SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
☐
☒
☐
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 0-22320
Trinity Biotech plc
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)
Ireland
(Jurisdiction of incorporation or organization)
IDA Business Park, Bray, Co. Wicklow, Ireland
(Address of principal executive offices)
Kevin Tansley
Chief Financial Officer
Tel: +353 1276 9800
Fax: +353 1276 9888
IDA Business Park, Bray, Co. Wicklow, Ireland
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
American Depositary Shares (each representing 4 ‘A’ Ordinary
Shares, par value US$0.0109)
Name of each exchange on which registered
NASDAQ Global Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
96,162,410 Class ‘A’ Ordinary Shares
(as of December 31, 2017)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use
the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
U.S. GAAP ☐
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
This Annual Report on Form 20-F is incorporated by reference into our Registration Statements on Form F-3 No. 333-203555 and Form S-8 File Nos. 333-
166590, 333-182279, 333-195232 and 333-124384
TABLE OF CONTENTS
General
Forward-Looking Statements
PART I
Item 1
Identity of Directors, Senior Management and Advisers
Item 2
Offer Statistics and Expected Timetable
Item 3
Key Information
Item 4
Information on the Company
Item 4A Unresolved Staff Comments
Item 5
Item 6
Item 7 Major Shareholders and Related Party Transactions
Item 8
Financial Information
Item 9
The Offer and Listing
Item 10 Additional Information
Item 11 Quantitative and Qualitative Disclosures about Market Risk
Item 12 Description of Securities Other than Equity Securities
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
PART II
Item 13 Defaults, Dividend Arrearages and Delinquencies
Item 14 Material Modification to the Rights of Security Holders and Use of Proceeds
Item 15 Controls and Procedures
Item 16A Audit Committee Financial Expert
Item 16B Code of Ethics
Item 16C Principal Accountant Fees and Services
Item 16D Exemptions from the Listing Standards for Audit Committees
Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F Change in Registrant’s Certifying Accountant
Item 16G Corporate Governance
Item 16H Mine Safety Disclosure
Item 17
Item 18
Item 19
Financial Statements
Financial Statements
Exhibits
PART III
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General
As used herein, references to “we”, “us”, “Trinity Biotech” or the “Group” in this Form 20-F shall mean Trinity Biotech plc and its
world-wide subsidiaries, collectively. References to the “Company” in this annual report shall mean Trinity Biotech plc.
Our financial statements are presented in US Dollars and are prepared in accordance with International Financial Reporting Standards
(“IFRS”) both as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union
(“EU”). The IFRS applied are those effective for accounting periods beginning January 1, 2017. Consolidated financial statements are
required by Irish law to comply with IFRS as adopted by the EU which differ in certain respects from IFRS as issued by the
IASB. These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the
differences are relevant in the context of Trinity Biotech, the consolidated financial statements for the periods presented comply with
IFRS both as issued by the IASB and as adopted by the EU. All references in this annual report to “Dollars” and “$” are to US
Dollars, and all references to “Euro” or “€” are to European Union Euro. Except as otherwise stated herein, all monetary amounts in
this annual report have been presented in US Dollars. For presentation purposes all financial information, including comparative
figures from prior periods, have been stated in round thousands.
Forward-Looking Statements
This Annual Report on Form 20-F contains forward-looking statements. The Private Securities Litigation Reform Act of 1995
provides a safe harbour from civil litigation for forward-looking statements accompanied by meaningful cautionary statements. Except
for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which may be identified by words such as “estimates”,
“anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “should” and similar expressions or the
negative versions thereof and which also may be identified by their context. Such statements, whether expressed or implied, are based
upon current expectations of the Company and speak only as of the date made. The Company assumes no obligation to publicly
update or revise any forward-looking statements even if experience or future changes make it clear that any projected results
expressed or implied therein will not be realized. These statements are subject to various risks, uncertainties and other factors – please
refer to the risk factors in Item 3 for a more comprehensive outline of these risks and the threats which they pose to the Company and
its results.
Identity of Directors, Senior Management and Advisers
Item 1
Not applicable.
Offer Statistics and Expected Timetable
Item 2
Not applicable.
Item 3
Key Information
The following selected consolidated financial data of Trinity Biotech as at December 31, 2017 and 2016 and for each of the years
ended December 31, 2017, 2016 and 2015 have been derived from, and should be read in conjunction with, the audited consolidated
financial statements and notes thereto set forth in Item 18 of this Annual Report. The selected consolidated financial data as at
December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and December 31, 2013 are derived from the audited
consolidated financial statements not appearing in this Annual Report. This data should be read in conjunction with the financial
statements, related notes and other financial information included elsewhere herein.
1
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues
Cost of sales
Gross profit
Other operating income
Research and development expenses
Selling, general and administrative expenses
Selling, general and administrative expenses -
impairment charges and inventory write-
off/provision
Operating (loss)/profit
Financial income
Financial expenses
Net financing income
(Loss)/Profit before tax
Income tax credit/(expense)
(Loss)/Profit for the year
2017
US$‘000
99,140
(57,250)
41,890
100
(5,657)
(32,246)
(41,755)
(37,668)
3,198
(5,405)
(2,207)
(39,875)
1,214
(38,661)
2016
US$‘000
Year ended December 31,
2015
US$‘000
99,611
(56,127)
43,484
239
(5,040)
(30,366)
100,195
(53,683)
46,512
288
(5,069)
(28,225)
(48,165)
(39,848)
3,147
(5,439)
(2,292)
(42,140)
3,557
(38,583)
—
13,506
13,491
(4,054)
9,437
22,943
(756)
22,187
2014
US$‘000
104,872
(55,496)
49,376
424
(4,291)
(30,071)
2013
US$‘000
91,216
(45,996)
45,220
532
(3,691)
(33,066)
—
15,438
97
(132)
(35)
15,403
(479)
14,924
—
8,995
1,276
(51)
1,225
10,220
(574)
9,646
(Loss)/Profit for the year on discontinued
operations
(Loss)/Profit for the year (all attributable to
owners of the parent)
Basic (loss)/earnings per ADS (US Dollars)
Diluted (loss)/earnings per ADS (US Dollars)
Basic (loss)/earnings per ‘A’ ordinary share
(US Dollars)
Diluted (loss)/earnings per ‘A’ ordinary share
(US Dollars)
Weighted average number of shares used in
computing basic EPS per ADS
Weighted average number of shares used in
computing diluted EPS per ADS
Weighted average number of shares used in
computing basic EPS per ‘A’ ordinary share
Weighted average number of shares used in
computing diluted EPS per ‘A’ ordinary share
(1,609)
(62,042)
(391)
2,290
—
(40,270)
(1.86)
(1.86)
(0.47)
(0.47)
(100,625)
(4.38)
(4.38)
(1.10)
(1.10)
21,796
0.94
0.46
0.24
0.12
17,214
0.76
0.73
0.19
0.18
9,646
0.44
0.41
0.11
0.10
21,621,602
22,964,703
23,161,773
22,749,726 21,936,647
26,877,544
28,299,399
27,407,793
23,717,747 23,428,175
86,486,409
91,858,813
92,647,091
90,998,904 87,746,588
107,510,179 113,197,598 109,631,172
94,870,988 93,712,698
2
Consolidated Balance Sheet Data
Net current assets (current assets less current
liabilities)
Non-current liabilities
Total assets
Capital stock
Shareholders’ equity
December 31,
2017
US$’000
December 31,
2016
US$’000
December 31,
2015
US$’000
December 31,
2014
US$’000
December 31,
2013
US$’000
91,362
(106,549)
192,974
1,213
65,196
108,208
(115,585)
249,592
1,213
108,727
143,085
(129,646)
363,683
1,209
213,892
46,888
(23,809)
242,838
1,192
196,972
55,766
(22,499)
226,486
1,170
183,011
There were no dividends declared during 2017 in respect of the fiscal year 2016 (no dividends paid in 2016 in respected of the fiscal
year 2015, final dividend of 22 cents per ADS was paid in 2015 in respect of the fiscal year 2014, 22 cents per ADS paid in 2014 in
respect of the fiscal year 2013 and 20 cents per ADS paid in 2013 in respect of the fiscal year 2012).
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You should carefully consider all of the information set forth in this Form 20-F, including the following risk factors, when investing in
our securities. The risks described below are not the only ones that we face. Additional risks not currently known to us or that we
presently deem immaterial may also impair our business operations. We could be materially adversely affected by any of these risks.
Risk Factors
Risks Related to our Business
Our long-term success depends upon the successful development and commercialization of new products.
•
Our long-term viability and growth will depend upon the successful discovery, development and commercialization of other
products from our research and development (“R&D”) activities. In order to remain competitive, we are committed to
significant expenditures on R&D and the commercialization of new or enhanced products. The R&D process generally takes a
significant amount of time from product inception to commercial launch. However, there is no certainty that this investment in
research and development will yield technically feasible or commercially viable products. We may have to abandon a new or
enhanced product or a product during its development phase in which we have invested substantial time and money. During the
fiscal years ended December 31, 2017, 2016 and 2015, we incurred US$10.4 million, US$17.4 million and US$19.7 million,
respectively, in capitalised R&D expenses. We expect to continue to incur significant costs related to our research and
development activities.
Successful products require significant development and investment, including testing to demonstrate their performance
capabilities, cost-effectiveness or other benefits prior to commercialization. In addition, unless exempt, regulatory clearance or
approval must be obtained before our medical device products may be sold. Additional development efforts on these products
may be required before we are ready to submit applications for marketing authorisation to any regulatory authority. Regulatory
authorities may not clear or approve these products for commercial sale or may substantially delay or condition clearance or
approval. In addition, even if a product is successfully developed and all applicable regulatory clearances or approvals are
obtained, there may be little or no market for the product. Accordingly, if we fail to develop and gain commercial acceptance for
our products, or if we have to abandon a new product during its development phase, or if competitors develop more effective
products or a greater number of successful new products, customers may decide to use products developed by our competitors.
This would result in a loss of revenues and adversely affect our results of operations, cash flow and business.
Our future growth in the United States is dependent in part on Food and Drug Administration (“FDA”) clearance of products. If
FDA clearance is delayed or not achieved for these products, it could have a material impact on the future growth of our
business. Similarly, future growth outside of USA is dependent on clearance of products by the relevant regulatory authorities in
those countries.
•
•
Our ability to sell products could be adversely affected by competition from new and existing diagnostic products.
• We have invested in research and development but there can be no guarantees that our R&D programmes will not be rendered
technologically obsolete or financially non-viable by the technological advances of our competitors, which would also adversely
affect our existing product lines and inventory. The main competitors of Trinity Biotech (and their principal products with
which Trinity Biotech competes) include: Abbott Diagnostics (AxSYM™, IMx™, i-STAT®, Determine™, Wampole™,
Athena™, Biosite Triag®), Arkray (HA-8180), Bio-Rad (Bio-Plex™, Variant II, Turbo and D10™), Diasorin Inc. (Liasion™,
ETIMAX™), Johnson & Johnson – Ortho Clinical Diagnostics (Vitros™), OraSure Technologies, Inc. (OraQuick®), Roche
Diagnostics (COBAS AMPLICOR™, Ampliscreen™, Accutrend™, Tina Quant™), Siemens – Beckman Coulter (Uni-Cel),
Siemens – Dade-Behring (BEP 2000, Enzygnost®), Siemens – Bayer (Centaur™), Siemens – DPC (Immulite™), Thermo Fisher
(Konelab™) and Tosoh (G8™).
The diagnostics industry is focused on the testing of biological specimens in a laboratory or at the point-of-care and is highly
competitive and rapidly changing. As new products enter the market, our products may become obsolete or a competitor’s
products may be more effective or more effectively marketed and sold than ours. If we fail to maintain and enhance our
competitive position, our customers may decide to use products developed by competitors which could result in a loss of
revenues.
•
4
• We may in certain instances also face competition from products that are sold at a lower price. Where this occurs, customers
•
may choose to buy lower cost products from third parties or we may be forced to sell our products at a lower price, both of
which could result in a loss of revenues or a lower gross margin contribution from the sale of our products. We may also be
required to increase our marketing efforts in order to compete effectively, which would increase our costs.
Our tests compete with products made by our competitors. Multiple competitors are making investments in competing
technologies and products, and a number of our competitors may have a competitive advantage because of their greater
financial, technical, research and other resources. Some competitors offer broader product lines and may have greater market
presence or name recognition than we have. If we receive FDA clearance, and in order to achieve market acceptance, we and/or
our distributors will likely be required to undertake substantial marketing efforts and spend significant funds to inform potential
customers and the public of the existence and perceived benefits of our products. Our marketing efforts for these products may
not be successful. As such, there can be no assurance that these products will obtain significant market acceptance and fill the
market needs that are perceived to exist on a timely basis, or at all.
If we fail to maintain regulatory approvals and clearances, or are unable to obtain, or experience significant delays in obtaining,
regulatory clearances or approvals for our future products or product enhancements, our ability to commercially distribute and
market these products could suffer.
•
Our medical device products and operations are subject to rigorous government regulation in the United States by the FDA, and
numerous other federal, state and foreign governmental authorities, as well as and by comparable regulatory authorities in other
jurisdictions such as the Health Products Regulatory Authority (“HPRA”) in Ireland. In particular, we are subject to strict
governmental controls on the development, manufacture, labelling, storage, testing, advertising, promotion, marketing,
distribution and import and export of our products. In addition, we or our distributors are often required to register with and/or
obtain clearances or approvals from foreign governments or regulatory bodies before we can import and sell our products in
foreign countries. The clearance and approval process for our products, while variable across countries, is generally lengthy,
time consuming, detailed and expensive.
The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and
we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial
distribution of a new medical device only after the device has received clearance under Section 510(k) of the Federal Food,
Drug, and Cosmetic Act (“FDCA”), or is the subject of an approved premarket approval application (“PMA”) unless the device
is specifically exempt from those requirements. The FDA will clear marketing of a lower risk medical device through the 510(k)
process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products. High
risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not
deemed substantially equivalent to a previously cleared device, require the approval of a PMA.
The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. A PMA application must be
supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data,
to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. The 510(k) clearance process
usually takes from three to 12 months, but it can take longer. The process of obtaining PMA approval is much more costly and
uncertain than the 510(k) clearance process. It generally takes from one to three years, or even longer, from the time the PMA
application is submitted to the FDA, until an approval is obtained. There is no assurance that we will be able to obtain FDA
clearance or approval for any of our new products on a timely basis, or at all.
In the United States, the majority of our currently commercialized products have received pre-market clearance under Section
510(k) of the FDCA. If the FDA requires us to go through a lengthier, more rigorous examination for future products or
modifications to existing products than we had expected, our product introductions or modifications could be delayed or
cancelled, which could cause our sales to decline. In addition, the FDA may determine that future products will require the more
costly, lengthy and uncertain PMA process. Although we currently market only one device pursuant to an approved PMA, the
FDA may demand that we obtain a PMA prior to marketing certain of our future products.
•
•
5
•
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:
•
•
•
•
•
our ability to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended users;
insufficient data from our pre-clinical studies and clinical trials to support clearance or approval, where required; and
the failure of the manufacturing process or facilities we use to meet applicable requirements.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations,
or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability
to modify our currently cleared products on a timely basis. For example, in response to industry and healthcare provider
concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of
the program, and in January 2011, announced several proposed actions intended to reform the review process governing the
clearance of medical devices. FDA’s review of its 510(k) clearance process could result in additional changes to regulatory
requirements or guidance documents which could increase the costs of compliance, or restrict our ability to maintain current
clearances. In addition, as part of the Food and Drug Administration Safety and Innovation Act (“FDASIA”), Congress
reauthorised the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several
“Medical Device Regulatory Improvements” and miscellaneous reforms which are further intended to clarify and improve
medical device regulation both pre- and post-clearance and approval.
Our continued success is dependent on our ability to develop and market new products, some of which are currently awaiting
clearance or approval from the applicable regulatory authorities. There is no certainty that such clearance or approval will be
granted or, even once granted, will not be revoked during the continuing review and monitoring process. Further, regulatory
authorities, including the FDA, may not approve or clear our future products for the indications that are necessary or desirable
for successful commercialization. A regulatory authority may impose requirements as a condition to granting a marketing
authorisation, may include significant restrictions or limitations as part of a marketing authorisation it grants and may delay or
refuse to authorise a product for marketing, even though a product has been authorised for marketing without restrictions or
limitations in another country or by another agency. Failure to receive clearance or approval for our new products, or
commercially undesirable limitations on our clearances or approvals, would have an adverse effect on our ability to expand our
business.
•
•
Clinical trials necessary to support future premarket submissions will be expensive and will require enrollment of suitable patients
who may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any
modified or new products and will adversely affect our business, operating results and prospects.
•
Initiating and completing clinical trials necessary to support approval of future products under development, is time consuming
and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future
results, and any product we advance into clinical trials may not have favorable results in later clinical trials.
Conducting successful clinical studies will require the enrollment of patients who may be difficult to identify and recruit. Patient
enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of
the patient population, the nature of the trial protocol, and the availability of appropriate clinical trial investigators. Patients may
not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products.
Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not
adequately develop such protocols to support clearance and approval. Further, the FDA may require us to submit data on a
greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection
requirements or data analysis applicable to our clinical trials. Any challenges to patient enrollment may cause an increase in
costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In
addition, despite considerable time and expense invested in our clinical trials, FDA may not consider our data adequate to
demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating
results and prospects.
6
•
Our facility and our clinical investigational sites operate under procedures that govern the conduct and management of FDA-
regulated clinical studies under 21 CFR Parts 50, 56 and 812, and Good Clinical Practices. Although the majority of our in-vitro
diagnostic (“IVD”) clinical studies meet the definition of exempted investigations under 21 Part 812 and are exempt from the
Investigational Device Exemption (“IDE”) regulations in 21 CFR Part 812, we are still required to meet the requirements of 21
CFR Parts 50 and 56 for informed consent and Institutional Review Board (“IRB”) approval. FDA may conduct Bioresearch
Monitoring (“BiMo”) inspections of us and/or our clinical sites to assess compliance with FDA regulations, our procedures, and
the clinical protocol. If the FDA were to find that we or our clinical investigators are not operating in compliance with
applicable regulations, we could be subject to the above FDA enforcement action as well as refusal to accept all or part of our
data in support of a 510(k) or PMA and/or we may need to conduct additional studies.
If the third parties on which we rely to conduct our pre-clinical studies and clinical trials and to assist us with pre-clinical
development do not perform as contractually required or expected, we may not be able to obtain regulatory approval for or
commercialize our products.
• We may not have the ability to independently conduct our pre-clinical studies and clinical trials for our products and we may
rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories
to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or
meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is
compromised due to the failure to adhere to our pre-clinical or clinical protocols or regulatory requirements or for other reasons,
our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be
able to obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business,
operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be
delayed in conducting our clinical trials for reasons outside of their control.
The results of our clinical trials may not support our product candidate claims.
•
Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate
claims or that the FDA or foreign authorities will agree with our conclusions regarding them. The clinical trial process may fail
to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to
abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the
filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues.
Failure to comply with FDA or other regulatory requirements may require us to suspend production of our products or institute a
recall which could result in higher costs and a loss of revenues.
•
Even after we obtain clearance or approval for our medical devices, we are still subject to ongoing and extensive post market
regulatory requirements. Regulation by the FDA and other federal, state and foreign regulatory agencies, such as the HPRA in
E.U., impacts many aspects of our operations, and the operations of our suppliers and distributors, including manufacturing,
labeling, packaging, adverse event reporting, storage, advertising, promotion, marketing, record keeping, import and export. For
example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation (“QSR”), which covers
the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization,
storage and shipping of our products. Our manufacturing facilities and those of our suppliers and distributors are, or can be,
subject to periodic regulatory inspections by the FDA to assess compliance with the QSR and other regulations, and by other
comparable foreign regulatory authorities with respect to similar requirements in other jurisdictions. The FDA and foreign
regulatory agencies may require post-marketing testing and surveillance to monitor the performance of approved products or
place conditions on any product clearances or approvals that could restrict the commercial applications of those products. The
failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other
regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety
issues, could result in, among other things, any of the following enforcement actions:
•
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
7
•
•
•
•
•
unanticipated expenditures to address or defend such actions;
customer notifications for repair, replacement, refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
operating restrictions;
•
• withdrawing 510(k) clearances on PMA approvals that have already been granted;
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refusal to grant export approval for our products; or
criminal prosecution.
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Other regulatory authorities have similar sanctions in their respective jurisdictions.
If any of these actions were to occur it would harm our reputation and cause our product sales and profitability to suffer and may
prevent us from generating revenue. Furthermore, our key component suppliers may not currently be or may not continue to be
in compliance with all applicable regulatory requirements which could result in our failure to produce our products on a timely
basis and in the required quantities, if at all.
Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the
intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and
generate revenue from the product. If the FDA determines that our promotional materials, labeling, training or other marketing
or educational activities constitute promotion of an unapproved use, it could request that we cease or modify our training or
promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign
enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of
an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting
false claims for reimbursement.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of
our products, and we must comply with medical device reporting requirements, including the reporting of adverse events and
malfunctions related to our products. Later discovery of previously unknown problems with our products, including
unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to
comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products or
manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair,
replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product
seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results
and prospects.
In the ordinary course of business, we must frequently make subjective judgments with respect to compliance with applicable
laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these
regulations, we could be subjected to substantial civil and criminal penalties, as well as product recall, seizure or injunction with
respect to the sale of our products. The assessment of any civil and criminal penalties against us could severely impair our
reputation within the industry and any limitation on our ability to manufacture and market our products could have a material
adverse effect on our business.
In addition to the FDA and other regulations described above, laws and regulations in some countries may restrict our ability to
sell products in those countries. While we intend to comply with any applicable restrictions, there is no guarantee we will be
successful in these efforts.
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• We must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control, disposal of hazardous substances and labour or employment practices.
Compliance with these laws or any new or changed laws regulating our business could result in substantial costs. Because of the
number and extent of the laws and regulations affecting our industry, and the number of governmental agencies whose actions
could affect our operations, it is impossible to reliably predict the full nature and impact of these requirements. To the extent the
costs and procedures associated with complying with these laws and requirements are substantial or it is determined that we do
not comply, our business and results of operations could be adversely affected.
8
Our products may in the future be subject to product recalls that could harm our reputation, business and financial results.
• Manufacturers may, on their own initiative, initiate actions, including a non-reportable market withdrawal or a reportable
product recall, for the purpose of correcting a material deficiency, improving device performance, or for other reasons.
Additionally, the FDA and similar foreign health or governmental authorities have the authority to require an involuntary recall
of commercialized products in the event of material deficiencies or defects in design, manufacturing or labeling or in the event
that a product poses an unacceptable risk to health. In the case of the FDA, the authority to require a recall must be based on an
FDA finding that there is a reasonable probability that a device intended for human use would cause serious, adverse health
consequences or death. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of
component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our
products would divert managerial and financial resources and have an adverse effect on our financial condition and results of
operations. The FDA requires that certain classifications of recalls be reported to FDA within 10 working days after the recall is
initiated.
Companies are required to maintain certain records of post-market actions, even if they determine such actions are not
reportable to the FDA. If we determine that certain actions do not require notification of the FDA, the FDA may disagree with
our determinations and require us to report those actions as recalls. A future recall announcement could harm our reputation
with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the
recalls when they were conducted or failing to timely report or initiate a reportable product action. Further, depending on the
corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will
need to obtain new approvals or clearances before we may market or distribute the corrected device. Seeking such approvals or
clearances may delay our ability to replace the recalled devices in a timely manner.
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If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical
device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
• We are also required to comply with the FDA’s Medical Device Reporting (“MDR”), requirements in the United States and
comparable regulations worldwide, such as the HPRA. For example, under the FDA’s MDR regulations, we are required to
report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our
product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In
addition, all manufacturers placing medical devices in European Union markets are legally bound to report any serious or
potentially serious incidents involving devices they produce or sell to the Competent Authority in whose jurisdiction the
incident occurred.
Were this to happen to us, the relevant Competent Authority would file an initial report, and there would then be a further
inspection or assessment if there are particular issues. This would be carried out either by the Competent Authority or it could
require that Trinity Biotech’s Notified Body, carry out the inspection or assessment.
• We have reported MDRs in the past, and we anticipate that in the future it is likely that we may experience events that would
require reporting to the FDA pursuant to the MDR regulations. Any adverse event involving our products could result in future
voluntary corrective actions, or agency actions, such as inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication
of our time and capital, distract management from operating our business, and may harm our reputation and financial results.
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Modifications to our products, if cleared or approved, may require new 510(k) clearances or pre-market approvals, or may require
us to cease marketing or recall the modified products until clearances or approvals are obtained.
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Any modification to a 510(k)-cleared device in the United States that could significantly affect its safety or effectiveness, or that
would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly,
approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may
review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals
are necessary.
9
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If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to
previously cleared products for which we conclude that new clearances or approvals are unnecessary, we may be required to
cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant
regulatory fines or penalties. Further, our products could be subject to recall if the FDA determines, for any reason, that our
products are not safe or effective. Any recall or FDA requirement that we seek additional approvals or clearances could result in
significant delays, fines, increased costs associated with modification of a product, loss of revenue and potential operating
restrictions imposed by the FDA.
For example, we obtained 510(k) clearance for our Primus Variant System for the separation and quantification of normal and
abnormal haemoglobin species as an aid in the diagnosis of haemoglobinopathies. The sample type used by this system was
blood tubes. We subsequently introduced two systems based on the original Primus Variant System and they were named as
ultra² GeneSys Variant System and ultra² Resolution Variant System. The primary focus of the GeneSys was on newborn
screening using Dried Blood Spots as the sample type, while the Resolution was intended for confirmatory testing on the adult
population using blood tubes as the sample type. We determined that these modifications to the indications for use were within
our existing clearance and did not require the submission of a new 510(k) notification. The FDA stated that the use of Dried
Blood Spots was not part of the original submission and represented a new modified Intended Use. The FDA informed us that it
disagreed with our decision not to seek new 510(k) clearances for these modifications, and we have agreed to file new 510(k)
notifications to obtain clearance for these indications. We have filed the 510(k) submission. The FDA has requested additional
method comparison data. The data is being generated and will be resubmitted. We continue to support our current installed base.
We will undertake any directive deemed necessary by the FDA as we wait for final approval. If we are not able to obtain new
510(k) clearances, or if the FDA withdraws its authorisation, we may be required to cease marketing for the currently-marketed
indications and remove these products from U.S. commercial distribution.
Furthermore, the FDA’s ongoing review of the 510(k) program may make it more difficult for us to make modifications to any
products for which we obtain clearance, either by imposing more strict requirements on when a manufacturer must submit a new
510(k) notification for a modification to a previously cleared product, or by applying more onerous review criteria to such
submissions. For example, in accordance with FDASIA, the FDA was obligated to prepare a report for Congress on the FDA’s
approach for determining when a new 510(k) clearance will be required for modifications or changes to a previously cleared
device. The FDA issued this report and indicated that manufacturers should continue to adhere to the FDA’s 1997 Guidance on
this topic when making a determination as to whether or not a new 510(k) clearance is required for a change or modification to a
device. However, the practical impact of the FDA’s continuing scrutiny of the 510(k) program remains unclear.
We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved
or “off-label” uses.
•
Our promotional materials must comply with FDA and other applicable laws and regulations. We believe that the specific uses
for which our products are marketed fall within the scope of the indications for use that have been cleared or approved by the
FDA. However, the FDA could disagree and require us to stop promoting our products for those specific uses until we obtain
FDA clearance or approval for them. In addition, if the FDA determines that our promotional materials constitutes promotion of
an unapproved use, it could request that we modify our promotional materials or subject us to regulatory or enforcement actions,
including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties.
It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional
materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory
authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and
adoption of the products would be impaired.
If the FDA were to modify its policy of enforcement discretion with respect to our laboratory developed tests, we could incur
substantial costs and delays associated with trying to obtain premarket clearance or other approvals.
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Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA
has generally exercised its enforcement discretion and not enforced applicable regulations with respect to laboratory developed
tests (“LDTs”), although reagents, instruments, software or components provided by third parties and used to perform LDTs
may be subject to FDA regulation.
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The FDA defines the term “laboratory developed test” as an IVD test that is intended for clinical use and designed,
manufactured and used within a single laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not
enforce provisions of the Food, Drug, and Cosmetic Act, or FDA Act, with respect to LDTs. In July 2014, due to the increased
proliferation of LDTs for complex diagnostic testing and concerns with several high-risk LDTs related to lack of evidentiary
support for claims and erroneous results, the FDA issued guidance that, when finalized, would adopt a risk-based framework
that would increase FDA oversight of LDTs. As part of this developing framework, FDA issued draft guidance in October 2014,
informing Congress and manufacturers of LDTs of its intent to collect information from laboratories regarding their current
LDTs and newly developed LDTs through a notification process. The FDA will use this information to classify LDTs and to
prioritize enforcement of premarket review requirements for categories of LDTs based on risk, using a public process.
Specifically, the FDA plans to use advisory panels to provide recommendations to the agency on LDT risks, classification and
prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.
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• We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for any of
our LDTs, whether through additional guidance or regulations issued by the FDA, new enforcement policies adopted by the
FDA or new legislation enacted by Congress. It is possible that legislation will be enacted into law, regulations could be
promulgated or guidance could be issued by the FDA which may result in increased regulatory burdens for us to continue to
offer our current LDTs or to develop and introduce new LDTs. We cannot predict the timing or content of future legislation
enacted, regulations promulgated or guidance issued regarding LDTs, or how it will affect our business.
If FDA premarket review, including clearance or approval, is required for our current or future LDTs (either alone or together
with sample collection devices), products or services we may develop, or we decide to voluntarily pursue FDA clearance or
approval, we may be forced to stop selling our LDTs while we work to obtain such FDA clearance or approval. Our business
would be negatively affected until such review was completed and clearance to market or approval was obtained. The regulatory
process may involve, among other things, successfully completing additional clinical studies and submitting premarket
notification or filing a premarket approval application with the FDA. If premarket review is required by the FDA or if we decide
to voluntarily pursue FDA premarket review of our LDTs, there can be no assurance that any tests, products or services we may
develop in the future will be cleared or approved on a timely basis, if at all, nor can there be assurance that labeling claims will
be consistent with our current claims or adequate to support continued adoption of for our LDTs. If our LDTs are allowed to
remain on the market but there is uncertainty in the marketplace about our tests, if we are required by the FDA to label them
investigational and we cannot offer the LDTs for diagnostic purposes, or if labeling claims the FDA allows us to make are
limited, orders may decline.
Ongoing compliance with FDA regulations would increase the cost of conducting our business, and subject us to heightened
regulation by the FDA and penalties for failure to comply with these requirements.
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We are also subject to various federal and state laws targeting fraud and abuse in the healthcare industry.
•
If we fail to comply with federal and state health care laws, including fraud and abuse, false claims, physician payment
transparency and privacy and security laws, we could face substantial penalties and our business, operations and financial
condition could be adversely affected. We are subject to anti-kickback laws, self-referral laws, false claims laws, and laws
constraining the sales, marketing and other promotional activities of manufacturers of medical devices by limiting the kinds of
financial arrangements we may enter into with physicians, hospitals, laboratories and other potential purchasers of our products.
The laws that may affect our ability to operate include, but are not limited to:
•
the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and wilfully soliciting,
receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an
individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under
federal healthcare programs, such as the Medicare and Medicaid programs. A person or entity does not need to have
actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in
addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-
Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
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the Physician Self-Referral Law, also known as the “Stark Law”, which provides for strict liability for referrals by
physicians to entities with which they or their immediate family members have a financial arrangement for certain
designated health services, including clinical laboratory services provided by our CLIA-certified laboratory owned and
operated by Immco Diagnostics Inc., that are reimbursable by federal healthcare programs, unless an exception applies.
Penalties for violating the Stark Law include denial of payment, civil monetary penalties of up to fifteen thousand dollars
per claim submitted, and exclusion from federal health care programs, as well as a penalty of up to one-hundred thousand
dollars for attempts to circumvent the law;
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or
causing to be presented, claims for payment from Medicare, Medicaid or other federal third-party payors that are false or
fraudulent. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf
of the government and such individuals, commonly known as “whistleblowers”, may share in any amounts paid by the
entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may
be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate
false claim;
the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a
federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order
or receive items or services reimbursable by the government from a particular provider or supplier;
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false
statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to
have actual knowledge of the statute or specific intent to violate it to have committed a violation;
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions
and protects the security and privacy of protected health information;
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with
certain exceptions) to report annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to
payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors) and teaching hospitals, and requires applicable manufacturers to report annually to the government
ownership and investment interests held by the physicians described above and their immediate family members and
payments or other “transfers of value” to such physician owners. Manufacturers are required to submit reports to CMS by
the 90th day of each calendar year. We cannot assure you that we have and will successfully report all transfers of value
by us, and any failure to comply could result in significant fines and penalties. Failure to submit the required information
may result in civil monetary penalties up to an aggregate of $150,000 per year (and up to an aggregate of $1 million per
year for “knowing failures”) for all payments, transfers of value or ownership or investment interests not reported in an
annual submission, and may result in liability under other federal laws or regulations;
federal and state laws governing the certification and licensing of clinical laboratories, including operational, personnel
and quality requirements designed to ensure that testing services are accurate and timely, and federal and state laws
governing the health and safety of clinical laboratory employees;
the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from paying, offering
to pay or authorising the payment of anything of value to any foreign government official, government staff member,
political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working
in an official capacity; the UK Bribery Act, which prohibits both domestic and international bribery, as well as bribery
across both public and private sectors; and bribery provisions contained in the German Criminal Code, which makes the
corruption and corruptibility of physicians in private practice and other healthcare professionals a criminal offense; and
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analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws
which may apply to items or services reimbursed by any payor, including commercial insurers; state laws that require
device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance
promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other
potential referral sources; state laws that require device manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the
privacy and security of health information in certain circumstances, many of which differ from each other in significant
ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbours available under such laws,
it is possible that some of our business activities, including our relationships with physicians and other healthcare providers,
some of whom may recommend, purchase and/or order our tests, our sales and marketing efforts and certain arrangements with
customers, including those where we provide our instrumentation for free in exchange for minimum purchase requirements of
our reagents, and our billing and claims processing practices, could be subject to challenge under one or more of such laws. By
way of example, some of our consulting arrangements with physicians do not meet all of the criteria of the personal services
safe harbour under the federal Anti-Kickback Statute. Accordingly, they do not qualify for safe harbour protection from
government prosecution. A business arrangement that does not substantially comply with a safe harbour, however, is not
necessarily illegal under the Anti-Kickback Statute, but may be subject to additional scrutiny by the government. We are also
exposed to the risk that our employees, independent contractors, principal investigators, consultants, vendors and distributors
may engage in fraudulent or other illegal activity. Any action against us for violation of these laws, even if we successfully
defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of
our business.
To enforce compliance with the federal laws, the U.S. Department of Justice (“DOJ”), has recently increased its scrutiny of
interactions between health care companies and health care providers, which has led to a number of investigations, prosecutions,
convictions and settlements in the health care industry. Dealing with investigations can be time and resource consuming and can
divert management’s attention from the business. In addition, settlements with the DOJ or other law enforcement agencies have
forced healthcare providers to agree to additional compliance and reporting requirements as part of a consent decree or corporate
integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our
business.
Many of the existing requirements are new and have not been definitively interpreted by state authorities or courts, and available
guidance is limited. In addition, changes in or evolving interpretations of these laws, regulations, or administrative or judicial
interpretations, may require us to change our business practices or subject our business practices to legal challenges, which
could have a material adverse effect on our business, financial condition and results of operations.
•
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• We have not yet developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the
rules and program requirements to which we are or may become subject. Although the development and implementation of such
compliance programs can mitigate the risk of investigation, prosecution, and penalties assessed for violations of these laws, or
any other laws that may apply to us, the risks cannot be entirely eliminated.
If our operations are found to be in violation of any of the laws described above or any other laws and regulations that apply to
us, we could receive adverse publicity, face enforcement action and be subject to penalties, including civil and criminal
penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state
healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our results of
operations.
Our business could be adversely affected by changing conditions in the diagnostic market.
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The diagnostics industry is in transition with a number of changes that affect the market for diagnostic test products. The
diagnostics industry has experienced considerable consolidation through mergers and acquisitions in the past several years. For
example, major consolidation among reference laboratories and the formation of multi-hospital alliances, reducing the number
of institutional customers for diagnostic test products. There can be no assurance that we will be able to enter into and/or sustain
contractual or other marketing or distribution arrangements on a satisfactory commercial basis with these institutional
customers.
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Further, this consolidation trend may result in the remaining companies having greater financial resources and technological
capabilities, thereby intensifying competition in the industry, which could have a material adverse effect on our business.
Future acquisitions may be less successful than expected, not generate the expected benefits, disrupt our ongoing business, distract
our management, increase our expenses and adversely affect our business, and therefore, growth may be limited.
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Trinity Biotech has historically grown organically and through the acquisition of, and investment in, other companies, product
lines and technologies. We may enter into strategic acquisitions or investments as a way to expand our business. These
activities, and their impact on our business, are subject to many risks, including the following:
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Suitable acquisitions or investments may not be found or consummated on terms or schedules that are satisfactory to us or
consistent with our objectives;
The benefits expected to be derived from an acquisition may not materialize and could be affected by numerous factors,
such as regulatory developments, insurance reimbursement, general economic conditions and increased competition;
• We may be unable to successfully integrate an acquired company’s personnel, assets, management systems, products
•
and/or technology into our business;
• Worse than expected performance of an acquired business may result in the impairment of intangible assets;
• Acquisitions may require substantial expense and management time and could disrupt our business;
• We may not be able to accurately forecast the performance or ultimate impact of an acquired business;
• An acquisition and subsequent integration activities may require greater capital and other resources than originally
anticipated at the time of acquisition;
• An acquisition may result in the incurrence of unexpected expenses, the dilution of our earnings or our existing
stockholders’ percentage ownership, or potential losses from undiscovered liabilities not covered by an indemnification
from the seller(s) of the acquired business;
• An acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers;
• An acquisition of a foreign business may involve additional risks, including, but not limited to, foreign currency exposure,
liability or restrictions under foreign laws or regulations, and our inability to successfully assimilate differences in foreign
business practices or overcome language or cultural barriers; and
• Our ability to integrate future acquisitions may be adversely affected by inexperience in dealing with new technologies.
The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the
benefits expected from an acquisition or investment. This may adversely affect our financial condition, results of operations and
ability to grow our business or otherwise achieve our financial and strategic objectives.
Our revenues are highly dependent on a network of distributors worldwide.
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Trinity Biotech currently distributes its product portfolio through distributors in approximately 100 countries worldwide. Our
continuing economic success and financial security is dependent on our ability to secure effective channels of distribution on
favourable trading terms with suitable distributors.
The loss or termination of our relationship with these key distributors could significantly disrupt our business unless suitable
alternatives were timely found or lost sales to one distributor are absorbed by another distributor.
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Finding a suitable alternative to a lost or terminated distributor may pose challenges in our industry’s competitive environment,
and another suitable distributor may not be found on satisfactory terms, if at all. For instance, some distributors already have
exclusive arrangements with our competitors, and others do not have the same level of penetration into our target markets as our
existing distributors. If total revenue from these or any of our other significant distributors were to decrease in any material
amount in the future or we are not successful in timely transitioning business to new distributors, our business, operating results
and financial condition could be materially and adversely affected.
Reductions in government funding to agencies and organizations we work with could adversely affect our business and financial
results.
• We sell our products into the public health market, which consists of state, county and other governmental public health
agencies, community based organizations, service organizations and similar entities. Many of these customers depend to a
significant degree on grants or funding provided by governments or governmental agencies to run their operations, including
programs that use our products, such as our HIV testing products. In international markets, we often sell our products to parties
funded by such agencies. The level of available government grants or funding is unpredictable, and certain organizations may
not have their contracts renewed for funding. Available funding may be affected by various factors including future economic
conditions, legislative and regulatory developments, political changes, civil unrest and changing priorities for research and
development activities. Any reduction or delay in government funding or change in organizational contracts could cause our
customers to delay, reduce or forego purchases of our products or cause short term or long term fluctuations in our product
revenues through these channels.
Trinity Biotech may be subject to liability resulting from its products or services.
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Trinity Biotech may be subject to claims for personal injuries or other damages if any of our products, or any product which is
made with the use or incorporation of any of our technologies, causes injury of any type or is found otherwise unsuitable during
product testing, manufacturing, marketing, sale or usage. There is no assurance that we would be successful in defending any
product liability lawsuits brought against us. Regardless of merit or eventual outcome, product liability claims could result in:
Lost revenues;
• Decreased demand for our products;
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• Damage to our image or reputation;
• Costs related to litigation;
• Diversion of management time and attention; and
Incurrence of damages payable to plaintiffs.
•
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Trinity Biotech has global product liability insurance in place for its manufacturing subsidiaries up to a maximum of €6,500,000
(US$6,841,000) for any one accident, limited to a maximum of €6,500,000 (US$6,841,000) in any one year period of insurance.
A deductible of €5,000 ($5,300) for each claim and every claim increasing to US$25,000 in respect of USA/Canada is
applicable to each insurance event that may arise. There can be no assurance that our product liability insurance is sufficient to
protect us against liability that could have a material adverse effect on our business. In addition, although we believe that we
will be able to continue to obtain adequate coverage in the future, there is no assurance that we will be able to do so at
acceptable costs.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would
adversely affect our business and operating results.
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Products manufactured at our facilities in Bray, Ireland, Jamestown and Buffalo, New York, Kansas City, Missouri and
Carlsbad, California comprised approximately 83% of revenues during the fiscal year ended December 31, 2017. Our global
supply of these products and services is dependent on the uninterrupted and efficient operation of these facilities. In addition, we
currently rely on a small number of third-party manufacturers to produce certain of our diagnostic products and product
components.
If we do not negotiate long-term contracts, our suppliers will likely not be required to provide us with any guaranteed minimum
production levels. As a result, we cannot assure you that we will be able to obtain sufficient quantities of product in the future.
•
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In addition, our reliance on third-party suppliers involves a number of risks, including, among other things:
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contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that
could negatively affect the efficacy or safety of our products or cause delays in shipments of our products;
• we or our contract manufacturers and suppliers may not be able to respond to unanticipated changes in customer orders,
and if orders do not match forecasts, we or our suppliers may have excess or inadequate inventory of materials and
components;
• we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply
arrangements for key components;
• we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an
interruption in the manufacture, assembly and shipment of our systems;
• we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or
their other customers;
fluctuations in demand for products that our contract manufacturers and suppliers manufacture for others may affect their
ability or willingness to deliver components to us in a timely manner;
our suppliers or those of our contract manufacturer may wish to discontinue supplying components or services to us for
risk management reasons;
• we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a
timely manner if the necessary components become unavailable; and
our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit
their ability to fulfill our orders and meet our requirements.
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The operations of our facilities or these third-party manufacturing facilities could be adversely affected by fire, power failures,
natural or other disasters, such as earthquakes, floods, or terrorist threats. Although we carry insurance to protect against certain
business interruptions at our facilities, some pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. There can be no assurance that such coverage will be adequate or that such coverage will
continue to remain available on acceptable terms, if at all.
If any of these risks materialize, it could significantly increase our costs and impact our ability to meet demand for our products.
If we are unable to satisfy commercial demand for our products in a timely manner, our ability to generate revenue would be
impaired, market acceptance of our products could be adversely affected, and customers may instead purchase or use our
competitors’ products. In addition, we could be forced to secure new or alternative contract manufacturers or suppliers. Securing
a replacement contract manufacturer or supplier could be difficult. The introduction of new or alternative manufacturers or
suppliers also may require design changes to our products that are subject to FDA and other regulatory clearances or approvals.
We may also be required to assess the new manufacturer’s compliance with all applicable regulations and guidelines, which
could further impede our ability to manufacture our products in a timely manner. As a result, we could incur increased
production costs, experience delays in deliveries of our products, suffer damage to our reputation, and experience an adverse
effect on our business and financial results. Any significant interruption in the Group’s or third-party manufacturing capabilities
could materially and adversely affect our operating results.
16
We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees
or the inability to attract and retain qualified personnel as necessary could adversely affect our operations.
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Trinity Biotech’s success is dependent to a large extent upon the contributions of certain key management personnel. Our key
employees at December 31, 2017 were Ronan O’Caoimh, our CEO and Chairman, Jim Walsh, Executive Director, and Kevin
Tansley, our CFO/Executive Director. We may not be able to attract or retain a sufficient number of qualified employees in the
future due to the intense competition for qualified personnel among medical products and other life science businesses.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience
constraints that will adversely affect our ability to effectively manufacture, sell and market our products, to meet the demands of
our strategic partners in a timely fashion, or to support research, development and clinical programs. Although we believe we
will be successful in attracting and retaining qualified personnel, competition for experienced scientists and other personnel
from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms.
•
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We are dependent on third-party suppliers for certain critical components and the primary raw materials required for our test kits.
The primary raw materials required for Trinity Biotech’s test kits consist of antibodies, antigens or other reagents, glass fibre
•
and packaging materials which are acquired from third parties. If our third-party suppliers are unable or unwilling to supply or
manufacture a required component or product or if they make changes to a component, product or manufacturing process or do
not supply materials meeting our specifications, we may need to find another source and/or manufacturer. This could require
that we perform additional development work.
Some of our products, which we acquire from third parties, are highly technical and are required to meet exacting specifications,
and any quality control problems that we experience with respect to the products supplied by third-party vendors could
adversely and materially affect our reputation, our attempts to complete our clinical trials or commercialization of our products
and adversely and materially affect our business, operating results and prospects. We may also need to obtain FDA or other
regulatory authorisations for the use of an alternative component or for certain changes to our products or manufacturing
process. We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or
foreign regulatory authorities and the failure of our suppliers to comply with strictly enforced regulatory requirements could
expose us to regulatory action including, warning letters, product recalls, termination of distribution, product seizures, or civil
penalties. Completing that development and obtaining such authorisations could require significant time and expense and we
may not obtain such authorisations on a timely basis, or at all. The availability of critical components and products from other
third parties could also reduce our control over pricing, quality and timely delivery. These events could either disrupt our ability
to manufacture and sell certain of our products into one or more markets or completely prevent us from doing so, and could
increase our costs. Any such event could have a material adverse effect on our results of operations, cash flow and business.
Furthermore, since some of these suppliers are located outside of the United States, we are subject to foreign export laws and
United States import and customs regulations, which complicate and could delay shipments of components to us.
Although Trinity Biotech does not expect to be dependent upon any one source for these critical components or raw materials,
alternative sources of antibodies with the characteristics and quality desired by Trinity Biotech may not be available. Such
unavailability could affect the quality of our products and our ability to meet orders for specific products.
•
Global economic conditions may have a material adverse impact on our results.
• We currently generate significant operating cash flows, which combined with access to the credit markets provides us with
discretionary funding capacity for research and development and other strategic activities. Uncertainty in global economic
conditions may continue for the foreseeable future and intensify. This uncertainty poses a risk to the overall economy that could
impact demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers
and creditors, including financial institutions. Volatile economic conditions have adversely affected and could continue to
adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could
adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions or make other
discretionary investments. Many of our customers rely on public funding provided by federal, state and local governments, and
this funding has been and may continue to be reduced or deferred as a result of economic conditions.
17
•
If global economic conditions deteriorate significantly, our business could be negatively impacted, including such areas as
reduced demand for our products from a slow-down in the general economy, supplier or customer disruptions resulting from
tighter credit markets and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial
intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers. These circumstances
may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to purchase our products
or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it
may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns.
We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery.
We face risks relating to our international sales and business operations, including regulatory risks, which could impact our
current business operations and growth strategy.
•
Our international sales and operations are subject to various United States and foreign laws and regulations relating to export
controls (including, without limitation, the U.S. Commerce Department’s Export Administration Regulations), economic
sanctions (including, without limitation, various sanctions regulations administered by the U.S. Treasury Department’s Office of
Foreign Assets Control), and anti-corruption (including, without limitation, the United States Foreign Corrupt Practice
Act). Failure to comply with such applicable laws and regulations could subject us to civil or criminal penalties, government
investigations, debarment from export privileges, and reputational harm, which could have a material adverse effect on our
business.
Developments related to the U.K.’s referendum on membership in the E.U. could adversely affect us.
•
The United Kingdom (“U.K.”) held a referendum on June 23, 2016 and voted in favour of exiting the European Union, or E.U.
This “Brexit” referendum has created political and economic uncertainty, particularly in the U.K. and E.U. and this uncertainty
may last for a number of years. Until the precise terms of the U.K.’s exit from the E.U. are determined, it will be difficult to
predict the impact of the Brexit referendum. Our business in the U.K., the E.U. and world-wide could be affected during this
period of uncertainty, and perhaps longer, by the impact of the Brexit referendum. The U.K.’s decision to exit the E.U. could
cause volatility in global financial markets, including in global currency exchange rates, resulting in a slow-down in economic
activity in the U.K., Europe or globally, negatively impact new trade agreements between the U.K and other countries, including
the United States, and result in significant regulatory changes and uncertainty. One or more of these events could make it more
difficult or costly to sell our products, particularly in the U.K. and Europe, and negatively affect our revenues and results of
operations. The Brexit referendum may also influence other countries and result in additional countries deciding to leave the
E.U. This in turn could result in additional changes and uncertainty, any or all of which could negatively impact our business.
Our sales and operations are subject to the risks of fluctuations in currency exchange rates.
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A substantial portion of our operations is based in Ireland and Europe is one of our main sales territories. As a result, changes in
the exchange rate between the U.S. Dollar and the Euro can have significant effects on our results of operations. In addition, in
markets where we invoice in U.S. Dollars but where the local currency has weakened, we have been required to reduce our
pricing in order to preserve our competiveness. The Group has an exposure to the Canadian Dollar through its two Canadian
entities (Nova Century Scientific and Phoenix Biotech) and to the Brazilian Real through its Brazilian entity. The Group also
has revenues and costs denominated in British Sterling. The discontinued operation in Sweden, Fiomi Diagnostics, also gives us
a Swedish Kroner exposure.
In the future, we may enter into hedging instruments to manage our currency exchange rate risk. However, our attempts to
hedge against these risks may not be successful. If we are unable to successfully hedge against unfavourable foreign currency
exchange rate movements, our consolidated financial results may be adversely impacted.
•
The conversion of our outstanding employee share options would dilute the ownership interest of existing shareholders.
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The total share options exercisable at December 31, 2017, as described in Item 18, Note 20 to the consolidated financial
statements, are convertible into American Depository Shares (ADSs), 1 ADS representing 4 “A” Ordinary Shares. The exercise
of the share options exercisable will likely occur only when the conversion price is below the trading price of our ADSs and will
dilute the ownership interests of existing shareholders. For instance, should the options of the 3,268,707 “A” Ordinary Shares
(817,177 ADSs) exercisable at December 31, 2017 be exercised, Trinity Biotech would have to issue 3,268,707 additional “A”
Ordinary Shares (817,177 ADSs). On the basis of 96,162,410 “A” Ordinary Shares outstanding at December 31, 2017, this
would effectively dilute the ownership interest of the existing shareholders by approximately 3%.
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It could be difficult for US holders of ADSs to enforce any securities laws claims against Trinity Biotech, its officers or directors in
Irish Courts.
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At present, no treaty exists between the United States and Ireland for the reciprocal enforcement of foreign judgments. The laws
of Ireland do however, as a general rule, provide that the judgments of the courts of the United States have in Ireland the same
validity as if rendered by Irish Courts. Certain important requirements must be satisfied before the Irish Courts will recognise
the United States judgment. The originating court must have been a court of competent jurisdiction, the judgment may not be
recognised if it is based on public policy, was obtained by fraud or its recognition would be contrary to Irish public policy. Any
judgment obtained in contravention of the rules of natural justice will not be enforced in Ireland.
Our inability to manufacture products in accordance with applicable specifications, performance standards or quality
requirements could adversely affect our business.
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The materials and processes used to manufacture our products must meet detailed specifications, performance standards and
quality requirements to ensure our products will perform in accordance with their label claims, our customers’ expectations and
applicable regulatory requirements.
As a result, our products and the materials used in their manufacture or assembly undergo regular inspections and quality
testing. Factors such as defective materials or processes, mechanical failures, human errors, environmental conditions, changes
in materials or production methods by our vendors, and other events or conditions could cause our products or the materials
used to produce or assemble our products to fail inspections and quality testing or otherwise not perform in accordance with our
label claims or the expectations of our customers.
Any failure or delay in our ability to meet the applicable specifications, performance standards, quality requirements or
customer expectations could adversely affect our ability to manufacture and sell our products or comply with regulatory
requirements. These events could, in turn, adversely affect our revenues and results of operations.
•
•
Compliance with regulations governing public company corporate governance and reporting is complex and expensive.
•
Many laws and regulations impose obligations on public companies, which have increased the scope, complexity and cost of
corporate governance, reporting and disclosure practices. Our implementation of certain aspects of these laws and regulations
has required and will continue to require substantial management time and oversight and may require us to incur significant
additional accounting and legal costs. We continually evaluate and monitor developments with respect to new and proposed
rules and cannot predict or estimate the ultimate amount of additional costs we may incur or the timing of such costs. These
laws and regulations are also subject to varying interpretations, in many cases due to their lack of specificity, and as a result,
their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could
result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure
and governance practices. Although we are committed to maintaining high standards of corporate governance and public
disclosure, if we fail to comply with any of these requirements, legal proceedings may be initiated against us, which may
adversely affect our business.
Failure to achieve our financial and strategic objectives could have a material adverse impact on our business prospects.
•
As a result of any number of risk factors identified herein, no assurance can be given that we will be successful in implementing
our financial and strategic objectives. In addition, the funds for research, clinical development and other projects have in the past
come primarily from our business operations. If our business slows and we have less money available to fund research and
development and clinical programs, we will have to decide at that time which programs to cut, and by how much. Similarly, if
adequate financial, personnel, equipment or other resources are not available, we may be required to delay or scale back our
business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if
our technology, product, clinical and market development efforts are unsuccessful or delayed.
Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material
adverse effect on our business and prospects.
•
19
We may require future additional capital.
•
Our future liquidity and ability to meet our future capital requirements will depend on numerous factors, including, but not
limited to, the following:
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The costs and timing of expansion of sales and marketing activities;
The timing and success of the commercial launch of new products;
The extent to which we gain or expand market acceptance for existing, new or enhanced products;
The costs and timing of the expansion of our manufacturing capacity;
The success of our research and product development efforts;
The time, cost and degree of success of conducting clinical trials and obtaining regulatory approvals;
The magnitude of capital expenditures;
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• Changes in existing and potential relationships with distributors and other business partners;
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The costs involved in obtaining and enforcing patents, proprietary rights and necessary licenses;
The costs and liability associated with patent infringement or other types of litigation;
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• Competing technological and market developments; and
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The scope and timing of strategic acquisitions.
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If additional financing is needed, we may seek to raise funds through the sale of equity or other securities or through bank
borrowings. There can be no assurance that financing through the sale of securities, bank borrowings or otherwise will be
available to us on satisfactory terms, or at all.
Investor confidence and share value may be adversely impacted if we and/or our independent registered public accounting firm
conclude that our internal control over financial reporting is not effective.
•
As directed by the Sarbanes-Oxley Act of 2002, we are required to include a report in our Annual Reports on Form 20-F that
contains an assessment by management of the effectiveness of our internal control over financial reporting. In addition, our
independent registered public accounting firm must report on the effectiveness of these internal controls.
• We expect that our internal controls will continue to evolve as our business activities change. Although we seek to diligently
•
and vigorously review our internal control over financial reporting in an effort to ensure compliance with the Section 404
requirements, any control system, regardless of how well designed, operated and evaluated, can provide only reasonable, not
absolute, assurance that its objectives will be met. In addition, the overall quality of our internal controls may be affected by the
internal control over financial reporting implemented by any business we acquire and our ability to assess and successfully
integrate the internal controls of any such business.
If, during any year, our independent registered public accounting firm is not satisfied with our internal control over financial
reporting or the level at which our controls are documented, designed, operated, tested or assessed, then it may issue a report
that is adverse. We also could conclude that our internal control over financial reporting is not effective. These events could
result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial
statements and effectiveness of our internal controls, which ultimately could negatively impact the market price of our common
stock.
The large amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in
the future.
• We regularly review our long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and
acquired indefinite life intangible assets are subject to impairment review on an annual basis and whenever potential impairment
indicators are present. Other long-lived assets are reviewed when there is an indication that an impairment may have occurred.
The amount of goodwill and identifiable intangible assets on our consolidated balance sheet is US$65 million (2016: US$87
million). In 2017, we recorded total impairment charges of US$42 million (2016: US$48 million). We may record further
significant impairment charges in the future if there are changes in market conditions, a significant reduction in share price or
other changes in the future outlook. In addition, we may from time to time sell assets that we determine are not critical to our
strategy or execution. Future events or decisions may lead to asset impairments and/or related charges. Certain non-cash
impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business
environment. Any significant impairment charges could have a material adverse effect on our results of operations.
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Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.
•
To the extent that we or our strategic partners fail to maintain a high quality level of service and support for diagnostic products,
there is a risk that the perceived quality of our products will be diminished in the marketplace. Likewise, we may fail to provide
the level, quantity or quality of service expected by the marketplace. This could result in slower adoption rates and lower than
anticipated utilisation of our products which could have a material adverse effect on our business, financial condition and results
of operations.
Consolidation of our customers or the formation of group purchasing organisations could result in increased pricing pressure that
could adversely affect our operating results.
•
The health care industry has undergone significant consolidation resulting in increased purchasing leverage for customers and
consequently increased pricing pressures on our business. Additionally, some of our customers have become affiliated with
group purchasing organisations. Group purchasing organisations typically offer members price discounts on laboratory supplies
and equipment if they purchase a bundled group of one supplier’s products, which results in a reduction in the number of
manufacturers selected to supply products to the group purchasing organization and increases the group purchasing
organization’s ability to influence its members’ buying decisions. Further consolidation among customers or their continued
affiliation with group purchasing organizations may result in significant pricing pressures and correspondingly reduce the gross
margins of our business or may cause our customers to reduce their purchases of our products, thereby adversely affecting our
business, prospects, operating results or financial condition.
We may be unable to protect or obtain proprietary rights that we utilise or intend to utilise.
•
In developing and manufacturing our products, we employ a variety of proprietary and patented technologies. In addition, we
have licensed, and expect to continue to license, various complementary technologies and methods from academic institutions
and public and private companies. We cannot provide any assurance that the technologies that we own or license provide
protection from competitive threats or from challenges to our intellectual property. In addition, we cannot provide any
assurances that we will be successful in obtaining licenses or proprietary or patented technologies in the future, or that licenses
granted to us by third parties will not be granted to other third parties who could potentially compete with us.
Filing, prosecuting and defending patents covering our current and future products throughout the world would be prohibitively
expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their
own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but
where patent enforcement is not as strong as that in the United States. These products may compete with our products in
jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property
rights may not be effective or sufficient to prevent them from so competing.
•
The scope of the patent protection we obtain may not be sufficiently broad to compete effectively in our markets; our patent
applications could be rejected or the existing patents could be challenged; and trade secrets and confidential know-how could be
obtained by competitors.
•
Trinity Biotech currently owns 7 U.S. patents with remaining patent lives varying from eight months to 15 years.
• We may fail to identify patentable aspects of our research and development output before it is too late to obtain patent
protection. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our
current products or any future products in the United States or in other foreign countries. There is no assurance that all of the
potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or
prevent a patent from issuing from a pending patent application.
• We can provide no assurance that third parties will not challenge the validity, enforceability or scope of the patents Trinity
Biotech may apply for, or obtain, which may result in such patents being narrowed, invalidated, or held unenforceable. Any
successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for
the successful commercialization of any products covered by those patents.
Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product under patent
protection could be reduced. We can provide no assurance that our patents will continue to be commercially valuable.
Trade secrets and confidential know-how are important to our scientific and commercial success. Although we seek to protect
our proprietary information through confidentiality agreements and other contracts, we can provide no assurance that others will
not independently develop the same or similar information or gain access to our proprietary information.
•
21
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or
eliminated for non-compliance with these requirements.
•
Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Organization
(“USPTO”) and other foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign
national or international patent agencies require compliance with a number of procedural, documentary, fee payment and other
similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a
late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in
abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant
jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to,
failure to timely file national and regional stage patent applications based on our international patent application, failure to
respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalise and submit formal
documents. If we or our licensors fail to maintain the patents and patent applications covering our current or future products, our
competitors might be able to enter the market, which would have an adverse effect on our business.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
•
Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents
could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have
licensed or that we might obtain in the future.
For example, the United States has enacted and implemented wide-ranging patent reform legislation, which could increase the
uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defence of our issued
patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The
Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the
way patent applications are prosecuted and may also affect patent litigation. The United States Patent Office recently developed
new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent
law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16,
2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However,
the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defence of our issued patents, all of which could have an adverse effect on our business and
financial condition.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent
protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to
increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained.
•
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Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
Litigation over intellectual property rights is prevalent in the diagnostic industry, including patent infringement lawsuits,
•
interferences, derivation and administrative law proceedings, inter party review, and post-grant review before the USPTO, as
well as oppositions and similar processes in foreign jurisdictions.
As the market for diagnostics continues to grow and the number of participants in the market increases, we may increasingly be
subject to patent infringement claims. It is possible that a third-party may claim infringement against us. For example, because
patent applications can take many years to issue, there may be currently pending patent applications which may later result in
issued patents that our products may infringe. Defence of these claims, regardless of their merit, would involve substantial
litigation expense and would be a substantial diversion of managerial and financial resources from our business. Parties making
claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialise one or more of our products. The pendency of any litigation may cause our distributors and customers to reduce
or terminate purchases of our products. If found to infringe, we may have to pay substantial damages, including treble damages
and attorneys’ fees for wilful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected
products, which may be impossible or require substantial time and monetary expenditure.
Any substantial loss resulting from such a claim could cause our revenues to decrease and have a material adverse affect on our
profitability, and the damage to our reputation in the industry could have a material adverse affect on our business.
22
•
If we need to obtain a license as a result of litigation, we cannot predict whether any such license would be available at all or
whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to
obtain licenses from third parties to advance our research or allow commercialisation of our products. We may fail to obtain any
of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and
commercialise one or more of our products, which could harm our business significantly.
We may be involved in lawsuits to enforce our patents, the patents of our licensors or our other intellectual property rights, which
could be expensive, time consuming and unsuccessful.
•
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights.
To counter infringement or unauthorised use, we may be required to file legal claims, which can be expensive and time-
consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not
cover the technology in question. An adverse result in any litigation or defence proceedings could put one or more of our patents
at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a
claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our
patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory
requirements, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant
material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also
raise similar validity claims before the USPTO in post-grant proceedings such as ex parte re-examinations, inter partes review,
or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside
the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
• We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during
prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the
defence of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity
or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future
products. Such a loss of patent protection could harm our business.
• We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in
countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in
litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings
to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our
management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is
a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could
also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our ordinary shares.
•
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Our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based
attacks, security breaches or privacy violations is critical to the success of our business.
• We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit
and store electronic information, including personal information of our customers. Security breaches of this infrastructure,
including physical or electronic break-ins, computer viruses, malware attacks by hackers and similar breaches, can cause all or
portions of our websites to be unavailable, create system disruptions, shutdowns, erasure of critical data and software or
unauthorised disclosure of confidential information. We invest in security technology to protect our data against risks of data
security breaches and cyber-attacks and we have implemented solutions, processes, and procedures to help mitigate these risks,
such as encryption, virus protection, security firewalls and comprehensive information security and privacy policies. However,
despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or
breached due to employee error, malfeasance or other disruptions. The age of our information technology systems, as well as the
level of our protection and business continuity or disaster recovery capability, varies from site to site, and there can be no
guarantee that any such plans, to the extent they are in place, will be effective. In addition, a security breach or privacy violation
that leads to disclosure of consumer information (including personally identifiable information or protected health information)
could harm our reputation, compel us to comply with disparate state breach notification laws and otherwise subject us to liability
under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent further security
breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, we may be
subject to legal claims or proceedings, or we may suffer loss of reputation, financial loss and other regulatory penalties because
of lost or misappropriated information, including sensitive consumer data, which could have a material adverse impact on our
business, financial condition and results of operations. While we currently expend resources to protect against cyber-attacks and
security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques,
and we may need to expend additional resources to continue to protect against potential security breaches or to address problems
caused by such attacks or any breach of our safeguards. In addition, a data security breach could distract management or other
key personnel from performing their primary operational duties.
In addition, the interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere
are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is
inconsistent with our data practices. If so, this could result in government-imposed fines or orders requiring that we change our
data practices, which could have an adverse effect on our business. Complying with these various laws could cause us to incur
substantial costs or require us to change our business practices in a manner adverse to our business.
•
Reductions in government funding and research budgets could adversely affect our business and financial results.
• We sell our products into the public health market, which consists of state, county and other governmental public health
agencies, community based organisations, service organisations and similar entities. Many of these customers depend to a
significant degree on grants or funding provided by governmental agencies to run their operations including programs that use
our products. In international markets, we often sell our products to parties funded by such agencies. The level of available
government grants or funding is unpredictable and may be affected by various factors including future economic conditions,
legislative and regulatory developments, political changes, civil unrest and changing priorities for research and development
activities. Any reduction or delay in government funding could cause our customers to delay, reduce or forego purchases of our
products.
24
Risks Related to Government Regulation
Changes in healthcare regulation could affect our revenues, costs and financial condition.
•
•
•
In the United States in recent years, there have been numerous initiatives at the federal and state level for comprehensive
reforms affecting the payment for, the availability of and reimbursement for healthcare services. These initiatives have ranged
from proposals to fundamentally change federal and state healthcare reimbursement programs, including providing
comprehensive healthcare coverage to the public under government-funded programs, to minor modifications to existing
programs. One example is the Patient Protection and Affordable Care Act, the Federal healthcare reform law enacted in 2010
(the “Affordable Care Act”). Similar reforms may occur internationally.
Legislative and regulatory bodies are likely to continue to pursue healthcare reform initiatives in many forms and may continue
to reduce funding in an effort to lower overall federal healthcare spending. The U.S. government recently enacted legislation
that eliminated what is known as the “individual mandate” under the Affordable Care Act and may enact other changes in the
future. The ultimate content and timing of any of these types of changes in other healthcare reform legislation and the resulting
impact on us are impossible to predict. If significant reforms are made to the healthcare system in the U.S., or in other
jurisdictions, those reforms may increase our costs or otherwise have an adverse effect on our financial condition and results of
operations.
The Affordable Care Act imposes a 2.3% excise tax on certain transactions, including U.S. sales of many medical devices,
which includes domestic sales of certain of our products. This new tax became effective in January 2013. However, the
Consolidated Appropriations Act of 2016, which was enacted late 2015, suspended the tax beginning January 1, 2016, and this
suspension was recently extended until December 31, 2019. It is unclear whether and to what extent this tax will impact our
business, if and when the suspension is lifted.
Tax matters, including disagreements with taxing authorities, the changes in corporate tax rates and imposition of new taxes could
impact our results of operations and financial condition.
• We are subject to regular reviews, examinations, and audits by tax authorities in a number of jurisdictions across the world with
respect to our taxes. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we
have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment of
such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and
financial position.
•
A significant portion of our business is located in the U.S. and is subject to income and other taxes in the U.S. and our
operations, plans and results are affected by tax and other initiatives. On December 22, 2017, the U.S. Government enacted
comprehensive tax legislation known as the Tax Cuts and Jobs Act. This legislation makes broad and complex changes to the
U.S. tax code, including but not limited to reducing the corporate tax rate from 35% to 21%, requiring a one-time mandatory
deemed repatriation of certain deferred foreign earnings tax on and accelerating first year expensing of certain capital
expenditures. The legislation also introduces new tax laws that may affect our taxable income in 2018, which will include, but
not be limited to, a new provision designed to tax global intangible low taxed income, limitations on the deductibility of certain
executive compensation, creating a base erosion anti-abuse tax and modifying or repealing many deductions and credits. The
impact of many provisions of the Tax Cuts and Jobs Act is subject to interpretation until additional Treasury Department
guidance is issued. The ultimate impacts of the Tax Act may differ from the Company’s estimates due to changes in the
interpretations and assumptions made, as well as any forthcoming regulatory guidance. The changes to the tax code could also
affect our valuation of deferred tax assets and liabilities. Any such change in valuation could have a material impact on our
income tax expense and deferred tax balances.
25
Our laboratory business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or
future changes in, the law or regulations of the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), or those of
other state or local agencies.
•
Our laboratory operated by Immco Diagnostics Inc. is subject to CLIA, which is administered by CMS and extends federal
oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-
approved accreditation agency. CLIA is designed to ensure the quality and reliability of clinical laboratories by, among other
things, mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency
testing, patient test management, quality control, quality assurance and inspections. Laboratories must undergo on-site surveys
at least every two years, which may be conducted by the Federal CLIA program or by a private CMS approved accrediting
agency such as the College of American Pathologists, among others. The sanction for failure to comply with CLIA requirements
may be suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well
as significant fines and/or criminal penalties.
• We are also subject to regulation of laboratory operations under state clinical laboratory laws of New York and of certain other
states from where we accept specimens. State clinical laboratory laws may require that laboratories and/or laboratory personnel
meet certain qualifications, specify certain quality controls or require maintenance of certain records. For example, California
requires that we maintain a license to conduct testing in California, and California law establishes standards for our day-to-day
laboratory operations, including the training and skill required of laboratory personnel and quality control.
•
In some respects, notably with respect to qualifications of testing personnel, California’s clinical laboratory laws impose more
rigorous standards than does CLIA. Certain other states, including Florida, Maryland, New York and Pennsylvania, require that
we hold licenses to test specimens from patients residing in those states, and additional states may require similar licenses in the
future. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of
various licenses, certificates and authorisations, which could adversely affect our business and results of operations.
Item 4
Information on the Company
Trinity Biotech develops, acquires, manufactures and markets medical diagnostic products for the clinical laboratory and point-of-care
segments of the diagnostic market. These products are used to detect autoimmune, infectious and sexually transmitted diseases,
diabetes and disorders of the liver and intestine. Trinity Biotech also is a significant provider of raw materials to the life sciences and
research industries globally.
Trinity Biotech markets its portfolio of almost 850 products to customers in approximately 100 countries around the world through its
own sales force and a network of international distributors and strategic partners.
Trinity Biotech was incorporated as a public limited company (“plc”) registered in Ireland in 1992. The Company commenced
operations in 1992 and, in October 1992, completed an initial public offering of its securities in the US. The principal offices of the
Group are located at IDA Business Park, Bray, Co Wicklow, Ireland. The Group has expanded its product base through internal
development and acquisitions.
The following represents the acquisitions made by Trinity Biotech in recent years:
Acquisition of Fiomi Diagnostics AB
In 2012, the Group acquired 100% of the common stock of Fiomi Diagnostics AB (“Fiomi”) for US$12.9m.
Fiomi is a Swedish-based company which was founded to develop diagnostic tests for the point of care cardiac market. Trinity
Biotech has developed point of care tests for the cardiac markers Troponin I and BNP. The technology, which uses micro-pillar
technology, is capable of providing extremely sensitive, highly reproducible, quantitative, multiplexed results which give more
accurate results than the established point-of-care tests currently in the market.
Following the withdrawal of the FDA 510(k) submission for Troponin-I in October 2016, the company has closed the Sweden product
development and manufacturing facilities and is currently evaluating future applications for this advanced technology platform.
Acquisition of Immco Diagnostics Inc
In 2013, the Group acquired 100% of the common stock of Immco Diagnostics Inc (“Immco”) for US$32.88m.
Immco, which is headquartered in Buffalo, New York, specialises in the development, manufacture and sale of autoimmune test kits
on a worldwide basis. This product line is complemented by specialised reference laboratory services in diagnostic immunology,
pathology and immunogenetics, marketed to U.S. based hospitals and reference laboratories.
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Acquisition of Blood Bank Screening Business
In 2013, the Group acquired the blood bank screening business of Lab21 Ltd for US$7.45m.
The blood bank screening business acquired consists of a range of products for the screening of syphilis and cytomegalovirus (CMV),
and was, at the time of acquisition based in Cambridge and Newmarket, UK.
Principal Markets
The primary market for Trinity Biotech’s diagnostic products is the Americas (which consists principally of North America and South
America). During fiscal year 2017, 60% (US$59.5 million) (2016: 62% or US$61.6 million) (2015: 62% or US$62.4 million) of the
Group’s total revenues were derived from products sold in the Americas. Sales in the non-Americas (principally European, Asian and
African countries) represented 40% (US$39.6 million) of total sales for fiscal year 2017 (2016: 38% US$38.0 million) (2015: 38% or
US$37.8 million).
For a more comprehensive segment analysis please refer to Item 5, “Results of Operations” and Item 18, Note 2 to the consolidated
financial statements.
Principal Products
The brand names of the principal products of Trinity Biotech are listed below, organised first by point of use and second by
application. The trademarks and registered marks noted below are owned by Trinity Biotech.
Point-Of-Care
Infectious Diseases
UniGold™
Recombigen®
Infectious Diseases
MarDx®
MarBlot®
Haemoglobin
Premier™
Ultra2TM
Clinical Laboratory
Autoimmune
ImmuBlot™
ImmuGlo™
ImmuLisa™
OTOblot™
Clinical Chemistry
EZ™
Blood Bank Screening
Captia™
Trinity Biotech also sells raw materials to the life sciences industry and research institutes globally through its wholly owned
subsidiary, Benen Trading Ltd., trading as Fitzgerald Industries.
Trinity Biotech sells its products through its direct sales organisations in the United States, Brazil and to an extent the United
Kingdom, France and Germany and through its network of principal distributors and non-governmental bodies into approximately 100
countries globally.
Point-of-Care (“POC”)
Point-of-care refers to diagnostic tests which are carried out in the presence of the patient.
Uni-Gold™ HIV
We believe that Trinity Biotech makes a very significant contribution to the global effort to meet the challenge of human immuno-
deficiency virus, or HIV, with its principal product, Uni-Gold™ HIV. In Africa, Uni-Gold™ HIV has been used for several years in
voluntary counselling and testing centres in the sub-Saharan region where it provides a cornerstone to early detection and treatment
intervention.
In the U.S., the Centers for Disease Control (“CDC”) recommend the use of rapid tests to control the spread of HIV/AIDS. As part of
this, Uni-Gold™ HIV is used in public health facilities, hospitals and other outreach facilities.
During 2013, Trinity Biotech received approval from the FDA for a HIV-2 claim for the Uni-Gold™ Recombigen® product. The
approval increases the sales potential of the Uni-Gold™ Recombigen® product in the United States as this product can now participate
in certain health programs previously not open to it and compete more effectively in the hospital market.
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The Future of Point-Of Care at Trinity Biotech
Point-of-care is strategically key to the growth of Trinity. Central to this growth will be our new HIV Screening test, which will allow
us to enter the screening market for the first time. In Africa, the HIV testing typically involves using a rapid point-of-care test as a
screening test followed by a different rapid test as the confirmatory test. Our Uni-gold™ HIV product is the dominant confirmatory
HIV test in the African market and has been the gold standard for over 15 years. It is the confirmatory test of choice in the vast
majority of significant African countries. However, Trinity Biotech has not previously competed in the larger screening market, which
is valued at over $100 million with just a small number of market participants.
We are currently developing a new product, Trinscreen. The new product will not jeopardise our existing confirmatory business as the
Trinscreen test employs a different HIV antigen, facilitating the use of the Uni-gold HIV test as a valid confirmatory test in the same
market. Our strategy will be to leverage existing brand equity of Trinity Biotech in African markets to take market share in the
screening market. This initiative will be supported by increased sales and marketing resources in the African market. Market
opportunities for the Trinscreen product also exist in other territories.
Trinity Biotech also introduced Uni-Gold™ S. pneumoniae, Uni-Gold™ Legionella, Uni-Gold™ C. difficile and Uni-Gold™
Syphilis. All of these products are Conformité Européenne (“CE”) marked and we will concentrate on international markets.
These point-of-care products will be sold through Trinity Biotech’s sales and marketing organisation to clinical and reference
laboratories directly in the United Kingdom, France and Germany and through independent distributors and strategic partners in other
countries.
Clinical Laboratory
Trinity Biotech supplies the clinical laboratory segment of the in-vitro diagnostic market with a range of diagnostic tests and
instrumentation which detect:
Infectious diseases,
•
• Haemoglobin, haemoglobin variants and glycated haemoglobin used in monitoring diabetes, and
• Autoimmune diseases
Trinity Biotech also supplies this market with reagent products and other products through its clinical chemistry business.
Infectious Diseases
Trinity Biotech manufactures products for niche and specialised applications in infectious diseases. The products are used with patient
samples and the results generated help physicians to guide diagnosis for a broad range of infectious diseases. The key disease areas
that Trinity Biotech serves include:
•
•
•
•
•
Lyme disease,
sexually transmitted diseases, including Syphilis and Herpes simplex virus,
respiratory infections, including legionella,
Epstein Barr virus, and
other viral pathogens, including measles, mumps, toxoplasmosis, cytomegalovirus, rubella and varicella.
Trinity Biotech develops, manufactures and distributes products in enzyme-linked immunosorbent (“ELISA”), western blot (“WB”)
and cytotoxicity assay formats for the diagnosis of infectious diseases. As a complement to the product range, the automation offering
includes ELISA and western blot processors.
The vast majority of the infectious diseases product line of Trinity Biotech is FDA cleared for sale in the United States and CE marked
in Europe. Products are sold in approximately 100 countries, with the focus on the Americas, Europe and Asia. The infectious disease
products are sold through the sales and marketing organisation of Trinity Biotech to clinical and reference laboratories directly in the
U.S. and U.K. and through independent distributors and strategic partners in other countries.
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Diabetes and haemoglobinopathies
Trinity Biotech manufactures products for in-vitro diagnostic testing for haemoglobin A1c (“HbA1c”) used in the monitoring and
diagnosis of diabetes, as well identifying those who are at a high risk of developing diabetes (pre-diabetic). The Premier Hb9210 uses
patented boronte affinity technology to test for HbA1c which is a measure of a patient’s average blood sugar control over the last two
to three months. It is a highly accurate biomarker available for the diagnosis of diabetes and is a strong indicator of a diabetic’s
glycemic control. HbA1c is also used to identify those at risk of becoming diabetic; often referred to as impaired glucose tolerance.
Trinity Biotech manufactures its own A1c instrument, the Premier Hb9210, which was launched in Europe and obtained FDA
approval in late 2011. In Europe, Trinity Biotech distributes Premier Hb9210 through its partner Menarini Diagnostics. In the USA
and Brazil, Trinity Biotech sells the Premier Hb9210 through its direct sales organisation. In the rest of the world, principally Asia, we
sell the Premier Hb9210 through a network of distributors. The Premier’s unique features, cost structure and core technology enables
it to compete in most economies and settings.
Trinity Biotech also develops and commercialises products for haemoglobin variants, primarily through the Ultra2 instrument. This is
used for the detection of haemoglobinapothies. Haemoglobinapothies are genetic defects that result in abnormal structure of the
haemoglobin molecule. Haemoglobinapathies include sickle-cell diseases, alpha and beta thalassemia and are amongst the most
common genetic disorders in the world.
Trinity Biotech launched Premier Resolution, its next generation Haemoglobinapothy Analyzer in June 2016. The Premier Resolution
was launched in Europe and the Middle East after undergoing rigorous and successful field trial. In 2018 the Resolution will be
introduced in the USA with FDA approval expected during the year. The Resolution uses an internally developed column as well as
state of the art hardware innovations in order to provide unparalleled detection of variants. It is a best in class analyser that will enable
Trinity to expand upon its leading position as a key supplier to this highly specialised segment.
The point-of-care segment of the HbA1c market is addressed by the Tri-stat system. The Tri-stat offers rapid, precise analysis in a
simple and highly cost effective manner. Using boronate affinity technology and a two phase optical system, three samples can be
analysed simultaneously and all three results reported in just 10 minutes. In 2018, a new, second generation Tri-stat analyser will be
launched outside of the US market.
There is an increasing trend towards laboratory and workstation consolidation. This is happening for a number of reasons, including
labour cost constraints, complete information integration and a rapid migration towards Point of Care and/or Total Laboratory
Automation (TLA). Trinity Biotech is launching a TLA solution by incorporating the Premier instrument into the FlexLab track
system. This will allow the company to penetrate the higher-volume market segment.
Autoimmune Diseases
Autoimmune diseases are diseases that involve immune responses of a body against its own cells and tissues.
In 2013, Trinity Biotech acquired Immco Diagnostics, an autoimmunity company known for novel assay development and impactful
contributions to autoimmune disease diagnostic research.
Immco develops, manufactures and distributes products in the following formats for diagnosis of autoimmune diseases:
•
Immunofluorescence Assay (“IFA”),
Enzyme-linked immunosorbent (“ELISA”),
•
• Western Blot (“WB”) and
•
Line immunoassay (“LIA”).
The Immco products are a seamless fit for the instrumentation platforms that Trinity Biotech continues to market for ELISA and WB
assays. The majority of Immco’s product line is FDA cleared for sale in the U.S. and CE marked in Europe.
The Immco product line addresses the high growth, lower throughput, speciality autoimmune segment, where competition is limited.
The principal autoimmune conditions in this segment are rheumatoid arthritis, vasculitis, lupus, celiac and Crohn’s disease, ulcerative
colitis, neuropathy, Hashimoto’s disease and Grave’s disease.
The Immco products are sold through Trinity Biotech’s sales and marketing organisation to clinical and reference laboratories directly
in the U.S. and via distributors in other countries. Menarini Diagnostics, a European market leader in autoimmune testing, distributes
Immco products in the key European markets.
29
The diagnostic product line is complemented by Immco’s New York state licensed reference laboratory offering specialised services
in diagnostic immunology, pathology and immunogenetics, and is marketed to U.S.-based reference laboratories and hospitals.
Clinical Chemistry
The speciality clinical chemistry business of Trinity Biotech includes reagent products such as ACE, bile acids, lactate, oxalate and
glucose-6-phosphate dehydrogenase (“G6PDH”) that are clearly differentiated in the marketplace. These products are suitable for both
manual and automated testing and have proven performance in the diagnosis of many disease states from liver and kidney disease to
G6PDH deficiency which is an indicator of haemolytic anaemia.
Blood Bank Screening
Trinity Biotech’s blood bank screening business was acquired from Lab21 Ltd in July 2013. The business unit manufactures a number
of products to screen donated blood for transfusion-transmissible infections.
The World Health Organisation estimates that there were 107 million blood donations in 2011 and half of these were within high
income countries. In these countries it is mandatory to screen for HIV, HBV, HCV and Syphilis by nucleic acid or immunoassay
testing and the WHO recommends testing for other pathogens (e.g. CMV, chagas and HTLV) based on territory.
Trinity Biotech manufactures enzyme-linked immunosorbent (“ELISA”), for the detection of Syphilis and CMV. These products are
sold through distributor sales channels and are manufactured under original equipment manufacturer agreements for other major third
party diagnostic companies. The business is not currently operating in the United States.
Sales and Marketing
Trinity Biotech sells its product through its own direct sales force in the United States. Our sales team in the United States is
responsible for marketing and selling the Trinity Biotech range of point-of-care, infectious diseases, Haemoglobins, autoimmune and
clinical chemistry products.
Through its international sales and marketing organisation, which is located in Ireland, Trinity Biotech sells:
•
Its Clinical Chemistry product range directly to hospitals and laboratories in Germany and France;
Infectious Diseases and Clinical Chemistry product ranges directly to hospitals and laboratories in the UK; and
•
• All product lines through independent distributors and strategic partners in a further 100 countries.
Competition
The diagnostic industry is very competitive. There are many companies, both public and private, engaged in the sale of medical
diagnostic products and diagnostics-related research and development, including a number of well-known pharmaceutical and
chemical companies. Competition is based primarily on product reliability, customer service and price. Innovation in the market is
rare but significant advantage can be made with the introduction of new disease markers or innovative techniques with patent
protection.
The Group’s competition includes several large companies such as, but not limited to: Abbott Diagnostics, Arkray, Bio-Rad, Diasorin
Inc., Johnson & Johnson, OraSure Technologies Inc., Roche Diagnostics, Siemens (from the combined acquisitions of Bayer, Dade-
Behring and DPC), Thermo Fisher and Tosoh.
Patents and Licences
Patents
Many of Trinity Biotech’s tests are not protected by specific patents, due to the significant cost of putting patents in place for Trinity
Biotech’s wide range of products. However, Trinity Biotech believes that substantially all of its tests are protected by proprietary
know-how, manufacturing techniques and trade secrets.
From time-to-time, certain companies have asserted exclusive patent, copyright and other intellectual property rights to technologies
that are important to the industry in which Trinity Biotech operates. In the event that any of such claims relate to its planned products,
Trinity Biotech intends to evaluate such claims and, if appropriate, seek a licence to use the protected technology. There can be no
assurance that Trinity Biotech would, firstly, be able to obtain licences to use such technology or, secondly, obtain such licences on
satisfactory commercial terms. If Trinity Biotech or its suppliers are unable to obtain or maintain a licence to any such protected
technology that might be used in Trinity Biotech’s products, Trinity Biotech could be prohibited from marketing such products. It
could also incur substantial costs to redesign its products or to defend any legal action taken against it. If Trinity Biotech’s products
should be found to infringe protected technology, Trinity Biotech could also be required to pay damages to the infringed party.
30
Licences
Trinity Biotech has entered into a number of key licensing arrangements including the following:
In 2013, Trinity Biotech entered into a licence agreement with a leading market participant, giving the Group a non-exclusive,
worldwide licence access to a significant HIV-2 patent portfolio for the purpose of making, using and selling a HIV test kit, subject to
certain limitations.
In 2012, Trinity Biotech entered into a licence agreement with the CDC in Atlanta, Georgia, United States for the rights to use
Cardiolipin and other immunoassays and mechanisms in developing and producing a Syphilis rapid test.
In 2006, Trinity Biotech entered into a new licence agreement with Inverness Medical Innovations (“IMI”) to IMI’s updated broad
portfolio of lateral flow patents, which expanded the field of use to include over the counter (“OTC”) for HIV products, thus ensuring
Trinity Biotech’s freedom to operate in the lateral flow market with its UniGold™ technology. As a platform technology, the lateral
flow licences obtained from Inverness Medical Innovations also apply to Point-of-Care tests developed at our Carlsbad facility.
In 2005, Trinity Biotech obtained a licence from the University of Texas for the use of certain Lyme disease antigens, thus enabling
the inclusion of these antigens in the Group’s Lyme diagnostic products.
On December 19, 1999 Trinity Biotech obtained a non-exclusive commercial licence from the National Institute of Health (“NIH”) in
the United States for NIH patents relating to the general method of producing HIV-1 in cell culture and methods of serological
detection of antibodies to HIV-1.
Each of the key licensing arrangements disclosed under this subheading terminates on the date expiration or adjudication of invalidity
or unenforceability of the last of the particular licensed patents covered by the respective agreement. Each licensor has the right to
terminate the arrangement in the event of non-performance by Trinity Biotech. The key licensing arrangements, with the exception of
the agreement entered into in 2013 which provides for the payment of a lump sum licence fee, require the Group to pay a royalty to
the licence holder which is based on sales of the products which utilise the relevant technology being licensed. The royalty rates vary
from 1.6% to 12.5% of sales. The total amount paid by Trinity Biotech under key licensing arrangements in 2017 was US$709,000
(2016: US$516,000).
Government Regulation
The research, development, preclinical and clinical testing, as well as the manufacture, labelling, marketing, sales, record-keeping,
advertising, distribution, and promotion of Trinity Biotech’s products are subject to extensive and rigorous government regulation in
the United States and in other countries in which Trinity Biotech’s products are sought to be marketed.
The process of obtaining authorisation to market our products varies, depending on the product categorisation and the country, from
merely notifying the authorities of intent to sell, to lengthy formal approval procedures which often require detailed laboratory and
clinical testing and other costly and time-consuming processes. The main regulatory bodies which require extensive clinical testing
are the FDA in the United States, the Health Product Regulatory Authority (as the authority over Trinity Biotech in Europe) and
Health Canada.
The process in each country varies considerably depending on the nature of the test, the perceived risk to the user and patient, the
facility at which the test is to be used and other factors. As 60% of Trinity Biotech’s 2017 revenues were generated in the Americas
(with a large concentration of this in the United States) and as the United States represents a substantial proportion of the worldwide
diagnostics market, an overview of FDA regulation has been included below.
Food and Drug Administration
All of our products sold in the United States are medical devices subject to the Federal Food, Drug, and Cosmetic Act (“FDCA”), as
implemented and enforced by the U.S. Food and Drug Administration (“FDA”). Certain products sold in the United States require
FDA clearance to market under Section 510(k) of the FDCA. Other products sold in the United States require premarket approval
(“PMA”) to market.
31
Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or
other regulatory authorities, which may result in sanctions including, but not limited to:
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
unanticipated expenditures to address or defend such actions
customer notifications for repair, replacement, refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
operating restrictions;
withdrawing 510(k) clearances or PMA approvals that have already been granted;
refusal to grant export approval for our products; or
criminal prosecution.
The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical products
distributed domestically or exported internationally are safe and effective for their intended uses:
product design, development and manufacture;
product safety, testing, labeling and storage;
record keeping procedures;
product marketing, sales and distribution; and
post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or
device malfunctions and repair or recall of products.
FDA premarket clearance and approval requirements
Access to U.S. Market. Each medical device that Trinity Biotech may wish to commercially distribute in the U.S. will require either
pre-market notification (more commonly known as 510(k)) clearance or approval of a pre-market approval (“PMA”) application prior
to commercial distribution, unless specifically exempt. Under the FDCA, medical devices are classified into one of three classes --
Class I, Class II or Class III -- depending on the degree of risk associated with each medical device and the extent of control needed to
ensure safety and effectiveness. Class I devices are those for which safety and effectiveness can be assured by adherence to FDA’s
general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA's Quality System
Regulation ("QSR"), facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-
misleading labeling, advertising, and promotional materials (the “General Controls”). Some Class I devices also require premarket
clearance by the FDA through the 510(k) premarket notification process described below.
Class II devices are subject to FDA’s general controls, and any other special controls as deemed necessary by FDA to ensure the
safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished through the
510(k) premarket notification process. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to
user fees.
Devices deemed by the FDA to pose the greatest risk, such as life sustaining, life-supporting or implantable devices, or devices
deemed not substantially equivalent to a previously 510(k)-cleared device are categorised as Class III, requiring approval of a PMA.
510(k) Clearance Pathway. When a 510(k) clearance is required, Trinity Biotech must submit a pre-market notification
demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device, a device that was in
commercial distribution before May 28, 1976 for which the U.S. Food and Drug Administration has not yet called for the submission
of pre-market approval applications, or is a device that has been reclassified from Class III to either Class II or I. By regulation, the
FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As a practical
matter, clearance may take longer. As a practical matter, the FDA’s 510(k) clearance pathway usually takes from 3 to 12 months, but
it can take longer, and clearance is never assured. Although many 510(k) pre-market notifications are cleared without clinical data, in
some cases, the U.S. Food and Drug Administration requires significant clinical data to support substantial equivalence.
In reviewing a pre-market notification, the FDA may request additional information, including clinical data, which may significantly
prolong the review process.
32
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a major change in its intended use, requires a new 510(k) clearance or could even require a PMA approval, if the change
raises complex or novel scientific issues or the product has a new intended use. The FDA requires each manufacturer to make this
determination initially, but the FDA may review any such decision and may disagree with a manufacturer’s determination.
If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the
modified device until 510(k) clearance or pre-market approval is obtained. We have modified aspects of some of our devices since
receiving regulatory clearance. Some of those modifications we believe could not significantly affect the safety or efficacy of the
device, and therefore, we believe new 510(k) clearances or pre-market approvals are not required. We have also obtained new 510(k)
clearances from the FDA for other modifications to our devices.
In the future, we may make additional modifications to our products after they have received FDA clearance or approval, and in
appropriate circumstances, determine that new clearance or approval is unnecessary.
However, the FDA may disagree with our determination and if the FDA requires us to seek 510(k) clearance or pre-market approval
for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we
obtain the required clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other
penalties. In addition, the FDA continues to evaluate the 510(k) process and may make substantial changes to industry requirements,
including which devices are eligible for 510(k) clearance, the ability to rescind previously granted 510(k)s and additional requirements
that may significantly impact the process.
PMA Approval Pathway. A device that does not qualify for 510(k) clearance generally will be placed in class III and required to
obtain PMA approval, which requires proof of the safety and effectiveness of the device to the FDA’s satisfaction for its intended use.
A PMA application must provide extensive technical, preclinical and clinical trial data and also information about the device and its
components regarding, among other things, device design, manufacturing and labelling. In addition, an advisory panel made up of
clinicians and/or other appropriate experts from outside the FDA is typically convened to evaluate the application and make
recommendations to the FDA as to whether the device should be approved.
Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’s overall
decision making process. The PMA approval pathway is more costly, lengthy and uncertain than the 510(k) clearance process. After
a premarket approval application is sufficiently complete, the FDA will accept the application and begin an in-depth review of the
submitted information. By statute, the FDA has 180 days to review the “accepted application”, although, generally, review of the
application can take between one and three years, but it may take significantly longer. During this review period, the FDA may request
additional information or clarification of information already provided. In addition, the FDA will conduct a pre-approval inspection of
the manufacturing facility to ensure compliance with Quality System Regulation, which imposes elaborate design development,
testing, control, documentation and other quality assurance procedures in the design and manufacturing process.
After approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labelling or its
manufacturing process. The FDA imposes substantial user fees for the submission and review of PMA applications. The FDA may
approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device including,
among other things, restrictions on labelling, promotion, sale and distribution and collection of long-term follow-up data from patients
in the clinical study that supported approval. Failure to comply with the conditions of approval can result in materially adverse
enforcement action, including the loss or withdrawal of the approval. New PMA applications or PMA supplements are required for
significant modifications to the manufacturing process, labelling of the product and design of a device that is approved through the
PMA process. PMA supplements often require submission of the same type of information as the original PMA application, except
that the supplement is limited to information needed to support any changes from the device covered by the original PMA application,
and may not require as extensive clinical data or the convening of an advisory panel.
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Clinical Studies
Devices that have not received FDA approval or clearance and are used in clinical trials are considered to be and must be labeled as
investigational devices. FDA regulates these products under the IDE regulations. (See 21 C.F.R. § 812.)
Per the IDE regulations, clinical studies that involve investigational devices are divided into two categories, based on the type of
device. Studies of devices considered by the agency to present a significant risk require prior approval by an Institutional Review
Board (“IRB”), informed consent of patients, and FDA approval of an IDE application, which details in part the clinical study
protocol, pursuant to 21 C.F.R. § 812. A significant risk device study is defined as a study of a device that presents a potential for
serious risk to the health, safety, or welfare of a subject and falls into at least one of the following categories: (1) it is intended as an
implant; (2) it is used in supporting or sustaining human life; (3) it is of substantial importance in diagnosing, curing, mitigating or
treating a disease, or otherwise prevents impairment of human health; or (4) it otherwise presents a potential for serious risk to the
health, safety, or welfare of a subject. See 21 C.F.R. 812.3(m). Studies of non-significant risk investigational devices require IRB
approval and informed consent; however, the sponsor of the study does not have to obtain FDA approval of an IDE application before
beginning the study.
Most clinical studies of IVDs (all of which technically involve investigational use only (“IUO”) devices) are exempted from the IDE
regulation, so long as the IUO device and the study meet certain regulatory criteria. Specifically, devices are exempt from IDE
requirements if they are intended for IUO and:
•
•
•
•
•
Are noninvasive;
Do not require an invasive sampling procedure that poses a significant risk;
Do not introduce energy into a subject by design or intention;
Are not to be used as a diagnostic procedure without confirmation of the diagnosis by another medically established
diagnostic product or procedure; and
Comply with the labeling requirements for IUO devices, as outlined in 21 C.F.R. § 812.2(c)(3).
If an IUO device does not meet all the requirements for exemption, studies involving that IUO device would be subject to the IDE
regulations. The majority of our products are exempt from the IDE regulation. However, we are required to have IRB approval prior
to and during our clinical trials and must obtain informed consent from study participants.
Post-market Regulation
After the FDA permits a device to enter commercial distribution, numerous regulatory requirements apply. These include:
product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
Quality System Regulation, (“QSR”), which requires manufacturers, including third-party manufacturers, to follow
stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the
manufacturing process;
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label
use or indication;
clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major
change in intended use of one of our cleared devices;
approval of product modifications that affect the safety or effectiveness of one of our approved devices;
medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if
their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would
likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to
recur;
post-approval restrictions or conditions, including post-approval study commitments;
post-market surveillance regulations, which apply when necessary to protect the public health or to provide
additional safety and effectiveness data for the device;
the FDA's recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from
the market a product that is in violation of governing laws and regulations;
regulations pertaining to voluntary recalls; and
notices of corrections or removals.
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We have registered our facilities with the FDA as medical device manufacturers. The FDA has broad post-market and regulatory
enforcement powers. We are subject to announced and unannounced inspections by the FDA to determine our compliance with the
QSR and other regulations and these inspections may include the manufacturing facilities of our suppliers. If the FDA finds any
failure to comply, the agency can institute a wide variety of enforcement actions, ranging from a public warning letter to more severe
sanctions such as fines, injunctions, and civil penalties; recall or seizure of products; the issuance of public notices or warnings;
operating restrictions, partial suspension or total shutdown of production; refusing requests for 510(k) clearance or PMA approval of
new products; withdrawing 510(k) clearance or PMA approvals already granted; and criminal prosecution.
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade
Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of
other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection
statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to
advertising claims. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it
could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the
issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal,
state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute
promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws
prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be
impaired.
Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a
risk of injury or are otherwise defective. Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our
device would cause serious adverse health consequences or death.
Unanticipated changes in existing regulatory requirements or adoption of new requirements could have a material adverse effect on
the Group. Any failure to comply with applicable QSR or other regulatory requirements could have a material adverse effect on the
Group’s revenues, earnings and financial standing.
There can be no assurances that the Group will not be required to incur significant costs to comply with laws and regulations in the
future or that laws or regulations will not have a material adverse effect upon the Group’s revenues, earnings and financial standing.
Clinical Laboratory Improvement Amendments of 1988, (“CLIA”)
Purchasers of Trinity Biotech’s clinical diagnostic products and our reference laboratory in the United States may be regulated under
The Clinical Laboratory Improvements Amendments of 1988 and related federal and state regulations. CLIA is intended to ensure the
quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel
qualifications, administration and participation in proficiency testing, patient test management, quality control, quality assurance and
inspections. The regulations promulgated under CLIA established three levels of diagnostic tests (“waived”, “moderately complex”
and “highly complex”) and the standards applicable to a clinical laboratory depend on the level of the tests it performs. Laboratories
performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests.
In addition, we and our customers are required to meet certain laboratory licensing requirements for states with regulations beyond
CLIA. For more information on state licensing requirements, see the sections entitled “Government Regulation – New York
Laboratory Licensing” and “Government Regulation – Other States’ Laboratory Licensing.”
Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of
providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
CLIA requires that a laboratory hold a certificate applicable to the type of laboratory examinations it performs and that it complies
with, among other things, standards covering operations, personnel, facilities administration, quality systems and proficiency testing,
which are intended to ensure that clinical laboratory testing services are accurate, reliable and timely. Laboratories must register and
list their tests with the Centers for Medicare & Medicaid Services, or CMS, the agency that oversees CLIA.
CLIA compliance and certification is also a prerequisite to be eligible to bill for services provided to governmental payor program
beneficiaries and for many private payors. CLIA is user-fee funded. Therefore, all costs of administering the program must be
covered by regulated facilities, including certification and survey costs.
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To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards.
We also may be subject to additional unannounced inspections. Laboratories performing high complexity testing are required to meet
more stringent requirements than laboratories performing less complex tests. CLIA requires full validation including accuracy,
precision, specificity, sensitivity and establishment of a reference range for any test used in clinical testing. The regulatory and
compliance standards applicable to the testing we perform may change over time and any such changes could have a material effect on
our business.
Federal Oversight of Laboratory Developed Tests and Research Use Only Products
Trinity Biotech supplies clinical laboratories with raw materials, such as reagent products, that may be used by clinical laboratories in
clinical laboratory tests, which are regulated under CLIA, as well as by applicable state laws. Although the FDA has statutory
authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement
discretion and not enforced applicable regulations with respect to laboratory developed tests, or LDTs. The FDA defines the term
“laboratory developed test” as an in vitro diagnostic test that is intended for clinical use and designed, manufactured and used within a
single laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not enforce provisions of the Food, Drug and
Cosmetic Act with respect to LDTs. In July 2014, due to the increased proliferation of LDTs for complex diagnostic testing, and
concerns with several high-risk LDTs related to lack of evidentiary support for claims and erroneous results, the FDA issued guidance
that, when finalized, would adopt a risk based framework that would increase FDA oversight of LDTs. As part of this developing
framework, FDA issued draft guidance in October 2014, informing Congress and manufacturers of LDTs of its intent to collect
information from laboratories regarding their current LDTs and newly developed LDTs through a notification process. The FDA will
use this information to classify LDTs and to prioritize enforcement of premarket review requirements for categories of LDTs based on
risk, using a public process. Specifically, FDA plans to use advisory panels to provide recommendations to the agency on LDT risks,
classification and prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.
Some products are for research use only (“RUO”), or for IUO. RUO and IUO products are not intended for human clinical use and
must be properly labeled in accordance with FDA guidance. Claims for RUOs and IUOs related to safety, effectiveness, or diagnostic
utility or that it are intended for human clinical diagnostic or prognostic use are prohibited. In November 2013, the FDA issued
guidance titled “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only - Guidance
for Industry and Food and Drug Administration Staff.” This guidance sets forth the requirements to utilize such designations, labeling
requirements and acceptable distribution practices, among other requirements. Mere placement of an RUO or IUO label on an in vitro
diagnostic product does not render the device exempt from otherwise applicable clearance, approval or other requirements. The FDA
may determine that the device is intended for use in clinical diagnosis based on other evidence, including how the device is marketed.
We cannot predict the potential effect the FDA’s current and forthcoming guidance on LDTs and IUOs/RUOs will have on our
reagents or materials that we market to the life sciences industry, and that we may use in the development of assays in our reference
laboratory. We cannot be certain that the FDA might not promulgate rules or issue guidance documents that could affect our ability to
sell these materials to the market. Should any of the reagents marketed by us to the life sciences industry and used in conducting
diagnostic services be affected by future regulatory actions, our business could be adversely affected by those actions.
We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for LDTs that
rely on our reagents or through our reference laboratory, whether through additional guidance or regulations issued by the FDA, new
enforcement policies adopted by the FDA or new legislation enacted by Congress.
Legislative proposals addressing oversight of LDTs were introduced in recent years and we expect that new legislative proposals will
be introduced from time to time. It is possible that legislation could be enacted into law or regulations or guidance could be issued by
the FDA which may result in new or increased regulatory requirements.
Product Exports
Export of products subject to 510(k) notification requirements, but not yet cleared to market, are permitted without FDA export
approval, if statutory requirements are met. Unapproved products subject to PMA requirements can be exported to any country
without prior FDA approval provided, among other things, they are not contrary to the laws of the destination country, they are
manufactured in substantial compliance with the QSR, and have been granted valid marketing authorisation in Australia, Canada,
Israel, Japan, New Zealand, Switzerland, South Africa or member countries of the European Union or of the European Economic Area
(“EEA”). FDA approval must be obtained for exports of unapproved products subject to PMA requirements if these export conditions
are not met.
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There can be no assurance that Trinity Biotech will meet statutory requirements and/or receive required export approval on a timely
basis, if at all, for the marketing of its products outside the United States.
Healthcare Reform
The Protecting Access to Medicare Act of 2014 (“PAMA”), which was signed into law on April 1, 2014, significantly alters the current
payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS. Under PAMA, beginning January 1, 2016,
clinical laboratories must report laboratory test contracted payment data for each Medicare-covered clinical diagnostic laboratory test
that it furnishes during a time period to be defined by future regulations, which we expect will cover the previous 12 months. The
reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price concessions) and the volume of
each test that was paid by each contracted private payor (including health insurance issuers, group health plans, Medicare Advantage
plans and Medicaid managed care organisations). Beginning in 2017, the Medicare payment rate for each clinical diagnostic lab test
will be equal to the weighted median amount for the test from the most recent data collection period.
Other recent laws make changes impacting clinical laboratories, many of which have already gone into effect. The Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act
(“ACA”), enacted in March 2010, among other things:
includes a reduction in the annual update factor used to adjust payments under the CLFS for inflation. This update factor reflects
the consumer price index for all urban consumers, or CPI-U, and the ACA reduces the CPI-U by 1.75% for the years 2011
through 2015. The Affordable Care Act also imposes a multifactor productivity adjustment in addition to the CPI-U, which may
further reduce payment rates;
requires certain medical device manufacturers to pay an excise tax in an amount equal to 2.3% of the price for which such
manufacturer sells its medical devices that are listed with the FDA; and
requires the coordination and promotion of research on comparative clinical effectiveness of different technologies and
procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by
providers and clinicians and initiatives to promote quality indicators in payment methodologies.
The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction (known as sequestration) to
several government programs. This included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which
went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2024
unless additional Congressional action is taken.
Further, in February 2012, the Middle Class Tax Relief and Job Creation Act of 2012 was passed, which, among other things, reduced
by 2% the 2013 Medicare CLFS and rebased payments at the reduced rate for subsequent years. Overall, when adding this 2%
reduction to the ACA’s 1.75% reduction to the update factor and the productivity adjustment, the payment rates under the CLFS
declined by 2.95% and 0.75% for 2013 and 2014, respectively.
This reduction does not include the additional sequestration adjustment. Lastly, on January 2, 2013, the American Taxpayer Relief Act
of 2012 was signed into law, which, among other things, increased the statute of limitations period for the government to recover
overpayments to providers from three to five years.
State and Federal Privacy and Security Laws
Under the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for
Economic and Clinical Health Act, or collectively, HIPAA, the U.S. Department of Health and Human Services (“HHS”), has issued
regulations to protect the privacy and security of individually identifiable health information, also known as protected health
information (“PHI”), held, used or disclosed by health care providers, such as our reference laboratory, and other covered entities.
HIPAA also regulates standardisation of data content, codes and formats used in certain electronic health care transactions and
standardisation of identifiers for health plans and providers. HIPAA also governs patient access to laboratory test reports. Effective
October 6, 2014, individuals (or their personal representatives, as applicable) have the right to access test reports directly from
laboratories and to direct that copies of those reports be transmitted to persons or entities designated by the individual. Penalties for
violations of HIPAA regulations include civil and criminal penalties.
In addition to federal privacy regulations, there are a number of state laws governing the privacy, confidentiality and security of
individually identifiable health information and other personal information that are applicable to our business. Where these state laws
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are stricter than the requirements imposed by HIPAA or impose different or additional requirements than HIPAA, we may be subject
to additional restrictions and liability above and beyond HIPAA’s requirements.
The laws governing privacy and security of health information and other personal information are rapidly changing and new laws
governing privacy and security may be adopted in the future as well. We can provide no assurance that we are or will remain in
compliance with diverse privacy and security requirements in all of the jurisdictions in which we do business or process personal
information, or in which our patients reside, or that we will be able to keep up with the cost of complying with new or additional
requirements. Failure to comply with privacy and security requirements could result in damage to our reputation, adversely affect
customer or investor confidence in us and reduce the demand for our services from existing and potential customers. In addition, we
could face litigation, penalties and regulatory actions including civil or criminal penalties and significant costs for compliance with
new or changing requirements, all of which could generate negative publicity and which could have a materially adverse effect on our
business.
Federal and State Anti-Kickback Laws
The Federal Anti-Kickback Statute makes it a felony for a person or entity, including a laboratory, to knowingly and wilfully offer,
pay, solicit or receive any remuneration, directly or indirectly, to induce or in return for either the referral of an individual or the
purchase, lease or order, or arranging for the purchase, lease or order, of items, services or other business that is reimbursable under
any federal health care program, including Medicare and Medicaid. Courts have stated that an arrangement may violate the Anti-
Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal health care program business,
regardless of whether there are other legitimate purposes for the arrangement. In addition, a person or entity does not need to have
actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The definition of "remuneration"
has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or
equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its
fair market value. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses
outside of the healthcare industry.
Recognising that the Anti-Kickback Statute may technically prohibit innocuous or beneficial arrangements within the healthcare
industry, HHS has issued a series of regulatory safe harbours. Although full compliance with these safe harbours protects health care
providers and other parties against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to
fit within a specific safe harbour does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the
federal Anti-Kickback Statute will be pursued. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based
on a cumulative review of all of its facts and circumstances. Penalties for the Federal Anti-Kickback Statute violations are severe and
include imprisonment, criminal fines, civil money penalties and exclusion from participation in federal health care programs.
Federal and state law enforcement authorities scrutinise arrangements between health care entities or providers and potential referral
sources to ensure that the arrangements are not designed as a mechanism to induce patient care referrals or induce the purchase or
prescribing of particular products or services.
The law enforcement authorities, the courts and Congress have also demonstrated a willingness to look behind the formalities of a
transaction to determine the underlying purpose of payments between health care providers or entities and actual or potential referral
sources.
Many states have also adopted statutes similar to the federal Anti-Kickback Statute, some of which apply to payments in connection
with the referral of patients for healthcare items or services reimbursed by any source, not only governmental payor programs. There
can be no assurance that our relationships with physicians, hospitals, clinical laboratories and other customers will not be subject to
investigation or challenge under such laws.
Physician Self-Referral Prohibitions
In addition to the Anti-Kickback Statute, a federal law directed at physician "self-referral," commonly known as the Stark Law,
prohibits, among other things, physicians who personally or through an immediate family member, have a financial relationship,
including an investment, ownership or compensation relationship with an entity, including clinical laboratories, from referring
Medicare patients to that entity for designated health services, which include clinical laboratory services, unless an exception applies.
In addition, the clinical laboratory is prohibited from billing for any tests performed pursuant to a prohibited referral. Recent court
cases have extended the Stark law's prohibition to referral of Medicaid patients as well. A person who engages in a scheme to
circumvent the Stark Law's referral prohibition may be fined up to US$100,000 for each such arrangement or scheme. In addition, any
person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject
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to civil monetary penalties of up to US$15,000 per bill submission, an assessment of up to three times the amount claimed and
possible exclusion from participation in federal governmental payor programs. Bills submitted in violation of the Stark Law may not
be paid by Medicare or Medicaid and any person collecting any amounts with respect to any such prohibited bill is obligated to refund
such amounts. Many states also have anti- "self-referral" and other laws that are not limited to Medicare and Medicaid referrals.
Like the Anti-Kickback Statute, the Stark Law is broad in its application to health care transactions and arrangements. Accordingly,
the Stark Law contains many exceptions, which protect certain arrangements and transactions from the Stark Law penalties. The Stark
Law is a strict liability statute, however, so intent is irrelevant, i.e., a physician's financial relationship with a laboratory must meet an
exception under the Stark Law, or the referrals are prohibited. Thus, unlike the Anti-Kickback Statute's safe harbours, if a laboratory's
financial relationship with a referring physician does not meet the requirements of a Stark Law exception, then the physician is
prohibited from making Medicare and Medicaid referrals to the laboratory and any such referrals will result in overpayments to the
laboratory and subject the laboratory to the Stark Law's penalties. Many states have also adopted statutes similar to the Stark Law,
some of which apply to payments in connection with the referral of patients for healthcare items or services reimbursed by any source,
not only governmental payor programs.
Civil Monetary Penalties Law
The federal Civil Monetary Penalties Law, among other things, prohibits the offering or giving of remuneration, including the
provision of free items and services, to a Medicare or Medicaid beneficiary that the person knows or should know is likely to
influence the beneficiary's selection of a particular supplier of items or services reimbursable by a federal or state governmental
program. Violations could lead to civil money penalties of up to $10,000 for each wrongful act, assessment of three times the amount
claimed for each item or service and exclusion from the federal healthcare programs.
Other Federal and State Fraud and Abuse Laws
In addition to the requirements discussed above, several other health care fraud and abuse laws apply to our business. For example,
provisions of the Social Security Act permit Medicare and Medicaid to exclude an entity that charges the federal health care programs
substantially in excess of its usual charges for its services. The terms "usual charge" and "substantially in excess" are ambiguous and
subject to varying interpretations.
HIPAA also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing or attempting to
execute, a scheme to defraud any healthcare benefit program, including private third-party payors, and knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection
with the delivery of or payment for healthcare benefits, items or services. Similar to the Anti-Kickback Statute, a person or entity does
not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.
A violation of each of these statutes is a felony and may result in fines, imprisonment or exclusion from governmental payor
programs. Many states have similar statutes that may carry significant penalties.
The Federal False Claims Act prohibits a person from knowingly submitting a claim, making a false record or statement in order to
secure payment or retaining an overpayment by the federal government. Actions which violate the Anti-Kickback Statute or Stark Law
also incur liability under the False Claims Act. In addition to actions initiated by the government itself, the statute’s “qui tam”
provisions authorise actions to be brought on behalf of the federal government by a private party having knowledge of the alleged
fraud.
Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the
action. If the government is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress
without the government's involvement, then the plaintiff will receive a percentage of the recovery.
When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages
sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each separate false claim, exclusion from
participation in federal health care programs and criminal penalties. Several states have also adopted comparable state false claims
act, some of which apply to all payors.
The ACA, among other things, also imposed new reporting requirements on manufacturers of certain devices, drugs and biologics for
certain payments and transfers of value by them and in some cases their distributors to physicians and teaching hospitals, as well as
ownership and investment interests held by physicians and their immediate family members.
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New York Laboratory Licensing
Because our reference laboratory located in New York receives specimens from New York State, our clinical reference laboratory is
required to be licensed under New York laws and regulations, which establish standards for, among other things:
day-to-day operation of a clinical laboratory, including training and skill levels required of laboratory personnel;
physical requirements of a facility;
equipment; and
validation and quality control.
New York law also mandates proficiency testing for laboratories licensed under New York state law, regardless of whether such
laboratories are located in New York. If a laboratory is out of compliance with New York statutory or regulatory standards, the state
regulatory agency may suspend, limit, revoke or annul the laboratory's New York license, censure the holder of the license or assess
civil money penalties. Statutory or regulatory noncompliance may result in a laboratory's operator being found guilty of a
misdemeanor under New York law. The state regulatory agency also must approve any LDT before the test is offered in New York.
Should we be found out of compliance with New York laboratory requirements, we could be subject to such sanctions, which could
harm our business. We cannot provide assurance that the state will at all times find us to be in compliance with applicable laws.
Other States' Laboratory Licensing
In addition to New York, other states including California, Florida, Maryland, Pennsylvania and Rhode Island, require licensing of
out-of-state laboratories under certain circumstances. From time to time, we may become aware of other states that require out-of-state
laboratories to obtain licensure in order to accept specimens from the state and it is possible that other states do have such
requirements or will have such requirements in the future.
Regulation outside the United States
Distribution of Trinity Biotech’s products outside of the United States is also subject to foreign regulation. Each country’s regulatory
requirements for product approval and distribution are unique and may require the expenditure of substantial time, money, and effort.
There can be no assurance that new laws or regulations will not have a material adverse effect on Trinity Biotech’s business, financial
condition, and results of operation. The time required to obtain needed product approval by particular foreign governments may be
longer or shorter than that required for FDA clearance or approval. There can be no assurance that Trinity Biotech will receive on a
timely basis, if at all, any foreign government approval necessary for marketing its products.
Organisational Structure
Trinity Biotech plc and its subsidiaries (“the Group”) is a manufacturer of diagnostic test kits and instrumentation for sale and
distribution worldwide.
Trinity Biotech’s executive offices are located at Bray, Ireland while its research and development, manufacturing and marketing
activities are principally conducted at the following:
Trinity Biotech Manufacturing Limited, based in Bray, Ireland;
•
• Clark Laboratories Inc, based in Jamestown, New York;
• MarDx Diagnostics Inc, based in Carlsbad, California;
Primus Corporation, based in Kansas City;
•
• Biopool US Inc, based in Jamestown, New York;
•
• Nova Century Scientific Inc, based in Burlington, Canada; and
•
Trinity Biotech Brazil based in Sao Paulo.
Immco Diagnostics Inc, based in Amherst and Buffalo, New York;
The Group’s distributor of raw materials for the life sciences industry, Benen Trading Ltd (trading as Fitzgerald Industries), is based in
Bray, Ireland and Acton, Massachusetts, USA.
For a more comprehensive schedule of the subsidiary undertakings of the Group please refer to Item 18, Note 32 to the consolidated
financial statements.
40
Property, Plant and Equipment
Trinity Biotech has five manufacturing sites worldwide, four in the United States. (Buffalo and Jamestown, NY, Kansas City, MO and
Carlsbad, CA), and one in Bray, Ireland. An additional facility is owned in Burlington, Canada which serves as a distribution centre
and also carries out some research and development activities.
The U.S. and Irish facilities are each FDA registered and ISO certified facilities. As part of its ongoing commitment to quality, each
Trinity Biotech facility was granted the latest ISO 13485 certification. This certification was granted by internationally recognised
notified bodies. This serves as external verification that Trinity Biotech has established an effective quality system in accordance with
an internationally recognised standard. By having an established quality system there is a presumption that Trinity Biotech will
consistently manufacture products in a controlled manner. To achieve this certification, each Trinity Biotech facility performed an
extensive review of the existing quality system and implemented any additional regulatory requirements
Trinity Biotech has entered into a number of related party transactions with JRJ Investments (“JRJ”), a partnership currently owned by
Mr O’Caoimh and Dr Walsh, directors of the Company, and directly with Mr O’Caoimh and Dr Walsh, to provide current and
potential future needs for the Group’s manufacturing and research and development facilities, located in Bray, Ireland. In November
2002, Trinity Biotech entered into an agreement for a 25 year lease with JRJ, for 15,780 square feet of offices at an annual rent of
€381,000 (US$432,000), payable from 2004. In December 2007, the Group entered into an agreement with Mr O’Caoimh and Dr
Walsh pursuant to which the Group took a lease on an additional 43,860 square foot manufacturing facility in Bray, Ireland at a total
annual rent of €787,000 (US$892,000). See Item 7 – Major Shareholders and Related Party Transactions.
Trinity Biotech USA operates from a 25,610 square foot FDA and ISO 9001 approved facility in Jamestown, New York. The facility
was purchased by Trinity Biotech USA in 1994. Additional warehousing space is also leased in Jamestown, New York at an annual
rental charge of US$172,000.
MarDx operates from two facilities in Carlsbad, California. The first facility comprises 21,436 square feet and is the subject of a five
year lease, renewed in 2015, at an annual rental cost of US$260,000. The second adjacent facility comprises 14,500 square feet and is
the subject of a three year lease, renewed in 2015, at an annual rental cost of US$187,000.
Immco Diagnostics Inc. operates from a 19,250 square foot facility and a 5,649 square foot facility in Buffalo, New York, subject to
leases expiring in 2018 and 2022. The annual rent for these facilities is US$394,000. In 2018, Immco entered into an agreement for a
15 year lease for a 31,731 square foot facility in Amherst, New York. This premise will allow for lab expansion and increased
manufacturing capability. The initial annual rent for this facility is US$405,000 rising to US$452,000 by 2029. An additional 5,120
square foot facility is owned in Burlington, Canada.
Additional office and factory space is leased by the Group in Kansas City, Missouri, Acton, Massachusetts, Sao Paulo, Brazil and
Extrema, Brazil at an annual cost of US$152,000, US$98,000, US$29,000 and US$40,000 respectively.
At present we have sufficient productive capacity to cover demand for our product range. We continue to review our level of capacity
in the context of future revenue forecasts. In the event that these forecasts indicate capacity constraints, we will either obtain new
facilities or expand our existing facilities.
In relation to products produced at our facilities – these are as follows:
Bray, Ireland – Point-of-Care/HIV, Immunofluorescence and Clinical Chemistry products are manufactured at this site.
Jamestown, New York – this site specializes in the production of Microtitre Plate EIA products for infectious diseases and auto-
immunity.
Carlsbad, California – this facility specialises in the development and manufacture of products utilising Western Blot and lateral
flow technology. Our suite of Lyme products is manufactured at this facility and our new Infectious Diseases Point-of-Care range are
manufactured at this site.
Kansas City, Missouri – this site is responsible for the manufacture of the Group’s haemoglobin range of products.
Buffalo, New York – these sites are responsible for the manufacture of autoimmune test kits and the majority of R&D activities for
Immco Diagnostics, along with its reference laboratory business.
We are in material compliance with all environmental legislation, regulations and rules applicable in each jurisdiction in which we
operate.
41
Item 4A Unresolved Staff Comments
Not applicable.
42
Operating and Financial Review and Prospects
Item 5
Operating Results
Trinity Biotech’s consolidated financial statements include the attributable results of Trinity Biotech plc and all its subsidiary
undertakings collectively. This discussion covers the years ended December 31, 2017, December 31, 2016 and December 31, 2015,
and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 20-F.
The financial statements have been prepared in accordance with IFRS both as issued by the International Accounting Standards Board
(“IASB”) and as subsequently adopted by the European Union (“EU”) (together “IFRS”). Consolidated financial statements are
required by Irish law to comply with IFRS as adopted by the EU which differ in certain respects from IFRS as issued by the
IASB. These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the
differences are relevant in the context of Trinity Biotech, the consolidated financial statements for the periods presented comply with
IFRS both as issued by the IASB and as adopted by the EU.
Trinity Biotech has availed of the exemption under SEC rules to prepare consolidated financial statements without a reconciliation to
U.S. generally accepted accounting principles (“U.S. GAAP”) as at and for the three year period ended December 31, 2017 as Trinity
Biotech is a foreign private issuer and the financial statements have been prepared in accordance with IFRS as issued by the
International Accounting Standards Board (“IASB”).
Overview
Trinity Biotech develops, manufactures and markets diagnostic test kits used for the clinical laboratory and Point-of-Care (“POC”)
segments of the diagnostic market. These test kits are used to detect infectious diseases, sexually transmitted diseases, blood disorders
and autoimmune disorders, as well as monitoring and diagnosing diabetes and haemoglobin variants. The Group markets almost 850
different diagnostic products in approximately 100 countries. In addition, the Group manufactures its own and distributes third party
infectious disease diagnostic instrumentation. Trinity Biotech, through its Fitzgerald subsidiary, is a provider of raw materials to the
life sciences industry.
Factors affecting our results
The global diagnostics market is growing due to, among other reasons, the ageing population and the increasing demand for rapid tests
in a clinical environment.
Our revenues are directly related to our ability to identify significant revenue-generating products while they are still in development
and to bring them to market quickly and effectively. Efficient and productive research and development is crucial in this environment
as we, like our competitors, search for effective and cost-efficient solutions to diagnostic problems. The growth in new technology
will almost certainly have a fundamental effect on the diagnostics industry as a whole and upon our future development.
The comparability of our financial results for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 have been impacted by
the decision to discontinue operations in Fiomi Diagnostics AB in 2016 following the withdrawal of the Troponin premarket
submission to the U.S. Food and Drug Administration (see Item 18, Note 10). The Group also realised an impairment loss in 2016 and
in 2017 as a result of the annual impairment review as at December 31, 2016 and at December 31, 2017 (see Item 18, Note 13). The
comparability of results have also been impacted by acquisitions made by the Group in one of the five years. There were no
acquisitions made in 2017, 2016, 2015 or 2014. In 2013, the Group acquired 100% of the common stock of Immco Diagnostics Inc.
Immco specialises in the development, manufacture and sale of autoimmune test kits on a worldwide basis. In 2013, the Group also
acquired the blood bank screening business of Lab21 Ltd, a UK based company. The acquired business generates revenues from
syphilis products.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information
on the Company”.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with IFRS. The preparation of these financial statements requires us to make estimates and
judgements that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities.
43
On an on-going basis, we evaluate our estimates, including those related to intangible assets, contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the critical accounting policies described below reflect our more significant judgements and estimates used in the
preparation of our consolidated financial statements.
Revenue Recognition
Goods sold and services rendered
Revenue from the sale of goods is recognised in the statement of operations when the significant risks and rewards of ownership have
been transferred to the buyer. Revenue from products is generally recorded as of the date of shipment, consistent with our typical ex-
works shipping terms. Where the shipping terms do not permit revenue to be recognised as of the date of shipment, revenue is
recognised when the Group has satisfied all of its obligations to the customer in accordance with the shipping terms.
Revenue, including any amounts invoiced for shipping and handling costs, represents the value of goods supplied to external
customers, net of discounts and excluding sales taxes.
Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the transaction
at the balance sheet date.
Revenue is recognised to the extent that it is probable that economic benefit will flow to the Group, that the risks and rewards of
ownership have passed to the buyer and the revenue can be measured. No revenue is recognised if there is uncertainty regarding
recovery of the consideration due at the outset of the transaction or the possible return of goods.
The Group leases instruments under operating and finance leases as part of its business. In cases where the risks and rewards of
ownership of the instrument pass to the customer, the fair value of the instrument is recognised as revenue at the commencement of
the lease and is matched by the related cost of sale. In the case of operating leases, revenue is recognised over the life of the lease.
Research and development expenditure
We write-off research and development expenditure as incurred, with the exception of expenditure on projects whose outcome has
been assessed with reasonable certainty as to technical feasibility, commercial viability and recovery of costs through future revenues.
Such expenditure is capitalised at cost within intangible assets and amortised over its expected useful life of 15 years, which
commences when the product is launched.
In-process research and development (“IPR&D”) is tested for impairment on an annual basis, in the fourth quarter, or more frequently
if impairment indicators are present, using projected discounted cash flow models. If IPR&D becomes impaired or is abandoned, the
carrying value of the IPR&D is written down to its revised fair value with the related impairment charge recognised in the period in
which the impairment occurs. If the fair value of the asset becomes impaired as the result of unfavourable data from any ongoing or
future clinical trial, changes in assumptions that negatively impact projected cash flows, or because of any other information regarding
the prospects of successfully developing or commercialising our programs, we could incur significant charges in the period in which
the impairment occurs. The valuation techniques utilised in performing impairment tests incorporate significant assumptions and
judgments to estimate the fair value, as described above. The use of different valuation techniques or different assumptions could
result in materially different fair value estimates.
Factors which impact our judgement to capitalise certain research and development expenditure include the degree of regulatory
approval for products and the results of any market research to determine the likely future commercial success of products being
developed. We review these factors each year to determine whether our previous estimates as to feasibility, viability and recovery
should be changed.
At December 31, 2017 the carrying value of capitalised development costs was US$34,778,000 (2016: US$46,966,000) (see Item 18,
Note 13 to the consolidated financial statements). The decrease in 2017 was mainly as a result of an impairment loss charge of
US$20,782,000. This charge was partially offset by additions of US$10,402,000 and amortisation of US$1,708,000.
44
Impairment of intangible assets and goodwill
Definite lived intangible assets are reviewed for indicators of impairment annually while goodwill and indefinite lived assets are tested
for impairment annually, either individually or at the cash generating unit level. Factors considered important, as part of an
impairment review, include the following:
•
Significant underperformance relative to expected, historical or projected future operating results;
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
•
• Obsolescence of products;
•
• Our market capitalisation relative to net book value.
Significant decline in our stock price for a sustained period; and
When we determine that the carrying value of intangibles, non-current assets and related goodwill may not be recoverable based upon
the existence of one or more of the above indicators of impairment, any impairment is measured based on our estimates of projected
net discounted cash flows expected to result from that asset, including eventual disposition. Our estimated impairment could prove
insufficient if our analysis overestimated the cash flows or conditions change in the future.
Goodwill and other intangibles are subject to impairment testing on an annual basis. The recoverable amount of each of the cash-
generating units (“CGU”) is determined based on a value-in-use computation, which is the only methodology applied by the Group
and which has been selected due to the impracticality of obtaining fair value less costs to sell measurements for each reporting period.
For the purpose of the annual impairment tests, goodwill is allocated to the relevant CGU. The impairment test performed as at
December 31, 2017 identified a total impairment loss of US$85,603,000 in six cash generating units (“CGUs”), of which
US$41,755,000 has been recorded in the 2017 financial statements. Refer to Item 18, Note 13 for further information.
The value-in-use calculations use cash flow projections based on the 2018 budget and projections for a further four years using
projected revenue and cost growth rates of between 7% and minus 20%.
At the end of the five year forecast period, terminal values for each CGU, based on a long term growth rate of 2%, are used in the
value-in-use calculations. The value-in-use represents the present value of the future cash flows, including the terminal value,
discounted at a rate appropriate to each CGU.
The key assumptions employed in arriving at the estimates of future cash flows are subjective and include projected EBITDA, net
cash flows, discount rates and the duration of the discounted cash flow model. The assumptions and estimates used were derived from
a combination of internal and external factors based on historical experience. The pre-tax discount rates used range from 15% to 26%
(2016: 13% to 36%). Post tax discount rates have been calculated using external inputs such as prevailing short and long term interest
rates, a small stock premium, a stock beta and the corporate tax rates applicable to each CGU. The discount rates reflect the risk
profile of each CGU. See Item 18, Note 13 to the consolidated financial statements for further information.
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and is particularly sensitive in
the following areas;
•
•
In the event that there was a variation of 10% in the assumed level of future growth in revenues, which would represent a
reasonably likely range of outcomes, there would be an additional impairment loss of US$835,000 at December 31, 2017.
In the event there was a 10% variation in the discount rate used to calculate the potential impairment of the carrying
values, which would represent a reasonably likely range of outcomes, there would be an additional impairment loss of
US$4,786,000 at December 31, 2017.
Allowance for slow-moving and obsolete inventory
We evaluate the realisability of our inventory on a case-by-case basis and make adjustments to our inventory provision based on our
estimates of expected losses. We write off inventory that has reached its “use-by” date and for which no further re-processing can be
performed. We also consider recent trends in revenues for various inventory items and instances where the realisable value of
inventory is likely to be less than its carrying value. Given the allowance is calculated on the basis of the actual inventory on hand at
the particular balance sheet date, there were no material changes in estimates made during 2017, 2016 or 2015 which would have an
impact on the carrying values of inventory during those periods, except as discussed below.
45
At December 31, 2017 our allowance for slow moving and obsolete inventory was US$7,543,000 which represents approximately
18.70% of gross inventory value. This compares with US$10,017,000, or approximately 23.51% of gross inventory value, at
December 31, 2016 and US$4,822,000, or approximately 12.1% of gross inventory value, at December 31, 2015 (see Item 18, Note 16
to the consolidated financial statements). The estimated allowance for slow moving and obsolete inventory as a percentage of gross
inventory has decreased between 2017 and 2016 due to the physical scrapping of obsolete inventory. In the case of raw materials and
work in progress, the size of the provision has been based on expected future production of these products. Management is satisfied
that the assumptions made with respect to future sales and production levels of these products are reasonable to ensure the adequacy of
this provision. In the event that the estimate of the provision required for slow moving and obsolete inventory was to increase or
decrease by 2% of gross inventory, which would represent a reasonably likely range of outcomes, then a change in allowance of
US$807,000 at December 31, 2017 (2016: US$852,000) (2015: US$799,000) would result.
Allowance for impairment of receivables
We make judgements as to our ability to collect outstanding receivables and where necessary make allowances for impairment. Such
impairments are made based upon a specific review of all significant outstanding receivables. In determining the allowance, we
analyse our historical collection experience and current economic trends. If the historical data we use to calculate the allowance for
impairment of receivables does not reflect the future ability to collect outstanding receivables, additional allowances for impairment of
receivables may be needed and the future results of operations could be materially affected. Given the specific manner in which the
allowance is calculated, there were no material changes in estimates made during 2017, 2016 or 2015 which would have an impact on
the carrying values of receivables in these periods. At December 31, 2017, the allowance was US$3,590,000 which represents
approximately 3.6% of Group revenues. This compares with US$3,171,000 at December 31, 2016 which represented approximately
3.2% of Group revenues and to US$2,812,000 at December 31, 2015 which represented approximately 2.8% of Group revenues. The
increase in the allowance for impairment of receivables in the year ended December 31, 2017 was due to a general deterioration in the
age of receivables. In the event that the estimate of impairment was to increase or decrease by 0.5% of Group revenues, which would
represent a reasonably likely range of outcomes, then a change in the allowance of US$496,000 at December 31, 2017 (2016:
US$498,000) (2015: US$501,000) would result.
Accounting for income taxes
Significant judgement is required in determining our worldwide income tax expense provision. In the ordinary course of a global
business, there are many transactions and calculations where the ultimate tax outcome is uncertain.
Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities,
the process of identifying items of revenue and expense that qualify for preferential tax treatment and segregation of foreign and
domestic income and expense to avoid double taxation. In addition, we operate within multiple taxing jurisdictions and are subject to
audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time for resolution.
Although we believe that our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not
be different than that which is reflected in our historical income tax provisions and accruals. Such differences could have a material
effect on our income tax provision and profit in the period in which such determination is made. Deferred tax assets and liabilities are
determined using enacted or substantively enacted tax rates for the effects of net operating losses and temporary differences between
the book and tax bases of assets and liabilities.
While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing whether
deferred tax assets can be recognised, there is no assurance that these deferred tax assets may be realisable. The extent to which
recognised deferred tax assets are not realisable could have a material adverse impact on our income tax provision and net income in
the period in which such determination is made. In addition, we operate within multiple taxing jurisdictions and are subject to audits in
these jurisdictions. These audits can involve complex issues that may require an extended period of time for resolution. In
management’s opinion, adequate provisions for income taxes have been made.
Item 18, Note 14 to the consolidated financial statements outlines the basis for the deferred tax assets and liabilities and includes
details of the unrecognised deferred tax assets at year end. The Group does not recognise deferred tax assets arising on unused tax
losses except to the extent that there are sufficient taxable temporary differences relating to the same taxation authority and the same
taxable entity which will result in taxable amounts against which the unused tax losses can be utilised before they expire.
46
Share-based payments
For equity-settled share-based payments (share options), the Group measures the services received and the corresponding increase in
equity at fair value at the measurement date (which is the grant date) using a trinomial model. Given that the share options granted do
not vest until the completion of a specified period of service, the fair value, which is assessed at the grant date, is recognised on the
basis that the services to be rendered by employees as consideration for the granting of share options will be received over the vesting
period.
The share options issued by the Group are not subject to market-based vesting conditions as defined in IFRS 2, Share-based Payment.
Non-market vesting conditions are not taken into account when estimating the fair value of share options as at the grant date; such
conditions are taken into account through adjusting the number of equity instruments included in the measurement of the transaction
amount so that, ultimately, the amount recognised equates to the number of equity instruments that actually vest. The expense in the
statement of operations in relation to share options represents the product of the total number of options anticipated to vest and the fair
value of those options; this amount is allocated to accounting periods on a straight-line basis over the vesting period.
Given that the performance conditions underlying the Group’s share options are non-market in nature, the cumulative charge to the
statement of operations is only reversed where the performance condition is not met or where an employee in receipt of share options
relinquishes service prior to completion of the expected vesting period. Share based payments, to the extent they relate to direct labour
involved in development activities, are capitalised.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised. The Group does not operate any cash-settled share-based payment schemes or share-based
payment transactions with cash alternatives as defined in IFRS 2.
Exchangeable notes and derivative financial instruments
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the host debt
instrument is recognised at the residual value of the total net proceeds of the bond issue less fair value of the embedded derivatives.
Subsequently, the host debt instrument is measured at amortised cost using the effective interest rate method.
The embedded derivatives are initially recognised at fair value and are restated at their fair value at each reporting date. The fair value
changes of the embedded derivatives are recognised in the statement of operations. See Item 18, Note 24 to the consolidated financial
statements for further information.
Impact of Recently Issued Accounting Pronouncements
The consolidated financial statements have been prepared in accordance with IFRS both as issued by the IASB and as subsequently
adopted by the EU. The IFRS applied are those effective for accounting periods beginning 1 January 2017. Consolidated financial
statements are required by Irish law to comply with IFRS as adopted by the EU which differ in certain respects from IFRS as issued
by the IASB.
These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the differences are
relevant in the context of Trinity Biotech, the consolidated financial statements for the periods presented comply with IFRS both as
issued by the IASB and as adopted by the EU. During 2017, the IASB and the International Financial Reporting Interpretations
Committee (“IFRIC”) issued additional standards, interpretations and amendments to existing standards which are effective for
periods starting after the date of these financial statements. A list of these additional standards, interpretations and amendments, and
the potential impact on the financial statements of the Group, is outlined in Item 18, Note 1(xxix).
Subsequent Events
On January 30, 2018 the Company guaranteed a 15 year lease entered into by its subsidiary Immco Diagnostics, Inc. The space,
which will be used to relocate the Diagnostic Laboratory business and increase manufacturing capacity, is 31,731 square feet located
in Amherst, New York. Rent will commence following a construction period as well as a three month free base rent period, which is
currently estimated to be in the fourth quarter of 2018. Annual rent will average US$422,000 and construction costs are expected to
be one million after the tenant improvement allowance from the landlord is applied.
There are no other matters or circumstances that have arisen since the end of the year that have significantly affected or may
significantly affect either:
•
•
•
The entity’s operations in future financial years;
The results of those operations in future financial years; or
The entity’s state of affairs in future financial years.
47
Results of Operations
Year ended December 31, 2017 compared to the year ended December 31, 2016
The following compares our results in the year ended December 31, 2017 to those of the year ended December 31, 2016 under IFRS.
Our analysis is divided as follows:
1.
2.
3.
4.
5.
Overview
Revenues
Operating Loss
Loss for the year
Discontinued operations
1. Overview
In 2017, the financial results are impacted by:
•
•
•
a non-cash impairment charge of US$41.8 million in the statement of operations relating to the carrying value of goodwill
and other intangible assets, property, plant and equipment and prepayments.
a loss on discontinued operations for the year of US$1.3 million before tax, relating to the discontinuation of our Cardiac
point-of-care operation.
certain once-off costs totalling US$1.4 million relating to a flood damage incident and a settlement of a licence royalty
dispute. See section 3, operating loss, for further details.
The following table sets forth a breakdown of impairment charges, product cull costs and the loss on discontinued operation incurred
in the current financial year:
Year ended December 31, 2017
Property, plant & equipment (Item 18, Note 12)
Goodwill and other intangible assets (Item 18,
Note 13)
Prepayments (Item 18, Note 17)
Loss for the year including write off of foreign
currency translation reserve - discontinued
operation (Item 18, Note 10)
Total loss on discontinued operation and
impairment charges and inventory
provisioning before tax
Impairment
Charges –
continuing
operations
US$’000
10,437
29,667
1,651
Discontinued
Operation
US$000
Total
US$‘000
-
-
-
10,437
29,667
1,651
1,286
-
1,286
41,755
1,286
43,041
Income tax (credit)/expense
Total loss on discontinued operation and
impairment charges after tax
(517)
323
(194)
41,238
1,609
42,847
48
Revenues in 2017 decreased from US$99.6 million in 2016 to US$99.1 million, representing a decrease of 0.5%. The revenues this
year are broadly the same as last year due to lower revenues in USA for Point-of-Care and Clinical Laboratory being almost
completely offset by higher Point-of-Care revenues in Africa, higher laboratory services in USA and higher sales of Diabetes products
globally. In relation to the latter, the level of increase would have been higher but for the impact of foreign exchange movements. In
markets where we invoice in dollars but where the local currency has weakened, we have been required to reduce our pricing in order
to preserve our competiveness.
Geographically, 60% of our sales were generated in the Americas, 27% in Africa/Asia and 13% in Europe.
The gross margin for continuing operations was 42.3% for 2017 compared to 43.7% in 2016. The reduction in gross margin is due to
the changing sales mix in terms of geography (higher sales to Asian customers for which sales prices and margins are lower) and
foreign exchange factors, including the impact of exchange rates on distributor pricing. The operating loss is US$37.7 million for the
year which compares to US$39.8 million for 2016. Excluding the impairment charge, the operating profit for 2017 is US$4.1 million,
compared to US$8.3 million in 2016. The decrease of US$4.2 million in operating profit before impairment charges items in 2017 is
mainly attributable to the lower gross profit and higher selling, general and administrative expenses.
Selling General & Administrative Expenditure (excluding impairment charges and inventory write offs) increased from US$30.4
million in 2016 to US$32.2 million for 2017, which represents an increase of 6%. The increase is mainly attributable to higher
amortisation charges and certain once-off costs totalling US$1.4 million relating to a flood damage incident and a settlement of a
licence royalty dispute.
In 2017, net financing expense was US$2.2 million compared to US$2.3 million in 2016. The decrease of US$0.1 million is mainly
attributable to the revaluation of embedded derivatives at fair value, which resulted in higher income of US$0.1 million in 2017
compared to 2016.
The loss for the year from continuing operations amounted to US$38.7 million, compared to US$38.6 million in 2016, representing a
decrease of 0.2%. Before the impact of impairment charges, the profit for 2017 from continuing operations would have been US$3.1
million.
2. Revenues
The Group’s revenues consist of the sale of diagnostic kits and related instrumentation and the sale of raw materials to the life sciences
industry. Revenues from the sale of the above products are generally recognised on the basis of shipment to customers. The Group
ships its products on a variety of freight terms, including ex-works, carriage including freight (“CIF”) and free on board (“FOB”),
depending on the specific terms agreed with customers. In cases where the Group ships on terms other than ex-works, the Group does
not recognise the revenue until its obligations have been fulfilled in accordance with the shipping terms.
No right of return exists in relation to product sales except in instances where demonstrable product defects occur. The Group has
defined procedures for dealing with customer complaints associated with such product defects as they arise.
The Group leases instruments under operating and finance leases as part of its business. In cases where the risks and rewards of
ownership of the instrument pass to the customer, the fair value of the instrument is recognised as revenue at the commencement of
the lease and is matched by the related cost of sale. In the case of operating leases of instruments which typically involve
commitments by the customer to pay a fee per test run on the instruments, revenue is recognised on the basis of customer usage of the
instruments.
49
Revenues by Product Line
Trinity Biotech’s revenues for the year ended December 31, 2017 were US$99,140,000 compared to revenues of US$99,611,000 for
the year ended December 31, 2016, which represents a decrease of US$471,000 or 0.5%. The following table sets forth selected sales
data for each of the periods indicated.
Revenues
Clinical Laboratory
Point-of-Care
Laboratory Services
Total
Year ended December 31,
2016
2017
US$’000
US$’000
73,366
16,774
9,000
99,140
74,166
16,908
8,537
99,611
% Change
(1.1%)
(0.8%)
5.4%
(0.5%)
Clinical Laboratory
Clinical Laboratory revenues decrease by US$800,000 in 2017, which represents a decrease of 1.1%. This decrease was mainly
attributable to a 14% decrease in Infectious Diseases and Clinical Chemistry revenues. These tests are used to detect infectious and
sexually transmitted diseases, and disorders of the liver and intestine. Revenues for these tests have been declining for several years,
particularly in USA but we have succeeded in partially making up for these declines by selling more to emerging markets, with China
being the largest market. The decision to cull the Bartels and Microtrak product lines in late 2016 also contributed to the decrease in
Infectious Diseases revenues in 2017. Partially offsetting these decreases were higher revenues for haemoglobin A1c testing, which
increased by 15% compared to 2016 due to the continued success of the Premier instrument and related reagents. Our sales prices
remain relatively stable in each territory, as we are unable to pass on sales price increases to our customers due to competitive factors.
Point-of-Care
Point-of-Care revenues decreased by US$134,000, which represents a reduction of 0.8%. Revenues for our Unigold HIV test were
US$15.5 million in 2017 compared to US$15.8 million in 2016. During 2017, the company maintained its position in Africa as the
designated supplier of confirmatory tests in all of the markets in which it operates. HIV revenues in Africa were the highest they have
been in the last three years. Sales prices were relatively stable during 2017 and the reduction in point-of-care revenues was due to
lower sales volumes in the Americas.
Laboratory Services
We offer laboratory testing services for autoimmune disorders from our lab in Buffalo, New York. In 2017, laboratory services
revenues increased by US$463,000. The increase in laboratory service revenues was driven by the growing demand for a wide range
of autoimmune diagnostic testing. Revenues for Sjögrens Syndrome accounts for 21% of the total revenues.
50
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
Revenues
Americas
Asia/Africa
Europe
Total
Year ended December 31,
2016
2017
US$‘000
US$‘000
59,539
27,131
12,470
99,140
61,613
25,501
12,497
99,611
% Change
(3.4%)
6.4 %
(0.2%)
(0.5%)
In the Americas, revenues decreased US$2,074,000 or 3.4% due to the continued trend of falling sales of infectious diseases tests and
HIV tests in USA. These declines were partially offset by strong growth in laboratory testing revenues from our autoimmune reference
laboratory and higher revenues from our diabetes business in Brazil, although this was dampened by the continued weakness in the
Brazilian currency.
Asia/Africa revenues increased by 6.4%, or US$1,630,000 compared to 2016. The main reasons for this were increased revenues for
Unigold HIV in Africa and haemoglobin A1c in Asia/Middle East. Unigold HIV performed strongly in 2017, maintaining its position
as the dominant confirmatory test in Africa and revenues were the highest they have been since 2014. Haemoglobin A1c revenues in
the territory were driven by strong demand for our diabetes analyser, the Premier, with Middle East being the region recording the
highest growth in the year.
In Europe, revenues decreased by US$27,000, compared to 2016. The slight decrease was due to a fall in Clinical Laboratory
revenues, in particular infectious diseases caused in part by the product cull announced in late 2016. The decrease was also partly due
to currency movements - the Sterling/US dollar exchange deteriorated by 5.5% on average in 2017 compared to 2016. These declines
were almost completely offset by increases in Haemoglobin A1c revenues and revenues from our Fitzgerald business, which sells
antibodies to the life sciences and research industries.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information
on the Company”.
3. Operating Loss – continuing operations
The following table sets forth the Group’s operating loss from continuing operations:
Revenues
Cost of sales
Gross profit
Other operating income
Research & development
SG&A expenses
Selling, general and administrative expenses - impairment
charges and inventory write-off/provision
Operating loss on continuing operations
Year ended December 31,
2016
2017
US$’000
US$’000
99,611
99,140
(56,127)
(57,250)
43,484
41,890
239
100
(5,040)
(5,657)
(30,366)
(32,246)
(41,755)
(37,668)
(48,165)
(39,848)
% Change
(0.5%)
2.0 %
(3.7%)
(58.2%)
12.2 %
6.2 %
(13.3%)
(5.5%)
51
Cost of sales and gross margin
Total cost of sales increased by US$1,123,000 from US$56,127,000 for the year ended December 31, 2016 to US$57,250,000, for the
year ended December 31, 2017, an increase of 2.0%. The gross margin of 42.3% in 2017 compares to a gross margin of 43.7% in
2016.
The decrease in gross margin in 2017 is largely attributable to the different sales mix in terms of geography. Sales to Asia are of
significantly lower margin than average. Our largest market in Asia, China is a lower price market and one in which we sell through a
distributor as opposed to in the USA where we sell directly and hence earn better margins. The other main reason for reduced margins
is foreign exchange, including the impact of exchange rates on distributor pricing.
Other operating income
In 2017, other operating income comprises income from the provision of canteen services. Other operating income in 2016 also
included property lease rental income, which ended in 2016 due to the expiration of the rental sub lease. This is the main reason other
operating income decreased by US$139,000 from US$239,000 for the year ended December 31, 2016 to US$100,000, for the year
ended December 31, 2017.
Research and development expenses (“R&D”)
Research and development expenditure recorded in the Statement of Operations increased from US$5,040,000 in 2016 to
US$5,657,000 in 2017. The increase in 2017 is mainly due to higher regulatory costs. For details of the Company’s various R&D
projects see “Research and Products under Development” below.
Selling, General & Administrative expenses (“SG&A”)
Total SG&A expenses increased by US$1,880,000 from US$30,366,000 for the year ended December 31, 2016 to US$32,246,000 for
the year ended December 31, 2017.
The following table outlines the breakdown of SG&A expenses in 2017 compared to 2016.
SG&A (excl. share-based payments and amortisation)
Share-based payments
Amortisation
Total
Year ended December 31,
2016
2017
US$’000
US$’000
28,050
893
3,303
32,246
26,044
1,349
2,973
30,366
% Change
7.7%
(33.8%)
11.1%
6.2%
Selling General & Administrative Expenditure (excluding share-based payments and amortisation)
SG&A expenses excluding share-based payments and amortisation increased from US$26,044,000 for the year ended December 31,
2016 to US$28,050,000 for the year ended December 31, 2017, which represents an increase of 7.7%. The increase of US$2,006,000
is mainly attributable to certain once-off costs relating to a flood damage incident at one of our U.S. plants (US$894,000) and a
settlement in relation to a licence royalty dispute (US$497,000).
The flood damage occurred in late 2017 when there was severe flooding in the Kansas City area caused by extremely heavy rainfall.
Ongoing engineering works being undertaken on a nearby waterway accentuated the impact on our plant. This caused significant
damage to instrumentation inventory due to the electric and electronic components contained therein. Given the plants location on a
flood plain, insurance coverage was not available to cover the particular circumstances. The financial implications of the flooding was
limited to damage to inventory.
Back royalties were payable in relation to a dispute over the application of the terms of a licence agreement to which the Company is a
party. Rather than undergo a lengthy and costly legal dispute, both parties reached a mutually acceptable agreement. The charge of
US$497,000 includes a payment of back royalties covering a period of five years plus legal fees incurred up to the point of settlement.
52
Share-based payments
The expense represents the fair value of share options granted to directors and employees which is charged to the statement of
operations over the vesting period of the underlying options. The Group has used a trinomial valuation model for the purposes of
valuing these share options with the key inputs to the model being the expected volatility over the life of the options, the expected life
of the option, the option price, the dividend yield and the risk free rate.
The Group recorded a total share-based payments charge of US$928,000 (2016: US$1,381,000). The decrease of US$453,000 in the
total share-based payments expense is due to a larger number of share options coming to the end of their vesting period during 2017
than were granted in 2017. The total charge is shown in the following expense headings in the statement of operations: US$35,000
(2016: US$32,000) was charged against cost of sales and US$893,000 (2016: US$1,349,000) was charged against selling, general &
administrative expenses.
For further details, refer to Item 18, Note 21 to the consolidated financial statements.
Amortisation
Amortisation increased from US$2,973,000 for the year ended December 31, 2016 to US$3,303,000 for the year ended December 31,
2017. The increase of US$330,000 is due to the commencement of amortisation for several internally developed products, which were
launched during 2017.
Selling, general and administrative expenses - impairment charges and inventory write-off/provision
Impairment charges of US$41,755,000 for the year ended December 31, 2017 are included in selling, general and administrative
expenses. In 2016, impairment charges of US$43,379,000 and product cull costs of US$4,786,000 (total US$48,165,000) were
included in selling, general and administrative expenses. The Group carries out an annual impairment review of the asset valuations.
In determining whether a potential asset impairment exists, a range of internal and external factors are considered. A number of factors
affected this calculation including the Company’s market capitalisation at the end of 2017 that was significantly lower compared to
the end of 2016. This factor as well as recent volatility in the Company’s share price resulted in a higher cost of capital being
attributable to the Company’s expected future cash flows. As the future discounted cash flows for a number of cash generating units
was below the carrying value of their net assets, the Group recognised at December 31, 2017 an impairment charge of US$41,755,000.
The impairment was taken against goodwill and other intangible assets, property, plant and equipment and prepayments.
In 2016, an impairment charge of US$43,379,000 was recognised. The impairment was taken against goodwill and other intangible
assets, property, plant and equipment and prepayments. The Group also recognised an inventory provision of US$4,786,000 in relation
to a number of products, which were culled. This mainly represented inventory provisioning for the Bartels and Microtrak product
lines which were acquired over 15 years ago. Revenues for these products had been declining significantly over a number of years and
had reached the end of their economic life, especially given the level of technical support required to keep older products of this nature
on the market. For further details, see Item 18, Notes 12, 13 and 17.
4. Loss for the year
The following table sets forth selected statement of operations data for each of the periods indicated.
Operating loss
Net financing expense
Loss before tax
Income tax credit
Loss of the year from continuing operations
Year ended December 31,
2016
2017
US$‘000
US$‘000
(39,848)
(37,668)
(2,292)
(2,207)
(42,140)
(39,875)
3,557
1,214
(38,583)
(38,661)
% Change
(5.5%)
(3.7%)
(5.4%)
(65.9%)
0.2%
Net Financing income
Net financing expense was US$2,207,000 for the year-end December 31, 2017 compared to US$2,292,000 in 2016. Financial
expenses decreased by US$34,000 to US$5,405,000 during 2017 mainly due to lower implicit interest on licence fees. Financial
income increased by US$51,000 from US$3,147,000 for the year-end December 31, 2016 to US$3,198,000 in 2017. There was an
increase of US$120,000 in the income arising from the revaluation of embedded derivatives at fair value, partially offset by a decrease
in bank deposit interest due to the lower cash on deposit.
53
Taxation
The Group recorded a tax credit on continuing operations of US$1,214,000 for the year ended December 31, 2017 compared to a tax
credit of US$3,557,000 for the year ended December 31, 2016. The 2017 tax credit comprises US$457,000 of current tax charge
offset by US$1,671,000 of deferred tax credit. For further details on the Group’s tax charge please refer to Item 18, Note 9 and Note
14 to the consolidated financial statements.
Loss for the year from continuing operations
The loss for the year amounted to US$38,661,000, compared to a loss of US$38,583,000 in 2016, representing a decrease of 0.2.%.
5. Discontinued operations
The Cardiac Point-of-Care operation was discontinued during year ended December 31, 2016. Expenses, gains and losses relating to
the discontinuation of the Cardiac point-of-care tests operation have been eliminated from profit or loss from the Group’s continuing
operations and are shown as a single line item on the face of the Consolidated Statement of Operations. The following table sets forth
selected statement of operations data for each of the periods indicated.
Loss on discontinued operations
Year ended December 31,
2016
US$‘000
(62,042)
2017
US$‘000
(1,609 )
During 2016, management decided to cease the development of Cardiac point-of-care tests on the Meritas platform. These products
were being developed by the Group’s subsidiary Fiomi Diagnostics. The decision to cease this development work and to close the
Fiomi operation came after the company held a meeting with the U.S. Food and Drug Administration (“FDA”) in order to obtain an
update on the Meritas Troponin premarket submission. At that meeting, the FDA unexpectedly suggested that our submission should
be withdrawn. The FDA made it known that any new point-of-care Troponin product would be required to demonstrate performance
equivalent to the most recently cleared laboratory-based device. As there was no certainty that this level of performance could ever be
achieved by the point-of-care Meritas product, even with the benefit of further development efforts, management decided there was no
option but to cease the development work on Troponin I and the analyser and its sister products, BNP and D-dimer.
The discontinued operation had no revenues since commencement as the products were still in their development phase. The loss on
discontinued operations is US$1,609,000 in year ended December 31, 2017, which comprises (a) a net reduction of US$1,794,000 in
the provisions required to meet our legal and commercial obligations following the closure of Fiomi’s facility (the Company has
negotiated settlements with a number of counterparties that were lower than had been originally estimated) and (b) the unwinding of
Fiomi’s foreign currency translation reserve of US$3,080,000. The tax charge is US$323,000. The loss on discontinued operations in
2016 was higher by US$60,433,000 due to the write off of the operation’s property, plant and equipment, goodwill and intangible
assets, inventories and the provision for closure costs. For further details, see Item 18, Note 10.
54
Results of Operations
Year ended December 31, 2016 compared to the year ended December 31, 2015
The following compares our results in the year ended December 31, 2016 to those of the year ended December 31, 2015 under IFRS.
Our analysis is divided as follows:
6.
7.
Overview
Revenues
Operating Loss
Loss for the year
9.
10. Discontinued operations
8.
6. Overview
In 2016, the financial results are impacted by:
•
•
•
the discontinuation of our Cardiac point-of-care operation, which resulted in a loss on discontinued operations for the year
of US$66.9 million before tax, comprising the write off of assets and closure costs.
a non-cash impairment charge of US$43.4 million in the statement of operations relating to the carrying value of goodwill
and other intangible assets, property, plant and equipment and prepayments.
the decision by management to cull some product lines resulting in inventory provisions of US$4.8 million.
The following table sets forth a breakdown of impairment charges, product cull costs and the loss on discontinued operation incurred
in the current financial year:
Year ended December 31, 2016
Impairment
Charges –
continuing
operations
US$’000
Product
Cull -
continuing
operations
US$’000
Discontinued
Operation
US$000
Property, plant & equipment (Item 18, Note 12)
Goodwill and other intangible assets (Item 18, Note 13)
Inventory (Item 18, Note 16)
Prepayments ((Item 18, Note 17)
Loss for the year including closure costs – discontinued
operation (Item 18, Note 10)
Write off of foreign currency translation reserve -
discontinued operation (Item 18, Note 10)
Total loss on discontinued operation and impairment
charges and inventory provisioning before tax
Income tax credit (Item 18, note 9)
4,647
49,433
2,578
—
4,382
38,240
—
757
—
—
6,492
3,779
66,929
(4,887 )
Total
US$‘000
9,029
87,673
7,364
757
6,492
3,779
—
—
4,786
—
—
—
43,379
(3,094 )
4,786
(689)
115,094
(8,670)
Total loss on discontinued operation, impairment charges
and product cull after tax
62,042
40,285
4,097
106,424
55
Revenues in 2016 decreased from US$100.2 million in 2015 to US$99.6 million, representing a decrease of 0.6%. This reduction was
primarily attributable to Point-of-Care revenues, which decreased by 10% from US$18.8 million in 2015 to US$16.9 million in 2016.
Meanwhile, Clinical Laboratory revenues and laboratory services were US$82.7 million, an increase of 2% versus 2015. The primary
drivers of Clinical Laboratory growth during 2016 continued to be sales of Diabetes and Autoimmune products. This level of increase
would have been higher but for the impact of foreign exchange movements. The impact of the strengthening of the US Dollar against
the Brazilian Real, Canadian Dollar and Sterling, all of which represent the non-dollar currencies in which the Company invoices
sales, resulted in a reduction in our US Dollar denominated revenues. In addition, in markets where we invoice in dollars but where
the local currency has weakened, we have been required to reduce our pricing in order to preserve our competiveness.
Geographically, 62% of our sales were generated in the Americas, 26% in Africa/Asia and 12% in Europe.
The gross margin for continuing operations was 43.7% for 2016 compared to 46.4% in 2015. The reduction in gross margin is due to
adverse sales mix (lower sales of higher margin point-of-care products) and foreign exchange factors, including the impact of
exchange rates on distributor pricing. The operating loss is US$39.8 million for the year which compares to an operating profit of
US$13.5 million for 2015. Excluding the non-recurring impairment charge and product cull provision, the operating profit for 2016 is
US$8.3 million. The decrease of US$5.2 million in operating profit before non-recurring items in 2016 is mainly attributable to the
lower gross profit and higher selling, general and administrative expenses.
Selling General & Administrative Expenditure (excluding impairment charges and inventory write offs) increased from
US$28.2 million in 2015 to US$30.4 million for 2016, which represents an increase of 8%. The increase is mainly attributable to
foreign currency re-translation losses in 2016 and higher amortisation charges, partially offset by the cessation of medical device
excise tax in the USA on January 1, 2016.
In 2016, net financing expense was US$2.3 million compared to net finance income of US$9.4 million in 2015. The year-on-year
change of US$11.7 million is mainly attributable to the revaluation of embedded derivatives at fair value, which resulted in lower
income of US$10.7 million in 2016 compared to 2015. The remaining movement is the full year effect of financing expenses
associated with the Exchangeable Notes which were issued in early Quarter 2, 2015.
The loss for the year from continuing operations amounted to US$38.6 million, compared to a profit of US$22.2 million in 2015,
representing a decrease of 273.9%. Before the impact of impairment charges and product cull provisions, the profit for 2016 from
continuing operations would have been US$5.8 million.
7. Revenues
The Group’s revenues consist of the sale of diagnostic kits and related instrumentation and the sale of raw materials to the life sciences
industry. Revenues from the sale of the above products are generally recognised on the basis of shipment to customers. The Group
ships its products on a variety of freight terms, including ex-works, carriage including freight (“CIF”) and free on board (“FOB”),
depending on the specific terms agreed with customers. In cases where the Group ships on terms other than ex-works, the Group does
not recognise the revenue until its obligations have been fulfilled in accordance with the shipping terms.
No right of return exists in relation to product sales except in instances where demonstrable product defects occur. The Group has
defined procedures for dealing with customer complaints associated with such product defects as they arise.
The Group leases instruments under operating and finance leases as part of its business. In cases where the risks and rewards of
ownership of the instrument pass to the customer, the fair value of the instrument is recognised as revenue at the commencement of
the lease and is matched by the related cost of sale. In the case of operating leases of instruments which typically involve
commitments by the customer to pay a fee per test run on the instruments, revenue is recognised on the basis of customer usage of the
instruments.
Revenues by Product Line
Trinity Biotech’s revenues for the year ended December 31, 2016 were US$99,611,000 compared to revenues of US$100,195,000 for
the year ended December 31, 2015, which represents a decrease of US$584,000 or 0.6%. The following table sets forth selected sales
data for each of the periods indicated.
56
Revenues
Clinical Laboratory
Point-of-Care
Laboratory Services
Total
Year ended December 31,
2015
2016
US$’000
US$’000
74,166
16,908
8,537
99,611
73,576
18,810
7,809
100,195
% Change
0.8%
(10.1%)
9.3%
(0.6%)
Clinical Laboratory
In 2016, Clinical Laboratory revenues increased by US$590,000 which equates to an increase of 0.8%. This increase was mainly
attributable to higher sales of Premier products. This was partially offset by a reduction in revenues for Infectious Diseases products in
USA and the impact of the strengthening US dollar on the Company’s foreign currency denominated revenues. In particular, the
weakness of the Brazilian Real, Canadian dollar and Sterling, all of which represent significant currencies in which the Company
invoices sales, resulted in a reduction in our US dollar reported revenues. This was accentuated by weakness in the currencies of other
countries such as Turkey, Russia and a number of South American countries where the Company invoices in US dollars. In such
countries the dollar’s strength served to erode our competitiveness, which had a negative effect on our revenues. Our sales prices tend
to be relatively stable as we are unable to pass on sales price increases to our customers due to competitive factors.
Point-of-Care
Point-of-Care revenues decreased by US$1,902,000, which represents a reduction of 10.1%. Unlike Clinical Laboratory revenue,
currency movements had a negligible impact on Point-of-Care revenues as a large proportion of sales are invoiced in US dollar.
Revenues for our Unigold HIV test were US$15.8 million in 2016 compared to US$17.2 million in 2015. Sales prices were relatively
stable during 2016 and the reduction in HIV revenues was due to lower sales volumes in both of our major markets of Africa and
Americas. During 2016, the company maintained its position in Africa as the designated supplier of confirmatory tests in all of the
markets in which it operates. In U.S.A, in 2016 there continued to be a downward trend in public health funding for HIV testing
initiatives.
Laboratory Services
Laboratory Services revenues increased in 2016 by US$728,000 which equates to growth of 9.3%. The increase was attributable to our
autoimmune business in Buffalo, New York. The increase in laboratory service revenues was driven by the growing demand for a
wide range of autoimmune diagnostic testing in the U.S., with our Sjögrens Syndrome test continuing to be the highest in revenue
terms.
57
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
Revenues
Americas
Asia/Africa
Europe
Total
Year ended December 31,
2015
2016
US$‘000
US$‘000
61,613
25,501
12,497
99,611
62,421
22,346
15,428
100,195
% Change
(1.3%)
14.1%
(19.0%)
(0.6%)
In the Americas, the 1.3% decrease amounting to US$808,000 was primarily attributable to the continuing trend of falling sales of
infectious diseases tests in the U.S. and the negative impact of the strengthening of the US dollar on Canadian revenues, partially
offset by strong growth in revenues from our autoimmune laboratory in the U.S. and higher revenues from our diabetes business in
Brazil, although this was dampened by the continued weakness in the Brazilian currency.
Asia/Africa revenues increased by 14.1%, or US$3,155,000 compared to 2015. The main reasons for this were the growth in revenues
from emerging markets in Asia, with China being the most significant. The revenue increase from Asian customers was broadly-
based, with increases recorded for diabetes products, raw materials sold to the life sciences industry by our Fitzgerald business and
infectious diseases assays. These increases were partially offset by the decrease in Unigold HIV revenues in Africa.
Revenues in Europe decreased by US$2,931,000, or 19.0% compared to 2015. The decrease was due to a fall in Clinical Laboratory
revenues, in particular infectious diseases and revenues for our Fitzgerald business. The decrease was also partly due to currency
movements - the Sterling/US dollar exchange deteriorated by 11.9% on average in 2016 compared to 2015.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information
on the Company”.
8. Operating (Loss)/Profit – continuing operations
The following table sets forth the Group’s operating loss from continuing operations:
Revenues
Cost of sales
Gross profit
Other operating income
Research & development
SG&A expenses
Selling, general and administrative expenses - impairment
charges and inventory write-off/provision
Operating (loss)/profit on continuing operations
Year ended December 31,
2015
2016
US$’000
US$’000
100,195
99,611
(53,683)
(56,127)
46,512
43,484
288
239
(5,069)
(5,040)
(28,225)
(30,366)
(48,165)
(39,848)
—
13,506
% Change
(0.6%)
4.6%
(6.5%)
(17.0%)
(0.6%)
7.6%
100%
(395.0%)
58
Cost of sales and gross margin
Total cost of sales increased by US$2,444,000 from US$53,683,000 for the year ended December 31, 2015 to US$56,127,000, for the
year ended December 31, 2016, an increase of 4.6%. The gross margin of 43.7% in 2016 compares to a gross margin of 46.4% in
2015.
The decrease in gross margin in 2016 is largely attributable to (a) lower sales of higher margin point-of-care products and (b) foreign
exchange factors, including the impact of exchange rates on distributor pricing.
Other operating income
Other operating income comprises rental income from sublet properties and income from the provision of services to Diagnostica
Stago under Transition Services Agreements (“TSAs”). Other operating income decreased by US$49,000 from US$288,000 for the
year ended December 31, 2015 to US$239,000, for the year ended December 31, 2016. The decrease is due to the expiration of a
rental sub lease.
Research and development expenses
Research and development expenditure recorded in the Statement of Operations decreased from US$5,069,000 in 2015 to
US$5,040,000 in 2016. Headcount in Research & development was broadly consistent in 2015 and 2016 and for that reason the
expenses were consistent in both years. For details of the Company’s various R&D projects see “Research and Products under
Development” below.
Selling, General & Administrative expenses (“SG&A”)
Total SG&A expenses increased by US$2,141,000 from US$28,225,000 for the year ended December 31, 2015 to US$30,366,000 for
the year ended December 31, 2016.
The following table outlines the breakdown of SG&A expenses in 2016 compared to 2015.
SG&A (excl. share-based payments and amortisation)
Share-based payments
Amortisation
Total
Year ended December 31,
2015
2016
US$’000
US$’000
26,044
1,349
2,973
30,366
24,031
1,541
2,653
28,225
% Change
8.4%
(12.5%)
12.1%
7.6%
Selling General & Administrative Expenditure (excluding share-based payments and amortisation)
SG&A expenses excluding share-based payments and amortisation increased from US$24,031,000 for the year ended December 31,
2015 to US$26,044,000 for the year ended December 31, 2016, which represents an increase of 8.4%. The increase of US$2,013,000
is mainly attributable to foreign currency re-translation losses in 2016 partially offset by the cessation of medical device excise tax in
the US on January 1, 2016.
Share-based payments
The expense represents the fair value of share options granted to directors and employees which is charged to the statement of
operations over the vesting period of the underlying options. The Group has used a trinomial valuation model for the purposes of
valuing these share options with the key inputs to the model being the expected volatility over the life of the options, the expected life
of the option, the option price, the dividend yield and the risk free rate.
The Group recorded a total share-based payments charge of US$1,381,000 (2015: US$1,550,000). The decrease of US$169,000 in the
total share-based payments expense is due to a larger number of share options coming to the end of their vesting period during 2016
than were granted in 2016. The total charge is shown in the following expense headings in the statement of operations: US$32,000
(2015: US$9,000) was charged against cost of sales and US$1,349,000 (2015: US$1,541,000) was charged against selling, general &
administrative expenses.
For further details, refer to Item 18, Note 21 to the consolidated financial statements.
59
Amortisation
Amortisation increased from US$2,653,000 for the year ended December 31, 2015 to US$2,973,000 for the year ended December 31,
2016. The increase of US$320,000 is due to the commencement of amortisation for several internally developed products which were
launched during 2016.
Selling, general and administrative expenses - impairment charges and inventory write-off/provision
Impairment charges and product cull costs of US$48,165,000 for the year ended December 31, 2016 (2015: nil) are included in
selling, general and administrative expenses. The impairment charges arose when Trinity Biotech’s share price reduced significantly
in Quarter 4, 2016 and its market capitalization was then significantly below the book value of its net assets. This is an indicator of a
potential impairment. In such circumstances, the Group decided to recognise at December 31, 2016 an impairment charge of
US$43,379,000. The impairment was taken against goodwill and other intangible assets, property, plant and equipment and
prepayments. The Group has also recognised an inventory provision of US$4,786,000 in relation to a number of products which have
been culled. This mainly represents inventory provisioning for the Bartels and Microtrak product lines which were acquired over 15
years ago. Revenues for these products have been declining significantly over the last number of years and have now reached the end
of their economic life, especially given the level of technical support required to keep older products of this nature on the market. For
further details, see Item 18, Notes 12, 13 and 17.
9. Loss for the year
The following table sets forth selected statement of operations data for each of the periods indicated.
Operating (loss)/profit
Net financing (expense)/income
(Loss)/Profit before tax
Income tax credit/(expense)
(Loss)/Profit of the year from continuing operations
Year ended December 31,
2015
2016
US$‘000
US$‘000
(39,848)
(2,292)
(42,140)
3,557
(38,583)
13,506
9,437
22,943
(756)
22,187
% Change
(395%)
(124%)
(284%)
(571%)
(274%)
Net Financing income
Net financing expense was US$2,292,000 for the year-end December 31, 2016 compared to income of US$9,437,000 in 2015.
Financial expenses increased by US$1,385,000 to US$5,439,000 during 2016 mainly due to the full year effect of interest expense
associated with the exchangeable senior notes which were issued in early quarter 2, 2015. Financial income decreased by
US$10,344,000 from US$13,491,000 for the year-end December 31, 2015 to US$3,147,000 in 2016. There was a reduction of
US$10,745,000 in the income arising from the revaluation of embedded derivatives at fair value, partially offset by an increase in
bank deposit interest due to the higher cash on hand.
Taxation
The Group recorded a tax credit on continuing operations of US$3,557,000 for the year ended December 31, 2016 compared to a tax
charge of US$756,000 for the year ended December 31, 2015. The 2016 tax credit comprises US$289,000 of current tax credit and
US$3,268,000 of deferred tax credit. For further details on the Group’s tax charge please refer to Item 18, Note 9 and Note 14 to the
consolidated financial statements.
Loss for the year from continuing operations
The loss for the year amounted to US$38,583,000, compared to a profit of US$22,187,000 in 2015, representing a decrease of 274.0%.
10. Discontinued operations
The Cardiac Point-of-Care operation was discontinued during year ended December 31, 2016. Expenses, gains and losses relating to
the discontinuation of the Cardiac point-of-care tests operation have been eliminated from profit or loss from the Group’s continuing
operations and are shown as a single line item on the face of the Consolidated Statement of Operations. The following table sets forth
selected statement of operations data for each of the periods indicated.
60
Loss on discontinued operations
Year ended December 31,
2015
US$‘000
(391)
2016
US$‘000
(62,042 )
During 2016, management decided to cease the development of Cardiac point-of-care tests on the Meritas platform. These products
were being developed by the Group’s subsidiary Fiomi Diagnostics (“Fiomi”) located in Sweden. The decision to cease this
development work and to close the Swedish operation came after the company held a meeting with the U.S. Food and Drug
Administration (“FDA”) in order to obtain an update on the Meritas Troponin premarket submission. At that meeting the FDA
unexpectedly suggested that our submission should be withdrawn. The FDA made it known that any new point-of-care Troponin
product would be required to demonstrate performance equivalent to the most recently cleared laboratory-based device. As there was
no certainty that this level of performance could ever be achieved by the point-of-care Meritas product, even with the benefit of further
development efforts, management decided there was no option but to cease the development work on Troponin I and the analyzer and
its sister products, BNP and D-dimer.
The discontinued operation had no revenues since commencement as the products were still in their development phase. The loss on
discontinued operations is US$62,042,000 in year ended December 31, 2016, which comprises the after tax loss for the year of
US$646,000, the write-off of the carrying value of all capitalised development costs and goodwill (US$49,433,000), property, plant
and equipment (US$4,647,000), and inventories (US$2,578,000); the cost of closing the Swedish facility (US$5,846,000), which
mainly consisting of contractual obligations associated with terminating premises and supplier contracts, as well as redundancy costs
for 41 employees and lastly a charge in relation to foreign translation reserves (US$3,779,000) which had been recognised in previous
periods as a reserve movement. The related tax credit of US$4,887,000 mainly comprises the reversal of deferred tax liabilities
recorded in prior years.
Liquidity and Capital Resources
Financing
The Group entered into finance lease arrangements with Allied Irish Bank during 2015. The Group has no other bank borrowings.
During 2015, the Group issued US$115,000,000 of exchangeable senior notes which will mature on April 1, 2045, subject to earlier
repurchase, redemption or exchange. The notes are senior unsecured obligations and accrue interest at an annual rate of 4%, payable
semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2015. Management intends to use the net
proceeds from the exchangeable senior notes for potential future acquisitions and for general corporate purposes, which may include
continued product development and commercialization and share buyback.
Working capital
In the Directors’ opinion, the Group will have access to sufficient funds to support its existing operations for at least the next 12
months by utilising existing cash resources and cash generated from operations.
The amount of cash generated from operations will depend on a number of factors which include the following:
•
•
•
•
•
The ability of the Group to continue to generate revenue growth from its existing product lines;
The ability of the Group to generate revenues from new products following the successful completion of its development
projects;
The extent to which capital expenditure is incurred on additional property plant and equipment;
The level of investment required to undertake both new and existing development projects; and
Successful working capital management in the context of a growing business.
61
Cash management
As at December 31, 2017, Trinity Biotech’s consolidated cash and cash equivalents and short-term investments were US$57,607,000.
This compares to cash and cash equivalents of US$77,109,000 at December 31, 2016.
Cash generated from operations for the year ended December 31, 2017 amounted to US$9,370,000 (2016: US$10,556,000), a decrease
of US$1,186,000. The decrease in cash generated from operations of US$1,186,000 is attributable to a decrease in operating cash
flows before changes in working capital of US$2,718,000 and a decrease in working capital outflows of US$1,532,000. The decrease
in operating cash flows before changes in working capital of US$2,718,000 is primarily driven by the decrease in operating profit
before impairment losses during the current financial year. The working capital outflow decrease, when compared to the prior year, is
partly due to the decrease in cash outflows for inventories of US$1,161,000 and a decrease in cash outflows of US$747,000 for trade
and other payables. This has been partially offset by the decrease in trade and other receivables, when compared to the prior year of
US$376,000. The cash generated from operations was attributable to an operating loss of US$37,668,000 (2016: loss of
US$39,848,000), as adjusted for non cash items of US$49,739,000 (2016: US$52,074,000) plus cash outflows due to changes in
working capital of US$138,000 (2016: cash outflows of US$1,670,000).
Other non-cash charges decreased from US$52,074,000 for the year ended December 31, 2016 to US$49,739,000 for the year ended
December 31, 2017. Once off charges in 2017 are mainly attributable to the impairment of prepayments (US$1,651,000), property,
plant and equipment (US$10,437,000), and intangible assets (US$29,667,000).
The net cash outflows in 2017 due to changes in working capital of US$138,000 are due to the following:
• A decrease in trade and other receivables of US$306,000 due to the decrease, year on year, in the debtors days number;
• An increase in inventory of US$2,461,000 due to the strategic build up of certain inventory items during the course of the
year; and
• An increase in trade and other payables balance of US$2,017,000 due to timing of payments.
Net interest received amounted to US$723,000 (2016: US$841,000). This included interest received of US$776,000 (2016:
US$901,000) on the Group’s cash deposits.
Net cash outflows from investing activities for the year ended December 31, 2017 amounted to US$16,180,000 (2016:
US$21,875,000) which were principally made up as follows:
•
Payments to acquire intangible assets of US$10,229,000 (2016: US$16,548,000), which principally related to
development expenditure capitalised as part of the Group’s on-going product development activities; and
• Acquisition of property, plant and equipment of US$4,839,000 (2016: US$4,215,000) incurred as part of the Group’s
investment programme for its manufacturing and distribution activities, and placement of instruments.
There were no acquisitions of subsidiaries in 2017 or 2016.
•
Net cash outflows from financing activities for the year ended December 31, 2017 amounted to US$12,643,000 (2016: outflows of
US$13,355,000). This outflow is primarily due to the buyback of shares of US$7,799,000 and interest payments related to
exchangeable notes of US$4,600,000. Payments of finance lease liabilities in the year were US$295,000 (2016: US$282,000). In 2017
these outflows were partially offset by the receipt of US$51,000 finance lease proceeds. In 2016 these outflows were partially offset
by net receipts of US$857,000 from the issue of ordinary shares, there were no share issues during 2017. Ordinary shares issued in
2016 were as a result of share options exercised during the course of the year.
The majority of the Group’s transactions are conducted in US Dollars. The primary foreign exchange risk arises from the fluctuating
value of the Group’s Euro denominated expenses as a result of the movement in the exchange rate between the US Dollar and the
Euro. The Group also faces foreign exchange risk from movement in the exchange rate between the US Dollar and Swedish Kroner,
British Sterling, Canadian Dollar and Brazilian Real. Trinity Biotech continuously monitors its exposure to foreign currency
movements and expectations of future exchange rate exposure and, if deemed necessary, will cover a portion of this exposure through
the use of forward contracts. When used, these forward contracts are cash flow hedging instruments whose objective is to cover a
portion of these Euro forecasted transactions.
62
For a more comprehensive discussion of the Group’s use of financial instruments, its currency and interest rate structure and its
funding and treasury policies please refer to Item 11 “Quantitative and Qualitative Disclosures about Market Risk”.
Contractual obligations
The following table summarises our minimum contractual obligations and commercial commitments, including interest, as of
December 31, 2017:
Contractual Obligations
Exchangeable note
Exchangeable note interest
Operating lease obligations
Finance lease obligations
Total
Payments due by Period
Total
US$’000
115,000
126,500
22,139
938
264,577
less than 1
year
US$’000
—
4,600
2,693
387
7,680
1-3 Years
US$’000
—
9,200
4,356
551
4-5 Years
US$’000
—
9,200
3,430
—
14,107
12,630
more than
5 years
US$’000
115,000
103,500
11,660
—
230,160
In the past, Trinity Biotech incurred debt and raised equity to pursue its policy of growth through acquisition. However, since the
divestiture of the Coagulation product line in 2010, the Group has eliminated bank debt and has adequate cash resources. The Group
raised US$110,529,000 (net of fees) during 2015 through the issuance of exchangeable loan notes (see Note 24 for further
information). The Group intends to grow organically for the foreseeable future and Trinity Biotech believes that it will have sufficient
funds to meet its capital commitments and continue existing operations in to the future, in excess of 12 months. If the Group was to
make a large and unanticipated cash outlay, the Group would have further funding requirements which could be met through access to
equity and debt markets.
Impact of Currency Fluctuation
Trinity Biotech’s revenue and expenses are affected by fluctuations in currency exchange rates especially the exchange rate between
the US Dollar and the Euro, Swedish Kroner, the Brazilian Real and Canadian Dollar. Trinity Biotech’s revenues are primarily
denominated in US Dollars and its expenses are incurred principally in US Dollars, Euro, Swedish Kroner and Brazilian Real. The
weakening of the US Dollar could have an adverse impact on future profitability.
Trinity Biotech holds most of its cash assets in US Dollars. As Trinity Biotech reports in US Dollars, fluctuations in exchange rates do
not result in exchange differences on these cash assets. Fluctuations in the exchange rate between the Euro, Swedish Kroner, or
Brazilian Real and the US Dollar may impact on the Group’s Euro, Kroner or Real monetary assets and liabilities and on Euro, Kroner
or Real expenses and consequently the Group’s earnings.
Off-Balance Sheet Arrangements
After consideration of the following items the Group’s management have determined that there are no off-balance sheet arrangements
which need to be reflected in the financial statements.
Leases with Related Parties
The Group has entered into lease arrangements for premises in Ireland with JRJ Investments (“JRJ”), a partnership currently owned by
Mr O’Caoimh and Dr Walsh, directors of Trinity Biotech plc, and directly with Mr O’Caoimh and Dr Walsh. When entering into the
lease arrangements, independent valuers have advised Trinity Biotech that the rent fixed with respect to these leases represents a fair
market rent. Details of these leases with related parties are set out in Item 4 “Information on the Company”, Item 7 “Major
Shareholders and Related Party Transactions” and Item 18, Note 27 to the consolidated financial statements.
Research & Development (“R&D”) carried out by third parties
Certain R&D activities of the Group have been outsourced to third parties. These activities are carried out in the normal course of
business with these companies.
63
During 2017, a number of individuals acted as third party consultants and contractors; working principally on the Premier projects.
The total amount paid to these R&D consultants and contractors in 2017 was US$27,000 (2016: US$450,000).
Research and Products under Development
Trinity Biotech has research and development groups focusing separately on haemoglobin products, infectious diseases and
autoimmune products. During 2017, these groups were located in Ireland and the USA and largely mirror the production capability at
each production site. In addition to in-house activities, Trinity Biotech sub-contracts some research and development from time to
time to independent researchers based in the USA and Europe.
Principal Development Projects
The following table sets forth for each of Trinity Biotech’s main development projects, the costs incurred during each period presented
and the cumulative costs (before amortization and impairment) incurred as at 31 December 2017:
Product Name
Premier Instrument for Haemoglobin A1c testing
HIV screening rapid test
US Striped Lyme
Uni-gold test enhancement
G-6-PDH test
Tri-stat Point-of-Care instrument
2017
US$’000
2,601
1,514
1,156
1,134
812
764
2016
US$’000
2,810
1,085
1,003
1,154
-
678
Total project
costs to
December 31,
2017 ¹
US$’000
27,444
4,230
3,752
3,546
812
7,941
¹ Cumulative costs to December 31, 2017 are shown before deduction of amortization and impairment losses.
The costs in the foregoing table mainly comprise the cost of internal resources, such as the payroll costs for the development teams
and attributable overheads. The remainder mainly comprises materials, consumables, regulatory trial and third party consultants’
costs.
The following table sets forth the estimated cost to complete each of the main development projects which were underway in 2017.
The total estimated completion costs are anticipated to be incurred evenly up to the completion date of the relevant project.
Product Name
Premier Instrument for Haemoglobin A1c testing
HIV screening rapid test
US Striped Lyme
Uni-gold test enhancement
G-6-PDH test
Tri-stat Point-of-Care instrument
Total estimated
cost to complete
US$’000
Estimated date
for completion
1,900
4,600
900
750
575
260
2018
2019
2018
2018
2018
2018
There are inherent risks and uncertainties associated with completing development projects on schedule. In the experience of Trinity
Biotech, the main risks to the achievement of a project’s planned completion date occur primarily during the product’s verification and
validation phase. During this phase the product must attain successful results from in-house product testing and from third party
clinical trials. Obtaining regulatory approval on a timely basis is another variable in achieving a project’s planned completion date.
Some aspects of the development of a new product are outside of the control of Trinity Biotech. Notwithstanding the uncertainty
surrounding these external factors, Trinity Biotech believes the planned completion dates of these projects are realistic and achievable.
If major development projects were severely delayed, in the opinion of Trinity Biotech it would not impact significantly on Trinity
Biotech’s financial position or on the capitalisation criteria. As the manufacturing lead time for these new products is relatively short,
it is anticipated that material cash inflows will commence shortly after each of the project’s planned completion date.
64
The following is a description of the principal projects which are currently being undertaken by the research and development groups
within Trinity Biotech:
Haemoglobin Development Group
Premier Hb9210 Instrument for Haemoglobin A1c Testing
This project entails the development of a new HPLC instrument for testing HbA1c. Development was initiated in late 2007, and was
launched outside of the United States in 2011 followed by within the United States in early 2012.
In response to increased lab automation as well as workstation consolidation, the Premier 9210 TLA project was initiated at the end of
2014. TLA (total lab automation) capability will enable the Premier 9210 to be interfaced with many of the TLA systems currently
available.
As part of our continuous improvement a new monitor, key board and frit housing have been customised and validated. These
improvements maintain the competiveness of the instruments. Looking forward, the Premier Hb9210 v2.0 is in the initial stages and
design with an expected release date of mid 2018.
HbA1c testing is rapidly growing due to the increased utility as a method for diagnosis and identification of pre-diabetics. Diabetes is
the fourth leading cause of death by disease in the world. In 2015, 1.6 million people died due to diabetes. Every 6 seconds a person
dies from the disease. The number of diabetic patients is expected to reach 592 million in 2035. In the U.S. alone some 24.4 million
Americans (7 percent of the population) have the disease with a further 54 million Americans considered to be pre-diabetic. The total
HbA1c market worldwide is estimated to be approximately US$900 million.
The company has also developed Premier Resolution which is utilised for variant testing. Premier Resolution continues to be
enhanced with unique features such as lot specific gradients, an optimised internal column with pre-filter to extend column life, and a
rapidly expanding on-board variant library.
Tri-stat 2.0
Tri-stat represents a new HbA1c device that offers rapid, precise analysis in a simple and highly cost effective manner. Using boronate
affinity technology and a two phase optical system, three samples can be analysed simultaneously. This instrument though often
characterised as point-of-care is being targeted at low volume laboratories and governmental outreach programs. The ability to
perform three samples simultaneously enables the instrument to address these segments. Taking advantage of the latest technology the
instrument features a colour touchscreen, multiple language capability, modern connectivity, increased storage capacity as well as
replaceable diodes for state-of-the-art performance.
Point-of-Care Development Group
Trinity Biotech is in the process of developing tests for the detection of HIV and a next-generation Lyme confirmatory test at the
product development unit at the Carlsbad, California facility. Trinity Biotech is currently in the process of obtaining regulatory
approvals for these tests.
Trend Information
For information on trends in future operating expenses and capital resources, see “Results of Operations” and “Liquidity and Capital
Resources” under Item 5.
65
Item 6 Directors, Senior Management and Employees
Directors
Name
Ronan O’Caoimh
Jim Walsh, PhD
Kevin Tansley
Denis R. Burger, PhD
Peter Coyne
Clint Severson
James D. Merselis
Age
62 Chairman and Chief Executive Officer
59 Executive Director
47 Executive Director, Chief Financial Officer & Company Secretary
74 Non Executive Director / Lead Director
58 Non Executive Director
69 Non Executive Director
64 Non Executive Director
Title
Board of Directors & Executive Officers
Ronan O’Caoimh, Chairman and Chief Executive Officer, co-founded Trinity Biotech in June 1992 and acted as Chief Financial
Officer until March 1994 when he became Chief Executive Officer. He was also elected Chairman in May 1995. In November 2007, it
was decided to separate the role of Chief Executive Officer and Chairman and Mr O’Caoimh assumed the role of Executive Chairman.
In October 2008, following the resignation of the Chief Executive Officer, Mr O’Caoimh resumed the role of Chief Executive Officer
and Chairman. Prior to joining Trinity Biotech, Mr O’Caoimh was Managing Director of Noctech Limited, an Irish diagnostics
company. Mr O’Caoimh was Finance Director of Noctech Limited from 1988 until January 1991 when he became Managing Director.
Mr O’Caoimh holds a Bachelor of Commerce degree from University College Dublin and is a Fellow of the Institute of Chartered
Accountants in Ireland. On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated
and replaced by a management agreement with Darnick Company.
Jim Walsh, PhD, Executive Director, initially joined Trinity Biotech in October 1995 as Chief Operations Officer. Dr Walsh
resigned from the role of Chief Operations Officer in 2007 to become a Non Executive Director of the Company. In October, 2010 Dr
Walsh rejoined the company as Chief Scientific Officer. Dr Walsh transferred from this position in 2015 and focuses on Business
Development activities. Prior to joining Trinity Biotech, Dr Walsh was Managing Director of Cambridge Diagnostics Ireland Limited
(“CDIL”). He was employed with CDIL since 1987. Before joining CDIL he worked with Fleming GmbH as Research &
Development Manager. Dr Walsh holds a PhD in Chemistry from University College Galway.
Kevin Tansley, Chief Financial Officer, joined Trinity Biotech in March 2003 and was appointed Chief Financial Officer and
Secretary to the Board of Directors in November 2007. Mr. Tansley was appointed to the board in September 2016 as Executive
Director. Mr Tansley trained as a chartered accountant in the Corporate Financial Services practice of Arthur Andersen & Co. Prior to
joining Trinity Biotech in 2003, Mr Tansley held a number of financial positions in the Irish electricity utility ESB. Mr Tansley holds
a Masters of Accounting from University College Dublin and is a Fellow of the Institute of Chartered Accountants in Ireland.
Denis R. Burger, PhD, Non-executive director, co-founded Trinity Biotech in June 1992 and acted as Chairman from June 1992 to
May 1995. He is currently Vice Chairman of CytoDyn Inc., an anti-retroviral therapeutics, OTC:BB listed company and is
also lead director of Aptose Biosciences, Inc, a cancer therapeutics, TSX and NASDAQ listed company. Until March 2007, Dr Burger
was the Chairman and Chief Executive Officer of AVI Biopharma Inc, a NASDAQ listed biotechnology company. He was also a co-
founder and, from 1981 to 1990, Chairman of Epitope Inc. In addition, Dr Burger has held a professorship in the Department of
Microbiology and Immunology and Surgery (Surgical Oncology) at the Oregon Health and Sciences University in Portland. Dr Burger
received his degree in Bacteriology and Immunology from the University of California in Berkeley in 1965 and his Master of Science
and PhD in 1969 in Microbiology and Immunology from the University of Arizona.
Peter Coyne, Non-executive director, joined the board of Trinity Biotech in November 2001 as a non-executive director. Mr Coyne
trained as a chartered accountant in the Corporate Financial Services practice of Arthur Andersen & Co. Mr Coyne was previously a
director of AIB Corporate Finance and has extensive experience of advising boards on mergers and acquisitions and corporate
strategy. Mr Coyne is an independent business consultant advising companies and business owners on mergers, acquisitions and
disposals. Mr Coyne is a non-executive director of Ark Life Assurance Company dac, an Irish life assurance company regulated by the
Central Bank of Ireland and owned since January 2016 by Swiss Re. Mr. Coyne holds a bachelor of engineering degree from
University College Dublin, is a fellow of the Institute of Chartered Accountants in Ireland and is a CEDR Accredited Mediator.
Clint Severson, Non-executive director, joined the board of Trinity Biotech in November 2008 as a non-executive director. Mr
Severson is currently Chairman and CEO of Abaxis Inc., a NASDAQ traded diagnostics company based in Union City,
California. From February 1989 to May 1996, Mr Severson served as President and Chief Executive Officer of MAST
Immunosystems, Inc., a privately-held medical diagnostic company and to date he has accumulated over 40 years experience in the
medical diagnostics industry. Mr Severson is also on the board of Cutera.
66
James D. Merselis, Non-executive director, joined the board of Trinity Biotech in February 2009. He is currently a Co-Founder and
Managing Director of Synchrony Bio LLC, a newly formed healthcare-focused venture investment fund based in St. Louis, MO. He
is also a non-executive director for the following companies: Biosensia Ltd, a point-of-care diagnostics company located in Dublin,
Ireland; Kypha Inc., a St. Louis, Missouri based diagnostic company focused on Complement assays in the diagnosis and management
of patients with inflammatory diseases; Geneoscopy, a St. Louis, Missouri based company developing next generation diagnostics that
leverage the power of RNA to better prevent, detect, and treat gastrointestinal disease; and Abram Scientific Inc., a coagulation
diagnostics company located in Palo Alto, California. Mr. Merselis has more than forty years experience in healthcare, including
twenty-two years at Boehringer Mannheim Diagnostics (now Roche Diagnostics). Mr. Merselis has led a number of healthcare
diagnostic start-ups. From 2002 to 2007, he served as President and CEO of HemoSense, Inc., a point-of-care diagnostics company
providing patients and physicians with rapid test results to help manage the risk of stroke with the use of Warfarin or Coumadin.
During this time he successfully took the company public (AMEX:HEM) followed two years later by its acquisition by Alere
(NYSE:ALR). His leadership at other start-ups has included: Nexus Dx (now Samsung), Alverix, Inc. (now Becton Dickenson), and
Micronics, Inc. (now SONY).
Compensation of Directors and Officers
The basis for the executive directors’ remuneration and level of annual bonuses is determined by the Remuneration Committee of the
board. In all cases, bonuses and the granting of share options are subject to stringent performance criteria. The Remuneration
Committee consists of Dr Denis Burger (committee chairman and lead director), Mr Clint Severson and Mr James Merselis. Directors’
remuneration shown below comprises salaries, pension contributions and other benefits and emoluments in respect of executive
directors. Non-executive directors are remunerated by fees and the granting of share options. The fees payable to non-executive
directors are determined by the board. Each director is reimbursed for expenses incurred in attending meetings of the board of
directors.
Total directors and non-executive directors’ remuneration, excluding pension, for the year ended December 31, 2017 amounted to
US$1,800,000. The pension charge for the year amounted to US$44,000. See Item 18, Note 5 to the consolidated financial statements.
The split of directors’ remuneration set out by director is detailed in the table below:
Executive Director
Ronan O’Caoimh1
Jim Walsh2
Kevin Tansley3
Non-executive Director
Denis R. Burger
Peter Coyne
James Merselis
Clint Severson
Salary/
Benefits
US$’000
639
115
423
1,177
Performance
related bonus
US$’000
135
—
88
223
Defined
contribution
pension
US$’000
—
2
42
44
Total
2017
US$’000
774
117
553
1,444
Total
2016
US$’000
788
240
559
1,587
Fees
US$’000
100
100
100
100
400
Total
2017
US$’000
100
100
100
100
400
Total
2016
US$’000
100
100
100
100
400
As at December 31, 2017 there was no accrual by the Company to provide pension, retirement or similar benefits for the directors
(2016: NIL).
The total share-based compensation expense recognised in the consolidated statement of operations in 2017 in respect of options
granted to both executive and non-executive directors amounted to US$727,000. See Item 18, Note 5 to the consolidated financial
statements.
1
2
3
Represents payments to Ronan O’Caoimh for director fees and to Darnick Company in respect of CEO services.
Includes payments made to Diagnostic Polymers, a company wholly-owned by Jim Walsh and members of his immediate
family. Represents payments to Jim Walsh for director fees and to Diagnostic Polymers in respect of executive services.
Kevin Tansley was appointed to the board in September 2016 as Executive Director. Remuneration also includes remuneration
paid to Kevin Tansley in respect of his roles as Chief Financial Officer and Company Secretary.
67
A total of 5,150,000 ‘A’ share options (equivalent to 1,287,500 ADS options) were granted to the directors during 2017, the terms of
which are set out below. Share options granted to directors during 2017 are detailed in the table below:
Director/Executive Officer
Ronan O’Caoimh
Jim Walsh
Kevin Tansley
Denis Burger
Peter Coyne
Clint Severson
James Merselis
Number of Options
Granted
2,244,000 ‘A’ shares
(561,000 ADS)
750,000 ‘A’ shares
(187,500 ADS)
864,000 ‘A’ shares
(216,000 ADS)
662,000 ‘A’ shares
(165,500 ADS)
210,000 ‘A’ shares
(52,500 ADS)
210,000 ‘A’ shares
(52,500 ADS)
210,000 ‘A’ shares
(52,500 ADS)
Exercise Price of
Options Granted
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
US$1.34 per ‘A’ share
(US$5.35 per ADS)
Date of Option
Grant*
7 September 2017
7 September 2017
7 September 2017
7 September 2017
7 September 2017
7 September 2017
7 September 2017
* All options issued are subject to a 7 year life from date of grant.
In September 2017, the directors forfeited share options as follows:
Director/Executive Officer
Ronan O’Caoimh
Jim Walsh
Kevin Tansley
Denis Burger
Peter Coyne
Clint Severson
James Merselis
Number of Options
Granted
1,600,000 ‘A’ shares
(400,000 ADS)
660,000 ‘A’ shares
(165,000 ADS)
1,000,000 ‘A’ shares
(250,000 ADS)
120,000 ‘A’ shares
(30,000 ADS)
120,000 ‘A’ shares
(30,000 ADS)
100,000 ‘A’ shares
(25,000 ADS)
120,000 ‘A’ shares
(30,000 ADS)
In addition, see Item 7 – Major Shareholders and Related Party Transactions for further information on the compensation of Directors
and Officers.
Directors’ Service Contracts
The Company has entered into service contracts with its Executive Directors and Officers. These contracts contain certain termination
provisions which are summarised below.
On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by an
agreement with Darnick Company, a company wholly-owned by members of Mr O’Caoimh’s immediate family. Pursuant to the
agreement, Darnick Company will provide the Company with the services of Mr O’Caoimh as Chief Executive Officer. The
agreement contains certain non-competition and confidentiality provisions. The term of the agreement will continue until such time as
it is terminated by either party, subject to the Company providing one year’s notice. Where termination occurs within 12 months of a
change of control of the Company, two year’s notice will apply. Darnick Company may terminate the agreement on six months’
notice. Mr O’Caoimh remains as Chairman of the Board of Directors.
Under the terms of his service contract, Kevin Tansley, Chief Financial Officer, is entitled to 12 months salary and benefits in the
event of termination by the Company. Where termination arises within 12 months of a change in control of the Company, Mr. Tansley
is entitled to 18 months salary and benefits.
68
Board Practices
The Articles of Association of Trinity Biotech provide that one third of the directors in office (other than the Managing Director or a
director holding an executive office with Trinity Biotech) or, if their number is not three or a multiple of three, then the number
nearest to but not exceeding one third, shall retire from office at every annual general meeting. If at any annual general meeting the
number of directors who are subject to retirement by rotation is two, one of such directors shall retire and if the number of such
directors is one, that director shall retire. Retiring directors may offer themselves for re-election. The directors to retire at each annual
general meeting shall be the directors who have been longest in office since their last appointment. As between directors of equal
seniority the directors to retire shall, in the absence of agreement, be selected from among them by lot.
The Board of Directors has established Audit, Remuneration and Compensation Committees. The Remuneration and Compensation
Committee consists of Dr Denis Burger (committee chairman and lead director), Mr Clint Severson and Mr James Merselis. This
Committee is responsible for approving executive directors’ remuneration including bonuses and share option grants. The Audit
Committee reviews the Group’s annual and interim financial statements and reviews reports on the effectiveness of the Group’s
internal controls. It also appoints the external auditors, reviews the scope and results of the external audit and monitors the relationship
with the auditors. The Audit Committee comprises two of the four non-executive directors of the Group, Mr Peter Coyne (Committee
Chairman) and Mr James Merselis. The Compensation Committee currently comprises Mr Ronan O’Caoimh (Committee Chairman)
and Dr Jim Walsh. The Board of Directors administers the Employee Share Option Plan. The Board determines the exercise price and
the term of the options. Individual option grants of less than 30,000 ‘A’ ordinary shares (7,500 ADRs) are approved by the
Compensation Committee. Options granted to the members of the Compensation Committee are approved by the Remuneration
Committee and share options granted to non-executive directors are decided by the other members of the board.
Because Trinity Biotech is a foreign private issuer, it is not required to comply with all of the corporate governance requirements set
forth in NASDAQ Rule 5600 as they apply to U.S. domestic companies. The Group’s corporate governance measures differ in the
following significant ways: (a) the Group has not appointed an independent nominations committee or adopted a board resolution
addressing the nominations process and (b) the Audit Committee of the Group currently consists of two members (both of whom are
non-executive directors) – while U.S. domestic companies listed on NASDAQ are required to have three members on their audit
committee and be comprised only of independent directors.
Employees
During 2017, Trinity Biotech had an average of 556 employees (2016: 582) consisting of 60 research scientists and technicians, 334
manufacturing and quality assurance employees, and 162 finance, administration, sales and marketing staff (2016: 73 research
scientists and technicians, 348 manufacturing and quality assurance employees, and 161 finance, administration, sales and marketing
staff). Trinity Biotech’s future hiring levels will depend on the growth of revenues.
The geographic spread of the Group’s average employees is as follows: 356 in our U.S. operations, 172 in Bray, Ireland, 4 in Uppsala,
Sweden, 2 in the UK and 22 in Sao Paulo, Brazil.
Stock Option Plans
The Board of Directors have adopted the Employee Share Option Plans (the “Plans”); with the most recently adopted Share Option
Plan being the 2017 Plan. The purpose of these Plans is to provide Trinity Biotech’s employees, consultants, officers and directors
with additional incentives to improve Trinity Biotech’s ability to attract, retain and motivate individuals upon whom Trinity Biotech’s
sustained growth and financial success depends. These Plans are administered by the Board of Directors. Options under the Plans may
be awarded only to employees, officers, directors and consultants of Trinity Biotech.
The exercise price of options is determined by the Board of Directors. The term of an option will be determined by the Board,
provided that the term may not exceed ten years from the date of grant. Option grants up to 30,000 ‘A’ ordinary shares (7,500 ADRs)
are administered by the Compensation Committee. The Committee will also determine the exercise price and term of these options.
All options will terminate 90 days after termination of the option holder’s employment, service or consultancy with Trinity Biotech (or
one year after such termination because of death or disability) except where a longer period is approved by the board of directors.
69
Under certain circumstances involving a change in control of Trinity Biotech, the Board may accelerate the exercisability and
termination of options.
As of February 28, 2018, 8,770,000 (2,192,500 ADS equivalent) of the options outstanding were held by the directors and Company
Secretary of Trinity Biotech as follows:
Director/Company Secretary
Ronan O’Caoimh
Denis Burger
Jim Walsh
Peter Coyne
Clint Severson
James Merselis
Kevin Tansley
Number of
Options ‘A’
Shares
800,000
800,000
2,244,000
60,000
662,000
500,000
160,000
750,000
60,000
60,000
210,000
20,000
60,000
210,000
40,000
60,000
210,000
500,000
500,000
864,000
Number of
Options
ADS
Equivalent
200,000
200,000
561,000
15,000
165,500
125,000
40,000
187,500
15,000
15,000
52,500
5,000
15,000
52,500
10,000
15,000
52,500
125,000
125,000
216,000
Exercise
Price (Per
‘A’ Share)
US$2.52
US$2.43
US$1.34
US$2.43
US$1.34
US$2.52
US$2.43
US$1.34
US$2.52
US$2.43
US$1.34
US$2.52
US$2.43
US$1.34
US$2.52
US$2.43
US$1.34
US$2.52
US$2.43
US$1.34
Exercise Price
(Per ADS)
US$10.09
Expiration Date of
Options
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
US$9.73 24 February 2023
US$5.35 7 September 2024
US$10.09
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
US$10.09
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
US$10.09
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
US$10.09
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
US$10.09
7 March 2019
US$9.73 24 February 2023
US$5.35 7 September 2024
As of February 28, 2018 the following total options were outstanding:
Total options outstanding
Number of ‘A’
Ordinary Shares
Subject to Option
10,977,376
Range of
Exercise Price
per Ordinary Share
US$1.24-US$4.36
Range of Exercise Price
per ADS
US$4.95-US$17.44
As of February 28, 2018 there were no warrants to purchase ‘A’ Ordinary Shares in the Company outstanding.
70
Item 7 Major Shareholders and Related Party Transactions
As of February 28, 2018 Trinity Biotech has outstanding 96,162,410 ‘A’ Ordinary shares. Such totals exclude 10,937,374 shares
issuable upon the exercise of outstanding options and warrants.
The following table sets forth, as of February 28, 2018, the Trinity Biotech ‘A’ Ordinary Shares beneficially held by (i) each person
believed by Trinity Biotech to beneficially hold 5% or more of such shares, (ii) each director and the Company Secretary of Trinity
Biotech, and (iii) all directors and the Company Secretary as a group.
Except as otherwise noted, all of the persons and groups shown below have sole voting and investment power with respect to the
shares indicated. The Group is not controlled by another corporation or government.
Paradice Investment Management LLC
Janus Capital Management LLC
Heartland Advisors, Inc.
Ronan O’Caoimh
Jim Walsh
Denis Burger
Peter Coyne
Clint Severson
James Merselis
Kevin Tansley
Directors & Co. Secretary as a group (7
persons)
Number of ‘A’
Ordinary Shares
Beneficially
Owned
6,557,184
5,657,164
5,384,600
7,481,501(1)
2,803,610(2)
754,000(3)
360,000(4)
578,000(5)
498,600(6)
2,014,000(7)
Number of
ADSs
Beneficially
Owned
1,639,296
1,414,291
1,346,150
1,870,375
700,903
188,500
90,000
144,500
124,650
503,500
Percentage
‘A’ Ordinary
Shares (8)
6.1%
5.3%
5.0%
7.0%
2.6%
0.7%
0.3%
0.5%
0.5%
1.9%
Percentage
Total
Voting
Power
6.1%
5.3%
5.0%
7.0%
2.6%
0.7%
0.3%
0.5%
0.5%
1.9%
14,489,711(1)(2)(3)(4)(5)(6)(7) 3,622,428
13.5%
13.5%
(1)
(2)
Includes 3,844,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 1,410,000 ‘A’ Ordinary shares issuable upon exercise of options. Note that 1,200,000 ‘A’ Ordinary shares (300,000
ADSs) of Dr Walsh’s shares are held in trust for the benefit of Dr Walsh’s immediate family.
Includes 722,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 330,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 290,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 310,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 1,864,000 ‘A’ Ordinary shares issuable upon exercise of options.
(3)
(4)
(5)
(6)
(7)
(8) Percentage ‘A’ Ordinary shares is based upon total outstanding ‘A’ Ordinary shares and total number of shares issuable upon
exercise of options.
71
Related Party Transactions
The Group has entered into various arrangements with JRJ Investments (“JRJ”), a partnership owned by Mr O’Caoimh and Dr Walsh,
directors of Trinity Biotech, and directly with Mr O’Caoimh and Dr Walsh, to provide for current and potential future needs to extend
its premises at IDA Business Park, Bray, Co. Wicklow, Ireland.
In November 2002, the Group entered into an agreement for a 25-year lease with JRJ for offices that adjacent to its then premises at
IDA Business Park, Bray, Co. Wicklow, Ireland. The annual rent of €381,000 (US$432,000) is payable from January 1, 2004.
Upward-only rent reviews are carried out every five years and there have been no increases arising from these rent reviews.
In December 2007, the Group entered into an agreement with Mr. O’Caoimh and Dr Walsh pursuant to which the Group took a 25-
year lease on an additional 43,860 square foot manufacturing facility in Bray, Ireland at a total annual rent of €787,000 (US$892,000).
At the time, independent valuers advised the Group that the rent in respect of each of the leases represents a fair market rent. Upward-
only rent reviews are carried out every five years and there have been no increases arising from these rent reviews.
Trinity Biotech and its directors (excepting Mr O’Caoimh and Dr Walsh who express no opinion on this point) believe at the time that
the arrangements entered into represent a fair and reasonable basis on which the Group can meet its ongoing requirements for
premises.
Darnick Company is wholly-owned by members of Mr. O’Caoimh’s immediate family. On March 30, 2011, the service agreement
with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by a management agreement with Darnick Company.
Pursuant to the agreement, Darnick Company will provide Trinity Biotech with the services of Mr O’Caoimh as Chief Executive
Officer. In 2017, the Group paid US$711,000 to Darnick Company in respect of compensation for provision of CEO services. There is
no balance payable to or receivable from Darnick Company as at December 31, 2017.
Diagnostic Polymers is a company wholly-owned by Jim Walsh and members of his immediate family. In 2017, the Group paid
US$14,000 to Diagnostic Polymers in respect of compensation for provision of executive services. There is no balance payable to or
receivable from Diagnostic Polymers as at December 31, 2017.
Rayville Limited, an Irish registered company, which is wholly owned by the three executive directors and certain other executives of
the Group, owns all of the ‘B’ non-voting Ordinary Shares in Trinity Research Limited, one of the Group’s subsidiaries. The ‘B’
shares do not entitle the holders thereof to receive any assets of the company on a winding up. All of the ‘A’ voting ordinary shares in
Trinity Research Limited are held by the Group. Trinity Research Limited may, from time to time, declare dividends to Rayville
Limited and Rayville Limited may declare dividends to its shareholders out of those amounts. Any such dividends paid by Trinity
Research Limited are ordinarily treated as a compensation expense by the Group in the consolidated financial statements prepared in
accordance with IFRS, notwithstanding their legal form of dividends to minority interests, as this best represents the substance of the
transactions.
The last dividend paid by Trinity Research Limited to Rayville Limited was in June 2009 for US$2,830,000. At the time, this amount
was immediately lent back by Rayville Limited to Trinity Research Limited. Since then US$1,788,000 of these loans have been
repaid and recognised as a compensation expense by the Group. As of December 31, 2016 and December 31, 2017, the remaining
amount of the loan was US$1,042,000. As this remaining amount of the original dividend is matched by a loan from Rayville Limited
to Trinity Research Limited which is repayable solely at the discretion of the Remuneration Committee of the Board and is unsecured
and interest free, the Group netted the dividend paid to Rayville Limited against the corresponding loan from Rayville Limited in the
2016 and 2017 consolidated financial statements.
The amount of payments to Rayville included in compensation expense was US$Nil for 2017, 2016, 2015 and 2014. There were no
dividends payable to Rayville Limited as at December 31, 2017, 2016, 2015 or 2014.
72
Item 8 Financial Information
Legal Proceedings
In 2017, a dispute arose over the application of the terms of a licence agreement to which the Company is a party. Rather than undergo
a lengthy and costly legal dispute, both parties reached a mutually acceptable agreement. The parties intend to sign an agreement in
2018 that extends the term of the licence and settles the dispute in relation to past royalties. The consolidated statement of operations
for the year ended December 31, 2017 includes a charge of US$497,000 relating to the settlement, comprising back royalties covering
a period of five years plus legal fees incurred up to the point of settlement.
In 2008 Trinity Biotech filed a civil suit with a New York court against the former shareholders of Primus Corporation. Trinity
Biotech claimed that the defendants unjustly received an overpayment of US$512,000 based on the fraudulent and wrongful
calculation of the earnout payable to the shareholders of Primus Corporation. Trinity Biotech also alleged that one of the former
shareholders, Mr Thomas Reidy, failed to return stock certificates and collateral pledged by Trinity Biotech as security for the
payment of a US$3 million promissory note given to the defendants by Trinity Biotech as part of compensation under the share
purchase agreement for acquiring Primus. During 2009, all of the defendants with the exception of Mr. Reidy settled the legal
action. The US District Court, Southern District of New York granted a judgment against Mr. Reidy ordering him to pay Trinity
damages of US$200,000 plus interest and to return stock certificates and collateral pledged by Trinity Biotech as security for the
payment of the US$3 million promissory note. Mr Reidy has paid Trinity Biotech US$5,000 to date.
There are also a small number of legal cases being brought against the Group by certain of its former employees. There is a provision
for cases where payment is considered by management to be probable. The ultimate resolution of the aforementioned proceedings is
not expected to have a material adverse effect on the Group’s financial position, results of operations or cash flows.
In 2010, Laboratoires Nephrotek, formerly a distributor for Trinity Biotech, took a legal action in France against the Group, claiming
damages of US$0.8 million. They claimed that certain instruments supplied by Trinity Biotech did not operate properly in the field. In
2013, Trinity Biotech successfully defended this claim in the French courts. In 2017, the French courts heard Nephrotek’s appeal and
again found in favour of Trinity Biotech. This case is now closed.
The ultimate resolution of the aforementioned proceedings is not expected to have a material adverse effect on our financial position,
results of operations or cash flows.
Item 9 The Offer and Listing
Trinity Biotech’s ADSs are listed on the NASDAQ Global Market under the symbol “TRIB”. In 2005, Trinity Biotech adjusted the
ratio of ADSs to Ordinary Shares and changed its NASDAQ Listing from the NASDAQ Small Capital listing to a NASDAQ National
Market Listing. The ratio of ADSs to underlying Ordinary Shares has changed from 1 ADS : 1 Ordinary Share to 1 ADS : 4 Ordinary
Shares and all historical data has been restated as a result.
The Group’s ‘A’ Ordinary Shares were also listed and traded on the Irish Stock Exchange until November 2007, whereby the
Company de-listed from the Irish Stock Exchange. The Group’s depository bank for ADSs is The Bank of New York Mellon. On
February 28, 2018, the reported closing sale price of the ADSs was US$5.46 per ADS. The following tables set forth the range of
quoted high and low sale prices of Trinity Biotech’s ADSs for (a) the years ended December 31, 2013, 2014, 2015, 2016 and 2017; (b)
the quarters ended March 31, June 30, September 30 and December 31, 2016; March 31, June 30, September 30 and December 31,
2017; and (c) the months of March, April, May, June, July, August, September, October, November and December 2017 and January
and February 2018 as reported on NASDAQ. These quotes reflect inter-dealer prices without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
73
ADSs
ADSs
ADSs
ADSs
Year Ended December 31
2013
2014
2015
2016
2017
2016
Quarter ended March 31
Quarter ended June 30
Quarter ended September 30
Quarter ended December 31
2017
Quarter ended March 31
Quarter ended June 30
Quarter ended September 30
Quarter ended December 31
Month Ended
March 31, 2017
April 30, 2017
May 31, 2017
June 30, 2017
July 31, 2017
August 31, 2017
September 30, 2017
October 31, 2017
November 30, 2017
December 31, 2017
January 31, 2018
February 28, 2018
High
US$25.63
US$28.06
US$20.24
US$13.68
US$7.04
High
US$12.02
US$12.17
US$13.68
US$13.15
High
US$7.04
US$6.15
US$6.13
US$5.77
High
US$6.19
US$6.15
US$5.64
US$6.07
US$6.13
US$5.99
US$5.67
US$5.52
US$5.28
US$5.77
US$5.63
US$5.74
Low
US$14.30
US$14.00
US$10.74
US$5.76
US$4.50
Low
US$9.20
US$10.37
US$10.51
US$5.76
Low
US$5.31
US$5.25
US$5.16
US$4.50
Low
US$5.31
US$5.48
US$5.25
US$5.68
US$5.56
US$5.16
US$5.33
US$4.50
US$4.82
US$4.74
US$5.08
US$5.37
The number of record holders of Trinity Biotech’s ADSs as at February 28, 2018 amounts to 511, inclusive of those brokerage firms
and/or clearing houses holding Trinity Biotech’s securities for their clients (with each such brokerage house and/or clearing house
being considered as one holder).
74
Item 10 Additional Information
The following is a summary of certain provisions of the Articles of Association of Trinity Biotech plc. This summary does not purport
to be complete and is qualified in its entirety by reference to the complete text of the Articles, which are included as an exhibit to this
annual report.
Objects
The Company’s objects, detailed in Clause 3 of its Memorandum of Association, are varied and wide ranging and include the carrying
on of the business of researchers, manufacturers, buyers, sellers and distributors of all kinds of patents, pharmaceutical, medicinal and
diagnostic preparations, equipment, drugs and accessories of every description. They also include the power to acquire shares or other
interests or securities in other companies or businesses and to exercise all rights in relation thereto. The Company’s registered number
in Ireland is 183476.
Powers and Duties of Directors
The directors may make such arrangements as may be thought fit for the management of the Company’s affairs in the Republic of
Ireland or abroad.
A director may enter into a contract and be interested in any contract or proposed contract with the Company either as vendor,
purchaser or otherwise and shall not be liable to account for any profit made by him resulting therefrom provided that he has first
disclosed the nature of his interest in such a contract at a meeting of the board as required by Section 231 of the Irish Companies Act
2014. Generally, a director must not vote in respect of any contract or arrangement or any proposal in which he has a material interest
(otherwise than by virtue of his holding of shares or debentures or other securities in or through the Company). In addition, a director
shall not be counted in the quorum at a meeting in relation to any resolution from which he is barred from voting.
A director is entitled to vote and be counted in the quorum in respect of certain arrangements in which he is interested (in the absence
of some other material interest). These include the giving of a security or indemnity to him in respect of money lent or obligations
incurred by him for the Group, the giving of any security or indemnity to a third party in respect of a debt or obligation of the Group
for which he has assumed responsibility, any proposal concerning an offer of shares or other securities in which he may be interested
as a participant in the underwriting or sub-underwriting and any proposal concerning any other company in which he is interested
provided he is not the holder of or beneficially interested in 1% or more of the issued shares of any class of share capital of such
company or of voting rights.
The Board may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and
uncalled capital and to issue debentures and other securities. The Board is obliged to restrict its borrowings to ensure that the
aggregate amount outstanding of all monies borrowed by the Group does not, without the previous sanction of an ordinary resolution
of the Company, exceed an amount equal to twice the Adjusted Capital and Reserves (as defined in the Articles of Association).
However, no lender or other person dealing with the Company shall be obliged to see or to inquire whether the limit imposed is
observed and no debt incurred in excess of such limit will be invalid or ineffectual unless the lender has express notice at the time
when the debt is incurred that the limit was or was to be exceeded.
Directors are not required to retire upon reaching any specific age and are not required to hold any shares in the capital of the Group.
The Articles provide for retirement of the directors by rotation.
One third of the directors other than a director holding executive office or, if their number is not three or a multiple of three, then the
number nearest to but not exceeding one third, shall retire from office at each annual general meeting. If, however, the number of
directors subject to retirement by rotation is two, one of such directors shall retire. If the number of such directors is one, that director
shall retire. Subject to the terms of the Articles, the directors to retire at each annual general meeting shall be the directors who have
been longest in office since their last appointment. Where directors are of equal seniority, the directors to retire shall, in the absence of
agreement, be selected by lot. A retiring director shall be eligible for re-appointment and shall act as director throughout the meeting
at which he retires. A separate motion must be put to a meeting in respect of each director to be appointed unless the meeting itself has
first agreed that a single resolution is acceptable without any vote being given against it.
75
Rights, Preferences and Restrictions Attaching to Shares
The Company may, subject to the provisions of the Irish Companies Act 2014, issue any share on the terms that it is, or at the option
of the Company is to be liable, to be redeemed on such terms and in such manner as the Company may determine by special
resolution.
At a general meeting, on a show of hands, every member who is present in person or by proxy and entitled to vote shall have one vote
(so, however, that no individual shall have more than one vote) and upon a poll, every member present in person or by proxy shall
have one vote for every share carrying voting rights of which he is the holder. In the case of joint holders, the vote of the senior (being
the first person named in the register of members in respect of the joint holding) who tendered a vote, whether in person or by proxy,
shall be accepted to the exclusion of votes of the other joint holders.
Subject to any conditions of allotment, the directors may from time to time make calls on members in respect of monies unpaid on
their shares. At least 14 days notice must be given of each call. A call shall be deemed to have been made at the time when the
resolution of the directors authorising such call was passed.
Where a shareholder or person who appears to be interested in shares fails to comply with a request for information from the Company
in relation to the capacity in which such shares or interest are held, who is interested in them or whether there are any voting
arrangements, that shareholder or person may be served with a disenfranchisement notice and may thereby be restricted from
transferring the shares and exercising the voting rights or receiving any sums in respect of the shares (except in the case of a
liquidation).
In addition, if cheques in respect of the last three dividends paid to a shareholder remain uncashed, the Company is, subject to
compliance with the procedure set out in the Articles of Association, entitled to sell the shares of that shareholder.
Before recommending a dividend, the directors may reserve out of the profits of the Company such sums as they think proper which
shall be applicable for any purpose to which the profits of the Company may properly be applied and, pending such application, may
be either employed in the business of the Company or be invested in such investments (other than shares of the Company or of its
holding company (if any)) as the directors may from time to time think fit.
The Company may by ordinary resolution convert any paid up shares into stock and reconvert any stock into paid up shares of any
denomination. The holders of stock may transfer the same or any part thereof in the same manner and according to the same
regulations to which the converted shares were subject.
Action Necessary to Change the Rights of Shareholders
In order to change the rights attaching to any class of shares, a special resolution passed at a class meeting of the holders of such
shares is required. The provisions in relation to general meetings apply to such class meetings except the quorum shall be two persons
holding or representing by proxy at least one third in nominal amount of the issued shares of that class. In addition, in order to amend
any provisions of the Articles of Association in relation to rights attaching to shares, a special resolution of the shareholders as a
whole is required. The special rights attached to any class of shares in the capital of the Company shall not be deemed to be varied by
the creation or issue of further shares ranking pari passu.
Calling of AGMs and EGMs of Shareholders
The Company must hold a general meeting as its annual general meeting each year. Not more than 15 months can elapse between
annual general meetings. The annual general meetings are held at such time and place as the directors determine and all other general
meetings are called extraordinary general meetings. Every general meeting shall be held in the Republic of Ireland unless all of the
members entitled to attend and vote at such meeting consent in writing to it being held elsewhere or a resolution providing that it be
held elsewhere was passed at the preceding annual general meeting. The directors may at any time call an extraordinary general
meeting and such meetings may also be convened on such requisition, or in default may be convened by such requisitions, as is
provided by the Irish Companies Act 2014.
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In the case of an annual general meeting or a meeting at which a special resolution is proposed, 21 clear days’ notice of the meeting is
required and in any other case seven clear days’ notice is required. Notice must be given in writing to all members and to the auditors
in accordance with the Articles of Association and must state the details specified in the Articles of Association. A general meeting
(other than one at which a special resolution is to be proposed) may be called on shorter notice subject to the agreement of the auditors
and all members entitled to attend and vote at it. In certain circumstances provided for in the Irish Companies Act 2014, extended
notice of a general meeting is required. These include a meeting at which a resolution for the removal of a director before the
expiration of his term of office is proposed.
No business may be transacted at a general meeting unless a quorum is present. Five members present in person or by proxy (not
being less than five individuals) representing not less than 40% of the ordinary shares shall be a quorum. The Company is not obliged
to serve notices upon members who have not served notice on the Company of an address in the Republic of Ireland or the U.S. but
otherwise there are no specific limitations in the Articles of Association restricting the rights of non-resident or foreign shareholders to
hold or exercise voting rights respect of shares in the Company.
However, the Financial Transfers Act, 1992 and regulations made thereunder prevent transfers of capital or payments between Ireland
and certain countries. These restrictions on financial transfers are more comprehensively described in “Exchange Controls” below. In
addition, Irish competition law may restrict the acquisition by a party of shares in the Company but this does not apply on the basis of
nationality or residence.
Other Provisions of the Memorandum and Articles of Association
The Memorandum and Articles of Association do not contain any specific provisions:
• which would have an effect of delaying, deferring or preventing a change in control of the Company and which would
operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its
subsidiaries); or
governing the ownership threshold above which a shareholder ownership must be disclosed; or
imposing conditions governing changes in the capital which are more stringent than is required by Irish law.
•
•
The Company incorporates by reference all other information concerning its Memorandum and Articles of Association from the
Registration Statement on Form F-1 on June 12, 1992.
Irish Law
As required by the Companies Act 2014, all of Trinity Biotech’s private limited companies incorporated in Ireland (refer to Note 32)
have been converted into the new form of private limited company. Pursuant to Irish law, Trinity Biotech must maintain a register of
its shareholders. This register is open to inspection by shareholders free of charge and to any member of the public on payment of a
small fee. The books containing the minutes of proceedings of any general meeting of Trinity Biotech are required to be kept at the
registered office of the Company and are open to the inspection of any member without charge. Minutes of meetings of the Board of
Directors are not open to scrutiny by shareholders. Trinity Biotech is obliged to keep proper accounting records. The shareholders
have no statutory right to inspect the accounting records. The only financial records, which are open to the shareholders, are the
financial statements, which are sent to shareholders with the annual report. Irish law also obliges Trinity Biotech to file information
relating to certain events within the Company (changes to share rights, changes to the Board of Directors). This information is filed
with the Companies Registration Office (the “CRO”) in Dublin and is open to public inspection. The Articles of Association of Trinity
Biotech permit ordinary shareholders to approve corporate matters in writing provided that it is signed by all the members for the time
being entitled to vote and attend at general meeting. Ordinary shareholders are entitled to call a meeting by way of a requisition. The
requisition must be signed by ordinary shareholders holding not less than one-tenth of the paid up capital of the Company carrying the
right of voting at general meetings of the Company. Trinity Biotech is generally permitted, subject to company law, to issue shares
with preferential rights, including preferential rights as to voting, dividends or rights to a return of capital on a winding up of the
Company. Any shareholder who complains that the affairs of the Company are being conducted or that the powers of the directors of
the Company are being exercised in a manner oppressive to him or any of the shareholders (including himself), or in disregard of his
or their interests as shareholders, may apply to the Irish courts for relief. Shareholders have no right to maintain proceedings in respect
of wrongs done to the Company.
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Ordinarily, our directors owe their duties only to Trinity Biotech and not its shareholders. The duties of directors are twofold,
fiduciary duties and duties of care and skill. Fiduciary duties are owed by the directors individually and owed to Trinity Biotech.
Those duties include duties to act in good faith towards Trinity Biotech in any transaction, not to make use of any money or other
property of Trinity Biotech, not to gain directly or indirectly any improper advantage for himself at the expense of Trinity Biotech, to
act bona fide in the interests of Trinity Biotech and exercise powers for the proper purpose. A director need not exhibit in the
performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
When directors, as agents in transactions, make contracts on behalf of the Company, they generally incur no personal liability under
these contracts.
It is Trinity Biotech, as principal, which will be liable under them, as long as the directors have acted within Trinity Biotech’s objects
and within their own authority. A director who commits a breach of his fiduciary duties shall be liable to Trinity Biotech for any profit
made by him or for any damage suffered by Trinity Biotech as a result of the breach. In addition to the above, a breach by a director of
his duties may lead to a sanction from a Court including damages of compensation, summary dismissal of the director, a requirement
to account to Trinity Biotech for profit made and restriction of the director from acting as a director in the future.
Material Contracts
Other than contracts entered into in the ordinary course of business, the following represents the material contracts entered into by the
Group:
Acquisition of Immco Diagnostics Inc
In 2013, the Group purchased 100% of the common stock of Immco Diagnostics Inc for a total consideration of US$32.88m. Immco,
which is headquartered in Buffalo, New York, is a diagnostic company specialising in the development, manufacture and sale of
autoimmune test kits on a worldwide basis.
The key terms of the acquisition are as follows:
• Cash consideration of US$31,652,000;
•
Issuance of share option as at the acquisition date with a fair value of US$1,121,000; and
The transfer of 5,566 Trinity Biotech ADSs as at the acquisition date (fair value of US$110,000).
•
Acquisition of Fiomi Diagnostics AB
In 2012, the Group purchased 100% of the common stock of Fiomi Diagnostics AB for a total consideration of US$12.9 million
(including US$3.2m of contingent payments – net of interest of US$0.2m).
The key terms of the acquisition are as follows:
• An up-front cash payment of US$5.6m;
•
• Contingent cash consideration (net present value) of US$3.2m.
The transfer of 408,000 Trinity Biotech ADSs as at the acquisition date (fair value of US$4.1m); and
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Exchange Controls and Other Limitations
Affecting Security Holders
Irish exchange control regulations ceased to apply from and after December 31, 1992. Except as indicated below, there are no
restrictions on non-residents of Ireland dealing in domestic securities, which includes shares or depositary receipts of Irish companies
such as Trinity Biotech. Except as indicated below, dividends and redemption proceeds also continue to be freely transferable to non-
resident holders of such securities. The Financial Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make
provision for the restriction of financial transfers between Ireland and other countries and persons. Financial transfers are broadly
defined and include all transfers that would be movements of capital or payments within the meaning of the treaties governing the
member states of the European Union. The acquisition or disposal of ADSs or ADRs representing shares issued by an Irish
incorporated company and associated payments falls within this definition. In addition, dividends or payments on redemption or
purchase of shares and payments on a liquidation of an Irish incorporated company would fall within this definition.
At present the Financial Transfers Act, 1992 prohibits financial transfers involving the late Slobodan Milosevic and associated
persons, Burma (Myanmar), Belarus, certain persons indicted by the International Criminal Tribunal for the former Yugoslavia, the
late Osama bin Laden, Al-Qaida, the Taliban of Afghanistan, Democratic Republic of Congo, Democratic People’s Republic of Korea
(North Korea), Iran, Iraq, Côte d’Ivoire, Lebanon, Liberia, Zimbabwe, Sudan, Somalia, Republic of Guinea, Afghanistan, Egypt,
Eritrea, Libya, Syria, Tunisia, certain known terrorists and terrorist groups, and countries that harbour certain terrorist groups, without
the prior permission of the Central Bank of Ireland.
Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United
Nations sanctions, any person or body controlled by any of the foregoing, or by any person acting on behalf of the foregoing, may be
subject to restrictions pursuant to such sanctions as implemented into Irish law. We do not anticipate that orders under the Financial
Transfers Act, 1992 or United Nations sanctions implemented into Irish law will have a material effect on our business.
Taxation
The following discussion is based on U.S. and Republic of Ireland tax law, statutes, treaties, regulations, rulings and decisions all as of
the date of this annual report. Taxation laws are subject to change, from time to time, and no representation is or can be made as to
whether such laws will change, or what impact, if any, such changes will have on the statements contained in this summary. No
assurance can be given that proposed amendments will be enacted as proposed, or that legislative or judicial changes, or changes in
administrative practice, will not modify or change the statements expressed herein.
This summary is of a general nature only. It does not constitute legal or tax advice nor does it discuss all aspects of Irish taxation that
may be relevant to any particular Irish Holder or U.S. Holder of ordinary shares or ADSs.
This summary does not discuss all aspects of Irish and U.S. federal income taxation that may be relevant to a particular holder of
Trinity Biotech ADSs in light of the holder’s own circumstances or to certain types of investors subject to special treatment under
applicable tax laws (for example, financial institutions, life insurance companies, tax-exempt organisations, and non-U.S. taxpayers)
and it does not discuss any tax consequences arising under the laws of taxing jurisdictions other than the Republic of Ireland and the
U.S. federal government. The tax treatment of holders of Trinity Biotech ADSs may vary depending upon each holder’s own
particular situation.
Prospective purchasers of Trinity Biotech ADSs are advised to consult their own tax advisors as to the US, Irish or other tax
consequences of the purchase, ownership and disposition of such ADSs.
U.S. Federal Income Tax Consequences to U.S. Holders
The following is a summary of certain material U.S. federal income tax consequences that generally would apply with respect to the
ownership and disposition of Trinity Biotech ADSs, in the case of a holder of such ADSs who is a U.S. Holder (as defined below) and
who holds the ADSs as capital assets. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect on the date hereof
and all of which are subject to change either prospectively or retroactively. For the purposes of this summary, a U.S. Holder is: an
individual who is a citizen or a resident of the United States; a corporation created or organised in or under the laws of the United
States or any political subdivision thereof; an estate whose income is subject to U.S. federal income tax regardless of its source; or a
trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons or
(b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
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This summary does not address all tax considerations that may be relevant with respect to an investment in ADSs. This summary does
not discuss all the tax consequences that may be relevant to a U.S. Holder in light of such Holder’s particular circumstances or to U.S.
Holders subject to special rules, including persons that are not U.S. holders, broker dealers, financial institutions, certain insurance
companies, investors liable for alternative minimum tax, tax exempt organisations, regulated investment companies, non-resident
aliens of the U.S. or taxpayers whose functional currency is not the U.S. Dollar, persons who hold ADSs through partnerships or other
pass-through entities, persons who acquired their ADSs through the exercise or cancellation of employee stock options or otherwise as
compensation for services, investors that actually or constructively own 10% or more of Trinity Biotech’s voting shares, and investors
holding ADSs as part of a straddle or appreciated financial position or as part of a hedging or conversion transaction.
If an entity treated as a partnership for U.S. federal income tax purposes owns ADSs, the U.S. federal income tax treatment of a
partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership. The partners in a
partnership which owns ADSs should consult their tax advisors about the U.S. federal income tax consequences of holding and
disposing of ADSs.
This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation. In addition, this
summary does not include any discussion of state, local or foreign taxation. You are urged to consult your tax advisors regarding the
foreign and U.S. federal, state and local tax considerations of an investment in ADSs.
For U.S. federal income tax purposes, U.S. Holders of Trinity Biotech ADSs will be treated as owning the underlying Class ‘A’
Ordinary Shares represented by the ADSs held by them. This discussion assumes such treatment is respected.
Dividends and Other Distributions on ADSs
The gross amount of any distribution made by Trinity Biotech to U.S. Holders with respect to the underlying shares represented by the
ADSs held by them, including the amount of any Irish taxes withheld from such distribution, will be treated for U.S. federal income
tax purposes as a dividend to the extent of Trinity Biotech’s current and accumulated earnings and profits, as determined for U.S.
federal income tax purposes. The amount of any such distribution that exceeds Trinity Biotech’s current and accumulated earnings and
profits will be applied against and reduce a U.S. Holder’s tax basis in the U.S. Holder’s ADSs, and any amount of the distribution
remaining after the U.S. Holder’s tax basis has been reduced to zero will constitute capital gain. However, there can be no assurances
we will calculate earnings and profits under U.S. federal income tax principles. Therefore, any distribution we make to you may be
reported as a dividend. The capital gain will be treated as a long-term or short-term capital gain depending on whether or not the U.S.
Holder’s ADSs have been held for more than one year as of the date of the distribution.
Dividends paid by Trinity Biotech generally will not qualify for the dividends received deduction otherwise available to U.S.
corporate shareholders.
Subject to complex limitations, any Irish withholding tax imposed on such dividends will be a foreign income tax eligible for credit
against a U.S. Holder’s U.S. federal income tax liability (or, alternatively, for deduction against income in determining such tax
liability) where certain conditions are satisfied. The limitations set out in the Code include computational rules under which foreign
tax credits allowable with respect to specific classes of income, commonly referred to as “baskets,” cannot exceed the U.S. federal
income taxes otherwise payable with respect to each such class of income. Dividends generally will be treated as foreign-source
passive category income or, in the case of certain U.S. Holders, general category income for U.S. foreign tax credit purposes. Further,
there are special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to a reduced tax, see
discussion below.
A U.S. Holder will be denied a foreign tax credit with respect to Irish income tax withheld from dividends received on the ADSs to the
extent such U.S. Holder has not held the ADSs for at least 16 days of the 31-day period beginning on the date which is 15 days before
the ex-dividend date, or to the extent such U.S. Holder is under an obligation to make related payments with respect to substantially
similar or related property. Any days during which a U.S. Holder has substantially diminished its risk of loss on the ADSs are not
counted toward meeting the 16-day holding period required by the Code. If a refund of the tax withheld is available to you under the
laws of Ireland or under the United States and Ireland treaty (the “Treaty”), the amount of tax withheld that is refundable will not be
eligible for such credit against your U.S. federal income tax liability (and will not be eligible for the deduction against your U.S.
federal taxable income). The rules relating to the determination of the foreign tax credit are complex, and you should consult with
your personal tax advisors to determine whether and to what extent you would be entitled to this credit against your U.S. federal
income tax liability.
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Subject to certain limitations, including the PFIC rules discussed below, “qualified dividend income” received by a noncorporate U.S.
Holder will be subject to tax at lower rates. Distributions taxable as dividends paid on the ADSs should qualify as qualified dividend
income provided that either: (i) we are entitled to benefits under the Treaty or (ii) the ADSs are readily tradable on an established
securities market in the U.S. and certain other requirements are met. We believe that we are entitled to benefits under the Treaty and
that the ADSs currently are readily tradable on an established securities market in the U.S. However, no assurance can be given that
the ordinary shares will remain readily tradable. The rate reduction does not apply unless certain holding period requirements are
satisfied. With respect to the ADSs, the U.S. Holder must have held such ADSs for at least 61 days during the 121-day period
beginning 60 days before the ex-dividend date. The rate reduction also does not apply to dividends received from passive foreign
investment companies, see discussion below, or in respect of certain hedged positions or in certain other situations. The legislation
enacting the reduced tax rate contains special rules for computing the foreign tax credit limitation of a taxpayer who receives
dividends subject to the reduced tax rate. U.S. Holders of ADSs should consult their own tax advisors regarding the effect of these
rules in their particular circumstances.
Dispositions of the ADSs
Upon a sale or exchange of ADSs, a U.S. Holder will recognise a gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realised on the sale or exchange and the U.S. Holder’s adjusted tax basis in the ADSs sold or
exchanged. Such gain or loss generally will be capital gain or loss and will be long-term or short-term capital gain or loss depending
on whether the U.S. Holder has held the ADSs sold or exchanged for more than one year at the time of the sale or exchange. If you are
a non-corporate U.S. Holder, long-term capital gains may be eligible for reduced tax rates.
Passive Foreign Investment Company
For U.S. federal income tax purposes, a foreign corporation is treated as a “passive foreign investment company” (or “PFIC”) in any
taxable year in which, after taking into account the income and assets of the corporation and certain of its subsidiaries pursuant to the
applicable “look through” rules, either (1) at least 75% of the corporation’s gross income is passive income or (2) at least 50% of the
average value of the corporation’s assets is attributable to assets that produce passive income or are held for the production of passive
income. Based on the nature of its present business operations, assets and income, Trinity Biotech believes that for the year 2016, it is
not a PFIC. However, no assurance can be given that changes will not occur in Trinity Biotech’s business operations, assets and
income that might cause it to be treated as a PFIC at some future time.
If Trinity Biotech were to become a PFIC, a U.S. Holder of ADSs would be required to allocate to each day in the holding period for
such U.S. Holder’s ADSs a pro rata portion of any distribution received (or deemed to be received) by the U.S. Holder from Trinity
Biotech, to the extent the distribution so received constitutes an “excess distribution,” as defined under U.S. federal income tax law.
Generally, a distribution received during a taxable year by a U.S. Holder with respect to the underlying shares represented by any of
the U.S. Holder’s ADSs would be treated as an “excess distribution” to the extent that the distribution so received, plus all other
distributions received (or deemed to be received) by the U.S. Holder during the taxable year with respect to such underlying shares, is
greater than 125% of the average annual distributions received by the U.S. Holder with respect to such underlying shares during the
three preceding years (or during such shorter period as the U.S. Holder may have held the ADSs). Any portion of an excess
distribution that is treated as allocable to one or more taxable years prior to the year of distribution during which Trinity Biotech was
classified as a PFIC would be subject to U.S. federal income tax in the year in which the excess distribution is made, but it would be
subject to tax at the highest tax rate applicable to the U.S. Holder in the prior tax year or years. The U.S. Holder also would be subject
to an interest charge, in the year in which the excess distribution is made, on the amount of taxes deemed to have been deferred with
respect to the excess distribution. In addition, any gain recognised on a sale or other disposition of a U.S. Holder’s ADSs, including
any gain recognised on a liquidation of Trinity Biotech, would be treated in the same manner as an excess distribution. Any such gain
would be treated as ordinary income rather than as capital gain.
If Trinity Biotech became a PFIC, a U.S. Holder may make a “qualifying electing fund” (or “QEF”) election in the year Trinity
Biotech first becomes a PFIC or in the year the U.S. Holder acquires the ADSs, whichever is later. This election provides for a current
inclusion of Trinity Biotech’s ordinary income and capital gain income in the U.S. Holder’s U.S. taxable income. In return, any gain
on sale or other disposition of a U.S. Holder’s ADSs in Trinity Biotech, if it were classified as a PFIC, will be treated as capital, and
the interest penalty will not be imposed. This election is not made by Trinity Biotech, but by each U.S. Holder. Trinity Biotech must
provide certain information to the U.S. Holder in order to qualify as a QEF. U.S. Holders should contact their tax advisor for further
information on this area.
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Alternatively, if the ADSs are considered “marketable stock” a U.S. Holder may elect to “mark-to-market” its ADSs, and such U.S.
Holder would not be subject to the rules described above. Instead, such U.S. Holder would generally include in income any excess of
the fair market value of the ADSs at the close of each tax year over its adjusted basis in the ADSs. If the fair market value of the ADSs
had depreciated below the U.S. Holders adjusted basis at the close of the tax year, the U.S. Holder may generally deduct the excess of
the adjusted basis of the ADSs over its fair market value at that time. However, such deductions generally would be limited to the net
mark-to-market gains, if any, that the U.S. Holder included in income with respect to such ADSs in prior years. Income recognised
and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of ADSs with respect to
which the mark-to-market election is made, is treated as ordinary income or loss (except that loss is treated as capital loss to the extent
the loss exceeds the net mark-to-market gains, if any, that a U.S. Holder included in income with respect to such ADSs in prior years).
However, gain or loss from the disposition of ADSs (as to which a “mark-to-market” election was made) in a year in which Trinity
Biotech is no longer a PFIC, will be capital gain or loss. The ADSs should be considered “marketable stock” if they traded at least 15
days during each calendar quarter of the relevant calendar year in more than de minimis quantities.
If a U.S. Holder owns ADSs during any year in which we are a PFIC, the U.S. Holder generally must file an IRS Form 8621 with
respect to Trinity Biotech, generally with the U.S. Holder’s federal income tax return for that year.
Information Reporting and Backup Withholding
Distributions made with respect to underlying shares represented by ADSs and proceeds from the sale, exchange or other disposition
of ADSs may be subject to information reporting to the IRS and to US backup withholding tax. Backup withholding will not apply,
however, if the U.S. Holder (i) is a corporation or comes within certain exempt categories, and demonstrates its eligibility for
exemption when so required, or (ii) furnishes a correct taxpayer identification number and makes any other required certification.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S.
Holder’s U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules
by filing the appropriate claim for refund with the IRS.
Information with Respect to Foreign Financial Assets
U.S. individuals (and, under proposed regulations, certain entities) that hold certain specified foreign financial assets, including stock
in a foreign corporation, with values in excess of certain thresholds are required to file with their U.S. federal income tax return Form
8938, on which information about the assets, including their value, is provided. Taxpayers who fail to file the form when required are
subject to penalties. An exemption from reporting applies to foreign assets held through certain financial institutions. Investors are
encouraged to consult with their own tax advisors regarding the possible application of this disclosure requirement to their investment
in our ordinary shares.
Medicare Contribution Tax
In addition to the income taxes described above, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain
thresholds will be subject to a 3.8% Medicare contribution tax on net investment income, which includes dividends and capital gains.
U.S. Holders may be subject to state or local income and other taxes with respect to their purchase, ownership and disposition
of ADSs. U.S. Holders of ADSs should consult their own tax advisers as to the applicability and effect of any such taxes.
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Republic of Ireland Taxation
For the purposes of this summary, an “Irish Holder” means a holder of ordinary shares or ADSs evidenced by ADSs that
(i) beneficially owns the ordinary shares or ADSs registered in its name; (ii) in the case of individual holders, are resident, ordinarily
resident and domiciled in Ireland under Irish taxation laws; (iii) in the case of holders that are companies, are resident in Ireland under
Irish taxation laws; and (iv) are not also resident in any other country under any double taxation agreement entered into by Ireland.
For Irish taxation purposes, Irish Holders of ADSs will be treated as the owners of the underlying ordinary shares represented by such
ADSs.
Solely for the purposes of this summary of Irish Tax considerations, a “U.S. Holder” means a holder of ordinary shares or ADSs
evidenced by ADSs that (i) beneficially owns the ordinary shares or ADSs registered in its name; (ii) is resident in the United States
for the purposes of the Republic of Ireland/United States Double Taxation Convention (the Treaty); (iii) in the case of an individual
holder, is not also resident or ordinarily resident in Ireland for Irish tax purposes; (iv) in the case of a corporate holder, is not a resident
in Ireland for Irish tax purposes and is not ultimately controlled by persons resident in Ireland; and (v) is not engaged in any trade or
business in Ireland and does not perform independent personal services through a permanent establishment or fixed base in Ireland.
In 2011, the Board decided that it was an appropriate time to commence a dividend policy for the first time in the Company’s history.
The payment of a dividend is generally subject to dividend withholding tax (“DWT”) at the standard rate of income tax in force at the
time the dividend is paid, currently 20%. Under current legislation, where DWT applies, Trinity Biotech will be responsible for
withholding it at source.
DWT will not be withheld where an exemption applies and where Trinity Biotech has received all necessary documentation from the
recipient prior to payment of the dividend.
Corporate Irish Holders will generally be entitled to claim an exemption from DWT by delivering a declaration which confirms that
the company is resident in Ireland for tax purposes to Trinity Biotech in the form prescribed by the Irish Revenue Commissioners.
Such corporate Irish Holders will generally not otherwise be subject to Irish tax in respect of dividends received.
Individual Irish Holders will be subject to income tax on the gross amount of any dividend (that is the amount of the dividend received
plus any DWT withheld), at their marginal rate of income tax, currently either 20% or 40% depending on the individual’s
circumstances, excluding Pay Related Social Insurance (“PRSI”) and the Universal Social Charge (“USC”). Individual Irish Holders
will be able to claim a credit against their resulting income tax liability in respect of DWT withheld. Individual Irish Holders may,
depending on their circumstances, also be subject to the Irish USC of up to 8%, with a further 3% surcharge also arising on certain
income in excess of €100,000 and a PRSI contribution of up to 4% in respect of their dividend income.
Under the Irish Taxes Consolidation Act 1997, dividends paid by Trinity Biotech to non-Irish shareholders will, unless exempted, be
subject to DWT. Such non-Irish shareholders will not suffer DWT on dividends if the shareholder is:
•
•
•
•
•
an individual resident in the U.S. (or certain other countries with which Ireland has a double taxation treaty) and who is
neither resident nor ordinarily resident in Ireland; or
a U.S. tax resident corporation not under the control of Irish residents; or
a corporation that is not resident in Ireland and which is ultimately controlled by persons resident in the U.S. (or certain
other countries with which Ireland has a double taxation treaty), with such person or persons not under the control of
persons who are not so resident; or
a corporation that is not resident in Ireland and the principal class of whose shares (or its 75% parent’s principal class of
shares) is substantially or regularly traded on a recognised stock exchange; or
is otherwise entitled to an exemption from DWT.
In order to avail of the above exemption, certain declarations must be made in advance to the paying company.
A self-assessment system applies to a company tax resident in a treaty jurisdiction receiving dividends, under which a non-resident
company will provide a declaration and certain information to the dividend paying company or intermediary to claim the exemption.
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Special DWT arrangements are available in the case of shares in Irish companies held by U.S. resident holders through American
depository banks using ADSs where such banks enter into intermediary agreements with the Irish Revenue Commissioners and are
viewed as qualifying intermediaries under Irish Tax legislation. Under such agreements, American depository banks who receive
dividends from Irish companies and pay the dividends on to the U.S. resident ADS holders are allowed to receive and pass on a
dividend from the Irish company on a gross basis (without any withholding) if:
•
•
•
the recipient is the direct beneficial owner of the shares, and
the depository bank’s ADS register shows that the direct beneficial owner of the dividends has a U.S. address on the
register, and
there is an intermediary between the depository bank and the beneficial shareholder and the depository bank receives
confirmation from the intermediary that the beneficial shareholder’s address in the intermediary’s records is in the U.S.
Where the above procedures have not been complied with and DWT is withheld from dividend payments to U.S. Holders of ordinary
shares or ADSs evidenced by ADSs, such U.S. Holders can apply to the Irish Revenue Commissioners claiming a full refund of DWT
paid by filing a declaration / claim in the form prescribed by the Irish Revenue Commissioners. Certain accompanying information
should also be included when making such claims.
The DWT rate applicable to U.S. Holders is reduced to 5% under the terms of the Treaty for corporate U.S. Holders holding 10% or
more of voting shares and to 15% for other U.S. Holders. While this will, subject to the application of Article 23 of the Treaty,
generally entitle U.S. Holders to claim a partial refund of DWT from the Irish Revenue Commissioners, U.S. Holders will, in most
circumstances, likely prefer to seek a full refund of DWT under Irish domestic legislation (see above).
Disposals of Ordinary Shares or ADSs
Irish Holders that acquire ordinary shares or ADSs will generally be considered, for Irish tax purposes, to have acquired their ordinary
shares or ADSs at a base cost equal to the amount paid for the ordinary shares or ADSs. On subsequent dispositions, ordinary shares
or ADSs acquired at an earlier time will generally be deemed, for Irish tax purposes, to be disposed of on a “first in first out” basis
before ordinary shares or ADSs acquired at a later time. Irish Holders that dispose of their ordinary shares or ADSs will be subject to
Irish capital gains tax (“CGT”) to the extent that the proceeds realised from such disposition exceed the indexed base cost of the
ordinary shares or ADSs disposed of and any incidental expenses. The current rate of CGT is 33% and this applies to disposals made
on or after 6 December 2012. Indexation of the base cost of the ordinary shares or ADSs is available up to 31 December 2002, and
only in respect of ordinary shares or ADSs held for more than 12 months prior to their disposal.
Irish Holders that have unutilised capital losses from other sources in the current, or any previous tax year, can generally apply such
losses to reduce gains realised on the disposal of the ordinary shares or ADSs.
An annual exemption allows individuals to realise chargeable gains of up to €1,270 in each tax year without giving rise to CGT. This
exemption is specific to the individual and cannot be transferred between spouses. Irish Holders are required, under Ireland’s self-
assessment system, to file tax returns reporting any chargeable gains arising to them in a particular tax year.
Where disposal proceeds are received in a currency other than Euro they must be translated into Euro amounts to calculate the amount
of any chargeable gain or loss. Similarly, acquisition costs denominated in a currency other than Euro must be translated at the date of
acquisition in Euro amounts.
Irish Holders that realise a loss on the disposal of ordinary shares or ADSs will generally be entitled to offset such allowable losses
against capital gains realised from other sources in determining their CGT liability in that year. Allowable losses which remain
unrelieved in a year may generally be carried forward indefinitely for CGT purposes and applied against capital gains in future years.
Transfers between spouses who live together will not give rise to any chargeable gain or loss for CGT purposes with the acquiring
spouse acquiring the same pro rata base cost and acquisition date as that of the transferring spouse.
84
U.S. Holders will not be subject to Irish CGT on the disposal of ordinary shares or ADSs provided that such ordinary shares or ADSs
are quoted on a stock exchange at the time of disposition. The stock exchange for this purpose is the Nasdaq National Market
(“NASDAQ”). While it is our intention to continue the quotation of ADSs on NASDAQ, no assurances can be given in this regard.
If, for any reason, our ADSs cease to be quoted on NASDAQ, U.S. Holders will not be subject to CGT on the disposal of their
ordinary shares or ADSs provided that the ordinary shares or ADSs do not, at the time of the disposal, derive the greater part of their
value from land, buildings, minerals, or mineral rights or exploration rights in Ireland.
A gift or inheritance of ordinary shares will be, or in the case of ADSs may be, within the charge to capital acquisitions tax, regardless
of where the disponer or the donee/successor in relation to the gift/inheritance is domiciled, resident or ordinarily resident. Capital
acquisitions tax is levied at a rate of 33% on the taxable value of the gift or inheritance above certain tax-free thresholds and this rate
applies in respect of gifts and inheritances taken on or after 6 December 2012 (the rate was 30% between 7 December 2011 and
5 December 2012). The tax-free threshold is determined by the amount of the current benefit and of previous benefits received within
the group threshold since 5 December 1991, which are within the charge to capital acquisitions tax and the relationship between the
former holder and the successor. Gifts and inheritances between spouses are not subject to the capital acquisitions tax. Gifts of up to
€3,000 can be received each year from any given individual without triggering a charge to capital acquisitions tax. Where a charge to
Irish CGT and capital acquisitions tax arises on the same event, capital acquisitions tax payable on the event can be reduced by the
amount of the CGT payable. There should be no clawback of the same event credit of CGT offset against capital acquisitions tax
provided the donee does not dispose of the ordinary shares or ADSs within two years from the date of gift.
The Estate Tax Convention between Ireland and the United States generally provides for Irish capital acquisitions tax paid on
inheritances in Ireland to be credited, in whole or in part, against tax payable in the United States, in the case where an inheritance of
ordinary shares or ADSs is subject to both Irish capital acquisitions tax and U.S. federal estate tax. The Estate Tax Convention does
not apply to Irish capital acquisitions tax paid on gifts.
Irish stamp duty, which is a tax imposed on certain documents, is payable on all transfers of ordinary shares of an Irish registered
company (other than transfers made between spouses, transfers made between 90% associated companies, or certain other exempt
transfers) regardless of where the document of transfer is executed. Irish stamp duty is also payable on electronic transfers of ordinary
shares. A transfer of ordinary shares made as part of a sale or gift will generally be stampable at the ad valorem rate of 1% of the value
of the consideration received for the transfer, or, if higher, the market value of the shares transferred. With effect from 6 December
2017, stamp duty at a rate of 6% will apply in certain circumstances to the sale of transfer of shares which derive their value, or the
greater part of their value, from non-residential property in Ireland. Any instrument executed on or after 24 December 2008 which
transfers stock or marketable securities on sale where the amount or value of the consideration is €1,000 or less may be exempt from
stamp duty. Where the consideration for a sale is expressed in a currency other than Euro, the duty will be charged on the Euro
equivalent calculated at the rate of exchange prevailing at the date of the transfer.
Transfers of ordinary shares where no beneficial interest passes (e.g. a transfer of shares from a beneficial owner to a nominee) will
generally be exempt from stamp duty.
Transfers of ADSs are exempt from Irish stamp duty as long as the ADSs are quoted on any recognised stock exchange in the U.S. or
Canada.
Transfers of ordinary shares from the Depositary or the Depositary’s custodian upon surrender of ADSs for the purposes of
withdrawing the underlying ordinary shares from the ADS system, and transfers of ordinary shares to the Depositary or the
Depositary’s custodian for the purposes of transferring ordinary shares onto the ADS system, will be stampable at the ad valorem rate
of 1% of the value of the shares transferred if the transfer relates to a sale or contemplated sale or any other change in the beneficial
ownership of ordinary shares. Such transfers will be exempt from Irish stamp duty if the transfer does not relate to or involve any
change in the beneficial ownership in the underlying ordinary shares and the transfer form contains the appropriate certification. The
person accountable for the payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for consideration less
than the market value, both parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the
transfer (with a possible 14 day extension for online filings and payments). Late or inadequate payment of stamp duty may result in
liability for interest, penalties, surcharge and fines.
85
Dividend Policy
In 2011, the Board decided that it was an appropriate time to pay a dividend for the first time in the Company’s history. The Board
proposed a final dividend of 22 cents per ADS in respect of the 2014 financial year and this proposal was approved by the
shareholders at the 2015 Annual General Meeting of the Company and subsequently paid during the course of 2015. A dividend of 22
cents per ADS was approved and paid in 2014, in respect of the 2014 financial year. A dividend of 20 cents per ADS was approved
and paid in 2013, in respect of the 2012 financial year. A dividend of 15 cents per ADS was approved and paid in 2012, in respect of
the 2011 financial year. A dividend of 10 cents per ADS was approved and paid in 2011, in respect of the 2010 financial year.
Dividends or other distributions are declared and paid in US Dollars. Any future cash dividends will depend upon the Company’s
results of operations, financial condition, cash requirements, availability of surplus and such other factors as the Board of Directors
may deem relevant, and will be subject to approval by the Company’s shareholders. Accordingly, there can be no assurance that a
dividend will be declared each year or that, if a dividend is declared, it will be comparable with the one declared the previous year. In
March 2016, the Company announced that it was suspending its dividend and that a share buyback program would be commenced.
Documents on Display
This annual report and the exhibits thereto and any other document that we have to file pursuant to the Exchange Act may be
inspected without charge and copied at prescribed rates at the Securities and Exchange Commission public reference room at 100 F
Street, N.E., Room 1580, Washington, D.C. 20549; and on the Securities and Exchange Commission Internet site
(http://www.sec.gov). You may obtain information on the operation of the Securities and Exchange Commission’s public reference
room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by visiting the Securities and
Exchange Commission’s website at http://www.sec.gov, and may obtain copies of our filings from the public reference room by
calling (202) 551-8090. The Exchange Act file number for our Securities and Exchange Commission filings is 000-22320. The
information on our website is not incorporated by reference into this annual report.
Item 11 Quantitative and Qualitative Disclosures about Market Risk
Quantitative information about Market Risk
Interest rate sensitivity
Trinity Biotech monitors its exposure to changes in interest and exchange rates by estimating the impact of possible changes on
reported profit before tax and net worth. The Group accepts interest rate and currency risk as part of the overall risks of operating in
different economies and seeks to manage these risks by following the policies set above.
Trinity Biotech estimates that the maximum effect of a rise of one percentage point in one of the principal interest rates to which the
Group is exposed, without making any allowance for the potential impact of such a rise on exchange rates, would be a decrease in the
loss before tax for 2017 by approximately 1.2%.
Exchange rate sensitivity
At year-end 2017, approximately 21.8% of the Group’s US$65,196,000 net worth (shareholders’ equity) was denominated in
currencies other than the US Dollar, principally the Euro, Canadian Dollar, Swedish Kroner and Great British Pound.
A strengthening or weakening of the US Dollar by 10% against all the other currencies in which the Group operates, would have the
approximate effect of reducing or increasing the Group’s 2017 year-end net worth by US$1,423,000.
Qualitative information about Market Risk
Trinity Biotech’s treasury policy is to manage financial risks arising in relation to or as a result of underlying business needs. The
activities of the treasury function, which does not operate as a profit centre, are carried out in accordance with board approved policies
and are subject to regular internal review. These activities include the Group making use of spot and forward foreign exchange
markets.
86
Trinity Biotech uses a range of financial instruments (including cash, forward contracts and finance leases) to fund its operations.
These instruments are used to manage the liquidity of the Group in a cost effective, low-risk manner. Working capital management is
a key additional element in the effective management of overall liquidity. Trinity Biotech does not trade in financial instruments or
derivatives.
The main risks arising from the utilisation of these financial instruments are interest rate risk, liquidity risk and foreign exchange risk.
Trinity Biotech’s reported net income and net assets are all affected by movements in foreign exchange rates.
At December 31, 2017 Group borrowings were at fixed rates of interest and consisted of US Dollar denominated exchangeable notes
and Euro and US Dollar denominated finance leases. At December 31, 2017 year-end borrowings totalled US$93,841,000 (2016:
US$93,237,000) (2015:US$92,827,000) at interest rates of 4.00% to 5.51% (2016: 4.00% to 4.59%) (2015: 4.00% to 4.59%). The
nominal amount of the Loan Note borrowings is US$115,000,000. The first date on which holders of the Loan Note can exercise their
put option is April 1, 2022. If the put option is exercised, the issuer has to repurchase the notes at par. At December 31, 2014 and 2013
the Group had no borrowings. See Item 18, Note 28.
In broad terms, a one-percentage point increase in interest rates would increase interest income by US$480,000 (2016: US$770,000)
and would not affect the interest expense in 2017 or 2016; resulting in an increase in interest income of US$480,000 (2016:
US770,000).
The majority of the Group’s activities are conducted in US Dollars. The primary foreign exchange risk arises from the fluctuating
value of the Group’s Euro, Swedish Kroner and Brazilian Real denominated expenses as a result of the movement in the exchange rate
between the US Dollar and those currencies. Arising from this, where considered necessary, the Group periodically pursues a treasury
policy which aims to sell US Dollars forward to match a portion of its uncovered Euro, Kroner and Real expenses at exchange rates
lower than budgeted exchange rates. These forward contracts are primarily cashflow hedging instruments whose objective is to cover
a portion of these Euro, Kroner or Real forecasted transactions. These forward contracts normally have maturities of less than one year
after the balance sheet date. There were no forward contracts in place as at 31 December, 2017.
The Group had foreign currency denominated cash balances equivalent to US$3,250,000 at December 31, 2017 (2016:
US$2,003,000).
87
Item 12 Description of Securities Other than Equity Securities
Fees and Charges Payable by ADS Holders
The table below summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, to our depositary,
The Bank of New York Mellon, pursuant to the deposit agreement (filed with the SEC on January 15, 2004 as an exhibit to our Form
F-6, registration no. 333-111946) and the types of services and the amount of the fees or charges paid for such services. The actual
fees payable by Trinity Biotech and the holders of ADSs are negotiated between Trinity Biotech and the depositary. In connection
with these arrangements, Trinity Biotech has agreed to pay various fees and expenses of the depositary. Trinity Biotech will pay any
fee chargeable upon the issuance of ADSs in connection with the exchange of the notes. Currently, ADS holders are responsible for
paying a fee upon the delivery of ordinary shares against the surrender of ADSs.
The fees and charges that an ADS holder may be required to pay can be changed in the future upon mutual agreement between Trinity
Biotech and by the depositary and may include:
Service
(1) Issuance of ADSs upon deposit of ordinary shares.
(2) Delivery of deposited securities against surrender of
ADSs.
(3) Issuance of ADSs in connection with a distribution of
shares.
(4) Distribution of cash dividends or other cash
distributions, including distribution of cash proceeds
following the sale of rights, shares or other property in
accordance with the deposit agreement
(5) Transfer of ADSs
Rate
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Up to $0.02 per 1
ADS
Up to $1.50 per
certificate for ADRs
or ADRs transferred
By whom paid
Persons depositing ordinary shares or person
receiving ADSs.
Persons surrendering ADSs for the purpose of
withdrawal of deposited securities or persons to
whom deposited securities are delivered.
Person to whom distribution is made.
Person to whom distribution is made.
Person to whom Receipt is transferred.
In addition, ADS holders are responsible for certain fees and expenses incurred by the depositary and certain taxes and governmental
charges such as:
•
transfer and registration fees of securities on Trinity Biotech’s securities register to or from the name of the depositary or
its agent when ADS holders deposit or withdrawal securities;
expenses for cable, telex and fax transmissions and for delivery of securities;
expenses incurred for converting foreign currency into U.S. dollars; and
taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit, other
than taxes for which Trinity Biotech is liable).
•
•
•
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of
their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs
to the depositary for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with
distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record
of ADSs as of the applicable ADS record date.
88
The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions
other than cash (e.g., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with
the distribution. In the case of ADSs registered in the name of the investor, the depositary sends invoices to the applicable record date
ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary generally collects its fees
through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and
custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn
charge their clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay taxes or other governmental charges by the holder of an ADS, the depositary may, under the terms of the
deposit agreement, refuse the requested service until payment is received or may set off the amount of such tax or other governmental
charge from any distribution to be made to the ADS holder, and the ADS holder would remain liable for any deficiency.
The disclosure under this heading “Fees and Charges Payable by ADS Holders” is subject to and qualified in its entirety by reference
to the full text of the Deposit Agreement.
Part II
Item 13
Not applicable.
Defaults, Dividend Arrearages and Delinquencies
Item 14
Not applicable.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
Item 15
Evaluation of Disclosure Controls and Procedures
The Group’s disclosure and control procedures are designed so that information required to be disclosed in reports filed or submitted
under the Securities Exchange Act 1934 is prepared and reported on a timely basis and communicated to management, to allow timely
decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-
15(d) of the Securities Exchange Act of 1934 as of the end of the period covered by this Form 20-F. The Chief Executive Officer and
Chief Financial Officer have concluded that disclosure controls and procedures were effective as of December 31, 2017.
In designing and evaluating our disclosure controls and procedures, our management, with the participation of the Chief Executive
Officer and Chief Financial Officer, recognised that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply
its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
the Group have been detected.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Trinity Biotech are responsible for establishing and maintaining adequate internal control over financial reporting.
Trinity Biotech’s internal control over financial reporting is a process designed under the supervision and with the participation of the
principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and
preparation of Trinity Biotech’s financial statements for external reporting purposes in accordance with IFRS both as issued by the
IASB and as subsequently adopted by the EU.
89
Trinity Biotech’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that
transactions are recorded as necessary to permit preparation of the financial statements in accordance with IFRS and that receipts and
expenditures are being made only in accordance with the authorisation of management and the directors of Trinity Biotech; and
provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of Trinity
Biotech’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all misstatements.
It is not always possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period
between the purchase date and the date of management’s assessment. In such cases, management will note that it has excluded the
acquired business or businesses from its report on internal control over financial reporting. Also, projections of any evaluation of the
effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, and that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of internal control over financial reporting based on criteria established in the 2013
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on this assessment, management has concluded that the Group’s internal control over financial reporting was
effective as of December 31, 2017.
Our auditor, Grant Thornton, an independent registered public accounting firm, has issued an attestation report on the Group’s internal
control over financial reporting as of December 31, 2017 (see Item 18).
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 16
16A Audit Committee Financial Expert
Mr Peter Coyne is an independent director and a member of the Audit Committee.
Our board of directors has determined that Mr Peter Coyne meets the definition of an audit committee financial expert, as defined in
Item 401 of Regulation S-K.
This determination is made on the basis that Mr Coyne is a Fellow of the Institute of Chartered Accountants in Ireland and has
extensive experience in advising public and private groups on all aspects of corporate strategy. Mr Coyne was formerly a director of
AIB Corporate Finance, a subsidiary of AIB Group plc, and was also formerly a senior manager in Arthur Andersen’s Corporate
Financial Services practice.
16B Code of Ethics
Trinity Biotech has adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting
Officer and all organisation employees. Written copies of the code of ethics are available free of charge upon written request to us at
the address on the first page of this annual report. If we make any substantive amendments to the code of ethics or grant any waivers,
including any implicit waiver, from a provision of these codes to our Chief Executive Officer, Chief Financial Officer or Chief
Accounting Officer, we will disclose the nature of such amendment or waiver on our website.
16C Principal Accountant Fees and Services
Fees Billed by Independent Public Accountants
The following table sets forth, for each of the years indicated, the fees billed by our independent public accountants and the percentage
of each of the fees out of the total amount billed by the accountants.
Audit
Audit-related
Tax
Total
Year ended December 31,
2017
US$’000
Year ended December 31,
2016
US$’000
%
87%
-%
13%
507
-
73
580
%
81%
6%
13%
469
37
77
583
Audit services include audit of our consolidated financial statements, as well as work only the independent auditors can reasonably be
expected to provide, including statutory audits. Audit related services are for assurance and related services performed by the
independent auditor, including due diligence related to acquisitions and any special procedures required to meet certain regulatory
requirements. Tax fees consist of fees for professional services for tax compliance and tax advice.
Pre-Approval Policies and Procedures
Our Audit Committee has adopted policies and procedures for the pre-approval of audit and non-audit services rendered by our
independent public accountants, Grant Thornton. The policy generally pre-approves certain specific services in the categories of audit
services, audit-related services, and tax services up to specified amounts, and sets requirements for specific case-by-case pre-approval
of discrete projects, those which may have a material effect on our operations or services over certain amounts.
Pre-approval may be given as part of the Audit Committee’s approval of the scope of the engagement of our independent auditor or on
an individual basis. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the
decision must be presented to the full Audit Committee at its next scheduled meeting. The policy prohibits retention of the
independent public accountants to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the
rules of the SEC, and also considers whether proposed services are compatible with the independence of the public accountants.
91
16D Exemptions from the Listing Standards for Audit Committees
Not applicable.
16 E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On March 3, 2011 the Company announced its intention to commence a Share Buyback Program for the first time in the Company’s
history. Under the authority given by the passing of Resolution 6 at the 2017 AGM, the maximum number of shares that may yet be
purchased by Trinity Biotech or on the Group’s behalf at December 31, 2017 was 19,101,098 (4,775,275 ADSs) (2016: 6,460,199
(1,615,050 ADSs)).
2017 Share Buyback
During 2017, 5,374,692 shares ‘A’ Ordinary Shares (1,343,673 ADSs) were purchased by Trinity Biotech or on the Group’s behalf
(2016: 4,437,740).
16 F Change in Registrant’s Certifying Accountant
Not applicable.
16 G Corporate Governance
As Trinity Biotech is a foreign private issuer, it is not required to comply with all of the corporate governance requirements set forth in
NASDAQ Rule 5600 as they apply to U.S. domestic companies. The Group’s corporate governance measures differ in the following
significant ways: (a) the Group has not appointed an independent nominations committee or adopted a board resolution addressing the
nominations process. At present, the Board as a whole address the nominations process; and (b) the Audit Committee of the Group
currently consists of two members (both of whom are independent non-executive directors) – while U.S. domestic companies listed on
NASDAQ are required to have three members on their audit committee.
16 H Mine Safety Disclosure
Not applicable.
92
Part III
Item 17 Financial Statements
The registrant has responded to Item 18 in lieu of responding to this item.
Item 18 Financial Statements
93
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Trinity Biotech plc
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Trinity Biotech plc and subsidiaries (the “Company”) as of December
31, 2017, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2017, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2017 and our report
dated April 20, 2018 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON
Dublin, Ireland
April 20, 2018
94
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Trinity Biotech plc
Opinion on the financial statements
We have audited the accompanying consolidated statement of financial position of Trinity Biotech plc and subsidiaries (the
“Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, changes in
equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2017, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board and International Financial Reporting Standards as adopted by the European Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in the
2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”), and our report dated April 20, 2018 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON
We have served as the Company’s auditor since 2008.
Dublin, Ireland
April 20, 2018
95
2017
Total
US$‘000
99,140
(57,250)
41,890
100
(5,657)
(32,246)
(41,755)
(37,668)
3,198
(5,405)
(2,207)
(39,875)
1,214
(38,661)
(1,609)
(40,270)
(1.79)
(1.79)
Year ended December 31
2016
Total
US$‘000
99,611
(56,127 )
43,484
239
(5,040)
(30,366)
(48,165)
(39,848)
3,147
(5,439)
(2,292)
(42,140)
3,557
(38,583)
(62,042)
(100,625)
(1.68)
(1.68)
2015
Total
US$‘000
100,195
(53,683)
46,512
288
(5,069)
(28,225)
—
13,506
13,491
(4,054)
9,437
22,943
(756)
22,187
(391)
21,796
0.96
0.48
(0.45)
(0.45)
(1.86)
(1.86)
(0.47)
(0.47)
(0.42)
(0.42)
(4.38)
(4.38)
(1.10)
(1.10)
0.24
0.12
0.94
0.46
0.24
0.12
CONSOLIDATED STATEMENT OF OPERATIONS
Revenues
Cost of sales
Gross profit
Other operating income
Research and development expenses
Selling, general and administrative expenses
Impairment charges and inventory provisioning
Operating (loss)/profit
Financial income
Financial expenses
Net financing (expense)/income
(Loss)/Profit before tax
Total income tax credit/(expense)
(Loss)/Profit for the year
Loss for the year on discontinued operations
(Loss)/Profit for the year (all attributable to equity holders)
Basic (loss)/earnings per ADS (US Dollars) – continuing operations
Diluted (loss)/earnings per ADS (US Dollars) – continuing operations
Basic (loss)/earnings per ‘A’ ordinary share (US Dollars) –continuing operations
Diluted earnings per ‘A’ ordinary share (US Dollars) – continuing operations
Basic (loss)/earnings per ADS (US Dollars) – group
Diluted (loss)/earnings per ADS (US Dollars) – group
Basic (loss)/earnings per ‘A’ ordinary share (US Dollars) – group
Diluted (loss)/earnings per ‘A’ ordinary share (US Dollars) –group
Notes
2
4
6
2, 3
2, 3
5
2, 9
2
10
2
11
11
11
11
11
11
11
11
96
Year ended December 31
2016
US$‘000
2017
US$‘000
(40,270) (100,625)
2015
US$‘000
21,796
3,086
3,086
(37,184)
3,122
3,122
(97,503)
(4,872)
(4,872)
16,924
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Loss)/Profit for the year
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences
Other comprehensive income
Total Comprehensive (Loss)/Income (all attributable to owners of the parent)
Notes
2
97
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Non-current assets
Property, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Derivative financial instruments
Other assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Income tax receivable
Cash and cash equivalents
Short-term investments
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the parent
Share capital
Share premium
Treasury shares
Accumulated surplus
Translation reserve
Other reserves
Total equity
Current liabilities
Income tax payable
Trade and other payables
Provisions
Finance lease liabilities
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Finance lease liabilities
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
98
Notes
12
13
14
24
15
16
17
18
19
At December 31
2017
US$‘000
2016
US$‘000
5,800
64,754
8,698
360
771
80,383
32,805
20,740
1,439
23,564
34,043
112,591
13,403
87,275
14,556
—
870
116,104
32,589
22,585
1,205
77,109
—
133,488
2
192,974
249,592
20
20
20
20
20
20
22
23
25
24
24
25
14
2
1,213
16,187
(24,783)
75,802
(3,246)
23
65,196
310
20,515
50
354
21,229
92,955
2,230
532
10,832
106,549
127,778
1,213
16,187
(17,327)
110,434
(6,332)
4,552
108,727
175
24,757
75
273
25,280
92,232
4,260
732
18,361
115,585
140,865
192,974
249,592
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balance at January 1, 2015
Profit for the period
Other comprehensive income
Total comprehensive income
Share-based payments (Note 21)
Options or warrants exercised
Share issue expenses
Dividends
Balance at December 31, 2015
Balance at January 1, 2016
Loss for the period
Other comprehensive income
Total comprehensive income
Share-based payments (Note 21)
Options or warrants exercised
Shares purchased
Share issue expenses
Balance at December 31, 2016
Balance at January 1, 2017
Loss for the period
Other comprehensive income
Total comprehensive income/(loss)
Transfer of warrant reserve (Note 21)
Share-based payments (Note 21)
Shares purchased
Balance at December 31, 2017
Other reserves
Translation
reserve
US$’000
(4,582)
—
(4,872)
(4,872)
—
—
—
—
(9,454)
(9,454)
—
3,122
3,122
—
—
—
—
(6,332)
(6,332)
—
3,086
3,086
—
—
(3,246)
Warrant
reserve
US$’000
4,529
—
—
—
—
—
—
—
4,529
4,529
—
—
—
—
—
—
—
4,529
4,529
—
—
—
(4,529)
—
—
—
Hedging
reserves
US$’000
23
—
—
—
—
—
—
—
23
23
—
—
—
—
—
—
—
23
23
—
—
—
—
—
23
Accumulated
surplus
US$’000
190,755
21,796
—
21,796
1,974
—
—
(5,099)
209,426
209,426
(100,625)
—
(100,625)
1,633
—
—
—
110,434
110,434
(40,270)
—
(40,270)
4,529
1,109
—
75,802
Total
US$’000
196,972
21,796
(4,872)
16,924
1,974
3,127
(6)
(5,099)
213,892
213,892
(100,625)
3,122
(97,503)
1,633
673
(9,960)
(8)
108,727
108,727
(40,270)
3,086
(37,184)
—
1,109
(7,456)
65,196
Share capital
‘A’ ordinary
shares
US$’000
1,192
—
—
—
—
17
—
—
1,209
1,209
—
—
—
—
4
—
—
1,213
1,213
—
—
—
—
—
1,213
Share
premium
US$’000
12,422
—
—
—
—
3,110
(6)
—
15,526
15,526
—
—
—
—
669
—
(8)
16,187
16,187
—
—
—
—
—
16,187
Treasury
Shares
US$’000
(7,367)
—
—
—
—
—
—
—
(7,367)
(7,367)
—
—
—
—
—
(9,960)
—
(17,327)
(17,327)
—
—
—
—
(7,456)
(24,783)
99
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
(Loss) / profit for the year
Adjustments to reconcile net profit to cash provided by operating activities:
Depreciation
Amortisation
Income tax (credit)/expense
Financial income
Financial expense
Share-based payments
Foreign exchange (gains)/losses on operating cash flows
Loss on disposal or retirement of property, plant and equipment
Movement in inventory provision
Impairment of inventory
Impairment of prepayments
Impairment of property, plant and equipment
Impairment of intangible assets
Provision for closure costs
Other non-cash items
Operating cash flows before changes in working capital
Decrease / (increase) in trade and other receivables
Increase in inventories
Increase / (decrease) in trade and other payables
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash generated by operating activities
Cash flows from investing activities
Payments to acquire intangible assets
Acquisition of property, plant and equipment
Licence fees
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Share buyback
Expenses paid in connection with share issue and debt financing
Dividends paid to equity holders of the parent
Proceeds from issuance of exchangeable notes
Fees relating to issuance of exchangeable notes
Interest payment on exchangeable notes
Proceeds from new finance leases
Payment of finance lease liabilities
Net cash generated by / (used in) financing activities
Increase / (Decrease) in cash and cash equivalents and short term investments
Effects of exchange rate movements on cash held
Cash and cash equivalents and short-term investments at beginning of year
Cash and cash equivalents and short term investments at end of year
100
Notes
5
5, 13
3
3
21
5
16
6, 17
6, 12
6, 13
10
22
24
29
18,19
Year ended December 31,
2017
US$‘000
2016
US$‘000
2015
US$‘000
(40,270)
(100,625)
21,796
1,896
3,303
(374)
(3,198)
5,405
928
307
3
2,275
—
1,651
10,437
29,667
(1,794)
(728)
9,508
306
(2,461)
2,017
9,370
(53)
776
(843)
9,250
(10,229)
(4,839)
(1,112)
(16,180)
—
(7,799)
—
—
—
—
(4,600)
51
(295)
(12,643)
(19,573)
71
77,109
57,607
3,159
2,973
(8,630)
(3,147)
5,444
1,414
(226)
15
(533)
7,405
757
9,029
87,673
3,431
4,087
12,226
682
(3,622)
1,270
10,556
(60)
901
(1,169)
10,228
2,989
2,653
1,080
(13,491)
4,063
1,550
(2,115)
15
852
—
—
—
—
—
563
19,955
(772)
(2,336)
(3,329)
13,518
(34)
135
(463)
13,156
(16,548)
(4,215)
(1,112)
(21,875)
(19,492)
(7,094)
(1,112)
(27,698)
857
(9,322)
(8)
—
—
—
(4,600)
—
(282)
(13,355)
(25,002)
158
101,953
77,109
2,943
—
(6)
(5,099)
115,000
(4,471)
(2,198)
1,489
(138)
107,520
92,978
(127)
9,102
101,953
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
i)
ii)
iii)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted by Trinity Biotech plc (“the Company”) and its subsidiaries (“the Group”) are set
out below.
General information
Trinity Biotech develops, acquires, manufactures and markets medical diagnostic products for the clinical laboratory and
point-of-care segments of the diagnostic market. These products are used to detect autoimmune, infectious and sexually
transmitted diseases, diabetes and disorders of the liver and intestine. Trinity Biotech also is a significant provider of raw
materials to the life sciences and research industries globally.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) both as issued by the International Accounting Standards Board (“IASB”) and as subsequently adopted by the
European Union (“EU”) (together “IFRS”). The IFRS applied are those effective for accounting periods beginning January 1,
2016. Consolidated financial statements are required by Irish law to comply with IFRS as adopted by the EU which differ in
certain respects from IFRS as issued by the IASB. These differences predominantly relate to the timing of adoption of new
standards by the EU. However, as none of the differences are relevant in the context of Trinity Biotech, the consolidated
financial statements for the periods presented comply with IFRS both as issued by the IASB and as adopted by the EU.
Basis of preparation
The consolidated financial statements have been prepared in United States Dollars (US$), rounded to the nearest thousand,
under the historical cost basis of accounting, except for derivative financial instruments, certain balances arising on acquisition
of subsidiary entities and share-based payments which are initially recorded at fair value. Derivative financial instruments are
also subsequently carried at fair value.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and amounts reported in the financial statements and accompanying notes.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Judgements made by management that have a significant effect on the financial statements and estimates with a significant risk
of material adjustment in the next year are discussed in Note 31.
Having considered the Group’s current financial position and cashflow projections, the directors believe that the Group will be
able to continue in operational existence for at least the next 12 months from the date of approval of these consolidated
financial statements and that it is appropriate to continue to prepare the consolidated financial statements on a going concern
basis.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements. The accounting policies have been applied consistently by all Group entities.
iv)
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to
govern the financial and reporting policies of an entity so as to obtain benefits from its activities. In assessing control, potential
voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
v)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains or losses or income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less any accumulated depreciation and any impairment losses (see
Note 1(viii)). The cost of self-constructed assets includes the cost of materials, direct labour and attributable overheads. It is
not Group policy to revalue any items of property, plant and equipment.
Depreciation is charged to the statement of operations on a straight-line basis to write-off the cost of the assets over their
expected useful lives as follows:
•Leasehold improvements
•Buildings
•Office equipment and fittings
•Computer equipment
•Plant and equipment
5-15 years
50 years
10 years
3-5 years
5-15 years
Land is not depreciated. The residual values, if not insignificant, useful lives and depreciation methods of property, plant and
equipment are reviewed and adjusted if appropriate on a prospective basis, at each balance sheet date. There were no changes
to useful lives in the year.
Leased assets – as lessee
Leases under terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance
leases. Property, plant and equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair
value and present value of the minimum lease payments at inception of the lease, less accumulated depreciation and any
impairment losses. Lease payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in financial
expenses in the statement of operations.
Depreciation is calculated in order to write-off the amounts capitalised over the estimated useful lives of the assets, or the lease
term if shorter, by equal annual instalments. The excess of the total rentals under a lease over the amount capitalised is treated
as interest, which is charged to the statement of operations in proportion to the amount outstanding under the lease. Leased
assets are reviewed for impairment (see Note 1(viii)).
Leases other than finance leases are classified as “operating leases”, and the rentals thereunder are charged to the statement of
operations on a straight-line basis over the period of the leases. Lease incentives are recognised in the statement of operations
on a straight-line basis over the lease term.
Leased assets – as lessor
Leases where the Group substantially transfers the risks and benefits of ownership of the asset to the customer are classified as
finance leases within finance lease receivables. The Group recognises the amount receivable from assets leased under finance
leases at an amount equal to the net investment in the lease. Finance lease income is recognised as revenue in the statement of
operations reflecting a constant periodic rate of return on the Group’s net investment in the lease.
Assets provided to customers under leases other than finance leases are classified as operating leases and carried in property,
plant and equipment at cost and are depreciated on a straight-line basis over the useful life of the asset or the lease term, if
shorter.
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an
item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the
Group and the cost of the replaced item can be measured reliably. All other costs are recognised in the statement of operations
as an expense as incurred.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
vi)
vii)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
In respect of business combinations that have occurred since January 1, 2004 (being the transition date to IFRS), goodwill
represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount
recorded under the old basis of accounting, Irish GAAP, (“Previous GAAP”). Save for retrospective restatement of deferred
tax as an adjustment to retained earnings in accordance with IAS 12, Income Taxes, the classification and accounting treatment
of business combinations undertaken prior to the transition date were not reconsidered in preparing the Group’s opening IFRS
balance sheet as at January 1, 2004.
To the extent that the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
acquired exceeds the cost of a business combination, the identification and measurement of the related assets, liabilities and
contingent liabilities are revisited accompanied by a reassessment of the cost of the transaction, and any remaining balance is
immediately recognised in the statement of operations.
At the acquisition date, any goodwill is allocated to each of the cash generating units expected to benefit from the
combination’s synergies. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses (see
Note 1(viii)).
Intangibles, including research and development (other than goodwill)
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it
is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be
measured reliably. The asset is deemed to be identifiable when it is separable (that is, capable of being divided from the entity
and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability) or
when it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the
Group or from other rights and obligations.
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the intangible asset
meets the definition of an asset and the fair value can be reliably measured on initial recognition. Subsequent to initial
recognition, these intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses (Note 1(viii)). Intangible assets with definite useful lives are reviewed for indicators of impairment annually while
intangible assets with indefinite useful lives and those not yet brought into use are tested for impairment annually, either
individually or at the cash generating unit level.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or
substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible
and the Group has sufficient resources to complete the development. The expenditure capitalised includes the cost of materials,
direct labour and attributable overheads and third party costs. Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
The technical feasibility of a new product is determined by a specific feasibility study undertaken at the first stage of any
development project. The majority of our new product developments involve the transfer of existing product know-how to a
new application. Since the technology is already proven in an existing product which is being used by customers, this
facilitates the proving of the technical feasibility of that same technology in a new product.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The results of the feasibility study are reviewed by a design review committee comprising senior managers. The feasibility
study occurs in the initial research phase of a project and costs in this phase are not capitalised.
The commercial feasibility of a new product is determined by preparing a discounted cash flow projection. This projection
compares the discounted sales revenues for future periods with the relevant costs. As part of preparing the cash flow
projection, the size of the relevant market is determined, feedback is sought from customers and the strength of the proposed
new product is assessed against competitors’ offerings. Once the technical and commercial feasibility has been established and
the project has been approved for commencement, the project moves into the development phase.
All other development expenditure is expensed as incurred. Subsequent to initial recognition, the capitalised development
expenditure is carried at cost less any accumulated amortisation and any accumulated impairment losses (Note 1(viii)).
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the statement of operations as an expense as incurred.
Expenditure on internally generated goodwill and brands is recognised in the statement of operations as an expense as
incurred.
Amortisation
Amortisation is charged to the statement of operations on a straight-line basis over the estimated useful lives of intangible
assets, unless such lives are indefinite. Intangible assets are amortised from the date they are available for use in its intended
market. The estimated useful lives are as follows:
•Capitalised development costs
•Patents and licences
•Other (including acquired customer and supplier lists)
15 years
6-15 years
6-15 years
The Group uses a useful economic life of 15 years for capitalised development costs. This is a conservative estimate of the
likely life of the products. The Group is confident that products have a minimum of 15 years life given the inertia that
characterizes the medical diagnostics industry and the barriers to enter into the industry. The following factors have been
considered in estimating the useful life of developed products:
(a)
once a diagnostic test becomes established, customers are reluctant to change to new technology until it is fully proven,
thus resulting in relatively long product life cycles. There is also reluctance in customers to change to a new product as it
can be costly both in terms of the initial changeover cost and as new technology is typically more expensive.
demand for the diagnostic tests is enduring and robust within a wide geographic base. The diseases that the products
diagnose are widely prevalent (HIV, Diabetes and Chlamydia being just three examples) in many countries. There is a
general consensus that these diseases will continue to be widely prevalent in the future.
there are significant barriers to new entrants in this industry. Patents and/or licences are in place for many of our
products, though this is not the only barrier to entry. There is a significant cost and time to develop new products, it is
necessary to obtain regulatory approval and tests are protected by proprietary know-how, manufacturing techniques and
trade secrets.
(b)
(c)
Certain trade names acquired are deemed to have an indefinite useful life as there is no foreseeable limit to the period over
which these assets are expected to generate cash inflows for the Group.
Where amortisation is charged on assets with finite lives, this expense is taken to the statement of operations through the
‘selling, general and administrative expenses’ line.
Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
viii)
Impairment
The carrying amount of the Group’s assets, other than inventories, accounts receivable, cash and cash equivalents, short-term
investments and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset’s recoverable amount (being the greater of fair value less costs to sell and
value in use) is assessed at each balance sheet date.
Fair value less costs to sell is defined as the amount obtainable from the sale of an asset or cash-generating unit in an arm’s
length transaction between knowledgeable and willing parties, less the costs that would be incurred on disposal. Value in use is
defined as the present value of the future cash flows expected to be derived through the continued use of an asset or cash-
generating unit. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which
the future cash flow estimates have not yet been adjusted. The estimates of future cash flows exclude cash inflows or outflows
attributable to financing activities. For an asset that does not generate largely independent cash flows, the recoverable amount
is determined by reference to the cash generating unit to which the asset belongs.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable
amount is estimated at each balance sheet date at the cash generating unit level. The goodwill and indefinite-lived assets were
reviewed for impairment at December 31, 2016 and December 31, 2017. See Note 13.
In-process research and development (IPR&D) is tested for impairment on an annual basis, in the fourth quarter, or more
frequently if impairment indicators are present, using projected discounted cash flow models. If IPR&D becomes impaired or
is abandoned, the carrying value of the IPR&D is written down to its revised fair value with the related impairment charge
recognised in the period in which the impairment occurs. If the fair value of the asset becomes impaired as the result of
unfavorable data from any ongoing or future clinical trial, changes in assumptions that negatively impact projected cash flows,
or because of any other information regarding the prospects of successfully developing or commercializing our programs, we
could incur significant charges in the period in which the impairment occurs. The valuation techniques utilized in performing
impairment tests incorporate significant assumptions and judgments to estimate the fair value, as described above. The use of
different valuation techniques or different assumptions could result in materially different fair value estimates.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the statement of operations.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units and then to reduce the carrying amount of other assets in the cash-generating units
on a pro-rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
An impairment loss in respect of goodwill is not reversed.
Following recognition of any impairment loss (and on recognition of an impairment loss reversal), the depreciation or
amortisation charge applicable to the asset or cash generating unit is adjusted prospectively with the objective of
systematically allocating the revised carrying amount, net of any residual value, over the remaining useful life.
ix)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in, first-out principle and includes
all expenditure which has been incurred in bringing the products to their present location and condition, and includes an
appropriate allocation of manufacturing overhead based on the normal level of operating capacity. Net realisable value is the
estimated selling price of inventory on hand in the ordinary course of business less all further costs to completion and costs
expected to be incurred in selling these products.
The Group provides for inventory, based on estimates of the expected realisability. The estimated realisability is evaluated on a
case-by-case basis and any inventory that is approaching its “use-by” date and for which no further re-processing can be
performed is written off. Any reversal of an inventory provision is recognised in the statement of operations in the year in
which the reversal occurs.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
x)
xi)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trade and other receivables
Trade receivables are amounts due from customers for products sold or services provided in the ordinary course of business.
Trade and other receivables are stated at their amortised cost less impairment losses incurred. Cost approximates fair value
given the short term nature of these assets.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Trade
and other payables are stated at cost. Cost approximates fair value given the short term nature of these liabilities.
xii) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits which are readily available at year-end. Deposits
with maturities greater than six months are recognised as short-term investments and are carried at fair value. The Group has
no short-term bank overdraft facilities. Where restrictions are imposed by third parties, such as lending institutions, on cash
balances held by the Group these are treated as financial assets in the financial statements.
xiii) Short-term investments
xiv)
Short-term investments comprise short-term deposits which have maturities greater than six months. Where restrictions are
imposed by third parties, such as lending institutions, on short-term deposits held by the Group these are treated as financial
assets in the financial statements.
Share-based payments
For equity-settled share-based payments (share options), the Group measures the services received and the corresponding
increase in equity at fair value at the measurement date (which is the grant date) using a trinomial model. Given that the share
options granted do not vest until the completion of a specified period of service, the fair value, which is assessed at the grant
date, is recognised on the basis that the services to be rendered by employees as consideration for the granting of share options
will be received over the vesting period.
The share options issued by the Group are not subject to market-based vesting conditions as defined in IFRS 2, Share-based
Payment. Non-market vesting conditions are not taken into account when estimating the fair value of share options as at the
grant date; such conditions are taken into account through adjusting the number of equity instruments included in the
measurement of the transaction amount so that, ultimately, the amount recognised equates to the number of equity instruments
that actually vest. The expense in the statement of operations in relation to share options represents the product of the total
number of options anticipated to vest and the fair value of those options; this amount is allocated to accounting periods on a
straight-line basis over the vesting period. Given that the performance conditions underlying the Group’s share options are
non-market in nature, the cumulative charge to the statement of operations is only reversed where the performance condition is
not met or where an employee in receipt of share options relinquishes service prior to completion of the expected vesting
period. Share based payments, to the extent they relate to direct labour involved in development activities, are capitalised, see
Note 1(vii).
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised. The Group does not operate any cash-settled share-based payment schemes or share-
based payment transactions with cash alternatives as defined in IFRS 2.
xv)
Government grants
Grants that compensate the Group for expenses incurred such as research and development, employment and training are
recognised as income in the statement of operations on a systematic basis in the same periods in which the expenses are
incurred. Grants that compensate the Group for the cost of an asset are recognised in the statement of operations as other
operating income on a systematic basis over the useful life of the asset.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
xvi)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition
Goods sold and services rendered
Revenue from the sale of goods is recognised in the statement of operations when the significant risks and rewards of
ownership have been transferred to the buyer. Revenue from products is generally recorded as of the date of shipment,
consistent with typical ex-works shipment terms. Where the shipment terms do not permit revenue to be recognised as of the
date of shipment, revenue is recognised when the Group has satisfied all of its obligations to the customer in accordance with
the shipping terms. Revenue, including any amounts invoiced for shipping and handling costs, represents the value of goods
supplied to external customers, net of discounts and excluding sales taxes.
Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the
transaction at the balance sheet date.
Revenue is recognised to the extent that it is probable that economic benefit will flow to the Group, that the risks and rewards
of ownership have passed to the buyer and the revenue can be measured. No revenue is recognised if there is uncertainty
regarding recovery of the consideration due at the outset of the transaction or the possible return of goods.
The Group leases instruments under operating and finance leases as part of its business. In cases where the risks and rewards
of ownership of the instrument pass to the customer, the fair value of the instrument is recognised as revenue at the
commencement of the lease and is matched by the related cost of sale. In the case of operating leases of instruments which
typically involve commitments by the customer to pay a fee per test run on the instruments, revenue is recognised on the basis
of customer usage of the instruments. See also Note 1(v).
Other operating income
Other income comprises income recognised under Transitional Services Agreements (TSA) with Diagnostica Stago. As part of
the divestiture of the Coagulation product line in April 2010, the Group entered into a TSA. The services provided by the
Group to Stago under the TSA comprise canteen services. This income has not been treated as revenue since the TSA activities
are incidental to the main revenue-generating activities of the Group.
xvii) Employee benefits
Defined contribution plans
The Group operates defined contribution schemes in various locations where its subsidiaries are based. Contributions to the
defined contribution schemes are recognised in the statement of operations in the period in which the related service is
received from the employee.
Other long-term benefits
Where employees participate in the Group’s other long-term benefit schemes (such as permanent health insurance schemes
under which the scheme insures the employees), or where the Group contributes to insurance schemes for employees, the
Group pays an annual fee to a service provider, and accordingly the Group expenses such payments as incurred.
Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate employment before normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy.
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
xviii) Foreign currency
A majority of the revenue of the Group is generated in US Dollars. The Group’s management has determined that the
US Dollar is the primary currency of the economic environment in which the Company and its subsidiaries (with the exception
of the Group’s subsidiaries in Sweden, Brazil and Canada) principally operate. Thus the functional currency of the Company
and its subsidiaries (other than the Swedish, Brazilian and Canadian subsidiaries) is the US Dollar. The functional currency of
the Swedish subsidiary is the Swedish Kroner, the functional currency of the Brazilian entity is the Brazilian Real, and the
functional currency of the Canadian subsidiary is the Canadian Dollar. The presentation currency of the Company and Group
is the US Dollar. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange
ruling at the balance sheet date. The resulting gains and losses are included in the statement of operations. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction.
Results and cash flows of subsidiary undertakings, which have a functional currency other than the US Dollar, are translated
into US Dollars at average exchange rates for the year, and the related balance sheets have been translated at the rates of
exchange ruling on the balance sheet date. Any exchange differences arising from the translations are recognised in the
currency translation reserve via the statement of changes in equity.
Where Euro, Brazilian Real, Canadian Dollar or Swedish Kroner amounts have been referenced in this document, their
corresponding US Dollar equivalent has also been included and these equivalents have been calculated with reference to the
foreign exchange rates prevailing at December 31, 2017.
xix) Hedging
The activities of the Group expose it primarily to changes in foreign exchange rates and interest rates. The Group uses
derivative financial instruments, from time to time, such as forward foreign exchange contracts to hedge these exposures.
The Group enters into forward contracts to sell US Dollars forward for Euro. The principal exchange risk identified by the
Group is with respect to fluctuations in the Euro as a substantial portion of its expenses are denominated in Euro but its
revenues are primarily denominated in US Dollars. Trinity Biotech monitors its exposure to foreign currency movements and
may use these forward contracts as cash flow hedging instruments whose objective is to cover a portion of this Euro expense.
At the inception of a hedging transaction entailing the use of derivatives, the Group documents the relationship between the
hedged item and the hedging instrument together with its risk management objective and the strategy underlying the proposed
transaction. The Group also documents its quarterly assessment of the effectiveness of the hedge in offsetting movements in
the cash flows of the hedged items.
Derivative financial instruments are recognised at fair value. Where derivatives do not fulfil the criteria for hedge accounting,
they are classified as held-for-trading and changes in fair values are reported in the statement of operations. The fair value of
forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity
profiles and equates to the current market price at the balance sheet date.
The portion of the gain or loss on a hedging instrument that is deemed to be an effective cash flow hedge is recognised directly
in the hedging reserve in equity and the ineffective portion is recognised in the statement of operations. As the forward
contracts are exercised the net cumulative gain or loss recognised in the hedging reserve is transferred to the statement of
operations and reflected in the same line as the hedged item.
xx)
Exchangeable notes and derivative financial instruments
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the
host debt instrument is recognised at the residual value of the total net proceeds of the bond issue less fair value of the
embedded derivatives. Subsequently, the host debt instrument is measured at amortised cost using the effective interest rate
method.
The embedded derivatives are initially recognised at fair value and are restated at their fair value at each reporting date. The
fair value changes of the embedded derivatives are recognised in the statement of operations.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
xxi)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board of Directors.
xxii) Tax (current and deferred)
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of
operations except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax represents the expected tax payable (or recoverable) on the taxable profit for the year using tax rates enacted or
substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate
income, and taking into account any adjustments stemming from prior years.
Deferred tax is provided on the basis of the balance sheet liability method on all temporary differences at the balance sheet
date which is defined as the difference between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that are
anticipated to apply in the period in which the asset is realised or the liability is settled based on tax rates and tax laws that
have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised when it is probable
that future taxable profits will be available to utilize the associated losses or temporary differences. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities.
Deferred tax assets and liabilities are recognised for all temporary differences (that is, differences between the carrying amount
of the asset or liability and its tax base) with the exception of the following:
i. Where the deferred tax liability arises from goodwill not deductible for tax purposes or the initial recognition of an asset
or a liability in a transaction that is not a business combination and affects neither the accounting profit nor the taxable
profit or loss at the time of the transaction; and
ii. Where, in respect of temporary differences associated with investments in subsidiary undertakings, the timing of the
reversal of the temporary difference is subject to control and it is probable that the temporary difference will not reverse
in the foreseeable future.
Where goodwill is tax deductible, a deferred tax liability is not recognised on initial recognition of goodwill. It is recognised
subsequently for the taxable temporary difference which arises when the goodwill is amortised for tax with no corresponding
adjustment to the carrying value of the goodwill.
The carrying amounts of deferred tax assets are subject to review at each balance sheet date and are derecognised to the extent
that future taxable profits are considered to be inadequate to allow all or part of any deferred tax asset to be utilised.
xxiii) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
xxiv) Cost of sales
Cost of sales comprises product cost including manufacturing and payroll costs, quality control, shipping, handling, and
packaging costs and the cost of services provided.
xxv) Finance income and costs
Financing expenses comprise interest costs payable on leases and exchangeable notes. Interest payable on finance leases is
allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of
the liability. Financing expenses also includes the financing element of long term liabilities which have been discounted.
Finance income includes interest income on deposits and is recognised in the statement of operations as it accrues, using the
effective interest method. Finance income also includes fair value adjustments to embedded derivatives associated with
exchangeable notes.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
xxvi) Treasury shares
When the Group purchases its own equity instruments (treasury shares), the costs, including any directly attributable
incremental costs, are deducted from equity. No gain or loss is recognised in the statement of operations on the purchase, sale,
issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the
consideration, if reissued, is recognised in share premium. Voting rights related to treasury shares are nullified for the Group
and no dividends are allocated to them.
xxvii) Equity
Share capital represents the nominal (par) value of shares that have been issued. Share premium includes any premiums
received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
xxviii) Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale. Profit
or loss from discontinued operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or
loss resulting from the measurement and disposal of assets classified as held for sale.
xxiv) Fair values
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are
not based on observable market data
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
xxix) New IFRS Standards and Interpretations not applied
The IASB and IFRIC have issued additional standards and interpretations which are effective for periods starting after
January 1, 2017, all of which have not yet been adopted by the EU. The following standards and interpretations have yet to be
adopted by the Group:
International Financial Reporting Standards (IFRS/IAS)
Financial Instruments
IFRS 9
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 2
Share-based Payments – Classification and
Measurement of Share-based Payment
Transactions
IFRIC 22 Foreign Currency Transactions and Advance
Effective date
January 1, 2018 (adopted by the EU with effectivity date
of January 1, 2018)
January 1, 2018 (adopted by the EU with effectivity date
of January 1, 2018)
January 1, 2019 (not yet adopted by the EU)
January 1, 2018 (not yet adopted by the EU)
January 1, 2018 (not yet adopted by the EU)
Consideration
IFRS 9 ‘Financial Instruments’ will replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ and includes
requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge
accounting. The new requirements become effective as of January 1, 2018. Trinity Biotech will adopt the new standard on the
required effective date and will not restate comparative information.
During 2017, we performed a detailed impact assessment of IFRS 9. The new standard introduces changes for financial
liabilities where movements in own credit for financial liabilities designated at fair value through statement of operations will
be presented in other comprehensive income. This will impact on the recording of fair value movements in embedded
derivatives. The new standard also introduces expanded disclosure requirements, that are expected to change the nature and
extent of the Company’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13
Customer Loyalty Programs. IFRS 15 is effective for annual periods beginning on or after January 1, 2018.
The updated standard is effective for Trinity Biotech in the first quarter of the year ended December 31, 2018. We have elected
to adopt the updated standard by applying the modified retrospective application method. We have evaluated the effect that the
updated standard may have on our consolidated financial statements and related disclosures. While we are continuing to assess
all potential impacts of the new standard, the adoption of the IFRS 15 is not expected to have a significant impact on the
financial statements. Our preparatory work is also focused on the increased disclosure obligations including in respect of
expanded disclosure in respect of disaggregated revenue disclosures from contracts with customers, separate disclosure of
contract assets and liabilities, disclosure of retrospective revenue and disclosure of the remaining performance obligations by
product/service (or backlog). Due to the complexity of certain of our contracts, the actual revenue recognition treatment
required under the new standard for these arrangements may be dependent on contract-specific terms and vary in some
instances.
•
•
The Group has adopted the following standards and amendments during the year:
IAS 7 Statement of Cash Flows (Amendment) – Disclosure Initiative
IAS 12 Income Taxes (Amendment) – Recognition of Deferred Tax Assets for Unrealised Losses
The application of the above standards did not result in material changes in the Group’s consolidated accounts.
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker, who is responsible for allocating resources and assessing the performance of the
operating segments, has been identified as the Board of Directors. Management has determined the operating segments based
on the reports reviewed by the Board of Directors, which are used to make strategic decisions. The Board considers the
business from a geographic perspective based on the Group’s management and internal reporting structure. Sales of product
between companies in the Group are made on commercial terms which reflect the nature of the relationship between the
relevant companies. Segment results, assets and liabilities include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise interest-bearing loans, borrowings and expenses and
corporate expenses. Segment capital expenditure is the total cost during the year to acquire segment plant, property and
equipment and intangible assets that are expected to be used for more than one period, whether acquired on acquisition of a
business combination or through acquisitions as part of the current operations.
The Group comprises two main geographical segments (i) the Americas and (ii) Rest of World. The Group’s geographical
segments are determined by the location of the Group’s assets and operations. The Group has also presented a geographical
analysis of the segmental data for Ireland as is consistent with the information used by the Board of Directors.
The reportable operating segments derive their revenue primarily from one source (i.e. the market for diagnostic tests for a
range of diseases and other medical conditions). In determining the nature of its segmentation, the Group has considered the
nature of the products, their risks and rewards, the nature of the production base, the customer base and the nature of the
regulatory environment. The Group acquires, manufactures and markets a range of diagnostic products. The Group’s products
are sold to a similar customer base and the main body whose regulation the Group’s products must comply with is the Food
and Drug Administration (“FDA”) in the US.
The following presents revenue and profit information and certain asset and liability information regarding the Group’s
geographical segments.
i)
The distribution of revenue by geographical area based on location of assets was as follows:
Rest of World
Ireland
US$‘000
33,048
3,587
36,635
Other
US$‘000
—
—
—
Rest of World
Other
US$‘000
Ireland
US$‘000
35,718
5,349
41,067
4
348
352
Rest of World
Ireland
US$‘000
38,521
6,750
45,271
Other
US$‘000
1,243
10,484
11,727
Eliminations
US$’000
—
(45,734)
(45,734)
Total
US$‘000
99,140
—
99,140
Eliminations
US$’000
—
(45,019)
(45,019)
Total
US$‘000
99,611
—
99,611
Eliminations
US$’000
—
(56,230)
(56,230)
Total
US$‘000
100,195
—
100,195
Revenue
Year ended December 31, 2017
Revenue from external customers
Inter-segment revenue
Total revenue
Year ended December 31, 2016
Revenue from external customers
Inter-segment revenue
Total revenue
Year ended December 31, 2015
Revenue from external customers
Inter-segment revenue
Total revenue
Americas
US$‘000
66,092
42,147
108,239
Americas
US$‘000
63,889
39,322
103,211
Americas
US$‘000
60,431
38,996
99,427
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016
2.
ii)
SEGMENT INFORMATION (CONTINUED)
The distribution of revenue by customers’ geographical area was as follows:
Revenue
Americas
Asia / Africa
Europe (including Ireland) *
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
59,539
27,131
12,470
99,140
61,613
25,501
12,497
99,611
62,421
22,346
15,428
100,195
* Revenue from customers in Ireland is not disclosed separately due to the immateriality of these revenues.
iii)
The distribution of revenue by major product group was as follows:
Revenue
Clinical laboratory
Point-of-Care
Laboratory services
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
73,366
16,774
9,000
99,140
74,166
16,908
8,537
99,611
73,576
18,810
7,809
100,195
iv)
The distribution of segment results by geographical area was as follows:
Rest of World
Ireland
US$‘000
1,125
(32,561 )
(31,436 )
Other
US$‘000
(44)
—
(44)
Total
US$‘000
4,825
(41,755)
(36,930)
(738)
(37,668)
(2,207)
(39,875)
1,214
(38,661)
(1,609)
(40,270)
Americas
US$‘000
3,744
(9,194)
(5,450)
Year ended December 31, 2017
Result before impairment
Impairment
Result after impairment
Unallocated expenses *
Operating loss
Net financing expense (Note 3)
Loss before tax
Income tax credit (Note 9)
Loss for the year on continuing operations
Loss for the year on discontinued operations (Note 10)
Loss for the year
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
SEGMENT INFORMATION (CONTINUED)
Americas
US$‘000
4,564
(22,989)
(335)
(18,760)
Americas
US$‘000
4,183
Year ended December 31, 2016
Result before exceptional expenses
Impairment
Inventory provision
Result after exceptional expenses
Unallocated expenses *
Operating profit
Net financing expense (Note 3)
Loss before tax
Income tax credit (Note 9)
Loss for the year on continuing operations
Loss for the year on discontinued operations (Note 10)
Loss for the year
Year ended December 31, 2015
Result
Unallocated expenses *
Operating profit
Net financing income (Note 3)
Profit before tax
Income tax expense (Note 9)
Profit for the year on continuing operations
Loss for the year on discontinued operations (Note 10)
Profit for the year
Rest of World
Ireland
US$‘000
4,270
(20,390 )
(4,451 )
(20,571 )
Other
US$‘000
384
—
—
384
Rest of World
Ireland
US$‘000
9,782
Other
US$‘000
524
Total
US$‘000
9,218
(43,379)
(4,786)
(38,947)
(901)
(39,848)
(2,292)
(42,140)
3,557
(38,583)
(62,042)
(100,625)
Total
US$‘000
14,489
(983)
13,506
9,437
22,943
(756)
22,187
(391)
21,796
* Unallocated expenses represent head office general and administration costs of the Group which cannot be allocated to the
results of any specific geographical area.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
v)
SEGMENT INFORMATION (CONTINUED)
The distribution of segment assets and segment liabilities by geographical area was as follows:
As at December 31, 2017
Assets and liabilities
Segment assets
Unallocated assets:
Income tax assets (current and deferred)
Cash and cash equivalents and short-term investments
Total assets as reported in the Group balance sheet
Segment liabilities
Unallocated liabilities:
Income tax liabilities (current and deferred)
Total liabilities as reported in the Group balance sheet
As at December 31, 2016
Assets and liabilities
Segment assets
Unallocated assets:
Income tax assets (current and deferred)
Cash and cash equivalents and short-term investments
Total assets as reported in the Group balance sheet
Segment liabilities
Unallocated liabilities:
Income tax liabilities (current and deferred)
Total liabilities as reported in the Group balance sheet
Americas
US$‘000
Rest of World
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
88,714
36,513
3
125,230
11,486
104,901
249
Americas
US$‘000
Rest of World
Ireland
US$‘000
Other
US$‘000
10,137
57,607
192,974
116,636
11,142
127,778
Total
US$‘000
93,589
63,062
71
156,722
9,746
108,049
4,534
15,761
77,109
249,592
122,329
18,536
140,865
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
vi)
SEGMENT INFORMATION (CONTINUED)
The distribution of long-lived assets, which are property, plant and equipment, goodwill and intangible assets and other non-
current assets (excluding deferred tax assets), by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
December 31, 2017
US$‘000
15,873
—
55,812
71,685
December 31, 2016
US$‘000
41,909
—
59,639
101,548
vii)
The distribution of depreciation and amortisation by geographical area was as follows:
Depreciation:
Rest of World – Ireland
Rest of World – Other
Americas
Amortisation:
Rest of World – Ireland
Americas
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
1,186
—
1,238
2,424
1,164
2,139
3,303
1,072
304
2,197
3,573
1,533
1,440
2,973
825
151
2,081
3,057
1,468
1,185
2,653
viii) The distribution of share-based payment expense by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
Share based-payments – discontinued
operations
December 31, 2017
US$‘000
841
—
87
928
December 31, 2016
US$‘000
1,187
41
153
1,381
December 31, 2015
US$‘000
1,415
13
122
1,550
—
928
33
1,414
—
1,550
See Note 21 for further information on share-based payments.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
ix)
SEGMENT INFORMATION (CONTINUED)
The distribution of interest income and interest expense by geographical area was as follows:
Interest Income
Year ended December 31, 2017
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Interest Expense
Year ended December 31, 2017
Interest on licence fee
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes
Inter-segment interest expense
Total
Interest Income
Year ended December 31, 2016
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Americas
US$‘000
44
—
—
44
Americas
US$‘000
—
—
—
—
4,853
4,853
Americas
US$‘000
21
—
—
21
Rest of World
Ireland
US$‘000
764
2,390
—
3,154
Other
US$‘000
—
—
4,853
4,853
Ireland
US$‘000
40
42
4,600
723
—
5,405
Rest of World
Other
US$‘000
—
—
—
—
—
—
Rest of World
Ireland
US$‘000
856
2,270
—
3,126
Other
US$‘000
—
—
4,853
4,853
Eliminations
US$‘000
—
—
(4,853)
(4,853)
Eliminations
US$‘000
—
—
—
—
(4,853)
(4,853)
Eliminations
US$’000
—
—
(4,853)
(4,853)
Total
US$‘000
808
2,390
—
3,198
Total
US$’000
40
42
4,600
723
—
5,405
Total
US$‘000
877
2,270
—
3,147
Rest of World
Interest Expense
Year ended December 31, 2016
Interest on deferred consideration and licence fee
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes
Inter-segment interest expense
Total
Americas
US$‘000
—
—
—
—
4,853
4,853
Ireland
US$‘000
66
55
4,600
718
—
5,439
Other
US$‘000
—
—
—
—
—
—
Eliminations
US$’000
—
—
—
—
(4,853)
(4,853)
Total
US$‘000
66
55
4,600
718
—
5,439
Rest of World
Ireland
US$‘000
472
13,015
—
13,487
Other
US$‘000
—
—
4,854
4,854
Eliminations
US$’000
—
—
(4,854)
(4,854)
Total
US$‘000
476
13,015
—
13,491
Interest Income
Year ended December 31, 2015
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Americas
US$‘000
4
—
—
4
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
2.
SEGMENT INFORMATION (CONTINUED)
Interest Expense
Year ended December 31, 2015
Interest on deferred consideration and licence fee
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes
Inter-segment interest expense
Total
Americas
US$‘000
—
—
—
—
4,854
4,854
Rest of World
Ireland
US$‘000
138
33
3,348
535
—
4,054
Other
US$‘000
—
—
—
—
—
—
Eliminations
US$’000
—
—
—
—
(4,854)
(4,854)
Total
US$‘000
138
33
3,348
535
—
4,054
Interest expense in 2016 does not include US$5,000 (2015: US$9,000) that has been stated in Note 10 in respect of the
discontinued operations in Fiomi.
x)
The distribution of taxation (expense)/credit by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
December 31, 2017
US$‘000
192
(81)
1,103
1,214
December 31, 2016
US$‘000
2,038
(48)
1,567
3,557
December 31, 2015
US$‘000
(1,050)
(72)
366
(756)
xi)
xii)
During 2017, 2016 and 2015 there were no customers generating 10% or more of total revenues.
The distribution of capital expenditure by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
3.
FINANCIAL INCOME AND EXPENSES
December 31, 2017
US$‘000
7,602
—
8,080
15,682
December 31, 2016
US$‘000
14,431
763
7,591
22,785
Financial income:
Non-cash financial income
Interest income
Financial expense:
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes (Note 24)
Interest on deferred consideration and licence fee
Net Financing (Expense) / Income
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
2,390
808
3,198
(42)
(4,600)
(723)
(40)
(5,405)
(2,207)
2,270
877
3,147
(55)
(4,600)
(718)
(66)
(5,439)
(2,292)
13,015
476
13,491
(33)
(3,348)
(535)
(138)
(4,054)
9,437
Exchangeable note interest expense and non-cash financial income and expense relate to the exchangeable senior notes issued
in 2015. For further information, refer to Note 24. Interest expense in 2016 does not include US$5,000 (2015: US$9,000) that
has been stated in Note 10 in respect of the discontinued operations in Fiomi.
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
4.
OTHER OPERATING INCOME
Rental income from premises
Other income
December 31, 2017
US$‘000
-
100
100
December 31, 2016
US$‘000
135
104
239
December 31, 2015
US$‘000
201
87
288
Other income mainly comprises income recognised under Transitional Services Agreements (TSA) with Diagnostica Stago. As
part of the divestiture of the Coagulation product line in April 2010, the Group entered into a TSA. The services provided by
the Group to Stago under the TSA comprise canteen services. This income has not been treated as revenue since the TSA
activities are incidental to the main revenue-generating activities of the Group.
5.
(LOSS)/PROFIT BEFORE TAX
The following amounts were charged / (credited) to the statement of operations:
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
Directors’ emoluments (including non-
executive directors):
Remuneration
Pension
Share based payments
Auditor’s remuneration
Audit fees
Tax fees
Other non audit fees
Depreciation*
Amortisation
Loss on the disposal of property, plant
and equipment
Net foreign exchange differences**
Operating lease rentals:
Land and buildings
Other equipment
1,800
44
727
568
73
-
1,896
3,303
3
(17)
2,846
163
1,946
41
1,121
469
33
19
2,856
2,973
15
888
2,811
114
1,596
23
1,242
492
12
8
2,839
2,653
15
(1,018)
2,828
69
*
Note that US$528,000 (2016: US$414,000) (2015: US$68,000) of depreciation was capitalised to research and development
projects during 2017 in line with the Group’s capitalisation policy for Intangible projects.
In 2016, the depreciation expense did not include the amount of US$303,000 (2015: US$150,000) that was included in the
operating expenses that were stated in Note 10 in respect of the discontinued operations in Fiomi. In 2017, no depreciation
expense arose for the discontinued operation.
**
The net foreign exchange differences do not include US$440,000 (2016: US$253,000) which were included in the operating
expenses that were stated in Note 10 in respect of the discontinued operations in Fiomi.
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
6.
IMPAIRMENT CHARGES AND INVENTORY PROVISIONING
In accordance with IAS 36, Impairment of Assets, the Group carries out an annual impairment review of the asset valuations.
In determining whether a potential asset impairment exists, a range of internal and external factors are considered. A number
of factors affected this calculation including the Company’s market capitalisation at the end of the year that was significantly
lower compared to the end of 2016. This factor as well as recent volatility in the Company’s share price resulted in a higher
cost of capital being attributable to the Company’s expected future cash flows. As the future discounted cash flows for a
number of cash generating units (“CGUs”) was below the carrying value of their net assets, the Group decided to recognise at
December 31, 2017 a non-cash impairment charge of US$41,755,000.
The impact of the above items on the statement of operations for the year ended December 31, 2017 was as follows:
Selling, general & administration expenses
Impairment of PP&E (note 12)
Impairment of goodwill and other intangible assets (note 13)
Impairment of prepayments (note 17)
Total impairment loss before tax
Income tax impact of impairment loss
Total impairment loss after tax
US$’000
10,437
29,667
1,651
41,755
(517)
41,238
The impact of impairment charges and inventory provisioning on the statement of operations for the year ended December 31,
2016 was as follows:
Selling, general & administration expenses
Impairment of PP&E (note 12)
Impairment of goodwill and other intangible assets (note
13)
Impairment of prepayments (note 17)
Product discontinuation (note 16)
Total impairment loss and inventory provisioning costs before
tax
Income tax impact of impairment loss and inventory provisioning
costs
Total impairment loss and inventory provisioning costs after
tax
Impairment
charges
US$’000
Product
Cull
US$’000
Total
US$‘000
4,382
—
4,382
38,240
757
—
—
—
4,786
38,240
757
4,786
43,379
4,786
48,165
(3,094)
(689)
(3,783)
40,285
4,097
44,382
In 2016, the decision to withdraw the Meritas Troponin premarket submission to the U.S. Food and Drug Administration,
Trinity Biotech’s led to a significant reduction in the Group’s share price. Given that the market capitalization was then
significantly below the book value of the net assets, the Group decided to recognise at December 31, 2016 a non-cash
impairment charge of US$28,390,000. The impairment was taken against goodwill and other intangible assets, property, plant
and equipment and prepayments (see notes 12, 13 and 17). Certain capitalised development projects were judged to be
specifically impaired and their total carrying value of US$14,989,000 was expensed. Total impairment charges were
US$43,379,000.
Also in 2016, the Group recognised a charge of US$4,786,000 in relation to a number of products that were culled. This
mainly represented inventory provisioning for the Bartels and Microtrak product lines that were acquired over 15 years.
Revenues for these products had been declining significantly over the last number of years and had reached the end of their
economic life, especially given the level of technical support required to keep older products of this nature on the market.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
7.
PERSONNEL EXPENSES
Wages and salaries
Social welfare costs
Pension costs
Share-based payments
Restructuring costs
December 31, 2017
US$‘000
26,316
2,424
459
928
-
30,127
December 31, 2016
US$‘000
25,901
2,542
552
1,414
1,276
31,685
December 31, 2015
US$‘000
24,531
2,418
711
1,550
—
29,210
Personnel expenses are shown net of capitalisations. Total personnel expenses, inclusive of amounts capitalised for wages and
salaries, social welfare costs and pension costs, for the year ended December 31, 2017 amounted to US$37,351,000 (2016:
US$40,980,000) (2015: US$38,671,000). Total share based payments, inclusive of amounts capitalised in the balance sheet,
amounted to US$1,109,000 for the year ended December 31, 2017 (2016: US$1,633,000) (2015: US$1,974,000). See Note 20
for further details.
There were no restructuring costs incurred for the years ended December 31, 2017 and December 31, 2015. Restructuring
costs for the year ended December 31, 2016 were US$1,276,000 and related to Swedish operations.
The average number of persons employed by the Group in the financial year was 556 (2016: 582) (2015: 555) and is analysed
into the following categories:
Research and development
Administration and sales
Manufacturing and quality
8.
PENSION SCHEMES
December 31, 2017
60
162
334
556
December 31, 2016
73
161
348
582
December 31, 2015
69
156
330
555
The Group operates defined contribution pension schemes for certain of its full time employees. The benefits under these
schemes are financed by both Group and employee contributions. Total contributions made by the Group in the financial year
and charged against income amounted to US$458,000 (2016: US$708,000) (2015: US$711,000) of which $Nil (2016:
$156,000) is included within the restructuring costs in Note 7. The pension accrual for the Group at December 31, 2017 was
US$33,000 (2016: US$83,000), (2015: US$205,000).
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
9.
INCOME TAX (CREDIT)/EXPENSE
The charge for tax based on the profit comprises:
Current tax expense
Irish Corporation tax
Foreign taxes (a)
Adjustment in respect of prior years
Total current tax (credit)/expense
Deferred tax expense (b)
Origination and reversal of temporary
differences (see Note 14)
Origination and reversal of net operating
losses (see Note 14)
Total deferred tax (credit)/expense
Total income tax (credit)/charge on
continuing operations in statement of
operations
December 31, 2017
US$‘000
December 31, 2016
US$‘000
December 31, 2015
US$‘000
(51)
358
150
457
(5,969)
4,298
(1,671)
(240)
222
(271)
(289)
(2,872)
(396)
(3,268)
(251)
472
82
303
2,411
(1,958)
453
(1,214)
(3,557)
756
(a) The foreign taxes relate primarily to USA and Canada.
(b)
In 2017, there was a deferred tax credit of US$170,000 (2016: credit of US$1,804,000; 2015: charge of US$1,246,000)
recognised in respect of Ireland and a deferred tax credit of US$1,501,000 (2016: US$1,464,000 credit; 2015:
US$793,000 credit) recognised in respect of overseas tax jurisdictions.
Effective tax rate
Profit/(Loss) before taxation
As a percentage of profit/loss before tax:
Current tax
Total (current and deferred)
December 31, 2017
US$‘000
(39,875)
December 31, 2016
US$‘000
(42,140)
December 31, 2015
US$‘000
22,943
1.14%
(3.05%)
(0.69%)
(8.44%)
1.32%
3.30%
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective total tax rate for the Group:
Irish corporation tax
Effect of current year net operating
losses and temporary differences for
which no deferred tax asset was
recognised (a)
Effect of changes in US tax code (b)
Effect of tax rates on overseas earnings
Effect of Irish income taxable at higher
tax rate
Adjustments in respect of prior years
R&D tax credits (c)
Other items (d)
Effective tax rate
December 31, 2017
(12.5%)
December 31, 2016
(12.5%)
December 31, 2015
12.5%
12.05%
(1.89%)
(2.09%)
-
0.38%
(0.17%)
1.17%
(3.05%)
6.22%
-
(1.39%)
0.05%
(0.64%)
(0.65%)
0.47%
(8.44%)
(1.94%)
-
(1.34%)
0.06%
2.53%
(3.98%)
(4.53%)
3.30%
(a) The effect of current year net operating losses and temporary differences for which no deferred tax asset was recognised
is analyzed further in the table below (see also Note 14). No deferred tax asset was recognised because there was no
reversing deferred tax liability in the same jurisdiction reversing in the same period and no future taxable income in the
same jurisdiction.
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
9.
INCOME TAX EXPENSE (CONTINUED)
(b)
In 2017, a number of changes were made to the USA tax code, the most significant of which was the reduction in the
federal corporation tax rate to 21%. This resulted in a once-off tax credit of US$753,000 arising from the reduction in
deferred tax balances due to the tax rate change, partially offset by the effect of mandatory deemed repatriation of certain
deferred foreign earnings.
(c) A lower amount of R&D tax credits has been recorded in 2017 compared to prior years because several of the R&D
projects in Ireland are at an advanced stage where they no longer qualify for such a tax credit.
(d) Other items comprise items not chargeable to tax/expenses not deductible for tax. In 2017, other items mainly comprise
the movement in the Loan Note’s embedded derivatives value and the accretion of notional interest on the Loan Note’s
host contract, both of which are exempt from deferred taxation recognition under IAS 12, Income Taxes.
Unrecognised deferred tax assets – continuing operations
Temporary differences arising in the US
(Decrease)/increase in net operating losses arising
in Brazil
Net operating losses arising in Ireland
Effect in
2017
US$’000
68
(714)
5,452
4,806
Percentage
effect in
2017
0.17%
(1.79%)
13.67%
12.05%
Effect in
2016
US$’000
2
1,670
947
2,619
Percentage
effect in
2016
0.01%
3.96%
2.25%
6.22%
The distribution of (loss) / profit before taxes by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
December 31, 2017
US$‘000
(35,821)
4,809
(8,863)
(39,875)
December 31, 2016
US$‘000
(23,787)
5,241
(23,594)
(42,140)
December 31, 2015
US$‘000
18,232
5,378
(667)
22,943
At December 31, 2017, the Group had unutilised net operating losses as follows:
USA
Ireland
Brazil
December 31, 2017
US$‘000
7,737
57,206
4,060
69,003
December 31, 2016
US$‘000
8,896
40,652
6,159
55,707
December 31, 2015
US$‘000
11,026
22,609
1,245
34,880
In the USA, the utilisation of net operating loss carryforwards is limited to future profits in the USA. The net operating losses
for the US arising prior to January 1, 2018 have a maximum carryforward of 20 years. In respect of the US, US$3,943,000 will
expire by December 31, 2033, US$21,000 will expire by December 31, 2034, US$2,021,000 will expire by December 31,
2035, and US$1,752,000 will expire by December 31, 2036.
At December 31, 2017, the Group had unrecognised deferred tax assets in respect of unused tax losses and unused tax credits
as follows:
US – unused tax credits
Brazil – unused tax losses
Ireland – unused tax losses
Unrecognised deferred tax asset
December 31, 2017
US$‘000
345
1,380
8,471
10,196
December 31, 2016
US$‘000
277
2,094
3,019
5,390
December 31, 2015
US$‘000
275
423
724
1,422
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
9.
INCOME TAX EXPENSE (CONTINUED)
The accounting policy for deferred tax is to calculate the deferred tax asset that is deemed recoverable, considering all sources
for future taxable profits. The deferred tax assets in the above table have not been recognised due to uncertainty regarding the
full utilization of these losses in the related tax jurisdiction in future periods. Only when it is probable that future profits will
be available to utilize the forward losses or temporary differences is a deferred tax asset recognised. When there is a reversing
deferred tax liability in that jurisdiction that reverses in the same period, the deferred tax asset is restricted so that it equals the
reversing deferred tax liability.
The Group has US state credit carryforwards of US$436,000 at December 31, 2017 (2016: US$420,000; 2015: US$417,000).
A deferred tax asset of US$345,000 (2016: US$ 277,000; 2015: US$ 275,000) in respect of US state credit carryforwards was
not recognised in 2017 due to uncertainties regarding future full utilisation of these state credit carryforwards in the related tax
jurisdiction in future periods.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
10.
LOSS FOR THE YEAR ON DISCONTINUED OPERATIONS
In October 2016, management decided to cease the development of Cardiac point-of-care tests on the Meritas platform. These
products were being developed by the Group’s subsidiary Fiomi Diagnostics (“Fiomi”) located in Sweden. The decision to cease the
development work and to close the Swedish operation came after the company held a meeting with the U.S. Food and Drug
Administration (“FDA”) in order to obtain an update on the Meritas Troponin premarket submission. At that meeting the FDA
suggested that the submission should be withdrawn. The FDA made it known that any new point-of-care Troponin product would be
required to demonstrate performance equivalent to the most recently cleared laboratory-based device. As there was no certainty that
this level of performance could ever be achieved by the point-of-care Meritas product, even with the benefit of further development
efforts, management decided to cease the development work on Troponin I and the analyzer and its sister products, BNP and D-dimer.
Expenses, gains and losses relating to the discontinuation of the Cardiac point-of-care tests operation have been eliminated from profit
or loss from the Group’s continuing operations and are shown as a single line item (net of related taxes) on the face of the
Consolidated Statement of Operations. The discontinued operation had no revenues since commencement as the products were still in
their development phase. In 2016, the loss on discontinued operations included the write off of the carrying value of all capitalised
development costs, goodwill, property, plant and equipment, inventories and other assets associated with the Meritas project. It also
included a provision for the cost of closing the Swedish facility, mainly consisting of contractual obligations associated with
terminating premises and supplier contracts, as well as redundancy costs for 41 employees.
In 2017, settlements were negotiated with a number of counterparties that were lower than had been estimated in the previous years’
financial statements. The resultant excess provision for closure costs has been released to the Consolidated Statement of Operations.
As at December 31, 2017, the discontinued operation does not have any remaining employees and all operating lease obligations have
been terminated. The loss on discontinued operations also includes a charge in relation to foreign translation reserves that had been
recognised in previous periods as a reserve movement.
The operating loss for the Cardiac point-of-care tests operation in Sweden and the loss on remeasurement of its assets and liabilities
are summarised as follows:
Revenues
Operating expenses
Operating loss
Interest expenses
Loss from discontinued operations before
tax
Income tax credit/(expense)
Loss for the year
Loss on remeasurement of assets and
liabilities:
Property, plant and equipment (note 12)
Goodwill and intangible assets (note 13)
Inventories
Closure costs
Foreign currency translation reserve
Taxation
Total loss
Loss for the year from discontinued
operations
December 31, 2017
US$‘000
—
—
—
—
December 31, 2016
US$‘000
—
(827)
(827)
(5)
December 31, 2015
US$‘000
—
(58)
(58)
(9)
(832)
186
(646)
(4,647)
(49,433)
(2,578)
(5,846)
(3,779)
4,887
(61,396)
(62,042)
(67)
(324)
(391)
—
—
—
—
—
—
—
(391)
—
—
—
—
—
—
1,794
(3,080)
(323)
(1,609)
(1,609)
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
10.
LOSS FOR THE YEAR ON DISCONTINUED OPERATIONS (CONTINUED)
Basic earnings per ordinary share – discontinued operations
Basic (loss)/earnings per ordinary share for discontinued operations is computed by dividing the loss after taxation on
discontinued operations of US$1,609,000 (2016: US$62,042,000) (2015: US$391,000) for the financial year by the weighted
average number of ‘A’ ordinary shares in issue. As at December 31, 2017, this amounted to 86,486,409 shares (2016:
91,858,813 shares) (2015: 92,647,091 shares), see note 11 for further details.
Diluted earnings per ordinary share – discontinued operations
Diluted earnings per ordinary share for discontinued operations is computed by dividing the loss after taxation on discontinued
operations of US$1,609,000 (2016: US$62,042,000) (2015: US$391,000) for the financial year by the diluted weighted
average number of ordinary shares in issue of 107,510,179 (2016: 113,197,598) (2015: 109,631,172), see note 11 for further
details. Under IAS 33 Earnings per Share, diluted earnings per share cannot be anti-dilutive. Therefore, diluted loss per ADS
in accordance with IFRS is equal to basic earnings per ADS.
Earnings per ADS
In June 2005, Trinity Biotech adjusted its ADS ratio from 1 ADS: 1 ordinary share to 1 ADS: 4 ordinary shares. Earnings per
ADS for all periods presented have been restated to reflect this exchange ratio.
Basic (loss)/earnings per ADS for discontinued operations is computed by dividing the loss after taxation on discontinued
operations of US$1,609,000 (2016: US$62,042,000) (2015: US$391,000) for the financial year by the weighted average
number of ADS in issue of 21,621,602 (2016: 22,964,703); (2015: 23,161,773), see note 11 for further details.
Diluted (loss)/earnings per ADS for discontinued operations is computed by dividing the loss after taxation on discontinued
operations of US$1,609,000 (2016: US$62,042,000) (2015: US$391,000) for the financial year, by the diluted weighted
average number of ADS in issue of 26,877,544 (2016: 28,299,399) (2015: 27,407,793), see note 11 for further details.
Basic (loss)/earnings per ADS (US Dollars) –
discontinued operations
Diluted (loss)/earnings per ADS (US Dollars) –
discontinued operations
Basic (loss)/earnings per ‘A’ share (US Dollars) –
discontinued operations
Diluted (loss)/earnings per ‘A’ share (US Dollars) –
discontinued operations
December 31,
2017
December 31,
2016
December 31,
2015
(0.07)
(0.07)
(0.02)
(0.02)
(2.70)
(2.70)
(0.68)
(0.68)
(0.02)
(0.02)
(0.004)
(0.004)
Cash flows
The cash flows attributable to discontinued operations are as follows:
Cash flows from operating activities
Cash flows from investing activities
December 31,
2017
(2,847)
-
December 31,
2016
(1,623)
(8,989)
December 31,
2015
(11,135)
(10,802)
There were no cash flows from financing activities attributable to discontinued operations for the years ended December 31,
2017, 2016 or 2015.
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
11.
(LOSS)/EARNINGS PER SHARE
Basic earnings per ordinary share
Basic earnings per ordinary share for the group is computed by dividing the loss after taxation of US$40,270,000 (2016: loss
of US$100,625,000) (2015: profit of US$21,796,000) for the financial year by the weighted average number of ‘A’ ordinary
shares in issue. Basic earnings per ordinary share for continuing operations is computed by dividing the loss after taxation for
continued operations of US$38,661,000 (2016: profit of US$38,583,000) (2015: profit of US$22,187,000) for the financial
year by the weighted average number of ‘A’ ordinary shares in issue.
As at December 31, 2017, this amounted to 86,486,409 shares (2016: 91,858,813 shares) (2015: 92,647,091 shares).
‘A’ ordinary shares
Basic earnings per share denominator
Reconciliation to weighted average earnings per
share denominator:
Number of ‘A’ ordinary shares at January 1 (Note 20)
Weighted average number of shares issued during the
year*
Weighted average number of treasury shares
Basic earnings per share denominator
December 31,
2017
86,486,409
86,486,409
December 31,
2016
91,858,813
91,858,813
December 31,
2015
92,647,091
92,647,091
96,162,410
95,840,138
94,308,358
-
(9,676,001)
86,486,409
120,396
(4,101,721)
91,858,813
974,161
(2,635,428)
92,647,091
*The weighted average number of shares issued during the year is calculated by taking the number of shares issued multiplied
by the number of days in the year each share is in issue, divided by 365 days.
Diluted earnings per ordinary share
Diluted earnings per ordinary share for the group is computed by dividing the adjusted loss after tax of US$37,337,000 (2016:
loss of US$97,577,000) (2015: profit of US$12,658,000) for the financial year by the diluted weighted average number of
ordinary shares in issue of 107,510,179 (2016: 113,197,598) (2015: 109,631,172). Diluted earnings per ordinary share for
continuing operations is computed by dividing the adjusted loss after tax on continuing operations of US$35,728,000 (2016:
loss of US$35,536,000) (2015: profit of US$13,049,000) for the financial year by the diluted weighted average number of
ordinary shares in issue of 107,510,179 (2016: 113,197,598) (2015: 109,631,172). The adjusted loss after tax on continuing
operations is computed by adding back the interest expense, accretion interest and movements in the fair value of the
derivatives on the exchangeable notes to the loss after taxation for continuing operations.
Under IAS 33 Earnings per Share, diluted earnings per share cannot be anti-dilutive. Therefore, diluted loss per ADS in
accordance with IFRS would be equal to basic earnings per ADS.
The basic weighted average number of ordinary shares for the Group may be reconciled to the number used in the diluted
earnings per ordinary share calculation as follows:
Basic earnings per share denominator (see above)
Issuable on exercise of options and warrants
Issuable on conversion of exchangeable notes
Diluted earnings per share denominator
December 31,
2017
86,486,409
-
21,023,770
107,510,179
December 31,
2016
91,858,813
315,019
21,023,766
113,197,598
December 31,
2015
92,647,091
1,700,733
15,283,348
109,631,172
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
11.
(LOSS)/EARNINGS PER SHARE (CONTINUED)
The profit/(loss) after tax for the year may be reconciled to the amount used in the diluted earnings per ordinary share
calculation as follows:
(Loss)/Profit after tax for the year
Non-cash financial income
Cash interest expense
Non-cash interest on exchangeable notes
Adjusted (loss)/profit after tax
December 31, 2017
US$‘000
(40,270 )
(2,390 )
4,600
723
(37,337 )
December 31, 2016
US$‘000
(100,625 )
(2,270 )
4,600
718
(97,577 )
December 31, 2015
US$‘000
21,796
(13,020 )
3,348
534
12,658
Earnings per ADS
In June 2005, Trinity Biotech adjusted its ADS ratio from 1 ADS: 1 ordinary share to 1 ADS: 4 ordinary shares. Earnings per
ADS for all periods presented have been restated to reflect this exchange ratio.
Basic earnings per ADS for the Group is computed by dividing the loss after taxation of US$40,270,000 (2016: loss of
US$100,625,000) (2015: profit of US$21,796,000) for the financial year by the weighted average number of ADS in issue of
21,621,602 (2016: 22,964,703); (2015: 23,161,773). Basic earnings per ADS for continuing operations is computed by
dividing the loss after taxation of US$38,661,000 (2016: loss of US$38,583,000) (2015: profit of US$22,187,000) for the
financial year by the weighted average number of ADS in issue of 21,621,602 (2016: 22,964,703); (2015: 23,161,773).
ADS
Basic earnings per share denominator
Reconciliation to weighted average earnings per
share denominator:
Number of ADS at January 1 (Note 20)
Weighted average number of shares issued during the
year*
Weighted average number of treasury shares
Basic earnings per share denominator
December 31,
2017
21,621,602
21,621,602
December 31,
2016
22,964,703
22,964,703
December 31,
2015
23,161,773
23,161,773
24,040,602
23,960,035
23,577,090
-
(2,419,000)
21,621,602
30,098
(1,025,430)
22,964,703
243,540
(658,857)
23,161,773
Diluted earnings per ADS for the Group is computed by dividing the adjusted loss after taxation of US$37,337,000 (2016: loss
of US$97,577,000) (2015: profit of US$12,658,000) for the financial year, by the diluted weighted average number of ADS in
issue of 26,877,544 (2016: 28,299,399) (2015: 27,407,793).
*The weighted average number of shares issued during the year is calculated by taking the number of shares issued multiplied
by the number of days in the year each share is in issue, divided by 365 days.
The basic weighted average number of ADS shares for the Group may be reconciled to the number used in the diluted earnings
per ADS share calculation as follows:
Basic earnings per share denominator (see above)
Issuable on exercise of options and warrants
Issuable on conversion of exchangeable notes
Diluted earnings per share denominator
December 31,
2017
21,621,602
-
5,255,942
26,877,544
December 31,
2016
22,964,703
78,755
5,255,941
28,299,399
December 31,
2015
23,161,773
425,183
3,820,837
27,407,793
The number of shares issuable on conversion of exchangeable notes is prorated for the 2015 financial year to reflect the fact
the exchangeable notes were issued in April, 2015.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
12.
PROPERTY, PLANT AND EQUIPMENT
Cost
At January 1, 2016
Other additions
Disposals or retirements
Exchange adjustments
At December 31, 2016
At January 1, 2017
Other additions
Disposals or retirements
Exchange adjustments
At December 31, 2017
Accumulated depreciation and impairment
losses
At January 1, 2016
Charge for the year
Impairment loss
Disposals or retirements
Exchange adjustments
At December 31, 2016
At January 1, 2017
Charge for the year
Impairment loss
Disposals or retirements
Exchange adjustments
At December 31, 2017
Carrying amounts
At December 31, 2017
7
At December 31, 2016
Freehold land
and buildings
US$‘000
Leasehold
improvements
US$‘000
Computers,
fixtures and
fittings
US$‘000
2,899
143
—
(11)
3,031
3,031
465
(488)
(4)
3,004
5,873
391
(257)
(12)
5,995
5,995
302
(404)
1
5,894
(2,527)
(144)
(53)
—
8
(2,716)
(2,716)
(165)
(267 )
488
1
(2,659)
(4,828)
(367)
(109)
234
6
(5,064)
(5,064)
(263)
(383)
402
—
(5,308)
Plant and
equipment
US$‘000
31,720
4,735
(268)
297
36,484
36,484
4,491
(3,083)
3
37,895
(13,936)
(2,980)
(8,867)
253
(194)
(25,724)
(25,724)
(1,914)
(9,787)
3,062
(4)
(34,367)
Total
US$‘000
43,073
5,277
(525)
288
48,113
48,113
5,258
(3,984)
30
49,417
(22,414)
(3,573)
(9,029)
487
(181)
(34,710)
(34,710)
(2,424)
(10,437)
3,961
(7)
(43,617)
345
315
586
931
3,528
5,800
10,760
13,403
2,581
8
—
14
2,603
2,603
—
(9)
30
2,624
(1,123)
(82)
—
—
(1)
(1,206)
(1,206)
(82)
—
9
(4)
(1,283)
1,341
1,397
The annual impairment review performed at December 31, 2017 showed that the carrying value of the Group’s assets
exceeded the amount to be recovered through use or sale of the assets by a total of US$85,603,000. The details of the
impairment review are described in note 13. When an impairment loss is identified in a cash generating unit, it must be first
allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to the other assets of the
unit pro rata on the basis of the carrying amount of each asset in the unit. In this manner, an impairment loss of US$10,437,000
was allocated to property, plant and equipment in 2017. The recoverable amount of property, plant and equipment was
determined to be the value in use of each cash generating unit.
The annual impairment review performed at December 31, 2016, showed that the carrying value of the Group’s assets
exceeded the amount to be recovered through use or sale of the assets by a total of US$38,257,000. The details of the
impairment review are described in note 13. When an impairment loss is identified in a cash generating unit, it must be first
allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to the other assets of the
unit pro rata on the basis of the carrying amount of each asset in the unit. In this manner, an impairment loss of US$4,382,000
was allocated to property, plant and equipment in 2016. The recoverable amount of property, plant and equipment was
determined to be the value in use of each cash generating unit. The remaining impairment loss comprises the write down of the
recoverable amount of the property, plant and equipment of the discontinued operation (refer to Note 10) of US$4,647,000.
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
12.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Assets held under operating leases (where the Company is the lessor)
Included in the carrying amount of property, plant and equipment are a number of assets included in plant and equipment
which generate operating lease revenue for the Group. The net book value of these assets as at December 31, 2017 and 2016 is
US$Nil following full write down of the assets due to group impairment (refer to Note 13). Depreciation charged on these
assets in 2017 amounted to US$30,000 (2016: US$1,119,000).
Included in disposals/retirements in 2017 is US$Nil (2016: US$25,000) relating to the net book value of leased instruments
reclassified as inventory on return from customers.
Property, plant and equipment under construction
Included in property, plant and equipment at December 31, 2017 is an amount of US$561,000 (2016: US$778,000) relating to
assets in the course of construction.
Assets held under finance leases
Included in the carrying amount of property, plant and equipment is an amount for capitalised leased assets of US$51,000
(2016: US$1,515,000). Movement in the carrying amount of capitalised leased assets during 2017 is due to group impairments.
The depreciation charge in respect of capitalised leased assets for the year ended December 31, 2017 was US$181,000 (2016:
US$181,000).
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS
Cost
At January 1, 2016
Other additions
Exchange adjustments
At December 31, 2016
At January 1, 2017
Other additions
Disposals
Reclassification
Exchange adjustments
At December 31, 2017
Accumulated amortisation and Impairment losses
At January 1, 2016
Charge for the year
Impairment losses
Exchange adjustments
At December 31, 2016
At January 1, 2017
Charge for the year
Disposals
Impairment losses
Exchange adjustments
At December 31, 2017
Carrying amounts
At December 31, 2017
At December 31, 2016
Goodwill
US$‘000
82,112
—
(423)
81,689
81,689
—
—
—
81,689
(29,426)
—
(26,489)
—
(55,915)
(55,915)
—
—
(7,876)
—
(63,791)
17,898
25,774
Development
costs
US$‘000
Patents and
licences
US$‘000
Other
US$‘000
Total
US$‘000
109,443
17,431
(255)
126,619
126,619
10,402
(132)
29
136,918
(20,199)
(1,259)
(58,195)
—
(79,653)
(79,653)
(1,708)
—
(20,782)
3
(102,140)
34,778
46,966
9,968
—
(43)
9,925
9,925
22
—
—
9,947
(6,280)
(86)
(2,948)
(224)
(9,538)
(9,538)
(17)
—
(173)
—
(9,728)
33,624
77
—
33,701
33,701
—
(15)
132
—
33,818
235,147
17,508
(721)
251,934
251,934
10,424
(15)
—
(29)
262,372
(17,884)
(1,628)
(41)
—
(19,553)
(19,553)
(1,578)
8
(836)
—
(21,959)
(73,789)
(2,973)
(87,673)
(224)
(164,659)
(164,659)
(3,303)
8
(29,667)
3
(197,618)
219
387
11,859
14,148
64,754
87,275
Included within development costs are costs of US$31,904,000 which were not amortised in 2017 (2016: US$15,872,000).
These development costs are not being amortised as the projects to which the costs relate were not fully complete at
December 31, 2017 or at December 31, 2016. As at December 31, 2017 these projects are expected to be completed during the
period from January 1, 2018 to December 31, 2019 at an expected further cost of approximately US$10,560,000.
Intangible assets written off relating to Discontinued operation
In 2016, development of Cardiac point-of-care tests on the Meritas platform was terminated. The decision to cease the
development came after the company held a meeting with the U.S. Food and Drug Administration (“FDA”) in order to obtain
an update on the Meritas Troponin premarket submission. At that meeting the FDA suggested that the submission should be
withdrawn. The FDA made it known that any new point-of-care Troponin product would be required to demonstrate
performance equivalent to the most recently cleared laboratory-based device. As there was no certainty that this level of
performance could ever be achieved by the point-of-care Meritas product, even with the benefit of further development efforts,
management decided to cease the development work on Troponin I and the analyzer and its sister products, BNP and D-dimer.
In the financial statements for the year ended December 31, 2016, all capitalised development work for the Troponin I assay
and analyser, BNP assay and the D-dimer test totalling US$41,374,000 was written off. The carrying value of the intangible
asset relating to the underlying micropillar technology (US$2,946,000) was written off, as well as the goodwill arising on the
Fiomi Diagnostics acquisition (US$5,109,000). Other intangible assets of US$4,000 brought the total write down of intangible
assets of the cardiac point-of-care operation in 2016 to US$49,433,000 (refer to Note 10).
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The following represents the costs incurred during each period presented for each of the principal development projects:
Product Name
Premier Instrument for Haemoglobin A1c testing1
HIV screening rapid test
US Lyme
Uni-gold test enhancement
G-6-PDH test
Tri-stat Point-of-Care instrument
Sjogrens monoclonal antibodies
HIV screening Africa
Autoimmune FDA registrations
Uni-Gold antigen improvement
Premier Resolution
Brain Natriuretic Peptide (BNP) assay
Troponin I assay and reader
Cardiac analyser
Enhanced TPHA/CMV
Malaria Point-of-Care test
D-Dimer development
Other projects with spend less than US$250,000 in 2017
Total capitalised development costs
2017
US$’000
2,601
1,514
1,156
1,134
812
764
376
289
273
258
252
-
-
-
-
-
-
973
10,402
2016
US$’000
2,810
1,085
1,003
1,154
-
678
166
650
341
287
259
2,904
1,932
1,056
810
411
332
1,553
17,431
1
The Premier project entails the development of a High Performance Liquid Chromotography (HPLC) instrument for
testing haemoglobin A1c (HbA1c). A number of versions of the instrument are being developed including an Ion
Exchange version (Premier Resolution). At December 31, 2017 this project had a total carrying amount of $22,955,000.
Amortisation will occur over a 15 year period, commencing on commercialization of each version of the instrument.
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
All of the development projects for which costs have been capitalised are judged to be technically feasible, commercially
viable and likely to produce future economic benefits. In reaching this conclusion, many factors have been considered
including the following:
(a) The Group only develops products within its field of expertise. The R&D team is experienced in developing new
products in this field and this experience means that only products which have a high probability of technical success are
put forward for consideration as potential new products.
(b) A technical feasibility study is undertaken in advance of every project. The feasibility study for each project is reviewed
by the R&D team leader, and by other senior management depending on the size of the project. The feasibility study
occurs in the initial research phase of the project and costs in this phase are not capitalised.
(c) Nearly all of our new product developments involve the transfer of our existing product know-how to a new application.
The Group does not engage in pure research. Every development project is undertaken with the intention of bringing a
particular new product to market for which there is a known demand.
(d) The commercial feasibility of each new product is established prior to commencement of a project by ensuring it is
projected to achieve an acceptable income after applying appropriate discount rates.
Other intangible assets
Other intangible assets consist primarily of acquired customer and supplier lists, trade names, website and software costs.
Amortisation
Amortisation is charged to the statement of operations through the selling, general and administrative expenses line.
Impairment testing for intangibles including goodwill and indefinite lived assets
Goodwill and other intangibles are subject to impairment testing on an annual basis. In determining whether a potential asset
impairment exists, a range of internal and external factors are considered. A number of factors impacted this calculation
including the Company’s market capitalisation at the end of the year which was significantly lower compared to the end of
2016. This factor as well as recent volatility in the Company’s share price resulted in a higher cost of capital being attributable
to the Company’s expected future cash flows. As the future discounted cash flows for a number of cash generating units
(“CGUs”) was below the carrying value of their net assets, the Group decided to recognise at December 31, 2017 a non-cash
impairment charge of US$41,755,000.
The impairment test performed as at December 31, 2017 identified a total impairment loss of US$85,603,000 in six CGUs, of
which US$41,755,000 has been recorded in the 2017 financial statements. Not all of the total impairment loss was recorded in
the financial statements due to the allocation method proscribed in IAS 36, Impairment of Assets. According to the accounting
standard, the impairment loss for each CGU is first allocated to reduce the carrying amount of any goodwill allocated to the
CGU, then to other assets of the unit pro rata on the basis of the carrying amount of each asset in the CGU. The full
impairment loss for Biopool US Inc, Trinity Biotech Manufacturing Limited and Mardx Diagnostic Inc could not be reflected
in the 2017 financial statements for these entities because each of these entities had insufficient assets to write down after
excluding those assets with a known recoverable amount. The amount of impairment loss that could not be recorded for
Biopool US Inc, Trinity Biotech Manufacturing Limited and Mardx Diagnostic Inc was US$32,177,000, US$9,769,000 and
US$1,902,000 respectively. As a result, the impairment loss that was recorded in the 2017 financial statements was
US41,755,000, being the total impairment loss of US$85,603,000 less the amounts which could not be recorded.
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The impairment loss arose from the impairment review performed on Trinity Biotech Manufacturing Limited, Immco
Diagnostics Inc,, Mardx Diagnostic Inc, Clark Laboratories Inc, Phoenix Bio-tech Corp and Biopool US Inc. An impairment
loss arose in these entities due to the carrying value of their net assets exceeding the entity’s discounted future cashflows. The
recoverable amount of each of the CGUs is determined based on a value-in-use computation, which is the only methodology
applied by the Group and which has been selected due to the impracticality of obtaining fair value less costs to sell
measurements for each reporting period. For the purpose of the annual impairment tests, goodwill is allocated to the relevant
CGU. The annual impairment analysis is based on a valuation technique involving level 3 inputs, see Note 1 (viii).
The value-in-use calculations use cash flow projections based on the 2018 budget and projections for a further four years using
projected revenue and cost growth rates of between 7% and minus 20%. At the end of the five year forecast period, terminal
values for each CGU, based on a long term growth rate of 2%, are used in the value-in-use calculations. The value-in-use
represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each
CGU. The key assumptions employed in arriving at the estimates of future cash flows are subjective and include projected
EBITDA, net cash flows, discount rates and the duration of the discounted cash flow model. The assumptions and estimates
used were derived from a combination of internal and external factors based on historical experience. The pre-tax discount
rates used range from 15% to 26% (2016: 13% to 36%).
The table below sets forth the impairment loss recorded for each of the CGU’s at December 31, 2017.
Trinity Biotech Manufacturing Limited
Immco Diagnostics Inc.
Clark Laboratories Inc.
Mardx Diagnostic Inc.
Phoenix Bio-tech Corp
Biopool US Inc.
Total impairment loss
US$’000
32,561
1,094
978
4,690
1,801
631
41,755
The table below sets forth the breakdown of the impairment loss for each class of asset at December 31, 2017:
Goodwill and other intangible assets (see note 13)
Property, plant and equipment (see note 12)
Prepayments (see note 17)
Total impairment loss
The impairment loss at December 31, 2017 allocated to goodwill arose on the following CGUs:
Mardx Diagnostic Inc.
Phoenix Bio-tech Corp.
Clark Laboratories Inc.
Immco Diagnostics Inc.
Blood bank screening business
Total impairment loss allocated to goodwill
US$’000
29,667
10,437
1,651
41,755
US$’000
3,572
1,801
978
1,094
431
7,876
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and is particularly
sensitive in the following areas;
•
In the event that there was a variation of 10% in the assumed level of future growth in revenues, which would represent a
reasonably likely range of outcomes, there would be an additional impairment loss of US$835,000 at December 31, 2017.
In the event there was a 10% variation in the discount rate used to calculate the potential impairment of the carrying
values, which would represent a reasonably likely range of outcomes, there would be an additional impairment loss of
US$4,786,000 at December 31, 2017.
•
Significant Goodwill and Intangible Assets with Indefinite Useful Lives
CGUs or combinations of CGUs for which the carrying amount of goodwill is significant for the purposes of impairment
testing in comparison with the Group’s total carrying amount of goodwill are those where the percentage is greater than 20%
of the total.
The additional disclosures required for the CGU with significant goodwill are as follows:
Carrying amount of goodwill (US$’000)
Discount rate applied (real pre-tax)
Excess value-in-use over carrying amount (US$’000)
% EBITDA would need to decrease for an impairment to
arise
Long-term growth rate
Fitzgerald Industries
December 31,
2017
12,592
17.70%
8,397
30.4%
2.0%
December 31,
2016
12,592
13.56%
17,762
46.8%
2.0%
The key assumptions and methodology used in respect of this CGU are consistent with those described above. The
assumptions and estimates used are specific to the individual CGU and were derived from a combination of internal and
external factors based on historical experience.
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
13.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
Intangible Assets with Indefinite Useful lives
(included in other intangibles)
Fitzgerald Industries International CGU
Fitzgerald trade name
RDI trade name
Primus Corporation CGU
Primus trade name
Immco Diagnostic CGU
Immco Diagnostic trade name
Total
December 31, 2017
US$‘000
December 31, 2016
US$‘000
970
560
670
3,393
5,593
970
560
670
3,393
5,593
The trade name assets purchased as part of the acquisition of Fitzgerald in 2004, Primus and RDI in 2005 and Immco
Diagnostics in 2013 were valued using the relief from royalty method and based on factors such as (1) the market and
competitive trends and (2) the expected usage of the name. It was considered that these trade names will generate net cash
inflows for the Group for an indefinite period.
14.
DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities of the Group are attributable to the following:
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Tax value of loss carryforwards recognised
Deferred tax assets/(liabilities)
Assets
Liabilities
Net
2017
US$’000
448
—
1,006
3,510
2,109
1,625
8,698
2016
US$’000
—
—
897
5,701
2,035
5,923
14,556
2017
US$’000
(98)
(9,443)
—
—
(1,291)
—
(10,832)
2016
US$’000
(574)
(16,430)
—
—
(1,357)
—
(18,361)
2017
US$’000
350
(9,443)
1,006
3,510
818
1,625
(2,134)
2016
US$’000
(574)
(16,430)
897
5,701
678
5,923
(3,805)
The deferred tax asset in 2017 is mainly due to deductible temporary differences relating to provisions, property, plant and
equipment, net operating losses, share-based payments and the elimination of unrealised intercompany inventory profit. The
deferred tax asset decreased by US$5,858,000 in 2017 principally due to the reduction in the tax value of loss carryforwards
due to a change in US tax rate.
The deferred tax liability is caused by the net book value of non-current assets being greater than the tax written down value of
non-current assets, temporary differences due to the acceleration of the recognition of certain charges in calculating taxable
income permitted in Ireland and the US and deferred tax recognised on fair value asset uplifts in connection with business
combinations. The deferred tax liability decreased by US$7,529,000 in 2017, principally because of the reduction in the US tax
rate and because of the impairment of intangible assets on which the deferred tax liabilities were recognised.
Deferred tax assets and liabilities are only offset when the entity has a legally enforceable right to set off current tax assets
against current tax liabilities and where the intention is to settle current tax liabilities and assets on a net basis or to realise the
assets and settle the liabilities simultaneously. At December 31, 2017 and at December 31, 2016 no deferred tax assets and
liabilities are offset as it is not certain as to whether there is a legally enforceable right to set off current tax assets against
current tax liabilities and it is also uncertain as to what current tax assets may be set off against current tax liabilities and in
what periods.
The vast majority of temporary differences are expected to reverse after 2021.
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECMEBER 31, 2017
14.
DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
Unrecognised deferred tax assets
Deferred tax assets have not been recognised by the Group in respect of the following items:
Capital losses
Net operating losses
US state credit carryforwards
December 31,
2017
US$’000
8,293
61,264
345
69,902
December 31,
2016
US$’000
8,293
23,630
277
32,200
There was an increase of US$37,702,000 in the unrecognised deferred tax assets during the year ended December 31, 2017.
For comments on the uncertainty prompting less than full recognition refer to Note 9. The movement in the unrecognised
deferred tax assets during the year ended December 31, 2017 is analysed as follows:
Movement in unrecognised deferred tax assets
US state credit carryforwards
Net operating losses Brazil
Net operating losses Ireland
Total – continuing operations
Increase /
(decrease)
US$’000
68
(2,100)
39,734
37,702
Applicable
tax rate
%
n/a
34%
12.5% - 25%
Tax
effect
US$’000
68
(714)
5,452
4,806
A deferred tax asset of US$345,000 (2016: US$277,000) in respect of US state credit carryforwards was not recognised due to
uncertainties regarding the timing of the utilisation of these state credit carryforwards in the related tax jurisdiction in future
periods.
A deferred tax asset of US$1,380,000 (2016: US$2,094,000) was not recognised in respect of net operating losses in Brazil.
The entity in Brazil was incorporated in 2012 and has cumulative losses to date. The deferred tax asset has not been recognised
for Brazil due to uncertainty regarding the full utilization of these losses in the related tax jurisdiction in future periods. Only
when it is probable that future profits will be available to utilize the forward losses or temporary differences is a deferred tax
asset recognised.
A deferred tax asset of US$2,641,000 (2016: US$1,671,000) was not recognised in respect of net operating losses of Trinity
Biotech Investments Ltd. (“TBIL”). TBIL, which is tax resident in Ireland, issued an exchangeable note of US$115 million in
2015 following its incorporation earlier in that year. To date this entity has interest expenses and no income. The deferred tax
asset has not been recognised due to uncertainty regarding the full utilization of these losses in future periods. Only when it is
probable that future profits will be available to utilize the forward losses is a deferred tax asset recognised. In accordance with
IAS 12, Income Taxes, both the movement in the exchangeable note’s embedded derivatives value and the movement on the
exchangeable note’s host contract, being the accretion of notional interest, are exempt from deferred taxation recognition.
A deferred tax asset of US$5,829,875 (2016: US$1,348,000 was not recognised in respect of net operating losses in Trinity
Biotech Manufacturing Ltd. The deferred tax asset has not been recognised due to insufficient deferred tax liabilities following
the impairment charge relating to fixed assets in this entity. When there is a reversing deferred tax liability in a jurisdiction that
reverses in the same period, the deferred tax asset is restricted so that it equals the reversing deferred tax liability.
No deferred tax asset is recognised in respect of a capital loss forward of US$8,293,000 (2016: US$8,293,000) in Ireland as it
is not probable that there will be future capital gains against which to offset these capital losses.
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
14.
DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
Unrecognised deferred tax liabilities
At December 31, 2017 and 2016, there was no recognised or unrecognised deferred tax liability for taxes that would be
payable on the unremitted earnings of certain of the Group’s subsidiaries. The Company is able to control the timing of the
reversal of the temporary differences of its subsidiaries and it is probable that these temporary differences will not reverse in
the foreseeable future.
Movement in temporary differences during the year
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Tax value of loss carryforwards recognised
Balance
January, 1
2017
US$’000
(574)
(16,430)
897
5,701
678
5,923
(3,805)
Recognised
in income
US$’000
924
6,987
109
(2,191)
140
(4,298)
1,671
Recognised
in loss on
discontinued
operations
US$’000
—
—
—
—
—
—
—
Foreign
Exchange
movement
US$’000
—
—
—
—
—
—
—
Balance
December 31,
2017
US$’000
350
(9,443)
1,006
3,510
818
1,625
(2,134)
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Tax value of loss carryforwards recognised
Balance
January, 1
2016
US$’000
(830)
(22,319)
1,015
2,960
471
6,676
(12,027)
Recognised
in income
US$’000
256
(214)
(118)
2,741
207
396
3,268
Recognised
in loss on
discontinued
operations
US$’000
—
6,036
—
—
—
(1,149)
4,887
Foreign
Exchange
movement
US$’000
—
67
—
—
—
—
67
Balance
December 31,
2016
US$’000
(574)
(16,430)
897
5,701
678
5,923
(3,805)
15.
OTHER ASSETS
Finance lease receivables (see Note 17)
Other assets
December 31, 2017
US$‘000
December 31, 2016
US$‘000
685
86
771
788
82
870
The Group leases instruments as part of its business. For details of future minimum finance lease receivables with non-
cancellable terms, please refer to Note 17.
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
16.
INVENTORIES
Raw materials and consumables
Work-in-progress
Finished goods
December 31, 2017
US$‘000
10,345
7,236
15,224
32,805
December 31, 2016
US$‘000
9,176
7,288
16,125
32,589
All inventories are stated at the lower of cost or net realisable value. The replacement cost of inventories does not differ from
cost. Total inventories for the Group are shown net of provisions of US$7,543,000 (2016: US$10,017,000). Cost of sales in
2017 includes inventories expensed of US$54,904,000 (2016: US$50,259,000), (2015: US$53,098,000).
The movement on the inventory provision for the three year period to December 31, 2017 is as follows:
Opening provision at January 1
Charged during the year
Utilised during the year
Released during the year
Closing provision at December 31
December 31,
2017
US$‘000
10,017
2,561
(4,749)
(286)
7,543
December 31,
2016
US$‘000
4,822
6,390
(1,065)
(130)
10,017
December 31,
2015
US$‘000
4,636
892
(666)
(40)
4,822
During 2017, US$286,000 (2016: US$130,000), (2015: US$40,000) of inventory provision relating to net realisable value was
released to the statement of operations following a current year review of inventory usage.
In 2016, a provision was created of US$4,786,000 in relation to a number of products which have been culled during the year.
This mainly relates to the Bartels and Microtrak product lines which were acquired over 15 years ago. Revenues for these
products have been declining significantly over the last number of years and have now reached the end of their economic life,
especially given the level of technical support required to keep older products of this nature on the market.
17.
TRADE AND OTHER RECEIVABLES
Trade receivables, net of impairment losses
Prepayments
Value added tax
Finance lease receivables
December 31,
2017
US$‘000
17,242
2,998
-
500
20,740
December 31,
2016
US$‘000
18,340
3,634
69
542
22,585
Trade receivables are shown net of an impairment losses provision of US$3,590,000 (2016: US$3,171,000) (see Note 28).
Prepayments are shown net of impairment of US$1,651,000 (2016: US$757,000) (see note 6).
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
17.
TRADE AND OTHER RECEIVABLES (CONTINUED)
Leases as lessor
(i) Finance lease commitments – Group as lessor
The Group leases instruments as part of its business. Future minimum finance lease receivables with non-cancellable terms are
as follows:
Less than one year
Between one and five years (Note 15)
Less than one year
Between one and five years (Note 15)
December 31, 2017
US$‘000
Gross
investment
860
1,204
2,064
Unearned
income
360
519
879
December 31, 2016
US$‘000
Gross
investment
949
1,388
2,337
Unearned
income
407
600
1,007
Minimum
payments
receivable
500
685
1,185
Minimum
payments
receivable
542
788
1,330
The Group classified future minimum lease receivables between one and five years of US$685,000 (2016: US$788,000) as
Other Assets, see Note 15. Under the terms of the lease arrangements, no contingent rents are receivable.
(ii) Operating lease commitments – Group as lessor
The Group leases instruments under operating leases as part of its business.
Future minimum rentals receivable under non-cancellable operating leases are as follows:
US$‘000
December 31, 2017
Less than one year
Between one and five years
Instruments
3,959
90
4,049
Total
3,959
90
4,049
US$‘000
December 31, 2016
Less than one year
Between one and five years
Instruments
3,671
184
3,855
Total
3,671
184
3,855
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
18.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
19.
SHORT-TERM INVESTMENTS
December 31, 2017
US$’000
9,561
14,003
23,564
December 31, 2016
US$’000
9,845
67,264
77,109
All liquid investments with a maturity greater than six months are considered to be short-term investments. As of 31,
December 2017, the short-term investments are deposits amounting to US$34,043,000 (2016: all deposits matured within six
months of the year end date and were classified as cash and cash equivalents).
Investments (deposits)
December 31, 2017
US$’000
34,043
December 31, 2016
US$’000
-
20.
CAPITAL AND RESERVES
Share capital
In thousands of shares
In issue at January 1
Issued for cash
In issue at December 31
In thousands of ADSs
Balance at January 1
Issued for cash
Balance at December 31
Class ‘A’
Ordinary shares
2017
96,162
-
96,162
Class ‘A’
Ordinary shares
2016
95,840
322
96,162
ADS
2017
24,041
-
24,041
ADS
2016
23,960
81
24,041
In thous ands of ADSs
Balance at J anuary 1
Purchas ed during the year
Balance at December 31
ADS
Treas ury s hares
2017
ADS
Treas ury s hares
2016
1,768
1,344
3,112
659
1,109
1,768
In thousands of shares
Balance at January 1
Purchased during the year
Balance at December 31
In thousands of ADSs
Balance at January 1
Purchased during the year
Balance at December 31
Class ‘A’
Treasury shares
2017
7,073
5,375
12,448
Class ‘A’
Treasury shares
2016
2,635
4,438
7,073
ADS
Treasury shares
2017
ADS
Treasury shares
2016
1,768
1,344
3,112
659
1,109
1,768
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
20.
CAPITAL AND RESERVES (CONTINUED)
The Group had authorised share capital of 200,700,000 ‘A’ ordinary shares of US$0.0109 each (2016: 200,700,000 ‘A’
ordinary shares of US$0.0109 each) as at December 31, 2017.
The amounts above relating to treasury shares purchased during 2016 and the balance at 31 December 2016 (in ‘A’ ordinary
shares and ADSs) have been restated due to a prior year disclosure error.
(a) During 2017, the Group did not issue any shares from the exercise of employee options (2016: 322,272 ‘A’ Ordinary
shares were issued from the exercise of employee options for a consideration of US$673,000 settled in cash). During
2016, the Group incurred costs of US$8,000 in connection with the issue of shares. At December 31, 2017, there were
no amounts receivable on issuance share capital (2016: US$nil) relating to the exercise of share options.
(b) During 2017, the Group repurchased 5,374,692 ‘A’ ordinary shares (1,343,673 ADS’s) under its share buyback program.
(2016: 4,437,740 ‘A’ ordinary shares or 1,109,435 ADS’s).
(c) There were no dividends paid during 2017 in respect of the 2016 financial year, (nil in respect of the 2015 financial
year), (22 cents per ADS in respect of the 2014 financial year). As provided in the Articles of Association of the
Company, dividends or other distributions are declared and paid in US Dollars.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign currency denominated operations of the Group since January 1, 2004.
Warrant reserve
The Group calculates the fair value of warrants at the date of issue taking the amount directly to a separate reserve within
equity. The fair value is calculated using the trinomial model. The fair value which is assessed at the grant date is calculated on
the basis of the contractual term of the warrants.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions entered into but not yet crystallised.
The warrant and hedging reserves form Other Reserves in the Consolidated Statement of Financial Position.
Treasury shares
During 2017, the Group purchased 5,374,692 ‘A’ Ordinary shares (1,343,673 ADS’s) ‘Treasury shares’. The total cost of these
shares was US$7,456,000.
142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS
Warrants
There were no warrants outstanding at the beginning of 2017, and there were no warrants granted in either 2017 or 2016. As
there were no warrants outstanding, the warrant reserve was transferred to the accumulated surplus reserve during 2017.
Options
Under the terms of the Company’s Employee Share Option Plans, options to purchase 10,727,376‘A’ Ordinary Shares
(2,681,844 ADSs) were outstanding at December 31, 2017. Under these Plans, options are granted to officers, employees and
consultants of the Group at the discretion of the Compensation Committee (designated by the board of directors), under the
terms outlined below.
Certain options have been granted to consultants of the Group and, where this is the case, the Group has measured the fair
value of the services provided by these consultants by reference to the fair value of the equity instruments granted. This
approach has been adopted in these cases as it is impractical for the Group to reliably estimate the fair value of such services.
The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Vesting conditions
The options vest following a period of service by the officer or employee. The required period of service is determined by the
Compensation Committee at the date of grant of the options (usually the date of approval by the Compensation Committee)
and it is generally over a three to four year period. There are no market conditions associated with the share option vesting
periods.
Contractual life
The term of an option is determined by the Board, Compensation Committee and Remuneration Committee provided that the
term may not exceed a period of between seven to ten years from the date of grant. All options will terminate 90 days after
termination of the option holder’s employment, service or consultancy with the Group (or one year after such termination
because of death or disability) except where a longer period is approved by the Board of Directors. Under certain
circumstances involving a change in control of the Group, the Compensation Committee may accelerate the exercisability and
termination of options.
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
The number and weighted average exercise price of share options and warrants per ordinary share is as follows (as required by
IFRS 2, this information relates to all grants of share options and warrants by the Group):
Outstanding January 1, 2015
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2016
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2017
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2015
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2016
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2017
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Options and
warrants
‘A’ Ordinary
Shares
9,291,652
976,000
(1,602,000)
(507,200)
8,158,452
4,679,323
8,158,452
2,160,000
(322,272)
(165,997)
9,830,183
5,838,851
9,830,183
5,630,000
-
(4,732,807)
10,727,376
3,268,707
Options and
warrants
‘ADS’ Equivalent
2,322,913
244,000
(400,500)
(126,800)
2,039,613
1,169,831
2,039,613
540,000
(80,568)
(41,499)
2,457,546
1,459,713
2,457,546
1,407,500
-
(1,183,202)
2,681,844
817,179
144
Weighted-
average exercise
price
US$
Per ‘A’ Ordinary
Share
3.20
3.20
1.95
3.96
3.36
3.03
3.36
2.39
2.09
3.39
3.19
3.31
3.19
1.31
-
3.86
1.92
2.57
Weighted-
average exercise
price
US$
Per ‘ADS’
12.80
12.80
7.80
15.84
13.44
12.12
13.44
9.57
8.35
13.58
13.43
13.24
12.74
5.25
-
10.26
7.69
10.29
Range
US$
Per ‘A’ Ordinary
Share
0.66 – 4.79
2.71 – 4.47
1.07 – 4.21
2.50 – 4.79
0.66 – 4.47
0.66 – 4.23
0.66 – 4.47
1.67 – 2.80
0.66 – 2.65
2.52 – 3.61
0.66 – 4.47
0.75 – 4.23
0.66 – 4.47
1.24 – 1.44
-
0.75 – 4.47
1.24 – 4.36
1.66 – 4.36
Range
US$
Per ‘ADS’
2.63 – 19.15
10.84 – 17.88
4.28 – 16.84
10.00 – 19.16
2.63 – 17.88
2.63 – 16.92
2.63 – 17.88
6.69 – 11.20
2.64 – 10.61
10.08 – 14.44
2.64 – 17.88
3.00 – 16.92
2.64 - 17.88
4.95 – 5.75
-
3.00 – 17.88
4.96– 17.44
6.64 – 17.45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
There were no share options exercised during 2017. The weighted average share price per ‘A’ Ordinary share at the date of
exercise for options exercised in 2016 was: US$2.96 per ‘A’ Ordinary share (US$11.84 per ADS) and 2015: US$4.25 per ‘A’
Ordinary share (US$17.00 per ADS).
The opening share price per ‘A’ Ordinary share at the start of the financial year was US$1.73 or US$6.93 per ADS (2016:
US$2.92 or US$11.69 per ADS) (2015: US$4.38 or US$17.50 per ADS) and the closing share price at December 31, 2017 was
US$1.28 or US$5.10 per ADS (2016: US$1.73 or US$6.92 per ADS) (2015: US$2.94 or US$11.76 per ADS). The average
share price for the year ended December 31, 2017 was US$1.42 per ‘A’ Ordinary share or US$5.66 per ADS.
A summary of the range of prices for the Company’s stock options for the year ended December 31, 2017 follows:
Exercise price range
US$1.00-US$2.05
US$2.06- US$2.99
US$3.00 -US$4.47
Exercise price range
US$4.00-US$8.20
US$8.24- US$11.96
US$12.00 -US$17.88
Outstanding
Weighted–
average
exercise
price
1.38
2.52
4.21
Outstanding
Weighted–
average
exercise
price
5.52
10.08
16.84
Weighted-
average
contractual
life
remaining
(years)
6.52
3.20
3.95
Weighted-
average
contractual
life
remaining
(years)
6.52
3.20
3.95
No. of
options
‘A’ ordinary
shares
6,075,644
4,333,732
318,000
10,727,376
No. of
options
‘ADS
equivalent’
1,518,911
1,083,433
79,500
2,681,844
No. of
options
‘A’ ordinary
shares
215,652
2,861,061
192,002
3,268,715
No. of
options
‘ADS
equivalent’
53,913
715,265
48,001
817,179
Exercisable
Weighted–
average
exercise
price
1.69
2.53
4.21
Exercisable
Weighted–
average
exercise
price
6.76
10.12
16.84
Weighted-
average
contractual
life
remaining
(years)
2.57
2.20
3.92
Weighted-
average
contractual
life
remaining
(years)
2.57
2.20
3.92
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
The weighted-average remaining contractual life of options outstanding at December 31, 2017 was 5.10 years (2016: 4.16
years).
A summary of the range of prices for the Company’s stock options for the year ended December 31, 2016 follows:
Exercise price range
US$0.66-US$0.99
US$1.00-US$2.05
US$2.06- US$2.99
US$3.00 -US$4.47
Exercise price range
US$2.63-US$3.96
US$4.00-US$8.20
US$8.24- US$11.96
US$12.00 -US$17.88
Outstanding
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
0.80
1.63
2.54
4.22
1.70
2.71
4.29
4.21
Outstanding
Weighted–
average
exercise
price
3.20
6.52
10.16
16.88
Weighted-
average
contractual
life
remaining
(years)
1.70
2.71
4.29
4.21
No. of
options
‘A’ ordinary
shares
14,000
801,652
4,776,531
4,238,000
9,830,183
No. of
options
‘ADS
equivalent’
3,500
200,413
1,194,133
1,059,500
2,457,546
No. of
options
‘A’ ordinary
shares
14,000
571,652
2,230,534
3,022,665
5,838,851
No. of
options
‘ADS
equivalent’
3,500
142,913
557,634
755,666
1,459,713
Exercisable
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
0.80
1.59
2.54
4.21
1.70
1.01
2.20
3.89
Exercisable
Weighted–
average
exercise
price
3.20
6.36
10.16
16.84
Weighted-
average
contractual
life
remaining
(years)
1.70
1.01
2.20
3.89
The recognition and measurement principles of IFRS 2 have been applied to share options granted under the Company’s Share
Option Plans since November 7, 2002 which have not vested by January 1, 2005 in accordance with IFRS 2.
146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
Charge for the year under IFRS 2
The charge for the year is calculated based on the fair value of the options granted which have not yet vested.
The fair value of the options is expensed over the vesting period of the option. US$928,000 was charged to the statement of
operations in 2017, (2016: US$1,381,446), (2015: US$1,550,000) split as follows:
Share-based payments – cost of sales
Share-based payments – selling, general and administrative
Total – continuing operations
Share-based payments – discontinued operations
Total
December 31,
2017
US$‘000
35
893
928
-
928
December 31,
2016
US$‘000
32
1,349
1,381
33
1,414
December 31,
2015
US$‘000
9
1,541
1,550
—
1,550
The total share based payments charge for the year was US$1,109,000 (2016: US$1,633,000) (2015: US$1,974,000).
However, a total of US$181,000 (2016: US$219,000) (2015: US$424,000) of share based payments was capitalised in
intangible development project assets during the year.
The fair value of services received in return for share options granted are measured by reference to the fair value of share
options granted. The estimate of the fair value of services received is measured based on a trinomial model. The following are
the input assumptions used in determining the fair value of share options granted in 2017, 2016 and 2015:
Key
management
personnel
2017
US$0.43 /
(US$1.72)
Other
employees
2017
US$0.44 /
(US$1.76)
Key
management
personnel
2016
US$0.58 /
(US$2.32)
Other
employees
2016
US$0.57 /
(US$2.28)
Key
management
personnel
2015
Nil
Weighted average fair value at
measurement date per ‘A’
share / (per ADS)
Total ‘A’ share options
granted / (ADS’s
equivalent)
Weighted average share price
per ‘A’ share / (per ADS)
Weighted average exercise
price per ‘A’ share / (per
ADS)
Weighted average expected
volatility
Weighted average expected
life
Weighted average risk free
interest rate
5,150,000 /
(1,287,500)
480,000 /
(120,000)
1,700,000 /
(425,000)
460,000 /
(115,000)
US$1.34 /
(US$5.36)
US$1.34 /
(US$5.36)
US$1.31 /
(US$5.24)
US$1.31 /
(US$5.24)
US$2.43 /
(US$9.72)
US$2.43 /
(US$9.72)
US$2.25 /
(US$9.00)
US$2.25 /
(US$9.00)
40.62%
40.48%
29.63%
36.73%
4.45
4.69
4.81
3.74
1.59%
1.91%
1.21%
1.29%
Expected dividend yield
0.81%
0.81%
1.14%
0.96%
147
Other
employees
2015
US$0.68 /
(US$2.72)
976,000 /
(244,000)
US$3.20 /
(US$12.80)
US$3.20 /
(US$12.80)
29.27%
3.73
1.46%
1.14%
Nil
Nil
Nil
Nil
Nil
Nil
Nil
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
21.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.
The expected volatility is based on the historic volatility (calculated based on the expected life of the options). The Group has
considered how future experience may affect historical volatility.
The profile and activities of the Group are not expected to change in the immediate future and therefore Trinity Biotech would
expect estimated volatility to be consistent with historical volatility.
22.
TRADE AND OTHER PAYABLES
Trade payables
Payroll taxes
Employee related social insurance
Accrued liabilities
Deferred income
Restructuring accrual
December 31, 2017
US$’000
8,045
423
151
11,618
278
-
20,515
December 31, 2016
US$’000
9,017
489
416
10,877
224
3,734
24,757
Accrued liabilities include US$1,112,000 (2016: US$2,195,000) relating to contracted licence payments for HIV-2 licence.
The restructuring accrual in 2016 represented the cost of closing the Swedish facility, Fiomi Diagnostics (refer to Note 10),
and mainly comprised contractual obligations associated with terminating premises and supplier contracts, as well as unpaid
redundancy costs for 20 employees. For more information refer to Note 10, Loss on Discontinued Operations.
23.
PROVISIONS
Provisions
December 31, 2017
US$’000
50
December 31, 2016
US$’000
75
The provision for warranty claims was reduced by US$25,000 in 2017 based on a revised assessment of future claims.
During 2017 and 2016 the Group experienced no significant product warranty claims. However, the Group believes that it is
appropriate to retain a product warranty provision to cover any future claims. The provision at December 31, 2017 represents
the estimated cost of product warranties, the exact amount which cannot be determined. US$50,000 represents management’s
best estimate of these obligations at December 31, 2017.
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
24.
BORROWINGS
Exchangeable notes
During 2015, the Group issued US$115,000,000 of exchangeable senior notes which will mature on April 1, 2045, subject to
earlier repurchase, redemption or exchange. The notes are senior unsecured obligations and accrue interest at an annual rate of
4%, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2015. The notes are
convertible into ordinary shares of the parent entity at the applicable exchange rate, at any time prior to the close of business
on the second business day immediately preceding the maturity date, at the option of the holder, or repayable on April 1, 2045.
The conversion rate is 47.112 ADSs per $1,000 principal amount of notes, equivalent to an exchange price of approximately
$21.88 per ADS. The exchange rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for
any accrued and unpaid interest. The notes include a number of non-financial covenants, all of which were complied with at
December 31, 2017.
The notes include a number of put and call options, and these embedded derivatives are measured at fair value through the
Consolidated Statement of Operations. The first date on which holders can exercise their put option is April 1, 2022. If the put
option is exercised, the issuer has to repurchase the notes at par. The embedded derivatives are summarised as follows:
Non-current assets
Exchangeable note bond call option
Non-current liabilities
Exchangeable note equity conversion option
Exchangeable note bond put option
Total value of embedded derivatives – net liability
December 31,
2017
US$’000
December 31,
2016
US$’000
360
440
1,790
2,230
1,870
—
3,970
290
4,260
4,260
Financial income in the consolidated statement of operations for the year includes US$2,390,000 (2016: US$2,270,000)
arising from the revaluation of embedded derivatives at fair value at December 31, 2017.
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the
host debt instrument is recognised at the residual value of the total net proceeds of the bond issue less fair value of the
embedded derivatives. Subsequently, the host debt instrument is measured at amortised cost using the effective interest rate
method. The carrying value of exchangeable senior notes is calculated as follows:
Balance at 1 January
Accretion interest
Exchangeable senior notes
Total value of embedded derivatives – liability
Total non-current liabilities
December 31,
2017
US$’000
92,232
723
92,955
December 31,
2017
US$’000
92,955
2,230
95,185
December 31,
2016
US$’000
91,514
718
92,232
December 31,
2016
US$’000
92,232
4,260
96,492
This liability will accrete back to its nominal value of US$115,000,000 over the term of the debt using an effective interest rate
methodology. Financial expense in the consolidated statement of operations for the year includes US$723,000 (2016:
US$718,000) of accretion interest.
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
25.
FINANCE LEASE LIABILITIES
Certain manufacturing equipment are held under finance lease arrangements following sale and leaseback transactions during
the year, with a carrying value of US$51,000 as of December 31, 2017 (2016: US$1,459,000). The repayment period of
finance leases is between 3 and 5 years. Finance leases are secured by the related assets held under the finance lease, and the
carrying values of finance lease liabilities at December 31, 2017 are as follows:
Current liabilities
Finance lease liabilities
Non-current liabilities
Finance lease liabilities
Finance lease liabilities
Finance lease liabilities are payable as follows:
Less than one year
In more than one year, but not more than two
In more than two years but not more than five
Less than one year
In more than one year, but not more than two
In more than two years but not more than five
December 31, 2017
US$’000
December 31, 2016
US$’000
354
354
532
532
273
273
732
732
December 31, 2017
US$’000
Interest
33
17
2
52
Principal
354
364
168
886
December 31, 2016
US$’000
Interest
40
27
16
83
Principal
273
286
446
1,005
Minimum
lease
payments
387
381
170
938
Minimum
lease
payments
313
313
462
1,088
Terms and debt repayment schedule
The terms and conditions of outstanding interest bearing loans and borrowings at December 31, 2017 are as follows:
Facility
Finance lease liabilities
Finance lease liabilities
Total interest-bearing loans and borrowings
Nominal
interest
rate
4.54 %
5.51%
Year of
maturity
2020
2019
Currency
Euro
USD
Fair
Value
835
51
886
Carrying
Value
835
51
886
150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
25.
FINANCE LEASE LIABILITIES (CONTINUED)
The terms and conditions of outstanding interest bearing loans and borrowings at December 31, 2016 were as follows:
Facility
Finance lease liabilities
Total interest-bearing loans and borrowings
Currency
Euro
Nominal
interest
rate
4.54%
Year of
maturity
2020
Fair
Value
1,005
1,005
Carrying
Value
1,005
1,005
26.
(a)
COMMITMENTS AND CONTINGENCIES
Capital Commitments
The Group has capital commitments authorised and contracted for of US$121,000 as at December 31, 2017 (2016:
US$220,000).
(b) Leasing Commitments
The Group leases a number of premises under operating leases. The leases typically run for periods up to 25 years. Lease
payments are reviewed periodically (typically on a 5 year basis) to reflect market rentals. Operating lease commitments
payable during the next 12 months amount to US$2,693,000 (2016: US$3,215,000) payable on leases of buildings at Bray,
Ireland, Jamestown, Buffalo and Amherst, New York, Acton, Massachusetts, Carlsbad, California, Sao Paulo, Brazil and
Extrema, Brazil. US$92,000 (2016: US$663,000) of these operating lease commitments relates to leases whose remaining term
will expire within one year, US$182,000 (2016: US$Nil) relates to leases whose remaining term expires between one and two
years, US$1,014,000 (2016: US$1,323,000) between two and five years and the balance of US$1,405,000 (2016:
US$1,229,000) relates to leases which expire after more than five years. See Note 27 for related party leasing arrangements.
Future minimum operating lease commitments with non-cancellable terms in excess of one year are as follows:
Year ended
2017
Operating leases
US$’000
2,693
2,409
1,947
1,776
1,654
11,660
22,139
Year ended
2016
Operating leases
US$’000
3,215
2,483
2,183
1,855
1,261
11,451
22,448
2018
2019
2020
2021
2022
Later years
Total lease obligations
2017
2018
2019
2020
2021
Later years
Total lease obligations
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
26.
COMMITMENTS AND CONTINGENCIES (CONTINUED)
(c)
(d)
(e)
(f)
For future minimum finance lease commitments, in respect of which the lessor has a charge over the related assets, see Note
25.
Bank Security
The Group repaid in full its bank borrowings in April 2010, at which point all previous charges against Group assets were
released. At December 31, 2017 Group borrowings were at fixed rates of interest and consisted entirely of Euro denominated
finance leases, refer to Note 25. The banks providing the finance leases have a charge over the equipment for which the lease
pertains.
Group Company Guarantees
Pursuant to the provisions of Section 357, Irish Companies Act, 2014, the Company has guaranteed the liabilities of Trinity
Biotech Manufacturing Limited, Trinity Research Limited, Benen Trading Limited and Trinity Biotech Financial Services
Limited subsidiary undertakings in the Republic of Ireland, for the financial year to December 31, 2017 and, as a result, these
subsidiary undertakings have been exempted from the filing provisions of Section 357, Irish Companies Act, 2014. Where the
Company enters into these guarantees of the indebtedness of other companies within its Group, the Company considers these
to be insurance arrangements and accounts for them as such. The Company treats the guarantee contract as a contingent
liability until such time as it becomes probable that the company will be required to make a payment under the guarantee. The
Company does not enter into financial guarantees with third parties.
Government Grant Contingencies
The Group has received training and employment grant income from Irish development agencies. Subject to existence of
certain conditions specified in the grant agreements, this income may become repayable. No such conditions existed as at
December 31, 2017. However if the income were to become repayable, the maximum amounts repayable as at December 31,
2017 would amount to US$3,033,000 (2016: US$2,659,000).
Litigation
There are also a small number of legal cases being brought against the Group by certain of its former employees. There is a
provision for cases where payment is considered by management to be probable. The ultimate resolution of the aforementioned
proceedings is not expected to have a material adverse effect on the Group’s financial position, results of operations or cash
flows.
(g) Licence Agreement Dispute
A dispute arose over the application of the terms of a licence agreement to which the Company is a party. Rather than undergo
a lengthy and costly legal dispute, both parties reached a mutually acceptable agreement in early 2018. The parties intend to
sign an agreement in 2018 that extends the term of the licence and settles the dispute in relation to past royalties. There is an
accrual of US$497,000 relating to the pending settlement, comprising the agreed amount of back royalties covering a period of
five years plus estimated legal fees incurred up to the point of settlement.
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
27.
RELATED PARTY TRANSACTIONS
The Group has related party relationships with its subsidiaries, and with its directors and executive officers.
Leasing arrangements with related parties
The Group has entered into various arrangements with JRJ Investments (“JRJ”), a partnership owned by Mr O’Caoimh and Dr
Walsh, directors of the Company, to provide for current and potential future needs to extend its premises at IDA Business
Park, Bray, Co. Wicklow, Ireland.
In November 2002, the Group entered into an agreement for a 25 year lease with JRJ for offices that have been constructed
adjacent to its premises at IDA Business Park, Bray, Co. Wicklow, Ireland. The annual rent of €381,000 (US$432,000) is
payable from January 1, 2004. There was a rent review performed on this premises in 2009 and further to this review, there
was no change to the annual rental charge.
In December 2007, the Group entered into an agreement with Mr. O’Caoimh and Dr Walsh pursuant to which the Group took
a 25-year lease on an additional 43,860 square foot manufacturing facility in Bray, Ireland at a rate of € 17.94 per square foot
(including fit out) giving a total annual rent of €787,000 (US$892,000).
Trinity Biotech and its directors (excepting Mr O’Caoimh and Dr Walsh who express no opinion on this point) believe that the
arrangements entered into represent a fair and reasonable basis on which the Group can meet its ongoing requirements for
premises. At December 31, 2017 there were no rental payments outstanding (2016: Nil).
Compensation of key management personnel of the Group
At December 31, 2017, 2016 and 2015 the key management personnel of the Group were made up of three key personnel: the
two executive directors; Mr Ronan O’Caoimh and Dr Jim Walsh and Mr Kevin Tansley, our Chief Financial Officer/Executive
Director. Kevin Tansley was appointed to the board in September 2016 as an Executive Director.
Compensation for the year ended December 31, 2017 of these personnel is detailed below:
Short-term employee benefits
Performance related bonus
Post-employment benefits
Share-based compensation benefits
December 31, 2017
US$’000
December 31, 2016
US$’000
1,177
223
44
663
2,107
1,298
248
41
1,114
2,701
The amounts disclosed in respect of directors emoluments in note 5 includes non-executive directors’ fees of US$400,000
(2016: US$400,000) and share-based compensation benefits of US$156,000 (2016: US$181,000). Total directors’
remuneration is also included in “personnel expenses” (Note 7) and “(loss)/profit before tax” (Note 5). Share-based
compensation benefits included in note 5 exclude capitalised amounts of US$92,000 (2016: US$174,000).
On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by
an agreement with Darnick Company, a company wholly-owned by members of Mr O’Caoimh’s immediate family. Directors’
compensation includes payments made to Darnick Company.
Directors’ compensation also includes payments made to Diagnostic Polymers, a company wholly-owned by Jim Walsh and
members of his immediate family.
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
27.
RELATED PARTY TRANSACTIONS (CONTINUED)
Directors’ and Company Secretary’s interests in the Company’s shares and share option plan
At January 1, 2017
Exercised
Granted
Expired
Forfeited
At December 31, 2017
At January 1, 2016
Exercised
Granted
Shares purchased during the year
At December 31, 2016
‘A’ Ordinary Shares
5,719,706
—
—
—
—
5,719,706
Share options
7,655,004
—
5,150,000
(315,000)
(3,720,000)
8,770,004
‘A’ Ordinary Shares
5,695,306
—
—
24,400
5,719,706
Share options
6,015,004
(60,000 )
1,700,000
—
7,655,004
Rayville Limited, an Irish registered company, which is wholly owned by the three executive directors and certain other
executives of the Group, owns all of the ‘B’ non-voting Ordinary Shares in Trinity Research Limited, one of the Group’s
subsidiaries. The ‘B’ shares do not entitle the holders thereof to receive any assets of the company on a winding up. All of the
‘A’ voting ordinary shares in Trinity Research Limited are held by the Group. Trinity Research Limited may, from time to
time, declare dividends to Rayville Limited and Rayville Limited may declare dividends to its shareholders out of those
amounts.
Any such dividends paid by Trinity Research Limited are ordinarily treated as a compensation expense by the Group in the
consolidated financial statements prepared in accordance with IFRS, notwithstanding their legal form of dividends to minority
interests, as this best represents the substance of the transactions.
The last dividend paid by Trinity Research Limited to Rayville Limited was in June 2009 for US$2,830,000. At the time this
amount was immediately lent back by Rayville Limited to Trinity Research Limited. Since then US$1,788,000 of these loans
have been repaid and recognised as a compensation expense by the Group. As of December 31, 2016 and December 31, 2017,
the remaining amount of the loan was US$1,042,000. As this remaining amount of the original dividend is matched by a loan
from Rayville Limited to Trinity Research Limited which is repayable solely at the discretion of the Remuneration Committee
of the Board and is unsecured and interest free, the Group netted the dividend paid to Rayville Limited against the
corresponding loan from Rayville Limited in the 2016 and 2017 consolidated financial statements.
154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group uses a range of financial instruments (including cash, finance leases, receivables, payables and derivatives) to fund
its operations. These instruments are used to manage the liquidity of the Group in a cost effective, low-risk manner. Working
capital management is a key additional element in the effective management of overall liquidity. The Group does not trade in
financial instruments or derivatives. The main risks arising from the utilization of these financial instruments are interest rate
risk, liquidity risk and credit risk.
Interest rate risk
Effective and repricing analysis
The following table sets out all interest-earning financial assets and interest bearing financial liabilities held by the Group at
December 31, indicating their effective interest rates and the period in which they re-price:
As at December 31, 2017
Cash and cash equivalents
Short-term investments
Finance lease receivable
Licence payments
Finance lease payable
Exchangeable note
Total
As at December 31, 2016
Cash and cash equivalents
Finance lease receivable
Licence payments
Finance lease payable
Exchangeable note
Total
Effective
interest
rate
1.4%
1.4%
4.0%
3.0%
4.6%
4.8%
Note
18
19
17
22
25
24
Effective
interest
rate
0.8%
4.1%
3.0%
4.5%
4.8%
Note
18
17
22
25
24
Total
US$’000
23,564
34,043
1,185
(1,112)
(886)
(92,955)
(36,161)
6 mths or less
US$’000
23,564
—
267
(1,112)
(176)
—
22,543
6 –12 mths
US$’000
—
34,043
233
—
(178)
—
34,098
Total
US$’000
77,109
1,330
(2,195)
(1,005)
(92,232)
(16,993)
6 mths or less
US$’000
77,109
289
(1,112)
(135)
—
76,151
6 –12 mths
US$’000
—
253
(1,083)
(138)
—
(968)
1-2 years
US$’000
—
—
333
—
(364)
—
(31)
1-2 years
US$’000
—
392
—
(286)
—
106
2-5 years
US$’000
—
—
352
—
(168)
—
184
2-5 years
US$’000
—
396
—
(446)
—
(50)
> 5 years
US$’000
—
—
—
—
—
(92,955)
(92,955)
> 5 years
US$’000
—
—
—
—
(92,232)
(92,232)
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
In broad terms, a one-percentage point increase in interest rates would increase interest income by US480,000 (2016:
US$770,000) and would not affect the interest expense (2016: nil) resulting in an increase in net interest income of
US$480,000 (2016: increase in net interest income of US$770,000).
Interest rate profile of financial assets / liabilities
The interest rate profile of financial assets/liabilities of the Group was as follows:
Fixed rate instruments
Fixed rate financial liabilities (licence fees)
Fixed rate financial liabilities (exchangeable note)
Fixed rate financial liabilities (finance lease payables)
Financial assets (short-term deposits and short-term investments)
Financial assets (finance lease receivables)
Variable rate instruments
Financial assets (cash and short-term deposits)
December 31, 2017
US$‘000
December 31, 2016
US$‘000
(1,112)
(92,955)
(886)
48,046
1,185
9,561
(36,161)
(2,195)
(92,232)
(1,005)
67,265
1,330
9,844
(16,993)
Financial assets comprise cash and cash equivalents and short-term investments as at December 31, 2017 and December 31,
2016 (see Note 18 and 19).
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial liabilities at fair value through profit and loss. Therefore a change in
interest rates at December 31, 2017 would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would increase interest income by US$480,000 (2016:
US$770,000) and would not affect the interest expense in 2017 or 2016; resulting in an increase in interest income of
US$480,000 (2016: US770,000). This assumes that all other variables, in particular foreign currency rates, remain constant.
There was no significant difference between the fair value and carrying value of the Group’s trade receivables and trade and
other payables at December 31, 2017 and December, 31 2016 as all fell due within 6 months.
156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity risk
The Group’s operations are cash generating. Short-term flexibility is achieved through the management of the Group’s short-
term deposits.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
As at December 31, 2017
US$’000
Financial liabilities
Trade & other payables
Exchangeable notes
Exchangeable note interest
Carrying
amount
US$’000
Contractual
cash flows
US$’000
6 mths or
less
US$’000
6 mths –
12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
>5 years
US$’000
20,515
92,955
1,150
114,620
20,515
115,000
126,500
262,015
20,515
—
2,300
22,815
—
—
2,300
2,300
—
—
4,600
4,600
—
—
13,800
13,800
—
115,000
103,500
218,500
As at December 31, 2016
US$’000
Financial liabilities
Trade & other payables
Exchangeable notes
Exchangeable note interest
Carrying
amount
US$’000
Contractual
cash flows
US$’000
6 mths or
less
US$’000
6 mths –
12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
>5 years
US$’000
23,607
92,232
1,150
116,989
23,607
115,000
131,100
269,707
22,524
—
2,300
24,824
1,083
—
2,300
3,383
—
—
4,600
4,600
—
—
13,800
13,800
—
115,000
108,100
223,100
Foreign exchange risk
The majority of the Group’s activities are conducted in US Dollars. Foreign exchange risk arises from the fluctuating value of
the Group’s Euro denominated expenses as a result of the movement in the exchange rate between the US Dollar and the Euro.
Arising from this, where considered necessary, the Group pursues a treasury policy which periodically aims to sell US Dollars
forward to match a portion of its uncovered Euro expenses at exchange rates lower than budgeted exchange rates. These
forward contracts are primarily cashflow hedging instruments whose objective is to cover a portion of these Euro forecasted
transactions. Forward contracts normally have maturities of less than one year after the balance sheet date. There were no
forward contracts in place as at December 31, 2017.
Foreign currency short term financial assets and liabilities which expose the Group to currency risk are disclosed below. The
amounts shown are those reported to key management translated into US Dollars at the closing rate:
As at December 31, 2017
Cash
Trade and other receivable
Trade and other payables
Total exposure
As at December 31, 2016
Cash
Trade and other receivable
Trade and other payables
Total exposure
EUR
US$‘000
235
1,396
(1,936)
(305)
EUR
US$‘000
214
852
(1,983)
(917)
GBP
US$‘000
443
101
(16)
528
GBP
US$‘000
520
157
(29)
648
SEK
US$‘000
5
(239)
(234)
SEK
US$‘000
46
68
(4,528)
(4,414)
CAD
US$‘000
2,107
298
(86)
2,319
CAD
US$‘000
845
414
(85)
1,174
BRL
US$‘000
443
1,958
(2,235)
166
BRL
US$‘000
371
1,103
(1,976)
(502)
Other
US$‘000
16
6
—
22
Other
US$‘000
7
—
—
7
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
The Group states its forward exchange contracts at fair value in the balance sheet. The Group classifies its forward exchange
contracts as hedging forecasted transactions and thus accounts for them as cash flow hedges.
There were no forward exchange contracts in place at December 31, 2017 or December 31, 2016.
Sensitivity analysis
A 10% strengthening of the US Dollar against the Euro at December 31, 2017 would have increased profit and other equity by
the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
December 31, 2017
Euro
December 31, 2016
Euro
Profit or loss
US$’000
2,158
1,093
A 10% weakening of the US Dollar against the Euro at December 31, 2017 would have decreased profit and other equity by
the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
December 31, 2017
Euro
December 31, 2016
Euro
Profit or loss
US$’000
(2,637)
(1,336)
Credit Risk
The Group has no significant concentrations of credit risk. Exposure to credit risk is monitored on an ongoing basis. The
Group maintains specific provisions for potential credit losses. To date such losses have been within management’s
expectations. Due to the large number of customers and the geographical dispersion of these customers, the Group has no
significant concentrations of accounts receivable.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and
deferred consideration, the Group’s exposure to credit risk arises from default of the counter-party, with a maximum exposure
equal to the carrying amount of these instruments. The Group’s management considers that all of the above financial assets
that are not impaired or past due for each of the 31 December reporting dates under review are of good credit quality.
The Group maintains cash and cash equivalents and enters into forward contracts, when necessary, with various financial
institutions. The Group performs regular and detailed evaluations of these financial institutions to assess their relative credit
standing. The carrying amount reported in the balance sheet for cash and cash equivalents and forward contracts approximate
their fair value.
158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as
follows:
Third party trade receivables (Note 17)
Finance lease income receivable (Note 17)
Cash & cash equivalents (Note 18)
Short-term investments (Note 19)
Carrying Value
December 31, 2017
US$’000
17,242
1,185
23,564
34,043
76,034
Carrying Value
December 31, 2016
US$’000
18,340
1,330
77,109
—
96,779
The maximum exposure to credit risk for trade receivables and finance lease income receivable by geographic location is as
follows:
United States
Euro-zone countries
United Kingdom
Other European countries
Other regions
Carrying Value
December 31, 2017
US$’000
8,682
1,789
185
21
7,750
18,427
Carrying Value
December 31, 2016
US$’000
10,201
1,645
252
10
7,562
19,670
The maximum exposure to credit risk for trade receivables and finance lease income receivable by type of customer is as
follows:
End-user customers
Distributors
Non-governmental organisations
Carrying Value
December 31, 2017
US$’000
8,200
10,003
224
18,427
Carrying Value
December 31, 2016
US$’000
11,882
7,127
661
19,670
Due to the large number of customers and the geographical dispersion of these customers, the Group has no significant
concentrations of accounts receivable.
Impairment Losses
The ageing of trade receivables at December 31, 2017 is as follows:
Not past due
Past due 0-30 days
Past due 31-120 days
Greater than 120 days
Gross
2017
US$’000
10,770
3,190
1,906
4,966
20,832
Impairment
2017
US$’000
—
31
50
3,509
3,590
Gross
2016
US$’000
12,275
2,741
1,807
4,688
21,511
Impairment
2016
US$’000
—
8
67
3,096
3,171
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at January 1
Charged to costs and expenses
Amounts written off during the year
Balance at December 31
2017
US$’000
3,171
662
(243)
3,590
2016
US$’000
2,812
415
(56)
3,171
2015
US$’000
2,205
780
(173)
2,812
The allowance for impairment in respect of trade receivables is used to record impairment losses unless the Group is satisfied
that no recovery of the account owing is possible. At this point the amount is considered irrecoverable and is written off
against the financial asset directly.
Capital Management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Board of Directors monitors earnings per share as a measure of performance,
which the Group defines as profit after tax divided by the weighted average number of shares in issue.
Following the divestiture of the Coagulation product line in 2010, the Group eliminated all bank debt. In the past, the Group
has funded acquisitions using both equity and long term debt depending on the size of the acquisition and the capital structure
in place at the time of the acquisition.
Although at December 31, 2017 the Group has no bank debt, it maintains a relationship with a number of lending banks and
Trinity Biotech is listed on the NASDAQ which allows the Group to raise funds through equity financing where necessary.
During 2015, the Group raised US$115,000,000 through the issuance of 30 year exchangeable senior notes which will mature
on April 1, 2045, subject to earlier repurchase, redemption or exchange.
The Board of Directors is authorised to purchase its own shares on the market on the following conditions;
•
•
•
the aggregate nominal value of the shares authorised to be acquired shall not exceed 10% of the aggregate nominal value
of the issued share capital of the Company at the close of business on the date of the passing of the resolution:
the minimum price (exclusive of taxes and expenses) which may be paid for a share shall be the nominal value of that
share:
the maximum price (exclusive of taxes and expenses) which may be paid for a share shall not be more than the average
of the closing bid price on NASDAQ in respect of the ten business days immediately preceding the day on which the
share is purchased.
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Fair Values
The table below sets out the Group’s classification of each class of financial assets/liabilities, their fair values and under which
valuation method they are valued:
December 31, 2017
Loans and receivables
Trade receivables
Cash and cash equivalents
Short-term investments
Finance lease receivable
Liabilities at amortised cost
Exchangeable note
Finance lease payable
Trade and other payables (excluding deferred income)
Provisions
Fair value through profit and loss (FVPL)
Exchangeable note bond call option
Exchangeable note equity conversion option
Exchangeable note bond put option
Note
Level 1
US$’000
Level 2
US$’000
Total
carrying
amount
US$’000
17
18
19
15, 17
24
25
22
23
24
24
24
17,242
23,564
34,043
1,185
76,034
—
(886)
(20,237)
(50)
(21,173)
—
—
—
—
54,861
—
—
—
—
—
17,242
23,564
34,043
1,185
76,034
(92,955)
—
—
—
(92,955)
(92,955)
(886)
(20,237)
(50)
(114,128)
360
(440)
(1,790)
(1,870)
(94,825)
360
(440)
(1,790)
(1,870)
(39,964)
Fair
Value
US$’000
17,242
23,564
34,043
1,185
76,034
(92,955)
(886)
(20,237)
(50)
(114,128)
360
(440)
(1,790)
(1,870)
(39,964)
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are
not based on observable market data
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
28.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
December 31, 2016
Loans and receivables
Trade receivables
Cash and cash equivalents
Finance lease receivable
Liabilities at amortised cost
Exchangeable note
Finance lease payable
Trade and other payables (excluding deferred income)
Provisions
Fair value through profit and loss (FVPL)
Exchangeable note bond call option
Exchangeable note equity conversion option
Exchangeable note bond put option
Note
Level 1
US$’000
Level 2
US$’000
Total
carrying
amount
US$’000
Fair
Value
US$’000
17
18
15, 17
24
25
22
23
24
24
24
18,340
77,109
1,330
96,779
—
(1,005)
(24,533)
(75)
(25,613)
—
—
—
—
71,166
—
—
—
—
18,340
77,109
1,330
96,779
18,340
77,109
1,330
96,779
(92,232)
—
—
—
(92,232)
(92,232)
(1,005)
(24,533)
(75)
(117,845)
—
(3,970)
(290)
(4,260)
(96,492)
—
(3,970)
(290)
(4,260)
(25,326)
(92,232 )
(1,005 )
(24,533 )
(75 )
(117,845 )
—
(3,970 )
(290 )
(4,260 )
(25,326 )
The valuation techniques used for instruments categorised as level 2 are described below:
The fair values of the options associated with the exchangeable notes are calculated in consultation with third-party valuation
specialists due to the complexity of their nature. There are a number of inputs utilised in the valuation of the options, including
share price, historical share price volatility, risk-free rate and the expected borrowing cost spread over the risk-free rate.
162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
29.
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
Balance at 1 January 2017
Cash-flows:
Interest paid
Repayment
Proceeds
Non-cash:
Interest charged
Exchange adjustment
Accretion interest
Fair value
Reclassification
Borrowings &
derivative
financial
instruments
US$’000
96,492
Note
24,25
Short-term
lease
liabilities
US$’000
273
Long-term lease
liabilities
US$’000
732
(4,600)
—
—
—
(295)
28
4,600
—
723
(2,030)
—
—
53
—
—
295
—
—
24
—
71
—
—
(295)
Balance at 31 December 2017
24,25
98,185
354
532
Balance at 1 January 2016
Cash-flows:
Interest paid
Repayment
Non-cash:
Interest charged
Exchange adjustment
Accretion interest
Fair value
Reclassification
Borrowings &
derivative
financial
instruments
US$’000
102,734
Note
Short-term
lease
liabilities
US$’000
271
Long-term lease
liabilities
US$’000
1,042
(4,600)
—
—
(282)
4,600
—
718
(6,960)
—
—
(5)
—
—
289
—
—
—
(21)
—
—
(289)
Balance at 31 December 2016
24,25
96,492
273
732
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
30.
POST BALANCE SHEET EVENTS
On January 30, 2018 the Company guaranteed a 15 year lease entered into by its subsidiary Immco Diagnostics, Inc. The
space, which will be used to relocate the Diagnostic Laboratory business and increase manufacturing capacity, is 31,731
square feet located in Amherst, New York. Rent will commence following a construction period as well as a three month free
base rent period, which is currently estimated to be in the fourth quarter of 2018. Annual rent will average US$422,000 and
construction costs are expected to be one million after the tenant improvement allowance from the landlord is applied.
There are no other matters or circumstances that have arisen since the end of the year that have significantly affected or may
significantly affect either:
• The entity’s operations in future financial years;
•
• The entity’s state of affairs in future financial years.
The results of those operations in future financial years; or
31.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of these financial statements requires the Group to make estimates and judgements that affect the reported
amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, the Group evaluates these estimates, including those related to intangible assets, contingencies and
litigation. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Key sources of estimation uncertainty
Note 13 contains information about the assumptions and the risk factors relating to goodwill impairment. Note 21 outlines
information regarding the valuation of share options and warrants. Note 24 outlines the valuation techniques used by the
Company in determining the fair value of exchangeable notes and the associated embedded derivatives. In Note 28, detailed
analysis is given about the interest rate risk, credit risk, liquidity risk and foreign exchange risk of the Group.
Critical accounting judgements in applying the Group’s accounting policies
Certain critical accounting judgements in applying the Group’s accounting policies are described below:
164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
31.
ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Research and development expenditure
Under IFRS as adopted by the EU, the Group writes off research and development expenditure as incurred, with the exception
of expenditure on projects whose outcome has been assessed with reasonable certainty as to technical feasibility, commercial
viability and recovery of costs through future revenues. Such expenditure is capitalised at cost within intangible assets and
amortised over its expected useful life of 15 years, which commences when commercial production starts. For further
information, refer to note 13.
Acquired in-process research and development (IPR&D) is valued at its fair value at acquisition date in accordance with IFRS
3. The Company determines this fair value by adopting the income approach valuation technique. Once the fair value has been
determined, the Company will recognise the IPR&D as an intangible asset when it: (a) meets the definition of an asset and
(b) is identifiable (i.e. is separable or arises from contractual or other legal rights).
Factors which impact our judgement to capitalise certain research and development expenditure include the degree of
regulatory approval for products and the results of any market research to determine the likely future commercial success of
products being developed. We review these factors each year to determine whether our previous estimates as to feasibility,
viability and recovery should be changed.
Impairment of intangible assets and goodwill
Definite lived intangible assets are reviewed for indicators of impairment annually while goodwill and indefinite lived assets
are tested for impairment annually, individually or at the cash generating unit level.
Factors considered important, as part of an impairment review, include the following:
Significant underperformance relative to expected historical or projected future operating results;
•
• Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
• Obsolescence of products;
•
• Our market capitalisation relative to net book value.
Significant decline in our stock price for a sustained period; and
When we determine that the carrying value of intangibles, non-current assets and related goodwill may not be recoverable
based upon the existence of one or more of the above indicators of impairment, any impairment is measured based on our
estimates of projected net discounted cash flows expected to result from that asset, including eventual disposition. Our
estimated impairment could prove insufficient if our analysis overestimated the cash flows or conditions change in the future.
For further information, refer to note 13.
Allowance for slow-moving and obsolete inventory
We evaluate the realisability of our inventory on a case-by-case basis and make adjustments to our inventory provision based
on our estimates of expected losses. We write-off any inventory that is approaching its “use-by” date and for which no further
re-processing can be performed. We also consider recent trends in revenues for various inventory items and instances where
the realisable value of inventory is likely to be less than its carrying value. For further information, refer to note 16.
Allowance for impairment of receivables
We make judgements as to our ability to collect outstanding receivables and where necessary make allowances for impairment.
Such impairments are made based upon a specific review of all significant outstanding receivables. In determining the
allowance, we analyse our historical collection experience and current economic trends. If the historical data we use to
calculate the allowance for impairment of receivables does not reflect the future ability to collect outstanding receivables,
additional allowances for impairment of receivables may be needed and the future results of operations could be materially
affected. For further information, refer to note 28.
165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
31.
ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Accounting for income taxes
Significant judgement is required in determining our worldwide income tax expense provision. In the ordinary course of a
global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these
uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the
process of identifying items of revenue and expense that qualify for preferential tax treatment and segregation of foreign and
domestic income and expense to avoid double taxation. In addition, we operate within multiple taxing jurisdictions and are
subject to audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time
for resolution. Although we believe that our estimates are reasonable, no assurance can be given that the final tax outcome of
these matters will not be different than that which is reflected in our historical income tax provisions and accruals. Such
differences could have a material effect on our income tax provision and profit in the period in which such determination is
made. In management’s opinion, adequate provisions for income taxes have been made.
Deferred tax assets and liabilities are determined for the effects of net operating losses and temporary differences between the
book and tax bases of assets and liabilities, using tax rates projected to be in effect for the year in which the differences are
expected to reverse. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies
in assessing whether deferred tax assets can be recognised, there is no assurance that these deferred tax assets may be
realisable. The extent to which recognised deferred tax assets are not realisable could have a material adverse impact on our
income tax provision and net income in the period in which such determination is made.
Note 14 to the consolidated financial statements outlines the basis for the deferred tax assets and liabilities and includes details
of the unrecognised deferred tax assets at year end. The Group derecognised deferred tax assets arising on unused tax losses
except to the extent that there are sufficient taxable temporary differences relating to the same taxation authority and the same
taxable entity which will result in taxable amounts against which the unused tax losses can be utilized before they expire. The
derecognition of these deferred tax assets was considered appropriate in light of the increased tax losses caused by the
restructuring and uncertainty over the timing of the utilization of the tax losses. Except for the derecognition of deferred tax
assets there were no material changes in estimates used to calculate the income tax expense provision during 2017, 2016 or
2015.
166
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
32.
GROUP UNDERTAKINGS
The consolidated financial statements include the financial statements of Trinity Biotech plc and the following principal
subsidiary undertakings:
Name and registered office
Trinity Biotech plc
IDA Business Park, Bray
Co. Wicklow, Ireland
Principal activity
Investment and holding
company
Principal Country of
incorporation and
operation
Ireland
Group % holding
Holding
company
Trinity Biotech Manufacturing Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Manufacture and sale
of diagnostic test kits
Trinity Research Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Benen Trading Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Trinity Biotech Manufacturing Services
Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Trinity Biotech Luxembourg Sarl
1, rue Bender,
L-1229 Luxembourg
Trinity Biotech Inc
Girts Road,
Jamestown,
NY 14702, USA
Clark Laboratories Inc
Trading as Trinity Biotech (USA)
Girts Road, Jamestown
NY14702, USA
Mardx Diagnostics Inc
5919 Farnsworth Court
Carlsbad
CA 92008, USA
Fitzgerald Industries International, Inc
2711 Centerville Road, Suite 400
Wilmington, New Castle
Delaware, 19808, USA
Biopool US Inc (trading as Trinity
Biotech Distribution)
Girts Road, Jamestown
NY14702, USA
Primus Corporation
4231 E 75th Terrace
Kansas City,
MO 64132, USA
Research and
development
Trading
Dormant
Ireland
Ireland
Ireland
Ireland
Investment and
provision of financial
services
Holding Company
Luxembourg
U.S.A.
100%
100%
100%
100%
100%
100%
U.S.A.
100%
U.S.A.
100%
U.S.A.
100%
U.S.A.
100%
U.S.A.
100%
Manufacture and sale
of diagnostic test kits
Manufacture and sale
of diagnostic test kits
Management services
company
Sale of diagnostic test
kits
Manufacture and sale
of diagnostic test kits
and instrumentation
167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
32.
GROUP UNDERTAKINGS (CONTINUED)
Name and registered office
Phoenix Bio-tech Corp.
1166 South Service Road West
Oakville, ON L6L 5T7
Canada.
Fiomi Diagnostics Holding AB
Dag Hammarskjöldsv 52A
SE-752 37 Uppsala
Sweden
Fiomi Diagnostics AB
Dag Hammarskjöldsv 52A
SE-752 37 Uppsala
Sweden
Trinity Biotech Do Brasil
Rua Claudio Soares
Sao Paulo
Brazil
Trinity Biotech (UK) Ltd
184 Cambridge Science Park
Cambridge CB4 0GA
United Kingdom
Immco Diagnostics Inc
60 Pineview Drive
Buffalo
NY 14228, USA
Nova Century Scientific Inc
5022 South Service Road
Burlington
Ontario
Canada
Trinity Biotech Investment Ltd
PO Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands
Principal activity
Manufacture and sale of
diagnostic test kits
Principal Country of
incorporation and
operation
Canada
Group % holding
100 %
Holding Company
Sweden
100 %
Discontinued operation
Sweden
100 %
Sale of diagnostic test
kits
Sales & marketing
activties
Manufacture and sale of
autoimmune products
and laboratory services
Manufacture and sale of
autoimmune products
Brazil
100 %
UK
100 %
U.S.A.
100 %
Canada
100 %
Investment and
provision of financial
services
Cayman Islands
100 %
(Incorporated
March 20, 2015)
33.
AUTHORISATION FOR ISSUE
These Group consolidated financial statements were authorised for issue by the Board of Directors on April 20, 2018.
168
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised
the undersigned to sign this Annual Report on its behalf.
Signatures
TRINITY BIOTECH PLC
By /s/ RONAN O’CAOIMH
Mr Ronan O’Caoimh
Director/
Chief Executive Officer
Date: April 20, 2018
By: /s/ KEVIN TANSLEY
Mr Kevin Tansley
Company secretary/
Chief Financial Officer
Date: April 20, 2018
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Item 19
Exhibits
Exhibit No.
1.1
Description of Exhibit
Memorandum and Articles of Association of Trinity Biotech plc (included as Exhibit 1 to our Annual Report on
Form 20-F (File No. 000-22320), filed with the SEC on March 31, 2006).
2.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Form of Deposit Agreement dated as of October 21, 1992, as amended and restated, among Trinity Biotech plc,
The Bank of New York as Depositary, and all Owners and holders from time to time of American Depositary
Receipts issued thereunder (included as Exhibit 1 to our Form F-6 (File No. 333-111946), filed with the SEC on
January 15, 2004.)
Trinity Biotech plc Employee Share Option Plan 2013 (included as Exhibit 4.1 to our Registration Statement on
Form S-8 (File No. 333-195232), filed with the SEC on April 11, 2014).
Trinity Biotech plc Employee Share Option Plan 2011 (included as Exhibit 4 to our Registration Statement on
Form S-8 (File No. 333-182279), filed with the SEC on June 22, 2012).
Credit Facilities Letter dated as of February 6, 2015 between Allied Irish Banks, p.l.c. and Trinity Biotech plc,
Trinity Biotech Manufacturing Limited and Trinity Biotech Financial Services Limited, as Borrowers (included as
Exhibit 4.7 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Guarantee Letter to Allied Irish Banks, p.l.c. dated as of February 6, 2015 by Trinity Biotech plc, Trinity Biotech
Manufacturing Limited and Trinity Biotech Financial Services Limited, as Borrowers (included as Exhibit 4.8 to
our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of October 18, 2004 between Ronan O’Caoimh and Jim Walsh with Trinity Biotech
Manufacturing Limited in respect of office premises in Bray, Co Wicklow, Ireland (included as Exhibit 4b.1 to our
Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 31, 2006).
Lease agreement dated as of November 26, 2004 between Ronan O’Caoimh, Jonathon O’Connell and Jim Walsh
with Trinity Biotech plc in respect of warehouse premises in Bray, Co Wicklow, Ireland (included as Exhibit 4b.2
to our to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on 31 March 2006).
Lease agreement dated as of December 20, 2007 between Ronan O’Caoimh and Jim Walsh with Trinity Biotech
Manufacturing Limited in respect of warehouse premises in Bray, Co Wicklow, Ireland (included as Exhibit 4.13
to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of March 19, 2004 between Livers, LLC with Primus Corporation in respect of office
premises in Kansas City, Missouri, U.S.A. (included as Exhibit 4.14 to our Annual Report on Form 20-F (File
No. 000- 22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of May 30, 2001 between Lorrelle S. Johnson and Sharon L. Johnson with Clark
Laboratories Inc in respect of office premises in Jamestown, New York, U.S.A. (included as Exhibit 4.15 to our
Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of February 13, 2012 between Barco Inv. Inc with Mardx Diagnostics in respect of office
premises in San Diego, California, U.S.A. (included as Exhibit 4.16 to our Annual Report on Form 20-F (File
No. 000- 22320), filed with the SEC on March 25, 2015).
170
4.11
4.12
4.13
4.14
4.15
8.1
12.1
12.2
13.1
13.2
15.1
Lease agreement dated as of December 1, 2007 between 60 Pineview LLC with Immco Diagnostics Inc in respect of
office premises in Amherst, New York, U.S.A. (included as Exhibit 4.17 to our Annual Report on Form 20-F (File
No. 000- 22320), filed with the SEC on March 25, 2015).
CDC Non-Exclusive Patent License Agreement dated as of May 22, 2012 (included as Exhibit 4.19 to our Annual
Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
The University of Texas System Materials License Agreement dated as of April 18, 2005 (included as Exhibit 4.20 to
our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Inverness Medical Innovations, Inc. Patent License Agreement renewal dated as of August 3, 2006 (included as Exhibit
4.21 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
National Institute of Health Non-Exclusive Patent License Agreement dated as of December 17, 1999 (included as
Exhibit 4.22 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
List of significant subsidiaries of Trinity Biotech plc (included as Item 18, note 31 to the consolidated financial
statements in this Annual Report).
Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Consent of Independent Registered Public Accounting Firm
171
Exhibit 12.1
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Ronan O’Caoimh, certify that:
1. I have reviewed this annual report on Form 20-F of Trinity Biotech plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
rules 13a-15(f) and 15d-15(f)) for the company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting to the company’s auditors and the audit committee of the company’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: April 20, 2018
/s/ RONAN O’CAOIMH*
Ronan O’Caoimh
Chief Executive Officer
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
172
Exhibit 12.2
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Tansley, certify that:
1. I have reviewed this annual report on Form 20-F of Trinity Biotech plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
rules 13a-15(f) and 15d-15(f)) for the company and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting to the company’s auditors and the audit committee of the company’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: April 20, 2018
/s/ KEVIN TANSLEY*
Kevin Tansley
Chief Financial Officer
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
173
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.1
In connection with the Annual Report of Trinity Biotech plc (the “Company”) on Form 20-F for the period ended December 31, 2017
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronan O’Caoimh, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
operations of the Company.
/s/ RONAN O’CAOIMH*
Ronan O’Caoimh
Chief Executive Officer
April 20, 2018
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Trinity Biotech plc for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
174
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.2
In connection with the Annual Report of Trinity Biotech plc (the “Company”) on Form 20-F for the period ended December 31, 2017
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Tansley, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
operations of the Company.
/s/ KEVIN TANSLEY*
Kevin Tansley
Chief Financial Officer
April 20, 2018
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Trinity Biotech plc for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
175
Consent of Independent Registered Public Accounting Firm
We have issued our reports dated April 20, 2018, with respect to the consolidated financial statements and internal control over
financial reporting included in the Annual Report of Trinity Biotech plc on Form 20-F for the year ended December 31, 2017. We
consent to the incorporation by reference of said reports in the following Registration Statements of Trinity Biotech plc:
Exhibit 15.1
Form Type
Form S-8
Form S-8
Form S-8
Form S-8
Form F-3
/s/ GRANT THORNTON
Dublin, Ireland
April 20, 2018
File Number
333-166590
333-124384
333-182279
333-195232
333-203555
Effective Date
5/6/2010
4/15/2011
6/22/2012
4/11/2014
4/26/2017
176