal of customers from the respective projects. The impairment loss is included in the research and development expenses. Contractual commitments for the acquisition of intangible assets amount to €873 thousand (PY: €1,388 thousand). 15 Other financial assets Other financial assets I N € T H O U S A N D S Derivative instruments Other miscellaneous Other financial assets Sept 30, 2015 Sept 30, 2014 Current Non-current – 7,899 7,899 – – – Total – 7,899 7,899 Current Non-current 15,422 2,882 18,304 – – – T _ 040 Total 15,422 2,882 18,304 92 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS D E R I VAT I V E I N S T R U M E N T S Derivative financial instruments as of September 30, 2014 comprised fair values of early redemption options embedded in the indenture which was concluded on June 7, 2013. Due to the premature and full redemption of senior secured notes on June 16, 2015, the embedded derivatives were derecog- nized. The decrease in fair value of these embedded derivatives in fiscal 2015 amounting to €(15,422) thousand is included in the Group’s income statement as finance cost. See also Note 9. OT H E R M I S C E L L A N E O U S Other miscellaneous financial assets as of September 30, 2015 mainly comprise assets related to the sale of receivables program initially started in March 2014 amounting to €3,404 thousand (Sept 30, 2014: €2,882 thousand) and receivables from a warranty insurance company amounting to €3,766 thousand (Sept 30, 2014: – ). 16 Other assets Other assets I N € T H O U S A N D S VAT Prepayments Deferred charges Other miscellaneous Sept 30, 2015 Sept 30, 2014 Current Non-current Total Current Non-current 4,239 1,005 2,881 1,968 – 1,080 – 784 4,239 2,085 2,881 2,752 2,643 1,175 2,679 2,475 8,972 – 158 – 944 Other assets 10,093 1,864 11,957 Non-current prepayments comprise prepayments on property, plant and equipment. 17 Inventories Inventories I N € T H O U S A N D S Raw materials and supplies Finished products Work in progress Merchandise Inventories Notes T _ 041 Total 2,643 1,333 2,679 3,419 1,102 10,074 T _ 042 Sept 30, 2015 Sept 30, 2014 30,969 12,151 10,121 6,542 59,783 24,519 10,455 8,639 5,927 49,540 93 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Inventories that are expected to be turned over within twelve months amounted to €59,783 thousand (PY: €49,540 thousand). Write-downs on inventories to net realizable value amounted to €5,376 thou- sand (PY: €5,705 thousand). In the reporting period raw materials, consumables and changes in finished goods and work in progress recognized as cost of sales amounted to €299,844 thousand (PY: €239,206 thousand). The Stabilus Group’s prepayments for inventories amounting to €873 thousand (PY: €1,063 thousand) are included in prepayments in other current assets. 18 Trade accounts receivable Trade accounts receivable include the following items: Trade accounts receivable I N € T H O U S A N D S Trade accounts receivable Allowance for doubtful accounts Trade accounts receivable T _ 043 Sept 30, 2015 Sept 30, 2014 65,044 (2,196) 62,848 58,068 (1,571) 56,497 Trade accounts receivable increased in the fiscal year ended September 30, 2015 mainly due the higher sales partly compensated by the additional sale of receivables to factors. The Group provides credit in the normal course of business and performs ongoing credit evaluations on certain customers’ financial condition, but generally does not require collateral to support such receivables. The Group established an allowance for doubtful accounts based upon factors such as the credit risk of specific customers, historical trends and other information. The allowances for doubtful accounts developed as follows: Allowance for doubtful accounts T _ 044 I N € T H O U S A N D S Allowance for doubtful accounts as of beginning of fiscal year Foreign currency differences Increase in the allowance Decrease in the allowance Sept 30, 2015 Sept 30, 2014 (1,571) (1,586) (24) (606) 5 (38) (232) 285 Allowance for doubtful accounts as of fiscal year-end (2,196) (1,571) 94 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS 19 Current tax assets Current tax assets are measured at the amount expected to be recovered from the taxation authorities when the amount already paid in respect of current and prior periods exceeds the amount due for those periods. 20 Cash and cash equivalents Cash and cash equivalents includes cash on hand and in banks, i.e. liquid funds and demand deposits. As of September 30, 2015, it amounted to €39,473 thousand (PY: €33,494 thousand). Cash in banks earned interest at floating rates based on daily bank deposit rates. 21 Equity The development of the equity is presented in the statement of changes in equity. Issued capital Issued capital as of September 30, 2015 amounted to €207 thousand (September 30, 2014: €207 thou- sand) and was fully paid in. It is divided into 20,723,256 shares with a nominal value of €0.01 each. The authorized capital of the Company is set at €315 thousand represented by maximum of 31,500 thou- sand shares, each with a nominal value of €0.01. Capital reserves Capital reserves as of September 30, 2015 amounted to €73,091 thousand (September 30, 2014: €73,091 thousand) and contained premiums received for the issuance of shares of €64,970 thousand, a distributable reserve of €4,836 thousand and other capital contributions by owners of €3,286 thousand. Retained earnings Retained earnings as of September 30, 2015 amounted to €24,871 thousand (September 30, 2014: €7,920 thousand) and included Group’s net result in the fiscal year 2015 amounting to €16,950 thousand. Dividends In the second quarter of fiscal 2015, a dividend amounting to €56 thousand was paid to a non- controlling shareholder of a Stabilus subsidiary. Other reserves Other reserves comprise all foreign currency differences arising from the translation of the financial state- ments of foreign operations and unrealized actuarial gains and losses. The following table shows the changes in other reserves recognized in equity through other comprehensive income as well as the income tax recognized in equity through other comprehensive income. Notes 95 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Other comprehensive income / (expense) I N € T H O U S A N D S Balance as of Sept 30, 2013 Before tax Tax (expense) benefit Net of tax Non-controlling interest Balance as of Sept 30, 2014 Before tax Tax (expense) benefit Net of tax Non-controlling interest Balance as of Sept 30, 2015 22 Financial liabilities The financial liabilities comprise following items: Financial liabilities I N € T H O U S A N D S Notes Senior facility Financial liabilities Unrealized actuarial gains / (losses) Unrealized gains / (losses) from foreign currency translation (2,307) (9,207) 2,763 (6,444) – (8,751) 50 (16) 34 – (8,717) 4,044 (422) – (422) – 3,623 (16,390) – (16,390) – (12,767) T_045 Total 1,737 (9,629) 2,763 (6,866) – (5,128) (16,340) (16) (16,356) – (21,484) T _ 046 Sept 30, 2015 Sept 30, 2014 Current Non-current – 5,000 5,000 – 258,644 258,644 Total – 263,644 263,644 Current Non-current Total 5,789 256,556 262,345 – – – 5,789 256,556 262,345 On June 16, 2015, the Group refinanced the senior secured notes due in 2018 and the €25.0 million revolving credit facility dated June 7, 2013. The senior secured notes with the outstanding principal amount of €256,123 thousand were fully and prematurely redeemed on June 16, 2015. In accordance to the terms of the notes issued, the nominal redemption price per redeemed note amounted to €103,875, equaling 103.875% of the principal amount of each €100,000 note redeemed leading to an early redemption fee of €9,925 thousands. The fair value of embedded derivatives was derecognized accordingly. See also Note 9 and 15 above. S E N I O R FA C I L I T I E S On December 19, 2014, Stabilus entered into a €320 million senior facilities agreement with, among others, Commerzbank Aktiengesellschaft, Unicredit Bank AG and Helaba Landesbank Hessen-Thüringen Girozentrale as mandated lead arrangers, Unicredit Luxembourg S.A. as facility and security agent. The 96 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS agreement comprises a term loan facility of €270 million and a revolving credit facility of €50 million, both maturing on June 16, 2020. The duration of the senior facilities can be extended by an additional year, upon Company’s request until June 16, 2016 and lenders’ agreement to that request. The senior facilities were available to the Company from June 15, 2015. The loans carry variable interest rates depending on the net leverage ratio-related margin grid with a margin over Euribor range between 0.85% and 3.50% per annum. Based on the company’s current leverage level, the interest rate is 2.0% above Euribor. The term loan facility is to be repaid in semi-annual installments (payable on March 31 and September 30) equal to €2.5 million per installment date in the first two years, €7.5 million thereafter and until the termination date (June 16, 2020) on which the facility has to be repaid in full. During the availability period of the revolving facility, a commitment fee of 35% of the applicable mar- gin is payable on the last day of each successive three month period. An ancillary facility can be made available under this senior facilities agreement, containing e.g. over- draft facilities, guarantees, bonding, documentary or stand-by letter of credit facilities, short-term loan facilities, derivative or foreign exchange facilities subject to the satisfaction of certain conditions. A lender can provide all or part of its revolving facility commitment as an ancillary facility. The senior facilities are guaranteed by Stabilus and other subsidiary guarantors defined in the agree- ment. The agreement contains certain financial covenants, including a requirement of a maximum net leverage ratio. The Group’s liability under the senior term loan facility with a principal amount of €270 million was measured at amortized cost under consideration of transaction costs. As of September 30, 2015, the Group had no liability under the committed €50 million revolving credit facility. 23 Other financial liabilities Other financial liabilities Sept 30, 2015 Sept 30, 2014 I N € T H O U S A N D S Current Non-current Total Current Non-current Liabilities to employees Social security contribution Finance lease obligation Liabilities to related parties Other financial liabilities 5,787 1,844 347 – 7,978 – – 2,139 – 2,139 5,787 1,844 2,486 – 10,117 4,120 1,701 536 3 6,360 – – 960 – 960 Notes T _ 047 Total 4,120 1,701 1,496 3 7,320 97 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Finance lease obligation, measured as present value of future minimum lease payments, relates to a lease contract for a real estate lease contract for a production facility in Romania. 24 Provisions Provisions Sept 30, 2015 Sept 30, 2014 I N € T H O U S A N D S Current Non-current Anniversary benefits Early retirement contracts Employee-related costs Environmental protection Other risks Legal and litigation costs Warranties Other miscellaneous Provisions 13 659 9,082 376 1,035 90 7,938 935 20,128 – 860 – – – – – 172 1,032 Total 13 1,519 9,082 376 1,035 90 7,938 1,107 21,160 Current Non-current – – 3,575 730 578 135 2,338 1,195 8,551 295 3,372 – – – – – 393 4,060 The non-current provisions developed as follows: Changes of non-current provisions I N € T H O U S A N D S Balance as of Sept 30, 2013 Foreign currency differences Costs paid Release to income Additions Balance as of Sept 30, 2014 Reclassifications Foreign currency differences Costs paid Release to income Additions Balance as of Sept 30, 2015 98 Anniversary benefits Early retirement Other miscellaneous 551 1 (237) (20) – 295 (13) – (208) (74) – – 5,913 (3) (2,377) (161) – 3,372 (659) – (1,711) (142) – 860 573 27 – (242) 35 393 (262) 18 – – 23 172 T _ 048 Total 295 3,372 3,575 730 578 135 2,338 1,588 12,611 T _ 049 Total 7,037 25 (2,614) (423) 35 4,060 (934) 18 (1,919) (216) 23 1,032 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes T _ 050 The discount rate used for the calculation of non-current provisions as of September 30, 2015 was 0.9% (PY: range from 0.75% to 1.25%). The development of current provisions is set out in the table below: Changes of current provisions I N € T H O U S A N D S Employee- related costs Environ- mental protection measures Balance as of Sept 30, 2013 4,160 Foreign currency differences (70) 915 43 (3,514) (228) Costs paid Release to income Additions Balance as of Sept 30, 2014 Reclassifications – 2,999 3,575 – Foreign currency differences (467) Costs paid Release to income Additions Balance as of Sept 30, 2015 (2,668) (128) 8,770 9,082 – – 730 – 308 (662) – – Other risks 565 30 – (17) – 578 – – (75) (349) 881 Legal and litigation costs Anniver- sary benefits Early retirement Warranties Other miscella- neous Total 138 (3) – – – 135 – (45) – – – 90 – – – – – – – – – – – – 13 659 – – – – – – – – 13 659 6,057 (103) 2,073 13,908 (35) (138) (2,241) (2,026) (8,009) (1,485) (14) (1,516) 110 2,338 262 (311) (1,395) (99) 7,143 7,938 1,197 1,195 – 4,306 8,551 934 (551) (1,066) 95 (98) 294 935 (4,705) (674) 17,088 20,128 376 1,035 The provision for employee-related expenses comprises employee bonuses and termination benefits. The provision for environmental protections measures relate to the 1985 vacated former Stabilus Inc US site in Colmar, PE, USA at the North Penn Area 5. In the meantime this North Penn Area 5 has been identified by the United States Environmental Protection Agency (EPA) as an area requiring envi- ronmental remediation. In 2011 the EPA contacted seven companies in the North Penn Area 5 as potential responsible parties for cost sharing, Stabilus being one of them. The Group is currently unable to develop a reasonable estimate of its share of the ultimate obligation as cost apportionment method of the EPA and Stabilus insurance reimbursement are unclear at this point in time. As such, no liability for an EPA reimbursement has been reflected in the balance sheet as of September 30, 2015. An esti- mated liability for long-term bioremediation has been recorded by the Group in the balance sheet as of September 30, 2015. The provision for other risks from purchase and sales commitments represents expected sales discounts, expected losses from pending deliveries of goods and other sales-related liabilities. The provision for legal and litigation costs represents costs of legal advice and notary charges as well as the costs of litigation. 99 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes The provision for warranties represents the accrued liability for pending risks from warranties offered by the Group for their products. The Group issues various types of contractual warranties under which it generally guarantees the performance of products delivered and services rendered. The Group accrues for costs associated with product warranties at the date products are sold. This line also com- prises accruals that are calculated for individual cases. Insurance reimbursements related to individual cases are presented in other financial assets. 25 Pension plans and similar obligations Liabilities for the Group’s pension benefit plans and other post-employment plans comprise the following: Pension plans and similar obligations T _ 051 I N € T H O U S A N D S Principal pension plan Deferred compensation Pension plans and similar obligations Sept 30, 2015 Sept 30, 2014 47,505 484 47,989 47,877 476 48,353 D E F I N E D B E N E F I T P L A N S A N D D E F E R R E D C O M P E N S AT I O N Defined benefit plan The Group granted post-employment pension benefits to all employees in Germany who joined the company prior to January 1, 2006. The level of post-employment benefits is generally based on eligible compensation levels and / or ranking within the Group hierarchy and years of service. Liabilities for principal pension plans amounting to €47,505 thousand (PY: €47,877 thousand) result from unfunded accumulated benefit obligations. As of December 21, 2010, in order to free the Group of future liquidity risks, the Group’s pension poli- cies for Germany were amended, in which the title earned in the former defined benefit plan was fro- zen. Going forward no additional defined benefit titles can be earned except for certain older employ- ees. At the same time, the Company introduced a defined contribution plan in which direct payments to an external insurer are made. The weighted average duration of the defined benefit obligations in the fiscal year 2015 is 16.4 years (PY: 16.8 years). Deferred compensation Deferred compensation included in accrued pension liabilities relates to employees of the former Atecs Mannesmann companies. Deferred compensation is a form of retirement pay which is financed by the employees, where, based on an agreement between the Group and the employees, part of their income is retained by the Group and paid to the respective employees after retirement. The total deferred com- pensation as of September 30, 2015 amounts to €484 thousand (PY: €476 thousand), the increase is due to reduced discounting time frame. 100 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS The unfunded status is as follows: Unfunded status I N € T H O U S A N D S Present value of unfunded defined benefit obligations Less: Fair value of plan assets Unfunded status The present value of the defined benefit obligation developed as follows: Present value of defined benefit obligations I N € T H O U S A N D S Present value of defined benefit obligations as of beginning of fiscal year Service cost Interest cost Financial assumptions Experience assumptions Actuarial (gains) / losses Pension benefits paid Present value of defined benefit obligations as of fiscal year-end The pension cost in the consolidated statement of comprehensive income includes the following expenses for defined benefit plans: Pension cost for defined benefit plans I N € T H O U S A N D S Service cost Interest cost Pension cost for defined benefit plans Notes T _ 052 Sept 30, 2015 Sept 30, 2014 47,989 48,353 – – 47,989 48,353 T _ 053 Year ended Sept 30, 2015 48,353 42 1,141 155 (205) (50) (1,497) 47,989 2014 39,123 48 1,382 8,292 914 9,206 (1,406) 48,353 Year ended Sept 30, 2015 42 1,141 1,183 T _ 054 2014 48 1,382 1,430 101 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes The present value of the defined benefit obligation and the experience adjustments arising on the plan liabilities are as follows: Present value of the defined benefit obligation and the experience adjustments on the plan liabilities I N € T H O U S A N D S Sept 30, 2011 Sept 30, 2012 Sept 30, 2013 Sept 30, 2014 Sept 30, 2015 T _ 055 Defined benefit obligation Experience adjustments 33,081 38,066 39,123 48,353 47,989 (357) (308) (213) 914 (205) Generally, the measurement date for Group’s pension obligations is September 30. The measurement date for Group’s net periodic pension cost generally is the beginning of the period. Assumed discount rates, salary increases and long-term return on plan assets vary according to the economic conditions in the country in which the pension plan is situated. Following assumptions (measurement factors) were used to determine the pension obligations: Significant factors for the calculation of pension obligations T _ 056 I N % P. A . Discount rate Inflation Salary increases Pension increases Turnover rate Sept 30, 2015 Sept 30, 2014 2.38% 1.50% 0.00% 1.50% 4.00% 2.40% 1.50% 0.00% 1.50% 4.00% The discount rates for the pension plans are determined annually as of September 30 on the basis of first-rate, fixed-interest industrial bonds with maturities and values matching those of the pension payments. S E N S I T I V I T Y A N A LYS I S If the discount rate were to differ by + 0.5% / – 0.5% from the interest rate used at the balance sheet date, the defined benefit obligation for pension benefits would be an estimated €3,644 thousand lower or €4,141 thousand higher. If the future pension increase used were to differ by + 0.2% / – 0.2% from management’s estimates, the defined benefit obligation for pension benefits would be an estimated €1,173 thousand higher or €1,131 thousand lower. The reduction / increase of the mortality rates by 2 years results in an increase / deduction of life expectancy depending on the individual age of each 102 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS beneficiary. The effects on the defined benefit obligation (the "DBO") as of September 30, 2015 due to a 2 year reduction / increase of the life expectancy would result in a decrease of €2,044 thousand or an increase of €2,124 thousand. When calculating the sensitivity of the DBO to significant actuarial assumptions, the same method (present value of the DBO calculated with the projected unit credit method) has been applied as when calculating the post-employment benefit obligation recognized in the Consolidated Statement of Financial Position. Increases and decreases in the discount rate or the rate of pension progression which are used in determining the DBO do not have a symmetrical effect on the DBO due to the com- pound interest effect created when determining the net present value of the future benefit. If more than one of the assumptions are changed simultaneously, the combined impact due to the changes would not necessarily be the same as the sum of the individual effects due to the changes. If the assumptions change at a different level, the effect on the DBO is not necessarily in a linear relation. Expected pension benefit payments for the fiscal year 2016 will amount to €1,858 thousand (PY: €1,764 thousand). D E F I N E D C O N T R I B U T I O N P L A N S The expenses incurred under defined contribution plans are primarily related to government-run pension plans. Expenses for these plans in the reporting period amounted to €12,504 thousand (PY: €11,856 thousand). 26 Trade accounts payable Trade accounts payable amount to €68,929 thousand (PY: €53,724 thousand) as of the end of the fiscal year. The full amount is due within one year. The liabilities are measured at amortized cost. For information on liquidity and exchange rate risks for trade accounts payable, please see Note 32. 27 Current tax liabilities The current tax liabilities relate to income and trade taxes. Notes 103 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 28 Other liabilities The following table sets out the breakdown of Group’s other current and non-current liabilities: Other liabilities Sept 30, 2015 Sept 30, 2014 I N € T H O U S A N D S Current Non-current Current Non-current 1,267 2,269 5,515 1,891 157 576 – – – – Total 1,843 2,269 5,515 1,891 157 456 2,169 5,463 2,764 127 11,099 576 11,675 10,979 – – – – – – Advanced payments received Vacation expenses Other personnel-related expenses Outstanding costs Miscellaneous Other liabilities 29 Leasing O P E R AT I N G L E A S E T _ 057 Total 456 2,169 5,463 2,764 127 10,979 The Group entered into non-cancellable operating leases for IT hardware, cars and other machinery and equipment with lease terms of 2 to 6 years. The future minimum lease payments relating to leas- ing agreements during the basic rental period when they cannot be terminated are as follows: Operating lease I N € T H O U S A N D S within one year after one year but not more than five years more than five years Total T _ 058 Minimum lease payments in year ended Sept 30, 2015 5,050 16,782 814 22,646 2014 4,429 11,193 205 15,827 The increase in total minimum lease payments in the next five years is primarily due to the expansion of the rented production facilities in China. Current period expense for operating leases amounts to €6,159 thousand (PY: €5,205 thousand). 104 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes T _ 059 Sept 30, 2015 Sept 30, 2014 Minimum lease payments (MLP) Present value of MLP Minimum lease payments (MLP) Present value of MLP 542 1,214 1,147 2,903 519 1,000 909 2,428 541 759 623 504 613 404 1,923 1,521 F I N A N C E L E A S E Finance lease I N € T H O U S A N D S within one year after one year but not later than five years more than five years Total As of September 30, 2015 there are two real estate lease contracts regarding a production facility in Romania recorded as finance lease. Prior year figures also included an additional lease contract for a production line in Germany. Production facility: Orion Rent Imobiliare S.R.L, Brasov, entered into a non-cancellable real estate finance lease agreement on December 31, 2010 (prior to Stabilus Group taking over a controlling interest in this company) with a term of 144 months prior to the Stabilus Group becoming a controlling shareholder of Orion Rent Imobiliare S.R.L. The agreement contains a purchase option starting at the end of the third year of the contract, for a purchase price amounting to the capital that remains to be paid up to the expiry of the contract less early payment fee (between 2.75% and 4.75% of the remaining capital to be paid). The net carrying amount at the balance sheet date is €1,037 thousand (PY: €1,138 thousand). The lease term started on January 1, 2011. The leasing fees are settled in euro, but payable in new Romanian lei. They include a variable component of the total funding cost with 3-month Euribor as the reference basis. Stabilus Romania S.R.L. entered into a real estate lease agreement which was classified as finance lease as of March 1, 2015. The contract has a duration of 91 months and can be extended. The con- tract includes the extension of the existing production facility for the production of gas springs and dampers. The underlying interest rate amounts to 2%. The net carrying amount at the balance sheet date was €2,275 thousand. The payments for finance leases in the fiscal year ended September 30, 2015 amounted to €1,841 thousand (PY: €1,191 thousand). No contingent rents have been recognized as an expense during the period. 105 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 30 Contingent liabilities and other financial commitments C O N T I N G E N T L I A B I L I T I E S Contingent liabilities are uncertainties for which the outcome has not been determined. If the outcome is probable and estimable, the liability is shown in the statement of financial position. In regards to a potential contingent obligation in the EPA Colmar please see Note 24. G U A R A N T E E S On October 11, 2005, Stabilus Romania S.R.L., Brasov, (“STRO”) entered into a rental agreement with ICCO SRL (ICCO) for a production facility used for production of gas springs and dampers with an area of 8.400 square meters for STRO in Brasov, Romania. The initial rental agreement has a contract period of seven years which has been extended to support production space, requirements for the trans- fer of certain productions steps to Romania. STAB Dritte Holding GmbH, Koblenz, merged into Stable Beteiligungs GmbH, Koblenz, a wholly owned subsidiary of the Company, issued a bank guarantee for €600 thousand (PY: €600 thousand), in the event that STRO will be unable to pay. Stabilus GmbH, Koblenz, issued a letter of support for the event that STRO will be unable to pay. On September 22, 2005, Stabilus S. A. de C. V. (“STMX”) entered into a lease agreement with Deutsche Bank Mexico, S. A., and Kimex Industrial BEN, LLC, for a production facility with an area of 28,952 square meters of land and 5,881 square meters of construction in Ramos Arizpe, State of Coahuila, Mexico. The lease agreement has a contract period of ten years and will be extended. Stabilus GmbH, Koblenz, issued a letter of support for the event that STMX will be unable to pay. The Group entered into a senior facilities agreement. The credit guarantees provided in this agreement are full down-stream, up-stream and cross-stream given by the guarantors as defined in this agree- ment – comprising certain material subsidiaries of the Group – in favor of the finance parties. The guarantees are subject to limitations, including being limited to the extent that otherwise the guaran- tee would amount to unlawful financial assistance and other jurisdiction-specific tests (e.g. net assets). Given a normal course of the economic development as well as a normal course of business, manage- ment believes these guaranties should not result in a material adverse effect for the Group. 106 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS OT H E R F I N A N C I A L C O M M I T M E N T S The nominal value of the other financial commitments as of September 30, 2015 amounted to €34,095 thousand (PY: €20,970 thousand). Nominal values of other financial commitments are as follows: Financial commitments I N € T H O U S A N D S Capital commitments for fixed and other intangible assets Obligations under rental and leasing agreements Total I N € T H O U S A N D S Capital commitments for fixed and other intangible assets Obligations under rental and leasing agreements Total Sept 30, 2015 1 to 5 years More than 5 years – 16,782 16,782 – 814 814 Sept 30, 2014 1 to 5 years More than 5 years – 11,193 11,193 – 205 205 Less than 1 year 11,449 5,050 16,499 Less than 1 year 5,143 4,429 9,572 Notes T _ 060 Total 11,449 22,646 34,095 Total 5,143 15,827 20,970 107 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 31 Financial instruments The following table shows the carrying amounts and fair values of the Group’s financial instruments. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments T _ 061 I N € T H O U S A N D S Trade accounts receivables Cash Derivative instruments Other miscellaneous Other financial assets Total financial assets Financial liabilities Trade accounts payable Finance lease liabilities Liabilities to related parties Other financial liabilities Total financial liabilities Sept 30, 2015 Sept 30, 2014 Measurement category acc. to IAS 39 Carrying amount Fair value Carrying amount Fair value LaR LaR FAFV LaR LaR / FAFV FLAC FLAC – FLAC FLAC / – 62,848 39,473 – 7,899 7,899 110,220 263,644 68,929 2,486 – 2,486 62,848 39,473 – 7,899 7,899 110,220 261,277 68,929 2,428 – 2,428 56,497 33,494 15,422 2,882 18,304 108,295 262,345 53,724 1,496 3 1,499 56,497 33,494 15,422 2,882 18,304 108,295 273,437 53,724 1,521 3 1,524 335,059 332,634 317,568 328,685 Aggregated according to categories in IAS 39: Loans and receivables (LaR) Financial assets at fair value through profit and loss (FAFV) Financial liabilities measured at amortized cost (FLAC) 110,220 110,220 – – 92,873 15,422 92,873 15,422 332,573 330,206 316,072 327,164 108 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes The following table provides an overview of the classification of financial instruments presented above in the fair value hierarchy, except for financial instruments with fair values corresponding to the carry- ing amounts (i.e. trade accounts receivable and payable, cash and other financial liabilities). Financial instruments T _ 062 I N € T H O U S A N D S Financial assets Sept 30, 2015 Sept 30, 2014 Total Level 11) Level 22) Level 33) Total Level 11) Level 22) Level 33) Derivative instruments – Financial liabilities Senior facilities (PY: Senior secured notes) Finance lease liabilities 261,277 2,428 – – – – 261,277 – – 273,437 273,437 – 2,428 1,521 – – – 15,422 – 15,422 1) Fair value measurement based on quoted prices (unadjusted) in active markets for these or identical instruments. 2) Fair value measurement based on inputs that are observable on active markets either directly (i. e. as prices) or indirectly (i. e. derived from prices). 3) Fair value measurement based on inputs that are not observable market data. The fair value is the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values in the previous fiscal year: • The fair value of the quoted senior secured notes is based on price quotations at the reporting date. • The valuation technique used for the determination of the obligations under finance leases, is the discounted cash flow method. The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate depending on the maturity of the payment. The expected payments are determined by considering contractual redemption payments and interest payments with the currently agreed interest rate. Significant unobservable inputs are the risk-adjusted discount rates, which range from 7.5% to 10.1%, and the forecasted interest payments. Therefore, the fair value would change if the risk-adjusted discount rate or the interest rate changed. • The fair value of embedded derivative instruments is calculated using a standard option pricing model. For the valuation, the credit spread used is calibrated such that the model reproduces the current market of the notes quoted on the Luxembourg Stock Exchange at the reporting date. The finance lease contracts include fixed-interest rates. Therefore, the fair value of finance lease liabili- ties (categorized as Level 3 in the fair value hierarchy table) are not exposed to interest risk through fluctuation. The net gains and losses on financial instruments result in the fiscal year ended September 30, 2015 from the currency translation and changes in the estimate of future cash flows of loans and receivables and financial liabilities measured at amortized cost, as well as gains from changes in fair value of derivative instruments. They are set out in the Notes 8 and 9. The net foreign exchange gain amounted to €16,936 thousand (PY: €6,034 thousand). – – 1,521 109 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Total interest income and expense from financial instruments is reported in the Notes 8 and 9. The value of the embedded derivatives was effected by the interest of the comparable market instru- ment on each potential exercise date and will rise if the relevant interest rate declines and vice versa. 32 Risk reporting I N T E R N A L R I S K M A N A G E M E N T The Group employs within the budgeting process an integrated system for the early identification and monitoring of risks specific to the Group, in order to identify changes in the business environment and deviations from targets at an early stage and to initiate countermeasures in advance. This includes monthly short and medium-term analysis of the order intake and the sales invoicing behavior. Control impulses for the individual companies are derived from this. Customer behavior is ascertained and ana- lyzed continuously and the information obtained from this serves as an early warning indicator for pos- sible changes in demand patterns. In addition, significant KPIs (order intake, sales and EBITDA, staffing level, quality indicators) are reported monthly by all Group companies and are assessed by Group management. F I N A N C I A L R I S K S The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Group. These risks include credit risk, liquidity risk and market risk (including cur- rency risk and fair value interest rate risk). The Group seeks to minimize the effects of financial risks by using derivative financial instruments to hedge these exposures wherever useful. The use of financial derivatives is governed by the Group’s pol- icies approved by the Management Board, which provide principles on foreign currency risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Group does not have any derivative financial instruments apart from the derivatives which were embedded in the bond indenture and were derecognized following the full redemption of the senior secured notes in June 2015. C R E D I T R I S K S Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of dealing only with creditworthy counter- parties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are moni- tored and the aggregate value of transactions concluded is spread amongst approved counterparties. 110 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Trade accounts receivable consist of a large number of customers, spread across diverse industries and geographical areas. Credit evaluation is performed on the financial condition of accounts receivable and, where viewed appropriate, credit guarantee insurance cover is purchased. Besides this, commer- cial considerations impact the credit lines per customer. The maximum exposure to credit risk of financial assets is the carrying amount as follows: Credit risk included in financial assets T _ 063 I N € T H O U S A N D S Financial assets Trade accounts receivable Other miscellaneous Total I N € T H O U S A N D S Financial assets Trade accounts receivable Derivative instruments Other miscellaneous Total Sept 30, 2015 Neither past due nor impaired < 30 days 30 – 60 days 60 – 90 days 90 – 360 days > 360 days Total 53,872 7,899 61,771 6,075 1,002 – – 6,075 1,002 414 – 414 1,280 – 1,280 206 – 206 62,848 7,899 70,747 Neither past due nor impaired < 30 days 30 – 60 days 60 – 90 days 90 – 360 days > 360 days Total Sept 30, 2014 48,263 15,422 2,882 66,567 5,930 729 – – – – 5,930 729 – – – – 1,274 301 – – – – 1,274 301 56,497 15,422 2,882 74,801 Credit risk of other financial assets of the Group, which comprise cash and cash equivalents, and mis- cellaneous financial assets, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group does not have any critical credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the coun- terparties are banks with high credit ratings assigned by international credit rating agencies and are also typically lenders to the Group. Therefore, credit quality of financial assets which are neither past due nor impaired is assessed to be good. L I Q U I D I T Y R I S K S The Management Board has established an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management require- ments. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities and by monitoring forecast cash flows at regular intervals. 111 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Trade accounts payable 68,929 – – – – – T _ 064 Total 79,800 15,553 20,287 19,986 226,103 1,147 68,929 362,876 Notes The following maturities summary shows how cash flows from the Group’s liabilities as of Septem- ber 30, 2015 will influence its liquidity situation. The summary describes the course of the undis- counted principal and interest outflows of the financing liabilities and the undiscounted cash outflows of the trade accounts payable. The undiscounted cash outflows are subject to the following conditions: If the counterparty can request payment at different dates, the liability is included on the basis of the earliest payment date. The underlying terms and conditions are described in the Note 22. Liquidity outflows for liabilities I N € T H O U S A N D S Senior facility Finance lease 2016 2017 2018 2019 2020 after 2020 Total 10,329 15,233 19,988 19,688 225,806 – 291,044 542 320 299 298 297 1,147 2,903 The senior facility gives planning stability over the next years. At the balance sheet date, the Group has undrawn committed facilities of €50.0 million (PY: €25.0 million) to reduce liquidity risks. F I N A N C E M A R K E T R I S K S The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see below) and interest rates (see below). As of September 30, 2015, the Group has not entered into any derivative financial instruments. The Group monitors closely its exposure to interest rate risk and foreign currency risk and regularly checks the opportunities of entering into a variety of derivative financial instruments. Exchange rate risk Due to its subsidiaries, the Group has significant assets and liabilities outside the Eurozone. These assets and liabilities are denominated in local currencies. When the net asset values are converted into euro, currency fluctuations result in period to period changes in those net asset values. The Group’s equity position reflects these changes in net asset values. The Group does not hedge against these structural currency risks. The Group also has transactional currency exposures which arise from sales or purchases in currencies other than the functional currency and loans in foreign currencies. In order to mitigate the impact of currency exchange rate fluctuations for the operating business, the Group continually assesses its expo- sure and attempts to balance sales revenue and costs in a currency to thus reduce the currency risk. Besides the balance sheet the Group’s revenue and costs are also impacted by currency fluctuations. 112 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS A 1% increase / decrease in value of US dollar compared to euro would lead to an increase / decrease of EBIT of approximately €0.3 million. Interest rate risk The Group is exposed to interest rate risks, which mainly relate to debt obligations, as the Group financing is based on Euribor related credit agreements. The interest rate risk is monitored by using the cash flow sensitivity of the Group’s cash flows due to floating interest loans. An 1% increase of floating interest rates (Euribor) would lead to an increase of financial expense of approximately €2.7 million. As the Euribor is below 0% as of September 30, 2015 a decrease has no effect on financial expenses. 33 Capital management The Stabilus Group’s capital management covers both equity and liabilities. A further objective is to maintain a balanced mix of debt and equity. Due to the broad product range and the activities on global markets, the Stabilus Group generates under normal economic conditions predictable and sustainable cash flows. The equity ratio as of September 30, 2015 is calculated as follows: Equity ratio I N € T H O U S A N D S Equity Total assets Equity ratio The Stabilus Group is not subject to externally imposed capital requirements. The ratio of net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is also used as a covenant in the senior facilities agreement, is an important financial ratio (debt ratio) used in the Stabilus Group. The objective is to improve the debt ratio in the future. The Company does not expect a breach of this covenant. Notes T _ 065 Year ended Sept 30, 2015 76,709 542,239 14.1% 2014 76,123 520,302 14.6% 113 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 34 Notes to the consolidated statement of cash flows The statement of cash flows is prepared in compliance with IAS 7. The statement of cash flows of the Stabilus Group shows the development of the cash flows from operating, investing and financing activ- ities. Inflows and outflows from operating activities are presented in accordance with the indirect method and those from investing and financing activities by the direct method. The cash funds reported in the statement of cash flows comprise all liquid funds, cash balances and cash at banks reported in the statement of financial position. Interest payments of €32,237 thousand (PY: €30,113 thousand) are taken into account in the cash outflows from financing activities. Income tax payments of €17,274 thousand (PY: €7,065 thousand) are allocated in full to the operating activities area, since allocation to individual business areas is impracticable. 35 Segment reporting The Stabilus Group is organized and managed primarily on a regional level. The three reportable oper- ating segments of the Group are Europe, NAFTA and Asia / Pacific including RoW. The product portfolio is largely similar in these three regional segments. The Group measures the performance of its operating segments through a measure of segment profit or loss (key performance indicator) which is referred to as “adjusted EBIT” and in the previous periods “adjusted EBITDA”. Adjusted EBIT represents EBIT (i.e. earnings before interest and taxes), as adjusted by management primarily in relation to severance, consulting, restructuring and other non-recurring costs, expenses for one-time legal disputes, interest on pension changes as well as depreciation and amortiza- tion of Group’s assets to fair value resulting from the April 2010 purchase price allocation (PPA). 114 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Segment information for the fiscal years ended September 30, 2015 and 2014 is as follows: Segment reporting T _ 066 Europe NAFTA Asia / Pacific and RoW Year ended Sept 30, Year ended Sept 30, Year ended Sept 30, I N € T H O U S A N D S External revenue1) Intersegment revenue1) Total revenue1) EBITDA Depreciation and amortization (incl. impairment losses) EBIT Adjusted EBITDA Adjusted EBIT I N € T H O U S A N D S External revenue1) Intersegment revenue1) Total revenue1) EBITDA Depreciation and amortization (incl. impairment losses) EBIT Adjusted EBITDA Adjusted EBIT 2015 308,474 28,293 336,767 55,396 2014 2015 2014 267,271 229,285 176,817 23,480 4,649 290,751 233,934 39,591 31,128 (21,409) (19,512) 33,987 62,484 41,075 20,079 57,542 38,030 (6,509) 24,619 31,608 25,099 2015 73,512 393 73,905 12,960 (3,217) 9,743 13,235 10,018 2014 63,245 123 63,368 11,669 (1,971) 9,698 12,130 10,159 2,519 179,336 20,045 (6,175) 13,871 22,813 16,638 Total segments Other / Consolidation Stabilus Group Year ended Sept 30, Year ended Sept 30, Year ended Sept 30, 2015 611,271 33,335 644,606 99,484 (31,135) 68,349 107,327 76,192 2014 507,333 26,122 533,455 71,305 (27,658) 43,648 92,485 64,827 2015 – (33,335) (33,335) – (12,678) (12,678) – – 2014 – (26,122) (26,122) – (12,452) (12,452) – 227 2015 611,271 – 611,271 99,484 (43,813) 55,671 107,327 76,192 2014 507,333 – 507,333 71,305 (40,110) 31,196 92,485 65,054 1) Revenue breakdown by location of Stabilus company (i.e. “billed-from view”). The EBIT of operating segment Europe in the fiscal year ended September 30, 2015 includes an impair- ment loss of €794 thousand (PY: €776 thousand). The amounts presented in the column “Other / Con- solidation” above include the elimination of transactions between the segments and certain other cor- porate items which are related to the Stabilus Group as a whole and are not allocated to the segments, e.g. depreciation from purchase price allocations. 115 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes The following table sets out the reconciliation of the total segments’ profit (adjusted EBITDA) to profit before income tax. Reconciliation of the total segments’ profit to profit / (loss) before income tax T _ 067 I N € T H O U S A N D S Total segments’ profit (adjusted EBIT) Other / consolidation Group adjusted EBIT Adjustments to EBIT Profit from operating activities (EBIT) Finance income Finance costs Profit / (loss) before income tax The adjustments to EBIT include refinancing, (in prior year) IPO, launch / startup and reorganization- related advisory expenses, pension interest as well as depreciation and amortization of PPA. The information about geographical areas is set out in the following tables: Geographical information: revenue by country I N € T H O U S A N D S Germany Romania Europe Mexico USA NAFTA China South Korea Brazil Australia Japan New Zealand Asia / Pacific and RoW Revenue1) 1) Revenue breakdown by location of Stabilus company (i.e. “billed-from view”) 116 Year ended Sept 30, 2015 76,192 – 76,192 (20,521) 55,671 17,851 (42,405) 31,117 2014 64,827 227 65,054 (33,858) 31,196 17,451 (38,775) 9,872 T _ 068 Year ended Sept 30, 2015 236,551 71,923 308,474 134,123 95,162 229,285 42,800 12,041 6,513 5,729 4,744 1,685 73,512 611,271 2014 232,495 34,776 267,271 96,305 80,513 176,817 33,607 10,633 7,952 5,476 3,931 1,647 63,245 507,333 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes Geographical information: non-current assets by country T _ 069 I N € T H O U S A N D S Germany Romania Spain Luxembourg UK Switzerland France Gibraltar Goodwill Europe USA Mexico Goodwill NAFTA China South Korea Brazil Australia Japan New Zealand Goodwill Asia / Pacific and RoW Total Year ended Sept 30, 2015 160,251 21,357 3,470 821 85 78 7 – 2014 159,117 18,051 3,595 873 92 71 5 – 27,787 213,856 27,787 209,591 44,086 26,562 13,379 84,027 30,277 10,043 2,065 1,054 503 275 10,292 54,509 43,245 27,326 13,379 83,950 28,193 6,623 2,579 1,083 520 342 10,292 49,632 352,392 343,173 The non-current assets above exclude financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts. In fiscal year 2015, the Group had three customers who accounted for at least 10% of total external revenue. The total revenue with these customers was €71,952 thousand (PY: €54,767 thousand), €68,036 thousand (PY: €52,506 thousand) and €62,672 thousand (PY: €46,626 thousand) respectively in the fiscal year ending September 30, 2015. In fiscal year 2015 and 2014 such revenue was generated in all three segments. 117 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 36 Share-based payment The Group established share-based payment arrangements for members of the Management Board (Matching Stock Program) and for senior management employees (Phantom Stock Program). Matching Stock Program The variable compensation for the members of the Management Board includes a matching stock pro- gram. The matching stock program (the “MSP”) provides for four annual tranches granted each year during the time frame fiscal year ending September 30, 2015 until September 17, 2017. Participation in the matching stock program requires Management Board members to invest in shares of the Com- pany. The investment generally has to be held for the lock-up period. As part of the matching stock program A (the “MSP A”) for each share the Management Board invests in the Company in the specific year (subject to general cap), the Management Board members receive a certain number of fictitious options to acquire shares in the Company for each tranche of the matching stock program. The amount of stock options received depends upon a factor to be set by the Supervisory Board (Renumeration Committee) annually in a range between 1.0 and 1.7 times for a certain tranche. Thus, if a Management Board member were to buy 1,000 shares under the MSP in the Company, he would receive 1,000 to 1,700 fictitious options for a certain tranche. The fictitious options are subject to a lock-up period of four years and may be exercised during a subsequent two-year exercise period. As part of matching stock program B (the “MSP B”) for each share the Management Board holds in the Company in the specific year (subject to a general cap), the Management Board members receive a certain number of fictitious options to acquire shares in the Company for each tranche of the matching stock program. The amount of stock options received depends upon a factor to be set by the Supervi- sory Board (Renumeration Committee) annually in a range between 0.0 and 0.3 times for a certain tranche. Thus, if a Management Board member were to be holding 1,000 shares under the MSP in the Company, he would receive 0 to 300 fictitious options for a certain tranche. The fictitious options are subject to a lock-up period of four years and may be exercised during a subsequent two-year exercise period. The options may only be exercised if the stock price of the Company exceeds a set threshold for the relevant tranche, which the Supervisory Board will determine, and which needs to be between 10% and 50% growth over the base price, which is the share price on the grant date. If exercised, the fictitious options are transformed into a gross amount equaling the difference between the option price and the relevant stock price multiplied by the number of exercised fictitious options. The generally limited net amount resulting from the calculated gross amount is paid out to the Management Board members. Alternatively, the Company may decide to buy shares in an amount equaling the net amount in order to settle the exercised options. The Company plans a cash settlement. The maximum gross amounts resulting from the exercise of the fictitious options of one tranche in general is limited in amount. Reinvestment of IPO proceeds from previous equity programs are not taken into account for MSP A. Phantom Stock Program The Group initiated for 2015 and 2016 a Phantom Stock Program for senior management employees excluding Stabilus S.A. directors. To participate in the program, the employees have to invest a certain 118 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes amount in Stabilus shares. The employee receives options in a ratio of two for each self-investment, capped at an investment level of €10,000 per program year. The fictitious options are subject to a lock-up period of four years and may be exercised during a subsequent two-year exercise period. The exercise is triggered by the sale of the underlying shares. The payout price is triggered by the price of the share sales in the exercise period. The payout is capped at 500% of the invested amount. Measurement of fair values The fair value of the share-based payments of the MSP has been measured by using a binomial simulation. The inputs used in the measurement of the fair values at the grant date and the measurement date of the MSP include market conditions and were as follows. Input parameter for fair value measurement of MSP Fair value Share price Exercise price Expected volatility (weighted average) Expected life (weighted average) Expected dividends Risk-free interest rate T_070 Grant date Measurement date Oct 1, 2014 Sept 30, 2015 5.07 24.82 24.82 32 4 1.5 0.04 8.78 32.25 24.82 31 3 1.5 (0.2) € € € % years % % The expected volatility has been based on the historical volatility of the 3-year period to September 30, 2015. Since sufficient historical data is not available for the Stabilus shares, Stabilus decided to use the mean value of the historical volatilities of the shares of the peer group. In the fiscal year 2015 only options for the MSP B were issued. MSP B options T_071 2015 2014 Number of options Exercise price Number of options Exercise price Outstanding at January 1 Forfeit during the year Exercised during the year Granted during the year Outstanding at September 30 Exercisable at September 30 – – – 19,721 19,721 – – – – 24.82 24.82 – – – – – – – – – – – – – 119 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes The Phantom Stock Program is measured with the actual share price and accrued over the vesting time. Phantom Stock Program options T_072 Outstanding at January 1 Forfeit during the year Exercised during the year Granted during the year Program 2015 Program 2016 Outstanding at September 30 Exercisable at September 30 2015 2014 Number of options Exercise price Number of options Exercise price – – – 5,642 3,217 8,859 – – – – 32.25 32.25 32.25 – – – – – – – – – – – – – – – Expense recognized in profit or loss An amount of €130 thousand has been recognized in the related employee benefit expenses and an amount of €130 thousand in provisions for employee-related expenses. 37 Auditor’s fees Auditor’s fees I N € T H O U S A N D S ( E X C L U D I N G VAT ) Audit fees Audit-related fees Tax fees Other fees Total T _ 073 2014 618 929 – – 1,547 Year ended Sept 30, 2015 612 161 – – 772 For fiscal year ended September 30, 2015, a global fee (excluding VAT) of €612 thousand (PY: 618 thou- sand) was agreed for the audit of the consolidated and annual financial statements of the Stabilus entities. These fees are included in the Group’s administrative expenses. In addition, KPMG Luxembourg Société coopérative, Luxembourg, and other member firms of the KPMG network, billed the Group audit-related fees amounting to, excluding VAT, €161 thousand (PY: €929 thousand which relate to the initial public offering in May 2014). 120 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS 38 Related party relationships In accordance with IAS 24, persons or entities that control or are controlled by the Stabilus Group shall be disclosed, unless they are included in consolidation as a consolidated entity. The disclosure obligation under IAS 24 furthermore extends to transactions with persons who exercise a significant influence on the financial and business policies of the Stabilus Group, including close family members or interposed entrepreneurs. A significant influence on the financial and business policies of the Stabilus Group can hereby be based on a shareholding of 20% or more in Stabilus, a seat on the Management Board of Stabilus or another key position. Following the IPO on May 23, 2014, the shareholder structure of Stabilus changed. Related parties of the Stabilus Group in accordance with IAS 24 primarily comprise the prior to the IPO sole shareholder Servus Group HoldCo II and the Stabilus Group management which also holds an investment in the Company. After selling its shares in Stabilus S.A., Servus Group HoldCo II is no longer defined as related party. 39 Remuneration of key management personnel The key management personnel are the members of the Management Board Dietmar Siemssen (CEO), Mark Wilhelms (CFO), Bernd-Dietrich Bockamp (Director Group Accounting) and Andreas Schröder (Group Financial Reporting Director) as well as Hans-Josef Hosan (CTO - until May 29, 2015) and Ansgar Krötz (COO - until September 30, 2015). The total remuneration paid to key management per- sonnel of the Group is calculated as the amount of remuneration paid in cash and benefits in kind. The latter primarily comprise the provision of company cars and pension. The total remuneration of the above mentioned key management personnel at the various key Stabilus Group affiliates during the reporting period amounted to €3,204 thousand (PY: €6,705 thousand) classified as short-term employee benefits, €73 thousand (PY: €33 thousand) classified as post-employment benefits, €3,935 thousand (PY: –) classified as termination benefits and €43 thousand (PY: –) classified as share- based payments. The short-term employee benefits in the fiscal year 2014 included €3,979 thousand IPO bonus-related payments of which the net amounts were largely reinvested in Stabilus stock. The compensa- tion of the four Stabilus S.A. Management Board members is included in the above mentioned figure. Their compensation for fiscal year 2015 was €2,128 thousand, split in a fix compensation of €975 thousand and a variable compensation of €1,153 thousand. Members of the Management and Supervisory Board have direct interest in Stabilus S.A. of about jointly 1% of the total shares. The total remuneration to the members of the Supervisory Board amounts to €351 thousand (PY: € 146). Notes 121 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Notes 40 Subsequent events As of December 18, 2015, there were no further events or developments that could have materially affected the measurement and presentation of Group’s assets and liabilities as of September 30, 2015. Luxembourg, December 18, 2015 Stabilus S.A. Management Board 122 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS R E S P O N S I B I L I T Y S TAT E M E N T We, Dietmar Siemssen (Chief Executive Officer), Mark Wilhelms (Chief Financial Officer), Bernd- Dietrich Bockamp (Director Group Accounting) and Andreas Schröder (Group Financial Reporting Director), confirm, to the best of our knowledge, that the consolidated financial statements which have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of Stabilus S.A. and the undertakings included in the consolidation taken as a whole and that the management report includes a fair review of the development and performance of the business and the position of Stabilus S.A. and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Luxembourg, December 18, 2015 Dietmar Siemssen Mark Wilhelms Bernd-Dietrich Bockamp Andreas Schröder Management Board Resp on sib ility Stat ement 123 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Man agemen t Board M A N A G E M E N T B O A R D O F S TA B I L U S S. A . The Management Board comprises four members: Bernd-Dietrich Bockamp is the Director Group Accounting and was Dietmar Siemssen (Chairman) is the Chief Executive Officer and Stabilus in 2011. Prior to that, he led the financial projects and system was appointed to the Management Board in 2014 as well as the team at FTE Automotive following several years at KPMG Bayerische Chairman of the Management Board. With 20 years of experience Treuhand. He holds a degree in industrial engineering and manage- in the automotive industry, Mr. Siemssen joined Stabilus in 2011 ment. Mr. Bockamp also holds further management positions within appointed to the Management Board in 2014. Mr. Bockamp joined following a 19-year career in various management positions at the Stabilus Group. Continental AG. He holds a degree in mechanical engineering and business administration. Mr. Siemssen also holds further manage- Andreas Schröder is the Group Financial Reporting Director and was ment positions within the Stabilus Group. appointed to the Management Board in 2014. Mr. Schröder joined Stabilus in 2010. Prior to that, he worked for several years in assurance Mark Wilhelms is the Chief Financial Officer and was appointed and advisory business services at Ernst & Young. He holds a degree in to the Management Board in 2014. With 25 years of experience in business administration. Mr. Schröder also holds further management the automotive industry, Mr. Wilhelms joined Stabilus in 2009 from positions within the Stabilus Group. FTE Automotive, where he served as Chief Financial Officer for six years. From 2007, he was also head of the NAFTA region at FTE. Prior to that, he held various management positions in finance, plant and marketing at various locations over his 17-year career at Ford. He holds a degree in process engineering as well as a degree in economics. Mr. Wilhelms also holds further management positions within the Stabilus Group. 124 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS Sup erviso ry Bo ard S U P E R V I S O RY B O A R D O F S TA B I L U S S. A . The Supervisory Board comprises four members: Andi Klein (until May 12, 2015) served as a member of the Supervi- sory Board since 2014. He is an operating and investment partner at Udo Stark serves as a member of the Supervisory Board since 2014 WestPark management Services Germany GmbH, which provides ser- as well as the Chairman of the Supervisory Board. He was Chairman of vices exclusively to Triton and Triton portfolio companies. Formerly he the Executive Board of MTU Aero Engines AG until 2007. From 1991 held several executive positions at Procter & Gamble (Executive in until 2000, Mr. Stark led the listed plant construction and machinery M&A, Restructuring & Turnaround, Portfolio & Long Term Strategy, group Agiv AG. Subsequently, he became Chairman of the Shareholder Financial Management of diverse business units in Germany, Switzer- Committee at Messer Griesheim GmbH, Chairman of the Executive land, Belgium and the U.S.). Board of mg technologies AG and CEO of MTU Aero Engines AG. From 2008 to 2013, Mr. Stark served as a member of the Supervisory Board Dr. Joachim Rauhut serves as a member of the Supervisory Board of MTU Aero Engines AG. He is currently a member of the Supervi- since May 12, 2015. He was a member of the Executive Board of Wacker sory Board of Bilfinger SE and Chairman of the Advisory Board of Chemie AG until October 31, 2015. He joined the Management Board Arvos Group. of Wacker-Chemie GmbH in 2001 and supported Wacker Chemie’s initial public offering in 2006. Previously, he served in various leading Nizar Ghoussaini (until September 30, 2015) served as a member of corporate positions, including posts at Mannesmann AG and Krauss- the Supervisory Board since 2014. From 1999 until 2008 he was the Maffei AG. He is member of the Supervisory Board of MTU Aero President and CEO of Benteler Automobiltechnik based in Paderborn, Engines AG and B. Braun Melsungen AG and member of the Advisory Germany. Prior to that, he was President of the Premium Car Division Counsel of J. Heinrich Kramer Holding GmbH. of Lear Corporation, based in Sulzbach, Germany with responsibil- ity for seating, interiors and electrical / electronics business for the Dr. Ralf-Michael Fuchs serves as a member of the Supervisory German and French car companies worldwide. Board since October 1, 2015. He joined Dürr AG in 2000. Today, he is a member of the Dürr Senior Executive Management and CEO of the Dr. Stephan Kessel serves as a member of the Supervisory Board Division Measuring and Process Systems. Furthermore, he is CEO of since 2014. He was Chief Executive of Continental AG until 2002. Pre- Carl Schenck AG as well as Chairman of the Management Board of viously, Dr. Kessel held a variety of management positions at Continen- Schenck RoTec GmbH, both subsidiaries of Dürr Group. Previously, he tal AG, joining its Management Board in 1997 and becoming Chief had been serving in various leading roles, including positions at Executive in 1999. In recent years, Dr. Kessel has taken up a number of AGIV AG and IWKA AG. board positions at European companies including, among others, Sta- bilus. From 2008 through 2010, Dr. Kessel was Chairman of the Board of the former holding company of the Operating Stabilus Group. 125 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS In de pendent Aud itor ’s R eport I N D E P E N D E N T A U D I TO R ’ S R E P O R T To the Shareholders of Stabilus S.A. 2, rue Albert Borschette, L-1246 Luxembourg Report of the réviseur d’entreprises agréé R E P O R T O N T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S Following our appointment by the Annual General Meeting of the Shareholders dated February 18, 2015, we have audited the accompanying consolidated financial statements of Stabilus S.A. and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at Sep- tember 30, 2015 and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explan- atory information as set out on pages 59 to 122. Management Board's responsibility for the consolidated financial statements The Management Board is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the Réviseur d’Entreprises agréé Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgement of the Réviseur d’Entreprises agréé, including the assessment of the risks of material misstatement of the con- solidated financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d’Entreprises agréé considers internal control relevant to the entity’s preparation and fair presenta- tion of the consolidated financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board, as well as evaluating the overall presentation of the consolidated financial statements. 126 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS In depen dent Au dito r’s Report We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements as set out on pages 59 to 122 give a true and fair view of the consolidated financial position of Stabilus S.A. as of September 30, 2015, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accord- ance with International Financial Reporting Standards as adopted by the European Union. R E P O R T O N OT H E R L E G A L A N D R E G U L ATO RY R E Q U I R E M E N T S The combined management report, including the corporate governance statement, which is the respon- sibility of the Management Board, is consistent with the consolidated financial statements and includes the information required by the law with respect to the corporate governance statement. Luxembourg, December 18, 2015 KPMG Luxembourg Société coopérative Cabinet de révision agréé Ph. Meyer 127 ANNUAL REPORT 2015CONSOLIDATED FINANCIAL STATEMENTS D A N N U A L A C C O U N T S S T N U O C C A L A U N N A D A C T UAT I O N TA P P E T A C T UAT I O N TA P P E T P I S TO N R O D S E A L A N D G U I D E PA C K A G E O I L N A M E BLOC-O-LIFT® The BLOC-O-LIFT gas springs are so-called locking gas springs. They are used for functions such as adjustments with force support, damping, as well as infinitely variable locking. This is achieved with a special piston valve sys- tem. If the valve is open, BLOC-O-LIFT provides force sup- port and damping. If the valve is closed, the gas springs locks and provides high resistance to any motion. T 4 9 3 6 – 4 1 6 7 5 1 – 0 3 4 7 N P R – 1 0 5 P R E S S U R E T U B E N I T R O G E N P I S TO N PA C K A G E W I T H VA LV E T U B E E N D F I T T I N G Balanc e sh eet B A L A N C E S H E E T as of September 30, 2015 Balance sheet I N € T H O U S A N D S Assets Fixed assets Intangible fixed assets Concessions, patents, licences, trade marks and similar rights and assets, if they were acquired for valuable consideration and need not be shown under goodwill, to the extent that is was acquired for valuable consideration Tangible fixed assets Other fixtures and fittings, tools and equipment Financial fixed assets Shares in affiliated undertakings Current assets Debtors Amounts owed by affiliated undertakings becoming due and payable within one year Other receivables becoming due and payable within one year Cash at bank, cash in postal cheque accounts, cheques and cash in hand Prepayments Total assets T_074 N OT E Sept 30, 2015 Sept 30, 2014 3 461,766 461,720 16 35 – 5 461,715 6,341 461,715 5,931 6,133 5,735 69 139 543 50 147 496 468,650 468,147 4 5 6 130 ANNUAL REPORT 2015ANNUAL ACCOUNTS Balance sheet I N € T H O U S A N D S Liabilities Capital and reserves Subscribed capital Share premium and similar premiums Reserves Legal reserve Other reserves Profit or loss brought forward Profit or loss for the financial year Subordinated debts Non convertible loans becoming due and payable after more than one year Provisions Provisions for taxation Non subordinated debts Trade creditors becoming due and payable within one year Amounts owed to affiliated undertakings becoming due and payable within one year Tax and social security debts Tax debts Social security debts Other creditors becoming due and payable within one year Total liabilities Balance sheet T_074 N OT E Sept 30, 2015 Sept 30, 2014 7 451,115 451,224 207 207 260,771 260,771 8 21 4,836 185,389 (108) – – 9 9 – 4,836 (33,289) 218,699 914 914 9 9 17,525 16,000 922 1,985 9 16,150 13,896 25 83 345 78 – 41 468,650 468,147 131 ANNUAL REPORT 2015ANNUAL ACCOUNTS Profit and loss ac count P R O F I T A N D L O S S A C C O U N T for the fiscal year ended September 30, 2015 Profit and loss account I N € T H O U S A N D S Charges Other external charges Staff costs Salaries and wages Social security on salaries and wages Value adjustments on formation expenses and on tangible and intangible fixed assets Other operating charges Interest and other financial charges concerning affiliated undertakings other interest and similar financial charges Income tax Profit for the financial year Total charges Income Other operating income Income from financial fixed assets derived from affiliated undertakings Loss for the financial year Total income T_075 Year ended Sept 30, N OT E 2015 2014 10 12 3 11 13 14 7,496 16,382 810 493 316 15 351 876 303 573 20 – 9,567 9,459 – – 108 9,567 104 86 18 0 146 179,486 179,408 78 5 218,699 414,822 4,792 410,030 410,030 – 414,822 132 ANNUAL REPORT 2015ANNUAL ACCOUNTS N OT E S TO T H E A N N U A L A C C O U N T S as of and for the fiscal year ended September 30, 2015 1 General Stabilus S.A., Luxembourg, hereafter also referred to as “Stabilus” or the “Company” is a public lim- ited liability company (société anonyme) incorporated in Luxembourg and governed by Luxembourg law. The registered office of the Company is 2, rue Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg. The trade register number is B0151589. The Company was founded under the name of Servus HoldCo S.à r.l. on February 26, 2010. The Company is managed by a Management Board under the supervision of the Supervisory Board. The Company is formed for an unlimited duration. The purpose of the Company is (i) the acquisition, holding and disposal, in any form, by any means, whether directly or indirectly, of participations, rights and interests in, and obligations of, Luxembourg and foreign companies, including but not limited to any entities forming part of the Stabilus Group, (ii) the acquisition by purchase, subscription, or in any other manner, as well as the transfer by sale, exchange or in any other manner of stock, bonds, debentures, notes and other securities or financial instruments of any kind (including notes or parts or units issued by Luxembourg or foreign mutual funds or similar undertakings) and receivables, claims or loans or other credit facilities and agreements or contracts relating thereto, and (iii) the ownership, administration, development and management of a portfolio of assets (including, among other things, the assets referred to in (i) and (ii) above). The Company’s financial year starts on October 1 and ends on September 30 each year. The Company has no parent company which prepares consolidated financial statements including the Company as a subsidiary. The Company also prepares consolidated financial statements in accordance with EU regulation 1606/2002. The copies of the consolidated financial statements are available at the registered office of the Com- pany at 2, rue Albert Borschette, L-1246 Luxembourg or on www.stabilus.com. 133 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts 2 Summary of significant accounting policies B A S I S O F P R E S E N TAT I O N The annual accounts are prepared in accordance with Luxembourg company law and generally accepted accounting principles applicable in Luxembourg. The accounting policies and valuation principles are, apart from those enforced by law, determined by the Management Board. F O R E I G N C U R R E N C Y T R A N S L AT I O N The Company maintains its books and records in euro (€). The balance sheet and the profit and loss account are expressed in this currency. Formation expenses, intangible, tangible and financial fixed assets denominated in currencies other than euro are translated at the historical exchange rates. Cash at bank denominated in currencies other than euro are translated at the exchange rates prevail- ing at the date of the balance sheet. Current assets and liabilities denominated in currencies other than euro (having an economic link and similar characteristics) are recorded globally at the exchange rates prevailing at the date of the balance sheet. Long-term debts denominated in currencies other than euro having an economic link with receivables recorded in financial assets (and having similar characteristics) are translated at the historical exchange rates (loans “back to back”). As a result, realized exchange gains and losses and unrealized exchange losses are recorded in the profit and loss account. Unrealized exchange gains are not recognized. VA L U AT I O N O F I N TA N G I B L E A N D TA N G I B L E F I X E D A S S E T S Intangible and tangible assets are used for business purposes and are measured at cost less accumu- lated value adjustments. Depreciation on intangible and tangible fixed assets is recorded on a straight- line basis in accordance with its utilization and based on the useful lifes of the assets. The residual values, depreciation methods and useful lifes are reviewed annually and adjusted, if necessary. VA L U AT I O N O F F I N A N C I A L F I X E D A S S E T S Shares in affiliated undertakings, participating interests and securities held as fixed assets are stated at acquisition cost. Write-downs are recorded if, in the opinion of the Management Board, it is 134 ANNUAL REPORT 2015Notes to the Annual Accounts ANNUAL ACCOUNTS expected the reduction in their value will be permanent. The impairment analysis is done individually for each investment. Loans to affiliated undertakings are recorded at their nominal value. Loans are written down to their recoverable amount if, in the opinion of the Management Board, there is a permanent impairment. These value adjustments may not be continued if the reasons for which the value adjustments were made have ceased to exist. D E B TO R S Current receivables are recorded at their nominal value. Current receivables are written down to their recoverable amount if, in the opinion of the Management Board, there is a permanent impairment. These value adjustments may not be continued if the reasons for which the value adjustments were made have ceased to exist. D E B T S Debts are recorded at their reimbursement value. Where the amount repayable on account is greater than the amount received, the difference is shown as an asset and is written off over the period of the debt. Debts are recorded under subordinated debts when their status is subordinated to unsecured debts. P R O V I S I O N S Provisions are intended to cover losses or debts, the nature of which is clearly defined and which, at the date of the balance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date on which they will arise. 135 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts 3 Movements in fixed assets Fixed assets schedule I N € T H O U S A N D S Gross value Balance as of Sept 30, 2014 Additions Disposals Balance as of Sept 30, 2015 Accumulated value adjustments Balance as of Sept 30, 2014 Additions Disposals Balance as of Sept 30, 2015 Carrying amount Balance as of Sept 30, 2014 Balance as of Sept 30, 2015 4 Financial fixed assets Shares in affiliated undertakings I N € T H O U S A N D S Blitz F10 neun GmbH, Grosse Eschenheimer Strasse 13, 60613 Frankfurt, Germany Servus III (Gibraltar) Limited*, 57/63 Line Wall Road, Gibraltar Servus Luxembourg S.à r.l., 2 rue Albert Borschette, L-1246 Luxembourg Servus Sub S.à r.l., 2 rue Albert Borschette, L-1246 Luxembourg Total Intangible fixed assets Tangible fixed assets Shares in affiliated undertakings T_076 Total – 22 – 22 – (6) – (6) – 16 6 38 – 44 – (9) – (9) 5 35 461,715 461,721 – – 60 – 461,715 461,781 – – – – – (15) – (15) 461,715 461,715 461,720 461,766 Proportion of capital held Year end date Shares in affiliated undertakings as at Sept 30, 2015 Equity as at year end (including result) Profit or loss for the year ended T_077 100.00% 31.12.2014 100.00% 28 5,162 14 – 100.00% 30.09.2014 13 (23) 100.00% 30.09.2014 456,512 461,715 456,459 (31) (45) * No information disclosed due to the foundation in 2014 and not yet approved accounts available 136 ANNUAL REPORT 2015Notes to the Annual Accounts ANNUAL ACCOUNTS 5 Amounts owed by affiliated undertakings The increase is mainly due to the new service level agreements with affiliated undertakings. An amount of €156 thousand consists of receivables under these agreements. The remaining amount relates to cash pool receivables owed by affiliated undertakings. 6 Prepayments Prepayments mainly relate to insurance contracts. 7 Capital and reserves Issued capital as of September 30, 2015 amounts to €207 thousand (September 30, 2014: €207 thou- sand) and was fully paid in. It is divided into 20,723,256 shares with a nominal value of €0.01 each. As at September 30, 2015, the share premium amounted to €261 million and the distributable other reserve amounted to €4,836 thousand. The authorized capital of the Company is set at €315 thousand represented by maximum of 31,500,000 shares, each with a nominal value of €0.01. Under Luxembourg law, the Company is required to appropriate annually at least 5% of its statutory net profit to a legal reserve until the aggregate reserve equals 10% of the subscribed share capital. The reserve is not available for distribution. Following the decision of the Annual General Meeting on February 17, 2015 the Company appropriated an amount of €21 thousand equal to 10% of the sub- scribed share capital to the legal reserve. 8 Subordinated debts An upstream loan has been granted by its affiliated undertaking Stable II S.à r.l. to the Company on June 7, 2013 for an amount of €808 thousand used for repayment of mezzanine warrants in an amount of €808 thousand. The upstream loan was repaid in 2015. 9 Amounts owed to affiliated undertakings An amount of €16,150 thousand consists of cash pool liabilities owed to affiliated undertakings. 137 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts 10 Other external charges Other external charges I N € T H O U S A N D S Administration fees Consulting fees Audit fees Group insurance Legal and professional fees Bank charges Total T_078 2014 92 15,549 280 40 420 1 Year ended Sept 30, 2015 500 6,324 378 111 168 15 7,496 16,382 Consulting fees include fees in relation to the refinancing in the financial year 2015 and to the IPO and restructuring in the financial year 2014. 11 Other operating charges The other operation charges refer to the remuneration of the Supervisory Board. 12 Staff costs The Company employs 4 employees as of September 30, 2015 (PY: 3). The average number of employ- ees in the financial year 2015 was 3 (PY: 1). 13 Interest and other financial charges Interest and other financial charges I N € T H O U S A N D S Interest from variable PPL interest Other Total T_079 Year ended Sept 30, 2015 – 876 876 2014 179,301 185 179,486 The interest from variable PPL interest in the fiscal year 2014 relates to the restructuring transactions. 138 ANNUAL REPORT 2015Notes to the Annual Accounts ANNUAL ACCOUNTS 14 Income from financial fixed assets Income from financial fixed assets I N € T H O U S A N D S Gains on distributions of PPLs Dividend Servus II (Gibraltar) Limited Dividend Servus III (Gibraltar) Limited Profit in sale of shares Total T_080 Year ended Sept 30, 2015 – – – – – 2014 179,301 5,159 210,660 14,910 410,030 The gains on distribution of PPLs in the fiscal year 2014 relates to the restructuring transactions. 15 Taxation The Company is subject to Luxembourg company tax law. 16 Related parties The remuneration of the members of the Management Board amount to €278 thousand (PY: €86 thou- sand). Further remuneration is paid by other affiliated undertakings. The remuneration of the members of the Supervisory Board amount to €351 thousand (PY: €146 thousand). Selected Stabilus Group management members hold interest in Stabilus S.A. directly of about jointly 1% of the total shares. 17 Share-based payment The variable compensation for the members of the Management Board includes a matching stock pro- gram. The matching stock program (the “MSP”) provides for four annual tranches granted each year during the time frame fiscal year ending September 30, 2015 until September 17, 2017. Participation in the matching stock program requires Management Board members to invest in shares of the Com- pany. The investment generally has to be held for the lock-up period. As part of the matching stock program A (the “MSP A”) for each share the Management Board invests in the Company in the specific year (subject to general cap), the Management Board members receive a certain number of fictitious options to acquire shares in the Company for each tranche of the match- ing stock program. The amount of stock options received depends upon a factor to be set by the Super- visory Board (Renumeration Committee) annually in a range between 1.0 and 1.7 times for a certain tranche. Thus, if a Management Board member were to buy 1,000 shares under the MSP in the Company, 139 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts he would receive 1,000 to 1,700 fictitious options for a certain tranche. The fictitious options are subject to a lock-up period of four years and may be exercised during a subsequent two-year exercise period. As part of matching stock program B (the “MSP B”) for each share the Management Board holds in the Company in the specific year (subject to a general cap), the Management Board members receive a certain number of fictitious options to acquire shares in the Company for each tranche of the matching stock program. The amount of stock options received depends upon a factor to be set by the Supervi- sory Board (Remuneration Committee) annually in a range between 0.0 and 0.3 times for a certain tranche. Thus, if a Management Board member were to be holding 1,000 shares under the MSP in the Company, he would receive 0 to 300 fictitious options for a certain tranche. The fictitious options are subject to a lock-up period of four years and may be exercised during a subsequent two-year exercise period. The options may only be exercised if the stock price of the Company exceeds a set threshold for the relevant tranche, which the Supervisory Board will determine, and which needs to be between 10% and 50% growth over the base price, which is the share price on the grant date. If exercised, the ficti- tious options are transformed into a gross amount equaling the difference between the option price and the relevant stock price multiplied by the number of exercised fictitious options. The generally limited net amount resulting from the calculated gross amount is paid out to the Management Board members. Alternatively, the Company may decide to buy shares in an amount equaling the net amount in order to settle the exercised options. The Company plans a cash settlement. The maximum gross amounts resulting from the exercise of the fictitious options of one tranche in general is limited in amount. Reinvestment of IPO proceeds from previous equity programs are not taken into account for MSP A. In fiscal year 2015 17,721 options were issued for MSP B. The exercise price is €24.82 and the options are valued with an fair value of €8.75 as of September 30, 2015. 18 Commitments, contingencies and pledges The Company and other affiliated companies entered into a new senior facilities agreement with a total amount of €320 million made up of a €270 million facility A commitment and a €50 million revolving facility commitment. The new loan was used for the redemption of the bond issued on June 7, 2013 by Servus Luxembourg Holding S.C.A. On June 11, 2015, all securities in relation to the bond issued on June 7, 2013 by Servus Luxembourg Holding S.C.A. were released. In order to collateralize the senior facility the assignment of the shares in affiliated undertakings have been provided as items of security. The Company is guarantor of the senior facility and is jointly and severally liable for potential cash pool obligations. All obligations of the loan agreement were fulfilled by the Stabilus Group within the past financial year or are expected to be fulfilled within the planning period. Therefore the Management Board does not expect utilization as guarantor. 140 ANNUAL REPORT 2015Notes to the Annual Accounts ANNUAL ACCOUNTS The Company has signed an office rent contract starting November 1, 2013 which will be terminated on January 31, 2018. The commitments amount for the financial year 2016 and 2017 €171 thousand each and the financial year 2018 €57 thousand. The Company issued a bank guarantee with an amount of €100 thousand to the landlord. 19 Subsequent events There were no events or developments that could have materially affected the measurement and presen tation of the Company’s assets and liabilities as of September 30, 2015. Luxembourg, December 18, 2015 Stabilus S.A. Management Board 141 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts I N D E P E N D E N T A U D I TO R ’ S R E P O R T To the Shareholders of Stabilus S.A. 2, rue Albert Borschette, L-1246 Luxembourg Report of the réviseur d’entreprises agréé R E P O R T O N T H E A N N U A L A C C O U N T S Following our appointment by the Annual General Meeting of the Shareholders dated February 18, 2015, we have audited the accompanying annual accounts of Stabilus S.A. which comprise the balance sheet as at September 30, 2015 and the profit and loss account for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 130 to 141. Management Board's responsibility for the annual accounts The Management Board is responsible for the preparation and fair presentation of these annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts, and for such internal control as the Management Board determines is neces- sary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error. Responsibility of the Réviseur d’Entreprises agréé Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the judgement of the Réviseur d’Entreprises agréé, including the assessment of the risks of material misstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the Réviseur d’Entreprises agréé considers inter- nal control relevant to the entity’s preparation and fair presentation of the annual accounts 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board, as well as evaluating the overall presentation of the annual accounts. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 142 ANNUAL REPORT 2015Notes to the Annual Accounts ANNUAL ACCOUNTS Opinion In our opinion, the annual accounts as set out on pages 130 to 141 give a true and fair view of the financial position of Stabilus S.A. as of September 30, 2015, and of the results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts. R E P O R T O N OT H E R L E G A L A N D R E G U L ATO RY R E Q U I R E M E N T S The combined management report, including the corporate governance statement, which is the respon- sibility of the Management Board, is consistent with the annual accounts and includes the information required by the law with respect to the corporate governance statement. Luxembourg, December 18, 2015 KPMG Luxembourg Société coopérative Cabinet de révision agréé Ph. Meyer 143 ANNUAL REPORT 2015ANNUAL ACCOUNTS Notes to the Annual Accounts E A D D I T I O N A L I N F O R M AT I O N N O I T A M R O F N I L A N O I T I D D A E P I S TO N R O D O I L P R E S S U R E T U B E P I S TO N PA C K A G E S E A L A N D G U I D E PA C K A G E C O M P E N S AT I O N C H A M B E R N A M E STAB-O-SHOC® HD24/29 STAB-O-SHOC HD24/29 is a hydrolic vibration damper for high loads. The dampers are orientation-specific as stan- dard. Areas of application are, amont others, seat dampers, washing machines, and motion dampers with high force requirements for especially heavy flaps. One special design is the overrunning brake damper in automotive design. T 5 3 4 5 – 7 2 9 0 8 8 – 2 5 9 7 N P R – 1 6 0 Financ ial Calendar F I N A N C I A L C A L E N DA R Financial calendar D AT E 1 ) 2 ) December 21, 2015 February 15, 2016 February 17, 2016 May 13, 2016 August 12, 2016 December 15, 2016 T _ 081 P U B L I C AT I O N / E V E N T Publication of full year results for fiscal year 2015 (Annual Report 2015) Publication of the first-quarter results for fiscal year 2016 (Interim Report Q1 FY16) Annual General Meeting for fiscal year 2016 Publication of the second-quarter results for fiscal year 2016 (Interim Report Q2 FY16) Publication of the third-quarter results for fiscal year 2016 (Interim Report Q3 FY16) Publication of full year results for fiscal year 2016 (Annual Report 2016) 1) We cannot rule out changes of dates. We recommend checking them on our website in the Investor Relations / Financial Calendar section (www.ir.stabilus.com). 2) Please note that our fiscal year (FY) comprises a twelve-month period from October 1 until September 30 of the following calendar year, e.g. the fiscal year 2015 comprises a year ended September 30, 2015. D I S C L A I M E R Forward-looking statements This annual report contains forward-looking statements that relate to the current plans, objectives, forecasts and estimates of the management of Stabilus S.A. These state- ments take into account only information that was available up and including the date that this annual report was prepared. The management of Stabilus S.A. makes no guar- antee that these forward-looking statements will prove to be right. The future develop- ment of Stabilus S.A. and its subsidiaries and the results that are actually achieved are subject to a variety of risks and uncertainties which could cause actual events or results to differ significantly from those reflected in the forward-looking statements. Many of these factors are beyond the control of Stabilus S.A. and its subsidiaries and therefore cannot be precisely predicted. Such factors include, but are not limited to, changes in economic conditions and the competitive situation, changes in the law, interest rate or exchange rate fluctuations, legal disputes and investigations, and the availability of funds. These and other risks and uncertainties are set forth in the combined manage- ment report. However, other factors could also have an adverse effect on our business performance and results. Stabilus S.A. neither intends to nor assumes any separate obli- gation to update forward-looking statements or to change these to reflect events or developments that occur after the publication of this annual report. Rounding Certain numbers in this annual report have been rounded up or down. There may there- fore be discrepancies between the actual totals of the individual amounts in the tables and the totals shown as well as between the numbers in the tables and the numbers given in the corresponding analyses in the text of the annual report. All percentage changes and key figures in the combined management report were calculated using the underlying data in millions of euros with one decimal place (€ millions). 146 ANNUAL REPORT 2015ADDITIONAL INFORMATION TA B L E D I R E C TO RY D E S C R I P T I O N Research and development Income statement Revenue by region (location of Stabilus company) Revenue by markets Reconciliation of EBIT to adjusted EBITDA Reconciliation of EBIT to adjusted EBIT Operating segments Balance sheet Cash flows Free cash flow Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Subsidiaries Exchange rates New standards and interpretations Standards and interpretations issued and endorsed by the EU (not yet adopted) Standards and interpretations issued but not yet endorsed by the EU Revenue by region (location of Stabilus company) Revenue by markets Expenses by function Personnel expenses Number of employees Other income Other expenses Finance income Finance costs Income tax expense Tax expense reconciliation (expected to actual) Deferred tax assets and liabilities Tax loss and interest carry-forwards Weighted average number of shares Earnings per share Property, plant and equipment Depreciation expense for property, plant and equipment Goodwill sensitivity analysis Intangible assets Amortization expense for intangible assets Other financial assets Other assets Inventories Trade accounts receivable Allowance for doubtful accounts Other comprehensive income / (expense) Financial liabilities Other financial liabilities Table d irecto ry N U M B E R PA G E 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 37 39 39 40 41 42 43 44 45 46 59 60 62 63 67 69 70 70 71 80 80 81 81 82 82 82 83 83 84 84 85 86 87 87 88 89 90 91 92 92 93 93 94 94 96 96 97 147 ANNUAL REPORT 2015ADDITIONAL INFORMATIONADDITIONAL INFORMATIOND Table director y D E S C R I P T I O N Provisions Changes of non-current provisions Changes of current provisions Pension plans and similar obligations Unfunded status Present value of defined benefit obligations Pension cost for defined benefit plans Present value of the defined benefit obligation and the experience adjustments on the plan liabilities Significant factors for the calculation of pension obligations Other liabilities Operating lease Finance lease Financial commitments Financial instruments Financial instruments Credit risk included in financial assets Liquidity outflows for liabilities Equity ratio Segment reporting Reconciliation of the total segments’ profit to profit / (loss) before income tax Geographical information: revenue by country Geographical information: non-current assets by country Input parameter for fair value measurement of MSP MSP B options Phantom Stock Program options Auditor’s fees Balance sheet Profit and loss account Fixed assets schedule Shares in affiliated undertakings Other external charges Interest and other financial charges Income from financial fixed assets Financial calendar N U M B E R PA G E 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 98 98 99 100 101 101 101 102 102 104 104 105 107 108 109 111 112 113 115 116 116 117 119 119 120 120 130 132 136 136 138 138 139 146 148 ANNUAL REPORT 2015ADDITIONAL INFORMATION In fo rm at ion Resou rces I N F O R M AT I O N R E S O U R C E S Further information including news, reports and publications can be found in the investor relations section of our website at www.ir.stabilus.com. Investor Relations Phone: +352 286 770 21 Fax: +352 286 770 99 Email: investors@stabilus.com Publisher Stabilus S.A. 2, rue Albert Borschette, L-1246 Luxembourg Grand Duchy of Luxembourg Phone: +352 286 770 1 Fax: +352 286 770 99 Email: info.lu@stabilus.com Internet: www.stabilus.com 149 ANNUAL REPORT 2015ADDITIONAL INFORMATION
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